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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10,1996
REGISTRATION NO. 333 - ______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRODERBUND SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 94-2768218
(STATE OR OTHER JURISDICTION OF INCORPORATION (PRIMARY STANDARD (I.R.S. EMPLOYER
OR ORGANIZATION) INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
CODE NUMBER)
500 REDWOOD BOULEVARD
NOVATO, CA 94948-6121
(415) 382-4400
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(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS L. MARCUS, ESQ.
VICE PRESIDENT OF BUSINESS DEVELOPMENT
AND GENERAL COUNSEL
BRODERBUND SOFTWARE, INC.
500 REDWOOD BOULEVARD
NOVATO, CA 94948-6121
(415) 382-4400
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
TOR R. BRAHAM, ESQ.
PAGE MAILLIARD, ESQ.
IVAN J. BROCKMAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(415) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE FEE
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Common Stock, $0.01 par value per share... 270,318 shares $32.625 $8,819,124.75 $3,041.08
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(1) The proposed Maximum Offering Price Per Share was estimated pursuant to
Rule 457(c) whereby the per share price was determined by reference to the
average of the high and low price reported in the Nasdaq National Market
System on July 8, 1996, which average was $32.625.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
270,318 SHARES
BRODERBUND SOFTWARE, INC.
COMMON STOCK
This Prospectus may be used in connection with the offer and sale, from
time to time, of up to 270,318 shares (the "Shares") of Common Stock, $0.01 par
value per share (the "Common Stock"), of Broderbund Software, Inc. ("Broderbund"
or the "Company"), for the account of the selling stockholders identified below
(the "Selling Stockholders"). All of the Shares covered hereby are to be sold by
the Selling Stockholders. The Company will not receive any of the proceeds from
the sale of the Shares by the Selling Stockholders. The expenses incurred in
registering the Shares, including legal and accounting fees, will be paid by the
Company.
The Shares offered hereby may be offered and sold, from time to time,
by the Selling Stockholders in one or more transactions (which may involve block
transactions) on the Nasdaq National Market (or any exchange on which the Common
Stock may then be listed), in the over-the-counter market, in negotiated
transactions or otherwise. Sales will be effected at such prices and for such
consideration as may be obtainable from time to time. Commission expenses and
brokerage fees, if any, will be paid by the Selling Stockholders. See "Plan of
Distribution."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "BROD." On July 8, 1996, the last sale price for the Common
Stock as reported on the Nasdaq National Market was $32.625 per share.
SEE "RISK FACTORS" ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS __________, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: New York Regional Office, Seven World Trade Center, New York,
New York 10048, and Chicago Regional Office, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of the prescribed fees. The Common Stock of the Company is
quoted on the Nasdaq National Market. Reports, proxy and information statements
and other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006. In addition, the Commission maintains a Web site (http:\\www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission through the
Electronic Data Gathering, Analysis, and Retrieval system.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
shares covered by this prospectus, reference is made to the Registration
Statement. Statements contained herein concerning the provisions of any document
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of such document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended August 31, 1995; (ii) the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended
November 30, 1995, February 29, 1996 and May 31, 1996 and (iii) the Company's
Proxy Statement dated December 15, 1995.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in writing
to Investor Relations at the Company's principal executive offices at 500
Redwood Boulevard, Novato, California 94948-6121 or by telephone at (415)
382-4449.
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THE COMPANY
GENERAL
Broderbund Software, Inc. ("Broderbund" or the "Company") develops,
publishes and markets personal computer software for the home, school and small
business markets and has sold over 30 million units of consumer software since
the founding of the Company in 1980. Broderbund has developed innovative,
award-winning products designed to take advantage of advances in personal
computer technology. The Company remains committed to creating imaginative
software to provide value for consumers of many different ages. Broderbund has a
successful record of identifying and capitalizing on developing trends using its
studio development approach.
Broderbund sells published products, which are developed by the Company
using a combination of internal and external resources, and affiliated label
products, which are developed by other software companies and distributed by
Broderbund through its sales organization. The Company sells its products
through distributors, software specialty retail chains, computer superstores,
mass merchandisers, discount warehouse stores, mail order firms, and educational
dealers. In addition, Broderbund sells its products directly to schools and
consumers.
