Annual Reports

 
Quarterly Reports

  • 10-Q (May 6, 2008)
  • 10-Q (Feb 7, 2008)
  • 10-Q (Nov 5, 2007)
  • 10-Q (May 10, 2007)
  • 10-Q (Feb 6, 2007)
  • 10-Q (Nov 6, 2006)

 
8-K

 
Other

Moldflow 10-Q 2007

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
e10vq
Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to          
     
 
Commission file number: 000-30027
 
 
     
Delaware   04-3406763
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
 
492 OLD CONNECTICUT PATH, SUITE 401 FRAMINGHAM, MA 01701
(Address of principal executive offices) (Zip Code)
 
508-358-5848
(Registrant’s telephone number, including area code)
 
[None]
 
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 filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
     
    Outstanding at
    November 1,
Class
 
2007
 
Common Stock, $0.01 par value per share   12,024,968
 


 

 
MOLDFLOW CORPORATION
 
FORM 10-Q
For the Quarter Ended September 30, 2007
 
 
                 
        Page Number
 
  Unaudited Financial Statements:    
    Condensed Consolidated Balance Sheet as of September 30, 2007 and June 30, 2007   2
    Condensed Consolidated Statement of Income for the three-month periods ended September 30, 2007 and September 30, 2006   3
    Condensed Consolidated Statement of Cash Flows for the three-month periods ended September 30, 2007 and September 30, 2006   4
    Notes to Unaudited Condensed Consolidated Financial Statements   5
  Management’s Discussion and Analysis of Financial Condition and Results of Operations   16
  Quantitative and Qualitative Disclosures About Market Risk   26
  Controls and Procedures   27
 
  Legal Proceedings   28
  Risk Factors   28
  Unregistered Sales of Equity Securities and Use of Proceeds   28
  Defaults Upon Senior Securities   28
  Submission of Matters to a Vote of Security Holders   28
  Other Information   28
  Exhibits   29
  30
 EX-31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
 EX-31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
 EX-32.1 Section 1350 Certification of Chief Executive Officer.
 EX-32.2 Section 1350 Certification of Chief Financial Officer.


1


Table of Contents

 
 
Item 1.   Unaudited Financial Statements
 
MOLDFLOW CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEET
 
                 
    September 30,
    June 30,
 
    2007     2007  
    (In thousands)
 
    (Unaudited)  
 
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 68,749     $ 59,482  
Marketable securities
    12,602       13,163  
Accounts receivable, net
    10,172       11,878  
Prepaid expenses
    6,707       6,383  
Other current assets
    4,783       10,594  
                 
Total current assets
    103,013       101,500  
Fixed assets, net
    3,356       3,137  
Goodwill
    6,465       6,465  
Other assets
    1,629       2,659  
                 
Total assets
  $ 114,463     $ 113,761  
                 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
Accounts payable
  $ 1,062     $ 876  
Accrued expenses
    8,991       11,489  
Deferred revenue
    12,392       14,095  
                 
Total current liabilities
    22,445       26,460  
Deferred revenue
    1,808       1,582  
Other long-term liabilities
    1,617       305  
                 
Total liabilities
    25,870       28,347  
                 
Contingencies, commitments and guarantor arrangements (Note 11)
               
Stockholders’ equity:
               
Common stock
    126       124  
Treasury stock, at cost
    (8,526 )     (8,018 )
Additional paid-in capital
    87,305       85,358  
Retained earnings
    2,624       1,617  
Accumulated other comprehensive income
    7,064       6,333  
                 
Total stockholders’ equity
    88,593       85,414  
                 
Total liabilities and stockholders’ equity
  $ 114,463     $ 113,761  
                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


2


Table of Contents

MOLDFLOW CORPORATION
 
CONDENSED CONSOLIDATED STATEMENT OF INCOME
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
    (In thousands, except
 
    per share data)
 
    (Unaudited)  
 
Revenue:
               
Product
  $ 5,787     $ 5,116  
Services
    7,617       6,645  
                 
Total revenue
    13,404       11,761  
                 
Costs and operating expenses:
               
Cost of product revenue
    397       357  
Cost of services revenue
    1,229       1,027  
Research and development
    2,101       1,847  
Selling and marketing
    4,820       4,202  
General and administrative
    3,946       3,655  
                 
Total costs and operating expenses
    12,493       11,088  
                 
Income from continuing operations
    911       673  
Interest income, net
    1,046       783  
Other income (loss), net
    (52 )     3  
                 
Income from continuing operations before income taxes
    1,905       1,459  
Provision for (benefit from) income taxes
    373       (158 )
                 
Net income from continuing operations
  $ 1,532     $ 1,617  
Net income from discontinued operations, net of income taxes (Note 2)
          64  
Net loss on disposal of discontinued operations, net of income taxes (Note 2)
    (236 )      
                 
Net income
  $ 1,296     $ 1,681  
                 
Basic net income per common share from continuing operations
  $ 0.13     $ 0.14  
Basic net income per common share from discontinued operations
          0.01  
Basic net loss per common share on the disposal of discontinued operations
    (0.02 )      
                 
Basic net income per common share
  $ 0.11     $ 0.15  
                 
Diluted net income per common share from continuing operations
  $ 0.12     $ 0.14  
Diluted net income per common share from discontinued operations
           
Diluted net loss per common on the disposal of discontinued operations
    (0.02 )      
                 
Diluted net income per common share
  $ 0.10     $ 0.14  
                 
Shares used in computing net income (loss) per common share:
               
Basic
    11,876       11,164  
Diluted
    12,330       11,613  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


3


Table of Contents

MOLDFLOW CORPORATION
 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
    (In thousands)
 
    (Unaudited)  
 
Cash flows from operating activities:
               
Net income from continuing operations
  $ 1,532     $ 1,617  
Net income from discontinued operations, net of income taxes (Note 2)
          64  
Net loss on disposal of discontinued operations, net of income taxes (Note 2)
    (236 )      
                 
Net income
  $ 1,296     $ 1,681  
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:
               
Depreciation of fixed assets
    250       267  
Amortization of other intangible assets
    186       219  
Provisions for doubtful accounts
    21       48  
Share-based compensation
    520       350  
Other non-cash charges or expenses
    89       (2 )
Excess tax benefits from shared-based compensation
          (10 )
Changes in operating assets and liabilities:
               
Accounts receivable
    2,056       1,578  
Prepaid expenses and other current assets
    163       679  
Other assets
    1,056       (75 )
Accounts payable
    178       (378 )
Accrued expenses and other liabilities
    (1,751 )     (1,375 )
Deferred revenue
    (2,130 )     (1,520 )
                 
Net cash provided by operating activities of continuing operations
    2,170       1,398  
Net cash (used in) operating activities of discontinued operations
    (236 )     (166 )
                 
Net cash provided by operating activities
    1,934       1,232  
Cash flows from investing activities:
               
Purchases of fixed assets
    (380 )     (228 )
Capitalization of software development costs
    (64 )     (52 )
Purchases of marketable securities
    (3,739 )     (5,413 )
Sales and maturities of marketable securities
    4,300       5,743  
Proceeds from sale of business
    6,000        
                 
Net cash provided by investing activities of continuing operations
    6,117       50  
Net cash used in investing activities of discontinued operations
          (31 )
                 
Net cash provided by investing activities
    6,117       19  
                 
Cash flows from financing activities:
               
Proceeds from issuance of common stock
    1,282       432  
Purchase of treasury stock
    (360 )     (1,387 )
Excess tax benefits from share-based compensation
          10  
                 
Net cash (used in) provided by financing activities
    922       (945 )
Effect of exchange rate changes on cash and cash equivalents
    294       103  
                 
Net increase in cash and cash equivalents
    9,267       409  
Cash and cash equivalents, beginning of period
    59,482       52,111  
                 
Cash and cash equivalents, end of period
  $ 68,749     $ 52,520  
                 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


4


Table of Contents

MOLDFLOW CORPORATION
 
 
1.   Basis of Presentation and Nature of Business
 
Moldflow Corporation (“Moldflow” or the “Company”) designs, develops, manufactures and markets computer software solutions for the design and engineering of injection-molded plastic parts. The Company’s revenues are derived from the plastics design and manufacturing industry. The Company sells its products primarily to customers in the United States, Europe, Asia and Australia. The Company’s fiscal year end is June 30.
 
