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Compuware Announces Fiscal Year 2013 Q2 Results

A conference call replay will also be available. The United States replay number will be 800-475-6701, and the international replay number will be +1-320-365-3844. The replay passcode will be 265467. Additionally, investors can listen to the conference call via webcast by visiting the Compuware Corporation Investor Relations web site at http://www.compuware.com .

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 SEPTEMBER 30, 
 ASSETS     
  2012 2011
 CURRENT ASSETS:     
 Cash and cash equivalents   $ 63,516  $ 63,866
 Accounts receivable, net   365,143  433,506
 Deferred tax asset, net   39,413  44,173
 Income taxes refundable   9,930  5,540
 Prepaid expenses and other current assets   31,884  30,357
 Total current assets   509,886  577,442
     
 PROPERTY AND EQUIPMENT, LESS ACCUMULATED     
 DEPRECIATION AND AMORTIZATION   319,472  330,079
     
 CAPITALIZED SOFTWARE AND OTHER     
 INTANGIBLE ASSETS, NET   117,395  121,310
     
 ACCOUNTS RECEIVABLE   199,574  200,028
 DEFERRED TAX ASSET, NET   37,973  42,366
 GOODWILL   794,989  803,289
 OTHER ASSETS   35,789  37,430
     
 TOTAL ASSETS   $ 2,015,078  $ 2,111,944
     
 LIABILITIES AND SHAREHOLDERS' EQUITY     
     
 CURRENT LIABILITIES:     
 Accounts payable   $ 17,296  $ 21,943
 Accrued expenses   82,389  92,937
 Income taxes payable   5,490  22,670
 Deferred revenue   399,103  421,897
 Total current liabilities   504,278  559,447
     
 LONG TERM DEBT   59,300  125,600
     
 DEFERRED REVENUE   300,695  329,212
     
 ACCRUED EXPENSES   24,726  27,715
     
 DEFERRED TAX LIABILITY, NET   84,193  78,639
 Total liabilities   973,192  1,120,613
     
 SHAREHOLDERS' EQUITY:     
 Common stock   2,148  2,184
 Additional paid-in capital   693,556  674,318
 Retained earnings   362,648  334,723
 Accumulated other comprehensive loss   (16,466)  (19,894)
 Total shareholders' equity   1,041,886  991,331
     
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 2,015,078  $ 2,111,944
 
COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
         
         
     
  THREE MONTHS ENDED SEPTEMBER 30, SIX MONTHS ENDED SEPTEMBER 30,
         
  2012 2011 2012 2011
REVENUES:        
 Software license fees  $ 31,674  $ 61,711  $ 65,668  $ 95,837
 Maintenance fees 102,197 109,080  205,146  216,065
 Subscription fees 20,231 19,101  40,710  38,225
 Professional services fees 45,954 53,256  94,106  106,828
 Application services fees 20,542 17,548  41,129  33,715
 Total revenues  220,598 260,696  446,759 490,670
         
OPERATING EXPENSES:        
 Cost of software license fees 4,904 4,770  9,729  8,306
 Cost of maintenance fees 9,068 9,773  18,014  19,304
 Cost of subscription fees 7,827 7,774  15,220  14,901
 Cost of professional services 40,085 46,100  82,386  91,219
 Cost of application services 18,989 19,835  36,710  36,669
 Technology development and support 27,549 26,740  54,046  51,441
 Sales and marketing 56,641 65,577  118,831  127,572
 Administrative and general 38,361 41,967  78,086  83,481
 Total operating expenses  203,424 222,536  413,022 432,893
         
INCOME FROM OPERATIONS  17,174 38,160  33,737 57,777
         
OTHER INCOME (EXPENSE), NET (87) (8) (35) 990
         
INCOME BEFORE INCOME TAXES  17,087 38,152  33,702 58,767
         
INCOME TAX PROVISION 6,493 15,473  12,640  19,103
         
NET INCOME   $ 10,594  $ 22,679  $ 21,062  $ 39,664
         
DILUTED EPS COMPUTATION        
Numerator: Net income   $ 10,594  $ 22,679  $ 21,062  $ 39,664
Denominator:        
 Weighted-average common shares outstanding 215,633 218,521  216,566  218,373
 Dilutive effect of stock options 4,337 3,604  4,142  4,439
 Total shares  219,970 222,125  220,708 222,812
Diluted EPS  $ 0.05  $ 0.10  $ 0.10  $ 0.18
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
     
