Open Text (OTEX) 10-Q 30 Apr 10 2010 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	9 Months Ended Mar. 31, 2010	Apr. 28, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q3
Trading Symbol	OTEX
Entity Registrant Name	OPEN TEXT CORP
Entity Central Index Key	0001002638
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		56,779,751

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Mar. 31, 2010	Jun. 30, 2009
ASSETS
Cash and cash equivalents	$321,328	$275,819
Accounts receivable trade, net of allowance for doubtful accounts of $5,207 as of March 31, 2010 and $4,208 as of June 30, 2009 (note 3)	122,557	115,802
Income taxes recoverable (note 12)	24,998	4,496
Prepaid expenses and other current assets	21,156	18,172
Deferred tax assets (note 12)	16,765	20,621
Total current assets	506,804	434,910
Investments in marketable securities		13,103
Capital assets (note 4)	54,835	45,165
Goodwill (note 5)	699,833	576,111
Acquired intangible assets (note 6)	334,770	315,048
Deferred tax assets (note 12)	64,472	69,877
Other assets (note 7)	17,760	13,064
Long-term income taxes recoverable (note 12)	46,007	39,958
Total assets	1,724,481	1,507,236
Current liabilities:
Accounts payable and accrued liabilities (note 8)	114,419	116,992
Current portion of long-term debt (note 10)	15,782	3,449
Deferred revenues	212,655	189,397
Income taxes payable (note 12)	13,083	10,356
Deferred tax liabilities (note 12)	2,354	508
Total current liabilities	358,293	320,702
Long-term liabilities:
Accrued liabilities (note 8)	16,682	21,099
Pension liability (note 9)	15,363	15,803
Long-term debt (note 10)	285,774	299,234
Deferred revenues	11,151	7,914
Long-term income taxes payable	55,740	47,131
Deferred tax liabilities (note 12)	118,961	108,889
Total long-term liabilities	503,671	500,070
Shareholders' equity:
Share capital (note 11) 56,600,540 and 52,716,751 Common Shares issued and outstanding at March 31, 2010 and June 30, 2009, respectively; Authorized Common Shares: unlimited	593,397	457,982
Additional paid-in capital	58,623	52,152
Accumulated other comprehensive income	69,973	71,851
Retained earnings	140,524	104,479
Total shareholders' equity	862,517	686,464
Total liabilities and shareholders' equity	$1,724,481	$1,507,236

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Jun. 30, 2009
Accounts receivable trade, allowance for doubtful accounts	$5,207	$4,208
Common Shares, issued and outstanding	56,600,540	52,716,751

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009	9 Months Ended Mar. 31, 2010	9 Months Ended Mar. 31, 2009
Revenues:
License	$49,527	$51,919	$169,547	$166,845
Customer support	124,443	101,949	378,375	300,816
Service and other	38,807	38,167	124,067	114,648
Total revenues	212,777	192,035	671,989	582,309
Cost of revenues:
License	3,744	4,496	11,522	12,670
Customer support	20,777	17,304	63,209	50,227
Service and other	31,314	30,288	101,036	89,898
Amortization of acquired technology-based intangible assets	15,044	11,625	44,338	34,171
Total cost of revenues	70,879	63,713	220,105	186,966
Gross profit	141,898	128,322	451,884	395,343
Operating expenses:
Research and development	31,654	28,809	97,543	87,335
Sales and marketing	45,983	44,426	150,564	138,605
General and administrative	18,405	17,937	62,007	54,604
Depreciation	4,437	3,229	12,982	8,847
Amortization of acquired customer-based intangible assets	8,910	11,176	26,562	29,529
Special charges (note 13)	6,083	1,788	35,095	13,234
Total operating expenses	115,472	107,365	384,753	332,154
Income from operations	26,426	20,957	67,131	63,189
Other income (expense), net	(5,554)	11,655	(3,785)	(199)
Interest expense, net	(2,625)	(2,431)	(8,387)	(10,772)
Income before income taxes	18,247	30,181	54,959	52,218
Provision for income taxes (note 12)	5,133	8,146	18,914	14,761
Net income for the period	$13,114	$22,035	$36,045	$37,457
Net income per share-basic (note 17)	0.23	0.42	0.64	0.72
Net income per share-diluted (note 17)	0.23	0.41	0.63	0.71
Weighted average number of Common Shares outstanding-basic	56,537	52,312	56,106	51,825
Weighted average number of Common Shares outstanding-diluted	57,696	53,441	57,214	53,122

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009	9 Months Ended Mar. 31, 2010	9 Months Ended Mar. 31, 2009	Dec. 31, 2009	Jun. 30, 2009	Dec. 31, 2008	Jun. 30, 2008
Retained earnings, beginning of period	$127,410	$62,963	$104,479	$47,541
Net income	13,114	22,035	36,045	37,457
Retained earnings, end of period	$140,524	$84,998	$140,524	$84,998	$127,410	$104,479	$62,963	$47,541

