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
August 1, 1995
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(Date of Report [Date of earliest event reported])
COMPUTER ASSOCIATES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-10180 13-2857434
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1 Computer Associates Plaza, Islandia, NY 11788-7000
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(Address of principal executive office) (Zip Code)
(516) 342-5224
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(Registrant's telephone, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE> 1
Item 2 Acquisition or Disposition of Assets
(a) On June 1, 1995, Computer Associates International, Inc.
(the "Registrant"), through a wholly owned subsidiary, VR126, Inc.
("VR126"), commenced a tender offer for all of the issued and
outstanding shares of Legent Corporation ("Legent") common stock at
a price of $47.95 per share in cash. The purchase price was
determined through a series of arms length negotiations between
officers and representatives of the Registrant and Legent's
representatives and Board of Directors. The offer was made
pursuant to a definitive Agreement and Plan of Merger dated as of
May 25, 1995 (the "Agreement") among the Registrant, VR126 and
Legent. On August 1, 1995, the Registrant through VR126 accepted
for payment approximately 37.9 million shares of Legent outstanding
common stock validly tendered in the offer representing
approximately 98% of the outstanding shares (approximately 90% on
a fully diluted basis).
Legent is engaged in the design, development, marketing and support
of a broad range of computer software products for the management
of information systems. Legent markets software products which are
used to manage mainframe, midrange, server, workstation and PC
systems deployed throughout a business enterprise. Legent's
products and services are designed to improve the efficiency of
computer resources by providing data integrity, managing
applications, moving files among users, providing back-up and
security capabilities, enhancing system utilization, monitoring
processing performance and accounting for the usage of system
resources. Legent's assets consist of cash, receivables, property
and equipment, purchased software products and other tangible and
intangible assets. Legent's liabilities consist primarily of trade
payables and normal accruals. The purchase price and associated
charges will be allocated among the identifiable tangible and
intangible assets of Legent based on their fair market value at the
acquisition date under the purchase method of accounting for
business combinations. The cost of purchased research and
development for that portion of the acquired technology that has
not reached the working model stage and has no alternative future
use will be written off against the Registrant's earnings in its
second quarter ending September 30, 1995. The after-tax charge
against earnings is initially estimated to be approximately $800
million, or approximately $5.00 per share.
<PAGE> 2
The pending merger of VR126 and Legent will become effective as soon
as practicable after the satisfaction of the conditions set forth in,
and subject to the terms of, the Agreement, but in no event earlier
November 6, 1995. Once the pending merger becomes effective,
Legent will become a wholly owned subsidiary of the Registrant.
The total funds needed to consummate the offer and the merger is
approximately $1.8 billion. The Registrant has obtained and will
continue to obtain such funds from the Registrant's general
corporate funds and drawings under the Registrant's $2 billion
Credit Agreement dated as of July 24, 1995, between the Registrant,
the banks and other financial institutions party thereto and Credit
Suisse, as Agent. The names of the other lenders are set forth in
the Credit Agreement. The Credit Agreement is a five-year reducing
revolving credit agreement initially having a borrowing cost at
LIBOR plus 5/8%. The Credit Agreement calls for the maintenance of
certain financial conditions and ratios.
(b) Legent utilized its assets in its computer software business,
and the Registrant intends to continue such use in its own software
business.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial statements of business acquired.
The required financial statements of Legent were previously
reported in Legent's Annual Report on Form 10-K for the year ended
September 30, 1994 and Quarterly Reports on Form 10-Q for the
quarters ended December 31, 1994 and March 31, 1995, respectively,
and incorporated herein by reference.
(b) Pro forma financial information.
The following unaudited pro forma combined condensed balance sheet
as of June 30, 1995, and the unaudited pro forma combined condensed
income statements for the year ended March 31, 1995 and the quarter
ended June 30, 1995, give effect to the merger of Legent as if it
had occurred on June 30, 1995 for purposes of the balance sheet and
as of April 1, 1994 and April 1, 1995, respectively, for purposes
of the income statements. The unaudited pro forma information is
based on the historical financial statements of the Registrant and
Legent giving effect to the transaction under the "purchase" method
of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
<PAGE> 3
The Registrant has a fiscal year end of March 31 while Legent has
a fiscal year end of September 30. As a result, the operations for
the twelve months ended March 31, 1995 for the Registrant have been
combined with the twelve months ended March 31, 1995 for Legent.
Legent's twelve month period was derived by adding Legent's six
months ended September 30, 1994 with its six months ended March 31,
1995.
