<PAGE>
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) May 28, 1999
-------------------------------
SEAGATE SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Exact Name of the Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
77-0397623
- ------------------------------ -------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
915 Disc Drive, Scotts Valley, California 95066
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(831) 438-6550
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5: OTHER EVENTS
On May 28, 1999, Seagate Software, its subsidiary the Network & Storage
Management Group, and its parent company Seagate Technology, closed the
Agreement and Plan of Reorganization (the "Plan") dated October 5, 1998 with
VERITAS Holding Corporation ("New VERITAS") and VERITAS Software Corporation
("VERITAS"). The Plan provided for the contribution by Seagate Software, Seagate
Technology, and certain of their respective subsidiaries to New VERITAS of (a)
the outstanding stock of the Network & Storage Management Group and certain
other subsidiaries of Seagate Software and (b) those assets used primarily in
the network and storage management business of Seagate Software (the "NSMG
business"), in consideration for the issuance of shares of Common Stock of New
VERITAS to Seagate Software and the offer by New VERITAS to grant options to
purchase Common Stock of New VERITAS to certain of Seagate Software's employees
who become employees of New VERITAS or its subsidiaries. As part of the Plan,
New VERITAS assumed certain liabilities of the NSMG business. The Plan was
structured to qualify as a tax-free exchange.
Subsequent to the consummation, all outstanding securities of New VERITAS
were assumed and converted into common stock of VERITAS with identical rights,
preferences and privileges, on a share for share basis. As a result of the
contribution of the NSMG business to New VERITAS, Seagate Software received a
total of 69,148,208 shares of VERITAS common stock and former employees of the
NSMG business received options to purchase an aggregate of 6,945,048 shares of
VERITAS common stock. Share and option amounts for VERITAS have been adjusted to
reflect the two-for-one stock split effective July 9, 1999 by VERITAS.
In a separate but related transaction to the NSMG contribution to VERITAS,
on June 9, 1999, Seagate Technology exchanged 5,275,772 shares of its common
stock for 3,267,255 of the outstanding shares of Seagate Software common stock
owned by employees, directors, and consultants of Seagate Software. The
exchange ratio was determined based on the estimated value of Seagate Software
common stock divided by the fair market value of Seagate Technology common
stock.
The pro forma financial information presented below is presented as if the
contribution of NSMG to VERITAS and the purchase of the Seagate Software
minority interest by Seagate Technology had occurred at the beginning of fiscal
1999. The pro forma statements of operations for the twelve months ended July
2, 1999, include the historical results of Seagate Software less the historic
results of the NSMG business through the 11 months ended May 28, 1999, plus
Seagate Software's equity interest in the pro forma results of VERITAS,
including recurring amortization of related goodwill and intangibles plus
recurring amortization of goodwill and intangibles associated with the purchase
of shares of Seagate Software stock by Seagate Technology.
2
<PAGE>
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 hereunto duly authorized.
Dated: September 3, 1999 SEAGATE SOFTWARE, INC.
By: /s/ Ellen E. Chamberlain
-------------------------
Ellen E. Chamberlain
Senior Vice President and
Chief Financial Officer
<PAGE>
Seagate Software, Inc.