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	9 Months Ended Mar. 31, 2010	9 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net income for the period	$36,045	$37,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	83,882	72,547
In-process research and development		121
Share-based compensation expense	7,154	3,957
Excess tax benefits on share-based compensation expense	(904)	(8,382)
Pension expense	562	1,124
Amortization of debt issuance costs	1,064	831
Unrealized gain on financial instruments	(878)	(134)
Loss on sale and write down of capital assets	136	353
Release of unrealized gain on marketable securities	(4,353)
Deferred taxes	(3,714)	(3,577)
Impairment charges	830
Changes in operating assets and liabilities:
Accounts receivable	23,953	47,897
Prepaid expenses and other current assets	(1,306)	(3,745)
Income taxes	(18,238)	9,656
Accounts payable and accrued liabilities	(11,466)	(18,730)
Deferred revenue	(1,029)	(1,304)
Other assets	3,233	(528)
Net cash provided by operating activities	114,971	137,543
Cash flows from investing activities:
Additions of capital assets-net	(15,269)	(6,308)
Purchase of Vignette Corporation, net of cash acquired	(90,600)
Purchase of Captaris Inc., net of cash acquired		(101,033)
Purchase of eMotion LLC, net of cash acquired	(556)	(3,635)
Purchase of a division of Spicer Corporation		(11,437)
Purchase consideration for prior period acquisitions	(11,407)	(17,190)
Investments in marketable securities		(8,930)
Maturity of short-term investments	45,525
Net cash used in investing activities	(72,307)	(148,533)
Cash flow from financing activities:
Excess tax benefits on share-based compensation expense	904	8,382
Proceeds from issuance of Common Shares	8,937	17,674
Repayment of long-term debt	(2,607)	(2,570)
Debt issuance costs	(1,024)
Net cash provided by financing activities	6,210	23,486
Foreign exchange loss on cash held in foreign currencies	(3,365)	(30,364)
Increase (decrease) in cash and cash equivalents during the period	45,509	(17,868)
Cash and cash equivalents at beginning of the period	275,819	254,916
Cash and cash equivalents at end of the period	$321,328	$237,048

BASIS OF PRESENTATION

BASIS OF PRESENTATION
	9 Months Ended Mar. 31, 2010
BASIS OF PRESENTATION	NOTE 1BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements (consolidated financial statements) include the accounts of Open Text Corporation and our wholly owned subsidiaries, collectively referred to as Open Text or the Company. All inter-company balances and transactions have been eliminated. These consolidated financial statements are expressed in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). These financial statements are based upon accounting policies and the methods of their application are consistent with those used and described in our annual consolidated financial statements for the fiscal year ended June30, 2009. The consolidated financial statements do not include certain financial statement disclosures included in the annual consolidated financial statements prepared in accordance with U.S. GAAP and therefore should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended June30, 2009. The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented and includes the financial results of Vignette Corporation (Vignette), with effect from July22, 2009 (see Note 14). The operating results for the three and nine months ended March31, 2010 are not necessarily indicative of the results expected for any succeeding quarter or the entire fiscal year ending June30, 2010. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. In particular, significant estimates, judgments and assumptions include those related to: (i)revenue recognition, (ii)allowance for doubtful accounts, (iii)testing goodwill for impairment, (iv)the valuation of acquired intangible assets, (v)the valuation of long-lived assets, (vi)the recognition of contingencies, (vii)restructuring accruals, (viii)acquisition accruals and pre-acquisition contingencies, (ix)asset retirement obligations, (x)realization of investment tax credits, (xi)the valuation of stock options granted and liabilities related to share-based payments, including the valuation of our long-term incentive plan, (xii)the valuation of financial instruments, (xiii)the valuation of pension assets and obligations, and (xiv)accounting for income taxes. Comprehensive income (loss) The following table sets forth the components of comprehensive income (loss) for the reporting periods indicated: Three months ended March 31, Nine months ended Ma