The accompanying unaudited condensed consolidated financial statements include the accounts of Moldflow and its wholly-owned subsidiaries. The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended June 30, 2007 included in the Company’s Annual Report on Form 10-K. The June 30, 2007 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of the results for the interim periods. The results of operations for the three month period ended September 30, 2007 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.
 
On June 30, 2007, the Company completed the sale of substantially all of the assets of its Manufacturing Solutions (“MS”) division, including its Altanium, Shotscope and Celltrack product lines. The Moldflow Plastics Xpert (“MPX”) software product, which had been previously part of the MS division, was retained by Moldflow as this software-focused product line was more closely aligned with its Design Analysis Solutions (“DAS”) business. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company is reporting the MS division as a discontinued operation in the consolidated financial statements for all periods presented. See Note 2 to the consolidated financial statements, Discontinued Operations, for further discussion of the MS division divestiture. Unless indicated otherwise, both current and historical amounts provided throughout this Form 10-Q relate solely to the Company’s continuing operations.
 
2.   Discontinued Operations
 
On June 30, 2007, the Company completed the sale of its Manufacturing Solutions (“MS”) division to Husky Injection Molding Systems Ltd. (the “Buyer”) for $7.0 million in cash. The purchase price was subject to a post-closing net asset value adjustment to reflect the fair value of the assets and liabilities acquired at the date of closing. At June 30, 2007, the Company estimated that these post-closing adjustments would result in additional proceeds of $744,000. In the first quarter of fiscal 2008, the Company and the Buyer agreed to a final post-closing adjustment of $584,000, resulting in an adjusted total purchase price of $7.6 million. The difference between the estimated and actual adjustment, inclusive of associated legal costs, was recorded as an additional loss on the disposal of the discontinued operation.
 
The Company received $6.0 million of the purchase price in July 2007 and $584,000 in October 2007. Pursuant to the sale agreement, the remaining $1.0 million of the adjusted purchase price was placed in escrow. The Company expects the escrow to settle within the next twelve months and has recorded the balance as a current asset on its unaudited condensed consolidated balance sheet as of September 30, 2007.
 
3.   Share-Based Compensation and Stock Plans
 
 
Effective July 1, 2005, the Company adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” which establishes accounting for equity instruments exchanged for employee and director services. Under the


5


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
provisions of SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which generally is the vesting period of the equity grant.
 
The following table presents share-based compensation expenses for the Company’s continuing operations included in its unaudited condensed consolidated statement of income:
 
                 
    Three Months
    Three Months
 
    Ended
    Ended
 
    September 30,
    September 30,
 
    2007     2006  
    (In thousands)  
 
Cost of product revenue
  $ 7     $ 2  
Cost of services revenue
    12       10  
Research and development
    110       71  
Selling and marketing
    114       57  
General and administrative
    277       210  
                 
Share-based compensation expense before related tax effects
    520       350  
Income tax benefit
    (38 )      
                 
Net share-based compensation expense
  $ 482     $ 350  
                 
 
The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. Pre-vesting forfeiture rates for purposes of determining share-based compensation expense for stock options, restricted stock and restricted stock units for the three-month periods ended September 30, 2007 and September 30, 2006 were estimated to be 7.0% and 8.6%, respectively. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted during the three-month periods ended September 30, 2007 and September 30, 2006. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.
 
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:
 
                 
    Three Months
    Three Months
 
    Ended
    Ended
 
    September 30,
    September 30,
 
    2007     2006  
 
Dividend yield
    0 %     0 %
Expected volatility factor(1)
    44.3 %     41.1 %
Risk-free interest rate(2)
    4.2-4.9 %     4.9 %
Expected term (in years)(3)(4)
    4.8       3.5-5.0  
 
 
(1) Measured using a weighted average of historical daily price changes of the Company’s stock and of peer group companies over the most recent period that matches the expected term of the option.
 
(2) The risk-free interest rate for periods equal to the expected term of the share option is based on the U.S. Treasury yield in effect at the time of grant.
 
(3) The expected term assumption utilized by the Company for the period ended September 30, 2007 is the number of years that it estimates that options granted to its employees will be outstanding prior to exercise or post-vesting cancellation. The Company calculated the expected term using historical exercise and post-vesting cancellation data related to grants made to its employees.


6


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
 
(4) The expected term assumption utilized by the Company for the period ended September 30, 2006 is the number of years that the Company estimates that options will be outstanding prior to exercise or post-vesting cancellation. The Company elected to use the simplified method for estimating the expected term for its stock options, which qualify as “plain-vanilla” options.
 
 
In August 1997, the Company adopted the 1997 Equity Incentive Plan (the “1997 Plan”), which provided for the grant of incentive stock options, non-qualified stock options, stock awards and stock purchase rights for the purchase of up to 931,303 shares of the Company’s common stock by officers, employees, consultants and directors of the Company. In April 1999, the number of shares available under the 1997 Plan was increased to 1,537,158 shares. The Board of Directors is responsible for administration of the 1997 Plan. The Company no longer issues shares under the 1997 Plan.
 
On January 20, 2000, the Board of Directors approved the Moldflow Corporation 2000 Stock Option and Incentive Plan (the “2000 Plan”), which, as amended, provides for the grant of incentive stock options, stock awards and stock purchase rights for the purchase of up to 4,096,219 shares of common stock by officers, employees, consultants and directors of the Company. The number of shares issuable under the 2000 Plan is also increased as of each June 30 and December 31 by a number of shares equal to 20% of the shares issued by the Company during such six-month period. The Board determines the term of each option, the option exercise price, the number of shares for which each option is granted and the rate at which each option is exercisable. Incentive stock options may be granted to any officer or employee at an exercise price per share of not less than the fair value per common share on the date of the grant (not less than 110% of fair value in the case of holders of more than 10% of the Company’s voting stock) and with a term not to exceed ten years from the date of the grant (five years for incentive stock options granted to holders of more than 10% of the Company’s voting stock). Non-qualified stock options may be granted to any officer, employee, consultant or director at an exercise price per share of not less than the par value per share. As of September 30, 2007, there were 989,488 shares available for future grant under the 2000 Plan.
 
The following sections, Stock Options, Restricted Stock, and Restricted Stock Units, summarize activity under the Company’s stock plans. Share data for the three months ended September 30, 2006 includes activity for both the Company’s continuing and discontinued operations.
 
Stock Options:
 
A summary of the Company’s stock option activity follows:
 
                                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
          Weighted Average
          Weighted Average
 
    Shares     Exercise Price     Shares     Exercise Price  
 
Outstanding at beginning of period
    1,209,842     $ 12.74       2,086,551     $ 10.85  
Granted
    154,683       16.13       239,207       12.03  
Exercised
    (163,057 )     7.88       (88,482 )     4.88  
Canceled
    (5,052 )     11.95       (210,690 )     13.23  
                                 
Outstanding at end of period
    1,196,416     $ 13.79       2,026,586     $ 10.98  
                                 
Options exercisable at end of period
    843,168     $ 13.45       1,517,885     $ 10.33  
Weighted average fair value of options granted in the period
          $ 7.01             $ 5.18  


7


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes information about outstanding stock options as of September 30, 2007:
 
                                         
    Options Outstanding              
          Weighted
          Options Exercisable  
          Average
    Weighted
          Weighted
 
          Remaining
    Average
          Average
 
          Contractual
    Exercise
          Exercise
 
Range of Exercise Prices   Shares     Life     Price     Shares     Price  
 
$5.01-$10.00
    201,075       1.7 years     $ 9.37       201,075     $ 9.37  
$10.01-$15.00
    484,575       4.8 years       11.95       333,911       11.76  
$15.01-$20.00
    436,960       3.8 years       16.35       245,682       16.68  
$20.01-$25.00
    60,206       2.3 years       22.03       48,900       21.97  
$25.01-$30.00
    13,600       1.3 years       26.32       13,600       26.32  
                                         
      1,196,416       3.7 years     $ 13.79       843,168     $ 13.45  
                                         
 
The Company recorded share-based compensation expense from continuing operations related to stock options of $266,000 and $232,000 for the three months ended September 30, 2007 and September 30, 2006, respectively. The intrinsic value of options exercised in the three-month period ended September 30, 2007 was $2.3 million, and the intrinsic value of options that vested during the period was $916,000. The total compensation cost from continuing operations not yet recognized as of September 30, 2007 related to non-vested stock option awards was $1.8 million, which will be recognized over a weighted-average period of 2.3 years.
 
