UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C., 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Progress Software Corporation

Massachusetts (State or other jurisdiction of incorporation or organization)		04-2746201 (I.R.S. employer identification no.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition

On September 20, 2005, Progress Software Corporation issued a press release announcing financial results for its third fiscal quarter ended August 31, 2005. A copy of this press release is furnished as Exhibit 99.1 to this report. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the company, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

	(c)		Exhibits
	99.1		Press Release dated September 20, 2005

SIGNATURES

     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 hereunto duly authorized.

Exhibit 99.1

PROGRESS SOFTWARE REPORTS THIRD QUARTER RESULTS

Revenue up 11%; Net Income and EPS Show Strong Increases

BEDFORD, Mass., September 20, 2005—Progress Software Corporation (Nasdaq: PRGS), a global supplier of application infrastructure software used to develop, deploy, integrate and manage business applications, today announced results for its third quarter ended August 31, 2005. Revenue for the quarter was $99.5 million, up 11 percent (11 percent at constant currency) from $89.3 million in the third quarter of 2004. Software license revenue increased 16 percent (15 percent at constant currency) to $38.0 million from $32.9 million in the same quarter last year.

On a generally accepted accounting principles (GAAP) basis, operating income increased 1 percent to $12.9 million from $12.7 million in the third quarter of fiscal 2004. Net income increased 57 percent to $13.4 million from $8.5 million in the same quarter last year. Diluted earnings per share increased 41 percent to 31 cents per share from 22 cents per share in the third quarter of 2004.

On a pro forma basis, operating income increased 38 percent to $20.0 million from $14.5 million in the same quarter last year. Pro forma net income increased 48 percent to $14.4 million from $9.7 million in the same quarter last year and pro forma diluted earnings per share increased 36 percent to 34 cents per share from 25 cents in the third quarter of fiscal 2004.

The pro forma results in the third quarter of fiscal 2005 exclude after-tax charges for amortization of acquired intangibles of $1.7 million, certain other acquisition-related expenses for retention bonuses for key employees of acquired companies of $1.2 million and stock-based compensation associated with the repurchase of stock in a subsidiary of $1.9 million and a tax benefit of $3.8 million. The pro forma results in the third quarter of fiscal 2004 exclude an after-tax charge for amortization of acquired intangibles of $1.2 million.

The company’s cash and short-term investments at the end of the quarter totaled $253 million. During the third quarter, the company purchased approximately 105,000 shares of its stock at a cost of $3.2 million. On September 15, 2005, the board of directors of PSC authorized the repurchase of up to 10 million shares of the company’s outstanding common stock, at such times when the company deems such purchases to be an effective use of cash, starting October 1, 2005. The company’s existing repurchase authorization, under which 9.6 million shares remain available for repurchase, expires on September 30, 2005.

“During the third quarter of 2005 we continued to see the benefits of our growth initiatives and significant increases in profitability. All PSC operating units: the Progress OpenEdge Division, Sonic Software, Progress Real Time Division and DataDirect Technologies delivered excellent revenue growth with substantial operating improvements,” stated Joseph Alsop, co-founder and chief executive officer of PSC. “Our

newer companies now account for over 35 percent of our software license revenue while revenue from OpenEdge continues to grow. PSC today is well positioned to deliver solid results as we approach 2006.”

Highlights

Executives from three operating divisions of Progress Software Corporation (PSC) were named winners of the Innovator 2005 awards by InfoWorld Media Group. Bill Cullen of Sonic Software, Mark Palmer of the Progress Real Time Division and Jonathan Robie of DataDirect have been recognized for their vision and expertise. All three executives will be added to InfoWorld Media Group’s Innovators Hall of Fame.
http://www.progress.com/innovator_2005_awards

Sonic Software announced that Sonic ESB® and the Sonic SOA Suite™ have been named “the most powerful, flexible, and scalable ESB” in a comprehensive ESB product round-up by InfoWorld magazine.
http://www.progress.com/esbroundup

The Progress Real Time Division announced the Progress ESP™ Platform. As the industry’s first fully integrated, general purpose Event Stream Processing (ESP) platform, Progress ESP delivers tools that allow business users to create applications that can monitor real-time event streams, detect and analyze event patterns, and take action in milliseconds.
http://www.progress.com/esp_platform

Stylus Studio announced the release of Stylus Studio® 6 XML Enterprise Edition, the newest edition of the award winning Stylus Studio XML IDE. Packed with powerful new tools for Java™ code generation, EDI/EDIFACT document conversion, and XQuery application development among others, Stylus Studio 6 XML Enterprise Edition is one of the world’s most comprehensive tools for advanced XML data integration projects.
http://www.stylusstudio.com/press/2005_06_07_stylus_enterprise.html

