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UNITED STATES
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 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO
__________
  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)
 
 þ o
 þ o




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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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESExhibit IndexCertification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certifications of CEO and CFO pursuant to Section 906    Table of Contents  
  
  BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 JUNE 30,
    
    
    DECEMBER 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    28,751
    
    
    $
    25,666Cash  restricted
    
    
    2,250
    
    
    
    2,250Short-term investments
    
    
    2,983
    
    
    
    6,974Accounts receivable, net of allowance of $639 and $671
    
    
    6,153
    
    
    
    14,657Other
    
    
    1,452
    
    
    
    1,634Total current assets
    
    
    41,589
    
    
    
    51,181Property and equipment, net
    
    
    5,987
    
    
    
    6,664Other
    
    
    579
    
    
    
    709Total assets
    
    $
    48,155
    
    
    $
    58,554LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,903
    
    
    $
    3,023Accrued liabilities
    
    
    4,149
    
    
    
    5,307Accrued compensation
    
    
    2,949
    
    
    
    3,603Deferred revenues
    
    
    14,571
    
    
    
    11,963Total current liabilities
    
    
    23,572
    
    
    
    23,896Deferred revenues
    
    
    1,947
    
    
    
    2,707Other
    
    
    1,024
    
    
    
    1,824Commitments and contingenciesShareholders equity:Preferred stock, $0.01 par value, 20,000 shares authorized, none
issuedCommon stock, no par value, 100,000 shares authorized, 48,136 and
47,849 shares issued and outstanding
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    105,904
    
    
    
    106,244Deferred stock compensation and other
    
    
    (2,672
    )
    
    
    (920
    )Accumulated deficit
    
    
    (82,859
    )
    
    
    (77,316
    )Accumulated other comprehensive income
    
    
    1,238
    
    
    
    2,118Total shareholders equity
    
    
    21,612
    
    
    
    30,127Total liabilities and shareholders equity
    
    $
    48,155
    
    
    $
    58,554
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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (unaudited)
(in thousands, except per share amounts)
 THREE MONTHS
    
    
    SIX MONTHSENDED JUNE 30,
    
    
    ENDED JUNE 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Licenses
    
    $
    7,884
    
    
    $
    8,648
    
    
    $
    13,472
    
    
    $
    14,560Services
    
    
    9,315
    
    
    
    9,231
    
    
    
    18,686
    
    
    
    18,15217,199
    
    
    
    17,879
    
    
    
    32,158
    
    
    
    32,712Cost of revenues:Licenses
    
    
    176
    
    
    
    190
    
    
    
    354
    
    
    
    330Services
    
    
    2,069
    
    
    
    1,910
    
    
    
    4,118
    
    
    
    3,7412,245
    
    
    
    2,100
    
    
    
    4,472
    
    
    
    4,071Gross profit
    
    
    14,954
    
    
    
    15,779
    
    
    
    27,686
    
    
    
    28,641Operating costs and expenses:Sales and marketing
    
    
    9,404
    
    
    
    9,739
    
    
    
    18,988
    
    
    
    18,919Research and development
    
    
    4,601
    
    
    
    5,396
    
    
    
    9,194
    
    
    
    9,972General and administrative
    
    
    2,054
    
    
    
    2,024
    
    
    
    4,334
    
    
    
    3,922Restructuring
    
    
    1,142
    
    
    
    149
    
    
    
    1,142
    
    
    
    14917,201
    
    
    
    17,308
    
    
    
    33,658
    
    
    
    32,962Operating loss
    
    
    (2,247
    )
    
    
    (1,529
    )
    
    
    (5,972
    )
    
    
    (4,321
    )Other income, net
    
    
    281
    
    
    
    112
    
    
    
    522
    
    
    
    206Loss before income taxes
    
    
    (1,966
    )
    
    
    (1,417
    )
    
    
    (5,450
    )
    
    
    (4,115
    )Provision for income taxes
    
    
    67
    
    
    
    74
    
    
    
    93
    
    
    
    144Net loss
    
    $
    (2,033
    )
    
    $
    (1,491
    )
    
    $
    (5,543
    )
    
    $
    (4,259
    )Loss per common share  basic and
diluted
    
    $
    (0.04
    )
    
    $
    (0.03
    )
    
    $
    (0.12
    )
    
    $
    (0.09
    )Number of shares used to calculate per share
amounts, basic and diluted
    
    
    47,595
    
    
    
    47,432
    
    
    
    47,745
    
    
    
    47,380Reconciliation of net loss to comprehensive loss:Net loss
    
    $
    (2,033
    )
    
    $
    (1,491
    )
    
    $
    (5,543
    )
    
    $
    (4,259
    )Unrealized loss from currency translation
    
    
    (536
    )
    
    
    (168
    )
    
