2000 annual report
egility
e-business solutions
infinite possibilities
[LOGO] MERANT(TM)
<PAGE>
[GRAPHIC OMITTED]
e-business
"e" is here to stay
success is defined by your ability to change
MERANT IS...
> A leading e-business software solutions company that helps customers
e-enable their businesses.
> A leading provider of e-business application infrastructure solutions,
which enable businesses to create, transform, integrate, and manage their
e-business operations.
> A mainstay in the business world with 5 million customer licenses at over
35,000 customer sites, including all of the Fortune 100, two-thirds of the
Global 500, and more than 400 leading dotcoms.
> A partner to more than 500 technology companies.
> An employer of 2,000 people worldwide, with a presence in 50 countries.
> Publicly traded on the London Stock Exchange under the symbol MRN, and on
Nasdaq(R) under the symbol MRNT.
1
<PAGE>
to our
shareholders
our commitment is to increase value
our focus is on our customers
[PHOTO OMITTED]
J. Michael Gullard
Chairman of the Board
[PHOTO OMITTED]
Gary G. Greenfield
President and CEO
This has been a year of transition for MERANT, as we move to becoming a leading
global e-business software solutions company. We made substantial progress in
2000. However, there is still much to accomplish. MERANT's mission--to
accelerate our customer's business through the application of innovative
information technology--remains a compelling driver for the continued success of
our company.
WORKING TO MEET OBJECTIVES
In last year's annual report, we set three key objectives for ourselves:
To build awareness of MERANT as the leader in enterprise application
development.
To this end, we successfully integrated our predecessor companies, Micro Focus
and INTERSOLV, under the MERANT name. Thanks to our awareness-building efforts,
industry analysts today recognize MERANT as a leading provider of solutions that
help companies e-enable their businesses. This year, we transformed our sales
organization to provide one face to our customers.
To expand our products and services that extend customers' existing systems to
the world of e-business.
During the year we launched the MERANT Egility framework. This enables companies
to create and manage a flexible e-business application infrastructure, allowing
them to evolve their e-business operations effectively without constant
reinvestment. It is the backbone of our positioning as a strategic ally for
change in helping companies transition to e-business.
We made four important acquisitions this year. The first three were focused
specifically on enhancing and broadening our solution offerings to customers. We
acquired the Marathon Group in the second quarter to allow us to develop
commercial-grade web sites and processes for our customers. Our third quarter
acquisition of EnterpriseLink Technology Corporation gave our customers the
ability to rapidly web-enable their legacy applications. We also acquired
Trillium Software, making it possible to manage changes in packaged
applications, an increasingly vital issue for a major segment of our customer
base. Additionally, we acquired Northern Software Partners based in Oslo, Norway
to enhance our sales and distribution operations in the Nordic region.
While these acquisitions broadened both the solution technology and the range of
e-business services we can offer to customers, we did not achieve the growth in
service-related revenue and profits we had planned. Our ability to capitalize on
the solutions focus we are driving throughout the company will be key to
generating significant growth in services.
To improve our own e-business model to enhance relationships with our customers
and increase sales productivity.
One of the offerings our customers value is MERANT SupportNet--our customer
support service. This year we upgraded our knowledge base and created an
entirely new SupportNet online system to help customers get the information they
need to be successful with MERANT technology--anytime, anywhere, via the
Internet. During the year we also initiated a number of other Internet-based
projects, including improved electronic
2 & 3
<PAGE>
e-volution
leveraging our strengths
innovating for growth
"By using MERANT I-Solutions, products, and partnering with their outstanding
consulting organization, we rapidly transformed one of our most successful core
business applications into a viable e-business solution. We are extremely
pleased with what we have accomplished with MERANT, and in our ability to
provide our customers with faster, more efficient defined benefits solutions."
--Glenn Meglino
Senior Director of Application Development
Towers Perrin
sales and support capabilities. We plan to announce new, revenue-generating
online services in the coming months.
GOALS GOING FORWARD
In order to extend our momentum we must be able to respond to certain
challenges. For instance, we must continue to attract and retain first-rate
people. As we further increase our strategic importance to our customers, we
must enhance our service offerings. Our financial results must be consistent and
predictable. We must continue to define ourselves in the eyes of the financial
community so that shareholder value reflects the true value of all that we are
building. And we must continue to place the highest value on building and
maintaining the loyalty of our customers. From the largest Fortune 100
multinationals, to the emerging e-business enterprises, we are becoming our
customers' strategic ally in e-enabling their enterprises.
We must continue to evolve MERANT to being a leading e-business software
solutions provider. For fiscal 2001 we have established three strategic
objectives.
Reach Out to Our Customers with a Common Face
During the last year we brought the company together. We must now establish
MERANT in the market and reach out to our customers as a single, consolidated
company. Through extensive marketing and sales efforts, we intend to accelerate
our increasing presence with our customers.
Enhance and Expand Egility
With the introduction of Egility, we can now offer our customers a strong
application infrastructure for combining applications, content, and data. We
want to enhance and expand the breadth and depth of the solutions, combining
advanced technology, expertise, and practices.
