- Novell continues its transition to Linux and returns to operating profitability.
- Company records non-recurring charges of $130 million, including writedowns of net deferred tax assets, long-term investments and intangible assets, and restructuring charges.
PROVO, Utah Nov. 20, 2003 Novell, Inc. (NASDAQ:NOVL) today announced financial results for its fourth fiscal quarter ended Oct. 31, 2003. For the quarter, Novell reported revenues of $287 million, compared to revenues of $300 million for the fourth fiscal quarter 2002, and $283 million for the third fiscal quarter 2003. Net loss in the fourth fiscal quarter 2003 was $109 million, or $0.29 loss per share, including $130 million in non-recurring charges, principally to increase a valuation allowance for net deferred tax assets. This compared to a net loss of $92 million, or $0.25 loss per share, for the fourth fiscal quarter 2002.
For Novell's full year fiscal 2003, the company reported revenues of $1.1 billion and a net loss of $162 million, or $0.44 loss per share. Comparatively, revenues for the full year fiscal 2002 were $1.1 billion and a net loss of $247 million, or $0.68 loss per share.
On a non-GAAP basis, adjusted net income for the fourth fiscal quarter 2003 was $19 million, or $0.05 per share, which excludes a $119 million non-cash charge to increase a valuation allowance for net deferred tax assets that is further explained below, an $8 million restructuring charge, $3 million of charges related to the Ximian acquisition and impaired investments, and the related tax effects of these items. This compares to non-GAAP adjusted net income for the fourth quarter 2002 of $15 million, or $0.04 per share, which excludes $109 million in non-cash charges from the write-down of impaired real estate assets and venture investments. Full details on Novell's reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.
"We are pleased with the progress on operating profitability levels that we achieved in this quarter. Additionally, in our fourth quarter, we continued advancing toward many of the strategic goals we laid out at the beginning of our 2003 fiscal year," said Jack L. Messman, Novell chairman, president and chief executive officer. "Building value for our shareholders has been a top priority for Novell during 2003. We feel that we are poised to enter fiscal year 2004 with a better positioned company in the marketplace."
Novell has recently made two strategic moves to strengthen its products and services for the Linux platform. In August, Novell acquired Ximian, the leading provider of desktop and server solutions that enable enterprise Linux adoption. Shortly after the close of the fourth quarter, Novell agreed to acquire SUSE Linux, one of the world's leading suppliers of Linux software and services.
"Having taken important steps with both Ximian and SUSE Linux, we feel that the open source movement can be brought into the mainstream more expeditiously and with greater momentum," Messman said. "The customer can be reassured that mission-critical applications can indeed run on the Linux platform, reinforced by a worldwide technical support organization. We are responding to our customers, giving them the lower costs, flexibility and choice they have repeatedly told us they want."
On the balance sheet, cash and short-term investments were $752 million at the end of the fourth fiscal quarter 2003, compared with $636 million a year ago. Cash flow from operations during the fourth fiscal quarter 2003 was $53 million. For the full year fiscal year 2003, cash flow from operations was $55 million. Days sales outstanding (DSO) in accounts receivable was 74 days at the end of the fourth fiscal quarter 2003, up from 70 days in the prior quarter. Deferred revenues were $322 million at the end of the fourth fiscal quarter 2003, up 17% percent year-over-year.
Non-cash valuation allowance for deferred tax assets
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," in the fourth fiscal quarter 2003, the company provided a full valuation allowance against net deferred tax assets carried on its balance sheet. SFAS No. 109 requires an assessment of a company's current and previous performance and other relevant factors when determining the need for such a valuation allowance. Under this pronouncement, factors such as current and previous operating losses are given greater weight than the outlook for future profitability in determining deferred tax asset carrying value. This adjustment will have no impact on the company's cash flow or future prospects, nor does it alter the company's ability to utilize the underlying tax net operating loss and credit carryforwards in the future.
A summary of Novell's vision, mission and strategy can be accessed on the Novell Web site at: www.novell.com/company/ir/qresults.
Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the quarter with financial analysts will be broadcast at 5 PM EST November 20, 2003, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial in number is 888-323-5254, password "Novell", and the international dial in number is +1-773-756-4625, password "Novell". Until December 3, an audio replay of the call will be available from the same page. A telephone replay of the conference call will be available after 7:30 PM EST November 20, through December 3, at 888-568-0698. The international replay number is +1-402-998-1472. A copy of this press release is posted on Novell's Web site at: http://www.novell.com/company/ir/qresults/.