NEW ACCOUNTING PRONOUNCEMENTS A

NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING POLICY UPDATES
	9 Months Ended Mar. 31, 2010
NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING POLICY UPDATES	NOTE 2NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING POLICY UPDATES Recent Accounting Pronouncements Revenue Recognition Updates In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2009-13,Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13). ASU2009-13 applies to multiple-deliverable revenue arrangements that are currently within the scope of FASB ASC Subtopic 605-25 (previously included in Emerging Issues Task ForceIssue no. 00-21,Revenue Arrangements with Multiple Deliverables). ASU 2009-13 provides principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. It also requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price. The guidance eliminates the use of the residual method, requires entities to allocate revenue using the relative-selling-price method, and significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. Additionally, in October 2009 the FASB also issued Accounting Standards Update 2009-14 (Topic985): Certain Revenue Arrangements that Include Software Arrangements (ASU 2009-14). ASU 2009-14 focuses on determining which arrangements are within the scope of the software revenue guidance in ASC Topic 985 (previously included in AICPA Statement of Position no. 97-2,Software Revenue Recognition)and those that are not. ASU 2009-14 removes tangible products from the scope of the software revenue guidance if the products contain both software and non-software components that function together to deliver a products essential functionality and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are within the scope of the software revenue guidance. Bothof these updates are effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June15, 2010.We are currently assessing the impact of these updates on our future consolidated financial statements. Measuring Liabilities at Fair Value In August 2009, the FASB issued Accounting Standards Update 2009-05, Fair Value Measurements and Disclosures (Topic 820)Measuring Liabilities at Fair Value (ASU 2009-05). ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value of such liability using one or more of the techniques prescribed by the update. We adopted ASU 2009-05 in our first quarter of Fiscal 2010 and its adoption did not have a material impact on our consolidated financial statements. In January 2010, the FASB issued Accounting Standards Update No.2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 includes certain additional disclosures about the different class

ALLOWANCE FOR DOUBTFUL ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS
	9 Months Ended Mar. 31, 2010
ALLOWANCE FOR DOUBTFUL ACCOUNTS	NOTE 3ALLOWANCE FOR DOUBTFUL ACCOUNTS Balance of allowance for doubtful accounts as of June30, 2009 $ 4,208 Bad debt expense for the period 3,616 Write-offs /adjustments (2,617 ) Balance of allowance for doubtful accounts as of March31, 2010 $ 5,207

CAPITAL ASSETS

CAPITAL ASSETS
	9 Months Ended Mar. 31, 2010
CAPITAL ASSETS	NOTE 4CAPITAL ASSETS As of March31, 2010 Cost Accumulated Depreciation Net Furniture and fixtures $ 14,261 $ 9,665 $ 4,596 Office equipment 7,027 5,981 1,046 Computer hardware 89,957 75,078 14,879 Computer software 32,528 24,878 7,650 Leasehold improvements 24,077 13,820 10,257 Land and buildings* 18,457 2,050 16,407 $ 186,307 $ 131,472 $ 54,835 As of June30, 2009 Cost Accumulated Depreciation Net Furniture and fixtures $ 11,472 $ 7,677 $ 3,795 Office equipment 8,696 7,674 1,022 Computer hardware 77,813 66,118 11,695 Computer software 28,094 20,679 7,415 Leasehold improvements 19,662 13,074 6,588 Land and buildings 16,163 1,513 14,650 $ 161,900 $ 116,735 $ 45,165 * Included in the cost of the building is an amount which relates to the Companys construction of a new building in Waterloo, Ontario, Canada. Additions to the building amounted to $0.2 million during the three months ended March31, 2010. Construction of the building is in progress and therefore depreciation has not yet commenced.

GOODWILL

GOODWILL
	9 Months Ended Mar. 31, 2010
GOODWILL	NOTE 5GOODWILL Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets. The following table summarizes the changes in goodwill since June30, 2009: Balance, June30, 2009 $ 576,111 Acquisition of Vignette Corporation (note 14) 132,524 Adjustments relating to prior acquisitions (793 ) Adjustments on account of foreign exchange (8,009 ) Balance, March31, 2010 $ 699,833

ACQUIRED INTANGIBLE ASSETS

ACQUIRED INTANGIBLE ASSETS
	9 Months Ended Mar. 31, 2010
ACQUIRED INTANGIBLE ASSETS	NOTE 6ACQUIRED INTANGIBLE ASSETS Technology Assets Customer Assets Total Net book value, June30, 2009 $ 173,547 $ 141,501 $ 315,048 Acquisition of Vignette Corporation (note 14) 68,200 22,700 90,900 Amortization expense (44,338 ) (26,562 ) (70,900 ) Foreign exchange and other impacts 406 (684 ) (278 ) Net book value, March31, 2010 $ 197,815 $ 136,955 $ 334,770 The range of amortization periods for intangible assets is from 4-10 years. The following table shows the estimated future amortization expense for the fiscal years indicated below. This calculation assumes no future adjustments to acquired intangible assets: Fiscalyearsending June30, 2010 (three months ended June 30) $ 23,652 2011 93,149 2012 90,753 2013 88,046 2014 and beyond 39,170 Total $ 334,770

OTHER ASSETS

OTHER ASSETS
	9 Months Ended Mar. 31, 2010
OTHER ASSETS	NOTE 7OTHER ASSETS AsofMarch31, 2010 AsofJune30, 2009 Debt issuance costs $ 4,692 $ 4,728 Depositsand restricted cash 8,972 4,615 Long-term prepaid expenses and other long-term assets 3,844 3,130 Pension assets 252 591 $ 17,760 $ 13,064 Debt issuance costs relate primarily to costs incurred for the purpose of obtaining long-term debt used to partially finance the Hummingbird acquisition and are being amortized over the life of the long-term debt.Deposits and restricted cash relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of contractual-based agreements. Long-term prepaid expenses and other long-term assets primarily relate to certain advance payments on long-term licenses that are being amortized over the applicable terms of the licenses. Pension assets relate to defined benefit pension plans for legacy IXOS employees and directors (see Note 9), recognized under ASC Topic 715 CompensationRetirement Benefits.

