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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM _________TO_________
 COMMISSION FILE NUMBER 000-24677 BINDVIEW DEVELOPMENT CORPORATION  TEXAS
(State or other jurisdiction of
incorporation or organization)
    
    76-0306721
(I.R.S. Employer
Identification No.)5151 SAN FELIPE, 25th FLOOR, HOUSTON, TX
(Address of principal executive offices)
    
    77056
(Zip code)
 (713) 561-4000
(Registrants telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o As of May 2, 2005, the Company had 48,063,982 shares of Common Stock, no par value, outstanding.   1




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 5. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSITEM 6. EXHIBITSSIGNATURESExhibit IndexSeparation AgreementCertification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certifications of CEO & CFO pursuant to Section 1350    Table of Contents  
 PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands) MARCH 31,
    
    
    DECEMBER 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    34,029
    
    
    $
    25,666Cash  restricted
    
    
    2,250
    
    
    
    2,250Short-term investments
    
    
    3,769
    
    
    
    6,974Accounts receivable, net of allowance of $671
    
    
    6,152
    
    
    
    14,657Other
    
    
    1,988
    
    
    
    1,634Total current assets
    
    
    48,188
    
    
    
    51,181Property and equipment, net
    
    
    5,757
    
    
    
    6,664Other assets
    
    
    551
    
    
    
    709Total assets
    
    $
    54,496
    
    
    $
    58,554LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,304
    
    
    $
    3,023Accrued liabilities
    
    
    4,595
    
    
    
    5,307Accrued compensation
    
    
    2,230
    
    
    
    3,603Deferred revenue
    
    
    13,944
    
    
    
    11,963Total current liabilities
    
    
    23,073
    
    
    
    23,896Deferred revenue
    
    
    2,332
    
    
    
    2,707Other
    
    
    1,334
    
    
    
    1,824Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value, 20,000 shares
authorized, none issued
    
    
    
    
    
    
    Common stock, no par value, 100,000 shares
authorized, 48,626 and
47,849 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    107,791
    
    
    
    106,244Note receivable from shareholder
    
    
    (65
    )
    
    
    (131
    )Deferred stock compensation
    
    
    (918
    )
    
    
    (789
    )Accumulated deficit
    
    
    (80,826
    )
    
    
    (77,316
    )Accumulated other comprehensive income
    
    
    1,774
    
    
    
    2,118Total shareholders equity
    
    
    27,757
    
    
    
    30,127Total liabilities and shareholders equity
    
    $
    54,496
    
    
    $
    58,554
 See notes to unaudited consolidated financial statements. 2




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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (Unaudited)
(in thousands, except per share amounts) THREE MONTHS ENDEDMARCH 31,2005
    
    
    2004Revenues:Licenses
    
    $
    5,588
    
    
    $
    5,912Services
    
    
    9,371
    
    
    
    8,92114,959
    
    
    
    14,833Cost of revenues:Licenses
    
    
    178
    
    
    
    140Services
    
    
    2,049
    
    
    
    1,8312,227
    
    
    
    1,971Gross profit
    
    
    12,732
    
    
    
    12,862Operating costs and expenses:Sales and marketing
    
    
    9,584
    
    
    
    9,180Research and development
    
    
    4,593
    
    
    
    4,576General and administrative
    
    
    2,280
    
    
    
    1,89816,457
    
    
    
    15,654Operating loss
    
    
    (3,725
    )
    
    
    (2,792
    )Other income
    
    
    241
    
    
    
    94Loss before income taxes
    
    
    (3,484
    )
    
    
    (2,698
    )Provision for income taxes
    
    
    26
    
    
    
    70Net loss
    
    $
    (3,510
    )
    
    $
    (2,768
    )Loss per common share  basic and
diluted
    
    $
    (0.07
    )
    
    $
    (0.06
    )Number of shares used to calculate per share
amounts, basic and diluted
    
    
    47,889
    
    
    
    47,329Reconciliation of net loss to comprehensive loss:Net loss
    
    $
    (3,510
    )
    