Legal notice regarding forward looking statements
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements," including those related to future financial and operating results, benefits and synergies of the company's brands and strategies, future opportunities and the growth of the market for open source solutions. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to integrate acquired operations and employees, Novell's success in executing its Linux strategies, Novell's ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Linux industry, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand and the other factors described in Novell 's Annual Report on Form 10-K for the 2002 fiscal year. Novell disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this press release.
About Novell
Novell, Inc. is a leading provider of information solutions that deliver secure identity management (Novell® Nsure), Web application development (Novell exteNd) and cross-platform networking services (Novell Nterprise), all supported by strategic consulting and professional services (Novell NgageSM). When the acquisition of SUSE Linux is completed, Novell will expand its open source commitment and become the first to offer comprehensive Linux products and services for the enterprise from the desktop to the server. Novell's vision of one Net a world without information boundaries helps customers realize the value of their information securely and economically. For more information, call Novell's Customer Response Center at (888) 321-4CRC (4272) or visit http://www.novell.com. Press should visit http://www.novell.com/pressroom.
Novell and Ximian are registered trademarks; exteNd, Nsure and Nterprise are trademarks; and Ngage is a service mark of Novell, Inc. in the United States and other countries. All third-party trademarks are the property of their respective owners.
Press Contact:
Bruce Lowry
Novell, Inc.
Phone: 415-591-6523
E-Mail: blowry@novell.com
Investor Relations Contact:
Bill Smith
Novell, Inc.
Phone: 800-317-3195
E-Mail: irmail@novell.com
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Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
|
|
| |
Fiscal Quarter |
|
Fiscal Year |
| |
Oct 31, 2003
|
|
Oct 31, 2002
|
|
Oct 31, 2003
|
|
Oct 31, 2002
|
| Net revenue |
| |
New software licenses |
$ 70,498 |
|
$ 94,301 |
|
$ 265,256 |
|
$ 319,281 |
| |
Maintenance and services |
216,251 |
|
206,034 |
|
840,240 |
|
815,039 |
| Total net revenue |
286,749 |
|
300,335 |
|
1,105,496 |
|
1,134,320 |
|
| Cost of revenue |
| |
New software licenses |
5,140 |
|
9,464 |
|
22,210 |
|
31,175 |
| |
Maintenance and services |
96,197 |
|
99,735 |
|
392,939 |
|
418,243 |
| Total cost of revenue |
101,337 |
|
109,199 |
|
415,149 |
|
449,418 |
|
| Gross profit |
185,412 |
|
191,136 |
|
690,347 |
|
684,902 |
|
| Operating expenses |
| |
Sales and marketing |
88,314 |
|
94,552 |
|
380,826 |
|
358,742 |
| |
Product development |
44,304 |
|
48,801 |
|
183,758 |
|
169,247 |
| |
General and administrative |
24,300 |
|
31,642 |
|
110,963 |
|
122,588 |
| |
Restructuring |
8,042 |
|
- |
|
43,067 |
|
19,100 |
| |
Purchased in process R&D |
920 |
|
- |
|
920 |
|
3,000 |
| |
Impairments |
- |
|
80,350 |
|
- |
|
80,350 |
| Total operating expenses |
165,880 |
|
255,345 |
|
719,534 |
|
753,027 |
|
| Income (loss) from operations |
19,532 |
|
(64,209) |
|
(29,187) |
|
(68,125) |
|
| Other income (expense), net |
(3,442) |
|
(23,402) |
|
(25,823) |
|
(24,100) |
|
| Income (loss) before taxes |
16,090 |
|
(87,611) |
|
(55,010) |
|
(92,225) |
|
| Income tax expense (benefit) |
125,094 |
|
4,061 |
|
106,894 |
|
10,896 |
|
| Income (loss) before accounting change |
