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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ________
COMMISSION FILE NUMBER 000-24677
BINDVIEW DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 76-0306721
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5151 SAN FELIPE, 25th FLOOR, HOUSTON, TX 77056
(Address of principal executive offices) (Zip code)
(713) 561-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of November 12, 2002, the Company had 46,272,182 shares of Common Stock, no
par value, outstanding.
===============================================================================
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2002 2001
-------------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 38,256 $ 39,791
Short-term investments - 3,253
Accounts receivable, net of allowance of $1,237 and $1,097 9,331 10,344
Other 2,135 1,180
----------- --------
Total current assets 49,722 54,568
Property and equipment, net 8,389 9,221
Deferred income taxes - 19,562
Other 4,768 4,770
----------- --------
Total assets $ 62,879 $ 88,121
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,536 $ 1,763
Accrued liabilities 5,836 4,954
Accrued compensation 3,326 4,051
Deferred revenues 11,828 10,350
----------- --------
Total current liabilities 23,526 21,118
Deferred revenues 2,031 2,618
Other liabilities 122 576
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, 100,000 shares authorized,
51,969 and 54,375 shares issued 1 1
Additional paid-in capital 109,707 121,884
Accumulated deficit (69,796) (43,965)
Accumulated other comprehensive loss (86) (185)
Less - notes receivable from shareholders (862) (1,188)
Less - 1,886 and 2,998 shares of common stock held in
treasury, at cost (1,764) (12,738)
----------- --------
Total shareholders' equity 37,200 63,809
----------- --------
Total liabilities and shareholders' equity $ 62,879 $ 88,121
=========== ========
See notes to unaudited consolidated financial statements.
2
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- --------------------------
2002 2001 2002 2001
-------------- -------------- -------------- -----------
Revenues:
Licenses $ 8,455 $ 9,749 $ 25,620 $ 29,798
Services 7,489 6,914 22,132 21,400
--------- -------- -------- --------
15,944 16,663 47,752 51,198
--------- -------- -------- --------
Cost of revenues:
Licenses 137 207 387 843
Services 1,439 1,530 4,367 4,950
--------- -------- -------- --------
1,576 1,737 4,754 5,793
--------- -------- -------- --------
Gross profit 14,368 14,926 42,998 45,405
Operating costs and expenses:
Sales and marketing 8,732 11,371 28,608 39,165
Research and development 4,951 5,623 14,920 17,527
General and administrative 1,950 3,783 5,768 12,307
Asset impairment 276 1,979 276 1,979
Restructuring 1,608 6,000 1,608 6,594
--------- -------- -------- --------
Operating loss (3,149) (13,830) (8,182) (32,167)
Other income (loss), net 208 (4,525) 1,913 (3,176)
--------- -------- -------- --------
Loss before income taxes (2,941) (18,355) (6,269) (35,343)
Provision (benefit) for income taxes - (5,507) 19,562 (10,506)
--------- -------- -------- --------
Net loss $ (2,941) $(12,848) $ (25,831) $ (24,837)
========== ========= ========== ==========
Loss per common share - basic and
diluted $ (0.06) $ (0.25) $ (0.50) $ (0.48)
========== ========= ========== ==========
Reconciliation of net loss to comprehensive loss:
Net loss $ (2,941) $ (12,848) $ (25,831) $ (24,837)
Gain from currency translation 125 287 99 344
--------- -------- -------- --------
Comprehensive loss $ (2,816) $(12,561) $ (25,732) $ (24,493)
========== ========= ========== ==========
See notes to unaudited consolidated financial statements.
3
BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2002 2001
---------- -----------
Cash flows from operating activities:
Net loss $ (25,831) $ (24,837)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,362 4,294
Bad debt expense - 3,012
Asset impairment 276 8,148
Deferred income tax expense (benefit) 19,562 (10,506)
Other 48 123
Changes in operating assets and liabilities:
Accounts receivable 870 11,336
Other assets (912) 62
Accounts payable 565 (2,717)
Accrued liabilities (248) 6,370
Deferred revenues 803 (633)
--------- ---------
Net cash used in operating activities (1,505) (5,348)
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,643) (2,308)
Net proceeds from maturity (purchase) of investments 3,253 (295)
Other 40 --
--------- ---------
Net cash provided by (used in) investing activities 650 (2,603)
--------- ---------
Cash flows from financing activities:
Restriction on cash under letter of credit -- (4,500)
Repurchase of common stock (1,765) (7,414)
Net proceeds from sale of common stock 561 1,756
--------- ---------
Net cash used in financing activities (1,204) (10,158)
Effect of exchange rate changes on cash 524 332
--------- ---------
Net decrease in cash and cash equivalents (1,535) (17,777)
Cash and cash equivalents at beginning of year 39,791 49,337
--------- ---------
Cash and cash equivalents at end of period $ 38,256 $ 31,560
========= =========
Non-cash financing and investing activities:
Reduction of shareholder note in lieu of guaranteed bonus $ 326 $ --
Note receivable from shareholder in exchange for $ -- $ 1,044
400,000 shares of common stock
See notes to unaudited consolidated financial statements.
4
BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying consolidated financial statements of BindView
Development Corporation, a Texas corporation (the "Company" or "BindView"),
included herein have been prepared without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been omitted.