ACCOUNTS PAYABLE AND ACCRUED LI

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
	9 Months Ended Mar. 31, 2010
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES	NOTE 8ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Current liabilities Accounts payable and accrued liabilities are comprised of the following: AsofMarch31, 2010 AsofJune30, 2009 Accounts payabletrade $ 10,745 $ 15,465 Accrued salaries and commissions 34,101 31,973 Accrued liabilities 49,430 49,527 Amounts payable in respect of restructuring (note 13) 11,299 5,061 Amounts payable in respect of acquisitions and acquisition related accruals 5,647 12,992 Asset retirement obligations 3,197 1,974 $ 114,419 $ 116,992 Long-term accrued liabilities AsofMarch31, 2010 AsofJune30, 2009 Amounts payable in respect of restructuring (note 13) $ 756 $ 849 Amounts payable in respect of acquisitions and acquisition related accruals 2,979 7,128 Other accrued liabilities 8,682 7,936 Asset retirement obligations 4,265 5,186 $ 16,682 $ 21,099 Asset retirement obligations We are required to return certain of our leased facilities to their original state at the conclusion of our lease. We have accounted for such obligations in accordance with ASC Topic 410 Asset Retirement and Environmental Obligations. As of March31, 2010 the present value of this obligation was $7.5 million (June30, 2009 $7.2 million), with an undiscounted value of $9.6 million (June 30, 2009 $8.7 million). Accruals relating to acquisitions In relation to our acquisitions made before July1, 2009, the date on which we adopted ASC Topic 805, we have accrued for costs relating to legacy workforce reductions and abandonment of excess legacy facilities. Such accruals were capitalized as part of the cost of the subject acquisition and in the case of abandoned facilities, have been recorded at present value less our best estimate for future sub-lease income and costs incurred to achieve sub-tenancy. The accrual for workforce reductions is extinguished against the payments made to the employees and in the case of excess facilities, will be discharged over the term of the respective leases. Any excess of the difference between the present value and actual cash paid for the abandoned facility will be charged to income and any deficits will be reversed to goodwill. The provisions for abandoned facilities are expected to be paid by February 2015. The following table summarizes the activity with respect to our acquisition accruals during the nine months ended March31, 2010. Balance June30, 2009 Initial Accruals Usage/ Foreign Exchange/ Other Adjustments Subsequent Adjustments to Goodwill Balance March31, 2010 Captaris Employee termination costs $ 4,916 $ $ (4,227 ) $ (457 ) $ 232 Excess facilities 6,123 (2,066 ) 147 4,204 Transaction-related costs (49 ) 49 11,039 (6,342 ) (261 ) 4,436 Hummingbird Employee termination cost

PENSION PLANS AND OTHER POST RE

PENSION PLANS AND OTHER POST RETIREMENT BENEFITS
	9 Months Ended Mar. 31, 2010
PENSION PLANS AND OTHER POST RETIREMENT BENEFITS	NOTE 9PENSION PLANS AND OTHER POST RETIREMENT BENEFITS CDT Defined Benefit Plan and CDT Long-term Employee Benefit Obligations: On November1, 2008, the following unfunded defined benefit pension plan and long-term employee benefit obligations were acquired, relating to legacy Captaris employees of a wholly owned subsidiary of Captaris called Captaris Document Technologies GmbH (CDT). As of March31, 2010 and June30, 2009, the balances relating to these obligations were as follows: Totalbenefit obligation Currentportionof benefit obligation* Noncurrentportionof benefit obligation CDT defined benefit plan $ 14,819 $ 435 $ 14,384 CDT Anniversary plan 730 183 547 CDT early retirement plan 432 432 Total as of March31, 2010 $ 15,981 $ 618 $ 15,363 Totalbenefit obligation Currentportionof benefit obligation* Noncurrentportionof benefit obligation CDT defined benefit plan $ 14,828 $ 362 $ 14,466 CDT Anniversary plan 960 214 746 CDT early retirement plan 591 591 Total as of June30, 2009 $ 16,379 $ 576 $ 15,803 * The current portion of the benefit obligation has been included within Accounts payable and accrued liabilities within the Condensed Consolidated Balance Sheets. CDT Defined Benefit Plan CDT sponsors an unfunded defined benefit pension plan covering substantially all CDT employees (CDT pension plan) which provides for old age, disability and survivors benefits. Benefits under the CDT pension plan are generally based on age at retirement, years of service and the employees annual earnings. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. The following are the components of net periodic benefit costs for the CDT pension plan and the details of the change in the benefit obligation for the periods indicated: AsofMarch31, 2010 AsofJune30, 2009 Benefit obligationbeginning $ 14,828 * $ 13,489 ** Service cost 312 349 Interest cost 668 585 Benefits paid (252 ) (134 ) Curtailment (gain)/ loss 94 (271 ) Actuarial gain (95 ) (734 ) Foreign exchange (736 ) 1,544 Benefit obligationending 14,819 14,828 Less: current portion (435 ) (362 ) Noncurrent portion of benefit obligation $ 14,384 $ 14,466 * Benefit obligation as of June30, 2009. ** Benefit obligation as of November1, 2008 (date of acquisition). The following are the details of net pension expense for the CDT pension plan for the following periods indicated: Threemonthsended March 31, 2010 Ninemonthsended March 31, 2010 Pension expense: Service cost $ 99 $ 312 Interest cost 212 668 Net pension

