UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2003.
OR
[ ] 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 0-19817.
STELLENT, INC.
--------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1652566
------------------------------- --------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7777 GOLDEN TRIANGLE DRIVE, EDEN PRAIRIE, MINNESOTA 55344-3736
--------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(952) 903-2000
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934) Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 par value -
22,196,514 shares as of January 22, 2004.
1
STELLENT, INC.
FORM 10-Q
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 3
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 22
2
EXPLANATORY NOTE
In accordance with Exchange Act Rule 12b-15, this Amendment No. 1 on
Form 10-Q/A amends certain items of the Quarterly Report on Form 10-Q of
Stellent, Inc. (the "Company") for the fiscal period ended December 31, 2003,
filed with the Securities and Exchange Commission on January 30, 2004, and
presents the relevant text of the items amended. These amended items do not
restate the Company's consolidated financial statements previously filed in the
Form 10-Q. This Form 10-Q/A does not reflect events occurring after the filing
of the original Form 10-Q or modify or update those disclosures affected by
subsequent events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion may contain forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed herein as well as those discussed under
the caption Risk Factors. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and in the Company's other
reports filed with the Securities and Exchange Commission that advise interested
parties of the risks and factors that may affect the Company's business.
OVERVIEW
Our product solutions are comprised of universal content management software,
content components software and vertical applications and help customers
worldwide solve real business problems related to efficiently creating, managing
and sharing critical information. Our company has strategically grown to become
one of the foremost content management software vendors in the industry, having
been ranked one of the top three content management software providers by
industry analyst firms Gartner Dataquest, Giga Information Group and Aberdeen
Group.
CRITICAL ACCOUNTING POLICIES AND JUDGMENTS
The policies described below are particularly important to understanding our
financial position and results of operations and may require management to make
estimates or judgments that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3
Revenue Recognition
We currently derive all of our revenues from licenses of software products and
related services. We recognize revenue in accordance with Statement of Position
(SOP) 97-2, "Software Revenue Recognition," as amended by SOP 98-9, Modification
of SOP 97-2, "Software Revenue Recognition with Respect to Certain
Transactions," and Securities and Exchange Commission Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements."
Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require services that are essential to the functionality of
the software.
Persuasive Evidence of an Arrangement Exists - We determine that persuasive
evidence of an arrangement exists with respect to a customer under, i) a
signature license agreement, which is signed by both the customer and us, or,
ii) a purchase order, quote or binding letter-of-intent received from and signed
by the customer, in which case the customer has either previously executed a
signature license agreement with us or will receive a shrink-wrap license
agreement with the software. We do not offer product return rights to end users
or resellers.
Delivery has Occurred - Our software may be either physically or electronically
delivered to the customer. We determine that delivery has occurred upon shipment
of the software pursuant to the billing terms of the arrangement or when the
software is made available to the customer through electronic delivery. Customer
acceptance generally occurs at delivery.
The Fee is Fixed or Determinable - If at the outset of the customer arrangement,
we determine that the arrangement fee is not fixed or determinable, revenue is
typically recognized when the arrangement fee becomes due and payable. Fees due
under an arrangement are generally deemed fixed and determinable if they are
payable within twelve months.
Collectibility is Probable and Supported - We determine whether collectibility
is probable and supported on a case-by-case basis. We may generate a high
percentage of our license revenue from our current customer base, for whom there
is a history of successful collection. We assess the probability of collection
from new customers based upon the number of years the customer has been in
business and a credit review process, which evaluates the customer's financial
position and ultimately their ability to pay. If we are unable to determine from
the outset of an arrangement that collectibility is probable based upon our
review process, revenue is recognized as payments are received.
With regard to software arrangements involving multiple elements, we allocate
revenue to each element based on the relative fair value of each element. Our
determination of fair value of each element in multiple-element arrangements is
based on vendor-specific objective evidence ("VSOE"). We limit our assessment of
VSOE for each element to the price charged when the same element is sold
separately. We have analyzed all of the elements included in our
multiple-element arrangements and have determined that we have sufficient VSOE
to allocate revenue to consulting services and post-contract customer support
("PCS") components of our license arrangements. We sell our consulting services
separately, and have established VSOE on this basis. VSOE for PCS is determined
based upon the customer's annual renewal rates for these elements. Accordingly,
assuming all other revenue recognition criteria are met, revenue from
4
perpetual licenses is recognized upon delivery using the residual method in
accordance with SOP 98-9, and revenue from PCS is recognized ratably over their
respective terms, typically one year.
Our direct customers typically enter into perpetual license arrangements. Our
Content Components Division generally enters into term-based license
arrangements with its customers, the term of which generally exceeds one year in
length. We recognize revenue from time-based licenses at the time the license
arrangement is signed, assuming all other revenue recognition criteria are met,
if the term of the time-based license arrangement is greater than twelve months.
If the term of the time-based license arrangement is twelve months or less, we
recognize revenue ratably over the term of the license arrangement.
Services revenue consists of fees from consulting services and PCS. Consulting
services include needs assessment, software integration, security analysis,
application development and training. We bill consulting services fees either on
a time and materials basis or on a fixed-price schedule. In general, our
consulting services are not essential to the functionality of the software. Our
software products are fully functional upon delivery and implementation and
generally do not require any significant modification or alteration for customer
use. Customers purchase our consulting services to facilitate the adoption of
our technology and may dedicate personnel to participate in the services being
performed, but they may also decide to use their own resources or appoint other
professional service organizations to provide these services. Software products
are billed separately from professional services. We recognize revenue from
consulting services as services are performed. Our customers typically purchase
PCS annually, and we price PCS based on a percentage of the product license fee.
Customers purchasing PCS receive product upgrades, Web-based technical support
and telephone hot-line support.
Customer advances and billed amounts due from customers in excess of revenue
recognized are recorded as deferred revenue. Investments in Other Companies
Investments are classified as long-term as the Company anticipates holding them
for more than one year. The Company holds less than 20% interest in, and does
not directly or indirectly exert significant influence over, any of the
respective investees.