E-Enable MERANT
At the same time that we are asking our customers to change their business model
to take advantage of the advances in technology, we must look at new and better
ways of delivering our solutions and services to our customers and for managing
our business. The world of the Internet has created significant capabilities
which MERANT can use to improve its own way of doing business.
We are focused on achieving revenue and profit growth for the company for the
current fiscal year and beyond. Committed to building shareholder value and
enhancing the long-term prospects for all our customers, we are optimistic about
what the future holds for MERANT, and how MERANT can, in fact, help shape that
future for companies around the world.
/s/ Gary Greenfield
Gary Greenfield
President and CEO
/s/ J. Michael Gullard
J. Michael Gullard
Chairman of the Board
4 & 5
<PAGE>
e-merging
making our mark in the new environment
CORRALLING
CUSTOMERS
ON THE WEB.
Finding themselves in new and unfamiliar territory, Wrangler needed some help.
They wanted to create a web presence but quickly found that traditional agencies
didn't understand their business issues, architectural foundation, or
communications strategy. So, they turned to MERANT. The resulting partnership
produced the highly successful Wrangler.com site, which allows consumers to
visit five independent lifestyle content areas and browse Wrangler products, and
which ultimately drives them into a store for purchase.
MERANT also helped create Trader's Pass, a powerful extranet site that provides
Wrangler's sales representatives, and thousands of their retailers, with a
single source for up-to-date Wrangler information and sales and marketing
materials.
[GRAPHIC OMITTED]
"MERANT really knows technology and business process integration. But their
greatest value isn't technology. From the beginning, we had a vision of what we
wanted to accomplish. MERANT made that vision a reality. They fuel us to think
about how the Internet could impact our business."
--Renee Clubb
Senior Coordinator
for Western Wear Wrangler
THE INTERNET IS DISRUPTING EVERYTHING
Customer expectations have dramatically changed. In the past, a business could
determine the channel through which it would serve its customer. Today, the
customer chooses the channel and expects it to be available twenty-four hours a
day, seven days a week. Customers want control, information, and functionality
and support at their fingertips all the time. If one company is not able to
provide it, customers go elsewhere, because a competitor is just one click away
and is overhauling its entire enterprise to deliver what the competitors can't.
Trading partners are integrating. Suppliers are managing customer inventories
and altering the production mix to meet changing consumer buying patterns. The
traditional business model is under attack, affecting distribution, supply chain
management, pricing--everything.
INFORMATION TECHNOLOGY IS SITTING RIGHT IN THE CENTER OF ALL THE CHANGE
More and more, everyone we deal with--customers, suppliers, partners, employees,
media, analysts, investors--is interacting with the company, getting
information, making decisions, purchasing, and getting support directly through
applications. Applications are at the forefront of the customers' experience
with the company. Just as driving your car is what defines your experience with
your automobile company, interacting with an application--a web site for
example--often is the only experience many customers have with a company. In
fact, applications really are where business happens today.
So, information technology has to lead the way. IT is driving a changing
business model, actually leading the strategic charge in companies to leapfrog
the competition.
WHAT OUR CUSTOMERS WANT TO DO
What are customers telling us they want to be able to do in their move to
e-business?
First is giving their customers what they want--business-to-business,
business-to-consumer--it doesn't matter. They also want to leverage the
Internet, that is, get more out of the Internet than they put in.
Everybody wants to reduce development time, to create applications on Internet
time, and they want to integrate key business processes, not work outside them
or duplicate them. Customers want to be flexible so they can respond to market
changes. They want to be fast, faster than the competition.
They want to deploy company-wide e-business applications that work. They realize
they must manage a continuing process of change and they want help.
6 & 7
<PAGE>
e-enable
adapt or perish
every company needs an ally for change
Because our customers realize that the technology their customer sees is so
good, it all looks simple. Yet, they know there is enormous complexity behind
the scenes and screens, which makes a true e-business extremely difficult to
deliver.
If you can't deliver behind the screens--if you can't deliver the information,
execute the transaction, provide the support--the user will see right through.
The Internet has exposed the enterprise.
Seamless integration is key to our customer.
MERANT EGILITY FRAMEWORK
That's why we created MERANT Egility. The Egility framework is a series of
solutions that creates an e-business application infrastructure so a customer
can build, integrate, and manage the multitude of e-business applications needed
to compete. All of them. Not just the one or two or ten e-business applications
the customer has today.
Egility infrastructure solutions combine MERANT expertise, best-in-class MERANT
technology, repeatable best practices, and leading industry partners. The
solutions enable rapid development, integration, and delivery, and allow
customers to manage the applications, information, and content needed to run
their business. The result is a foundation for sustained e-business.
THE IMPORTANCE OF AN E-BUSINESS APPLICATIONS INFRASTRUCTURE
In the past, IT professionals had their own language and would build a glass
house and tell everyone what was needed and when they'd have it ready. No
longer. Technology is accessible to everyone, and everyone demands an integrated
experience.
Development used to be contained and controlled. Now we buy packaged
applications, build custom applications, create web content, and build with
components. Sometimes it's difficult to tell where we stand on that thin line
between order and chaos.