Broderbund has five different sales forces through which it distributes
products. The largest sales force is the North American retail sales force which
serves over 19,000 domestic retail outlets. The other sales forces include the
education sales and marketing group, the international organization, direct
sales and the OEM or bundling group. Through its affiliated label program,
Broderbund is the exclusive North American distribution for several software
publishers. The Company's distribution of these affiliated label companies'
products increases the leverage of Broderbund's sales department in the
distribution channel and allows the Company to deliver a broader product line.
Broderbund's product strategy is to identify and develop families of
software products in order to achieve sustained consumer appeal and brand name
recognition. The Company offers products primarily in three consumer software
categories: personal productivity, education and entertainment. Personal
productivity products consist of software that enable the user to produce and
manipulate printed output, enhancing the user's creativity. Broderbund designs
its education products to be both educational and fun. Entertainment products
are designed for the consumer's leisure time enjoyment. The top five best
selling products during fiscal 1995 were The Print Shop(R), Deluxe CD
Ensemble(TM), Myst(R), Where In The World Is Carmen Sandiego?(R), 3D Home
Architect(R) and Math Workshop(TM), part of The Active Mind Series(TM).
Broderbund products have won over 300 awards during the Company's
history. The Company's best known products are in The Print Shop(R) family of
personal productivity products, the Carmen Sandiego(TM) family of educational
products and the entertainment product Myst. Broderbund has sold over ten
million units in The Print Shop family since its introduction in May 1984. In
1995, the Company released The Print Shop Deluxe Ensemble II(TM), which includes
a powerful graphics browser to search the over 4,500 graphics included in the
program.
Other Broderbund productivity products include 3D Home Architect, an
easy-to-use, comprehensive do-it-yourself home design program complete with
realistic 3D views and PC Globe(R) Maps 'n' Facts(TM), an electronic atlas. The
Company also publishes other productivity products, such as Type Styler(TM),
used to create special effects with display type.
In April 1995, the Company acquired Banner Blue Software, publisher of
the number one selling genealogy program, Family Tree Maker(TM). Banner Blue
Software has become a division of Broderbund operating out of its facilities in
Fremont, California and Provo, Utah. Kenneth L. Hess, Banner Blue Software's
founder, is president of the Banner Blue division. Other products from the
Banner Blue division include Family Archives(TM), CD-ROM collections of family
historical data, and Org Plus(R), an organization charting tool.
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The Carmen Sandiego family has sold over five million units since its
introduction in April 1985. The Company receives limited licensing revenues from
two television shows based on the Carmen Sandiego software programs. Myst, a
surrealistic adventure game, has sold over 2 million units since its
introduction in September 1993.
Broderbund has also established a family of early learning products to
promote basic learning skills in children ages three to thirteen in an
environment filled with games, music and animated characters. The Company's
products in this family are diversified into the Active Mind Series, the
Imagimaker Series(TM) family, and other educational and fun titles. The Active
Mind Series is designed to help children develop essential learning skills and
integrate them into daily life. This family includes the recently released
Logical Journey of the Zoombinis, James Discovers Math(TM), The Playroom(R), and
Math Workshop. Another new product in the Active Mind Series is Reading
Galaxy(TM) where, using a game show format, children are encouraged to read over
400 passages from 30 well-known classic and contemporary books. The Imagimaker
Series is comprised of the Kid Pix family, a series of multimedia paint and
animation products that allow children to do projects ranging from arts and
crafts to slide shows, and Amazing Writing Machine(TM), a creative writing
program to inspire children to write and animate their own books, journals,
poems and letters.
In the entertainment area, Broderbund released In the 1st Degree(TM), a
challenging legal drama combining interactive CD-ROM software with modern
cinematography techniques. Another new product is Learn the Art of Magic(TM),
which teaches people how to master magic tricks quickly and easily. Some of
Broderbund's other entertainment products include Myst and Prince of Persia(R)
CD Collection, two Arabian Nights type action-adventure games.
Living Books(R) is an equal partnership between Broderbund and Random
House. This joint venture publishes a series of award-winning, interactive
animated children's storybooks on CD-ROM. Broderbund has an affiliated label
arrangement with Living Books to distribute its products through Broderbund's
computer software distribution channels. During fiscal 1995, Living Books became
profitable and continued to expand. Living Books has now released a total of 11
children's titles for both Windows and Macintosh CD-ROM, including The
Berenstain Bears Get into a Fight to help children with conflict resolution, Dr.
