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Mercury Interactive Corp – ‘8-K’ for 7/3/06 – EX-99.1

On:  Monday, 7/3/06, at 6:22pm ET   ·   As of:  7/5/06   ·   For:  7/3/06   ·   Accession #:  1193125-6-141404   ·   File #:  0-22350

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/05/06  Mercury Interactive Corp          8-K:2,9     7/03/06    2:474K                                   RR Donnelley/FA

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     18K 
 2: EX-99.1     Press Release                                       HTML    385K 


EX-99.1   —   Press Release


This exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]



  Press Release  

Exhibit 99.1

 

LOGO

  

Investor Relations Contact

Michelle Ahlmann, 650.603.5464

Mercury

 

Public Relations Contact

Dave Peterson, 650.603.5231

Mercury

 

Paul Sherer, 415.385.5970

Ogilvy Public Relations Worldwide

Mercury Files Restated Financial Statements

 

    Completes Major Milestone with the Filing of the Amended 2004 10-K/A

 

    Restatement Principally Non-Cash Adjustments From Past Stock Option Practices

 

    Provides Update on SEC Activities

Mountain View, CA, July 3, 2006 – Mercury Interactive Corporation (OTC: MERQ), the global leader in business technology optimization (BTO) software, today said that it has completed its previously announced restatement of the Company’s financial statements for the fiscal years 2004, 2003 and 2002. The restated financial statements have been filed with the Securities and Exchange Commission in an amended Form 10-K/A for the year ended December 31, 2004. The Company intends to file an amended Form 10-Q/A for the quarter ended March 31, 2005 with the SEC later this month.

“We have taken a rigorous and thorough approach to completing the restatement and recertification of our financial statements. I want to thank our customers, partners, shareholders and employees for their loyalty and support during this time period,” said Tony Zingale, president and chief executive officer at Mercury. The Company remains in a strong financial position and we believe has a significant market opportunity going forward. I am particularly proud of Mercury’s continued ability to execute against our strategic business plan and our focus on customer success, technology innovation and expansion of our capabilities through our acquisitions.”

Update on SEC Filings

The Company intends to file its Forms 10-Q for the quarters ended June 30 and September 30, 2005 and its Form 10-K for the year ended December 31, 2005 in Q3 2006, and to become current in its SEC reporting in as timely a fashion as possible thereafter.


Mercury Files Restated Financial Statements   Page 2

 

Overview of Restatement of Consolidated Financial Statements

As previously announced, a Special Committee comprised of disinterested members of the Audit Committee of the Board was formed in June 2005 to conduct an internal investigation relating to past stock option practices in response to an inquiry initiated by the SEC in November 2004. The Special Committee, its outside legal counsel and accounting experts reviewed thousands of individual option grants, modifications and exercises dating back to 1993, interviewed numerous individuals, and engaged in a forensic audit of the issues under investigation. In August 2005, the Special Committee concluded that the actual grant dates for certain past stock options differed from the originally stated grant dates for such awards. As a result, the Company determined that it should have recognized material amounts of stock-based compensation expense which were not accounted for in its previously issued financial statements and, accordingly, that the previously filed unaudited interim and audited consolidated financial statements for the fiscal years 2004, 2003 and 2002, as well as the unaudited interim financial statements for the first quarter of 2005, should no longer be relied upon because these financial statements contained misstatements and would need to be restated. On November 2, 2005, the Company announced that the Special Committee had made certain determinations as a result of its review, and that the Board of Directors had accepted the resignations of the then CEO, CFO and General Counsel.

As a result of the Special Committee’s investigation and the Company’s internal review of its historical financial statements, the Company has recorded significant adjustments to its previously filed financial statements. The adjustments in the restated consolidated financial statements did not affect the Company’s previously reported cash and investment balances in prior periods.

The restated consolidated financial statements reflect a decrease in income before provision for taxes of approximately $566.7 million for the periods 1992 through December 31, 2004, consisting principally of non-cash adjustments to stock-based compensation expense resulting from the stock option grant and exercise practices described below. The majority of these expenses are reflected as a decrease to retained earnings (net of income tax effects) in the opening balance sheet for 2002 of approximately $362.3 million, reflecting adjustments from 1992 to 2001, and the remaining amounts are reported in the Company’s consolidated statements of operations in subsequent periods. The Company also has made a number of tax-related adjustments arising principally from the stock-based compensation adjustments.