The Company believes that the presentations and disclosures herein are adequate
to make the information not misleading. The consolidated financial statements
reflect all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation of the interim periods. Certain accounts in the
consolidated financial statements for 2001, as previously presented, have been
reclassified to conform with current year classifications.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year. These
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements included in its Annual
Report on Form 10-K for the year ended December 31, 2001.
2. LOSS PER SHARE
The following table sets forth the computation of basic and diluted
loss per share (in thousands, except per share amounts):
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ----------------------------
2002 2001 2002 2001
-------------- ------------- ------------- ------------
Numerator:
Net loss - numerator for
loss per share - basic and
diluted $ (2,941) $(12,848) $(25,831) $(24,837)
========= ========= ========= ========
Denominator:
Denominator for basic loss per
share - weighted-average shares 51,050 51,097 51,314 51,532
Effect of dilutive securities -- -- -- --
-------- -------- -------- --------
Total diluted shares 51,050 51,097 51,314 51,532
======== ======== ======== ========
Loss per common share - basic and
diluted $ (0.06) $ (0.25) $ (0.50) $ (0.48)
======== ========= ======== ========
Options and warrants to purchase 8.7 million shares of common stock for
the three and nine months ended September 30, 2002 and 10.9 million shares of
common stock for the three and nine months ended September 30, 2001 were
outstanding, but were not included in the computation of diluted loss per share
as their inclusion would have been anti-dilutive.
3. RESTRUCTURING EXPENSES AND ASSET IMPAIRMENTS
In 2001, the Company completed a corporate reorganization and
implemented a number of cost-cutting measures to improve operating efficiency
and to accelerate the Company's return to profitability (the "2001
Restructuring"). The cost of this plan totaled approximately $6.6 million and
consisted primarily of (i) involuntary employee separation for approximately 160
employees (a reduction in workforce of approximately 21 percent), (ii)
5
BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
closing or downsizing of the Company's Boston and Arlington development centers
and certain European sales offices, (iii) reserves for leasehold abandonment
(net of expected sublease rentals of approximately $3.0 million), and (iv)
various non-personnel related cuts. The restructuring costs included a $1.2
million charge related to asset impairments of leasehold improvements, equipment
and other assets of the closed or downsized offices. The estimated costs of the
plan were based on information available at the time. Subsequent to recording
the charge, the cost of employee severances increased for certain foreign
employees and the Company's estimate of sublease rentals for certain leased
property increased resulting in a reduction to the Company's lease commitment
obligations, which is reflected below in the Adjustments column.
The 2001 Restructuring expenses and remaining accrual at September 30,
2002 follow (in thousands):
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES ADJUSTMENTS EXPENDITURES WRITE-OFFS SEPTEMBER 30, 2002
------------- ------------ ------------ ---------- ------------------
Employee severance ...... $ 2,791 $ 792 $(3,583) $ -- $ --
Lease commitments ....... 2,182 (985) (915) -- 282
Office closure costs .... 111 (22) (89) -- --
Asset impairments ....... 1,169 -- -- (1,169) --
Other restructuring costs 341 215 (513) -- 43
------- ------- ------- ------- -------
$ 6,594 $ -- $(5,100) $(1,169) $ 325
======= ======= ======= ======= =======
In July 2002, the Company approved a restructuring plan to improve
operating efficiency and sales and marketing productivity (the "2002
Restructuring"). The cost of this plan totaled approximately $1.6 million and
consisted primarily of (i) involuntary employee separation for approximately 30
employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Company's Boston development center and certain European sales offices,
(iii) reserves for leasehold abandonment (net of expected sublease rentals of
approximately $0.6 million), and (iv) various non-personnel related cuts.
The 2002 Restructuring expenses and remaining accrual at September 30,
2002 follow (in thousands):
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES EXPENDITURES SEPTEMBER 30, 2002
------------- ------------ ------------------
Employee severance ........ $ 711 $ (170) $ 541
Lease commitments ......... 842 (117) 725
Other restructuring costs.. 55 (27) 28
------- ------- -------
$ 1,608 $ (314) $ 1,294
======= ======= =======
In connection with the July 2002 restructuring plan, the Company
determined that certain leasehold improvements related to the downsized or
closed offices were impaired as of September 30, 2002 and recognized an asset
impairment of $0.3 million.
4. INCOME TAXES
The Company follows the liability method of accounting for income
taxes. Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial statement and income tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
6
BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In the second quarter of 2002, the Company made an assessment of
realization of its deferred tax assets and concluded that a full valuation
allowance of $19.8 million was appropriate at June 30, 2002. As in its prior
assessments, the Company considered its current and previous performance and
other relevant factors in determining the sufficiency of its valuation
allowance. Objective factors, such as current and previous operating losses,
were given substantially more weight than management's outlook for future
profitability. Management remains optimistic about the future prospects of the
Company's business and the industry and continues to believe that over time, as
the market improves, the Company should generate sufficient taxable income to
utilize a substantial portion of its net operating loss carryforwards. Until
such time as a consistent pattern of sufficient profitability is established, no
tax benefit will be recognized associated with the Company's pre-tax accounting
losses and a full income tax provision will not be provided on any future
pre-tax accounting income.
At September 30, 2002, the Company had net operating loss ("NOL")
carryforwards of approximately $64 million available to offset future taxable
income. These NOL carryforwards expire between 2003 and 2021.
