<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended JUNE 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d)of the Securities Exchange
Act of 1934 For the transistion period from ____________ to ____________
Commission File Number: 0-22712
VERITAS SOFTWARE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2823068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1600 Plymouth Street, Mountain View, 94043
California (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 415/335-8000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X YES NO
Indicate the number of shares outstanding of each of the registrant's classes of
Common Stock as of July 31, 1996:
Common Stock, No Par Value 8,933,937 shares
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VERITAS SOFTWARE CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page no.
--------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June
30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income for
the Three Months Ended June 30, 1996 and 1995,
and for the Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
Index to Exhibits 14
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERITAS Software Corporation
Condensed Consolidated Balance Sheets
(IN THOUSANDS)
June 30, December 31,
1996 1995
--------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,405 $ 2,345
Short-term investments............................ 31,192 27,409
Accounts receivable, net.......................... 2,006 2,003
Notes receivable, net............................. 225 -
Prepaid expenses.................................. 386 391
--------- ---------
Total current assets.............................. 35,214 32,148
Property and equipment, net............................ 2,781 2,163
Notes and other assets................................. 1,377 697
--------- ---------
$39,372 $35,008
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 1,623 $ 653
Other accrued liabilities......................... 1,817 2,228
Deferred revenue.................................. 957 1,339
Current obligations under capital leases.......... 32 116
--------- ---------
Total current liabilities......................... 4,429 4,336
Accrued rent........................................... 804 594
Shareholders' equity:
Common stock...................................... 67,898 66,976
Accumulated deficit............................... (33,759) (36,898)
--------- ---------
Total shareholders' equity........................ 34,139 30,078
--------- ---------
$39,372 $35,008
--------- ---------
--------- ---------
See accompanying notes to condensed consolidated financial statements.
3
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VERITAS Software Corporation
Condensed Consolidated Statements of Income
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
User license fees............................................... $ 7,428 $ 4,331 $14,121 $8,727
Source license fees............................................. 325 328 540 590
Services and training........................................... 460 384 881 872
Porting......................................................... 107 325 242 827
-------- -------- -------- --------
Net revenues........................................... 8,320 5,368 15,784 11,016
Operating expenses:
Cost of revenues.............................................. 647 502 1,245 1,305
Product development........................................... 2,615 1,454 4,663 2,774
Selling, general and administrative........................... 2,340 1,701 4,533 3,663
In-process research and development 2,200 - 2,200 -
-------- -------- -------- --------
Total operating expenses............................... 7,802 3,657 12,641 7,742
-------- -------- -------- --------
Operating income ............................................... 518 1,711 3,143 3,274
Interest income, net.......................................... 425 351 805 614
Gain on sale of ViSTA operations.............................. - - - 1,726
-------- -------- -------- --------
Income before taxes............................................. 943 2,062 3,948 5,614
Provision for income taxes.................................... 418 145 809 394
-------- -------- -------- --------
Net income ..................................................... $ 525 $ 1,917 $ 3,139 $ 5,220
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share............................................ $0.06 $0.21 $0.33 $0.58
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in per share computation............................ 9,529 9,166 9,474 8,996
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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VERITAS Software Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income... ................................................... $ 3,139 $ 5,220
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................... 679 736
Gain on sale of ViSTA operations................................. - (1,726)
In-process research and development. 2,200 -
Changes in operating assets and liabilities:
Accounts receivable......................................... (3) 1,719
Prepaid expenses ........................................... 5 (199)
Notes and other assets...................................... (453) (100)
Accounts payable ........................................... 970 (480)
Other accrued liabilities................................... (411) (419)
Deferred revenue (382) (343)
Accrued rent 210 -
--------- ---------
Net cash provided by operating activities.............. 5,954 4,408
INVESTING ACTIVITIES
Purchases of short-term investments, net......................... (3,783) (12,300)
Purchase of equipment........................................... (1,137) (1,459)
Proceeds from sale of ViSTA operations........................... - 2,172
Payment received on note......................................... 188 -
Purchase of ACSC ................................................ (3,000) -
--------- ---------
Net cash used in investing activities.................. (7,732) (11,587)
FINANCING ACTIVITIES
Principal payments under capital lease obligations............... (84) (158)
Proceeds from sale of common stock, net.......................... 922 443
--------- ---------
Net cash provided by financing activities............. 838 285
--------- ---------
Net increase in cash and cash equivalents............................ (940) (6,894)
Cash and cash equivalents at beginning of period..................... 2,345 8,686
--------- ---------
Cash and cash equivalents at end of period........................... $ 1,405 $ 1,792
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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VERITAS Software Corporation
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
1. Basis of presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. The following information should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
