(b) The following documents are filed as a part of this report:
1) Consolidated financial statements and Reports of Independent Registered Public Accounting Firm and the related notes thereto are included under Item 8, in Part II.
2) Valuation and Qualifying Accounts; see Note 8 in the Notes to Consolidated Financial Statements included under Item 8, in Part II.
3) Exhibits: The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated by reference to exhibits previously filed with the SEC.
| Exhibit Number |
Description of Exhibit | |
| 3.1 | Articles of Incorporation of the Company. (1) | |
| 3.2 | Articles of Amalgamation of the Company. (1) | |
| 3.3 | Articles of Amendment of the Company. (1) | |
| 3.4 | By-law No. 1 of the Company. (1) | |
| 3.5 | Articles of Amendment of the Company. (1) | |
| 3.6 | By-law No. 2 of the Company. (1) | |
| 3.7 | By-law No. 3 of the Company. (1) | |
| 3.8 | Articles of Amalgamation of the Company. (1) | |
| 3.9 | Articles of Amalgamation of the Company, dated July 1, 2001. (2) | |
| 3.10 | Articles of Amalgamation of the Company, dated July 1, 2002. (3) | |
| 3.11 | Articles of Amalgamation of the Company, dated July 1, 2003. (4) | |
| 3.12 | Articles of Amalgamation of the Company, dated July 1, 2004. (5) | |
| 3.13 | Articles of Amalgamation of the Company, dated July 1, 2005. (6) | |
| 3.14 | Open Text Corporation By-law, dated December 15, 2005. (7) | |
| 3.15 | Articles of Continuance of the Company, dated December 29, 2005. (7) | |
| 4.1 | Form of Common Share Certificate. (1) | |
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| Exhibit Number |
Description of Exhibit | |
| 10.5 | Amendment to Agreement, dated June 27, 1997 between INSO Corporation and the Company. (8) | |
| 10.6 | 1998 Stock Option Plan. (9) | |
| 10.9* | Indemnity Agreement with Walter Koehler dated August 8, 2005. (10) | |
| 10.10* | Indemnity Agreement with Peter Lipps dated August 19, 2005. (10) | |
| 10.11 | 2004 Employee Stock Option Plan. (11) | |
| 10.12 | Artesia Stock Option Plan. (11) | |
| 10.13 | Vista Stock Option Plan. (11) | |
| 10.14* | Employment Agreement, dated September 23, 2005 between P. Thomas Jenkins and the Company. (11) | |
| 10.15* | Employment Agreement, dated September 23, 2005 between John Shackleton and the Company. (11) | |
| 10.20 | Demand operating credit facility between the Company and Royal Bank of Canada, dated February 2, 2006. (12) | |
| 10.21* | Employment Agreement, dated May 3, 2006 between Paul J. McFeeters and the Company. (13) | |
| 10.22* | Employment Agreement, dated June 30, 2006 between Kirk Roberts and the Company. (14) | |
| 10.23* | Employment Agreement, dated June 30, 2006 between Tony Preston and the Company. (14) | |
| 10.24* | Employment Agreement, dated July 17, 2006 between John Wilkerson and the Company. (14) | |
| 10.25 | Arrangement Agreement between the Company, 6575064 Canada Inc., and Hummingbird Ltd., dated August 4, 2006. (14) | |
| 10.26* | “Form of” Indemnity Agreement between the Company and certain of its officers dated September 7, 2006. (14) | |
| 10.27* | Open Text Corporation Long-Term Incentive Plan dated September 10, 2007. (15) | |
| 10.28 | Consulting Agreement between Steven Sadler and SJS Advisors Inc. and the Company, dated May 3, 2005. | |
| 21.2 | List of the Company’s Subsidiaries as of July 15, 2008. | |
| 23.1 | Consent of Independent Registered Public Accounting Firm. | |
| 24.1 | Power of Attorney (contained on Signature Page). | |
| 31.1 | Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| * | Indicates management contract relating to compensatory plans or arrangements. |
| (1) | Filed as an Exhibit to the Company’s Registration Statement on Form F-1 (Registration Number 33-98858) as filed with the Securities and Exchange Commission (the “SEC”) on November 1, 1995 or Amendments 1, 2 or 3 thereto (filed on December 28, 1995, January 22, 1996 and January 23, 1996 respectively), and incorporated herein by reference. |
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| (2) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 28, 2001 and incorporated herein by reference. |
| (3) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 28, 2002 and incorporated herein by reference. |