    $
    (2,768
    )Unrealized gain (loss) from foreign currency
translation
    
    
    (344
    )
    
    
    37Comprehensive loss
    
    $
    (3,854
    )
    
    $
    (2,731
    )
 See notes to unaudited consolidated financial statements. 3




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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands) THREE MONTHS ENDEDMARCH 31,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (3,510
    )
    
    $
    (2,768
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization
    
    
    749
    
    
    
    740Stock compensation expense (benefit)
    
    
    (192
    )
    
    
    56Changes in operating assets and liabilities:Accounts receivable
    
    
    8,450
    
    
    
    7,003Other assets
    
    
    (181
    )
    
    
    112Accounts payable
    
    
    (706
    )
    
    
    (666
    )Accrued liabilities
    
    
    (2,186
    )
    
    
    (3,494
    )Deferred revenues
    
    
    1,611
    
    
    
    1,849Net cash provided by operating activities
    
    
    4,035
    
    
    
    2,832Cash flows from investing activities:Capital expenditures
    
    
    (539
    )
    
    
    (194
    )Reimbursement of tenant improvements
    
    
    705
    
    
    
    284Purchases of short-term investments
    
    
    (745
    )
    
    
    Proceeds from maturity of investments
    
    
    3,950
    
    
    
    Restrictions on cash and other
    
    
    
    
    
    
    (184
    )Net cash provided by (used in) investing activities
    
    
    3,371
    
    
    
    (94
    )Cash flows from financing activities:Proceeds from sale of common stock
    
    
    1,295
    
    
    
    992Net cash provided by financing activities
    
    
    1,295
    
    
    
    992Effect of exchange rate changes on cash
    
    
    (338
    )
    
    
    65Net increase in cash and cash equivalents
    
    
    8,363
    
    
    
    3,795Cash and cash equivalents at beginning of year
    
    
    25,666
    
    
    
    35,449Cash and cash equivalents at end of period
    
    $
    34,029
    
    
    $
    39,244Non-cash financing and investing activities:Reduction of shareholder note in lieu of guaranteed bonus
    
    $
    66
    
    
    $
    66
 See notes to unaudited consolidated financial statements. 4




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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL The accompanying consolidated financial statements of BindView Development Corporation, a
Texas corporation (the Company or BindView), included herein have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. The consolidated
financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary
for a fair statement of the interim periods. Certain reclassifications have been made to the prior
years consolidated financial statements to conform with the current year presentation. The results of operations for the interim periods are not necessarily indicative of the
results of operations to be expected for the full year. These consolidated financial statements
should be read in conjunction with the Companys audited consolidated financial statements included
in its Annual Report on Form 10-K for the year ended December 31, 2004. 2. LOSS PER SHARE Options to purchase 9.2 million shares of common stock for the three months ended March 31,
2005 and 2004, were outstanding, but were not included in the computation of diluted loss per share
as their inclusion would have been anti-dilutive. 3. STOCK BASED COMPENSATION The Company accounts for all stock-based employee compensation plans under the recognition and
measurement provisions of APB Opinion 25, Accounting for Stock Issued to Employees, (APB 25)
and related interpretations. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Companys common shares at the date of the grant
over the amount an employee must pay to acquire the common shares. The Company generally grants
options at prices equal to the market price of common shares on the date of the grant. However, if
options are granted at a price below fair market value, compensation expense is recorded in
accordance with the provisions of APB 25. Compensation expense may also be recognized for certain
options which are considered variable option grants. Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based
Compensation  an Amendment to FAS 123, requires companies that continue to account for
stock-based compensation in accordance with APB 25 to disclose certain information using tabular
presentation as presented below. This table illustrates the effect on net loss and loss per share
as if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, to stock-based employee compensation (in thousands, except per share
amounts): THREE MONTHSENDED MARCH 31,2005
    
    
    2004Net loss as reported
    
    $
    (3,510
    )
    
    $
    (2,768
    )Add: Stock-based employee compensation
expense (benefit) included in reported
net loss
    
    
    (192
    )
    
    
    56Deduct: Total stock-based employee
compensation expense determined under
fair value method for all awards
    