5. SHAREHOLDERS' EQUITY
Under terms of a share repurchase program approved by the Board of
Directors, the Company purchased approximately 1.9 million shares of common
stock during the nine months ended September 30, 2002, at an average price per
share of $0.94. In February 2002, the Company retired all of the 3.0 million
shares of common stock held in treasury as of December 31, 2001.
6. RECENT PRONOUNCEMENTS
In June 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement requires recording
costs associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan, which is generally before
an actual liability has been incurred. Adoption of this Statement is required
with the beginning of fiscal year 2003. This statement will impact the timing of
exit or disposal activities reported by the Company after adoption.
7. SUBSEQUENT EVENTS
The Company has been notified by NASDAQ that its stock has traded below
the minimum $1 bid per share requirement for 30 consecutive trading days and
that the Company has until January 14, 2003 to regain compliance with this
listing requirement. At that time, the Company can appeal the determination to a
Listing Qualifications Panel, in accordance with NASDAQ's rules. The Company is
considering possible actions to be implemented if its closing bid price does not
meet the NASDAQ National Market minimum bid price requirement within the 90-day
initial period. Among the actions under consideration would be to transfer the
Company's common stock to the NASDAQ SmallCap Market, which would provide the
Company an additional 270 days to satisfy the minimum $1 bid price requirement
and would make it eligible for transfer back to the NASDAQ National Market
during that period.
From October 1, 2002 through November 8, 2002, the Company purchased 3.8
million shares of its common stock for $3.6 million, an average price per share
of $0.95. This includes 2.5 million shares that were purchased from General
Atlantic Partners, LLC, a private equity investment firm and a pre-IPO investor
in BindView.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations contain forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include those discussed in the "Risk Factors" set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001, as
well as other factors such as, for example: the risks associated with lower
customer demand in a weak economy; increased competition within the network
management software industry; the effects of recently-implemented cost
reductions on the Company's business; transitional inefficiencies that may arise
during the Company's implementation of recently-announced reorganization plans;
and the management challenges of implementing those plans while attempting to
maintain employee motivation and effectiveness. The following discussion should
be read in conjunction with the Company's Consolidated Financial Statements.
OVERVIEW
BindView Development Corporation ("BindView" or the "Company") delivers
proactive network security-management software and services to help secure,
automate and lower the costs of managing information technology infrastructures.
Our software helps safeguard our customers' computer networks from the inside
out, working to protect those networks from both internal and external threats,
while also helping to lower our customers' overall cost of ownership through
automation of numerous administrative tasks and security reporting requirements.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the Company's Consolidated
Financial Statements and Notes thereto. Actual results could differ from those
estimates. BindView believes the following critical accounting policies affect
its more significant estimates and assumptions used in the preparation of its
Consolidated Financial Statements and Notes thereto.
Revenue Recognition
We generate the large majority of our revenue from licenses of our
software. We also generate revenue from sales of maintenance service agreements
and, to a lesser extent, consulting and training services. Our service revenue
has increased in recent periods as the size of our installed base has grown. Our
customers typically purchase one year of maintenance with their initial license
of our products.
We sell our products principally through both our direct sales force,
which includes our direct sales and telesales personnel, as well as through
indirect channels, such as distributors, value-added resellers ("VARs") and
original equipment manufacturers ("OEMs").
We follow Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2") and Statement of Position 98-9, "Modification of SOP 97-2, Software
Revenue Recognition with respect to certain transactions" ("SOP 98-9"), in
accounting for revenues. We primarily license our software products under
perpetual licenses. Revenues are recognized under these arrangements once the
following criteria are met: (i) a written purchase order, license agreement or
contract has been executed; (ii) software, or software license authorization
code in situations where the customer previously received evaluation software,
has been delivered to the customer; (iii) license agreements with no significant
vendor obligations or customer acceptance rights outstanding have been issued to
the customer; (iv) the license fee is fixed and determinable and collection of
the fee is probable; and (v) vendor-specific objective evidence exists to
allocate the total fee. Vendor-specific objective evidence is based on the price
generally charged when an element is sold separately. In situations where
vendor-specific objective evidence does not exist, and all other revenue
recognition criteria have been met, revenue is recognized ratably over the life
of the agreement. If installation is essential to the functionality of the
software, revenue is deferred until completion of the installation.
Revenues from maintenance contracts and other related services are
reported as service revenue. Customers are generally required to purchase a
one-year maintenance agreement in conjunction with their initial licensing of
8
the Company's software products and may elect to purchase up to three years of
maintenance. Maintenance revenues are recognized ratably over the contract term.
The portion of maintenance contract revenues that have not yet been recognized
as revenues is reported as deferred revenue in the accompanying Consolidated
Balance Sheets. Deferred maintenance revenue, which has not been collected is
not recognized. In addition to deferred maintenance, deferred revenues also
include services which have been billed but not performed or license contracts
for which the aforementioned revenue recognition criteria have not been met.
Sales made through distributors, VARs, and OEMs are recognized upon
execution of a written purchase order, license agreement or contract with either
the reseller or end user and after all revenue recognition criteria previously
noted have been met. We perform ongoing credit evaluations and assessments of
the financial viability of our customers, including distributors, VARs and OEMs,
in determining whether or not revenue recognition is appropriate.