LONG-TERM DEBT

LONG-TERM DEBT
	9 Months Ended Mar. 31, 2010
LONG-TERM DEBT	NOTE 10LONG-TERM DEBT Long-term debt Long-term debt is comprised of the following: AsofMarch31, 2010 AsofJune30, 2009 Long-term debt Term loan $ 288,767 $ 291,012 Mortgage 12,789 11,671 301,556 302,683 Less: Current portion of long-term debt Term loan 2,993 2,993 Mortgage 12,789 456 15,782 3,449 Long-term portion of long-term debt $ 285,774 $ 299,234 Term loan and Revolver On October2, 2006, we entered into a $465.0 million credit agreement (the credit agreement) with a Canadian chartered bank (the bank) consisting of a $390.0 million term loan facility (the term loan) and a $75.0 million committed revolving long-term credit facility (the revolver). The term loan was used to finance a portion of our Hummingbird acquisition. We have not drawn down any amounts under the revolver to date. Term loan The term loan has a seven year term, expires on October2, 2013 and bears interest at a floating rate of LIBOR plus 2.25%. The quarterly scheduled term loan principal repayments are equal to 0.25% of the original principal amount, due each quarter with the remainder due at the end of the term, less ratable reductions for any non-scheduled prepayments made. From October2, 2006 (the inception of the loan) to March31, 2010, we have made total non-scheduled prepayments of $90.0 million towards the principal on the term loan. Our current quarterly scheduled principal payment is approximately $0.7 million. For the three and nine months ended March31, 2010, we recorded interest expense of $1.8 million and $5.5 million, respectively, (three and nine months ended March31, 2009-$2.0 million and $9.2 million, respectively), relating to the term loan. Revolver The revolver has a five year term and expires on October2, 2011. Borrowings under this facility bear interest at rates specified in the credit agreement. The revolver is subject to a stand-by fee ranging between 0.30% and 0.50%per annum depending on our consolidated leverage ratio. There were no borrowings outstanding under the revolver as of March31, 2010. For the three and nine months ended March31, 2010, we recorded interest expense of $57,000 and $0.2 million respectively, (three and nine months ended March31, 2009 $56,000 and $0.2 million, respectively), on account of stand-by fees relating to the revolver. Mortgage The mortgage consists of a five year mortgage agreement entered into during December 2005 with the bank. The original principal amount of the mortgage was Canadian $15.0 million. The mortgage: (i)has a fixed term of five years, (ii)matures on January1, 2011, and (iii)is secured by a lien on our headquarters in Waterloo, Ontario. Interest accrues monthly at a fixed rate of 5.25%per annum. Principal and interest are payable in monthly installments of Canadian $0.1 million with a final lump sum principal payment of Canadian $12.6 million due on maturity. As of March 31, 2010, the carrying value of the mortgage was $12.8 million (June 30, 2009 $11.7 million). As of M

