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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Amendment No. 1
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
February 26, 1997
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Date of Report (date of earliest event reported)
RATIONAL SOFTWARE CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 0-12167 54-121709
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
2800 SAN TOMAS EXPRESSWAY
SANTA CLARA, CA 95051-0951
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(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 496-3600
Not Applicable
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(Former name or former address, if changed since last report)
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The Registrant hereby amends Item 7 of its Current Report on Form 8-K
filed February 27, 1997 in its entirety to read as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements and exhibits are filed as part of
this report, where indicated.
(a) Financial statements of business acquired, prepared pursuant to
Rule 3.05 of Regulation S-X are incorporated herein by reference
to Rational's Registration Statement on Form S-4 (File No. 333-
19669) filed with the Securities and Exchange Commission on
January 13, 1997, as amended on January 17, 1997.
(b) Pro forma financial information required pursuant to Article 11
of Regulation S-X:
The pro forma financial information for the fiscal years ended
March 31, 1994, 1995 and 1996 were included in the Company's Registration
Statement on Form S-4 (No. 333-19669) filed with the Securities and Exchange
Commission on January 13, 1997 as amended on January 17, 1997. The pro forma
information including in this filing on Form 8-K/A updates the six-month pro
forma information for 1995 and 1996 with the nine month pro forma information
for 1995 and 1996.
The following unaudited pro forma condensed combined financial
statements assume a business combination between Rational and SQA accounted
for on a "pooling of interests" basis. The unaudited pro forma condensed
combined financial statements are based upon the respective historical
financial statements of Rational and SQA and should be read in conjunction
with such historical financial statements and the notes thereto, which are
incorporated by reference into this form 8-K/A. The unaudited pro forma
condensed combined balance sheet combines Rational's December 31, 1996
unaudited condensed consolidated balance sheet with SQA's December 31, 1996
unaudited condensed consolidated balance sheet. The unaudited pro forma
condensed combined statements of operations combine Rational's historical
condensed consolidated statements of operations for the nine months ended
December 31, 1995 and 1996 with the nine months ended September 30, 1995 and
1996 of SQA, respectively.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated as presented in the
accompanying unaudited pro forma condensed combined financial information, nor
is it necessarily indicative of future operating results or financial position.
These unaudited pro forma condensed combined financial statements should
be read in conjunction with the historical consolidated financial statements and
the related notes thereto of Rational and of SQA incorporated by reference
herein.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
RATIONAL SQA
DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.................................. $221,998 $41,073 $263,071
Short-term investments..................................... 7,751 - 7,751
Accounts receivable, net................................... 25,387 5,536 30,923
Prepaid expenses and other assets.......................... 1,971 1,218 3,189
-------- -------- --------
Total current assets.................................. 257,107 47,827 304,934
Property and equipment, net................................ 6,485 3,568 10,053
Other assets, net.......................................... 6,974 494 7,468
-------- -------- --------
Total assets............................................... $270,566 $51,889 $322,455
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable........................................... $ 3,348 $ 1,025 $ 4,373
Accrued employee benefits.................................. 8,602 - 8,602
Other accrued expenses..................................... 6,288 2,763 9,051
Accrued merger and restructuring expenses, current
portion................................................... 720 - 7,200 7,920
Deferred revenue........................................... 11,177 2,966 14,143
Current portion of long-term debt and lease obligations.... 3 11 14
-------- -------- -------- --------
Total current liabilities............................. 30,138 6,765 7,200 44,103
Accrued rent............................................... 590 - 590
Accrued merger and restructuring expenses, long-term....... 980 - 980
-------- -------- -------- --------
Total liabilities..................................... 31,708 6,765 7,200 45,673
Commitments and contingencies
Stockholders' equity:
Common Stock......................................... 405 81 (11) 475
Additional paid-in capital........................... 306,089 46,185 11 352,285
Treasury stock....................................... (1,340) - - (1,340)
Accumulated deficit.................................. (66,162) (1,142) (7,200) (74,504)
Cumulative translation adjustment.................... (134) - - (134)
