UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003.
OR
[ ] 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 0-19817.
STELLENT, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1652566
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7777 GOLDEN TRIANGLE DRIVE, EDEN PRAIRIE, MINNESOTA 55344-3736
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(952) 903-2000
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 par value -
21,888,683 shares as of August 8, 2003.
1
STELLENT, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2003 and March 31, 2003..........................3
Condensed Consolidated Statements of Operations - Three months ended
June 30, 2003 and 2002............................................................................4
Condensed Consolidated Statements of Cash Flows - Three months ended
June 30, 2003 and 2002............................................................................5
Notes to the Condensed Consolidated Financial Statements..........................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............11
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......................................21
Item 4. Disclosure Procedures and Controls...............................................................22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................22
Item 2. Changes in Securities and Use of Proceeds .......................................................22
Item 3. Defaults upon Senior Securities..................................................................22
Item 4. Submission of Matters to a Vote of Security Holders..............................................22
Item 5. Other Information................................................................................22
Item 6. Exhibits and Reports on Form 8-K.................................................................22
SIGNATURES................................................................................................24
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STELLENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, MARCH 31,
2003 2003
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 31,429 $ 37,439
Short-term marketable securities 29,919 28,497
Trade accounts receivable, net 17,352 15,602
Prepaid royalties 2,089 2,335
Prepaid expenses and other current assets 4,500 3,423
------------ ------------
Total current assets 85,289 87,296
Long-term marketable securities 14,800 15,233
Property and equipment, net 4,909 4,830
Prepaid royalties, net of current 1,441 1,934
Goodwill, net 12,703 12,703
Other acquired intangible assets, net 2,664 4,837
Investments in other companies 1,136 1,136
Other 1,595 1,740
------------ ------------
Total assets $ 124,537 $ 129,709
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,387 $ 2,287
Deferred revenues 8,827 9,187
Commissions payable 1,394 1,353
Accrued expenses and other 5,618 4,646
------------ ------------
Total current liabilities 18,226 17,473
------------ ------------
Shareholders' equity
Common stock 218 219
Additional paid-in capital 186,298 186,604
Accumulated other comprehensive income 362 315
Accumulated deficit (80,567) (74,902)
------------ ------------
Total shareholders' equity 106,311 112,236
------------ ------------
Total liabilities and shareholders' equity $ 124,537 $ 129,709
============ ============
Note: The balance sheet at March 31, 2003 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
STELLENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
2003 2002
--------- ---------
Revenues:
Product licenses ........................................ $ 9,845 $ 11,118
Services ................................................ 7,542 5,937
--------- ---------
Total revenues ............................................ 17,387 17,055
--------- ---------
Cost of revenues:
Product licenses ........................................ 1,100 1,799
Amortization of capitalized software from acquisitions .. 521 474
Services ................................................ 3,798 3,076
--------- ---------
Total cost of revenues .................................... 5,419 5,349
--------- ---------
Gross profit .............................................. 11,968 11,706
--------- ---------
Operating expenses:
Sales and marketing ..................................... 9,962 10,307
General and administrative .............................. 2,324 2,722
Research and development ................................ 3,175 4,724
Amortization of acquired intangible assets and other .... 1,652 1,661
Restructuring charges ................................... 812 2,504
--------- ---------
Total operating expenses .................................. 17,925 21,918
--------- ---------
Loss from operations ...................................... (5,957) (10,212)
Other:
Interest income, net .................................... 292 601
--------- ---------
Net loss .................................................. $ (5,665) $ (9,611)
========= =========
Net loss per common share-Basic and Diluted ............... $ (0.26) $ (0.43)
Weighted average common shares outstanding-Basic and
Diluted ................................................... 21,830 22,363
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
STELLENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
2003 2002
----------- -----------
OPERATING ACTIVITIES
Net loss ................................................................... $ (5,665) $ (9,611)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization ......................................... 848 895
Amortization of intangible assets, acquisition expense and other ...... 2,173 2,135
Other ................................................................. -- 158
Changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable .................................................... (1,750) 1,472
Prepaid expenses and other current assets .............................. (383) 321
Accounts payable and other liabilities ................................. 100 123
Accrued liabilities .................................................... 971 354
Deferred revenue ....................................................... (359) (361)
Accrued commissions .................................................... 41 (62)
----------- -----------
Net cash flows used in operating activities ................................. (4,024) (4,576)
----------- -----------
INVESTING ACTIVITIES:
(Purchases) maturities of marketable securities, net .................... (989) 979
Purchases of fixed assets ............................................... (737) (812)
Acquisition costs ....................................................... -- (2,790)
Proceeds from notes with other companies ................................ -- 56
Other ................................................................... -- (293)
----------- -----------
Net cash flows used in investing activities ................................. (1,726) (2,860)
----------- -----------
FINANCING ACTIVITIES:
Repurchase of common stock .............................................. (308) --
Other ................................................................... 1 (33)
----------- -----------
Net cash flows used in financing activities ................................. (307) (33)
----------- -----------
Cumulative effect of foreign currency translation adjustment ................ 47 278
----------- -----------
Net decrease in cash ........................................................ (6,010) (7,191)
Cash and equivalents, beginning of period ................................... 37,439 15,493
----------- -----------
Cash and equivalents, end of period ......................................... $ 31,429 $ 8,302
=========== ===========
Non-cash investing activity-unrealized gain (loss) on investment ............ $ -- $ (581)
=========== ===========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
STELLENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions in
Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments have been recorded
as necessary to present fairly the Company's consolidated financial position,
results of operations and cash flow for the periods presented. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements included in the Company's Fiscal Year 2003 Annual Report on
Form 10-K. The consolidated results of operations for the three month periods
ended June 30, 2003 and 2002 are not necessarily indicative of the results that
may be expected for any future period.
NOTE 2. USE OF ESTIMATES
The preparation of these financial statements requires that the Company make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, the Company evaluates its estimates including
those related to revenue recognition, allowance for bad debts, income taxes,
commission expense accrual, and useful lives of intangible assets and property
and equipment, among others. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from the
estimates made by management with respect to these items and other items that
require management's estimates.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In 1997, Stellent (the "Company") launched one of the first software product
suites on the market that was fully developed and created expressly for
Web-based content and document management. At the time, content management,
which currently is considered a critical component of an organization's
communication and information technology (IT) infrastructures, was an emerging
technology used to help companies easily and quickly share information
internally or externally using the Web. Currently, the Company's solutions,
which are comprised of content components, universal content management and
vertical applications, help customers worldwide solve real business problems
related to efficiently creating, managing and sharing critical information. The
Company's customers are primarily located throughout the United States and
Europe. Its headquarters are located in Eden Prairie, Minnesota and the company
has operations or collaborations in Australia, France, Germany, Japan, Korea,
the Netherlands, the United Kingdom and in other cities in the United States.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated.
Revenue Recognition: The Company currently derives all of its revenues from
licenses of software products and related services. The Company recognizes
revenue in accordance with Statement of Position (SOP) 97-2, "Software Revenue
Recognition," as amended by SOP 98-9, "Modification of SOP 97-2, Software
Revenue Recognition with Respect to Certain Transactions," and Securities and
Exchange Commission Staff Accounting Bulletin 101, "Revenue Recognition in
Financial Statements."
Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require additional services or modifications that are
essential to the functionality of the software.
Persuasive Evidence of an Arrangement Exists -- The Company determines that
persuasive evidence of an arrangement exists with respect to a customer under i)
a signature license agreement, which is signed by both the customer and the
Company, or ii) a purchase order, quote or binding letter-of-intent received
from and signed by the customer, in which case the customer has either
previously executed a signature license agreement with the Company or will
receive a shrink-wrap license agreement with the software. The Company does not
offer product return rights to end users or resellers.
