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Peregrine Systems Inc – ‘10-Q/A’ for 12/31/01

On:  Monday, 3/4/02   ·   For:  12/31/01   ·   Accession #:  912057-2-8566   ·   File #:  0-22209

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

 3/04/02  Peregrine Systems Inc             10-Q/A     12/31/01    1:130K                                   Merrill Corp/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q/A      Amendment to Quarterly Report                       HTML    129K 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Amendment No. 1
Form 10-Q/A

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2001

OR

FOR THE TRANSITION PERIOD FROM                              TO                             .

COMMISSION FILE NUMBER: 000-22209

PEREGRINE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

3611 Valley Centre Drive
San Diego, California 92130
(Address of principal executive offices, including zip code)

(858) 481-5000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes ý    No o

        The number of issued and outstanding shares of the Registrant's Common Stock, $0.001 par value, as of December 31, 2001, was 192,308,453.

PEREGRINE SYSTEMS, INC.

EXPLANATORY NOTE

The purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2001 is solely to amend Part I, Item 1, Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2001 (unaudited) to reflect the correct amount of cash paid during the period for interest and income taxes. As amended, the amount of cash paid during the period for interest is correctly stated as $19,987,000 for the nine months ended December 31, 2001. As amended, the amount of cash paid during the period for income taxes is correctly stated as $6,641,000 for the nine months ended December 31, 2001. This amendment to our Quarterly Report on Form 10-Q does not otherwise attempt to update the information included herein beyond the original filing date of the report.

PEREGRINE SYSTEMS, INC.

TABLE OF CONTENTS

PART I
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PEREGRINE SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PEREGRINE SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share and share amounts)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

PEREGRINE SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

PEREGRINE SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Basis of Presentation

        The accompanying condensed consolidated balance sheet as of December 31, 2001, condensed consolidated statements of operations for the three and nine month periods ended December 31, 2001 and 2000, and condensed consolidated statements of cash flows for the nine month periods ended December 31, 2001 and 2000, have been prepared by Peregrine Systems, Inc. (unless otherwise noted, "Peregrine Systems," "we," "PSI," "us," or "our" refers to Peregrine Systems, Inc.) and have not been audited. These condensed consolidated financial statements, in our opinion, include all adjustments necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for all periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed for the year ended March 31, 2001, which provides further information regarding our significant accounting policies and other financial and operating information. Interim operating results are not necessarily indicative of operating results for the full year or any other future period. The condensed consolidated financial statements include the accounts of PSI and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain amounts for prior periods have been reclassified to conform to current year presentation.

        The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Note 2. Revenue Recognition

        Our revenues are derived principally from product licensing and services. License fees are generally due upon the granting of the license and typically include a one-year warranty period as part of the license agreement. Service revenues are comprised of fees from maintenance (post-contract support), professional services (consulting), network services, and training. We also derive revenues from transaction fees, subscription fees, and maintenance fees associated with our business-to-business relationship management products.

        Revenues from direct and indirect license agreements are recognized, provided that all of the following conditions are met: a noncancelable license agreement has been signed; the product has been delivered; there are no material uncertainties regarding customer acceptance; collection of the resulting receivable is deemed probable; risk of concession is deemed remote; and no other significant vendor obligations exist. We may grant payment terms of more than one year. Typically this is only done in limited circumstances where the contract is with customers having a proven credit history; when appropriate we discount the related receivable at the applicable market interest rate as a reduction of revenue. Revenues from maintenance services that are sold separately from license revenue are recognized ratably over the term of the support period, generally one year. Maintenance revenues that are bundled with license agreements are unbundled using vendor specific objective evidence. Consulting revenues are primarily related to implementation services most often performed on a time and material basis under separate service agreements for the installation of our products. Revenues from consulting and training services are recognized as the respective services are performed. Transaction and subscription fees are recognized monthly as services are provided.

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        Cost of licenses consists primarily of amounts paid to third-party vendors, product media, manuals, packaging materials, personnel, and related shipping costs. Cost of services consists primarily of salaries, benefits, and allocated overhead costs incurred in providing telephone support, professional services, training to customers, and other maintenance. Deferred revenues primarily relate to maintenance fees, which have been paid by our customers in advance of the performance of these services.

        On occasion, we purchase goods or services for our operations from certain limited vendors at or about the same time we license our software to these organizations. These transactions are separately negotiated and recorded at terms we consider to be arms length.

Note 3. Computation of Net Loss Per Share

        Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Potentially dilutive securities represent incremental shares issuable upon exercise of our equity and debt securities. For the three and nine month periods ended December 31, 2001 and 2000, the diluted loss per share calculation excludes the effect of certain equity and debt securities as inclusion would be anti-dilutive.

Note 4. Acquisitions

        On August 27, 2001, we completed the acquisition of Remedy Corporation ("Remedy"), a supplier of information technology service management and customer relationship management solutions. We issued approximately 28 million shares of our common stock (excluding assumed options) and paid approximately $280.8 million in cash in exchange for all of the outstanding shares of Remedy for a total purchase price, including merger related costs, of approximately $1.2 billion.

Pro Forma Financial Information

        The following table presents the unaudited pro forma results assuming we had acquired each of Harbinger and Remedy at the beginning of fiscal 2002 and 2001, as applicable. This information may not necessarily be indicative of our future combined results.

        The unaudited pro forma results of operations exclude the results of operations of certain other acquisitions consummated during fiscal 2002 and fiscal 2001. The inclusion of the results associated with these acquisitions would not materially affect the pro forma financial information presented below.