Stock Options
We follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for our employee stock options, which
generally provides that no compensation expense is recognized when options are
granted with an exercise price equal to fair market value on the date of the
grant.
Income Taxes
We follow the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are determined based on
differences between the financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances may also be provided
based upon subjective evaluations of facts, circumstances and expectations,
which may change over the course of time and may result in significant changes
in our tax provision.
Accounts Receivable and Provision for Doubtful Accounts
We provide an allowance for doubtful accounts when collection is
considered doubtful. We perform ongoing credit evaluations of our customers,
review our collection efforts and analyze our payment experience with specific
customers in order to determine whether or not collection is doubtful. There may
be a significant fluctuation in our provision for doubtful accounts to the
extent that our subjective evaluation of the facts, circumstances and
expectations change.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUES. Revenues for the current quarter decreased 4.3 percent to
$15.9 million, from $16.7 million for the third quarter of 2001. The decline in
revenues was the result of a decrease in license revenues of 13 percent to $8.5
million, down from $9.7 million for the third quarter of 2001. This decline was
primarily due to lower licenses revenues from the Company's products for
Novell-based platforms and lower license revenues in Europe and Latin America.
During the quarter, service revenues increased 8.3 percent to $7.5 million, from
$6.9 million for the third quarter of 2001, primarily as a result of an increase
in professional service revenues during the current quarter.
License revenues from our North American operations totaled $7.9
million, or approximately 93 percent of total license revenues in the third
quarter of 2002, down from $9.0 million, or approximately 92 percent of total
license revenues in the third quarter of 2001. License revenues from our
European operations were approximately $0.6 million, down from $0.7 million in
the third quarter of 2001.
During the quarter, revenues from the Company's products for
Microsoft-based platforms were $11.0 million, an increase of 14 percent over the
third quarter of 2001. Revenues from these products accounted for approximately
69 percent of total revenues, up from 58 percent of total revenues for the same
period last year. Revenues from the Company's products for Novell-based
platforms for the current quarter were $3.4 million, a decline of 37 percent
from the third quarter of 2001, and accounted for 21 percent of total revenues,
down from 32 percent in the third quarter of 2001.
9
Revenues from these products have been declining over the past few quarters,
reflecting both the maturity and our penetration of the Novell market. While we
expect our Novell revenues will continue to decline in the future, the rate of
decline should be modest over the next few quarters and we expect the decline
will be offset by revenue growth from our other product platforms.
GROSS PROFIT. Gross profit for the current quarter totaled $14.4
million, which was down from $14.9 million in the third quarter of 2001. The
decrease in gross profit related to the decline in license revenues. Gross
margin for the current quarter was 90.1 percent compared with 89.6 percent in
the third quarter of 2001. The expansion in gross margin reflected the
improvement in operating leverage in our technical support and professional
services units as a result of our restructuring initiatives.
OPERATING COSTS AND EXPENSES. Operating costs and expenses for the
current quarter totaled $17.5 million, down from $28.8 million for the third
quarter of 2001. The improvement was primarily the result of the Company's
reorganization and restructuring initiatives to improve operating efficiency.
Sales and marketing expenses for the current quarter decreased 23.2
percent to $8.7 million, from $11.3 million for the third quarter of 2001,
primarily related to our actions taken to improve sales efficiency and marketing
effectiveness. These actions included a rationalization of our sales force and
marketing programs relative to the market opportunity. As a result, we closed or
downsized a number of our foreign sales offices, reduced the size of our
enterprise sales force, which were focused exclusively on large enterprise
transactions and redirected our marketing efforts to primarily focus on
enhancing our product marketing capabilities and improving our sales opportunity
generation capabilities. We expect sales and marketing expenses as a percentage
of revenues to be lower in 2003 as a result of our initiatives to improve
operating leverage and sales and marketing effectiveness.
Research and development expenses for the current quarter decreased
12.0 percent to $5.0 million, from $5.6 million for the third quarter of 2001.
This decrease primarily related to the closing or downsizing of the Company's
development offices in Boston, Massachusetts and Arlington, Virginia and moving
those activities into our lower-cost development centers in Houston, Texas and
Pune, India. We have also transferred development responsibilities for certain
of our legacy products from Houston to Pune, India and expect to continue
leveraging that development center in the future. We expect future research and
development expenses to decrease as a percentage of revenues as a result of our
prior and current restructuring initiatives as well as our anticipated growth in
future revenues.
General and administrative expenses for the current quarter decreased
48.5 percent to $2.0 million, from $3.8 million for the third quarter of 2001.
This decrease primarily related to the reduction in administrative expenses
related to our restructuring initiatives and higher provisions for consulting
fees, sales tax accruals and bad debts in the third quarter of 2001. We expect
future general and administrative expenses to decrease as a percentage of
revenues as a result of restructuring initiatives to improve operating
efficiencies as well as our anticipated growth in future revenues.
