Other disclosures
7_Segment reporting
Segment report for the nine months ended September 30, 2009
(January 1 to September 30, 2009 and January 1 to September 30, 2008)
IFRS, unaudited
| € thousands | Sept. 30,
2009 | Sept. 30,
2008 | Sept. 30,
2009 | Sept. 30,
2008 | Sept. 30,
2009 | Sept.30,
2008 | Sept. 30,
2009 | Sept. 30,
2008 | Sept. 30,
2009 | Sept. 30,
2008 |
| Licenses | 98,336 | 105,066 | 66,720 | 79,452 | 6,137 | - | 171,193 | 184,518 | ||
| Maintenance | 141,618 | 124,341 | 82,342 | 66,992 | 4,235 | - | 228,195 | 191,333 | ||
| Product revenue | 239,954 | 229,407 | 149,062 | 146,444 | 10,372 | - | 399,388 | 375,851 | ||
| Professional services | 50,168 | 53,185 | 75,330 | 77,278 | 28,000 | - | 153,498 | 130,463 | ||
| Other | 590 | 1,341 | 1,578 | 550 | 198 | - | 2,366 | 1,891 | ||
| Total revenue | 290,712 | 283,933 | 225,970 | 224,272 | 38,570 | - | 555,252 | 508,205 | ||
| Cost of sales | –62,265 | –59,193 | –85,771 | –82,786 | –26,111 | - | – 9,178 | –5,353 | –183,325 | –147,332 |
| Gross profit | 228,447 | 224,740 | 140,199 | 141,486 | 12,459 | - | – 9,178 | –5,353 | 371,927 | 360,873 |
| Sales, Marketing & Distribution expenses | –52,692 | –51,888 | –63,999 | –70,226 | – 6,701 | - | – 6,280 | –5,843 | -129,672 | – 127,957 |
| Business line contribution | 175,755 | 172,852 | 76,200 | 71,260 | 5,758 | - | –15,458 | –11,196 | 242,255 | 232,916 |
| Research and development expenses | – 58,996 | – 56,721 | ||||||||
| General and administrative expenses | – 48,565 | – 47,773 | ||||||||
| Other operating income / expense, net | 4,082 | – 2,793 | ||||||||
| Earnings before interest and taxes | 138,776 | 125,629 | ||||||||
| Net financial income | – 1,912 | – 4,459 | ||||||||
| Earnings before taxes | 136,864 | 121,170 | ||||||||
| Taxes | – 44,170 | – 40,521 | ||||||||
| Net income | 92,694 | 80,649 |
Segment report for the three months ended September. 30, 2009
(July 1 to September 30, 2009 and July 1 to September. 30, 2008)
IFRS, unaudited
| ETS | webMethods | IDS | Reconciliation | Total | ||||||
| € thousands | Q3 2009 | Q3 2008 | Q3 2009 | Q3 2008 | Q3 2009 | Q3 2008 | Q3 2009 | Q3 2008 | Q3 2009 | Q3 2008 |
| Licenses | 34,539 | 37,117 | 21,395 | 30,654 | 6,137 | - | 62,071 | 67,771 | ||
| Maintenance | 48,536 | 46,709 | 28,366 | 23,488 | 4,235 | - | 81,137 | 70,197 | ||
| Product revenue | 83,075 | 83,826 | 49,761 | 54,142 | 10,372 | - | 143,208 | 137,968 | ||
| Professional services | 15,952 | 16,981 | 25,552 | 24,782 | 28,000 | - | 69,504 | 41,763 | ||
| Other | 167 | 281 | 508 | 35 | 198 | - | 873 | 316 | ||
| Total revenue | 99,194 | 101,088 | 75,821 | 78,959 | 38,570 | - | 213,585 | 180,047 | ||
| Cost of sales | -20,589 | –19,570 | –26,746 | –26,896 | –26,111 | - | – 5,084 | – 1,807 | – 78,530 | – 48,273 |
| Gross profit | 78,605 | 81,518 | 49,075 | 52,063 | 12,459 | - | – 5,084 | – 1,807 | 135,055 | 131,774 |
| Sales, Marketing & Distribution expenses | –16,930 | –18,133 | –19,260 | –24,101 | – 6,701 | - | – 2,293 | – 1,852 | – 45,184 | – 44,086 |
| Business line contribution | 61,675 | 63,385 | 29,815 | 27,962 | 5,758 | - | – 7,377 | –3,659 | 89,871 | 87,688 |
| Research and development expenses | – 19,623 | – 19,397 | ||||||||
| General and administrative expenses | – 16,245 | – 15,684 | ||||||||
| Other operating income / expense, net | 2,427 | – 3,945 | ||||||||
| Earnings before interest and taxes | 56,430 | 48,662 | ||||||||
| Net financial income | – 1,657 | – 1,572 | ||||||||
| Earnings before taxes | 54,773 | 47,090 | ||||||||
| Taxes | – 16,658 | – 16,088 | ||||||||
| Net income | 38,115 | 31,002 | ||||||||
8_Contingent liabilities
| in € thousands | Sept. 30, 2009 | Dec. 31, 2008 | Sept. 30, 2008* |
| Guarantees | 1,223 | 1,311 | 1,608 |
| Other | 1,906 | 1,252 | 1,459 |
| 3,129 | 2,563 | 3,067 |
* The prior-year figures were adjusted.