Delivery has Occurred -- The Company's software may be either physically or
electronically delivered to the customer. The Company determines that delivery
has occurred upon shipment of the software pursuant to the billing terms of the
arrangement or when the software is made available to the customer through
electronic delivery. Customer acceptance
6
STELLENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
generally occurs at delivery.
The Fee is Fixed or Determinable -- If at the outset of the customer
arrangement, the Company determines that the arrangement fee is not fixed or
determinable, revenue is typically recognized when the arrangement fee becomes
due and payable. Fees due under an arrangement are generally deemed fixed and
determinable if they are payable within twelve months.
Collectibility is Probable and Supported -- The Company determines whether
collectibility is probable and supported on a case-by-case basis. The Company
may generate a high percentage of its license revenue from its current customer
base, for whom there is a history of successful collection. The Company assesses
the probability of collection from new customers based upon the number of years
the customer has been in business and a credit review process, which evaluates
the customer's financial position and, ultimately, their ability to pay. If the
Company is unable to determine from the outset of an arrangement that
collectibility is probable based upon its review process, revenue is recognized
as payments are received.
With regard to software arrangements involving multiple elements, the Company
allocates revenue to each element based on the relative fair value of each
element. The Company's determination of fair value of each element in
multiple-element arrangements is based on vendor-specific objective evidence
("VSOE"). The Company limits its assessment of VSOE for each element to the
price charged when the same element is sold separately. The Company has analyzed
all of the elements included in its multiple-element arrangements and has
determined that it has sufficient VSOE to allocate revenue to consulting
services and post-contract customer support ("PCS") components of its license
arrangements. The Company sells its consulting services separately, and has
established VSOE on this basis. VSOE for PCS is determined based upon the
customer's annual renewal rates for these elements. Accordingly, assuming all
other revenue recognition criteria are met, revenue from perpetual licenses is
recognized upon delivery using the residual method in accordance with SOP 98-9,
and revenue from PCS is recognized ratably over their respective terms,
typically one year.
The Company's direct customers typically enter into perpetual license
arrangements. The Company's Content Components Division generally enters into
term-based license arrangements with its customers, the term of which generally
exceeds one year in length. The Company recognizes revenue from time-based
licenses at the time the license arrangement is signed, assuming all other
revenue recognition criteria are met, if the term of the time-based license
arrangement is greater than twelve months. If the term of the time-based license
arrangement is twelve months or less, the Company recognizes revenue ratably
over the term of the license arrangement.
Services revenue consists of fees from consulting services and PCS. Consulting
services include needs assessment, software integration, security analysis,
application development and training. The Company bills consulting services fees
either on a time and materials basis or on a fixed-price schedule. In general,
the Company's consulting services are not essential to the functionality of the
software. The Company's software products are fully functional upon delivery and
implementation and generally do not require any significant modification or
alteration for customer use. Customers purchase the Company's consulting
services to facilitate the adoption of the Company's technology and may dedicate
personnel to participate in the services being performed, but they may also
decide to use their own resources or appoint other professional service
organizations to provide these services. Software products are billed separately
from professional services. The Company recognizes revenue from consulting
services as services are performed. The Company's customers typically purchase
PCS annually, and the Company prices PCS based on a percentage of the product
license fee. Customers purchasing PCS receive product upgrades, Web-based
technical support and telephone hot-line support.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
Cost of Revenues: The Company expenses all manufacturing, packaging and
distribution costs associated with product license revenue as cost of revenues.
The Company expenses all technical support service costs associated with service
revenue as cost of revenues. The Company also expenses amortization of
capitalized software from acquisitions as cost of revenues.
7
STELLENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Cash and Equivalents: The Company considers all short-term, highly liquid
investments that are readily convertible into known amounts of cash and have
original maturities of three months or less to be cash equivalents. At June 30,
2003, $2,829 was held at various financial institutions located in Europe and
other foreign countries.
Marketable Securities: Investments in debt securities with a remaining maturity
of one year or less at the date of purchase are classified as short-term
marketable securities. Investments are held in debt securities of the United
States government and with corporations that have the highest possible credit
rating. Investments in debt securities with a remaining maturity of greater than
one year are classified as long-term marketable securities. All investments are
classified as held to maturity and recorded at amortized cost as the Company has
the ability and positive intent to hold to maturity.
Investments in Other Companies: Investments in other equity securities with
other companies in the software industry are classified as long-term as the
Company anticipates holding them for more than one year. The Company holds less
than 20% interest in, and does not directly or indirectly exert significant
influence over, any of the respective investees.
A portion of these investments are publicly traded and are deemed by management
to be available for sale. The Company uses the specific identification method to
determine cost and fair value for computing gains and losses. Accordingly, these
investments are reported at fair value with net unrealized gains or losses
reported within shareholders' equity as accumulated other comprehensive income
or loss. No sales of available for sale investments have occurred through June
30, 2003.
Investments in other companies also include investments in several non-public,
start-up technology companies for which the Company uses the cost method of
accounting.
Accounts Receivable: The Company's accounts receivable balances are due from
companies across a broad range of industries, such as Government, Finance,
Manufacturing, Consumer, Aerospace and Transportation, Health Care/Insurance,
and High Tech/Telecom. Credit is extended based on evaluation of a customer's
financial condition and, generally, collateral is not required. Accounts
receivable from sales of services are typically due from customers within 30
days and accounts receivable from sales of licenses are typically due over terms
ranging from 30 days to nine months. Accounts receivable balances are stated at
amounts due from customer net of an allowance for doubtful accounts. Accounts
outstanding longer than the contractual payment terms are considered past due.
The Company determined its allowance by considering a number of factors,
including the length of time trade receivables are past due, the Company's
previous loss history, the customer's current ability to pay its obligation to
the Company, and the condition of the general economy and the industry as a
whole. The Company writes-off accounts receivable when they become
uncollectible, and any payments subsequently received on such receivables are
credited to the allowance for doubtful accounts.
Property and Equipment: Property and equipment, including leasehold
improvements, are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, ranging from
two to eight years, or the life of the lease for leasehold improvements,
whichever is shorter. Maintenance, repairs and minor renewals are expensed when
incurred.
Goodwill and Other Acquired Intangible Assets: Goodwill represents the excess of
the purchase price over the fair value of net assets acquired.
The carrying value of goodwill and other intangible assets is tested for
impairment on an annual basis or when factors indicating impairment are present.
The Company will complete its annual impairment test of goodwill on January 1 of
each year.
Impairment of Long-Lived Assets: The Company evaluates the recoverability of its
long-lived assets in accordance with SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 144 requires recognition of impairment of
long-lived assets in the event that events or circumstances indicate an
impairment may have occurred and when the net book value of such assets exceeds
the future undiscounted cash flows attributed to such assets. The Company
assesses the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
8
STELLENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Software Development Costs: Software development costs may be capitalized once
the technological feasibility of the project is established. The amount of
software development costs that may be capitalized is subject to limitations
based on the net realizable value of the potential product. Typically the period
between achieving technological feasibility of the Company's products and the
general availability of the products has been short.
Developed capitalized software is amortized on a straight-line basis over three
years. Amortization expense of developed capitalized software is included in
Cost of Revenues -- Product Licenses. The capitalized software primarily relates
to software purchased from a third party or developed for the Company by a third
party.
Warranties: The Company generally warrants its software products for a period of
30 to 90 days from the date of delivery and estimates probable product warranty
costs at the time revenue is recognized. The Company exercises judgment in
determining its accrued warranty liability. Factors that may affect the warranty
liability include historical and anticipated rates of warranty claims, material
usage, and service delivery costs. Warranty costs incurred have not been
material.
