Sybase, Inc. (NYSE:SY), an industry leader in delivering
enterprise and mobile software, today reported financial results
for the third quarter ended September 30, 2009.
Highlights:
- Historical third quarter records
achieved in total revenue, operating income, operating margin, net
income, EPS, and cash flow from operations
- Database license revenue
increased 32% and 35% in constant currency
- Messaging services increased 18%
and 23% in constant currency
- GAAP operating income up 34% to
$70.9 million, representing operating margin of 24%
- Non-GAAP operating income up 28%
to $86.9 million, representing operating margin of 30%
- GAAP EPS up 17% to $0.43,
non-GAAP EPS up 16% to $0.63
- Cash flow from operations
increased 95% to $104.9 million
2009 Third Quarter Results
Total revenue for the third quarter of 2009 was $293.4 million
compared with $284.0 million in the third quarter of 2008. License
revenue grew to $96.2 million versus $92.9 million in the third
quarter of 2008. Services revenue was $144.4 million, and messaging
revenue was $52.8 million in the 2009 third quarter.
Sybase’s third quarter total revenue reflects a 3% negative
impact from foreign currency exchange rates. Absent the impact of
currency, license revenue and total revenue both increased 6% year
over year.
Operating income calculated in accordance with generally
accepted accounting principles (GAAP) for the third quarter
increased 34% year over year to $70.9 million, representing an
operating margin of 24%.
For the quarter, the company reported GAAP net income of $38.5
million and GAAP earnings per diluted share (EPS) of $0.43. This
compares with 2008 third quarter GAAP net income of $32.1 million
and GAAP EPS of $0.37.
Non-GAAP operating income for the 2009 third quarter increased
28% year over year to $86.9 million, representing a 30% operating
margin.
Non-GAAP net income for the third quarter grew 18% year over
year to $56.0 million. Non-GAAP EPS grew 16% year over year to
$0.63.
Non-GAAP amounts exclude the amortization of certain purchased
intangibles, stock-based compensation, restructuring costs, charges
related to the impairment of auction rate securities, imputed
interest related to our convertible debt, gains or losses on assets
held for employees in a deferred compensation plan, and the tax
effect of these and related items.
Accompanying this release is a reconciliation from GAAP to
non-GAAP amounts for the third quarters of 2008 and 2009.
Cash flow from operations was $104.9 million in the quarter.
Chairman, CEO and President of Sybase John Chen stated, "We are
very pleased to deliver all-time third-quarter highs in total
revenue, operating margin, net income, and cash flow from
operations. Our performance was driven by solid growth in analytics
and messaging services.”
Added Mr. Chen, “We are most encouraged by the strategic
business wins we secured during the quarter with Verizon, Siemens,
and IBM to build mobile applications on Sybase technology. These
wins extend our position as the global leader in mobile middleware,
mobile device management, and mCommerce.
“Due to our stronger-than-expected performance year to date, we
are on pace to achieve our third consecutive record year, and we
are again raising our full-year 2009 outlook,” concluded Mr.
Chen.
Balance Sheet and Other Data
At September 30, 2009, Sybase reported $1.2 billion in cash and
cash investments, including restricted cash of $18.0 million.
During the quarter, the company completed a $400 million private
placement of 3.5% convertible notes. Sybase intends to use the net
proceeds of this private placement to redeem its existing 1.75%
convertible notes. In conjunction with the private placement, the
company increased its repurchase program by $150 million and spent
$70 million to repurchase its common stock and approximately $50
million to repurchase its 1.75% convertible notes.
As of September 30, 2009, $92.4 million remained authorized
under the company’s current share repurchase program.
Days sales outstanding (DSO) for the third quarter was 67.
Guidance
For the fourth quarter ending December 31, 2009, management
anticipates total revenue in the range of $305 million to $310
million. Management anticipates non-GAAP fully diluted EPS in the
range of $0.66 to $0.68 and GAAP EPS in the range of $0.52 to
$0.54.
For full-year 2009, management is raising guidance for total
revenue to a range of $1.14 billion to $1.15 billion from prior
expectations of $1.11 billion to $1.12 billion. Management is
raising guidance for non-GAAP EPS to a range of $2.33 to $2.35 from
previous guidance of $2.23 to $2.27. Management is raising GAAP EPS
to a range of $1.71 to $1.73, which compares with previous guidance
of $1.67 to $1.71. Management is also raising expectations for
full-year 2009 cash flow from operations to at least $295 million
from prior expectations of at least $275 million.