The carrying amount of collateral received amounted to €521 thousand (2008: €521 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 2009 amount to €3,475 thousand (2008: €3,233 thousand). Obligations of €27,192 thousand exist for the period up until the end of fiscal year 2014 (2008: a total of €46,506 thousand until the end of fiscal 2013), and obligations of €7,090 thousand for the period after fiscal 2014 (2008: a total of €6,658 thousand for the period after fiscal 2013). The lease agreements are operating leases as defined in IAS 17.
9_Seasonal influences
Revenues and pre-tax earnings per quarter were as follows in fiscal 2008:
| in € thousands/in % | Q1 2008 | Q2 2008 | Q3 2008 | Q4 2008 | 2008 |
| Total revenue | 159,391 | 168,767 | 180,047 | 212,405 | 720,610 |
| in % of annual revenue | 22.1 | 23.4 | 25.0 | 29.5 | 100.0 |
| Earnings before taxes | 34,562 | 39,518 | 47,0907 | 54,256 | 175,426 |
| in % of net income for the year | 19.7 | 22.5 | 26.9 | 30.9 | 100.0 |
Revenues and earnings before taxes for the third and fourth quarters of fiscal 2008 were positively influenced by the expansion of business in Brazil; as a result, the quarterly breakdown of revenues and earnings before taxes has only limited informational value. Due to the acquisition of IDS Scheer described in note 4, revenues and earnings reported in 2008 are only of limited informational value for revenues and earnings in 2009.
10_Litigation
In connection with the lawsuit by a small Canadian software company due to an alleged patent infringement, court-ordered mediation talks were held which led to a settlement and a resolution of the lawsuit.
There were no other changes with respect to the legal disputes reported at the end of 2008, nor were there any new legal disputes that could potentially have a significant effect on the financial position, financial performance, or cash flows.
11_Stock option plans and stock appreciation rights program
Software AG has two different stock option plans for members of the executive board, upper management, and employees of the Group. Our share-based compensation programs are described in detail on pages 103 –106 of our 2008 Annual Report.
The expense for stock options that were accounted for as equity-settled stock option programs in the third quarter of 2009 in accordance with IFRS 2 amounted to €707 thousand (Q3 2008: €197 thousand).
The expense for stock options that were accounted for as cash-settled stock option programs in the third quarter of 2009 in accordance with IFRS 2 amounted to €870 thousand (Q3 2008: €1,392 thousand).
The number of outstanding stock options has changed as follows since Dec. 31, 2008:
| in € thousands | Balance as of Dec. 31, | Granted | Exercised | Forfeited | Balance as of Sept. 30,2009 | Thereof exercisable as of Sept. 30, 2009 |
| Stock option program | 77,707 | 0 | – 58,610 | – 448 | 18,649 | 13,413 |
| Stock price-based remuneration plan from 2007 | 1,919,000 | 204,000 | 0 | – 245,000 | 1,878,000 | 0 |
Of the options outstanding on September 30, 2009 from the 2007 stock price-based remuneration program, 1,100,000 options were accounted for in accordance with the provisions of IFRS 2 as cash-settled stock option programs.
Moreover, as part of employee stock option programs, 88,589 stock options, each of which entitles its bearer to 10 IDS Scheer shares, were outstanding as of September 30, 2009.
12_Employees
As of September 30, 2009, the effective number of employees (i.e., part-time employees are taken into account on a pro-rata basis only) amounted to 6,086 (September 30, 2008: 3,466), 64 percent of whom were employed abroad (September 30, 2008: 78 percent). The increase of 2,620 employees over the prior year is largely attributable to the acquisition of IDS Scheer AG which contributed 2,497 employees. In absolute terms (i.e., part-time employees are taken fully into account), the Group employed 6,221 people (September 30, 2008: 3,606) at the end of the third quarter on September 30, 2009. The increase of 2,615 employees over the prior year is largely attributable to the acquisition of IDS Scheer AG which contributed 2,574 employees.
13_Changes and information regarding corporate bodies
Supervisory Board
Frank F. Beelitz, who had been a member of the supervisory board since January 1, 2000, stepped down from his position as Chairman and member of the board as of the end of the Annual Shareholders’ Meeting held on April 30, 2009.
Heinz Otto Geidt, domiciled in Kelkheim, Germany and Director of Asset Management at Software AG Foundation, was elected to the supervisory board as a new member by the Annual Shareholders’ Meeting on April 30, 2009.
On April 30, 2009, Dr. Ing. Andreas Bereczky, the former Deputy Chairman, was elected Chairman, and Alf Henryk Wulf was elected Deputy Chairman by the members of the supervisory board.
Executive Board
Holger Friedrich left the Company on March 13, 2009.As of March 13, 2009, Ivo Totev was appointed as member of the executive board and took over responsibility for the area of Global Consulting Services.
14_Events after the balance sheet date
Except for the events mentioned in note 4 (Business Acquisitions), no significant events occurred between the balance sheet date and the date of release of these interim financial statements.
Date of release of the interim financial statements
Software AG‘s executive board approved the consolidated quarterly financial statements on November 12, 2009.