    
    (984
    )
    
    
    (1,232
    )Pro forma net loss
    
    $
    (4,686
    )
    
    $
    (3,944
    )Loss per common share (basic and
diluted): As reported
    
    $
    (0.07
    )
    
    $
    (0.06
    ) Pro forma
    
    $
    (0.10
    )
    
    $
    (0.08
    )
 5




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4. RESTRUCTURING EXPENSES In December 2004, the Company approved a plan to eliminate certain positions primarily in
Latin America (the 2004 Restructuring Plan). The cost of this plan totaled approximately $0.5
million and consisted primarily of involuntary employee separation costs. The 2004 Restructuring Plan activity from December 31, 2004 to March 31, 2005 was as follows
(in thousands): Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    3/31/2005Employee severance
    
    $
    306
    
    
    $
    (165
    )
    
    $
    141Other
    
    
    20
    
    
    
    (8
    )
    
    
    12$
    326
    
    
    $
    (173
    )
    
    $
    153
 The Company expects all actions under the 2004 Restructuring Plan will be completed by
September 2005. The Company approved restructuring plans during 2002 and 2001 designed to improve operating
efficiency (the Reorganization Plans). The costs of these plans, and subsequent modifications to
their original estimates, totaled approximately $11.5 million. The Reorganization Plans were
comprised of (i) involuntary separation costs, (ii) closing its Boston development center and
certain European sales offices, (iii) reserves for leasehold abandonment, and (iv) various
non-personnel related cuts. The remaining accrual for the Reorganization Plans at March 31, 2005 is
comprised of the estimated carrying costs for the remaining excess space in Houston, Texas. The
estimated carrying costs of the remaining abandoned lease space were determined with the assistance
of the Companys leasing agent and were based on an assessment of applicable commercial real estate
markets. Additional adjustments to this balance could be required in future periods based on the
economic outlook of the real estate market in Houston, Texas. The Reorganization Plans activity
for the three months ended March 31, 2005 was as follows (in thousands): Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    03/31/2005Lease commitments
    
    $
    1,117
    
    
    $
    (109
    )
    
    $
    1,008
 5. INCOME TAXES The Company continues to provide a full valuation allowance against its deferred tax assets in
accordance with SFAS No. 109, Accounting for Income Taxes. As in its prior assessments, the
Company considered current and previous performance and other relevant factors in determining the
sufficiency of its valuation allowance. Objective factors, such as current and previous operating
losses, were given substantially more weight than managements outlook for future profitability.
Until such time as a consistent pattern of sufficient profitability is established, no tax benefit
will be recognized associated with the Companys pre-tax accounting losses. 6. RECENT ACCOUNTING PRONOUNCEMENTS In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (Revised
2004), Share-Based Payment (SFAS 123R). This standard requires expensing of stock options and
other share- 6




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based payments and supersedes SFAS No. 123, which had allowed companies to choose between
expensing stock options or showing pro forma disclosure only. This standard as published was to be
effective for the Company as of July 1, 2005 and would apply to all awards granted, modified,
cancelled or repurchased after that date as well as the unvested portion of prior awards. On April 14, 2005, the Securities and Exchange Commission (SEC) announced the adoption of a
rule that defers the required effective date of SFAS No. 123R. The SEC rule provides that SFAS No.
123R is now effective for registrants as of the beginning of the first fiscal year beginning after
June 15, 2005, instead of at the beginning of the first quarter after June 15, 2005, delaying the
required change until January 1, 2006. The Company is evaluating the two methods of adoption allowed by SFAS No. 123R; the
modified-prospective transition method and the modified-retrospective transition method. Adoption
of SFAS No. 123R will significantly increase compensation expense. The actual impact on future
years will be dependent on a number of factors, including our stock price and the level of future
grants and awards from our stock plans. 7. SUBSEQUENT EVENTS In April 2005, the Companys Board of Directors approved a stock repurchase program whereby
the Company may, at its discretion, spend up to $10.0 million for the repurchase of the Companys
common stock in the open market, subject to SEC guidelines and restrictions set forth in Rule
10b-18. In April 2005, the Company
acquired certain assets and intellectual property of Brightfly
Development Inc. ("BDI") for use in the Companys development
operations. The Company made an initial payment of $0.3 million to
BDI at closing and will make additional payments of up to $0.8
million over the next two years if certain conditions are met. 7




