-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WRw6Pl86WmajxNBAjbHtMhYhXYOpzFzTXdRhuAiTPzWG1uue+10WF+UXDOQkesMa mpNTeMREjzKkx7YikzfELQ== 0000928385-02-000322.txt : 20020414 0000928385-02-000322.hdr.sgml : 20020414 ACCESSION NUMBER: 0000928385-02-000322 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020131 ITEM INFORMATION: Other events FILED AS OF DATE: 20020208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROSTRATEGY INC CENTRAL INDEX KEY: 0001050446 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 510323571 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24435 FILM NUMBER: 02532425 BUSINESS ADDRESS: STREET 1: 1861 INTERNATIONAL DR CITY: MCLEAN STATE: VA ZIP: 22102 BUSINESS PHONE: 7038488600 MAIL ADDRESS: STREET 1: 1861 INTERNATIONAL DR CITY: MCLEAN STATE: VA ZIP: 22102 8-K 1 d8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): January 31, 2002 ---------------- MICROSTRATEGY INCORPORATED -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 0-24435 51-0323571 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 1861 International Drive, McLean, Virginia 22102 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (703) 848-8600 - -------------------------------------------------------------------- ------------------------------------------------------------- (Former Name or Former Address, if Changed since Last Report) Item 5. Other Events. On January 31, 2002, the Registrant issued a press release announcing its financial results for the quarter ended December 31, 2001, and providing additional outlook and financial guidance information. A copy of this press release has been filed with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference. EXHIBIT DESCRIPTION 99.1 Press Release regarding the Registrant's fourth quarter financial results, dated as of January 31, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MicroStrategy Incorporated (Registrant) By: /s/ Eric F. Brown ------------------------------------ Name: Eric F. Brown Title: President and Chief Financial Officer Date: February 8, 2002 EX-99.1 3 dex991.txt EXHIBIT 99.1 Exhibit 99.1 FOR IMMEDIATE RELEASE Contact: Marc Brailov MicroStrategy Incorporated (703) 770-1670 (703 407-9884 (Cell) mbrailov@microstrategy.com - -------------------------- MicroStrategy Achieves Pro Forma Profitability in Q4 2001 Pro Forma Profitability Objective Met; Company Generates More Than $12 Million in EBITDA MCLEAN, Va., January 31, 2002 - MicroStrategy(R) Incorporated (NASDAQ: MSTR), a leading worldwide provider of business intelligence software, today announced its financial results for the three-month period ending December 31, 2001 (the fourth quarter of its 2001 fiscal year), achieving pro forma profitability. By achieving pro forma profitability, MicroStrategy meets its goal, first announced in October 2000, to become profitable in its core business on a pro forma basis by the fourth quarter of 2001. The reported financial information for the fourth quarter 2001 includes MicroStrategy's continuing business operations, and its Strategy.com subsidiary, which has been shut down and treated as a discontinued operation as of the end of 2001. Sequentially, fourth quarter revenue of $43.2 million in 2001 compares favorably to third quarter 2001 with total revenue up by 5%, and license revenue increasing by 23% in continuing core business operations. Pro forma net operating results from continuing operations improved from a loss of $5.0 million, or $(0.06) per share, in the third quarter of 2001 to a profit of $7.4 million, or $0.06 per share, in the fourth quarter of 2001. This improvement in earnings is primarily due to higher gross profit margins (81% in Q4 2001) and a $10.5 million reduction in operating costs versus Q3 2001. MicroStrategy's net loss attributable to common stockholders for the fourth quarter of 2001, determined in accordance with Generally Accepted Accounting Principles (GAAP), was $24.0 million or $(0.26) per share. A reconciliation of GAAP to pro forma earnings is included in the attached financial exhibits. The Q4 2001 pro forma results exclude approximately $29.7 million in non-cash charges and approximately $0.8 million in other, non-recurring charges that are detailed in the attached financial exhibits. "In October 2000 we publicly committed to reach core-business pro forma profitability by the end of 2001 and reiterated that commitment throughout 2001. Today, I am pleased to report that we have met that goal," said Eric Brown, MicroStrategy President and CFO. "This is the result of six quarters of hard work to create a more focused, cost-efficient, productive, and competitive company. Our overall business generated more than $12 million in positive EBITDA for the quarter." "The