<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
----------
Commission File Number 0-20095
STAC SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3825313
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12636 High Bluff Drive, San Diego, California
92130-2093 (Address of principal executive office,
including zip code)
(619) 794-4300
(Registrant's telephone number, including area code)
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.
YES X NO ___
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of December 31, 1999.
Common Stock, par value $0.001 per share 6,180,319 shares
<PAGE>
STAC SOFTWARE, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets
as of December 31, 1999 and
September 30, 1999 3
Condensed Consolidated Statements of
Operations for the three months
ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash
Flows for the three months ended
December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Item 3. Quantitative and Qualitative Discussions about
Market Risk 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2
<PAGE>
STAC SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
December 31, September 30,
1999 1999
------------ ------------
(UNAUDITED)
Current assets:
Cash and cash equivalents $ 14,493 $ 9,079
Marketable securities 15,916 20,711
Accounts receivable 2,167 2,381
Inventories 201 240
Other current assets 532 454
------------ ------------
Total current assets 33,309 32,865
Property and equipment, net 1,452 1,556
Other assets 442 452
------------ ------------
$ 35,203 $ 34,873
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,273 $ 1,132
Accrued expenses and other
current liabilities 2,166 2,312
------------ ------------
Total current liabilities 3,439 3,444
Other liabilities 127 127
------------ ------------
3,566 3,571
------------ ------------
Stockholders' equity
Common stock at par value 9 8
Additional paid in capital 77,416 76,633
Treasury stock (41,347) (41,347)
Cumulative translation adjustment (22) (23)
Retained earnings (4,419) (3,969)
------------ ------------
Total stockholders' equity 31,637 31,302
------------ ------------
$ 35,203 $ 34,873
============ ============
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
STAC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
December 31,
1999 1998
------------ ------------
Net revenues 3,178 3,006
Cost of revenues 253 192
------------ ------------
Gross margin 2,925 2,814
------------ ------------
Operating expenses:
Research and development 1,339 1,985
Sales and marketing 1,920 2,411
General and administrative 598 1,401
Restructuring - 822
------------ ------------
Total operating expenses 3,857 6,619
------------ ------------
Operating loss (932) (3,805)
Interest income 420 440
------------ ------------
Loss before income taxes (512) (3,365)
Benefit from income taxes (62) (1,439)
------------ ------------
Loss from continuing operations (450) (1,926)
Discontinued operations:
Income from discontinued operations, net
of taxes of $550 in 1998 - 885
------------ ------------
Net loss $ (450) $ (1,041)
============ ============
Earnings per common share, basic:
Loss from continuing operations $ (0.07) $ (0.33)
============ ============
Income from discontinued operations $ 0.00 $ 0.15
============ ============
Net loss $ (0.07) $ (0.18)
============ ============
Earnings per common share, diluted:
Loss from continuing operations $ (0.07) $ (0.33)
============ ============
Income from discontinued operations $ 0.00 $ 0.15
============ ============
Net loss $ (0.07) $ (0.18)
============ ============
Weighted average common shares
outstanding, basic 6,060 5,867
============ ============
Weighted average common shares
outstanding, diluted 6,060 5,867
============ ============
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
STAC SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
Three Months Ended
December 31,
1999 1998
---------- ----------
Cash flows from operating activities:
Net loss $ (450) $ (1,041)
Adjustments required to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 340 515
Loss on disposals of property and equipment - 588
Changes in assets and liabilities:
Accounts receivable 214 (692)
Inventories 39 (16)
Other assets (80) 131
Accounts payable 141 224
Income taxes receivable/payable - (17)
Accrued expenses and other current liabilities (146) 922
---------- ----------
Net cash provided by operating activities 58 614
---------- ----------
Cash flows from investing activities:
Purchases of marketable securities (5,205) (9,967)
Sales of marketable securities 10,000 9,000
Purchases of property and equipment (224) (227)
---------- ----------
Net cash provided (used) by investing activities 4,571 (1,194)
---------- ----------
Cash flows from financing activities:
Issuance of common stock 739 1,045
Tax benefit from exercise of stock options 45 136
---------- ----------
Net cash provided by financing activities 784 1,181
---------- ----------
Effect of exchange rates on cash and cash equivalents 1 -
---------- ----------
Net cash provided by discontinued operations - 624
---------- ----------
Net increase in cash and cash equivalents 5,414 1,225
Cash and cash equivalents at beginning of period 9,079 11,573
---------- ----------
Cash and cash equivalents at end of period $ 14,493 $ 12,798
========== ==========
Supplemental non-cash activities:
Stock dividend $ - $ 7,371
========== ==========
Conversion of deferred compensation to equity
upon exercise of common stock options $ - $ 16
========== ==========
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
STAC SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation:
---------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
The accompanying condensed consolidated unaudited financial statements of Stac
Software, Inc. ("Stac" or the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission regarding
interim financial reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report for the year ended September 30, 1999. In the opinion of
management, the accompanying condensed consolidated unaudited financial
statements contain all adjustments, consisting of only normal recurring items,
necessary for a fair presentation of the Company's financial position as of
December 31, 1999 and its results of operations for the three month periods
ended December 31, 1999 and 1998, respectively. These condensed consolidated
unaudited financial statements are not necessarily indicative of the results to
be expected for the entire year.