Vested share options outstanding and exercisable were 843,168 in the three month period ended September 30, 2007 with an intrinsic value of $5.1 million and a weighted average remaining contractual life of 2.4 years.
 
 
The following table summarizes restricted stock award activity under the 2000 Plan during the periods presented:
 
                                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
          Weighted
          Weighted
 
          Average
          Average
 
    Number
    Grant Date
    Number
    Grant Date
 
    of Shares     Fair Value     of Shares     Fair Value  
 
Nonvested at beginning of period
    163,585     $ 13.52       81,744     $ 15.39  
Granted
    100,457       16.05       126,069       12.05  
Vested
    (62,919 )     13.26       (19,699 )     15.35  
                                 
Nonvested at end of period
    201,123     $ 14.87       188,114     $ 13.16  
                                 
 
The shares of restricted stock have been issued at no cost to the recipients. The restricted stock vests annually over a three-year period. The fair value of the restricted stock is expensed ratably over the vesting period. The Company recorded share-based compensation expense from continuing operations related to restricted stock of $237,000 and $118,000 for the three months ended September 30, 2007 and September 30, 2006, respectively. As of September 30, 2007, the total compensation cost from continuing operations not yet recognized related to non-vested restricted stock awards was $2.6 million, which will be recognized over a weighted-average period of 2.4 years.
 
For United States employees, vested restricted stock awards were net-share settled such that the Company withheld shares with value equivalent to employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld of


8


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
16,324 in the three-month period ended September 30, 2007 were recorded to treasury stock and were valued based on the Company’s closing price of the restricted stock on their vesting dates. The payment for employees’ tax obligations related to these shares was approximately $288,000. An additional 3,291 shares were withheld as a result of restricted stock surrendered for withholding taxes in a prior period and recorded in the three-month period ended September 30, 2007. The payment for employees’ tax obligations related to these shares was approximately $72,000.
 
 
                 
    Three Months Ended
    September 30, 2007
        Weighted
        Average
    Number
  Grant Date
    of Shares   Fair Value
 
Nonvested at beginning of period
    24,620     $ 8.81  
                 
Nonvested at end of period
    24,620     $ 8.81  
                 
 
The Company did not issue any restricted stock units in the first quarter of fiscal 2008. Each restricted stock unit vests annually over a three-year period. Vesting of the restricted stock units automatically accelerates upon a change of control of the Company. Vested restricted stock units are paid out in common stock upon the earlier of a termination of services by the recipient or a change of control of the Company. Restricted stock units do not have voting rights until such time as the restricted stock units are paid out in shares. These post-vesting restrictions were reflected in the discount rate and thus considered in the determination of the fair value of the restricted stock units. Two approaches are considered in estimating the discount rate: empirical studies related to transactions involving restricted shares and the level of discount implied by the Black-Scholes valuation model. The fair value of the restricted stock units is expensed ratably over the vesting period.
 
The Company recorded share-based compensation expense related to restricted stock units of $17,000 for the three months ended September 30, 2007. As of September 30, 2007, the total compensation cost not yet recognized related to non-vested restricted stock units was $145,000, which will be recognized as an expense to continuing operations over a weighted-average period of 2.2 years.


9


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
4.   Net Income Per Common Share
 
The following table presents the calculation for both basic and diluted net income per common share:
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
    (In thousands, except
 
    per share data)  
 
Net income from continuing operations
  $ 1,532     $ 1,617  
Net income from discontinued operations, net of income taxes (Note 2)
          64  
Net loss on disposal of discontinued operations, net of income taxes (Note 2)
    (236 )      
                 
Net income
  $ 1,296     $ 1,681  
                 
Shares used in computing net income per common share — basic
    11,876       11,164  
Effect of dilutive securities:
               
Employee and Director Stock Options
    454       449  
                 
Shares used in computing net income per common share — diluted
    12,330       11,613  
                 
Basic net income per common share from continuing operations
  $ 0.13     $ 0.14  
Basic net income per common share from discontinued operations
          0.01  
Basic net loss per common share on the disposal of discontinued operations
    (0.02 )      
                 
Basic net income per common share
  $ 0.11     $ 0.15  
                 
Diluted net income per common share from continuing operations
  $ 0.12     $ 0.14  
Diluted net income per common share from discontinued operations
        $  
Diluted net loss per common on the disposal of discontinued operations
    (0.02 )      
                 
Diluted net income per common share
  $ 0.10     $ 0.14  
                 
 
Weighted average common stock equivalents related to stock options of 107,206 and 863,000 shares were outstanding for the three-month periods ended September 30, 2007 and September 30, 2006, respectively but were not included in the calculation of diluted net income per share from continuing operations as their inclusion would be anti-dilutive.
 
Under the provisions of SFAS 128, “Earnings per Share,” when there is income from continuing operations and the Company reports a discontinued operation, the Company computes diluted net loss per common share from discontinued operations and total diluted net income (loss) per common share using the same number of potentially dilutive securities applied in computing diluted net income per common share from continuing operations, even though this would have an anti-dilutive effect.
 
5.   Derivative Financial Instruments and Hedging Activities
 
The Company has established a hedging program designed to reduce the exposure to changes in currency exchange rates. As of September 30, 2007, hedging instruments with notional amounts of $4.9 million, $6.6 million and $4.2 million were outstanding to exchange Euros, Japanese yen and Australian dollars, respectively. The fair value of these instruments, as derived from dealer quotations, was $269,000 and was recorded as a component of other current assets. Net unrealized gains on these instruments of $88,000 at September 30, 2007 were included in


10


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
accumulated other comprehensive income. During the three-month period ended September 30, 2007, a gain of $38,000 was recorded as a component of other income on the effective portion of options that were settled. As of September 30, 2007, there was no gain or loss recognized on the ineffective portion of these options.
 
As of September 30, 2006, hedging instruments with nominal amounts of $3.6 million, $5.7 million and $4.1 million were outstanding to exchange Euros, Japanese yen and Australian dollars, respectively. The fair value of these instruments, as derived from dealer quotations, was $146,000 and was recorded as a component of other current assets. Net unrealized gains of $50,000 for the three months ended September 30, 2006 on these instruments were included in accumulated other comprehensive income. During the period ended September 30, 2006, gains of $8,000 were recorded as components of other income on the effective portion of options that were settled. As of September 30, 2006, there was no gain or loss recognized on the ineffective portion of these options.
 
The Company held no derivatives during the three-month period ended September 30, 2007 or September 30, 2006 for non-hedging purposes.
 
6.   Acquired Intangible Assets
 
Intangible assets acquired in the Company’s business combinations include goodwill, customer base, developed technology, customer order backlog and non-compete agreements. All of the Company’s acquired intangible assets, except for goodwill, were subject to amortization over their estimated useful lives, and, as of September 30, 2007 and June 30, 2007, were fully amortized.
 
The total carrying value of goodwill of the Company’s continuing operations at both September 30, 2007 and June 30, 2007 was $6.5 million.
 
7.   Software Development Costs
 
Costs associated with the development of computer software and related products are expensed prior to establishing technological feasibility, as defined by SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” and capitalized thereafter until the product is available for general release to customers. Eligible development costs of $64,000 and $52,000 were capitalized in three months ended September 30, 2007 and September 30, 2006, respectively. All such costs have been included in other non-current assets in the Company’s unaudited condensed consolidated balance sheet and are being amortized to cost of product revenue over their estimated useful lives, which range from three to five years.
 
A summary of capitalized software development costs follows:
 
                 
    September 30,
    June 30,
 
    2007     2007  
    (In thousands)  
 
Gross carrying amount
  $ 2,613     $ 2,549  
Less — accumulated amortization
    (1,963 )     (1,844 )
                 
Net carrying amount
  $ 650     $ 705  
                 
 
8.   Comprehensive Income
 
Comprehensive income is comprised of net income and other comprehensive income and loss. Other comprehensive income and loss includes certain changes in equity that are excluded from net income, such as cumulative foreign currency translation adjustments. Other comprehensive income also includes unrealized gains and losses on the Company’s hedging instruments and unrealized gains and losses on the Company’s marketable securities.