Mercury Files Restated Financial Statements   Page 3

 

The primary components of the accounting adjustments reflected in the restated consolidated financial statements are as follows:

 

    

Year ended December 31,

(in thousands)

 
     2004     2003     2002     1992 through 2001  

Category(1)

   Total
increase/
(decrease)
for period
    % of total
adjustments
prior to
income taxes
    Total
increase/
(decrease)
for period
    % of total
adjustments
prior to
income taxes
    Total
increase/
(decrease)
for period
    % of total
adjustments
prior to
income taxes
    Total
increase/
(decrease)
for period
    % of total
adjustments
prior to
income taxes
 

Stock option grant date changes

   $ (17,789 )   42 %   $ (79,518 )   72 %   $ (47,636 )   132 %   $ (113,400 )   30 %

Stock options exercisable with promissory notes

     582     -1 %     (9,425 )   9 %     12,653     -35 %     (255,640 )   67 %

Stock options involved in consulting, transitions or advisory roles

     (7,196 )   17 %     (3,039 )   3 %     (2,337 )   6 %     (6,889 )   2 %

Other matters related to stock options

     (15,311 )   36 %     (13,617 )   12 %     (164 )   1 %     (376 )   0 %
                                                        

Total stock option related accounting adjustments

     (39,714 )   94 %     (105,599 )   96 %     (37,484 )   104 %     (376,305 )   99 %

Other miscellaneous accounting adjustments

     (2,757 )   6 %     (4,281 )   4 %     1,374     -4 %     (1,923 )   1 %
                                                        

Total adjustment to income (loss) before provision for income taxes

     (42,471 )   100 %     (109,880 )   100 %     (36,110 )   100 %     (378,228 )   100 %

Income tax impact of restatement adjustments

     11,647         5,781         7,966         15,921    
                                        

Total adjustments to net income

     (30,824 )       (104,099 )       (28,144 )       (362,307 )  
                                        

(1) For explanatory purposes, we have classified the stock option and other adjustments that were affected by the restatement into the aforementioned categories as presented above. The classified amounts involve certain subjective judgments by management to the extent particular stock option related accounting errors may fall within more than one category to avoid double counting the adjustment amounts between categories (e.g., a stock option that is subject to date changes, combined with expenses resulting from the exercise of promissory notes, and/or combined with expenses resulting from consulting, transition or advisory roles). As such, the table above should be considered a reasonable representation of the magnitude of expenses in each category.

The cumulative effect of the restatement adjustments on the Company’s restated consolidated balance sheet at December 31, 2004 resulted in an increase in the accumulated deficit offset by a corresponding increase in additional paid-in capital and unearned stock-based compensation which results in a net decrease in total stockholders’ equity of $17.1 million. The adjustments reduced retained earnings as of December 31, 2001 from $155.7 million to an accumulated deficit of $206.6 million, and reduced retained earnings as of December 31, 2004 from $347.1 million to an accumulated deficit of $178.3 million.


Mercury Files Restated Financial Statements   Page 4

 

The restated consolidated financial statements reflect the following increases (decreases) in previously reported GAAP net income, and previously reported GAAP diluted earnings per common share:

 

     2004     2003     2002  

Net Income (in millions)

   $ (30.8 )   $ (104.1 )   $ (28.1 )

Diluted Earnings Per Share

   $ (0.30 )   $ (1.13 )   $ (0.32 )

Overview of Financial Recertification-Related Process

After the November 2005 determinations by the Special Committee, the Board of Directors requested that the Special Committee work in conjunction with the Company to conduct a supplemental review of the principal financial reporting control areas of the Company and the key individuals functioning in these areas during the relevant time periods. This recertification work was conducted in order to determine whether the work previously carried out by the Company in connection with the preparation of its restated financial statements could be relied upon with respect to matters other than the stock option related matters that were the subject of the Special Committee’s initial efforts.

As a result of the initial Special Committee findings and this work, the Company determined, as part of the Item 9A Controls and Procedures disclosure in its amended 2004 Annual Report on Form 10-K/A, that the Company’s disclosure controls and procedures were not effective at a reasonable level of assurance as of December 31, 2004. In its Item 9A disclosure, the Company identified two material weaknesses in its internal control over financial reporting as of December 31, 2004. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, issued an opinion that management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004 is fairly stated, in all material respects. Notwithstanding these material weaknesses, management believes that because of the substantial work performed during the restatement process, the Company’s financial position, results of operations and cash flows, as reflected in the restated consolidated financial statements, are fairly stated in all material respects in accordance with GAAP for each of the periods presented.