During the three months ended December 31, 2003, the Company sold the portion of
these investments which was publicly traded. This investment was classified as
available-for-sale and the Company had recorded other than temporary impairment
related to this asset during fiscal 2003. This investment was sold and the
Company recorded a gain of approximately $388 during the three months ended
December 31, 2003.
The remaining investments in other companies include investments in two
non-public, start-up technology companies for which the Company uses the cost
method of accounting.
Accounts Receivable
Our accounts receivable balances are due from companies across a broad range of
industries, such as Government, Finance, Manufacturing, Consumer, Aerospace and
Transportation, Health Care/Insurance, and High Tech/Telecom. Credit is extended
based on evaluation of a customer's financial condition and, generally,
collateral is not required. Accounts receivable from sales of services are
typically due from customers within 30 days and accounts receivable from sales
of
5
licenses are due over terms ranging from 30 days to nine months. Accounts
receivable balances are stated at amounts due from customer net of an allowance
for doubtful accounts. Accounts outstanding longer than the contractual payments
terms are considered past due. We determined our allowance by considering a
number of factors, including the length of time trade receivables are past due,
our previous loss history, the customer's current ability to pay its obligation
to us, and the condition of the general economy and the industry as a whole. We
write-off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.
Goodwill and Other Acquired Intangible Assets
Goodwill and Other Acquired Intangible Assets: Goodwill represents the excess of
the purchase price over the fair value of net assets acquired. The carrying
value of goodwill and other intangible assets is tested for impairment on an
annual basis or when factors indicating impairment are present. We have elected
to complete the annual impairment test of goodwill on January 1 of each year. We
believe no impairment of goodwill assets has occurred to-date.
Impairment of Long-Lived Assets
We evaluate the recoverability of long-lived assets and recognize impairment of
long-lived assets in the event that events or circumstances indicate an
impairment may have occurred and when the net book value of such assets exceeds
the future undiscounted cash flows attributed to such assets. We assess the
impairment of long-lived assets whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. No impairment of
long-lived assets has occurred during the three and nine month periods ended
December 31, 2003 and 2002.
Accounting for Income Taxes
Deferred tax liabilities and deferred tax assets reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. A
valuation allowance has been established due to the uncertainty of future
taxable income, which is necessary to realize the benefits of the deferred tax
assets. The Company had net operating loss (NOL) carryforwards of approximately
$84.3 million at March 31, 2003, which begin to expire in 2011. These NOL's are
subject to annual utilization limitations due to prior ownership changes.
Realization of the NOL carryforwards and other deferred tax temporary
differences are contingent on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required by SFAS No. 109, Accounting for Income Taxes, by assessing the
available positive and negative evidence surrounding its recoverability.
Accordingly, in the fourth quarter of fiscal 2003 we increased the valuation
allowance to fully offset the deferred tax asset.
We will continue to assess and evaluate strategies that will enable the deferred
tax asset, or portion there of, to be utilized, and will reduce the valuation
allowance appropriately at such time when it is determined that the "more likely
than not" approach is satisfied.
6
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
REVENUES
Total revenues increased by $3.2 million, or 20%, to $19.2 million for
the three months ended December 31, 2003 from $16.0 million for the three months
ended December 31, 2002. The increase in revenues was attributable to increased
consulting services and post-contract customer support revenue.
Product Licenses. Revenues for product licenses increased by $0.5
million, or 5%, to $10.2 million for the three months ended December 31, 2003
from $9.7 million for the three months ended December 31, 2002. The increase in
revenues for product licenses was attributable to increased revenue from our
Content Components Division (CCD), which was due to an increase in demand by
software vendors caused by improving market conditions.
Services. Revenues for services, consisting of consulting services,
training and post contract customer support, increased by $2.7 million, or 42%,
to $9.0 million for the three months ended December 31, 2003 from $6.3 million
for the three months ended December 31, 2002, as follows (in thousands):
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------- ---------------------------
Consulting services and training $ 4,062 45% $ 2,347 37%
Post-contract support 4,981 55 4,011 63
----------- ----------- ----------- -----------
Total services revenues $ 9,043 100% $ 6,358 100%
=========== =========== =========== ===========
The $1.7 million increase in revenues for services was due to an
increase in consulting services revenues as our customers' software
implementations have become larger and more numerous, and $1.0 million of the
increase was due to an increase in post-contract customer support revenue which
is primarily attributable to a larger installed base of products.
COST OF REVENUES
Total cost of revenues increased by $0.9 million, or 19%, to $5.9
million for the three months ended December 31, 2003 from $5.0 million for the
three months ended December 31, 2002. Total cost of revenues as a percentage of
total revenues was 31% for the three months ended December 31, 2003 and 2002.
Gross profit increased by $2.3 million, or 21%, to $13.3 million for the three
months ended December 31, 2003 from $11.0 million for the three months ended
December 31, 2002. Total gross profit as a percentage of total revenues was 69%
for the three months ended December 31, 2003 and 2002. The increase in gross
profit dollars was due to increased revenues for post-contract customer support
revenue attributable to a larger installed base of products and by the decreased
cost of revenues for product licenses due to the mix of products sold.
Product Licenses. Cost of revenues for product licenses decreased $0.5
million for the three months ended December 31, 2003 to $1.2 million from $1.7
million for the three months ended December 31, 2002. The decrease in cost of
revenues for product licenses was attributable to increased sales of our CCD
products, which generally have a lower cost of sales than our universal content
management products, a change in product mix in our universal content management
products and a reduction in costs related to payments for third-party technology
incorporated into our products.
7
Amortization of capitalized software from acquisitions. Cost of
revenues related to amortization of capitalized software from acquisitions was
$0.4 million for the three months ended December 31, 2003 compared to $0.5
million for the three months ended December 31, 2002. The cost of revenues for
amortization of capitalized software from acquisitions was attributable to the
amortization of capitalized software obtained in the acquisition of certain
assets of RESoft, Kinecta, Active IQ, and Ancept in July 2001, April 2002, March
2003, and August 2003, respectively. The decrease in cost of revenues related to
amortization of capitalized software from acquisitions was attributable to the
completion in June 2003 of amortization of capitalized software related to our
acquisition of CCD.