Indemnification Obligations: The Company generally provides to its customers
intellectual property indemnification in its arrangements for the Company's
software products or services. Typically these arrangements provide that the
Company will indemnify, defend and hold the customers harmless against claims by
third parties that the Company's software products or services infringe upon the
copyrights, trademarks, patents or trade secret rights of such third parties.
Translation of Foreign Currencies: Foreign currency assets and liabilities of
the Company's international subsidiaries are translated using the exchange rates
in effect at the balance sheet date. Results of operations are translated using
the average exchange rates prevailing throughout the year. The effects of
exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are accumulated as part of the foreign currency
translation adjustment in shareholders' equity.
Comprehensive Income (Loss): Comprehensive income (loss) includes foreign
currency translation adjustments and unrealized gains or losses on the Company's
available for sale securities.
Marketing: The Company expenses the cost of marketing as it is incurred. The
Company enters into cooperative marketing programs with some of its resellers,
and when the Company receives an identifiable benefit in return for
consideration, and the Company can reasonably estimate the fair value of the
benefit received, the cooperative marketing is accounted for as marketing
expense. If the fair value cannot be estimated or an identifiable benefit is not
received the cooperative marketing is accounted for as a reduction of revenue.
Stock-based Compensation: The Company has stock option plans for employees and a
separate stock option plan for directors. The intrinsic value method is used to
value the stock options issued to employees and directors, and the Company
accounts for those plans under the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. In the periods presented, no stock-based employee compensation
cost is reflected in net loss, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. Had the fair value method been applied, the compensation expense
would have been different. The following table illustrates the effect on net
loss and net loss per share if the Company had applied the fair value method for
the following periods:
THREE MONTHS ENDED
JUNE 30,
2003 2002
----------- -----------
Net loss as reported ..................................... $ (5,665) $ (9,611)
Less: Total stock based employee compensation expense
determined under fair value based method for all awards .. (1,838) (3,290)
----------- -----------
Net loss - pro forma ..................................... $ (7,508) $ (12,901)
=========== ===========
Basic and diluted weighted average shares ................ 21,830 22,363
Basic and diluted net loss per share - as reported ....... $ (0.26) $ (0.43)
Basic and diluted net loss per share - pro forma ......... $ (0.34) $ (0.58)
9
STELLENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Fair Value of Financial Instruments: The Company's financial instruments
including cash and cash equivalents, short-term marketable securities, long-term
marketable securities, accounts receivable and accounts payable, and are carried
at cost, which approximates fair value due to the short-term maturity of these
instruments.
New Accounting Pronouncements: In November 2002, the FASB reached a consensus on
EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." This EITF sets out criteria for whether revenue can be recognized
separately from other deliverables in a multiple deliverable arrangement. The
criteria considers whether the delivered item has stand-alone value to the
customer, whether the fair value of the delivered item can be reliably
determined and the rights of returns for the delivered item. This EITF is
required to be adopted by the Company beginning April 1, 2004. The adoption of
this EITF is not anticipated to have a material effect on the Company's
consolidated financial statements.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities," which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 applies
immediately to variable interest entities created or obtained after January 31,
2003 and it applies in the first fiscal year or interim period beginning after
June 15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. FIN 46 is not
anticipated to have a material effect on the Company's consolidated financial
statements.
In May 2003, the FASB issued Statement 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This statement
changes the classification of certain common financial instruments from either
equity or mezzanine presentation to liabilities in the balance sheet and
requires an issuer of those financial instruments to recognize changes in fair
value or redemption amount, as applicable, in earnings. This statement is
effective for financial instruments entered into or modified after May 31, 2003
and, with one exception, is effective for the quarter beginning July 1, 2003 for
public companies. As the Company has not issued any financial instruments
addressed by this new pronouncement its adoption is not anticipated to have a
material effect on the Company's financial statements.
NOTE 4. BASIC AND DILUTED NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of shares
outstanding of common stock. Diluted net loss per share is computed using the
weighted average number of shares of common stock and common equivalent shares
outstanding during the period. Common equivalent shares consist of stock options
(using the treasury stock method). Common equivalent shares are excluded from
the computation if their effect is anti-dilutive.
For the three months ended June 30, 2003 and 2002, the Company incurred net
losses and therefore, basic and diluted per share amounts are the same as all
common equivalent shares are anti-dilutive.
NOTE 5. RESTRUCTURING CHARGES
In the quarter ended June 30, 2002, in connection with management's plan to
reduce costs and improve operating efficiencies, the Company recorded a
restructuring charge of approximately $2,500. This restructuring charge was
comprised primarily of $2,100 in severance pay and benefits related to the
involuntary termination of approximately 50 employees, with the remaining $400
related to the closing of facilities and other exit costs. At June 30, 2003, no
amounts remained to be paid in connection with these charges.
In the quarter ended June 30, 2003, the Company recorded a restructuring charge
of approximately $812. This restructuring charge was comprised primarily of $412
in severance pay and benefits related to the involuntary termination of
employees, with the remaining $400 related to the closing of facilities and
other exit costs. This plan included the closing of an office facility as part
of its acquisition of certain assets of Active IQ in March 2003. The facility
was closed during the quarter ended June 30, 2003 and approximately $50 was
recorded to facility closing costs and future lease payments. The remaining $350
of facility closing costs related to a change in the estimated costs of closing
a research and development facility in Massachusetts, which was closed in the
quarter ended September 30, 2002. At June 30, 2003, approximately $567
remained to be paid in connection with these charges.
The table below summarizes our restructuring plans:
10
STELLENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STELLENT, INC.
RESTRUCTURING CHARGES - SUMMARY
FY04 - Q1 JUNE 2003
Restructuring charges
-----------------------------------------------------------------------------------------------------
First Quarter '03 Second Quarter '03 Third Quarter '03 Fourth Quarter '03 First Quarter '04
------------------- ------------------- ------------------ ---------------------------------------
=====================================================================================================
Employee Other Employee Other Employee Other Employee Other Employee Other
termination exit termination exit termination exit termination exit termination exit
benefits costs benefits costs benefits costs benefits costs benefits costs Total
----------- ------ ----------- ------ ----------- ----- ----------- ----- ----------- ----- ------
Balance at
April 1, 2002 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Expense 2,100 404 - - - - - - - - 2,504
Payments (1,488) (316) - - - - - - - - (1,804)
------ ----- --------- ------ ------- ----- ------- ---- ------- ----- -------
Balance at
June 30, 2002 612 88 - - - - - - - - 700
Expense - - 434 405 - - - - - - 839
Payments (612) (88) (230) (40) - - - - - - (970)
------ ----- --------- ------ ------- ----- ------- ---- ------- ----- -------
Balance at
September 30, 2002 - - 204 365 - - - - - - 569
Expense - - - - 382 292 - - - - 674
Payments - - (36) (24) (312) (256) - - - - (628)
------ ----- --------- ------ ------- ----- ------- ---- ------- ----- -------
Balance at
December 31, 2002 - - 168 341 70 36 - - - - 615
Expense - - - - - - 305 46 351
Payments - - (114) (37) (37) (36) (65) (3) - - (292)
------ ----- --------- ------ ------- ----- ------- ---- ------- ----- -------
Balance at
March 31, 2003 - - 54 304 33 - 240 43 - - 674
Expense - - - - - - 396 56 452
Payments - - (36) (65) (33) - (60) (11) (245) - (450)
Payments - - - - - - - - - 360 360
------ ----- --------- ------ ------- ----- ------- ---- ------- ----- -------
Balance at
June 30, 2003 $ - $ - $ 18 $ 239 $ - $ - $ 180 $ 32 $ 151 $ 416 $1,036
====== ====== ========= ====== ======= ===== ======= ==== ======= ===== =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion may contain forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed herein as well as those discussed under
the caption Risk Factors. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that advise interested
parties of the risks and factors that may affect the Company's business.