2. Use of estimates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Net income per share.
Net income per share has been computed using the weighted average number of
common shares outstanding, after giving effect to dilutive common stock
equivalents. Common stock equivalents consist of the dilutive shares issuable
upon the exercise of stock options and warrants (using the treasury stock
method).
4. Acquisition of ACSC.
On April 1, 1996, the Company acquired all of the outstanding capital stock
of Advanced Computing Systems Company ("ACSC"), a company which develops media
management software, for a total cost of $3,450,000. Of the total charge,
$2,200,000 was allocated to in-process research and development which was
expensed in the second quarter of 1996 and approximately $1,250,000 was
allocated to acquired intangibles which will be amortized over a three to five
year period. Total cash outflows in the second quarter of 1996 related to this
purchase were $3,000,000. The Company has agreed to pay the sole shareholder of
ACSC a royalty on certain future product revenue derived from the assets
acquired. The royalty will be based on product shipments beginning in the third
quarter of 1997 and will be payable over a five year period up to a maximum of
$2,500,000. For the six months ended June 30, 1996 and 1995, the results of
operations of ACSC were not material to the Company; and accordingly pro forma
information has not been provided.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. The following information should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
This Form 10-Q contains forward-looking statements written in the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve a number of risks and uncertainties,
including (i) the Company's timely development and market acceptance of new non-
OEM products, (ii) the timely creation of versions of the Company's products for
Microsoft Windows NT operating system ("Windows NT"), (iii) the impact of
Windows NT and other operating systems on the UNIX market upon which the
Company's current products are dependent (iv) the reliance on OEMs to continue
porting and shipping the Company's products, (v) the ability of the Company to
successfully expand the distribution of its products through new and unproven
channels, including resellers, integrators, distributors and end-users, (vi) the
uncertainty of the labor market, management issues and local regulations in
India where the Company's subsidiary provides software development services,
(vii) the Company's ability to hire and retain research and development
personnel with appropriate skills in a highly competitive labor market, and
(viii) such risks and uncertainties as are detailed from time to time in the
Company's reports and filings with the Securities and Exchange Commission
("SEC"), including the Form 10-K for the year ended December 31, 1995 and the
Company's Form 10-Q for the quarter ended March 31, 1996. The actual results
that the Company achieves may differ materially from any forward-looking
statements due to such risks and uncertainties.
The Company has used various sentences within this Form 10-Q which contain
such forward-looking statements, and word such as "believes", "anticipates",
"expects", "intends", and similar expressions that are intended to identify
forward-looking statements, but are not the exclusive means of denoting the
same. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may arise after the
date of this report. Readers are urged to carefully review and consider various
disclosures made by the Company in this report and in the Company's other
reports filed with the SEC that attempt to advise interested parties of the
risks and factors that may affect the Company's business.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30,
1995.
NET REVENUES
Net revenues increased from $5,368,000 in the second quarter of 1995 to
$8,320,000 in the second quarter of 1996, an increase of $2,952,000, or 55%.
This increase primarily reflects growth in user license fees.
USER AND SOURCE LICENSE FEES
User license fees increased from $4,331,000 in the second quarter of 1995
to $7,428,000 for the same period of 1996, an increase of $3,097,000, or 72%.
This increase primarily reflects the growth in OEM shipments of one or more of
the Company's storage management products and an increase in sales of the
Company's shrink wrap versions of products, including FirstWatch high
availability products acquired from Tidalwave in 1995. Source license fees
decreased from $328,000 in the second quarter of 1995 to $325,000 for the same
period of 1996.
7
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SERVICES AND TRAINING
Services and training revenue, primarily derived from annual maintenance
agreements and training, increased from $384,000 in the second quarter of 1995
to $460,000 in the same period of 1996, a increase of $76,000, or 20%,
reflecting the increasing size of the Company's installed base of customers and
products.