-------- -------- -------- --------
Total stockholders' equity..................... 238,858 45,124 (7,200) 276,782
-------- -------- -------- --------
Total liabilities and stockholders' equity................. $270,566 $51,889 $ - $322,455
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements
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UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
REFLECTING RATIONAL SOFTWARE CORPORATION
AFTER GIVING EFFECT TO THE MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTH PRO FORMA
----------------------
1995 1996
------- --------
<S> <C>
Net product revenue....................... $46,138 $67,332
Consulting and supporting revenue......... 27,951 37,752
-------- --------
Total revenue............................. 74,089 105,084
Cost of product revenue................... 5,447 6,838
Cost of consulting and supporting revenue. 14,867 18,742
-------- --------
Total cost of revenue..................... 20,314 25,580
-------- --------
Gross margin.............................. 53,775 79,504
Research and development expenses..... 13,572 16,763
Sales and marketing expenses.......... 31,261 35,927
General and administrative expenses... 8,762 12,225
Charges for acquired in-process
research and development............. 8,700 17,658
Merger and restructuring costs........ - -
-------- --------
Total operating expenses.................. 62,295 82,573
-------- --------
Operating loss ........................... (8,520) (3,069)
Other income, net......................... 1,079 4,925
-------- --------
Income (loss) before income taxes......... (7,441) 1,856
Provision for income taxes................ 512 2,726
-------- --------
Net loss ................................. (7,953) (870)
======== ========
Net loss per share ....................... $(0.23) $(0.02)
======== ========
Equivalent Shares used in computing
net income (loss) per share.............. 35,021 43,224
========= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed combined balance
statements
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
1. The pro forma condensed combined financial statements reflect the issuance of
up to 7,000,000 shares of Rational Common Stock for all of the outstanding
shares of SQA Common Stock in connection with the Merger based on an exchange
rate of 0.86 shares of Rational Common Stock for each outstanding share of
SQA Common Stock.
2. There were no material transactions between Rational and SQA during any
period presented. In addition, it is currently expected that the impact of
any conforming accounting policies will not be material.
3. The Combined Company expects to incur charges to operations estimated at
approximately $7.2 million, primarily in the quarter in which the Merger is
consummated, to reflect direct transaction fees and costs incident to the
Merger. Integration costs of merging the companies are expected to include
severance costs associated with any employee terminations, costs associated
with conforming employee benefits plans, charges associated with the closure
of duplicate facilities and asset writedowns related to duplicate business
systems. This charge has been reflected in the pro forma condensed combined
balance sheet as a reduction to retained earnings and an increase to accrued
liabilities. The estimated charge is not reflected in the pro forma condensed
combined statement of operations data.
4. For the three months ended December 31, 1996, SQA reported net income of $1.5
million ($0.17 per share) on total revenues of $7.4 million compared to net
income of $0.6 million ($0.09 per share) on total revenues of $4.2 million
for the comparable 1995 quarter.
(c) Exhibits
+ 2.1 Agreement and Plan of Reorganization dated November 12, 1996 by and
among Rational Software Corporation, a Delaware corporation, Sunshine
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Rational Software Corporation, and SQA, Inc., a Delaware corporation
is incorporated herein by reference to Rational's Registration
Statement on Form S-4 (File No. 333-19669) filed with the Securities
and Exchange Commission on January 13, 1997, as amended on January 17,
1997.
+ 2.2 Certificate of Merger merging Sunshine Acquisition Corp. with and into
Target, dated February 26, 1997.
+ 99.1 Press Release dated February 26, 1997.
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+ Filed previously.
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Pursuant to this requirement 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.
RATIONAL SOFTWARE CORPORATION
May 9, 1997 /s/ Robert T. Bond
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Robert T. Bond
Senior Vice President, Chief Operating
Officer, Chief Financial Officer, and
Secretary
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
+ 2.1 Agreement and Plan of Reorganization dated November 12, 1996 by and
among Rational Software Corporation, a Delaware corporation, Sunshine
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary
of Rational Software Corporation, and SQA, Inc., a Delaware corporation
is incorporated herein by reference to Rational's Registration
Statement on Form S-4 (File No. 333-19669) filed with the Securities
and Exchange Commission on January 13, 1997, as amended on January 17,
1997.
+ 2.2 Certificate of Merger merging Sunshine Acquisition Corp. with and into
Target, dated February 26, 1997.
+ 99.1 Press Release dated February 26, 1997.
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+ Filed previously.