OVERVIEW
In 1997, we launched one of the first software product suites on the market that
was fully developed and created expressly for Web-based content and document
management. At the time, content management, which is today considered a
critical component of an organization's communication and information technology
(IT) infrastructures, was an emerging technology used to help companies easily
and quickly share information internally or externally using the Web.
Currently, our solutions are comprised of universal content management software,
content components software and vertical applications and help customers
worldwide solve real business problems related to efficiently creating, managing
and sharing critical information. Our company has strategically grown to become
one of the foremost content management software vendors in the industry, having
been ranked one of the top three content management software providers by
industry analyst firms Gartner Dataquest, Giga Information Group and Aberdeen
Group.
CRITICAL ACCOUNTING POLICIES AND JUDGMENTS
The policies described below are particularly important to understanding our
financial position and results of operations and may require management to make
estimates or judgments that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
We currently derive all of our revenues from licenses of software products and
related services. We recognize revenue in accordance with Statement of Position
(SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification
of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions,
and Securities and Exchange Commission Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements."
Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require services that are essential to the functionality of
the software.
Persuasive Evidence of an Arrangement Exists -- We determine that persuasive
evidence of an arrangement exists with respect to a customer under, i) a
signature license agreement, which is signed by both the customer and us, or,
ii) a purchase order, quote or binding letter-of-intent received from and signed
by the customer, in which case the customer has either previously executed a
signature license agreement with us or will receive a shrink-wrap license
agreement with the software. We do not offer product return rights to end users
or resellers.
Delivery has Occurred -- Our software may be either physically or electronically
delivered to the customer. We determine that delivery has occurred upon shipment
of the software pursuant to the billing terms of the arrangement or when the
11
software is made available to the customer through electronic delivery. Customer
acceptance generally occurs at delivery.
The Fee is Fixed or Determinable -- If at the outset of the customer
arrangement, we determine that the arrangement fee is not fixed or determinable,
revenue is typically recognized when the arrangement fee becomes due and
payable. Fees due under an arrangement are generally deemed fixed and
determinable if they are payable within twelve months.
Collectibility is Probable and Supported -- We determine whether collectibility
is probable and supported on a case-by-case basis. We may generate a high
percentage of our license revenue from our current customer base, for whom there
is a history of successful collection. We assess the probability of collection
from new customers based upon the number of years the customer has been in
business and a credit review process, which evaluates the customer's financial
position and ultimately their ability to pay. If we are unable to determine from
the outset of an arrangement that collectibility is probable based upon our
review process, revenue is recognized as payments are received.
With regard to software arrangements involving multiple elements, we allocate
revenue to each element based on the relative fair value of each element. Our
determination of fair value of each element in multiple-element arrangements is
based on vendor-specific objective evidence ("VSOE"). We limit our assessment of
VSOE for each element to the price charged when the same element is sold
separately. We have analyzed all of the elements included in our
multiple-element arrangements and have determined that we have sufficient VSOE
to allocate revenue to consulting services and post-contract customer support
("PCS") components of our license arrangements. We sell our consulting services
separately, and have established VSOE on this basis. VSOE for PCS is determined
based upon the customer's annual renewal rates for these elements. Accordingly,
assuming all other revenue recognition criteria are met, revenue from perpetual
licenses is recognized upon delivery using the residual method in accordance
with SOP 98-9, and revenue from PCS is recognized ratably over their respective
terms, typically one year.
Our direct customers typically enter into perpetual license arrangements. Our
Content Components Division generally enters into term-based license
arrangements with its customers, the term of which generally exceeds one year in
length. We recognize revenue from time-based licenses at the time the license
arrangement is signed, assuming all other revenue recognition criteria are met,
if the term of the time-based license arrangement is greater than twelve months.
If the term of the time-based license arrangement is twelve months or less, we
recognize revenue ratably over the term of the license arrangement.
Services revenue consists of fees from consulting services and PCS. Consulting
services include needs assessment, software integration, security analysis,
application development and training. We bill consulting services fees either on
a time and materials basis or on a fixed-price schedule. In general, our
consulting services are not essential to the functionality of the software. Our
software products are fully functional upon delivery and implementation and
generally do not require any significant modification or alteration for customer
use. Customers purchase our consulting services to facilitate the adoption of
our technology and may dedicate personnel to participate in the services being
performed, but they may also decide to use their own resources or appoint other
professional service organizations to provide these services. Software products
are billed separately from professional services. We recognize revenue from
consulting services as services are performed. Our customers typically purchase
PCS annually, and we price PCS based on a percentage of the product license fee.
Customers purchasing PCS receive product upgrades, Web-based technical support
and telephone hot-line support.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue.
Investments in Other Companies
Investments in Other Companies: Investments in other equity securities and
related notes with other companies in the software industry are classified as
long-term as the Company anticipates holding them for more than one year. The
Company holds less than 20% interest in, and does not directly or indirectly
exert significant influence over any of the respective investees.
A portion of these investments are publicly traded and are deemed by management
to be available for sale. The Company uses the specific identification method to
determine cost and fair value for computing gains and losses. Accordingly, these
investments are reported at fair value with net unrealized gains or losses
reported within shareholders' equity as accumulated other comprehensive income
or loss. No sales of available for sale investments have occurred through June
30, 2003.
Investments in other companies also include investments in several non-public,
start-up technology companies for which the Company uses the cost method of
accounting.
12
Accounts Receivable
Our accounts receivable balances are due from companies across a broad range of
industries, such as Government, Finance, Manufacturing, Consumer, Aerospace and
Transportation, Health Care/Insurance, and High Tech/Telecom. Credit is extended
based on evaluation of a customer's financial condition and, generally,
collateral is not required. Accounts receivable from sales of services are
typically due from customers within 30 days and accounts receivable from sales
of licenses are due over terms ranging from 30 days to nine months. Accounts
receivable balances are stated at amounts due from customer net of an allowance
for doubtful accounts. Accounts outstanding longer than the contractual payments
terms are considered past due. We determined our allowance by considering a
number of factors, including the length of time trade receivables are past due,
our previous loss history, the customer's current ability to pay its obligation
to us, and the condition of the general economy and the industry as a whole. We
write-off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.
Goodwill and Other Acquired Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired.
The carrying value of goodwill and other intangible assets is tested for
impairment on an annual basis or when factors indicating impairment are present.
We have elected to complete the annual impairment test of goodwill on January 1
of each year. We engage an independent outside professional services firm to
assist us in our impairment testing of goodwill. Additionally, no circumstances
occurred during the first quarter of our fiscal year ending March 31, 2004 which
would have created an impairment loss at June 30, 2003.
Impairment of Long-Lived Assets
We evaluate the recoverability of long-lived assets in accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144
requires recognition of impairment of long-lived assets in the event that events
or circumstances indicate an impairment may have occurred and when the net book
value of such assets exceeds the future undiscounted cash flows attributed to
such assets. We assess the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. No impairment of long-lived assets has occurred during the periods
ended June 30, 2003 and 2002.
Accounting for Income Taxes
Deferred tax liabilities and deferred tax assets reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The
valuation allowance has been established due to the uncertainty of future
taxable income, which is necessary to realize the benefits of the deferred tax
assets. The Company had net operating loss (NOL) carryforwards of approximately
$84.3 million at March 31, 2003, which begin to expire in 2011. These NOL's are
subject to annual utilization limitations due to prior ownership changes.
Realization of the NOL carryforwards and other deferred tax temporary
differences are contingent on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required by SFAS No. 109, Accounting for Income Taxes, by assessing the
available positive and negative evidence surrounding its recoverability.
