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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 1, 2006
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FAIR ISAAC CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Delaware 0-16439 94-1499887
-------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
901 Marquette Avenue, Suite 3200
Minneapolis, Minnesota 55402-3232
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 612-758-5200
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
Item 2.02. Results of Operations and Financial Condition.
Item 5.02. Departure of Directors or Principal Officers;
Appointment of Principal Officers.
Item 9.01. Financial Statements and Exhibits.
Signature
Exhibit Index
Exhibit 99.1
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2006, Fair Isaac Corporation (the "Company") reported
its financial results for the quarter and fiscal year ended September 30, 2006.
See the Company's press release dated November 1, 2006, which is furnished as
Exhibit 99.1 hereto and incorporated by reference in this Item 2.02.
Item 5.02. Departure of Directors or Principal Officers;
Appointment of Principal Officers.
(b) Thomas G. Grudnowski, who served as the Company's chief executive
officer, president, and a member of the Board, resigned from all of the
positions he held with the Company and its affiliated entities on November 1,
2006, effectively immediately. Mr. Grudnowski has agreed to remain as an
employee of the Company during a transition period ending on January 31, 2007.
(c) Charles M. Osborne, 53, has been appointed as the Company's chief
executive officer, on an interim basis and effective November 1, 2006. Mr.
Osborne has served the Company as a vice president and as chief financial
officer since May 2004 and will continue to hold these positions while serving
as interim chief executive officer. Additional information regarding Mr.
Osborne's business experience is set forth at the end of Part I to the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 2005 and
incorporated by reference in this Item 5.02. A copy of the press release
announcing Mr. Grudnowski's resignation and Mr. Osborne's appointment is
furnished as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Description
99.1 Press Release dated November 1, 2006
SIGNATURE
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 hereunto duly authorized.
FAIR ISAAC CORPORATION
By /s/ Charles M. Osborne
-------------------------------
Charles M. Osborne
Chief Executive Officer
Date: November 1, 2006
EXHIBIT INDEX
Exhibit No. Description Manner of Filing
- ----------- ----------- ----------------
99.1 Press Release dated November 1, 2006 Filed Electronically
Exhibit 99.1
Fair Isaac Announces Fourth Quarter and
Fiscal 2006 Results, New Stock Repurchase Authorization, and Departure
of Chief Executive Officer
MINNEAPOLIS--(BUSINESS WIRE)--Nov. 1, 2006--Fair Isaac Corporation
(NYSE:FIC), the leading provider of analytics and decision technology,
today announced the financial results for its fourth quarter and
fiscal year ended September 30, 2006. In addition, the board of
directors authorized a new $500 million share repurchase program.
The board of directors of Fair Isaac Corporation also announced
today that Thomas G. Grudnowski has stepped down as chief executive
officer and board member, effective immediately. Charles M. Osborne,
Fair Isaac's chief financial officer, has been named chief executive
officer on an interim basis.
"Tom Grudnowski came to Fair Isaac to revitalize and reinvigorate
the company. He brought a strategic vision and put in place a plan
that has given this company the capabilities to compete and win. We
thank Tom for his significant leadership over the past seven years as
we look forward to continued execution of the company's strategy,"
said A. George Battle, chairman, on behalf of the board.
The board will begin a search for a new chief executive officer
immediately. The interim chief executive officer, Mr. Osborne, has
been the chief financial officer of the company since May 2004 and has
over 32 years of business leadership experience. He will also retain
his chief financial officer responsibilities. The company has made no
additional structural changes or executive leadership changes at this
time.
Fourth Quarter Fiscal 2006 Results
The company reported fourth quarter revenues of $207.3 million in
fiscal 2006 versus $203.3 million reported in the prior year period.
Net income for the fourth quarter of fiscal 2006 totaled $22.1
million, or $0.35 per diluted share, versus $35.7 million, or $0.53
per diluted share, reported in the prior year period.
Fourth quarter fiscal 2006 results included share-based
compensation expense of $7.4 million after-tax, or $0.12 per diluted
share, due to the adoption of SFAS 123(R), and costs associated with
the previously announced lease exit of $8.3 million after-tax, or
$0.13 per diluted share.
Fiscal 2006 Results
The company reported revenues of $825.4 million versus $798.7
million in the prior year period. Net income for fiscal 2006 totaled
$103.5 million, or $1.59 per diluted share, versus $134.5 million, or
$1.86 per diluted share, reported in the prior year.
Fiscal 2006 results included share-based compensation expense of
$26.6 million after-tax, or $0.41 per diluted share, due to the
adoption of SFAS 123(R), and restructuring and acquisition-related
costs of $12.7 million after-tax, or $0.19 per diluted share.
Fiscal 2005 results included a decrease in diluted earnings per
share of $0.09 related to the adoption of EITF Issue No. 04-8, and an
increase in diluted earnings per share of $0.14 related to revisions
made to tax liabilities.