Services. Cost of revenues, consisting primarily of personnel for
consulting services, training and post-contract customer support, increased by
$1.5 million, or 54%, to $4.4 million for the three months ended December 31,
2003 from $2.9 million for the three months ended December 31, 2002. Gross
profit as a percentage of revenues for services was 51% for the three months
ended December 31, 2003, compared to 55% for the three months ended December 31,
2002. The decrease in the gross profit as a percentage of services revenues was
due to an increase in costs associated with the hiring and training of
additional personnel and the use of outside contractors related to the
significant growth in consulting services revenue. Services cost of revenues for
the three month periods were as follows (in thousands):
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------------- -----------------------
Consulting services and training $ 3,458 78% $ 2,025 70%
Post-contract support 966 22 852 30
--------- --------- --------- ---------
Total services revenues $ 4,424 100% $ 2,877 100%
========= ========= ========= =========
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased by $0.8
million, or 8%, to $10.4 million for the three months ended December 31, 2003
from $9.6 million for the three months ended December 31, 2002. Sales and
marketing expenses as a percentage of total revenues were 54% for the three
months ended December 31, 2003 compared to 60% for the three months ended
December 31, 2002. The increase in sales and marketing expense dollars was
primarily attributable to expenses related to our global users conference held
in October, 2003 and other sales events, and was partially offset by reduced
commission expenses related to the mix of products sold.
General and Administrative. General and administrative expenses
decreased $0.8 million, or 30% to $2.0 million for the three months ended
December 31, 2003 from $2.8 million for the three months ended December 31,
2002. General and administrative expenses as a percentage of total revenues were
10% for the three months ended December 31, 2003 compared to 18% for the three
months ended December 31, 2002. The decrease in general and administrative
expenses was due to a decrease in bad debt expense.
Research and Development. Research and development expenses increased
by $0.3 million, or 9%, to $3.3 million for the three months ended December 31,
2003 from $3.0 million for the three months ended December 31, 2002. Research
and development expenses as a percentage of total revenues were 17% for the
three months ended December 31, 2003 compared to 19% for the three months ended
December 31, 2002. The increase in research and development expenses was due to
increased headcount.
8
Acquisition and Related Costs. Acquisition and related costs of $0.3
million for the three months ended December 31, 2002 were related to final
development milestone and bonus payments related to the acquisition of Kinecta
Corporation in April 2002.
Amortization of Intangibles. Approximately $40.8 million of the $55.3
million purchase price of certain assets of CCD was allocated to core
technology, customer base, software, trademarks and other intangibles, and is
being amortized over the assets' estimated useful lives of three to four years.
Approximately $5.1 million of the $5.6 million purchase price of certain assets
of RESoft was allocated to certain intangible assets, such as customer base and
trademarks, and is also being amortized over their useful lives of three years.
Intangible amortization and other expense was $0.1 million for the three month
periods ended December 31, 2003 and $1.7 million in the three months ended
December 31, 2002. The decrease in operating expenses related to amortization of
intangibles was attributable to the completion in June 2003 of amortization of
intangibles related to our acquisition of CCD.
Restructuring Charges. There were no restructuring charges expensed or
accrued in the quarter ended December 31, 2003. In the quarter ended December
31, 2002, in connection with management's plan to reduce costs and improve
operating efficiencies, the Company recorded a restructuring charge of
approximately $0.7 million. The restructuring charge was comprised of severance
pay and benefits related to the involuntary termination of employees of
approximately $0.4 million with the remaining $0.3 million related to the
closing of facilities and other exit costs. The quarterly cost savings and cash
flow increase associated with the termination of these employees would be
estimated at approximately $0.1 million and the quarterly cost savings
associated with the closing of facilities would be estimated at approximately
$0.1 million, but would have no impact on cash flow. However, the Company may be
required to invest in certain areas to expand our customer base, grow our
revenues and invest in new product development, which may eliminate or exceed
these cost savings.
Please see Note 7. of the Notes to Condensed Consolidated Financial
Statements for further information on our restructuring plans.
OTHER INCOME, NET
Interest income. Net interest income was $0.2 million for the three
months ended December 31, 2003 compared to net interest income of $0.5 million
for the three months ended December 31, 2002. Net interest income for the three
months ended December 31, 2003 and 2002 was primarily related to investments
purchased with the proceeds of our public stock offerings completed in June 1999
and March 2000. The decrease in net interest income was primarily due to
decreases in the interest rates earned by invested funds resulting from
decreases in market interest rates, which have declined over 50% and a decrease
of approximately 14% in the amount of invested funds, which has decreased due to
cash used in operations and acquisitions.
Investment gain on sale (impairment). During the three months ended
December 31, 2003, the Company sold its shares in Active IQ, an investment for
which the value was previously written down to zero as the result of an other
than temporary impairment. The company realized approximately $0.4 million in
proceeds and gain from the sale. During the three months ended December 31,
2002, the Company determined that a permanent decline in the value of certain of
its investments in other companies had occurred. The Company made this
determination after reviewing financial statements of these companies or
discussing their future business plans and prospects with their management. As a
result, the Company recorded a write-down on the investments in these companies
of approximately $0.7 million for the three months ended December 31, 2002.
9
NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
REVENUES
Total revenues increased by $6.5 million, or 13%, to $55.1 million for
the nine months ended December 31, 2003 from $48.6 million for the nine months
ended December 31, 2002. Approximately $3.5 million of the increase in total
revenues was due to an increase in consulting services revenues, as our
customers' software implementations have become larger and more numerous, and to
an increase of approximately 3.1 million in post-contract customer support
revenue, which is primarily attributable to a larger installed base of products.
Product Licenses. Revenues for product licenses of $30.2 million for
the nine months ended December 31, 2003 were essentially even with revenues for
product licenses of $30.3 million for the nine months ended December 31, 2002.