In 2001, the Company completed a corporate reorganization and
implemented a number of cost-cutting measures to improve operating efficiency
and to accelerate the Company's return to profitability (the "2001
Restructuring"). The cost of this plan totaled approximately $6.6 million, of
which $0.6 million was incurred in the first quarter of 2001 and $6.0 million
was incurred in the third quarter of 2001, and consisted primarily of (i)
involuntary employee separation for approximately 160 employees (a reduction in
workforce of approximately 21 percent), (ii) closing or downsizing of the
Company's Boston and Arlington development centers and certain European sales
offices, (iii) reserves for leasehold abandonment (net of expected sublease
rentals of approximately $3.0 million), and (iv) various non-personnel related
cuts. The restructuring costs included a $1.2 million charge related to asset
impairments of leasehold improvements, equipment and other assets of the closed
or downsized offices. The estimated costs of the plan were based on information
available at the time. Subsequent to recording the charge, the cost of employee
severances increased for certain foreign employees and the Company's estimate of
sublease rentals for certain leased property increased resulting in a reduction
in the Company's lease commitment obligation, which is reflected below in the
Adjustments column.
The 2001 Restructuring expenses and amounts charged against the
provision as of September 30, 2002 were as follows (in thousands):
10
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES ADJUSTMENTS EXPENDITURES WRITE-OFFS SEPTEMBER 30, 2002
------------- ----------- ------------ ---------- ------------------
Employee severance ...... $ 2,791 $ 792 $(3,583) $ -- $ --
Lease commitments ....... 2,182 (985) (915) -- 282
Office closure costs .... 111 (22) (89) -- --
Asset impairments ....... 1,169 -- -- (1,169) --
Other restructuring costs 341 215 (513) -- 43
------- ------- ------- ------- -------
$ 6,594 $ -- $(5,100) $(1,169) $ 325
======= ======= ======= ======= =======
In July 2002, the Company approved a restructuring plan to improve
operating efficiency and improve sales and marketing productivity (the "2002
Restructuring"). The cost of this plan totaled approximately $1.6 million and
consisted primarily of (i) involuntary employee separation for approximately 30
employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Company's Boston development center and certain European sales offices,
(iii) reserves for leasehold abandonment (net of expected sublease rentals of
approximately $0.6 million), and (iv) various non-personnel related cuts.
The 2002 Restructuring expenses and amounts charged against the
provision as of September 30, 2002 were as follows (in thousands):
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES EXPENDITURES SEPTEMBER 30, 2002
------------- ------------ ------------------
Employee severance ........ $ 711 $ (170) $ 541
Lease commitments ......... 842 (117) 725
Other restructuring costs.. 55 (27) 28
------- ------- -------
$ 1,608 $ (314) $ 1,294
======= ======= =======
In connection with the July 2002 restructuring plan, we also determined
that certain leasehold improvements related to the downsized or closed offices
were impaired as of September 30, 2002 and recognized an asset impairment of
$0.3 million.
OTHER INCOME (LOSS). Other income (loss) totaled $0.2 million and
$(4.5) million for the three months ended September 30, 2002 and 2001,
respectively. The increase in other income was the result of a non-recurring
(non-cash) impairment recorded during the third quarter of 2001 of a $5.0
million equity investment made by the Company in a UK-based software
distribution and consulting firm.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company provided a full
valuation allowance against its deferred tax assets of $19.8 million during the
second quarter of 2002. Until such time as a consistent pattern of sufficient
profitability is established, no tax benefit will be recognized associated with
the Company's pre-tax accounting losses and a full income tax provision will not
be provided on any future pre-tax accounting income. The benefit for income
taxes was $5.5 million (an effective tax rate of 30.0 percent) for the third
quarter of 2001.
NET LOSS. Due to the factors described above, net loss for the quarter
ended September 30, 2002 was $2.9 million compared with $12.8 million for the
quarter ended September 30, 2001.
OUTLOOK. The Company expects revenues for the fourth quarter of 2002 to
range between $18.0 million and $19.5 million. At these revenue levels, the
Company expects to generate positive operating income and cash flows and net
income to range between $0.7 million, or $0.01 per share, and $1.8 million, or
$0.04 per share. The Company's ability to achieve or exceed these estimates will
depend on the expected increase in IT security spending and continued
improvement in the Company's sales execution and marketing effectiveness.
11
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUES. Revenues for the first nine months of 2002 decreased 6.7
percent to $47.8 million, from $51.2 million for the first nine months of 2001.
The decline in revenues was primarily the result of a decrease in license
revenues of 14.0 percent to $25.6 million, from $29.8 million for the first nine
months of 2001. This decline was primarily due to lower licenses revenues from
the Company's products for Novell-based platforms and lower license revenues in
Europe and Latin America. Service revenues increased slightly to $22.1 million,
from $21.4 million for the first nine months of 2001.
License revenues from our North American operations totaled $23.6
million, or approximately 92 percent of total license revenues for the first
nine months of 2002, down from $26.2 million, or approximately 88 percent of
total license revenues for the first nine months of 2001. License revenues from
our European operations were approximately $2.0 million for the first nine
months of 2002, down from $3.6 million in the first nine months of 2001.
During the first nine months of 2002, revenues from the Company's
products for Microsoft-based platforms were $31.1 million, an increase of 7
percent from the same period last year. Revenues from these products accounted
for approximately 65 percent of total revenues, up from 57 percent of total
revenues for the same period last year. Revenues from the Company's products for
Novell-based platforms for the first nine months of 2002 were $10.9 million, a
decline of 33 percent from the same period last year, and accounted for 23
percent of total revenues, down from 32 percent of total revenues for the same
period last year. Revenues from these products have been declining over the past
few quarters, reflecting both the maturity and our penetration of the Novell
market. While we expect our Novell revenues will continue to decline in the
future, the rate of decline should be modest over the next few quarters and we
expect the decline will be offset by revenue growth from our other product
platforms.