We've gone from business as usual to constant, never-ending change. So, we need
an e-business application infrastructure to support business, and that's what
MERANT provides. The traditional application infrastructure must be updated to
help companies manage in this new environment. The new infrastructure must
accelerate the business despite the complexity. The MERANT framework provides a
launch pad for a company's e-business.
THE MERANT FRAMEWORK IS UNIQUE
No other company can provide the combination of expertise and technology that is
available from MERANT. From legacy extension to software configuration
management,
WHY NASD
IS BULLISH
ON MERANT.
[GRAPHIC OMITTED]
"Today, nearly 5,000 companies trading securities on The Nasdaq Stock Market(R)
depend on us to do their jobs--so we must provide software that they can rely on
24/7. To succeed in e-business, we have turned to MERANT to support rigorous
configuration management and issue tracking. Thanks to this industry leader, we
have achieved a substantial improvement in our impact analysis and our
communications within the organization. The MERANT solutions empower us to be
much more responsive and proactive in making changes or updates with the level
of integrity that investors demand."
--Steve Moffett
Senior Vice President, NASD
The National Association of Securities Dealers (NASD) is the largest
securities-industry self-regulatory organization in the United States and is the
parent company of The Nasdaq Stock Market(R), the American Stock Exchange(R),
and NASD Regulations(R).
8 & 9
<PAGE>
e-solutions
integrating all of our expertise
for our customer
[GRAPHIC OMITTED]
JD WILLIAMS
TRIES ON MERANT,
LIKES WHAT IT SEES.
When JD Williams, one of the world's largest home shopping catalog companies,
needed to take its offering of 17 different catalogs online, it called on MERANT
to deliver a fully integrated solution. The resulting site gives customers
real-time access to account, pricing, and ordering information. Full
transactional capability is completely integrated with the existing IT
infrastructure, and the entire effort is backed with a profile and customized
content delivery system that leverages the tremendous customer and order history
data assets that make JD Williams so formidable in their traditional business.
"MERANT with its Egility solutions offered a unique set of capabilities in both
their ability to help us creatively brand 17 catalog sites and their ability to
leverage our core information systems. The truly remarkable thing was the time
they spent learning our business and offering insight into our Internet
strategy. The result was a world-class solution."
--Tom Fothergill
Director of E-Commerce
JD Williams
from application development to web content management, or with any of the other
solutions in the Egility framework, when you combine MERANT's consulting
capabilities, industry partners, and long history of e-business experience with
our market-leading, best-of-breed software, customers have access to a system
which is unparalleled in our industry.
MERANT E-SOLUTIONS
Though the MERANT Egility framework provides the foundation, more and more
companies are asking MERANT to provide a total e-business solution--the
e-business application infrastructure and the web sites and e-business
applications needed to compete. MERANT E-Solutions are built upon the MERANT
Egility framework to create complete application solutions to accelerate and
fulfill a company's e-business initiatives.
We work with the customer to define their e-business strategy. We create
Internet, intranet, and extranet e-business and e-commerce applications and
sites. We transform and integrate existing applications to operate seamlessly in
the e-business environment. And we develop and deploy on-line training
courseware and programs to ensure that the workforce is ready and able to
conduct and support e-business.
In addition to our own MERANT expertise, technologies, and best practices, we
have a formidable group of more than 500 leading technology companies, including
industry heavyweights Sun Microsystems, Oracle, Microsoft, and IBM, that partner
with us. They rely on MERANT expertise and technology to serve their customers,
and we bring them in to broaden the solutions available to ours.
MERANT BRINGS IT ALL TOGETHER
MERANT provides the fastest way to e-enable a business. With the MERANT Egility
framework we provide an e-business application infrastructure. With MERANT
E-Solutions, we use the Egility framework to deliver complete e-business
solutions.
Now every organization can drive a sustainable and competitive e-business,
creating the new, transforming the old, integrating the two, and managing it
all. MERANT positions our customers to continually provide their customers what
they want and need faster than the competition.
[LOGO] IBM(R) [LOGO] Microsoft
[LOGO] Sun(R) [LOGO] ORACLE(R)
microsystems
10 & 11
<PAGE>
Information for Shareholders
DUAL LISTING
MERANT's ordinary shares are listed on the London Stock Exchange under the
symbol MRN. MERANT's shares are also traded on The Nasdaq Stock Market(R) in the
United States in the form of American Depositary Shares (or ADS) under the
symbol MRNT. Each ADS represents five ordinary shares.
MERANT reports its financial results in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) and U.K. GAAP.
CONDENSED FINANCIAL STATEMENTS
The condensed financial information included in this report has been presented
to allow readers to understand the financial results, without the need to refer
to the more detailed full annual accounts. Along with this report shareholders
will receive a copy of the full detailed Financial Statements, together with the
Directors Report and other statutory information. The condensed financial
statements have been prepared on a basis consistent with prior years.
U.S. FINANCIAL STATEMENTS
The condensed financial information contained on pages 14 to 16 does not
constitute complete financial statements in accordance with U.S. GAAP. The
condensed financial information is based on the audited financial statements of
the Company which will be filed with the Securities and Exchange Commission
(SEC). The auditors' report on the U.S financial statements for the year ended
April 30, 2000 was unqualified.