A summary of the company's 2009 guidance assumptions and a
reconciliation to the company’s previous guidance assumptions are
as follows:
2009 Guidance Assumptions GAAP Non-GAAP
Revenue Growth
2009 forecasted revenue growth - constant currency (1) 5 % 6 % 5 %
6 % 2009 forecasted foreign exchange impact on revenue growth (2)
(4 %) (4 %) (4 %) (4 %) 2009 forecasted revenue growth - reported 1
% 2 % 1 % 2 %
EPS
Reconciliation
Prior 2009 EPS guidance 1.67 1.71 2.23 2.27 Increase due to
foreign exchange impact 0.05 0.05 0.07 0.07 Increase due to
operations 0.14 0.14 0.14 0.14 Amortization of acquisition-related
intangible assets (0.01 ) (0.01 ) 0.00 0.00 Stock-based
compensation 0.01 0.01 0.00 0.00 Interest on convertible debt (0.11
) (0.11 ) (0.05 ) (0.05 ) Auction rate securities (0.04 ) (0.04 )
0.00 0.00 Tax effect from change above 0.00 0.00 (0.03 ) (0.03 )
Tax rate change 0.01 (0.01 ) (0.02 ) (0.04 ) WASO impact due to
higher share count (0.01 ) (0.01 ) (0.01 ) (0.01 )
2009 EPS guidance $ 1.71 $ 1.73 $ 2.33
$ 2.35 (1) No change (2) Prior assumption was
(7%)
Please see "Note Regarding
Non-GAAP Financial Measures" for important information regarding
Non-GAAP Financial Measures.
Conference Call and Webcast Information
The Sybase 2009 third quarter conference call and simultaneous
Webcast is scheduled to begin at 7:30 a.m. Pacific Time/10:30 a.m.
Eastern Time on Thursday, October 22, 2009. To access the live
Webcast, please visit www.fulldisclosure.com or Sybase’s Website at
www.sybase.com at least 20 minutes prior to the call to download
any necessary audio or plug-in software. A telephone replay will be
available approximately two hours after the conference call ends
and will be available until 10:00 p.m. Pacific Time on October 29,
2009. To access the replay, please dial (888) 203-1112 for domestic
access and (719) 457-0820 for international callers; the access
code for the telephone replay is #8110814. Additionally, the
archived Webcast will be available through January 21, 2010 at
http://www.sybase.com/about_sybase/investorrelations.
About Sybase, Inc.
Sybase is an industry leader in delivering enterprise and mobile
software to manage, analyze and mobilize information. We are
recognized globally as the performance leader, proven in the most
data-intensive industries and across all systems, networks and
devices. For 25 years, our information management, analytics and
enterprise mobility solutions have powered the world’s most
mission-critical systems in financial services, telecommunications,
manufacturing and government. For more information, visit
http://www.sybase.com. Read
Sybase blogs: http://blogs.sybase.com.
Forward-Looking Statements
Certain statements in this release concerning Sybase, Inc. and
its prospects and future growth are forward-looking and involve a
number of uncertainties and risks. These statements include the
financial projections included in the guidance section of the
release. Factors that could cause actual events or results to
differ materially from those suggested by these forward-looking
statements include, but are not limited to, the performance of the
global economy and credit market conditions; software industry
sales trends; market acceptance of the company’s products and
services; customer and industry analyst perception of the company
and its technology vision and future prospects; the success of
certain business combinations or strategic relationships engaged in
by the company or by competitors; shifts in our business strategy;
the interoperability of our products with other software products;
system failures or other issues that impact our ability to deliver
mobile messages; political unrest or acts of war; possible
disruptive effects of organizational or personnel changes; and
other factors described in Sybase, Inc.’s reports filed with the
U.S. Securities and Exchange Commission, including its annual
report on Form 10-K for the year ended December 31, 2008 and its
quarterly reports on Form 10-Q for the three-month periods ended
March 31, 2009 and June 30, 2009.
Note Regarding Non-GAAP Financial Measures
In addition to our GAAP results, Sybase discloses adjusted
operating income, net income and net income per share, referred to
respectively as “non-GAAP operating income”, “non-GAAP net income”,
and “non-GAAP net income per diluted share”. These items, which are
collectively referred to as “Non-GAAP Measures”, exclude the impact
of stock-based compensation, the amortization of
acquisition-related intangible assets, restructuring costs,
non-cash charges related to the impairment of auction rate
securities (“ARS”), the imputed interest expense on our convertible
notes, gains or losses on assets held for employees in a deferred
compensation plan, and the tax effect of these and related items.
From time to time, subject to the review and approval of the audit
committee of the Board of Directors, we may make other adjustments
for expenses and gains that we do not consider reflective of core
operating performance in a particular period and may modify the
Non-GAAP Measures by excluding these expenses and gains.
We define our core operating performance to be the revenues
recorded in a particular period and the expenses incurred within
that period which management has the capability of directly
affecting in order to drive operating income. Non-cash stock-based
compensation, amortization of acquisition-related intangible
assets, restructuring charges, impairment charges to our ARS, the
imputed interest expense on our convertible notes, and gains or
losses on assets held for employees in a deferred compensation plan
are excluded from our core operating performance because the
decisions which gave rise to these expenses were not made to drive
revenue in a particular period, but rather were made for our
long-term benefit over multiple periods. While strategic decisions,
such as the decisions to issue stock-based compensation, to acquire
a company or to restructure the organization, are made to further
our long-term strategic objectives and do impact our income
statement under GAAP, these items affect multiple periods and
management is not able to change or affect these items within any
particular period. As such, supplementing GAAP disclosure with
non-GAAP disclosure using the Non-GAAP Measures provides management
with an additional view of operational performance by excluding
expenses that are not directly related to performance in any
particular period. Therefore, we exclude these impacts in our
planning, monitoring, evaluation and reporting of our underlying
revenue-generating operations for a particular period.