Seuss's ABC, based on the works of Theodore Giesel, and the recently released,
Sheila Ray and the Brave, a sing-along adventure in reading.
STRATEGY
The Company's product strategy is based on the following:
PRODUCT FAMILIES. Broderbund seeks to develop products that may be
expanded into families of related sequel or complementary products that will
achieve sustained consumer appeal and brand name recognition, as have the
Company's successful The Print Shop, Carmen Sandiego, Kid Pix, The Active Mind
Series and Living Books families of products. Developing product families helps
to achieve longer life cycles for the Company's products.
ADVANCED TECHNOLOGY. The Company seeks to create technologically
sophisticated products on the latest personal computer platforms, currently
Windows and Macintosh CD-ROM. Broderbund incorporates conventional programming
disciplines with advanced tools like those used to develop animated or cinematic
films and produce products such as In the 1st Degree. The Company has also
developed proprietary internal programming tools, including a powerful product
development system that allows for simultaneous development of programs on
multiple platforms. The advanced technology utilized increases the appeal of
Broderbund's products to sophisticated consumers as well as new users.
CREATIVITY. Broderbund seeks to foster creativity in the development of
its products. The Company's goal is to lead the market in manifesting creativity
in our products and in pioneering new types of interactive experiences.
Throughout its fifteen years of developing products, Broderbund has a history of
establishing products with enduring consumer appeal by conceiving imaginative
and innovative ideas to develop new niches in the consumer market.
QUALITY. The Company seeks to provide a high level of quality in its
products. The Company strives to develop products that exceed customer
expectations and provide long-term lasting value and enjoyment. The Software
Publishers
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Association ("SPA") has consistently recognized the quality of Broderbund
products. Broderbund has been awarded more SPA "Excellence in Software" Awards
than any other company.
EASE-OF-USE. The Company seeks to create products that allow the
consumer to become quickly proficient in the use of the product. Because
Broderbund's products are easy to use, they are often given as gifts or
recommended as purchases for the first-time buyer.
THIRD PARTY VALIDATION. The Company seeks to develop products that
appeal both to the primary user and to third parties, particularly parents and
teachers, who have significant influence over the product buying decision.
Broderbund believes the educational and creative content in its products makes
them popular with parents and teachers without diminishing the entertainment
value to the primary users.
During 1995, the Company completed its transition to the CD-ROM
platform. New product development will focus on the CD-ROM platform and
incorporating on-line activities into the Company's products. The Company
intends to continue to manufacture existing floppy products while there is a
market for those products, particularly in the education area. During fiscal
1995, the Company updated its major products to incorporate significant consumer
features of Windows 95. During fiscal 1996, the Company has introduced native
Windows 95 products.
The Strategy subsection of this Company section contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Actual results could differ materially
from those projected in the forward-looking statements as a result of certain
factors including without limitation those set forth in "Risk Factors."
RECENT RESULTS
On June 19, 1996, the Company announced its operating results for the
quarterly period ended May 31, 1996. Net revenues in the quarter ended May 31,
1996, were $35.0 million as compared with $36.1 million reported during the same
quarter last year. Net income for the third fiscal quarter totaled $6.2 million
or $.29 per share. During the same period last year, the Company reported net
income of $7.0 million or $.33 per share.
For the nine months ended May 31, 1996, revenues were $154.0 million,
up 15% from the $134.4 million reported during the same period in the prior
year. Net income for the nine-month period totaled $41.0 million or $1.90 per
share. During the second quarter of fiscal 1996, Broderbund recorded a pretax
gain of $15.5 million arising from a break-up fee received in a terminated
merger. Exclusive of the one-time gain, net income for the nine months ended May
31, 1996 was $31.7 million or $1.47 per share, up from the $29.0 million or
$1.39 per share reported during the same period last year.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. The discussion in this Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" and "The Company" as well as those
discussed elsewhere in this Prospectus.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY. The Company has
experienced, and expects to continue to experience, significant fluctuations in
operating results due to a variety of factors including the timing and market
acceptance of new product introductions, the rate of decline in sales of
existing and older products, the rate and success of competitive product
introductions, the rate of product returns and the timing of orders from major
customers. In addition, the Company's business is highly seasonal, with net
revenues typically highest during the Company's first fiscal quarter, due
primarily to increased demand for consumer software during the calendar year-end
holiday buying season. Net revenues in other quarters are generally lower and
vary significantly as a result of new product introductions and other factors.