Fourth Quarter Fiscal 2006 Revenues Highlights
Revenues for fourth quarter fiscal 2006 across each of the
company's four operating segments were as follows:
-- Strategy Machine(R) Solutions revenues increased to $111.6
million in the fourth quarter compared to $109.6 million in
the prior year quarter, or by 1.8%, primarily due to an
increase in revenues from fraud, originations, and collections
and recovery solutions, offset by a decline associated with
insurance solutions and consumer scoring products.
-- Scoring Solutions revenues were $45.5 million in the fourth
quarter compared to $47.8 million in the prior year quarter,
or a decrease of 4.8%, primarily due to a decrease in revenues
derived from risk scoring services at the credit reporting
agencies.
-- Professional Services revenues increased to $37.0 million in
the fourth quarter from $33.4 million in the prior year
quarter, or by 10.9%, primarily due to an increase in revenues
from strategic consulting services and implementation services
for EDM products.
-- Analytic Software Tools revenues increased to $13.2 million in
the fourth quarter compared to $12.6 million in the prior year
quarter, or by 5.1%, due to an increase in revenues generated
from sales of the Blaze Advisor(TM) product.
Fiscal 2006 Revenues Highlights
Revenues for fiscal 2006 across each of the company's four
operating segments were as follows:
-- Strategy Machine(R) Solutions revenues increased to $457.2
million from $453.7 million in the prior year period, or by
0.8%, primarily due to growth in fraud solutions, consumer
scoring products and collections and recovery solutions,
offset by a decline associated with marketing services and
insurance solutions.
-- Scoring Solutions revenues increased to $177.2 million from
$167.3 million in the prior year period, or by 5.9%, primarily
due to an increase in revenues from risk scoring services at
the credit reporting agencies, and PreScore(R) Service.
-- Professional Services revenues increased to $145.3 million
from $129.6 million in the prior year period, or by 12.1%,
primarily due to an increase in revenues from strategic
consulting services and implementation services for EDM
products, offset by a decline in consulting services related
to precision marketing.
-- Analytic Software Tools revenues were $45.7 million compared
to $48.0 million in the prior year period, or a decrease of
4.8%, due to a decline in revenues generated from sales of the
Blaze Advisor(TM) product.
Bookings Highlights
The bookings for the fourth quarter were $112.6 million versus
$109.7 million in the same period last year. The company defines a
"new booking" as estimated future contractual revenues, including
agreements with perpetual, multi-year and annual terms. Management
regards the volume of new bookings achieved as one indicator of future
revenues, but they are not comparable to, nor should they be
substituted for, an analysis of the company's revenues.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents, and marketable security investments
were $267.8 million at September 30, 2006, as compared to $288.1
million at September 30, 2005. Significant changes in cash and cash
equivalents from September 30, 2005 include cash provided by
operations of $199.0 million for fiscal 2006 and $64.2 million
received from the exercise of stock options and stock issued under an
employee stock purchase plan. Cash used during fiscal 2006 includes
$31.4 million related to purchases of property and equipment and
$256.5 million to repurchase company stock.
Outlook
The company expects revenues for first quarter fiscal 2007 of
approximately $210.0 million and earnings per diluted share, to be
approximately $0.48. The company expects revenues for fiscal 2007 of
approximately $870.0 million and earnings per diluted share, to be
approximately $2.10. The earnings per diluted share, guidance include
compensation expense related to SFAS 123(R).
New Stock Repurchase Program
Fair Isaac also announced today that its Board of Directors has
approved a common stock repurchase program to acquire up to $500
million of the company's outstanding common stock. This new program
replaces the Company's previous repurchase program announced on August
29, 2006, which had authorized the company to acquire up to $250
million of outstanding stock. Under the previous program, Fair Isaac
purchased approximately 2.4 million shares of its common stock, at an
aggregate cost of approximately $85.3 million. The stock repurchase
program, which is open-ended, allows the company to repurchase its
shares from time to time in the open market and in negotiated
transactions.
Company to Host Conference Call
The company will host a conference call today at 5:00 p.m. Eastern
Time (4:00 p.m. Central Time/2:00 p.m. Pacific Time) to discuss its
fourth quarter and fiscal 2006 results, and outlook for fiscal 2007.
The call can be accessed live on the Investor Relations section of the
company's Web site at www.fairisaac.com, and a replay will be
available approximately two hours after the completion of the call
through November 29, 2006.
About Fair Isaac Corporation
Fair Isaac Corporation (NYSE:FIC) makes decisions smarter. The
company's solutions and technologies for Enterprise Decision
Management give businesses the power to automate more processes, and
apply more intelligence to every customer interaction. Through
increasing the precision, consistency and agility of their decisions,
Fair Isaac clients worldwide increase sales, build customer value, cut
fraud losses, manage credit risk, reduce operational costs, meet
changing compliance demands and enter new markets more profitably.