11


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The following table presents the calculation of comprehensive income:
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
    (In thousands)  
 
Net income
  $ 1,296     $ 1,681  
Other comprehensive income:
               
Increase in fair value of marketable securities, net of related tax effects
    14       6  
Increase in value of financial instruments designated as hedges, net of related tax effects
    98       58  
Foreign currency translation adjustment
    619       98  
                 
Other comprehensive income
    731       162  
                 
Comprehensive income
  $ 2,027     $ 1,843  
                 
 
9.   Segment Information
 
The Company has reviewed the provisions of SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” with respect to the criteria necessary to evaluate the number of operating segments that exist. Based on its review, the Company has determined that it operates as a single segment. The Company licenses and sells its products to customers throughout the world. Sales and marketing operations outside the United States are conducted principally through the Company’s foreign sales subsidiaries in Europe and Asia.
 
The Company had no customers from which it derived more than 10% of the total revenue for the fiscal periods presented.
 
10.   Income Taxes
 
 
The Company is subject to income tax in numerous jurisdictions and at various rates worldwide, and the use of estimates is required in determining the provision for income taxes. For the three-month period ended September 30, 2007, the Company recorded a tax provision of $373,000, on income from operations before tax of $1.9 million, resulting in an effective income tax rate of 20%. For the three-months ended September 30, 2007, the difference between the effective tax rate of 20% and the U.S. federal statutory income tax rate of 34% was primarily due to taxes incurred in certain foreign jurisdictions at rates lower than those enacted in the U.S. and a one-time tax benefit of $143,000 primarily due to the lapse of the applicable statute of limitations related to potential audits.
 
For the three-months ended September 30, 2006, the Company recorded a tax benefit of $158,000. The tax benefit included a one-time benefit of $562,000, which resulted from a revised estimate of the tax liabilities related to the tax positions of one of the Company’s foreign subsidiaries and taxes payable in certain foreign jurisdictions.
 
 
The Company has established a valuation allowance against net deferred tax assets, consisting principally of net operating losses and foreign tax credit carryforwards and temporary differences in certain jurisdictions, including the United States, because it believes that it is more likely than not that the tax assets in those jurisdictions will not be realized prior to their expiration. At September 30, 2007, the Company had total deferred tax assets of $133,000, which is net of a tax asset valuation allowance of $3.6 million and deferred tax liabilities of $519,000. Realization of the net deferred tax assets is dependent on the Company’s ability to generate future taxable income in


12


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
the related tax jurisdictions. Management believes that sufficient taxable income will be earned in the future to realize these assets.
 
 
The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”) on July 1, 2007. FIN 48 provides a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
 
Upon adoption, the Company recorded $289,000 of tax liabilities primarily related to estimated interest and penalties associated with previously recorded reserves. This amount was recorded as an increase to other long-term liabilities and a decrease to retained earnings on the Company’s condensed consolidated balance sheet. At the date of adoption, the Company had $184,000 of accrued interest and penalties included in other liabilities on its condensed consolidated balance sheet.
 
It is the Company’s policy to recognize interest and penalties related to unrecognized tax benefits as income tax expense in our consolidated statement of operations.
 
Unrecognized tax benefits represent tax positions for which reserves have been established. As of the date of adoption, the Company’s unrecognized tax benefits totaled $1.7 million, of which $1.1 million, if recognized, would favorably affect our effective tax rate in any future period.
 
The Company has identified no uncertain tax position for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.
 
In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, France, Japan, Germany, Ireland and the U.S., and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Tax years 2002 through 2006 are still open to examination depending on the major jurisdiction. With the exception of Australia, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2002 in its major jurisdictions.
 
 
In the first quarter of fiscal 2005, one of the Company’s Australian subsidiaries became subject to an audit by the Australian Tax Office (“ATO”). The amount of liabilities assessed to date by the ATO, including tax penalties and interest, is approximately A$7.9 million (currently valued at $7.0 million). Payments of A$3.9 million (currently valued at $3.4 million) have been made to date with respect to these assessed amounts. The liability amount of approximately A$7.9 million referred to above represents the Company’s maximum potential exposure, but does not reflect the potential tax benefits of such payments, which might serve to mitigate the net expense that would be reflected in the Company’s results of operations.
 
In November 2005, the Company received a notice of assessment from the ATO related to its 2001 tax year, which assessed a tax due in an amount of A$1.8 million (currently valued at $1.6 million). Subsequently, the Company was issued penalty and interest charges totaling A$1.4 million (currently valued at $1.2 million) related to the tax assessment for the 2001 year.
 
In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, the Company paid A$907,000 (currently valued at $802,000), approximately 50% of the income tax assessment for 2001, to the ATO in December 2005, which was recorded as a current asset as of June 30, 2006. In April 2006, the Company paid 50% of the penalty and interest charges totaling A$708,000 (currently valued at $626,000) related to the tax assessment for the 2001 year. The ATO has agreed to defer any action to


13


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalty charge for the 2001 tax year needs to be paid pending the resolution of the dispute.
 
In May 2006, the Company received a notice of assessment for tax, interest and penalties related to 1994 and 1995 totaling approximately A$4.5 million (currently valued at $3.9 million). In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, in the fourth quarter of 2006, the Company paid approximately A$1.1 million (currently valued at $972,000) to the ATO, which represented 50% of the outstanding interest assessments for the 1994 and 1995 years and A$1.1 million (currently valued at $972,000), which represented 50% of the outstanding tax and penalty assessments for the 1994 and 1995 years. These items were also recorded as current assets. The tax authority has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalties for 1994 and 1995 need to be paid pending the resolution of the dispute.
 
The Company believes that its positions on its tax returns have merit. The Company has taken steps to preserve its rights through the ATO’s objection process and believes that its position will ultimately be sustained. Accordingly, the Company has not recorded any liabilities or unrecognized tax benefit in its condensed consolidated balance sheet related to these matters. All payments made to the ATO have been recorded as current assets in all periods presented, as the Company currently expects a resolution to these matters within the next twelve months.
 
11.   Contingencies, Commitments and Guarantor Arrangements
 
In the normal course of business, the Company indemnifies third parties and enters into commitments and guarantees (“Agreements”) under which it may be required to make payments. These Agreements include indemnities to the following parties: lessors in connection with facility leases; customers in relation to their performance of services subcontracted to other providers; vendors in connection with guarantees of Company employee expenses; and former employees in connection with their prior services as director or officer of the Company or its subsidiary companies. In addition, the Company may be responsible for the performance under credit facilities of the Company’s subsidiaries and for indemnity obligations in connection with the sale of business assets. The duration of these Agreements varies, and in certain cases, is indefinite. Furthermore, the majority of these Agreements do not limit the Company’s maximum potential payment exposure. However, the Company has never incurred material costs to settle claims or defend lawsuits related to these Agreements and their estimated fair value is minimal. Accordingly, as of September 30, 2007, no liabilities have been recorded.
 
The Company generally warrants that its products will perform in all material respects in accordance with its standard published specifications in effect at the time of delivery of the products to the customer for a period of 90 days to two years from the date of shipment or any longer period that may be required by local law. The Company records a liability based upon its history of claims against the contractual warranty provisions. Historically, payments made under these provisions have been insignificant.
 
12.   Share Repurchase Program and Treasury Stock
 
On May 17, 2006, the Company’s Board of Directors established a stock repurchase program under which the Company was authorized to repurchase up to 600,000 shares of its outstanding common stock. In fiscal 2006, pursuant to the program, the Company acquired 196,100 shares of its outstanding common stock for $2.6 million, an average purchase price of $13.15 per share. During fiscal 2007, the Company acquired 403,900 shares of its outstanding common stock for $5.4 million, an average purchase price of $13.47 per share. All such shares were held as treasury stock as of September 30, 2007.
 