NOTE 2. Loss Per Share: (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)
--------------
Basic EPS is calculated by dividing net loss by the weighted average number of
common shares outstanding for the period, without consideration for the dilutive
impact of potential common shares ("dilutive securities") that were outstanding
during the period. Diluted EPS is computed by dividing net loss by the weighted
average number of common shares outstanding for the period, increased by
dilutive securities that were outstanding during the period unless the effect of
these securities is anti-dilutive. Net loss remains the same for the
calculations of basic EPS and diluted EPS. A reconciliation of the numerators
and denominators of the basic and diluted EPS calculations for the three months
ended December 31, 1999 and 1998 is presented below.
Three Months Ended
December 31, 1999
-----------------
Per-Share
Net Loss Shares Amount
---------- ---------- ----------
Net Loss $ (450)
Basic EPS 6,060 $ (0.07)
Dilutive Securities -
----------
Diluted EPS 6,060 $ (0.07)
==========
6
<PAGE>
Three Months Ended
December 31, 1998
-----------------
Per-Share
Net Loss Shares Amount
---------- ---------- ----------
Net Loss $ (1,041)
Basic EPS 5,867 $ (0.18)
Dilutive Securities -
----------
Diluted EPS 5,867 $ (0.18)
==========
NOTE 3. Inventories (IN THOUSANDS, DECEMBER 31, 1999 UNAUDITED):
-----------
December 31, September 30,
1999 1999
------------ ------------
Raw materials $ 169 $ 203
Finished goods 32 37
------------ ------------
$ 201 $ 240
============ ============
NOTE 4. Stock Option Plan Summary (UNAUDITED)
-------------------------
The following is a summary of stock options outstanding at December 31, 1999:
OPTIONS OUTSTANDING
--------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED-
REMAINING AVERAGE
CONTRACTUAL EXERCISE
NUMBER LIFE (YEARS) PRICE
------------ ------------ ------------
Price Range
$1.64 - $2.72.............. 370,217 4.66 $ 2.58
$3.08 - $3.36.............. 684,024 6.60 $ 3.36
$3.50 - $5.16.............. 323,031 8.52 $ 4.14
$5.19 - $7.60.............. 344,163 7.30 $ 6.71
$9.60 - $26.00............. 80,553 5.75 $ 18.25
------------
$1.64 - $26.00............. 1,801,988 6.64 $ 4.65
============
The following is a summary of stock options exercisable at December 31, 1999:
OPTIONS EXERCISABLE
----------------------------
WEIGHTED-
AVERAGE
EXERCISE
NUMBER PRICE
------------ ------------
Price Range
$1.64 - $2.72.............. 320,080 $ 2.56
$3.08 - $3.36.............. 507,191 $ 3.36
$3.50 - $5.16.............. 98,326 $ 4.20
$5.19 - $7.60.............. 278,325 $ 6.93
$9.60 - $26.00............. 69,580 $ 17.65
------------
$1.64 - $26.00............. 1,273,502 $ 4.79
============
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risk and
uncertainties. Stac Software, Inc.'s ("Stac" or "the Company") future results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include but are not limited to: fluctuations in
the Company's operating results, continued new product introductions by the
Company, market acceptance of the Company's new product introductions, new
product introductions by competitors, OEM and distributor inventory levels,
technological changes in the personal computer and communications industries,
uncertainties regarding intellectual property rights and the other factors
referred to herein (including, but not limited to, the factors discussed below
under "Revenues," "Quarterly Trends and Channel Inventories" "Seasonality,"
"Operating Systems," "Competition and Risks Associated with New Product
Introductions," and "Stock Price Volatility"), in the Company's Form 10-K for
the year ended September 30, 1999.