     
  SIX MONTHS ENDED SEPTEMBER 30,
  2012 2011
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:    
 Net income  $ 21,062  $ 39,664
 Adjustments to reconcile net income to cash provided     
 by operations:    
 Depreciation and amortization 31,126 28,770
 Stock award compensation 15,179 11,983
 Deferred income taxes 4,812 3,024
 Other 269 125
 Net change in assets and liabilities, net of effects from    
 currency fluctuations and acquisitions:    
 Accounts receivable 90,397 41,669
 Prepaid expenses and other current assets (66) 5,913
 Other assets 4,601 (7,232)
 Accounts payable and accrued expenses (41,426) (10,048)
 Deferred revenue (114,452) (95,571)
 Income taxes 4,820 13,461
 Net cash provided by operating activities  16,322 31,758
     
CASH FLOWS USED IN INVESTING ACTIVITIES:    
 Purchase of:    
 Business, net of cash acquired  --  (249,337)
 Property and equipment (12,977) (12,189)
 Capitalized software (15,583) (13,137)
 Other (1,400)  (500)
 Net cash used in investing activities  (29,960) (275,163)
     
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:    
 Proceeds from borrowings 87,300 161,200
 Payments on borrowings (73,000) (35,600)
 Net proceeds from exercise of stock awards including excess tax benefits 8,676 6,498
 Employee contribution to common stock purchase plans 1,427 1,403
 Repurchase of common stock (44,828)  (3,308)
 Net cash provided by (used in) financing activities  (20,425) 130,193
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,601) (3,166)
     
NET CHANGE IN CASH AND CASH EQUIVALENTS  (35,664) (116,378)
     
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 99,180 180,244
     
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $ 63,516  $ 63,866
     
 
COMPUWARE CORPORATION AND SUBSIDIARIES
OPERATIONAL HIGHLIGHTS
(Dollar Amounts In Thousands)
       
  QUARTER ENDED SEP 30,  
  2012 2011 YR - YR % Chg
Total Product Software Revenue by Geography      
North America  $ 88,809  $ 107,989 (17.8%)
International  65,293  81,903 (20.3%)
       
Deferred License Fees      
 Current  $ 17,747  $ 30,120 (41.1%)
 Long-term  8,774  14,361 (38.9%)
       
Deferred Maintenance      
 Current  $ 299,037  $ 309,689 (3.4%)
 Long-Term  257,798  275,379 (6.4%)
       
Deferred Subscription      
 Current  $ 46,602  $ 49,314 (5.5%)
 Long-Term  10,549  14,412 (26.8%)
       
Deferred Professional Services  $ 22,190  $ 18,845 17.8%
       
Deferred Application Services  $ 37,101  $ 38,989 (4.8%)
       
       
       
Other:      
Total Company Headcount  4,567  4,720 (3.2%)
       
Total DSO (Billed)   64.9  66.8  
Total DSO  148.9  149.7  
       
       
       
Stock-based compensation Expense      
       
Cost of license fees  $ --  $ -- N/A
Cost of maintenance fees  235  274 (14.2%)
Cost of subscription fees   18  32 (43.8%)
Cost of professional services   68  40 70.0%
Cost of application services   387  515 (24.9%)
Technology development and support   730  750 (2.7%)
Sales and marketing   1,403  1,767 (20.6%)
Administrative and general   4,049  3,282 23.4%
            
Total stock-based compensation expense before income taxes   $ 6,890  $ 6,660 3.5%
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)
                 
                 
Quarter Ended: APM Changepoint Mainframe Uniface Professional Services Covisint Application Services Unallocated Expenses Total
                 
September 30, 2012                
                 
 Software license fees  $ 17,942  $ 2,068  $ 9,773  $ 1,891  --   --   --   $ 31,674
 Maintenance fees  22,410  4,052  68,378  7,357  --   --   --   102,197
 Subscription fees  19,544  687  --   --   --   --   --   20,231
 Professional services fees  7,184  3,317  674  1,095  $ 33,684  --   --   45,954
 Application services fees  --   --   --   --   --   $ 20,542  --   20,542
Total revenues  67,080  10,124  78,825  10,343  33,684  20,542  --   220,598
                 
Operating expenses  74,059  10,752  20,284  4,606  28,138  20,051  $ 45,534  203,424
                 
Income (loss) from operations  $ (6,979)  $ (628)  $ 58,541  $ 5,737  $ 5,546  $ 491  $ (45,534)  $ 17,174
Contribution margin % (10.4%) (6.2%) 74.3% 55.5% 16.5% 2.4%   7.8%
                 
Operating expenses include:                
 Stock awards compensation  $ 1,651  $ 15  $ 550  $ 10  $ 42  $ 387  $ 4,235  $ 6,890
 Amortization of purchased software  $ 2,224  $ --   $ --   $ --   $ --   $ 148  $ --   $ 2,372
 Amortization of other acquired intangible assets  $ 1,826  $ --   $ --   $ --   $ --   $ 113  $ --   $ 1,939
                 
