UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): January 20, 2000
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LEGATO SYSTEMS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-26130 94-3077394
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
3210 Porter Drive, Palo Alto, California 94304
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(Address of Principal Executive Offices) (Zip Code)
Company's telephone number, including area code: (650) 812-6000
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(Former Name or Former Address, if Changed Since Last Report.)
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ITEM 5. OTHER EVENTS
On January 19, 2000, Legato Systems, Inc. (the "Company") issued a
press release reporting its financial results for the fourth quarter and the
twelve months ended December 31, 1999. The Company also announced a restatement
of the financial results for the third quarter ending September 30, 1999. The
press release which includes further details regarding this announcement is
attached hereto as an exhibit and is incorporated by reference herein.
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ITEM 7. EXHIBITS.
Exhibit
Number Description
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99.1 Press Release dated January 19, 2000.
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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 hereunto duly authorized.
LEGATO SYSTEMS, INC.
Date: January 20, 2000 By: /s/ Stephen C. Wise
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Name: Stephen C. Wise
Title: Senior Vice President,
Finance and Administration and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated January 19, 2000.
EDITORIAL CONTACT:
Trish Terry
Public Relations Manager
925.875.8062
[email protected]
INVESTOR CONTACT:
Stephen C. Wise
Chief Financial Officer
650.812.6102
FOR IMMEDIATE RELEASE
LEGATO ANNOUNCES FOURTH QUARTER AND FISCAL 1999 RESULTS
PALO ALTO, CA, January 19, 2000-Legato Systems, Inc. (Nasdaq: LGTO), a
worldwide leader in enterprise storage management, today announced financial
results for its fourth quarter and fiscal year 1999. The Company also announced
restated results for the third quarter of 1999.
For the fourth quarter, the Company reported revenue of $71.2 million,
representing an increase of 47% over last year's fourth quarter revenue of $48.5
million. Operating income rose 41% to $14.4 million. Net income, excluding
merger-related costs, increased 39% to $9.9 million, from $7.1 million in the
same period of 1998. Diluted earnings per share, excluding merger-related costs,
increased 38% to $0.11 per share, compared to $0.08 earned per share in the
fourth quarter of last year.
For the fiscal year 1999, the Company reported revenue of $251.1 million,
registering an increase of 55% over the same period last year of $161.8 million.
Operating income rose 130% to $63.9 million. Net income for 1999, excluding
merger-related costs, increased 112% to $43 million, from $20.2 million for the
same period of 1998. Diluted earnings of $0.48 per share, excluding
merger-related costs, grew 100% over the $0.24 earned during fiscal year 1998.
The Company is restating results for the third quarter of 1999 to reflect
an adjustment concerning one contract that decreased revenue in the third
quarter from $71.7 million to $65.9 million. The Company believes that this
revenue will be recorded in the first and second quarters of 2000. As a result
of this adjustment, earnings per share in the third quarter is reduced from
$0.18 to $0.14. "During the last few days, in connection with the audit of the
Company's 1999 results, Legato was informed by its auditors that one contract
recorded as revenue in the third quarter should be recorded as revenue in 2000,"
said Stephen C. Wise, Legato's chief financial officer.
"In spite of solid revenue and earnings growth," commented Louis C. Cole,
Legato's president and chief executive officer, "we are very disappointed that
results for the fourth quarter fell short of expectations." The shortfall in
fourth quarter revenue resulted primarily from the Company's determination, in
consultation with its auditors during the last few days in connection with the
1999 audit, that revenue from two contracts signed during the fourth quarter
should be recognized during 2000.
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"As we enter 2000, Legato has the energy and momentum typically associated
with a start-up company, yet as a leading storage management software company,
we're financially and technologically strong, and delivering measurable value to
customers," Cole said. "Looking ahead to 2000, we believe that annual revenues
will grow in the range of 50 percent year-over-year, and that growth will be
stronger in the second half of the year," Cole concluded.