    
    (880
    )
    
    
    (131
    )Comprehensive loss
    
    $
    (2,569
    )
    
    $
    (1,659
    )
    
    $
    (6,423
    )
    
    $
    (4,390
    )
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BINDVIEW DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
 SIX MONTHS ENDEDJUNE 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (5,543
    )
    
    $
    (4,259
    )Adjustments to reconcile net loss to net cash from operating
activities:Depreciation and amortization
    
    
    1,399
    
    
    
    1,446Stock compensation expense (benefit)
    
    
    (236
    )
    
    
    181Changes in operating assets and liabilities:Accounts receivable
    
    
    8,408
    
    
    
    3,435Other assets
    
    
    300
    
    
    
    (429
    )Accounts payable
    
    
    (1,091
    )
    
    
    (595
    )Accrued liabilities
    
    
    (2,003
    )
    
    
    (2,384
    )Deferred revenues
    
    
    1,854
    
    
    
    2,844Net cash provided by operating activities
    
    
    3,088
    
    
    
    239Cash flows from investing activities:Capital expenditures
    
    
    (1,419
    )
    
    
    (603
    )Reimbursement of tenant improvements
    
    
    705
    
    
    
    284Purchases of short-term investments
    
    
    (2,049
    )
    
    
    (3,912
    )Proceeds from maturity of investments
    
    
    6,040
    
    
    
    Restrictions on cash
    
    
    
    
    
    
    (194
    )Net cash provided by (used in) investing activities
    
    
    3,277
    
    
    
    (4,425
    )Cash flows from financing activities:Repurchase of common stock
    
    
    (4,068
    )
    
    
    (1,236
    )Net proceeds from sale of common stock
    
    
    1,619
    
    
    
    1,170Net cash used in financing activities
    
    
    (2,449
    )
    
    
    (66
    )Effect of exchange rate changes on cash
    
    
    (831
    )
    
    
    (78
    )Net increase (decrease) in cash and cash equivalents
    
    
    3,085
    
    
    
    (4,330
    )Cash and cash equivalents at beginning of year
    
    
    25,666
    
    
    
    35,449Cash and cash equivalents at end of period
    
    $
    28,751
    
    
    $
    31,119
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BINDVIEW DEVELOPMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. GENERAL
   2. LOSS PER SHARE
  3.
STOCK-BASED COMPENSATION
   THREE MONTHS
    
    
    SIX MONTHSENDED JUNE 30,
    
    
    ENDED JUNE 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss as reported
    
    $
    (2,033
    )
    
    $
    (1,491
    )
    
    $
    (5,543
    )
    
    $
    (4,259
    )Add: Stock-based
employee compensation
expense (benefit)
included in reported net
loss
    
    
    (44
    )
    
    
    125
    
    
    
    (236
    )
    
    
    181Deduct: Total
stock-based employee
compensation expense
determined under fair
value method for all
awards
    
    
    (1,118
    )
    
    
    (1,510
    )
    
    
    (2,102
    )
    
    
    (2,742
    )Pro forma net loss
    
    $
    (3,195
    )
    
    $
    (2,876
    )
    
    $
    (7,881
    )
    
    $
    (6,820
    )
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THREE MONTHS
    
    
    SIX MONTHSENDED JUNE 30,
    
    
    ENDED JUNE 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Loss per common share
(basic and diluted):- As reported
    
    $
    (0.04
    )
    
    $
    (0.03
    )
    
    $
    (0.12
    )
    
    $
    (0.09
    )- Pro forma
    
    $
    (0.07
    )
    
    $
    (0.06
    )
    
    $
    (0.17
    )
    
    $
    (0.14
    )
 4. RESTRUCTURING EXPENSES
   RemainingRestructuring
    
    
    Cash
    
    
    AccrualCharges
    
    
    Expenditures
    
    
    6/30/2005Employee
severance
    
    $
    1,142
    
    
    $
    (588
    )
    
    $
    554
    Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    6/30/2005Employee severance
    
    $
    306
    
    
    $
    (254
    )
    
    $
    52Other
    
    
    20
    
    
    
    (8
    )
    
    
    12$
    326
    
    
    $
    (262
    )
    
    $
    64
   Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    6/30/2005Lease commitments
    
    $
    1,117
    
    
    $
    (239
    )
    
    $
    878
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5. INCOME TAXES
  6. RECENT ACCOUNTING PRONOUNCEMENTS
   7. SHAREHOLDERS EQUITY
  8. ASSET ACQUISITION
  7




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Overview
  Critical Accounting Policies
  Results of Operations
 Three Months Ended June 30, 2005 Compared with the Three Months Ended June 30, 2004
 Revenues.
   8




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Gross Profit.
   Operating Costs and Expenses.
   9