Revenues for product licenses for the nine months ended December 31, 2003 were
affected early in the period by the worldwide economic slowdown, which has
resulted in a reduction in overall customer spending in information technology
initiatives.
Services. Revenues for services, consisting of consulting services,
training and post contract customer support, increased by $6.6 million, or 36%,
to $24.9 million for the nine months ended December 31, 2003 from $18.3 million
for the nine months ended December 31, 2002, as follows (in thousands):
NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------ -----------------------
Consulting services and training $ 10,644 43% $ 7,136 39%
Post-contract support 14,247 57% 11,118 61%
--------- --------- --------- ---------
Total services revenues $ 24,891 100% $ 18,254 100%
========= ========= ========= =========
The $3.5 million increase in revenues for services was due to an increase in
consulting services revenue as our customers' software implementations have
become larger and more numerous, and approximately $3.1 million of the increase
due to an increase in post-contract customer support revenue, which is primarily
attributable to a larger installed base of products.
COST OF REVENUES
Total cost of revenues increased by $1.7 million, or 11%, to $17.0
million for the nine months ended December 31, 2003 from $15.3 million for the
nine months ended December 31, 2002. Total cost of revenues as a percentage of
total revenues was 31% for the nine months ended December 31, 2003 and compared
to 32% for the nine months ended December 31, 2002. Gross profit increased by
$4.8 million, or 15%, to $38.1 million for the nine months ended December 31,
2003 from $33.3 million for the nine months ended December 31, 2002. Total gross
profit as a percentage of total revenues was 69% for the nine months ended
December 31, 2003 and 68% for the nine months ended December 31, 2002. The
increase in gross profit dollars was due to increased revenues for post-contract
customer support revenue attributable to a larger installed base of products and
by the decreased cost of revenues for product licenses due to the mix of
products sold.
Product Licenses. Cost of revenues for product licenses decreased $1.6
million for the nine months ended December 31, 2003 to $3.4 million from $5.0
million for the nine months ended December 31, 2002. The decrease in cost of
revenues for product licenses was primarily attributable to
10
increased sales of our CCD products, which generally have a lower costs of sales
than our universal content management products and the change in product mix in
our universal content management products. Additional reductions in costs
related to payments for third-party technology incorporated into our products.
Amortization of capitalized software from acquisitions. Cost of
revenues related to amortization of capitalized software from acquisitions was
$1.2 million for the nine months ended December 31, 2003 and compared to $1.4
million for the nine months ended December 31, 2002. The cost of revenues for
amortization of capitalized software from acquisitions was attributable to the
amortization of capitalized software obtained in the acquisition of certain
assets of RESoft, Kinecta, Active IQ and Ancept acquisitions in July 2001, April
2002, March 2003, and August 2003, respectively. The decrease in cost of
revenues related to amortization of capitalized software from acquisitions was
attributable to the completion in June 2003 of amortization of capitalized
software related to our acquisition of CCD.
Services. Cost of revenues, consisting of primarily personnel for
consulting services, training and post-contract customer support, increased by
$3.5 million, or 40%, to $12.4 million for the nine months ended December 31,
2003 from $8.9 million for the nine months ended December 31, 2002. Gross profit
as a percentage of revenues for services was 50% for the nine months ended
December 31, 2003, compared to 51% for the nine months ended December 31, 2002.
The decrease in the gross profit as a percentage of services revenues was due to
an increase in costs associated with the hiring and training of additional
personnel and the use of outside contractors related to the significant growth
in consulting services revenue. Services cost of revenues for the nine month
periods were as follows (in thousands):
NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------------- -----------------------
Consulting services and training costs $ 9,554 77% $ 6,074 68%
Post-contract support costs 2,851 23% 2,806 32%
--------- --------- --------- ---------
Total services costs $ 12,405 100% $ 8,880 100%
========= ========= ========= =========
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased by $0.3
million, or 1%, to $29.9 million for the nine months ended December 31, 2003
from $29.6 million for the nine months ended December 31, 2002. Sales and
marketing expenses as a percentage of total revenues were 54% for the nine
months ended December 31, 2003 compared to 61% for the nine months ended
December 31, 2002. The increase in sales and marketing expense dollars was
primarily attributable to expenses related to our global users conference held
in October 2003.
General and Administrative. General and administrative expenses
decreased $1.0 million, or 13% to $6.9 million for the nine months ended
December 31, 2003 from $7.9 million for the nine months ended December 31, 2002.
General and administrative expenses as a percentage of total revenues were 13%
for the nine months ended December 31, 2003 compared to 16% for the nine months
ended December 31, 2002. The decrease in general and administrative expenses was
due to a decrease in bad debt expense.
Research and Development. Research and development expenses decreased
by $2.7 million, or 22%, to $9.8 million for the nine months ended December 31,
2003 from $12.5 million for the nine months ended December 31, 2002. Research
and development expenses as a percentage of total revenues
11
were 18% for the nine months ended December 31, 2003 compared to 26% for the
nine months ended December 31, 2002. The decrease in research and development
expenses was due to reduced headcount as part of the consolidation of research
and development facilities and the completion of certain research and
development projects in the quarter ended December 31, 2002.
Acquisition and Related Costs. Acquisition and related costs for the
nine months ended December 31, 2002 were primarily related to a potential
transaction with a Japanese company that would have given the Company new
wireless technologies and an avenue to generate revenues for our content
management products. After proceeding with the due-diligence, it was determined
that the target company was not situated well enough for the Company to
accomplish previously established goals. The total acquisition costs of
approximately $1.0 million represent $0.7 million of expenses associated with
this project, which include funds that we advanced to the company for a trade
show, product integration testing, test marketing costs of the products and
other purposes. The remaining $0.3 million of acquisition costs represent final
development milestone and bonus payments related to the acquisition of Kinecta
Corporation in April 2002.
Amortization of Intangibles. Approximately $40.8 million of the $55.3
million purchase price of certain assets of CCD was allocated to core
technology, customer base, software, trademarks and other intangibles, and is
being amortized over the assets' estimated useful lives of three to four years.
