================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO __________
COMMISSION FILE NUMBER 000-24677
BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0306721
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5151 SAN FELIPE, 25th FLOOR, HOUSTON, TX 77056
(Address of principal executive offices) (Zip code)
(713) 561-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
As of May 07, 2004, the Company had 47,602,013 shares of Common Stock, no par
value, outstanding.
================================================================================
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2004 2003
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $39,244 $35,449
Cash - restricted 2,250 2,250
Accounts receivable, net of allowance of $1,040 7,430 14,337
Other 1,978 2,180
------- -------
Total current assets 50,902 54,216
Property and equipment, net 5,726 6,564
Investments and other assets 2,795 2,498
------- -------
Total assets $59,423 $63,278
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,396 $ 2,066
Accrued liabilities 4,262 4,879
Accrued compensation 2,518 5,275
Deferred revenue 15,148 13,351
------- -------
Total current liabilities 23,324 25,571
Deferred revenue 1,522 1,477
Other 1,977 2,087
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, $0.01 par value, 20,000 shares authorized, none
issued - -
Common stock, no par value, 100,000 shares authorized, 47,562 and
47,034 shares issued and outstanding 1 1
Additional paid-in capital 106,168 105,176
Note receivable from shareholder (326) (392)
Accumulated deficit (74,672) (72,034)
Accumulated other comprehensive income 1,429 1,392
--------- ---------
Total shareholders' equity 32,600 34,143
--------- ---------
Total liabilities and shareholders' equity $ 59,423 $ 63,278
========= =========
See notes to unaudited consolidated financial statements.
2
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
-------------------
2004 2003
-------- --------
Revenues:
Licenses $ 5,912 $ 5,196
Services 9,051 7,851
-------- --------
14,963 13,047
Cost of revenues:
Cost of licenses 140 116
Cost of services 1,831 1,432
-------- --------
1,971 1,548
Gross profit 12,992 11,499
Operating costs and expenses:
Sales and marketing 9,180 7,758
Research and development 4,576 4,235
General and administrative 1,898 1,777
Restructuring -- 549
-------- --------
Operating loss (2,662) (2,820)
Other income 94 119
-------- --------
Loss before income taxes (2,568) (2,701)
Provision for income taxes 70 --
-------- --------
Net loss $ (2,638) $ (2,701)
======== ========
Loss per common share - basic and
diluted $ (0.06) $ (0.06)
======== ========
Number of shares used to calculate per share
amounts, basic and diluted 47,329 46,342
Reconciliation of net loss to comprehensive loss:
Net loss $ (2,638) $ (2,701)
Unrealized gain from foreign currency translation 37 189
-------- --------
Comprehensive loss $ (2,601) $ (2,512)
======== ========
See notes to unaudited consolidated financial statements.
3
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
--------------------
2004 2003
-------- --------
Cash flows from operating activities:
Net loss $ (2,638) $ (2,701)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 740 969
Stock compensation expense 56 --
Other (2) 74
Changes in operating assets and liabilities:
Accounts receivable 6,873 3,747
Other assets 114 570
Accounts payable (666) (999)
Accrued liabilities (3,494) (2,682)
Deferred revenues 1,849 499
-------- --------
Net cash provided by (used in) operating activities 2,832 (523)
-------- --------
Cash flows from investing activities:
Capital expenditures (194) (299)
Reimbursement of tenant improvements 284 --
Restrictions on cash (194) --
Other 10 --
-------- --------
Net cash provided by (used in) investing activities (94) (299)
-------- --------
Cash flows from financing activities:
Net proceeds from sale of common stock 992 248
-------- --------
Net cash provided by financing activities 992 248
Effect of exchange rate changes on cash 65 196
-------- --------
Net increase (decrease) in cash and cash equivalents 3,795 (378)
Cash and cash equivalents at beginning of year 35,449 37,760
-------- --------
Cash and cash equivalents at end of period $ 39,244 $ 37,382
======== ========
Non-cash financing and investing activities:
Reduction of shareholder note in lieu of guaranteed bonus $ 66 $ 161
See notes to unaudited consolidated financial statements.