MicroStrategy turnaround is the direct result of the streamlined cost structure and strong fiscal controls we put in place in 2001," said Michael J. Saylor, MicroStrategy Chairman and CEO. "Our success is also due to an impressive roster of new customer wins and existing customers who are expanding their MicroStrategy deployments. In 2002, we expect to extend our technological leadership in the increasingly critical and strategic business intelligence market with the release of MicroStrategy 7i, our enterprise-class platform. With technical advances in Web reporting, integrated email delivery, reporting performance, and security, MicroStrategy 7i will provide the performance, scalability and ease-of-use that enterprise-class customers expect." "MicroStrategy's managerial goal has been to create a better-focused, leaner company. These initiatives have also been aimed at succeeding over the long haul. This earnings announcement is a testament to its success," said Bob Moran, Research Vice President and Managing Director of Decision Support Research for the Aberdeen Group, Inc. MicroStrategy pointed to the following factors as key to its fiscal turnaround: . Corporate Restructuring - - MicroStrategy successfully implemented a comprehensive plan, announced in the second half of 2000, to substantially strengthen fiscal controls, provide focus on its core business intelligence software operations, and to significantly increase company-wide cost efficiency and productivity. - - MicroStrategy refocused its operations exclusively on the business intelligence software market by exiting unprofitable ventures that were unrelated to its core competency. Specifically, the company has shut down its Strategy.com subsidiary, and phased out its standalone applications selling and marketing group. - - Since Q4 2000, MicroStrategy has increased gross profit margins from 64% to 81% and maintained gross profit at approximately $35 million per quarter, while reducing total annualized expenses by over $160 million. During this 12-month period, pro forma results have improved from a loss of $16.7 million during Q4 2000 to a profit of $7.4 million during Q4 2001 with pro forma EPS improving from a loss per share of $(0.21) to diluted earnings per share of $0.06. . Customer Success & Growing Partnerships Despite a difficult macroeconomic environment, MicroStrategy continued to acquire new customers and partners at a rapid pace in the fourth quarter of 2001. Signed Agreements with 23 OEMs (Original Equipment Manufacturers) & Systems Integrators New partners include: Anexinet, Ascertain LLC, ComArch, Datamat, Doing SPA, Enkata, Enormic LLC, Genus Software, High Performance Systems Holding GmBh, iOLAP, ItWay, Logan Britton, Peak Effects, PowerMarket, Inc. PRC Inc., Protagona Worldwide Limited, Relational Solutions Inc, Slovenda, Systech Solutions Inc., Trinus Corporation, Web Information Services LLC, and Wizard Business Systems. MicroStrategy Added 113 New Customers in Q4 2001 New customers included: Allstate Insurance, ANZ Bank, AT&T, Bank of Montreal, Carl Warren, Century Theatres, Encoda, GlaxoSmithKline, Goodmark Foods, Inchcape Shipping, Ingenix, J.P.Morgan Chase, Keyspan Energy, Nikon Canada, Reinsurance Group of America, Unilever, US Air Force, Wilson's Leather. New deals with existing customers included: Amaxis, Avnet, Discover Financial Services, GE Capital Fleet Services, Hotwire, KeyCorp, Littlewoods, National Steel Corporation, Premier, Quintiles, Verizon, Wachovia, WFS Financial. Sample of representative deals from Q4 2001: GlaxoSmithKline In Q4 of 2001, GlaxoSmithKline purchased 10,000 licenses of MicroStrategy products to empower its sales representatives, executives and marketing managers with business intelligence insight. Century Theatres Century Theatres, with over 800 screens in 11 states, selected MicroStrategy as its enterprise-wide business intelligence standard, citing MicroStrategy's superior technology platform. As a result, Century Theatres management will be able to better track ticketing and concession information with enhanced reporting capabilities. Premier Premier represents more than 1,800 not-for-profit, healthcare organizations. Its Q4 software purchase complements its five primary business intelligence applications built on the MicroStrategy Platform that help its health system clients make informed decisions on clinical quality and patient safety, business and market strategy, clinical resources utilization, operational performance and productivity. MicroStrategy's customers now include nine of the top ten Fortune 500 communications companies; 15 of the top 24 Global 500 communications companies; six of the top ten Fortune 500 retailers; seven of the top ten diversified