Pro Forma Condensed Statement of Operations
Year Ended July 2, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------------
Less:
Network & Equity Interest
Storage in Operations Purchase of
Seagate Management of New Minority
Software, Inc. Group VERITAS Interest Pro forma
-------------- ----------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Licensing..................................... $ 274,431 $202,305 $ $ $ 72,126
Licensing from Seagate Technology............. 7,738 7,738
Maintenance, support and other................ 61,304 61,304
---------- ---------
Total revenues............................... 343,473 141,168
Cost of revenues
Licensing..................................... 12,597 9,971 2,626
Licensing from Seagate Technology............. 433 430 3
Maintenance, support and other................ 27,522 3,324 24,198
Amortization of developed technologies........ 12,196 2,877 879 (7) 10,198
---------- -------- ------------ ---------
Total cost of revenues....................... 52,748 16,602 879 37,025
---------- -------- ------------ ---------
Gross profit.................................... 290,725 185,703 (879) 104,143
Operating expenses:
Sales and marketing........................... 159,938 79,616 80,322
Research and development...................... 51,524 32,515 19,009
General and administrative.................... 34,055 18,808 15,247
In-process research and development........... 2,353 - (2,353)(7) -
Amortization of goodwill and other intangibles 14,917 9,254 11,050 (7) 16,713
---------- -------- ------------ ---------
Total operating expenses..................... 262,787 140,193 8,697 131,291
---------- -------- ------------ ---------
Income(loss) from operation..................... 27,938 45,510 (9,576) (27,148)
Gain related to contribution of NSMG to
VERITAS, net.................................. 1,670,301 12,025 (5) 123,839 (8) -
(1,806,165)(3)
Activity relating to equity interest in
VERITAS....................................... (118,888) (375,983)(1) (375,712)
84,707 (4)
34,452 (2)
Interest and other, net......................... 1,558 1,568 (10)
---------- -------- ------------ ------------ ---------
Income (loss) before income taxes............... 1,580,909 47,078 (2,050,964) 114,263 (402,870)
Benefit from (provision for) income taxes....... (641,920) (27,095) 762,161 (6) (16,056)(6) 131,280
---------- -------- ------------ ------------ ---------
Net income (loss)............................... $ 938,989 $ 19,983 $ (1,288,803) $ 98,207 $(271,590)
========== ======== ============ ============ =========
Net income (loss) per share:*
Basic ....................................... $1,703.53 $(80.86)
Diluted....................................... $14.89 $(80.86)
Number of shares used in per share computations:*
Basic ....................................... 551.2 3,353
Diluted ..................................... 63,047 3,353
</TABLE>
(*) The Network & Storage Management Group is an operating division of Seagate
Software and it has no formal capital structure; accordingly, share and per
share information is not presented.
See accompanying Notes to Seagate Software Pro Forma
Condensed Financial Statements.
3
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
1. Pro Forma Basis of Presentation
The pro forma financial information presented below is presented as if the
contribution of NSMG to VERITAS and the purchase of the Seagate Software
minority interest by Seagate Technology had occurred at the beginning of fiscal
1999. The pro forma statements of operations for the twelve months ended July 2,
1999, include the historical results of Seagate Software less the historic
results of the NSMG business through the 11 months ended May 28, 1999, plus
Seagate Software's equity interest in the pro forma results of VERITAS,
including recurring amortization of related goodwill and intangibles plus
recurring amortization of goodwill and intangibles associated with the purchase
of shares of Seagate Software stock by Seagate Technology. The pro forma
statement of operations excludes the effect of non-recurring items relating to
the Gain on contribution of NSMG to VERITAS, net, the write-off of amounts
pertaining to in-process research and development and compensation expense.
Seagate Software will include in its financial results its share of the net
income or loss of VERITAS, excluding certain NSMG purchase accounting related
amounts recorded by VERITAS, but including Seagate Software's amortization of
the difference between the recorded investment and the underlying assets and
liabilities of VERITAS. Because of practicality considerations, the net income
or loss of VERITAS will be included in the results of Seagate Software on a one
quarter lag basis. The pro forma results have been prepared consistent with a
one quarter lag basis. Accordingly, the results of VERITAS (including the
results of NSMG) included in the pro forma results for fiscal 1999 are the
results for the period from April 1998 to March 1999.
In a separate but related transaction to the NSMG contribution to VERITAS, on
June 9, 1999, the Company exchanged 5,275,772 shares of its common stock for
3,267,155 of the outstanding shares of Seagate Software common stock owned by
employees, directors and consultants of Seagate Software. The exchange ratio was
determined based on the estimated value of Seagate Software common stock divided
by the fair market value of Seagate Technology common stock.
The estimated value of Seagate Software common stock exchanged into Seagate
Technology common stock was determined based upon the sum of the fair value of
the NSMG business, as measured by the fair value of the shares received from
VERITAS, plus the estimated fair value of the Information Management Group
("IMG") of Seagate Software as determined by the Seagate Software Board of
Directors and as approved by the Seagate Technology Board of Directors, plus the
assumed proceeds from the exercise of all outstanding Seagate Software stock
options, divided by the number of fully converted shares of Seagate Software.
The Boards of Directors of Seagate Software and Seagate Technology considered a
number of factors in assessing the estimated fair value of the IMG business,
including historical and projected revenues, earnings and cash flows, as well as
other factors and consultations with financial advisors.