Accordingly, in the fourth quarter of fiscal 2003 we increased the valuation
allowance to fully offset the deferred tax asset.
We will continue to assess and evaluate strategies that will enable the deferred
tax asset, or portion there of, to be utilized, and will reduce the valuation
allowance appropriately at such time when it is determined that the "more likely
than not" approach is satisfied.
13
THREE MONTHS ENDED JUNE 30, 2003 AND 2002
REVENUES
Total revenues increased by $0.3 million, or 2%, to $17.4 million for the three
months ended June 30, 2003 from $17.1 million for the three months ended June
30, 2002. The increase in revenues was primarily attributable to increased
post-contract customer support revenue, resulting primarily from a larger
installed base of products.
Product Licenses. Revenues for product licenses decreased by $1.3 million, or
11%, to $9.8 million for the three months ended June 30, 2003 from $11.1 million
for the three months ended June 30, 2002. The decrease in revenues for product
licenses was primarily attributable to the worldwide economic slowdown, which
has resulted in a reduction in overall customer spending in information
technology initiatives.
Services. Revenues for services, consisting of consulting services, training and
post contract customer support, increased by $1.6 million, or 27%, to $7.5
million for the three months ended June 30, 2003 from $5.9 million for the three
months ended June 30, 2002. Expressed as a percentage of total services revenue,
consulting services and training revenues were approximately 40% and
post-contract customer support was 60% in the June 30, 2003 quarter,
respectively, and 42% and 58%, respectively, in the June 30, 2002 quarter.
THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE JUNE
2003 2002
=========== ===========
Consulting Services and Training $ 3,037 40% $ 2,489 42%
Post-Contract Support 4,505 60 3,448 58
----------- ------ ----------- ------
Total Services $ 7,542 100% $ 5,937 100%
=========== ====== =========== ======
The increase in revenues for services was primarily due to an increase in
post-contract customer support revenue which is attributable to a larger
installed base of products.
COST OF REVENUES
Total cost of revenues increased by $0.1 million, or 1%, to $5.4 million for the
three months ended June 30, 2003 from $5.3 million for the three months ended
June 30, 2002. Total cost of revenues as a percentage of total revenues was 31%
for the three months ended June 30, 2003 and 2002. Gross profit increased by
$0.3 million, or 2%, to $12.0 million for the three months ended June 30, 2003
from $11.7 million for the three months ended June 30, 2002. Total gross profit
as a percentage of total revenues was 69% for the three months ended June 30,
2003 and 2002. The increase in gross profit dollars was primarily due to
increased revenues for post-contract customer support revenue attributable to a
larger installed base of products and by the decreased cost of revenues for
product licenses due to the mix of products sold.
Product Licenses. Cost of revenues for product licenses decreased $0.7 million
for the three months ended June 30, 2003 to $1.1 million from $1.8 million for
the three months ended June 30, 2002. The decrease in cost of revenues for
product licenses was primarily attributable to increased sales of our CCD
products, which generally have a lower costs of sales than our universal content
management products and the change in product mix in our universal content
management products.
Amortization of capitalized software from acquisitions. Cost of revenues related
to amortization of capitalized software from acquisitions was $0.5 million for
the three months ended June 30, 2003 and 2002. The cost of revenues for
amortization of capitalized software from acquisitions was primarily
attributable to the amortization of capitalized software obtained in the
acquisition of certain assets of RESoft, Kinecta, and Active IQ in July 2001,
April 2002, and March 2003, respectively.
Services. Cost of revenues, consisting of primarily personnel for consulting
services, training and post-contract customer support, increased by $0.7
million, or 23%, to $3.8 million for the three months ended June 30, 2003 from
$3.1 million for the three months ended June 30, 2002. Expressed as a percentage
of total services costs, consulting services and training costs were
approximately 75% and post-contract customer support 25% in the June 30, 2003
quarter, respectively, and 67% and 33% in the June 30, 2002 quarter,
respectively. Gross profit as a percentage of revenues for services was 50% for
the three months ended June 30, 2003, compared to 48% for the three months ended
June 30, 2002. The increase in the gross profit as a percentage of revenues for
services was primarily due to increased utilization of existing consulting
services personnel and reductions in the number of consulting services employees
related to restructurings.
14
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses decreased by $0.3 million, or
3%, to $10.0 million for the three months ended June 30, 2003 from $10.3 million
for the three months ended June 30, 2002. Sales and marketing expenses as a
percentage of total revenues were 57% for the three months ended June 30, 2003
compared to 60% for the three months ended June 30, 2002. The decrease in sales
and marketing expense dollars and as a percentage of total revenues was
primarily due to reduced commission expense related to the mix pf products sold
and reduced travel expense due to decreased staffing related to the
restructurings of our company.
General and Administrative. General and administrative expenses decreased $0.4
million, or 15% to $2.3 million for the three months ended June 30, 2003 from
$2.7 million for the three months ended June 30, 2002. General and
administrative expenses as a percentage of total revenues were 13% for the three
months ended June 30, 2003 compared to 16% for the three months ended June 30,
2002. The decrease in general and administrative expenses was primarily due to a
decrease in bad debt expense due to a decrease in the allowance for doubtful
accounts.
Research and Development. Research and development expenses decreased by $1.5
million, or 33%, to $3.2 million for the three months ended June 30, 2003 from
$4.7 million for the three months ended June 30, 2002. Research and development
expenses as a percentage of total revenues were 18% for the three months ended
June 30, 2003 compared to 28% for the three months ended June 30, 2002. The
decrease in research and development expenses was primarily due to reduced
headcount from the consolidation of two research and development facilities and
the completion of certain research and development projects in the quarter ended
September 30, 2002.
Amortization of Intangibles. A portion of the purchase price of certain assets
of CCD was allocated to excess cost over fair value of net assets acquired, core
technology, customer base, software, trademarks and other intangibles, and is
being amortized over the assets' estimated useful lives of three years. A
portion of the purchase price of certain assets of RESoft, Kinecta and Active IQ
was allocated to certain intangible assets, such as trademarks, and is also
being amortized over their useful lives of three years. Intangible amortization
and other expense was $1.7 million for the three month periods ended June 30,
2003 and 2002.
Restructuring Charges. In the quarter ended June 30, 2003, in connection with
management's plan to reduce costs and improve operating efficiencies, the
Company recorded a restructuring charge of approximately $0.8 million. The
restructuring charge was comprised primarily of severance pay and benefits
related to the involuntary termination employees of approximately $0.4 million
with the remaining $0.4 million related to the closing of facilities and other
exit costs. In the quarter ended June 30, 2002, the Company recorded a
restructuring charge of approximately $2.5 million. The restructuring charge was
comprised primarily of $2.1 million in severance pay and benefits related to the
involuntary termination of approximately 50 employees, with the remaining $0.4
million related to the closing of facilities and other exit costs.
OTHER INCOME, NET
Interest income. Net interest income was $0.3 million for the three months ended
June 30, 2003 compared to net interest income of $0.6 million for the three
months ended June 30, 2002. Net interest income for the three months ended June
30, 2003 and 2002 was primarily related to investments purchased with the
proceeds of our public stock offerings completed in June 1999 and March 2000.
The decrease in net interest income was primarily due to decreases in the
interest rates earned by invested funds resulting from decreases in market
interest rates.