In addition, due to the typical slower summer selling season in Europe, the
Company expects to experience lower international revenues in the fourth fiscal
quarter comparable to prior fiscal quarters. The Company expects its net
revenues and operating results to continue to reflect significant seasonality.
There can be no assurance that the Company will achieve continued
growth in sales or profitability, or that the Company will remain profitable on
a quarterly basis. As a result of analysts' continued expectations of growth,
and the relatively high price/earnings multiple reflected in the valuation of
the Company's common stock, any significant shortfall in sales or net income, or
any significant change in analysts' expectations of future results, could have
an immediate and adverse impact on the trading price of the Company's common
stock.
DEPENDENCE ON NEW PRODUCT INTRODUCTIONS; PRODUCT DELAYS. The Company's
continued success depends on the timely introduction of successful new products
to replace declining revenues from older products. However, consumer preferences
for software products are difficult to predict, and few consumer software
products achieve sustained market acceptance. In addition, the rate of
competitive product introductions achieving market penetration has accelerated.
Furthermore, entertainment products typically have relatively short product
lives, and sales of older entertainment products may decline precipitously. If,
for any reason, revenues from new products should fail to replace declining
revenues from existing products, the Company's business, operating results and
the trading price of the Company's common stock would be significantly adversely
affected.
The process of developing software products such as those offered by
the Company is extremely complex and is becoming more complex and expensive over
time. In recent periods, the costs of internal development of new products, and
advances from the Company to fund product development by third parties, have
increased significantly. As a result, the financial risks borne by the Company
associated with new product development and introduction have increased. The
Company's expense levels are largely based on its expectations regarding future
sales, accordingly operating results would be disproportionately adversely
affected by a decrease in sales or failure to meet the Company's sales
expectations due to delays in new product introductions, or lower than expected
demand. Due to the inherent seasonality of the Company's business, a delay in a
new product introduction in the first quarter or second quarter of a fiscal year
may have a particularly exaggerated effect on results of operations in that
year. In the past, the Company has experienced significant delays in the
introduction of new products, and the Company anticipates that it will
experience similar delays from time to time in the future. If the Company does
not accurately anticipate and successfully adapt its products to emerging
platforms, environments and technologies or new products are not introduced when
planned or do not achieve market acceptance or anticipated revenues, the
Company's operating results and the trading price of the Company's common stock
could be materially adversely affected. There can be no assurance that the
Company will be able to introduce new products on schedule or that such new
products will achieve market acceptance.
DEPENDENCE ON THE PRINT SHOP AND MYST PRODUCT LINES. A substantial
percentage of the Company's net revenues was derived from a relatively small
number of key product lines including The Print Shop family of personal
productivity products and the entertainment product Myst. These products are
expected to continue to account for a
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material percentage of net revenues in fiscal 1996 and thereafter. However,
there can be no assurance that sales levels of any of these families of products
will increase or be sustained, especially in the light of increased competition
in the market place in each of the product areas. Although the Company's sales
of Myst remain significant, sales of the three year old product have decreased
in recent quarters and the Company anticipates that trend to continue, and there
can be no assurance that sales of the Myst entertainment product will not
decline precipitously. The failure of new products in these families to achieve
market acceptance, or an overall decline in sales of any one or more of the
products in these families, could have a material adverse effect on the
Company's financial condition and operating results. Should the Company fail to
replace sales of these products with increased sales of newly introduced
products, the Company's operating results may be materially adversely affected.
COMPETITION. The market for the Company's products is intensely and
increasingly competitive. The Company believes that existing consumer software
companies can be expected to broaden their product lines or increase their focus
to compete more directly with the Company's products. Moreover, large
corporations with substantial bases of intellectual property content in the
motion picture and media industries have increasingly entered or announced their
intention to enter the market for consumer software. Certain of the Company's
existing and future competitors have greater financial, technical, marketing,
sales and customer support resources than the Company. There can be no assurance
that the Company will continue to compete successfully in the future. The
Company expects that the environment of increased competition may place
significant strain on the Company's marketing, technological and financial
resources, which may adversely affect the Company's profitability.
