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
November 11, 1996
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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)
One 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> 2
Item 2 Acquisition of Disposition of Assets
------------------------------------
(a) On October 11, 1996, Computer Associates International, Inc.
(the Registrant), through a wholly owned subsidiary, Tse-Tsehese-
Staestse, Inc. (Merger Subsidiary), commenced a tender offer for all
of the issued and outstanding shares of Cheyenne Software, Inc.
(Cheyenne) common stock at a price of $30.50 per share in cash. The
purchase price was determined through a series of arms length
negotiations between officers and representatives of the Registrant and
Cheyenne s representatives and Board of Directors. The offer was made
pursuant to a definitive Agreement and Plan of Merger dated as of
October 7, 1996 (the Agreement) among the Registrant, the Merger
Subsidiary and Cheyenne. On November 11, 1996, the Registrant through
the Merger Subsidiary accepted for payment approximately 37.3 million
shares of Cheyenne outstanding common stock validly tendered in the
offer representing approximately 98% of the then outstanding shares.
Cheyenne is engaged in the development, sale, and support of
software products for use in desktop and networked personal computer
environments, including local area network and wide area network
applications, Cheyenne s products provide storage management, security,
and communication solutions for desktops and distributed enterprise
networks. The storage management, security, and communication products
include backup and disaster recovery capabilities, virus detection,
purging utilities and facsimile transmission. Cheyenne s assets consist
of cash, receivables, property and equipment, purchased software
products and other tangible and intangible assets. Cheyenne 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 Cheyenne 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 third fiscal
quarter ending December 31, 1996. The after tax charge against earnings
will be $598 million.
The pending merger of the Merger Subsidiary and Cheyenne 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 then November 30, 1996. Once the pending merger
becomes effective, Cheyenne will become a wholly owned subsidiary of the
Registrant.
The total funds needed to consummate the offer and the merger is
approximately $1.2 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 existing $2 billion Credit
Facility.
(b) Cheyenne 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 Cheyenne were previously reported
in Cheyenne s Annual Report on Form 10-K for the year ended June 30,
1996 and Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 and are incorporated herein by reference.
(b) Pro forma financial information.
The following unaudited pro forma combined condensed balance sheet as of
September 30, 1996, and the unaudited pro forma combined condensed
income statements for the year ended March 31, 1996 and the six months
ended September 30, 1996, give effect to the merger of Cheyenne as if it
had occurred on March 31, 1996 for purposes of the balance sheets and
as of April 1, 1995 and April 1, 1996, respectively, for purposes of the
income statements. The unaudited pro forma information is based on the
historical financial statements of the Registrant and Cheyenne giving
<PAGE> 3
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.
The Registrant has a fiscal year end of March 31 while Cheyenne has a
fiscal year end of June 30. As a result, the operations for the year
ended March 31, 1996 for the Registrant have been combined with the
twelve months ended March 31, 1996 for Cheyenne. Cheyenne s financial
statements for and as of the twelve month period were derived by
combining Cheyenne s financial statements for and as of the nine months
ended March 31, 1996 with its financial statements for and as of the
three months ended June 30, 1996.
The charge of $598 million resulting from purchased research and
development costs has been reflected in stockholders equity in the pro
forma consolidated condensed balance sheet at September 30, 1996. This
same charge has been excluded from the pro forma consolidated condensed
income statements for the year ended March 31, 1996 and the six months
ended September 30, 1996 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 Cheyenne. 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 Cheyenne.