This press release contains forward-looking statements about the Company's
restatement of the third quarter and expected results for the fourth quarter and
fiscal year 1999, future profitability and operating results, competition and
continuing acceptance of the company's products, and the Company's future
prospects for 2000. These forward-looking statements involve a number of risks
and uncertainties that could cause the Company's actual results to differ
materially. Factors that might cause such a difference include, but are not
limited to, additional accounting adjustments in connection with the Company's
1999 audit, fluctuations in quarterly operating results, product concentration,
competition, rapid technological change, management of an expanding company, and
integration of acquired companies. For a more detailed discussion of these
factors, interested parties should review the "Risk Factors" listed in the
Company's Form 10-K for 1998 and Forms 10-Q for the first, second and third
quarters of 1999, which are on file with the U.S. Securities and Exchange
Commission.
ABOUT LEGATO SYSTEMS
Legato Systems, Inc. (NASDAQ: LGTO), is a worldwide leader in the
enterprise storage management software market. Helping companies leverage
business-critical, corporate data assets, Legato's products and services enable
information continuance, a seamless approach to the movement, management and
protection of data throughout an enterprise. Founded in 1989, Legato's storage
management software products have become the recognized industry standard with
the largest installed base representing over 65,000 customers. Legato's products
are available through a network of Legato-licensed resellers, integrators and
OEM partners. Legato's corporate headquarters is located at 3210 Porter Drive,
Palo Alto, CA 94304. Telephone: 650.812.6000.
# # #
Legato Systems, Inc., Legato logo, and Legato NetWorker are registered
trademarks, and NetWorker Archive, NetWorker HSM, ClientPak, SmartClient,
SmartMedia, StorSuite, BusinesSuite, Power Edition, Legato GEMS, and OpenTape
are trademarks of Legato Systems, Inc. in the U.S. and/or other countries. All
other product, trademark, company, or service names mentioned herein are the
property of their respective owners.
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The following condensed consolidated financial statements have been
restated to reflect the Company's acquisition of the Qualix Group, Inc.
dba FullTime Software, completed April 19, 1999, and
accounted for as a pooling-of-interests.
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LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Twelve Months Ended
December 31, December 31,
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(unaudited)
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUE:
Product $ 51,454 $ 36,168 $ 183,611 $ 122,983
Service & support 19,767 12,323 67,473 38,774
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Total revenues 71,221 48,491 251,084 161,757
COST OF REVENUE:
Product 1,540 1,564 5,589 5,304
Service & Support 7,894 4,228 25,870 15,097
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Total cost of revenue 9,434 5,792 31,459 20,401
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GROSS PROFIT 61,787 42,699 219,625 141,356
OPERATING EXPENSES:
Research and development 12,643 7,215 40,057 25,645
Sales and marketing 28,414 20,644 94,731 72,017
General and administration 6,346 4,654 20,984 15,874
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Total operating expenses 47,403 32,513 155,772 113,536
OPERATING INCOME 14,384 10,186 63,853 27,820
Interest income, net 1,571 1,330 5,448 4,799
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OPERATING INCOME BEFORE PROVISION FOR INCOME TAXES 15,955 11,516 69,301 32,619
Provision for income taxes 6,063 4,376 26,334 12,395
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NET INCOME - OPERATIONAL $ 9,892 $ 7,140 $ 42,967 $ 20,224
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DILUTED EARNINGS PER SHARE - OPERATIONAL $ 0.11 $ 0.08 $ 0.48 $ 0.24
============ ============= ============= ==============
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Reconciliation of net income - operational to net income - as reported:
Net income - operational $ 9,892 $ 7,140 $ 42,967 $ 20,224
Amortization of intangibles 9,623 280 21,785 1,118
Merger related expenses - - 16,438 645
Qualix direct revenue and costs - (314) (132) (1,758)
Income taxes (2,783) 91 (10,162) 350
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Net income - as reported $ 3,052 $ 7,083 $ 15,038 $ 19,869
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Diluted earnings per share - as reported $ 0.03 $ 0.08 $ 0.17 $ 0.24
============ ============= ============= ==============
Shares used in the calculation of operational and as