Fortune 500 financial firms; six of the top ten Fortune 500 pharmaceutical companies; and three of the top five Fortune 500 insurers. . Technological Leadership MicroStrategy continues to be recognized as a technology leader in business intelligence. - - An August 2001 independent survey by Survey.com found that MicroStrategy's customers purchase more software licenses on average than the customers of its competitors, are most likely to purchase additional licenses, are least likely to defect to competitors, and are most likely to standardize with the technology, deploy via the Web, and have large databases. The survey included 19 vendors classified as comprising the business intelligence market. - - In August 2001, PC Magazine selected MicroStrategy 7.1 as its "Editors' Choice" for business intelligence software in a review of business intelligence software. MicroStrategy 7.1 outperformed its competition and was given the highest rating of four stars in this report, which included Cognos(R) Business Intelligence Platform, Brio(R) Enterprise 6.2.2, and Crystal(R) Enterprise 8.0, each of which received a 3-star rating. - - MicroStrategy in January 2002 won Reader's Choice awards in the leading IT publication Intelligent Enterprise - winning for its software's advanced analysis and data mining capabilities and for customer relationship management (CRM) analysis. MicroStrategy won these awards in competition with its leading competitors - including Business Objects, Oracle, Cognos, Brio, Actuate, and SAS Institute. - - MicroStrategy in 2001 won the prestigious Data Warehousing Institute's Best Practices in Data Warehousing with its customer Best Buy. Best Buy won the award for its MicroStrategy-based Business and Vendor Performance Application, which provides Web-based query and reporting capabilities to more than 2,500 corporate and retail managers, as well as to external partners. . Finance Commentary Beginning in the fourth quarter of 2001, the Company's Strategy.com subsidiary has been reclassified and reported on a discontinued operations basis in its consolidated statements of operations and its consolidated balance sheets. The consolidated financial information for Q4 2001 and the full fiscal year 2001 is presented for MicroStrategy's continuing operations and reflects the results of Strategy.com as a discontinued operation. Previously reported financial results for 2001 and 2000 have been reclassified to present MicroStrategy's continuing operations separately from the discontinued operations of Strategy.com. During the fourth quarter of 2001, the Company recorded a non-cash impairment charge of $12.2 million to write down the carrying value of certain Teracube technology intangible assets acquired from NCR in 1999 to their estimated fair value. In Q4 2001, the Company also recorded a non-cash charge of $11.6 million due to an increase in the value of the estimated cost of the litigation settlement related to an increase in value of the Company's stock price from the end of Q3 2001 to the end of Q4 2001. In Q4 2001, the Company recorded non-cash amortization expense of $4.5 million relating to its goodwill and intangible assets. Also during Q4 2001, the Company's operating expenses were approximately $1.3 million below expectations due to changes in estimates related to the Company's incentive compensation programs (the effect of which is included in several statement of operations expense line items). During the fourth quarter of 2001, R&D costs of approximately $1.0 million were capitalized relating to development of MicroStrategy 7i after the product's technical feasibility was established. And finally, in Q4 2001, the Company reclassified $17.1 million from short-term and long-term deferred revenue to a current liability in connection with the termination of its contractual relationship with Exchange Applications, Inc. As a result, the Company currently does not expect to recognize future revenue from this transaction. Outlook and Financial Guidance Information The following statements are subject to risks and uncertainties described at the end of this press release. Management guidance for 2002 supersedes any previously announced guidance as to the Company's expectations for financial results for 2002. Management will no longer offer guidance for the Strategy.com segment as this operation has been shut down as of the end of 2001. All activity will be reported in a single business segment. Management offers the following guidance for the consolidated continuing operations of MicroStrategy for the quarter ending March 31, 2002: Revenue is expected to be in the range of approximately $36 to $40 million with the decrease in revenue due to the reduction in deferred revenue