OVERVIEW
Stac's storage systems recovery software business is comprised of its
Replica Tape and Replica Network Data Manager ("NDM") product lines. Replica
Tape and Replica NDM are high-performance, easy-to-deploy, distributed business
systems recovery software products, which enable fast PC server, desktop and
notebook replication and disaster recovery. Replica Tape for NetWare was
introduced in February 1996 and Replica Tape for NT was made available in April
1997. Replica NDM was introduced to selected customer sites in April 1998 and
became commercially available in January 1999. The Company intends to focus on
the development of relationships with partners in the computer desktop solutions
sector and with system integration partners, and is currently investing the
majority of its product development, marketing and sales resources in the
Replica product line and extensions to Replica.
The Company also develops and markets ReachOut Enterprise ("ReachOut")
remote communications software, a remote access software suite which allows
administrators and end users to access a PC using another PC through a network,
the Internet, ISDN lines or modems. ReachOut works with Microsoft Corporation's
("Microsoft") Windows NT, Windows 98/95, Windows 3.x and DOS operating systems.
However, ReachOut has reached a mature phase of the product life cycle and the
Company expects the revenues associated with this product to continue to
decline.
On December 16, 1998, the Company distributed a special dividend
of its stock in its Hi/fn, Inc. ("Hi/fn") subsidiary to its stockholders. Hi/fn
was a majority owned subsidiary of the Company and is engaged in silicon and
software implementations of data compression and data encryption standards for
the network communications and storage equipment markets. As a result of the
spin-off, Hi/fn has been accounted for as a discontinued operation in the
Company's financial statements. Hi/fn is currently traded on Nasdaq under the
symbol HIFN. Please refer to the December 8, 1998 General Form for Registration
of Securities on Form 10 filed by Hi/fn with the SEC for a complete discussion
of Hi/fn and the spin-off transaction.
The following discussion should be read in conjunction with the
consolidated financial statements included elsewhere within this quarterly
report. Fluctuations in annual and quarterly results may occur as a result of
factors affecting demand for the Company's products such as the timing of the
Company's and competitors' new product introductions and upgrades. Due to such
fluctuations, historical results and percentage relationships are not
necessarily indicative of the operating results for any future period.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations and
the percentage relationship of certain items to revenues during the periods
shown:
Three Months Ended
December 31,
1999 1998
------------ ------------
Revenues 100% 100%
Cost of revenues 8 6
------------ ------------
Gross margin 92 94
------------ ------------
Research and development 42 66
Sales and marketing 60 80
General and administrative 19 47
Restructuring - 28
------------ ------------
Total operating expenses 121 221
------------ ------------
Operating loss (29) (127)
Interest income 13 15
------------ ------------
Loss before income taxes (16) (112)
Benefit from income taxes (2) (48)
------------ ------------
Loss from continuing operations (14) (64)
Income from discontinued operations - 29
------------ ------------
Net loss (14)% (35)%
============ ============
REVENUES. Revenues increased 6% to $3.2 million for the quarter ended
December 31, 1999 from $3.0 million in the quarter ended December 31, 1998. The
increase in revenues from the December 1998 quarter to the December 1999 quarter
was due to increasing sales of Replica products, partially offset by declining
sales of REACHOUT.