Founded in 1956, Fair Isaac powers hundreds of billions of decisions
each year in financial services, insurance, telecommunications,
retail, consumer branded goods, healthcare and the public sector. Fair
Isaac also helps millions of individuals manage their credit health
through the www.myfico.com website. Visit Fair Isaac online at
www.fairisaac.com.
Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements
contained in this news release that relate to Fair Isaac or its
business are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially,
including the company's ability to recruit and retain key technical
and managerial personnel, the maintenance of its existing
relationships and ability to create new relationships with customers
and key alliance partners, its ability to continue to develop new and
enhanced products and services, competition, regulatory changes
applicable to the use of consumer credit and other data, the
possibility that the anticipated benefits of acquisitions, including
expected synergies, will not be realized and other risks described
from time to time in Fair Isaac's SEC reports, including its Annual
Report on Form 10-K for the year ended September 30, 2005 and
quarterly report on Form 10-Q for the period ended June 30, 2006. If
any of these risks or uncertainties materialize, Fair Isaac's results
could differ materially from its expectations. Fair Isaac disclaims
any intent or obligation to update these forward-looking statements.
Fair Isaac, FICO, myFICO, Falcon, Blaze Advisor, TRIAD, Strategy
Machine and PreScore are trademarks or registered trademarks of Fair
Isaac Corporation in the United States and in other countries.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Quarters and Years Ended September 30, 2006 and 2005
(In thousands, except per share data)
(Unaudited)
Quarter Ended Year Ended
September 30, September 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Revenues $207,289 $203,297 $825,365 $798,671
---------- ---------- ---------- ----------
Operating expenses:
Cost of revenues 70,291 67,308 281,977 275,065
Research and
development 19,173 20,998 84,967 81,295
Selling, general and
administrative 66,967 55,621 260,845 223,400
Amortization of
intangible assets 6,366 6,260 25,191 25,900
Restructuring and
acquisition-related 12,862 - 19,662 -
---------- ---------- ---------- ----------
Total operating
expenses 175,659 150,187 672,642 605,660
---------- ---------- ---------- ----------
Operating income 31,630 53,110 152,723 193,011
Other income, net 1,416 1,076 6,469 1,077
---------- ---------- ---------- ----------
Income before income
taxes 33,046 54,186 159,192 194,088
Provision for income
taxes 10,993 18,438 55,706 59,540
---------- ---------- ---------- ----------
Net income $22,053 $35,748 $103,486 $134,548
========== ========== ========== ==========
Earnings per share:
Basic $0.36 $0.55 $1.63 $2.02
========== ========== ========== ==========
Diluted $0.35 $0.53 $1.59 $1.86 (a)
========== ========== ========== ==========
Shares used in
computing earnings per
share:
Basic 61,423 64,471 63,579 66,556
========== ========== ========== ==========
Diluted 62,506 67,216 65,125 73,584 (a)
========== ========== ========== ==========
Share-based
compensation expense
included in the above
operating expense
captions are as
follows (b):
Cost of revenues $2,705 $513 $10,970 $703
Research and
development 1,374 79 6,435 166
Selling, general and
administrative 7,982 1,243 24,680 2,058
---------- ---------- ---------- ----------
Total share-based
compensation expense $12,061 $1,835 $42,085 $2,927
========== ========== ========== ==========
(a) The computation of diluted earnings per share for the year ended
September 30, 2005 includes 4.5 million shares of common stock
issuable upon conversion of our senior convertible notes, along with
a corresponding adjustment to net income to add back related interest
expense, net of tax, of approximately $2.5 million. On March 31,
2005, the company successfully completed an exchange offer for
approximately 99.9% of the principal amount of its senior convertible
notes for new senior convertible notes. The dilutive effect of the
new senior convertible notes has been calculated using the treasury
stock method since the effective date of the exchange.
(b) Effective October 1, 2005, the company adopted SFAS 123(R),
"Share-Based Payment", which required the company to record
compensation expense for all share-based awards. Results from prior
periods have not been restated.