The after-tax charge of $800 million resulting from purchased
research and development costs has been reflected in stockholder's
equity in the pro forma consolidated condensed balance sheet at
June 30, 1995. This same charge has been excluded from the pro
forma consolidated condensed income statements for the year ended
March 31, 1995 and the quarter ended June 30, 1995 consistent with
Rule 11-02 of Regulation S-X.
The unaudited pro forma statements have been prepared by the
Registrant's management based upon the financial information of the
Registrant and Legent. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the
financial position or results of operations which would actually
have been reported had the acquisition been in effect during these
periods or which may be reported in the future. These unaudited
pro forma financial statements should be read in conjunction with
the separate notes to unaudited financial statements and related
notes thereto of the Registrant and Legent.
<PAGE> 4
<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and Legent
As of June 1995
(Unaudited)
(Amounts in Thousands)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant Legent(a) Adjustments Results
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. 65,149 114,450 ( 49,110)(b) 130,489
Marketable securities..................... 181,794 25,068 206,862
Trade and installment accounts
receivable - net........................ 664,861 187,674 852,535
Inventories and other current assets...... 60,049 57,592 117,641
----------- ----------- ------------- ----------
TOTAL CURRENT ASSETS................... 971,853 384,784 ( 49,110) 1,307,527
INSTALLMENT ACCOUNTS
RECEIVABLE, due after one year - net.... 1,150,708 107,007 1,257,715
PROPERTY AND EQUIPMENT - net.............. 334,462 108,445 442,907
PURCHASED SOFTWARE PRODUCTS - net......... 328,386 97,171 485,000 (c) 910,557
GOODWILL - net............................ 295,707 335,020 (c) 630,727
INVESTMENT AND OTHER NONCURRENT ASSETS.... 87,219 71,544 158,763
----------- ----------- ------------- ----------
TOTAL ASSETS 3,168,335 768,951 770,910 4,708,196
=========== =========== ============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LOANS PAYABLE - BANKS..................... 105,000 1,729,908 (b) 1,834,908
OTHER CURRENT LIABILITIES................. 580,807 79,279 430,022 (d) 1,090,108
LONG TERM DEBT AND OTHER.................. 48,140 12,653 60,793
DEFERRED INCOME TAXES..................... 466,906 88,000 (c) 554,906
DEFERRED MAINTENANCE...................... 302,366 186,022 ( 186,022)(c) 302,366
STOCKHOLDERS' EQUITY...................... 1,665,116 490,997 ( 1,290,998)(c) 865,115
----------- ----------- ------------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY................... 3,168,335 768,951 770,910 4,708,196
=========== =========== ============= ==========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE> 5
<TABLE>
Pro Forma Condensed Combined Income Sheets
of the Registrant and Legent
For the twelve months ended March 1995
(Unaudited)
<CAPTION>
(In thousands, except per share amounts)
Historical Historical Pro Forma Pro Forma
Registrant Legent(a) Adjustments(l) Results
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Product revenue and other related income.. 1,903,349 289,097 2,192,446
Maintenance fees.......................... 719,643 222,455 ( 124,703)(e) 817,395
----------- ----------- ------------- ----------
TOTAL REVENUE.......................... 2,622,992 511,552 ( 124,703) 3,009,841
----------- ----------- ------------- ----------
Costs and Expenses:
Selling, marketing and admin.............. 1,051,096 276,592 ( 107,698)(g) 1,219,990
Product development....................... 232,785 43,692 276,477
Commissions and royalties................. 127,436 34,274 161,710
Depreciation and amortization............. 257,699 50,635 214,908 (h) 523,242
Interest expense (income), net............ 8,057 ( 7,165) 141,794 (j) 142,686
Purchased research and development........ 249,300 249,300
Restructuring Charge...................... 16,935 16,935
----------- ----------- ------------- ----------
TOTAL COSTS AND EXPENSES............... 1,926,373 414,963 249,004 2,590,340
----------- ----------- ------------- ----------
Income (loss) before taxes........ 696,619 96,589 ( 373,707) 419,501
Income tax expense (benefit)...... 264,715 34,335 ( 143,835)(k) 155,215
----------- ----------- ------------- ----------
NET INCOME (LOSS).............. 431,904 62,254 ( 229,872) 264,286
=========== =========== ============= ==========
NET INCOME PER SHARE........... 2.57 1.67 1.57
=========== =========== ==========
SHARES USED IN COMPUTATION..... 168,038 37,190 168,038
=========== =========== ==========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE> 6
<TABLE>
Pro Forma Condensed Combined Income Sheets
of the Registrant and Legent
For the three months ended June 1995
(Unaudited)
<CAPTION>
(In thousands, except per share amounts)
Historical Historical Pro Forma Pro Forma
Registrant Legent(a) Adjustments(l) Results
