Revenues and pre-tax earnings per quarter were as follows in fiscal 2007:
|in € thousands||Q1 2007||Q2 2007||Q3 2007||Q4 2007||2007|
|in % of annual revenue||25.2||24.4||23.1||27.3||100.0|
|Earnings before taxes||28,163||37,946||30,412||40,570||137,091|
|in % of net income for the year||20.5||27.7||22.2||29.6||100.0|
In order to show seasonal influences, the revenues of SPL Software Ltd., Israel from January 1, 2007 through March 31, 2007 as well as the revenues of webMethods, Inc., USA from January 1, 2007 through May 24, 2007 were added to the revenues of the Software AG Group. Prior years showed a similar structure of revenues per quarter, which primarily reflects the purchasing behavior of our customers.
Pre-tax earnings show unadjusted values for Software AG Group, excluding minority interests of acquired companies from the beginning of the year up to the date of acquisition. Because of the acquisitions of these companies and the cost synergies achieved during the fiscal year, the presentation does not reflect the normalized profit allocation. For this reason, no forward-looking statements can be derived from this profit allocation.
Given the forward-looking nature of these disclosures, the presentation of the previous year’s figures was omitted.
|in € thousands||March 31, 2008||Dec. 31, 2007||March 31, 2007|
The carrying amount of collateral received is €521 thousand (Q1 2007: €0 thousand).
Other financial commitments
The Company has entered into rent and lease agreements for buildings, land, computer and telephone equipment, and vehicles. The obligations under these agreements for their remaining non-cancelable terms up until the end of fiscal 2008 amount to €7,506 thousand (Q1 2007: €6,318 thousand). Obligations of €40,915 thousand exist for the period up until the end of fiscal year 2013 (Q1 2007: €23,822 thousand until the end of fiscal 2012), and obligations of €6,130 thousand for the period after fiscal 2013 (Q1 2007: €4,612 thousand for the period after fiscal 2012). The lease agreements are operating leases as defined in IAS 17.
Stock option plans
Software AG has different stock option plans for members of the Executive Board, officers, and employees of the Group. In the first quarter of 2008, in accordance with IFRS 2, personnel expenses of €281 thousand were recognized for stock option plans with optional fulfillment through equity instruments, and personnel expenses of €844 thousand were posted for stock option programs with fulfillment through cash settlement. A total of 36,013 options were exercised in the first quarter from the second stock option plan, and 502 stock options were withdrawn. A further total of 155,392 options from this plan were issued to Executive Board members and officers.
Another 14,500 stock options with an exercise price of €72.36 were issued to officers and employees in Q1 2008 as part of the third stock price based compensation plan, and 21,000 stock options were withdrawn from officers and employees due to departure from the Company. Another 75,000 subscription rights granted as stock options were converted into stock appreciation rights. Thus 907,500 subscription rights were granted as stock options and an additional 1,100,000 as stock appreciation rights from the third stock price based compensation plan as of the end of the quarter. A total of 574,825 stock options were not measured due to expected employee turnover.
Please refer to the 2007 Annual Report for further disclosures on the option plans.
Notes on Significant Business Events
1. Acquisition of the software division of Jacada Ltd., Israel
As of January 1, 2008, Software AG acquired business units and assets of Jacada Ltd., Israel. Through its acquisition of Jacada’s Application Modernization Division, Software AG enhanced its product portfolio by adding new products for the modernization of user interfaces in applications that run on large and medium-sized systems. Jacada Ltd. is publicly listed on the US Nasdaq exchange (Nasdaq: JCDA).
Breakdown of purchase price
The purchase price paid for Jacada’s Application Modernization Division was €17,665 thousand (US$26,000 thousand). The purchase price was paid on January 2, 2008. The cost of the business combination has been allocated provisionally in accordance with IFRS 3.62 as follows:
in € thousands
Fair value as of
January 01, 2008
Carrying amount prior
|Carrying amount of the assets acquired||0|
|Cost of the business combination||17,665|
The Application Modernization Division acquired from Jacada generated annual revenue of approximately US$12 million in 2007. The achieved profit margin was higher than the Group average of Software AG. Software AG gained more than 200 corporate customers, primarily from the USA, as a result of this acquisition. For these reasons, a customer base was recognized as part of the initial accounting.