| (4) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 29, 2003 and incorporated herein by reference. |
| (5) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 13, 2004 and incorporated herein by reference. |
| (6) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 27, 2005 and incorporated herein by reference. |
| (7) | Filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on February 3, 2006 and incorporated herein by reference. |
| (8) | Filed as an Exhibit in the Company’s Report on Form 8-K, as filed wit the SEC on June 16, 1998 and incorporated herein by reference. |
| (9) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on August 20, 1999 and incorporated herein by reference. |
| (10) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 13, 2004 and incorporated herein by reference. |
| (11) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 27, 2005 and incorporated herein by reference. |
| (12) | Filed as an Exhibit in the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on February 3, 2006 and incorporated herein by reference. |
| (13) | Filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on May 5, 2006 and incorporated herein by reference. |
| (14) | Filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on September 12, 2006 and incorporated herein by reference. |
| (15) | Filed as an Exhibit to the Company’s Report on Form 8-K, as filed with the SEC on September 13, 2007 and incorporated herein by reference. |
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Open Text Corporation
We have audited Open Text Corporation’s internal control over financial reporting as of June 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Open Text Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Part II, Item 9A of this Form 10-K. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Open Text Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Open Text Corporation (and subsidiaries) as of June 30, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2008, and our report dated August 20, 2008 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP, Licensed Public Accountants
Toronto, Canada
August 20, 2008
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Open Text Corporation
We have audited the accompanying consolidated balance sheets of Open Text Corporation (and subsidiaries) as of June 30, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Open Text Corporation (and subsidiaries) as of June 30, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2008, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as of July 1, 2007.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Open Text Corporation’s internal control over financial reporting as of June 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 20, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP, Licensed Public Accountants
Toronto, Canada
August 20, 2008
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CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars, except share data)
| June 30, | |||||||
| 2008 | 2007 | ||||||
| ASSETS | |||||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ | 254,916 | $ | 149,979 | |||
| Accounts receivable trade, net of allowance for doubtful accounts of $3,974 as of June 30, 2008 and $2,089 as of June 30, 2007 (note 8) |
134,396 | 128,781 | |||||
| Income taxes recoverable (note 16) |
16,763 | 31,060 | |||||
| Prepaid expenses and other current assets |
10,544 | 10,368 | |||||
| Deferred tax assets (note 16) |
13,455 | 30,248 | |||||
| Total current assets |
430,074 | 350,436 | |||||
| Capital assets (note 4) |
43,582 | 43,614 | |||||
| Goodwill (note 5) |
564,648 | 528,312 | |||||
| Acquired intangible assets (note 6) |
281,824 | 343,324 | |||||
| Deferred tax assets (note 16) |
59,881 | 42,078 | |||||
| Other assets (note 7) |
10,491 | 9,524 | |||||
| Long-term income taxes recoverable (note 16) |
44,176 | 9,557 | |||||
| $ | 1,434,676 | $ | 1,326,845 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current liabilities: |
|||||||
| Accounts payable and accrued liabilities (note 9) |
$ | 99,035 | $ | 100,211 | |||
| Current portion of long-term debt (note 10) |
3,486 | 4,048 | |||||