Effective November 30, 1998, MERANT changed its fiscal year end and accounting
reference date to April 30 from January 31. The Company is therefore reporting
results for the fiscal years ended April 30, 2000 and April 30, 1999, for the
three-month fiscal period ended April 30, 1998, and the fiscal year ended
January 31, 1998.
The merger with INTERSOLV, Inc. was accounted for using the pooling-of-interests
method. The condensed financial data at January 31, 1998 and for the year ended
January 31, 1998 have been restated to include the financial results of
INTERSOLV, Inc. at April 30, 1998 and for the year ended April 30, 1998,
respectively. Consequently, INTERSOLV's financial data for the three months
ended April 30, 1998 are included in both the three months ended April 30, 1998
and the year ended January 31, 1998.
U.K. FINANCIAL STATEMENTS
The financial information contained in pages 17 to 19 does not constitute
statutory accounts as defined in Section 240 of the U.K. Companies Act 1985. The
figures for the year ended April 30, 2000 are based on the audited financial
statements which will be filed with the U.K. Registrar of Companies. The
auditors report on the financial statements for the year ended April 30, 2000
was unqualified.
Effective November 30, 1998, MERANT plc changed its fiscal year end and
accounting reference date to April 30 from January 31. The Company is,
therefore, reporting results for the year ended April 30, 2000 and for the
fifteen months ended April 30, 1999.
FORM 20-F
A copy of MERANT's Annual Report on Form 20-F, for the year ended April 30,
2000, as filed with the Securities and Exchange Commission, will be sent to
shareholders free of charge upon written request to Investor Relations. Form
20-F is similar to Form 10-K, and filed with the U.S. SEC by foreign private
issuers.
ELECTRONIC FILINGS
The U.S. SEC maintains a World Wide Web site located at http://www.sec.gov that
contains a searchable database of filings, reports, and other information
regarding issuers that file electronically with the SEC. Foreign private issuers
such as MERANT are not currently required to file electronically with the SEC.
MERANT voluntarily submits its filings electronically to the SEC.
12
<PAGE>
Auditors' Reports
REPORT OF THE INDEPENDENT AUDITORS ON CONDENSED FINANCIAL STATEMENTS
The Board of Directors and Shareholders, MERANT plc
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated balance sheets of MERANT plc and subsidiaries as
of April 30, 2000 and 1999, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years ended April 30,
2000 and 1999, the three-month period ended April 30, 1998 and the year ended
January 31, 1998 (not presented separately herein), and in our report dated June
26, 2000, we expressed an unqualified opinion on those consolidated financial
statements, based on our audits and the report of other auditors.
We did not audit the financial statements of INTERSOLV, Inc., which statements
reflect total assets constituting 40% of the related consolidated financial
statement total at April 30, 1998, and which reflect net revenue constituting
55% and 54% of the related consolidated financial statement totals for the
three-month period ended April 30, 1998 and the year ended January 31, 1998,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to amounts included
for INTERSOLV, Inc. for 1998, is based solely on the report of the other
auditors.
In our opinion, based on our audits and the report of other auditors, the
information set forth in the accompanying condensed consolidated financial
statements on pages 14 to 16 is fairly stated in all material respects in
relation to the consolidated financial statements from which it has been
derived.
Ernst & Young LLP
McLean, Virginia, USA
June 26, 2000
--------------------------------------------------------------------------------
AUDITORS' REPORT
Statement of the auditors to the members of MERANT plc:
We have examined the financial information set out on pages 17 to 19.
The financial information is the responsibility of the directors. Our
responsibility is to report to you our opinion on its preparation and
consistency with the annual accounts.
In our opinion the financial information on pages 17 to 19 has been properly
extracted from the annual accounts of MERANT plc for the year ended April 30,
2000.