NET OPERATING LOSS CARRYFORWARDS
As of March 31, 2003 we had net operating loss carryforwards of approximately
$84.3 million. The net operating loss carryforwards will expire at various dates
beginning in 2011, if not utilized. The Tax Reform Act of 1986 imposes
substantial restrictions on the utilization of net operating losses and tax
credits in the event of an "ownership change", as defined by Section 382 of the
Internal Revenue Code, of a corporation. Our ability to utilize net operating
loss carryforwards on an annual basis may be limited as a result of "ownership
changes" in connection with the sale of equity securities. We have provided a
valuation allowance against the entire amount of the deferred tax asset as of
June 30, 2003 because of the uncertainty regarding its realization. Our
accounting for deferred taxes and the valuation allowance involves the
evaluation of a number of factors such as our history of operating losses,
potential future losses and the nature of assets and liabilities giving rise to
deferred taxes.
15
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations and satisfied our capital expenditure requirements
primarily through operating revenues and public offerings of securities. Net
cash used in operating activities was $4.0 million for the three months ended
June 30, 2003 compared to net cash used by operating activities of $4.6 million
for the three months ended June 30, 2002. The change in cash flow used in
operations is primarily due to the reduced net loss in the three month period
ended June 30, 2003 from the three months ended June 30, 2002.
Our capital expenditures relate primarily for property and equipment consisting
largely of computer hardware. Capital expenditures for the three months ended
June 30, 2003 and 2002 were $0.7 million and $0.8 million, respectively. We have
also entered into capital and operating leases for facilities and equipment.
As of June 30, 2003 the Company had $76.1 million in cash and equivalents and
marketable securities with a total of $67.1 million in working capital. Net cash
used in investing activities was approximately $1.7 million, and net cash used
in financing activities was approximately $0.3 million for the three months
ended June 30, 2003.
The Company currently believes that the cash and equivalents and marketable
securities on hand will be sufficient to meet our working capital requirements
through our fiscal year 2004 and for the foreseeable future thereafter. After
that time, we may require additional funds to support our working capital
requirements or for other purposes and may seek to raise such additional funds
through public or private equity financings or from other sources. The Company
cannot be certain that additional financing will be available on terms favorable
to us, or on any terms, or that any additional financing will not be dilutive.
The Company continues to evaluate potential strategic acquisitions that could
utilize equity and, or, cash resources. Such opportunities could develop quickly
due to market and competitive factors.
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
In addition to reporting financial results in accordance with generally accepted
accounting principles, or GAAP, we include non-GAAP supplemental pro forma
financial information in our earnings press releases. Our non-GAAP supplemental
pro forma net income (loss) and net income (loss) per share results generally
exclude from the comparable GAAP amounts the effects of acquisition related
charges, such as amortization of capitalized software from acquisitions and
acquisition and related costs, and certain other charges such as amortization of
intangible assets and other, investment impairment and restructuring charges.
Our management believes the non-GAAP supplemental pro forma financial
information is useful to investors because it excludes certain non-cash expenses
and facilitates meaningful comparison of our performance between periods. In
accordance with SFAS 142, we discontinued the amortization of goodwill effective
April 1, 2002. The exclusion of amortization expense from the non-GAAP
supplemental pro forma financial information before and after April 1, 2002
enhances the comparability of our results between those periods. Investment
impairment charges and restructuring charges occur on an irregular basis, are
difficult to predict and often reflect in a single reporting period long-term
strategic decisions or external factors. The exclusion of such charges from the
non-GAAP supplemental pro forma financial information enhances comparisons of
our tactical performance between periods. Management uses the non-GAAP
supplemental pro forma financial information to evaluate our financial results,
develop budgets and manage expenditures. These non-GAAP measures may differ from
the non-GAAP measures used by other companies.
The pro forma supplemental financial information is presented for informational
purposes only and is not a substitute for the historical financial information
presented in accordance with accounting principles generally accepted in the
United States of America. Our pro forma basic net loss per share is computed by
dividing pro forma net loss by the weighted average number of outstanding
common shares and our pro forma diluted net loss per share is computed by
dividing pro forma net loss by the weighted average number of outstanding common
shares and common share equivalents relating to stock options and warrants, when
dilutive. Common stock equivalent shares consist of stock options and warrants
(using the treasury stock method). We urge readers to review and consider
carefully the GAAP financial information contained within our SEC filings.
Supplemental information (in thousands, except per share amounts):
16
THREE MONTHS ENDED
JUNE 30,
SUPPLEMENTAL INFORMATION: 2003 2002
----------- -----------
Net loss .................................................. $ (5,665) $ (9,611)
Add back charges:
Amortization of acquired intangible assets and other .... 1,652 1,661
Amortization of capitalized software from acquisitions .. 521 474
Restructuring charges ................................... 812 2,504
----------- -----------
Total add back charges .................................... 2,985 4,639
----------- -----------
Pro forma net loss before pro forma income taxes .......... (2,680) (4,972)
Pro forma income taxes .................................... -- --
----------- -----------
Pro forma net loss ........................................ $ (2,680) $ (4,972)
=========== ===========
Pro forma basic and diluted net loss per share ............ $ (0.12) $ (0.22)
Weighted average common shares outstanding - basic and
diluted ................................................... 21,830 22,363
The accompanying supplemental financial information is presented for
informational purposes only and is not a substitute for the historical financial
information presented in accordance with US GAAP.
Pro forma net income per share is computed using the weighted average number of
shares of Common Stock outstanding. The Company has included the effect of
options and warrants for common stock as calculated using the treasury stock
method when dilutive. Periods with pro forma loss before income taxes do not
include a tax benefit.
NEW ACCOUNTING PRONOUNCEMENTS
New Accounting Pronouncements: In November 2002, the FASB reached a consensus on
EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." This EITF sets out criteria for whether revenue can be recognized
separately from other deliverables in a multiple deliverable arrangement. The
criteria considers whether the delivered item has stand-alone value to the
customer, whether the fair value of the delivered item can be reliably
determined and the rights of returns for the delivered item. This EITF is
required to be adopted by the Company beginning April 1, 2004. The adoption of
this EITF is not anticipated to have a material effect on the Company's
consolidated financial statements.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities," which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 is not
anticipated to have a material effect on the Company's consolidated financial
statements.
In May 2003, the FASB issued Statement 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This statement
changes the classification of certain common financial instruments from either
equity or mezzanine presentation to liabilities in the balance sheet and
requires an issuer of those financial instruments to recognize changes in fair
value or redemption amount, as applicable, in earnings. This statement is
effective for financial instruments entered into or modified after May 31, 2003
and, with one exception, is effective for the quarter beginning July 1, 2003 for
public companies. As the Company has not issued any financial instruments
addressed by this new pronouncement its adoption is not anticipated to have a
material effect on the Company's financial statements.
RISK FACTORS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q for the period ended June 30, 2003 contains certain
forward-looking statements within the meaning of the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements are
based on the beliefs of our management as well as on assumptions made by, and
information currently available to, us at the time such statements were made.
When used in this Form 10-Q, the words "anticipate", "believe", "estimate",
"expect", "intend" and similar expressions, as they relate us, are intended to
identify such forward-looking statements. Although we believe these statements
are reasonable, readers of this Form 10-Q should be aware that actual results
could differ materially from those projected by such forward-looking statements
as a result of the risk factors listed below. Readers of this Form 10-Q should
17
consider carefully the factors listed below, as well as the other information
and data contained in this Form 10-Q. We caution the reader, however, that such
list of may not be exhaustive and that those or other factors, many of which are
outside of our control, could have a material adverse effect on us and our
results of operations. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements set forth hereunder. We undertake no obligation to update
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE.
While our products and services are not seasonal, our revenues and operating
results are difficult to predict and may fluctuate significantly from quarter to
quarter. If our quarterly revenues or operating results fall below the
expectations of investors or securities analysts, the price of our common stock
could fall substantially. A large part of our sales typically occurs in the last
month of a quarter, frequently in the last week or even the last days of the
quarter. If these sales were delayed from one quarter to the next for any
reason, our operating results could fluctuate dramatically. In addition, our
sales cycles may vary, making the timing of sales difficult to predict.