During the quarter ended September 30, 2007, treasury stock increased by 45,959 shares of which 16,324 shares related to restricted stock net-share settlements during the quarter and 3,291 was related to a prior period. Restricted stock net-share settlements reduce the number of shares that would have otherwise been issued as a result of vesting. Net share settlements do not represent an expense to the Company. In addition, the Company also


14


Table of Contents

 
MOLDFLOW CORPORATION
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
reclassified 6,641 shares and 19,703 shares from common stock to treasury as these shares were also withheld in prior periods for employee’s tax obligations on restricted stock and stock options, respectively. All such shares were held as treasury stock as of September 30, 2007.
 
13.   Recent Accounting Pronouncements
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early adoption of SFAS No. 159 is allowed under certain circumstances. The Company is currently evaluating the timing of adoption of SFAS No. 159 and the impact that adoption might have on its financial position and its results of operations.
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”) and expands disclosure related to the use of fair value measures in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the timing of adoption of SFAS No. 157 and the impact that adoption might have on its financial position and its results of operations.
 
14.   Subsequent Events
 
On November 1, 2007, the Company’s Board of Directors extended the Company’s stock repurchase program to allow for the repurchase of up to one million additional shares of its outstanding common stock.


15


Table of Contents

 
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with a review of our overall strategy to give the reader a view of the goals of our business and the direction in which our business and products are moving. This is followed by a discussion of the Critical Accounting Policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. Following that, we discuss the results of our continuing operations for the three-month period ended September 30, 2007 compared to the three-month period ended September 30, 2006. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled “Liquidity and Capital Resources” and “Off-Balance Sheet Financing Arrangements.”
 
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained in this report include, but are not limited to, statements concerning growth opportunities for our business, taxes, working capital and capital expenditure requirements, inflation, international operations and share-based compensation expenses. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” and “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition, or state other “forward-looking” information.
 
We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including those factors described in the Company’s most recent Annual Report on Form 10-K, Part I, Item 1A. “Risk Factors.” Readers should not place undue reliance on our forward-looking statements. We do not undertake any obligation to update any of our forward-looking statements to reflect events occurring after the date of this report.
 
 
Our goal is to be the leading global provider of software optimization solutions for the design and manufacture of plastic parts. We help companies manufacture less expensive and more reliable products by increasing the effectiveness of their product and mold design process as well as improving efficiencies across their entire design-through-manufacture process.
 
We believe that our key competitive strength is our extensive domain knowledge in the fields of materials science and characterization, numerical methods and predictive modeling through simulation and analysis, coupled with our expertise in packaging and delivering this knowledge to our customers in easy-to-use software applications. We develop software products internally and through cooperative research relationships with a number of public and private educational and research organizations around the world. In addition, some of our products are developed by commercial contractors. Because of the strong body of intellectual property and knowledge that we have created over the course of twenty-nine years in serving the product design, engineering and manufacturing markets, we have become the leading provider of highly sophisticated predictive software applications for the plastics design, engineering and manufacturing communities. Our growth strategy is derived from these strengths.
 
We continue to increase the business value of our products for our customers by improving the performance and functionality of our products with each new release, and developing products addressing specific vertical market needs in each of our target market segments. In the design phase, for example, we provide applications that address the process of microchip encapsulation, a process which is involved in the manufacture of semiconductors.
 
Expanding our geographic coverage is a key element of our growth strategy. We believe that the rapidly growing economies in China, India, Eastern Europe, South America and other developing regions present


16


Table of Contents

significant longer-term growth opportunities for our business. Our ability to conduct research and development at various locations throughout the world allows us to optimize product development and lower costs. International development, however, also involves significant costs and challenges, including whether we can adequately protect our intellectual property and derive significant revenue in areas where laws regarding intellectual property are not in place or not effectively enforced.
 
A significant part of our growth strategy is directed toward increasing customer loyalty and further developing opportunities within our large installed customer base. We generally receive approximately 65% to 75% of our overall revenue from existing customers. We deliver product releases on a regular basis which incorporate significant functional improvements to ensure that our customers have access to the latest technological developments. We focus on customer satisfaction through programs aimed at involving our customers in the future direction of our products, enhancing their ease of use and user experience, and providing multiple points of contact within the Company to ensure that their needs are met. These efforts encourage our existing customers to both renew their annual maintenance contracts and purchase additional licenses.
 
Our uses of cash include capital expenditures to support our operations and product development, investments in growth initiatives, and repurchases of our outstanding common stock. We have also used cash to acquire other companies or strategic assets. We continue to evaluate merger and acquisition opportunities to the extent they support our strategy and growth objectives.
 
Discontinued Operations
 
On June 30, 2007, we completed the sale of our Manufacturing Solutions (“MS”) division to Husky Injection Molding Systems Ltd. (the “Buyer”) for $7.0 million in cash. The purchase price was subject to a post-closing net asset value adjustment to reflect the fair value of the assets and liabilities acquired at the date of closing. At June 30, 2007, we estimated that these post-closing adjustments would result in additional proceeds of $744,000. In the first quarter of fiscal 2008, we agreed with the Buyer to a final post-closing adjustment of $584,000, resulting in an adjusted total purchase price of $7.6 million. The difference between the estimated adjustment and the actual adjustment, inclusive of associated legal costs, was recorded as an additional loss on the disposal of the discontinued operation.
 
We received $6.0 million of the purchase price in July 2007 and $584,000 in October 2007. Pursuant to the sale agreement, the remaining $1.0 million of the adjusted purchase price was placed in escrow. We expect escrow to settle within the next twelve months and has recorded the balance as a current asset on its condensed consolidated balance sheet as of September 30, 2007.
 
In accordance with Statement of Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we are reporting the MS division as a discontinued operation in the consolidated financial statements for all periods presented in these condensed consolidated financial statements.
 
 
Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In connection with the preparation of these financial statements, we make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and the related disclosures.
 
A critical accounting policy is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective or complex judgments for uncertain matters that could have a material effect on our financial condition and results of operations. Critical accounting policies for us include: Revenue Recognition, Asset Valuation Allowances, Acquisition Accounting, Impairment Accounting (including the accounting treatment of discontinued operations), Income Tax Accounting, Capitalization of Software Development Costs, Stock Option Accounting, and Restructuring. Management has reviewed these policies and related disclosures with the Audit Committee of our Board of Directors. We have revised our income tax accounting critical accounting policy below. For a detailed explanation of the judgments included in our other critical accounting policies refer to our Annual Report on Form 10-K for the year ended June 30, 2007.


17


Table of Contents

 
SFAS No. 109, “Accounting for Income Taxes,” establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations, or cash flows.
 
We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”) on July 1, 2007. FIN 48 provides a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
 
Under FIN 48, we first determine whether a tax authority would “more likely than not” sustain our tax position if it were to audit the position with full knowledge of all the relevant facts and other information. For those tax positions that meet this threshold, we measure the amount of tax benefit based on the largest amount of tax benefit that the enterprise has a greater than 50% chance of realizing in a final settlement with the relevant authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. We maintain a cumulative risk portfolio relating to all our uncertainties in income taxes in order to perform this analysis, but the evaluation of our tax position in connection with FIN 48 requires significant judgment and estimation in part because, in certain cases, tax law is subject to varied interpretation, and whether a tax position will ultimately be sustained may be uncertain. The actual outcome of our tax positions, if significantly different from our Company’s estimates, could materially impact the financial statements.
 
In addition, our effective tax rate estimates may be materially impacted by the amount of income taxes associated with our foreign earnings, which are taxed at rates different from the U.S. federal statutory tax rate, as well as the timing and extent of the realization of deferred tax assets, changes in tax law and potential acquisitions. Further, our tax rates may fluctuate within a fiscal year, including from quarter to quarter, due to items arising from discrete events, including settlement of tax audits and assessments, acquisitions of other companies, and changes in GAAP or other events.
 
 
                                 
    Three Months
          Three Months
       
    Ended
    As a
    Ended
    As a
 
    September 30,
    % of
    September 30,
    % of
 
    2007     Revenue     2006     Revenue  
    (In thousands, except for percentage data)  
 
Revenue
  $ 13,404       100 %   $ 11,761       100 %
Cost of revenue
    1,626       12       1,384       12  
Operating expenses
    10,867       81       9,704       82  
                                 
Income from continuing operations
  $ 911       7 %   $ 673       6 %
                                 
 
  •  Total revenue was $13.4 million and represented an increase of 14% from the same period of the previous year.
 