Ernst & Young
Reading, UK
July 21, 2000
13
<PAGE>
U.S. Financials
CONSOLIDATED STATEMENTS OF OPERATIONS U.S. Condensed Format
MERANT plc
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
April 30, April 30, April 30, January 31,
Amounts in thousands, except per share and ADS data 2000 1999 1998 1998
=======================================================================================================================
<S> <C> <C> <C> <C>
Net revenue
License fees $ 186,444 $ 193,144 $ 61,384 $ 198,793
Maintenance subscriptions 109,260 98,858 24,533 88,015
Training and consulting 69,740 82,200 21,070 76,111
-----------------------------------------------------------------------------------------------------------------------
Total net revenue 365,444 374,202 106,987 362,919
-----------------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of license fees 9,418 14,390 3,392 13,255
Cost of maintenance subscriptions 23,403 24,445 5,599 20,446
Cost of training and consulting 59,087 68,074 17,409 62,376
-----------------------------------------------------------------------------------------------------------------------
Total cost of revenue 91,908 106,909 26,400 96,077
-----------------------------------------------------------------------------------------------------------------------
Gross profit 273,536 267,293 80,587 266,842
-----------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 59,166 59,851 14,551 60,828
Sales and marketing 169,575 155,680 40,137 134,671
General and administrative 29,654 31,573 6,950 26,346
Goodwill amortization 8,316 3,585 464 1,391
Non-recurring charges 13,500 49,662 17,292 17,468
-----------------------------------------------------------------------------------------------------------------------
Total operating expenses 280,211 300,351 79,394 240,704
-----------------------------------------------------------------------------------------------------------------------
(Loss) income from operations (6,675) (33,058) 1,193 26,138
Interest income, net 4,787 6,334 1,151 3,935
-----------------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes (1,888) (26,724) 2,344 30,073
Income taxes (520) (1,808) (855) (9,925)
-----------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (2,408) $ (28,532) $ 1,489 $ 20,148
=======================================================================================================================
Net (loss) income per share: basic $ (0.02) $ (0.20) $ 0.01 $ 0.15
Net (loss) income per ADS: basic $ (0.08) $ (1.00) $ 0.05 $ 0.73
Shares used in computing net (loss) income per share: basic 145,897 143,130 137,823 137,351
ADSs used in computing net (loss) income per ADS: basic 29,179 28,626 27,565 27,470
-----------------------------------------------------------------------------------------------------------------------
Net (loss) income per share: diluted $ (0.02) $ (0.20) $ 0.01 $ 0.14
Net (loss) income per ADS: diluted $ (0.08) $ (1.00) $ 0.05 $ 0.70
Shares used in computing net (loss) income per share: diluted 145,897 143,130 145,618 144,326
ADSs used in computing net (loss) income per ADS: diluted 29,179 28,626 29,124 28,865
=======================================================================================================================
</TABLE>
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
14
<PAGE>
U.S. Financials
CONSOLIDATED BALANCE SHEETS U.S. Condensed Format
MERANT plc
April 30, April 30,
Amounts in thousands 2000 1999
================================================================================
Assets
Current assets:
Cash and cash equivalents $ 106,140 $ 86,580
Short-term investments 19,538 34,804
Accounts receivable, net 92,840 111,317
Prepaid expenses and other assets 10,127 13,485
--------------------------------------------------------------------------------
Total current assets 228,645 246,186
--------------------------------------------------------------------------------
Property, plant and equipment, net 47,518 46,090
Goodwill, net 44,297 10,239
Software product assets 5,569 17,007
Other assets 2,987 3,560
--------------------------------------------------------------------------------
Total assets $ 329,016 $ 323,082
================================================================================
Liabilities and shareholders' equity
Current liabilities:
Borrowings $ 2,785 $ 2,716
Accounts payable 12,208 12,150
Accrued employee compensation and commissions 20,088 24,352
Income taxes payable 7,601 18,325
Deferred revenue 69,830 69,155
Other current liabilities 41,945 29,869
--------------------------------------------------------------------------------
Total current liabilities 154,457 156,567
--------------------------------------------------------------------------------
Deferred income taxes 13,157 14,304
--------------------------------------------------------------------------------
Total liabilities 167,614 170,871
--------------------------------------------------------------------------------
Shareholders' equity:
Ordinary shares 4,876 4,691
Additional paid-in capital 172,892 154,868
Treasury shares (11,742) (7,552)
Retained earnings 6,442 8,850
Accumulated other comprehensive loss (11,066) (8,646)
--------------------------------------------------------------------------------
Total shareholders' equity 161,402 152,211
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 329,016 $ 323,082
================================================================================
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
15
<PAGE>
U.S. Financials
CONSOLIDATED STATEMENTS OF CASH FLOW U.S. Condensed Format
MERANT plc
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
April 30, April 30, April 30, January 31,
Amounts in thousands 2000 1999 1998 1998
=======================================================================================================================
<S> <C> <C> <C> <C>
Operating activities
Net (loss) income $ (2,408) $ (28,532) $ 1,489 $ 20,148
Adjustments to reconcile net (loss) income to cash
provided by operations
Depreciation of fixed assets 9,549 12,571 4,166 12,276
Amortization of software product assets 7,627 14,751 3,332 14,916
Amortization of goodwill 8,316 3,585 464 1,391
Write-down of software and intangible assets 7,404 2,000 -- --
Write-down of purchased research and development -- -- 15,739 15,739
Gain on sale of discontinued product lines -- -- 423 423
Restructuring/acquisition charges -- 4,774 (496) (496)
Loss on sale of fixed assets 230 -- 1,780 207
Deferred income taxes (1,020) (423) (4,426) --
Changes in operating assets and liabilities 19,246 9,589 8,623 (20,547)
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 48,944 18,315 31,094 44,057
-----------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of property, plant and equipment (13,664) (6,449) (4,815) (18,269)
Software product assets (3,593) (8,524) (2,480) (10,285)
Proceeds from sale of discontinued product lines -- -- 1,200 1,200
Acquisition of subsidiaries, net of cash balances acquired (41,835) (7,076) 1,589 (1,848)
Available-for-sale securities 15,266 5,649 (4,132) (33,639)
Other 3,057 -- 13 570
-----------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (40,769) (16,400) (8,625) (62,271)
-----------------------------------------------------------------------------------------------------------------------
Financing activities
Issuance of ordinary shares, net of expenses 18,208 1,709 2,613 9,879
Own shares (4,190) 217 -- 1,190
Borrowings 177 (3,051) (7,705) (3,509)
Repayment of capital leases -- (18) (1) (73)
-----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 14,195 (1,143) (5,093) 7,487
-----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (2,810) (651) 247 (316)
-----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 19,560 121 17,623 (11,043)
Adjusted for INTERSOLV cash flow previously reported -- -- (13,420) --
Cash at beginning of period 86,580 86,459 82,256 93,299
-----------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 106,140 $ 86,580 $ 86,459 $ 82,256
=======================================================================================================================
Supplemental disclosure of cash flow information:
Income taxes paid during the period $ 10,297 $ 4,317 $ 207 $ 1,464
=======================================================================================================================
Interest paid during the period $ 306 $ 239 $ 116 $ 976
=======================================================================================================================
</TABLE>
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
16
<PAGE>
U.K. Financials
CONSOLIDATED PROFIT AND LOSS ACCOUNT U.K. Format
MERANT plc
<TABLE>
<CAPTION>
Year ended
April 30, 2000 Fifteen months
----------------------------------------- ended Year ended
Continuing April 30, January 31,
operations Acquisitions Total 1999 1998
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Revenue
Licence fees 114,140 2,088 116,228 118,245 60,480
Maintenance subscriptions 67,492 368 67,860 56,454 28,233
Training and consulting 39,740 3,455 43,195 40,774 8,302
--------------------------------------------------------------------------------------------------------------------------
Total revenue 221,372 5,911 227,283 215,473 97,015
--------------------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of licence fees 5,756 112 5,868 9,365 6,990
Cost of maintenance subscriptions 14,449 103 14,552 16,998 6,984
Cost of training and consulting 32,702 4,016 36,718 29,247 8,861
--------------------------------------------------------------------------------------------------------------------------
Total cost of revenue 52,907 4,231 57,138 55,610 22,835
--------------------------------------------------------------------------------------------------------------------------
Gross profit 168,465 1,680 170,145 159,863 74,180
--------------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 41,040 486 41,526 34,319 19,679
Sales and marketing 107,592 1,367 108,959 89,161 35,477
General and administrative 57,736 56 57,792 40,412 6,288
--------------------------------------------------------------------------------------------------------------------------
Total operating expenses 206,368 1,909 208,277 163,892 61,444
--------------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit (37,903) (229) (38,132) (4,029) 12,736
Exceptional item--fundamental restructuring -- (11,831) --
--------------------------------------------------------------------------------------------------------------------------
(Loss)/profit after exceptional item (38,132) (15,860) 12,736
Interest income 2,763 4,288 2,481
--------------------------------------------------------------------------------------------------------------------------
(Loss)/profit before taxation (35,369) (11,572) 15,217
Taxation (92) (3,707) (4,791)
--------------------------------------------------------------------------------------------------------------------------
Retained (loss)/profit for the period (35,461) (15,279) 10,426
==========================================================================================================================
(Loss)/earnings per share: basic (24.9p) (14.3p) 14.0p
(Loss)/earnings per share: diluted (24.9p) (14.3p) 13.3p
==========================================================================================================================
</TABLE>
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
17
<PAGE>
U.K. Financials
CONSOLIDATED BALANCE SHEET U.K. Format
MERANT plc
April 30, April 30,
2000 1999
(pound)'000 (pound)'000
================================================================================
Fixed assets
Intangible fixed assets 120,205 133,976
Tangible fixed assets 30,075 28,633
Investments 7,431 4,691
--------------------------------------------------------------------------------
Total fixed assets 157,711 167,300
================================================================================
Current assets
Stocks 1,444 1,780
Debtors 65,861 77,887
Cash and bank deposits 79,543 75,394
--------------------------------------------------------------------------------
Total current assets 146,848 155,061
--------------------------------------------------------------------------------
Creditors: amounts falling due within one year 86,629 92,691
--------------------------------------------------------------------------------
Net current assets 60,219 62,370
--------------------------------------------------------------------------------
Total assets less current liabilities 217,930 229,670
Creditors: amounts falling due after more than one year -- 6
Provisions for liabilities and charges 19,446 12,555
--------------------------------------------------------------------------------
Net assets 198,484 217,109
================================================================================
Capital and reserves
Called up share capital 2,988 2,873
Share premium account 200,421 189,261
Profit and loss account (4,925) 24,975
--------------------------------------------------------------------------------
Total shareholders' funds 198,484 217,109
================================================================================
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
18
<PAGE>
U.K. Financials
CONSOLIDATED CASH FLOW STATEMENT U.K. Format
MERANT plc
<TABLE>
<CAPTION>
Fifteen months
Year ended ended Year ended
April 30, April 30, January 31,
2000 1999 1998
(pound)'000 (pound)'000 (pound)'000
=====================================================================================================================
<S> <C> <C> <C>
Net cash inflow from operating activities 36,756 33,864 17,767
---------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 2,936 4,433 2,519
Interest paid (190) (145) (70)
---------------------------------------------------------------------------------------------------------------------
Net cash inflow from returns on investments and servicing of finance 2,746 4,288 2,449
---------------------------------------------------------------------------------------------------------------------
Taxation
U.K. corporation tax refunded (paid) (5,542) 1,297 (599)
Overseas tax refunded/(paid) (854) (582) (262)
---------------------------------------------------------------------------------------------------------------------
Tax paid (6,396) 715 (861)
---------------------------------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (9,041) (8,906) (8,263)
Capitalised software product assets (2,361) (5,853) (5,688)
Investment in own shares (2,741) 195 748
Disposal of tangible fixed assets 1,523 -- 447
---------------------------------------------------------------------------------------------------------------------
Net cash outflow from capital expenditure and financial investment (12,620) (14,564) (12,756)
---------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Investment in subsidiary undertakings (28,276) 16,048 (2,000)
Net cash acquired with subsidiaries 518 (17,928) 961
---------------------------------------------------------------------------------------------------------------------
Net cash outflow from acquisitions and disposals (27,758) (1,880) (1,039)
---------------------------------------------------------------------------------------------------------------------
Cash inflow before financing (7,272) 22,423 5,560
---------------------------------------------------------------------------------------------------------------------
Financing
Issue of ordinary shares 11,285 2,139 1,517
Expenses attributable to issue of ordinary shares -- (2,654) --
Capital element of finance lease obligations -- (9) (65)
Bank loan 72 689 1,007
---------------------------------------------------------------------------------------------------------------------
Net cash inflow from financing 11,357 165 2,459
---------------------------------------------------------------------------------------------------------------------
Increase in cash 4,085 22,588 8,019
=====================================================================================================================
</TABLE>
The condensed financial information presented in the report should be read in
conjunction with the audited consolidated financial statements and notes (not
presented in this report).