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RemainingRestructuring
    
    
    Cash
    
    
    AccrualCharges
    
    
    Expenditures
    
    
    6/30/2005Employee
severance
    
    $
    1,142
    
    
    $
    (588
    )
    
    $
    554
    Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    6/30/2005Employee severance
    
    $
    306
    
    
    $
    (254
    )
    
    $
    52Other
    
    
    20
    
    
    
    (8
    )
    
    
    12$
    326
    
    
    $
    (262
    )
    
    $
    64
   Remaining
    
    
    
    
    
    
    RemainingAccrual
    
    
    Cash
    
    
    Accrual12/31/2004
    
    
    Expenditures
    
    
    6/30/2005Lease commitments
    
    $
    1,117
    
    
    $
    (239
    )
    
    $
    878
 Provision for Income Taxes.
 10




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Net Loss.
 Six Months Ended June 30, 2005 Compared with the Six Months Ended June 30, 2004
 Revenues.
     Gross Profit.
 11




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Operating Costs and Expenses.
     Provision for Income Taxes.
 12




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Net Loss.
 LIQUIDITY AND CAPITAL RESOURCES
       CONTRACTUAL
    
    
    
    
    
    Remainder ofOBLIGATION
    
    TOTAL
    
    
    2005
    
    
    2006 - 2008
    
    
    2009 - 2011
    
    
    2012- 2015Operating leases
    
    $
    20,305
    
    
    $
    2,090
    
    
    $
    11,260
    
    
    $
    6,440
    
    
    $
    515Sub-leasing arrangements*
    
    
    (1,757
    )
    
    
    (69
    )
    
    
    (916
    )
    
    
    (772
    )
    
    
    $
    18,548
    
    
    $
    2,021
    
    
    $
    10,344
    
    
    $
    5,668
    
    
    $
    515
   Competition
  
    
    security analysis and audit products;
    
    Windows NT management and migration tools;
    
    network security scanning technology;
    
    security-policy products and services;
    
    shareware/freeware software products that perform some of the same functions as our software;
    
    enterprise resource planning application add-ons for SAP security administration and vulnerability assessment;
    
    LAN desktop management suites; and
    
    stand-alone inventory and asset management products.
   13




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Total Number ofShares Purchased as
    
    
    Maximum Dollarpart of Publicly
    
    
    Value that can StillTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    be Spent Under thePeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Programs
    
    
    ProgramApril 1, 2005 to
April 30, 2005
    
    
    571,025
    
    
    $
    2.97
    
    
    
    571,025
    
    
    $
    8,302,494May 1, 2005 to
May 31, 2005
    
    
    767,650
    
    
    $
    3.09
    
    
    
    767,650
    
    
    $
    5,932,368June 1, 2005 to
June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,932,368Total
    
    
    1,338,675
    
    
    $
    3.04
    
    
    
    1,338,675
  
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MATTER
    
    FOR
    
    AGAINST
    

ABSTAIN
/ WITHHELD
    

BROKER
NON-VOTESReelection of
Richard A. Hosley II
to Board of Directors
    
    
    44,007,709
    
    
    
    0
    
    
    
    2,426,537
    
    
    
    0Reelection of
Robert D. Repass
to Board of Directors
    
    
    43,882,357
    
    
    
    0
    
    
    
    2,551,889
    
    
    
    0
  
   Exhibit 10.1
    
    Form of Second Amended and Restated Executive Employment Agreement dated June 15,
2005 between BindView and Edward L. Pierce (incorporated by reference to Exhibit 10.45 to
BindViews Annual Report on Form 10-K for the year ended December 31, 2002 (the 2002 10-K)Exhibit 10.2
    
    Form of First Amended and Restated Change of Control Agreement dated June 15, 2005
between BindView and Edward L. Pierce (incorporated by reference to Exhibit 10.50 to the
2002 10-K)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, Chief Executive Officer
and Edward L. Pierce, Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
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BINDVIEW DEVELOPMENT CORPORATIONAugust 8, 2005
    By:
    /s/      KEVIN P. COHNKevin P. CohnVice President, Controller and Chief Accounting
Officer (Principal Accounting Officer) 16




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Exhibit Index
 ExhibitNumber
    
    DescriptionExhibit 10.1
    
    Form of Second Amended and Restated Executive Employment Agreement dated June 15,
2005 between BindView and Edward L. Pierce (incorporated by reference to Exhibit 10.45 to
BindViews Annual Report on Form 10-K for the year ended December 31, 2002 (the 2002 10-K)Exhibit 10.2
    
    Form of First Amended and Restated Change of Control Agreement dated June 15, 2005
between BindView and Edward L. Pierce (incorporated by reference to Exhibit 10.50 to the
2002 10-K)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, Chief Executive Officer
and Edward L. Pierce, Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002