The fair value of the Seagate Software shares acquired less the original
purchase price paid by the employees was recorded as compensation expense for
those shares outstanding and vested less than six months. The purchase of
Seagate Software shares outstanding and vested more than six months was
accounted for as the purchase of a minority interest and, accordingly, the fair
value of the shares exchanged has been allocated to all of the identifiable
tangible and intangible assets and liabilities of Seagate Software. In
connection with the acquisition, Seagate Software recorded
4
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
compensation expense amounting to approximately $123.8 million and wrote off
purchased research and development amounting to $2.4 million in the fourth
quarter of fiscal 1999. Associated intangible assets and goodwill are being
amortized to operations over four years.
Contribution of the Network & Storage Management Group Business to VERITAS
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Computation of pro rata gain
Fair value of shares received ................................................... $3,151,350
Times: Pro rata percentage to be accounted for at fair value ................... 58.37%
----------
Adjusted fair value of securities received ...................................... $1,839,594
----------
Book value of NSMG .............................................................. $ 57,266
Times: Pro rata percentage to be accounted for at fair value .................... 58.37%
----------
Book value exchanged ............................................................ $ 33,429
----------
Pro rata gain ................................................................... $1,806,165
==========
Computation of investment in VERITAS
Book value of NSMG .............................................................. $ 57,266
Times: Pro rata percentage to be accounted for at book value .................... 41.63%
----------
Portion of investment in VERITAS with no step up in basis ....................... $ 23,837
Plus: Adjusted fair value of securities received ................................ 1,839,594
----------
Investment in VERITAS ........................................................... $1,863,431
==========
</TABLE>
5
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
<TABLE>
<CAPTION>
Annual
Allocation of Investment Amortization Amortization
(in millions) Amount Life of Intangibles
-------------- -------------- --------------
<S> <C> <C> <C>
Allocation of Investment to VERITAS
Tangible assets .......................................... $ 114,236
Intangible assets:
Distribution channel .................................. 8,949 4 years $ 2,237
Developed technology .................................. 46,079 4 years 11,520
Trademark and workforce ............................... 16,608 4 years 4,152
In-process research and development ................... 39,669
Allocation of Investment to the Network and Storage Management
Group
Tangible assets .......................................... 23,837
Intangible assets:
Distribution channel .................................. 65,934 4 years 16,483
Developed technology .................................. 92,033 4 years 23,008
Trademark and workforce ............................... 13,903 4 years 3,476
In-process research and development ................... 45,038
Goodwill ................................................. 1,397,145 4 years 349,286
---------- --------
Total original investment in VERITAS............................ $1,863,431 $410,162
========== ========
</TABLE>
Compensation Expense Accounting
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Amount
----------------
<S> <C>
Seagate Software options exercised and exchanged for Seagate Technology stock............ 2,240,470
Plus: Seagate Software stock held for less than 6 months and exchanged for Seagate
Technology stock........................................................................ 16,775
----------
Total Seagate Software shares exchanged.................................................. 2,257,245
Times: Exchange ratio into Seagate Technology stock...................................... 1.699
----------
Number of Seagate Technology shares issued............................................... 3,385,059
----------
Value per share of Seagate Technology common stock on June 9, 1999....................... $ 30.75
----------
Less: Average exercise price paid per Seagate Technology share.......................... $ (4.01)
----------
Average compensation expense per Seagate Technology share issued......................... $ 26.74
----------
Total compensation expense............................................................... $ 102,550
==========
</TABLE>
6
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
Acquisition of Minority Interest of Seagate Software
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
--------------- ------------ --------------
<S> <C> <C> <C>
Allocation of minority interest purchase price to intangible assets
of Seagate Software:
Distribution channel ............................................ $ 2,080 4 years $ 520
Developed technology ............................................ 3,836 4 years 959
Trademarks and workforce ........................................ 847 4 years 212
In-process research and development ............................. 2,353
Goodwill ........................................................ 45,291 4 years 11,323
Deferred tax liability .......................................... (2,653) (663)
---------- -------
Total .......................................................... $ 51,754 $12,351
========== =======
Value of minority interest
Number of Seagate Software shares and options exchanged for Seagate
Technology stock held by former employees, consultants and shares
held more than six months by employees ......................... 1,010,010
Times: Exchange ratio in Seagate Technology Stock ................ 1.699
----------
Number of Seagate Technology shares issued.......................... 1,716,007
==========
Value per share of Seagate Technology common stock as of
June 9, 1999 ..................................................... $30.75
----------
Total value of Seagate Technology shares issued ................... $ 52,767
Less: Proceeds from assumed exercise of Seagate Software stock
options............................................................ (1,013)
----------
Total value of minority interest .................................. $ 51,754
==========
</TABLE>
Method for allocating purchase price
Tangible net assets of VERITAS principally include cash and investments,
accounts receivable, fixed assets and other current assets. Liabilities
principally include accounts payable, accrued compensation, and other accrued
liabilities.