SHARE CAPITAL, OPTION PLANS AND

SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS
	9 Months Ended Mar. 31, 2010
SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS	NOTE 11SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS Share Capital Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of first preference shares. No preference shares have been issued. We did not repurchase any Common Shares during the three and nine months ended March31, 2010 and 2009. Share-Based Payments Total share-based compensation cost for the periods indicated below is detailed as follows: ThreemonthsendedMarch31, NinemonthsendedMarch31, 2010 2009 2010 2009 Stock options $ 1,066 $ 1,424 $ 6,268 * $ 3,957 Restricted stock units 193 811 Deferred stock units 75 75 Total share-based compensation expense $ 1,334 $ 1,424 $ 7,154 $ 3,957 * Inclusive of charges of $3.2 million booked to Special charges (see Note 13). Summary of Outstanding Stock Options As of March31, 2010, options to purchase an aggregate of 2,674,508 Common Shares were outstanding and 1,421,095 Common Shares were available for issuance under our stock option plans. Our stock options generally vest over four years and expire between seven and ten years from the date of the grant. The exercise price of the options we grant is set at an amount that is not less than the closing price of our Common Shares on the trading day for the NASDAQ immediately preceding the applicable grant date. A summary of option activity under our stock option plans for the nine months ended March31, 2010 is as follows: Options Weighted- AverageExercise Price Weighted- Average Remaining ContractualTerm (years) AggregateIntrinsicValue ($000s) Outstanding at June30, 2009 2,828,989 $ 20.71 Granted 285,500 41.12 Exercised (430,444 ) 18.99 Forfeited or expired (9,537 ) 22.02 Outstanding at March31, 2010 2,674,508 $ 23.16 3.78 $ 65,027 Exercisable at March31, 2010 1,632,391 $ 18.18 2.97 $ 47,814 We estimate the fair value of stock options using the Black-Scholes option pricing model, consistent with the provisions of ASC Topic 718 CompensationStock Compensation (ASC Topic 718) and SEC Staff Accounting Bulletin No.107. The option-pricing models require input of subjective assumptions including the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our stock options based upon historical data. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards. For the periods indicated, the followi

INCOME TAXES

INCOME TAXES
	9 Months Ended Mar. 31, 2010
INCOME TAXES	NOTE 12INCOME TAXES Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates. Upon adoption of FIN 48 we elected to follow an accounting policy to classify interest related to liabilities for income tax expense under the Interest income (expense), net line and penalties related to liabilities for income tax expense under the Other income (expense) line of our Condensed Consolidated Statements of Income. For the three and nine months ended March31, 2010, we recognized interest in the amount of $0.3million and $1.5 million, respectively (three and nine months ended March31, 2009, $0.3 million and $1.4 million, respectively) and penalties in the amount of nil and a recovery of $0.2 million, respectively (three and nine months ended March31, 2009, $0.3 million, and $0.3 million respectively). The amount of interest and penalties accrued as of March31, 2010 was $6.1 million ($4.1 million as of June30, 2009) and $9.8 million ($9.4 million as of June30, 2009), respectively. Included in these balances as of March31, 2010, are accrued interest and penalties of $0.5 million and $0.6 million, respectively, relating to the acquisition of Vignette (see Note 14). We believe that it is reasonably possible that the gross unrecognized tax benefits, as of March31, 2010 could increase in the next 12 months by $1.1 million (June 30, 2009, decrease by $0.2 million), relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions. Our three most significant tax jurisdictions are Canada, the United States and Germany. Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. Tax years that remain open to examinations by local taxing authorities vary by jurisdiction up to ten years. We are subject to tax examinations in all major taxing jurisdictions in which we operate and currently have examinations open in Canada, Germany, the United States, France and Spain. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. We believe that we have adequately provided for any reasonably foreseeable outcomes related to our tax examinations and that any settlement will not have a material adverse effect on our consolidated financial position or results of operations. However, we cannot predict with any level of certainty the exact nature of any future possible settlements.

SPECIAL CHARGES

SPECIAL CHARGES
	9 Months Ended Mar. 31, 2010
SPECIAL CHARGES	NOTE 13SPECIAL CHARGES Special charges are primarily costs related to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans. In addition, with effect from July1, 2009, Special charges also include acquisition-related costs with respect to acquisitions made on or after July1, 2009. The following tables summarize total Special charges incurred during the three and nine months ended March31, 2010. Threemonthsended March 31, 2010 Ninemonthsended March 31, 2010 Fiscal 2010 Restructuring Plan (cash liability portion) $ 5,056 $ 25,678 Fiscal 2010 Restructuring Plan (share-based compensation expense) 3,164 Total Fiscal 2010 Restructuring Plan 5,056 28,842 Fiscal 2009 Restructuring Plan 2,878 Acquisition-related costs 649 2,545 Impairment charges 378 830 Total $ 6,083 $ 35,095 Total costs to be incurred in conjunction with the Fiscal 2010 restructuring plan are expected to be approximately $32 million to $40 million, of which $28.8 million has been recorded within Special charges to date. Reconciliations of the liability relating to each of our outstanding restructuring plans are provided hereunder: Fiscal 2010 Restructuring Plan (cash liability portion) In the first quarter of Fiscal 2010, our Board approved, and we began to implement, restructuring activities to streamline our operations and consolidate certain excess facilities (Fiscal 2010 restructuring plan). These charges relate to workforce reductions and other miscellaneous direct costs. The provision related to workforce reduction is expected to be paid by December 2010. On a quarterly basis, we will conduct an evaluation of the remaining balances relating to workforce reduction and revise our assumptions and estimates as appropriate. A reconciliation of the beginning and ending liability for the nine months ended March31, 2010, is shown below. Fiscal 2010 Restructuring Plan Workforce reduction Facilitycosts Total Balance as of June30, 2009 $ $ $ Accruals and adjustments 23,859 1,819 25,678 Cash payments (15,551 ) (586 ) (16,137 ) Noncash draw-downs and foreign exchange 229 63 292 Balance as of March31, 2010 $ 8,537 $ 1,296 $ 9,833 Fiscal 2009 Restructuring Plan In the second quarter of Fiscal 2009, our Board approved, and we began to implement, restructuring activities to streamline our operations and consolidate certain excess facilities (Fiscal 2009 restructuring plan). These charges related to workforce reductions, abandonment of excess facilities and other miscellaneous direct costs, and do not include costs accrued for under EITF 95-3 in relation to our acquisition of Captaris (Note 8). The total costs to be incurred in conjunction with the Fiscal 2009 restructuring plan are expected to be $17.1 million, which has been recorded within Special charges since the commencement of the plan