International sales, which are included in the software sales component
of revenues, are comprised primarily of software products and were $0.8 million,
or 24% of revenues for the quarter ended December 31, 1999 compared to $1.1
million, or 37% of revenues in the quarter ended December 31, 1998. The decrease
in international revenues was primarily due to suppressed sales during the
quarter related to the "Y2K lock-down" (many potential buyers postponed
purchases of new software pending the start of the new calendar year),
contrasted with strong revenues in the December 1998 quarter. Stac markets and
sells to its European accounts from its office in the United Kingdom and markets
and sells to the other principal international markets through sales personnel
in its San Diego office and through relationships with distributors and
resellers abroad.
9
<PAGE>
COST OF REVENUES AND GROSS MARGIN. Cost of revenues consists primarily
of the user manuals, packaging, license fees, media and assembly associated with
the Company's software products, and the costs of rendering product support
services pursuant to paid service offerings. Gross margins were 92% for the
quarter ended December 31, 1999 compared to 94% in the comparable quarter of the
prior fiscal year. The decrease in gross margin was primarily due to increased
obsolescence reserves taken for box product inventory, a higher than planned mix
of box product revenues over MLA revenues, and lower than planned margin on
certain product sales.
RESEARCH AND DEVELOPMENT. Research and development costs consist
primarily of salaries, employee benefits, overhead, outside contractors and
non-recurring engineering fees. Such expenses were $1.3 million and $2.0 million
for the quarters ended December 31, 1999 and December 31, 1998, respectively.
The decrease in research and development costs from the prior year's quarter was
primarily due to lower employee-related costs in the current periods, related to
the reallocation of resources amongst development facilities in conjunction with
the restructuring discussed below. The Company expects to continue to invest in
the development of products for which it believes there is a need in the market;
however, there can be no assurance that research and development programs
invested in by the Company will be successful or that products resulting from
such programs will achieve market acceptance.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
the salaries, commissions and employment benefits of sales, marketing and
customer support personnel, and consulting, advertising, promotion and overhead
expenses. Such expenses were $1.9 million for the quarter ended December 31,
1999 and $2.4 million for the quarter ended December 31, 1998. The reduced
spending in the quarter ended December 31, 1999 from the prior year's comparable
quarter is primarily due to reductions in staffing attributable to the corporate
restructuring completed in the December 1998 quarter. Consolidated sales and
marketing expenses are expected to remain a significant ongoing operating
expense.
GENERAL AND ADMINISTRATIVE. General and administrative expenses are
comprised primarily of salaries for administrative and corporate services
personnel, legal, and other professional fees. Such expenses were $0.6 million
and $1.4 million for the quarters ended December 31, 1999 and December 31, 1998,
respectively. The reduction in expenses in the current quarter reflects lower
management costs and non-recurring costs, both related to Stac's spin-off of its
former Hi/fn, Inc. subsidiary.
RESTRUCTURING. The restructuring charge of $0.8 million in the three
months ended December 31, 1998 reflects $0.5 million of fixed assets abandoned
and written off as a result of the restructuring, $0.2 million in severance
costs and benefits, and $0.1 million in lease termination costs. The
restructuring was initiated to better align the Company's costs and resources
with the needs of a stand-alone, partner-focused software company.
INTEREST INCOME. Interest income was $0.4 million for the quarters
ended December 31, 1999 and 1998, respectively.
INCOME TAXES. The effective tax rate for the December 1999 and December
1998 quarters was based on the Company's forecasted taxable results for the year
and the anticipated carry-back benefit for income taxes paid in previous years,
if any. The effective income tax rate for the quarters ended December 31, 1999
and December 31, 1998 were 12% and 43%, respectively. The effective tax rate for
the three months ended December 31, 1998 reflects the non-deductible nature of
certain costs associated with the Hi/fn spin-off transaction, for which,
consistent with statutory guidelines, no tax benefit was recognized.
