// Script generated by Search Maker Pro: page=new Array();page[1]=new Array("http://www.netfedreports.de/sag0304/en/index.html","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar In August 2004, Software AG streamlined its international structure (see second-quarter report, events subsequent to the balance-sheet date). The Company’s activities are now organized into three regions: North America/Northern Europe (USA, Canada, United Kingdom, Scandinavia, South Africa) South (Southern Europe, South and Central America) Central/Asia (German-speaking countries, Eastern Europe, Middle East, Asia, Australia) This second-quarter report is still based on the four regions structure to make comparison with the previous quarter and the first half of 2004 easier. Business Development Text fehlt!! here ... Text fehlt! more ... Reporting Software AG financial reporting for 2004 is being prepared according to International Financial Reporting Standards (IFRS). You can find more information on the accounting methods used and the reconciliation with 2003 figures here. Download Interim Report Q3/04 (PDF) More Infos Interim Report Q1/04 Interim Report Q2/04 Annual Report 2003 Home | Legal Aspects | Impressum ©2004 Software AG"); page[2]=new Array("http://www.netfedreports.de/sag0304/en/contact/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Contact Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Contact Software AG Corporate Headquarters Uhlandstraίe 12 64297 Darmstadt, Germany Tel. +49 61 51-92-0 Fax +49 61 51-92-19 33 www.softwareag.com Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[3]=new Array("http://www.netfedreports.de/sag0304/en/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar In August 2004, Software AG streamlined its international structure (see second-quarter report, events subsequent to the balance-sheet date). The Company’s activities are now organized into three regions: North America/Northern Europe (USA, Canada, United Kingdom, Scandinavia, South Africa) South (Southern Europe, South and Central America) Central/Asia (German-speaking countries, Eastern Europe, Middle East, Asia, Australia) This second-quarter report is still based on the four regions structure to make comparison with the previous quarter and the first half of 2004 easier. Business Development Text fehlt!! here ... Text fehlt! more ... Reporting Software AG financial reporting for 2004 is being prepared according to International Financial Reporting Standards (IFRS). You can find more information on the accounting methods used and the reconciliation with 2003 figures here. Download Interim Report Q3/04 (PDF) More Infos Interim Report Q1/04 Interim Report Q2/04 Annual Report 2003 Home | Legal Aspects | Impressum ©2004 Software AG"); page[4]=new Array("http://www.netfedreports.de/sag0304/en/keyfigures/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Key figures Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Key figures Key figures IFRS, unaudited € millions (unless stated) Sep 30, 2004 Sep 30, 2003 Q3 2004 Q3 2003 Revenue 298.6 305.0 96.6 98.7 Products 214.6 212.3 71.1 71.2 of which licensing 77.7 68.7 25.1 22.9 of which maintenance 136.9 143.6 46.0 48.3 Professional services 82.8 91.4 25.2 27.1 Other 1.2 1.3 0.3 0.4 Adjusted EBIT 60.4 41.2 21.0 15.7 as % of revenue 20% 14% 22% 16% Income from investments 24.5 0 0 0 Restructuring expenses 0 - 31.8 0 0 EBIT 84.9 9.4 21.0 15.7 Income before taxes 87.3 11.6 21.9 16.4 as % of revenue 29% 4% 23% 17% Income after taxes 61.9 2.9 12.7 6.5 as % of revenue 21% 1% 13% 7% Earnings per share (€) 2.27 0.11 0.47 0.24 Q3 2004 Q3 2003 Employees (quartery average) 2,445 2,743 of which in Germany 776 978 € millions (unless stated) Sep 30, 2004 Dec 31, 2003 Total assets 515.2 509.1 Cash and cash equivalents 110.2 74.2 Shareholders´equity 312.7 269.2 as % of total assets 61% 53% Print Download Interim Report Q3/04 (PDF) More Infos Consolidated Balance Sheet Consolidated Income Statement Key figures 2002 Key figures 2001 Home | Legal Aspects | Impressum ©2004 Software AG"); page[5]=new Array("http://www.netfedreports.de/sag0304/en/profile/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Profile Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Profile Software AG is an international provider of systems software and XML integration and data-management services. We offer integration solutions based on XML (eXtensible markup language), a key technology for the smooth exchange of data and documents, and a powerful means of introducing state-of-the-art applications into existing IT architectures. We are the European No. 1 and one of the world leaders in this area. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[6]=new Array("http://www.netfedreports.de/sag0304/en/executiveboard/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Introduction by the Executive Board Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Firm foundations for growth Karl-Heinz Streibich Chief Executive Officer Software AG has made great progress in terms of strategy over the past nine months, and is significantly stronger as a result. Our future growth plans are clearly oriented toward achieving market leadership. Increased profitability, a more stable revenue base, and greater depth in terms of financial resources – they were the ambitious goals we set for fiscal 2004. And we left no stone unturned in their pursuit: Our strategic orientation, service portfolio, and internal organizational structures are all now more clearly focused on and driven by customer requirements. The changes are already paying dividends. Software AG today offers its customers outstanding added value. And we have significantly consolidated our market position. Allied with improvements in the economy as a whole, this has laid the groundwork for successful future growth. Consolidating and leveraging solutions expertise At the same time as optimizing our Enterprise Transaction Systems offering, we have also been working hard to develop the XML Business Integration Portfolio, successfully adding complete integration solutions: At the beginning of the year, the portfolio consisted solely of Integration Services and the EntireX and Tamino XML Server product lines. In the first half of the year, we added Integration Packages, and during the third quarter, Integration Solutions. These were based on concepts first developed in the regions and adapted for the international market. Each one embodies outstanding best practices and draws on our in-depth project experience. All the new solutions leverage existing strengths and apply them on a global level. International demand for integration Companies are increasingly looking to achieve tight integration. To succeed in today’s marketplace, they need to react rapidly to changing requirements. And to do this, they need to exchange information between a diverse range of systems and applications – not only internally, but also with customers, suppliers, and partners. E-government, too, is playing an increasingly prominent role, with official bodies placing greater emphasis on data transfer as a result. In both areas, systems integration is central to effective collaboration, accelerated processes, and optimized costs. As a result, it is a major success factor – in both the private and public sectors. The enhancement of our Integration Portfolio expands our footprint in this promising market. Software AG is already beginning to exploit some of the opportunities for sustainable growth in this area. We are convinced that XML will make an increasing contribution to our development. And the initial response to our broader portfolio confirms these positive expectations. Focus on market leadership The success we are witnessing in systems integration is indicative of the performance of Software AG as a whole. In the future, market leadership will remain a major challenge, which we will tackle head on. And our status as a cutting-edge technology company with a firm customer focus, international presence, and healthy business foundations means that we are exceptionally well placed to make great strides toward this goal in 2005. Karl-Heinz Streibich Chief Executive Officer Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[7]=new Array("http://www.netfedreports.de/sag0304/en/share/","Software AG: Interim Report 2004","","Deutsch | Contact | Software AG Homepage You are here: Home > Share