Prior to the adoption of Financial Accounting Standards Board
Statement 123 Revised “Share-based Payment” (“FAS 123R”) on January
1, 2006, our practice was to exclude stock-based compensation
internally to evaluate performance and we presented investors with
certain Non-GAAP Measures. With the adoption of FAS 123R, we
continue to believe that Non-GAAP Measures can provide relevant
disclosure to investors as contemplated by Staff Accounting
Bulletin 107 (“SAB 107”) and we have presented Non-GAAP Measures
that exclude stock-based compensation, amortization of
acquisition-related intangible assets, impairment charges to ARS,
imputed interest expense, restructuring costs and the related tax
effects. While these items (other than restructuring) are recurring
and affect GAAP net income, we do not use them to assess our
operational performance for any particular period because (a) these
items affect multiple periods and are unrelated to business
performance in a particular period; (b) we are not able to change
these items in any particular period; and (c) these items do not
contribute to the operational performance of our business for any
particular period.
We also use Non-GAAP Measures to operate the business because
the excluded expenses are not under the control of, and accordingly
are not used in evaluating the performance of, operations personnel
within their respective areas of responsibility. In the case of
stock-based compensation expense, the award of stock options is
governed by the stock committee of the Board of Directors and, in
the case of acquisition-related intangible assets; acquisitions
arise from strategic decisions which are not the responsibility of
most levels of operational management. The restructuring charges,
like our stock-based compensation charges, amortization of
acquisition-related intangible assets, and write-downs to ARS, the
imputed interest expense on our convertible notes, and gains or
losses on assets held for employees in a deferred compensation
plan, are excluded in management’s internal evaluations of our
operating results and are not considered for management
compensation purposes.
In the case of stock-based compensation, our compensation
strategy is to use stock-based compensation to attract and retain
key employees and executives. It is principally aimed at long term
employee retention, rather than to motivate or reward operational
performance for any particular period. Thus, stock-based
compensation expense varies for reasons that are generally
unrelated to operational performance in any particular period. We
use annual cash incentive payouts for executives and other
employees to motivate and reward the achievement of short-term
operational objectives.
We view amortization of acquisition-related intangible assets,
such as the amortization of an acquired company’s research and
development efforts, customer lists and customer relationships, as
items arising from pre-acquisition activities. These are costs that
are determined at the time of an acquisition. While it is
continually viewed for impairment, amortization of the cost is a
static expense, one that is typically not affected by operations
during any particular period and does not contribute to operational
performance for any particular period.
The cost of restructure charges are excluded in our Non-GAAP
Measures because they are significantly different in magnitude and
character from routine personnel and facility adjustments that
management makes when monitoring and conducting the Company’s core
operations during any particular period. We have not
undertaken restructuring since 2004 and amounts included in cost of
restructure in 2006 and subsequently reflect lease termination
costs from previously announced restructuring efforts. Our previous
restructuring activities and related expenses were not related to
operating performance for any particular period, and were not
subject to change by management in any particular
period. Instead, the prior restructuring was intended to align
our business model and expense structure to our position in the
market.
The liquidity and fair value of our investments in marketable
securities, including auction rate securities, have been negatively
impacted by the uncertainty in the credit markets and failed
auctions due to a lack of marketability of these securities. As a
result, we recorded impairment charges to reduce the carrying value
of our ARS investments. The impairment charges related to our ARS
investments have been excluded from our non-GAAP results of
operations. These impairment charges are excluded from management’s
assessment of our operating performance because management believes
that they are not indicative of our ongoing business operations. We
believe that the exclusion of these unique charges provides
investors an enhanced view of our operations and facilitates
comparisons with the results of other periods. In 2009, GAAP
changed to require that issuers of certain convertible debt
instruments that may be settled in cash (or other assets) on
conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner
that reflects the issuer’s non-convertible debt borrowing rate.
Accordingly, for GAAP purposes we are required to recognize imputed
interest expense on our $460 million of 1.75% convertible
subordinated notes that were issued in a private placement in
February 2005 and on our $400 million 3.5% convertible senior notes
that were issued in a private placement in August 2009, the
“imputed interest expense.” The imputed interest expense is
excluded from management’s assessment of our operating performance
because management believes that this is not indicative of our
ongoing business operations. We believe that the exclusion of the
imputed interest expense provides investors an enhanced view of our
operational performance and will facilitate the comparisons of
future reported results with results from periods prior to the GAAP
requirement to recognize imputed interest expense.
We maintain a rabbi trust for our deferred compensation plan
that was established to allow certain employees the opportunity to
defer the receipt of compensation. Plan participants elect to defer
a portion of their compensation and these amounts are deemed
invested in investment options that mirror the participants’ 401(k)
plan investment elections. The rabbi trust for the deferred
compensation plan is structured in accordance with IRS guidelines
and the assets in the trust are subject to the claims of our
general creditors. The gains and losses on assets in the deferred
compensation plan are excluded from management’s assessment of our
operating performance because management believes that they are not
indicative of our ongoing business operations. We believe that the
exclusion of these gains and losses provides investors an enhanced
view of our operational performance and these gains and losses are
unrelated to operational performance in any particular period.
