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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): October 15, 1996
STERLING SOFTWARE, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-8465 75-1873956
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
8080 NORTH CENTRAL EXPRESSWAY, SUITE 1100, DALLAS, TEXAS 75206
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 891-8600
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ITEM 5. OTHER INFORMATION.
As previously disclosed, Sterling Software, Inc. ("Sterling Software")
completed the tax-free spin-off of Sterling Commerce, Inc. ("Sterling Commerce")
effective as of September 30, 1996. As a result, Sterling Software believes
certain historical financial information regarding Sterling Software's
continuing operations may be relevant to investors in evaluating Sterling
Software's financial performance on a "stand-alone" basis (i.e., reflecting
Sterling Commerce as a discontinued operation).
A. Stand-Alone Unaudited Sterling Software Financial Information
-------------------------------------------------------------
Set forth below is certain historical financial information of Sterling
Software wherein the results of operations and financial position of Sterling
Commerce have been reflected as discontinued operations. Although unaudited,
the following information has been derived from financial information
previously filed with the Securities and Exchange Commission and publicly
reported by Sterling Software.
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NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30 JUNE 30
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1991 1992 1993 1994 1995 1995 1996
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<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
Operating data (1) (2) (3):
Revenue................................. $266,291 $293,958 $303,207 $325,903 $396,311 $280,505 $313,128
Cost of sales........................... 130,791 146,487 149,454 143,889 160,735 113,710 130,244
Product development and enhancement..... 16,666 15,748 20,919 20,505 27,702 21,126 15,887
Selling, general and administrative..... 114,638 123,603 115,403 112,380 147,552 104,261 126,398
Income from continuing operations
before restructuring charge, purchased
research and development, other income
(expense), income taxes, extraordinary
item and cumulative effect of a change
in accounting principle................ 4,196 8,120 17,431 49,129 60,322 41,408 40,599
Restructuring charge (4)................ 23,085 11,515 87,622 19,512 19,512
Purchased research and development...... 62,000 62,000
Income (loss) from continuing
operations before income taxes,
extraordinary item and cumulative
effect of a change in accounting
principle.............................. (25,838) (9,586) (73,153) 46,346 (18,656) (39,655) 54,538
Income (loss) from continuing
operations before extraordinary item
and cumulative effect of a change in
accounting principle................... (10,512) (14,165) (48,041) 30,586 (33,656) (48,447) 39,152
Income from discontinued operations,
net of taxes........................... 8,105 8,983 15,194 27,753 42,930 29,240 36,403
Gain on the initial public offering and
spin-off of subsidiary, net of taxes... 127,164
Income (loss) applicable to common
stockholders........................... (5,700) (6,656) (38,106) 58,143 9,129 (19,353) 202,719
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NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30 JUNE 30
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1991 1992 1993 1994 1995 1995 1996
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(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Average common shares outstanding...... 11,763 15,496 17,507 19,812 23,649 23,036 30,598
Per common share data:
Income (loss) from continuing
operations before extraordinary item
and cumulative effect of a change in
accounting principle:
Primary............................... (1.21) (1.01) (2.80) 1.33 (1.43) (2.11) 1.21
Fully diluted......................... (1.21) (1.01) (2.80) 1.29 (1.43) (2.11) 1.16
Income (loss) before extraordinary
item and cumulative effect of a change
in accounting principle:
Primary............................... (.52) (.43) (1.93) 2.54 .39 (.84) 6.24
Fully diluted......................... (.52) (.43) (1.93) 2.31 .39 (.84) 5.80
Income (loss) before cumulative effect
of a change in accounting principle:
Primary............................... (.48) (.43) (2.02) 2.54 .39 (.84) 6.24
Fully diluted......................... (.48) (.43) (2.02) 2.31 .39 (.84) 5.80
Net income (loss):
Primary............................... (.48) (.43) (2.18) 2.54 .39 (.84) 6.24
Fully diluted......................... (.48) (.43) (2.18) 2.31 .39 (.84) 5.80
NINE MONTHS ENDED
YEARS ENDED SEPTEMBER 30 JUNE 30
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1991 1992 1993 1994 1995 1995 1996
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(IN THOUSANDS)
Balance sheet data (1) (2):
Cash, cash equivalents and marketable
securities............................. $ 28,025 $ 41,694 $ 81,093 $143,361 $240,251 $200,501 $ 703,663
Working capital......................... 26,964 35,308 57,106 122,961 218,713 165,129 651,282
Total assets............................ 303,654 317,677 364,087 444,661 657,711 583,606 1,133,991
Long-term debt.......................... 84,833 80,743 117,532 115,932 116,668 116,424 1,093
Other noncurrent liabilities............ 4,446 9,781 18,331 18,867 21,845 19,216 25,415
Stockholders' equity.................... 108,468 117,565 97,697 175,804 348,338 273,869 903,857
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(1) Restated to reflect Sterling Commerce as a discontinued operation. On
September 30, 1996, Sterling Software completed the spin-off of Sterling
Commerce. Accordingly, the results of Sterling Commerce are not included in
the results of Sterling Software's continuing operations.
(2) On November 30, 1994, Sterling Software acquired KnowledgeWare, Inc.