Only a small percentage of products introduced in the consumer software
market achieve any degree of sustained market acceptance. Broderbund believes
that the principal competitive factors in the consumer software industry include
product features and quality, reliability and ease-of-use, brand name
recognition, strength in distribution channels, quality of support services and
price. A variety, and increasing number, of companies offer products that
compete directly with one or more of the Company's products. Broderbund believes
that the increased technical sophistication required in new consumer software
products has caused the availability of significant financial resources to
become a more important competitive factor. Broderbund believes that new
entrants into the market segments could increase pressure to reduce the prices
of its products and reduced profit margins could result. In response to price
competition, the Company has reduced the price of some of its products,
including the well-known series, The Print Shop. Prolonged price competition
would have a material adverse effect on the Company's operating results.
MARKETING AND DISTRIBUTION. The distribution channels through which the
Company's products are sold are characterized by rapid change, including
consolidations and financial difficulties of certain distributors and retailers
and the emergence of new retailers such as warehouse clubs, mass merchants and
computer superstores. In addition, there is an increasing number of companies
competing for access to these channels and an increasing number of products
competing for access to the limited amount of shelf space and promotional
resources available in the retail channel. As a result of this activity, the
Company has experienced an increase in product returns and credit risks and has
adjusted its reserve for product returns and doubtful accounts accordingly.
Sales to a limited number of distributors and retailers have
constituted and are anticipated to constitute a substantial majority of the
Company's net revenues. The loss of, or significant reduction in sales volume
attributable to any of the Company's principal resellers or accounts sold
through such resellers could materially adversely affect the Company's results
of operations. There can be no assurance that distributors and retailers will
continue to purchase the Company's products or provide the Company's products
with adequate shelf space and promotional support.
At the time of product shipment the Company establishes reserves that
are an estimate of future returns or products. The Company's estimates of future
returns takes into account the anticipated growth in revenue, the current level
of distributor and retailer inventories of its products in relation to the
seasonally adjusted rate of sell-through for each product, the impact of planned
product releases on sales of previously released products, the proportion of
sales attributable to new outlets of existing retailers and new channels, the
effects of shifts in consumer preferences, including the shift in preference
from floppy-disk based products to CD-ROM based products, and other factors.
Product returns
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that differ from the Company's reserves could affect the Company's operating
results. The Company believes that the rate of product returns will increase as
competition in the distribution channel increases and as mass merchants become
an increasing percentage of the Company's sales.
PROPRIETARY RIGHTS. Generally, the Company does not have signed license
agreements with the end users of its products and does not copy-protect its
software; rather, it relies on the copyright laws to prevent unauthorized
distribution of its software. The Company also relies on a combination of trade
secret, patent and trademark laws and nondisclosure agreements to protect its
proprietary rights. However, existing copyright laws afford only limited
protection, and it may be possible for unauthorized third parties to copy the
Company's products or to reverse engineer or otherwise obtain and use
information it regards as proprietary. Policing unauthorized use of the
Company's products is difficult, and while the Company is unable to determine
the extent to which software piracy of its products exists, software piracy can
be expected to be a persistent problem. In addition, there can be no assurance
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to its technologies. Further, the laws
of certain countries in which the Company's products are or may be distributed
do not protect products and intellectual property rights to the same extent as
the laws of the United States.
PRODUCTION. The Company prepares master software diskettes and CD-ROM
discs, user manuals and packaging, and prints labels. The Company primarily uses
outside sources to procure and duplicate CD-ROM discs. Substantially all of the
Company's floppy diskette duplication is performed by the Company at its own
facilities, using diskettes acquired in quantity from various sources. Printing
of the user manuals, packaging and manufacture of related materials are
performed to the Company's specifications by outside sources, and the completed
packages are assembled by the Company. To date the Company has not experienced
any material difficulties or delays in the manufacture and assembly of its
products, and has experienced very low returns due to product defects, however,
there can be no assurance that such trends will continue.
FACTORS AFFECTING EARNINGS AND STOCK PRICE. The Company's sales in any
given fiscal quarter depend almost entirely on purchase orders received and
shipments made in that quarter. In recent periods, demand for products in the
personal computer industry, including software products, has been subject to
significant fluctuation. Moreover, pricing pressures have become more
significant both in the hardware and software segments of the personal computer
industry. The Company's ability to increase or maintain revenue levels in any
given period depends significantly on the Company's timely release of new
products. Delay in product introductions or changes in the Company's product
development cycles may have a significant adverse effect on revenues and results
of operations in any given period.
