Revenues and earnings before taxes were distributed over fiscal 2006 as follows:
|€ thousands||Q1 2006||Q2 2006||Q3 2006||Q4 2006||2006|
|in % of annual revenue||23.6||25.1||23.5||27.8||100|
|Earnings before taxes||23,602||31,822||27,794||35,338||118,556|
|in % of net income |
for the year
The distribution of revenues was similarly structured in previous years, primarily due to the purchasing behavior of our customers.
As a result of the purchase of SPL Software, Israel, effective April 1, 2007 and the planned acquisition of webMethods in the second quarter of 2007, the distribution of revenues and earnings before taxes over the quarters of the current fiscal year cannot yet be projected.
Software AG has two different stock option plans for members of the Executive Board, officers, and employees. This resulted in personnel expenses of €1,385 thousand in the first quarter of 2007 due to the transition regulations set out in IFRS 2. Additional personnel expenses of approx. €248 thousand are expected for the remainder of fiscal 2007. The high level of personnel expenses in the first quarter of 2007 resulted from exercise of a greater number of stock options than had been expected when budgeting expenses. A total of 327,067 options were exercised in the first quarter of 2007. Another 16,729 stock options were withdrawn. As a result, as of March 31, 2007, a total of 316,271 stock options remain outstanding for exercise by members of the Executive Board and officers. As of December 31, 2006, 660,067 stock options had been issued to members of the Executive Board, officers, and employees.
Please refer to the 2006 Annual Report for further disclosures on the option plans.
The Company has entered into rent and lease for buildings, land, computer and telephone equipment, and vehicles. The obligations under these leases for their remaining non-cancelable terms up to the end of fiscal year 2007 amount to €6,318 thousand. Obligations of €23,822 thousand exist for the period up to the end of fiscal year 2012, and obligations of €4,612 thousand for the period after fiscal year 2012. The lease agreements are operating leases as defined in IAS 17.
Payment obligations of € 46.141 thousand resulted from the acquisition of SPL Software, Israel.
Expenses of €4,105 thousand were incurred in the first quarter due to restructuring activities, especially at Software AG Spain.
Due to the strength of the euro, especially against the U.S. dollar, currency translation losses of €6,100 thousand were incurred on Group sales and €3,847 thousand on Group EBITA in comparison with the prior-year quarter
The segment report will be prepared and published for the first time with a break-down by business line due to the realignment of Executive Board areas of responsibility to reflect the business lines of ETS and Crossvision and the according change in internal segment reporting.
As of March 31, 2007, the effective number of employees (i.e., part time employees are taken into account on a pro-rata basis only) amounted 2,599 (March 31, 2006: 2,771), 71.2 percent of whom were employed abroad (prior year: 72.0 percent). In absolute terms, the Group employed 2,711 people (prior year: 2,847) at the end of the first quarter (March 31, 2007).
In addition to the executive area of responsibility for Crossvision, Software AG set up an additional executive area of responsibility for ETS effective January 8, 2007 for which David Broadbent is responsible. Mr. Broadbent was appointed to the Executive Board as of January 8, 2007. In addition, the sales territories of Software AG were reallocated. In connection with the reorganization, Executive Board member Christian Barrios Marchant, previously responsible for the Southern and Western Europe/Latin America region, left the Company effective January 8, 2007.
Acquisition of SPL Software in Israel Effective April 1, 2007, Software AG acquired 80.08 percent of the shares in SPL Software, the Company's Israeli sales partner. This acquisition gives Software AG a direct market presence in Israel. Prior to the takeover, SPL Software was a wholly-owned subsidiary of the Silverboim Group and was Software AG's sales partner in Israel for 30 years. With its high-capacity IT business solutions, SPL Software is well positioned in banking and insurance, public utilities, and the public sector. Silverboim will retain a 20 percent share in SPL Software to secure its extensive contacts in the financial sector.
Cost of the business combination: The fixed cost for the 80 percent of the shares acquired amounted €46,141 thousand (USD 61,610 thousand). The first installment was paid on April 1, 2007.
The cost of the business combination has been determined provisionally pursuant to IFRS 3.62 as follows:
|€ thousands||Fair value||Carrying
|Cash and cash equivalents||4,832||4,832|
|Trade receivables and other current assets||7,054||7,054|
|Intangible assets customer base||18,121||7,643|
|Property, plant and equipment||2,197||2,197|
|Long-term equity investments||351||351|
|Non-current financial assets||52||52|
|Liabilities to banks|| 3,416|| 3,416|
|Trade payables and other current liabilities|| 9,165|| 9,166|
|Deferred tax liabilities|| 6,846|| 141|
|Deferred income|| 5,788|| 5,788|
|Carrying amount of the assets acquired|| 3,751|
|Cost of the business combination||46,141|
Goodwill: It was necessary to recognize goodwill due to the good market position of SPL Software and the possibility of leveraging this position to establish direct client relationships and penetrate new market segments.
Customer base: SPL Software has been Software AG's exclusive sales partner in Israel for 30 years. Based on modern software infrastructure technology from Software AG such as the Adabas 2006 database software, the Natural 2006 programming language, and the SOA Crossvision Suite, SPL has developed modern business applications for its customers. SPL's customers include leading companies in Israel, among them banks, insurance carriers, telecommunications service providers, industrial enterprises, and government agencies. More than 80 companies and public institutions utilize Software AG products distributed by SPL Software. For this reason, the initial accounting for the business combination includes SPL's customer base.
Earnings contribution since the date of acquisition: Since the acquisition date fell in the second quarter, net income for the first quarter does not include any earnings components from the acquired entity.
Software AG planning acquisition of webMethods, Inc., USA On April 18, 2007, Software AG announced the start of a public tender offer for all outstanding shares in webMethods, Inc., which is listed on the U.S. NASDAQ. The tender offer is being made pursuant to the merger agreement concluded on April 4, 2007 and announced on April 5, 2007 concerning the planned takeover of webMethods by Software AG. Software AG is offering all webMethods shareholders the opportunity to sell their shares for USD 9.15 (€6.88) per share net to the seller in cash via Wizard Acquisition Inc., USA, a wholly-owned subsidiary of Software AG. The tender offer is worth a total of approximately USD 546 million (approximately €410 million). After acquisition of the shares and the subsequent merger, webMethods will be an indirectly held subsidiary of Software AG.