Compuware Reports Fiscal Year 2005 Third Quarter Results

Compuware Reports Fiscal Year 2005 Third Quarter Results

Earnings of 11 Cents per Share Bolstered by 22.7 Percent Year-over-year Increase in Software License Fees, 14 Percent Professional Services Margin

DETROIT, Jan. 25 /PRNewswire-FirstCall/ -- Compuware Corporation (NASDAQ:CPWR) today announced financial results for its third quarter, which ended December 31, 2004.

"This is more like it," said Compuware Chairman and CEO Peter Karmanos, Jr. "These results confirm the confidence of Compuware's management in the company's ability to deliver sound third and fourth quarter results in fiscal 2005. I'm glad that the company is again moving in the right direction and look forward to a solid fourth quarter."

Third Quarter Fiscal 2005 Results

Compuware reports third quarter revenues of $330.5 million, compared to $318.2 million in the third quarter of the previous fiscal year. Net income was $41.7 million compared to $21.8 million in the same quarter of fiscal 2004. Earnings per share (diluted computation) were 11 cents compared to six cents, based upon 388.8 million and 385.9 million shares outstanding, respectively.

During the company's third quarter, software license fees were $99.0 million, compared to $80.7 million in the same quarter of the previous year. Maintenance fees were $108.7 million, compared to $102.9 million in the third quarter of fiscal 2004. Revenue from professional services was $122.9 million, compared to $134.6 million in the same quarter last year.

Third Quarter Fiscal Year 2005 Highlights
During the third quarter, Compuware:


-- Announced it acquired the technology assets of DevStream Corporation. The privately owned software company developed an advanced J2EE performance analysis product, which Compuware recently introduced as Vantage Analyzer for J2EE.

-- Introduced the latest, enhanced version of the Compuware Vantage solution, which provides new service assurance capabilities to help IT organizations be more effective in their approach to delivering reliable service to business users.

-- Reported that a new, independent research report published by industry analyst firm Gartner, Inc., confirmed the architected, rapid application development (ARAD) approach. The study examined the productivity and ROI benefits of service-oriented application development methods and found that ARAD can yield an ROI of up to 1,500 percent. ARAD is the approach used by Compuware OptimalJ, a leading, model-driven, pattern-based enterprise development solution.

-- Introduced the latest releases in the XPEDITER product line, which help organizations better analyze, understand, debug and test their mainframe applications. Compuware XPEDITER enables organizations to reduce IT expenditures and leverage and extend their existing investments in legacy applications.

-- Partnered with Collation, Inc. to provide configuration management capabilities to Compuware's application service management customers.

-- Demonstrated at STARWEST 2004 two new DevPartner products -- Compuware DevPartner Fault Simulator(TM) and Compuware DevPartner SecurityChecker(TM) -- that significantly extend the ability to detect and diagnose software quality errors in Microsoft-technology applications during the development process.

-- Announced an alliance with Dynamics Research Corporation (DRC) to develop applications for Ohio's Statewide Automated Child Welfare Information System. DRC was awarded the $30 million contract -- more than a third of which was earmarked for Compuware -- in a competitive RFP.

-- Announced an agreement to provide Mitsubishi Motors Corporation of Japan with Covisint Communicate portal service. Covisint Communicate will help Mitsubishi improve sharing of information and collaborative business processes with suppliers.

-- Demonstrated at the CU2004 Worldwide Uniface User Conference, the new capabilities of Uniface Jti, version 3.0, which helps eliminate the costs of rewriting and even re-architecting existing applications for the web.

-- Announced details of its Uniface application platform suite, which consists of the Compuware Uniface development environment, the Uniface Flow business process management solution and Uniface View, a web application delivery framework.

-- Was once again named as one of 101 Metropolitan Detroit's Best and Brightest Companies to Work For, as determined by the Michigan Business and Professional Association.

-- Announced that Detroit Public Schools (DPS) had been awarded PeopleSoft's "Leaders in Supply Chain Management" award. PeopleSoft honored DPS for the district's innovation and excellence in the areas of procurement and supply-chain management. The IT organization of DPS operates in partnership with Compuware.