The software that the Group has acquired is designed for the modernization of user interfaces in applications that run on large and medium-sized systems. It supplements Software AG’s product portfolio in the field of legacy modernization. Based upon a preliminary assessment, it was valued at €2,470 thousand.
Contribution to revenue and earnings since acquisition on January 1, 2008
Since the date of acquisition on January 1, 2008, the Application Modernization Division acquired from Jacada has contributed €598 thousand to Group revenues and has impacted Group net income for the year with €-107 thousand. As the Jacada software division has been completely integrated into Software AG, the contribution to Group net income for the year could be determined only by means of an estimate. Because the date of acquisition was January 1, 2008, a presentation of these profit figures as if the acquisition had occurred at the beginning of fiscal 2008 can be omitted.
Expenses related to the acquisition of the Jacada software division
The customer base, which was identified as an asset in connection with the acquisition of Jacada’s Application Modernization Division, will be amortized over a period of 10 years. Jacada’s acquired software will be amortized over a period of 5 years. Total amortization in Q1 2008 was €504 thousand. There were no other expenses connected with this acquisition, and no further expenses are expected.
2. Software AG also acquired the remaining minority interests of the following companies in Q1 2008:
These acquisitions of remaining minority interests eliminated the need to report minority interests in equity and net income in the quarterly consolidated financial statements as of March 31, 2008.
3. Earn-out payments for earlier acquisitions
Revenue-based earn-out payments of €488 thousand for Software A.G. (Israel) Ltd. (previously Sabratec Ltd., Israel) and €332 thousand for Casabac Technologies GmbH, Germany, were paid in Q1 2008.
4. Currency translation effects
The strong euro, particularly in relation to the U.S. dollar, caused negative currency translation effects on Group revenues compared to the same period in the previous year in the amount of €11,040 thousand.
As of March 31, 2008, the effective number of employees (i.e., part-time employees are taken into account on a pro-rata basis only) amounted to 3,426 (March 31, 2007: 2,599), 77.9 percent of whom were employed abroad (March 31, 2007: 71.2 percent). In absolute terms (i.e., part-time employees are taken fully into account), the Group employed 3,576 people (March 31, 2007: 2,711) at the end of the first quarter on March 31, 2008.
Events after the balance sheet date
The term of office of Mr. Justus Mische, who has been a member of the Supervisory Board since December 09, 2002, and who was selected by the Annual Shareholders’ Meeting, ended with the end of the Annual Shareholders’ Meeting on April 29, 2008, as he had reached the age limit specified in the articles of association.
Mr. Willi Berchtold, Dipl. Oec., Chief Financial Officer, Controlling and Informatics at ZF Friedrichshafen AG, and residing in Überlingen, was selected by the Annual Shareholders’ Meeting on April 29, 2008 as a new member of the Supervisory Board.
Mr. David Mitchell resigned his office as member of the Executive Board on April 29, 2008. He had previously been responsible for sales in the webMethods business division.
Reorganization of the Executive Board
On April 29, 2008, the Supervisory Board approved a reorganization of the Executive Board. The sales organizations of the two business divisions, webMethods and ETS, will each be placed under the direction of two Executive Board members with different regional responsibility. Region West (North and South America, Western and Southern Europe), will be led by Executive Board member Mark Edwards, who was previously the Chief Operation Officer for the ETS Division. Region East (Northern and Central Europe, Africa, Australia, and Asia) will be led by David Broadbent, who was previously the Chief Product Officer for the ETS Division, and who directed sales in the Asia/Pacific region.
Dr. Peter Kürpick, who was previously responsible for R&D in the webMethods Division, will also assume responsibility for R&D in the ETS Division.
Date of release of the consolidated interim financial statements
Software AG’s Executive Board approved the quarterly consolidated financial statements on May 9, 2008.