| Deferred revenues |
176,967 | 143,097 | |||||
| Income taxes payable (note 16) |
13,499 | 33,705 | |||||
| Deferred tax liabilities (note 16) |
4,876 | 1,601 | |||||
| Total current liabilities |
297,863 | 282,662 | |||||
| Long-term liabilities: |
|||||||
| Accrued liabilities (note 9) |
20,513 | 22,516 | |||||
| Long-term debt (note 10) |
304,301 | 366,765 | |||||
| Deferred revenues |
2,573 | 3,840 | |||||
| Long-term income taxes payable |
54,681 | — | |||||
| Deferred tax liabilities (note 16) |
109,912 | 120,019 | |||||
| Total long-term liabilities |
491,980 | 513,140 | |||||
| Minority interest |
8,672 | 6,975 | |||||
| Shareholders’ equity: |
|||||||
| Share capital (note 11) |
|||||||
| 51,151,666 and 50,180,118 Common Shares issued and outstanding at June 30, 2008 and June 30, 2007, respectively; Authorized Common Shares: unlimited |
438,471 | 426,188 | |||||
| Additional paid-in capital |
39,330 | 35,311 | |||||
| Accumulated other comprehensive income |
110,819 | 68,034 | |||||
| Retained earnings (deficit) |
47,541 | (5,465 | ) | ||||
| Total shareholders’ equity |
636,161 | 524,068 | |||||
| $ | 1,434,676 | $ | 1,326,845 | ||||
| Commitments and contingencies (note 13) |
|||||||
| Related party transactions (note 20) |
|||||||
| Subsequent events (note 21) |
|||||||
See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. Dollars, except share and per share data)
| Year ended June 30, | ||||||||||||
| 2008 | 2007 | 2006 | ||||||||||
| Revenues: |
||||||||||||
| License |
$ | 219,103 | $ | 182,507 | $ | 122,520 | ||||||
| Customer support |
363,580 | 287,570 | 183,878 | |||||||||
| Service |
142,849 | 125,587 | 103,164 | |||||||||
| Total revenues |
725,532 | 595,664 | 409,562 | |||||||||
| Cost of revenues: |
||||||||||||
| License |
15,415 | 13,652 | 11,196 | |||||||||
| Customer support |
58,764 | 46,433 | 28,908 | |||||||||
| Service |
117,037 | 105,955 | 83,469 | |||||||||
| Amortization of acquired technology intangible assets |
41,515 | 36,206 | 18,900 | |||||||||
| Total cost of revenues |
232,731 | 202,246 | 142,473 | |||||||||
| Gross profit |
492,801 | 393,418 | 267,089 | |||||||||
| Operating expenses: |
||||||||||||
| Research and development |
105,894 | 79,102 | 58,469 | |||||||||
| Sales and marketing |
174,185 | 150,958 | 104,225 | |||||||||
| General and administrative |
69,985 | 61,092 | 44,960 | |||||||||
| Depreciation |
12,017 | 13,846 | 11,103 | |||||||||
| Amortization of acquired intangible assets |
30,759 | 24,586 | 9,199 | |||||||||
| Special charges (recoveries) (note 17) |
(418 | ) | 12,908 | 26,182 | ||||||||
| Total operating expenses |
392,422 | 342,492 | 254,138 | |||||||||
| Income from operations |
100,379 | 50,926 | 12,951 | |||||||||
| Other income (expense), net (note 18) |
(1,023 | ) | 1,742 | (4,788 | ) | |||||||
| Interest income (expense), net |
(22,859 | ) | (20,282 | ) | 1,487 | |||||||
| Income before income taxes |
76,497 | 32,386 | 9,650 | |||||||||
| Provision for income taxes (note 16) |
22,993 | 10,334 | 4,093 | |||||||||
| Net income before minority interest |
53,504 | 22,052 | 5,557 | |||||||||
| Minority interest |
498 | 392 | 579 | |||||||||
| Net income for the year |
$ | 53,006 | $ | 21,660 | $ | 4,978 | ||||||
| Net income per share—basic (note 19) |
$ | 1.04 | $ | 0.44 | $ | 0.10 | ||||||
| Net income per share—diluted (note 19) |
$ | 1.01 | $ | 0.43 | $ | 0.10 | ||||||
| Weighted average number of Common Shares outstanding—basic |
50,779,530 | 49,392,845 | 48,666,139 | |||||||||
| Weighted average number of Common Shares outstanding—diluted |
52,604,115 | 50,907,897 | 49,949,593 | |||||||||
See accompanying Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands of U.S. dollars)
| Comprehensive Income |
Common Shares | Commitment to Issue Shares |
Additional Paid in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income |
Total | |||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||
| Balance as of June 30, 2005 |
— | 48,137 | $ | 406,580 | $ | 813 | $ | 22,341 | $ | (32,103 | ) | $ | 18,124 | $ | 415,755 | ||||||||||||
| Issuance of Common Shares |
|||||||||||||||||||||||||||
| Under employee stock option plans |
— | 470 | 3,663 | — | 5,161 | — | — | 8,824 | |||||||||||||||||||