(109,004) |
|
(91,672) |
|
(161,904) |
|
(103,121) |
|
| Cumulative effect of accounting change |
- |
|
- |
|
- |
|
(143,702) |
|
NET INCOME (LOSS)
|
$ (109,004) |
|
$ (91,672) |
|
$ (161,904) |
|
$ (246,823) |
|
| Net income (loss) per share: |
| |
Basic |
| |
Before cumulative effect of accounting change |
$ (0.29) |
|
$ (0.25) |
|
$ (0.44) |
|
$ (0.28) |
| |
Cumulative effect of accounting change |
- |
|
- |
|
- |
|
(0.40) |
| |
Basic |
$ (0.29) |
|
$ (0.25) |
|
$ (0.44) |
|
$ (0.68) |
|
| |
Diluted |
| |
Before cumulative effect of accounting change |
$ (0.29) |
|
$ (0.25) |
|
$ (0.44) |
|
$ (0.28) |
| |
Cumulative effect of accounting change |
- |
|
- |
|
- |
|
(0.40) |
| |
Diluted |
$ (0.29) |
|
$ (0.25) |
|
$ (0.44) |
|
$ (0.68) |
|
| Weighted average shares: |
| |
Basic |
373,876 |
|
364,884 |
|
370,545 |
|
363,569 |
| |
Diluted |
373,876 |
|
364,884 |
|
370,545 |
|
363,569 |
|
| Certain reclassifications, none of which affect net income, have been made to the prior period amounts in order to conform to the current year's presentation. |
|
|
|
Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
|
|
| ASSETS |
|
Oct 31, 2003 |
|
Oct 31, 2002 |
|
| Current assets |
| |
Cash and short-term investments |
|
$ 751,852 |
|
$ 635,858 |
| |
Receivables, net |
|
232,492 |
|
214,827 |
| |
Prepaid expenses |
|
23,005 |
|
24,077 |
| |
Deferred income taxes |
|
- |
|
21,204 |
| |
Other current assets |
|
23,204 |
|
23,572 |
| Total current assets |
|
1,030,553 |
|
919,538 |
|
| Property, plant and equipment, net |
|
255,526 |
|
369,189 |
| Goodwill |
|
213,300 |
|
179,534 |
| Intangible assets |
|
10,800 |
|
36,351 |
| Long-term investments |
|
50,948 |
|
73,452 |
| Deferred income taxes |
|
- |
|
74,323 |
| Other assets |
|
6,526 |
|
12,678 |
|
| Total assets |
|
$ 1,567,653 |
|
$ 1,665,065 |
|
| LIABILITIES & STOCKHOLDERS' EQUITY |
|
| Current liabilities |
|
| |
Accounts payable |
|
$ 50,258 |
|
$ 57,241 |
| |
Accrued compensation |
|
101,164 |
|
87,778 |
| |
Other accrued liabilities |
|
117,073 |
|
134,850 |
| |
Income taxes payable |
|
35,493 |
|
36,294 |
| |
Deferred revenue |
|
322,470 |
|
275,344 |
| Total current liabilities |
|
626,458 |
|
591,507 |
|
| Minority interests |
|
6,725 |
|
8,016 |
|
| Stockholders' equity |
|
934,470 |
|
1,065,542 |
|
| Total liabilities and stockholders' equity |
|
$ 1,567,653 |
|
$ 1,665,065 |
|
| Certain reclassifications, none of which affect net income, have been made to the prior period amounts in order to conform to the current year's presentation. |
|
|
|
Novell, Inc.
Consolidated Unaudited Condensed Statements of Cashflows
(In thousands)
|
|
| |
Fiscal Quarter |
|
Fiscal Year |
| |
Oct 31, 2003
|
|
Oct 31, 2002
|
|
Oct 31, 2003
|
|
Oct 31, 2002
|
| Cash flows from operating activities |
|
| |
Net income |
$ (109,004) |
|
$ (91,672) |
|
$ (161,904) |
|
$ (246,823) |
| Adjustments to reconcile net income to net cash provided (used) by operating activities |
|
| |
Gain on Sale of Fixed Assets |
- |
|
- |
|
(25,299) |
|
(8,762) |
| |
Depreciation and amortization |
11,884 |
|
19,610 |
|
61,058 |
|
68,785 |
| |
Loss on impaired goodwill and intangibles, net of tax |
- |
|
- |
|
13,935 |
|
143,702 |
| |
Loss on impaired investments and fixed assets |
2,172 |
|
108,083 |
|
34,735 |
|
137,922 |
| |
Non-cash restructuring charges |
8,042 |
|
- |
|
31,268 |
|
16,426 |
| |
In-Process R&D expense |
920 |
|
- |
|
920 |
|
3,000 |
| |
Changes in assets and liabilities |
138,982 |
|
(3,149) |
|
100,293 |
|
(62,776) |
|
| |
Net cash provided by operating activities |
52,996 |
|
32,872 |
|
55,006 |
|
51,474 |
|
| Cash flows from financing activities |
|
| |