10
<PAGE>
QUARTERLY TRENDS AND CHANNEL INVENTORIES. The Company historically has
experienced significant fluctuations in its revenues and operating results,
including net income, and anticipates that these fluctuations will continue. The
Company operates with relatively little backlog of its software sales, and the
majority of its software revenues each quarter result from orders received in
that quarter. Consequently, if near-term demand for the Company's products
weakens in a given quarter or if inventory of the Company's products in the
retail and distribution channels satisfies near-term demand, the Company's
operating results for that quarter would be adversely affected. In addition,
when the Company announces enhanced versions of its software products, the
announcement may have the effect of slowing sales of the current version of the
product as buyers delay their purchase. Quarterly results have been or may in
the future be influenced by the timing of announcements or introductions of new
products and product upgrades by the Company or its competitors, distributor
ordering patterns, product returns, delays in product development and licensing
of the Company's products and core technology. In addition, the Company's new
products, from which the Company derives a majority of its revenue, typically
have a lengthy evaluation period before any purchase is made.
SEASONALITY. The software industry has typically experienced some
seasonal variations in demand, with sales declining somewhat in the summer
months. The Company believes that its software sales are subject to similar
seasonal variations which, when combined with the other factors described above,
are likely to result in fluctuations in the Company's quarterly results. As a
result, historical quarter-to-quarter comparisons should not be relied upon as
indicative of future performance.
OPERATING SYSTEMS. Stac's ReachOut, Replica Tape and Replica NDM
products currently operate on a limited number of personal computer and network
operating systems. ReachOut supports Microsoft Windows NT, Windows 98, Windows
95, Windows 3.x and DOS, while Replica Tape supports Windows NT. Previous
versions of Replica Tape are still available to support Novell NetWare servers.
Replica Tape customers may require support of the Unix operating system, which
the Company does not currently provide. Replica NDM server component supports
only Windows NT with client support for Windows 98, Windows 95 and Windows NT
workstations. In addition, future versions of Microsoft's Windows operating
systems, including Windows 2000, may require significant changes to the
Company's products in order to maintain compatibility.
COMPETITION AND RISKS ASSOCIATED WITH NEW PRODUCT INTRODUCTIONS. The
market for the Company's products is intensely competitive. Increased
competition could result not only in a decline in sales volume, but also in
price reductions that could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company's Replica product line competes with well established back-
up products from Computer Associates, Inc., Veritas Software Corporation
("Veritas") and Legato Systems, Inc. ("Legato"), all of which have established
channels of distribution and installed customer bases. The Company has entered
into OEM licenses with Legato, Hewlett-Packard Company and Tivoli Systems, Inc.
(a wholly owned subsidiary of IBM) which authorize those companies to resell
Replica products under certain conditions. While the Company hopes to expand its
sales and marketing reach through these agreements, the Company expects to
realize less revenue per unit than it would if it sold the products itself. As a
result, the Company could realize less revenue from sales of Replica than it
might have otherwise obtained by only directly selling Replica. Also, there is
no assurance that revenues recognized in the current and previous quarters
pursuant to these agreements will continue into future quarters. In addition,
resellers could choose not to sell Replica over competitors' products with the
result that significant sales of Replica could fail to materialize, or products
similar to Replica could be successfully introduced to resellers by the
Company's competitors. In addition, Microsoft's current operating systems
incorporate back-up functionality and future operating systems are expected to
include some disaster recovery functionality. Also, Replica is being introduced
into sophisticated server environments and, while the Company has invested
significant resources in testing Replica under a variety of conditions,
configurations and circumstances, there are likely to be environments which have
not been anticipated for which additional development of Replica will be
necessary.
The Company's ReachOut product competes in the remote control software
market against more established products such as Symantec Corporation's
pcAnywhere, and, Netopia's Timbuktu. Further, Microsoft could elect to
incorporate remote control or additional remote access capabilities into its
operating systems which are pre-installed on most personal computers. The
Company believes that the rate of growth of the remote control market it serves
has decreased from prior years' growth rates or may actually be declining and
that it will have a difficult time gaining further sales growth against its
competitors.
11
<PAGE>
STOCK PRICE VOLATILITY. Due to the factors noted above, the Company's
future earnings and therefore, its stock price, may be subject to significant
volatility, particularly on a quarterly basis. Any shortfall in earnings from
levels expected by securities analysts could have an immediate and significant
adverse effect on the trading price of the Company's common stock in any given
period. Shortfalls in the Company's earnings could be caused by shortfalls in
revenues, timing of the receipt of technology license fees and/or increased
levels of expenditures. Additionally, the Company participates in a highly
dynamic industry, which often results in significant volatility of the Company's
stock price.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and marketable securities increased by $0.6 million
to $30.4 million at December 31, 1999 from those at September 30, 1999. The
increase was primarily due to payment received from employees and former
employees for stock option exercises, partially offset by cash used in general
operations. Working capital increased by $0.5 million to $29.9 million at
December 31, 1999 from that at September 30, 1999.