Certain Directors Receive “Wells Notice” from SEC

On June 23, 2006, the SEC Staff, as part of the “Wells” process by which the SEC Staff affords individuals and companies the opportunity to present their views regarding potential action by the SEC, advised counsel for directors Igal Kohavi, Yair Shamir and Giora Yaron that the SEC Staff is considering recommending that the Commission file a civil enforcement proceeding against each of these directors


Mercury Files Restated Financial Statements   Page 5

 

under applicable provisions of the federal securities laws. The directors have advised the SEC Staff that they intend to file a Wells submission arguing that they did not violate the federal securities laws, that they did not participate in or know of option backdating and that the charges under consideration are legally and factually without basis. Former officers of the Company are likely to receive or have received similar notices. In light of the Wells notice, the aforementioned directors have offered to withdraw from their respective positions on the applicable committees of the Company’s Board of Directors, and the Board has accepted that offer. As previously disclosed, the Company is cooperating in the continuing formal SEC investigation of the Company.

Update on 2005 Unaudited Financial Metrics

The Company also announced today full year 2005 revenue of approximately $843 million and a net full year increase in deferred revenue of approximately $50 million. The Company had 79 deals greater than $1 million for the full year 2005. The full year restated GAAP operating margin was approximately 13%, and the full year restated Non-GAAP operating margin was approximately 21%. The principal adjustments between the restated GAAP operating margin estimates and the restated Non-GAAP operating margin estimates are: the costs incurred in connection with the Special Committee investigation, our internal review of our historical financial statements, the preparation of the restated financial statements, the SEC investigation and inquiries from other government agencies, the related class action and derivative litigation and amendments to the terms of our notes as a result of our failure to timely file our Exchange Act reports with the SEC and the trustee for the notes, and amortization and write-off of intangible assets. The Company’s cash and investment balance was $1.4 billion at December 31, 2005.

Conference Call

Mercury will host a conference call to discuss the restatement and financial results at 5:00 a.m. Pacific Time on Wednesday, July 5, 2006. A live Webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations Web site at http://www.mercury.com/ir. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available until midnight on July 11, 2006. The audio replay can be accessed by calling 888-203-1112 or 719-457-0820, conference call code: 4047904.

About Mercury

Mercury Interactive Corporation (OTC: MERQ), the global leader in business technology optimization (BTO) software, is committed to helping customers optimize the business value of information technology. Founded in 1989, Mercury conducts business worldwide and is one of the largest enterprise software companies today. Mercury provides software and services for IT Governance, Application Delivery and Application Management. Customers worldwide rely on Mercury offerings to govern the priorities, processes and people of IT and test and manage the quality and performance of business-critical applications. Mercury BTO offerings are complemented by technologies and services from global business partners. For more information, please visit www.mercury.com.

Forward Looking Statements

This release contains “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 that reflect Mercury’s judgment and involve risks and uncertainties as of the date of this release.


Mercury Files Restated Financial Statements   Page 6

 

These forward looking statements include those related to the filing of the restated report on Form 10-Q/A for the first quarter of 2005 and the filing of delinquent reports on Forms 10-Q and 10-K, and the estimates of fiscal 2005 revenue, increase in deferred revenue, number of transactions greater than $1 million and restated GAAP and Non-GAAP operating margins, and the Company’s cash and investment balance at December 31, 2005. Actual events or results may differ materially from the results predicted or from any other forward-looking statements made by, or on behalf of, Mercury and should not be considered as an indication of future events or results. Potential risks and uncertainties include, among other things: 1) the timing of completion of the Company’s filing of its Form 10-Q/A for the first quarter of fiscal 2005, its Forms 10-Q for the second and third quarters of fiscal year 2005 and the first quarter of fiscal year 2006, and its Form 10-K for fiscal year 2005, and any other required SEC reports, 2) the impact of the expensing of stock options and stock purchases under Mercury’s employee stock purchase program pursuant to Financial Accounting Standards Board’s Statement 123(R), 3) the impact of the resignations of Amnon Landan, Douglas Smith and Susan Skaer, 4) the nature and scope of the ongoing government investigation, 5) the effect of the Wells notices received by certain directors, 6) the timing of relisting of the Company’s securities on a national securities exchange, including the risk that relisting will not occur, 7) the effect of the SEC investigation and any litigation or other legal proceedings arising out of the matters covered by the Special Committee investigation, 8) costs incurred by Mercury in connection with the Special Committee investigation and the SEC investigation, 9) financial results for fiscal 2005, and the adjustments resulting from the quarter-end and year-end close process and audit by Mercury’s independent auditors of the financial results for fiscal 2005, and 10) the additional risks and important factors described in Mercury’s SEC reports, including the Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 2005, which is available at the SEC’s website at http://www.sec.gov. All of the information in this press release is made as of July 3, 2006, and Mercury undertakes no duty to update this information.