Issuance of common stock, net |
12,276 |
|
6,325 |
|
20,081 |
|
13,186 |
|
| |
Net cash provided by financing activities |
12,276 |
|
6,325 |
|
20,081 |
|
13,186 |
|
| Cash flows from investing activities |
|
| |
Expenditures for property, plant and equipment |
(8,863) |
|
(8,934) |
|
(39,468) |
|
(27,610) |
| |
Proceeds from the sale of property, plant and equipment |
- |
|
- |
|
125,000 |
|
16,050 |
| |
Short-term investment activity |
(96,630) |
|
49,795 |
|
(213,870) |
|
191,279 |
| |
SilverStream acquisition |
- |
|
(414) |
|
- |
|
(102,975) |
| |
Ximian acquisition |
(40,205) |
|
- |
|
(40,205) |
|
- |
| |
Other |
(3,319) |
|
(4,507) |
|
(3,599) |
|
(15,344) |
|
| |
Net cash (used)/provided by investing activities |
(149,017) |
|
35,940 |
|
(172,142) |
|
61,400 |
|
| (Decrease) increase in cash and cash equivalents |
(83,745) |
|
75,137 |
|
(97,055) |
|
126,060 |
|
| Cash and cash equivalents - beginning of period |
450,677 |
|
388,850 |
|
463,987 |
|
337,927 |
|
| Cash and cash equivalents - end of period |
366,932 |
|
463,987 |
|
366,932 |
|
463,987 |
|
| Short-term investments- end of period |
384,920 |
|
171,871 |
|
384,920 |
|
171,871 |
|
| Cash and short-term investments - end of period |
$ 751,852 |
|
$ 635,858 |
|
$ 751,852 |
|
$ 635,858 |
|
|
|
Novell, Inc.
Unaudited Non-GAAP Adjusted Earnings Information
(In thousands, except per share data)
|
|
| |
GAAP
As Reported |
Adjustments |
Non-GAAP
Adjusted |
| |
| Fiscal quarter ended October 31, 2003 |
|
| Net revenue |
$ 286,749 |
$ - |
$ 286,749 |
| Gross profit |
185,412 |
- |
185,412 |
| Income (loss) from operations |
19,532 |
8,962 (a) |
28,494 |
| Income (loss) before taxes |
16,090 |
11,134 (b) |
27,224 |
| Net income (loss) |
(109,004) |
128,062
(c) |
19,058 |
| Diluted net income (loss) per share |
$ (0.29) |
$ 0.34
(c) |
$ 0.05 |
|
| Fiscal quarter ended July 31, 2003 |
|
| Net revenue |
$ 282,809 |
$ - |
$ 282,809 |
| Gross profit |
175,332 |
- |
175,332 |
| Income (loss) from operations |
(20,045) |
26,850 (d) |
6,805 |
| Income (loss) before taxes |
(23,762) |
33,526 (e) |
9,764 |
| Net income (loss) |
(12,400) |
19,235 (f) |
6,835 |
| Diluted net income (loss) per share |
$ (0.03) |
$ 0.05 (f) |
$ 0.02 |
|
| Fiscal quarter ended October 31, 2002 |
|
| Net revenue |
$ 300,335 |
$ - |
$ 300,335 |
| Gross profit |
191,136 |
- |
191,136 |
| Income (loss) from operations |
(64,209) |
81,169 (g) |
16,960 |
| Income (loss) before taxes |
(87,611) |
108,902 (h) |
21,291 |
| Net income (loss) |
(91,672) |
106,576 (i) |
14,904 |
| Diluted net income (loss) per share |
$ (0.25) |
$ 0.29 (i) |
$ 0.04 |
|
|
Footnotes related to adjustments:
- Reflects restructuring reserves of $8.0 million and in-process R&D expense of $0.9 million.
- Reflects the items in footnote (a) and investment write downs of $2.2 million.
- Reflects the items in footnotes (a) and (b), the necessary related tax adjustments, and a writedown of deferred tax assets of $119 million.
- Reflects restructuring reserves of $26.4 million and an adjustment to prior merger reserves of $0.5 million.
- Reflects impairment loss on intangible assets of $23.6 million, gain on sale of facilities in San Jose, CA of $24.9 million, and investment write downs of $8.0 million, in addition to the items in footnote (d).
- Reflects the items in footnotes (d) and (e), and the necessary related tax adjustments.
- Reflects asset impairments of $80.4 million and integration charges of $0.8 million.
- Reflects the items in footnote (g) and investment writedowns of $27.7 million.
- Reflects the items in footnotes (g) and (h), and the necessary related tax adjustments.
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