<PAGE> 4
<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and Cheyenne
As of September 1996
(Unaudited)
(Amounts in Thousands)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant Cheyenne (a) Adjustments Results
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash and Cash
Equivalents $ 116,548 $ 28,487 $ 145,035
Marketable Securities 84,735 22,764 107,499
Trade and installment
accounts receivable
- net 1,129,153 46,927 1,176,080
Investment and other
current assets 62,754 12,182 74,936
---------- ---------- ----------
TOTAL CURRENT ASSETS 1,393,190 110,360 1,503,550
INSTALLMENT ACCOUNTS
RECEIVABLE, due after
one year - net 2,041,524 2,041,524
PROPERTY AND EQUIPMENT
- net 421,476 28,898 450,374
PURCHASED SOFTWARE
PRODUCTS - net 440,417 3,801 $ 112,100(b) 556,318
EXCESS OF COST OVER NET
ASSETS ACQUIRED - net 767,395 1,367 415,893(b) 1,184,655
OTHER ASSETS 78,116 31,603 109,719
---------- ---------- ---------- ----------
TOTAL ASSETS $5,142,118 $ 176,029 $ 527,993 $5,846,140
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS
EQUITY:
LOANS PAYABLE - BANKS $ 495,000 $ 495,000
OTHER CURRENT
LIABILITIES 999,250 $ 24,885 $ 40,900(c) 1,065,035
LONG TERM DEBT AND
OTHER 740,506 3,581 1,189,500(d) 1,933,587
DEFERRED INCOME TAXES 793,655 556 42,600(b) 836,811
DEFERRED MAINTENANCE
REVENUE 300,776 300,776
STOCKHOLDERS EQUITY 1,812,931 147,007 (745,007)(b) 1,214,931
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $5,142,118 $ 176,029 $ 527,993 $5,846,140
========== ========== ========== ==========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE> 5
<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and Cheyenne
For the year ended March 1996
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant Cheyenne (a) Adjustments(i) Results
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Product revenue and
other related income $2,775,261 $ 165,955 $2,941,216
Maintenance fees 729,368 729,368
---------- ---------- ----------
TOTAL REVENUE 3,504,629 165,955 3,670,584
---------- ---------- ----------
Costs and Expenses:
Selling, marketing
and administrative 1,367,301 81,250 1,448,551
Product development 285,404 23,222 308,626
Commissions and
royalties 174,116 9,003 183,119
Depreciation and
amortization 404,326 8,019 $ 66,443(e) 478,788
Interest expense
(income), net 70,813 (3,111) 83,265(f) 150,967
Purchased research
and development 1,303,280 4,199 1,307,479
---------- ---------- ---------- ----------
TOTAL COSTS
AND EXPENSES 3,605,240 122,582 149,708 3,877,530
---------- ---------- ---------- ----------
(Loss) income before
taxes (100,611) 43,373 (149,708) (206,946)
Income tax (benefit)
expense (44,257) 14,573 (48,987)(g) (78,671)
---------- ---------- ---------- ----------
NET (LOSS) INCOME $ (56,354) $ 28,800 $ (100,721) $ (128,275)
========== ========== ========== ==========
NET (LOSS) INCOME
PER SHARE $ (0.16) $ 0.74 $ (0.35)
========== ========== ==========
SHARES USED IN
COMPUTATION 362,268 38,931 362,268
========== ========== ==========
<FN>
See Notes to Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE> 6
<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and Cheyenne
For the six months ended September 1996
(Unaudited)
(In thousands, except per share amounts)
<CAPTION>
Historical Historical Pro Forma Pro Forma
Registrant Cheyenne (a) Adjustments(i) Results
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Product revenue and
other related income $1,403,461 $ 101,415 $1,504,876
Maintenance fees 378,762 378,762
---------- ---------- ----------
TOTAL REVENUE 1,782,223 101,415 1,883,638
---------- ---------- ----------
Costs and Expenses:
Selling, marketing
and administrative 725,286 50,171 775,457
Product development 150,721 14,437 165,158
Commissions and
royalties 91,547 6,251 97,798
Depreciation and
amortization 225,900 5,481 $ 33,222(h) 264,603
Interest expense
(income), net 44,017 (960) 41,633(f) 84,690
Purchased research
and development 13,134 13,134
---------- ---------- ---------- ----------
TOTAL COSTS
AND EXPENSES 1,237,471 88,514 74,855 1,400,840
---------- ---------- ---------- ----------
Income (loss) before
taxes 544,752 12,901 (74,855) 482,798
Income tax expense
(benefit) 201,558 3,858 (24,494)(g) 180,922
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 343,194 $ 9,043 $ (50,361) $ 301,876
========== ========== ========== ==========
NET INCOME PER
SHARE $ 0.90 $ 0.23 $ 0.80
========== ========== ==========
SHARES USED IN
COMPUTATION 379,421 38,679 379,421
========== ========== ==========
<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) Estimated valuation adjustments of Cheyenne assets and liabilities
resulting from the preliminary allocation of the purchase price,
elimination of stockholders equity and the $598 million after tax
charge taken at time of acquisition for purchased research and
development costs. See (i) below for additional information.
(c) Accrued expenses associated with preliminary cost estimates,
including costs associated with the change of control, termination
of leases, and other reserves.
(d) Represents borrowings used to finance the acquisition of Cheyenne
common stock.
(e) Additional amortization of purchased software ($45 million) and
goodwill ($21 million) resulting from the acquisition of Cheyenne
assuming it had taken place on April 1, 1995. Amortization of
purchased software was based on 4-year life. Goodwill is amortized
on a 20-year basis.
(f) Interest expense associated with purchase consideration assuming 7%
per annum.
(g) Income tax benefit relates to tax deductible interest and
amortization of purchased software.
(h) Additional amortization of purchased software ($23 million) and
goodwill ($10 million) resulting from the acquisition of Cheyenne
assuming it had taken place on April 1, 1996. Amortization of
purchased software was based on 4-year life. Goodwill is amortized
on a 20-year basis.
(i) The income statement presentation excludes the effect of the $598
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
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/ Peter Schwartz
---------------------------------
Peter Schwartz
Sr. Vice President and Chief Financial Officer
Date: November 22, 1996