To estimate the value of the developed technology, the expected future cash
flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the technology,
existing and future markets, and assessments of the life cycle stage of the
technology. The developed technology is being amortized on the straight-line
basis over its estimated useful life (four years) which is expected to exceed
the ratio of current revenues to the total of current and anticipated revenues.
The value of the distribution networks and original equipment manufacturer
agreements was estimated by considering, among other factors, the size of the
current and potential future customer bases, the quality of existing
relationships with customers, the historical costs to develop customer
relationships, the expected income and associated risks. Associated risks
included the inherent difficulties and
7
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
uncertainties in transitioning business relationships and risks related to the
viability of and potential changes to future target markets.
The value of trademarks was estimated by considering, among other factors, the
assumption that in lieu of ownership of a trademark, a company would be willing
to pay a royalty in order to exploit the related benefits of such trademark.
The value of the assembled workforce was estimated as the costs to replace the
existing employees, including recruiting, hiring, and training costs for each
category of employee.
The value allocated to projects identified as in-process technology at VERITAS
and Seagate Software, for the minority interest acquired, were charged to
expense in the fourth quarter of fiscal 1999. These write-offs were necessary
because the acquired technologies had not reached technological feasibility at
the date of purchase and have no future alternative uses. Seagate Software
expects that the acquired in-process research and development will be
successfully developed, but there can be no assurance that commercial viability
of these products will be achieved.
The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements. The value of the purchased in-process technology for
VERITAS was estimated as the projected net cash flows related to such products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products, excluding revenues
attributable to future development efforts. These cash flows were then
discounted back to their net present value. The projected net cash flows from
such projects were based on management's estimates of revenues and operating
profits related to such projects.
Goodwill is calculated as the residual difference between the estimated
amount paid and the values assigned to identified tangible and intangible assets
and liabilities.
2. Pro forma net income per share
The Seagate Software Pro Forma Condensed Statements of Operations have been
prepared as if the exchange of Seagate Software shares for Seagate Technology
shares pursuant to the exchange offer and the NSMG combination had occurred at
the beginning of fiscal 1999.
The pro forma weighted average shares outstanding assumes the following (in
millions):
<TABLE>
<CAPTION>
Year
Ended
July 2, 1999
---------------
<S> <C>
Weighted average historical shares outstanding ..................................... 1,551
Adjustment for weighted shares acquired by Seagate
Technology pursuant to the exchange offer ......................................... 2,802
-----
Total weighted average shares outstanding .......................................... 3,353
=====
</TABLE>
8
<PAGE>
Seagate Software, Inc.
Notes to Pro Forma Condensed Financial Statements
3. Pro forma adjustments
The Seagate Technology pro forma condensed financial statements give effect to
the following pro forma adjustments:
(1) To reflect a full year of Seagate Software's amortization of intangibles
and goodwill resulting from the NSMG contribution to VERITAS.
(2) To reflect of Seagate Software's equity in the income of VERITAS
(including NSMG) prior to the effect of the amortization of intangible
assets and including goodwill, associated with the NSMG transaction.
(3) To reflect the elimination of the step-up in basis of the investment in
VERITAS.
(4) To reflect the elimination of the write-off of in-process research and
development resulting from the NSMG contribution to VERITAS.
(5) Transaction costs associated with the NSMG contribution to VERITAS.
(6) To reflect the change in book/tax differences related to the investment
in VERITAS.
(7) To reflect a full year of amortization of developed technology, and other
intangibles and goodwill and to eliminate the write-off of in-process
research and development resulting from the exchange of Seagate Software
shares for Seagate Technology shares pursuant to the exchange offer. The
purchase of the minority interest by Seagate Technology was recorded
using the fair values of Seagate Software common stock and Seagate
Technology common stock.
(8) To reflect the compensation expense related to stock and other agreements
issued in connection with the purchase of the minority interest.
9