###

Mercury, Mercury Interactive and the Mercury logo are trademarks of Mercury Interactive Corporation and may be registered in certain jurisdictions. Other product and company names are used herein for identification purposes only, and may be trademarks of their respective companies.

MERCURY INTERACTIVE CORPORATION

379 N. Whisman Road

Mountain View, CA 94043

Tel: (650) 603-5200 Fax: (650) 603-5300

www.mercury.com


Mercury Files Restated Financial Statements   Page 7

 

The following tables present the effect of the restatement adjustments by financial statement line item for the Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flows:

Consolidated Balance Sheets as of December 31, 2004 and 2003 (in thousands):

 

    December 31, 2004     December 31, 2003  
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments     As
restated
 

ASSETS

           

Current assets:

           

Cash and cash equivalents

  $ 182,868     $ —       $ 182,868     $ 127,971     $ —       $ 127,971  

Short-term investments

    447,453       —         447,453       589,389       —         589,389  

Trade accounts receivable, net

    224,011       (601 )     223,410       142,908       —         142,908  

Deferred tax assets, net

    10,140       (6,695 )     3,445       442       —         442  

Prepaid expenses and other assets

    85,077       (12,078 )     72,999       64,043       (2,618 )     61,425  
                                               

Total current assets

    949,549       (19,374 )     930,175       924,753       (2,618 )     922,135  

Long-term Investments

    508,120       —         508,120       516,348       —         516,348  

Property and equipment, net

    78,415       (182 )     78,233       73,203       —         73,203  

Investments in non-consolidated companies

    13,031       —         13,031       13,928       —         13,928  

Debt issuance costs, net

    11,258       —         11,258       14,965       —         14,965  

Goodwill

    395,439       890       396,329       347,616       (2,128 )     345,488  

Intangible assets, net

    38,452       —         38,452       45,126       —         45,126  

Restricted cash

    6,000       —         6,000       6,000       —         6,000  

Interest rate swap

    4,832       —         4,832       11,557       —         11,557  

Long-term deferred tax assets, net

    —         3,503       3,503       —         17,514       17,514  

Other assets

    14,854       8,694       23,548       17,456       —         17,456  
                                               

Total assets

  $ 2,019,950     $ (6,469 )   $ 2,013,481     $ 1,970,952     $ 12,768     $ 1,983,720  
                                               

LIABILITIES AND STOCKHOLDERS’ EQUITY

           

Current liabilities:

           

Accounts payable

  $ 20,008     $ —       $ 20,008     $ 17,584     $ —       $ 17,584  

Accrued liabilities

    128,997       14,818       143,815       96,637       6,986       103,623  

Income taxes

    65,578       (464 )     65,114       63,771       (9,320 )     54,451  

Deferred tax liabilities, net

    —         2       2       —         17,514       17,514  

Short-term deferred revenue

    312,115       (539 )     311,576       212,716       508       213,224  
                                               

Total current liabilities

    526,698       13,817       540,515       390,708       15,688       406,396  

Convertible notes

    804,483       —         804,483       811,159       —         811,159  

Long-term deferred revenue

    102,205       —         102,205       67,909       —         67,909  

Long-term deferred tax liabilities, net

    3,192       (3,192 )     —         266       (266 )     —    

Other long-term payables

    2,386       —         2,386       541       —         541  
                                               

Total liabilities

    1,438,964       10,625       1,449,589       1,270,583       15,422       1,286,005  
                                               

Commitments and contingencies (Notes 9, 10 and 19)

           

Stockholders’ equity:

           

Preferred stock

    —         —         —         —         —         —    

Common stock

    170       —         170       181       —         181  

Additional paid-in capital

    599,976       518,777       1,118,753       468,150       532,020       1,000,170  

Treasury stock

    (348,249 )     —         (348,249 )     (16,082 )     —         (16,082 )