                 
September 30, 2011                
                 
 Software license fees  $ 18,329  $ 2,136  $ 38,456  $ 2,790  --   --   --   $ 61,711
 Maintenance fees  19,129  3,913  78,019  8,019  --   --   --   109,080
 Subscription fees  18,599  502  --   --   --   --   --   19,101
 Professional services fees  6,787  4,300  1,569  1,072  $ 39,528  --   --   53,256
 Application services fees  --   --   --   --   --   $ 17,548  --   17,548
Total revenues  62,844  10,851  118,044  11,881  39,528  17,548  --   260,696
                 
Operating expenses  79,932  10,944  24,129  5,151  31,662  19,835  $ 50,883  222,536
                 
Income (loss) from operations  $ (17,088)  $ (93)  $ 93,915  $ 6,730  $ 7,866  $ (2,287)  $ (50,883)  $ 38,160
Contribution margin % (27.2%) (0.9%) 79.6% 56.6% 19.9% (13.0%)   14.6%
                 
Operating expenses include:                
 Stock awards compensation  $ 2,149  $ 107  $ 536  $ 61  $ 10  $ 515  $ 3,282  $ 6,660
 Amortization of purchased software  $ 2,397  $ --   $ --   $ --   $ --   $ 148  $ --   $ 2,545
 Amortization of other acquired intangible assets  $ 2,350  $ --   $ --   $ --   $ --   $ 113  $ --   $ 2,463
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)
                 
                 
Six Months Ended: APM Changepoint Mainframe Uniface Professional Services Covisint Application Services Unallocated Expenses  Total
                 
September 30, 2012                
                 
 Software license fees  $ 40,299  $ 2,861  $ 18,823  $ 3,685  --   --   --   $ 65,668
 Maintenance fees  43,175  8,182  138,924  14,865  --   --   --   205,146
 Subscription fees  39,396  1,314  --   --   --   --   --   40,710
 Professional services fees  15,379  6,761  967  2,271  $ 68,728  --   --   94,106
 Application services fees  --   --   --   --   --   $ 41,129  --   41,129
Total revenues  138,249  19,118  158,714  20,821  68,728  41,129  --   446,759
                 
Operating expenses  150,155  20,441  43,129  10,025  57,058  38,067  $ 94,147  413,022
                 
Income (loss) from operations  $ (11,906)  $ (1,323)  $ 115,585  $ 10,796  $ 11,670  $ 3,062  $ (94,147)  $ 33,737
Contribution margin % (8.6%) (6.9%) 72.8% 51.9% 17.0% 7.4%   7.6%
                 
Operating expenses include:                
 Stock awards compensation  $ 3,155  $ 30  $ 1,511  $ 37  $ 115  $ 709  $ 9,622  $ 15,179
 Amortization of purchased software  $ 4,483  $ --   $ --   $ --   $ --   $ 296  $ --   $ 4,779
 Amortization of other acquired intangible assets  $ 3,676  $ --   $ --   $ --   $ --   $ 225  $ --   $ 3,901
                 
September 30, 2011                
                 
 Software license fees  $ 29,782  $ 4,130  $ 57,154  $ 4,771  --   --   --   $ 95,837
 Maintenance fees  37,562  7,752  154,994  15,757  --   --   --   216,065
 Subscription fees  37,260  965  --   --   --   --   --   38,225
 Professional services fees  13,753  7,970  3,402  2,278  $ 79,425  --   --   106,828
 Application services fees  --   --   --   --   --   $ 33,715  --   33,715
Total revenues  118,357  20,817  215,550  22,806  79,425  33,715  --   490,670
                 
Operating expenses  149,371  22,306  48,205  10,551  63,251  36,669  $ 102,540  432,893
                 
Income (loss) from operations  $ (31,014)  $ (1,489)  $ 167,345  $ 12,255  $ 16,174  $ (2,954)  $ (102,540)  $ 57,777
Contribution margin % (26.2%) (7.2%) 77.6% 53.7% 20.4% (8.8%)   11.8%
                 
Operating expenses include:                
 Stock awards compensation  $ 3,265  $ 206  $ 1,035  $ 118  $ 203  $ 942  $ 6,214  $ 11,983
 Amortization of purchased software  $ 3,431  $ --   $ --   $ --   $ --   $ 296    $ 3,727
 Amortization of other acquired intangible assets  $ 3,812  $ --   $ --   $ --   $ --   $ 226    $ 4,038
CONTACT:  Press Contact
          Lisa Elkin, Senior Vice President, Investor Relations,
          Marketing and Communications 
          +1-313-227-7345

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