related to Exchange Applications, Inc. (discussed above) and the shut down of Strategy.com. Pro forma results of operations, excluding special items, are expected to range from a loss of $2 million to breakeven. Overall operating costs, excluding goodwill amortization, are expected to be higher in Q1 2002 than those reported in Q4 2001 due to the expenses from the MicroStrategy World user conference and other beginning of the year sales and marketing activities. Pro forma earnings per share, excluding special items, and assuming a basic weighted average share count is expected to range from a loss of approximately $0.02 per share to $0.00 per share. Average share count in the quarter using the basic weighted average share count method is expected to be 93-94 million. Management offers the following guidance for the consolidated continuing operations of MicroStrategy for the full year ending December 31, 2002: Consolidated revenue is expected to be in the range of approximately $155 to $165 million. Consolidated pro forma earnings per share, excluding special items, are expected to be in the range of approximately $0.03 to $0.06 per share. MicroStrategy will hold a conference call chaired by Michael Saylor today at 5:30 p.m. (EST) Domestically, dial 877-597-9704 and mention Michael Saylor as the chairperson prior to 5:30 p.m. EST, or for 48-hour playback access, dial 800-642-1687 and enter the conference ID 2917612. Internationally, dial 706-634-6550 and mention Michael Saylor as the chairperson prior to 5:30 p.m. EST, or for 48-hour playback, dial 706-645-9291 and enter the conference ID 2917612. For a live Webcast or replay of the call, visit -- http://www.microstrategy.com/investor or http://www.streetevents.com ------------------------------------- --------------------------- for StreetEvents subscribers. About MicroStrategy Incorporated Leadership in a Critical Market: Founded in 1989, MicroStrategy is a worldwide leader in the increasingly critical business intelligence software market. Large and small companies alike are harnessing MicroStrategy's business intelligence software to gain vital insights from their data to help them proactively enhance cost-efficiency, productivity and customer relations and optimize revenue-generating strategies. MicroStrategy's business intelligence platform offers exceptional capabilities that provide organizations -- in virtually all facets of their operations -- with user-friendly solutions to their data query, reporting, and advanced analytical needs, and distributes valuable insight on this data to users via Web, wireless, and voice. PC Magazine recently selected MicroStrategy 7(TM) as the 2001 "Editors' Choice" for business intelligence software. Built for the Internet: MicroStrategy 7 is the Scalable Business Intelligence Platform Built for the Internet(TM). Its pure-Web architecture provides Web reporting, security, performance and standards that are critical for Web deployment. Within intranets, MicroStrategy's products provide employees with information to enable them to make better, more cost-effective business decisions. In extranets, enterprises can use MicroStrategy 7 to build stronger relationships by linking customers and suppliers via the Internet. Diverse Customer Base: MicroStrategy's customer base cuts across industry and sector lines, with approximately 1,500 enterprise-class customers, including Lowe's Home Improvement Warehouse, AT&T Wireless Group, Wachovia and GlaxoSmithKline. MicroStrategy also has relationships with over 375 systems integrators and application development and platform partners, including IBM, PeopleSoft, Compaq, and JD Edwards. MicroStrategy is listed on Nasdaq under the symbol MSTR. For more information on the company, or to purchase or demo MicroStrategy's software, please visit MicroStrategy's Web site at http://www.microstrategy.com. ---------------------------- MicroStrategy, MicroStrategy 7, MicroStrategy 7i, and Scalable Business Intelligence Platform Built for the Internet are either trademarks or registered trademarks of MicroStrategy Incorporated in the United States and certain other countries. Other product and company names mentioned herein may be the trademarks of their respective owners. This press release may include statements that may constitute "forward-looking statements," including its estimates of future business prospects or financial results and statements containing the words "believe," "estimate," "project," "expect" or similar expressions. Forward-looking statements inherently involve risks and uncertainties that could cause actual results of MicroStrategy Incorporated and its subsidiaries (collectively, the "Company") to differ materially from the forward-looking statements. Factors