("KnowledgeWare") in a stock-for-stock acquisition accounted for as a
purchase. Accordingly, the operating results of KnowledgeWare are included
in Sterling Software's results of operations from the date of the
acquisition. The results of operations include $62,000,000 of purchased
research and development costs, which is the portion of the purchase price
attributable to in-process research and development and which was charged to
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expense in accordance with purchase accounting guidelines. The 1995 results
of operations also include a charge for restructure costs of $19,512,000 to
integrate KnowledgeWare's business into Sterling Software's operations. The
restructure charge includes employee termination costs, costs related to the
elimination of duplicate facilities, the write-off of costs related to
certain software products which were not actively marketed and other out of
pocket costs related to the reorganization. Cash costs and expenses
directly related to the acquisition of KnowledgeWare and unrelated to the
restructuring of Sterling Software are accounted for as a cost of the
acquisition. See Note 2 of the Notes to Sterling Software's Consolidated
Financial Statements included in its Annual Report on Form 10-K for the
fiscal year ended September 30, 1995 (the "Form 10-K").
(3) In August 1994, Sterling Software acquired American Business Computer
Company ("ABC") in a stock-for-stock acquisition accounted for as a pooling
of interests. In July 1993, Sterling Software acquired Systems Center, Inc.
("Systems Center") in a stock-for-stock acquisition accounted for as a
pooling of interests. Sterling Software's consolidated financial statements
have been retroactively adjusted to include the results of ABC and Systems
Center for all periods presented. See Note 2 of the Notes to Sterling
Software's Consolidated Financial Statements included in the Form 10-K.
(4) The 1993 restructuring charges reflect the cost of combination of Sterling
Software and Systems Center including transaction costs and charges relating
to the elimination of duplicate facilities and equipment, severance costs
and the write-off of costs related to certain software products not actively
marketed by Sterling Software. The 1992 restructuring charges include
severance and other costs related to System Center's reduction in workforce,
elimination of duplicate facilities and the sale of certain AS/400 and UNIX
utility products. The 1991 restructuring charges reflect a write-down by
Systems Center of certain purchased computer software costs based on a
revaluation of the products in light of changes in market conditions and
increased competition, as well as severance costs and costs associated with
elimination of certain management positions and duplicate functions
resulting from previous business acquisitions. See Note 3 of the Notes to
Sterling Software's Consolidated Financial Statements included in the
Form 10-K.
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B. Stand-Alone Unaudited Sterling Software Segment Information
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Set forth below is certain historical business segment information of
Sterling Software from which the results of Sterling Commerce have been
eliminated. Although unaudited, the following information has been
derived from financial information previously filed with the Securities and
Exchange Commission and publicly reported by Sterling Software.
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THREE MONTHS ENDED
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DECEMBER 31 MARCH 31 JUNE 30
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<S> <C> <C> <C> <C>
NINE MONTHS ENDED JUNE 30, 1996:
Revenue:
Systems Management...................... $ 35,210 $ 40,969 $ 42,558
Federal Systems......................... 26,262 26,815 27,553
Applications Management................. 26,459 28,228 28,244
Corporate and other..................... 8,054 10,585 12,191
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Consolidated totals.................... $ 95,985 $106,597 $110,546
======== ======== ========
Operating Profit (Loss):
Systems Management...................... $ 11,625 $ 15,535 $ 16,389
Federal Systems......................... 2,300 1,816 2,038
Applications Management................. 3,859 4,630 6,155
Corporate and other..................... (7,778) (7,769) (8,201)
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Consolidated totals.................... $ 10,006 $ 14,212 $ 16,381
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THREE MONTHS ENDED
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DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
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YEAR ENDED SEPTEMBER 30, 1995:
Revenue:
Systems Management...................... $ 33,374 $ 37,287 $ 37,821 $ 46,175
Federal Systems......................... 23,665 24,590 25,372 28,075
Applications Management................. 20,010 25,347 29,548 32,304
Corporate and other..................... 6,547 6,905 10,039 9,252
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Consolidated totals.................... $ 83,596 $ 94,129 $102,780 $115,806
======== ======== ======== =========
Operating Profit (Loss):
Systems Management...................... $ 11,136 $ 13,460 $ 14,154 $ 16,721
Federal Systems......................... 1,526 1,867 1,953 1,302
Applications Management................. 4,491 5,125 5,284 6,420
Restructuring charge.................... (19,512)
Purchased research and development...... (62,000)
Corporate and other..................... (6,308) (5,386) (5,894) (5,529)
-------- -------- -------- ---------
Consolidated totals..................... $(70,667) $ 15,066 $ 15,497 $ 18,914
======== ======== ======== =========
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C. Segment Information Concerning Software Product Revenues
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As disclosed under "Management's Discussion and Analysis of Financial
Condition and Results of Operation" in Sterling Software's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, products and product support
revenue increased in the first nine months of 1996 compared to the same period
of 1995 in the Systems Management and Applications Management business segments.
Products revenue increased in the first nine months of 1996 compared to the same
period of 1995 by 17% in the Systems Management business segment and 13% in the
Applications Management business segment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
STERLING SOFTWARE, INC.
By /s/ JEANNETTE P. MEIER
-----------------------------------------
Jeannette P. Meier
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
Date: October 15, 1996