4
BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying consolidated financial statements of BindView Development
Corporation, a Texas corporation (the "Company" or "BindView"), included herein
have been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The Company
believes that the presentations and disclosures herein are adequate to make the
information not misleading. The consolidated financial statements reflect all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the interim periods. Certain reclassifications have been made to
the prior year's consolidated financial statements to conform with the current
year presentation.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year. These
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements included in its Annual
Report on Form 10-K for the year ended December 31, 2003.
2. LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss
per share (in thousands, except per share amounts):
THREE MONTHS ENDED
MARCH 31,
-------------------
2004 2003
-------- --------
Numerator:
Net loss - numerator for
loss per share - basic and
diluted $ (2,638) $ (2,701)
======== ========
Denominator:
Weighted-average shares -
denominator for basic loss per share 47,329 46,342
Effect of dilutive securities -- --
-------- --------
Total diluted shares 47,329 46,342
======== ========
Loss per common share - basic and
diluted $ (0.06) $ (0.06)
======== ========
Options to purchase 9.2 million and 7.0 million shares of common stock for
the three months ended March 31, 2004 and 2003, respectively, were outstanding,
but were not included in the computation of diluted loss per share as their
inclusion would have been anti-dilutive.
3. STOCK BASED COMPENSATION
The Company accounts for all stock-based employee compensation plans under
the recognition and measurement provisions of APB Opinion 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's common shares at the date of the grant over
the amount an employee must pay to acquire the common shares. The Company
generally grants options at prices equal to the market price of common shares on
the date of the grant. However, if options are granted at a price below fair
market value, compensation expense is recorded in accordance with the provisions
of APB 25. Compensation expense may also be recognized
5
for certain options which are considered variable option grants. Statement of
Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based
Compensation - an Amendment to FAS 123," requires companies that continue to
account for stock-based compensation in accordance with APB 25 to disclose
certain information using tabular presentation as presented below. This table
illustrates the effect on net loss and loss per share as if the Company had
applied the fair value recognition provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation", to stock-based employee compensation (in thousands,
except per share amounts):
THREE MONTHS
ENDED MARCH 31,
-------------------
2004 2003
-------- --------
Net loss as reported $ (2,638) $ (2,701)
Add: Stock-based employee
compensation expense included in
reported net loss 56 --
Deduct: Total stock-based
employee compensation expense
determined under fair value method
for all awards (1,232) (1,440)
-------- --------
Pro forma net loss $ (3,814) $ (4,141)
======== ========
Loss per common share (basic and
diluted):
- - As reported $ (0.06) $ (0.06)
- - Pro forma $ (0.08) $ (0.09)
4. RESTRUCTURING EXPENSES AND ASSET IMPAIRMENTS
In January 2003, the Company approved a sales and marketing reorganization
plan (the "2003 Restructuring Plan"). The cost of this plan totaled
approximately $0.6 million and consisted primarily of (i) involuntary employee
separation for approximately 20 employees (a reduction in workforce of
approximately 4 percent), (ii) closing the Company's Netherlands sales office,
and (iii) reserves for leasehold abandonment. All actions under the 2003
Restructuring Plan were completed by December 31, 2003.
In July 2002, the Company approved a restructuring plan to improve
operating efficiency and improve sales and marketing productivity (the "2002
Restructuring Plan"). The cost of this plan totaled approximately $1.9 million
and consisted primarily of (i) involuntary employee separation for approximately
30 employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Company's Boston development center and certain European sales offices,
(iii) reserves for leasehold abandonment, and (iv) various non-personnel related
cuts.