As a result of these and other factors, the Company's sales in any
given period are inherently difficult to predict. In the event that the Company
should experience a shortfall in sales in a given fiscal quarter, the Company
does not expect that it would be able to reduce its operating expenses quickly
enough to prevent a decline in profit margins. As a result, a shortfall in sales
in any given period may have an exaggerated effect on the Company's earnings for
that period. Because the Company's stock trades at a relatively high
price-earnings multiple, due in part to analysts' expectations of continued
earnings growth, even a relatively small shortfall in earnings or a change in
analysts' expectations may cause an immediate and substantial decline in the
Company's stock price. Investors in the Company's common stock must be willing
to bear the risk of such fluctuations in earnings and stock price.
FUTURE OPERATING RESULTS. As is typical in the consumer software
industry, the Company's business is highly seasonal with net revenues and
operating income generally highest during the first fiscal quarter, lower in the
second fiscal quarter, and lowest in the seasonally slow third and fourth fiscal
quarters. The usual pattern is due primarily to the increased demand for the
Company's products during the calendar year-end holiday selling season. In
addition, due to the typical slower summer selling season in Europe, the Company
does not expect international revenues in the fourth fiscal quarter to be
comparable to the prior fiscal quarters. For the third quarter of fiscal 1996,
the Company reported a year-to-year decline in revenues and profitability. The
Company expects that revenues in the next two fiscal quarters will be
approximately the same as the same periods in the prior year.
-9-
<PAGE> 10
If there is little or no growth in net revenues in the next two fiscal quarters,
the Company's increasing operating expenses would cause net income to decline
when compared to the same period in the prior year.
Recent data indicates a slowdown in growth of end-user demand for
consumer software and hardware during 1996. Also, changes in the operating
systems, such as Windows 95, appear to have caused confusion in the consumer
market. In addition, competition in the consumer market has intensified with the
proliferation of many new products as existing competitors continue to broaden
their product lines and new competitors enter into or increase their focus on
the consumer software market. In response to increasing price competition, the
Company has reduced the price of some of its products, including its
best-selling series, The Print Shop. If such conditions persist, the Company's
future growth in net revenues, if any, could be adversely affected. Further,
there can be no assurance that sales of the Company's existing products,
particularly its entertainment products, will continue to sustain market
acceptance and to generate significant levels of revenue in subsequent quarters
or that a shortfall in revenue from any product could be replaced in a timely
manner. In addition, sales of products on older platforms and in certain product
lines have declined, and there can be no assurance that sales of these products
or other existing products will not decline further or experience lower than
expected sales levels. Because a significant portion of the Company's expense
levels are fixed and based upon its expectations regarding future revenues,
operating results would be disproportionately adversely affected by a decrease
in sales or failure to meet the Company's sales expectations. Further, any
significant shortfall in net revenues from levels expected by securities
analysts and stockholders could result in substantial volatility in the trading
price of the Company's common stock.
The Company's operating results and quarterly revenues are also
affected by the timing of new product introductions, product mix, timing of
orders placed by the Company's distributors and retailers and timing of
marketing expenditures. There can be no assurance that expected new product
introductions will not experience material delays, that new products introduced
by the Company will achieve any significant degree of market acceptance, or that
such acceptance will be sustained for any length of time. In addition, because
the Company expects that the cost of developing new products will continue to
increase, the financial risks associated with new product development will
increase as will the risks associated with material delays in the introduction
of such new products. The Company has previously announced that Myst 2, the
sequel to the Company's best-selling entertainment title Myst, will not be
released in calendar 1996 as previously expected. Moreover, sales of Myst have
declined substantially year-over-year, and there can be no assurance that the
shortfall in Myst revenues can be replaced in a timely manner. The shortfall
from the decline in Myst revenues was not fully replaced in the third fiscal
quarter. In addition, due to the consolidation of platforms that has occurred in
conjunction with the shift to CD-ROM, the adoption of the Windows 95 operating
system and the practice of putting multiple versions of a product on the same
CD-ROM, the Company may release fewer new products in future fiscal years than
it has in the past.
The distribution channels through which consumer software products are
sold have been characterized by intense competition and continuing uncertainties
and there can be no assurance that distributors and retailers will continue to
purchase the Company's products or provide the Company's products with adequate
levels of shelf space and promotional support. The Company believes that the
rate of product returns will increase as competition in the distribution channel
increases and as mass merchants become an increasing percentage of the Company's
sales. In addition, the business difficulties of a distributor or retailer could
have an adverse effect on the operating results and financial condition of the
Company.