PSC announced its membership in the Eclipse Foundation, an open source community committed to the implementation of a universal platform for the creation, integration and utilization of software tools. PSC also announced the inclusion of Eclipse-based visual development tools in Progress® OpenEdge® 10.1 (now in beta) and current availability in the Progress Real Time Division product set.
http://www.progress.com/eclipse

Significant New Customer and Partner Wins, New Technology Adoptions and Major Deployments

Significant new partners and customers adopting technology from PSC operating companies, or deploying solutions using PSC technology, include: Albany International, Alliance Pharmacy, ATC Tunderman Combinatie, Cecinas San Jorge, City of Edmonton, Comperex, Banco Davivienda, Duomo Corporation, Dynamic Leisure Group, Gesiuris, Globus Travel Technology, Haynes International, Heat Trace Products, Italtel Spa, Lombard Odier Darier Hentsch Group, Maag Technic, MobileAria, Nexus HealthLink Medical Center, Nitar Tech Corporation, Norco Co-operative Limited, Pacific Blue Cross, Technology Marketing Group, TVAzteca and Virtic.

Significant existing partners and customers adopting technology from PSC operating companies, or making substantial additional deployments of PSC technology, include: The American National Red Cross, City of Portland, Configure One, Credit Suisse First Boston, CRS Retail Systems, DataFlux, Deutsche Bank UK, DynamicSoft, EarthLink, Expeditors International of Washington, GFI Group, IBM, Informatica, InfoVista, International Fund Services, Kaufland Beta Mobilien, Lincoln Financial Group, Lucent Technologies, Orlando Wyndham, Pfizer Global Pharmaceuticals, Raytheon, Sallie Mae Servicing Corporation, Sapient, Sonus Networks, Tarrant County, Texas, Telstra Corporation Limited, Trillys Systems, Trizetto Group, TRX, QVC and Wells Fargo Internet Services.

Business Outlook

The company is providing the following guidance for the fourth fiscal quarter ending November 30, 2005:

	•		Revenue is expected to be in the range of $104 million to $106 million. GAAP operating income is expected to be in the range of $19 million to $20 million, including amortization of acquired intangibles and certain other acquisition-related expenses of approximately $3 million.
	•		GAAP diluted earnings per share are expected to be in the range of 31 cents to 32 cents.
	•		On a pro forma basis, operating income is expected to be in the range of $22 million to $23 million, excluding amortization of acquired intangibles and certain other acquisition-related expenses of approximately $3 million.
	•		On a pro forma basis, diluted earnings per share are expected to be in the range of 36 cents to 37 cents, excluding approximately 5 cents per share for amortization of acquired intangibles and certain other acquisition-related expenses.

The company is providing the following guidance for the fiscal year ending November 30, 2005:

	•		Revenue is expected to be in the range of $401 million to $403 million. GAAP operating income is expected to be in the range of $64 million to $65 million, including amortization of acquired intangibles, certain other acquisition-related expenses and stock-based compensation of approximately $16 million.
	•		GAAP diluted earnings per share are expected to be in the range of $1.16 to $1.17.
	•		On a pro forma basis, operating income is expected to be in the range of $80 million to $81 million, excluding amortization of acquired intangibles, certain other acquisition-related expenses and stock-based compensation of approximately $16 million.
	•		On a pro forma basis, diluted earnings per share are expected to be in the range of $1.32 to $1.33, excluding approximately 16 cents per share for amortization of acquired intangibles, certain other acquisition-related expenses, stock-based compensation and a tax benefit.

Legal Notice Regarding Pro Forma Financial Information

The company provides pro forma operating income, net income and earnings per share as additional information for investors. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). Such measures are intended to supplement GAAP and may be different from pro forma measures used by other companies. The company believes that the pro forma results described in this release are useful for an understanding of its ongoing operations and provide additional detail and an alternative method of assessing its operating results. Management of the company uses these pro forma results to compare the company’s performance to that of prior periods for analysis of trends and for budget and planning purposes. A reconciliation of pro forma adjustments to the company’s GAAP financial results is included in the tables below.

Conference Call

PSC’s conference call to discuss its third quarter results will be Webcast live today at 9:00 a.m. Eastern via CCBN on the company’s Web site, located at www.progress.com/investors. The call will also be Webcast live via Yahoo (www.yahoo.com), Motley Fool (www.fool.com), StreetEvents (www.streetevents.com), TD Waterhouse (www.tdwaterhouse.com) and Fidelity.com (www.fidelity.com). An archived version of the conference call will be available for replay.