performance Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Share price continues to rise Software AG stock profited from positive business development during the third quarter. The upswing experienced in the first six months continued into the following period: Company shares made a 63 percent gain over the first nine months, significantly outperforming both the TecDAX and Nasdaq 100 indices of leading tech stocks. Furthermore, Software AG stepped up investor-relations activities during the third quarter. We also made a significant contribution to Deutsche Bφrse’s XBRL initiative: We delivered our reports in the new format and provided backbone technology for the new system – helping to improve the transparency and effectiveness of German financial markets. Stock markets sensitive to oil price Once again in the third quarter of 2004, the price of oil was the key macro-economic factor on global bourses. As the cost of ‘black gold’ continued to escalate, the economic outlook worsened. Major indices such as the Dow Jones and DAX were affected, posting negative third-quarter development. Tech stocks also took a tumble, with considerable losses for the TecDAX and Nasdaq 100 between July and September. However, despite the broader economic woes, Software AG shares bucked the trend to continue the positive development of the first six months. Having ended 2003 at €16.30, stock closed trading on September 20 at €26.51 – significantly outperforming tech-stock benchmarks TecDAX and Nasdaq 100. These indices posted losses of 8 percent and 4 percent, respectively. Increased interest from US investors We stepped up IR activities in the third quarter, making important contacts at investor conferences and roadshows in Germany and leading European financial centers. However, these events were not restricted to Europe: We responded to increased US interest by holding two investor conferences in New York. In the future, we will increase efforts to attract investment from North America. The number of analysts providing coverage of Software AG shares remained high in the third quarter, at 21. Positive recommendations remained at 16, following publication of third-quarter results on October 28. Four analysts rated the stock as “sell” or “underperform”. One “hold” was downgraded to a “sell”. And there is one remaining “hold” recommendation. The average target price was €30. Quarterly reports available in innovative new XBRL format Since October 2004, Software AG quarterly reports have been available in a new format: The traditional HTML, PDF, and print versions are now supplemented by XBRL (eXtensible Business Reporting Language). XBRL is a freely available XML-based standard for handling corporate financial information, designed to significantly streamline the exchange and comparison of data. The new language enables direct access, rapid availability, and automatic processing. This benefits financial institutions, investors, companies, and analysts. This will cut the costs of generating, publishing, and distributing financial data. Furthermore, automatic conversion, rather than manual transfer, will increase the quality and integrity of data. We are also supporting Deutsche Bφrse’s pilot XBRL project with essential technology expertise: Financial reports uploaded to the DB system are saved and managed using our latest Tamino XML Server software. And Software AG has also been tasked with operation of the XBRL portal for the German stock-exchange organization. This project provides further evidence that our innovative solutions are successfully gaining ground in the marketplace. For further information on the XBRL initiative and to view quarterly reports in the new format, visit http://xbrl.deutsche-boerse.com/xbrl/index-en.html. Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[8]=new Array("http://www.netfedreports.de/sag0304/en/businessdevelopment/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Overview of business development Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Profitability Strategic progress First nine months of fiscal 2004 Outlook Interim statement Notes Financial Calendar Print Business development stable, profits rising The positive trend of the first six months continued into the third quarter of 2004. Once again, Software AG enjoyed significant gains in terms of profitability, with dynamic growth in its important license business. Third-quarter earnings before interest and tax (EBIT) outperformed the corresponding 2003 figure by 34 percent, at €21.0 million. Earnings before tax (EBT) rose to €21.9 million. The bottom line improved by 95 percent: Net profit totaled €12.7 million. Adjusted for currency translation effects, total revenues matched 2003 levels, at €96.6 million. However, the high-margin licensing segment posted an above-average gain of 10 percent. Strong license sales across both business lines Between July and September, new software licenses generated €25.1 million (€22.9 million in Q3 2003). The lion’s share was attributable to Enterprise Transaction Systems (ETS), which enjoyed 10 percent growth to €17.5 million. This business line, which is focused on mainframe modernization, profited from the positive customer response to our innovative product packages. For example, the packages designed to increase the productivity and performance of IT systems, launched in the first half of the year, as well as the Adabas SQL Gateway, contributed over €1 million. In the systems integration segment, licensing revenues gained 2 percent to €5.2 million. In this area, too, the enhanced offering prompted an increase in demand. However, the new, optimized XML Business Integration portfolio remains relatively new to the marketplace; its full impact on sales figures will not be felt until 2005. Third-quarter product revenues (licensing and maintenance) amounted to €71.1 million (€71.2 million in Q3 2003). Maintenance services generated €46.0 million (€48.3 million). Adjusted for currency effects, this is a 1 percent fall. Revenues from professional services totaled €25.2 million (€27.1 million), impacted by the sluggish German market and the traditional dip in sales at this time of year in Southern Europe. Buoyant license trade in Europe In spite of weak economic fundamentals in the eurozone, third-quarter revenues outperformed 2003 figures by 7 percent in Southern and Western Europe, and by 5 percent in Central and Eastern Europe. Both regions posted above-average gains in the key licensing segment. In Southern and Western Europe, license sales increased by 56 percent, and in Central and Eastern Europe by 61 percent – accounting for nearly one third of both regions’ total revenues. In Northern Europe, Asia/Pacific, South Africa, revenues were unchanged over 2003. Business was muted in the USA, as public-sector organizations delayed spending decisions in the run-up to the presidential elections. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[9]=new Array("http://www.netfedreports.de/sag0304/en/outlook/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Outlook Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Growth strategy ensures bright future Positive business development during the first nine months has clearly underlined the value of our strategic decision to focus on two product lines. Software AG is now well placed to face the challenges of 2005. But our growth strategy does not stop there: We intend to further expand our portfolio, leverage international market opportunities, and strengthen our presence through strategic partnerships. Stable revenues and marked upturn in earnings in 2004 Before currency effects, full-year consolidated revenues are still expected to remain stable. However, as a result of a successful drive to increase efficiency, EBIT margin is on course to grow by over 20 percent, with a 40 percent increase in EBIT, to approximately €83 million. The divestment of our stockholding in SAP Systems Integration AG (SAP SI) generated further exceptional income of €24.5 million. EPS will be in the range of €2.75 to €2.85, including €0.88 attributable to the SAP SI stock sale. Double-digit revenues growth in the mid term In 2005, we expect a slight increase in IT spending to lead to single-figure growth. In the mid term, however, we look forward to double-figure expansion, with stable margins. Steady sales are forecast in the mainframe segment, with growth projected for XML Integration solutions. By tapping into new markets, we hope to generate added momentum. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[10]=new Array("http://www.netfedreports.de/sag0304/en/interimstatement/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Interim statement > Consolidated income statement Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Consolidated income statement Consolidated balance sheets Statement of cash flows Segment report Statement of changes in equity Notes Financial Calendar Print Download Interim Report Q3/04 (PDF) Consolidated income statement for the nine months ended September 30, 2004 (January 1 to September 30, 2004) IFRS, unaudited € thousands Sep 30, 2004 Sep 30, 2003 Q3 2004 Q3 2003 Revenue Products 214,563 212,382 71,052 71,212 of wich licencing 77,663 68,747 25,057 22,929 of which maintenance 136,900 143,635 45,995 48,283 Professional services 82,846 91,368 25,222 27,064 Other 1,202 1,206 361 404 Total revenue 298,611 304,956 96,635 98,680 Total costs of sales - 101,901 - 111,478 - 32,903 - 34,797 Gross profit 196,710 193,478 63,732 63,883 Research and development - 36,948 - 47,218 - 11,353 - 15,448 Sales, marketing and distribution - 65,414 - 74,006 - 22,346 - 23,305 Administrative costs - 33,488 - 40,635 - 11,321 - 12,968 Total operating expenses - 135,850 - 161,859 - 45,020 - 51,721 Other income/expenses - 477 9,576 2,321 3,585 Restructuring expenses 0 - 31,780 0 0 Income from sale of SAP-SI shares 24,539 0 0 0 Interest income/expenses 2,345 2,200 845 679 Profit before tax 87,267 11,615 21,878 16,426 Taxes - 25,366 - 8,717 - 9,137 - 9,967 Net income 61,901 2,898 12,741 6,459 Earnings per share (EUR, basic) 2.27 0.11 0.47 0.24 Earnings per share (EUR, diluted) 2.27 0.11 0.47 0.24 Weighted average shares outstanding (basic) 27,266,752 27,266,752 27,266,752 27,266,752 Weighted average shares outstanding (diluted) 27,266,752 27,266,752 27,266,752 27,266,752 Print Home | Legal Aspects | Impressum ©2004 Software AG"); page[11]=new Array("http://www.netfedreports.de/sag0304/en/notes/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Accounting principles Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Accounting principles Basis Since the beginning of 2004, the consolidated financial statements of Software AG have been prepared in accordance with the International Accounting Standards Board’s (IASB) International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Software AG complied with the IAS and IFRS, and IFRIC (International Financial Reporting Interpretations Committee, formerly SIC) interpretations applicable on December 31, 2003. Figures in the consolidated financial statements are, unless otherwise stated, quoted in thousands of euros (€ thousands). Principals of consolidation The consolidated financial statements include Software AG and companies under its control. Control is generally taken to be proven where the Group holds, directly or indirectly, the majority of voting rights for authorized capital in a company, and/or can determine the fiscal or business policy of the company. The financial statements of consolidated companies are compiled according to consistent accounting and valuation principles. Subsidiaries established by Software AG are consolidated on the date they are formed. However, first-time consolidation occurred after the date of foundation for SAG-E, SAG-P, SAG-CH, and Softinterest Holding AG – which were consolidated for the first time in 1994 – as well as for Asian subsidiary SQL and for SAG-IRL. The first-time consolidation of all companies was undertaken using the book value method. Subsequent consolidation is derived from the figures employed for first-time consolidation. Debit balances arising from capital consolidation and relating solely to goodwill from acquisitions before January 31, 2001, were netted against capital reserves, pursuant to Section 309, Subsection 1, of the German Commercial Code (HGB). Goodwill from acquisitions after January 31, 2001, is capitalized and amortized over ten years. In accordance with the option granted by IFRS 1.14, the Company has not applied IAS 22 retrospectively, but has continued to use the figures for mergers and acquisitions posted according to HGB. Revenue, expenses and income, receivables, liabilities, and provisions arising between consolidated companies have been eliminated. Intercompany earnings from services provided within the Group were also eliminated where these were not realized from services to third parties. Consolidated companies On May 13, 2004, Software AG established SAG Systemhaus S.L., Madrid, Spain with subscribed capital of € 60 thousand. As of this date, the new company was consolidated as part of the Software AG Group. This was the only change to the scope of consolidation since December 31, 2003. Estimates and assumptions In a very limited number of instances, estimates and assumptions were made which could impact the statement and figures posted for balance-sheet assets, debt, income, expenses and contingent liabilities. True values may deviate from these estimates and assumptions. Currency translation The financial statements of foreign subsidiaries are translated using functional currencies: As these companies have organizational, financial, and commercial independence, the respective local currency is identical to the functional currency. Assets and liabilities are translated according to the currency exchange rate on the balance-sheet date, and expenses and income according to monthly averages. Currency translation differences are posted as such under equity, but not recognized in net profit or loss for the period. In the individual financial statements for consolidated companies, foreign-currency items are translated on the balance-sheet date, and included in net profit or loss for the period. Translation differences from long-term intercompany net cash in non-German companies are excepted from this rule. These are posted as other comprehensive income under equity, but not recognized in net profit or loss for the period. Cash on hand and bank balances This item includes cash and short-term investments, plus short-term cash equivalents. Securities include short-term, highly liquid financial investments which can be converted to cash at any time, and which are only subject to immaterial fluctuations in value. Securities financial assets and derivatives Financial assets are initially valued at the cost of acquisition, including transaction costs. The subsequent valuation depends on their classification. Financial assets which are available for sale are valued according to their price on the balance-sheet date (i.e. the fair market value). Gains or losses are posted as other comprehensive income under equity, but not recognized in net profit or loss for the period. Financial assets are recorded at their individual fair market values where this is possible to calculate and the assets have not been held until maturity. Loans and receivables included under this item which are not held for trading purposes, and assets with no publicly available price on an active market, where it is not possible to reliably calculate a fair market price, are valued at the adjusted cost of acquisition. All values are subject to regular, objective impairment testing, and value impairment, where it has occurred, is reflected in earnings for the period. Software AG uses hedging instruments to protect against the risks posed by worldwide currency fluctuations. Company policy is to hedge against currency risks in their totality, and not take specific action for each individual transaction. Open positions in futures transactions are valued at the fair market value, and stated on the balance sheet under other assets or current provisions. Changes in the fair market value of derivative instruments used to offset the cumulative change in expected future cash flows from currency fluctuations are posted as other comprehensive income until such time as the underlying transaction is reclassified in net profit or loss for the period. The ineffective portions of cash-flow hedges, and changes in the fair market value of derivatives which do not fulfill hedge accounting requirements, are immediately recognized in net profit or loss for the relevant year. Inventories Inventories are recorded at the lower of cost of acquisition/manufacture or net realizable value. Net realizable value is the estimated amount that would be