On June 12, 2001 MERANT announced it had entered into a conditional agreement to sell the Micro Focus legacy development, transformation and integration business to Golden Gate Capital and Parallax Partners. The sale was approved by MERANT shareholders on July 23, 2001 and was closed in August 2001. At closing, an initial payment of $54.5 million in cash was received from the buyers, based on an estimated net asset value of $2.0 million. The gain on the sale of Micro Focus will be recognized in the second fiscal quarter. Final net asset value and purchase price will be determined as provided for by the sale agreement in the second half of this fiscal year. The Micro Focus business is treated as discontinued operations in the reported results.

In addition, the Company’s cash position may be further strengthened in this fiscal year by the sale of the Company’s owned real estate in Newbury, UK. The property sale is estimated to generate approximately £10 million ($14 million) of additional funds. Micro Focus is currently leasing most of the office space in Newbury from MERANT. MERANT plans on leasing back a portion of these premises as part of the proposed sale transaction, and will be continuing its UK residence.

Commenting on the quarter, Gary Greenfield, MERANT president and chief executive officer, said:

Completion of the Micro Focus sale positions MERANT to focus on growth, primarily in the enterprise change management market we serve with PVCS. During the quarter, MERANT expanded PVCS with the addition of PVCS Content Manager and the next version of its market-leading PVCS Dimensions product. We have begun to see the benefits of our closely focused business model over this period, even with the continuing challenging trading conditions.

Ken Sexton, chief financial officer of MERANT said:

Cost reductions implemented over the course of the last fiscal year are already bringing operating costs in line with our revenue expectations. We are pleased with operating profits from continuing operations, which were in line with first quarter seasonal expectations. Looking back on our performance in the same period last year, we have made substantial progress in the efficient management of our costs and maintenance of our margins.

MERANT’s first quarter business developments include:

MERANT Expands PVCS to Focus on Leadership in Emerging Enterprise Change Management (ECM) Market – MERANT provides ECM market leadership with the addition of PVCS Content Manager and the launch of PVCS Dimensions 7.0, the first software configuration management product to provide enterprise capability for both distributed and mainframe development.

MERANT Moves Hosted Development Solution Behind Customer Firewall – MERANT ASaP Onsite provides ultimate security, rapid deployment and remote team collaboration for code and content while removing administrative burden.

MERANT DataDirect Adds Java Mainframe Connectivity – New product expands industry’s most comprehensive Java connectivity offering, integrating enterprise data connectivity across legacy systems and new world Java applications.

MicroStrategy Signs OEM Agreement with MERANT DataDirect -Partnership enables rapid deployment of business intelligence applications

Sale of Micro Focus

On June 12, 2001, MERANT entered into a conditional agreement to sell the Micro Focus business for $62.5 million plus the assumption of certain liabilities. The purchase price was subject to adjustment to the extent that the value of net tangible assets of Micro Focus at closing were less than or greater than $10 million. At closing, the estimated net tangible asset value of Micro Focus was $2 million. The estimated value differed from the $10 million stated in the sale agreement, primarily because the liabilities assumed by the buyer of Micro Focus were greater than originally expected. The gain on sale of Micro Focus, after reductions for the value of tangible and intangible assets plus transaction and other related costs, will be recorded in the quarter ending October 31, 2001.

Financial Commentary under UK GAAP – for periods ended July 31, 2001

Revenues from continuing operations were £29.7 million for the first fiscal quarter as compared to £26.8 million for the quarter ended July 31, 2000. Revenue for the PVCS and DataDirect businesses on a combined basis grew 5% at constant currency exchange rates compared to the prior year’s first quarter. Increased PVCS revenue in Europe and Asia offset demand weakness in the North American market. Increased revenue from software vendors embedding DataDirect technology is the primary reason for revenues increasing in this business area. Changes in currency exchange rates increased U.K. GAAP revenue for continuing operations by £1.5 million when compared to last year, because of the U.S. dollar strengthening. Revenue from the discontinued Micro Focus business declined, due to decline in demand for Cobol and mainframe-related products.

Overall gross margins increased from the prior year’s first quarter, primarily because of improved margins from our maintenance subscription revenue base. Operating expenses were down in this year’s first quarter, as savings were realized from actions taken during the last twelve months. Excluding the effect of goodwill amortisation and exceptional charges, pre-tax earnings from continued operations were £0.9 million, or 0.4 pence per ordinary share on a net basis, for the quarter ended July 31, 2001. The above pre-tax earnings are excluding goodwill charges of £9.8 million for continuing operations.

SOURCE: COMPANY PRESS RELEASE