Our historical non-GAAP effective tax rates differ from our GAAP
effective tax rates because of (i) the exclusion of the
amortization of acquisition-related intangible assets, stock-based
compensation expenses, restructuring costs, and other expense and
income items described above, (ii) the exclusion of certain
acquired tax attributes, and (iii) the resulting impact on the
realization of the Company’s other tax assets. We exclude the
impact of these discrete tax items from our non-GAAP income tax
provision or benefit because management believes that they are not
indicative of our ongoing business operations.
Because the Non-GAAP Measures are not calculated in accordance
with GAAP, they are used by our management as a supplement to, and
not an alternative to, or superior to, financial measures
calculated in accordance with GAAP. There are a number of
limitations on the Non-GAAP Measures, including the following:
- These Non-GAAP Measures do not
have standardized meanings and may not be comparable to similar
non-GAAP measures used or reported by other software or technology
companies.
- The Non-GAAP Measures do not
reflect all costs associated with our operations determined in
accordance with GAAP. For example:Non-GAAP operating margin
performance and non-GAAP net income do not include stock
compensation expense related to equity awards granted to our
workforce. Our stock incentive plans are important components of
our employee incentive compensation arrangements and are reflected
as expenses in our GAAP results under FAS 123R. While we include
the dilutive impact of such equity awards in weighted average
shares outstanding, the expense associated with stock-based awards
is excluded from our non-GAAP measures.Although amortization of
acquisition-related intangible assets does not directly impact our
current cash position, such expense represents the declining value
of the technology or other intangible assets that we have acquired.
These assets are amortized over their respective expected economic
lives or impaired, if appropriate. The expense associated with this
decline in value is excluded from our non-GAAP measures and
therefore non-GAAP measures do not include the costs of acquired
intangible assets that supplement our research and
development.Restructuring charges in 2006 and subsequently
primarily represent lease termination costs associated with
restructuring activities that commenced in 2004 and before. Most of
the charges are cash expenditures, which are excluded from our
Non-GAAP Measures.While the interest imputed on our convertible
notes does not directly impact our current cash position, such
expense recognizes the deemed economic value of the conversion
feature associated with the notes. The expense associated with this
deemed economic value is excluded from our non-GAAP measures and,
therefore, non-GAAP measures do not reflect a deemed expense
associated with our convertible notes.
- Excluded expenses for
stock-based compensation, amortization of acquisition-related
intangible assets, imputed interest on our convertible debt, and
gains and losses on assets in our deferred compensation plan will
continue to recur and impact the Company’s GAAP results. While
restructuring costs are non-recurring activities, their occasional
occurrence will impact GAAP results. As such, the Non-GAAP Measures
should not be construed as an inference that the excluded items are
unusual, infrequent or non-recurring.
The company adjusts for these limitations by relying on these
Non-GAAP Measures only as a supplement to the Company’s GAAP
results.
SYBASE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, (In
thousands, except share and per share data) 2009 2008 (1)
(Unaudited) Current assets: Cash and cash equivalents $
906,937 $ 611,364 Short-term investments 198,339
8,689 Total cash, cash equivalents and short-term
investments 1,105,276 620,053 Restricted cash 17,973 2,773
Accounts receivable, net 218,662 270,400 Deferred income taxes
43,173 45,524 Prepaid income taxes 9,610 4,932 Other current assets
31,205 34,208 Total current assets
1,425,899 977,890 Long-term investments 77,447 15,513
Property, equipment and improvements, net 59,067 62,263 Deferred
income taxes 3,671 17,794 Capitalized software, net 83,973 82,400
Goodwill, net 529,938 527,151 Other purchased intangibles, net
93,818 113,970 Other assets 39,146 29,341
Total assets $ 2,312,959 $ 1,826,322
Current liabilities: Accounts payable $ 25,966 $
26,300 Accrued compensation and related expenses 74,819 80,031
Accrued income taxes 25,646 17,562 Other accrued liabilities
124,253 124,050 Deferred revenue 204,976 211,903 Convertible
subordinated notes 417,961 - Total
current liabilities 873,621 459,846 Other liabilities 43,018
44,788 Deferred income taxes 36,525 11,898 Long-term tax liability
42,505 32,082 Long-term deferred revenue 5,786 4,535 Convertible
subordinated notes 326,455 438,299 Total stockholders'
equity and temporary equity 985,049 834,874
Total liabilities, stockholders' equity and temporary equity
$ 2,312,959 $ 1,826,322
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”) and FAS No. 160,
“NonControlling Interests in Consolidated Financial Statements”
(FAS 160). As required by the FSP and FAS 160, prior period results
have been recast to conform with the new pronouncements.