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Managements Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements which involve risks and uncertainties. The Companys actual results may
differ significantly from the results discussed in the forward-looking statements. Factors that
might cause such a difference include those discussed in the Cautionary Statements set forth in
the Companys Annual Report on Form 10-K for the year ended December 31, 2004. The following
discussion should be read in conjunction with the Companys consolidated financial statements
included with this report and our consolidated financial statements and related Managements
Discussion and Analysis of Financial Condition and Results of Operations for the year ended
December 31, 2004 included in our Annual Report on Form 10-K. Overview See discussion under Item 1, General in our Annual Report on Form 10-K for the year ended
December 31, 2004 for an overview of our business. Critical Accounting Policies and Estimates There have been no significant changes to our critical accounting policies and estimates
during the three months ended March 31, 2005 compared with those disclosed in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-K for the year ended December 31, 2004. Results of Operations Three Months Ended March 31, 2005 Compared with the Three Months Ended March 31, 2004 Revenues.Revenues for the current quarter were $15.0 million compared with $14.8 million for
the first quarter of 2004. License revenues for the first quarter of 2005 were $5.6 million, or
37.4 percent of total revenues, down from $5.9 million, or 39.6 percent of total revenues, in the
first quarter of 2004. The decline in license revenues was primarily due to the reorganization in
the sales force in the Americas, which took longer than expected to implement and overall slowness
in IT spending during the first quarter. Service revenues for the first quarter of 2005 were $9.4
million, or 62.6 percent of total revenues, up from $8.9 million, or 60.1 percent of total
revenues, in the first quarter of 2004. Service revenues for the first quarter of 2005 were
comprised of maintenance revenues of $7.9 million and professional service revenues of $1.5
million, up from $7.5 million in maintenance revenues and $1.4 million in professional service
revenues in the first quarter of 2004. The increase in service revenues was primarily due to high
customer maintenance renewal rates on our growing install base. The average sales price for transactions in the first quarter of 2005 was $29 thousand,
compared with $27 thousand in the first quarter of 2004. With respect to large transactions
generating at least $100 thousand in license revenue, we closed 11 transactions in the first
quarter of 2005 having an average sales price of approximately $272 thousand, and 11 transactions
in the first quarter of 2004 having an average sales price of $281 thousand. During the first quarter of 2005, revenues from our products for Microsoft-based platforms
totaled $9.8 million, a slight decrease from 2004. Revenues from these products accounted for
approximately 66 percent of total revenues in the first quarter of 2005, down from 68 percent of
total revenues for the first quarter of 2004. License revenues for our Microsoft-related products
for the first quarter of 2005 were $4.2 million compared with $5.1 million in the first quarter of
2004. Maintenance revenues for our Microsoft-related products in the first quarter of 2005 were
$5.6 million compared with $5.0 million in the first quarter of 2004. Revenues from our products for Novell-based platforms for the first quarter of 2005 were $1.8
million, or 12 percent of total revenues, compared with $2.5 million in first quarter of 2004, or
17 percent of total revenues. Consistent with the trend seen in past quarters, total revenues from
these products were down year-over-year, reflecting both the maturity and our penetration of the
Novell market. License revenues for Novell-based platforms 8