reported diluted earnings per share 92,783 84,163 89,351 83,074
============ ============= ============= ==============
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LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
1999 1998
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ASSETS
Current assets:
Cash, cash equivalents and investments $ 169,929 $ 125,972
Accounts receivables, net 69,018 39,982
Other current assets 10,112 6,059
Deferred tax asset 32,437 11,836
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Total current assets 281,496 183,849
Property and equipment, net 27,090 21,119
Deposits and other assets 2,254 536
Intangible assets, net 141,988 2,243
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Total assets $ 452,828 $ 207,747
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 31,915 $ 26,816
Deferred revenues 46,450 21,879
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Total current liabilities 78,365 48,695
Deferred tax liability 22,975 523
Stockholders' equity:
Common stock 293,086 115,165
Retained earnings 58,402 43,364
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Total stockholders' equity 351,488 158,529
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Total liabilities and stockholders' equity $ 452,828 $ 207,747
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<TABLE>
<CAPTION>
LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUE:
Product $ 48,332 $ 32,726 $ 132,157 $ 86,815
Service & support 17,621 10,312 47,706 26,451
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Total revenues 65,953 43,038 179,863 113,266
COST OF REVENUE:
Product 1,385 1,504 4,049 3,740
Service & Support 6,639 4,077 17,976 10,869
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Total cost of revenue 8,024 5,581 22,025 14,609
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GROSS PROFIT 57,929 37,457 157,838 98,657
OPERATING EXPENSES:
Research and development 10,354 6,837 27,414 18,430
Sales and marketing 23,763 17,883 66,317 51,373
General and administration 5,052 3,717 14,638 11,220
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Total operating expenses 39,169 28,437 108,369 81,023
OPERATING INCOME 18,760 9,020 49,469 17,634
Interest income, net 1,257 1,262 3,877 3,469
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OPERATING INCOME BEFORE PROVISION FOR INCOME TAXES 20,017 10,282 53,346 21,103
Provision for income taxes 7,606 3,907 20,271 8,019
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NET INCOME - OPERATIONAL $ 12,411 $ 6,375 $ 33,075 $ 13,084
=============== ============ =============== ===============
DILUTED EARNINGS PER SHARE - OPERATIONAL $ 0.14 $ 0.08 $ 0.38 $ 0.16
=============== ============ =============== ===============
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Reconciliation of net income - operational to net income - as reported:
Net income - operational $ 12,411 $ 6,375 $ 33,075 $ 13,084
Amortization of intangibles 7,722 279 12,162 838
Merger related expenses 8,300 645 16,438 645
Qualix direct revenue and costs - (469) (132) (1,444)
Income taxes (2,964) (182) (7,380) 259
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Net income - as reported $ (647) $ 6,102 $ 11,987 $ 12,786
=============== ============ =============== ===============
Diluted earnings per share - as reported $ (0.01) $ 0.07 $ 0.14 $ 0.16
=============== ============ =============== ===============
Shares used in the calculation of operational and as
reported diluted earnings per share 90,694 83,723 87,802 82,465
=============== ============ =============== ===============
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LEGATO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, December 31,
1999 1998
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(Unaudited)
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ASSETS
Current assets:
Cash, cash equivalents and investments $ 144,724 $125,972
Accounts receivables, net 62,087 39,982
Other current assets 9,194 6,059
Deferred tax asset 12,231 11,836
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Total current assets 228,236 183,849
Property and equipment, net 23,895 21,119
Deposits and other assets 2,253 536
Intangible assets, net 151,620 2,243
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Total assets $ 406,004 $207,747
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 11,093 $ 26,816
Deferred revenues 39,594 21,879
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Total current liabilities 50,687 48,695
Deferred tax liability 25,519 523
Stockholders' equity:
Common stock 274,448 115,165
Retained earnings 55,350 43,364
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Total stockholders' equity 329,798 158,529
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Total liabilities and stockholders' equity $ 406,004 $ 207,747
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