The 2002 Restructuring Plan activity from December 31, 2003 to March 31,
2004 was as follows (in thousands):
REMAINING REMAINING
ACCRUAL CASH ACCRUAL
12/31/2003 EXPENDITURES 3/31/2004
---------- ------------ ---------
Lease commitments.......... $ 1,538 $ (128) $1,410
-------- ------ ------
$ 1,538 $ (128) $1,410
======== ====== ======
The remaining accrual for the 2002 Restructuring Plan at March 31, 2004 is
comprised of the estimated carrying costs for our remaining excess space in
Houston, Texas. Adjustments to this accrual could be required in future periods
if there are significant changes in the commercial real estate sublease market
in Houston, Texas.
In 2001, the Company completed a corporate reorganization and implemented
a number of cost-cutting measures to improve operating efficiency and to
accelerate our return to profitability (the "2001 Restructuring Plan"). The cost
of this plan totaled approximately $6.6 million and consisted primarily of: (i)
involuntary employee separation expenses for approximately 160 employees (a
reduction in workforce of approximately 21 percent), (ii)
6
downsizing or closing of the Company's Boston and Arlington development centers
and certain European sales offices, (iii) reserves for leasehold abandonment,
and (iv) various non-personnel related costs. The restructuring costs included a
$1.2 million charge related to asset impairments of leasehold improvements,
equipment and other assets of the closed or downsized offices.
The 2001 Restructuring Plan activity from December 31, 2003 to March 31,
2004 was as follows (in thousands):
REMAINING REMAINING
ACCRUAL CASH ACCRUAL
12/31/2003 EXPENDITURES 3/31/2004
---------- ------------ ---------
Lease commitments.......... $ 453 $ (58) $ 395
------ ------ ------
$ 453 $ (58) $ 395
====== ====== ======
The remaining accrual for the 2001 Restructuring Plan consists of excess
carrying costs until the lease cancellation for the Company's two floors
abandoned as part of said Plan is effective in September of 2004.
5. INCOME TAXES
The Company continues to provide a full valuation allowance against its
deferred tax assets of $19.6 million in accordance with Financial Accounting
Standard No. 109, "Accounting for Income Taxes". As in its prior assessments,
the Company considered current and previous performance and other relevant
factors in determining the sufficiency of its valuation allowance. Objective
factors, such as current and previous operating losses, were given substantially
more weight than management's outlook for future profitability. Until such time
as a consistent pattern of sufficient profitability is established, no tax
benefit will be recognized associated with the Company's pre-tax accounting
losses and a full income tax provision will not be provided on any future
pre-tax accounting income.
6. SUBSEQUENT EVENT
In May 2004, the Company's Board of Directors approved a stock repurchase
program for the second quarter of 2004. Under this program, management of the
Company may, at its discretion, spend up to $2.5 million for the repurchase of
the Company's common stock in the open market, subject to Securities and
Exchange Commission guidelines and restrictions set forth in Rule 10b-18.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include those discussed in the "Cautionary Statements" set
forth in the Company's Annual Report on Form 10-K for the year ended December
31, 2003. The following discussion should be read in conjunction with the
Company's consolidated financial statements included with this report and our
consolidated financial statements and related Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 2003 included in our Annual Report on Form 10-K.
OVERVIEW
See discussion under Item 1, "General" in our Annual Report on Form 10-K
for the year ended December 31, 2003 for an overview of our business.
CRITICAL ACCOUNTING POLICIES
There have been no significant changes to our critical accounting policies
and estimates during the three months ended March 31, 2004 compared with those
disclosed in Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations included in our Annual Report on Form 10-K for the
year ended December 31, 2003.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2004 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
2003
REVENUES. Revenues for the current quarter were $15.0 million compared
with $13.0 million for the first quarter of 2003. License revenues for the first
quarter of 2004 were $5.9 million, or 39.5 percent of total revenues, up from
$5.2 million, or 39.8 percent of total revenues, in the first quarter of 2003.
Services revenues for the first quarter of 2004 were $9.1 million, or 60.5
percent of total revenues, up from $7.9 million, or 60.2 percent of total
revenues, in the first quarter of 2003. Services revenues for the first quarter
of 2004 were comprised of maintenance revenues of $7.5 million and professional
services revenues of $1.6 million, up from $7.0 million in maintenance revenues
and $0.9 million in professional services revenues in the first quarter of 2003.
