Compuware Announces Fiscal Year 2013 Q3 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 [phone]. The replay passcode will be 274653. 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 DECEMBER 31,
ASSETS
		2012				2011
CURRENT ASSETS:
Cash and cash equivalents		$	64,884			$	82,201
Accounts receivable, net			449,964				470,724
Deferred tax asset, net			38,669				47,460
Income taxes refundable			3,693				4,634
Prepaid expenses and other current assets			32,377				32,283
Total current assets			589,587				637,302
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION			314,404				326,099
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET			119,041				117,175
ACCOUNTS RECEIVABLE			190,613				216,735
DEFERRED TAX ASSET, NET			36,254				40,789
GOODWILL			799,823				797,163
OTHER ASSETS			35,202				35,547
TOTAL ASSETS		$	2,084,924			$	2,170,810
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	13,509			$	16,805
Current portion of long term debt			-				110,000
Accrued expenses			98,171				107,512
Income taxes payable			14,883				19,073
Deferred revenue			413,446				435,219
Total current liabilities			540,009				688,609
LONG TERM DEBT			70,000				-
DEFERRED REVENUE			311,036				356,693
ACCRUED EXPENSES			29,139				27,908
DEFERRED TAX LIABILITY, NET			84,648				77,100
Total liabilities			1,034,832				1,150,310
SHAREHOLDERS' EQUITY:
Common stock			2,121				2,188
Additional paid-in capital			692,133				681,359
Retained earnings			368,445				355,650
Accumulated other comprehensive loss			(12,607	)			(18,697	)
Total shareholders' equity			1,050,092				1,020,500
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	2,084,924			$	2,170,810

COMPUWARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
		THREE MONTHS ENDED								NINE MONTHS ENDED
		DECEMBER 31,								DECEMBER 31,
		2012				2011				2012				2011
REVENUES:
Software license fees		$	64,831			$	57,121			$	130,499			$	152,958
Maintenance fees			102,341				106,843				307,487				322,908
Subscription fees			20,793				19,931				61,503				58,156
Professional services fees			46,049				50,575				140,155				157,403
Application services fees			23,852				18,587				64,981				52,302
Total revenues			257,866				253,057				704,625				743,727
OPERATING EXPENSES:
Cost of software license fees			5,388				4,844				15,117				13,150
Cost of maintenance fees			8,639				9,603				26,653				28,907
Cost of subscription fees			7,603				7,291				22,823				22,192
Cost of professional services			39,694				45,277				122,080				136,496
Cost of application services			20,758				17,265				57,468				53,934
Technology development and support			25,629				27,265				79,675				78,706
Sales and marketing			65,773				69,683				184,604				197,255
Administrative and general			44,733				39,236				122,819				122,717
Total operating expenses			218,217				220,464				631,239				653,357
INCOME FROM OPERATIONS			39,649				32,593				73,386				90,370
OTHER INCOME (EXPENSE), NET			(55	)			231				(90	)			1,221
INCOME BEFORE INCOME TAXES			39,594				32,824				73,296				91,591
INCOME TAX PROVISION			14,254				11,236				26,894				30,339
NET INCOME		$	25,340			$	21,588			$	46,402			$	61,252
DILUTED EPS COMPUTATION
Numerator: Net income		$	25,340			$	21,588			$	46,402			$	61,252
Denominator:
Weighted-average common shares outstanding			212,836				218,534				215,318				218,427
Dilutive effect of stock options			4,036				3,349				4,153				4,134
Total shares			216,872				221,883				219,471				222,561
Diluted EPS		$	0.12			$	0.10			$	0.21			$	0.28

COMPUWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
		NINE MONTHS ENDED
		DECEMBER 31,
		2012				2011
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income		$	46,402			$	61,252
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization			49,358				44,706
Stock award compensation			20,663				17,555
Deferred income taxes			6,172				7,460
Other			552				221
Net change in assets and liabilities, net of effects from currency fluctuations and acquisitions:
Accounts receivable			17,140				(14,201	)
Prepaid expenses and other current assets			(2,024	)			1,940
Other assets			6,632				(3,451	)
Accounts payable and accrued expenses			(24,868	)			783
Deferred revenue			(91,181	)			(53,184	)
Income taxes			20,122				10,604
Net cash provided by operating activities			48,968				73,685
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of:
Business, net of cash acquired			-				(249,337	)
Property and equipment			(18,241	)			(15,879	)
Capitalized software			(24,817	)			(18,346	)
Other			(1,400	)			(575	)
Net cash used in investing activities			(44,458	)			(284,137	)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from borrowings			142,800				180,200
Payments on borrowings			(117,800	)			(70,200	)
Net proceeds from exercise of stock awards including excess tax benefits			11,965				8,503
Employee contribution to common stock purchase plans			2,046				2,101
Repurchase of common stock			(76,366	)			(4,259	)
Net cash provided by (used in) financing activities			(37,355	)			116,345
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(1,451	)			(3,936	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			(34,296	)			(98,043	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			99,180				180,244
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	64,884			$	82,201

COMPUWARE CORPORATION AND SUBSIDIARIES
OPERATIONAL HIGHLIGHTS
(Dollar Amounts In Thousands)
		QUARTER
		ENDED
		DEC 31,								YR - YR
		2012				2011				% Chg
Total Product Software Revenue by Geography
North America		$	106,211			$	98,244			8.1	%
International			81,754				85,651			(4.5	%)
Deferred License Fees
Current		$	19,451			$	26,952			(27.8	%)
Long-term			10,276				12,270			(16.3	%)
Deferred Maintenance
Current		$	310,450			$	323,485			(4.0	%)
Long-Term			269,275				305,549			(11.9	%)
Deferred Subscription
Current		$	48,315			$	50,444			(4.2	%)
Long-Term			8,333				13,265			(37.2	%)
Deferred Professional Services		$	22,322			$	20,361			9.6	%
Deferred Application Services		$	36,060			$	39,586			(8.9	%)
Other:
Total Company Headcount			4,579				4,722			(3.0	%)
Total DSO (Billed)			83.9				88.0
Total DSO			157.0				167.4
Stock-based compensation expense
Cost of license fees		$	-			$	-			N/A
Cost of maintenance fees			164				202			(18.8	%)
Cost of subscription fees			(47	)			(68	)		30.9	%
Cost of professional services			65				54			20.4	%
Cost of application services			396				254			55.9	%
Technology development and support			468				575			(18.6	%)
Sales and marketing			1,328				1,493			(11.1	%)
Administrative and general			3,110				3,062			1.6	%
Total stock-based compensation expense before income taxes		$	5,484			$	5,572			(1.6	%)

COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)
																						Covisint
																		Professional				Application				Unallocated
Quarter Ended:		APM				Changepoint				Mainframe				Uniface				Services				Services				Expenses				Total
December 31, 2012
Software license fees		$	33,938			$	2,684			$	24,743			$	3,466				-				-				-			$	64,831
Maintenance fees			23,369				4,139				67,048				7,785				-				-				-				102,341
Subscription fees			20,130				663				-				-				-				-				-				20,793
Professional services fees			7,624				3,137				673				1,413			$	33,202				-				-				46,049
Application services fees			-				-				-				-				-			$	23,852				-				23,852
Total revenues			85,061				10,623				92,464				12,664				33,202				23,852				-				257,866
Operating expenses			76,773				10,951				24,727				5,254				28,264				21,664			$	50,584				218,217
Income (loss) from operations		$	8,288			$	(328	)		$	67,737			$	7,410			$	4,938			$	2,188			$	(50,584	)		$	39,649
Contribution margin %			9.7	%			(3.1	%)			73.3	%			58.5	%			14.9	%			9.2	%							15.4	%
Operating expenses include:
Stock awards compensation		$	680			$	12			$	606			$	6			$	45			$	396			$	3,739			$	5,484
Amortization of purchased software		$	2,272			$	-			$	-			$	-			$	-			$	148			$	-			$	2,420
Amortization of other acquired intangible assets		$	1,758			$	-			$	-			$	-			$	-			$	113			$	-			$	1,871
December 31, 2011
Software license fees		$	24,360			$	3,513			$	26,720			$	2,528				-				-				-			$	57,121
Maintenance fees			19,441				3,895				75,782				7,725				-				-				-				106,843
Subscription fees			19,379				552				-				-				-				-				-				19,931
Professional services fees			8,893				4,517				558				981			$	35,626				-				-				50,575
Application services fees			-				-				-				-				-			$	18,587				-				18,587
Total revenues			72,073				12,477				103,060				11,234				35,626				18,587				-				253,057
Operating expenses			82,118				11,683				24,721				5,044				31,794				17,265			$	47,839				220,464
Income (loss) from operations		$	(10,045	)		$	794			$	78,339			$	6,190			$	3,832			$	1,322			$	(47,839	)		$	32,593
Contribution margin %			(13.9	%)			6.4	%			76.0	%			55.1	%			10.8	%			7.1	%							12.9	%
Operating expenses include:
Stock awards compensation		$	1,679			$	82			$	415			$	47			$	28			$	254			$	3,067			$	5,572
Amortization of purchased software		$	2,563			$	-			$	-			$	-			$	-			$	148			$	-			$	2,711
Amortization of other acquired intangible assets		$	2,143			$	-			$	-			$	-			$	-			$	113			$	-			$	2,256

