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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended November 30, 2002
¨ |
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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: 000-26579
TIBCO SOFTWARE INC.
(Exact name of registrant as specified in its charter)
| Delaware |
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77-0449727 |
| (State or other jurisdiction |
|
(I.R.S. Employer |
| of incorporation or organization) |
|
Identification No.) |
3303 Hillview Avenue, Palo Alto, CA 94304
(Address of principal executive offices) (Zip Code)
(650) 846-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title
of Class)
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 if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 under the
Act). Yes x No ¨
As of January 27, 2003, there were 210,335,637 shares of the Registrant’s Common Stock outstanding, and the
aggregate market value of such shares held by non-affiliates of the Registrant (based upon the closing sale price of such shares on The Nasdaq National Market on January 27, 2003) was approximately $518,954,766 Shares of common stock held by each
executive officer and director and by each entity that owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant’s definitive Proxy Statement for the 2003 Annual Meeting of Stockholders to be held on April 15,
2003 are incorporated by reference in Part III of this Form 10-K to the extent stated herein.
TIBCO SOFTWARE INC. FORM 10-K
For the Fiscal Year Ended November 30, 2002
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| PART I |
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| ITEM 1. |
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| PART II |
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| PART III |
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| PART IV |
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II-1 |
2
PART I
Overview
We are a leading enabler of real-time business. Our business integration solutions, business optimization solutions and services give businesses the ability to connect and
coordinate their applications, employees, partners and customers, and then better monitor, analyze, understand, and modify the business activities that span those systems and people so they can better respond to problems and opportunities. Our
products do this by enabling computer systems to interact with each other in real-time, automating processes that span those systems, and by giving people the ability to monitor and interact with information and processes.
Our products can make corporate assets such as applications and databases more effective and valuable by tying them together with a common
framework and coordinating the interactions between them. Our products can lower IT costs by enabling companies to more quickly and easily create, manage and modify interactions. Our products can make companies more efficient by automating routine
processes to allow their employees to focus their efforts on managing exceptional problems and opportunities. Our products can give managers and executives the information they need to identify and understand both the strengths and weaknesses of
their business and external factors that shape their business, along with the ability to quickly reallocate their assets or adapt their operations to fix the problem or capitalize on the opportunity.
Our products are currently licensed by approximately 1,900 companies worldwide in diverse industries such as telecommunications, retail,
healthcare, manufacturing, energy, transportation, logistics, financial services, government and insurance. We sell our products through a direct sales force and through alliances with leading software vendors and systems integrators.
Our objective is to establish TIBCO as the leading provider of business integration and optimization software. The core
elements of our strategy include promoting the widespread adoption of our technology, pursuing a license driven business strategy, leveraging our vertical market expertise, capitalizing on a significant partnership with Reuters, our major
stockholder, in the financial services industry, expanding our international presence and continuing to enhance our technology and products.
TIBCO™ Products
We sell a wide range of products that address different elements of business integration and optimization. All of our products can be sold
individually to solve specific technical challenges, but the emphasis of our product development and sales efforts is to create products that interoperate seamlessly and then sell them together as a complete solution that solves business problems.
In fiscal year 2002 we released two important new products: (i) TIBCO BusinessWorks and (ii) TIBCO
BusinessFactor, and made significant improvements to our messaging offering, adding two new messaging products.
TIBCO BusinessWorks is an all-inclusive business integration product that provides the core functionality required for business integration in a single product that has been optimized for ease-of-use, rapid-deployment and extreme
scalability. TIBCO BusinessWorks leverages leading technologies and standards such as XML, Web Services and J2EE and provides a single graphical environment for designing, deploying and managing connections between applications and partners and
automated business processes. TIBCO BusinessWorks is interoperable with our other products.
3
TIBCO BusinessFactor is a Business Activity Monitoring solution that enables the
timely and contextual monitoring and analysis of business-level activities and performance indicators. TIBCO BusinessFactor provides a visual and interactive interface that makes it easy to analyze operations and activities in context of business
objectives, past performance and current conditions so managers and executives can more quickly identify and address risks and opportunities. TIBCO BusinessFactor is a key new element of our solution for business optimization.
In fiscal 2002 we also continued to develop and enhance our existing products, which are marketed and sold as part of our three
product families: TIBCO ActiveEnterprise™ for Enterprise Application Integration (EAI) and Business
Process Management (BPM); TIBCO ActiveExchange™ for Business-to-Business (B2B) integration; and
TIBCO ActivePortal™ for web-based user integration. TIBCO Rendezvous™ continues to be an important part of our offering. We have increased customer flexibility through new messaging
products such as TIBCO Enterprise™ for JMS (Java Message Service), a product based on the Java 2
Platform, Enterprise Edition (J2EE) specification for JMS-based messaging, and TIBCO SmartSockets™ ,
a provider-based messaging solution that delivers exceptional performance and scalability.
TIBCO
ActiveEnterprise—The products of TIBCO ActiveEnterprise make it easier for businesses to create connections between their various internal systems and to coordinate the transactions and processes that span those systems. TIBCO ActiveEnterprise
enables interactions between such diverse applications as CRM (Customer Relationship Management), ERP (Enterprise Resource Planning) and e-business applications, databases, data warehouses and mainframes, and even homegrown applications and
information sources. TIBCO ActiveEnterprise enables communications between systems using standards-based technologies such as XML (eXtensible Markup Language), JMS (Java Message Service) and Web Services. TIBCO ActiveEnterprise also provides
high-performance messaging software that customers can turn to when they need more speed, reliability or scalability as a supplement to standards-based or other more limited communications options. TIBCO ActiveEnterprise makes businesses more
efficient by automating routine processes and managing the complex workflow of human tasks, and helps keep companies running at peak efficiency by providing interfaces that let people monitor and analyze systems and processes throughout the
business.
TIBCO ActiveExchange—The products of TIBCO ActiveExchange make it easier for businesses to create
connections with other businesses and to coordinate transactions and processes that involve those organizations. TIBCO ActiveExchange enables the secure exchange of messages, information and documents with companies of all sizes over the Internet.
TIBCO ActiveExchange increases the efficiency of processes between companies (such as placing a purchase order, returning excess inventory or updating a catalog entry) by automating routine processes and managing the workflow of human tasks and
exceptions to processes. To ensure the security of all interactions, TIBCO ActiveExchange provides authentication, authorization and encryption functionality and supports leading security standards and technologies.
TIBCO ActivePortal—The products of TIBCO ActivePortal let companies aggregate, personalize and deliver information and interfaces
from within their business to specific people both inside and outside their organization. TIBCO ActivePortal brings together content and services from a wide range of sources, manages the access rights and profiles of users, and makes the right
information and interfaces available to the right user at the right time. TIBCO ActivePortal gives businesses complete control over the user experience so they can customize messages and information for selected groups and even specific users. TIBCO
ActivePortal delivers information, interfaces and alerts through the Web and wired devices, as well as through wireless devices such as pagers, mobile phones and personal digital assistants (PDAs).
Services
Professional Services
Our professional services offerings include a wide range of
consulting services such as systems planning and design, custom development and systems integration for the rapid deployment of TIBCO products. We offer
4
our professional services with the initial deployment of our products as well as on an ongoing basis to address the continuing needs of our customers. Our professional services staff is located
throughout North America, Europe and the Pacific Rim, enabling us to perform installations and respond to customer demands rapidly across our global customer base. Many of our professional services employees have advanced degrees, substantial TIBCO
experience and industry expertise in systems architecture and design and also have domain expertise in manufacturing, telecommunications, energy, logistics, healthcare, financial services and other industries.
We also have relationships with resellers, professional service organizations and system integrators including Accenture, Cap Gemini/Ernst
& Young, Deloitte Consulting, KPMG and Sapient, to cooperate in the deployment of our products to customers. These relationships help promote TIBCO products and provide additional technical expertise to enable us to provide the full range of
professional services our customers require to deploy our products.
Maintenance and Support
We offer a suite of software support and maintenance options that are designed to meet the needs of our diverse customer base.
These support options include twenty-four hour coverage that is available seven days a week, 365 days a year, to meet the needs of our global customers. To accomplish this level of support we have established a worldwide support organization with
major support centers in Palo Alto, California, London, England and Sydney, Australia. These centers, working in conjunction with several smaller support offices located throughout the United States, Japan and India, provide seamless support using a
“follow-the-sun” support model. In addition to support teams around the globe we have introduced a Customer Support Website that provides our customers with the ability to submit service requests, receive confirmation that a service
request has been opened and to obtain current status on these requests. Additionally, the Customer Support Website provides access to our support procedures, escalation numbers and late breaking news (LBN). LBN is used to provide updates and new
information about our products.
Training
We provide a comprehensive and global training program for customers and partners. Training is available at our main office in Palo Alto and at major training centers in
Cambridge, Massachusetts; Houston, Texas; Munich, Germany; and Tokyo, Japan. We also deliver training on-site at customer locations. We provide specialized training for our professional services partners to enhance their effectiveness in integrating
our products. Our Educational Services group has the capability to develop solutions to address the specific needs of individual customers and partners. Our curriculum leads to an industry recognized technical certification in high visibility TIBCO
technologies.
Sales and Marketing
Sales
We currently market our software and services
primarily through a direct sales organization complemented by indirect sales channels. Our direct sales force is located in nineteen U.S. cities and in twenty-one locations internationally across North America, Europe and the Pacific Rim. We have
established distribution and licensing relationships with several strategic hardware vendors, database providers, software and toolset developers and systems integrators. We have also developed alliances with key solution providers to target
vertical industry sectors, including energy, telecommunications and manufacturing.
Under the terms of our license
agreement with Reuters Group PLC, a global news and information group, we generally may not sell certain of our products or services directly into the financial services market without prior approval from Reuters. Accordingly, we generally sell our
products to companies in the financial services industry through third-party distributors and systems integrators. Reuters is a distributor of our products in that
5
market. The distribution relationship with Reuters accounted for 9%, 8% and 8% of our total revenue in each of fiscal 2002, 2001 and 2000, respectively. To the extent that we sell our products
into the financial services market other than through Reuters, we must generally pay a fee to Reuters.
Marketing
We use a mix of market research, analyst updates, seminars, direct mail, print
advertising, trade shows, speaking engagements, public relations, customer newsletters and web marketing in order to achieve our marketing goals. Our marketing department also produces collateral material for distribution to potential customers
including presentation materials, white papers, brochures and fact sheets. We also host annual user conferences for our customers and provide support to our channel partners with a variety of programs, training and product marketing support
materials.
Product Development
Reuters has granted us a perpetual, royalty-free license to The Information Bus™ (TIB™) messaging technology included in some of our products as it
existed on December 31, 1996. We have concentrated our product development efforts since then on enhancing this licensed technology and on developing new products. We expect that most of our enhancements to existing products and new products will be
developed internally. However, we will evaluate on an ongoing basis the acquisition of externally developed technologies for integration into our product lines.
We expect that a majority of our research and development activities will focus on enhancing and extending our TIBCO products. Historically, our product development efforts were focused on creating our
core product solutions. In fiscal 2002, our development focus shifted to create products that interoperate seamlessly.
We expect that we will continue to commit significant resources to product development in the future. To date, all product development costs have been expensed as incurred.
Competition
The market for our products and
services is extremely competitive, continually evolving and subject to rapid change. While we offer a comprehensive suite of application integration solutions, we compete with various providers of application integration products including BEA, IBM,
Mercator, Microsoft, SeeBeyond, Vitria and webMethods. We believe that none of these companies has as comprehensive a suite of products as ours, but of these companies, IBM has the potential to offer the most complete set of products for enterprise
application integration. We expect additional competition from other established and emerging companies. In addition, we may face pricing pressures from our current competitors and new market entrants in the future. We believe that the competitive
factors affecting the market for our products and services include product functionality and features, quality of professional services offerings, performance and price, ease of product implementation, quality of customer support services, customer
training and documentation, and vendor and product reputation. The relative importance of each of these factors depends upon the specific customer environment. Although we believe that our products and services currently compete favorably with
respect to such factors, we may not be able to maintain our competitive position against current and potential competitors.
Some of our current competitors have, and some of our potential customers may have, longer operating histories, significantly greater financial, technical, product development and marketing resources, greater name recognition and
larger customer bases than we do. Our present or future competitors may be able to develop products comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends or customer requirements, or
devote greater resources to the development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets, or competition may intensify and harm our business and operating results. If we are
not successful in developing new products
6
and enhancements to our existing products or achieving customer acceptance, our gross margins may decline, and our business and operating results may suffer.
Our license agreement with Reuters does not prohibit Reuters from providing enterprise infrastructure software products and services in
competition with us. Under the terms of our license agreement with Reuters, we generally may not sell our products directly into the financial services market without prior approval from Reuters. Reuters currently sells our products to financial
services companies and creates products based on the TIB technology specifically for financial service companies. In addition, pursuant to the license agreement, Reuters has access to the source code for our products. Although Reuters currently does
not create TIB-based products designed for general use in all markets, if Reuters were to decide to begin providing information integration products and services in our markets, we would face additional competition for customers in these markets.
Proprietary Technology
Our success is dependent upon our proprietary software technology. We license the patents relating to some of the technology underlying some of our software, including TIBCO Rendezvous, from Reuters.
Consequently, we can assert infringement of these patents only through Reuters or with the consent of Reuters. We have several pending patent applications and three issued patents, although we rely principally on trade secret, copyright and
trademark laws, and nondisclosure and other contractual agreements to protect our technology. We also believe that factors such as the technological and creative skills of our personnel, product enhancements and new product developments are
essential to establishing and maintaining a technology leadership position. We enter into confidentiality and/or license agreements with our employees, distributors and customers, and limit access to and distribution of our software, documentation
and other proprietary information. Nevertheless, the steps we have taken may fail to prevent misappropriation of our technology, and the protections we have may not prevent our competitors from developing products with functionality or features
similar to our products.
Furthermore, third parties might independently develop competing technologies that are
substantially equivalent or superior to our technologies. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries where we operate. If we fail to protect our proprietary technology, our
business could be seriously harmed.
Although we do not believe our products infringe the proprietary rights of
any third parties, third parties may nevertheless assert infringement claims against our customers or us in the future. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to
establish the validity of our proprietary rights. Litigation, whether resolved in our favor or not, would cause us to incur substantial costs and divert our management resources from productive tasks, which would harm our business. Parties making
claims against us could secure substantial damages, as well as injunctive or other equitable relief, which could effectively block our ability to license our products in the United States or abroad. Such a judgment could seriously harm our business.
If it appears necessary or desirable, we may seek licenses to intellectual property if we believe that our technology potentially infringes on such intellectual property. We may not, however, be able to obtain such licenses on commercially
reasonable terms or at all, and the terms of any offered licenses might not be acceptable to us. The failure to obtain necessary licenses or other rights could seriously harm our business. As the number of software products in our industry increases
and the functionality of those products further overlaps, we believe that software developers may become increasingly subject to infringement claims.
Employees
As of November 30, 2002, we employed 1,030 persons, including 327 in sales and
marketing, 289 in research and development, 145 in finance and administration and 269 in professional services and technical support. Of our 1,030 employees, 171 were located in Europe and 71 in the Pacific Rim and the balance in
7
North America. Our success is highly dependent on our ability to attract and retain qualified employees. Competition for employees is intense in the software industry. To date, we believe we
have been successful in our efforts to recruit qualified employees, but there is no assurance that we will continue to be as successful in the future. None of our employees are subject to collective bargaining agreements. We believe that our
relationship with our employees is good.
Available Information
Our principal Internet address is www.tibco.com. We make available free of charge on www.tibco.com our annual, quarterly and current reports, and amendments to those
reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our principal administrative, sales, marketing, service and
research and development facilities are located in a four building campus totaling approximately 292,000 square feet in Palo Alto, California. We hold these buildings pursuant to a lease that expires April 25, 2014. In addition, we lease field
support offices in 41 cities throughout the world. The field offices range from small executive offices to a 19,448 square foot facility. Lease terms range from month-to-month on certain executive offices to nine years on certain direct leases.
Because our professional services are generally performed at the client site, field facilities are generally small. Field facilities are generally used for periodic meetings, training, and administration and by account managers. Our principal field
facilities are in Atlanta, Georgia; Beijing, China; Shanghai, China; Bethesda, Maryland; Brussels, Belgium; Calgary, Canada; Cambridge, Massachusetts; Chapel Hill, North Carolina; Chicago, Illinois; Cincinnati, Ohio; Columbus, Ohio; Dallas, Texas;
Denver, Colorado; Detroit, Michigan; Houston, Texas; Irvine, California; Kansas City, Kansas; Lisbon, Portugal; London, England; Madrid, Spain; Melbourne, Australia; Miami, Florida; Milan, Italy; Minneapolis, Minnesota; Munich, Germany; New York,
New York; Oslo, Norway; Paris, France; Philadelphia, Pennsylvania; Pittsburgh, Pennsylvania; Rome, Italy; Rotterdam, Netherlands; San Diego, California; Seattle, Washington; Singapore; Seoul, Korea; Stockholm, Sweden; Sydney, Australia; Taipei,
Taiwan; Tokyo, Japan; Toronto, Canada and Woy Woy, Australia. We are continually evaluating the adequacy of existing facilities and additional facilities in new cities and we believe that suitable additional space will be available in the future on
commercially reasonable terms as needed.
We, certain investment bank underwriters and certain of our
directors and officers have been named in a putative class action for violation of the federal securities laws in the United States District Court for the Southern District of New York, captioned, “In re TIBCO Software, Inc. Initial Public
Offering Securities Litigation, 01 Civ. 6110 (SAS).” This is one of many of cases challenging underwriting practices in the initial public offerings (“IPOs”) of more than 300 companies. These cases have been coordinated for pretrial
proceedings as “In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS).” Plaintiffs generally allege that certain underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive
brokerage commissions and customer agreements regarding post-offering purchases of stock in exchange for allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports.
The complaint against us claims that the purported improper underwriting activities were not disclosed in the registration statements for our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons
who purchased our securities or sold put options during the time period from July 13, 1999 to December 6, 2000. We believe that we have meritorious defenses to the claims against us and we intend to defend against the complaints vigorously. We have
filed motions to dismiss the action.
A lawsuit with similar allegations of undisclosed improper underwriting
practices, and part of the same coordinated proceedings, is pending against Talarian, which we acquired in April 2002. That action is captioned,
8
“In re Talarian Corp. Initial Public Offering Securities Litigation, 01 Civ. 7474 (SAS).” The complaint against Talarian, certain of its underwriters, and certain of its former
directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for Talarian’s IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian
securities during the time period from July 20, 2000 to December 6, 2000. We believe that there are meritorious defenses to the claims against Talarian and intend to defend against those claims vigorously. We have filed motions to dismiss the
action.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2002.
9
PART II
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MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS |
Our common stock has been quoted on The Nasdaq National Market
under the symbol TIBX since July 1999. The following table presents, for the periods indicated, the high and low sale prices per share of our common stock during the quarters indicated, as reported on The Nasdaq National Market.
| Fiscal 2001
|
|
High
|
|
Low
|
| First Quarter (from December 1, 2000 to March 2, 2001) |
|
$ |
77.50 |
|
$ |
9.50 |
| Second Quarter (from March 3, 2001 to June 1, 2001) |
|
$ |
16.25 |
|
$ |
6.44 |
| Third Quarter (from June 2, 2001 to August 31, 2001) |
|
$ |
16.80 |
|
$ |
6.76 |
| Fourth Quarter (from September 1, 2001 to November 30, 2001) |
|
$ |
13.40 |
|
$ |
5.07 |
| |
| Fiscal 2002
|
|
High
|
|
Low
|
| First Quarter (from December 1, 2001 to March 1, 2002) |
|
$ |
16.90 |
|
$ |
9.77 |
| Second Quarter (from March 2, 2002 to May 31, 2002) |
|
$ |
15.05 |
|
$ |
5.70 |
| Third Quarter (from June 1, 2002 to August 30, 2002) |
|
$ |
6.62 |
|
$ |
4.13 |
| Fourth Quarter (from August 31, 2002 to November 30, 2002) |
|
$ |
7.40 |
|
$ |
3.28 |
We had 674 stockholders of record as of November 30, 2002.
We have never declared or paid any cash dividends on our common stock, and we do not anticipate paying any cash
dividends in the foreseeable future.
Equity Compensation Plan Information
| Plan Category
|
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Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)
|
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Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)
|
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Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
|
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| Equity compensation plans approved by security holders(1) |
|
43,458,856 |
|
$ |
7.55 |
|
15,449,264 |
(3) |
| Equity compensation plans not approved by security holders(2) |
|
1,556 |
|
$ |
17.35 |
|
— |
|
| |
|
|
|
|
|
|
|
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| Total |
|
43,460,412 |
|
$ |
7.55 |
|
15,449,264 |
(3) |
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|
|
|
|
|
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|
|
(1) |
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Includes our 1996 Stock Option Plan, which provides for an annual increase in the number of shares available for issuance thereunder, on the first day of
each fiscal year, equal to the least of (i) 60,000,000 Shares, (ii) 5% of our outstanding shares of common stock on such date, or (iii) an amount determined by our board of directors. |
(2) |
|
Consists of individual options granted by Talarian Corporation (“Talarian”) to seven of its employees from November 1999 through March 2000. We
assumed these options in connection with our acquisition of Talarian in April 2002. Each option has a per share exercise price equal to the fair market value of a share of Talarian’s common stock on the date of grant (as determined by
Talarian’s board of directors) and a term of ten years, and vests, contingent upon the continued employment of the optionee, as to 12.5% of the underlying shares six months after the date of grant and as to an additional 2.0833% of the
underlying shares each month thereafter. |
10
(3) |
|
Includes 15,342,193 shares available for future issuance under our equity compensation plans and 107,071 shares available for future issuance under equity
compensation plans we assumed in connection with our acquisitions of Extensibility Inc. (“Extensibility”) and Talarian. We do not presently intend to grant any further options or other equity awards under these assumed plans.
|
The selected consolidated financial data below have been derived
from our audited financial statements. You should read the following table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes
thereto included elsewhere in this annual report on Form 10-K. The historical results presented below are not indicative of any future results.