GROSS PROFIT. Gross profit for the first nine months of 2002 totaled
$43.0 million, which was down from $45.4 million in the first nine months of
2001 as a result of the decline in license revenues. Gross margin for the first
nine months was 90.0 percent compared with 88.7 percent in the first nine months
of 2001. The expansion in gross margin reflected the improvement in operating
leverage in our technical support and professional services units as a result of
our restructuring initiatives.
OPERATING COSTS AND EXPENSES. Operating costs and expenses for the
first nine months of 2002 totaled $51.2 million, down from $77.6 million for the
first nine months of 2001. The improvement was primarily the result of the
Company's reorganization and restructuring initiatives to improve operating
efficiency.
Sales and marketing expenses for the first nine months of 2002
decreased 27.0 percent to $28.6 million, from $39.1 million for the first nine
months of 2001, primarily related to our actions taken to improve sales
efficiency and marketing effectiveness. These actions included a rationalization
of our sales force and marketing programs relative to the market opportunity. As
a result, we closed or downsized a number of our foreign sales offices, reduced
the size of our enterprise sales force, which were focused exclusively on large
enterprise transactions and redirected our marketing efforts to primarily focus
on enhancing our product marketing capabilities and improving our sales
opportunity generation capabilities. We expect sales and marketing expenses as a
percentage of revenues to be lower in 2003 as a result of our initiatives to
improve operating leverage and sales and marketing effectiveness.
Research and development expenses for the first nine months of 2002
decreased 14.9 percent to $14.9 million, from $17.5 million for the first nine
months of 2001. This decrease primarily related to the closing or downsizing of
the Company's development offices in Boston, Massachusetts and Arlington,
Virginia and moving those activities into our lower-cost development centers in
Houston, Texas and Pune, India. We have also transferred development
responsibilities for certain of our legacy products from Houston to Pune, India
and expect to continue leveraging that development center in the future. We
expect future research and development expenses to decrease as a percentage of
revenues as a result of these restructuring initiatives as well as our
anticipated growth in future revenues.
12
General and administrative expenses for the first nine months of 2002
decreased 53.1 percent to $5.8 million, from $12.3 million for the first nine
months of 2001. This decrease primarily related to the reduction in
administrative expenses related to our restructuring initiatives and higher
provisions for consulting fees, sales tax accruals and bad debts during the
first nine months of 2001. We expect future general and administrative expenses
to decrease as a percentage of revenues as a result of restructuring initiatives
to improve operating efficiencies as well as our anticipated growth in future
revenues.
In 2001, the Company completed a corporate reorganization and
implemented a number of cost-cutting measures to improve operating efficiency
and to accelerate the Company's return to profitability (the "2001
Restructuring"). The cost of this plan totaled approximately $6.6 million, of
which $0.6 million was incurred in the first quarter of 2001 and $6.0 million
was incurred in the third quarter of 2001, and consisted primarily of (i)
involuntary employee separation for approximately 160 employees (a reduction in
workforce of approximately 21 percent), (ii) closing or downsizing of the
Company's Boston and Arlington development centers and certain European sales
offices, (iii) reserves for leasehold abandonment (net of expected sublease
rentals of approximately $3.0 million), and (iv) various non-personnel related
cuts. The restructuring costs included a $1.2 million charge related to asset
impairments of leasehold improvements, equipment and other assets of the closed
or downsized offices. The estimated costs of the plan were based on information
available at the time. Subsequent to recording the charge, the cost of employee
severances increased for certain foreign employees and the Company's estimate of
sublease rentals for certain leased property increased resulting in a reduction
in the Company's lease commitment obligation, which is reflected below in the
Adjustments column.
The 2001 Restructuring expenses and amounts charged against the
provision as of September 30, 2002 were as follows (in thousands):
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES ADJUSTMENTS EXPENDITURES WRITE-OFFS SEPTEMBER 30, 2002
------- ----------- ------------ ---------- ------------------
Employee severance ...... $ 2,791 $ 792 $(3,583) $ -- $ --
Lease commitments ....... 2,182 (985) (915) -- 282
Office closure costs .... 111 (22) (89) -- --
Asset impairments ....... 1,169 -- -- (1,169) --
Other restructuring costs 341 215 (513) -- 43
------- ------- ------- ------- -------
$ 6,594 $ -- $(5,100) $(1,169) $ 325
======= ======= ======= ======= =======
In July 2002, the Company approved a restructuring plan to improve
operating efficiency and improve sales and marketing productivity (the "2002
Restructuring"). The cost of this plan totaled approximately $1.6 million and
consisted primarily of (i) involuntary employee separation for approximately 30
employees (a reduction in workforce of approximately 5 percent), (ii) closing
the Company's Boston development center and certain European sales offices,
(iii) reserves for leasehold abandonment (net of expected sublease rentals of
approximately $0.6 million), and (iv) various non-personnel related cuts.