PORTING
Porting revenue decreased from $325,000 in the second quarter of 1995 to
$107,000 in the second quarter of 1996, a decrease of $218,000, or 67%. The
Company generally does not seek porting or any other custom work, but the
Company does enter into agreements which it believes would result in useful
extensions to current products and result in the growth of user license fees.
COST OF REVENUES
Cost of revenues increased from $502,000 in the second quarter of 1995 to
$647,000 in the second quarter of 1996, an increase of $145,000, or 29%. Cost
of revenues includes the costs associated with user and source license fees, the
costs of providing service and training to the Company's customers, and the
costs of porting and other non-recurring engineering services. Cost of license
fees increased from $184,000 in the second quarter of 1995 to $329,000 in the
same period of 1996, an increase of $145,000, or 79%, primarily due to higher
sales volumes of products requiring royalties paid to third parties. Cost of
service and training increased from $177,000 in the second quarter of 1995 to
$279,000 in the second quarter of 1996, an increase of $102,000, or 58%,
reflecting increases in headcount necessary to support the increasing size of
the Company's installed base of customers and products. Cost of porting
decreased from $141,000 in the second quarter of 1995 to $39,000 in the same
period of 1996, a decrease of $102,000, or 72%. This decrease was due to a
decrease in porting revenues and corresponding costs by the Company in the
second quarter of 1996 compared to the same period of 1995.
PRODUCT DEVELOPMENT
Product development increased from $1,454,000 in the second quarter of 1995
to $2,615,000 in the second quarter of 1996, an increase of $1,161,000, or 80%.
The increase in product development expense was primarily attributable to
increased headcount and related recruiting expenses required to support new
product development activities, such as adapting the Company's products to run
on the Windows NT operating system. Total product development headcount
increased from 51 at June 30, 1995 to 77 at June 30, 1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased from $1,701,000 in
the second quarter of 1995 to $2,340,000 in the second quarter of 1996, an
increase of $639,000, or 38%. The increase was primarily a result of an
increase in the number of sales representatives, marketing personnel, and
marketing programs as the Company continues to invest in the development of non-
OEM channels. Selling, general and administrative expenses as a percentage of
total net revenues decreased from 32% in the second quarter of 1995 to 28% in
the second quarter of 1996. This decrease was primarily due to increased user
license fees from OEM customers, which did not require a corresponding increase
in selling, general and administrative expenses. However, the Company expects
selling, general and administrative expenses to increase as a percentage of
revenues; as non-OEM revenues begin to represent a larger percentage of the
Company's revenues.
8
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IN-PROCESS RESEARCH AND DEVELOPMENT
On April 1, 1996, the Company acquired all of the outstanding capital stock
of Advanced Computing Systems Company ("ACSC"), a company which develops media
management software, for a total cost of $3,450,000. Of the total charge,
$2,200,000 was allocated to in-process research and development which was
expensed in the second quarter of 1996 and approximately $1,250,000 was
allocated to acquired intangibles which will be amortized over a three to five
year period. Total cash outflows in the second quarter of 1996 related to this
purchase were $3,000,000. The Company has agreed to pay the sole shareholder of
ACSC a royalty on certain future product revenue derived from the assets
acquired. The royalty will be based on product shipments beginning in the third
quarter of 1997 and will be payable over a five year period up to a maximum of
$2,500,000. For the three months and six months ended June 30, 1996 and 1995,
the results of operations of ACSC were not material to the Company; and
accordingly pro forma information has not been provided.
INTEREST INCOME
Interest income increased from $351,000 in the second quarter of 1995 to
$425,000 in the same quarter of 1996, an increase of $74,000, or 21%. This
increase reflects higher average investment balances through the second three
months of 1996, compared to the same period of 1995.
PROVISION FOR INCOME TAXES
Provision for income taxes increased from $145,000 in the second quarter of
1995 to $418,000 in the second quarter of 1996, an increase of $273,000, or
188%. This increase reflects the Company's full utilization of its California
loss carryforwards in the first quarter of 1996. The Company had an effective
tax rate of 13% in the quarter ended June 30, 1996, before a non-deductible
expense of $2,200,000 for in-process research and development, compared to 7%
for the same period of 1995.
