-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A00HXiN1O8uJOiMskNDKCs8cqBxYD+sHzy91JMkFrPaQ2BY1lhY6BEg3ksSrhXpF TC8Ww3xHl3G9OW70b2q3Bg== 0000930661-98-001330.txt : 19980611 0000930661-98-001330.hdr.sgml : 19980611 ACCESSION NUMBER: 0000930661-98-001330 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980610 ITEM INFORMATION: FILED AS OF DATE: 19980610 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING COMMERCE INC CENTRAL INDEX KEY: 0001005291 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 752623341 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-14196 FILM NUMBER: 98645765 BUSINESS ADDRESS: STREET 1: 300 CRESCENT CT STREET 2: STE 1200 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2149811000 MAIL ADDRESS: STREET 1: 8080 NORTH CENTRAL EXPRESSWAY STREET 2: SUITE 1100 CITY: DALLAS STATE: TX ZIP: 75206 8-K 1 FORM 8-K (6-10-98) ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ 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): JUNE 10, 1998 STERLING COMMERCE, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 1-14196 75-2623341 (State of (Commission (IRS Employer Incorporation) File Number) Identification No.) 300 CRESCENT COURT, SUITE 1200, DALLAS, TEXAS 75201 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (214) 981-1000 ================================================================================ ITEM 5. OTHER EVENTS. As previously announced, Sterling Commerce, Inc., a Delaware corporation ("Sterling Commerce"), Sterling Commerce (Southern), Inc., a Delaware corporation and wholly owned subsidiary of Sterling Commerce ("Merger Sub"), and XcelleNet, Inc., a Georgia corporation ("XcelleNet"), entered into an Agreement and Plan of Merger dated as of April 16, 1998 (the "Merger Agreement"), pursuant to which XcelleNet will be merged with and into Merger Sub (the "Merger"), with Merger Sub as the surviving corporation and remaining a wholly owned subsidiary of Sterling Commerce. On June 10, 1998, Sterling Commerce filed a Registration Statement on Form S-4 (the "Registration Statement") to register shares of common stock, par value $0.01, of Sterling Commerce ("Common Stock") issuable in connection with the Merger, including shares of Common Stock issuable upon exercise of presently outstanding options to purchase shares of XcelleNet, which options, if not exercised prior to the completion of the Merger, will be converted into options to purchase shares of Common Stock upon completion of the Merger. The proxy statement/prospectus included in the Registration Statement includes certain pro forma combined condensed financial information of Sterling Commerce which has been prepared to give effect to the Merger using the purchase method of accounting. Set forth below is the pro forma combined condensed financial information included in the Registration Statement. The unaudited pro forma combined condensed financial statements of Sterling Commerce give effect to the consummation of the Merger, as if the Merger had been consummated: (i) on March 31, 1998, in the case of the Unaudited Pro Forma Combined Condensed Balance Sheet and (ii) on October 1, 1996, in the case of the Unaudited Pro Forma Combined Condensed Statements of Operations for the fiscal year ended September 30, 1997 and the six months ended March 31, 1998. The unaudited pro forma combined condensed financial information is presented for illustrative purposes only and is not necessarily indicative of what Sterling Commerce's actual financial position or results of operations would have been had the Merger been consummated on such dates, nor is it necessarily indicative of future financial position or results of operations. Additionally, it does not give effect to (i) any transactions other than the Merger and those described in the accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements of Sterling Commerce; (ii) either Sterling Commerce's or XcelleNet's results of operations since March 31, 1998; or (iii) any one-time charges that may result from the restructuring of Sterling Commerce's existing business due to the Merger. Sterling Commerce's Management is still in the process of evaluating and planning for the restructuring directly related to the Merger. In addition, Sterling Commerce intends to restructure certain other parts of its existing businesses and expects to incur charges related thereto, which costs are not included in the pro forma combined condensed financial information. All of these restructuring costs are expected to be incurred in the quarter ending September 30, 1998, when the Merger is expected to close and decisions related to the restructurings are expected to be finalized. Although Sterling Commerce's management is still in the process of evaluating the nature, scope and extent of the