raised from a sale during normal operations, less the estimated costs arising until manufacture is complete, and less sales costs. Trade receivables Trade receivables are posted at the fair value applicable when revenues are realized or services provided, and valued at the net book value, less any necessary value adjustments. This item also includes unbilled services from projects for which a fixed price has been agreed, but for which the percentage of completion method is applied. Other current assets Other current assets are valued at cost of acquisition, which corresponds to fair market value. Intangible assets Concessions, industrial and similar rights and assets, and licenses to such rights are capitalized at cost of acquisition and amortized over their useful economic lives according to the straight-line method. These assets are regularly subject to impairment testing. Goodwill Debit balances arising from capital consolidation as defined by HGB are calculated according to book value, with no disclosure of hidden reserves. Before January 31, 2001, balances were offset against capital reserves, pursuant to Section 309, Subsection 1 of HGB. After this date, goodwill was capitalized and amortized over ten years according to the straight-line method. The term over which goodwill is amortized is established at the time of the acquisition, based on useful economic life. Software AG applies IFRS 1.13, which allows the Company to retain HGB valuations of goodwill arising before the transition to IFRS accounting on January 1, 2003. In accordance with IFRS 3, the historical HGB valuation of goodwill was posted at € 176,591 thousand on this date. IFRS 3 requires that goodwill is no longer amortized, but subject to annual impairment testing and examination of its future useful economic life. The residual book value is written down to its fair value where the value has been impaired. Property, plant and equipment Property, plant and equipment are stated at cost of acquisition or manufacture less accumulated depreciation and impairment costs. Where items are sold or scrapped, the relevant cost of acquisition and accumulated write-downs are eliminated – any realized income/loss from the disposal of the asset is shown on the income statement. Tangible assets acquired for € 410 or less are fully written down in the year they are first posted. Cost of acquisition/manufacture comprises purchase price, including any customer payments and non-refundable income tax, and costs that are directly attributable to preparing the asset for its intended use. Expenditure such as maintenance incurred once the asset is in use is posted in the period during which it is incurred. Subsequent expenditure is only booked under assets where this improves the condition of the asset beyond its originally assessed standard of performance. Financing costs are not included under cost of acquisition/manufacture. Property, plant and equipment are depreciated over their useful economic lives according to the straight-line method: Buildings 50 years Leasehold improvements 8 – 10 years Office equipment 3 – 13 years Computer hardware and accessories 1 – 4 years Useful economic lives and methods of depreciation are periodically examined to ensure that theoretical values correspond with actual expected values. Assets under construction are allocated to unfinished property, plant and equipment, and stated at cost of acquisition/manufacture. Depreciation only takes place once manufacture is complete and the asset is in use. Impairment of the value of intangible assets and property, plant and equipment Where there is evidence that the value of intangible assets, property, plant and equipment has been impaired, these are immediately written down to their recoverable values, i.e. the higher of net realizable value and value in use. Value in use is the cash value of forecast future cash flows from the continued use of an asset and from disposal at the end of its useful economic life. Leasing Fixed assets include assets provided under leasing contracts. Software AG leases computer hardware and accessories, and office equipment. In accordance with IAS 17, leasing contracts are classified as capital leases (where the leased asset is allocated to the lessee) or operating leases (where the leased asset is allocated to the lessor). Capital leases: Leased items are posted on the balance sheet under both assets and leasing liabilities (at the same amount). The fair market value of the leased item at the beginning of the contract is used, or, where less, the cash value of the total minimum leasing payments. Calculation of this cash value is based on the interest rate of the overall lease agreement, where this figure can be practically identified. Otherwise, the lessee’s threshold borrowing interest rate is used. Capital leases are amortized over their scheduled useful economic lives according to the straight-line method. Future lease installments are posted as financial liabilities. Operating leases: Operating lease payments are expensed throughout the life of the leasing agreement. Deferred taxes Tax assets and liabilities are deferred according to the balance-sheet liability method for temporary differences between figures stated for tax purposes and those on the consolidated balance sheets. Taxes are also deferred on loss carryforwards. Deferred taxes are calculated according to the tax rate expected to apply in the year in which they will be realized. Dividends are only included once the annual shareholders’ meeting has voted on the use of earnings. Deferred tax assets and liabilities are not discounted. The book values of deferred taxes are regularly examined and, where necessary, adjusted. Prepaid expenses This item includes prepayments made by Software AG within the scope of license and rental agreements. Amounts are reversed and booked as expense in the accounting period when the service is delivered to Software AG. Liabilities Short-term liabilities are stated at their repayment or fulfillment value. Long-term liabilities are stated at adjusted cost of acquisition, calculated according to the effective interest method, i.e. by discounting expected future repayments. Provisions Provisions are formed where the Company has a de jure or de facto obligation to a third party arising from an event in the past, where it is likely that the Company will have to settle this obligation, and a reliable estimate can be made of the value of the liability. Estimates are subject to regular examination and, where necessary, adjustment. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Provisions for pensions Software AG operates both defined-benefit and defined-contribution pension plans. The actuarial calculation of provisions for pensions follows the projected unit credit method described in IAS 19, whereby expected future increases in pensions and salaries are also included. For the defined-contribution plan, Software AG has no obligations beyond its undertaking to pay all contributions to earmarked funds. Deferred income Deferred income includes prepayments from customers for maintenance services. Amounts are reversed and posted as revenue in the period Software AG delivers the service. Other comprehensive income Other comprehensive income comprises differences arising from the translation of the financial statements of commercially independent non-German subsidiaries, and effects from the valuation of financial instruments. Also included are translation differences from cash positions that are primarily part of a net investment in a commercially independent non-German subsidiary. Figures are quoted after tax. Equity Development of shareholders equity is shown here. In addition, contingent capital at September 30, 2004, comprised the following amounts: (1.) Up to € 3,357 thousand in up to 1,118,962 no-par value shares, reserved to cover subscription rights granted under the first share-option plan (Management Incentive Plan I, MIP I) for Executive Board members and senior executives of the Software AG Group. The terms and conditions of this plan, as well as the numbers of shares allocated/exercised, are given here. (2.) Up to € 3,000 thousand in up to 1,000,000 nopar value shares, reserved to cover subscription rights granted under the second share-option plan (Management Incentive Plan II, MIP II) for Executive Board members and senior executives of the Software AG Group. The