COMPUWARE CORPORATION AND SUBSIDIARIES
BUSINESS UNIT RESULTS OF OPERATIONS
(In Thousands)
																						Covisint
																		Professional				Application				Unallocated
Nine Months Ended:		APM				Changepoint				Mainframe				Uniface				Services				Services				Expenses				Total
December 31, 2012
Software license fees		$	74,237			$	5,545			$	43,566			$	7,151				-				-				-			$	130,499
Maintenance fees			66,544				12,321				205,972				22,650				-				-				-				307,487
Subscription fees			59,526				1,977				-				-				-				-				-				61,503
Professional services fees			23,003				9,898				1,640				3,684			$	101,930				-				-				140,155
Application services fees			-				-				-				-				-			$	64,981				-				64,981
Total revenues			223,310				29,741				251,178				33,485				101,930				64,981				-				704,625
Operating expenses			226,928				31,392				67,856				15,279				85,322				59,731			$	144,731				631,239
Income (loss) from operations		$	(3,618	)		$	(1,651	)		$	183,322			$	18,206			$	16,608			$	5,250			$	(144,731	)		$	73,386
Contribution margin %			(1.6	%)			(5.6	%)			73.0	%			54.4	%			16.3	%			8.1	%							10.4	%
Operating expenses include:
Stock awards compensation		$	3,834			$	42			$	2,118			$	42			$	160			$	1,105			$	13,362			$	20,663
Amortization of purchased software		$	6,755			$	-			$	-			$	-			$	-			$	444			$	-			$	7,199
Amortization of other acquired intangible assets		$	5,435			$	-			$	-			$	-			$	-			$	338			$	-			$	5,773
December 31, 2011
Software license fees		$	54,142			$	7,643			$	83,874			$	7,299				-				-				-			$	152,958
Maintenance fees			57,003				11,647				230,776				23,482				-				-				-				322,908
Subscription fees			56,639				1,517				-				-				-				-				-				58,156
Professional services fees			22,646				12,487				3,960				3,259			$	115,051				-				-				157,403
Application services fees			-				-				-				-				-			$	52,302				-				52,302
Total revenues			190,430				33,294				318,610				34,040				115,051				52,302				-				743,727
Operating expenses			231,489				33,989				72,926				15,595				95,045				53,934			$	150,379				653,357
Income (loss) from operations		$	(41,059	)		$	(695	)		$	245,684			$	18,445			$	20,006			$	(1,632	)		$	(150,379	)		$	90,370
Contribution margin %			(21.6	%)			(2.1	%)			77.1	%			54.2	%			17.4	%			(3.1	%)							12.2	%
Operating expenses include:
Stock awards compensation		$	4,945			$	288			$	1,451			$	164			$	231			$	1,196			$	9,280			$	17,555
Amortization of purchased software		$	5,994			$	-			$	-			$	-			$	-			$	444							$	6,438
Amortization of other acquired intangible assets		$	5,956			$	-			$	-			$	-			$	-			$	338							$	6,294

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