that could contribute to such differences include: the possibility that the conditions to the securities class action and shareholder derivative settlement agreements will not be satisfied; the Company's ability to secure financing for its current operations and long-term plans on acceptable terms; the ability of the Company to implement and achieve widespread customer acceptance of its MicroStrategy 7 software on a timely basis; the Company's ability to recognize deferred revenue through delivery of products or satisfactory performance of services; the timely release of the MicroStrategy 7i platform; continued acceptance of the Company's products in the marketplace; the timing of significant orders; delays in the Company's ability to develop or ship new products; market acceptance of new products; competitive factors; general economic conditions; currency fluctuations and other risks detailed in the Company's registration statements and periodic reports filed with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. ### MICROSTRATEGY INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Three Months Ended Years Ended December 31, December 31, ------------------------ ------------------------ 2001 (1) 2000 (1) 2001 (1) 2000 (1) --------- --------- --------- --------- (unaudited) (unaudited, (unaudited) (as adjusted) as adjusted) Revenues Product licenses $ 18,707 $ 25,396 $ 72,781 $ 100,582 Product support and other services 24,528 30,624 107,635 114,679 --------- --------- --------- --------- Total revenues 43,235 56,020 180,416 215,261 --------- --------- --------- --------- Cost of Revenues Product licenses 1,156 1,483 4,170 2,600 Product support and other services 6,850 18,685 41,473 74,961 --------- --------- --------- --------- Total cost of revenues 8,006 20,168 45,643 77,561 --------- --------- --------- --------- Gross profit 35,229 35,852 134,773 137,700 --------- --------- --------- --------- Operating Expenses Sales and marketing 12,172 32,790 74,792 137,534 Research and development 6,372 10,219 32,819 43,890 General and administrative 5,909 9,531 37,168 47,082 Restructuring and impairment charges 13,065 -- 39,463 9,367 Amortization of goodwill and intangible assets 4,505 4,721 17,251 17,667 --------- --------- --------- --------- Total operating expenses 42,023 57,261 201,493 255,540 --------- --------- --------- --------- Loss from operations (6,794) (21,409) (66,720) (117,840) Financing & Other Income (Expense) Net interest (1,578) 870 (3,230) 3,121 Loss on investments (1,350) (1,736) (3,603) (9,365) (Provision for) reduction in estimated cost of litigation settlement (11,554) 23,971 30,098 (89,729) Other (expense) income, net (707) (65) (2,139) 96 --------- --------- --------- --------- Total financing & other income (expense) (15,189) 23,040 21,126 (95,877) --------- --------- --------- --------- (Loss) income from continuing operations before income taxes (21,983) 1,631 (45,594) (213,717) Provision for income taxes 1,120 800 2,460 1,400 --------- --------- --------- --------- Net (loss) income from continuing operations (23,103) 831 (48,054) (215,117) --------- --------- --------- --------- Discontinued Operations Income (loss) from discontinued operations 4,178 (8,917) (30,739) (46,189) Loss from abandonment (2,075) -- (2,075) -- --------- --------- --------- --------- Income (loss) from discontinued operations 2,103 (8,917) (32,814) (46,189) --------- --------- --------- --------- Net loss (21,000) (8,086) (80,868) (261,306) --------- --------- --------- --------- Dividends on and accretion of series A, B, C, D and E convertible preferred stock (3,042) (2,187) (10,353) (4,687) Net gain on refinancing of series A redeemable convertible preferred stock -- -- 29,370 -- Gain on early redemption of mandatorily redeemable convertible preferred stock of consolidated subsidiary -- -- 44,923 -- Preferred stock beneficial conversion feature -- -- -- (19,375) --------- --------- --------- --------- Net loss attributable to common stockholders $ (24,042) $ (10,273) $ (16,928) $(285,368) ========= ========= ========= ========= Basic and diluted earnings (loss) per share Continuing operations including preferred dividends, gain on series A refinancing, and beneficial conversion feature $ (0.28) $ (0.02) $ (0.34) $ (3.00) Discontinued operations including gain on early redemption $ 0.02 $ (0.11) $ 0.14 $ (0.58) --------- --------- --------- --------- Net loss attributable to common stockholders $ (0.26) $ (0.13) $ (0.20) $ (3.58) ========= ========= ========= ========= Weighted average shares outstanding used in computing basic and diluted earnings (loss) per share 92,157 80,393 86,587 79,779 ========= ========= ========= =========