----------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Product revenue and other related income.. 396,802 57,708 454,510
Maintenance fees.......................... 180,650 58,527 ( 51,583)(f) 187,594
----------- ----------- ------------- ----------
TOTAL REVENUE.......................... 577,452 116,235 ( 51,583) 642,104
----------- ----------- ------------- ----------
Costs and Expenses:
Selling, marketing and admin.............. 277,279 71,607 ( 26,924)(g) 321,962
Product development....................... 60,940 12,472 73,412
Commissions and royalties................. 26,081 7,073 33,154
Depreciation and amortization............. 71,222 13,438 53,727 (i) 138,387
Interest expense (income), net............ 1,376 ( 2,209) 35,448 (j) 34,615
----------- ----------- ------------- ----------
TOTAL COSTS AND EXPENSES............... 436,898 102,381 62,251 601,530
----------- ----------- ------------- ----------
Income (loss) before taxes........ 140,554 13,854 ( 113,834) 40,574
Income tax expense (benefit)...... 52,005 4,987 ( 41,979)(k) 15,013
----------- ----------- ------------- ----------
NET INCOME (LOSS).............. 88,549 8,867 ( 71,855) 25,561
=========== =========== ============= ==========
NET INCOME PER SHARE........... .53 .24 .15
=========== =========== ==========
SHARES USED IN COMPUTATION..... 168,446 37,550 168,446
=========== =========== ==========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE> 7
Computer Associates International, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(a) Certain reclassifications were made to conform to the Registrant's
headings.
(b) Represents borrowings, net of cash, used to finance the acquisition of
Legent common stock.
(c) Estimated valuation adjustments of Legent assets and liabilities
resulting from the preliminary allocation of the purchase price,
elimination of stockholders' equity and the estimated $800 million
after tax charge taken at time of acquisition for purchased research
and development costs. See (l) below for additional information.
(d) Accrued expenses associated with preliminary cost estimates, including
severence costs, termination of leases, cost to provide maintenance
contracts existing at date of acquisition and other reserves.
(e) Ratable recognition of maintenance assuming acquisition had taken
place on April 1, 1994.
(f) Ratable recognition of maintenance assuming acquisition had taken place
on April 1, 1995.
(g) Cost of providing maintenance contracts exisiting at date of acquisition
and accrued at that time.
(h) Additional amortization of purchased software and goodwill resulting from
Legent acquisition assuming acquisition had taken place on April 1, 1994.
Amortization of purchased software was based on 5-year life. Goodwill
is amortized on a 20-year basis.
(i) Additional amortization of purchased software and goodwill resulting from
Legent acquisition assuming acquisition had taken place on April 1, 1995.
Amortization of purchased software was based on 5-year life. Goodwill
is amortized on a 20-year basis.
(j) Interest expense associated with purchase consideration assuming 8% per
annum.
(k) Income tax benefit to bring the combined pro forma results to the
Registrant's combined effective tax rate of 37%.
(l) The income statement presentation EXCLUDES the effect of an estimated
$800 million after tax charge to operations taken at time of acquisition
for purchased research and development costs related to acquired
technology that has not reached the working model stage and has no
alternative future use.
<PAGE> 8
(c) Exhibits.
1. Legent Corporation Annual Report on Form 10-K (File 0-17647)
for the year ended September 30, 1994 previously filed and
incorporated by reference herein.
2. Legent Corporation Form 10-Q (File 0-17647) for the quarter
ended December 31, 1994 previously filed and incorporated herein by
reference.
3. Legent Corporation Form 10-Q (File 0-17647) for the quarter
ended March 31, 1995 previously filed and incorporated herein by
reference.
4. Computer Associates International, Inc. Annual Report on Form
10-K (File 0-10180) for the year ended March 31, 1995 previously
filed and incorporated herein by reference.
5. Computer Associates International, Inc. Form 10-Q (File 0-
10180) for the quarter ended June 30, 1995 previously filed and
incorporated herein by reference.
6. Agreement and Plan of Merger dated as of May 25, 1995 among
the Registrant, VR126 and Legent (as amended by Amendment No. 1
thereto) previously filed as an Exhibit to the Registrant's Schedule
14D-1/13D (File 005-40253) and incorporated herein by reference.
7. Credit Agreement dated as of July 24, 1995, between Registrant,
the banks and other financial institutions party thereto and Credit
Suisse, as agent previously filed as an Exhibit to the Registrant's
form 10-Q (File 0-10180) for the quarter ended June 30, 1995 and
incorporated herein by reference.
<PAGE> 9
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.
Computer Associates International, Inc.
(Registrant)
By: /s/Sanjay Kumar
-----------------------------------
Sanjay Kumar
President and Chief Operating Officer
Date: August 9, 1995
