UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
May 30, 2007
Date of Report
(Date of earliest event reported)
NOVELL, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 0-13351 (Commission File Number) | 87-0393339 (IRS Employer Identification Number) |
404 Wyman Street, Suite 500
Waltham, MA 02451
(Address of principal executive offices and zip code)
(781) 464-8000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
| (17 CFR 240.14d-2(b)) |
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
| (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On May 30, 2007, Novell, Inc. (“Novell”) issued a press release to report Novell's financial results for the second fiscal quarter ended April 30, 2007. A copy of the press release is attached to this current report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
We disclosed non-GAAP adjusted financial measures in the press release for the fiscal quarters and first six months ended April 30, 2007 and April 30, 2006. These non-GAAP measures include adjusted diluted income available to common stockholders from continuing operations, adjusted diluted income per common share from continuing operations and adjusted diluted weighted average shares. These non-GAAP financial measures do not replace the presentation of Novell's GAAP financial results but are provided to improve overall understanding of current financial performance and prospects for the future because they eliminate expenses and gains that are unusual, not predictable or not within our control.
We believe the presentation of non-GAAP adjusted financial measures presents a useful performance measure because it enables investors to track and compare our on-going, ordinary operating performance from one reporting period to another and helps investors better understand management's view of our on-going, ordinary business. Novell's management also includes non-GAAP financial measures as a component of regular internal operating reports. Our management uses non-GAAP measures to allocate resources, determine commissions and bonuses, and evaluate performance. By making these same measures available in our external reporting, we are able to provide investors with the additional financial measures that management believes reflect its view of the on-going, ordinary business, thus improving investors' ability to assess the future prospects of Novell.
Adjusted diluted income available to common stockholders from continuing operations is useful to investors in evaluating our results of operations because it provides a more consistent reflection of our on-going, ordinary operating performance. Most adjustments are for items that are unusual, infrequent, difficult to predict and often material. Non-GAAP financial measures exclude amounts that may recur but cannot be predicted. Also excluded are items that distort trends in our on-going, ordinary business. During the fiscal quarters and first six months ended April 30, 2007 and April 30, 2006, we made adjustments to diluted income available to common stockholders from continuing operations for the following:
- Stock-based compensation expense - We treated the stock-based compensation expense in the fiscal quarters and first six months ended April 30, 2007 and April 30, 2006 as an adjustment in calculating adjusted diluted income available to common stockholders from continuing operations to be more in line with the financial community and the method used to calculate consensus estimates. Also, FASB Statement No. 123R, “Share Based Payment”, was not applied prior to fiscal year 2006 and therefore its inclusion in the GAAP financial results distorts long-term trends.
- Restructuring expenses - The restructuring expenses we incurred in the second fiscal quarter and first six months ended April 30, 2007 related to a decision to refocus our business to increase sustainable profitability. The amended restructuring plan resulted from our continuing efforts to develop our comprehensive transformation of our business as we work towards achieving our stated goal of 5% to 7% exit rate operating margins by the end of the full fiscal year ended October 31, 2007. These expenses are not expected to recur once this restructuring is completed, currently targeted for the end of fiscal 2007. In the first six months ended April 30, 2006 we did not incur restructuring expenses; however, we did have a reversal of some prior restructuring expenses to adjust the liability based on changes in estimates. This reversal was not anticipated and is not expected to recur.
- Purchased in-process research and development - In the second fiscal quarter ended April 30, 2006 we completed an acquisition. As part of the acquisition, we acquired some in-process research and development that was expensed in the period of acquisition. Acquisitions occur infrequently and the related in-process research and development expenses distort trends; therefore, these costs were not considered part of our on-going, ordinary business.
- Gain on sale of property, plant and equipment - This gain resulted from the sale of a corporate aviation asset in the second fiscal quarter ended April 30, 2006. We sell material corporate assets infrequently and are not in the business of selling material corporate assets; therefore these were not considered part of our on-going, ordinary business.
- Litigation-related income - The litigation settlements in the first six months ended April 30, 2007 and in the second fiscal quarter ended April 30, 2006 were unusual, unexpected and not part of our on-going, ordinary business.
- Stock-based compensation review expenses - In the third fiscal quarter ended July 31, 2006, we began a self-initiated, voluntary review of historical stock-based compensation practices and related potential accounting impact. In the second fiscal quarter and first six months ended April 30, 2007, we incurred expenses related to this review. This type of review occurs infrequently; therefore, the costs related to the review were not considered part of our on-going, ordinary business.
- Gain on sale of venture capital partnership interests - In prior years, we had a portfolio of investments in various venture capital partnerships. As part of our cash management strategy, we decided to eliminate this type of investment vehicle. In the first six months ended April 30, 2007, we sold the remaining investments. The sale of this portfolio of venture capital partnership interests was a one-time occurrence since the former investment program is no longer in place; therefore, the gain on the sale of the venture capital partnership interests was not considered part of our ongoing, ordinary business.
- Net gain (loss) on impaired long-term investments - Losses from impairments of long-term investments are not considered to be part of our on-going business. Likewise, gains from the sale of long-term investments made when we had the investment program in place are not considered to be part of our on-going business.
- Income tax adjustments - These adjustments result from the adjustments made to GAAP income (loss) from continuing operations related to the excluded items indicated above.
- Allocation of earnings to preferred stockholders - This adjustment results from the adjustments made to GAAP income (loss) available to common stockholders from continuing operations to arrive at non-GAAP income available to common stockholders from continuing operations and are required to be made based on the accounting rules for calculating diluted net income available to common stockholders from continuing operations and diluted net income per common share from continuing operations.
Adjusted diluted income per common share from continuing operations is useful to investors in evaluating the overall net effect of the foregoing adjustments on a diluted per share basis.
Adjusted diluted weighted average shares is useful to investors in evaluating the changes to diluted weighted average shares required by changes between GAAP and non-GAAP income (loss) from continuing operations.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number | Description |
---|---|
99.1 | Press Release dated May 30, 2007. |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Novell, Inc. (Registrant) | |
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Date: May 30, 2007 | By /s/ Dana C. Russell (Signature) Senior Vice President, Chief Financial Officer (Title) |
EXHIBIT INDEX
The following exhibit is filed as part of this current report on Form 8-K.
Exhibit Number | Description |
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Exhibit 99.1 | Press Release of Novell, Inc. dated May 30, 2007 |