Approximately $5.6 million of the $5.1 million purchase price of certain assets
of RESoft was allocated to certain intangible assets, such as customer base and
trademarks, and is also being amortized over their useful lives of three years.
Intangible amortization and other expense was $1.9 million for the nine month
period ended December 31, 2003 and $5.0 million in the nine months ended
December 31, 2002. The decrease in operating expenses related to amortization of
intangibles was primarily attributable to the completion in June 2003 of
amortization of intangibles related to our acquisition of CCD.
Restructuring Charges. In the nine months ended December 31, 2003,
in connection with management's plan to reduce costs and improve operating
efficiencies, the Company recorded a restructuring charge of approximately $0.8
million. The restructuring charge was comprised primarily of severance pay and
benefits related to the involuntary termination of employees of approximately
$0.4 million with the remaining $0.4 million related to a change in estimate
related to the closing of facilities and other exit costs. In the nine months
ended December 31, 2002, the Company recorded total restructuring charges of
approximately $4.0 million. The restructuring charge was comprised primarily of
$2.9 million in severance pay and benefits related to the involuntary
termination of approximately 105 employees, with the remaining $1.1 million
related to the closing of facilities and other exit costs. The effect on
expenses and cash flows over the next year associated with the termination of
employees is expected to be a decrease of approximately $1.0 million. The effect
on expenses over the next year associated with the closing of the facilities and
other exit costs is expected to be a decrease of approximately $0.2 million, but
is expected to have an immaterial effect on cash flows. The combined expense
decrease of $1.2 million is anticipated to be in the areas of selling and
marketing of $0.8 million, research and development of $0.2 million and general
and administrative of $0.2 million. However, we may be required to re-invest in
certain areas to expand our customer base, grow our revenues and invest in new
product development, which may eliminate or exceed these cost savings.
Please see Note 7. of the Notes to Condensed Consolidated Financial
Statements for further information on our restructuring plans.
OTHER INCOME, NET
Interest income. Net interest income was $0.8 million for the nine
months ended December 31, 2003 compared to net interest income of $1.6 million
for the nine months ended December 31, 2002. Net
12
interest income for the nine months ended December 31, 2003 and 2002 was
primarily related to investments purchased with the proceeds of our public stock
offerings completed in June 1999 and March 2000. The decrease in net interest
income was primarily due to decreases of over 50% in the interest rates earned
by invested funds and reduced amounts of invested funds.
Investment gain on sale (impairment). During the nine months ended
December 31, 2003, the company sold its shares in a publicly traded company, an
investment for which the value was previously written down to zero as the result
of an other than temporary impairment. The company realized approximately $0.4
million in proceeds and gain from the sale. In the December 31, 2002 quarter,
the Company determined that a permanent decline in the value of certain of its
investments in other companies, had occurred. The Company made this
determination after reviewing financial statements of these companies or
discussing their future business plans and prospects with their management. As a
result, the Company recorded a write-down on the investments in and notes with
these companies of approximately $0.7 million for the nine months ended December
31, 2002.
NET OPERATING LOSS CARRYFORWARDS
As of March 31, 2003 the Company had net operating loss carryforwards of
approximately $84.3 million. The net operating loss carryforwards will expire at
various dates beginning in 2011, if not utilized. The Tax Reform Act of 1986
imposes substantial restrictions on the utilization of net operating losses and
tax credits in the event of an "ownership change", as defined by Section 382 of
the Internal Revenue Code, of a corporation. Our ability to utilize net
operating loss carryforwards on an annual basis may be limited as a result of
"ownership changes" in connection with the sale of equity securities. We have
provided a valuation allowance against the entire amount of the deferred tax
asset as of December 31, 2003 because of the uncertainty regarding its
realization. Our accounting for deferred taxes and the valuation allowance
involves the evaluation of a number of factors such as our history of operating
losses, potential future losses and the nature of assets and liabilities giving
rise to deferred taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and satisfied its capital expenditure
requirements primarily through operating revenues and public offerings of
securities. Net cash used in operating activities was $5.9 million for the nine
months ended December 31, 2003 compared to net cash used by operating activities
of $13.3 million for the nine months ended December 31, 2002. The change in cash
flow used in operations is primarily due to the reduced net loss in the nine
month period ended December 31, 2003 from the nine months ended December 31,
2002.
The Company's capital expenditures relate primarily to property and equipment
consisting largely of computer hardware. Capital expenditures for the nine
months ended December 31, 2003 and 2002 were $1.7 million and $1.1 million,
respectively. We have also entered into capital and operating leases for
facilities and equipment.
As of December 31, 2003 the Company had $73.3 million in cash and equivalents
and marketable securities (short-term and long-term) and a total of $68.5
million in working capital. Net cash used in investing activities was $0.4
million in the nine months ended December 31, 2003 while net cash provided by
investing activities was approximately $31.8 million, due primarily to net
maturities of marketable securities, for the nine months ended December 31,
2002.
The Company currently believes that the cash and equivalents and marketable
securities on hand will be sufficient to meet our working capital requirements
through our fiscal year 2004 and for the foreseeable future thereafter.
Nevertheless, at any time, we may require additional funds to support our
working capital requirements or for other purposes and may seek to raise such
additional funds through public or private equity financings or from other
sources. The Company cannot be certain that additional financing will be
available on terms favorable to us, or on any terms, or that any additional
financing will not be dilutive.
The Company continues to evaluate potential strategic acquisitions that could
utilize equity and, or, cash resources. Such opportunities could develop quickly
due to market and competitive factors.
NEW ACCOUNTING PRONOUNCEMENTS
New Accounting Pronouncements: In November 2002, the FASB reached a consensus on
EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." This EITF sets out criteria for whether revenue can be recognized
separately from other deliverables in a multiple deliverable arrangement. The
criteria considers whether the delivered item has stand-alone value to the
customer, whether the fair value of the delivered item can be reliably
determined and also considers the rights of returns for the delivered item. This
EITF is required to be adopted by the Company beginning April 1, 2004. The
adoption of this EITF is not anticipated to have a material effect on the
Company's consolidated financial statements.