Except for the historical information contained in this Form S-3, the
information set forth herein includes forward looking statements that are
dependent on certain risks and uncertainties. Important factors that could cause
actual results to differ materially from the anticipated results include, but
are not limited to, the anticipation of growth of specific market segments, the
positioning of Broderbund's products in those segments, the competitive
environment in the consumer software industry, the dependence on other products
such as Windows 95, the anticipation and successful adaptation to rapid
technological change, and the importance of the timing and market acceptance of
new Broderbund product releases.
-10-
<PAGE> 11
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth as of July 8, 1996 certain information
with respect to the beneficial share ownership of the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING NUMBER OF OWNED AFTER OFFERING
--------------------------- SHARES --------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ------------------------------------------------------- --------------- ----------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Ken Hess and Connie Hess as Trustees for
the Ken and Connie Hess Living Trust(1)............. 212,354 1.02% 212,354 0 0%
M. Lynn Brewer......................................... 40,489 * 40,489 0 0
Jonathan S. Aaronson & Alma C. Rodoni as
Trustees for the Jonathan S. Aaronson &
Alma C. Rodoni Living Trust Dated 5/1/91............ 8,528 * 8,528 0 0
Daniel Handalian II.................................... 325 * 325 0 0
Hugo D. Paz............................................ 2,450 * 2,450 0 0
Courtney J. Kermeen.................................... 865 * 865 0 0
Bonnie Anderson........................................ 5,307 * 5,307 0 0
TOTAL............................................... 270,318 1.30% 270,318 0 0%
</TABLE>
______________________
* Less than 1%
(1) Kenneth L. Hess is the President of Banner Blue Software Incorporated,
a wholly-owned subsidiary of the Company.
-11-
<PAGE> 12
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Stockholders or
by pledgees, donees, transferees or other successors in interest. Such sales may
be made in any one or more transactions (which may involve block transactions)
on the Nasdaq National Market, or any exchange on which the Common Stock may
then be listed, in the over-the-counter market or otherwise in negotiated
transactions or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers may sell the Shares as agent or may purchase such Shares as
principal and resell them for their own account pursuant to this Prospectus.
Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or
purchasers the Shares, for whom they may act as agent (which compensation may be
in excess of customary commissions). In connection with such sales, the Selling
Stockholders and any participating brokers or dealers may be deemed to be
"underwriters" as defined in the Securities Act. The Registration Rights
Agreement by and among the Company and the Selling Stockholders provides that
the Company will indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the validity of the securities
offered hereby will be passed upon for the Company by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements of Broderbund Software, Inc.
incorporated by reference in Broderbund Software, Inc.'s Annual Report (Form
10-K) for the year ended August 31, 1995 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
-12-
<PAGE> 13
===============================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents
by Reference.......................................................... 3
The Company.............................................................. 4
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 11
Selling Stockholders..................................................... 11
Plan of Distribution..................................................... 12
Legal Matters............................................................ 12
Experts.................................................................. 12
</TABLE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company or the Selling
Stockholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy the Shares by anyone in any jurisdiction in
which such offer or solicitation is not authorized, or in which the person
making the offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. Under no circumstances
shall the delivery of this Prospectus or any sale made pursuant to this
Prospectus, create any implication that the information contained in this
Prospectus is correct as of any time subsequent to the date of this Prospectus.
===============================================================================
===============================================================================
270,318 SHARES
BRODERBUND
SOFTWARE, INC.