The increase in services revenues was primarily due to an increase in our
installed customer base and a higher focus on selling value-added consulting
services.
During the first quarter of 2004, revenues from our products for
Microsoft-based platforms totaled $10.1 million, an increase of 16.5 percent
over 2003. Revenues from these products accounted for approximately 68 percent
of total revenues in the first quarter of 2004, up from 67 percent of total
revenues for the first quarter of 2003. License revenues for our
Microsoft-related products for the first quarter of 2004 were $5.1 million
compared with $4.5 million in the first quarter of 2003. Maintenance revenues
for our Microsoft-related products in the first quarter of 2004 were $5.0
million compared with $4.2 million in the first quarter of 2003. We expect
revenues from our products and maintenance for Microsoft-based platforms will
continue to grow as a percentage of total revenues.
Revenues from our products for Novell-based platforms for the first
quarter of 2004 were $2.5 million, or 17 percent of total revenues, compared
with $2.7 million in first quarter of 2003, or 21 percent of total revenues.
Consistent with the trend seen in past quarters, total revenues from these
products were down year-over-year, reflecting both the maturity and our
penetration of the Novell market. Licenses revenues for Novell-based platforms
for the first quarter of 2004 were $0.6 million compared with $0.5 million in
the first quarter of 2003. Maintenance revenues for Novell-based platforms in
the first quarter of 2004 were $1.8 million compared with $2.2 million in the
first quarter of 2003. While we expect our Novell revenues will continue to
decline in the future, we expect the revenue decline will be modest relative to
the declines over the past two years and expect the decline will be offset by
higher revenues from our products and maintenance for other platforms.
8
Sales of our security focused bv-Control product line accounted for
approximately 84 percent of our license revenue in the first quarter of 2004
compared with 78 percent in the first quarter of 2003. Sales of our system
administration focused bv-Admin product line accounted for approximately 16
percent of our license revenue in the first quarter of 2004 compared with 22
percent in the first quarter of 2003.
No customer accounted for more than 10 percent of our revenues during the
first quarter of 2004 or 2003. Revenues recognized from sales to customers
outside North America, primarily in Europe, accounted for approximately 10
percent of total revenues in the first quarter of 2004 compared with 9 percent
in the first quarter of 2003.
GROSS PROFIT. Gross profit for the current quarter totaled $13.0 million,
up 13 percent from the first quarter of 2003, due to the increase in revenues.
Gross margin for the current quarter was 86.8 percent, down from 88.1 percent in
the first quarter of 2003. The decline in gross margin related to the increase
in professional services revenues, which have a lower gross margin than the
Company's license and maintenance revenues.
Gross profit generated from license revenue for the first quarter of 2004
was $5.8 million, compared with $5.1 million for the first quarter of 2003. The
gross margin from license revenue for the first quarter of 2004 was 97.6
percent, compared with 97.8 percent for the first quarter of 2003.
Gross profit from services revenue for the first quarter of 2004 was $7.2
million, compared with $6.4 million for the first quarter of 2003. Gross margin
from services revenue for the first quarter of 2004 was 79.8 percent compared
with 81.8 percent for the first quarter of 2003. The decline in gross margin
reflected higher personnel costs associated with our technical-support and
professional-services units. While we do not track and measure costs of
performing services (technical support, professional services) by product
platform (i.e., Microsoft, Novell, etc), we do not believe there is a material
difference in the gross margin by product line.
OPERATING COSTS AND EXPENSES. Operating costs and expenses for the first
quarter of 2004 totaled $15.7 million, up from $14.3 million for the first
quarter of 2003, which included a restructuring charge of $0.5 million.
Excluding the $0.5 million charge in the first quarter of 2003, operating costs
and expenses were approximately $1.9 million, or 13.7 percent, higher in the
first quarter of 2004 due to significant investments in sales and marketing
since the first quarter of 2003, costs related to our planned expansion of our
R&D operations in India, higher wage and health care costs and expenses
associated with Sarbanes-Oxley compliance.