Notes receivable from issuance of common stock

    (4,173 )     (1,283 )     (5,456 )     (6,580 )     (1,349 )     (7,929 )

Unearned stock-based compensation

    (608 )     (9,214 )     (9,822 )     (1,533 )     (38,775 )     (40,308 )

Accumulated other comprehensive loss

    (13,182 )     —         (13,182 )     (6,219 )     —         (6,219 )

Retained earnings / (Accumulated deficit)

    347,052       (525,374 )     (178,322 )     262,452       (494,550 )     (232,098 )
                                               

Total stockholders’ equity

    580,986       (17,094 )     563,892       700,369       (2,654 )     697,715  
                                               

Total liabilities and stockholders’ equity

  $ 2,019,950     $ (6,469 )   $ 2,013,481     $ 1,970,952     $ 12,768     $ 1,983,720  
                                               


Mercury Files Restated Financial Statements   Page 8

 

Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002 (in thousands, except per share amounts):

 

    Year Ended December 31,  
    2004     2003     2002  
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments     As
restated
 

Revenues:

                 

License fees

  $ 261,306     $ 76     $ 261,382     $ 201,047     $ (208 )   $ 200,839     $ 192,212     $ 2     $ 192,214  

Subscription fees

    152,064       135       152,199       98,858       (34 )     98,824       53,024       (54 )     52,970  

Maintenance fees

    196,141       74       196,215       159,030       (7 )     159,023       122,343       (81 )     122,262  

Professional service fees

    76,036       239       76,275       47,538       (19 )     47,519       32,543       (36 )     32,507  
                                                                       

Total Revenues

    685,547       524       686,071       506,473       (268 )     506,205       400,122       (169 )     399,953  
                                                                       

Costs and expenses:

                 

Cost of license and subscription (including stock-based compensation) (1)

    40,344       1,455       41,799       29,056       5,376       34,432       24,804       2,523       27,327  

Cost of maintenance (including stock-based compensation) (1)

    15,583       2,315       17,898       11,880       5,851       17,731       11,662       2,935       14,597  

Cost of professional services (including stock-based compensation) (1)

    62,834       903       63,737       36,942       3,379       40,321       24,334       1,176       25,510  

Cost of revenue—amortization of intangible assets (1)

    10,019       —         10,019       5,189       —         5,189       1,833       —         1,833  

Marketing and selling (including stock-based compensation) (1)

    314,900       20,967       335,867       244,374       59,491       303,865       194,418       22,128       216,546  

Research and development (including stock-based compensation) (1)

    73,724       8,398       82,122       55,904       17,192       73,096       42,699       8,498       51,197  

General and administrative (including stock-based compensation) (1)

    56,008       7,794       63,802       40,034       15,870       55,904       32,474       (1,560 )     30,914  

Acquisition-related expenses

    900       —         900       11,968       —         11,968       —         —         —    

Restructuring, integration, and other related expenses

    3,088       —         3,088       3,389       —         3,389       (537 )     —         (537 )

Amortization of intangible assets

    5,544       —         5,544       2,281       —         2,281       542       —         542  

Excess facilities expense

    8,943       —         8,943       16,882       —         16,882       —         —         —    
                                                                       

Total costs and expenses

    591,887       41,832       633,719       457,899       107,159       565,058       332,229       35,700       367,929  
                                                                       

Income (loss) from operations

    93,660       (41,308 )     52,352       48,574       (107,427 )     (58,853 )     67,893       (35,869 )     32,024  

Interest income

    38,614       (404 )     38,210       36,077       (1,678 )     34,399       35,119       (178 )     34,941  

Interest expense

    (20,292 )     (4,335 )     (24,627 )     (19,551 )     (3,273 )     (22,824 )     (23,370 )     (1,624 )     (24,994 )

Other income (expense), net

    (4,837 )     3,576       (1,261 )     (7,405 )     2,498       (4,907 )     2,747       1,561       4,308  
                                                                       

Income (loss) before provision for income taxes

    107,145       (42,471 )     64,674       57,695       (109,880 )     (52,185 )     82,389       (36,110 )     46,279  

Provision for income taxes

    22,545       (11,647 )     10,898       16,182       (5,781 )     10,401       17,185       (7,966 )     9,219  
                                                                       

Net income (loss)

  $ 84,600     $ (30,824 )   $ 53,776     $ 41,513     $ (104,099 )   $ (62,586 )   $ 65,204     $ (28,144 )   $ 37,060  
                                                                       

