<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
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SEAGATE TECHNOLOGY, INC.
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(Exact Name of the Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
001-11403 94-2612933
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(Commission File Number) (I.R.S. Employer Identification No.)
920 Disc Drive, Scotts Valley, California 95066
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(Address of Principal Executive Offices) (Zip Code)
(831) 438-6550
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
ITEM 5: OTHER EVENTS
On May 28, 1999, Seagate Technology, and its direct and indirect
subsidiaries, Seagate Software and the Seagate Software Network & Storage
Management Group, closed and consummated the Agreement and Plan of
Reorganization (the "Plan") dated as of October 5, 1998 with VERITAS Holding
Corporation ("New VERITAS") and VERITAS Software Corporation ("VERITAS"). The
Plan provided for the contribution by Seagate Technology, Seagate Software, 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 Technology less the historic
results of the NSMG business through the 11 months ended May 28, 1999, plus
Seagate Technology'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.
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<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 TECHNOLOGY, INC.
By: /s/ Thomas F. Mulvaney
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Thomas F. Mulvaney
Senior Vice President, General
Counsel and Corporate Secretary
<PAGE>
Seagate Technology, Inc.
Pro Forma Condensed Statement of Operations
Year Ended July 2, 1999
(in millions, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------------
Less: Equity
Network & Interest
Storage in Operations Purchase of
Seagate Management of New Minority
Technology Group VERITAS Interest Pro forma
---------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue........................................... $ 6,802 $ 202 $ $ $6,600
Cost of sales..................................... 5,250 17 1 (7) 5,234
Marketing and administrative...................... 534 99 435
Product development............................... 581 32 549
In-process research and development............... 2 - (2)(7) -
Amortization of goodwill and other intangibles.... 39 9 11 (7) 41
Restructuring..................................... 60 60
Unusual items..................................... 78 78
---------- ---------- ------------- ----------- ---------
Total operating expenses................ 6,544 157 10 6,397
---------- ---------- ------------- ----------- ---------
Income (loss) from operations..................... 258 45 (10) 203
Gain on contribution of NSMG to VERITAS, net...... 1,670 - (1,806)(3) 124 (8) -
12 (5)
Activity related to equity interest in VERITAS.... (119) (376)(1) (375)
85 (4)
35 (2)
Interest and other, net........................... 64 2 62
---------- ---------- ------------- ----------- ---------
Income (loss) before income taxes................. 1,873 47 (2,051) 115 (110)
Benefit from (provision for) income taxes......... (697) (27) 762 (6) (16)(6) 76
---------- ---------- ------------- ----------- ---------
Net income (loss)................................. $ 1,176 $ 20 $(1,289) $ 99 $ (34)
========== ========== ============= =========== =========
Net income (loss) per share:*
Basic........................................ $4.94 $(.14)
Diluted...................................... $4.53 $(.14)
Number of shares used in per share computations:*
Basic........................................ 237.9 242.8
Diluted...................................... 243.1 242.8
</TABLE>
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(*) 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 Technology Pro Forma
Condensed Financial Statements.
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<PAGE>
Seagate Technology, 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 Technology less the historic
results of the NSMG business through 11 months ended May 28, 1999, plus Seagate
Technology'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 Technology 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 Technology's
amortization of the difference between its 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 Technology 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, Seagate Technology 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
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<PAGE>
Seagate Technology, Inc.
Notes to Pro Forma Condensed Financial Statements
Software. In connection with the acquisition, Seagate Technology recorded
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 millions)
<TABLE>
<CAPTION>
<S> <C>
Computation of pro rata gain
Fair value of shares received.................................................................... $3,151
Times: Pro rata percentage to be accounted for at fair value .................................... 58.37%
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Adjusted fair value of securities received....................................................... $1,839
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Book value of NSMG............................................................................... $ 57
Times: Pro rata percentage to be accounted for at fair value..................................... 58.37%
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Book value exchanged............................................................................. $ 33
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Pro rata gain.................................................................................... $1,806
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Computation of investment in VERITAS
Book value of NSMG............................................................................... $ 57
Times: Pro rata percentage to be accounted for at book value..................................... 41.63%
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Portion of investment in VERITAS with no step up in basis........................................ $ 24
Plus: Adjusted fair value of securities received................................................. 1,839
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Investment in New VERITAS........................................................................ $1,863
======
</TABLE>
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<PAGE>
Seagate Technology, Inc.
Notes to Pro Forma Condensed Financial Statements
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
------ ------------ --------------
<S> <C> <C> <C>
Allocation of Investment to VERITAS
(in millions)
Tangible assets............................................. $ 114
Intangible assets:
Distribution channel................................... 9 4 years $ 2.2
Developed technology................................... 46 4 years 11.5
Trademark and workforce................................ 16 4 years 4.0
In-process research and development.................... 40
Allocation of Investment to the Network and Storage
Management Group:
Tangible assets............................................. 24
Intangible assets:
Distribution channel................................... 66 4 years 16.5
Developed technology................................... 92 4 years 23.0
Trademark and workforce................................ 14 4 years 3.5
In-process research and development.................... 45
Goodwill.................................................... 1,397 4 years 349.3
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Total original investment in VERITAS.................................. $1,863 $410
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Compensation Expense Accounting
(in millions, except share and per share data)
Amount
----------
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
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Total Seagate Software shares exchanged.................................................................. 2,257,245
Times: Exchange ratio into Seagate Technology stock ..................................................... 1.699
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Number of Seagate Technology shares issued............................................................... 3,385,059
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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............................................................................... $ 103
==========
</TABLE>
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<PAGE>
Seagate Technology, Inc.
Notes to Pro Forma Condensed Financial Statements
Acquisition of Minority Interest of Seagate Software
(in millions, except share and per share data)
<TABLE>
<CAPTION>
Annual
Amortization Amortization
Amount Life of Intangibles
------ ------------ --------------
Allocation of minority interest purchase price to intangible assets of
Seagate Software
<S> <C> <C> <C>
Distribution channel...................................................... $ 2 4 years $ 0.5
Developed technology...................................................... 4 4 years 1.0
Trademarks and workforce.................................................. 1 4 years 0.3
In-process research and development....................................... 2
Goodwill.................................................................. 45 4 years 11.2
Deferred tax liability.................................................... (2) (0.5)
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Total................................................................ $52 $12.5
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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
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Number of Seagate Technology shares issued..................................... 1,716,007
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Value per share of Seagate Technology common stock as of
June 9, 1999................................................................. $ 30.75
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Total value of Seagate Technology shares issued................................ $ 53
Less: Proceeds from assumed exercise of Seagate Software stock options........ (1)
----------
Total value of minority interest............................................... $ 52
==========
</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,
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<PAGE>
Seagate Technology, Inc.
Notes to Pro Forma Condensed Financial Statements
the expected income and associated risks. Associated risks included the inherent
difficulties and 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 Technology 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.......................................... 237.9
Shares issued pursuant to the exchange offer as adjusted for the period subsequent to the
issue date............................................................................ 4.9
------------
Total weighted average shares outstanding............................................... 242.8
============
</TABLE>
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<PAGE>
Seagate Technology, 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 to the NSMG contribution to
VERITAS.
(2) To reflect Seagate Software's equity in the income of New 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.
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