About Progress Software Corporation

Progress Software Corporation (Nasdaq: PRGS) is a global industry leader providing application infrastructure software for all aspects of the development, deployment, integration and management of business applications through its operating units: Progress OpenEdge Division, Sonic Software, DataDirect Technologies, and Progress Real Time Division. Headquartered in Bedford, Mass., Progress can be reached at www.progress.com or +1-781-280-4000.

Safe Harbor Statement

Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including but not limited to the following: the receipt and shipment of new orders, the timely release of enhancements to the company’s products, the growth rates of certain market segments, the positioning of the company’s products in those market segments, variations in the demand for customer service and technical support, pricing pressures and the competitive environment in the software industry, business and consumer use of the Internet, and the company’s ability to penetrate international markets and manage its international operations. The company undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with the company’s business, please refer to the company’s filings with the Securities and Exchange Commission.

Progress, OpenEdge, Progress ESP, Progress OpenEdge, and Stylus Studio are trademarks or registered trademarks of Progress Software Corporation in the U.S. and other countries. Sonic ESB and Sonic SOA Suite are trademarks or registered trademarks of Sonic Software Corporation in the U.S. and other countries. Java and all Java-based marks are trademarks or registered trademarks of Sun Microsystems, Inc. in the U.S. and other countries. Any other trademarks contained herein are the property of their respective owners.

Progress Software Corporation
Condensed Consolidated Statements of Income

		Three Months Ended
		August 31,				August 31,				Percent
(In thousands except per share data)		2005				2004				Change
Revenue:
Software licenses		$	37,986			$	32,864				16	%
Maintenance and services			61,502				56,452				9	%
Total revenue			99,488				89,316				11	%
Costs and expenses:
Cost of software licenses			1,843				2,092
Cost of maintenance and services			13,492				12,826
Sales and marketing			37,910				35,310
Product development			15,957				14,907
General and administrative			10,284				9,674
Amortization of acquired intangibles			2,568				1,809
Stock-based compensation			2,803				—
Acquisition-related expenses, net			1,776				—
Total costs and expenses			86,633				76,618				13	%
Income from operations			12,855				12,698				1	%
Other income, net			1,303				103
Income before provision for income taxes			14,158				12,801				11	%
Provision for income taxes			801				4,281
Net income		$	13,357			$	8,520				57	%
Earnings per share:
Basic		$	0.34			$	0.24				42	%
Diluted		$	0.31			$	0.22				41	%
Weighted average shares outstanding:
Basic			38,947				36,220				8	%
Diluted			42,501				38,853				9	%

Pro Forma Condensed Consolidated Statements of Income

		Three Months Ended August 31, 2005												Three Months Ended August 31, 2004
		As				Pro Forma								As				Pro Forma								Percent
(In thousands except per share data)		Reported				Adjustments				Pro Forma				Reported				Adjustments				Pro Forma				Change
Revenue:
Software licenses		$	37,986							$	37,986			$	32,864							$	32,864				16	%
Maintenance and services			61,502								61,502				56,452								56,452				9	%
Total revenue			99,488								99,488				89,316								89,316				11	%
Costs and expenses:
Cost of software licenses			1,843								1,843				2,092								2,092
Cost of maintenance and services			13,492								13,492				12,826								12,826
Sales and marketing			37,910								37,910				35,310								35,310
Product development			15,957								15,957				14,907								14,907
General and administrative			10,284								10,284				9,674								9,674
Amortization of acquired intangibles			2,568			$	(2,568	)			—				1,809			$	(1,809	)			—
Stock-based compensation			2,803				(2,803	)			—				—				—				—
Acquisition-related expenses, net			1,776				(1,776	)			—				—				—				—
Total costs and expenses			86,633				(7,147	)			79,486				76,618				(1,809	)			74,809				6	%
Income from operations			12,855				7,147				20,002				12,698				1,809				14,507				38	%
Other income, net			1,303								1,303				103								103
Income before provision for income taxes			14,158				7,147				21,305				12,801				1,809				14,610				46	%
Provision for income taxes			801				6,123				6,924				4,281				639				4,920
Net income		$	13,357			$	1,024			$	14,381			$	8,520			$	1,170			$	9,690				48	%
Earnings per share:
Basic		$	0.34							$	0.37			$	0.24							$	0.27				37	%
Diluted		$	0.31							$	0.34			$	0.22							$	0.25				36	%
Weighted average shares outstanding:
Basic			38,947								38,947				36,220								36,220				8	%
Diluted			42,501								42,501				38,853								38,853				9	%