The 2002 Restructuring expenses and amounts charged against the
provision as of September 30, 2002 were as follows (in thousands):
RESTRUCTURING CASH REMAINING ACCRUAL
CHARGES EXPENDITURES SEPTEMBER 30, 2002
------------- ------------ ------------------
Employee severance ........ $ 711 $ (170) $ 541
Lease commitments ......... 842 (117) 725
Other restructuring costs.. 55 (27) 28
------- ------- -------
$ 1,608 $ (314) $ 1,294
======= ======= =======
In connection with the July 2002 restructuring plan, the Company
determined that certain leasehold improvements related to the downsized or
closed offices were impaired as of September 30, 2002 and recognized an asset
impairment of $0.3 million.
13
OTHER INCOME (LOSS). Other income (loss) totaled $1.9 million and
$(3.2) million for the nine months ended September 30, 2002 and 2001,
respectively. The increase in other income in 2002 was due to (i) the receipt of
a $1.3 million settlement in the first quarter of 2002 of a business
interruption claim related to flooding that occurred in June 2001 and (ii) a
non-recurring (non-cash) impairment recorded in the third quarter of 2001 of a
$5.0 million equity investment made by the Company in a UK-based software
distribution and consulting firm.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company provided a full
valuation allowance against deferred tax assets of $19.6 million for the nine
months ended September 30, 2002, compared with a tax benefit of $10.5 million
(an effective tax rate of 29.7 percent) for the first nine months of 2001. As
required by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", the Company continued its assessments of the realization of its
deferred tax assets and as a result, concluded that a full valuation allowance
was appropriate at June 30, 2002.
As in its prior assessments, the Company considered its current and
previous performance and other relevant factors in determining the sufficiency
of its valuation allowance. Objective factors, such as current and previous
operating losses, were given substantially more weight than management's outlook
for future profitability. Management remains optimistic about the future
prospects of the Company's business and the industry and continues to believe
that over time, as the market improves, the Company should generate sufficient
taxable income to utilize a substantial portion of its net operating loss
carryforwards. Until such time as a consistent pattern of sufficient
profitability is established, no tax benefit will be recognized associated with
the Company's pre-tax accounting losses and a full income tax provision will not
be provided on any future pre-tax accounting income.
NET LOSS. Due to the factors described above, net loss for the first
nine months of 2002 was $25.8 million compared with $24.8 million for the first
nine months of 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements have principally related to working
capital needs and capital expenditures. These requirements have been met through
a combination of issuances of securities and internally generated funds.
The Company had cash, cash equivalents and short-term investments of
$38.3 million at September 30, 2002 compared with $43.0 million at December 31,
2001.
Cash flows used in operating activities were $1.5 million in the first
nine months of 2002 compared with $5.3 million in the first nine months of 2001.
The decrease in cash used in operating activities in 2002 was due to: (i) the
significant reduction in its loss before income taxes for the first nine months
of 2002 compared with the first nine months of 2001 and (ii) the increase in
cash generated from changes in net operating assets and liabilities resulting
from improvements in working capital management.
Cash flows provided by (used in) investing activities were $0.7 million
in the first nine months of 2002 compared with $(2.6) million in the first nine
months of 2001. The increase in cash generated from investing activities
primarily related to an increase in proceeds generated from the maturity of
investments that were not reinvested. Capital expenditures for the first nine
months of 2002 were $2.6 million compared with $2.3 million for the first nine
months of 2001. Capital expenditures for the first nine months of 2002 reflected
investments in excess of $1.0 million in the Company's customer relationship
management systems made in order to enhance sales force efficiency.
Cash flows provided by (used in) financing activities were $(1.2)
million in the first nine months of 2002 compared with $(10.2) million in the
first nine months of 2001. Cash provided by (used in) financing activities
during the first nine months of 2002 was the result of (i) $0.6 million in cash
provided primarily by employee purchases of common stock through the Company's
Employee Stock Purchase Plan and (ii) $1.8 million in cash used to repurchase
1.9 million shares of the Company's common stock. Cash provided by (used in)
financing activities in the first nine months of 2001 was due to (i) $7.4
million in cash used to repurchase 2.0 million shares of the Company's common
stock, (ii) 1.8 million in cash provided by the exercise of employee stock
options, and (iii) $4.5 million in cash used to secure an irrevocable letter of
credit issued in connection with the Company's corporate lease agreement.
14
We conduct operations in leased facilities under operating leases
expiring at various dates through 2011. The remaining contractual obligations
under these lease commitments were comprised of the following as of September
30, 2002:
CONTRACTUAL OBLIGATION TOTAL 2002 2003 - 2005 2006 - 2007 2008 AND BEYOND
---------------------- ----- ---- ----------- ----------- ----------------
Operating leases.................. $ 36,819 $ 996 $10,642 $9,047 $16,134
Sub-leasing arrangements*......... (1,973) (287) (1,686) -- --
-------- ------ ------- ------ -------
$ 34,846 $ 709 $ 8,956 $9,047 $16,134
======== ====== ======= ====== =======
* The Company has sub-leased portions of these facilities under
operating leases. Anticipated cash receipts from these sub-lease arrangements
have been taken into account when deriving expected cash outflow on operating
lease commitments.