terms and conditions of this plan, as well as the numbers of shares allocated/exercised, are given here. (3.) Up to € 13,515 thousand in up to 4,505,000 no-par value shares, reserved to grant option rights to holders of warrants from cum-warrant bonds, and to grant conversion options to holders of convertible bonds in accordance with the bonds’ terms. The Executive Board is authorized to issue such bonds, with a term of up to 10 years, once or more than once in the period to April 27, 2006, up to a total nominal value of € 500,000 thousand. The Executive Board had not made use of this authorization by September 30, 2004. At the annual shareholders’ meeting on April 30, 2004, the entitlement to draw on this capital was withdrawn and replaced by that detailed under section 4 below. (4.) Up to € 36,000 thousand in up to 12,000,000 bearer shares, each with a € 3 share of capital stock, reserved to grant option rights and to agree option obligations arising from cum-warrant bonds, and to grant conversion options and option obligations to holders of convertible bonds in accordance with the bonds’ terms (agreed at the annual shareholders’ meeting on April 30, 2004). Subject to the approval of the Supervisory Board, the Executive Board may authorize the exercise of these rights by Software AG or a (directly or indirectly) wholly owned subsidiary by April 29, 2009. In this instance, shareholders are entitled to pre-emptive subscription rights, with the following exceptions: The Executive Board is authorized to exclude fractional amounts. Subject to the approval of the Supervisory Board, the Executive Board is authorized to totally exclude shareholders’ subscription rights in the following instance: Where, upon due examination, the issue price of options or convertible bonds is not thought to be significantly less than its hypothetical market value (i.e. such value being calculated by accepted financial industry methods). However, this right to exclusion only applies to options and convertible bonds with rights or obligations for shares totaling no more than € 8,180 thousand, or, where lower, 10 percent of capital stock at the time the subscription rights are excluded. The Executive Board had not made use of this authorization by September 30, 2004. At the balance-sheet date, the Executive Board is further authorized, with the consent of the Supervisory Board, to increase the Company’s subscribed capital by up to € 37,989 thousand once or more than once in the period to April 27, 2006, by issuing up to 12,663,036 registered shares against cash and/or non-cash contributions (authorized capital). With the exception of the cases detailed below, shareholders will be granted pre-emptive subscription rights: The Executive Board is authorized to exclude shareholders’ pre-emptive subscription rights with respect to fractional amounts. The Executive Board is further authorized, with the consent of the Supervisory Board, to exclude shareholders’ pre-emptive subscription rights with respect to capital increases against non-cash contributions effected for the purpose of acquiring participations, holdings, companies or business units. The Executive Board is also authorized, with the consent of the Supervisory Board, to exclude shareholders’ pre-emptive subscription rights provided that the capital increase against cash effected on the basis of this authorization does not exceed 10 percent of the subscribed capital at the time this authorization is first exercised, and provided that the issue price is not significantly lower than the market value. Finally, the Executive Board is authorized, with the consent of the Supervisory Board, to exclude shareholders’ pre-emptive subscription rights with respect to a nominal amount not exceeding € 6,503 thousand in order to offer new shares to employees of Software AG and its affiliated companies (in accordance with sections 15 ff. of the German Stock Corporation Act) under an employee share option plan. The new shares can also be transferred to a bank on condition that sale is restricted to entitled persons in accordance with the Company’s instructions. At September 30, 2004, the Executive Board had not exercised its power to increase subscribed capital. Revenues Software AG primarily generates revenues from software licenses (for unlimited periods of usage), maintenance, and other services. Incoming monies from software licenses are only posted as revenues once a contract has been signed with the customer, all possible rights of return have expired, the software has been supplied, and a price has been agreed or can be established, and there is sufficient probability that payment will be made. Maintenance revenues are prorated over the period of service provision. Revenues from contract work invoiced according to man-hours are recognized once the services have been provided by Software AG. Pursuant to IAS 11 and IAS 18, revenues from fixed-price service contracts are recognized according to the percentage of completion method where the revenues can be reliably measured, there is sufficient probability that Software AG will receive the economic benefits of the transaction, and that all related costs expected until completion of the service can be reliably measured. Revenues figures are net of all discounts and rebates. Costs of manufacture Costs of manufacture include all production-related costs on the basis of normal utilization levels. They include individual unit costs that can be directly allocated to projects, plus fixed and variable overheads. Borrowing costs are not capitalized in costs of acquisition/manufacture. No unscheduled write-downs on inventories were required during the reporting period. Research and development costs Research and development costs are expensed in the income statement as they are incurred. The creation of and subsequent improvements to software involve closely linked research and development phases. Accordingly, it is not possible to strictly separate expenses incurred for research from those incurred for development. Consequently the criteria for separately reporting development costs laid out in IAS 38, Section 41, in conjunction with 42, cannot be met. Sales, marketing and distribution These include personnel and materials costs, write-downs, and advertising expenses. Administrative costs These include personnel and materials costs, and applicable depreciation and amortization. Earnings per share Earnings per share are calculated by dividing net income allocable to shareholders for the period by the weighted number of shares outstanding during the period. Software AG only has common stock. Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[12]=new Array("http://www.netfedreports.de/sag0304/en/financialcalender/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Financial Calendar Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Financial Calendar Print Financial Calendar January 17–19, 2005 CA Cheuvreux German Corporate Conference, Kronberg, Germany – CFO February 15, 2005 Unaudited Q4/FY 2004 financial figures April 28, 2005 Q1 2005 financial figures May 13, 2005 Annual General Shareholders’ Meeting, Frankfurt, Germany June 02, 2005 8th German Corporate Conference, Deutsche Bank AG, Frankfurt, Germany – CEO July 28, 2005 H1/Q2 2005 financial figures October 28, 2005 Q3 2005 financial figures Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[13]=new Array("http://www.netfedreports.de/sag0304/en/interimstatement/balancesheets/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Interim statement > Consolidated balance sheets Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Consolidated income statement Consolidated balance sheets Statement of cash flows Segment report Statement of changes in equity Notes Financial Calendar Print Download Interim Report Q3/04 (PDF) Consolidated balance sheet as of September 30, 2004 IFRS, unaudited € thousands Sep 30, 2004 Sep 30, 2003 December 31, 2003 Assets A. Cash and cash equivalents 1. Cash on hand and bank balances 88,146 58,465 53,083 2. Securities 22,102 16,342 21,076 110,248 74,807 74,159 B. Current assets 1. Inventories 356 360 387 2. Trade receivables 126,120 113,483 124,578 3. Other receivables and other assets 7,043 6,974 7,701 133,519 120,817 132,666 C. Fixed assets 1. Intangible assets 1,306 1,047 1,491 2. Goodwill 176,472 176,591 176,472 3. Property, plant and equipment 44,853 48,537 47,880 4. Financial