Sales and marketing expenses for the first quarter of 2004 were $9.2
million (61.4 percent of revenues), up from $7.8 million (59.5 percent of
revenues) for the first quarter of 2003. The increase in sales and marketing
expenses primarily related to investments in areas where we see long-term growth
opportunities, specifically our Federal, Latin American and European operations.
We also added personnel to our inside sales force and increased spending on
marketing programs to grow our working sales pipeline. We expect sales and
marketing expenses as a percentage of revenues to be lower in the second quarter
of 2004 as a result of anticipated revenue growth.
Research and development expenses for the first quarter of 2004 were $4.6
million (30.6 percent of revenues), up from $4.2 million (32.5 percent of
revenues) for the first quarter of 2003. This increase primarily related to our
actions taken to affect the planned expansion of our R&D operations in India to
better execute on our product strategy, as well as increased personnel costs in
our Houston location. Primarily as a result of the expansion in India, we expect
R&D expenses in 2004 will be up $2.0 to $2.5 million over 2003. Approximately
$1.0 million of this increase relates to one-time expenses; we therefore expect
R&D expenses in 2005 will be below the expense level for 2004. We also expect
that this initiative coupled with anticipated revenue growth will result in a
decrease in research and development expenses as a percentage of revenues.
General and administrative expenses for the first quarter of 2004 were
$1.9 million (12.7 percent of revenues), up from $1.8 million (13.6 percent of
revenues) for the first quarter of 2003. We expect future general and
administrative expenses to decrease as a percentage of revenues as a result of
our restructuring initiatives to date to improve operating efficiencies, as well
as anticipated revenue growth.
In January 2003, we approved a sales and marketing reorganization plan
(the "2003 Restructuring Plan"). The cost of this plan totaled approximately
$0.6 million and consisted primarily of (i) involuntary employee
9
separation for approximately 20 employees (a reduction in workforce of
approximately 4 percent), (ii) closing our Netherlands sales office, and (iii)
reserves for leasehold abandonment. All actions under the 2003 Restructuring
Plan were completed by December 31, 2003. The 2003 Restructuring Plan resulted
in an estimated reduction in annual operating expenses of approximately $1.4
million.
In July 2002, we approved a restructuring plan to improve operating
efficiency and improve sales and marketing productivity (the "2002 Restructuring
Plan"). The cost of this plan totaled approximately $1.9 million and consisted
primarily of (i) involuntary employee separation for approximately 30 employees
(a reduction in workforce of approximately 5 percent), (ii) closing our Boston
development center and certain European sales offices, (iii) reserves for
leasehold abandonment, and (iv) various non-personnel related cuts.
The 2002 Restructuring Plan activity from December 31, 2003 to March 31,
2004 was as follows (in thousands):
REMAINING REMAINING
ACCRUAL CASH ACCRUAL
12/31/2003 EXPENDITURES 3/31/2004
---------- ------------ ---------
Lease commitments........... $ 1,538 $ (128) $1,410
-------- ------ ------
$ 1,538 $ (128) $1,410
======== ====== ======
The remaining accrual for the 2002 Restructuring Plan at March 31, 2004 is
comprised of the estimated carrying costs for our remaining excess space in
Houston, Texas. Adjustments to this balance could be required in future periods
based on the economic outlook of the real estate market in Houston, Texas. The
2002 Restructuring Plan resulted in an estimated reduction in annual operating
expenses of approximately $2.9 million.
In 2001, we completed a corporate reorganization and implemented a number
of cost-cutting measures to improve operating efficiency and to accelerate our
return to profitability (the "2001 Restructuring Plan"). The cost of this plan
totaled approximately $6.6 million and consisted primarily of: (i) involuntary
employee separation expenses for approximately 160 employees (a reduction in
workforce of approximately 21 percent), (ii) downsizing or closing of our Boston
and Arlington development centers and certain of our European sales offices,
(iii) reserves for leasehold abandonment, and (iv) various non-personnel related
costs. The restructuring costs included a $1.2 million charge related to asset
impairments of leasehold improvements, equipment and other assets of the closed
or downsized offices.