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2006 and 2005
(In thousands)
(Unaudited)
September 30, September 30,
2006 2005
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ASSETS:
Current assets:
Cash and cash equivalents $75,154 $82,880
Marketable securities 152,141 146,088
Receivables, net 165,806 156,375
Prepaid expenses and other current
assets 20,209 27,337
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Total current assets 413,310 412,680
Marketable securities and investments 40,479 59,087
Property and equipment, net 56,611 48,436
Goodwill and intangible assets, net 786,062 803,306
Other noncurrent assets 24,743 27,552
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$1,321,205 $1,351,061
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and other accrued
liabilities $53,809 $50,947
Senior convertible notes 400,000 -
Accrued compensation and employee
benefits 34,936 31,373
Deferred revenue 48,284 55,837
------------- -------------
Total current liabilities 537,029 138,157
Senior convertible notes - 400,000
Other noncurrent liabilities 14,148 7,810
------------- -------------
Total liabilities 551,177 545,967
Stockholders' equity 770,028 805,094
------------- -------------
$1,321,205 $1,351,061
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FAIR ISAAC CORPORATION
REVENUES BY SEGMENT
For the Quarters and Years Ended September 30, 2006 and 2005
(In thousands)
(Unaudited)
Quarter Ended Year Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Strategy machine solutions $111,553 $109,578 $457,211 $453,734
Scoring solutions 45,483 47,758 177,152 167,270
Professional services 37,035 33,383 145,271 129,636
Analytic software tools 13,218 12,578 45,731 48,031
--------- --------- --------- ---------
Total revenues $207,289 $203,297 $825,365 $798,671
========= ========= ========= =========
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2006 and 2005
(In thousands)
(Unaudited)
Year Ended
September 30,
---------------------
2006 2005
---------- ----------
Cash flows from operating activities:
Net income $103,486 $134,548
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 48,805 51,517
Changes in operating assets and liabilities,
net of acquisitions (2,096) (5,082)
Other, net 48,847 33,099
---------- ----------
Net cash provided by operating activities 199,042 214,082
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (31,409) (16,414)
Cash paid for acquisitions, net of cash acquired - (41,312)
Net activity from marketable securities 13,882 32,003
Other, net 500 22,822
---------- ----------
Net cash used in investing activities (17,027) (2,901)
---------- ----------
Cash flows from financing activities:
Proceeds from issuances of common stock 64,200 71,867
Repurchases of common stock (256,487) (328,537)
Other, net 1,994 (5,316)
---------- ----------
Net cash used in financing activities (190,293) (261,986)
---------- ----------
Effect of exchange rate changes on cash 552 (385)
---------- ----------
Decrease in cash and cash equivalents (7,726) (51,190)
Cash and cash equivalents, beginning of period 82,880 134,070
---------- ----------
Cash and cash equivalents, end of period $75,154 $82,880
========== ==========
Fair Isaac Corporation
Baseline Revenue Analysis
(In thousands)
- ----------------------------------------------------------------------
BKG'05 Q1A Q2A Q3A Q4A FY05
- ----------------------------------------------------------------------
Total
Baseline
Prior to
'05 $176,161 $164,445 $158,912 $150,950 $650,468
- ----------------------------------------------------------------------
Q1-2005A $115,363 19,385 12,916 9,120 7,622 49,043
Q2-2005A 136,560 18,660 12,402 8,312 39,374
Q3-2005A 143,318 23,373 16,259 39,632
Q4-2005A 109,728 20,154 20,154
- ----------------------------------------------------------------------
Total FY05 504,969 19,385 31,576 44,895 52,347 148,203
- ----------------------------------------------------------------------
Total
Baseline
Prior to
'06 504,969 195,546 196,021 203,807 203,297 798,671
- ----------------------------------------------------------------------
Q1-2006A
Q2-2006A
Q3-2006A
Q4-2006A
- ----------------------------------------------------------------------
Total FY06
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand
Total $504,969 $195,546 $196,021 $203,807 $203,297 $798,671
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- ----------------------------------------------------------------------
BKG'06 Q1A Q2A Q3A Q4A FY06
- ----------------------------------------------------------------------
Total
Baseline
Prior to
'05 $149,484 $143,730 $141,099 $140,237 $574,550
- ----------------------------------------------------------------------
Q1-2005A 6,205 4,261 3,765 2,560 16,791
Q2-2005A 6,194 5,975 5,238 4,525 21,932
Q3-2005A 7,404 7,198 5,478 4,524 24,604
Q4-2005A 11,482 10,521 8,339 6,428 36,770
- ----------------------------------------------------------------------
Total FY05 31,285 27,955 22,820 18,037 100,097
- ----------------------------------------------------------------------
Total
Baseline
Prior to
'06 180,769 171,685 163,919 158,274 674,647
- ----------------------------------------------------------------------
Q1-2006A $127,778 22,021 15,296 8,988 6,548 52,853
Q2-2006A 106,024 21,176 12,674 8,716 42,566
Q3-2006A 94,480 21,547 13,009 34,556
Q4-2006A 112,572 20,743 20,743
- ----------------------------------------------------------------------
Total FY06 440,854 22,021 36,472 43,209 49,016 150,718
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Grand
Total $440,854 $202,790 $208,157 $207,128 $207,290 $825,365
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A = Actual
CONTACT: Fair Isaac Corporation, Minneapolis
Investors & Analysts:
John D. Emerick, Jr., 612-758-5560
johnemerick@fairisaac.com