19
<PAGE>
Corporate Information
Investor Relations
MERANT
9420 Key West Avenue
Rockville, MD 20850, USA
www.merant.com
e-mail: [email protected]
Registrar and Transfer Agent
Lloyds TSB Registrars
The Causeway, Worthing
West Sussex BN99 3UH, UK
ADR Depositary
Bank of New York
ADR Division
101 Barclay Street
22nd Floor
New York, NY 10286, USA
Registered Office
MERANT plc
The Lawn
22-30 Old Bath Road
Newbury
Berkshire RG14 1QN, UK
Registered No: 1709998
Stockbrokers
UBS Warburg
1 Finsbury Avenue
London, EC2M 2PP, UK
and The Stock Exchange
London, EC2N 1HP, UK
Independent Auditors
Ernst & Young
Apex Plaza
Reading
Berkshire RG1 1YE, UK
Ernst & Young LLP
8484 Westpark Drive
McLean, VA 22102 USA
Legal Counsel/Solicitors
Jonathan Philip Davies, Partner
Memery Crystal
31 Southampton Row
London WC1B 5HT, UK
Markets for Stock
London Stock Exchange symbol: MRN,
Nasdaq, National Market symbol: MRNT.
Board of Directors
J. Michael Gullard
Chairman of the Board and
General Partner,
Cornerstone Management
Gary Greenfield
President, Chief Executive Officer,
MERANT
Michel Berty
Founder,
MBY Consultants, Inc.
Kevin Burns
Managing Principal,
Lazard Technology Partners
Harold Hughes
Chief Executive Officer,
Pandesic LLC
Barry X Lynn
President, Chief Executive Officer,
Be eXcel, Inc.
Don C. Watters
Retired Director, and Member of
McKinsey & Company Advisory Council
MERANT Senior Management
Gary Greenfield
President,
Chief Executive Officer
Ken Sexton
Senior Vice President,
Chief Financial Officer
Panos Anastassiadis
Executive Vice President,
Worldwide Distribution
Michael Consoli
Senior Vice President, General Manager,
Enterprise Data Connectivity
Greg Gehring
Senior Vice President,
Chief Information Officer
Dean Genge
Senior Vice President,
Corporate Marketing
Tony Hill
Senior Vice President, General Manager,
Application Creation and Transformation
Buff Jones
Senior Vice President, General Manager,
Application Development Management
Leo Millstein
Vice President, General Counsel,
and Corporate Secretary
Andrew Weiss
Senior Vice President,
Chief Technology Officer
Gary Wright
Senior Vice President,
Consulting
20
<PAGE>
Special Note on Forward-Looking Statements
The following statement is made in accordance with the U.S. Private Securities
Litigation Reform Act of 1995: This Annual Report contains forward-looking
statements that include statements regarding expectations for MERANT's business
strategy, prospects, and growth, including the growth of MERANT's e-business
solutions business and related revenues, and the one-time nature of certain
charges. When used in this document, the words "anticipate," "believe,"
"estimate," "expect," and similar expressions, as they relate to the Company or
its management, are intended to identify such forward-looking statements. These
forward-looking statements involve a number of risks and uncertainties. Actual
results could differ materially from those anticipated by these forward-looking
statements. Future results will be difficult to predict as MERANT transforms its
business strategy to provide e-business solutions and away from certain of its
past primary markets, including the market for Year 2000 products and services.