COMMON STOCK
PROSPECTUS
____________, 1996
===============================================================================
-13-
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will
be paid by the Registrant in connection with the sale and distribution of the
securities being registered, other than underwriting discounts and commissions,
if any. All of the amounts shown are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee........................................... $ 3,041.08
Legal fees and expenses........................................ 5,000.00
Accounting fees and expenses................................... 3,000.00
Blue Sky fees and expenses (including legal fees).............. 3,000.00
Transfer agent's and registrar's fees and expenses............. --
Miscellaneous expenses......................................... --
-----------
Total.......................................................... $ 14,041.08
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation limits, to the maximum
extent permitted by Delaware law, the personal liability of directors for
monetary damages for breach of their fiduciary duties as a director. The
Registrant's Bylaws provide that the Registrant shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law. The Registrant has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements require the
Registrant, among other things to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Registrant believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful. The Registration Rights Agreement
(Exhibit 4.5 hereto) provides for cross-indemnification of the Selling
Stockholders and the Registrant, its directors and officers for certain
liabilities arising under the Securities Act or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-1
<PAGE> 15
ITEM 16. EXHIBITS
EXHIBIT DESCRIPTION
NUMBER
4.5 Registration Rights Agreement by and between Broderbund
Software, Inc. and the stockholders listed therein+
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Ernst & Young LLP, Independent Auditors
(see page II-5)
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
- ----------------------
+ Incorporated by Reference to the Registrant's Registration Statement on
Form S-3 (File No. 33-92326) filed with the Commission on May 15, 1995.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
a. To include any prospectus required by
Section 10(a)(3) of the Securities Act;
b. To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and
c. To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that paragraphs (a) and (b) above do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") that are incorporated by reference in the Registration
Statement.
2. That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 16
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, the information omitted from
the form of Prospectus filed as part of this Registration Statement in reliance
upon 430A and contained in a form of Prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared effective.
II-3
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Broderbund Software, Inc., a corporation organized and existing
under the laws of the State of Delaware, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-3
and has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Novato, State of
California, on this 10th day of July, 1996.
BRODERBUND SOFTWARE, INC.
By: /s/ Thomas L. Marcus
----------------------------------------------------------
Thomas L. Marcus
Vice President, Business Development and General Counsel
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
William M. McDonagh, Michael Shannahan and Thomas L. Marcus, jointly and
severally, as attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any amendment to this Registration Statement and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorneys-in-fact, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact or
either of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Douglas G. Carlston Chief Executive Officer and Chairman of the July 10, 1996
- --------------------------------------- Board of Directors (Principal Executive Officer)
Douglas G. Carlston
/s/ William M. McDonagh President, Chief Operating Officer and Director July 10, 1996
- ---------------------------------------
William M. McDonagh
/s/ Michael Shannahan Chief Financial Officer July 10, 1996
- --------------------------------------- (Principal Financial and Accounting Officer)
Michael Shannahan
/s/ Edmund R. Auer Director July 10, 1996
- ---------------------------------------
Edmund R. Auer
Director
- ---------------------------------------
Gary L. Buckmiller
/s/ William P. Egan Director July 10, 1996
- ---------------------------------------
William P. Egan
/s/ David E. Liddle Director July 10, 1996
- ---------------------------------------
David E. Liddle
/s/ Lawrence Wilkinson Director July 10, 1996
- ---------------------------------------
Lawrence Wilkinson
/s/ Scott D. Cook Director July 10, 1996
- ---------------------------------------
Scott D. Cook
</TABLE>
II-4
<PAGE> 18
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Broderbund Software,
Inc. for the registration of 270,318 shares of its common stock and to the
incorporation by reference therein of our reports dated October 4, 1995, except
for Note 2 as to which the date is November 7, 1995, with respect to the
consolidated financial statements of Broderbund Software, Inc. incorporated by
reference in its Annual Report (Form 10-K) for the year ended August 31, 1995
and the related financial statement schedules included therein, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Francisco, California
July 8, 1996
II-5
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
4.5 Registration Rights Agreement, by and between Broderbund Software, Inc. and the stockholders
listed therein+
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-5)
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
</TABLE>
- ---------------
+ Incorporated by Reference to the Registrant's Registration Statement on
Form S-3 (File No. 33-92326) filed with the Commission on May 15, 1995.
II-6
<PAGE> 1
EXHIBIT 5.1
July 10, 1996
Broderbund Software, Inc.
500 Redwood Boulevard
Novato, CA 94948-6121
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about July 10, 1996 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 270,318 shares of your Common Stock, par
value $0.01 per share (the "Shares"), to be sold by certain stockholders listed
in the Registration Statement (the "Selling Stockholders"). As your counsel, we
have examined the proceedings taken and proposed to be taken in connection with
the sale of the Shares by the Selling Stockholders in the manner set forth in
the Registration Statement in the Section entitled "Plan of Distribution."
It is our opinion that the Shares, when sold by the Selling
Stockholders in the manner referred to in the Registration Statement, will be
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
WILSON SONSINI GOODRICH & ROSATI