Net income (loss) per share-basic

  $ 0.95     $ (0.34 )   $ 0.61     $ 0.48     $ (1.20 )   $ (0.72 )   $ 0.78     $ (0.33 )   $ 0.45  
                                                                       

Net income (loss) per share-diluted

  $ 0.83     $ (0.30 )   $ 0.53     $ 0.41     $ (1.13 )   $ (0.72 )   $ 0.74     $ (0.32 )   $ 0.42  
                                                                       

Weighted average common shares- basic

    89,060       (1,392 )     87,668       87,124       (515 )     86,609       83,938       (1,226 )     82,712  
                                                                       

Weighted average common shares and equivalents-diluted

    103,207       30       103,237       102,401       (15,792 )     86,609       87,640       (426 )     87,214  
                                                                       

__________

(1)    Stock-based compensation:

                 

Cost of license and subscription

  $ —       $ 1,201     $ 1,201     $ —       $ 5,073     $ 5,073     $ —       $ 2,517     $ 2,517  

Cost of maintenance

    —         1,725       1,725       —         5,433       5,433       —         2,926       2,926  

Cost of professional services

    108       690       798       53       3,127       3,180       —         1,174       1,174  

Marketing and selling

    437       15,868       16,305       5,609       54,816       60,425       643       22,093       22,736  

Research and development

    255       7,944       8,199       296       16,108       16,404       453       9,453       9,906  

General and administrative

    21       6,211       6,232       34       15,114       15,148       67       (917 )     (850 )


Mercury Files Restated Financial Statements   Page 9

 

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 (in thousands, except per share amounts):

 

    Year ended December 31,  
    2004     2003     2002  
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments     As
restated
 

Cash flows from operating activities:

                 

Net income (loss)

  $ 84,600     $ (30,824 )   $ 53,776     $ 41,513     $ (104,099 )   $ (62,586 )   $ 65,204     $ (28,144 )   $ 37,060  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

                 

Depreciation and amortization

    21,697       (6 )     21,691       17,869       —         17,869       14,704       —         14,704  

Sales reserve

    1,873       —         1,873       1,193       —         1,193       3,342       —         3,342  

Unrealized (gain) loss on interest rate swap

    51       —         51       8       —         8       (406 )     —         (406 )

Amortization of intangible assets

    15,563       —         15,563       7,470       —         7,470       2,375       —         2,375  

Stock-based compensation

    821       33,639       34,460       5,992       99,671       105,663       1,163       37,246       38,409  

Gain on early retirement of debt

    —         —         —         —         —         —         (11,610 )     —         (11,610 )

Loss on investments in non-consolidated companies

    1,138       —         1,138       3,959       —         3,959       5,296       —         5,296  

Loss on disposals of assets

    454       188       642       —         —         —         —         —         —    

Gain on sale of available-for-sale securities

    (336 )     —         (336 )     —         —         —         —         —         —    

Unrealized gain on warrant

    (502 )     —         (502 )     (435 )     —         (435 )     —         —         —    

Write-off of in-process research and development

    900       —         900       11,968       —         11,968       —         —         —    

Excess facilities expense

    8,943       —         8,943       16,882       —         16,882       —         —         —    

Tax benefit from employee stock options

    17,964       (17,625 )     339       6,367       (6,367 )     —         —         —         —    

Deferred income taxes

    (7,214 )     710       (6,504 )     13,517       (11,589 )     1,928       (6,595 )     6,595       —    

Changes in assets and liabilities, net of effect of acquisitions:

                 

Trade accounts receivable

    (76,787 )     601       (76,186 )     (40,878 )     —         (40,878 )     (28,288 )     590       (27,698 )

Prepaid expenses and other assets

    (14,350 )     733       (13,617 )     (20,808 )     2,499       (18,309 )     (27,498 )     22,884       (4,614 )

Accounts payable

    1,152       —         1,152       3,167       —         3,167       (451 )     —         (451 )

Accrued liabilities

    23,142       7,833       30,975       12,927       7,091       20,018       11,443       (1,531 )     9,912  

Income taxes

    5,216       5,429       10,645       (12,681 )     12,882       201       38,492       (37,667 )     825  

Deferred revenue

    126,627       (1,048 )     125,579       111,944       268       112,212       65,002       (421 )     64,581  

Other long-term payables

    1,845       —         1,845       541       —         541       —         —         —    
                                                                       