RISK FACTORS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q for the period ended December 31, 2003 contains certain
forward-looking statements within the meaning of the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward-looking statements are based on the beliefs of our management as well as
on assumptions made by, and information currently available to, us at the time
such statements were made. When used in this Form 10-Q, the words "anticipate",
"believe", "estimate", "expect", "intend" and similar expressions, as they
relate us, are intended to identify such forward-looking statements. Although we
believe these statements are reasonable, readers of this Form 10-Q should be
aware that actual results could differ materially from those projected by such
forward-looking statements as a result of the risk factors listed below. Readers
of this Form 10-Q should consider carefully the factors listed below, as well as
the other information and data contained in this Form 10-Q. We caution the
reader, however, that such list of may not be exhaustive and that those or other
factors, many of which are outside of our control, could have a material adverse
effect on us and our results of operations. All forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements set forth hereunder. We undertake no
obligation to update
13
publicly any forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
WE FACE MANY RISKS IN CONNECTION WITH OUR PROPOSED MERGER WITH OPTIKA. SOME OF
THOSE RISKS APPLY WHETHER OR NOT THE MERGER IS COMPLETED.
Our proposed merger with Optika might not be completed on a timely basis, or at
all. If the merger were delayed or not completed, the following may occur:
- to the extent that the price or our common stock reflects a market
assumption that the merger will be completed, the price of our common stock
may decline;
- customers may delay or defer purchasing our products because of the
uncertainty about the future direction of our product offerings;
- any delay in the completion of the merger could diminish the anticipated
benefits of the merger or result in additional transaction costs, loss of
revenues or other effects associated with uncertainty about the
transaction, including a decline in the price of our common stock; and
- we will be required to pay significant costs incurred in connection with
the merger, including legal, accounting and a portion of the financial
advisory fees and certain filing fees, whether or not the merger is
completed.
Even if the proposed merger is completed, the combined company may not realize
expected benefits because of integration and other challenges. These risks
include the following:
- the failure of the combined company to meet the complex challenges involved
in integrating the products, technology, personnel and other operations of
Stellent and Optika successfully or to realize the anticipated cost
savings, could seriously harm the results of operations of the combined
company;
- managing the implementation of the integration plan will divert management
attention from ongoing business concerns, which could harm our future
operating results;
- employees may be uncertain about their future role with the combined
company until integration plans are finalized, which could adversely affect
their productivity and our ability to attract or retain key employees; and
- the combined company must retain and motivate key employees, which will be
particularly difficult due to the potential distractions of the merger,
until our strategies, with regard to the integration of Optika, are
executed.
In addition, merger-related earnings charges may adversely affect the market
value of our common stock following the merger. We will allocate the total
estimated purchase price among Optika's various tangible and intangible assets,
and record the excess of the purchase price over those fair values as goodwill.
Some allocated portions of the purchase price will be expensed in the quarter in
which the merger is completed; that amount has not yet been determined, but may
14
be material. We will incur additional depreciation and amortization expense over
the useful lives of various acquired assets. In addition, to the extent the
value of the goodwill or intangible assets with indefinite lives becomes
impaired, we may be required to record material charges relating to the
impairment of those assets. We will also incur liabilities and restructuring
charges associated with integration planning, including costs associated with
employee severance and excess facilities, which are currently unknown but may be
material
These and other risks will be described in more detail in the joint proxy
statement/prospectus related to the merger that we will file with the SEC as a
registration statement on Form S-4. In addition, we call your attention to the
fact that Optika's business differs from our business, and Optika's results of
operations, as well as the price of Optika's common stock, may be affected by
factors different than those affecting our results of operations and the price
of our common stock before the merger. For further information on Optika's
business and certain factors to consider in connection with the proposed merger,
please refer to the reports that Optika files with the SEC, which may be
accessed through the SEC's EDGAR filing system on the SEC website at
www.sec.gov.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE.
While our products and services are not seasonal, our revenues and operating
results are difficult to predict and may fluctuate significantly from quarter to
quarter. If our quarterly revenues or operating results fall below the
expectations of investors or securities analysts, the price of our common stock
could fall substantially. A large part of our sales typically occurs in the last
month of a quarter, frequently in the last week or even the last days of the
quarter. If these sales were delayed from one quarter to the next for any
reason, our operating results could fluctuate dramatically. In addition, our
sales cycles may vary, making the timing of sales difficult to predict.
Furthermore, our infrastructure costs are generally fixed. As a result, modest
fluctuations in revenues between quarters may cause large fluctuations in
operating results. These factors all tend to make the timing of revenues
unpredictable and may lead to high period-to-period fluctuations in operating
results.
Our quarterly revenues and operating results may fluctuate for several
additional reasons, many of which are outside of our control, including the
following:
- demand for our products and services;
- the timing of new product introductions and sales of our products and
services;
- unexpected delays in introducing new products and services;
- increased expenses, whether related to sales and marketing, research and
development or administration;
- changes in the rapidly evolving market for Web content management
solutions;
- the mix of revenues from product licenses and services, as well as the mix
of products licensed;
- the mix of services provided and whether services are provided by our staff
or third-party contractors;
15
- the mix of domestic and international sales;
- costs related to possible acquisitions of technology or businesses;
- general economic conditions; and
- public announcements by our competitors.
POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO COMPLETE OR TO INTEGRATE AND MAY
DIVERT MANAGEMENT'S ATTENTION.
We may seek to acquire or invest in businesses, products or technologies that
are complementary to our business. If we identify an appropriate acquisition
opportunity, we may be unable to negotiate favorable terms for that acquisition,
successfully finance the acquisition or to integrate the new business or
products into our existing business and operations. In addition, the negotiation
of potential acquisitions and the integration of acquired businesses or products
may divert management time and resources from our existing business and
operations. To finance acquisitions, we may use a substantial portion of our
available cash or we may issue additional securities, which would cause dilution
to our shareholders.