Furthermore, our infrastructure costs are generally fixed. As a result, modest
fluctuations in revenues between quarters may cause large fluctuations in
operating results. These factors all tend to make the timing of revenues
unpredictable and may lead to high period-to-period fluctuations in operating
results.
Our quarterly revenues and operating results may fluctuate for several
additional reasons, many of which are outside of our control, including the
following:
- demand for our products and services;
- the timing of new product introductions and sales of our products and
services;
- unexpected delays in introducing new products and services;
- increased expenses, whether related to sales and marketing, research and
development or administration;
- changes in the rapidly evolving market for Web content management
solutions;
- the mix of revenues from product licenses and services, as well as the
mix of products licensed;
- the mix of services provided and whether services are provided by our
staff or third-party contractors;
- the mix of domestic and international sales;
- costs related to possible acquisitions of technology or businesses;
- general economic conditions; and
- public announcements by our competitors.
POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO COMPLETE OR TO INTEGRATE AND MAY
DIVERT MANAGEMENT'S ATTENTION.
We may seek to acquire or invest in businesses, products or technologies that
are complementary to our business. If we identify an appropriate acquisition
opportunity, we may be unable to negotiate favorable terms for that acquisition,
successfully finance the acquisition or to integrate the new business or
products into our existing business and operations. In addition, the negotiation
of potential acquisitions and the integration of acquired businesses or products
may divert management time and resources from our existing business and
operations. To finance acquisitions, we may use a substantial portion of our
available cash or we may issue additional securities, which would cause dilution
to our shareholders.
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WE MAY NOT BE PROFITABLE IN THE FUTURE.
Our revenues may not grow in future periods and we may not achieve quarterly pro
forma profitability. If we do not regain our pro forma profitability, the market
price of our stock may fall. Our ability to regain pro forma profitable
operations depends upon many factors beyond our direct control. These factors
include, but are not limited to:
- the demand for our products;
- our ability to quickly introduce new products;
- the level of product and price competition;
- our ability to control costs; and
- general economic conditions.
THE INTENSE COMPETITION IN OUR INDUSTRY MAY REDUCE OUR FUTURE SALES AND PROFITS.
The market for our products is highly competitive and is likely to become more
competitive. We may not be able to compete successfully in our chosen
marketplace, which may have a material adverse effect on our business, operating
results and financial condition. Additional competition may cause pricing
pressure, reduced sales and margins, or prevent our products from gaining and
sustaining market acceptance. Many of our current and potential competitors have
greater name recognition, access to larger customer bases, and substantially
more resources than we have. Competitors with greater resources than ours may be
able to respond more quickly than we can to new opportunities, changing
technology, product standards or customer requirements.
WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.
We are a small company and depend greatly on the knowledge and experience of our
senior management team and other key personnel. If we lose any of these key
personnel, our business, operating results and financial condition could be
materially adversely affected. Our success will depend in part on our ability to
attract and retain additional personnel with the highly specialized expertise
necessary to generate revenue, engineer, design and support our products and
services. Like other software companies, we face intense competition for
qualified personnel. We may not be able to attract or retain such personnel.
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR UNIVERSAL CONTENT
MANAGEMENT SOFTWARE AND CONTENT COMPONENT SOFTWARE PRODUCTS FOR OUR REVENUES.
We currently derive all of our revenues from product licenses and services
associated with our system of content management and viewing software products.
The market for content management and viewing software products is new and
rapidly evolving. We cannot be certain that a viable market for our products
will continue or that it will be sustainable. If we do not increase employee
productivity and revenues related to our existing products or generate revenues
from new products and services, our business, operating results and financial
condition may be materially adversely affected. We will continue to depend on
revenues related to new and enhanced versions of our software products for the
foreseeable future. Our success will largely depend on our ability to increase
sales from existing products and generate sales from product enhancements and
new products. We cannot be certain that we will be successful in upgrading and
marketing our existing products or that we will be successful in developing and
marketing new products and services. The market for our products is highly
competitive and is subject to rapid technological change. Technological advances
could make our products less attractive to customers and adversely affect our
business. In addition, complex software product development involves certain
inherent risks, including risks that errors may be found in a product
enhancement or new product after its release, even after extensive testing, and
the risk that discovered errors may not be corrected in a timely manner.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY.
If we are unable to protect our intellectual property, or incur significant
expense in doing so, our business, operating results and financial condition may
be materially adversely affected. Any steps we take to protect our intellectual
property may be inadequate, time consuming and expensive. We currently have one
pending patent application; but, no patent has yet been issued. Without
significant patent or copyright protection, we may be vulnerable to competitors
who develop functionally equivalent products. We may also be subject to claims
that our current products infringe on the intellectual property rights of
others. Any such claim may have a material adverse effect on our business,
operating results and financial condition.
We anticipate that software product developers will be increasingly subject to
infringement claims due to growth in the
19
number of products and competitors in our industry, and the overlap in
functionality of products in different industries. Any infringement claim,
regardless of its merit, could be time-consuming, expensive to defend, or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements may not be available on commercially favorable terms, or at
all.
We rely on trade secret protection, confidentiality procedures and contractual
provisions to protect our proprietary information. Despite our attempts to
protect our confidential and proprietary information, others may gain access to
this information. Alternatively, other companies may independently develop
substantially equivalent information.
OUR PRODUCTS MAY NOT BE COMPATIBLE WITH COMMERCIAL WEB BROWSERS AND OPERATING
SYSTEMS.
Our products utilize interfaces that are compatible with commercial Web
browsers. In addition, our Stellent Content Management System is a server-based
system written in Java that functions in both Windows NT and UNIX environments.
We must continually modify our products to conform to commercial Web browsers
and operating systems. If our products were to become incompatible with
commercial Web browsers and operating systems, our business would be harmed. In
addition, uncertainty related to the timing and nature of product introductions
or modifications by vendors of Web browsers and operating systems may have a
material adverse effect on our business, operating results and financial
condition.
WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS FAIL TO PERFORM
TO SPECIFICATIONS.
If software errors or design defects in our products cause damage to customers'
data and our agreements do not protect us from related product liability claims,
our business, operating results and financial condition may be materially
adversely affected. In addition, we could be subject to product liability claims
if our security features fail to prevent unauthorized third parties from
entering our customers' intranet, extranet or Internet Web sites. Our software
products are complex and sophisticated and may contain design defects or
software errors that are difficult to detect and correct. Errors, bugs or
viruses spread by third parties may result in the loss of market acceptance or
the loss of customer data. Our agreements with customers that attempt to limit
our exposure to product liability claims may not be enforceable in certain
jurisdictions where we operate.
FUTURE REGULATIONS COULD BE ADOPTED THAT RESTRICT OUR BUSINESS.
Federal, state or foreign agencies may adopt new legislation or regulations
governing the use and quality of Web content. We cannot predict if or how any
future laws or regulations would impact our business and operations. Even though
these laws and regulations may not apply to our business directly, they could
indirectly harm us to the extent that they impact our customers and potential
customers.
WE HAVE BEEN NAMED A DEFENDANT IN SECURITIES CLASS ACTION LITIGATION AND WE MAY
IN THE FUTURE BE NAMED IN ADDITIONAL LITIGATION, WHICH MAY RESULT IN SUBSTANTIAL
COSTS AND DIVERT MANAGEMENT'S ATTENTION AND RESOURCES.
As described in Part II -- Item 1: Legal Proceedings, several putative class
action suits have been filed naming the Company and certain of our current and
former officers and directors as co-defendants. We intend to vigorously defend
ourselves against the suits and seek the suits' dismissal at the appropriate
time. However, it is possible that the litigation could be resolved adversely,
could result in substantial costs and/or could divert management's attention and
resources, which could seriously harm our business.