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
| |
|
(in thousands, except per share amounts) |
|
| Statement of Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| License revenue |
|
$ |
159,114 |
|
|
$ |
216,757 |
|
|
$ |
181,601 |
|
|
$ |
56,916 |
|
|
$ |
17,495 |
|
| Service and maintenance revenue |
|
|
111,851 |
|
|
|
102,494 |
|
|
|
70,196 |
|
|
|
37,803 |
|
|
|
34,714 |
|
| Reimbursable expenses |
|
|
2,428 |
|
|
|
2,840 |
|
|
|
2,292 |
|
|
|
1,721 |
|
|
|
548 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenue |
|
|
273,393 |
|
|
|
322,091 |
|
|
|
254,089 |
|
|
|
96,440 |
|
|
|
52,757 |
|
| Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation(1) |
|
|
527 |
|
|
|
977 |
|
|
|
3,025 |
|
|
|
1,113 |
|
|
|
490 |
|
| Other cost of revenue |
|
|
60,962 |
|
|
|
66,669 |
|
|
|
63,785 |
|
|
|
36,612 |
|
|
|
27,682 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
211,904 |
|
|
|
254,445 |
|
|
|
187,279 |
|
|
|
58,715 |
|
|
|
24,585 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation(1) |
|
|
1,318 |
|
|
|
12,109 |
|
|
|
18,525 |
|
|
|
2,707 |
|
|
|
971 |
|
| Other research and development |
|
|
71,026 |
|
|
|
78,878 |
|
|
|
57,861 |
|
|
|
27,478 |
|
|
|
14,787 |
|
| Sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation(1) |
|
|
1,286 |
|
|
|
10,128 |
|
|
|
33,637 |
|
|
|
4,281 |
|
|
|
2,304 |
|
| Other sales and marketing |
|
|
126,467 |
|
|
|
136,818 |
|
|
|
92,228 |
|
|
|
33,130 |
|
|
|
15,242 |
|
| General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation(1) |
|
|
919 |
|
|
|
3,751 |
|
|
|
1,729 |
|
|
|
1,151 |
|
|
|
1,299 |
|
| Other general and administrative |
|
|
21,406 |
|
|
|
22,799 |
|
|
|
18,489 |
|
|
|
8,229 |
|
|
|
4,025 |
|
| Acquired in-process research and development(2) |
|
|
2,400 |
|
|
|
— |
|
|
|
2,260 |
|
|
|
2,800 |
|
|
|
— |
|
| Amortization of goodwill and acquired intangibles(2) |
|
|
24,428 |
|
|
|
23,516 |
|
|
|
10,479 |
|
|
|
521 |
|
|
|
— |
|
| Restructuring charges(3) |
|
|
49,336 |
|
|
|
21,197 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
298,586 |
|
|
|
309,196 |
|
|
|
235,208 |
|
|
|
80,297 |
|
|
|
38,628 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(86,682 |
) |
|
|
(54,751 |
) |
|
|
(47,929 |
) |
|
|
(21,582 |
) |
|
|
(14,043 |
) |
| Interest income and other, net |
|
|
16,264 |
|
|
|
31,040 |
|
|
|
24,866 |
|
|
|
2,101 |
|
|
|
1,092 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(70,418 |
) |
|
|
(23,711 |
) |
|
|
(23,063 |
) |
|
|
(19,481 |
) |
|
|
(12,951 |
) |
| Provision for (benefit from) income taxes(4) |
|
|
24,162 |
|
|
|
(10,469 |
) |
|
|
1,888 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(94,580 |
) |
|
$ |
(13,242 |
) |
|
$ |
(24,951 |
) |
|
$ |
(19,481 |
) |
|
$ |
(12,951 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
$ |
(0.46 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.22 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding(5) |
|
|
205,821 |
|
|
|
195,001 |
|
|
|
184,177 |
|
|
|
104,112 |
|
|
|
60,033 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
| |
|
November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
| |
|
(in thousands) |
| Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents, Short-term investments and Deposits held by Reuters(6) |
|
$ |
637,853 |
|
$ |
677,340 |
|
$ |
582,900 |
|
$ |
89,807 |
|
$ |
15,970 |
| Working capital |
|
|
563,732 |
|
|
638,803 |
|
|
596,303 |
|
|
95,603 |
|
|
18,301 |
| Total assets |
|
|
894,588 |
|
|
892,127 |
|
|
829,215 |
|
|
79,638 |
|
|
36,289 |
| Stockholders’ equity |
|
|
744,727 |
|
|
771,279 |
|
|
729,535 |
|
|
137,918 |
|
|
21,704 |
(1) |
|
See Notes 2 and 9 of Notes to Consolidated Financial Statements for an explanation of stock-based compensation. |
(2) |
|
See Notes 2 and 11 of Notes to Consolidated Financial Statements for an explanation of acquired in-process research and development and amortization of goodwill
and acquired intangibles. |
(3) |
|
See Note 5 of Notes to Consolidated Financial Statements for an explanation of restructuring charges. |
(4) |
|
See Note 7 of Notes to Consolidated Financial Statements for an explanation of significant components of the benefit (provision) for income taxes.
|
(5) |
|
See Note 2 of Notes to Consolidated Financial Statements for an explanation of shares used to compute net loss per share. |
(6) |
|
There were no Deposits held by Reuters as of the fiscal years ended November 30, 2002, 2001, 2000 and 1999, respectively. |
12
| |
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following contains 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. Words such as “anticipates,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates” and similar expressions identify such forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ materially include those set forth in the following discussion, and, in particular, the risks discussed below under the subheading
“Factors that May Affect Operating Results” and in other documents we file with the Securities and Exchange Commission. Unless required by law we undertake no obligation to update publicly any forward-looking statements.
We are a leading enabler of real-time business. We are the successor to a portion of the business of Teknekron Software
Systems, Inc. Teknekron developed software, known as the TIB technology, for the integration and delivery of market data, such as stock quotes, news and other financial information, in trading rooms of large banks and financial services
institutions. In 1992, Teknekron expanded its development efforts to include solutions designed to enable complex and disparate manufacturing equipment and software applications—primarily in the semiconductor fabrication market—to
communicate within the factory environment. Teknekron was acquired by Reuters Group PLC, the global news and information group, in 1994. Following the acquisition, continued development of the TIB technology was undertaken to expand its use in the
financial services markets.
In January 1997, our company, TIBCO Software Inc., was established as an entity
separate from Teknekron. We were formed to create and market software solutions for use in the integration of business information, processes and applications in diverse markets and industries outside the financial services sector. In connection
with our establishment as a separate entity, Reuters transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to the intellectual property from which some of our messaging software products
originated. Reuters also assigned to us at that time license and service contracts primarily within the high-tech manufacturing and energy markets, including contracts with NEC, Motorola, Mobil and Chevron.
During fiscal 2000, we continued to focus on strengthening our position in our significant vertical markets and our relationships with
major system integrators such as KPMG, Cap Gemini/ Ernst & Young and Deloitte & Touche. We also introduced our TIBCO ActiveExchange product suite, which is used to more dynamically and collaboratively automate interactions among businesses.
In addition, we added more than 300 new customers during fiscal 2000, including such industry leaders as Agilent, El Paso Energy, Schering Plough and The Limited.
During fiscal 2001, we released 66 new products including TIBCO ActiveExchange, the business-to-business solution that expanded our support for XML standards and Electronic
Data Integration (EDI), and consolidated our leadership position in supporting Rosettanet standards. In addition, we announced an initiative to make business integration more widely accessible with the anticipated release of TIBCO BusinessWorks, a
comprehensive, packaged, easy-to-use platform that gives companies the ability to rapidly solve integration challenges. TIBCO BusinessWorks is also one of the first solution to enable comprehensive, cross-platform Web Services for new and legacy
systems, including internal application and business process integration, as well as real-time monitoring and management.
During fiscal 2002, we released two new products: (i) TIBCO BusinessWorks; and (ii) TIBCO BusinessFactor, and made significant improvements to our messaging offering adding two new messaging products. We also continued to develop and
enhance our existing products, which are marketed and sold as part of our three product families: TIBCO ActiveEnterprise for EAI and BPM; TIBCO ActiveExchange for B2B integration; and TIBCO ActivePortal for web-based user integration.
13
Our products are currently licensed by approximately 1,900 companies worldwide in
diverse industries such as telecommunications, retail, healthcare, manufacturing, energy, transportation, logistics, financial services, government and insurance. We sell our products through a direct sales force and through alliances with leading
software vendors and systems integrators.
Our revenue in fiscal 2002, 2001 and 2000 consisted primarily of
license and maintenance fees from our customers and distributors, including fees from Reuters pursuant to our license agreement, both of which were primarily attributable to sales of our TIBCO ActiveEnterprise product suite. In addition, we receive
fees from our customers for providing project integration services. We also receive revenue from our strategic relationships with business partners who embed our products in their hardware and networking systems as well as from systems integrators
who resell our products.
We recognize license revenue when a signed contract or other persuasive evidence of an
arrangement exists, the software has been shipped or electronically delivered, the license fee is fixed or determinable, and collection of the resulting receivable is probable. When contracts contain multiple elements wherein vendor specific
objective evidence exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method” prescribed by Statement of Position 98-9. Revenue from subscription license agreements, which include
software, rights to future products and maintenance, is recognized ratably over the term of the subscription period. Revenue on shipments to resellers, which is generally subject to certain rights of return and price protection, is recognized when
the products are sold by the resellers to the end-user customer.
First-year maintenance typically is sold with
the related software license and renewed on an annual basis thereafter. Maintenance revenue is deferred based on vendor-specific objective evidence of fair value and amortized over the term of the maintenance contract, typically 12 months.
Consulting and training revenues are recognized as the services are performed and are usually on a time and materials basis. Such services primarily consist of implementation services related to the installation of the company’s products and
generally do not include significant customization to or development of the underlying software code.
Reuters is
a distributor of our products to customers in the financial services segment. Reuters owns approximately 49.8% of our outstanding capital stock and nominated two members on our Board of Directors. We have a license, maintenance and distribution
agreement with Reuters pursuant to which Reuters pays a minimum guaranteed distribution fee to us in the amount of $20 million per year through December 2003. For the calendar years ended December 31, 2002, 2001 and 2000, Reuters guaranteed minimum
distribution fees were $20.0 million, $20.0 million and $18.0 million, respectively. These fees are recognized ratably over the corresponding period as related party revenue. If actual distribution fees due from Reuters exceed the cumulative minimum
year-to-date guarantee, incremental fees are due. Such incremental fees are recognized in the period when the year-to-date fees exceed the cumulative minimum level. Royalty payments to Reuters for resale of Reuters products and services or fees
associated with sales to the financial services segment are classified as related party cost of revenue. In addition, our agreement with Reuters also requires us to provide Reuters with internal maintenance and support until December 31, 2011 for a
fee of $2.0 million per year plus an annual CPI-based increase, subject to Reuters’ annual renewal option. This amount is recognized ratably over the corresponding period as related party service and maintenance revenue. Reuters’
obligation to pay us minimum guaranteed product fees expires at the end of 2003. The potential effects of this expiration on our revenues from the financial services market are unclear, and we may desire to renegotiate the terms of our licensing and
distribution relationship with Reuters. Any new agreement with Reuters would be the result of negotiations between Reuters and us, and, because of Reuters’ relationship with us and its influence over our business, would be approved by a
majority of our Board of Directors, including a majority of our independent and disinterested directors.
Under
our agreement with Reuters, through May 28, 2004, we are restricted, unless we receive approval from Reuters, from selling our products and providing consulting services directly to companies in the financial services market. We are also restricted
from selling the TIB technology we license from Reuters directly to
14
companies in the financial services market or major competitors of Reuters, or from using the TIB technology to develop products specifically for use by these companies. Accordingly, through May
28, 2004, we must rely on Reuters and, to a lesser extent, other third-party resellers and distributors to sell our products to these companies. Further, Reuters is required to pay us product fees based on a percentage of its revenue from sales of
our products in the financial services market, excluding products that are embedded in any Reuters products. These product fees may be materially less than the product fees we could obtain from other distributors or resellers in the financial
services market. In addition, when we sell our products into the financial services market other than through Reuters, we are required to pay fees to Reuters, which we record as related party cost of revenue.
Our revenue is derived from a diverse customer base and no single customer represented greater than 10% of total revenue during fiscal
2002, 2001 and 2000, respectively. One customer had a balance in excess of 10% of net accounts receivable at November 30, 2002. There were no customers with a balance in excess of 10% of net accounts receivable at November 30, 2001. We establish
allowances for doubtful accounts based on our evaluation of collectibility and an allowance for returns and discounts based on specifically identified credits and historical experience.
Since the first quarter of fiscal 2001, adverse general economic conditions and conditions in the enterprise software industry have impacted the ability of our customers to
purchase our products and services as uncertainty in their businesses had increased. These conditions have caused our sales cycle to lengthen, customer budgets for research and development to decrease and customer purchases to be delayed or
decreased. We expect these conditions in the general economy and in our industry to continue to adversely impact our customers’ ability to purchase our products and services in the near future, but we are unable to predict with certainty how
long these trends will persist.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2 to the annual consolidated financial statements as of and for the year ended
November 30, 2002. We believe our most critical accounting policies include the following:
| |
• |
|
estimating valuation allowances and accrued liabilities, specifically allowance for doubtful accounts, returns and discounts and accrued restructuring costs;
|
| |
• |
|
accounting for income taxes; |
| |
• |
|
valuation of long-lived and intangible assets and goodwill; and |
| |
• |
|
accounting for investments. |
Revenue Recognition. We recognize license revenue when a signed contract or other persuasive evidence of an arrangement exists, the software has been shipped or electronically delivered, the
license fee is fixed or determinable, and collection of the resulting receivable is probable. When contracts contain multiple elements wherein vendor specific objective evidence exists for all undelivered elements, we account for the delivered
elements in accordance with the “Residual Method” prescribed by Statement of Position 98-9. Revenue from subscription license agreements, which include software, rights to future products and maintenance, is recognized
15
ratably over the term of the subscription period. Revenue on shipments to resellers, when subject to certain rights of return and price protection, is recognized when the products are sold by the
resellers to the end-user customer.
We assess whether the fee is fixed or determinable and collection is probable
at the time of the transaction. In determining whether the fee is fixed or determinable we compare the payment terms of the transaction to our normal payment terms. If a significant portion of a fee is due after our normal payment terms, we account
for the fee as not being fixed or determinable and recognize revenue as the fees become due. We assess whether collection is probable based on a number of factors, including the customer’s past transaction history and credit-worthiness. We do
not request collateral from our customers. If we determine that collection of a fee is not probable, we defer the fee and recognize revenue at the time collection becomes probable, which is generally upon receipt of cash.
First-year maintenance typically is sold with the related software license and renewed on an annual basis thereafter. For such
arrangements with multiple obligations, we allocate revenue to each component of the arrangement based on the fair value of the undelivered elements. Fair values of ongoing maintenance and support obligations are based on separate sales of renewals
to other customers or upon renewal rates quoted in the contracts. Maintenance revenue is deferred and recognized ratably over the term of the maintenance and support period. Fair value of services, such as consulting or training, is based upon
separate sales of these services. Consulting and training services are generally billed based on hourly rates and revenues are generally recognized as the services are performed. Consulting services primarily consist of implementation services
related to the installation of our products and generally do not include significant customization to or development of the underlying software code.
Significant management judgments and estimates must be made in connection with determination of the revenue to be recognized in any accounting period. If we made different judgments or utilized
different estimates for any period, material differences in the amount and timing of revenue recognized could result.
Valuation Allowances and Accrued Liabilities: Allowance for Doubtful Accounts and Returns and Discounts. We establish allowances for doubtful accounts, returns and discounts based on our review of
credit profiles of our customers, contractual terms and conditions, current economic trends and historical payment, and return and discount experience. We reassess the allowances for doubtful accounts, returns and discounts each period. If we made
different judgments or utilized different estimates for any period, material differences in the amount and timing of revenue or expense recognized could result.
Accrued Restructuring Costs. During fiscal 2001 and fiscal 2002, we recorded restructuring charges to align our cost structure with changing market conditions. Our
restructuring plan resulted in a reduction in headcount and the consolidation of facilities through the closing of excess field offices and relocation of corporate offices into one campus. Our restructuring charges included accruals for the
estimated loss on facilities that we intend to sublease based on estimates of the timing and amount of sublease income and the non-cash write-down of leasehold improvements. We reassess this liability each period based on market conditions.
Revisions to our estimates of this liability could materially impact our operating results and financial position in future periods if anticipated events and key assumptions, such as the timing and amounts of sublease rental income, either change or
do not materialize.
Accounting for Income Taxes. As part of the process of
preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that
our deferred tax assets will be recovered from future taxable income, and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in
a period, we must include an expense within the tax provision in the statement of operations. A valuation
16
allowance is currently set against deferred tax assets because management believes it is more likely than not that the deferred tax assets will not be realized through the generation of future
taxable income. We also do not provide for taxes on undistributed earnings of our foreign subsidiaries, as it is our intention to reinvest undistributed earnings indefinitely.
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and our future taxable income for
purposes of assessing our ability to realize any future benefit from our deferred tax assets. In the event that actual results differ from these estimates or we adjust these estimates in future periods, our operating results and financial position
could be materially affected.
Valuation of Long-Lived and Intangible Assets and
Goodwill. We assess goodwill, other intangible assets and other long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable through the
estimated undiscounted future cash flows resulting from the use of the assets. If we determine that the carrying value of goodwill, other intangible assets and other long-lived assets may not be recoverable we measure impairment by using the
projected discounted cash-flow method.
In accordance with Financial Accounting Standards Board (“FASB”)
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but instead will be subject to
impairment tests at least annually. We have adopted SFAS No. 142 as required in connection with our acquisition of Talarian in April 2002. For goodwill and intangibles recorded prior to July 1, 2002, we will adopt SFAS No. 142 during the first
quarter of fiscal 2003. Workforce does not qualify as a separately identifiable intangible and on adoption will be reclassified as goodwill. The adoption of SFAS No. 142 is not expected to have a material impact on our financial position and results
of operations, other than the cessation of amortization of goodwill.
Accounting for
Investments. We determine the appropriate classification of marketable securities at the time of purchase and evaluate such designation as of each balance sheet date. To date, all marketable securities have been
classified as available-for-sale and are carried at fair value with unrealized gains and losses, if any, included as a component of accumulated other comprehensive loss in stockholders’ equity. Marketable securities are presented as current
assets as we expect to use them within one year in current operations even though some have scheduled maturities of greater than one year. Realized gains and losses are recognized based on the specific identification method. Our investments also
include minority equity investments in privately held companies that are generally carried at cost basis and included in other assets on the balance sheet.
We review our investments on a regular basis to evaluate whether or not each security has experienced an other-than-temporary decline in fair value. Our policy includes, but is not limited to,
reviewing each of the companies’ cash position, earnings/revenue outlook, stock price performance, liquidity and management/ownership. If we believe that an other-than-temporary decline exists, we write down the investment to market value and
record the related write-down as a loss on investments in our consolidated statement of operations.
Significant
management judgment is required in determining whether an other-than-temporary decline in the value of our investments exists. Estimating the fair value of non-marketable equity investments in early-stage technology companies is inherently
subjective. Changes in our assessment of the valuation of our investments could materially impact our operating results and financial position in future periods if anticipated events and key assumptions do not materialize or change.
17
The following table sets forth, for the periods indicated, certain financial
information as a percentage of total revenue:
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
| License revenue: |
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
53 |
% |
|
61 |
% |
|
63 |
% |
| Related parties |
|
5 |
|
|
6 |
|
|
8 |
|
| |
|
|
|
|
|
|
|
|
|
| Total license revenue |
|
58 |
|
|
67 |
|
|
71 |
|
| |
|
|
|
|
|
|
|
|
|
| Software and maintenance revenue: |
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
36 |
|
|
29 |
|
|
27 |
|
| Related parties |
|
5 |
|
|
3 |
|
|
1 |
|
| Reimbursable expenses |
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
| Total software and maintenance revenue |
|
42 |
|
|
33 |
|
|
29 |
|
| |
|
|
|
|
|
|
|
|
|
| Total revenue |
|
100 |
|
|
100 |
|
|
100 |
|
| |
|
|
|
|
|
|
|
|
|
| Cost of revenue: |
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
— |
|
|
1 |
|
| Other cost of revenue non-related parties |
|
21 |
|
|
20 |
|
|
24 |
|
| Other cost of revenue related parties |
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
| Total cost of revenue |
|
22 |
|
|
21 |
|
|
26 |
|
| |
|
|
|
|
|
|
|
|
|
| Gross profit |
|
78 |
|
|
79 |
|
|
74 |
|
| |
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
| Research and development: |
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
4 |
|
|
7 |
|
| Other research and development |
|
26 |
|
|
25 |
|
|
23 |
|
| Sales and marketing: |
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
3 |
|
|
13 |
|
| Other sales and marketing |
|
47 |
|
|
42 |
|
|
37 |
|
| General and administrative: |
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
1 |
|
|
1 |
|
| Other general and administrative |
|
8 |
|
|
7 |
|
|
7 |
|
| Acquired in-process research and development |
|
1 |
|
|
— |
|
|
1 |
|
| Restructuring charge |
|
18 |
|
|
7 |
|
|
— |
|
| Amortization of goodwill and acquired intangibles |
|
9 |
|
|
7 |
|
|
4 |
|
| |
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
109 |
|
|
96 |
|
|
93 |
|
| |
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
(31 |
) |
|
(17 |
) |
|
(19 |
) |
| Interest income and other, net |
|
5 |
|
|
10 |
|
|
10 |
|
| |
|
|
|
|
|
|
|
|
|
| Net loss before income taxes |
|
(26 |
) |
|
(7 |
) |
|
(9 |
) |
| Provision for (benefit from) income taxes |
|
9 |
|
|
(3 |
) |
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
| Net loss |
|
(35 |
)% |
|
(4 |
)% |
|
(10 |
)% |
| |
|
|
|
|
|
|
|
|
|
Results of Operations
Total Revenue
Total revenue
was $273.4 million, $322.1 million and $254.1 million in fiscal 2002, 2001 and 2000, respectively, representing a decrease of $48.7 million, or 15.1%, from fiscal 2001 to fiscal 2002 and an increase
18
of $68.0 million, or 27%, from fiscal 2000 to fiscal 2001. Revenue from Reuters accounted for 9%, 8% and 8% of our total revenue in fiscal 2002, 2001 and 2000, respectively. In fiscal 2002, 2001
and 2000, revenue from Reuters was $25.3 million, $25.6 million and $20.8 million, respectively, consisting primarily of fees under our license agreement with Reuters.
License Revenue
License
revenue was $159.1 million, $216.8 million and $181.6 million in fiscal 2002, 2001 and 2000, respectively. License revenue decreased $57.7 million, or 27%, from 2001 to fiscal 2002. This decrease was due primarily to the global economic slowdown and
a reduction in information technology spending in general. License revenue increased $35.2 million, or 19%, from 2000 to fiscal 2001. This increase was due primarily to the increased volume of sales to both new and existing customers. License
revenue was 58%, 67% and 71% of total revenue in fiscal 2002, 2001 and 2000, respectively. The decrease in license revenue as a percentage of total revenue from fiscal 2000 to fiscal 2001 was due to slowing sales growth in a weakening global economy
along with the increase in service and maintenance revenue. We expect that license revenues will grow in absolute dollars and will remain relatively constant as a percentage of total revenue in fiscal 2003.