WE MAY NOT BE PROFITABLE IN THE FUTURE.
Our revenues may not grow in future periods and we may not achieve quarterly pro
forma profitability. If we do not regain our pro forma profitability, the market
price of our stock may fall. Our ability to regain pro forma profitable
operations depends upon many factors beyond our direct control. These factors
include, but are not limited to:
- the demand for our products;
- our ability to quickly introduce new products;
- the level of product and price competition;
- our ability to control costs; and
- general economic conditions.
THE INTENSE COMPETITION IN OUR INDUSTRY MAY REDUCE OUR FUTURE SALES AND PROFITS.
The market for our products is highly competitive and is likely to become more
competitive. We may not be able to compete successfully in our chosen
marketplace, which may have a material adverse effect on our business, operating
results and financial condition. Additional competition may cause pricing
pressure, reduced sales and margins, or prevent our products from gaining and
sustaining market acceptance. Many of our current and potential competitors have
greater name recognition, access to larger customer bases, and substantially
more resources than we have. Competitors with greater resources than ours may be
able to respond more quickly than we can to new opportunities, changing
technology, product standards or customer requirements.
WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.
We are a small company and depend greatly on the knowledge and experience of our
senior management team and other key personnel. If we lose any of these key
personnel, our business,
16
operating results and financial condition could be materially adversely
affected. Our success will depend in part on our ability to attract and retain
additional personnel with the highly specialized expertise necessary to generate
revenue, engineer, design and support our products and services. Like other
software companies, we face intense competition for qualified personnel. We may
not be able to attract or retain such personnel.
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR UNIVERSAL CONTENT
MANAGEMENT SOFTWARE AND CONTENT COMPONENT SOFTWARE PRODUCTS FOR OUR REVENUES.
We currently derive all of our revenues from product licenses and services
associated with our system of content management and content component software
products. The market for content management and content component software
products is new and rapidly evolving. We cannot be certain that a viable market
for our products will continue or that it will be sustainable. If we do not
increase employee productivity and revenues related to our existing products or
generate revenues from new products and services, our business, operating
results and financial condition may be materially adversely affected. We will
continue to depend on revenues related to new and enhanced versions of our
software products for the foreseeable future. Our success will largely depend on
our ability to increase sales from existing products and generate sales from
product enhancements and new products. We cannot be certain that we will be
successful in upgrading and marketing our existing products or that we will be
successful in developing and marketing new products and services. The market for
our products is highly competitive and is subject to rapid technological change.
Technological advances could make our products less attractive to customers and
adversely affect our business. In addition, complex software product development
involves certain inherent risks, including risks that errors may be found in a
product enhancement or new product after its release, even after extensive
testing, and the risk that discovered errors may not be corrected in a timely
manner.
WE DEPEND ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY.
If we are unable to protect our intellectual property, or incur significant
expense in doing so, our business, operating results and financial condition may
be materially adversely affected. Any steps we take to protect our intellectual
property may be inadequate, time consuming and expensive. We currently have one
pending patent application; but, no patent has yet been issued. Without
significant patent or copyright protection, we may be vulnerable to competitors
who develop functionally equivalent products. We may also be subject to claims
that our current products infringe on the intellectual property rights of
others. Any such claim may have a material adverse effect on our business,
operating results and financial condition.
We anticipate that software product developers will be increasingly subject to
infringement claims due to growth in the number of products and competitors in
our industry, and the overlap in functionality of products in different
industries. Any infringement claim, regardless of its merit, could be
time-consuming, expensive to defend, or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements may not be available
on commercially favorable terms, or at all.
We rely on trade secret protection, confidentiality procedures and contractual
provisions to protect our proprietary information. Despite our attempts to
protect our confidential and
17
proprietary information, others may gain access to this information.
Alternatively, other companies may independently develop substantially
equivalent information.
OUR PRODUCTS MAY NOT BE COMPATIBLE WITH COMMERCIAL WEB BROWSERS AND OPERATING
SYSTEMS.
Our products utilize interfaces that are compatible with commercial Web
browsers. In addition, our Stellent Content Management System is a server-based
system written in Java that functions in both Windows NT and UNIX environments.
We must continually modify our products to conform to commercial Web browsers
and operating systems. If our products were to become incompatible with
commercial Web browsers and operating systems, our business would be harmed. In
addition, uncertainty related to the timing and nature of product introductions
or modifications by vendors of Web browsers and operating systems may have a
material adverse effect on our business, operating results and financial
condition.
WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS FAIL TO PERFORM
TO SPECIFICATIONS.
If software errors or design defects in our products cause damage to customers'
data and our agreements do not protect us from related product liability claims,
our business, operating results and financial condition may be materially
adversely affected. In addition, we could be subject to product liability claims
if our security features fail to prevent unauthorized third parties from
entering our customers' intranet, extranet or Internet Web sites. Our software
products are complex and sophisticated and may contain design defects or
software errors that are difficult to detect and correct. Errors, bugs or
viruses spread by third parties may result in the loss of market acceptance or
the loss of customer data. Our agreements with customers that attempt to limit
our exposure to product liability claims may not be enforceable in certain
jurisdictions where we operate.
FUTURE REGULATIONS COULD BE ADOPTED THAT RESTRICT OUR BUSINESS.
Federal, state or foreign agencies may adopt new legislation or regulations
governing the use and quality of Web content. We cannot predict if or how any
future laws or regulations would impact our business and operations. Even though
these laws and regulations may not apply to our business directly, they could
indirectly harm us to the extent that they impact our customers and potential
customers.
WE HAVE BEEN NAMED A DEFENDANT IN A SECURITIES CLASS ACTION AND WE MAY IN THE
FUTURE BE NAMED IN ADDITIONAL LITIGATION, WHICH MAY RESULT IN SUBSTANTIAL COSTS
AND DIVERT MANAGEMENT'S ATTENTION AND RESOURCES.