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for the first quarter of 2005 were $0.1 million compared with $0.6 million in the first quarter of
2004. Maintenance revenues for Novell-based platforms in the first quarter of 2005 were $1.6
million compared with $1.8 million in the first quarter of 2004. While we expect our Novell
revenues will continue to decline in the future, we expect the revenue decline will be modest
relative to the declines over the past three years and expect the decline will be offset by higher
revenues from our products and maintenance for other platforms. Sales of our security focused bv-Control product line accounted for approximately 76 percent
of our license revenues in the first quarter of 2005 compared with 84 percent in the first quarter
of 2004. Sales of our system administration focused bv-Admin product line accounted for
approximately 10 percent of our license revenues in the first quarter of 2005 compared with 16
percent in the first quarter of 2004. Sales of our remaining product lines, primarily our new
compliance monitoring line, accounted for approximately 14 percent of our license revenues in the
first quarter of 2005. No customer accounted for more than 10 percent of our revenues during the first quarter of
2005 or 2004. Revenues recognized from sales to customers outside North America, primarily in
Europe, accounted for approximately 19 percent of total revenues in the first quarter of 2005
compared with 10 percent in the first quarter of 2004. Gross Profit.Gross profit for the current quarter totaled $12.7 million, down one percent
from the first quarter of 2004. Gross margin for the current quarter was 85.1 percent, compared
with 86.7 percent in the first quarter of 2004. The decline in gross margin reflected a shift in
business mix toward service revenues, which have a lower gross margin than license revenues. Gross profit generated from license revenues for the first quarter of 2005 was $5.4 million,
compared with $5.8 million for the first quarter of 2004. The gross margin from license revenues
for the first quarter of 2005 was 96.8 percent, compared with 97.6 percent for the first quarter of
2004. Gross profit from service revenues for the first quarter of 2005 was $7.3 million, compared
with $7.1 million for the first quarter of 2004. Gross margin from service revenues for the first
quarter of 2005 was 78.1 percent compared with 79.5 percent for the first quarter of 2004. The
decline in gross margin reflected higher personnel costs associated with our technical support and
professional services units. While we do not track and measure costs of performing
services (technical support, professional services) by product platform (i.e., Microsoft, Novell,
etc), we do not believe there is a material difference in the gross margin by product line. Operating Costs and Expenses.Operating costs and expenses for the first quarter of 2005
totaled $16.5 million, up from $15.7 million for the first quarter of 2004.This increase was due
primarily to approximately $0.6 million of severance expenses related to the sales reorganization
and recruiting fees incurred in connection with the searches for leadership to head worldwide sales
and our alliances program. Sales and marketing expenses for the first quarter of 2005 were $9.6 million (64.1 percent of
revenues), up from $9.2 million (61.9 percent of revenues) for the first quarter of 2004. As
mentioned above, the increase in sales and marketing expenses was primarily due to costs incurred
related to the sales reorganization and recruiting fees incurred in connection with two open
executive sales positions. We expect future sales and marketing expenses as a percentage of
revenues to be lower as a result of anticipated revenue growth and our initiatives to improve
operating leverage and sales and marketing effectiveness. Research and development expenses for the first quarter of 2005 and 2004 were $4.6 million
(30.7 percent of revenues in 2005 and 30.9 percent of revenues in 2004).Throughout 2004, we
continued to transfer more development responsibilities for certain products from Houston, Texas to
Pune, India and expect to continue leveraging that development center in the future. As a result of
these initiatives and anticipated revenue growth, we expect future research and development
expenses to decrease as a percentage of revenues. General and administrative expenses for the first quarter of 2005 were $2.3 million (15.2
percent of revenues), up from $1.9 million (12.8 percent of revenues) for the first quarter of
2004. The increase in general and administrative expenses is primarily attributable to an increase
in personnel and outside professional service fees 9




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related to our Sarbanes-Oxley compliance efforts. We expect future general and administrative
expenses to decrease as a percentage of revenues due to anticipated revenue growth. In December 2004, we approved a plan to eliminate certain positions primarily in Latin
America (the 2004 Restructuring Plan). The cost of this plan totaled approximately $0.5 million
and consisted primarily of involuntary employee separation costs. The 2004 Restructuring Plan will
result in an estimated reduction in annual operating expenses of approximately $1.2 million. The 2004 Restructuring Plan activity from December 31, 2004 to March 31, 2005 was as follows
(in thousands): Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    3/31/2005Employee severance
    
    $
    306
    
    
    $
    (165
    )
    
    $
    141Other
    
    
    20
    
    
    
    (8
    )
    