The 2001 Restructuring Plan activity from December 31, 2003 to March 31,
2004 was as follows (in thousands):
REMAINING REMAINING
ACCRUAL CASH ACCRUAL
12/31/2003 EXPENDITURES 3/31/2004
---------- ------------ ----------
Lease commitments........... $ 453 $ (58) $ 395
------ ------ ------
$ 453 $ (58) $ 395
====== ====== ======
The remaining accrual for the 2001 Restructuring Plan consists of excess
carrying costs until the lease cancellation for our two floors abandoned as part
of said Plan is effective in September of 2004. The 2001 Restructuring Plan
resulted in an estimated reduction in annual operating expenses of approximately
$11.8 million.
PROVISION FOR INCOME TAXES. We did not record an income tax provision for
our domestic operations in either the first quarter of 2004 or 2003, as we
continue to provide a full valuation allowance against our deferred tax assets
in accordance with Financial Accounting Standards No. 109, "Accounting for
Income Taxes". As in our prior assessments, we considered current and previous
performance and other relevant factors in determining the sufficiency of our
valuation allowance. Objective factors, such as current and previous operating
losses, were given substantially more weight than our outlook for future
profitability. Until such time as a consistent pattern of sufficient
profitability is established, no tax benefit will be recognized associated with
the Company's pre-tax accounting losses and a full income tax provision will not
be provided on any future pre-tax accounting income. A provision of $0.1 million
was recorded for taxes related to our foreign operations during the first
quarter of 2004.
NET LOSS. Due to the factors described above, net loss for the quarter
ended March 31, 2004 was $2.6 million compared with $2.7 million for the quarter
ended March 31, 2003.
OUTLOOK. For the first half of 2004, we estimate revenues will range
between $32.0 million to $36.0 million and net loss to range between $2.0
million and $4.0 million ($0.04 and $0.08 per share). For the second quarter of
2004, revenues are estimated to exceed $17.0 million and the net loss to be less
than $1.4 million. We estimate 2004 revenues to range between $75 million and
$80 million, and net income to range between $1.5 million and $3.5 million
($0.03 and $0.07 per share). We believe that our ability to achieve the high end
of our revenue range for the first half of 2004 is dependent on a number of
factors, including higher closure rates on large transactions in the sales
pipeline and an overall improvement in sales efficiency.
10
LIQUIDITY AND CAPITAL RESOURCES
Our capital requirements have principally related to working capital needs
and capital expenditures. These requirements have been met through a combination
of issuances of securities and internally generated funds.
We had cash, cash equivalents and short-term investments of $39.2 million
at March 31, 2004 compared with $35.4 million at December 31, 2003. Our working
capital has decreased approximately $1.0 million since December 31, 2003 to
$27.6 million at March 31, 2004 primarily due to an increase in our deferred
revenues and the effects of accruals for incentive based compensation. At March
31, 2004, we had no outstanding debt.
Cash flows provided by (used in) operating activities were $2.8 million in
the first quarter of 2004 compared with $(0.5) million in the first quarter of
2003. The increase in cash provided by operating activities in 2004 was
primarily the result of an increase in our cash collections on accounts
receivables of approximately $3.1 million over the first quarter of 2003.
Cash flows provided by (used in) investing activities were $(0.1) million
in the first quarter of 2004 compared with $(0.3) million in the first quarter
of 2003. The increase in cash generated from investing activities was the result
of (i) a $0.3 million reimbursement received from our landlord for tenant
improvements during the first quarter of 2004 and (ii) a $0.1 million reduction
in capital expenditures. This increase was partially offset by a $0.2 million
cash deposit made to a financial institution in order to issue performance
guaranties.