The Company's tax rate reflects the benefits of federal loss and credit
carryforwards. The federal tax loss carryforwards expire in 1996 through 2009.
The federal tax laws impose limitations on loss and credit carryforwards in the
event that changes in a company's stock ownership over a three year period
exceed a specified threshold (a "Change in Ownership"). Based on its analysis
of prior stock ownership changes, the Company believes that it has not incurred
a Change of Ownership. However, stock ownership changes have caused the
percentage of stock ownership change to be slightly below that which results in
a Change of Ownership, and sales of shares by shareholders of record prior to
the initial public offering within three years after the initial public offering
may cause a Change of Ownership to occur. In addition, the Company's analysis
of its stock ownership changes, which requires numerous assumptions, is subject
to review by the Internal Revenue Service (the "IRS"). If the IRS were to
maintain that the Company incurred a Change of Ownership, the Company would be
subject to an annual limitation on the utilization of its net operating loss and
certain tax credit carryforwards. However, given the Company's current fair
market value, such limitation, if any, is not expected to have a significant
effect on the Company's utilization of its net operation loss and tax credit
carryforwards.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995.
NET REVENUES
Net revenues increased from $11,016,000 in the first six months of 1995 to
$15,784,000 in the first six months of 1996, an increase of $4,768,000, or 43%.
This increase primarily reflects a growth in user license fees. ViSTA
operations contributed net revenues of $677,000 in the first six months of 1995,
compared to no revenue in the same period of 1996. ViSTA was sold to CenterLine
Software, Inc. ("Centerline") on March 31, 1995. Excluding ViSTA, net revenues
increased $5,445,000, or 53%, in the first six months of 1996 compared to the
same period of 1995.
9
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USER AND SOURCE LICENSE FEES
User license fees increased from $8,727,000 in the first six months of 1995
to $14,121,000 for the same period of 1996, an increase of $5,394,000, or 62%.
This increase primarily reflects the growth in OEM shipments of one or more of
the Company's storage management products and an increase in sales of the
Company's shrink wrap versions of products, including FirstWatch high
availability products acquired from Tidalwave in 1995. ViSTA user license fees
were $522,000 in the first six months of 1995, compared to no license fees in
the same period of 1996.
SERVICES AND TRAINING
Services and training revenue, primarily derived from annual maintenance
agreements and training, increased from $872,000 in the first six months of 1995
to $881,000 in the same period of 1996, a increase of $9,000, or 1%. ViSTA
services and training revenue was $120,000 in the first six months of 1995,
compared to no ViSTA service and training revenue in the first six months of
1996. Excluding ViSTA, service and training revenues increased $129,000, or
17%, in the first six months of 1996 compared to the same period of 1995,
reflecting the increasing size of the Company's installed base of customers and
products.
PORTING
Porting revenue decreased from $827,000 in the first six months of 1995 to
$242,000 in the first six months of 1996, a decrease of $585,000, or 71%. The
Company generally does not seek porting or any other custom work, but the
Company does enter into agreements which it believes would result in useful
extensions to current products and result in the growth of user license fees.
COST OF REVENUES
Cost of revenues decreased from $1,305,000 in the first six months of 1995
to $1,245,000 in the first six months of 1996, a decrease of $60,000. Cost of
revenues includes the costs associated with user and source license fees, the
costs of providing support services to the Company's customers, and the costs of
porting and other non-recurring engineering services. Cost of license fees
increased from $311,000 in the first six months of 1995 to $536,000 in the same
period of 1996, an increase of 225,000, or 72%, primarily due to higher sales
volumes and of products requiring royalties paid to third parties. Cost of
service and training increased from $423,000 in the first six months of 1995 to
$544,000 in the same period of 1996, an increase of 121,000, or 29%, reflecting
increases in headcount necessary to support the increasing size of the Company's
installed base of customers and products. Cost of porting decreased from
$571,000 in the first six months of 1995 to $165,000 in the same period of 1996,
a decrease of $406,000, or 71%. This decrease was due to a decrease in porting
revenues and corresponding costs by the Company in the first six months of 1996
compared to the same period of 1995.