Progress Software Corporation
Condensed Consolidated Statements of Income

		Nine Months Ended
		August 31,				August 31,				Percent
(In thousands except per share data)		2005				2004				Change
Revenue:
Software licenses		$	112,762			$	103,664				9	%
Maintenance and services			184,657				162,804				13	%
Total revenue			297,419				266,468				12	%
Costs and expenses:
Cost of software licenses			5,649				6,983
Cost of maintenance and services			41,328				39,611
Sales and marketing			113,799				107,590
Product development			47,749				44,791
General and administrative			31,948				29,187
Amortization of acquired intangibles			6,861				5,205
Stock-based compensation			2,803				—
Acquisition-related expenses, net			2,750				2,600
Total costs and expenses			252,887				235,967				7	%
Income from operations			44,532				30,501				46	%
Other income, net			1,542				742
Income before provision for income taxes			46,074				31,243				47	%
Provision for income taxes			11,174				9,998
Net income		$	34,900			$	21,245				64	%
Earnings per share:
Basic		$	0.93			$	0.59				58	%
Diluted		$	0.85			$	0.54				57	%
Weighted average shares outstanding:
Basic			37,651				35,970				5	%
Diluted			41,067				39,014				5	%

Pro Forma Condensed Consolidated Statements of Income

		Nine Months Ended August 31, 2005												Nine Months Ended August 31, 2004
		As				Pro Forma								As				Pro Forma								Percent
(In thousands except per share data)		Reported				Adjustments				Pro Forma				Reported				Adjustments				Pro Forma				Change
Revenue:
Software licenses		$	112,762							$	112,762			$	103,664							$	103,664				9	%
Maintenance and services			184,657								184,657				162,804								162,804				13	%
Total revenue			297,419								297,419				266,468								266,468				12	%
Costs and expenses:
Cost of software licenses			5,649								5,649				6,983								6,983
Cost of maintenance and services			41,328								41,328				39,611								39,611
Sales and marketing			113,799								113,799				107,590								107,590
Product development			47,749								47,749				44,791								44,791
General and administrative			31,948								31,948				29,187								29,187
Amortization of acquired intangibles			6,861			$	(6,861	)			—				5,205			$	(5,205	)			—
Stock-based compensation			2,803				(2,803	)			—				—				—				—
Acquisition-related expenses, net			2,750				(2,750	)			—				2,600				(2,600	)			—
Total costs and expenses			252,887				(12,414	)			240,473				235,967				(7,805	)			228,162				5	%
Income from operations			44,532				12,414				56,946				30,501				7,805				38,306				49	%
Other income, net			1,542								1,542				742								742
Income before provision for income taxes			46,074				12,414				58,488				31,243				7,805				39,048				50	%
Provision for income taxes			11,174				7,835				19,009				9,998				2,498				12,496
Net income		$	34,900			$	4,579			$	39,479			$	21,245			$	5,307			$	26,552				49	%
Earnings per share:
Basic		$	0.93							$	1.05			$	0.59							$	0.74				42	%
Diluted		$	0.85							$	0.96			$	0.54							$	0.68				41	%
Weighted average shares outstanding:
Basic			37,651								37,651				35,970								35,970				5	%
Diluted			41,067								41,067				39,014								39,014				5	%

Progress Software Corporation
Condensed Consolidated Balance Sheets

		August 31,				November 30,
(In thousands)		2005				2004
Assets
Cash and short-term investments		$	252,782			$	191,267
Accounts receivable, net			52,128				63,503
Other current assets			34,494				23,485
Total current assets			339,404				278,255
Property and equipment, net			40,128				40,658
Goodwill and intangible assets, net			134,998				107,363
Other assets			23,350				20,538
Total		$	537,880			$	446,814
Liabilities and shareholders’ equity
Accounts payable and other current liabilities		$	69,723			$	70,669
Short-term deferred revenue			100,767				101,106
Total current liabilities			170,490				171,775
Long-term debt			2,005				2,200
Long-term deferred revenue			5,124				5,861
Other liabilities			4,189				—
Shareholders’ equity:
Common stock and additional paid-in capital			127,945				70,085
Retained earnings			228,127				196,893
Total shareholders’ equity			356,072				266,978
Total		$	537,880			$	446,814

Condensed Consolidated Statements of Cash Flows

		Nine Months Ended
		August 31,				August 31,
(In thousands except per share data)		2005				2004
Cash flows from operations:
Net income		$	34,900			$	21,245
Depreciation, amortization and other noncash charges			13,415				15,141
Other changes in operating assets and liabilities			15,535				19,047
Net cash flows from operations			63,850				55,433
Capital expenditures			(5,861	)			(5,943	)
Acquisitions, net of cash acquired			(32,161	)			(87,520	)
Share issuances, net of repurchases			36,342				4,129
Other			(655	)			160
Net change in cash and short-term investments			61,515				(33,741	)
Cash and short-term investments, beginning of period			191,267				219,131
Cash and short-term investments, end of period		$	252,782			$	185,390