Basis of presentation Software AG’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB) and as applicable in the EU. The IAS/IFRSs applicable as of December 31, 2006 were observed, as were the corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC – formerly SIC). The same accounting policies were used as in the financial statements for 2006 with the exception of the new standard IFRS 8. Accounting policies are not, therefore, explained in detail in these quarterly financial statements. Since the new IFRS 8 standard has not yet been approved by the European Union, this interim report contains an additional segment report according to the previous standard, IAS 14. The quarterly financial statements are prepared in accordance with IAS 34, Interim Financial Reporting, as well as the regulations of the German Securities Trading Act (WpHG) and the rules of the Frankfurt Stock Exchange.
These interim financial statements have not been audited in accordance with section 317 of the German Commercial Code (HGB) or reviewed by an auditor.
The consolidated financial statements of Software AG are expressed in thousands of euros unless otherwise stated.
The companies in the consolidated group changed as follows in comparison with December 31, 2006.
SPL Software, Ltd., Israel Effective April 1, 2007, Software AG acquired 80.08 percent of the shares in SPL Software, Ltd., Israel (SPL), along with its five subsidiaries. The fixed cost for obtaining 80.08 percent of the shares, including costs directly attributable to the acquisition, amounted to €43,174 thousand. With regard to the remaining 19.92 percent of the shares, Software AG holds a call option and the seller holds a put option that may be exercised within two years of purchase of the company. The purchase price for the remaining shares will be calculated on the basis of the operating result for fiscal 2007. The price was set at €7,888 thousand in connection with initial inclusion of SPL in the consolidated financial statements of Software AG. Based on the requirements of IFRS 3 regarding the treatment of combined put and call options, 100 percent of the shares in the SPL companies was initially included in the consolidated financial statements of Software AG as of the date of acquisition. At the time of their acquisition, these companies contributed equity of €2,958 thousand to the consolidated accounts. In fiscal 2006, the SPL companies generated revenues amounting to €31,298 thousand.
webMethods, Inc., USA On May 25, 2007, a majority shareholding was assumed in webMethods, Inc., Fairfax, Virginia, USA. A 100-percent shareholding was subsequently acquired as of June 1, 2007. Given that Software AG effectively acquired control of webMethods as of May 25, 2007 (date of acquisition), webMethods and its 23 subsidiaries were included in the consolidated accounts of Software AG as of that date.
The cost for acquiring 100 percent of the shares, including costs directly attributable to the acquisition, amounted to €416,640 thousand (USD 559,548 thousand). As of the date of acquisition, the webMethods Group contributed equity of €150,244 thousand to the consolidated accounts. In the fiscal year extending from April 1, 2006 to March 31, 2007, the webMethods Group generated revenues in the amount of €156,719 thousand.
Earnings per share were calculated by dividing net income for the period attributable to Software AG’s shareholders by the weighted average number of shares outstanding during the reporting period and have been presented accordingly. Software AG has only issued common shares. In the third quarter of 2007, the weighted average number of shares was 28,496,985; in the first three quarters of 2007, the weighted average number of shares was 28,411,120.
In the first three quarters of 2007, a total of 400,783 stock options were exercised, of which 33,027 options were exercised under the first and second stock option plan.
The number of shares increased correspondingly by 400,783. Another 41,441 stock options may be exercised from the second stock option plan in fiscal 2007. The diluted earnings per share figure was thus calculated for these potential shares using the treasury stock method and presented accordingly for the reporting period. Diluted earnings per share were computed by dividing net income for the period attributable to Software AG’s shareholders by the number of shares issued and the exercisable stock options.