ACQUISITIONS

ACQUISITIONS
	9 Months Ended Mar. 31, 2010
ACQUISITIONS	NOTE 14ACQUISITIONS Fiscal 2010 Vignette Corporation. On July21, 2009, we acquired, by way of merger, all of the issued and outstanding shares of Vignette, an Austin, Texas based company that provides and develops software used for managing and delivering business content. Per the terms of the merger agreement, each share of common stock of Vignette (not already owned by Open Text) issued and outstanding immediately prior to the effective date of the merger (July 21, 2009) was converted into the right to receive $8.00 in cash and 0.1447 of one Open Text common share (equivalent to a value of $5.33 as of July21, 2009). The acquisition of Vignette is expected to strengthen our ability to offer an expanded portfolio of Enterprise Content Management (ECM) solutions to further consolidate our position as an independent leader in the ECM marketplace. In accordance with ASC Topic 805, this acquisition was accounted for as a business combination. The results of operations of Vignette have been consolidated with those of Open Text beginning July22, 2009. Total consideration for this acquisition was comprised of: Equity consideration paid $ 125,223 Cash consideration paid 182,909 Fair value of total consideration transferred 308,132 Vignette shares already owned by Open Text through open market purchases (at fair value) 13,283 $ 321,415 Acquisition related costs (included in Special charges in the Condensed Consolidated Statements of Income) for the nine months ended March31,2010 $ 1,917 Assets Acquired and Liabilities Assumed The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of July21, 2009 are set forth below: Current assets (inclusive of cash acquired of $92,309) $ 171,959 Long-term assets 22,323 Intangible customer assets 22,700 Intangible technology assets 68,200 Total liabilities assumed (96,291 ) Total identifiable net assets 188,891 Goodwill 132,524 Net assets acquired $ 321,415 The fair value of Common shares issued as part of the consideration was determined based upon the closing price of Open Texts common shares on acquisition date. The factors that impact the qualitative composition of goodwill, the allocation of goodwill to our reporting units and the deductibility thereof for income tax purposes are currently being assessed. The fair value of current assets acquired includes accounts receivable with a fair value of $27.1 million. The gross amount receivable was $28.3 million, of which $1.2 million was expected to be uncollectible. As of acquisition date, Vignette had significant deferred tax assets that were subject to valuation allowances including deferred tax assets relating to the domestic federal net operating loss (NOL) carryforwards. Internal Revenue Code Section382 imposes substantial restrictions on the utilization of these NOLs in the event of an ownership change of the corporation. We are currently assessing our ability to utilize these tax attribut

GUARANTEES AND CONTINGENCIES

GUARANTEES AND CONTINGENCIES
	9 Months Ended Mar. 31, 2010
GUARANTEES AND CONTINGENCIES	NOTE 15GUARANTEES AND CONTINGENCIES Guarantees and indemnifications We have entered into license agreements with customers that include limited intellectual property indemnification clauses. Generally, we agree to indemnify our customers against legal claims that our software products infringe certain third party intellectual property rights. In the event of such a claim, we are generally obligated to defend our customers against the claim and either settle the claim at our expense or pay damages that our customers are legally required to pay to the third-party claimant. These intellectual property infringement indemnification clauses generally are subject to limits based upon the amount of the license sale. We have not made any indemnification payments in relation to these indemnification clauses. In connection with certain facility leases, we have guaranteed payments on behalf of our subsidiaries either by providing a security deposit with the landlord or through unsecured bank guarantees obtained from local banks. We have not accrued a liability for guarantees, indemnities or warranties described above in the accompanying Condensed Consolidated Balance Sheets since no material payments are expected to be made. The maximum amount of potential future payments under such guarantees, indemnities and warranties is not determinable. Litigation We are subject from time to time to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business, and accrue for these items where appropriate. While the outcome of these proceedings and claims cannot be predicted with certainty, we do not believe that the outcome of any of these legal matters will have a material adverse effect on our consolidated financial position, results of operations and cash flows. Currently, we are not involved in any litigation that we reasonably believe could materially impact our financial position or results of operations and cash flows.