assets 6,182 21,629 25,028 228,813 247,804 250,871 D. Deferred taxes 36,465 43,848 44,959 E. Deferred expenses 6,214 6,957 6,476 Total assets 515,259 494,233 509,131 Equity and liabilities A. Current liabilities 1. Current financial liabilities 3,757 5,826 6,546 2. Trade payables 17,508 19,420 26,770 3. Other current liabilities 18,291 24,810 25,294 4. Current provisions 46,496 60,247 77,791 86,052 110,303 136,401 B. Non-current liabilities 1. Non-current financial liabilities 3,887 5,268 4,356 2. Trade payables 0 0 22 3. Other non-current liabilities 3,560 3,615 3,641 4. Provision for pension 20,748 19,047 19,666 5. Non-current provisions 835 4,091 5,596 29,030 32,021 33,281 C. Deferred taxes 11,944 15,303 12,798 D. Deferres income 75,362 74,182 57,330 E. Minority interest 126 159 126 F. Equity 1. Share capital 81,800 81,800 81,800 2. Capital reserve 132 132 132 3. Retained earnings 156,454 149,358 149,358 4. Consolidated income 61,901 2,898 7,096 5. Currency translation differences - 26,870 - 20,300 - 32,340 6. Other comprehensive income 39,328 48,377 63,149 312,745 262,265 269,195 Total equity and liabilities 515,259 494,233 509,131 Print Home | Legal Aspects | Impressum ©2004 Software AG"); page[14]=new Array("http://www.netfedreports.de/sag0304/en/businessdevelopment/profitability/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Overview of business development > Profitability Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Profitability Strategic progress First nine months of fiscal 2004 Outlook Interim statement Notes Financial Calendar Print Profitability Increased efficiency drives earnings growth The Company’s streamlined cost base continued to generate significant savings during the third quarter. Allied with improved operating margins, this led to significant profit growth. Earnings before interest, tax, and exceptional items (EBIT) rose to €21 million, and EBIT margin to 22 percent. Earnings before tax (EBT) climbed by more than one third to €21.9 million. Earnings per share nearly doubled, climbing to €0.47 (€0.24 in Q3 2003). Consolidated net profit increased to €12.7 million (€6.5 million), or 13 percent of revenues. As a result of a marked upturn in high-margin license sales, EBITA quadrupled in Central and Eastern Europe to €4.2 million. In the Americas region, operating earnings, at €9.2 million, remained at 2003 levels, in spite of a dip in revenues. Investment relating to the penetration of the South American market, combined with increased R&D spending to localize solutions for the Spanish market, led to EBITA slipping in the Southern and Western Europe region to – €0.6 million (€1.7 million in Q3 2003). In Northern Europe, Asia/Pacific, South Africa, operating earnings fell by €0.9 million to €4.0 million. Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[15]=new Array("http://www.netfedreports.de/sag0304/en/businessdevelopment/strategicprogress/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Overview of business development > Strategic progress Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Profitability Strategic progress First nine months of fiscal 2004 Outlook Interim statement Notes Financial Calendar Print Strategic progress Integration solutions take offering to a new level One of the cornerstones of our growth strategy is the continuous development of the Software AG service portfolio, based on future customer and market needs. The XML and ETS portfolios have been optimized to give them a greater focus on customer needs, and we are now adding XML Integration Solutions. The XML offering previously centered on integration products and services, but in 2004 we added two new levels: Level 3 comprises Integration Packages, forming a horizontal technology platform; level 4 includes additional vertical solutions. The higher the level, the greater the added-value for customers. Level 4 is based on industry-specific solutions developed in the regions, which we adapt to the needs of international markets. During the third quarter, this led, in particular, to new financial services, healthcare, and public-sector solutions. In the Enterprise Transaction System segment, we launched Adabas Replication Server during the third quarter. This innovative product was developed in response to the needs of 28 individual customers around the world, and reflects our customer-driven go-to-market strategy. Growth via geographical diversification There are exciting growth opportunities for Software AG in the emerging markets, particularly Eastern Europe, China, and South America. The Company has now directly entered the South American market and has already won major contracts with high-profile reference customers in Chile: We are providing consulting services to the Chilean government on the implementation of XML as a standard integration tool, with advice and support for the Health Ministry regarding the possibilities offered by e-government. Other customers include the national post office organization and two major healthcare companies that operate hospitals and GP practices. Expanded partner network Software AG and Novell, Inc. have formed a new technology partnership for XML-based products operating under Suse Linux. The two companies are collaborating to create solutions for vertical markets. Novell Alliance Partner status is helping Software AG to become more innovative, providing greater opportunities in the open-source space, and facilitating the penetration of new markets. We also collaborated with Sun Microsystems on two major XML integration projects in the UK: A Linux portal was implemented at Dorset County Council, and Tewkesbury Borough Council received a new solution to aid compliance with the UK Government’s electronic-service legislation. Our partnership with Shanghai 5A Technology Development Co. Ltd. enabled us to win the Shanghai Government as an important XML Business Integration customer. Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[16]=new Array("http://www.netfedreports.de/sag0304/en/businessdevelopment/ninemonths/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Overview of business development > First nine months of fiscal 2004 Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Profitability Strategic progress First nine months of fiscal 2004 Outlook Interim statement Notes Financial Calendar Print First nine months of fiscal 2004 Stable revenues with increased license sales Consolidated revenues for the first three quarters of 2004 totaled €298.6 million. The slight year-on-year dip in sales of 2 percent is solely attributable to the buoyant euro. Adjusted for currency translation effects, revenues rose by 1 percent. Product revenues (licensing and maintenance) increased to €214.6 million (€212.3 million in 2003). Licensing alone generated €77.7 million (€68.7 million), representing an increased share of total revenues from 23 percent to 26 percent. On September 30, 2004, the Software AG Group employed 2,468 employees, 333 fewer than on September 30, 2003. Ninefold increase in EBIT There was a significant improvement in the Software AG cost base during the period, with administrative, sales, and R&D expenses falling by €26.0 million over 2003 to €135.8 million. The largest percentage saving was realized for R&D costs, which fell 22 percent, followed by administrative costs, down 18 percent. EBIT, which rose from €9.4 million to €84.9 million, includes exceptional income in the amount of €24.5 million. This sum was generated by the second-quarter divestment of Software AG’s stockholding in SAP Systems Integration AG (SAP SI). High cash flow, healthy balance sheet Restructuring costs during the period were nearly twice the 2003 figure, at €23.4 million. The organic cash flow increased to €42.4 million (€40.9 million). Free cash flow also rose, to €11.4 million (€5.7 million). Total assets climbed to €515.2 million (€494.2 million), in spite of a reduction in fixed assets through the SAP SI share sale. Cash and cash equivalents rose to 21 percent of assets, at €110.2 million (€74.8 million in 2003). The Company has no bank debt. The rise in equity, up at €312.7 million, took the equity-to-total-assets ratio to 61 percent (53 percent in 2003). Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[17]=new Array("http://www.netfedreports.de/sag0304/en/interimstatement/cashflows/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Interim statement > Statement of cash flows Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Consolidated income statement Consolidated balance sheets Statement of cash flows Segment report Statement of changes in equity Notes Financial Calendar Print Statement of cash flows for the nine months ended September 30, 2004 (January 1 to September 30, 2004) IFRS, unaudited € thousands Sep 30, 2004 Sep 30, 2003 3Q 2004 3Q 2003 Income after taxes 61,901 2,898 12,741 6,459 Depreciation 6,784 8,692 2,253 2,635 Income from sale of SAP-SI shares - 24,539 0 0 0 Income from sale of other assets 231 379 237 16 Interest result - 2,345 - 2,200 - 846 - 679 Income taxes 24,146 7,090 8,778 9,466 Cash generated from operations 66,178 16,859 23,163 17,897 Changes in inventories, receivables and other current assets - 1,073 16,978 11,770 16,371 Changes in payables and other liabilities - 34,012 - 1,386 - 22,317 - 26,252 Income taxes paid - 17,637 - 23,695 - 10,861 - 6,924 Interest paid - 693 - 949 - 174 - 317 Interest received 2,928 3,010 996 930 Net cash used in/provided by operating activities 15,691 10,817 2,577 1,705 Cash received from the sale of tangible/intangible assets 72 699 16 152 Investments in tangible/intangible assets - 3,480 - 4,081 - 1,564 - 1,100 Cash received from the sale of financial assets 26,273 21 135 15 Investments in financial assets - 846 - 1,033 - 98 - 195 Net cash used in/provided by financing activities - 2,308 - 4,952 - 811 - 519 Proceeds from issue of minority share capital 0 159 0 159 Repayment of loans from acquisitions and other finance liabilities - 2,308 - 5,111 - 811 - 678 Net cash used in/provided by financing activities - 2,308 - 4,952 - 811 - 519 Change in cash funds from cash relevant transactions 35,402 1,471 255 58 Adjustment from currency translation 687 - 2,087 - 473 - 313 Net change in cash and cash equivalents 36,089 - 616 - 218 - 255 Cash and cash equivalents at the beginning of the period 74,159 75,423 110,466 75,062 Cash and cash equivalents at the end of the period 110,248 74,807 110,248 74,807 Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[18]=new Array("http://www.netfedreports.de/sag0304/en/interimstatement/segmentreport/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Interim statement > Segment report Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Consolidated income statement Consolidated balance sheets Statement of cash flows Segment report Statement of changes in equity Notes Financial Calendar Print Segment report Segment report for the nine months ended September 30, 2004 (January 1 to September 30, 2004) Segment report for the nine months ended September 30, 2003 (January 1 to September 30, 2003) Segment report for Q3 2004 (July 1 to September 30, 2004) Segment report for Q3 2003 (July 1 to September 30, 2003) (all tables) Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[19]=new Array("http://www.netfedreports.de/sag0304/en/interimstatement/shareholdersequity/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Interim statement > Statement of changes in equity Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Consolidated income statement Consolidated balance sheets Statement of cash flows Segment report Statement of changes in equity Notes Financial Calendar Print Statement of changes in equity Statement of changes in equity for the nine months ended September 30, 2004 (January 1 to September 30, 2004) Statement of changes in equity for the nine months ended September, 2003 (January 1 to September 30, 2003) (all tables) Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[20]=new Array("http://www.netfedreports.de/sag0304/en/notes/notesfirsttime/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Notes on the first-time application of IAS/IFRS Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Notes on the first-time application of IAS/IFRS Accounting and valuation Pursuant to IFRS 1, International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) are applied retrospectively upon their initial adoption. Figures from previous periods are adjusted accordingly to allow effective comparison. New standards published as part of the International Accounting Standards Board Improvement Project in December 2003, whose application is not compulsory until January 1, 2005, have not been employed for these financial statements. Of the new standards published during the previous quarter, whose application is not compulsory until January 1, 2005, or later, Software AG chose to apply the provisions of IFRS 3 relating to the impairment testing of goodwill to these financial statements. Application of IAS/IFRS involves the following material deviations from the accounting and valuation principles set out in German law: Goodwill is no longer amortized, but subject to regular impairment testing. Securities available for sale are valued at their fair market value, even where this exceeds the cost of acquisition. Gains and losses are included in other comprehensive income under equity, but are not recognized in net profit or loss. Derivative instruments are valued at their fair market value, even where this exceeds the cost of acquisition. Both gains and losses are recognized in net profit or loss for the period. Revenues are recognized according to the percentage-of-completion method. Property is depreciated according to its useful economic life, and not according to tax scales. Capital leases, according to the more restrictive IFRS provisions, are posted as assets and leasing liabilities. Provisions are only formed where obligations to third parties exist, and where the probability that these obligations will be fulfilled is at least 50 percent. Medium and long-term provisions are stated at cash values. Provisions are not formed for failure to perform maintenance or for other expenses. Provisions for pensions are formed according to the projected unit credit method. Deferred taxes are calculated according to the balance-sheet liability method. Deferred taxes on loss carryforwards are formed where the Company expects to be able to make use of these loss carryforwards. Cash positions in foreign currencies are valued at the balance-sheet-date rate and recognized in net profit or loss for the period. However, translation differences from long-term intercompany net cash investments in non-German companies are posted in other comprehensive income under equity, but are not recognized in net profit or loss for the period. Balance-sheet reconciliation on January 1, 2003 (HGB to IFRS) (Table) Reconciliation of equity on January 1, 2003 (HGB to IFRS) € thousands Note Equity in accordance with HGB as at Jan 1, 2003 214,468 Revenue recognized according to percentage of completion (1) 616 Depreciation of buildings (3) 8,884 Finance leases (3) (6) - 4,519 Market value of securities and financial derivatives (2) (4) 10,957 Deferred tax assets (5) 38,060 Adjustments to other accruals (8) 16,110 Adjustments ot pension accrual (9) - 10,653 Deferred tax liabilities (5) - 14,994 Equity in accordance with IFRS as at Jan 1, 2003 258,929 Balance-sheet reconciliation on September 30, 2003 (HGB to IFRS) (Table) Reconciliation of equity on September 30, 2003 (HGB to IFRS) € thousands Note Equity in accordance with HGB at Sep 30, 2003 223,665 Revenue recognized according to percentage of completion (1) 938 Correction to goodwill amortization (2) 16,389 Depreciation of buildings (3) 8,911 Finance leases (3) (6) - 3,176 Market value of securities and financial derivatives (2) (4) 15,463 Deferred tax assets (5) 20,054 Adjustments to other accruals (8) 4,960 Adjustments to pension accrual (9) - 10,653 Deferred tax liabilities (5) - 14,282 Other - 4 Equity in accordance with IFRS as at Sep 30, 2003 262,265 Reconciliation of net income/loss on September 30, 2003 (HGB to IFRS) € thousands Note Net loss in accordance with HGB at Sep 30, 2003 - 3,485 Revenue recognized according to percentage of completion (1) 322 Correction to goodwill amortization (2) 16,389 Depreciation of buildings (3) 27 Finance leases (3) (6) 1,343 Market value of securities and financial derivatives (4) - 265 Deferred tax assets (5) - 4,948 Adjustments to other accruals (8) - 11,150 Adjustments to pension accrual (9) 0 Deferred tax liabilities (5) 712 Other 3,953 Net gain in accordance with IFRS as at Sep 30, 2003 2,898 Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[21]=new Array("http://www.netfedreports.de/sag0304/en/notes/seasonaleffects/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Seasonal effects Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Seasonal effects The following table shows a breakdown of revenues and pre-tax profits (adjusted for restructuring costs) over the four quarters of 2003: The development of revenues over the four quarters followed the same pattern as in previous years. This is largely a result of customers’ purchasing behavior. However, it is important to note that fourth-quarter figures for the previous year were heavily influenced by strong license sales. Restructuring activities in the first half of 2003 and in the first three months of 2004 generated significant cost savings and a corresponding increase in pre-tax profit. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[22]=new Array("http://www.netfedreports.de/sag0304/en/notes/contingentliabilities/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Contingent liabilities Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Contingent liabilities At September 30, 2004, no provisions had been formed for the following contingent liabilities (stated at face values), for which it was deemed improbable that the Company would have to fulfill obligations: Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[23]=new Array("http://www.netfedreports.de/sag0304/en/notes/shareoptionplans/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Share-option plans Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Share-option plans The Software AG Group runs share-option plans for Executive Board members, senior executives, and other employees which are not expensed in the consolidated financial statements. First share-option plan: At September 30, 2004, Executive Board members held 145,846 subscription rights to shares in the Company, and senior executives 69,069 – unchanged over December 31, 2003. These rights cannot be exercised before September 30, 2004. Options have a term of seven years from the date on which they are granted, and may only be exercised, after an initial blocking period of 24 months as of the Software AG IPO, on four occasions during each fiscal year: after the publication of quarterly, biannual, and annual earnings figures. The subscription price per share is the issue price less a 20 percent mark-down, but no less than € 28.12. As Company stock was floated at € 30, this minimum applied. Holders of subscription rights must fulfill the following three conditions before they may exercise their conversion rights: Consolidated earnings from ordinary activities (according to HGB) must have increased by 30 percent between 1997 and 1999. This condition was fulfilled between 1997 and 1999. Consolidated earnings from ordinary activities must total at least 10 percent of revenues for the fiscal year prior to conversion. The share price must exceed the minimum conversion price. Second share-option plan: At September 30, 2004, Executive Board members held 153,375 subscription rights to shares in the Company, and senior executives 568,275. These rights cannot be exercised before September 30, 2004. During the third quarter, 11,125 new options were issued to Executive Board members, and 133,525 to senior executives. No rights could be exercised during the period. The subscription price is the average XETRA closing price over the previous five trading days on the Frankfurt Stock Exchange before the date of conversion. Holders of subscription rights must fulfill the following two conditions before they may exercise their conversion rights: Consolidated revenues must have increased for the fiscal year prior to conversion by at least 10 percent in comparison to the previous year. Consolidated earnings from ordinary activities (according to HGB) must total at least 10 percent of revenues for the year prior to conversion. The terms, blocking period, and conversion dates correspond to those of the first share-option plan. Print Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[24]=new Array("http://www.netfedreports.de/sag0304/en/notes/financialobligations/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Other financial obligations Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Other financial obligations Software AG has entered into rental and leasing contracts for buildings, real estate, IT and PBX systems, and vehicles. Obligations from these contracts (where the contracts are still within their minimum durations) until the end of fiscal 2004 total € 4,560 thousand. Obligations until the end of fiscal 2008 total € 36,037 thousand. The leasing contracts are operating leases as defined by IAS 17. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[25]=new Array("http://www.netfedreports.de/sag0304/en/notes/reportingperiod/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Significant transactions during the reporting period Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Significant transactions during the reporting period During the second quarter of 2004, the sale of shares in SAP SI generated income of € 24,539 thousand. Software AG spent a total of €23,430 thousand on restructuring during the first nine months of 2004, of which €4,093 thousand during the third quarter. This amount was covered by provisions for restructuring in the amount of €30,682 thousand, formed in 2003. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[26]=new Array("http://www.netfedreports.de/sag0304/en/notes/employees/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Employees Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Employees The Software AG workforce averaged 2,445 during the third quarter of 2004, and totaled 2,468 on September 30, 2004, 333 less than on the same date in 2003. The reduction in headcount largely took place in Germany, in particular at headquarters. 68 percent of Software AG employees work outside Germany. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[27]=new Array("http://www.netfedreports.de/sag0304/en/notes/executiveboard/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Executive Board and Supervisory Board Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Executive Board and Supervisory Board On September 30, 2003, the composition of the Supervisory Board had changed as follows in comparison to December 31, 2003: By resolution of the annual shareholders’ meeting on April 30, 2004, Dr. Andreas Bereczky, Director of Production at German public-service TV broadcaster ZDF, Mainz, was elected to succeed Dr. Peter Lex on the Software AG Supervisory Board. Karl-Heinz Hageni (employee representative) left the Supervisory Board on April 30, 2004. On June 25, 2004, employees elected Monika Neumann, chair of the General Works’ Council, Schliersee, as Mr. Hageni’s replacement. Dr. Peter Mossack (research and development) left the Executive Board on July 31, 2004. Gary Voight (Americas region) left the Executive Board on September 10, 2004. Download Interim Report Q3/04 (PDF) Home | Legal Aspects | Impressum ©2004 Software AG"); page[28]=new Array("http://www.netfedreports.de/sag0304/en/notes/balancesheetdate/","Software AG: Interim Report 03/04","","Deutsch | Contact | Software AG Homepage You are here: Home > Notes to the consolidated financial statements > Events subsequent to the balance-sheet date Home Key figures Profile Introduction by the Executive Board Share performance Overview of business development Outlook Interim statement Notes Accounting principles Notes on the first-time application of IAS/IFRS Seasonal effects Contingent liabilities Share-option plans Other financial obligations Significant transactions during the reporting period Employees Executive Board and Supervisory Board Events subsequent to the balance-sheet date Financial Calendar Print Events subsequent to the balance-sheet date Further restructuring activities are expected to generate costs totaling €2.7 million during the fourth quarter of the year. In November 2004, Software AG appointed Dr. Peter Kόrpick to the Executive Board. The appointment takes effect as of April 1, 2005. The XML Business Integration business line will report directly to Dr. Kόrpick whose responsibility will also include Research & Development and product marketing. As Senior Vice President at SAP AG, Dr. Kόrpick was responsible for the development of SAP NetWeaver integration technology in six development centers across the world. 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