As described in Part II - Item 1: Legal Proceedings, shareholder class action
suits have been filed naming the Company and certain of our current and former
officers and directors as co-defendants. We intend to vigorously defend
ourselves against the suits and seek the suits' dismissal at the appropriate
time. However, it is possible that the litigation could be resolved adversely,
could result in substantial costs and/or could divert management's attention and
resources, which could seriously harm our business.
18
More generally, securities class-action litigation has often been brought
against companies following periods of volatility in the price of their
securities. This risk is greater for technology companies, which have
experienced greater-than-average stock price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other industries. We may in the future be the
target of this kind of litigation and such litigation could also result in
substantial costs and divert management's attention and resources.
THE MARKET PRICE OF OUR COMMON STOCK COULD FLUCTUATE SIGNIFICANTLY.
The market price of our common stock has fluctuated significantly in the past
and may do so in the future. The market price of our common stock may be
affected by each of the following factors, many of which are outside of our
control:
- variations in quarterly operating results;
- changes in estimates by securities analysts;
- changes in market valuations of companies in our industry;
- announcements of significant events, such as major sales;
- acquisitions of businesses or losses of major customers;
- additions or departures of key personnel; and
- sales of our equity securities.
OUR PERFORMANCE WILL DEPEND ON THE CONTINUING GROWTH AND ACCEPTANCE OF THE WEB.
Our products are designed to be used with intranets, extranets and the Internet.
If the use of these methods of electronic communication does not grow, our
business, operating results and financial condition may be materially adversely
affected. Continued growth in the use of the Web will require ongoing and
widespread interest in its capabilities for communication and commerce. Its
growth will also require maintenance and expansion of the infrastructure
supporting its use and the development of performance improvements, such as high
speed modems. The Web infrastructure may not be able to support the demands
placed on it by continued growth. The ongoing development of corporate intranets
depends on continuation of the trend toward network-based computing and on the
willingness of businesses to reengineer the processes used to create, store,
manage and distribute their data. All of these factors are outside of our
control.
OUR EXISTING SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE OVER US.
As of December 31, 2003, Robert F. Olson, our President, Chief Executive Officer
and the Chairman, of our Board of Directors holds approximately 10.0% of our
outstanding common stock. Accordingly, Mr. Olson is able to exercise significant
control over our affairs. As a group, our directors and executive officers
beneficially own approximately 13.3% of our common stock. These persons have
significant influence over our affairs, including approval of the acquisition or
disposition of assets, future issuances of common stock or other securities and
the authorization of dividends on our common stock. Our directors and executive
officers could use their stock
19
ownership to delay, defer or prevent a change in control of our company,
depriving shareholders of the opportunity to sell their stock at a price in
excess of the prevailing market price.
WE CAN ISSUE SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL, WHICH COULD
ADVERSELY AFFECT THE RIGHTS OF COMMON SHAREHOLDERS.
Our Articles of Incorporation permit us to establish the rights, privileges,
preferences and restrictions, including voting rights, of unissued shares of our
capital stock and to issue such shares without approval from our shareholders.
The rights of holders of our common stock may suffer as a result of the rights
granted to holders of preferred stock that may be issued in the future. In
addition, we could issue preferred stock to prevent a change in control of our
company, depriving shareholders of an opportunity to sell their stock at a price
in excess of the prevailing market price.
OUR SHAREHOLDER RIGHTS PLAN AND CERTAIN PROVISIONS OF MINNESOTA LAW MAY MAKE A
TAKEOVER OF THE COMPANY DIFFICULT, DEPRIVING SHAREHOLDERS OF OPPORTUNITIES TO
SELL SHARES AT ABOVE-MARKET PRICES.
Our shareholder rights plan and certain provisions of Minnesota law may have the
effect of discouraging attempts to acquire the Company without the approval of
our Board of Directors. Consequently, our shareholders may lose opportunities to
sell their stock for a price in excess of the prevailing market price.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS FILED WITH THIS REPORT.
FILE DESCRIPTION REFERENCE
---- ----------- ---------
2.1 Agreement and Plan of Merger, dated January 11, Incorporated by reference to Exhibit No. 2 of the
2004, among Stellent, Inc., STEL Sub, Inc. and Registrant's Current Report on Form 8-K dated January
Optika Inc. 11, 2004
31.1 Certification by Robert F. Olson, Chairman of Electronic Transmission
the Board, President and Chief Executive
Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Gregg A. Waldon, Executive Electronic Transmission
Vice President, Chief Financial Officer,
Secretary and Treasurer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Robert F. Olson, Chairman of Electronic Transmission
the Board, President and Chief Executive
Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Gregg A. Waldon, Executive Electronic Transmission
Vice President, Chief Financial Officer,
Secretary and Treasurer, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
20
(b) Reports on Form 8-K.
On January 11, 2004, Stellent, Inc. (" Stellent") and its wholly owned
subsidiary, STEL Sub, Inc. ("STEL Sub"), entered into an Agreement and
Plan of Merger with Optika Inc. ("Optika"), providing for the merger of
Optika with and into STEL Sub.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned thereunto duly authorized.
Stellent, Inc.
--------------------------------------
Date: April 21, 2004 (Registrant)
By: /s/ Robert F. Olson
--------------------------------------
Robert F. Olson,
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: April 21, 2004 By: /s/ Gregg A. Waldon
--------------------------------------
Gregg A. Waldon
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
22
FILE DESCRIPTION REFERENCE
---- ----------- ---------
2.1 Agreement and Plan of Merger, dated January Incorporated by reference to Exhibit No. 2 of
11, 2004, among Stellent, Inc., STEL Sub, Inc. the Registrant's Current Report on Form 8-K
and Optika Inc. dated January 11, 2004
31.1 Certification by Robert F. Olson, Chairman of Electronic Transmission
the Board, President and Chief Executive
Officer, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification by Gregg A. Waldon, Executive Electronic Transmission
Vice President, Chief Financial Officer,
Secretary and Treasurer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Robert F. Olson, Chairman of Electronic Transmission
the Board, President and Chief Executive
Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification by Gregg A. Waldon, Executive Electronic Transmission
Vice President, Chief Financial Officer,
Secretary and Treasurer, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
23