Service and Maintenance Revenue
Service and maintenance revenue was $114.3 million, $105.3 million and $72.5 million in fiscal 2002, 2001 and 2000, respectively, representing increases of $9.0 million, or 9%, from fiscal 2001 to
fiscal 2002 and $32.8 million, or 45%, from fiscal 2000 to fiscal 2001. Service and maintenance revenue was 42%, 33% and 29% of total revenue in fiscal 2002, 2001 and 2000, respectively. These increases were primarily a result of additional
maintenance revenue related to the growth in our installed customer base, partially offset by a decrease in service revenue. We expect that service and maintenance revenue revenues will grow in absolute dollars and will remain relatively consistent
as a percentage of total revenue in fiscal 2003.
Cost of Revenue
Cost of revenue consists primarily of salaries, third party contractor and associated expenses related to providing project implementation
services, the cost of providing maintenance and customer support services, royalties and product fees. The majority of our cost of revenue is directly related to our service revenue. Cost of revenue, excluding stock based compensation charges, was
$61.0 million, $66.7 million and $63.8 million in fiscal 2002, 2001 and 2000, respectively, representing a decrease of $5.7 million, or 9%, from fiscal 2001 to fiscal 2002 and an increase of $2.9 million, or 5%, from fiscal 2000 to fiscal 2001. Cost
of revenue was 22%, 21% and 25% of total revenue in fiscal 2002, 2001 and 2000, respectively. The decrease in absolute dollars in fiscal 2002 resulted from a decrease in royalty fees and cost of third party contractors. The increase in cost of
revenue in absolute dollars in fiscal 2001 resulted from increased service and maintenance revenue.
Research
and Development Expenses
Research and development expenses consist primarily of personnel, third party
contractors and related costs associated with the development of our TIBCO ActiveEnterprise, TIBCO ActiveExchange, TIBCO ActivePortal, TIBCO BusinessWorks and TIBCO BusinessFactor product suites. Research and development expenses, excluding stock
based compensation charges, were $71.0 million, $78.9 million and $57.9 million in fiscal 2002, 2001 and 2000, respectively, representing a decrease of $7.9 million, or 10%, from fiscal 2001 to fiscal 2002 and an increase of $21.0 million, or 36%,
from fiscal 2000 to fiscal 2001. The decrease in fiscal year 2002 was primarily due to termination and renegotiation of agreements with third party contractors partially offset by a net increase in our development staff through our acquisition of
Talarian. The increase in fiscal 2001 was due primarily to increases in our development staff and third party development agreements that we entered into during fiscal 2001 as we continued to expand our product suites and upgrade the performance of
existing products. Research and development expenses excluding stock-based compensation were 26%, 25% and 23% of
19
total revenue in fiscal 2002, 2001 and 2000, respectively. We believe that continued investment in research and development is critical to attaining our strategic objectives and, as a result,
expect that spending on research and development will remain relatively stable in absolute dollars in fiscal 2003.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel
and related costs of our direct sales force and marketing staff and the cost of marketing programs, including customer conferences, promotional materials, trade shows and advertising. Sales and marketing expenses, excluding stock based compensation
charges, were $126.5 million, $136.8 million and $92.2 million in fiscal 2002, 2001 and 2000, respectively, representing a decrease of $10.3 million, or 8%, from fiscal 2001 to fiscal 2002 and an increase of $44.6 million, or 48%, from fiscal 2000
to fiscal 2001. The decrease in fiscal 2002 was primarily due to decreases in commissions and referral fees partially offset by increased advertising and promotional activity. The increase in fiscal 2001 resulted primarily from the continued
expansion of our domestic and international direct sales force in order to sell our expanding suite of products. Sales and marketing expenses excluding stock-based compensation were 47%, 42% and 37% of total revenue in fiscal 2002, 2001 and 2000,
respectively. We intend to selectively increase staff in our direct sales organization and to create select product marketing programs and, accordingly, expect that sales and marketing expenditures will increase modestly in absolute dollars in
fiscal 2003.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for general corporate functions, including executive, legal, finance, accounting
and human resources. General and administrative expenses, excluding stock based compensation charges, were $21.4 million, $22.8 million and $18.5 million in fiscal 2002, 2001 and 2000, respectively, representing a decrease of $1.4 million, or 6%,
from fiscal 2001 to fiscal 2002 and an increase of $4.3 million, or 23%, from fiscal 2000 to fiscal 2001. The decrease in fiscal 2002 was primarily due to a decrease in bad debt and compensation expense. The increase for fiscal 2001 was primarily a
result of increased staffing and associated operational costs related to building our general and administrative infrastructure. We believe that general and administrative expenses, exclusive of bad debt charges, will remain relatively stable in
absolute dollars in fiscal 2003.
Stock-Based Compensation
In connection with the grant of stock options to employees, non-employee directors and acquisitions during fiscal 1998 and 1999, we
recorded aggregate unearned compensation of $22.8 million, representing the difference between the deemed fair value of our common stock at the date of grant and the exercise price of such options. During fiscal 2000, we recorded aggregate unearned
compensation of $34.9 million in connection with the acquisition of Extensibility related to unvested options that were assumed as well as stock that was issued as part of the consideration for the acquisition and held in an escrow account. Such
amounts are presented as a reduction of stockholders’ equity and are amortized over the vesting period of the applicable option or restricted stock, and are shown by expense category. During the second fiscal quarter of 2002, we recorded $0.7
million of unearned compensation in connection with unvested options and restricted stock assumed on consummation of the acquisition of Talarian. In addition, as of November 30, 2002, we expect to record additional acquisition related compensation
expense of up to $0.3 million in connection with additional cash consideration contingent on the vesting and exercise of stock options and restricted stock that were unvested at the acquisition date. Stock-based compensation expense related to
employees, non-employee directors, Extensibility and Talarian was $3.2 million, $26.4 million and $16.7 million in fiscal 2002, 2001 and 2000, respectively. We expect to amortize $1.2 million, $0.3 million and $0.1 million of unearned
stock-based compensation in fiscal 2003, 2004 and 2005 respectively.
Stock-based compensation expense related to
stock options granted to consultants is recognized as earned using the multiple option method, and is shown by expense category. At each reporting date, we re-value the
20
underlying stock options using the Black-Scholes option-pricing model. As a result, stock-based compensation expense will fluctuate as the fair value of our common stock fluctuates. In connection
with the grant of stock options to consultants, we recorded stock-based compensation income of $0.4 million in fiscal 2002 and stock-based compensation expense of $0.1 million and $34.8 million in fiscal 2001 and 2000, respectively.
In fiscal 2002, 2001 and 2000, we recognized $1.3 million, $0.5 million and $5.4 million, respectively, as stock compensation
expense related to the employer portion of payroll taxes due as a result of employee exercise of non-qualified stock options.
Acquired In-Process Research and Development
Management estimated that $2.4 million of the
purchase price of Talarian in fiscal 2002 and $2.3 million of the purchase price of Extensibility in fiscal 2000 represented acquired in-process research and development (IPRD) that had not yet reached technological feasibility and has no
alternative future use. Accordingly, these amounts were immediately charged to expense upon consummation of the acquisitions. Independent third-party sources calculated the value of IPRD by estimating the expected cash flows from the projects once
commercially viable, discounting the net cash flows back to their present value and then applying a percentage of completion. In determining the value ultimately assigned to IPRD we considered the stage of completion, complexity of work to date,
difficulty of completing the remaining development, costs already incurred and the expected cost to complete the project. The projects have subsequently been completed within management’s estimates.
Restructuring Charge
During fiscal 2001, we recorded restructuring charges totaling $21.2 million, consisting of $2.8 million for headcount reductions, $17.8 million for consolidation of facilities and $0.6 million of other related restructuring
charges. These restructuring charges were recorded to align our cost structure with changing market conditions. The plan resulted in headcount reduction of approximately 170 employees, which was made up of 46% sales and marketing staff, 23%
professional services staff, 16% general and administrative staff and 15% research and development staff. The plan also included the consolidation of facilities by closing excess field offices and moving our corporate offices into one campus.
During fiscal 2002, we recorded restructuring charges totaling $49.3 million, consisting of $1.7 million for
headcount reductions and $47.6 million related to properties abandoned in connection with facilities consolidation. The additional facilities charges resulted from revisions of our estimates of future sublease income due to further deterioration of
real estate market conditions and on-going negotiations with potential sublessors. The headcount reduction of approximately 65 employees was comprised of 41% sales and marketing staff, 23% professional services staff, 18% general and administrative
staff, and 18% research and development staff. During fiscal 2002, we made cash payments of $10.4 million associated with previously abandoned facilities and $1.5 million related to headcount reductions.
In connection with the acquisition of Talarian in the second quarter, the Company recorded acquisition integration liabilities including
the incremental costs to exit and consolidate activities at Talarian locations, to involuntarily terminate Talarian employees, and for other costs to integrate operating locations and other activities of Talarian with those of the Company. Generally
accepted accounting principles require that these acquisition integration expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed liabilities in the allocation of the
purchase price to the net assets acquired. The components of the acquisition integration liabilities include workforce reductions and facilities related costs.
21
The following sets forth our accrued excess facilities costs as of November 30,
2002. These costs represent our estimated loss on abandoned facilities, net of sublease income, which we expect to pay over the next eight years. See Notes 5 and 8 of Notes to Consolidated Financial Statements.
| |
|
Restructuring
|
|
|
Acquisition Integration
|
|
|
Total
|
|
| Fiscal 2001 charges |
|
$ |
17,800 |
|
|
$ |
— |
|
|
$ |
17,800 |
|
| Cash utilized in fiscal 2001 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2001 |
|
|
17,800 |
|
|
|
— |
|
|
|
17,800 |
|
| Fiscal 2002 charges |
|
|
47,614 |
|
|
|
7,410 |
|
|
|
55,024 |
|
| Cash utilized in fiscal 2002* |
|
|
(9,135 |
) |
|
|
(1,286 |
) |
|
|
(10,421 |
) |
| Non-cash write-down of leasehold improvements in fiscal 2002* |
|
|
(11,092 |
) |
|
|
— |
|
|
|
(11,092 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2002 |
|
$ |
45,187 |
|
|
$ |
6,124 |
|
|
$ |
51,311 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The leasehold improvement write-downs were accounted for as a reduction of the assets and did not result in a liability. |
Amortization of Goodwill and Other Acquired Intangibles
Amortization of goodwill and other acquired intangibles was $24.4 million, $23.5 million and $10.5 million in fiscal 2002, 2001 and 2000, respectively. In fiscal 2002,
$71.4 million and $3.5 million of goodwill was recorded in connection with the Talarian acquisitions and the acquisition of PRAJA inc. (“PRAJA”), respectively. Under SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill
and intangible assets with indefinite lives relating to the Talarian and PRAJA acquisitions are not amortized but reviewed annually (or more frequently if indicators arise) for impairment. In connection with the Talarian acquisition, we recorded
$6.3 million of other identifiable intangible assets that are being amortized over their useful lives of between two and five years. Goodwill and other acquired intangibles of $68.0 million recorded in connection with the acquisition of
Extensibility in August 2000 are being amortized over their useful lives of two to five years. We will cease to amortize goodwill with the adoption of SFAS No. 142 which will result in a reduction of amortization expense in the amount of $18.0
million per year.
Interest and Other Income (Expense), Net
Interest and other income (expense), net, includes interest, realized gains and losses on investments and other miscellaneous income and
expense items. Interest income was $22.9 million, $33.8 million and $28.1 million in fiscal 2002, 2001 and 2000, respectively. Interest income decreased $10.9 million, or 32%, from 2001 to fiscal 2002. This decrease was primarily due to lower
interest rates. Interest income increased $5.7 million, or 20% from fiscal 2000 to fiscal 2001. The increase for fiscal 2001 was due primarily to an average balance increase resulting from positive cash flow from operating activities and the
investment balances from our follow-on offering being held for the entire year. Realized loss on investments, net were $6.9 million, $0.4 million and $1.8 million in fiscal 2002, 2001 and 2000, respectively.
Income Taxes
Due to changes in the current economic environment and based upon the weight of all available positive and negative evidence, management has determined that it is more likely than not that the deferred tax assets will not be
utilized; and accordingly, a full valuation allowance has been recorded for the year ended November 30, 2002.
As
of November 30, 2002, our federal and state net operating loss carryforwards for income tax purposes were $507 million and $213 million, respectively, which expire through 2022. As of November 30, 2002, our federal and state tax credit carryforwards
for income tax purposes were $5.2 million and $6.7 million,
22
respectively, which expire through 2022. These net operating losses and tax credits arise from stock option benefits that will be credited to Additional Paid-In Capital when used. In the event of
a change in ownership, as defined under federal and state tax laws, our net operating loss and tax credit carryforwards may be subject to annual limitation. The annual limitation may result in the expiration of the net operating loss and tax credit
carryforwards before utilization.
Liquidity and Capital Resources
In July 1999, we completed an initial public offering of approximately 27.5 million shares of our common stock at $5.00 per share. Net proceeds to us aggregated
approximately $123.5 million, net of underwriters’ commissions and offering expenses of $13.8 million. In March 2000, we completed a follow-on offering of approximately 4.8 million shares of our common stock at $106.00 per share. Net proceeds
to us aggregated approximately $481 million, net of underwriters’ commissions and of issuance costs of $1.1 million.
Net cash used for operating activities in fiscal 2002 was $1.8 million resulting from our net loss of $94.6 million being offset by non-cash charges of $80.4 million and a net change in assets and liabilities of
$12.3 million. Net cash provided by operating activities in fiscal 2001 was $103.0 million resulting from positive cash flows as our net loss of $13.2 million was more than offset by non-cash charges of $51.7 million and by a net reduction of
$64.5 million in assets and liabilities. Net cash provided by operating activities in fiscal 2000 was $37.6 million resulting principally from our net loss of $25.0 million that was offset by non-cash charges of $70.6 million.
Net cash used in investing activities was $56.8 million, $186.7 million and $374.8 million in fiscal 2002, 2001 and 2000,
respectively. Net cash used in investing activities in fiscal 2002 related primarily to costs incurred in connection with the build out of our new corporate headquarters, cash used for acquisitions, purchase of short-term investments and costs
incurred in connection with the implementation of our enterprise resource planning system. Net cash used in investing activities in fiscal 2001 and 2000 related primarily to the purchase of short-term investments.
Net cash provided by financing activities for fiscal 2002, 2001 and 2000, respectively, was $15.5 million, $11.7 million and $495.9
million. Net cash provided by financing activities for fiscal 2002 and 2001 resulted from the exercise of stock options and stock purchases under our Employee Stock Purchase Plan. In fiscal 2000, we raised $481.0 million in a follow-on offering of
our common stock.
At November 30, 2002 and 2001, we had $637.9 million and $677.3 million in cash, cash
equivalents and investments, respectively. We anticipate our operating expenses will remain relatively stable in fiscal 2003. As a result, we expect to use our cash resources to fund our operating expenses and capital expenditures, and additionally,
to fund acquisitions or investments in complementary businesses, technologies or product lines. We believe that our current cash, cash equivalents and investments, will be sufficient to meet our anticipated cash requirements for working capital and
capital expenditures for at least the next twelve months.
As of November 30, 2002 future minimum lease payments
under noncancelable operating leases, including $45.2 million provided for as accrued restructuring costs and $6.1 million provided for as acquisition integration liabilities, were as follows (in thousands):
| Year Ending November 30,
|
|
Expense
|
|
Sublease Income
|
|
Net
|
| 2003 |
|
$ |
27,164 |
|
$ |
1,183 |
|
$ |
25,981 |
| 2004 |
|
|
25,871 |
|
|
1,290 |
|
|
24,581 |
| 2005 |
|
|
25,692 |
|
|
1,034 |
|
|
24,658 |
| 2006 |
|
|
24,497 |
|
|
345 |
|
|
24,152 |
| 2007 |
|
|
25,064 |
|
|
349 |
|
|
24,715 |
| Thereafter |
|
|
144,385 |
|
|
1,167 |
|
|
143,218 |
| |
|
|
|
|
|
|
|
|
|
| |
|
$ |
272,673 |
|
$ |
5,368 |
|
$ |
267,305 |
| |
|
|
|
|
|
|
|
|
|
23
Recent Accounting Pronouncements
In November 2001, the FASB issued an announcement on the topic of “Income Statement Characterization of Reimbursements Received for Out of Pocket Expense
Incurred,” which was subsequently incorporated in Emerging Issues Task Force (“EITF”) No. 01-14. EITF No. 01-14 requires companies to characterize reimbursements received for out of pocket expenses as revenues in the statement of
operations. Historically, we have netted reimbursements received for out of pocket expenses against the related expenses in the accompanying consolidated statements of operations. We adopted the pronouncement in the quarter ended May 31, 2002.
Revenues from reimbursable expenses have been identified separately on the consolidated statement of operations and the respective periods for prior periods have been reclassified for comparative purposes.
In July 2001, the FASB issued Statements of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”
and No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Identifiable intangible assets that are not deemed to have indefinite lives will continue to be amortized over
their useful lives (but with no maximum life). The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, we are
required to adopt SFAS No. 142 effective December 1, 2002. Upon adoption, workforce no longer qualifies as a separately identifiable intangible and will be reclassified as goodwill and amortization will cease.
Beginning in the first quarter of fiscal 2003, the goodwill and acquired intangibles with an indefinite life will be carried forward net
of amortization accumulated as of December 1, 2002 and reviewed annually for impairment. Amortization of goodwill and intangibles with an indefinite life acquired before July 1, 2001 was $18.5 million and $17.4 million for the years ended November
30, 2002 and 2001, respectively. The full adoption of SFAS No. 142 is not expected to have a material impact on our financial position and results of operations, other than the cessation of amortization of goodwill. The adoption of SFAS No. 142 will
result in a reduction of amortization expense in the amount of $18.0 million per year.
In October 2001, the FASB
issued SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.” SFAS No.144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and
addresses financial accounting and reporting for the impairment or disposal of long-lived assets. We are required to adopt SFAS No. 144 on December 1, 2002 and do not expect the adoption of SFAS No. 144 to have a material impact on our results of
operations or financial condition.
In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs
Associated with Exit or Disposal Activities.” SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31, 2002 and as a result would not have a material impact on our current financial position or results of operations
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure—as Amendment to FAS 123.” SFAS
148 provides two additional transition methods for entities that adopt the preferable method of accounting for stock based compensation. Further, the statement requires disclosure of comparable information for all companies regardless of whether,
when, or how an entity adopts the preferable, fair value based method of accounting. These disclosures are now required for interim periods in addition to the traditional annual disclosure. The amendments to SFAS No. 123 which provide for additional
transition methods is effective for periods beginning after December 15, 2002, although earlier application is permitted. The amendments to the disclosure requirements are required for financial reports containing condensed financial statements for
interim periods beginning after December 15, 2002.
24
Factors That May Affect Operating Results
The following risk factors could materially and adversely affect our future operating results and could cause actual events to differ materially from those
predicted in forward-looking statements related to our business.
We have a history of losses and we expect future losses, and if
we do not achieve and sustain profitability our business will suffer and our stock price may decline.
We may
not be able to achieve revenue or earnings growth or obtain sufficient revenue to achieve and sustain profitability. We incurred net losses of approximately $94.6 million, $13.2 million, and $25.0 million in fiscal 2002, 2001 and 2000, respectively.
As of November 30, 2002, we had an accumulated deficit of approximately $169.9 million.
We have invested
significantly in building our sales and marketing organization and in our technology research and development. We expect to continue to spend financial and other resources on developing and introducing enhancements to our existing and new software
products and our direct sales and marketing activities. As a result, we need to generate significant revenue to achieve and maintain profitability.
Our future revenue is unpredictable, and we expect our quarterly operating results to fluctuate, which may cause our stock price to decline.
Period-to-period comparisons of our operating results may not be a good indication of our future performance. Moreover, our operating results in some quarters has not in
the past, and may not in the future, meet the expectations of stock market analysts and investors. This has in the past and may in the future cause our stock price to decline. As a result of our limited operating history and the evolving nature of
the markets in which we compete, we have difficulty accurately forecasting our revenue in any given period. In addition to the factors discussed elsewhere in this section, a number of factors may cause our revenue to fall short of our expectations
or cause fluctuations in our operating results, including:
| |
• |
|
the announcement or introduction of new or enhanced products or services by our competitors; |
| |
• |
|
the amount and timing of operating costs and capital expenditures relating to the expansion of our operations; |
| |
• |
|
the capital and expense budgeting decisions of our customers, which have recently been scrutinized at a higher level within our customers’ organizations,
and are closely related to macroeconomic factors such as the current recession; and |
| |
• |
|
the current recession that could be exacerbated if the United States were to enter into a war. |
In addition, our quarterly operating results are subject to variations throughout the year due to seasonal factors, which generally result
in lower sales activity in our first and third fiscal quarters.
There can be no assurance that any of our customers will continue to
purchase our products in the future.
We do not have long-term contracts with any of our customers. There can
be no assurance that any of our customers will continue to purchase our products in the future. As a result, a customer that generates substantial revenue for us in one period may not be a source of revenue in subsequent periods.
We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets.
Most of our licenses are on an “open credit” basis, with payment terms of 30 days typically in the United States, and, because
of local customs or conditions, longer in some markets outside the United States. We monitor individual customer payment capability in granting such open credit arrangements, seek to limit such
25
open credit to amounts we believe the customers can pay, and maintain reserves we believe are adequate to cover exposure for doubtful accounts.
Because of the current slowdown in the global economy, our exposure to credit risks have increased. Although we have programs in place to
monitor and mitigate the associated risk, including monitoring of particular risks in certain geographic areas, there can be no assurance that such programs will be effective in reducing our credit risks. There can be no assurance that, should
economic conditions not improve, additional losses would not be incurred, and that such losses would not be material. Although these losses have not been material to date, future losses, if incurred, could harm our business and have a material
adverse effect on our business, operating results and financial condition.
Our licensing and distribution relationship with Reuters
places limitations on our ability to conduct our business.
Our predecessor company was acquired by Reuters in
1994. In January 1997, Reuters established us as a separate entity, transferred to us certain assets and liabilities related to our business and granted to us a royalty-free license to intellectual property that is still incorporated into some of
our software products. Reuters continues to hold approximately 49.8% of our stock and has the right to nominate one-third of our directors, and accordingly is able to exert significant influence over our business. We have a significant relationship
with Reuters for licensing and distribution. Our relationship with Reuters involves limitations and restrictions on our business, as well as other risks described below.
We license from Reuters the underlying TIB messaging technology that existed as of December 31, 1996 (“Licensed TIB Technology”), from which some of our important
TIBCO ActiveEnterprise messaging products originated. We do not own the Licensed TIB Technology. Because Reuters has access to the intellectual property used in our products, it could use this intellectual property to compete with us. Reuters is not
restricted from using the Licensed TIB Technology to produce products that compete with our products, and it can grant limited licenses to the Licensed TIB Technology to others who may compete with us. In addition, we must license to Reuters all of
the intellectual property and products we create through December 2011. This will place Reuters in a position to more easily develop products that compete with ours.
Under our agreements with Reuters, unless otherwise authorized by Reuters, we are generally prohibited, through May 28, 2004, from selling our products and providing
consulting services directly to companies in the financial services market. We are also prohibited from directly licensing products containing the Licensed TIB Technology to financial services customers and major competitors of Reuters, and from
using the Licensed TIB Technology to develop products specifically for use by financial services companies. Accordingly, through May 28, 2004, we must rely on Reuters and, to a lesser extent, other third-party resellers and distributors to sell
our products to these companies. After May 28, 2004, we may be able to license our products (except for those, if any, that still include the Licensed TIB Technology) and provide consulting services directly to companies in the financial services
market. There are no assurances, however, that we will be successful in licensing our products or providing consulting services directly to companies in the financial services market which could harm our business and our operating results may
suffer.
Under the license, maintenance and distribution agreement, Reuters is required to pay us a minimum
guaranteed distribution fee in the amount of $20 million per year through December 2003. If actual distribution fees due from Reuters, as a result of their sales of our products in the financial services market, exceed the cumulative minimum
year-to-date guarantee, incremental fees are due. These product fees may be materially less than the product fees we could obtain from other distributors or resellers in the financial services market. In addition, when we sell our products into the
financial services market other than through Reuters, we are required to pay fees to Reuters, which we record as related party royalty expense.
Neither Reuters nor any third-party reseller or distributor has any contractual obligation to distribute our products to financial services customers. Reuters and other distributors may not be
successful in selling our
26
products into the financial services market, or they may elect to sell competitive third-party products into that market, either of which may adversely affect our revenue in that market.
In addition, if Reuters declines to continue the minimum guaranteed distribution fee at the end of December 2003,
there can be no assurances that we will be successful in generating enough revenue to replace the minimum guaranteed distribution fee which would adversely affect our business and operating results.
Our license agreement with Reuters imposes practical restrictions on our ability to acquire other companies. The license agreement places
no specific restrictions on our ability to acquire companies with all or part of their business in the financial services market and to continue such business. However, under the terms of the license agreement, we are prohibited from bundling or
combining our products that are based on the Licensed TIB Technology with an acquired company’s products and services and then selling the bundled or combined products directly to financial services companies. This prohibition could prevent us
from realizing potential synergies with companies we acquire.
The market for infrastructure software may not grow as quickly as we
anticipate, which would cause our revenues to fall below expectations.
The market for infrastructure software
is relatively new and evolving. We earn substantially all of our revenue from sales of our infrastructure software, including application integration software, and related services. We expect to earn substantially all of our revenue in the
foreseeable future from sales of these products and services. Our future financial performance will depend on growth in the number of organizations demanding software and services for application integration, information delivery and seeking outside
vendors to develop, manage and maintain this software for their critical applications. A weakening United States and global economy, which has had a disproportionate impact on information technology spending by businesses, has led to a reduction in
sales over the past several quarters and may continue to do so in the future. Many of our potential customers have made significant investments in internally developed systems and would incur significant costs in switching to third-party products,
which may substantially inhibit the growth of the market for infrastructure software. If the market fails to grow, or grows more slowly than we expect, our sales will be adversely affected.
Our acquisition strategy could cause financial or operational problems.
Our success depends on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands, and competitive pressures. To this end, we may acquire new and complementary
businesses, products or technologies. We do not know if we will be able to complete any acquisitions or that we will be able to successfully integrate any acquired business, operate them profitably, or retain their key employees. Integrating any
newly acquired business, product or technology could be expensive and time-consuming, could disrupt our ongoing business, and could distract our management. We may face competition for acquisition targets from larger and more established companies
with greater financial resources. In addition, in order to finance any acquisitions, we might need to raise additional funds through public or private financings. In that event, we could be forced to obtain equity or debt financing on terms that are
not favorable to us and, in the case of equity financing, that results in dilution to our stockholders. If we were unable to integrate any newly acquired entity, products or technology effectively, our business, financial condition and operating
results would suffer. In addition, any amortization or impairment of acquired intangible assets, stock based compensation or other charges resulting from the costs of acquisitions could harm our operating results.
Our stock price may be volatile, which could cause investors to lose all or part of their investments in our stock.
The stock market in general, and the stock prices of technology companies in particular, have experienced volatility which has often been
unrelated to the operating performance of any particular company or companies. During fiscal 2002, for example, our stock price fluctuated between a high of $16.90 and a low of $3.28. If
27
market or industry-based fluctuations continue, our stock price could decline in the future regardless of our actual operating performance and investors could lose all or part of their
investments.
The volatile nature of our market could strain our resources and cause our business to suffer.
Our ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires
an effective planning and management process. We have increased the scope of our operations both domestically and internationally. We must successfully integrate these new employees into our operations and generate sufficient revenues to justify the
costs associated with these employees. If we fail to successfully integrate employees or to generate the revenue necessary to offset employee-related expenses, we could be forced to reduce our headcount, which would force us to incur significant
expenses and would harm our business and operating results. For example, in response to changing market conditions, in fiscal 2001 we recorded a restructuring charge of $21.2 million, including $2.8 million related to a reduction of our headcount by
approximately 170 employees. During fiscal 2002, we recorded additional restructuring charges of $47.6 million related to abandoned facilities and $1.7 million related to a reduction of our headcount by approximately 65 employees. Our growth
has placed and will continue to place a significant strain on our management systems, infrastructure and resources. We expect that we will need to continue to improve our financial and managerial controls, reporting systems and procedures. We will
also need to continue to train and manage our workforce worldwide. Furthermore, we expect that we will be required to manage an increasing number of relationships with various customers and other third parties. Failure to expand or control costs in
any of the foregoing areas efficiently and effectively could interfere with the growth of our business as a whole.
Pending litigation
could harm our business.
We, certain of our directors and officers, and certain investment bank underwriters
have been named in a putative class action for violation of the federal securities laws in the United States District Court for the Southern District of New York, captioned In re TIBCO Software, Inc. Initial Public Offering Securities Litigation, 01
Civ. 6110 (SAS). This is one of a number of cases challenging underwriting practices in the initial public offerings (“IPOs”) of more than 300 companies. These cases have been coordinated for pretrial proceedings as In re Initial Public
Offering Securities Litigation, 21 MC 92 (SAS). Plaintiffs generally allege that certain underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive brokerage commissions and customer agreements
regarding post-offering purchases of stock in exchange for allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against us claims that the
purported improper underwriting activities were not disclosed in the registration statements for our IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased our securities or sold put
options during the time period from July 13, 1999 to December 6, 2000. We believe that we have meritorious defenses to the claims against us and we intend to defend ourselves vigorously. On March 1, 2002, a stipulation and order were entered
pursuant to which the individual defendants and we were dismissed without prejudice from claims relating to our initial public offering. We believe that the remaining claims against us are without merit and we intend to defend against the complaints
vigorously.
A lawsuit with similar allegations of undisclosed improper underwriting practices, and part of the
same coordinated proceedings, is pending against Talarian, which we acquired in 2002. That action is captioned, “In re Talarian Corp. Initial Public Offering Securities Litigation, 01 Civ. 7474 (SAS).” The complaint against Talarian,
certain of its underwriters, and certain of its former directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for Talarian’s IPO and seeks unspecified damages on behalf
of a purported class of persons who purchased Talarian securities during the time period from July 20, 2000 to December 6, 2000. We believe that there are meritorious defenses to the claims against Talarian and we intend to defend against those
claims vigorously.
The remaining complaints do not specify the amount of damages that the plaintiffs seek, and as
a result, we are unable to estimate the possible range of damages that might be incurred as a result of the lawsuits. We have
28
not accrued any amounts relating to potential damages associated with the lawsuits. The uncertainty associated with a substantial unresolved lawsuit could harm our business, financial condition
and reputation. The defense of the lawsuits could result in the diversion of our management’s time and attention away from business operations, which could harm our business. Negative developments with respect to the lawsuits could cause our
stock price to decline. In addition, although we are unable to determine the amount, if any, that we may be required to pay in connection with the resolution of the lawsuits by settlement or otherwise, such a payment could seriously harm our
financial condition and liquidity.
If we do not retain our key management personnel and attract and retain other highly skilled
employees, our business will suffer.
If we fail to retain and recruit the necessary personnel, our business
and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer. The success of our business is heavily dependent on the leadership of our key management personnel, including Vivek
Ranadive, our President and Chief Executive Officer. All of our executive officers and key personnel are employees at-will. If any of these people were to leave us it would be difficult to replace them and our business would be harmed. In addition,
provisions of the recently enacted Sarbanes-Oxley Act of 2002 and related rules proposed by the SEC and NASDAQ impose heightened personal liability on some of our key management personnel. The threat of such liability could potentially divert the
attention of such personnel away from their normal management duties.
Our success also depends on our ability to
recruit, retain and motivate highly skilled sales, marketing and engineering personnel. Competition for these people in the software industries is intense, and we may not be able to successfully recruit, train or retain qualified personnel. In
addition, we have experienced turnover in our marketing and sales management. Although we have recruited a new marketing manager, there can be no assurance that we will be successful in our retention and training efforts.
Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.
We cannot be certain that our products do not infringe issued patents or other intellectual property rights
of others. Because patent applications in the United States are not publicly disclosed until the patent is issued, applications relating to our software products may have been filed without our knowledge. We may be subject to legal proceedings and
claims from time to time, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. Intellectual property
litigation is expensive and time-consuming, and could divert our management’s attention away from running our business and could seriously harm our business. If we were to discover that our products violated the intellectual property rights of
others, we would have to obtain licenses from these parties in order to continue marketing our products without substantial reengineering. We might not be able to obtain the necessary licenses on acceptable terms or at all, and if we could not
obtain such licenses, we might not be able to reengineer our products successfully or in a timely fashion. If we fail to address any infringement issues successfully, we will be forced to incur significant costs and could be prevented from selling
our products.
Our intellectual property or proprietary rights could be misappropriated, which could force us to become involved in
expensive and time-consuming litigation.
We regard our copyrights, service marks, trademarks, trade secrets,
licensed patents and similar intellectual property as critical to our success. Any misappropriation of our proprietary information by third parties could harm our business, financial condition, and operating results. If our proprietary information
were misappropriated, we might have to engage in litigation to protect it. We might not succeed in protecting our proprietary information by initiating intellectual property litigation, and in any invent such litigation is expensive and
time-consuming, and could divert our management’s attention away from running our business and could seriously harm our business.
29
We must overcome significant competition in order to succeed.
The market for our products and services is extremely competitive and subject to rapid change. We compete with various providers of
enterprise application integration solutions, including webMethods and SeeBeyond. We also compete with various providers of webservices such as Microsoft, BEA and IBM. We believe that of these companies, IBM has the potential to offer the most
complete set of products for enterprise application integration. We also face competition for certain aspects of our product and service offerings from major systems integrators. We expect additional competition from other established and emerging
companies.
Many of our current and potential competitors have longer operating histories, significantly greater
financial, technical, product development and marketing resources, greater name recognition and larger customer bases than we do. Our present or future competitors may be able to develop products comparable or superior to those we offer, adapt more
quickly than we do to new technologies, evolving industry trends or customer requirements, or devote greater resources to the development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our
markets or competition may intensify and harm our business and operating results. If we are not successful in developing enhancements to existing products and new products in a timely manner, achieving customer acceptance or generating higher
average selling prices, our gross margins may decline, and our business and operating results may suffer.
Market acceptance of new
platforms and web services standards may require us to undergo the expense of developing and maintaining compatible product lines.
Our software products can be licensed for use with a variety of platforms. There may be future or existing platforms that achieve popularity in the marketplace which may or may not be architecturally compatible with our
software products. In addition, the effort and expense of developing, testing and maintaining software products will increase as more platforms achieve market acceptance within our target markets. Moreover, future or existing user interfaces that
achieve popularity within the enterprise application integration marketplace may or may not be compatible with our current software products. If we are unable to achieve market acceptance of our software product or adapt to new platforms, our sales
and revenues may be adversely affected.
Developing and maintaining different software products could place a
significant strain on our resources and software product release schedules, which could adversely affect our revenue and financial condition. If we are not able to develop software for accepted platforms or fail to adopt webservice standards, our
license and service revenues could be adversely affected. In addition, if the platforms we have developed software for are not accepted, our license and service revenues could be adversely affected.
Recently enacted and proposed regulatory changes may cause us to incur increased costs.
Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules proposed
by the SEC and NASDAQ could cause us to incur increased costs as we evaluate the implications of new rules and responds to new requirements. The new rules could make it more difficult for us to obtain certain types of insurance, including directors
and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to
attract and retain qualified persons to serve on the Company’s board of directors, or as executive officers. We are presently evaluating and monitoring developments with respect to these new and proposed rules, and we cannot predict or estimate
the amount of the additional costs we may incur or the timing of such costs.
| |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We invest in marketable securities in accordance with our
investment policy. The primary objectives of our investment policy are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. Our investment policy specifies credit quality standards for our investments and
limits the amount of
30
credit exposure to any single issue, issuer or type of investment. The maximum allowable duration of a single issue is 2.5 years and the maximum allowable duration of the portfolio is 1.3 years.
At the end of fiscal 2002, 2001 and 2000, we had an investment portfolio of fixed income securities totaling
$580.4 million, $566.5 million and $401.9 million, excluding those classified as cash and cash equivalents and restricted funds, respectively. Our investments consist primarily of bank and finance notes, various government obligations and
asset-backed securities. These securities are classified as available-for-sale and are recorded on the balance sheet at fair market value with unrealized gains or losses reported as a separate component of stockholders’ equity. Unrealized
losses are charged against income when a decline in fair market value is determined to be other than temporary. The specific identification method is used to determine the cost of securities sold.
The investment portfolio is subject to interest rate risk and will fall in value in the event market interest rates increase. If market
interest rates were to increase immediately and uniformly by 100 basis points (approximately 53% of current rates in the portfolio) from levels as of November 30, 2002, the fair market value of the portfolio would decline by approximately $3.6
million.
We develop products in the United States and sell in North America, South America, Asia, the Middle East
and Europe. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. A majority of sales are currently made in U.S. dollars, however, a
strengthening of the dollar could make our products less competitive in foreign markets. We enter into foreign currency forward exchange contracts (“forward contracts”) to manage exposure related to accounts receivable denominated in
foreign currencies. We do not enter into derivative financial instruments for trading purposes. We had outstanding forward contracts with notional amounts totaling approximately $3.0 million, $4.5 million and $6.2 million at November 30, 2002,
2001 and 2000, respectively. The open contracts at November 30, 2002 mature at various dates through January 2003 and are economic hedges of certain foreign currency transaction exposures in the Euro. The fair value of these forward contracts at
November 30, 2002 was not significant.
| |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Reference is made to the Index to Consolidated Financial Statements
that appears on page F-1 of this report. The Report of PricewaterhouseCoopers LLP, Independent Accountants, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the Index to Consolidated Financial
Statements, which appear beginning on page F-2 of this report, are incorporated by reference into this Item 8.
| |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
31
PART III
| |
|
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY |
The information required by this item concerning our directors and
executive officers is incorporated by reference to the information set forth in the sections entitled Election of Directors and Executive Compensation and Employment Agreements in our Proxy Statement for the 2003 Annual Meeting of Stockholders to be
filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2002.
The information required by this item regarding executive
compensation is incorporated by reference to the information set forth in the sections entitled Election of Directors—Director Compensation and Executive Compensation and Employment Agreements in our Proxy Statement for the 2003 Annual Meeting
of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2002.
| |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The information required by this item regarding security ownership
of certain beneficial owners and management is incorporated by reference to the information set forth in the section entitled Security Ownership of Certain Beneficial Owners and Management in our Proxy Statement for the 2003 Annual Meeting of
Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2002.
| |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
The information required by this item regarding certain
relationships and related transactions is incorporated by reference to the information set forth in the sections entitled Certain Transactions and Compensation Committee Interlocks and Insider Participation in Compensation Decisions in our Proxy
Statement for the 2003 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended November 30, 2002.
Within 90 days prior to the filing of this report, we undertook an
evaluation of our disclosure controls and procedures. Based upon that evaluation and related improvements to our system of disclosure controls and procedures, we have concluded that we have in place disclosure controls and procedures necessary to
insure that material information relating to our company, including our consolidated subsidiaries, is made known to us by others in our company, particularly with respect to the period covered by this report. Subsequent to the date of this
evaluation there have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls.
32
PART IV
| |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K |
(a) The following documents are filed as part of this
Form 10-K:
1. Financial Statements. Please
see the accompanying Index to Consolidated Financial Statements, which appears on page F-1 of the report. The Report of Independent Accountants, the Consolidated Financial Statements and the Notes to Consolidated Financial Statements listed in the
Index to Consolidated Financial Statements, which appear beginning on page F-2 of this report, are incorporated by reference into Item 8 above.
2. Financial Statement Schedules. Financial Statement Schedules have been omitted because the information required to be set forth therein is either
not applicable or is included in the Consolidated Financial Statements or the notes thereto. See also Item 14(d) below.
3. Exhibits: See Item 14(c) below. The management contracts and compensatory plans or arrangements required to be filed as exhibits to this form pursuant to Item 14(c) are
as follows:
| |
| 10.4 |
|
1996 Stock Plan, as amended |
| |
| 10.5 |
|
1998 Director Option Plan, as amended |
| |
| 10.7 |
|
Employment Agreement between Registrant and Vivek Y. Ranadive |
| |
| 10.8 |
|
Employment Agreement between Registrant and Robert P. Stefanski |
| |
| 10.17 |
|
Extensibility Inc. 2000 Stock Option Plan |
| |
| 10.18 |
|
Talarian Corporation 2000 Equity Incentive Plan |
| |
| 10.19 |
|
Talarian Corporation 1998 Equity Incentive Plan |
| |
| 10.20 |
|
Talarian Corporation 1991 Stock Option Plan |
| |
| 10.21 |
|
White Barn, Inc. Stock Option Plan |
| |
| 10.22 |
|
White Barn, Inc. 2000 Equity Incentive Plan |
(b) Reports on Form 8-K.
We did not file any Current Reports on Form 8-K during the fourth quarter of fiscal 2002.
(c) Exhibits. The exhibits listed on the accompanying Exhibit Index immediately following the
signature page are filed as part of, or are incorporated by reference into, this Form 10-K.
(d) Financial Statement Schedules. None
33
TIBCO SOFTWARE INC.
INDEX TO FINANCIAL STATEMENTS
| |
|
Page
|
| Report of Independent Accountants |
|
F-2 |
| |
| Consolidated Balance Sheets |
|
F-3 |
| |
| Consolidated Statements of Operations |
|
F-4 |
| |
| Consolidated Statements of Stockholders’ Equity |
|
F-5 |
| |
| Consolidated Statements of Cash Flows |
|
F-6 |
| |
| Notes to Consolidated Financial Statements |
|
F-7 |
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
TIBCO Software Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders’ equity and of cash flows present
fairly, in all material respects, the financial position of TIBCO Software Inc. and its subsidiaries at November 30, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended November 30,
2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
December 18, 2002
F-2
TIBCO SOFTWARE INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| |
|
November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
57,229 |
|
|
$ |
100,158 |
|
| Short-term investments |
|
|
580,624 |
|
|
|
577,182 |
|
| Accounts receivable, net |
|
|
59,795 |
|
|
|
59,080 |
|
| Due from related parties |
|
|
1,483 |
|
|
|
959 |
|
| Other current assets |
|
|
14,462 |
|
|
|
22,272 |
|
| |
|
|
|
|
|
|
|
|
| Total current assets |
|
|
713,593 |
|
|
|
759,651 |
|
| Property and equipment, net |
|
|
54,827 |
|
|
|
38,250 |
|
| Other assets |
|
|
8,348 |
|
|
|
30,223 |
|
| Goodwill and acquired intangibles, net |
|
|
117,820 |
|
|
|
64,003 |
|
| |
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
894,588 |
|
|
$ |
892,127 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
5,242 |
|
|
$ |
4,378 |
|
| Amounts due related parties |
|
|
1,846 |
|
|
|
1,773 |
|
| Accrued liabilities |
|
|
41,681 |
|
|
|
55,645 |
|
| Accrued excess facilities costs |
|
|
51,311 |
|
|
|
17,800 |
|
| Deferred revenue |
|
|
49,781 |
|
|
|
41,252 |
|
| |
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
149,861 |
|
|
|
120,848 |
|
| |
| Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
| |
| Stockholders’ equity: |
|
|
|
|
|
|
|
|
| Common stock, $0.001 par value; 1,200,000 shares authorized; 210,254 and 199,117 shares issued and outstanding,
respectively |
|
|
210 |
|
|
|
199 |
|
| Additional paid-in capital |
|
|
912,821 |
|
|
|
839,642 |
|
| Unearned stock-based compensation |
|
|
(1,333 |
) |
|
|
(3,796 |
) |
| Accumulated other comprehensive income |
|
|
2,897 |
|
|
|
10,522 |
|
| Accumulated deficit |
|
|
(169,868 |
) |
|
|
(75,288 |
) |
| |
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
744,727 |
|
|
|
771,279 |
|
| |
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
894,588 |
|
|
$ |
892,127 |
|
| |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
TIBCO SOFTWARE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| License revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
$ |
144,165 |
|
|
$ |
197,334 |
|
|
$ |
160,700 |
|
| Related parties |
|
|
14,949 |
|
|
|
19,423 |
|
|
|
20,901 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total license revenue |
|
|
159,114 |
|
|
|
216,757 |
|
|
|
181,601 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Service and maintenance revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
|
99,535 |
|
|
|
93,867 |
|
|
|
66,841 |
|
| Related parties |
|
|
12,316 |
|
|
|
8,627 |
|
|
|
3,355 |
|
| Reimbursable expenses |
|
|
2,428 |
|
|
|
2,840 |
|
|
|
2,292 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total service and maintenance revenue |
|
|
114,279 |
|
|
|
105,334 |
|
|
|
72,488 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenue |
|
|
273,393 |
|
|
|
322,091 |
|
|
|
254,089 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
527 |
|
|
|
977 |
|
|
|
3,025 |
|
| Other cost of revenue non-related parties |
|
|
58,445 |
|
|
|
63,732 |
|
|
|
60,829 |
|
| Other cost of revenue related parties |
|
|
2,517 |
|
|
|
2,937 |
|
|
|
2,956 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost of revenue |
|
|
61,489 |
|
|
|
67,646 |
|
|
|
66,810 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
211,904 |
|
|
|
254,445 |
|
|
|
187,279 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
1,318 |
|
|
|
12,109 |
|
|
|
18,525 |
|
| Other research and development |
|
|
71,026 |
|
|
|
78,878 |
|
|
|
57,861 |
|
| Sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
1,286 |
|
|
|
10,128 |
|
|
|
33,637 |
|
| Other sales and marketing |
|
|
126,467 |
|
|
|
136,818 |
|
|
|
92,228 |
|
| General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
919 |
|
|
|
3,751 |
|
|
|
1,729 |
|
| Other general and administrative |
|
|
21,406 |
|
|
|
22,799 |
|
|
|
18,489 |
|
| Acquired in-process research and development |
|
|
2,400 |
|
|
|
— |
|
|
|
2,260 |
|
| Restructuring charges |
|
|
49,336 |
|
|
|
21,197 |
|
|
|
— |
|
| Amortization of goodwill and acquired intangibles |
|
|
24,428 |
|
|
|
23,516 |
|
|
|
10,479 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
298,586 |
|
|
|
309,196 |
|
|
|
235,208 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(86,682 |
) |
|
|
(54,751 |
) |
|
|
(47,929 |
) |
| Interest and other income, net |
|
|
16,264 |
|
|
|
31,040 |
|
|
|
24,866 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(70,418 |
) |
|
|
(23,711 |
) |
|
|
(23,063 |
) |
| Provision for (benefit from) income taxes |
|
|
24,162 |
|
|
|
(10,469 |
) |
|
|
1,888 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(94,580 |
) |
|
$ |
(13,242 |
) |
|
$ |
(24,951 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
$ |
(0.46 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
|
|
205,821 |
|
|
|
195,001 |
|
|
|
184,177 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
TIBCO SOFTWARE INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in thousands)
| |
|
Common Stock
|
|
Additional Paid-In Capital
|
|
|
Unearned Stock-Based Compensation
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
Accumulated Deficit
|
|
|
Total
|
|
| |
|
Shares
|
|
Amount
|
|
|
|
|
|
| Balance at November 30, 1999 |
|
181,215 |
|
$ |
181 |
|
$ |
182,939 |
|
|
$ |
(8,083 |
) |
|
$ |
(24 |
) |
|
$ |
(37,095 |
) |
|
$ |
137,918 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24,951 |
) |
|
|
(24,951 |
) |
| Cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
(751 |
) |
|
|
— |
|
|
|
(751 |
) |
| Change in net unrealized gain on investments |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
5,030 |
|
|
|
— |
|
|
|
5,030 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,672 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock in follow-on offering, net of issuance costs of $1,147 |
|
4,776 |
|
|
5 |
|
|
481,032 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
481,037 |
|
| Common stock issued in connection with acquisition of Extensibility Inc. |
|
829 |
|
|
1 |
|
|
64,983 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
64,984 |
|
| Deferred compensation related to acquisition of Extensibility Inc. |
|
— |
|
|
— |
|
|
34,905 |
|
|
|
(34,905 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Exercise of common stock options, net |
|
7,170 |
|
|
7 |
|
|
10,520 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,527 |
|
| Employee stock purchase plan, common stock issued |
|
892 |
|
|
1 |
|
|
4,332 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,333 |
|
| Unearned stock-based compensation, net |
|
— |
|
|
— |
|
|
38,366 |
|
|
|
13,042 |
|
|
|
— |
|
|
|
— |
|
|
|
51,408 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2000 |
|
194,882 |
|
|
195 |
|
|
817,077 |
|
|
|
(29,946 |
) |
|
|
4,255 |
|
|
|
(62,046 |
) |
|
|
729,535 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13,242 |
) |
|
|
(13,242 |
) |
| Cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
532 |
|
|
|
— |
|
|
|
532 |
|
| Change in net unrealized gain on investments, net of tax of $3,726 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
5,735 |
|
|
|
— |
|
|
|
5,735 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,975 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercise of common stock options, net |
|
3,195 |
|
|
3 |
|
|
5,107 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,110 |
|
| Employee stock purchase plan, common stock issued |
|
1,040 |
|
|
1 |
|
|
6,560 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,561 |
|
| Tax benefits from employee stock option plans |
|
— |
|
|
— |
|
|
10,535 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,535 |
|
| Unearned stock-based compensation, net |
|
— |
|
|
— |
|
|
363 |
|
|
|
26,150 |
|
|
|
— |
|
|
|
— |
|
|
|
26,513 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2001 |
|
199,117 |
|
|
199 |
|
|
839,642 |
|
|
|
(3,796 |
) |
|
|
10,522 |
|
|
|
(75,288 |
) |
|
|
771,279 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(94,580 |
) |
|
|
(94,580 |
) |
| Cumulative translation adjustment |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
502 |
|
|
|
— |
|
|
|
502 |
|
| Change in net unrealized gain on investments, net of tax of $2,189 |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
(8,127 |
) |
|
|
— |
|
|
|
(8,127 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,205 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock issued in connection with acquisition of Talarian |
|
4,391 |
|
|
4 |
|
|
57,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,915 |
|
| Deferred compensation related to acquisition of Talarian |
|
|
|
|
|
|
|
668 |
|
|
|
(668 |
) |
|
|
|
|
|
|
|
|
|
|
0 |
|
| Exercise of common stock options, net |
|
5,756 |
|
|
6 |
|
|
9,762 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,768 |
|
| Employee stock purchase plan, common stock issued |
|
990 |
|
|
1 |
|
|
7,105 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,106 |
|
| Unearned stock-based compensation, net |
|
— |
|
|
— |
|
|
(2,267 |
) |
|
|
3,131 |
|
|
|
— |
|
|
|
— |
|
|
|
864 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2002 |
|
210,254 |
|
$ |
210 |
|
$ |
912,821 |
|
|
$ |
(1,333 |
) |
|
$ |
2,897 |
|
|
$ |
(169,868 |
) |
|
$ |
744,727 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
TIBCO SOFTWARE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(94,580 |
) |
|
$ |
(13,242 |
) |
|
$ |
(24,951 |
) |
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
14,737 |
|
|
|
11,178 |
|
|
|
4,687 |
|
| Write-off of in-process research and development |
|
|
2,400 |
|
|
|
— |
|
|
|
2,260 |
|
| Amortization of goodwill and other intangibles |
|
|
24,429 |
|
|
|
23,516 |
|
|
|
10,479 |
|
| Amortization of stock-based compensation |
|
|
2,769 |
|
|
|
26,513 |
|
|
|
51,408 |
|
| Realized loss on investments, net |
|
|
6,846 |
|
|
|
440 |
|
|
|
1,812 |
|
| Deferred income taxes |
|
|
18,166 |
|
|
|
(20,450 |
) |
|
|
— |
|
| Tax benefits from employee stock option plans |
|
|
— |
|
|
|
10,535 |
|
|
|
— |
|
| Non-cash restructuring and impairment charges |
|
|
11,092 |
|
|
|
— |
|
|
|
— |
|
| Changes in assets and liabilities (net of acquisitions): |
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
2,142 |
|
|
|
30,898 |
|
|
|
(51,287 |
) |
| Due from related parties, net |
|
|
162 |
|
|
|
2,081 |
|
|
|
2,619 |
|
| Other assets |
|
|
(901 |
) |
|
|
7,667 |
|
|
|
(11,814 |
) |
| Accounts payable |
|
|
226 |
|
|
|
(2,334 |
) |
|
|
(913 |
) |
| Accrued liabilities and excess facilities costs |
|
|
6,259 |
|
|
|
18,540 |
|
|
|
32,749 |
|
| Deferred revenue |
|
|
4,429 |
|
|
|
7,617 |
|
|
|
20,544 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by (used for) operating activities |
|
|
(1,824 |
) |
|
|
102,959 |
|
|
|
37,593 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Purchases of short-term investments |
|
|
(947,567 |
) |
|
|
(620,345 |
) |
|
|
(459,558 |
) |
| Sales and maturities of short-term investments |
|
|
939,906 |
|
|
|
461,865 |
|
|
|
136,661 |
|
| Cash used in acquisitions, net of cash received |
|
|
(9,018 |
) |
|
|
— |
|
|
|
(2,409 |
) |
| Purchases of property and equipment, net |
|
|
(40,985 |
) |
|
|
(21,835 |
) |
|
|
(21,423 |
) |
| Purchases of private equity investments |
|
|
(285 |
) |
|
|
(4,347 |
) |
|
|
(23,033 |
) |
| Cash and short-term investments pledged as security. |
|
|
1,102 |
|
|
|
(2,000 |
) |
|
|
(5,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used for investing activities |
|
|
(56,847 |
) |
|
|
(186,662 |
) |
|
|
(374,762 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net proceeds from issuance of common stock |
|
|
— |
|
|
|
— |
|
|
|
481,037 |
|
| Proceeds from exercise of stock options |
|
|
8,435 |
|
|
|
5,110 |
|
|
|
10,527 |
|
| Proceeds from employee stock purchase program |
|
|
7,106 |
|
|
|
6,561 |
|
|
|
4,333 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
15,541 |
|
|
|
11,671 |
|
|
|
495,897 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
|
201 |
|
|
|
532 |
|
|
|
(751 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
|
(42,929 |
) |
|
|
(71,500 |
) |
|
|
157,977 |
|
| Cash and cash equivalents at beginning of period |
|
|
100,158 |
|
|
|
171,658 |
|
|
|
13,681 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
|
$ |
57,229 |
|
|
$ |
100,158 |
|
|
$ |
171,658 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash paid during the year for taxes |
|
$ |
2,658 |
|
|
$ |
1,262 |
|
|
$ |
327 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred stock compensation |
|
$ |
(1,599 |
) |
|
$ |
363 |
|
|
$ |
73,271 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock and options issued in connection with acquisition |
|
$ |
57,915 |
|
|
$ |
— |
|
|
$ |
64,984 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value of assets (liabilities) assumed in acquisitions |
|
$ |
37,806 |
|
|
$ |
— |
|
|
$ |
(591 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2002
Note 1. The Company
TIBCO Software Inc. (“TIBCO Software” or the “Company”) is the successor to a portion of the business of Teknekron Software Systems, Inc. (“Teknekron”). Teknekron was founded in 1985 and pioneered the
development of “publish and subscribe” computing by creating the software infrastructure for the integration and delivery of market data (e.g., stock quotes, news and other financial information) in the trading rooms of large banks and
financial institutions. This publish and subscribe technology, know as The Information Bus or “TIB,” permitted the integration of disparate information from various data sources and its distribution across a variety of networks and
platforms within these banks, financial institutions and stock exchanges.
Teknekron was acquired by a subsidiary
of Reuters Group PLC (“Reuters”), the global news and information group, in 1994, and the underlying technology rights owned by Teknekron were assigned to Reuters. In November 1996, TIBCO Software was incorporated in Delaware as a separate
entity from Teknekron and was formed to create and market software solutions for use in the integration of business information, processes and applications in diverse industries outside the financial services market. In July 1999, the Company
completed its initial public offering (“IPO”), of 27,485,001 shares of common stock at $5.00 per share. Net proceeds aggregated approximately $123.5 million.
In March 2000, the Company sold 4,775,750 shares of its common stock in a follow-on offering. Net proceeds to the Company aggregated approximately $481 million, net of
issuance costs of $1.2 million. At November 30, 2002, Reuters owned approximately 49.8% of the issued and outstanding shares of the Company’s common stock and had two representatives on the Board of Directors.
Note 2. Basis of Presentation and Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances have been eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to prior year balances in order to conform to the current period presentation. These reclassifications have no impact on previously reported net loss or cash flows.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Foreign Currency Translation
The functional currency of the Company’s wholly owned foreign subsidiaries are the local currencies. Assets and liabilities of these
subsidiaries are translated into U.S. dollars at exchange rates at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Cumulative translation
F-7
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
adjustments are included as a component of accumulated other comprehensive loss in stockholders’ equity. Foreign exchange transaction gains and losses were not material in any of the periods
presented.
Cash, Cash Equivalents, and Short-Term Investments
The Company considers all highly liquid investment securities with remaining maturities, at date of purchase, of three months or less to
be cash equivalents. Management determines the appropriate classification of marketable securities at the time of purchase and evaluates such designation as of each balance sheet date. To date, all marketable securities have been classified as
available-for-sale and are carried at fair value with unrealized gains and losses, if any, included as a component of accumulated other comprehensive loss in stockholders’ equity. These investments are presented as current assets as management
expects to use them within one year in current operations even though some have scheduled maturities of greater than one year. Interest, dividends and realized gains and losses are included in interest and other income. Realized gains and losses are
recognized based on the specific identification method.
Investments consist of the following (in thousands):
| |
|
November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| U.S. government debt securities |
|
$ |
226,815 |
|
|
$ |
228,370 |
|
| Corporate debt securities |
|
|
272,785 |
|
|
|
84,958 |
|
| Marketable equity securities |
|
|
234 |
|
|
|
10,639 |
|
| Notes and other |
|
|
98,791 |
|
|
|
293,562 |
|
| |
|
|
|
|
|
|
|
|
| Total available-for-sale securities |
|
|
598,625 |
|
|
|
617,529 |
|
| Less: Amounts classified as cash equivalents |
|
|
(13,001 |
) |
|
|
(33,347 |
) |
| Investment pledged for security of letter of credit |
|
|
(5,000 |
) |
|
|
(7,000 |
) |
| |
|
|
|
|
|
|
|
|
| Total investments |
|
|
580,624 |
|
|
|
577,182 |
|
| Less: Marketable equity securities |
|
|
(234 |
) |
|
|
(10,639 |
) |
| |
|
|
|
|
|
|
|
|
| Total fixed income securities |
|
$ |
580,390 |
|
|
$ |
566,543 |
|
| |
|
|
|
|
|
|
|
|
| Short-term investments with contractual maturities: |
|
|
|
|
|
|
|
|
| One year or less |
|
$ |
187,530 |
|
|
$ |
111,223 |
|
| More than one year through five years |
|
|
392,860 |
|
|
|
455,320 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
580,390 |
|
|
$ |
566,543 |
|
| |
|
|
|
|
|
|
|
|
As of November 30, 2002, the Company had outstanding a $5.0 million
irrevocable standby letter of credit in connection with a facility lease. The letter of credit automatically renews annually for the duration of the lease term, which expires in December 2010. The investments pledged for security of the letter of
credit are presented as restricted cash and included in Other Assets in the Consolidated Balance Sheets.
As of
November 30, 2002, the Company had $0.9 million of restricted cash in connection with a facility surrender agreement. The restricted cash requirement of the surrender agreement will expire in June 2006. The restricted cash is included in Other
Assets in the Consolidated Balance Sheets.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, short-term
investments and accounts receivable. Cash, cash equivalents and investments are
F-8
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
deposited with financial institutions that management believes are creditworthy. The Company’s accounts receivable are derived from revenue earned from customers located primarily in the
United States and Europe. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based
upon the expected collectibility of accounts receivable.
Capitalized Software Development Costs
Costs related to research and development are generally charged to expense as incurred. Capitalization of
material software development costs begins when a product’s technological feasibility has been established in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model, which typically occurs when beta
testing commences, and the general availability of such software has been short, and as such, software development costs qualifying for capitalization have been insignificant.
Costs related to software acquired, developed or modified solely to meet the Company’s internal requirements and for which there are no substantive plans to market the
software are capitalized in accordance with the provisions of Statement of Position (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Costs incurred after the preliminary
planning stage of the project and after management has authorized and committed funds to the project are capitalized. The Company had $7.3 million and $1.5 million of capitalized software costs included in property and equipment at November 30,
2002 and 2001, respectively.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of
the assets as follows:
| Equipment and software |
|
2-5 years |
| Furniture and fixtures |
|
5 years |
| Leasehold improvements |
|
Shorter of the lease term or the estimated useful life |
Depreciation and amortization expense was $14.7 million, $11.2
million and $4.7 million for the fiscal years ended November 30, 2002, 2001 and 2000, respectively.
Goodwill
and Other Intangible Assets
Goodwill and other intangible assets acquired in purchase transactions prior to
July 1, 2001 are amortized on a straight-line method over the estimated useful lives of the assets of between 2 and 5 years. Other intangible assets acquired in purchase transactions prior to July 1, 2001 consist of purchased technology, trademarks,
non-compete agreements, assembled workforces and customer bases. Goodwill and other intangible assets acquired subsequent to July 1, 2001 are subject to the provisions of SFAS No. 141 “Business Combinations” and SFAS No. 142 “Goodwill
and Other Intangible Assets,” and as such, goodwill acquired in purchase business combinations after July 1, 2001 is not amortized, rather it is subject to periodic tests for impairment. The Company is required to adopt the provisions of SFAS
No. 142 for goodwill and other intangible assets acquired prior to June 30, 2001, effective December 1, 2002.
F-9
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets in accordance with SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” When events or changes in circumstances indicate the carrying amount of long-lived assets may not be recoverable the Company recognizes such an impairment in the event the net book
value of such assets exceeds the future undiscounted cash flows attributable to such assets. No impairment losses were incurred in the periods presented.
Revenue Recognition
License revenue consists principally
of revenue earned under software license agreements. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been shipped or electronically delivered, the license fee is
fixed or determinable, and collection of the resulting receivable is probable. When contracts contain multiple elements wherein vendor specific objective evidence exists for all undelivered elements, the Company accounts for the delivered elements
in accordance with the “Residual Method” prescribed by Statement of Position (“SOP”) 98-9. Revenue from subscription license agreements, which include software, rights to future products and maintenance, is recognized ratably
over the term of the subscription period. Revenue on shipments to resellers, which is generally subject to certain rights of return and price protection, is recognized when the products are sold by the resellers to the end-user customer.
Service revenue consists primarily of revenue received for performing implementation of system solutions, on-site
support, consulting and training. Service revenue is generally recognized as the services are performed.
Maintenance revenue consists of fees for providing software updates on a when and if available basis and technical support for software products (post-contract support or “PCS”). Maintenance revenue is recognized ratably
over the term of the agreement.
Payments received in advance of services performed are recorded as deferred
revenue. Allowances for estimated future returns and discounts are provided for upon recognition of revenue.
Income Taxes
The Company accounts for income taxes under the liability method of
accounting. Under the liability method, deferred taxes are determined based on the differences between the financial statement and tax bases of assets and liabilities at enacted tax rates in effect in the year in which the differences are expected
to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to estimated amounts expected to be realized.
Advertising Expense
Advertising costs are expensed as
incurred and totaled approximately $1.6 million, $0.6 million, and $1.1 million for the years ended November 30, 2002, 2001, and 2000, respectively.
Stock-Based Compensation
The Company accounts for
stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and complies with the disclosure provisions of SFAS
No. 123, “Accounting for Stock-Based Compensation.” Stock-based compensation expense is amortized, using the multiple option method prescribed by Financial Accounting Standards Board (“FASB”) Interpretation No. 28, over the
option’s vesting period.
F-10
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Beginning on July 1, 2000, the Company accounted for stock options
assumed and restricted stock issued in acquisitions in accordance with the provisions of FASB Interpretation No. 44 (“FIN 44”), “Accounting for Certain Transactions Involving Stock Compensation-an interpretation of APB Opinion No.
25.” Under FIN 44, assumed options in a purchase business combination are valued on the date of acquisition at their fair value calculated using the Black-Scholes options pricing model. The fair value of vested options is included as part of
the purchase price. A portion of the intrinsic value of unvested options and the fair value of unvested restricted stock is recorded as unearned stock-based compensation and amortized over the remaining vesting period of the options and restricted
stock. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123.
The Company accounted for stock options granted to consultants using the multiple option method as prescribed by FASB Interpretation No. 28. Stock-based compensation expense is recognized as earned. At each reporting date, the
Company re-values the stock-based compensation using the Black-Scholes option-pricing model. As a result, the stock-based compensation expense will fluctuate as the fair market value of the Company’s common stock fluctuates.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive income (loss), which consists of unrealized gains and losses on available-for-sale securities and cumulative translation adjustments. Total
comprehensive income is presented in the accompanying Consolidated Statement of Stockholders’ Equity. Total accumulated other comprehensive income is displayed as a separate component of stockholder’s equity in the accompanying
Consolidated Balance Sheets. The accumulated balances for each classification of comprehensive income (loss) consists of the following (in thousands):
| |
|
Unrealized Gain (Loss)
in Available-for-Sale Securities
|
|
|
Foreign Currency Translation
|
|
|
Accumulated Other Comprehensive Income
(Loss)
|
|
| Beginning balance at December 1, 1999 |
|
$ |
(226 |
) |
|
$ |
202 |
|
|
$ |
(24 |
) |
| Change during period |
|
|
5,030 |
|
|
|
(751 |
) |
|
|
4,279 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2000 |
|
|
4,804 |
|
|
|
(549 |
) |
|
|
4,255 |
|
| Change during period |
|
|
5,735 |
|
|
|
532 |
|
|
|
6,267 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2001 |
|
|
10,539 |
|
|
|
(17 |
) |
|
|
10,522 |
|
| Change during period |
|
|
(8,128 |
) |
|
|
503 |
|
|
|
(7,625 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2002 |
|
$ |
2,411 |
|
|
$ |
486 |
|
|
$ |
2,897 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average
number of common shares outstanding during the period less common shares subject to repurchase. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and potential common shares
outstanding during the period if their effect is dilutive. Certain potential common shares were not included in computing net loss per share because they were anti-dilutive.
F-11
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table sets forth the computation of basic and diluted
net loss per share for the periods indicated (in thousands, except per share amounts):
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Net loss |
|
$ |
(94,580 |
) |
|
$ |
(13,242 |
) |
|
$ |
(24,951 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
|
|
206,626 |
|
|
|
197,258 |
|
|
|
188,853 |
|
| Weighted average common shares subject to repurchase |
|
|
(805 |
) |
|
|
(2,257 |
) |
|
|
(4,676 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares used to compute basic and diluted net loss per share |
|
|
205,821 |
|
|
|
195,001 |
|
|
|
184,177 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share—basic and diluted |
|
$ |
(0.46 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth potential common shares that are not
included in the diluted net loss per share calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):
| |
|
November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
| Common stock subject to repurchase |
|
344 |
|
1,266 |
|
3,638 |
| Stock options |
|
43,460 |
|
34,011 |
|
41,830 |
| |
|
|
|
|
|
|
| |
|
43,804 |
|
35,277 |
|
45,468 |
| |
|
|
|
|
|
|
Derivative Financial Instruments
The Company accounts for derivative instruments and hedging activities under SFAS No. 133 “Accounting for Derivative Instruments and
Hedging Activities.” This statement establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as assets or liabilities in the statement of financial position and measurement of those
instruments at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will be either offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.
The Company enters into foreign currency forward exchange contracts (“forward contracts”) to manage exposure related to accounts receivable denominated in foreign
currencies. The Company does not enter into derivative financial instruments for trading purposes. The Company had outstanding forward contracts with notional amounts totaling approximately $3.0 million, $4.5 million and $6.2 million at November 30,
2002, 2001 and 2000, respectively. The open contracts at November 30, 2002 mature at various dates through January 2003 and are economic hedges of certain foreign currency transaction exposures in the Euro. The fair value of these forward
contracts at November 30, 2002 was not significant.
Recent Accounting Pronouncements
In November 2001, the FASB issued an announcement on the topic of “Income Statement Characterization of Reimbursements
Received for Out of Pocket Expense Incurred,” which was subsequently incorporated in
F-12
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Emerging Issues Task Force (“EITF”) No. 01-14. EITF No. 01-14 requires companies to characterize reimbursements received for out of pocket expenses as revenues in the statement of
operations. Historically, the Company has netted reimbursements received for out of pocket expenses against the related expenses in the accompanying consolidated statements of operations. The Company adopted the pronouncement in the quarter ended
May 31, 2002. Revenues from reimbursable expenses have been identified separately on the consolidated statement of operations and the respective periods for the prior year have been reclassified for comparative purposes.
In July 2001, the FASB issued SFAS No. 141, “Business Combinations” and No. 142, “Goodwill and Other Intangible
Assets.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for impairment. Identifiable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company will adopt SFAS No.142 effective December 1,
2002. As a result of SFAS No. 142 the reclassification of workforce no longer qualifies as a separately identifiable intangible and will be reclassified as goodwill. The adoption of SFAS No. 142 will result in a reduction of amortization expense in
the amount of $18.0 million per year.
Beginning in the first quarter of fiscal 2003, the goodwill and acquired
intangibles with an indefinite life will be carried forward net of amortization accumulated as of December 1, 2002 and reviewed annually for impairment. Amortization of goodwill and intangibles with an indefinite life acquired before July 1, 2001
was $18.5 million and $17.4 million for the years ended November 30, 2002 and 2001, respectively. The adoption of SFAS No. 142 is not expected to have a material impact on our financial position and results of operations, other than the cessation of
amortization of goodwill.
In October 2001, the FASB issued SFAS No. 144, “Accounting for Impairment or
Disposal of Long-Lived Assets.” SFAS No.144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. The Company will adopt SFAS No. 144 on December 1, 2002 and do not expect the adoption of SFAS No. 144 to have a material impact on the Company’s results of operations or financial condition.
In July 2002, the FASB issued SFAS No.146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS
No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock
Based Compensation—Transition and Disclosure—as Amendment to FAS 123.” SFAS 148 provides two additional transition methods for entities that adopt the preferable method of accounting for stock based compensation. Further, the
statement requires disclosure of comparable information for all companies regardless of whether, when, or how an entity adopts the preferable, fair value based method of accounting. These disclosures are now required for interim periods in addition
to the traditional annual disclosure. The amendments to SFAS No. 123, which provides for additional transition methods, are effective for periods beginning after December 15, 2002, although earlier application is permitted. The amendments to the
disclosure requirements are required for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002.
F-13
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 3. Balance Sheet Components
| |
|
November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
| |
|
(in thousands) |
|
| Accounts receivable |
|
$ |
62,586 |
|
|
$ |
60,930 |
|
| Unbilled fees and services |
|
|
2,895 |
|
|
|
3,465 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
65,481 |
|
|
|
64,395 |
|
| Less: Allowances for doubtful accounts, returns and discounts |
|
|
(5,686 |
) |
|
|
(5,315 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
$ |
59,795 |
|
|
$ |
59,080 |
|
| |
|
|
|
|
|
|
|
|
| Property and equipment, net: |
|
|
|
|
|
|
|
|
| Equipment and software |
|
$ |
46,664 |
|
|
$ |
32,738 |
|
| Furniture and fixtures |
|
|
5,554 |
|
|
|
3,015 |
|
| Leasehold improvements |
|
|
35,676 |
|
|
|
20,827 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
87,894 |
|
|
|
56,580 |
|
| Less: Accumulated depreciation and amortization |
|
|
(33,067 |
) |
|
|
(18,330 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
$ |
54,827 |
|
|
$ |
38,250 |
|
| |
|
|
|
|
|
|
|
|
| Other assets: |
|
|
|
|
|
|
|
|
| Private equity investments, net |
|
$ |
2,199 |
|
|
$ |
13,380 |
|
| Deferred tax asset |
|
|
— |
|
|
|
9,479 |
|
| Restricted cash |
|
|
898 |
|
|
|
— |
|
| Investments pledged for security of letter of credit |
|
|
5,000 |
|
|
|
7,000 |
|
| Other |
|
|
251 |
|
|
|
364 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
8,348 |
|
|
$ |
30,223 |
|
| |
|
|
|
|
|
|
|
|
| Goodwill and acquired intangibles, net: |
|
|
|
|
|
|
|
|
| Goodwill |
|
$ |
142,863 |
|
|
$ |
70,917 |
|
| Existing technology |
|
|
21,030 |
|
|
|
16,830 |
|
| Customer base |
|
|
4,960 |
|
|
|
4,960 |
|
| Workforce |
|
|
4,240 |
|
|
|
4,240 |
|
| Trademarks |
|
|
1,550 |
|
|
|
1,450 |
|
| OEM customer royalty agreements |
|
|
1,000 |
|
|
|
— |
|
| Maintenance agreements |
|
|
600 |
|
|
|
— |
|
| Non-compete agreement |
|
|
480 |
|
|
|
80 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
176,723 |
|
|
|
98,477 |
|
| Less: Accumulated amortization |
|
|
(58,903 |
) |
|
|
(34,474 |
) |
| |
|
|
|
|
|
|
|
|
| |
|
$ |
117,820 |
|
|
$ |
64,003 |
|
| |
|
|
|
|
|
|
|
|
| Accrued liabilities: |
|
|
|
|
|
|
|
|
| Compensation and benefits |
|
$ |
22,775 |
|
|
$ |
37,132 |
|
| Expenses |
|
|
18,906 |
|
|
|
18,513 |
|
| |
|
|
|
|
|
|
|
|
| |
|
$ |
41,681 |
|
|
$ |
55,645 |
|
| |
|
|
|
|
|
|
|
|
F-14
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4. Allowances for Doubtful Accounts, Returns and Discounts
The following is a summary of the sales and receivables reserves, returns, and discounts activity for the
periods indicated (in thousands):
| |
|
Balance at Beginning of Period
|
|
Charged Against Revenue
|
|
Charged to Expenses
|
|
Deduction
|
|
|
Balance at End
of Period
|
| Year Ended November 30, 2000 |
|
$ |
2,233 |
|
$ |
2,197 |
|
$ |
1,246 |
|
$ |
(1,419 |
) |
|
$ |
4,257 |
| Year Ended November 30, 2001 |
|
|
4,257 |
|
|
1,619 |
|
|
1,878 |
|
|
(2,439 |
) |
|
|
5,315 |
| Year Ended November 30, 2002 |
|
|
5,315 |
|
|
2,310 |
|
|
1,043 |
|
|
(2,982 |
) |
|
|
5,686 |
Note 5. Restructuring Charge
During fiscal 2001, the Company recorded restructuring charges totaling $21.2 million, consisting of $2.8 million for headcount
reductions, $17.8 million for consolidation of facilities and $0.6 million of other related restructuring charges. These restructuring charges were recorded to align the Company’s cost structure with changing market conditions. The
Company’s restructuring plan resulted in headcount reduction of approximately 170 employees, which was made up of 46% sales and marketing staff, 23% professional services staff, 16% general and administrative staff and 15% research and
development staff. The plan also included the consolidation of facilities through the closing of excess field offices and consolidation of corporate offices into one campus.
During fiscal 2002, the Company recorded additional restructuring charges totaling $49.3 million, consisting of $1.7 million for headcount reductions, $47.6 million related
to properties abandoned in connection with facilities consolidation. The additional facilities charges resulted from revisions of the Company’s estimates of future sublease income due to further deterioration of real estate market conditions
and on-going negotiations with sublessors. The headcount reduction of approximately 65 employees was comprised of 41% sales and marketing staff, 23% professional services staff, 18% general and administrative staff, and 18% research and development
staff. During fiscal 2002, the Company made cash payments of $10.4 million associated with previously abandoned facilities and $1.5 million related to headcount reductions. The Company is currently working with corporate real estate brokers to
sublease unoccupied facilities. If facility lease rates continue to decrease in these markets or if it takes longer than expected to sublease these facilities, the actual loss could exceed the estimate.
In connection with the acquisition of Talarian in the second quarter, the Company abandoned the Talarian facilities and recorded an
accrual for the estimated losses to be incurred to sublet such facilities. The accrual was recorded using the guidance provided by EITF 95-3 “Recognition of Liabilities in a Purchase Business Combination” and included as part of the
purchase price of Talarian Corporation. The acquisition integration liabilities include the incremental costs to exit and consolidate activities at Talarian locations, termination of certain Talarian employees, and for other costs to integrate
operating locations and other activities of Talarian with those of the Company. Generally accepted accounting principles require that these acquisition integration expenses, which are not associated with the generation of future revenues and have no
future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired. The components of the acquisition integration liabilities include workforce reductions and facilities related costs.
F-15
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following sets forth the Company’s accrued excess facilities
costs as of November 30, 2002. These costs represent the estimated loss on abandoned facilities, net of sublease income, and are expected to be paid over the next eight years.
| |
|
Restructuring
|
|
|
Acquisition Integration
|
|
|
Total
|
|
| Fiscal 2001 charges |
|
$ |
17,800 |
|
|
$ |
— |
|
|
$ |
17,800 |
|
| Amount utilized in fiscal 2001 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2001 |
|
|
17,800 |
|
|
|
— |
|
|
|
17,800 |
|
| Fiscal 2002 charges |
|
|
47,614 |
|
|
|
7,410 |
|
|
|
55,024 |
|
| Cash utilized in fiscal 2002 |
|
|
(9,135 |
) |
|
|
(1,286 |
) |
|
|
(10,421 |
) |
| Non-cash write-down of leasehold improvements in fiscal 2002* |
|
|
(11,092 |
) |
|
|
— |
|
|
|
(11,092 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at November 30, 2002 |
|
$ |
45,187 |
|
|
$ |
6,124 |
|
|
$ |
51,311 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The leasehold improvement write-downs were accounted for as a reduction of the assets and did not result in a liability. |
Note 6. Related Party Transactions
Reuters
The Company has
significant transactions with Reuters, including licensing, maintenance and support arrangements and development contracts. The following is a summary of the transactions for the periods indicated (in thousands):
| |
|
Year Ended November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
| License fees |
|
$ |
14,449 |
|
$ |
18,124 |
|
$ |
18,326 |
| Service and maintenance revenue: |
|
|
|
|
|
|
|
|
|
| Maintenance |
|
|
9,584 |
|
|
4,854 |
|
|
1,509 |
| Services contracts |
|
|
1,255 |
|
|
2,573 |
|
|
927 |
| |
|
|
|
|
|
|
|
|
|
| Total service and maintenance |
|
|
10,839 |
|
|
7,427 |
|
|
2,436 |
| |
|
|
|
|
|
|
|
|
|
| |
|
$ |
25,288 |
|
$ |
25,551 |
|
$ |
20,762 |
| |
|
|
|
|
|
|
|
|
|
The Company has entered into commercial transactions with Reuters
Group PLC, including its wholly owned and partially owned subsidiaries (collectively, “Reuters”), a principal stockholder of the Company. As of November 30, 2002, Reuters owned approximately 49.8% of the issued and outstanding shares of
the Company and had two representatives on the Board of Directors.
Reuters is a distributor of the Company’s
products to customers in the financial services segment pursuant to a license, maintenance and distribution agreement between the Company and Reuters. Under the agreement, Reuters has agreed to pay a minimum guaranteed distribution fee, which
consists of a portion of Reuters’ revenue from its sales of the Company’s products and related services and maintenance, to the Company in the amount of $20.0 million per year through December 2003. For the years ended December 31, 2002,
2001 and 2000, Reuters had guaranteed minimum distribution fees of $20.0 million, $20.0 million and $18.0 million, respectively. These fees are recognized ratably over the corresponding period as related party revenue. If actual distribution fees
due from Reuters’ exceed the cumulative minimum year-to-date guarantee, incremental fees are due. Such incremental fees are recognized in the period when the year-to-date fees exceed the cumulative minimum guarantee. Royalty payments to Reuters
for resale of Reuters products and services and fees associated with sales to the financial services segment are classified as related party cost of sales. In addition, the agreement requires
F-16
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the Company to provide Reuters with internal maintenance and support until December 31, 2011 for a fee of $2.0 million per year plus an annual CPI-based increase, subject to Reuters annual
renewal option. This amount is recognized ratably over the corresponding period as related party maintenance revenue.
The Company recognized revenue from Reuters of $25.3 million, $25.6 million and $20.8 million in the years ended 2002, 2001 and 2000, respectively. Revenue from Reuters consists primarily of product and maintenance fees on its sales
of TIBCO products under the terms of the license, maintenance and distribution agreement with Reuters. The Company incurred $2.9 million, $2.9 million and $3.0 million in royalty and commission expense to Reuters in the years ended 2002, 2001 and
2000, respectively.
Cisco Systems
As of November 30, 2002, 2001 and 2000, Cisco Systems, Inc. (“Cisco”) owned approximately 6%, 7% and 7% of the outstanding common stock, for the respective
periods and had one representative on the Company’s Board of Directors as of November 30, 2002 and 2001 and two representatives on the Company’s Board of Directors as of November 30, 2000. The Company recorded license revenue from Cisco of
$0.5 million, $1.3 million and $2.6 million and service and maintenance revenue of $1.5 million, $1.2 million and $0.9 million for the years ended November 30, 2002, 2001 and 2000, respectively.
Note 7. Income Taxes
Significant components of the provision for income taxes are as follows (in thousands):
| |
|
Year Ended November 30,
|
| |
|
2002
|
|
2001
|
|
|
2000
|
| Federal: |
|
|
|
|
|
|
|
|
|
|
| Current |
|
$ |
— |
|
$ |
9,070 |
|
|
$ |
688 |
| Deferred |
|
|
14,281 |
|
|
(16,668 |
) |
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
14,281 |
|
|
(7,598 |
) |
|
|
688 |
| State: |
|
|
|
|
|
|
|
|
|
|
| Current |
|
|
500 |
|
|
1,443 |
|
|
|
400 |
| Deferred |
|
|
6,831 |
|
|
(6,776 |
) |
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
7,331 |
|
|
(5,333 |
) |
|
|
400 |
| Foreign: |
|
|
|
|
|
|
|
|
|
|
| Current |
|
|
2,500 |
|
|
2,462 |
|
|
|
800 |
| Deferred |
|
|
— |
|
|
— |
|
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
2,500 |
|
|
2,462 |
|
|
|
800 |
| |
|
|
|
|
|
|
|
|
|
|
| Income tax (benefit) provision |
|
$ |
24,112 |
|
$ |
(10,469 |
) |
|
$ |
1,888 |
| |
|
|
|
|
|
|
|
|
|
|
F-17
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company paid income taxes of $2.7 million, $1.3 million and $0.3
million for the years ended November 30, 2002, 2001 and 2000, respectively. Income (loss) before provision for income taxes consisted of (in thousands):
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| United States |
|
$ |
(74,088 |
) |
|
$ |
(27,947 |
) |
|
$ |
(25,788 |
) |
| International |
|
|
3,670 |
|
|
|
4,236 |
|
|
|
2,725 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
(70,418 |
) |
|
$ |
(23,711 |
) |
|
$ |
(23,063 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
The (benefit) provision for income taxes was at rates other than
the U.S. Federal statutory tax rate for the following reasons:
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| U.S. Federal statutory rate |
|
(34.0 |
)% |
|
(35.0 |
)% |
|
(34.0 |
)% |
| State taxes |
|
(4.9 |
) |
|
(4.4 |
) |
|
(5.2 |
) |
| Minimum taxes |
|
— |
|
|
— |
|
|
5.3 |
|
| R & D credits |
|
(0.7 |
) |
|
(2.1 |
) |
|
(10.0 |
) |
| In-process research and development |
|
1.3 |
|
|
— |
|
|
3.9 |
|
| Goodwill |
|
8.1 |
|
|
24.7 |
|
|
5.5 |
|
| Stock option compensation |
|
1.2 |
|
|
38.5 |
|
|
30.3 |
|
| Foreign losses not benefited |
|
— |
|
|
— |
|
|
4.0 |
|
| Change in valuation allowance |
|
61.8 |
|
|
(70.0 |
) |
|
3.7 |
|
| Other |
|
1.4 |
|
|
4.1 |
|
|
4.8 |
|
| |
|
|
|
|
|
|
|
|
|
| Income tax (benefit) provision |
|
34.2 |
% |
|
(44.2 |
)% |
|
8.3 |
% |
| |
|
|
|
|
|
|
|
|
|
U.S. income taxes and foreign withholding taxes were not provided
for on a cumulative total of $11.1 million of undistributed earnings for certain non-U.S. subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside the U.S.
F-18
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The components of the Company’s deferred tax assets/liabilities
are as follows (in thousands):
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| Intangible assets |
|
$ |
(2,945 |
) |
|
$ |
(1,532 |
) |
|
$ |
(2,284 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net operating loss carryforward |
|
|
7,500 |
|
|
|
— |
|
|
|
815 |
|
| Stock option compensation |
|
|
501 |
|
|
|
233 |
|
|
|
— |
|
| Reserves and accruals |
|
|
31,110 |
|
|
|
14,728 |
|
|
|
7,732 |
|
| Credit carryforwards |
|
|
4,444 |
|
|
|
3,101 |
|
|
|
5,633 |
|
| Depreciation and amortization |
|
|
7,198 |
|
|
|
5,748 |
|
|
|
3,432 |
|
| Unrealized (gains)/losses on marketable securities |
|
|
5,814 |
|
|
|
(3,383 |
) |
|
|
(1,863 |
) |
| Capital loss carryforward |
|
|
— |
|
|
|
— |
|
|
|
785 |
|
| Other |
|
|
15 |
|
|
|
(729 |
) |
|
|
32 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total deferred tax assets |
|
|
56,582 |
|
|
|
19,698 |
|
|
|
16,566 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Valuation allowance |
|
|
(53,637 |
) |
|
|
— |
|
|
|
(16,566 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net deferred tax assets/(liabilities) |
|
$ |
— |
|
|
$ |
18,166 |
|
|
$ |
(2,284 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Due to changes in the current economic environment and based upon
the weight of all available positive and negative evidence, management has determined that it is more likely than not that the deferred tax assets will not be utilized; and accordingly, recorded a full valuation allowance of $53.6 million for the
year ended November 30, 2002.
As of November 30, 2002, the Company’s federal and state net operating
loss carryforwards for income tax purposes were $507 million and $213 million, respectively, which expire through 2022. As of November 30, 2002, the Company’s federal and state tax credit carryforwards for income tax purposes were $5.2 million
and $6.7 million, respectively, which expire through 2022. These net operating losses and tax credits arise from stock option benefits that will be credited to Additional Paid-In Capital when used. In the event of a change in ownership, as defined
under federal and state tax laws, the Company’s net operating loss and tax credit carryforwards may be subject to annual limitation. The annual limitation may result in the expiration of the net operating loss and tax credit carryforwards
before utilization.
Note 8. Commitments and Contingencies
Leases
The Company leases office space and equipment under non-cancelable operating leases with various expiration dates through March 2014. Rental expense was approximately $19.5 million, $13.7 million and $8.4 million for
the years ended November 30, 2002, 2001 and 2000, respectively.
F-19
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of November 30, 2002 future minimum lease payments under
non-cancelable operating leases, including $45.2 million provided for as accrued restructuring costs and $6.1 million provided for as acquisition integration liabilities, are as follows (in thousands):
| Year Ending November 30,
|
|
Expense
|
|
Sublease Income
|
|
Net
|
| 2003 |
|
$ |
27,164 |
|
$ |
1,183 |
|
$ |
25,981 |
| 2004 |
|
|
25,871 |
|
|
1,290 |
|
|
24,581 |
| 2005 |
|
|
25,692 |
|
|
1,034 |
|
|
24,658 |
| 2006 |
|
|
24,497 |
|
|
345 |
|
|
24,152 |
| 2007 |
|
|
25,064 |
|
|
349 |
|
|
24,715 |
| Thereafter |
|
|
144,385 |
|
|
1,167 |
|
|
143,218 |
| |
|
|
|
|
|
|
|
|
|
| |
|
$ |
272,673 |
|
$ |
5,368 |
|
$ |
267,305 |
| |
|
|
|
|
|
|
|
|
|
Legal Proceedings
The Company, certain investment bank underwriters and certain of the Company’s directors and officers have been named in a putative
class action for violation of the federal securities laws in the United States District Court for the Southern District of New York, captioned, “In re TIBCO Software, Inc. Initial Public Offering Securities Litigation, 01 Civ. 6110 (SAS).”
This is one of a number of cases challenging underwriting practices in the initial public offerings (“IPOs”) of more than 300 companies. These cases have been coordinated for pretrial proceedings as “In re Initial Public Offering
Securities Litigation, 21 MC 92 (SAS).” Plaintiffs generally allege that certain underwriters engaged in undisclosed and improper underwriting activities, namely the receipt of excessive brokerage commissions and customer agreements regarding
post-offering purchases of stock in exchange for allocations of IPO shares. Plaintiffs also allege that various investment bank securities analysts issued false and misleading analyst reports. The complaint against the Company claims that the
purported improper underwriting activities were not disclosed in the registration statements for the Company’s IPO and secondary public offering and seeks unspecified damages on behalf of a purported class of persons who purchased the
Company’s securities or sold put options during the time period from July 13, 1999 to December 6, 2000. The Company believes that it has meritorious defenses to the claims against it and intends to defend against the complaints vigorously.
The Company has filed motions to dismiss the action.
A lawsuit with similar allegations of undisclosed improper
underwriting practices, and part of the same coordinated proceedings, is pending against Talarian, which the Company acquired in April 2002. That action is captioned, “In re Talarian Corp. Initial Public Offering Securities Litigation, 01 Civ.
7474 (SAS).” The complaint against Talarian, certain of its underwriters, and certain of its former directors and officers claims that the purported improper underwriting activities were not disclosed in the registration statement for
Talarian’s IPO and seeks unspecified damages on behalf of a purported class of persons who purchased Talarian securities during the time period from July 20, 2000 to December 6, 2000. The Company believes that there are meritorious defenses to
the claims against Talarian and intends to defend against those claims vigorously. The Company has filed motions to dismiss the action.
Note 9. Stockholders’ Equity
Preferred Stock
The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue 25.0 million
shares of $0.001 par value preferred stock.
F-20
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Common Stock
The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue 1.2 billion shares of $0.001 par value common
stock. A portion of the shares issued are subject to a right of repurchase by the Company subject to vesting, which is generally over a five year period from the grant date or employee hire date, as applicable, until vesting is complete. Unvested
shares are subject to repurchase at the original exercise price. As of November 30, 2002, 2001 and 2000 shares of common stock subject to a repurchase option held by the Company totaled 0.3 million shares, 1.3 million shares and 3.6 million shares
at weighted average prices of $1.17, $0.77 and $0.53 per share, respectively.
Benefit Plans
1996 Stock Option Plan. In 1996, the Company adopted the 1996 Stock Option Plan (the “1996 Plan”). The 1996 Plan
provides for the granting of stock options to employees and consultants of the Company. Options granted under the 1996 Plan may be either incentive stock options or nonqualified stock options. Incentive stock options may be granted only to employees
(including officers and directors who are employees). Nonqualified stock options may be granted to Company employees and consultants. Options under the 1996 Plan may be granted for terms not to exceed ten years. Options granted before the IPO are
exercisable immediately upon grant and generally vest over five years and are subject to repurchase until vested. Options granted after the IPO, are not generally exercisable immediately and generally vest over four years. The 1996 Plan provides for
an automatic increase to the number of shares of common stock reserved for issuance (to be added on the first day of each fiscal year beginning in 2000) equal to the lesser of (i) 60 million shares, (ii) 5% of the outstanding shares of the
Company’s common stock, or (iii) a lesser amount determined by the Board of Directors. As of November 30, 2002, there were 9,278,018 shares reserved for grant under this plan.
Talarian Stock Option Plans. In April 2002, the Company assumed all of the Talarian Stock Option Plans (the “Talarian Plans”) in connection with the
Company’s acquisition of Talarian. At the date of acquisition all outstanding options of Talarian common stock were converted, according to the exchange ratio, into options of the Company’s common stock with terms and conditions equivalent
to those applicable at the time of conversion. The Company recorded $0.7 million of deferred compensation related to 486,965 options assumed and converted under this plan. Though the Company has no intention of additional grants there were 86,171
shares reserved for grant under this plan as of November 30, 2002.
2001 Stock Option Exchange Program. In January
2001, TIBCO’s Board of Directors approved a voluntary stock option exchange program for certain of the Company’s employees. Under the program, employees had the opportunity to cancel certain outstanding stock options granted to them under
the 1996 Plan between September 9, 1999 and February 15, 2001 in exchange for a new option grant for an equal number of shares with terms and conditions substantially the same as the cancelled options to be granted on October 8, 2001. The
program terminated on April 5, 2001. A total of 13,483,903 options were cancelled in connection with the option exchange. The exercise prices of the new options were the closing price on NASDAQ on October 8, 2001 at $8.00 per share. Members of
TIBCO’s Board of Directors and executive officers were not eligible to participate in this program.
2000
Extensibility Stock Option Plan. In 2000, the Company adopted the 2000 Extensibility Stock Option Plan (the “Extensibility Plan”) in connection with options assumed in the Company’s acquisition of Extensibility. Extensibility
employees who continued service with the Company were granted options with terms and conditions equivalent to those applicable at the date of acquisition. Though the Company has no intention of additional grants there were 20,900 shares reserved for
grant under this plan as of November 30, 2002.
1998 Advisory Council Option Plan. In October 1998, the Company
adopted the 1998 Advisory Council Option Plan (the “Advisory Plan”) as a sub-plan to the 1996 Plan for the purpose of attracting and retaining
F-21
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
personnel for service on an information technology advisory council. The Advisory Plan provides for an initial grant of 15,000 shares to each advisory council member (30,000 shares to the
chairman). Options are granted at an exercise price not less than fair market value of the Common Stock on the date of grant, have a term not to exceed ten years and become exercisable over a two-year period with half of the shares vesting annually.
Employee Stock Purchase Program. In June 1999, the Company adopted the Employee Stock Purchase Program (the
“ESP Program”) as a sub-plan to the 1996 Plan. Employees are generally eligible to participate in the ESP Program if they are customarily employed by the Company for more than 20 hours per week and more than 5 months in a calendar year and
are not (and would not become as a result of being granted an option under the ESP Program) 5% stockholders of the Company. Under the ESP Program, eligible employees may select a rate of payroll deduction up to 10% of their eligible compensation
subject to certain maximum purchase limitations.
Each offering period has a maximum duration of two years
(the “Offering Period”) and consists of four six-month Purchase Periods (each, a “Purchase Period”). Offering Periods and Purchase Periods thereafter will begin on January 1 and July 1 of each year. Effective July 1, 2001, all
future Offering Periods and Purchase Periods were changed to begin on February 1 and August 1 of each year. The price at which the common stock is purchased under the ESP Plan is 85% of the lesser of the fair market value of the Company’s
common stock on the first day of the applicable Offering Period or on the last day of that Purchase Period. The ESP Program will terminate after a period of ten years unless terminated earlier as permitted by the ESP Program.
Under this Program, approximately 990,000, 1,040,000 and 892,000 shares were issued during fiscal 2002, 2001 and 2000,
respectively, representing approximately $7.1 million, $6.6 million and $4.3 million in employee contributions for fiscal 2002, 2001 and 2000, respectively. As of November 30, 2002, there were 3,889,175 shares reserved for grant under this
plan.
1998 Director Option Plan. In February 1998, the Company adopted the 1998 Director Option Plan (the
“Director Plan”). As amended in April 2002, the Director Plan provides for an automatic initial grant of 100,000 shares to members of the Board who are not employees of the Company or Reuters (“External Directors”). At any
subsequent annual re-election, each External Director shall be granted an option to purchase 40,000 additional shares. Options are granted at an exercise price not less than the fair market value of the stock on the date of grant, have a term not to
exceed ten years and become exercisable over a three-year period with a third of the shares vesting annually. Any External Director with over one-year of consecutive service prior to the effective date of the Director Plan received an initial grant
of 450,000 shares. As of November 30, 2002, there were 2,175,000 shares reserved for grant under this plan.
F-22
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The activity under all stock option plans is summarized as follows
(in thousands, except per share data):
| |
|
Year Ended November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
| |
|
Options
|
|
|
Weighted Average Exercise Price
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
Options
|
|
|
Weighted Average Exercise Price
|
| Outstanding at beginning of period |
|
34,011 |
|
|
$ |
6.60 |
|
41,830 |
|
|
$ |
27.09 |
|
31,440 |
|
|
$ |
1.12 |
| Granted |
|
16,461 |
|
|
|
9.72 |
|
19,136 |
|
|
|
12.81 |
|
18,797 |
|
|
|
60.51 |
| Exercised |
|
(3,068 |
) |
|
|
3.01 |
|
(6,324 |
) |
|
|
0.90 |
|
(7,170 |
) |
|
|
1.47 |
| Forfeited |
|
(3,944 |
) |
|
|
11.95 |
|
(20,631 |
) |
|
|
55.65 |
|
(1,237 |
) |
|
|
22.95 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at end of period |
|
43,460 |
|
|
|
7.55 |
|
34,011 |
|
|
|
6.60 |
|
41,830 |
|
|
|
27.09 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Options exercisable at period end |
|
23,397 |
|
|
|
5.66 |
|
16,491 |
|
|
|
2.43 |
|
24,664 |
|
|
|
4.02 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about stock options
outstanding at November 30, 2002 (in thousands, except number of years and per share data):
| |
|
Options Outstanding
|
|
Options Exercisable
|
| Range of Exercise Price
|
|
Number of Shares Underlying Options
|
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
|
Number of Shares Underlying Options
|
|
Weighted Average Exercise Price
|
| $0.20 to $0.33 |
|
7,599 |
|
4.27 years |
|
$ |
0.22 |
|
7,599 |
|
$ |
0.22 |
| $0.34 to $2.00 |
|
4,964 |
|
6.12 years |
|
|
1.63 |
|
4,959 |
|
|
1.63 |
| $2.01 to $5.99 |
|
6,571 |
|
9.53 years |
|
|
5.54 |
|
673 |
|
|
4.60 |
| $6.00 to $8.00 |
|
11,161 |
|
8.89 years |
|
|
7.96 |
|
5,848 |
|
|
7.99 |
| $8.01 to $11.69 |
|
4,182 |
|
8.68 years |
|
|
10.92 |
|
1,723 |
|
|
11.14 |
| $11.70 to $15.41 |
|
7,848 |
|
9.03 years |
|
|
12.74 |
|
1,858 |
|
|
12.58 |
| $15.42 to $39.13 |
|
511 |
|
7.22 years |
|
|
26.13 |
|
345 |
|
|
26.10 |
| $39.14 to $74.67 |
|
624 |
|
7.38 years |
|
|
54.72 |
|
392 |
|
|
54.11 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
43,460 |
|
7.83 years |
|
$ |
7.55 |
|
23,397 |
|
$ |
5.66 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
At November 30, 2002, the Company had reserved 13,617,193 and
2,175,000 shares of authorized but unissued common stock for future issuance under the 1996 Plan and the Director Plan, respectively.
Stock-Based Compensation
| |
|
Year Ended November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
| Stock-based compensation related to: |
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
$ |
527 |
|
$ |
977 |
|
$ |
3,025 |
| Research and development |
|
|
1,318 |
|
|
12,109 |
|
|
18,525 |
| Sales and marketing |
|
|
1,286 |
|
|
10,128 |
|
|
33,637 |
| General and administrative |
|
|
919 |
|
|
3,751 |
|
|
1,729 |
| |
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
4,050 |
|
$ |
26,965 |
|
$ |
56,916 |
| |
|
|
|
|
|
|
|
|
|
F-23
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company has recorded a total of $58.4 million in unearned
compensation through November 30, 2002, representing the difference between the deemed fair value of our common stock at the date of grant and the exercise price of such options and in connection with acquisitions. In addition, as of November 30,
2002, the Company expects to record additional acquisition related compensation expense of up to $0.3 million in connection with additional cash consideration contingent on the vesting and exercise of stock options and restricted stock, which were
unvested at the acquisition date. Amortization of stock-based compensation was $3.2 million, $26.4 million, and $16.7 million for the years ended November 30, 2002, 2001 and 2000, respectively and is expected to be $1.2 million in 2003, $0.3
million in 2004 and $0.1 million in 2005.
Stock-based compensation expense related to stock options granted to
consultants is recognized as earned using the multiple option method, and is shown by expense category. At each reporting date, the Company re-values the stock options using the Black-Scholes option-pricing model. As a result, stock-based
compensation expense will fluctuate as the fair market value of the Company’s common stock fluctuates. In connection with the grant of stock options to consultants, the Company recognized stock-based compensation income of $0.4 million,
for the reversal of stock based compensation expense caused by a decline in the fair value of the Company’s common stock for the year ended November 30, 2002 and stock-based compensation expense of $0.1 million and $34.8 million for the
years ended November 30, 2001 and 2000, respectively.
In fiscal 2002, 2001 and 2000, the Company recognized $1.3
million, $0.5 million and $5.4 million, respectively as stock compensation expense related to the employer portion of payroll taxes due as a result of employee exercises of non-qualified stock options.
Fair Value Disclosures
Had compensation cost for the Company’s stock-based compensation plan been determined based on the fair value at the grant date for the awards under a method prescribed by SFAS No. 123, the
Company’s net loss would have increased to the pro forma amounts indicated below (in thousands):
| |
|
Year Ended November 30,
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
| As reported |
|
$ |
(94,580 |
) |
|
$ |
(13,242 |
) |
|
$ |
(24,951 |
) |
| Pro forma |
|
|
(203,084 |
) |
|
|
20,973 |
|
|
|
(295,974 |
) |
| Net income (loss) per share—basic: |
|
|
|
|
|
|
|
|
|
|
|
|
| As reported |
|
$ |
(0.46 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
| Pro forma |
|
|
(0.99 |
) |
|
|
0.11 |
|
|
|
(1.61 |
) |
| Net income (loss) per share—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
| As reported |
|
$ |
(0.46 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.14 |
) |
| Pro forma |
|
|
(0.99 |
) |
|
|
0.10 |
|
|
|
(1.61 |
) |
The Company calculated the value of each option grant on the date
of the grant using a Black-Scholes option-pricing model with the following assumptions:
| |
|
Stock Option Plans
|
|
|
ESP Plan
|
|
| |
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
| Risk free interest rates |
|
3.2 |
% |
|
4.2 |
% |
|
6.3 |
% |
|
3.2 |
% |
|
4.2 |
% |
|
6.3 |
% |
| Expected lives (in years) |
|
3.0 |
|
|
3.0 |
|
|
3.0 |
|
|
0.5 |
|
|
0.5 |
|
|
0.5 |
|
| Dividend yield |
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
| Expected volatility |
|
117 |
% |
|
128 |
% |
|
122 |
% |
|
117 |
% |
|
128 |
% |
|
122 |
% |
F-24
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
These pro forma amounts may not be representative of the effects on
reported net loss for future years as options vest over several years and additional awards are generally made each year. The weighted average fair value of a share of common stock underlying options granted in the years ended November 30, 2002,
2001 and 2000 was $7.86, $10.89, and $51.77, respectively.
401(k) Plan. The
Company’s employee savings and retirement plan is qualified under Section 401 of the Internal Revenue Code. Employees may elect to reduce their current compensation by up to the statutory prescribed annual limit and have the amount of such
reduction contributed to the 401(k) Plan. The Company provides matches to employee contributions up to 4% of an employee’s base pay and an additional 50% match on employee contributions of the next 2% of base pay. The Company’s matching
contributions to the Plan totaled $3.3 million, $2.8 million and $1.8 million in fiscal 2002, 2001 and 2000, respectively.
Note
10. Segment Information
The Company operates primarily in one industry segment: the
development and marketing of a suite of software products that enables businesses to link internal operations, business partners and customer channels through the real-time distribution of information. Revenue by geographic area is as follows (in
thousands):
| |
|
Year Ended November 30,
|
| |
|
2002
|
|
2001
|
|
2000
|
| Americas |
|
$ |
164,717 |
|
$ |
183,940 |
|
$ |
173,303 |
| Europe |
|
|
93,743 |
|
|
113,727 |
|
|
68,341 |
| Pacific Rim |
|
|
14,933 |
|
|
24,424 |
|
|
12,445 |
| |
|
|
|
|
|
|
|
|
|
| Total Revenue |
|
$ |
273,393 |
|
$ |
322,091 |
|
$ |
254,089 |
| |
|
|
|
|
|
|
|
|
|
Revenue from Reuters, a European customer, accounted for 9%, 8% and
8% of total revenue for the years ended November 30, 2002, 2001 and 2000, respectively. Long-lived assets outside the United States at November 30, 2002 and 2001 were not material.
Note 11. Business Combinations
PRAJA Inc.
On September 13, 2002, the Company completed its acquisition of PRAJA, a
privately held developer of business activity monitoring software. The Company expects that the acquisition will give its customers new capabilities in directly monitoring real-time business operations against key performance indicators. The total
purchase price of the acquisition, which was structured as an asset purchase transaction, was comprised of $3.2 million of cash and the assumption of $0.3 million net liabilities. The entire $3.5 million cost was allocated to goodwill and, as
required by SFAS No. 141 and SFAS No. 142, will be reviewed annually for impairment. The results of operations of PRAJA are included in the Company’s Consolidated Statement of Operations from the date of the acquisition.
Talarian Corporation
On April 23, 2002, the Company completed its acquisition of Talarian, a provider of infrastructure software that enables businesses to exchange information in real time, both internally and with their
partners, suppliers, and customers. Talarian’s server-based architecture allows software applications to communicate across local or wide area networks, including private networks and the Internet. The benefits to customers of Talarian’s
primary product, SmartSockets, are reduced development effort, increased flexibility, and rapid deployment. The acquisition of Talarian extends the breadth of the Company’s integration messaging solutions.
F-25
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The total purchase price of approximately $114.5 million comprised
$53.7 million in cash, the issuance of 4.4 million shares of the Company’s common stock valued at $53.6 million and the assumption of 0.5 million stock options and restricted shares valued at $5.0 million for all of the outstanding capital
stock of Talarian. The Company also incurred an estimated $2.9 million in transaction fees, including legal, valuation and accounting fees. The total consideration was reduced by $0.7 million of unearned stock-based compensation related to
approximately 0.2 million unvested stock options and restricted stock. Additional cash consideration of $0.9 million is contingent on the vesting and exercise of stock options and restricted stock and is to be recorded as compensation expense
as earned. The net purchase price of approximately $114.5 million has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the acquisition date. The results
of operations of Talarian are included in the Company’s Consolidated Statement of Operations from the date of the acquisition.
The shares issued in the acquisition have been valued in accordance with EITF Issue No. 99-12, “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination.” In accordance with EITF No. 99-12, the Company has established that the first date on which the number of the Company shares and the amount of other consideration became fixed was March 28, 2002. Accordingly, the Company has
valued the transaction using the average closing price three days before and after March 28, 2002 of $12.29 per share.
The assumed stock options were valued using the Black Scholes valuation model with a volatility factor of 128%, an average risk free interest rate of 4.2%, and estimated lives of three to 36 months.
The Talarian acquisition was accounted for under SFAS No. 141 and certain specified provisions of SFAS No. 142. The results of operations
of Talarian were included in the Company’s Condensed Consolidated Statement of Operations from April 23, 2002. The following table summarizes the estimated fair values of the tangible assets acquired and the liabilities assumed at the date of
acquisition (in thousands):
| Cash |
|
$ |
47,035 |
|
| Accounts receivable |
|
|
3,374 |
|
| Other current assets |
|
|
663 |
|
| Property and equipment |
|
|
1,420 |
|
| Other non-current assets |
|
|
151 |
|
| |
|
|
|
|
| Total assets acquired |
|
|
52,644 |
|
| Accrued liabilities |
|
|
(2,964 |
) |
| Acquisition integration liabilities |
|
|
(8,441 |
) |
| Deferred revenue |
|
|
(3,767 |
) |
| |
|
|
|
|
| Total liabilities assumed |
|
|
(15,172 |
) |
| |
|
|
|
|
| Net assets acquired |
|
$ |
37,472 |
|
| |
|
|
|
|
F-26
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The allocation of purchase price, excluding contingent purchase
consideration, to the tangible and identifiable intangible assets acquired and liabilities assumed is as follows (in thousands):
| Fair value of net tangible assets acquired |
|
$ |
37,472 |
| Intangible assets acquired: |
|
|
|
| Developed technology |
|
|
4,200 |
| Customer base |
|
|
600 |
| Trademarks |
|
|
100 |
| OEM customer royalties |
|
|
1,000 |
| Noncompete agreement |
|
|
400 |
| In-process research and development |
|
|
2,400 |
| Goodwill |
|
|
68,341 |
| |
|
|
|
| Purchase price |
|
$ |
114,513 |
| |
|
|
|
In-process research and development, relating to development
projects that had not reached technological feasibility and that had no future alternative uses, was expensed upon consummation of the merger. Other identifiable intangible assets are being amortized over their useful lives of two years for
non-compete agreements, three years for developed technology, 3 ½ years for customer base and trademarks, and five years for royalties.
Developed technology and in-process research and development (“IPRD”) were identified and valued through extensive interviews and analysis of data provided by Talarian concerning development
projects, their stage of development, the time and resources needed to complete them, if applicable, their expected income generating ability and associated risks. Where development projects had reached technological feasibility, they were
classified as developed technology and the value assigned to developed technology was capitalized. The income approach, which includes an analysis of the cash flows and risks associated with achieving such cash flows, was the primary technique
utilized in valuing acquired intangible assets. Key assumptions included a discount rate of 36% and estimates of revenue growth, maintenance renewal rates, cost of sales, operating expenses and taxes. The development projects have been completed
within management’s original estimates.
The residual purchase price of $68.3 million has been recorded as
goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets,” goodwill relating to the Talarian acquisition is not being amortized and will be tested for impairment annually or whenever events indicate that impairment may have occurred.
F-27
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As a result of the acquisition of Talarian, the Company incurred
acquisition integration expenses for the incremental costs to exit and consolidate activities at Talarian locations, to involuntarily terminate Talarian employees, and for other costs to integrate operating locations and other activities of Talarian
with those of the Company. Generally accepted accounting principles require that these acquisition integration expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed
liabilities in the allocation of the purchase price to the net assets acquired. The components of the acquisition integration liabilities included in the purchase price allocation for Talarian are as follows (in thousands):
| |
|
Original Costs
|
|
Utilized
|
|
|
Balance Remaining
at November 30, 2002
|
| Workforce reductions |
|
$ |
1,031 |
|
$ |
(1,031 |
) |
|
$ |
— |
| Facilities |
|
|
7,410 |
|
|
(1,286 |
) |
|
|
6,124 |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
8,441 |
|
$ |
(2,317 |
) |
|
$ |
6,124 |
| |
|
|
|
|
|
|
|
|
|
|
The acquisition integration liabilities are based on the
Company’s current integration plan, which principally focuses on the elimination of redundant administrative overhead and support activities and the restructuring and repositioning of the sales/marketing and research and development
organizations to eliminate redundancies in these activities.
The workforce reductions represent the termination
of 42 Talarian employees, including 10 research and development, 14 sales and marketing, and 18 administrative personnel.
Certain aspects of the integration plan will be refined as additional studies are completed, including the evaluation of acquired facilities and appropriate positioning of the sales/marketing and research and development
organizations to best serve customer needs. Adjustments to the estimated acquisition integration liabilities based on these refinements will be included in the allocation of the purchase price of Talarian, if the adjustment is determined within the
purchase price allocation period. Adjustments that are determined after the end of the purchase price allocation period will be recorded as a reduction of net income, if the ultimate amount of the liability exceeds the estimate, or recorded as a
reduction of goodwill, if the ultimate amount of the liability is below the estimate.
If the Company had acquired
Talarian and PRAJA at the beginning of each of the periods presented, the Company’s unaudited pro forma net revenues, net loss and net loss per share would have been as follows:
| |
|
Fiscal Year Ended November
30,
|
|
| |
|
2002
|
|
|
2001
|
|
| Revenue |
|
$ |
284,050 |
|
|
$ |
335,864 |
|
| |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(103,601 |
) |
|
$ |
(38,702 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss per share (basic and diluted) |
|
$ |
(0.50 |
) |
|
$ |
(0.20 |
) |
| |
|
|
|
|
|
|
|
|
F-28
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Extensibility Inc.
In August 2000, the Company entered into an Agreement and Plan of Reorganization to acquire Extensibility, a provider of enabling
technologies for XML-based application infrastructures. As a result of the acquisition, Extensibility became a wholly owned subsidiary of TIBCO. In connection with the acquisition, TIBCO issued common stock in exchange for all of the outstanding
capital stock and options of Extensibility. The acquisition was consummated on September 5, 2000 and was intended to be treated as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended, and accounted for under
the purchase method of accounting. The results of operations of Extensibility and the estimated fair value of the assets acquired and liabilities assumed are included in the Company’s financial statements from the date of acquisition.
The total fair market value of the consideration is approximately $102.4 million which consists of the allocated
purchase price of $67.5 million and $34.9 million in stock compensation related to unvested stock options that were assumed as well as stock that was issued as part of the consideration for the acquisition. The purchase price of $67.5 million
includes the value of securities issued in the amount of $59.9 million, the assumption of Extensibility options totaling $5.1 million, acquisition related expenses, consisting of financial advisory, accounting and legal fees, of approximately $2.5
million. The Company assumed liabilities with the fair value of $0.6 million and recorded $2.2 million for deferred tax liabilities related to the acquired intangibles.