  •  Product revenue was $5.8 million and represented an increase of 13% from the same period of the previous year.
 
  •  Service revenue was $7.6 million and represented an increase of 15% from the same period of the previous year.
 
  •  Income from continuing operations was $911,000 in the three-month period ended September 30, 2007 compared to $673,000 in the same period of the previous year.


18


Table of Contents

 
  •  Total net share-based compensation costs of $482,000 for the three-month period ended September 30, 2007 compared to $350,000 in the same period of the previous year.
 
  •  Operating activities of continuing operations generated $2.2 million of cash in the three-month period ended September 30, 2007, compared to $1.4 million in the same period of the previous year.
 
Results of Continuing Operations
 
The following table sets forth our statement of continuing operations data for the periods indicated as a percentage of total revenue:
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
 
Revenue:
               
Product
    43 %     43 %
Services
    57       57  
                 
Total revenue
    100 %     100 %
                 
Costs and operating expenses:
               
Cost of product revenue
    3 %     3 %
Cost of services revenue
    9       9  
Research and development
    16       16  
Selling and marketing
    36       36  
General and administrative
    29       31  
                 
Total costs and operating expenses
    93       95  
                 
Income from continuing operations
    7       5  
Interest income, net
    8       7  
Other income, net
    (1 )     1  
                 
Income from continuing operations before income taxes
    14       13  
Provision for (benefit from) income taxes
    3       (1 )
                 
Net income from continuing operations
    11 %     14 %
                 
 
Revenue
 
                 
    Three Months Ended  
    September 30,
    September 30,
 
    2007     2006  
    (In thousands)  
 
Revenue:
               
Product
  $ 5,787     $ 5,116  
Services
    7,617       6,645  
                 
Total
  $ 13,404     $ 11,761  
                 
 
Our product revenue primarily represents license fees for our packaged software application products. Typically, our customers pay an up-front, one-time fee for our products. The amount of the fee depends upon the number and type of software modules licensed and the number of the customer’s employees or other users who can access the software product simultaneously. In addition, we receive royalty payments from developers of other software products related to the bundling of our software with their design software programs. We record these royalty payments and shipping and handling fees related to delivery of our products as components of product revenue, none of which have been significant to date.


19


Table of Contents

Our service revenue is derived from maintenance and support contracts that require us to provide technical support services to customers and unspecified product upgrades and enhancements on a when-and-if-available basis. We also provide consulting services, training of customers’ employees and material testing services.
 
The following table sets forth our revenue by geography for the three months ended September 30, 2007 and September 30, 2006.
 
                                 
          Increase
       
    Three Months
    (Decrease)
    Three Months
 
    Ended
    Compared to
    Ended
 
    September 30,
    Prior Year     September 30,
 
    2007     $     %     2006  
    (In thousands, except for percentage data)  
 
Asia/Australia:
                               
Products
  $ 3,696     $ 863       30 %   $ 2,833  
Services
    2,929       388       15       2,541  
                                 
Total Asia/Australia
  $ 6,625     $ 1,251       23 %   $ 5,374  
                                 
% of total revenue
    49 %                     46 %
Americas:
                               
Products
  $ 671     $ (309 )     (32 )%   $ 980  
Services
    1,605       31       2       1,574  
                                 
Total Americas
  $ 2,276     $ (278 )     (11 )%   $ 2,554  
                                 
% of total revenue
    17 %                     22 %
Europe:
                               
Products
  $ 1,420     $ 117       9 %   $ 1,303  
Services
    3,083       553       22       2,530  
                                 
Total Europe
  $ 4,503     $ 670       17 %   $ 3,833  
                                 
% of total revenue
    34 %                     32 %
Consolidated:
                               
Products
  $ 5,787     $ 671       13 %   $ 5,116  
Services
    7,617       972       15       6,645  
                                 
Total
  $ 13,404     $ 1,643       14 %   $ 11,761  
                                 
% of total revenue
    100 %                     100 %
 
Changes in foreign currency exchange rates represented 3% of the increase in product and service revenue for the three-month period ended September 30, 2007.
 
Product revenue increased $671,000 in the three-month period ended September 30, 2007, compared to the same period of the prior fiscal year. The increase was primarily due to strong sales results in Japan, Korea and China driven mainly by orders from large customers in the electronics and automotive sectors. In the US, the decrease in product revenue was mainly due to a weakness in the automotive industry.
 
Service revenue increased $972,000 in the three-month period ended September 30, 2007 compared to the same period of the prior fiscal year. This increase was primarily from the sale of maintenance and support contracts across all geographic regions and is a reflection of long-term growth in our installed customer base arising from software license sales made during the current and previous reporting period.


20


Table of Contents

 
                                 
    Three Months
    Increase
    Three Months
 
    Ended
    Compared to
    Ended
 
    September 30,
    Fiscal Year     September 30,
 
    2007     $     %     2006  
    (In thousands, except for percentage data)  
 
Cost of revenue:
                               
Product
  $ 397     $ 40       11 %   $ 357  
As a percentage of total revenue
    3 %                     3 %
 
Cost of product revenue consists of the costs of compact discs and related packaging material, duplication and shipping costs. In some cases, we pay royalties to third parties for usage-based licenses of their products that are embedded in our products. Product royalties are expensed when the related obligation arises, which is generally upon the license of our products, and are included in cost of product revenue. Also, included in cost of product revenue is amortization expense related to capitalized software development costs.
 
Cost of product revenue was $397,000 in the three-month period ended September 30, 2007 compared to $357,000 in the same period of the prior fiscal year. The change was a result of an increase in third party royalties and shipping costs, which was partially offset by decreased amortization expense.
 
 
                                 
    Three Months
  Increase
  Three Months
    Ended
  Compared to
  Ended
    September 30,
  Fiscal Year   September 30,
    2007   $   %   2006
    (In thousands, except for percentage data)
 
Cost of services revenue
  $ 1,229     $ 202       20 %   $ 1,027  
As a percentage of total revenue
    9 %                     9 %
 
Cost of services revenue consists primarily of salary, fringe benefits and facility related costs of our maintenance and support, consulting and training activities and of our material testing laboratories, and is expensed when incurred. Additionally, from time to time, we engage outside consultants to meet peaks in customer demand for consulting services.
 
Cost of services revenue was $1.2 million in the three-month period ended September 30, 2007, compared to $1.0 million in the same period of the prior fiscal year. The increase resulted from having a greater number of technical support engineers on staff.
 
 
                                 
    Three Months
  Increase
  Three Months
    Ended
  Compared to
  Ended
    September 30,
  Fiscal Year   September 30,
    2007   $   %   2006
    (In thousands, except for percentage data)
 
Research and development
  $ 2,101     $ 254       14 %   $ 1,847  
As a percentage of total revenue
    16 %                     16 %
 
We employ a staff to develop new products and enhance our existing products. Product development expenditures, which include compensation, benefits, travel, payments to universities and other research institutions and facilities costs, are generally charged to operations as incurred. However, Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,” requires the capitalization of certain software development costs subsequent to the establishment of technological feasibility up to the point the product is available for commercial release to customers. In accordance with SFAS No. 86, research and development costs of $64,000 were capitalized in the three months ended September 30, 2007. All such capitalized costs are amortized to cost of product revenue over the estimated economic life of the related products, which ranges from three to five years.


21


Table of Contents

Research and development expenses were approximately $2.1 million in the three-month period ended September 30, 2007, compared to $1.8 million in the same period of the prior fiscal year as increases in personnel and facility costs were partially offset by our capitalization of software development costs in accordance with SFAS No. 86.
 
 
                                 
    Three Months
  Increase
  Three Months
    Ended
  Compared to
  Ended
    September 30,
  Fiscal Year   September 30,
    2007   $   %   2006
    (In thousands, except for percentage data)
 
Selling and marketing
  $ 4,820     $ 618       15 %   $ 4,202  
As a percentage of total revenue
    36 %                     36 %
 
We sell our products primarily through our direct sales force and indirect distribution channels. Selling and marketing expenses consist primarily of compensation paid to our sales staff, employee benefits costs, sales office facility rental and related costs, travel and promotional events such as trade shows, advertising, print and web-based collateral materials and public relations programs.
 