Compuware Corporation

Compuware Corporation (NASDAQ:CPWR) maximizes the value IT brings to the business by helping CIOs more effectively manage the business of IT. Compuware solutions accelerate the development, improve the quality and enhance the performance of critical business systems while enabling CIOs to align and govern the entire IT portfolio, increasing efficiency, cost control and employee productivity throughout the IT organization. Founded in 1973, Compuware serves the world's leading IT organizations, including more than 90 percent of the Fortune 100 companies. Learn more about Compuware at http://www.compuware.com/ .

Conference Call Information

Compuware will host a conference call today to discuss these results at 5:00 p.m. Eastern Time (22:00 GMT). Interested parties calling from the United States should call 877-459-8388. For international access, the conference call number is +1-484-630-8751. The password for the conference call is Compuware. A conference call replay will also be available. For more information, visit the Compuware Corporation Investor Relations web site at http://www.compuware.com/ .

Press Contact

Lisa Elkin, Vice President, Corporate Communications and Investor Relations, 313-227-7345

Certain statements in this release that are not historical facts, including those regarding the Company's future plans, objectives and expected performance, are "forward-looking statements" within the meaning of the federal securities laws. These forward-looking statements represent our outlook only as of the date of this release. While we believe any forward- looking statements we have made are reasonable, actual results could differ materially since the statements are based on our current expectations and are subject to risks and uncertainties. These risks and uncertainties are discussed in the Company's reports filed with the Securities and Exchange Commission. Readers are cautioned to consider these factors when relying on such forward-looking information. The Company does not undertake, and expressly disclaims any obligation, to update or alter its forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

AS OF DECEMBER 31,
ASSETS
2004 2003
CURRENT ASSETS:
Cash and cash equivalents $419,567 $367,199
Investments 194,719 175,043
Accounts receivable, net 431,701 427,433
Deferred tax asset, net 34,233 33,450
Income taxes refundable, net 23,578 21,848
Prepaid expenses and other current
assets 24,756 16,991
Building - available for sale 19,702
Total current assets 1,148,256 1,041,964

INVESTMENTS 122,481 117,386

PROPERTY AND EQUIPMENT, LESS
ACCUMULATED
DEPRECIATION AND AMORTIZATION 424,524 427,561

CAPITALIZED SOFTWARE, LESS
ACCUMULATED
AMORTIZATION 55,715 44,220

OTHER:
Accounts receivable 250,973 244,228
Deferred tax asset, net 15,676 57,194
Goodwill 297,108 213,083
Other 36,104 25,718
Total other assets 599,861 540,223

TOTAL ASSETS $2,350,837 $2,171,354

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $25,730 $28,194
Accrued expenses 188,631 196,584
Deferred revenue 293,176 263,589
Total current liabilities 507,537 488,367

DEFERRED REVENUE 339,140 291,542

ACCRUED EXPENSES 18,890 18,798
Total liabilities 865,567 798,707

SHAREHOLDERS' EQUITY:
Common stock 3,873 3,842
Additional paid-in capital 738,165 715,071
Retained earnings 730,871 647,193
Foreign currency translation
adjustment 12,361 6,541
Total shareholders' equity 1,485,270 1,372,647

TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,350,837 $2,171,354

Note: Certain amounts in prior periods have been reclassified to conform
to the current presentation.



COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)


QUARTER ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,

2004 2003 2004 2003
REVENUES:
Software license fees $98,996 $80,678 $218,761 $195,361
Maintenance fees 108,658 102,940 316,930 303,913
Professional services fees 122,881 134,567 377,365 427,676
Total revenues 330,535 318,185 913,056 926,950

OPERATING EXPENSES:
Cost of software license fees 5,403 8,285 21,289 23,328
Cost of professional services 105,734 123,767 337,518 399,814
Technology development and
support 33,907 41,640 115,587 124,398
Sales and marketing 84,441 82,117 234,496 227,167
Administrative and general 48,321 50,245 148,735 158,074
Total operating expenses 277,806 306,054 857,625 932,781

INCOME (LOSS) FROM OPERATIONS 52,729 12,131 55,431 (5,831)

OTHER INCOME 5,191 4,988 13,675 14,735

INCOME BEFORE INCOME TAXES 57,920 17,119 69,106 8,904

INCOME TAX PROVISION (BENEFIT) 16,218 (4,706) 19,350 (7,006)

NET INCOME $41,702 $21,825 $49,756 $15,910

DILUTED EPS COMPUTATION
Numerator: Net income $41,702 $21,825 $49,756 $15,910
Denominator:
Weighted-average common shares
outstanding 387,211 384,090 386,475 382,550
Dilutive effect of stock
options 1,609 1,852 1,785 1,753
Total shares 388,820 385,942 388,260 384,303
Diluted EPS $0.11 $0.06 $0.13 $0.04



COMPUWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

NINE MONTHS ENDED
DECEMBER 31,
2004 2003
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $49,756 $15,910
Adjustments to reconcile net income
to cash provided
by operations:
Depreciation and amortization 43,654 39,994
Tax benefit from exercise of
stock options 372 175
Issuance of common stock to
ESOP 4,872
Acquisition tax benefits 5,406 5,275
Deferred income taxes 11,397 804
Other 2,015 3,012
Net change in assets and
liabilities, net of effects
from acquisitions:
Accounts receivable (6,634) 144,406
Prepaid expenses and other
current assets (2,341) 876
Other assets 1,968 5,204
Accounts payable and accrued
expenses (24,936) (6,984)
Deferred revenue 6,908 (72,429)
Income taxes 10,362 (10,947)
Net cash provided by
operating activities 102,799 125,296

CASH FLOWS USED IN INVESTING
ACTIVITIES:
Purchase of:
Business (104,993)
Property and equipment:
Headquarters facility (7,073) (50,497)
Other (15,628) (5,500)
Capitalized software (16,431) (9,165)
Investments:
Proceeds 157,927 275,344
Purchases (164,953) (302,353)
Net cash used in
investing activities (151,151) (92,171)

CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Net proceeds from exercise of stock
options 1,283 1,179
Contribution to stock purchase
plans 6,111 6,468
Repurchase of common stock (996)
Net cash provided by
financing activities 7,394 6,651

EFFECT OF EXCHANGE RATE CHANGES ON
CASH 5,609 7,957

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (35,349) 47,733

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 454,916 319,466

CASH AND CASH EQUIVALENTS AT END OF
PERIOD $419,567 $367,199

Note: Certain amounts in prior periods have been reclassified to conform
to the current presentation.



COMPUWARE CORPORATION AND SUBSIDIARIES
OPERATIONAL HIGHLIGHTS
(dollar amounts in thousands)

QUARTER ENDED QUARTER ENDED
DEC. 31, DEC. 31, YR-YR SEPT. 30, QTR-QTR
2004 2003 % Change 2004 % Change
License Fees:
Distributed Product
License Fees
DevPartner $4,157 $6,901 (39.8%) $3,929 5.8%
QACenter and File-AID
Client/Server 7,150 6,173 15.8% 5,961 19.9%
UNIFACE and Optimal 5,080 5,496 (7.6%) 3,295 54.2%
Vantage 11,544 11,610 (0.6%) 7,635 51.2%
IT Governance 2,900 - N/A 1,657 75.0%
Total Distributed Product
License Fees 30,831 30,180 2.2% 22,477 37.2%
Mainframe Product License
Fees 68,165 50,498 35.0% 43,185 57.8%
Total License Fees 98,996 80,678 22.7% 65,662 50.8%

Maintenance Fees 108,658 102,940 5.6% 104,771 3.7%
Total Products Revenue $207,654 $183,618 13.1% $170,433 21.8%


Total Mainframe Products
Revenue $151,885 $135,943 11.7% $126,096 20.5%
Total Distributed Products
Revenue $55,769 $47,675 17.0% $44,337 25.8%

Total Products Revenue by
Geography
North America $114,237 $97,003 17.8% $95,644 19.4%
International $93,417 $86,615 7.9% $74,789 24.9%

Product Releases
Mainframe 4 4 0.0% 2 100.0%
Distributed 9 16 (43.8%) 6 50.0%

Total Costs of Software
Products $123,751 $132,042 (6.3%) $128,188 (3.5%)

Professional Services
Professional Services
Revenue $122,881 $134,567 (8.7%) $125,035 (1.7%)
Contribution Margin 14.0% 8.0% 9.7%
Billable Headcount 3,884 4,707 (17.5%) 3,949 (1.6%)

Total Company Headcount 8,109 9,097 (10.9%) 8,446 (4.0%)



Source: Compuware Corporation

CONTACT: Lisa Elkin, Vice President, Corporate Communications and
Investor Relations of Compuware Corporation, +1-313-227-7345

Web site: http://www.compuware.com/

Company News On-Call: http://www.prnewswire.com/comp/112310.html


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