SYBASE, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except per share data) 2009 2008 (1)
2009 2008 (1) Revenues: License fees $ 96,175 $
92,939 $ 279,577 $ 261,578 Services 144,400 146,295 418,961 432,286
Messaging 52,844 44,744 140,351
132,975 Total revenues 293,419 283,978
838,889 826,839 Costs and expenses: Cost of license fees
18,206 18,151 44,671 47,818 Cost of services 38,078 40,225 113,744
122,185 Cost of messaging 35,619 28,107 90,203 80,618 Sales and
marketing 60,606 70,347 187,098 212,912 Product development and
engineering 33,508 37,451 104,187 109,059 General and
administrative 32,667 32,831 96,621 102,969 Amortization of other
purchased intangibles 3,804 3,920 11,283 11,009 Cost of restructure
17 39 18 58
Total costs and expenses 222,505
231,071 647,825 686,628
Operating income 70,914 52,907 191,064 140,211 Interest
income and expense and other, net (8,001 ) (1,455 ) (18,789 )
(1,083 ) Total other-than-temporary impairment losses (1,811
) (3,267 ) (3,609 ) (9,552 ) Losses recognized in, or reclassified
from, other comprehensive income (1,919 ) -
(2,307 ) - Total other-than-temporary
impairment losses recognized in earnings (3,730 )
(3,267 ) (5,916 ) (9,552 ) Income before
income taxes 59,183 48,185 166,359 129,576 Provision for
income taxes 20,686 16,054
62,129 45,986 Net income $ 38,497 $
32,131 $ 104,230 $ 83,590 Less: Net income (loss)
attributable to the noncontrolling interest (20 ) 21
36 (7 ) Net income attributable
to Sybase, Inc. $ 38,517 $ 32,110 $ 104,194 $
83,597 Basic net income per share attributable
to Sybase, Inc. common stockholders (2) $ 0.47 $ 0.40
$ 1.28 $ 0.99 Shares used in computing basic
net income per share attributable to Sybase, Inc. common
stockholders (2) 80,047 79,245
80,147 82,868 Diluted net income per
share attributable to Sybase, Inc. common stockholders (2) $ 0.43
$ 0.37 $ 1.19 $ 0.93 Shares used
in computing diluted net income per share attributable to Sybase,
Inc. common stockholders (2) 87,427 86,797
86,144 88,115
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”) and FAS No. 160,
“NonControlling Interests in Consolidated Financial Statements”
(FAS 160). As required by the FSP and FAS 160, prior period results
have been recast to conform with the new pronouncements.
(2)
The Company has applied FSP EITF
03-6-1 "Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities" to its
historical and current EPS calculations. The EPS numbers shown
reflect the two-class method mandated by the guidance for
calculating EPS, which adjusts both income and shares used for
computing EPS.
NON-GAAP RESULTS RECONCILED TO GAAP RESULTS The
following tables reflect selected Sybase non-GAAP results
reconciled to GAAP results (in 000s except percentage and per share
amounts): Three Months Ended Nine Months Ended
September 30, September 30,
2009
2008 (1)
2009 2008 (1)
Operating
Income GAAP operating income
70,914
52,907
191,064 140,211 Plus: Amortization of
acquisition-related intangible assets
8,164 8,979
22,005 23,205 Stock-based compensation expense
6,317
5,752
18,746 16,845 Cost of restructure
17 39
18 58 Change in value of assets in deferred compensation
plan
1,518 -
2,209 -
Non-GAAP operating income
$ 86,930 $ 67,677
$ 234,042 $ 180,319
Net Income Attributable to Sybase, Inc. GAAP net
income attributable to Sybase, Inc.
38,517 32,110
104,194 83,597 Plus: Amortization of acquisition-related
intangible assets
8,164 8,979
22,005 23,205
Stock-based compensation expense
6,317 5,752
18,746
16,845 Cost of restructure
17 39
18 58 Impairment
loss on auction rate securities
3,730 3,267
5,916
9,552 Imputed interest expense for convertible notes
6,530
4,525
15,786 13,262 Less: Incremental income taxes
associated with certain Non-GAAP items
(7,243 )
(6,816 )
(20,156 ) (20,103 ) Credit received on
purchased assets
- (555 )
- (555 )
Non-GAAP net
income attributable to Sybase, Inc.
$ 56,032
$ 47,301
$ 146,509
$ 125,861
Net Income Per Diluted Share
GAAP net income per diluted share (2)
$ 0.43
$ 0.37 $ 1.19 $ 0.93 Plus: Amortization
of acquisition-related intangible assets
0.09 $ 0.10
0.26 $ 0.26 Stock-based compensation expense
0.07 $
0.07
0.22 $ 0.19 Cost of restructure
0.00 $ 0.00
0.00 $ 0.00 Impairment loss on auction rate securities
0.04 $ 0.04
0.07 $ 0.11 Imputed interest expense for
convertible notes
0.07 $ 0.05
0.18 $ 0.15 Less:
Incremental income taxes associated with certain Non-GAAP items
(0.08 ) ($0.08 )
(0.23 ) ($0.23 )
Credit received on purchased assets
- ($0.01 )
-
($0.01 )
Non-GAAP net income per diluted share (2)
$
0.63 $ 0.54
$ 1.67
$ 1.41 Shares used in computing diluted
net income per share (2)
87,427 86,797
86,144 88,115
CLASSIFICATION OF STOCK-BASED COMPENSATION EXPENSE
The following table shows the classification of stock-based
compensation expense (in 000s): Three Months Ended Nine
Months Ended September 30, September 30,
2009 2008
2009
2008 Cost of services
383 347
1,155 1,012 Cost
of messaging
152 132
443 350 Sales and marketing
1,533 1,429
4,601 4,145 Product development and
engineering
786 746
2,399 2,143 General and
administrative
3,463 3,098
10,148 9,195
Total $ 6,317 $ 5,752
$ 18,746 $
16,845
CLASSIFICATION OF AMORTIZATION OF PURCHASED
INTANGIBLES The following table shows the classification
of amortization of purchased intangibles expense (in 000s):
Three Months Ended Nine Months Ended September 30,
September 30,
2009 2008
2009 2008 Cost of license fees
3,180
3,997
7,290 9,114 Cost of messaging
1,180 1,062
3,432 3,082 Amortization of other purchased intangibles
3,804 3,920
11,283 11,009
Total $
8,164 $ 8,979
$ 22,005 $ 23,205
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”) and FAS No. 160,
“NonControlling Interests in Consolidated Financial Statements”
(FAS 160). As required by the FSP and FAS 160, prior period results
have been recast to conform with the new pronouncements.