Cash flows provided by financing activities were $1.0 million in the first
quarter of 2004 compared with $0.2 million in the first quarter of 2003. Cash
provided by financing activities during the first quarter of 2004 was the result
of (i) $0.7 million in cash provided by the issuance of common stock for
employee stock options and (ii) $0.3 million in cash provided by the issuance of
common stock under our Employee Stock Purchase Plan. Cash provided by financing
activities during the first quarter of 2003 was primarily attributable to cash
provided by the issuance of common stock under our Employee Stock Purchase Plan.
We conduct operations in leased facilities under operating leases expiring
at various dates through 2011. The contractual obligations under these lease
commitments were comprised of the following as of March 31, 2004 (in thousands):
CONTRACTUAL REMAINDER OF
OBLIGATION TOTAL 2004 2005 - 2007 2008 - 2009 2010 - 2011
- ------------------------- -------- -------- ----------- ----------- -----------
Operating leases ........ $ 23,828 $ 3,743 $ 10,586 $ 7,100 $ 2,399
Sub-leasing arrangements* (308) (308) -- -- --
-------- -------- -------- -------- --------
$ 23,520 $ 3,435 $ 10,586 $ 7,100 $ 2,399
======== ======== ======== ======== ========
* We have sub-leased portions of these facilities under operating leases.
Anticipated cash receipts from these executed sub-lease arrangements have been
taken into account when deriving expected cash outflow on operating lease
commitments in the preceding table.
Our expected principal cash requirements for the remainder of 2004 are:
(i) capital expenditures between $2.3 and $2.7 million, primarily for computer
and software equipment, (ii) working capital requirements, (iii) net payments on
operating leases of approximately $3.4 million, and (iv) stock repurchases up
to $2.5 million. We believe there is sufficient cash on hand to meet these cash
requirements, as well as our cash requirements for the foreseeable future.
STOCK REPURCHASE PROGRAM
In May 2004, our Board of Directors approved a stock repurchase program
for the second quarter of 2004. Under this program, management may, at its
discretion, spend up to $2.5 million for the repurchase of our common stock in
the open market, subject to Securities and Exchange Commission guidelines and
restrictions set forth in Rule 10b-18.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since December 31, 2003. See the
Company's Annual Report on Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
The management of the Company, including the Chief Executive Officer and
the Chief Financial Officer, have conducted an evaluation of the effectiveness
of the Company's disclosure controls and procedures pursuant to Rule 13a-14
under the Securities Exchange Act of 1934 as of March 31, 2004 (the "Evaluation
Date"). Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in ensuring that all material
information relating to the Company, including our consolidated subsidiaries,
required to be filed in this quarterly report has been made known to them in a
timely manner. There have been no significant changes made in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the Evaluation Date. There have been no significant
changes made during the fiscal quarter ending March 31, 2004 in the Company's
internal controls over financial reporting or in other factors that could
significantly affect internal controls over financial reporting.
12
PART II. OTHER INFORMATION
ITEM 5. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Report, including
without limitation, statements regarding the Company's future financial
position, revenue and expense projections, business strategy, planned products,
products under development, markets, budgets and plans and objectives of
management for future operations, are forward-looking statements. Although we
believe that the expectations reflected in these forward-looking statements are
reasonable, we cannot assure you that those expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from the Company's expectations are disclosed in statements set forth under
"Cautionary Statements" in our Annual Report on Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed with this Quarterly Report.
Exhibit 31.1 Certification of the Company's Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of the Company's Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certifications of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certifications of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
In a Report on Form 8-K dated March 2, 2004, the Company announced that
the date of its 2004 annual meeting would be Thursday, May 27, 2004.
In a Report on Form 8-K dated February 3, 2004, the Company reported it
had issued a press release announcing financial results for the quarter and year
ended December 31, 2003.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BINDVIEW DEVELOPMENT CORPORATION
May 14, 2004 By: /s/ KEVIN P. COHN
----------------------------------------------
Kevin P. Cohn
Vice President, Controller and Chief Accounting
Officer (Principal Accounting Officer)
14
INDEX TO EXHIBIT
Exhibit 31.1 Certification of the Company's Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of the Company's Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certifications of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certifications of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002