Net cash provided by (used in) operating activities

    212,797       (370 )     212,427       180,515       356       180,871       132,173       (448 )     131,725  
                                                                       


    Year ended December 31,  
    2004     2003     2002  
    As
previously
reported
    Adjustments   As
restated
    As
previously
reported
    Adjustments     As
restated
    As
previously
reported
    Adjustments   As
restated
 

Cash flows from investing activities:

                 

Maturities of investments

    544,135       —       544,135       453,142       —         453,142       382,261       —       382,261  

Purchases of held-to-maturity investments

    (481,887 )     —       (481,887 )     (809,395 )     —         (809,395 )     (303,427 )     —       (303,427 )

Increase in restricted cash

    —         —       —         —         —         —         (6,000 )     —       (6,000 )

Proceeds from sale of available-for-sale investments

    1,124,255       —       1,124,255       1,498,549       —         1,498,549       637,635       —       637,635  

Purchases of available-for-sale investments

    (1,034,438 )     —       (1,034,438 )     (1,687,095 )     —         (1,687,095 )     (871,973 )     —       (871,973 )

Proceeds from return on investment in non-consolidated company

    1,525       —       1,525       —         —         —         —         —       —    

Purchases of investments in non-consolidated companies

    (2,625 )     —       (2,625 )     (1,500 )     —         (1,500 )     (2,244 )     —       (2,244 )

Cash paid in conjunction with the acquisition of Performant, net

    —         —       —         (22,028 )     —         (22,028 )     —         —       —    

Cash paid in conjunction with the acquisition of Kintana, net

    (163 )     —       (163 )     (136,653 )     —         (136,653 )     —         —       —    

Cash paid in conjunction with a technology purchase from Allerez

    —         —       —         (1,270 )     —         (1,270 )     —         —       —    

Cash paid in conjunction with a domain name purchase

    —         —       —         (650 )     —         (650 )     —         —       —    

Cash paid in conjunction with the acquisition of Appilog, net

    (49,543 )     —       (49,543 )     —         —         —         —         —       —    

Net proceeds from sale of assets and vacant facilities

    2,684       —       2,684       —         —         —         —         —       —    

Acquisition of property and equipment, net

    (32,684 )     —       (32,684 )     (17,093 )     —         (17,093 )     (8,164 )     —       (8,164 )
                                                                   

Net cash provided by (used in) investing activities

    71,259       —       71,259       (723,993 )     —         (723,993 )     (171,912 )     —       (171,912 )
                                                                   

Cash flows from financing activities:

                 

Proceeds from issuances of convertible notes, net

    —         —       —         488,056       —         488,056       —         —       —    

Proceeds from issuances of common stock under stock option and employee stock purchase plans

    103,981       —       103,981       74,779       —         74,779       23,038       —       23,038  

Purchase of treasury stock

    (332,186 )     —       (332,186 )     —         —         —         —         —       —    

Retirement of convertible subordinated notes

    —         —         —         —         —         (64,640 )     —       (64,640 )

Collection of notes receivable from issuances of common stock, net

    1,689       370     2,059       4,186       (356 )     3,830       878       448     1,326  
                                                                   

Net cash provided by (used in) financing activities

    (226,516 )     370     (226,146 )     567,021       (356 )     566,665       (40,724 )     448     (40,276 )
                                                                   

Effect of exchange rate changes on cash

    (2,643 )     —       (2,643 )     (194 )     —         (194 )     1,287       —       1,287  
                                                                   

Net increase (decrease) in cash and cash equivalents

    54,897       —       54,897       23,349       —         23,349       (79,176 )     —       (79,176 )

Cash and cash equivalents at beginning of year

    127,971       —       127,971       104,622       —         104,622       183,798       —       183,798  
                                                                   

Cash and cash equivalents at end of year

  $ 182,868     $ —     $ 182,868     $ 127,971     $ —       $ 127,971     $ 104,622     $ —     $ 104,622  
                                                                   

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
7/11/06
Filed as of:7/5/06SC 13G
Filed on / For Period End:7/3/0610-K/A
6/23/06
12/31/0510-K,  NT 10-K
11/2/058-K
9/30/05NT 10-Q
3/31/0510-Q,  10-Q/A,  DEF 14A
12/31/0410-K,  10-K/A,  4,  8-K
12/31/0310-K
12/31/0210-K
12/31/0110-K
 List all Filings 
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