(2)
The Company has applied FSP EITF
03-6-1 "Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities" to its
historical and current EPS calculations. The EPS numbers shown
reflect the two-class method mandated by the guidance for
calculating EPS, which adjusts both income and shares used for
computing EPS.
SYBASE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September
30,
(Dollars in thousands) 2009
2008 (1)
Cash flows from operating activities: Net
income $ 104,230 $ 83,590 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 75,083 77,341 Loss on disposal of assets 53 5
Impairment of investment in auction rate securities 5,916 9,552
Deferred income taxes 12,436 (3,876 ) Stock-based compensation –
restricted stock 9,208 7,583 Stock-based compensation – all other
9,538 9,262 Tax benefit from stock-based compensation plans 7,999 —
Excess tax benefit from stock-based compensation plans (7,568 )
(8,970 ) Imputed interest expense for convertible notes 15,786
13,262 Amortization of note issuance costs 1,522 1,204 Changes in
assets and liabilities: Accounts receivable 51,285 11,003 Prepaid
income taxes (4,678 ) 17,604 Other current assets (12,099 ) (3,814
) Other assets – operating (2,795 ) 805 Accounts payable (337 ) 983
Accrued compensation and related expenses (5,213 ) (212 ) Accrued
income taxes 18,506 13,335 Other accrued liabilities (963 ) (13,290
) Deferred revenues (5,676 ) (6,276 ) Other liabilities
(1,660 ) 1,899
Net cash provided by operating activities
270,573 210,990
Cash flows from investing activities: (Increase) Decrease in
restricted cash (159 ) 83 Purchases of investments (284,756 )
(16,332 ) Maturities of investments 29,330 35,870 Sales of
investments 1,245 80,982 Business combinations, net of cash
acquired — (27,372 ) Purchases of property, equipment and
improvements (16,349 ) (26,013 ) Proceeds from sale of property,
equipment, and improvements 85 22 Capitalized software development
costs (33,982 ) (38,885 ) Decrease in other assets – investing
18 91 Net
cash provided by (used for) investing activities
(304,568 )
8,446 Cash
flows from financing activities: Proceeds from the issuance of
convertible subordinated notes, net of issuance costs 389,384 —
Extinguishment of convertible subordinated notes (50,120 ) —
Repayments of long-term obligations (1,043 ) (791 ) Net proceeds
from the issuance of common stock and reissuance of treasury stock
48,559 47,711 Purchases of treasury stock (85,049 ) (300,737 )
Excess tax benefit from stock-based compensation plans
7,568 8,970 Net cash
provided by (used for) financing activities
309,299 (244,847 ) Effect
of exchange rate changes on cash
20,269
(20,698 ) Net increase (decrease) in cash and
cash equivalents 295,573 (46,109 ) Cash and cash equivalents,
beginning of year
611,364
604,808 Cash and cash equivalents, end of
period
$ 906,937 $
558,699
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”) and FAS No. 160,
“NonControlling Interests in Consolidated Financial Statements”
(FAS 160). As required by the FSP and FAS 160, prior period results
have been recast to conform with the new pronouncements.
SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS
BY SEGMENT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED) (In thousands, except per
share data) Infrastructure
iAnywhere Consolidated Revenues: Platform Group Solutions Sybase
365 Eliminations Total License fees Infrastructure $ 69,585 $ 9 $
264 $ - $ 69,858 Mobile and Embedded 12,373 13,944
- - 26,317 Subtotal license fees
81,958 13,953 264 - 96,175 Intersegment license revenues 33
10,425 8 (10,466 ) - Total
license fees 81,991 24,378 272 (10,466 ) 96,175 Services
Direct service revenue 134,488 9,481 431 - 144,400 Intersegment
service revenues - 7,684 - (7,684 )
- Total services 134,488 17,165 431 (7,684 ) 144,400
Messaging Direct messaging revenue - - 52,844 - 52,844
Total revenues 216,479 41,543
53,547 (18,150 ) 293,419
Total allocated costs and expenses
before cost of restructure and amortization of other purchased
intangibles and purchased technology
148,616 28,724 47,299 (18,150 )
206,489
Operating income before cost of
restructure and amortization of other purchased intangibles and
purchased technology
67,863 12,819 6,248 - 86,930 Cost of restructure - 2009
Activity 17 - - - 17 Amortization of other purchased intangibles
500 1,024 2,280 - 3,804 Amortization of purchased technology
1,233 1,947 1,180 - 4,360
Operating income before unallocated costs $ 66,113 $ 9,848 $
2,788 $ - $ 78,749 Other unallocated costs 7,835
Operating income after unallocated costs 70,914
Interest income and expense and other, net, and total
other-than-temporary impairment losses recognized in earnings
(11,731 ) Income before income taxes 59,183 Provision
for income taxes 20,686 Net income $ 38,497
Less: Net income attributable to the noncontrolling interest
(20 ) Net income attributable to Sybase, Inc. $
38,517 Basic net income per share attributable
to Sybase, Inc. common stockholders (1) $ 0.47
Shares used in computing basic net income per share attributable to
Sybase, Inc. common stockholders (1) 80,047
Diluted net income per share attributable to Sybase, Inc. common
stockholders (1) $ 0.43 Shares used in computing
diluted net income per share attributable to Sybase, Inc. common
stockholders (1) 87,427
(1)
The Company has applied FSP EITF
03-6-1 "Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities" to its current
EPS calculations. The EPS numbers shown reflect the two-class
method mandated by the guidance for calculating EPS, which adjusts
both income and shares used for computing EPS.
SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS
BY SEGMENT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED) (In thousands, except per
share data) Infrastructure
iAnywhere Consolidated Revenues:
Platform Group
Solutions Sybase 365 Eliminations Total License fees Infrastructure
$ 201,947 $ 35 $ 663 $ - $ 202,645 Mobile and Embedded
31,342 45,581 9 - 76,932
Subtotal license fees 233,289 45,616 672 - 279,577 Intersegment
license revenues 87 26,245 26 (26,358 )
- Total license fees 233,376 71,861 698 (26,358 )
279,577 Services Direct service revenue 389,524 27,915 1,522
- 418,961 Intersegment service revenues - 23,075
- (23,075 ) - Total services 389,524
50,990 1,522 (23,075 ) 418,961 Messaging Direct messaging
revenue 6 - 140,345 - 140,351 Intersegment messaging revenues
- - 5 (5 ) - Total
messaging 6 - 140,350 (5 ) 140,351
Total revenues 622,906 122,851 142,570 (49,438 ) 838,889
Total allocated costs and expenses
before cost of restructure and amortization of other purchased
intangibles and purchased technology
438,052 88,734 127,499 (49,438 )
604,847
Operating income before cost of
restructure and amortization of other purchased intangibles and
purchased technology
184,854
34,117 15,071 - 234,042 Cost of restructure - 2009 Activity
18 - - - 18 Amortization of other purchased intangibles 1,548 3,071
6,664 - 11,283 Amortization of purchased technology 1,389
5,901 3,432 - 10,722
Operating income before unallocated costs $ 181,899 $ 25,145
$ 4,975 $ - $ 212,019 Other unallocated costs 20,955
Operating income after unallocated costs 191,064
Interest income and expense and other, net, and total
other-than-temporary impairment losses recognized in earnings
(24,705 ) Income before income taxes 166,359
Provision for income taxes 62,129 Net income $
104,230 Less: Net income attributable to the noncontrolling
interest 36 Net income attributable to Sybase,
Inc.
$ 104,194 Basic net income per share
attributable to Sybase, Inc. common stockholders (1) $ 1.28
Shares used in computing basic net income per share attributable to
Sybase, Inc. common stockholders (1) 80,147
Diluted net income per share attributable to Sybase, Inc. common
stockholders (1) $ 1.19 Shares used in computing
diluted net income per share attributable to Sybase, Inc. common
stockholders (1) 86,144
(1)
The Company has applied FSP EITF
03-6-1 "Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities" to its current
EPS calculations. The EPS numbers shown reflect the two-class
method mandated by the guidance for calculating EPS, which adjusts
both income and shares used for computing EPS.
NON-GAAP RESULTS RECONCILED TO GAAP RESULTS -
SEGMENTS The following table reflects non-GAAP
operating income before unallocated costs reconciled to GAAP
results for each Sybase segment ( in 000s except percentage and per
share amounts ) : Three Months Ended Nine Months
Ended September 30, 2009 September 30, 2009
InfrastructurePlatform Group
iAnywhereSolutions
Sybase 365
InfrastructurePlatform Group
iAnywhereSolutions
Sybase 365
Operating Income
Before Unallocated Costs GAAP operating income before
unallocated costs 66,113 9,848 2,788 181,899 25,145 4,975 Plus:
Amortization of acquisition-related intangible assets 1,733 2,971
3,460 2,937 8,972 10,096 Cost of restructure 17 - - 18 - -
Non-GAAP operating income before unallocated
costs $ 67,863 $ 12,819 $ 6,248 $
184,854 $ 34,117 $ 15,071
SYBASE, INC.