    
    12$
    326
    
    
    $
    (173
    )
    
    $
    153
 We expect all actions under the 2004 Restructuring Plan will be completed by September 2005. We approved restructuring plans during 2002 and 2001 designed to improve operating efficiency
(the Reorganization Plans). The costs of these plans, and subsequent modifications to their
original estimates, totaled approximately $11.5 million. The Reorganization Plans were comprised
of (i) involuntary separation costs, (ii) closing our Boston development center and certain
European sales offices, (iii) reserves for leasehold abandonment, and (iv) various non-personnel
related cuts. The Reorganization Plans resulted in an estimated reduction in annual operating
expenses of approximately $14.7 million. The remaining accrual for the Reorganization Plans at March 31, 2005 is comprised of the
estimated carrying costs for our remaining excess space in Houston, Texas. Additional adjustments
to this balance could be required in future periods based on the economic outlook of the real
estate market in Houston, Texas. The Reorganization Plans activity for the three months ended March 31, 2005 was as follows
(in thousands): Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    03/31/2005Lease commitments
    
    $
    1,117
    
    
    $
    (109
    )
    
    $
    1,008
 Provision for Income Taxes.We did not record an income tax provision for our domestic
operations in either the first quarter of 2005 or 2004, as we continue to provide a full valuation
allowance against our deferred tax assets in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. As in our prior assessments, we considered
current and previous performance and other relevant factors in determining the sufficiency of our
valuation allowance. Objective factors, such as current and previous operating losses, were given
substantially more weight than our outlook for future profitability. Until such time as a
consistent pattern of sufficient profitability is established, we will not recognize any tax
benefit associated with our domestic pre-tax accounting losses. A provision of less than $0.1
million was recorded for taxes related to our foreign operations in both the first quarter of 2005
and 2004. Net Loss.Due to the factors described above, net loss for the quarter ended March 31, 2005
was $3.5 million compared with $2.8 million for the quarter ended March 31, 2004. Liquidity and Capital Resources Our capital requirements have principally related to working capital needs, capital
expenditures and common stock repurchases. These requirements have been met through a combination
of issuances of securities and internally generated funds. 10




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We had cash, cash equivalents and short-term investments of $37.8 million at March 31, 2005
compared with $32.6 million at December 31, 2004. Our working capital has decreased approximately
$2.2 million since December 31, 2004 to $25.1 million at March 31, 2005 primarily due to our
current quarter net loss of $3.5 million, partially offset by $1.3 million in proceeds received
from the sale of common stock through our stock option and employee stock purchase plans. At March
31, 2005, we had no outstanding debt. Cash flows provided by operating activities were $4.0 million in the first quarter of 2005
compared with $2.8 million in the first quarter of 2004. The increase in cash provided by
operating activities in 2005 was primarily the result of an increase in cash collections on
accounts receivable of $1.1 million over the first quarter of 2004. Cash flows provided by (used in) investing activities were $3.4 million in the first quarter
of 2005 compared with $(0.1) million in the first quarter of 2004. The increase in cash generated
from investing activities was primarily the result of (i) $3.2 million in net proceeds from
maturities on short term investments and (ii) a $0.4 million increase in reimbursements for
leasehold improvements during the first quarter of 2005. This increase was partially offset by a
$0.3 million increase in capital expenditures during the current quarter. Cash flows provided by financing activities were $1.3 million in the first quarter of 2005
compared with $1.0 million in the first quarter of 2004. Cash provided by financing activities
during the first quarter of 2005 was the result of (i) $1.0 million in cash from the exercise of
employee stock options and (ii) $0.3 million in cash from the sale of common stock under our
Employee Stock Purchase Plan. Cash provided by financing activities during the first quarter of
2004 was primarily attributable to cash provided by the issuance of common stock under our Employee
Stock Purchase Plan. We conduct operations in leased facilities under operating leases expiring at various dates
through 2011. The contractual obligations under these lease commitments were comprised of the
following as of March 31, 2005 (in thousands): CONTRACTUAL
    
    
    
    
    