(1) As of December 31, 2001, the results of the Company's Strategy.com subsidiary have been presented on a discontinued operations basis. The results for the 2000 periods have been adjusted to reflect this change in reporting. Supplemental Data Pro forma net operating income (loss) $ 7,371 $ (16,683) $ (18,180) $ (88,989) ========= ========= ========= ========= Pro forma basic net operating income (loss) per share $ 0.08 $ (0.21) $ (0.21) $ (1.12) ========= ========= ========= ========= Pro forma diluted net operating income (loss) per share $ 0.06 $ (0.21) $ (0.21) $ (1.12) ========= ========= ========= ========= Basic weighted average shares outstanding 92,157 80,393 86,587 79,779 ========= ========= ========= ========= Pro forma diluted weighted average shares outstanding 114,100 80,393 86,587 79,779 ========= ========= ========= =========
Pro forma net operating income (loss) is calculated by starting with net (loss) income from continuing operations and adding back restructuring and impairment charges, amortization of goodwill and intangible assets, loss on investments, (provision for) reduction in estimated cost of litigation settlement. Additionally, the pro forma net operating loss for the full year 2001 excludes other non-recurring gains totaling $345. Additional schedules are attached hereto that reconcile: (i) net (loss) income from continuing operations to pro forma net operating income (loss) and (ii) basic weighted average shares outstanding to pro forma diluted weighted average shares outstanding. MICROSTRATEGY INCORPORATED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)
December 31, 2001 (1) 2000 (1) --------- --------- (unaudited) (as adjusted) Assets Current assets Cash and cash equivalents $ 38,409 $ 33,203 Restricted cash 439 25,884 Short-term investments 904 1,085 Accounts receivable, net 22,281 47,921 Prepaid expenses and other current assets 5,902 9,249 Net assets of discontinued operations -- 24,615 --------- --------- Total current assets 67,935 141,957 Property and equipment, net 26,506 39,425 Long-term investments -- 5,271 Goodwill and intangible assets, net 5,402 34,300 Deposits and other assets 3,789 1,993 Net assets of discontinued operations -- 18,048 --------- --------- Total Assets $ 103,632 $ 240,994 ========= ========= Liabilities and Stockholders' Equity (Deficit) Current liabilities Accounts payable and accrued expenses $ 18,935 $ 32,363 Accrued compensation and employee benefits 13,654 24,155 Accrued interest and preferred dividends 7,351 599 Accrued restructuring costs 7,422 -- Deferred revenue and advance payments 20,987 42,224 Contingency from terminated contract 17,074 -- Working capital line of credit 1,212 -- Net liabilities of discontinued operations 4,479 -- --------- --------- Total current liabilities 91,114 99,341 Deferred revenue and advance payments 5,431 26,083 Accrued litigation settlement 68,637 99,484 Other long-term liabilities 3,536 1,509 Accrued restructuring costs 4,271 -- --------- --------- Total Liabilities 172,989 226,417 --------- --------- Series A redeemable convertible preferred stock 6,385 119,585 Series B redeemable convertible preferred stock 32,343 -- Series C redeemable convertible preferred stock 25,937 -- Series D redeemable convertible preferred stock 3,985 -- Redeemable convertible preferred stock of discontinued operations -- 40,530 Stockholders' equity (deficit): Preferred stock undesignated; $.001 par value; 4,973 shares authorized; no shares issued or outstanding -- -- Class A common stock; $.001 par value; 330,000 shares authorized; 43,689 and 28,736 shares issued and outstanding, respectively 44 29 Class B common stock; $.001 par value; 165,000 shares authorized; 48,233 and 52,033 shares issued and outstanding, respectively 48 52 Additional paid-in capital 239,580 152,821 Deferred compensation (99) (624) Accumulated other comprehensive income 2,547 1,443 Accumulated deficit (380,127) (299,259) --------- --------- Total Stockholders' Equity (Deficit) (138,007) (145,538) Total Liabilities and Stockholders' Equity (Deficit) $ 103,632 $ 240,994 ========= =========
(1) As of December 31, 2001, the results of the Company's Strategy.com subsidiary have been presented on a discontinued operations basis. The consolidated balance sheets as of December 31, 2001 and 2000 have been reclassified to reflect this change in reporting. MICROSTRATEGY INCORPORATED Reconciliation of net (loss) income from continuing operations to pro forma net operating income (loss) (in thousands, except per share data) (unaudited)