The Company believes that existing cash balances and funds provided by
operations will be sufficient to finance the working capital requirements of the
consolidated companies for at least the next twelve months.
The Company is currently considering strategic transactions and
alternatives with the goal of maximizing stockholder value. For example, in
December 1998 the company completed the spin-off of Hi/fn, Inc. The company is
evaluating all areas of its existing business to make sure they fit its new
strategic direction, and is actively considering pursuing a number of potential
strategic transactions. These transactions may include a variety of different
business arrangements, including product line sales, divestitures,
restructurings, business combinations, strategic partnerships and joint
ventures. Such transactions create a number of risks for the Company, including
the risk that such transactions may not be consummated on favorable terms or at
all, the risk that such transactions may not enhance stockholder value and may
adversely affect the business or the trading price of the Company's stock and
the risk that any such transaction may require the Company to incur
non-recurring or other charges and may pose significant integration challenges
and/or management and business disruptions.
YEAR 2000
The Company has completed its Year 2000 plan as scheduled. The
possibility of significant interruptions of normal operations has been reduced.
As of February 9, 2000, the Company's products, computing, and communications
infrastructure systems have operated without Year 2000 related problems and
appear to be Year 2000 ready. The Company is not aware that any of its major
customers or third-party suppliers have experienced significant Year 2000
related problems.
The Company believes all its critical systems are Year 2000 ready.
However, there is no guarantee that the Company has discovered all possible
failure points. Specific factors contributing to this uncertainty include
failure to identify all systems, non-ready third parties whose systems and
operations impact the Company, and other similar uncertainties. If the Company
or third parties customers or suppliers experience Year 2000 related problems,
it could have a material adverse effect on the Company's financial condition and
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCUSSION ABOUT MARKET RISK.
The Company is exposed to a variety of risks, including foreign
currency fluctuations and changes in the market value of its investments. In the
normal course of business, the Company employs established policies and
procedures to manage its exposure to fluctuations in foreign currency values and
changes in the market value of its investments.
12
<PAGE>
The Company's foreign currency risks are mitigated principally by
maintaining only nominal foreign currency cash balances. Working funds necessary
to facilitate the short term operations of the Company's Subsidiary in the
United Kingdom are kept in the local currencies for the European countries in
which they do business, with excess funds transferred to Stac's offices in the
United States for investment.
The fair value of the Company's investments in marketable securities at
December 31, 1999 was $15,916,000. The Company's investment policy is to manage
its portfolio of marketable securities in order to preserve principal and
liquidity while maximizing the return. At December 31, 1999, the Company's
portfolio was primarily invested in high quality commercial paper, typically
with maturities of less than six months. These investments are distributed among
several issuers to minimize the credit risk associated with any single
institution.
13
<PAGE>
PART II-OTHER INFORMATION
Items 1 through 5 are not applicable and have been omitted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
Stac Software, Inc.
-----------------------------------------------
(Registrant)
Date: February 10, 2000 /s/ Clifford L. Flowers
-----------------------------------------------
Clifford L. Flowers
(Vice President of Finance and
Chief Financial Officer
Principal Financial and Accounting
Officer and Duly Authorized Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 14,493
<SECURITIES> 15,916
<RECEIVABLES> 2,167
<ALLOWANCES> 0
<INVENTORY> 201
<CURRENT-ASSETS> 33,309
<PP&E> 1,452
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,203
<CURRENT-LIABILITIES> 3,439
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 31,628
<TOTAL-LIABILITY-AND-EQUITY> 35,203
<SALES> 3,178
<TOTAL-REVENUES> 3,178
<CGS> 253
<TOTAL-COSTS> 4,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (512)
<INCOME-TAX> (62)
<INCOME-CONTINUING> (450)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (450)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