Selling and marketing expenses were approximately $4.8 million in the three-month period ended September 30, 2007, compared to $4.2 million in the same period of the prior fiscal year. The change was primarily a result of employing a greater number of sales personnel when compared to the previous year, which increased compensation costs, stock compensation expense, and travel expenses by $401,000.
 
 
                                 
    Three Months
  Increase
  Three Months
    Ended
  Compared to
  Ended
    September 30,
  Fiscal Year   September 30,
    2007   $   %   2006
    (In thousands, except for percentage data)
 
General and administrative
  $ 3,946     $ 291       8 %   $ 3,655  
As a percentage of total revenue
    29 %                     31 %
 
General and administrative expenses include legal, audit, tax consulting, regulatory compliance and insurance expenses and the compensation costs of our executive management, finance, information technology, human resources and administrative support groups.
 
General and administrative expenses were $3.9 million in the three-month period ended September 30, 2007, compared to $3.7 million in the same period of the prior fiscal year. The change was primarily a result of a $162,000 increase in personnel and facility related costs, a $97,000 increase in temporary labor, and a $67,000 increase in stock compensation expense, all of which was, partially offset by a $173,000 decrease in audit expenses.
 
 
Interest income, net, includes interest income earned on invested cash balances.
 
Our interest income, net, was $1.0 million in the three-month period ended September 30, 2007, as compared to $783,000 in the same period of the prior fiscal year, which is a result of having increasing levels of cash on-hand.
 
 
Other income (loss), net, includes realized and unrealized gains and losses arising from the remeasurement of our foreign currency denominated asset and liability balances recorded, especially in the United States, Australia and Ireland, recognized gains and losses on our foreign currency hedging instruments, and other non-operating income and expense items.
 
Other losses of $52,000 in the three-month period ended September 30, 2007, were not significantly different from those of the same period of the prior year.


22


Table of Contents

 
We are subject to income tax in numerous jurisdictions and at various rates worldwide, and the use of estimates is required in determining our provision for income taxes. For the three-month period ended September 30, 2007, we recorded a tax provision of $373,000 on income from operations before tax of $1.9 million resulting in an effective income tax rate of 20%. For the three months ended September 30, 2007, the difference between the effective rate of 20% and the U.S. federal statutory rate of 34% was primarily due to taxes incurred in certain foreign jurisdictions at rates lower than those enacted in the U.S. and a one-time tax benefit of $143,000 primarily due to the lapse of the applicable statute of limitations related to potential audits.
 
For the three months ended September 30, 2006, we recorded a tax benefit of $158,000. The tax provision included a one-time benefit of $562,000 which resulted from a revised estimate of the tax liabilities related to certain tax positions of one of the Company’s foreign subsidiaries and taxes payable in certain foreign jurisdictions.
 
We currently estimate that our income tax rate for fiscal 2008 will be approximately 25%. This estimated annual rate does not take into account any discrete items, other than the items described above, and is subject to change.
 
 
We have established a valuation allowance against net deferred tax assets, consisting principally of net operating losses and foreign tax credit carryforwards and temporary differences in certain jurisdictions, including the United States, because we believe that it is more likely than not that the tax assets in those jurisdictions will not be realized prior to their expiration. At September 30, 2007, we had total deferred tax assets of $133,000, net of a tax asset valuation allowance of $3.6 million and deferred tax liabilities of $519,000. Realization of the net deferred tax assets is dependent on our ability to generate future taxable income in the related tax jurisdictions. We believe that sufficient taxable income will be earned in the future to realize these assets.
 
 
We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” (“FIN 48”) on July 1, 2007. FIN 48 provides a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
 
Upon adoption of FIN 48, we recorded $289,000 of tax liabilities primarily related to estimated interest and penalties associated with previously recorded reserves. This amount was recorded as an increase to other long-term liabilities and a decrease to retained earnings on our condensed consolidated balance sheet. At the date of adoption, we had $184,000 of accrued interest and penalties included in other liabilities on our consolidated balance sheet.
 
It is our policy to recognize interest and penalties related to unrecognized tax benefits as income tax expense in our consolidated statement of operations.
 
Unrecognized tax benefits represent tax positions for which reserves have been established. As of the date of adoption, our unrecognized tax benefits totaled $1.7 million, of which $1.1 million, if recognized, would favorably affect our effective tax rate in any future period.
 
We have identified no uncertain tax position for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.
 
In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, France, Japan, Germany, Ireland and the U.S., and, as a result, file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Tax years 2002 through 2006 are still open to examination depending on the major jurisdiction. With the exception of Australia, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2002 in these major jurisdictions.


23


Table of Contents

 
In the first quarter of fiscal 2005, one of our Australian subsidiaries became subject to an audit by the Australian Tax Office (“ATO”). The amount of liabilities assessed to date by the ATO, including tax penalties and interest, is approximately A$7.9 million (currently valued at $7.0 million). Payments of A$3.9 million (currently valued at $3.4 million) have been made to date with respect to these assessed amounts. The liability amount of approximately A$7.9 million referred to above represents our maximum potential exposure, but does not reflect the potential tax benefits of such payments, which might serve to mitigate the net expense that would be reflected in our results of operations.
 
In November 2005, we received a notice of assessment from the ATO related to our 2001 tax year, which assessed a tax due in an amount of A$1.8 million (currently valued at $1.6 million). Subsequently, we were issued penalty and interest charges totaling A$1.4 million (currently valued at $1.2 million) related to the tax assessment for the 2001 year.
 
In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, we paid A$907,000 (currently valued at $802,000), approximately 50% of the income tax assessment for 2001, to the ATO in December 2005, which was recorded as a current asset as of June 30, 2006. In April 2006, we paid 50% of the penalty and interest charges totaling A$708,000 (currently valued at $626,000) related to the tax assessment for the 2001 year. The tax authority has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalty charge for the 2001 tax year needs to be paid pending the resolution of the dispute.
 
In May 2006, we received a notice of assessment for tax, interest and penalties related to 1994 and 1995 totaling approximately A$4.5 million (currently valued at A$3.9 million). In order to limit the interest that may accrue on these amounts from the date of assessment through the ultimate resolution of this matter, in the fourth quarter of 2006, we paid approximately A$1.1 million (currently valued at $972,000) to the ATO, which represented 50% of the outstanding interest assessments for the 1994 and 1995 years. These payments were also recorded as current assets. The ATO has agreed to defer any action to recover the remaining assessed tax amount outstanding and that no portion of the remaining interest and penalties for 1994 and 1995 need to be paid pending the resolution of the dispute.
 
We believe that the positions on our tax returns have merit. We have taken steps to preserve our rights through the ATO’s objection process and believe that our position will ultimately be sustained. Accordingly, we have not recorded any liabilities or unrecognized tax benefit in our consolidated balance sheet related to these matters. All payments made to the ATO have been recorded as current assets in all periods presented, as we currently expect a resolution to these matters within the next twelve months.


24


Table of Contents

 
                 
    Three Months
    Three Months
 
    Ended
    Ended
 
    September 30,
    September 30,
 
    2007     2006  
    (In thousands)  
 
Cash provided by operating activities of continuing operations
  $ 2,170     $ 1,398  
Cash used by operating activities of discontinued operations
    (236 )     (166 )
Net cash provided by operating activities
  $ 1,934     $ 1,232  
                 
Cash provided by investing activities of continuing operations
  $ 6,117     $ 50  
Cash used in investing activities of discontinued operations
          (31 )
Total cash provided by investing activities
  $ 6,117     $ 19  
                 
Total cash provided (used in) by financing activities
  $ 922     $ (945 )
                 
Total effect of exchange rate changes on cash and cash equivalents
  $ 294     $ 103  
                 
Net increase in cash and cash equivalents
  $ 9,267     $ 409  
                 
Cash and cash equivalents, beginning of period
  $ 59,482     $ 52,111  
Cash and cash equivalents, end of period
  $ 68,749     $ 52,520  
Marketable securities, end of period
  $ 12,602     $ 8,113  
Cash, cash equivalents and marketable securities, end of period
  $ 81,352     $ 60,633  
 
Historically, we have financed our continuing operations and met our capital expenditure requirements primarily through funds generated from operations and borrowings from lending institutions. As of September 30, 2007, our primary sources of liquidity consisted of our total cash and cash equivalents balance of $68.7 million, our marketable securities balance of $12.6 million and our credit facilities. In February 2007, we renewed our primary $5.0 million unsecured working capital credit facility for a term of two years. The available borrowing base of the facility is subject to a calculation that is based upon eligible accounts receivable. Advances may be in the form of loans, letters of credit, foreign exchange contracts or other cash management lines. The facility includes restrictive covenants, all of which we were in compliance with at September 30, 2007. These covenants include liquidity and profitability measures and restrictions that limit our ability to merge, acquire or sell assets without prior approval from the bank. At September 30, 2007, we had employed $939,000 of available borrowings through outstanding foreign exchange contracts and letters of credit. The remaining available borrowings were $4.1 million. In addition to our primary working capital line of credit, we also utilize domestic and foreign banking institutions to provide liquidity to our subsidiaries. We also have relationships with other banking institutions in order to facilitate foreign currency and hedging transactions. As of September 30, 2007, we had no outstanding debt.
 