Three Months Ended Years Ended December 31, December 31, ---------------------- ---------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Net (loss) income from continuing operations $ (23,103) $ 831 $ (48,054) $(215,117) Restructuring and impairment charges 13,065 -- 39,463 9,367 Amortization of goodwill and intangible assets 4,505 4,721 17,251 17,667 Loss on investments 1,350 1,736 3,603 9,365 Provision for (reduction in) estimated cost of litigation settlement 11,554 (23,971) (30,098) 89,729 Other non-recurring items -- -- (345) -- --------- --------- --------- --------- Pro forma net operating income (loss) $ 7,371 $ (16,683) $ (18,180) $ (88,989) ========= ========= ========= =========
MICROSTRATEGY INCORPORATED Q4 2001 pro forma adjustments - Cash vs. Non-cash (in thousands) Non-cash: Restructuring and impairment charges $12,245 Amortization of goodwill and intangible assets 4,505 Loss on investments 1,350 Provision for estimated cost of litigation settlement 11,554 ------- Total non-cash 29,654 Cash: Restructuring and impairment charges 820 ------- Total pro forma adjustments $30,474 =======
Reconciliation of basic weighted average shares outstanding to pro forma diluted weighted average shares outstanding (in thousands, except per share data) (unaudited)
Three Months Ended Years Ended December 31, December 31, ------- ------- ------- ------- 2001 2000 2001 2000 ------- ------- ------- ------- Basic weighted average shares outstanding 92,157 80,393 86,587 79,779 Effect of dilutive securities: Series B preferred stock 9,176 -- -- -- Series C preferred stock 7,708 -- -- -- Series D preferred stock 2,902 -- -- -- Employee stock options 2,157 -- -- -- ------- ------- ------- ------- Pro forma diluted weighted average shares outstanding 114,100 80,393 86,587 79,779 ======= ======= ======= =======
For the three months ended December 31, 2001, pro forma diluted weighted average shares outstanding was computed by adding the incremental number of shares of each of the Company's dilutive securities to the basic weighted average shares outstanding. Dilutive securities are sequenced on an incremental basis from the most dilutive to the least dilutive and are included in pro forma diluted weighted average shares outstanding to the extent such securities are not anti-dilutive. Had the Company generated net income in accordance with generally accepted accounting principles ("GAAP"), it would have been required under GAAP to calculate the diluted weighted average shares outstanding using this approach. As a result of this sequencing, the series A preferred stock was excluded from the computation of pro forma weighted average shares outstanding for the three months ended December 31, 2001 because their effect would have been anti-dilutive. If the series A preferred stock had been included, it would have increased pro-forma diluted weighted average shares outstanding by 2.3 million shares. In determining the dilutive share impact on pro forma earnings, the securities included in the reconciliation above have been converted using the "share settlement method" which assumes the securities are converted at the end of the period using a volume weighted average stock price based upon an option available to the Company to settle the securities in shares of common stock at maturity. It is not currently the Company's intention to exercise this share settlement option at the maturity of these securities. The "if-converted method" assumes the securities are converted at the fixed conversion rate currently available to the holders of the securities. In accordance with GAAP, if the Company had GAAP net income, the Company would be required to consider the most dilutive result of the aforementioned share settlement method or if-converted method. Under the if-converted method, the total number of diluted shares is 104,698; under the share settlement method, the total number of diluted shares is 114,100. As such, the share settlement method was utilized. Reconciliation of Q4 2001 net loss attributable to common stockholders to EBITDA as reported (in thousands, except per share data) (unaudited)
Three Months Ended December 31, 2001 -------- Net loss attributable to common stockholders $(24,042) Net interest 1,578 Provision for income taxes 1,120 Depreciation and amortization 1,943 Amortization of goodwill and intangible assets 4,505 -------- EBITDA before pro forma adjustments (14,896) Pro forma adjustments to EBITDA: Restructuring and impairment charges 13,065 Loss on investments 1,350 Provision for estimated cost of litigation settlement 11,554 Other expense 707 Income from discontinued operations (2,103) Dividends on and accretion of series A, B, C, D and E convertible preferred stock 3,042 -------- EBITDA as reported $ 12,719 ========
MICROSTRATEGY INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited, as adjusted)