Reconciliation of GAAP-based EPS to Non-GAAP EPS for the
three months ended December 31, 2009 (unaudited)
GAAP-based EPS $ 0.52 $ 0.54
Amortization of acquisition-related intangible assets 0.08
0.08 Stock-based compensation expense 0.08 0.08 Imputed interest
expense for convertible notes 0.08 0.08 Impairment loss on auction
rate securities 0.00 0.00 Income tax effect of above adjustments
(0.07 ) (0.07 ) Income tax effect due to differences between the
GAAP and non-GAAP effective tax rate (0.03 ) (0.03 )
Non-GAAP EPS $ 0.66 $ 0.68
Please see "Note Regarding
Non-GAAP Financial Measures" for important information regarding
Non-GAAP Financial Measures.
SYBASE, INC. Reconciliation of GAAP-based EPS to
Non-GAAP EPS for the twelve months ended December 31,
2009 (unaudited) GAAP-based
EPS $ 1.71 $ 1.73 Amortization of
acquisition-related intangible assets 0.33 0.33 Stock-based
compensation expense 0.29 0.29 Imputed interest expense for
convertible notes 0.26 0.26 Impairment loss on auction rate
securities 0.07 0.07 Income tax effect of above adjustments (0.33 )
(0.33 ) Income tax effect due to differences between the GAAP and
non-GAAP effective tax rate 0.00 0.00 Non-GAAP EPS $
2.33 $ 2.35
Please see "Note Regarding
Non-GAAP Financial Measures" for important information regarding
Non-GAAP Financial Measures.
SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS
- SUPPLEMENTAL FORMAT (in thousands)
Three Months Ended September
30, 2009 2008 (1) Software License
& Services: Software license & services revenue License
revenue $ 95,911 $ 92,934 CS&S revenue 118,081 117,374 Other
services 25,888 28,614 Total software
license & services revenue 239,880 238,922 Cost of
software license & services Cost of license 15,026 14,154 Cost
of services 37,695 39,878 Sales expense 42,662
52,646 Total cost of software license & services 95,383
106,678 Margin $ 144,497 $ 132,244 60 % 55 %
Messaging and Hosted Software: Messaging and hosted software
revenue Messaging revenue $ 52,844 $ 44,744 Hosted license and
services revenue 695 312 Total
messaging and hosted software revenue 53,539 45,056 Cost of
messaging & hosted software Cost of Messaging 34,287 26,913
Sales expense 5,795 5,762 Total cost of
messaging & hosted software 40,082 32,675 Margin $
13,457 $ 12,381 25 % 27 %
Total revenues for reportable
segments $ 293,419 $ 283,978
Total expenses for reportable segments 135,465
139,353 Total margin for reportable segments
157,954 144,625 Marketing expenses (9,978 ) (10,510 )
Product development and engineering expenses (32,024 ) (36,705 )
General and administrative expenses (29,022 ) (29,733 )
Amortization of intangible assets (8,164 ) (8,979 ) Cost (Reversal)
of restructure (17 ) (39 ) Stock-based compensation (6,317 ) (5,752
) Change in value of assets in deferred compensation plan (1,518 )
- Interest income and expense and other, net (11,731 )
(4,722 )
Income before provision for income taxes
$ 59,183 $ 48,185
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”). As required by the
FSP, prior period results have been recast to conform with the new
pronouncement.
SYBASE, INC. CONSOLIDATED STATEMENT OF OPERATIONS
- SUPPLEMENTAL FORMAT (in thousands)
Nine Months Ended September
30, 2009 2008 (1) Software License
& Services: Software license & services revenue License
revenue $ 278,904 $ 261,507 CS&S revenue 341,990 344,996 Other
services 75,449 85,906 Total software
license & services revenue 696,343 692,409 Cost of
software license & services Cost of license 37,381 38,704 Cost
of services 112,589 121,173 Sales expense 131,970
159,426 Total cost of software license & services
281,940 319,303 Margin $ 414,403 $ 373,106 60 % 54 %
Messaging and Hosted Software: Messaging and hosted software
revenue Messaging revenue $ 140,351 $ 132,975 Hosted license and
services revenue 2,195 1,455 Total
messaging and hosted software revenue 142,546 134,430 Cost
of messaging & hosted software Cost of Messaging 86,328 77,186
Sales expense 18,623 18,224 Total cost
of messaging & hosted software 104,951 95,410 Margin $
37,595 $ 39,020 26 % 29 %
Total revenues for reportable
segments $ 838,889 $ 826,839
Total expenses for reportable segments 386,891
414,713 Total margin for reportable segments
451,998 412,126 Marketing expenses (30,977 ) (31,117
) Product development and engineering expenses (100,771 ) (106,916
) General and administrative expenses (86,208 ) (93,774 )
Amortization of intangible assets (22,005 ) (23,205 ) Cost
(Reversal) of restructure (18 ) (58 ) Stock-based compensation
(18,746 ) (16,845 ) Change in value of assets in deferred
compensation plan (2,209 ) - Interest income and expense and other,
net (24,705 ) (10,635 )
Income before provision
for income taxes $ 166,359 $
129,576
(1)
On January 1, 2009 the Company
adopted FASB Staff Position APB 14-1, Accounting for Convertible
Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement) (the “FSP”). As required by the
FSP, prior period results have been recast to conform with the new
pronouncement.
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