Docucorp International (DOCC) 8-K Docucorp Announces Third Quarter Results

News Release

Contact:
	John Gray
	Chief Financial Officer
	214-891-6450
	jgray@docucorp.com

For Release:
	FOR IMMEDIATE RELEASE

Docucorp Announces Third Quarter Results

DALLAS – May 25, 2005 –Docucorp^® International (Nasdaq: DOCC), a leading provider of enterprise information solutions, today announced revenues of $19.8 million for the third quarter of fiscal year 2005, a seven percent increase compared to $18.5 million for the third quarter of the prior year. The company reported net income of $468,000, or $0.04 per diluted share, for the quarter compared to net income of $707,000, or $0.06 per diluted share, for the same period a year ago.

     For the nine months ended April 30, 2005, the company reported record revenues of $59.7 million compared to $57.1 million for the same period of fiscal year 2004. Net income for the first nine months of fiscal year 2005 was $2.4 million, or $0.21 per diluted share, compared to $3.8 million, or $0.33 per diluted share, for the first nine months of fiscal year 2004.

     Compared to the third quarter of the prior fiscal year, software license revenue increased 52 percent to $2.8 million, and ASP hosting revenue increased 12 percent to $6.6 million. Professional services revenue decreased four percent to $5.2 million, and maintenance revenue decreased two percent to $5.2 million.

     Third quarter net income was less than the same period of the prior year primarily due to lower margin in the company’s ASP business, increased product development costs, increased software amortization, expenses associated with Sarbanes-Oxley compliance, and costs associated with the relocation of the company’s corporate headquarters.

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DOCUCORP, THIRD QUARTER 2005 RESULTS ADD #1

     “We are pleased with the improvements in our software license sales and specifically the European software license sales,” said Michael D. Andereck, president and chief executive officer, Docucorp International. “Our European operations realized record revenues for the quarter and have experienced their fourth consecutive quarter of sequential revenue growth.”

     “Considering the acquisition of Newbridge Corporation late in the first quarter of the current fiscal year, I am disappointed in our ASP revenue growth, as well as the ASP margin,” said Andereck. “However, I remain confident in our ability to grow our ASP revenue as evidenced by our recently announced signing of a multi-million dollar contract with Capgemini Energy Limited Partnership.”

     “We remain committed to growing our revenues and enhancing our profitability for the benefit of our stockholders, employees and partners,” said Andereck. “Our focus during the recent quarter was on generating sales and improving the sales organization. While we clearly made progress, we need to continue to concentrate on accelerating sales.”

About Docucorp

Docucorp is the authority in providing dynamic solutions for acquiring, managing, personalizing and presenting enterprise information. Servicing the entire enterprise information lifecycle, Docucorp’s information software, application service provider (ASP) hosting and professional consulting services enable companies to implement solutions in-house or fully outsource to Docucorp. The company has an installed base of more than 1,300 customers, including many of the largest insurance, utility, financial services and health care organizations. Headquartered in Dallas, Docucorp has facilities in Atlanta; Silver Spring, Md.; Bedford, N.H.; Eindhoven, Netherlands; Brussels, Belgium; Prague, Czech Republic; Zurich, Switzerland; and London.

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DOCUCORP, THIRD QUARTER 2005 RESULTS ADD #2

Certain information contained in this news release may include “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than historical facts, included herein are forward-looking statements. These statements involve risks and uncertainties, such as competition, technological developments, loss of significant customers and the other factors discussed in the Company’s periodic reports filed with the Securities and Exchange Commission, that could cause the Company’s actual results to differ materially from those expressed or implied by these forward-looking statements. Docucorp is a registered trademark of Docucorp International.

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Consolidated Statements of Operations and Balance Sheet follow.

DOCUCORP INTERNATIONAL, INC.
Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)

	Three Months						Nine Months
	Ended April 30,						Ended April 30,
	2005			2004			2005			2004
Revenues
ASP hosting	$	6,559		$	5,882		$	20,150		$	17,778
Professional services		5,246			5,485			16,227			15,596
License		2,756			1,814			7,427			7,606
Maintenance		5,218			5,329			15,935			16,074
Total revenues		19,779			18,510			59,739			57,054
Cost of revenues
ASP hosting		6,092			4,909			17,858			14,592
Professional services		4,169			4,616			12,502			12,924
License		1,044			868			3,002			2,296
Maintenance		393			346			1,120			1,023
Total cost of revenues		11,698			10,739			34,482			30,835
Gross profit		8,081			7,771			25,257			26,219
Operating expenses
Product development		2,180			1,858			6,404			6,046
Sales and marketing		3,040			2,700			8,817			8,339
General and administrative		2,064			1,800			6,065			5,199
Total operating expenses		7,284			6,358			21,286			19,584
Income from operations		797			1,413			3,971			6,635
Interest expense		(118	)		(149	)		(442	)		(481	)
Other income (expense), net		82			(53	)		326			280
Income before income taxes		761			1,211			3,855			6,434
Provision for income taxes		293			504			1,484			2,671
Net income	$	468		$	707		$	2,371		$	3,763
Basic net income per share	$	0.04		$	0.07		$	0.22		$	0.37
Weighted average basic shares outstanding		10,741			10,359			10,609			10,050
Diluted net income per share	$	0.04		$	0.06		$	0.21		$	0.33
Weighted average diluted shares outstanding		11,621			11,720			11,561			11,328

DOCUCORP INTERNATIONAL, INC.
Consolidated Balance Sheets
(in thousands except share and per share amounts)
(unaudited)

	April 30,			July 31,
	2005			2004
Assets
Current assets:
Cash and cash equivalents	$	7,971		$	12,336
Accounts receivable, net of allowance of $462 and $375, respectively		17,487			16,752
Current portion of deferred taxes		112			112
Income tax receivable		817			817
Other current assets		2,688			2,461
Total current assets		29,075			32,478
Property and equipment, net of accumulated depreciation of $19,383 and $16,664, respectively		9,963			8,073
Software development costs, net of accumulated amortization of $24,882 and $22,096, respectively		13,470			12,269
Goodwill, net of accumulated amortization of $4,940		9,738			5,846
Identifiable intangibles, net of accumulated amortization of $64 and $0, respectively		956			—
Other assets		554			573
Total assets	$	63,756		$	59,239
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,063		$	1,473
Accrued liabilities:
Accrued compensation		2,210			2,104
Other		1,919			1,783
Income taxes payable		1,190			158
Current portion of capital lease obligations		1,271			626
Current portion of long-term debt		3,616			3,550
Deferred revenue		11,283			12,038
Total current liabilities		23,552			21,732
Deferred taxes		4,835			4,835
Long-term capital lease obligations		2,454			1,716
Long-term debt		4,371			6,804
Other long-term liabilities		1,662			1,353
Commitment and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized; none issued		—			—
Common stock, $0.01 par value, 50,000,000 shares authorized; 16,593,849 shares issued		166			166
Additional paid-in-capital		47,959			47,350
Treasury stock at cost, 5,506,385 and 6,050,429 shares, respectively		(30,611	)		(33,635	)
Retained earnings		12,133			9,821
Unearned compensation		(2,201	)		(402	)
Foreign currency translation adjustment		(564	)		(501	)
Total stockholders’ equity		26,882			22,799
Total liabilities and stockholders’ equity	$	63,756		$	59,239