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Acquisition-related Liabilities

        With respect to acquisition-related liabilities at December 31, 2001, we have both approved and preliminary plans of integration and consolidation. These plans include the steps we believe will be necessary within the next twelve months to integrate the operations of these acquisitions. The plans provide for the consolidation of duplicate facilities and infrastructure assets and the elimination of duplicate efforts and positions within the combined company. In connection with these integration and consolidation plans, we have accrued for acquisition-related costs comprised principally of the following components as of December 31, 2001 (in thousands):

        This accrual represents our best estimate, based on information available as of December 31, 2001, of the identifiable and quantifiable charges that we may incur as a result of these integration and consolidation plans. However, these estimates may change. Any changes in the estimates during the twelve month period following the acquisition will increase or decrease goodwill as appropriate. We believe substantially all of the above costs will be paid for within twelve months.

        The following represents a detail, by acquisition, of our acquisition-related liabilities (in thousands):

(1)

Included is an $18 million reversal against goodwill.

        In addition to the costs included in the accrual for our integration and consolidation plans, we will incur other incremental costs as a direct result of our efforts. These costs will be accounted for as incurred in future periods. To the extent these costs become significant they could have a material adverse effect on our future operating results.

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Note 5. Revolving Line of Credit

        In August 2001, we entered into a $150 million short-term bridge facility with a syndicate of financial institutions. In October 2001, we replaced this facility with a $150 million three-year revolving line of credit facility, also with a syndicate of financial institutions. This facility is secured by a pledge of certain tangible and intellectual property assets and interests in the outstanding capital stock of some of our domestic and foreign subsidiaries. The terms of the revolving line of credit facility include covenants that require us to attain certain financial criteria. Based upon our financial results reported as of December 31, 2001, we determined that we did not comply with some of these covenants. In February 2002, we entered into an amendment to the revolving line of credit facility that suspends certain of our financial covenants through March 31, 2002, imposes additional other financial covenants, and waives the covenant non-compliance existing as of December 31, 2001.

        In February 2002, all amounts outstanding under the revolving line of credit facility were repaid, with the exception of outstanding letters of credit under the facility of approximately $18.6 million. The changes to the facility may limit our current ability to make further borrowings. We may not be able to satisfy the new financial covenants or we may decide to terminate the facility if we conclude that the terms of the facility, as amended, are not favorable from a business perspective.

Note 6. Comprehensive Loss

        Total comprehensive loss is determined as follows:

Note 7. Segment and Geographic Operations

        Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," ("SFAS No. 131") requires disclosure of segment information in a manner consistent with the "management approach." The management approach is based on the way the chief operating decision-maker organizes segments within a company for making operating decisions and assessing performance. Prior to the acquisition of Harbinger in June 2000, we operated exclusively in the infrastructure management industry. Effective April 2001 through September 2001, we operated in four segments that met the criteria of being a reportable segment in accordance with the provisions of SFAS No. 131. These reportable segments were the infrastructure management group, the e-markets group, the integrated solutions group, and the shared-services group. Effective October 2001, we reorganized into three distinct business groups designed to restructure our business with a functional, rather than product, orientation. These groups are the customer relationships group, the solutions group, and the shared services group. Transactions between the reportable segments were made at terms which approximated arms length transactions and were in accordance with accounting

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principles generally accepted in the United States. There were no significant differences between the measurement of the reportable segment's profits and losses disclosed below and the measurement of profits and losses in our consolidated statements of operations. Certain management allocations were made between these segments. Prior periods have not been presented, as it would be impracticable to do so. The segment information for the three and nine month periods ended December 31, 2001, respectively, inclusive of management allocations, is as follows (in thousands):

        A summary of our operations by geographic area is as follows (in thousands):

Note 8. Recent Accounting Pronouncements

        During July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142"). SFAS No. 141 addresses the accounting for acquisitions of businesses and is effective for acquisitions occurring on or after July 1, 2001. SFAS No. 142 addresses the method of identifying and measuring goodwill and other intangible assets acquired in a business combination, and requires periodic evaluations of impairment of goodwill and intangible balances. SFAS No. 142 will be adopted April 1, 2002. The impacts of the adoption of SFAS No. 141 and SFAS No. 142 are still being assessed, but amongst the immediate impacts is that goodwill and certain other intangible assets acquired on or after July 1, 2001 will no longer be amortized to income in the consolidated statements of operations. Furthermore, upon adoption, goodwill and certain other intangible assets acquired before July 1, 2001 will no longer be amortized to income in the consolidated statements of operations.

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        During August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS No. 143"). SFAS No. 143 addresses the timing of the liability recognition, the initial measurement of the liability, the allocation of asset retirement cost to expense, the subsequent measurement of the liability, and the financial statement disclosures for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to all entities and legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long-lived assets, except for certain lessee obligations. SFAS No. 143 will be adopted April 1, 2003. We have not yet determined the impact of its adoption on our consolidated results of operations, financial position, or cash flows.

        During August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," ("SFAS No. 144"). SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," ("SFAS No. 121") and the accounting and reporting provision of the Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions," ("APB No. 30") for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 will be adopted April 1, 2002. The provisions of SFAS No. 144 are generally to be applied prospectively. We have not yet determined the impact of its adoption on our consolidated results of operations, financial position, or cash flows.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized in the City of San Diego, California, this 4th day of March, 2002.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q/A’ Filing		Date		Other Filings
		4/1/03		8-K
		4/1/02
		3/31/02		NT 10-K
Filed on:		3/4/02
For Period End:		12/31/01		10-Q
		8/27/01		8-K
		7/1/01
		3/31/01		10-K
		12/31/00		10-Q
		3/31/00		10-K
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