SUPPLEMENTAL CASH FLOW DISCLOSU

SUPPLEMENTAL CASH FLOW DISCLOSURES
	9 Months Ended Mar. 31, 2010
SUPPLEMENTAL CASH FLOW DISCLOSURES	NOTE 16SUPPLEMENTAL CASH FLOW DISCLOSURES Supplemental disclosure of cash flow information: Threemonthsended March 31, Ninemonthsended March 31, 2010 2009 2010 2009 Cash paid during the period for interest $ 2,061 $ 3,034 $ 8,547 $ 12,074 Cash received during the period for interest $ 142 $ 739 $ 687 $ 3,938 Cash paid during the period for income taxes $ 12,443 $ 1,005 $ 28,116 $ 6,028

NET INCOME PER SHARE

NET INCOME PER SHARE
	9 Months Ended Mar. 31, 2010
NET INCOME PER SHARE	NOTE 17NET INCOME PER SHARE Basic earnings per share are computed by dividing net income by the weighted average number of Common Shares outstanding during the period. Diluted earnings per share are computed by dividing net income by the shares used in the calculation of basic net income per share plus the dilutive effect of common share equivalents, such as stock options, using the treasury stock method. Common share equivalents are excluded from the computation of diluted net income per share if their effect is anti-dilutive. Three months ended March 31, Nine months ended March 31, 2010 2009 2010 2009 Basic earnings per share Net income $ 13,114 $ 22,035 $ 36,045 $ 37,457 Basic earnings per share $ 0.23 $ 0.42 $ 0.64 $ 0.72 Diluted earnings per share Net income $ 13,114 $ 22,035 $ 36,045 $ 37,457 Diluted earnings per share $ 0.23 $ 0.41 $ 0.63 $ 0.71 Weighted average number of shares outstanding Basic 56,537 52,312 56,106 51,825 Effect of dilutive securities 1,159 1,129 1,108 1,297 Diluted 57,696 53,441 57,214 53,122 Excluded as anti-dilutive * 309 419 527 34 * Represents options to purchase Common Shares excluded from the calculation of diluted net income per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS
	9 Months Ended Mar. 31, 2010
RELATED PARTY TRANSACTIONS	NOTE 18RELATED PARTY TRANSACTIONS Our procedure regarding the approval of any related party transaction is that the material facts of such transaction shall be reviewed by the independent members of our Board and the transaction approved by a majority of the independent members of our Board. The Board reviews all transactions wherein we are, or will be a participant and any related party has or will have a direct or indirect interest. In determining whether to approve a related party transaction, the Board generally takes into account, among other facts it deems appropriate: whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances; the extent and nature of the related persons interest in the transaction; the benefits to the company of the proposed transaction; if applicable, the effects on a directors independence; and if applicable, the availability of other sources of comparable services or products. During the nine months ended March31, 2010,Mr. Stephen Sadler, a director,earned approximately $0.3 million (nine months ended March31, 2009 $0.4 million) in consulting fees from Open Text for assistance with acquisition-related business activities.Mr.Sadler abstained from voting on all transactions from which he would potentially derive consulting fees.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS
	9 Months Ended Mar. 31, 2010
SUBSEQUENT EVENTS	NOTE 19SUBSEQUENT EVENTS Nstein Technologies Inc. On April1, 2010, we acquired Nstein Technologies Inc, (Nstein) a software company based in Montreal, Quebec, Canada. Nstein provides content management solutions which help enterprises centralize, understand and manage large amounts of content. Nsteins solutions include its patented Text Mining Engine which allows users to more easily search through different content and data. We believe we will be able to use Nsteins solutions to leverage and enhance our own product offering, thus further strengthening our position as an independent leader in the ECM market. Total consideration for this acquisition was $32.8 million, of which $24.3 million was paid in cash and the rest in Open Text shares. Burntsand Inc. On April 26, 2010, we announced our intention to acquire all issued and outstanding shares of Burntsand Inc (Burntsand) for a total of approximately CAD $11 million. The transaction is subject to the approval of Burntsands shareholders and is expected to close some time in our fourth quarter of Fiscal 2010. Burntsand, based in Toronto, Ontario, Canada, is a provider of technology consulting services for customers with complex information processing and information management requirements, focusing in particular in areas such as Enterprise Content Management, Collaboration and Service Management. We believe Burntsand will complement and enhance our current service offerings to further strengthen our position in the ECM market.