------------------------------------------------------------- Quarterly Results for 2001 (1) Total ------------------------------------------------ --------- Q1 Q2 Q3 Q4 2001 --------- --------- --------- --------- --------- Revenues Product licenses $ 18,636 $ 20,278 $ 15,160 $ 18,707 $ 72,781 Product support and other services 30,313 26,882 25,912 24,528 107,635 --------- --------- --------- --------- --------- Total revenues 48,949 47,160 41,072 43,235 180,416 --------- --------- --------- --------- --------- Cost of Revenues Product licenses 1,049 820 1,145 1,156 4,170 Product support and other services 14,882 10,538 9,203 6,850 41,473 --------- --------- --------- --------- --------- Total cost of revenues 15,931 11,358 10,348 8,006 45,643 --------- --------- --------- --------- --------- Gross profit 33,018 35,802 30,724 35,229 134,773 --------- --------- --------- --------- --------- Operating Expenses Sales and marketing 26,630 20,403 15,587 12,172 74,792 Research and development 10,463 7,843 8,141 6,372 32,819 General and administrative 11,728 10,659 8,872 5,909 37,168 Restructuring and impairment charges -- 23,422 2,976 13,065 39,463 Amortization of goodwill and intangible assets 4,249 4,249 4,248 4,505 17,251 --------- --------- --------- --------- --------- Total operating expenses 53,070 66,576 39,824 42,023 201,493 --------- --------- --------- --------- --------- Loss from operations (20,052) (30,774) (9,100) (6,794) (66,720) Financing & Other Income (Expense) Net interest 525 (988) (1,189) (1,578) (3,230) Loss on investments (1,097) (233) (923) (1,350) (3,603) Reduction in (provision for) estimated cost of litigation settlement 9,665 24,941 7,046 (11,554) 30,098 Other expense, net (90) (419) (923) (707) (2,139) --------- --------- --------- --------- --------- Total financing & other income (expense) 9,003 23,301 4,011 (15,189) 21,126 --------- --------- --------- --------- --------- Loss from continuing operations before income taxes (11,049) (7,473) (5,089) (21,983) (45,594) Provision for income taxes 289 48 1,003 1,120 2,460 --------- --------- --------- --------- --------- Net loss from continuing operations (11,338) (7,521) (6,092) (23,103) (48,054) --------- --------- --------- --------- --------- Discontinued Operations (Loss) income from discontinued operations (9,233) (25,777) 93 4,178 (30,739) Loss from abandonment -- -- -- (2,075) (2,075) --------- --------- --------- --------- --------- (Loss) income from discontinued operations (9,233) (25,777) 93 2,103 (32,814) --------- --------- --------- --------- --------- Net loss (20,571) (33,298) (5,999) (21,000) (80,868) --------- --------- --------- --------- --------- Dividends on and accretion of series A, B, C, D and E convertible preferred stock (2,158) (2,364) (2,789) (3,042) (10,353) Net gain on refinancing of series A redeemable convertible preferred stock -- 29,370 -- -- 29,370 Gain on early redemption of mandatorily redeemable convertible preferred stock of consolidated subsidiary -- -- 44,923 -- 44,923 --------- --------- --------- --------- --------- Net (loss) income attributable to common stockholders $ (22,729) $ (6,292) $ 36,135 $ (24,042) $ (16,928) ========= ========= ========= ========= =========
(1) As of December 31, 2001, the results of the Company's Strategy.com subsidiary have been presented on a discontinued operations basis. The results for the first three quarters of 2001 have been adjusted to reflect this change in reporting. Supplemental Data Pro forma net operating (loss) income $(15,657) $ (4,903) $ (4,991) $ 7,371 $(18,180) ========= ========= ========= ========= ========= Pro forma basic net operating (loss) income per share $ (0.19) $ (0.06) $ (0.06) $ 0.08 $ (0.21) ========= ========= ========= ========= ========= Pro forma diluted net operating (loss) income per share $ (0.19) $ (0.06) $ (0.06) $ 0.06 $ (0.21) ========= ========= ========= ========= ========= Basic weighted average shares outstanding 81,269 83,253 89,452 92,157 86,587 ========= ========= ========= ========= ========= Pro forma diluted weighted average shares outstanding 81,269 83,253 89,452 114,100 86,587 ========= ========= ========= ========= =========
Pro forma net operating (loss) income is calculated by starting with net loss from continuing operations and adding back restructuring and impairment charges, amortization of goodwill and intangible assets, loss on investments, reduction in (provision for) estimated cost of litigation settlement. Additionally, the pro forma net operating loss for Q2 and the full year 2001 excludes other non-recurring gains totaling $345. The basic and diluted weighted average shares outstanding used in the computation of pro forma loss per shares during Q3 excludes participating convertible securities because their effect would be anti-dilutive. -----END PRIVACY-ENHANCED MESSAGE-----