The allocation of the purchase price to intangibles was based upon an independent, third-party appraisal and management’s estimates and was as follows (in thousands):
| In-process research and development |
|
$ |
2,260 |
| Existing technology |
|
|
2,830 |
| Customer base |
|
|
2,060 |
| Workforce |
|
|
1,140 |
| Trademarks |
|
|
250 |
| Non compete agreement |
|
|
80 |
| Goodwill |
|
|
61,649 |
| |
|
|
|
| Total goodwill and acquired intangibles |
|
$ |
70,269 |
| |
|
|
|
The goodwill and acquired intangibles have estimated useful lives
of between 2 and 5 years.
A portion of the purchase price was allocated to developed technology, which is shown
as “Existing technology” in the table above, and in-process research and development (IPRD). Management estimated that $2.3 million of the purchase price represented IPRD that has not yet reached technological feasibility and has no
alternative future use. Accordingly, this amount was immediately charged to expense upon consummation of the acquisition. Developed technology and IPRD were identified and valued through extensive interviews, analysis of data provided by
Extensibility concerning development projects, their stage of development, the time and resources needed to complete them, if applicable, their expected income generating ability and associated risks. The income approach, which includes an analysis
of the cash flows, and risks associated with achieving such cash flows, was the primary technique utilized in valuing the developed technology and IPRD. Key assumption included a discount rate of 40% and estimates of growth, maintenance renewal
rates, cost of sales, operating expenses and taxes. The development projects have been completed within management’s original estimates.
F-29
TIBCO SOFTWARE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Where development projects had reached technological feasibility,
they were classified as developed technology and the value assigned to developed technology was capitalized. The developed technology is being amortized on a straight-line basis over its estimated useful life of five years.
A customer base represents established relationships with businesses that repeatedly order from a company. The income approach was used to
estimate the value of Extensibility’s customer base by determining the present value of future cash flows generated by existing customers. Key assumptions used in the calculation included a discount rate of 35% and estimates of revenue growth,
cost of sales, operating expenses and tax rate provided by management of Extensibility. The customer base is being amortized on a straight-line basis over its estimated useful life of four years.
The value of the assembled workforce was derived by estimating the costs to replace the existing employees, including recruiting and hiring costs for each category of
employee. The value of the assembled workforce is being amortized on a straight-line basis over its estimated useful life of two years.
The trademark was valued by applying a trademark royalty rate of 0.5% to forecasted revenue, and then the net cash flow expected from these amounts was discounted at a rate of 35% to arrive at an estimated fair market value.
The trademark is being amortized on a straight-line basis over its estimated useful life of four years.
The
following unaudited pro forma information combines the results of operations as if the acquisition of Extensibility had been consummated as of the beginning of the period presented (in thousands, except for per share data):
| |
|
Year Ended November 30, 2000
|
|
| Revenue |
|
$ |
252,197 |
|
| Net loss |
|
|
(55,405 |
) |
| Basic and diluted net loss per share |
|
$ |
(0.30 |
) |
The pro forma net loss includes the impact of adjustments related
to amortization of purchased intangibles and goodwill, amortization of deferred compensation and the reduction of interest income. The pro forma information does not purport to be indicative of the results that would have occurred had the
acquisition actually been in effect for these periods, or of results that may occur in the future.
F-30
TIBCO SOFTWARE INC.
QUARTERLY RESULTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| |
|
Three Months Ended Fiscal 2002
|
|
|
Three Months Ended Fiscal 2001
|
|
| |
|
Nov. 30, 2002
|
|
|
Aug. 31, 2002
|
|
|
May 31, 2002
|
|
|
Feb. 28, 2002
|
|
|
Nov. 30, 2001
|
|
|
Aug. 31, 2001
|
|
|
May 31, 2001
|
|
|
Feb. 28, 2001
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| License revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
$ |
38,324 |
|
|
$ |
30,802 |
|
|
$ |
31,973 |
|
|
$ |
43,066 |
|
|
$ |
45,857 |
|
|
$ |
42,542 |
|
|
$ |
55,063 |
|
|
$ |
53,872 |
|
| Related parties |
|
|
3,508 |
|
|
|
3,841 |
|
|
|
3,800 |
|
|
|
3,800 |
|
|
|
4,717 |
|
|
|
5,049 |
|
|
|
5,266 |
|
|
|
4,391 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total license revenue |
|
|
41,832 |
|
|
|
34,643 |
|
|
|
35,773 |
|
|
|
46,866 |
|
|
|
50,574 |
|
|
|
47,591 |
|
|
|
60,329 |
|
|
|
58,263 |
|
| Services and maintenance revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
|
25,934 |
|
|
|
24,913 |
|
|
|
24,781 |
|
|
|
23,908 |
|
|
|
25,323 |
|
|
|
25,092 |
|
|
|
21,936 |
|
|
|
21,516 |
|
| Related parties |
|
|
2,932 |
|
|
|
3,014 |
|
|
|
3,112 |
|
|
|
3,259 |
|
|
|
2,347 |
|
|
|
2,536 |
|
|
|
1,421 |
|
|
|
2,323 |
|
| Billed expenses |
|
|
593 |
|
|
|
718 |
|
|
|
467 |
|
|
|
650 |
|
|
|
808 |
|
|
|
785 |
|
|
|
719 |
|
|
|
528 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total services and maintenance revenue |
|
|
29,459 |
|
|
|
28,645 |
|
|
|
28,360 |
|
|
|
27,817 |
|
|
|
28,478 |
|
|
|
28,413 |
|
|
|
24,076 |
|
|
|
24,367 |
|
| Total revenue |
|
|
71,291 |
|
|
|
63,288 |
|
|
|
64,133 |
|
|
|
74,683 |
|
|
|
79,052 |
|
|
|
76,004 |
|
|
|
84,405 |
|
|
|
82,630 |
|
| Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
97 |
|
|
|
108 |
|
|
|
169 |
|
|
|
153 |
|
|
|
175 |
|
|
|
191 |
|
|
|
235 |
|
|
|
376 |
|
| Other cost of revenue non-related parties |
|
|
14,172 |
|
|
|
13,887 |
|
|
|
15,664 |
|
|
|
14,552 |
|
|
|
15,395 |
|
|
|
14,689 |
|
|
|
15,813 |
|
|
|
17,835 |
|
| Other cost of revenue related parties |
|
|
225 |
|
|
|
51 |
|
|
|
1,408 |
|
|
|
1,003 |
|
|
|
1,049 |
|
|
|
1,129 |
|
|
|
371 |
|
|
|
388 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost of revenue |
|
|
14,494 |
|
|
|
14,046 |
|
|
|
17,241 |
|
|
|
15,708 |
|
|
|
16,619 |
|
|
|
16,009 |
|
|
|
16,419 |
|
|
|
18,599 |
|
| Gross profit |
|
|
56,797 |
|
|
|
49,242 |
|
|
|
46,892 |
|
|
|
58,974 |
|
|
|
62,433 |
|
|
|
59,995 |
|
|
|
67,986 |
|
|
|
64,031 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
235 |
|
|
|
296 |
|
|
|
336 |
|
|
|
451 |
|
|
|
2,914 |
|
|
|
2,044 |
|
|
|
2,577 |
|
|
|
4,574 |
|
| Other research and development |
|
|
18,724 |
|
|
|
17,788 |
|
|
|
18,206 |
|
|
|
16,308 |
|
|
|
19,039 |
|
|
|
19,111 |
|
|
|
20,387 |
|
|
|
20,341 |
|
| Sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
360 |
|
|
|
431 |
|
|
|
206 |
|
|
|
289 |
|
|
|
934 |
|
|
|
741 |
|
|
|
6,161 |
|
|
|
2,292 |
|
| Other sales and marketing |
|
|
29,274 |
|
|
|
31,773 |
|
|
|
34,398 |
|
|
|
31,022 |
|
|
|
33,887 |
|
|
|
32,247 |
|
|
|
37,668 |
|
|
|
33,016 |
|
| General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
|
26 |
|
|
|
237 |
|
|
|
76 |
|
|
|
579 |
|
|
|
114 |
|
|
|
204 |
|
|
|
3,001 |
|
|
|
432 |
|
| Other general and administrative |
|
|
5,063 |
|
|
|
5,329 |
|
|
|
6,217 |
|
|
|
4,796 |
|
|
|
4,456 |
|
|
|
4,833 |
|
|
|
5,977 |
|
|
|
7,533 |
|
| Acquired in-process research and development |
|
|
— |
|
|
|
— |
|
|
|
2,400 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Restructuring charges |
|
|
— |
|
|
|
19,692 |
|
|
|
29,645 |
|
|
|
— |
|
|
|
8,567 |
|
|
|
— |
|
|
|
12,630 |
|
|
|
— |
|
| Amortization of goodwill and acquired intangibles |
|
|
6,201 |
|
|
|
6,354 |
|
|
|
6,020 |
|
|
|
5,854 |
|
|
|
5,852 |
|
|
|
5,854 |
|
|
|
5,854 |
|
|
|
5,956 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
59,883 |
|
|
|
81,900 |
|
|
|
97,504 |
|
|
|
59,299 |
|
|
|
75,763 |
|
|
|
65,034 |
|
|
|
94,255 |
|
|
|
74,144 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(3,086 |
) |
|
|
(32,658 |
) |
|
|
(50,612 |
) |
|
|
(325 |
) |
|
|
(13,330 |
) |
|
|
(5,039 |
) |
|
|
(26,269 |
) |
|
|
(10,113 |
) |
| Interest and other income and (loss), net |
|
|
6,064 |
|
|
|
7,154 |
|
|
|
(5,122 |
) |
|
|
8,166 |
|
|
|
4,860 |
|
|
|
10,074 |
|
|
|
6,620 |
|
|
|
9,486 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) before income taxes |
|
|
2,978 |
|
|
|
(25,504 |
) |
|
|
(55,734 |
) |
|
|
7,841 |
|
|
|
(8,470 |
) |
|
|
5,035 |
|
|
|
(19,649 |
) |
|
|
(627 |
) |
| Provision for (benefit from) income taxes |
|
|
(389 |
) |
|
|
19,882 |
|
|
|
258 |
|
|
|
4,410 |
|
|
|
(2,871 |
) |
|
|
(5,492 |
) |
|
|
(1,881 |
) |
|
|
(225 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
3,367 |
|
|
$ |
(45,386 |
) |
|
$ |
(55,992 |
) |
|
$ |
3,431 |
|
|
$ |
(5,599 |
) |
|
$ |
10,527 |
|
|
$ |
(17,768 |
) |
|
$ |
(402 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
0.02 |
|
|
$ |
(0.22 |
) |
|
$ |
(0.27 |
) |
|
$ |
0.02 |
|
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
|
|
209,484 |
|
|
|
208,026 |
|
|
|
204,630 |
|
|
|
201,144 |
|
|
|
197,198 |
|
|
|
196,087 |
|
|
|
194,190 |
|
|
|
192,527 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted |
|
$ |
0.02 |
|
|
$ |
(0.22 |
) |
|
$ |
(0.27 |
) |
|
$ |
0.02 |
|
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
$ |
(0.09 |
) |
|
$ |
(0.00 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding |
|
|
217,504 |
|
|
|
208,026 |
|
|
|
204,630 |
|
|
|
217,520 |
|
|
|
197,198 |
|
|
|
211,595 |
|
|
|
194,190 |
|
|
|
192,527 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
TIBCO SOFTWARE INC.
QUARTERLY RESULTS OF OPERATIONS—(Continued)
(as a percentage of total revenue)
(unaudited)
| |
|
Three Months Ended Fiscal 2002
|
|
|
Three Months Ended Fiscal 2001
|
|
| |
|
Nov. 30, 2002
|
|
|
Aug. 31, 2002
|
|
|
May 31, 2002
|
|
|
Feb. 28, 2002
|
|
|
Nov. 30, 2001
|
|
|
Aug. 31, 2001
|
|
|
May 31, 2001
|
|
|
Feb. 28, 2001
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| License revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
54 |
% |
|
49 |
% |
|
50 |
% |
|
58 |
% |
|
58 |
% |
|
56 |
% |
|
65 |
% |
|
65 |
% |
| Related parties |
|
5 |
|
|
6 |
|
|
6 |
|
|
5 |
|
|
6 |
|
|
7 |
|
|
6 |
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total license revenue |
|
59 |
|
|
55 |
|
|
56 |
|
|
63 |
|
|
64 |
|
|
63 |
|
|
71 |
|
|
70 |
|
| Service and maintenance revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-related parties |
|
36 |
|
|
39 |
|
|
39 |
|
|
32 |
|
|
32 |
|
|
33 |
|
|
26 |
|
|
26 |
|
| Related parties |
|
4 |
|
|
5 |
|
|
5 |
|
|
4 |
|
|
3 |
|
|
3 |
|
|
2 |
|
|
3 |
|
| Billed expenses |
|
1 |
|
|
1 |
|
|
— |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total service and maintenance revenue |
|
41 |
|
|
45 |
|
|
44 |
|
|
37 |
|
|
36 |
|
|
37 |
|
|
29 |
|
|
30 |
|
| Total revenue |
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
|
100 |
|
| Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
| Other cost of revenue non-related parties |
|
20 |
|
|
22 |
|
|
24 |
|
|
20 |
|
|
19 |
|
|
18 |
|
|
18 |
|
|
21 |
|
| Other cost of revenue related parties |
|
— |
|
|
— |
|
|
2 |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
0 |
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total cost of revenue |
|
20 |
|
|
22 |
|
|
26 |
|
|
21 |
|
|
20 |
|
|
20 |
|
|
18 |
|
|
22 |
|
| Gross profit |
|
80 |
|
|
78 |
|
|
74 |
|
|
79 |
|
|
80 |
|
|
80 |
|
|
82 |
|
|
78 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
4 |
|
|
3 |
|
|
3 |
|
|
6 |
|
| Other research and development |
|
26 |
|
|
28 |
|
|
28 |
|
|
22 |
|
|
24 |
|
|
25 |
|
|
24 |
|
|
25 |
|
| Sales and marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
1 |
|
|
1 |
|
|
— |
|
|
— |
|
|
1 |
|
|
1 |
|
|
7 |
|
|
3 |
|
| Other sales and marketing |
|
41 |
|
|
50 |
|
|
55 |
|
|
41 |
|
|
44 |
|
|
44 |
|
|
45 |
|
|
39 |
|
| General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
0 |
|
|
0 |
|
|
4 |
|
|
1 |
|
| Other general and administrative |
|
7 |
|
|
9 |
|
|
10 |
|
|
6 |
|
|
6 |
|
|
6 |
|
|
7 |
|
|
9 |
|
| Restructuring charges |
|
— |
|
|
31 |
|
|
46 |
|
|
— |
|
|
11 |
|
|
— |
|
|
15 |
|
|
— |
|
| Acquired in-process research and development |
|
— |
|
|
— |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Amortization of goodwill and acquired intangibles |
|
9 |
|
|
10 |
|
|
9 |
|
|
8 |
|
|
7 |
|
|
8 |
|
|
7 |
|
|
7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
84 |
|
|
130 |
|
|
153 |
|
|
79 |
|
|
97 |
|
|
87 |
|
|
112 |
|
|
90 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
(4 |
) |
|
(52 |
) |
|
(79 |
) |
|
— |
|
|
(17 |
) |
|
(7 |
) |
|
(30 |
) |
|
(12 |
) |
| Interest and other income, net |
|
9 |
|
|
11 |
|
|
(8 |
) |
|
11 |
|
|
6 |
|
|
14 |
|
|
8 |
|
|
12 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) before income taxes |
|
5 |
|
|
(41 |
) |
|
(87 |
) |
|
11 |
|
|
(11 |
) |
|
7 |
|
|
(22 |
) |
|
— |
|
| Provision for (benefit from) income taxes |
|
(1 |
) |
|
31 |
|
|
— |
|
|
6 |
|
|
(4 |
) |
|
(7 |
) |
|
(2 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
6 |
% |
|
(72 |
)% |
|
(87 |
)% |
|
5 |
% |
|
(7 |
)% |
|
14 |
% |
|
(20 |
)% |
|
— |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on this 5th day
of February, 2003.
| TIBCO Software Inc. |
|
| By: |
|
/s/ CHRISTOPHER G.
O’MEARA
|
| |
|
Christopher G. O’Meara Executive Vice President, Finance and Chief Financial
Officer |
POWER OF ATTORNEY
KNOW
ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Vivek Y. Ranadive and Christopher G. O’Meara, and each of them, his or her attorneys-in-fact, each with full power of substitution, for
him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by
the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature
|
|
Title
|
|
Date
|
|
| /s/ VIVEK Y.
RANADIVE
Vivek Y. Ranadive |
|
President, Chief Executive Officer, Chairman of the Board and Director (Principal
Executive Officer) |
|
February 5, 2003 |
|
| /s/ CHRISTOPHER G.
O’MEARA
Christopher G. O’Meara |
|
Executive Vice President, Finance and Chief Financial Officer (Principal Financial
Officer) |
|
February 5, 2003 |
|
| /s/ GINGER M.
KELLY
Ginger M. Kelly |
|
Corporate Controller and Chief Accounting Officer (Chief Accounting
Officer) |
|
February 5, 2003 |
|
| /s/ PHILIP
GREEN
Philip Green |
|
Director |
|
February 5, 2003 |
|
| /s/ NAREN
GUPTA
Naren Gupta |
|
Director |
|
February 5, 2003 |
II-1
| Signature
|
|
Title
|
|
Date
|
|
| /s/ WILLIAM A.
OWENS
William A. Owens |
|
Director |
|
January 21, 2003 |
|
| /s/ MATTHEW J.
SZULIK
Matthew J.
Szulik |
|
Director |
|
January 24, 2003 |
|
| /s/ MICHELANGELO
VOLPI
Michelangelo Volpi |
|
Director |
|
February 5, 2003 |
II-2
TIBCO SOFTWARE INC.
CERTIFICATIONS
I, Vivek Y. Ranadivé, certify that:
1. I have reviewed this annual report
on Form 10-K of TIBCO Software Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| |
(a) |
|
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within these entities, particularly during the period in which this annual report is being prepared; |
| |
(b) |
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the “Evaluation Date”); and |
| |
(c) |
|
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
|
5. The
registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
| |
(a) |
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| |
(b) |
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant ‘s internal controls; and
|
6. The
registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 5, 2003
| By: |
|
/s/ VIVEK Y.
RANADIVÉ
|
| Name: |
|
Vivek Y. Ranadivé |
| Title: |
|
President, Chief Executive Officer and Chairman of the Board |
TIBCO SOFTWARE INC.
I, Christopher G. O’Meara, certify that:
1. I have reviewed this annual report
on Form 10-K of TIBCO Software Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
| |
(a) |
|
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within these entities, particularly during the period in which this annual report is being prepared; |
| |
(b) |
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report
(the “Evaluation Date”); and |
| |
(c) |
|
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
|
5. The
registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
| |
(a) |
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| |
(b) |
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant ‘s internal controls; and
|
6. The
registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: February 5, 2003
| By: |
|
/s/ CHRISTOPHER G.
O’MEARA
|
| Name: |
|
Christopher G. O’Meara |
| Title: |
|
Executive Vice President, Finance and Chief Financial Officer |
EXHIBIT INDEX
| Exhibit No.
|
|
Exhibits
|
| *3.1 |
|
Certificate of Incorporation of Registrant. |
| **3.2 |
|
Bylaws of Registrant. |
| **4.1 |
|
Form of Registrant’s Common Stock certificate. |
| **10.1 |
|
Form of Indemnification Agreement. |
| **10.2 |
|
First Amended and Restated License, Maintenance and Distribution Agreement dated May 28, 1999 among Reuters Limited, TIBCO Finance Technology, Inc. and
Registrant. |
| +10.3 |
|
Third Amended and Restated Stockholders Agreement, among Reuters Nederland B.V., Reuters Limited, Cisco Systems, Inc., Mayfield IX, Mayfield Associated Fund
III, Vivek Ranadive and Registrant. |
| +10.4 |
|
1996 Stock Plan, as amended. |
| ++10.5 |
|
1998 Director Option Plan, as amended. |
| +10.6 |
|
Assignment and Assumption of Lease Agreement between TIBCO Finance Technology, Inc. and Registrant. |
| +10.7 |
|
Employment Agreement between Registrant and Vivek Y. Ranadive. |
| +10.8 |
|
Employment Agreement between Registrant and Robert P. Stefanski. |
| **10.12 |
|
Industrial Lease Agreement dated December 14, 1995 between Porter Drive Associated LLC and TIBCO Finance Technology, Inc. (formerly known as Teknekron
Software Systems (Delaware), Inc.). |
| ++10.13 |
|
Lease Agreement dated September 24, 1999 between The Board of Trustees of the Leland Stanford Junior University and the Registrant. |
| ++10.14 |
|
Lease Agreement dated January 21, 2000 between Spier Properties, L.P. and the Registrant. |
| ***10.15 |
|
Addendum to the First Amended and Restated License, Maintenance and Distribution Agreement effective as of June 2, 2001, among Reuters Limited, TIBCO Finance
Technology, Inc. and Registrant. |
| 10.16 |
|
Letter of Extension of Addendum to the First Amended and Restated License, Maintenance and Distribution Agreement effective as of June 2, 2001, among Reuters
Limited, TIBCO Finance Technology, Inc. and Registrant. |
| +++10.17 |
|
Extensibility Inc. 2000 Stock Option Plan. |
| ****10.18 |
|
Talarian Corporation 2000 Equity Incentive Plan. |
| ****10.19 |
|
Talarian Corporation 1998 Equity Incentive Plan. |
| ****10.20 |
|
Talarian Corporation 1991 Stock Option Plan. |
| ****10.21 |
|
White Barn, Inc. Stock Option Plan. |
| ****10.22 |
|
White Barn, Inc. 2000 Equity Incentive Plan. |
| 21.1 |
|
List of subsidiaries. |
| 23.2 |
|
Consent of PricewaterhouseCoopers LLP, Independent Accountants. |
| 24.1 |
|
Power of Attorney (included on signature page). |
| 99.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
| 99.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
* |
|
These exhibits are incorporated by reference to exhibits similarly numbered in the Registrant’s Registration Statement File No. 333-83491.
|
** |
|
These exhibits are incorporated by reference to exhibits similarly numbered in the Registrant’s Registration Statement File No. 333-78195.
|
+ |
|
These exhibits are incorporated by reference to exhibits similarly numbered in the Registrant’s Registration Statement File No. 333-31358.
|
++ |
|
These exhibits are incorporated by reference to exhibits similarly numbered in the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on
April 17, 2000. |
*** |
|
This exhibit is incorporated by reference to exhibits similarly numbered in the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on
October 5, 2001. |
+++ |
|
This exhibit is incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 File No. 333-48260.
|
**** |
|
These exhibits are incorporated by reference to exhibits filed with the Registrant’s Registration Statement on Form S-8 File No. 333-88730.
|