The Company's expected principal uses of cash for the fourth quarter of
2002 include: (i) the repurchase of the Company's common stock ($3.6 million in
cash was spent from October 1, 2002 through November 8, 2002 to repurchase 3.8
million shares), (ii) capital expenditures of approximately $0.4 million, and
(iii) the payment of restructuring expenses of approximately $0.7 to $1.0
million. The Company believes that it has sufficient cash on hand to meet these
cash requirements, as well as its cash requirements for the foreseeable future.
ITEM 4. CONTROLS AND PROCEDURES
The management of the Company, including the Chief Executive Officer
and the Chief Financial Officer, have conducted an evaluation of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Rule 13a-14 under the Securities Exchange Act of 1934 as of a date (the
"Evaluation Date") within 90 days prior to the filing date of this report. Based
on that evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that, as of the Evaluation Date, the Company's disclosure controls and
procedures were effective in ensuring that all material information relating to
the Company, including our consolidated subsidiaries, required to be filed in
this quarterly report has been made known to them in a timely manner. There have
been no significant changes made in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to the
Evaluation Date.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
APPOINTMENT TO THE BOARD OF DIRECTORS
The Company appointed Peter T. Dameris to the Board of Directors on August 15,
2002.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Report, including
without limitation, statements regarding the Company's future financial
position, business strategy, planned products, products under development,
markets, budgets and plans and objectives of management for future operations,
are forward-looking statements. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that those expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the Company's
expectations are disclosed in statements set forth under "Cautionary
15
Statements" in our Annual Report on Form 10-K, as well as other factors such as,
for example: the risks associated with lower customer demand in a weak economy;
increased competition within the network management software industry; the
effects of recently-implemented cost reductions on the Company's business;
transitional inefficiencies that may arise during the Company's implementation
of recently-announced reorganization plans; and the management challenges of
implementing those plans while attempting to maintain employee motivation and
effectiveness. All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by these Cautionary Statements, the other example factors listed
in the previous sentence, and such other statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 10.1* Indemnification agreement between the Company and
Peter T. Dameris, executed August 15, 2002
Exhibit 10.2 Nonqualified Stock Option Agreement, August 15, 2002,
between the Company and Peter T. Dameris
Exhibit 99.1 Certification of the Company's Chief Executive Officer,
Eric J. Pulaski, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification of the Company's Chief Financial Officer,
Edward L. Pierce, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
*Incorporated by reference to Indemnification Agreement filed as Exhibit
10.31 to BindView's Annual Report on Form 10-K (the "2001 Form 10-K") for
the year ended December 31, 2001. The indemnification agreement referenced
above is identical to Exhibit 10.31 in the 2001 Form 10-K, with the
exception of the indemnitee name and the date executed.
(b) Reports on Form 8-K.
In a Report on Form 8-K dated July 25, 2002, the Company reported that it
had issued a press release announcing, among other things, financial results
for the quarter and six months ended June 30, 2002.
In a Report on Form 8-K dated September 4, 2002, the Company reported that
it had adopted a common stock repurchase plan pursuant to SEC Rule 10b5-1.
The plan provided for purchases by the Company of up to an aggregate of $2
million of its common stock (inclusive of transaction expenses) during the
period from September 3, 2002 through October 28, 2002, subject to the
volume limitations of SEC Rule 10b18 and to criteria established by
BindView's board of directors.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BINDVIEW DEVELOPMENT CORPORATION
November 13, 2002 By: /s/ KEVIN P. COHN
------------------------------------
Kevin P. Cohn
Vice President, Controller and Chief
Accounting Officer (Principal Accounting
Officer)
17
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Eric J. Pulaski, certify that:
1. I have reviewed this quarterly report on Form 10-Q of BindView Development
Corporation;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officer 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
those entities, particularly during the period in which this
quarterly 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 quarterly report (the "Evaluation Date"); and
c) presented in this quarterly 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 officer 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 officer and I have indicated in this
quarterly 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: November 13, 2002
/s/ ERIC J. PULASKI
- ---------------------------------------
Eric J. Pulaski
Chairman of the Board, Chief Executive
Officer and President
18
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Edward L. Pierce, certify that:
1. I have reviewed this quarterly report on Form 10-Q of BindView Development
Corporation;
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officer 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:
d) 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
those entities, particularly during the period in which this
quarterly report is being prepared;
e) 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 quarterly report (the "Evaluation Date"); and
f) presented in this quarterly 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 officer 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):
c) 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
d) 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 officer and I have indicated in this
quarterly 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: November 13, 2002
/s/ EDWARD L. PIERCE
- -----------------------------------
Edward L. Pierce
Director, Senior Vice President and
Chief Financial Officer
19
EXHIBIT INDEX
(a) Exhibits:
Exhibit 10.1* Indemnification agreement between the Company and
Peter T. Dameris, executed August 15, 2002
Exhibit 10.2 Nonqualified Stock Option Agreement, August 15, 2002,
between the Company and Peter T. Dameris
Exhibit 99.1 Certification of the Company's Chief Executive Officer,
Eric J. Pulaski, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification of the Company's Chief Financial Officer,
Edward L. Pierce, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
*Incorporated by reference to Indemnification Agreement filed as Exhibit
10.31 to BindView's Annual Report on Form 10-K (the "2001 Form 10-K") for
the year ended December 31, 2001. The indemnification agreement referenced
above is identical to Exhibit 10.31 in the 2001 Form 10-K, with the
exception of the indemnitee name and the date executed.