More generally, securities class-action litigation has often been brought
against companies following periods of volatility in the price of their
securities. This risk is greater for technology companies, which have
experienced greater-than-average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other industries. We may in the future be the
target of this kind of litigation and such litigation could also result in
substantial costs and divert management's attention and resources.
THE MARKET PRICE OF OUR COMMON STOCK COULD FLUCTUATE SIGNIFICANTLY
The market price of our common stock has fluctuated significantly in the past
and may do so in the future. The market price of our common stock may be
affected by each of the following factors, many of which are outside of our
control:
- variations in quarterly operating results;
20
- changes in estimates by securities analysts;
- changes in market valuations of companies in our industry;
- announcements of significant events, such as major sales;
- acquisitions of businesses or losses of major customers;
- additions or departures of key personnel; and
- sales of our equity securities.
OUR PERFORMANCE WILL DEPEND ON THE CONTINUING GROWTH AND ACCEPTANCE OF THE WEB.
Our products are designed to be used with intranets, extranets and the Internet.
If the use of these methods of electronic communication does not grow, our
business, operating results and financial condition may be materially adversely
affected. Continued growth in the use of the Web will require ongoing and
widespread interest in its capabilities for communication and commerce. Its
growth will also require maintenance and expansion of the infrastructure
supporting its use and the development of performance improvements, such as high
speed modems. The Web infrastructure may not be able to support the demands
placed on it by continued growth. The ongoing development of corporate intranets
depends on continuation of the trend toward network-based computing and on the
willingness of businesses to reengineer the processes used to create, store,
manage and distribute their data. All of these factors are outside of our
control.
OUR EXISTING SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE OVER US.
As of June 30, 2003, Robert F. Olson, our President, Chief Executive Officer and
the Chairman, of our Board of Directors holds approximately 10.0% of our
outstanding common stock. Accordingly, Mr. Olson is able to exercise significant
control over our affairs. As a group, our directors and executive officers
beneficially own approximately 13.0% of our common stock. These persons have
significant influence over our affairs, including approval of the acquisition or
disposition of assets, future issuances of common stock or other securities and
the authorization of dividends on our common stock. Our directors and executive
officers could use their stock ownership to delay, defer or prevent a change in
control of our company, depriving shareholders of the opportunity to sell their
stock at a price in excess of the prevailing market price.
WE CAN ISSUE SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL, WHICH COULD
ADVERSELY AFFECT THE RIGHTS OF COMMON SHAREHOLDERS.
Our Articles of Incorporation permit us to establish the rights, privileges,
preferences and restrictions, including voting rights, of unissued shares of our
capital stock and to issue such shares without approval from our shareholders.
The rights of holders of our common stock may suffer as a result of the rights
granted to holders of preferred stock that may be issued in the future. In
addition, we could issue preferred stock to prevent a change in control of our
company, depriving shareholders of an opportunity to sell their stock at a price
in excess of the prevailing market price.
OUR SHAREHOLDER RIGHTS PLAN AND CERTAIN PROVISIONS OF MINNESOTA LAW MAY MAKE A
TAKEOVER OF STELLENT DIFFICULT, DEPRIVING SHAREHOLDERS OF OPPORTUNITIES TO SELL
SHARES AT ABOVE-MARKET PRICES.
Our shareholder rights plan and certain provisions of Minnesota law may have the
effect of discouraging attempts to acquire the Company without the approval of
our Board of Directors. Consequently, our shareholders may lose opportunities to
sell their stock for a price in excess of the prevailing market price.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our interest income on cash and marketable securities is affected by changes in
interest rates in the United States. Through June 30, 2003, changes in these
rates have had a significant effect on our company. Interest rates earned on
invested funds have fallen by over 50% since June 2002. The Company believes
that there may be future exposure to interest rate market risk.
Our investments are held in commercial paper which is affected by equity price
market risk and other factors. The Company does not anticipate that exposure to
these risks will have a material impact on us, due to the nature of our
investments.
21
The Company has no history of, and do not anticipate in the future, investing in
derivative financial instruments. Many transactions with international customers
are entered into in U.S. dollars, precluding the need for foreign currency
hedges. Any transactions that are currently entered into in foreign currency are
not deemed material to the financial statements. Thus, the exposure to market
risk is not material.
ITEM 4. DISCLOSURE PROCEDURES AND CONTROLS
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer, of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act")). Based on this evaluation, our chief executive
officer and chief financial officer concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. There was no change in our
internal control over financial reporting during our most recently completed
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 31, 2003 a putative class action was commenced by a Stellent Inc.
("Stellent" or the "Company") shareholder alleging that certain current and
former Stellent officers and directors violated Section 10(b) and Section 20(a)
of the federal securities laws. The lawsuit alleges, in essence, that the
defendants violated the securities laws by making optimistic statements during a
time when they should have known that business prospects were less promising.
The lawsuit is captioned, Kenneth Brown, on behalf of himself and all others
similarly situated v. Stellent Inc., Robert F. Olson, Vernon J. Hanzlik and
Gregg A. Waldon and is pending in United States District Court for the District
of Minnesota. Almost identical securities actions have been brought against
Stellent and certain former officers and directors in the United States District
Court for the District of Minnesota. The additional actions allege identical
claims.
The Company denies the allegations and is vigorously defending against the
claims. It is too early to predict the likelihood of prevailing on the various
lawsuits described above. The Company has strong defenses and does maintain
directors and officers insurance that it obtained to provide coverage (in whole
or in part) for claims such as those outlined above.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed with this report.
22
FILE DESCRIPTION REFERENCE
---- ----------- ---------
10.49 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Robert F. Olson.
10.50 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Daniel P. Ryan.
10.51 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Gregg A. Waldon.
31.1 Certification by Robert F. Olson, Electronic Transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Gregg A. Waldon, Electronic Transmission
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certification by Robert F. Olson, Electronic Transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Gregg A. Waldon, Electronic Transmission
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002.
99 Trading Plan of Robert F. Olson Electronic Transmission
pursuant to Rule 10b5-1(c) of the
Securities Exchange Act of 1934.
(b) Reports on Form 8-K.
A Form 8-K Current Report was filed, dated April 1, 2003, relating to a
press release by the Company that included preliminary financial information in
its fiscal fourth quarter, and fiscal year, ended March 31, 2003.
A Form 8-K Current Report was filed, dated April 29, 2003, relating to
a press release by the Company that included financial information in its fiscal
fourth quarter, and fiscal year, ended March 31, 2003.
23
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.
Stellent, Inc.
-------------------------
(Registrant)
Date: August 14, 2003 By: /s/ Robert F. Olson
--------------------------------------------
Robert F. Olson,
Chairman of the Board, President and Chief
Executive Officer
(Principal Executive Officer)
Date: August 14, 2003 By: /s/ Gregg A. Waldon
--------------------------------------------
Gregg A. Waldon
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
(Principal Financial and Accounting Officer)
24
FILE DESCRIPTION REFERENCE
---- ----------- ---------
10.49 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Robert F. Olson.
10.50 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Daniel P. Ryan.
10.51 Employment Agreement Dated April 1, Electronic transmission
2003 by and between the Registrant
and Gregg A. Waldon.
31.1 Certification by Robert F. Olson, Electronic Transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Gregg A. Waldon, Electronic Transmission
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certification by Robert F. Olson, Electronic Transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant
to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Gregg A. Waldon, Electronic Transmission
Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002.
99 Trading Plan of Robert F. Olson Electronic Transmission
pursuant to Rule 10b5-1(c) of the
Securities Exchange Act of 1934.
27