Factors that could cause actual results to differ materially include, among
others, the ability of MERANT to effectively manage its costs against uncertain
revenue expectations, the potential for a decrease in revenue or a slowdown in
revenue growth which may be caused by delays in the timing of sales and the
delivery of products or services, the ability of MERANT to develop, release,
market and sell products and services to customers in the highly dynamic market
for enterprise application development and e-business solutions, the potential
for a shift in demand for enterprise application development solutions and
e-business solutions based on changes in technology and customer needs, the
market acceptance of MERANT's e-business solutions and e-business solutions
generally, the effect of competitors' efforts to enter MERANT's markets and the
possible success of existing competitors in those markets, and MERANT's ability
to manage and integrate recently acquired businesses or other businesses that it
may acquire in the future. Further information on potential factors which could
affect MERANT's financial results is included in MERANT's financial statements
for fiscal 2000 under the heading "Factors That May Influence Future Operating
Results," and elsewhere in the Annual Report, and in Quarterly Reports on Form
6-K for the quarters ended July 31, 1999, October 31, 1999, and January 31,
2000, each as submitted to the SEC and as may be updated and amended with future
filings or submissions, including MERANT's Form 20-F for the year ended April
30, 2000. MERANT undertakes no obligation to release publicly any updates or
revisions to any forward-looking statements contained in this announcement that
may reflect events or circumstances occurring after the date of this
announcement.
Designed by Curran & Connors, Inc. / www.curran-connors.com
<PAGE>
Office Locations
United States
9420 Key West Avenue
Rockville, MD 20850
United States
Tel: +1 301 838 5000
Fax: +1 301 838 5432
Australia
Level 1, 845 Pacific Highway
Chatswood, New South Wales 2067
Sydney
Australia
Tel: +61 2 9904 6111
Fax: +61 2 9904 6007
Belgium/Luxembourg
A. Stocletlaan 87
B-2570 Duffel
Belgium
Tel: +32 (0) 15 30 77 00
Fax: +32 (0) 15 32 12 60
Brazil
Av. Brigadeiro Faria Lima
3729--5th Floor
CEP04538-905-SP
Sao Paulo
Brazil
Tel: +55 11 3048 8304
Fax: +55 11 3048 8201
Canada
One City Center Drive
Suite 301
Mississauga, Ontario LB5 1M2
Canada
Tel: +1 905 306 7280
Fax: +1 905 306 7402
Denmark
Larsbjornstraede 3
DK-1454 Kobenhavn K
Denmark
Tel: +45 333 772 90
Fax: +45 333 772 92
Finland
PL 500, Kristianinkatu 15
FI-00171 Helsinki
Finland
Tel: +358 9 622 72 500
Fax: +358 9 622 72 501
France
Tour Europlaza
20 Avenue Andre Prothin
La Defense 4
92400 Courbevoie
Paris
France
Tel: +33 (0) 1 70 92 94 94
Fax: +33 (0) 1 70 92 94 90
Germany
Carl-Zeiss-Ring 5
D-85737 Ismaning
Germany
Tel: +49 (0) 89 9627 10
Fax: +49 (0) 89 9627 1111
Italy
Viale Erminio Spalla, 41
00142 Roma
Italy
Tel: +39 06 51 53 93 1
Fax: +39 06 51 53 93 35
Japan
Atago Toyo Building
1-3-4 Atago
Minato-Ku Tokyo 105-0002
Japan
Tel: +81 (0) 3 5401 9600
Fax: +81 (0) 3 5401 9697
Netherlands
Kantoorgebouw Victoria
Hardwareweg 32
3821 BM Amersfoort
The Netherlands
Tel: +31 (0) 33 450 20 70
Fax: +31 (0) 33 450 20 80
Norway
Dronningens Gate 6
N-0152 Oslo
Norway
Tel: +47 (0) 2291 0720
Fax: +47 (0) 2291 0721
Portugal
Av. Eng Duarte Pachero
Amoreiras
Torre 2, Piso 8, Sala 10
Lisbon
Portugal 1070-03
Tel: +35 (0) 1 21 384 5010
Fax: +35 (0) 1 21 386 4491
Singapore
07-08 International Building
360 Orchard Road
Singapore 238869
Tel: +65 (0) 834 9880
Fax: +65 (0) 836 3119
South Africa
Suite 7, West Tower, 2nd Floor
Sandton Square, Maude Street
Sandown 2196
South Africa
Tel: +27 (0) 11 881 5684
Fax: +27 (0) 11 881 5611
Spain
Auturo Soria, 343 9th Floor
28033 Madrid
Spain
Tel: +34 91 302 82 26
Fax: +34 91 302 51 95
Sweden
Tegnergatan 35
S-111 61 Stockholm
Sweden
Tel: +46 (0) 8 545 133 90
Fax: +46 (0) 8 545 133 91
United Kingdom
The Lawn
22-30 Old Bath Road
Newbury
Berkshire RG14 1QN
United Kingdom
Tel: +44 (0) 1635 32646
Fax: +44 (0) 1635 33966
[LOGO] MERANT(TM)
When Development Means Business
www.merant.com
Copyright (C) 2000 MERANT. All rights
reserved. INTERSOLV and Micro Focus
are registered trademarks, and MERANT,
the MERANT logo, Egility and
EnterpriseLink are trademarks of
MERANT. All other trademarks
referenced herein are the property of
their respective owners.
QCB00-C-0636