At September 30, 2007, our marketable securities consisted of corporate bonds with maturities from the date of purchase in excess of three months. Investments in marketable securities are made in accordance with our corporate investment policy. The primary objective of this policy is the preservation of capital. Investments are limited to high quality corporate debt, government securities, municipal debt securities, money market funds and similar instruments. The policy establishes maturity limits, liquidity requirements and concentration limits. At September 30, 2007, we were in compliance with this internal policy.
 
Net cash provided by operating activities of our continuing operations in the three-month period ended September 30, 2007, was $2.2 million. Cash of $2.6 million was provided by our net income from continuing operations adjusted for certain non-cash charges and expenses, such as depreciation and amortization and share-based compensation expense. Cash generated by decreases in accounts receivable of $2.1 million, prepaid and other current assets of $163,000 and other assets of $1.1 million was offset by the consumption of cash due to a $1.8 million in accrued expenses and other liabilities. In addition, our deferred revenue account balances, decreased cash by $2.1 million as a result of the timing of renewals of maintenance contracts primarily in Europe and Japan.


25


Table of Contents

Operating activities of our continuing operations generated $1.4 million of cash in the three months ended September 30, 2006. Cash of $2.5 million was provided by our net income from continuing operations adjusted for certain non-cash charges and expenses, such as depreciation and amortization. In addition, decreases in accounts receivable of $1.6 million and prepaid and other current assets of $679,000 generated cash during the period. These items were partially offset by a $378,000 decrease in accounts payable, $1.4 million decrease in accrued expenses and other liabilities and a $1.5 million decrease in deferred revenue.
 
Investing activities of our continuing operations generated $6.1 million and $50,000 of cash in the first three months of fiscal 2008 and 2007, respectively. In the first three months of fiscal 2008 net sales of marketable securities generated $561,000, and $6.0 million in proceeds were received related to the sale of the MS division to Husky Injection Molding Systems. These items were partially offset by purchases of fixed assets of $380,000 and $64,000 of capitalized software development costs.
 
Financing activities generated $922,000 of cash in the first three months of fiscal 2008, a result of $1.3 million of proceeds received from the exercise of stock options, partially offset by $360,000 related to the payment of employee tax obligations resulting from the net exercise of stock based awards. Financing activities consumed $945,000 of cash in the first three months of fiscal 2007, a result of our repurchase of 114,500 shares of common stock for $1.4 million, offset by $432,000 of cash received from the exercise of stock options.
 
We believe that our current cash, cash equivalents, marketable securities and available lines of credit will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months following the date of this report. Capital expenditure requirements of the Company’s continuing operations for fiscal 2008 are expected to be consistent with prior fiscal years. Long-term cash requirements, other than normal operating expenses, are anticipated for the continued development of new products, the financing of anticipated growth, and the possible acquisition of businesses, software products or technologies complementary to our business. On a long-term basis or to complete acquisitions in the short term, we may require additional external financing through credit facilities, sales of additional equity or other financing vehicles. There can be no assurance that such financing can be obtained on favorable terms, if at all.
 
 
We do not have any special purpose entities or off-balance sheet financing arrangements.
 
 
In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early adoption of SFAS No. 159 is allowed under certain circumstances. We are currently evaluating the timing of adoption of SFAS No. 159 and the impact that adoption might have on our financial position and our results of operations.
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in U.S. generally accepted accounting principles (“GAAP”) and expands disclosure related to the use of fair value measures in financial statements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the timing of adoption of SFAS No. 157 and the impact that adoption might have on our financial position and our results of operations.
 
Item 3.   Quantitative and Qualitative Disclosures about Market Risk
 
There have been no significant changes in our market risk exposure as described in Item 7A: “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on 10-K for the fiscal year ended June 30, 2007.


26


Table of Contents

 
We collect amounts representing a substantial portion of our revenues and pay amounts representing a substantial portion of our operating expenses in foreign currencies. As a result, changes in currency exchange rates affect our operating results and our invested cash balances. At September 30, 2007, we had $11.7 million of cash and cash equivalents invested in foreign currency denominated accounts.
 
Our invested cash balances are subject to interest rate risk and, as a result, changes in interest rates from time to time may affect our operating results. We invest our excess cash balances in highly liquid, interest bearing instruments, including government and corporate bonds. At September 30, 2007, the fair value and principal amounts of our marketable securities portfolio amounted to $12.6 million, with a yield-to-maturity of 5.25%.
 
Item 4.   Controls and Procedures
 
 
As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. In designing and evaluating our disclosure controls and procedures, we and our management recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of September 30, 2007, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, (i) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to Moldflow’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In compliance with the rules, we intend to continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
 
 
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


27


Table of Contents

 
 
Item 1.   Legal Proceedings
 
From time to time, the Company may be involved in various claims and legal proceedings arising in the ordinary course of business. The Company is not currently a party to any such claims or proceedings which, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition or results of operations.
 
Item 1A.   Risk Factors
 
The Company cautions investors that its future performance and results and, therefore, any forward-looking statements are subject to risks and uncertainties. Various factors may cause the Company’s future results to differ materially from those projected in any forward-looking statements. These factors were disclosed, but are not limited to, the items in the Company’s most recent Annual Report on Form 10-K, Part I, Item 1A.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
 
The following table summarizes information about purchases by the Company during the three month period ended September 30, 2007 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.
 
                                 
                      Maximum Number of
 
                Total Number of Shares
    Shares that May
 
    Total Number
    Average
    Purchased as Part of
    Yet be Purchased
 
    of Shares
    Price Paid
    Publicly Announced
    Under the Plans
 
Period
  Purchased     per Share     Plans or Programs     or Programs  
 
July 1 - July 31, 2007
                       
August 1 - August 31, 2007
                       
September 1 - September 30, 2007(1)
    16,324       17.65              
                                 
      16,324                      
 
 
1) These shares were surrendered to the Company by certain employee stockholder in order to satisfy individual tax withholding obligations upon vesting of their restricted stock.
 
Item 3.   Defaults Upon Senior Securities
 
None.
 
Item 4.   Submission of Matters to a Vote of Securities Holders
 
None.
 
Item 5.   Other Information
 
None.


28


Table of Contents

 
Item 6.   Exhibits
 
(a) Exhibits:
 
         
Exhibit
   
No.
   
 
  3 .1   Third Amended and Restated Certificate of Incorporation of the Registrant (Previously filed as our exhibit to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 12, 2000 and incorporated by reference thereto.)
  31 .1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. (Filed herewith.)
  31 .2   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. (Filed herewith.)
  32 .1   Section 1350 Certification of Chief Executive Officer.(1) (Filed herewith.)
  32 .2   Section 1350 Certification of Chief Financial Officer.(1) (Filed herewith.)
 
 
(1) This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.


29


Table of Contents

 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Moldflow Corporation
 
  By: 
/s/   A. ROLAND THOMAS
A. Roland Thomas
President and Chief Executive Officer
 
Moldflow Corporation
 
  By: 
/s/  GREGORY W. MAGOON
Gregory W. Magoon
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
Date: November 5, 2007


30

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki