Comverse Technology, Inc. ("CTI") (Pink Sheets:CMVT) today
announced its results for the three months ended July 31, 2011.
Consolidated Highlights: Below is selected
financial information for the three months ended July 31, 2011 and
2010 prepared in accordance with generally accepted accounting
principles ("GAAP") and not in accordance with GAAP
("non-GAAP").
- Revenue decreased 5.8% to $386.4 million.
- GAAP net loss attributable to CTI increased 64.2% to $39.7
million.
- GAAP basic and diluted loss per share attributable to CTI's
shareholders increased from $0.12 to $0.19.
- Non-GAAP net income attributable to CTI¹ increased 61.8% to
$22.5 million.
- Basic and diluted non-GAAP earnings per share attributable to
CTI's shareholders increased from $0.07 to $0.11.
CTI is a holding company that conducts business through its
subsidiaries, principally its wholly-owned subsidiary, Comverse,
Inc. ("Comverse"), and its majority-owned subsidiaries, Verint
Systems Inc. ("Verint"), Starhome B.V. ("Starhome") and, prior to
its sale during fiscal 2010, Ulticom, Inc. For the current fiscal
periods, CTI's reportable segments were Comverse, Verint and All
Other.
Comverse Segment: Below is selected financial
information for the three and six months ended July 31, 2011 and
2010 for the Comverse segment.
|
Three Months
Ended July 31, |
Six Months Ended
July 31, |
(Dollars in thousands) |
2011 |
2010 |
2011 |
2010 |
Total revenue |
$ 182,055 |
$ 221,547 |
$ 345,819 |
$ 398,118 |
GAAP income (loss) from operations |
$ 9,591 |
$ (13,207) |
$ (28,084) |
$ (67,457) |
GAAP Operating margin |
5.3% |
(6.0%) |
(8.1%) |
(16.9%) |
|
|
|
|
|
Segment revenue |
$ 182,055 |
$ 221,547 |
$ 345,819 |
$ 398,118 |
Segment performance² |
$ 16,821 |
$ 14,267 |
$ 10,617 |
$ (10,561) |
Segment performance margin |
9.2% |
6.4% |
3.1% |
(2.7%) |
Charles Burdick, Chairman and Chief Executive Officer of CTI,
said, "We are pleased to present our second quarter results on a
timely basis. We have now provided all current financial
information providing our investors, customers and employees with
greater transparency into our results and we will seek to relist on
NASDAQ as soon as possible, enabling broader investor
participation. Importantly, our Comverse segment achieved
positive GAAP operating income, strong segment performance margin
and positive cash flow from operations through a more focused
business strategy emphasizing operating efficiency and
profitability. In addition, our majority-owned Verint and
Starhome subsidiaries continued to deliver growth and strong
operating performance."
1 "Non-GAAP net income (loss) attributable to Comverse
Technology, Inc." and "Non-GAAP earnings (loss) per share
attributable to Comverse Technology, Inc.'s shareholders" have not
been prepared in accordance with GAAP. See "Presentation of
Non-GAAP Financial Measures" and "Comverse Technology, Inc. and
Subsidiaries Consolidated Reconciliation of GAAP to Non-GAAP
Financial Measures" below.
2 For additional information concerning the computation of
"segment performance" and the reasons for using this financial
measure, see "Segment Performance" below. Segment performance
margin reflects segment performance as a percentage of segment
revenue.
Comverse Segment Results
Total Revenue and Segment Revenue
Total and segment revenue for the Comverse segment was $182.1
million for the current fiscal quarter, a decrease of 17.8%
compared to the $221.5 million for the prior year fiscal
quarter. Total and segment revenue included $1.1 million and
$0.5 million of intercompany revenue for the current fiscal quarter
and the prior year fiscal quarter, respectively.
Revenue from customer solutions was $91.4 million for the
current fiscal quarter, a decrease of $42.7 million, or 31.8%,
compared to the prior year fiscal quarter. Revenue from maintenance
was $89.6 million for the current fiscal quarter, an increase of
$2.6 million, or 3.0%, compared to the prior year fiscal
quarter.
Revenue from Business Support Systems ("BSS") customer solutions
and maintenance was $85.5 million for the current fiscal quarter,
an increase of $3.9 million, or 4.8%, compared to the prior year
fiscal quarter. Revenue from Value-Added Services ("VAS") customer
solutions and maintenance was $95.5 million for the current fiscal
quarter, a decrease of $44.0 million, or 31.5%, compared to the
prior year fiscal quarter. The decline in VAS revenue was in
large part the result of the company's Business Transformation
plan, which was initially presented in 2010, and involves the
adoption of a more focused and selective approach to the voice and
messaging product markets, including the implementation of more
strict profitability criteria in the pursuit of new business.
GAAP Income (Loss) from Operations
Income from operations for the Comverse segment was $9.6 million
for the current fiscal quarter, compared to loss from operations of
$13.2 million for the prior year fiscal quarter.
Segment Performance
Comverse segment performance was $16.8 million for the current
fiscal quarter, representing a segment performance margin of 9.2%,
compared to $14.3 million for the prior year fiscal quarter,
representing a segment performance margin of 6.4%.
Financial Condition of CTI and the Comverse
Segment
As of July 31, 2011, CTI and the Comverse segment had combined
cash, cash equivalents, bank time deposits and restricted cash of
approximately $374.2 million, compared to approximately $380.3
million as of April 30, 2011. During the current fiscal
quarter, CTI and Comverse made significant disbursements
aggregating approximately $55.3 million, primarily related to a
payment under a class action settlement agreement, professional
fees and restructurings. In addition, during such period,
CTI's holding company operations experienced negative cash flows
from operations. These decreases were partially offset by
aggregate cash proceeds of approximately $28.6 million received by
CTI from sales and redemptions of auction rate securities ("ARS")
and in connection with the settlement of certain CTI claims against
a third party. In addition, during the current fiscal quarter,
Comverse had positive cash flows from operations.
Restricted cash aggregated $78.5 million as of July 31, 2011,
compared to $69.0 million as of April 30, 2011. Cash, cash
equivalents, bank time deposits and restricted cash excludes ARS.
As of July 31, 2011 and April 30, 2011, CTI had $68.9 million and
$94.2 million aggregate principal amount of ARS, respectively, with
a carrying value on each such date of approximately $51.9 million
and $72.4 million, respectively. As previously disclosed, proceeds
from sales and redemptions of ARS (including interest thereon) are
restricted under the terms of the consolidated shareholder class
action settlement agreement.
As of July 31, 2011 and April 30, 2011, CTI and the Comverse
segment had combined indebtedness of approximately $2.2
million.
Verint Segment
Verint is a majority-owned subsidiary of CTI. Its common stock
is traded on the NASDAQ Global Market under the symbol "VRNT."
For additional information concerning Verint's results for the
three and six months ended July 31, 2011, please see the press
release to be issued by Verint on September 8, 2011, which will be
available on Verint's website, www.verint.com and will also be
included as an exhibit to the Current Report on Form 8-K filed by
Verint with the Securities and Exchange Commission (the "SEC"), and
Verint's quarterly report on Form 10-Q for the three months ended
July 31, 2011.
Conference Call Information
We will be conducting a conference call today at 8:00 am
EDT to discuss our results for the second quarter. An
on-line, real-time webcast of the conference call will be available
on our website at www.cmvt.com. The conference call can also be
accessed live via telephone at 1-678-825-8369. Please dial in
5-10 minutes prior to the scheduled start time.
A replay of the call will be available, beginning at
approximately 11:00 am on September 8, 2011, for thirty days, at
404-537-3406, and archived via webcast at www.cmvt.com. The
replay access code is 98059155.
Segment Performance
CTI uses segment performance, as defined below, as the primary
basis for assessing the financial results of its segments and for
the allocation of resources. Segment performance, as defined by
CTI's management in accordance with the Financial Accounting
Standards Board's ("FASB")guidance relating to segment reporting,
is not necessarily comparable to other similarly titled captions of
other companies. Segment performance, as defined by management,
represents operating results of a segment without the impact of
significant expenditures incurred by the segment in connection with
the efforts to become current in periodic reporting obligations
under the federal securities laws, certain non-cash charges, and
certain other insignificant gains and charges.
Segment performance is computed by management as income (loss)
from operations adjusted for the following: (i) stock-based
compensation expense; (ii) amortization of acquisition-related
intangibles; (iii) compliance-related professional fees; (iv)
compliance-related compensation and other expenses; (v) impairment
charges; (vi) litigation settlements and related costs; (vii)
acquisition-related charges; (viii) restructuring and integration
charges; and (ix) certain other insignificant gains and charges.
Compliance-related professional fees and compliance-related
compensation and other expenses relate to fees and expenses
incurred in connection with (a) the company's efforts to complete
current and previously issued financial statements and audits of
such financial statements and (b) the company's efforts to become
and remain current in its periodic reporting obligations under the
federal securities laws.
In evaluating each segment's performance, management uses
segment revenue, which consists of revenue generated by the
segment, including intercompany revenue. Certain segment
performance adjustments relate to expenses included in the
calculation of income (loss) from operations, while, from time to
time, certain segment performance adjustments may be presented as
adjustments to revenue. In calculating Verint's segment performance
for the three and six months ended July 31, 2011, the presentation
of segment revenue gives effect to segment revenue adjustments that
represent the impact of fair value adjustments required under the
FASB's guidance relating to acquired customer support contracts
that would have otherwise been recognized as revenue on a
standalone basis with respect to an acquisition consummated by
Verint in March 2011. Verint did not have a segment revenue
adjustment for the three and six months ended July 31, 2010.
Presentation of Non-GAAP Financial Measures
CTI provides Non-GAAP net income (loss) attributable to Comverse
Technology, Inc. and Non-GAAP earnings (loss) per share
attributable to Comverse Technology, Inc.'s shareholders as
additional information for its operating results. These measures
are not in accordance with, or alternatives for, GAAP financial
measures and may be different from, or not comparable to similarly
titled or other non-GAAP financial measures used by other
companies. CTI believes that the presentation of these
non-GAAP financial measures provides useful information to
investors regarding certain additional financial and business
trends relating to its results of operations as viewed by
management in monitoring the company's businesses. In
addition, management uses these non-GAAP financial measures for
reviewing financial results and for planning purposes. See
"Comverse Technology, Inc. and Subsidiaries Consolidated
Reconciliation of GAAP to Non-GAAP Financial Measures" below.
About Comverse Technology, Inc.
Comverse Technology, Inc., through its wholly-owned subsidiary
Comverse, is the world's leading provider of software and systems
enabling converged billing and active customer management and
value-added voice, messaging and mobile Internet services.
Comverse's extensive customer base spans more than 125 countries
and covers over 450 communication service providers serving more
than two billion subscribers. CTI also holds majority ownership
positions in Verint (Nasdaq:VRNT) and privately-held Starhome.
The Comverse Technology logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7454
Forward-Looking Statements
Certain statements appearing in this press release constitute
"forward-looking statements." Forward-looking statements include
financial projections, statements of plans and objectives for
future operations, statements of future economic performance, and
statements of assumptions relating thereto. In some cases,
forward-looking statements can be identified by the use of
terminology such as "may," "expects," "plans," "anticipates,"
"estimates," "believes," "potential," "projects," "forecasts,"
"intends," or the negative thereof or other comparable terminology.
By their very nature, forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could
cause actual results, performance and the timing of events to
differ materially from those anticipated, expressed or implied by
the forward-looking statements in this press release. These and
other risks, uncertainties and other important factors are
described in CTI's recent filings with the SEC, including, without
limitation, in Item 1A, "Risk Factors" of its Annual Report on Form
10-K for the fiscal year ended January 31, 2011 (the "2010 Form
10-K") and the sections captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
2010 Form 10-K, and include, among other things, the following
risks and uncertainties:
- the risk that the registration of CTI's common stock will be
revoked by a non-appealable order of the SEC, pursuant to Section
12(j) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), if the SEC fails to approve an Offer of Settlement
made on July 26, 2011 (which reflects the terms of an agreement in
principle entered into with the SEC's Division of Enforcement on
July 13, 2011) or, if approved, if the Division of Enforcement, in
its sole discretion, determines that the company's Quarterly Report
for the quarter ended July 31, 2011 contains deficiencies that are
not remedied by CTI within five business days from the date that
the Division of Enforcement notifies CTI of such deficiencies. If a
final order is issued by the SEC to revoke the registration of
CTI's common stock, brokers, dealers and other market participants
would be prohibited from buying, selling, making market in,
publishing quotations of, or otherwise effecting transactions with
respect to, such common stock and, as a result, public trading of
CTI's common stock would cease and investors would find it
difficult to acquire or dispose of CTI's common stock or obtain
accurate price quotations for CTI's common stock, which could
result in a significant decline in the value of CTI's common stock,
and our business and liquidity may be adversely impacted,
including, without limitation, an adverse impact on CTI's ability
to issue stock to raise equity capital, engage in business
combinations, provide employee equity incentives or use CTI's
common stock to make a significant payment under a consolidated
shareholder class action settlement agreement;
- the risk of diminishment in our capital resources as a result
of, among other things, future negative cash flows from operations
at Comverse or the continued incurrence of significant expenses by
CTI and Comverse in connection with the filing by CTI of periodic
reports under the federal securities laws and the remediation of
material weaknesses in internal control over financial reporting;
- the continuation of material weaknesses or the discovery of
additional material weaknesses in our internal control over
financial reporting and any delay in the implementation of remedial
measures;
- the review of the periodic reports of CTI and Verint Systems by
the staff of the SEC could result in amendments to our and Verint
Systems' financial information or other disclosures;
- the risk that, if CTI ceases to maintain a majority ownership
of Verint Systems' outstanding equity securities and ceases to
maintain control over Verint's operations, it may be required to no
longer consolidate Verint's financial statements within its
consolidated financial statements and, in such event, the
presentation of CTI's consolidated financial statements would be
materially different from the presentation for the fiscal periods
covered by this press release and for the fiscal years covered by
the 2010 Form 10-K;
- CTI may be unable to relist its common stock on the NASDAQ
Stock Market or another national securities exchange, in which
case, CTI's common stock would continue to be traded
over-the-counter on the "Pink Sheets" and shareholders may continue
to experience limited liquidity due to, among other things, the
absence of market makers;
- we may need to recognize further impairment of intangible
assets or financial assets, including our ARS portfolio, and
goodwill;
- the effects of any potential decline or weakness in the global
economy (due to among other things, the downgrade of the U.S.
credit rating and European sovereign debt crisis) on the
telecommunications industry, which may result in reduced
information technology spending and reduced demand for our
subsidiaries' products and services;
- disruption in the credit and capital markets may limit our
ability to access capital;
- potential loss of business opportunities due to continued
concern on the part of customers, partners, investors and employees
about our financial condition and CTI's previous extended delay in
becoming current in its periodic reporting obligations under the
federal securities laws;
- rapidly changing technology in our subsidiaries' industries and
our subsidiaries' ability to enhance existing products and develop
and market new products;
- our subsidiaries' dependence on contracts for large systems and
large installations for a significant portion of their sales and
operating results including, among other things, the lengthy and
complex bidding and selection process, the difficulty predicting
their ability to obtain particular contracts and the timing and
scope of these opportunities;
- the difficulty in predicting operating results as a result of
lengthy and variable sales cycles, focus on large customers and
installations, short delivery windows required by customers, and
the high percentage of orders typically generated late in the
fiscal quarter;
- the deferral or loss of one or more significant orders or
customers or a delay in an expected implementation of such an order
could materially and adversely affect our results of operations in
any fiscal period, particularly if there are significant sales and
marketing expenses associated with the deferred, lost or delayed
sales;
- the potential incurrence by our subsidiaries of significant
costs to correct previously undetected operational problems in
their complex products;
- our subsidiaries' dependence on a limited number of suppliers
and manufacturers for certain components and third party software
could cause a supply shortage and/or interruptions in product
supply;
- the risk that increased competition could force our
subsidiaries to lower their prices or take other actions to
differentiate their products and changes in the competitive
environment in the telecommunications industry worldwide could
seriously affect Comverse's business;
- the risk that increased costs or reduced demand for Comverse's
products resulting from compliance with evolving telecommunications
regulations and the implementation of new standards may adversely
affect our business and financial condition;
- the risk that Comverse will be unable to comply with stringent
standards imposed through Indian telecommunications service
providers on equipment and software vendors that are not Indian
owned or controlled by the Department of Telecommunications of the
Government of India (the "DoT"), in which case Comverse's ability
to conduct business in India will be substantially limited and our
revenue, profitability and cash flows would be materially adversely
affected;
- risks associated with significant indemnification obligations
and various other obligations to which Comverse is, and will
continue to be, subject as part of its compliance with DoT
prescribed standards;
- the risk that the failure or delay in achieving
interoperability of Comverse's products with its customers' systems
could impair its ability to sell its products;
- the competitive bidding process used to generate sales requires
our subsidiaries to expend significant resources with no guarantee
of recoupment;
- our subsidiaries' inability to maintain relationships with
value added resellers, systems integrators and other third parties
that market and sell their products could adversely impact our
financial condition and results of operations;
- third parties' infringement of our subsidiaries' proprietary
technology and the infringement by our subsidiaries of the
intellectual property of third parties, including through the use
of free or open source software;
- risks of certain contractual obligations of our subsidiaries
exposing them to uncapped liabilities;
- the impact of mergers and acquisitions, including, but not
limited to, difficulties relating to integration, the achievement
of anticipated synergies and the implementation of required
controls, procedures and policies at the acquired company;
- risks associated with significant foreign operations and
international sales, including the impact of geopolitical, economic
and military conditions in foreign countries, conducting operations
in countries with a history of corruption, entering into
transactions with foreign governments and ensuring compliance with
laws that prohibit improper payments;
- adverse fluctuations of currency exchange rates;
- risks relating to our significant operations in Israel,
including economic, political and/or military conditions in Israel
and the surrounding Middle East, and uncertainties relating to
research and development grants, tax benefits and the ability of
our Israeli subsidiaries to pay dividends;
- potential decline in the price of CTI's common stock in the
event that holders of securities awarded under CTI's equity
incentive plans elect to sell a significant number of shares after
CTI makes provision for the registration for issuance or sale of
securities awarded under equity incentive plans;
- the issuance of additional equity securities diluting CTI's
outstanding common stock, including the potential issuance of
shares of CTI's common stock in November 2011 pursuant to the
settlement agreement of a consolidated shareholder class action;
- risks that the credit ratings of CTI and its subsidiaries could
be downgraded or placed on a credit watch based on, among other
things, its financial results;
- the ability of Verint to pay its indebtedness as it becomes due
or refinance its indebtedness as well as comply with the financial
and other restrictive covenants contained therein;
- Verint's dependence on government contracts and the possibility
that U.S. or foreign governments could refuse to purchase Verint's
Communications Intelligence solutions or could deactivate Verint's
security clearances in their countries;
- risks associated with Verint's handling, or the perception of
mishandling, of customers' sensitive information;
- Verint's ability to receive or retain necessary export licenses
or authorizations; and
- other risks described in filings with the SEC.
The documents and reports we file with the SEC are available
through CTI, or its website, www.cmvt.com, or through the SEC's
Electronic Data Gathering, Analysis, and Retrieval system (EDGAR)
at www.sec.gov. CTI undertakes no commitment to update or revise
any forward-looking statements except as required by law.
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited) |
(In thousands, except
share and per share data) |
|
|
|
|
July 31, |
January 31, |
ASSETS |
2011 |
2011 |
|
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$500,690 |
$581,390 |
Restricted cash and bank time
deposits |
86,490 |
73,117 |
Auction rate securities |
51,852 |
72,441 |
Accounts receivable, net of
allowance of $9,175 and $13,237, respectively |
326,966 |
319,628 |
Inventories, net |
63,482 |
66,612 |
Deferred cost of revenue |
45,995 |
51,470 |
Deferred income taxes |
36,493 |
39,644 |
Prepaid expenses and other
current assets |
88,761 |
91,760 |
Total current assets |
1,200,729 |
1,296,062 |
Property and equipment, net |
75,662 |
66,843 |
Goodwill |
982,951 |
967,224 |
Intangible assets, net |
177,328 |
196,460 |
Deferred cost of revenue |
146,767 |
158,703 |
Deferred income taxes |
8,481 |
20,766 |
Other assets |
106,634 |
107,864 |
Total assets |
$2,698,552 |
$2,813,922 |
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$363,586 |
$401,940 |
Convertible debt
obligations |
2,195 |
2,195 |
Deferred revenue |
552,091 |
559,873 |
Deferred income taxes |
13,702 |
13,661 |
Bank loans |
6,000 |
6,000 |
Litigation settlement |
116,150 |
146,150 |
Income taxes payable |
13,033 |
11,486 |
Other current liabilities |
47,914 |
50,280 |
Total current liabilities |
1,114,671 |
1,191,585 |
Bank loans |
591,105 |
583,234 |
Deferred revenue |
270,150 |
270,934 |
Deferred income taxes |
80,864 |
52,953 |
Other long-term liabilities |
221,037 |
229,329 |
Total liabilities |
2,277,827 |
2,328,035 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Equity: |
|
|
Comverse Technology, Inc.
shareholders' equity: |
|
|
Common stock, $0.10 par value -
authorized, 600,000,000 shares; issued 205,636,586 and
204,937,882 |
|
|
shares, respectively; outstanding, 205,033,176 and
204,533,916 shares, respectively |
20,564 |
20,494 |
Treasury stock, at cost,
603,410 and 403,966 shares, respectively |
(4,909) |
(3,484) |
Additional paid-in capital |
2,108,029 |
2,088,717 |
Accumulated deficit |
(1,806,530) |
(1,707,638) |
Accumulated other comprehensive
income |
11,937 |
14,919 |
Total Comverse Technology, Inc.
shareholders' equity |
329,091 |
413,008 |
Noncontrolling interest |
91,634 |
72,879 |
Total equity |
420,725 |
485,887 |
Total liabilities and equity |
$2,698,552 |
$2,813,922 |
|
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(Unaudited) |
(In thousands, except
share and per share data) |
|
|
|
|
Three Months
Ended July 31, |
Six Months Ended
July 31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Revenue: |
|
|
|
|
Product revenue |
$ 165,902 |
$ 184,576 |
$ 307,937 |
$ 348,531 |
Service revenue |
220,465 |
225,666 |
427,927 |
418,599 |
Total revenue |
386,367 |
410,242 |
735,864 |
767,130 |
Costs and expenses: |
|
|
|
|
Product costs |
67,087 |
74,257 |
121,698 |
140,637 |
Service costs |
116,134 |
113,601 |
227,571 |
223,825 |
Selling, general and
administrative |
137,622 |
171,257 |
288,969 |
362,380 |
Research and development,
net |
51,499 |
63,307 |
105,938 |
130,204 |
Other operating expenses: |
|
|
|
|
Litigation settlements |
-- |
(150) |
-- |
(150) |
Restructuring charges |
1,963 |
1,020 |
13,050 |
6,976 |
Total costs and expenses |
374,305 |
423,292 |
757,226 |
863,872 |
Income (loss) from operations |
12,062 |
(13,050) |
(21,362) |
(96,742) |
Interest income |
1,550 |
1,008 |
2,667 |
2,002 |
Interest expense |
(8,005) |
(6,053) |
(17,133) |
(12,221) |
Loss on extinguishment of
debt |
-- |
-- |
(8,136) |
-- |
Other income, net |
12,519 |
3,938 |
12,397 |
5,615 |
Income (loss) before income tax
provision |
18,126 |
(14,157) |
(31,567) |
(101,346) |
Income tax provision |
(50,015) |
(2,604) |
(57,440) |
(2,226) |
Net loss from continuing operations |
(31,889) |
(16,761) |
(89,007) |
(103,572) |
Loss from discontinued operations, net of
tax |
-- |
(1,413) |
-- |
(3,053) |
Net loss |
(31,889) |
(18,174) |
(89,007) |
(106,625) |
Less: Net (income) loss attributable to
noncontrolling interest |
(7,808) |
(5,999) |
(9,885) |
577 |
Net loss attributable to Comverse Technology,
Inc. |
$ (39,697) |
$ (24,173) |
$ (98,892) |
$ (106,048) |
Weighted average common shares
outstanding: |
|
|
|
|
Basic and Diluted |
206,079,868 |
205,248,892 |
205,892,853 |
205,068,754 |
Loss per share attributable to Comverse
Technology, Inc.'s shareholders: |
|
|
|
|
Basic and Diluted loss per share |
|
|
|
|
Continuing operations |
$ (0.19) |
$ (0.12) |
$ (0.48) |
$ (0.51) |
Discontinued operations |
-- |
(0.00) |
-- |
(0.01) |
Basic and Diluted loss per share |
$ (0.19) |
$ (0.12) |
$ (0.48) |
$ (0.52) |
Net loss attributable to Comverse Technology,
Inc. |
|
|
|
|
Net loss from continuing
operations |
$ (39,697) |
$ (23,173) |
$ (98,892) |
$ (103,824) |
Loss from discontinued
operations, net of tax |
-- |
(1,000) |
-- |
(2,224) |
Net loss attributable to Comverse Technology,
Inc. |
$ (39,697) |
$ (24,173) |
$ (98,892) |
$ (106,048) |
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
(In
thousands) |
|
Six Months Ended
July 31, |
|
2011 |
2010 |
Cash flows from operating activities: |
|
|
Net cash used in operating activities -
continuing operations |
$ (75,365) |
$ (158,609) |
Net cash used in operating activities -
discontinued operations |
-- |
(1,743) |
Net cash used in operating activities |
(75,365) |
(160,352) |
|
|
|
Cash flows from investing activities: |
|
|
Proceeds from sales and
maturities of investments |
25,780 |
54,534 |
Acquisition of businesses, net
of cash acquired |
(11,958) |
(15,292) |
Purchase of property and
equipment |
(9,539) |
(10,170) |
Capitalization of software
development costs |
(1,662) |
(858) |
Net change in restricted cash
and bank time deposits |
(13,114) |
9,084 |
Settlement of derivative
financial instruments not designated as hedges |
(1,074) |
(11,147) |
Other, net |
1,569 |
208 |
Net cash (used in) provided by investing
activities - continuing operations |
(9,998) |
26,359 |
Net cash provided by investing activities -
discontinued operations |
-- |
54,766 |
Net cash (used in) provided by investing
activities |
(9,998) |
81,125 |
Cash flows from financing activities: |
|
|
Debt issuance costs and other
debt-related costs |
(15,034) |
(3,688) |
Proceeds from borrowings, net
of original issuance discount |
597,000 |
-- |
Repayment of bank loans,
long-term debt and other financing obligations |
(589,811) |
(22,679) |
Repurchase of common stock |
(1,425) |
(480) |
Net proceeds from issuance of
common stock by subsidiaries |
7,889 |
7,504 |
Other, net |
(2,004) |
-- |
Net cash used in financing activities -
continuing operations |
(3,385) |
(19,343) |
Net cash provided by financing activities -
discontinued operations |
-- |
156 |
Net cash used in financing activities |
(3,385) |
(19,187) |
Effects of exchange rates on cash and cash
equivalents |
8,048 |
(2,965) |
Net decrease in cash and cash
equivalents |
(80,700) |
(101,379) |
Cash and cash equivalents, beginning of
period including cash of discontinued operations |
581,390 |
574,872 |
Cash and cash equivalents, end of period
including cash of discontinued operations |
$ 500,690 |
$ 473,493 |
Less: Cash and cash equivalents of
discontinued operations at end of period |
-- |
(66,821) |
Cash and cash equivalents, end of period |
$ 500,690 |
$ 406,672 |
|
|
|
Non-cash investing and financing
transactions: |
|
|
Accrued but unpaid purchases of
property and equipment |
$ 889 |
$ 2,741 |
Inventory transfers to property
and equipment |
$ 14,151 |
$ 326 |
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
BUSINESS SEGMENT
INFORMATION |
(Unaudited) |
(In
thousands) |
|
|
Comverse |
Verint |
All Other |
Eliminations |
Consolidated
Totals |
|
(In
thousands) |
Three Months Ended July 31,
2011: |
|
|
|
|
|
Revenue |
$ 180,958 |
$ 194,959 |
$ 10,450 |
$ -- |
$ 386,367 |
Intercompany revenue |
1,097 |
-- |
1,121 |
(2,218) |
-- |
Total revenue |
$ 182,055 |
$ 194,959 |
$ 11,571 |
$ (2,218) |
$ 386,367 |
|
|
|
|
|
|
Total costs and expenses |
$ 172,464 |
$ 173,549 |
$ 30,529 |
$ (2,237) |
$ 374,305 |
|
|
|
|
|
|
Income (loss) from operations |
$ 9,591 |
$ 21,410 |
$ (18,958) |
$ 19 |
$ 12,062 |
|
|
|
|
|
|
Computation of segment performance: |
|
|
|
|
|
Total revenue |
$ 182,055 |
$ 194,959 |
$ 11,571 |
|
|
Segment revenue adjustment |
-- |
727 |
-- |
|
|
Segment revenue |
$ 182,055 |
$ 195,686 |
$ 11,571 |
|
|
|
|
|
|
|
|
Total costs and expenses |
$ 172,464 |
$ 173,549 |
$ 30,529 |
|
|
Segment expense adjustments: |
|
|
|
|
|
Stock-based compensation
expense |
1,029 |
6,641 |
674 |
|
|
Amortization of
acquisition-related intangibles |
4,498 |
8,100 |
-- |
|
|
Compliance-related professional
fees |
(2,142) |
17 |
11,609 |
|
|
Compliance-related compensation
and other expenses |
1,874 |
-- |
-- |
|
|
Impairment charges |
29 |
-- |
-- |
|
|
Litigation settlements and
related costs |
(1) |
-- |
4 |
|
|
Acquisition-related
charges |
-- |
2,820 |
-- |
|
|
Restructuring and integration
charges |
1,963 |
-- |
-- |
|
|
Other |
(20) |
671 |
2,905 |
|
|
Segment expense
adjustments |
7,230 |
18,249 |
15,192 |
|
|
Segment expenses |
165,234 |
155,300 |
15,337 |
|
|
Segment performance |
$ 16,821 |
$ 40,386 |
$ (3,766) |
|
|
|
|
|
|
|
|
Interest expense |
$ (141) |
$ (7,857) |
$ (7) |
$ -- |
$ (8,005) |
Depreciation and amortization |
$ (8,848) |
$ (12,585) |
$ (216) |
$ -- |
$ (21,649) |
Other non-cash items (1) |
$ 29 |
$ 19 |
$ -- |
$ -- |
$ 48 |
|
(1) Other non-cash items
consist primarily of write-offs and impairments of property and
equipment. |
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
BUSINESS SEGMENT
INFORMATION (continued) |
(Unaudited) |
(In
thousands) |
|
|
Comverse |
Verint |
All Other |
Eliminations |
Consolidated
Totals |
|
(In
thousands) |
Three Months Ended July 31,
2010: |
|
|
|
|
|
Revenue |
$ 221,053 |
$ 180,676 |
$ 8,513 |
$ -- |
$ 410,242 |
Intercompany revenue |
494 |
-- |
205 |
(699) |
-- |
Total revenue |
$ 221,547 |
$ 180,676 |
$ 8,718 |
$ (699) |
$ 410,242 |
|
|
|
|
|
|
Total costs and expenses |
$ 234,754 |
$ 156,877 |
$ 32,540 |
$ (879) |
$ 423,292 |
|
|
|
|
|
|
(Loss) income from operations |
$ (13,207) |
$ 23,799 |
$ (23,822) |
$ 180 |
$ (13,050) |
|
|
|
|
|
|
Computation of segment performance: |
|
|
|
|
|
Total revenue |
$ 221,547 |
$ 180,676 |
$ 8,718 |
|
|
Segment revenue adjustment |
-- |
-- |
-- |
|
|
Segment revenue |
$ 221,547 |
$ 180,676 |
$ 8,718 |
|
|
|
|
|
|
|
|
Total costs and expenses |
$ 234,754 |
$ 156,877 |
$ 32,540 |
|
|
Segment expense adjustments: |
|
|
|
|
|
Stock-based compensation
expense |
541 |
8,035 |
2,420 |
|
|
Amortization of
acquisition-related intangibles |
4,653 |
7,558 |
-- |
|
|
Compliance-related professional
fees |
20,176 |
6,067 |
17,295 |
|
|
Compliance-related compensation
and other expenses |
1,064 |
-- |
5 |
|
|
Litigation settlements and
related costs |
-- |
-- |
15 |
|
|
Acquisition-related
charges |
-- |
324 |
-- |
|
|
Restructuring and integration
charges |
1,020 |
-- |
-- |
|
|
Other |
20 |
540 |
392 |
|
|
Segment expense
adjustments |
27,474 |
22,524 |
20,127 |
|
|
Segment expenses |
207,280 |
134,353 |
12,413 |
|
|
Segment performance |
$ 14,267 |
$ 46,323 |
$ (3,695) |
|
|
|
|
|
|
|
|
Interest expense |
$ (125) |
$ (5,936) |
$ 8 |
$ -- |
$ (6,053) |
Depreciation and amortization |
$ (9,790) |
$ (12,054) |
$ (245) |
$ -- |
$ (22,089) |
Other non-cash items (1) |
$ 72 |
$ 180 |
$ -- |
$ -- |
$ 252 |
|
(1) Other non-cash items
consist primarily of write-offs and impairments of property and
equipment. |
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
BUSINESS SEGMENT
INFORMATION (continued) |
(Unaudited) |
(In
thousands) |
|
|
Comverse |
Verint |
All Other |
Eliminations |
Consolidated
Totals |
|
(In
thousands) |
Six Months Ended July 31,
2011: |
|
|
|
|
|
Revenue |
$ 344,118 |
$ 371,291 |
$ 20,455 |
$ -- |
$ 735,864 |
Intercompany revenue |
1,701 |
-- |
1,216 |
(2,917) |
-- |
Total revenue |
$ 345,819 |
$ 371,291 |
$ 21,671 |
$ (2,917) |
$ 735,864 |
|
|
|
|
|
|
Total costs and expenses |
$ 373,903 |
$ 331,047 |
$ 55,248 |
$ (2,972) |
$ 757,226 |
|
|
|
|
|
|
(Loss) income from operations |
$ (28,084) |
$ 40,244 |
$ (33,577) |
$ 55 |
$ (21,362) |
|
|
|
|
|
|
Computation of segment performance: |
|
|
|
|
|
Total revenue |
$ 345,819 |
$ 371,291 |
$ 21,671 |
|
|
Segment revenue adjustment |
-- |
962 |
-- |
|
|
Segment revenue |
$ 345,819 |
$ 372,253 |
$ 21,671 |
|
|
|
|
|
|
|
|
Total costs and expenses |
$ 373,903 |
$ 331,047 |
$ 55,248 |
|
|
Segment expense
adjustments: |
|
|
|
|
|
Stock-based compensation
expense |
1,697 |
14,191 |
3,533 |
|
|
Amortization of
acquisition-related intangibles |
8,996 |
16,296 |
-- |
|
|
Compliance-related professional
fees |
10,467 |
1,008 |
17,406 |
|
|
Compliance-related compensation
and other expenses |
3,907 |
-- |
-- |
|
|
Impairment charges |
157 |
-- |
-- |
|
|
Litigation settlements and
related costs |
474 |
-- |
88 |
|
|
Acquisition-related
charges |
-- |
5,194 |
-- |
|
|
Restructuring and integration
charges |
13,050 |
-- |
-- |
|
|
Other |
(47) |
2,006 |
3,142 |
|
|
Segment expense
adjustments |
38,701 |
38,695 |
24,169 |
|
|
Segment expenses |
335,202 |
292,352 |
31,079 |
|
|
Segment performance |
$ 10,617 |
$ 79,901 |
$ (9,408) |
|
|
|
|
|
|
|
|
Interest expense |
$ (471) |
$ (16,651) |
$ (11) |
$ -- |
$ (17,133) |
Depreciation and amortization |
$ (17,348) |
$ (25,539) |
$ (437) |
$ -- |
$ (43,324) |
Other non-cash items (1) |
$ 157 |
$ 222 |
$ -- |
$ -- |
$ 379 |
|
|
|
|
|
|
(1) Other non-cash items
consist primarily of write-offs and impairments of property and
equipment. |
|
|
|
|
|
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
BUSINESS SEGMENT
INFORMATION (continued) |
(Unaudited) |
(In
thousands) |
|
|
Comverse |
Verint |
All Other |
Eliminations |
Consolidated
Totals |
|
(In
thousands) |
Six Months Ended July 31,
2010: |
|
|
|
|
|
Revenue |
$ 397,049 |
$ 353,289 |
$ 16,792 |
$ -- |
$ 767,130 |
Intercompany revenue |
1,069 |
-- |
407 |
(1,476) |
-- |
Total revenue |
$ 398,118 |
$ 353,289 |
$ 17,199 |
$ (1,476) |
$ 767,130 |
|
|
|
|
|
|
Total costs and expenses |
$ 465,575 |
$ 333,472 |
$ 66,915 |
$ (2,090) |
$ 863,872 |
|
|
|
|
|
|
(Loss) income from operations |
$ (67,457) |
$ 19,817 |
$ (49,716) |
$ 614 |
$ (96,742) |
|
|
|
|
|
|
Computation of segment performance: |
|
|
|
|
|
Total revenue |
$ 398,118 |
$ 353,289 |
$ 17,199 |
|
|
Segment revenue adjustment |
-- |
-- |
-- |
|
|
Segment revenue |
$ 398,118 |
$ 353,289 |
$ 17,199 |
|
|
|
|
|
|
|
|
Total costs and expenses |
$ 465,575 |
$ 333,472 |
$ 66,915 |
|
|
Segment expense adjustments: |
|
|
|
|
|
Stock-based compensation
expense |
782 |
26,005 |
4,966 |
|
|
Amortization of
acquisition-related intangibles |
9,312 |
15,130 |
-- |
|
|
Compliance-related professional
fees |
40,402 |
26,267 |
35,946 |
|
|
Compliance-related compensation
and other expenses |
866 |
-- |
5 |
|
|
Litigation settlements and
related costs |
-- |
-- |
110 |
|
|
Acquisition-related
charges |
-- |
831 |
-- |
|
|
Restructuring and integration
charges |
6,976 |
-- |
-- |
|
|
Other |
(1,442) |
553 |
481 |
|
|
Segment expense
adjustments |
56,896 |
68,786 |
41,508 |
|
|
Segment expenses |
408,679 |
264,686 |
25,407 |
|
|
Segment performance |
$ (10,561) |
$ 88,603 |
$ (8,208) |
|
|
|
|
|
|
|
|
Interest expense |
$ (329) |
$ (11,884) |
$ (8) |
$ -- |
$ (12,221) |
Depreciation and amortization |
$ (20,175) |
$ (23,952) |
$ (484) |
$ -- |
$ (44,611) |
Other non-cash items (1) |
$ 323 |
$ 223 |
$ -- |
$ -- |
$ 546 |
|
|
|
|
|
|
(1) Other non-cash items
consist primarily of write-offs and impairments of property and
equipment. |
|
|
|
|
|
COMVERSE TECHNOLOGY,
INC. AND SUBSIDIARIES |
CONSOLIDATED
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
(Unaudited) |
(In thousands, except
per share data) |
|
Table of Reconciliation from GAAP Net
Loss Attributable to Comverse |
Three Months
Ended July 31, |
Six Months Ended
July 31, |
Technology, Inc. to Non-GAAP Net
Income (Loss) Attributable to |
|
|
|
|
Comverse Technology,
Inc. |
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Net loss attributable to
Comverse Technology, Inc. |
$ (39,697) |
$ (24,173) |
$ (98,892) |
$ (106,048) |
Revenue adjustments related to
acquisitions |
727 |
-- |
962 |
-- |
Stock-based compensation
expense |
8,344 |
10,996 |
19,421 |
31,753 |
Amortization of
acquisition-related intangibles |
12,598 |
12,211 |
25,292 |
24,442 |
Compliance-related professional
fees |
9,484 |
43,538 |
28,881 |
102,615 |
Compliance-related compensation
and other expenses |
1,874 |
1,069 |
3,907 |
871 |
Impairment charges |
29 |
-- |
157 |
-- |
Litigation settlements and
related costs |
3 |
15 |
562 |
110 |
Acquisition-related
charges |
2,820 |
324 |
5,194 |
831 |
Restructuring and integration
charges |
1,963 |
1,020 |
13,050 |
6,976 |
Other |
3,556 |
952 |
5,101 |
(408) |
Impairment of auction rate
securities |
-- |
332 |
-- |
378 |
Impairment of UBS put |
-- |
3,625 |
-- |
6,696 |
Unrealized (gains) losses on
derivatives, net |
(496) |
(3,407) |
611 |
(7,454) |
Loss on extinguishment of
debt |
-- |
-- |
8,136 |
-- |
Loss from discontinued
operations, net of tax |
-- |
1,000 |
-- |
2,224 |
Income from litigation
settlement |
(4,750) |
-- |
(4,750) |
-- |
Tax impact on Non-GAAP
adjustments (1) |
36,109 |
(26,442) |
34,967 |
(57,269) |
Noncontrolling interest impact
of Non-GAAP adjustments (2) |
(10,021) |
(7,125) |
(26,210) |
(22,453) |
Total Non-GAAP adjustments |
$ 62,240 |
$ 38,108 |
$ 115,281 |
$ 89,312 |
Non-GAAP net income (loss)
attributable to Comverse Technology, Inc. |
$ 22,543 |
$ 13,935 |
$ 16,389 |
$ (16,736) |
Non-GAAP Earnings (Loss) Per Share
Attributable to Comverse |
Three Months
Ended July 31, |
Six Months Ended
July 31, |
Technology, Inc.'s
Shareholders |
2011 |
2010 |
2011 |
2010 |
|
(In thousands, except
per share data) |
|
|
|
|
|
Numerator: |
|
|
|
|
Non-GAAP net income (loss)
attributable to Comverse Technology, Inc. - basic |
$ 22,543 |
$ 13,935 |
$ 16,389 |
$ (16,736) |
Adjustment for subsidiary stock
options |
(172) |
(146) |
(417) |
(1) |
Non-GAAP net income (loss)
attributable to Comverse Technology, Inc. - diluted |
$ 22,371 |
$ 13,789 |
$ 15,972 |
$ (16,737) |
|
|
|
|
|
Denominator: |
|
|
|
|
Basic weighted average common
shares outstanding |
206,080 |
205,249 |
205,893 |
205,069 |
Diluted weighted average common
shares outstanding |
206,697 |
205,873 |
206,684 |
205,069 |
|
|
|
|
|
Non-GAAP earnings (loss) per
share attributable to Comverse Technology, Inc.'s shareholders |
|
|
|
|
Basic and diluted |
$ 0.11 |
$ 0.07 |
$ 0.08 |
$ (0.08) |
|
|
|
|
|
(1) The tax impact on the
Non-GAAP adjustments is an allocation of the tax provision as
applied to the consolidated loss before income tax (provision)
benefit. |
(2) Represents the minority
shareholders' interest in Non-GAAP adjustments attributable to
Verint and Starhome. |
|
|
|
|
|
CONTACT: Paul D. Baker
Comverse Technology, Inc.
(212) 739-1060
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