PRODUCT DEVELOPMENT
Product development increased from $2,774,000 in the first six months of
1995 to $4,663,000 in the first six months of 1996, an increase of $1,889,000,
or 68%. The increase in product development expenses was primarily attributable
to increased headcount and related recruiting expenses required to support new
product development activities, such as adapting the Company's products to run
on the Windows NT operating system.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased from $3,663,000 in
the first six months of 1995 to $4,533,000 in the first six months of 1996, an
increase of $870,000, or 24%. The increase during this period was primarily a
result of an increase in the number of sales representatives, marketing
personnel, and marketing programs as the Company continues to invest in the
development of non-OEM channels. Selling, general and administrative expenses
as a percentage of total net revenues decreased
10
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from 33% in the first six months of 1995 to 29% in the first six months of 1996.
This decrease was primarily a result of increased user license fees from OEM
customers, which did not require a corresponding increase in selling, general
and administrative expenses. However, the Company expects selling, general and
administrative expenses will increase as a percentage of revenues as non-OEM
revenues begin to represent a larger percentage of the Company's revenues.
IN-PROCESS RESEARCH AND DEVELOPMENT
On April 1, 1996, the Company acquired all of the outstanding capital stock
of Advanced Computing Systems Company ("ACSC"), a company which develops media
management software, for a total cost of $3,450,000. Of the total charge,
$2,200,000 was allocated to in-process research and development which was
expensed in the second quarter of 1996 and approximately $1,250,000 was
allocated to acquired intangibles which will be amortized over a three to five
year period. Total cash outflows in the second quarter of 1996 related to this
purchase were $3,000,000. The Company has agreed to pay the sole shareholder of
ACSC a royalty on certain future product revenue derived from the assets
acquired. The royalty will be based on product shipments beginning in the third
quarter of 1997 and will be payable over a five year period up to a maximum of
$2,500,000. For the six months ended June 30, 1996 and 1995, the results of
operations of ACSC were not material to the Company; and accordingly pro forma
information has not been provided.
INTEREST INCOME
Interest income increased from $614,000 in the first six months of 1995 to
$805,000 in the same period of 1996, an increase of $191,000, or 31%. This
increase reflects higher average investment balances through the first six
months of 1996, compared to the same period of 1995.
GAIN ON SALE OF VISTA OPERATION
During the six months ended June 30, 1995, the Company recognized a gain of
$1,726,000 on the sale of substantially all of the operating assets of its ViSTA
testing tools operation. Under the terms of the sale agreement, the Company
received a cash payment of $2,172,000 in 1995, was issued a subordinated
promissory note for $750,000 payable in quarterly installments over a two year
period and was granted the right to receive royalties on ViSTA related products
payable over three years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity during the first six months of
1996 and 1995, respectively, has been cash generated from operating activities.
At June 30, 1996, The Company had $32,597,000 in cash, cash equivalents and
short-term investments, compared to $29,754,000 at December 31, 1995, an
increase of $2,843,000, or 10%. At June 30, 1996, the Company had working
capital of $30,685,000 compared to $27,812,000 at December 31, 1995. The ratio
of current assets to current liabilities at June 30, 1996 was 7.78 to 1 compared
to 7.41 to 1 at December 31, 1995.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $5,954,000 for the first six
months of 1996 compared to $4,408,000 provided by operating activities in the
same period of 1995, primarily reflecting higher revenues and income from
operations in the first six months of 1996 compared to the same period of 1995.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used for investing activities in the first six months of 1996 was
$7,732,000, including $3,783,000 used for the net purchase of short-term
investments, $1,137,000 used for the purchase of equipment, and $3,000,000 used
for the purchase of ACSC. Cash provided by investing activities in the first
six months of 1996 included $188,000 received on the note receivable from
Centerline. Expenditures for capital equipment are expected to approximate
$2,000,000 for 1996.
11
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CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided by financing activities in the first six months of 1996 was
$838,000, primarily provided by the exercise of stock options and the issuance
of common stock under the employee stock purchase plan.
The Company anticipates that its current cash, cash equivalents and short-
term investments will be sufficient to fund operating expenses at least through
fiscal 1996, including anticipated capital expenditures and future acquisitions.
The Company's long-term liquidity will be affected by numerous factors,
including its ability to generate cash from operations, its capital
requirements, future acquisitions and or dispositions, and the Company's product
development activities. The Company expects to continue to fund these future
activities from cash flows from operations and from future financings as
required. The Company may seek additional equity or debt financing to satisfy
future liquidity and capital resource needs, however, there can be no assurance
that capital will be available when needed or, if available, that the terms for
obtaining such funds will be favorable to the Company.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on June 7, 1996 (the
"Annual Meeting"), the following individuals were elected to the Board of
Directors:
VOTES FOR VOTES AGAINST
--------- -------------
Mark Leslie 7,571,299 8,158
Roel Pieper 7,570,886 8,571
Joseph D. Rizzi 7,570,941 8,516
Fred van den Bosch 7,570,441 9,016
Steven Brooks 7,570,836 8,621
The following proposals were also approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
AFFIRMATIVE VOTES NEGATIVE VOTES BROKER NON-VOTES
----------------- -------------- ----------------
<S> <C> <C> <C>
1. Amendment of the 1993
Directors Stock Option
Plan to amend the formula
for grant of options. 5,921,259 1,497,509 104,600
2. Amendment of the 1993
Employee Stock Purchase
Plan to increase the
reserved shares from
250,000 to 450,000. 7,313,149 108,414, 104,600
3. Ratification of the
appointment of Ernst &
Young LLP as auditors for
the fiscal year ending
December 31, 1996 7,569,348 4,106 1,865
</TABLE>
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The exhibits filed as a part of, or incorporated into, this Report on Form
10-Q are listed in the accompanying Index to Exhibits on page 14.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
June 30, 1996.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN
VIEW, STATE OF CALIFORNIA.
VERITAS Software Corporation
-----------------------------------
(Registrant)
August 12, 1996 /s/ Mark Leslie
- - ---------------------- ----------------
(Date) Mark Leslie
President, Chief Executive Officer
and Director, Chief Financial
Officer (principal financial and
accounting officer)
13
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT TITLE PAGE
- - ------ --------------- ----
2.01 Technology Acquisition Agreement dated March 31, 1995 between
the Registrant and CenterLine Software, Inc. (incorporated
herein by reference to Exhibit 2.01 of the Registrant's Report
on Form 8-K filed with the Securities and Exchange Commission
(the "SEC") on April 14, 1995)
2.02 Agreement and Plan of Reorganization between the Registrant and
Tidalwave Technologies, Inc. dated April 10, 1995 (incorporated
herein by reference to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995).
3.01 Registrant's Amended and Restated Articles of Incorporation
(incorporated herein by reference to Exhibit 3.01 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (the "1993 Form 10-K"))
3.02 Registrant's Amended Bylaws (incorporated herein by reference
to Exhibit 3.03 of the Registrant's Registration Statement on
Form S-1 (File No. 33-70726) filed with the SEC on October 22,
1993, as amended (the "Form S-1")))
4.01 Form of Specimen Certificate for Registrant's Common Stock
(incorporated herein by reference to Exhibit 4.01 to the Form
S-1)
4.02 Registration Rights Agreement dated April 6, 1995 between
Registrant and certain Investors as defined therein
(incorporated by reference to Exhibit 4.02 of the Registrant's
Registration Statement on Form S-3 (file No. 33-95558) filed
with the SEC on August 9, 1995, as amended
10.04 Registrant's 1993 Directors Stock Option Plan, as amended.
10.05 Registrant's 1993 Employee Stock Purchase Plan, as amended.
27.01 Financial Data Schedules 15
- - -------------------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,405
<SECURITIES> 31,192
<RECEIVABLES> 2,131
<ALLOWANCES> 125
<INVENTORY> 48
<CURRENT-ASSETS> 35,214
<PP&E> 6,277
<DEPRECIATION> 3,496
<TOTAL-ASSETS> 39,372
<CURRENT-LIABILITIES> 4,429
<BONDS> 0
0
0
<COMMON> 67,898
<OTHER-SE> (33,759)
<TOTAL-LIABILITY-AND-EQUITY> 39,372
<SALES> 15,784
<TOTAL-REVENUES> 15,784
<CGS> 1,245
<TOTAL-COSTS> 1,245
<OTHER-EXPENSES> 11,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,948
<INCOME-TAX> 809
<INCOME-CONTINUING> 3,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,139
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