    Remainder ofOBLIGATION
    
    TOTAL
    
    
    2005
    
    
    2006  2007
    
    
    2008  2009
    
    
    2010  2011Operating leases
    
    $
    20,007
    
    
    $
    3,150
    
    
    $
    7,357
    
    
    $
    7,100
    
    
    $
    2,400Sub-leasing arrangements*
    
    
    (950
    )
    
    
    (95
    )
    
    
    (305
    )
    
    
    (314
    )
    
    
    (236
    )$
    19,057
    
    
    $
    3,055
    
    
    $
    7,052
    
    
    $
    6,786
    
    
    $
    2,164
   *
    
    We have sub-leased portions of these facilities under operating leases. Anticipated cash
receipts from these executed sub-lease arrangements have been taken into account when deriving
expected cash outflow on operating lease commitments in the preceding table. Our expected principal cash requirements for the remainder of 2005 are: (i) capital
expenditures of approximately $2.5 million, primarily for computer and software equipment, (ii)
working capital requirements, (iii) net payments on operating
leases of approximately $3.1 million,
and (iv) stock repurchases of up to $10.0 million. We believe there is sufficient cash on hand to
meet these cash requirements, as well as our cash requirements for the foreseeable future. Stock Repurchase Program In April 2005, the Companys Board of Directors approved a stock repurchase program whereby
the Company may, at its discretion, spend up to $10.0 million for the repurchase of the Companys
common stock in the open market, subject to Securities and Exchange Commission guidelines and
restrictions set forth in Rule 10b-18. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no known material changes since December 31, 2004. See the Companys Annual
Report on Form 10-K for the year ended December 31, 2004. 11




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES The management of the Company, including the Chief Executive Officer and the Chief Financial
Officer, conducted an evaluation of the effectiveness of the Companys disclosure controls and
procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 as of March 31, 2005
(the Evaluation Date). Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that, as of the Evaluation Date, the Companys disclosure controls and
procedures were effective in ensuring that all material information relating to the Company,
including its consolidated subsidiaries, required to be filed in this quarterly report have been
made known to them in a timely manner. There have been no significant changes made during the fiscal quarter ended March 31, 2005, in
the Companys internal controls over financial reporting or in other factors that could
significantly affect internal controls over financial reporting. 
 PART II. OTHER INFORMATION 
 ITEM 5. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of historical facts included in this
Report, including without limitation, statements regarding the Companys future financial position,
revenue and expense projections, business strategy, planned products, products under development,
markets, budgets and plans and objectives of management for future operations, are forward-looking
statements. Although we believe that the expectations reflected in these forward-looking statements
are reasonable, we cannot assure you that those expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the Companys
expectations are disclosed in statements set forth under Cautionary Statements in our Annual
Report on Form 10-K for the year ended December 31, 2004. 
 ITEM 6. EXHIBITS  (a)
    Exhibits: The following exhibits are filed with this Quarterly Report on Form 10-Q. Exhibit 10.1
    
    Separation Agreement between
Bindview and Ronald E. Rosenthal, executed May 5, 2005, to be
effective as of April 15, 2005.Exhibit 31.1
    
    Certification of the Companys Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002Exhibit 31.2
    
    Certification of the Companys Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certifications of Eric J. Pulaski, Chairman of the Board and Chief Executive Officer
and Edward L. Pierce, Director, Executive Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 12




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##### Table of Contents



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 thereunto duly authorized. BINDVIEW DEVELOPMENT CORPORATIONMay 6, 2005
    
    By:
    
    /s/ KEVIN P. COHNKevin P. Cohn
Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
 13




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##### Table of Contents



Exhibit Index Exhibit 10.1
    
    Separation Agreement between
Bindview and Ronald E. Rosenthal, executed May 5, 2005, to be
effective as of April 15, 2005.Exhibit 31.1
    
    Certification of the Companys Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
    
    

Exhibit 31.2
    
    Certification of the Companys Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002Exhibit 32.1
    
    Certifications of Eric J. Pulaski, Chairman of the Board and Chief Executive Officer
and Edward L. Pierce, Director, Executive Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002