restructurings, it currently estimates that the related charges will be in the range of $65 million to $80 million in the aggregate. The pro forma combined condensed financial information does not purport to be indicative of Sterling Commerce's financial position or results of operations as of the date hereof or for any period ended on the date hereof, as of the closing date of the Merger (the "Closing Date"), or for any period ending at the Closing Date, or as of or for any other future date or period. The following unaudited pro forma combined condensed financial statements are based upon the historical financial statements of Sterling Commerce and XcelleNet and should be read in conjunction with such historical financial statements. Sterling Commerce has retained independent valuation professionals to determine the fair value of the assets and liabilities of XcelleNet (including intangible assets) as of the effective time of the Merger. Although such determination of fair value is not presently expected to result in values that are materially greater or less than the values assumed in the preparation of the following unaudited pro forma combined condensed financial statements, there can be no assurance with respect thereto. STERLING COMMERCE, INC. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF MARCH 31, 1998 (IN THOUSANDS)
STERLING PRO FORMA COMMERCE XCELLENET ADJUSTMENTS PRO FORMA HISTORICAL HISTORICAL (NOTE 2) COMBINED ---------- ---------- ----------- --------- Current Assets: Cash and cash equivalents......................... $269,122 $16,678 $ (74,151)(a) $211,649 Marketable securities............................. 273,061 16,786 289,847 Accounts and notes receivable, net................ 116,280 12,533 128,813 Income tax receivable............................. 9,731 227 9,958 Prepaid expenses and other current assets......... 20,060 1,959 22,019 -------- ------- --------- -------- Total current assets............................ 688,254 48,183 (74,151) 662,286 Property and equipment, net........................... 74,186 4,553 78,739 Computer software, net................................ 47,735 1,694 18,488 (c) 68,917 Excess cost over net assets acquired, net............. 16,190 2,319 25,531 (c) 44,040 Noncurrent deferred income taxes...................... 895 (895)(c) Other assets.......................................... 15,281 337 15,618 Investment in XcelleNet............................... 224,716 (a) (48,366)(b) (176,350)(c) -------- ------- --------- -------- Total Assets.................................... $842,646 $57,981 $ (31,027) $869,600 ======== ======= ========= ======== Current Liabilities: Accounts payable and accrued liabilities.......... $ 52,308 $ 5,269 $ 8,180 (a) $ 65,757 Income taxes payable.............................. 6,893 6,893 Deferred revenue.................................. 61,141 3,252 64,393 -------- ------- --------- -------- Total current liabilities....................... 120,342 8,521 8,180 137,043 Deferred income taxes............................. 16,733 1,094 6,774 (c) 23,507 Other noncurrent liabilities...................... 13,975 15,069 Stockholders' equity: Common stock....................................... 910 84 (84)(b) 934 24 (a) Additional paid-in capital........................ 546,342 34,644 (34,644)(b) 688,703 142,361 (a) Retained earnings................................. 144,344 13,638 (13,638)(b) 4,344 (140,000)(c) -------- ------- --------- -------- Total stockholders' equity...................... 691,596 48,366 (39,207) 693,981 -------- ------- --------- -------- Total liabilities and stockholders' equity.. $842,646 $57,981 $ (31,027) $869,600 ======== ======= ========= ========
See accompanying notes to unaudited pro forma combined condensed financial statements. STERLING COMMERCE, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
XCELLENET ---------------------------------------------------------- STERLING DEDUCT COMMERCE HISTORICAL HISTORICAL HISTORICAL YEAR THREE MONTHS ADD HISTORICAL PRO FORMA PRO FORMA PRO FORMA YEAR ENDED ENDED THREE MONTHS YEAR ADJUSTMENTS COMBINED YEAR ENDED 9/30/97 12/31/97 12/31/97 ENDED 12/31/96 ENDED 9/30/97 (NOTE 3) ENDED 9/30/97 ------------- ---------- ------------- -------------- ------------- ----------- ------------- Revenue: Products................. $119,958 $ 34,320 $10,540 $ 10,258 $ 34,038 $153,996 Product support.......... 71,316 14,942 4,229 3,117 13,830 85,146 Services................. 142,565 4,317 1,238 340 3,419 145,984 Royalties................ 16,758 16,758 -------- --------- ------- -------- -------- ------- -------- 350,597 53,579 16,007 13,715 51,287 401,884 Costs and expenses: Cost of sales: Products and product support.......... 35,863 6,027 1,590 1,299 5,736 $ 6,821 (a) 48,420 Services............. 34,752 4,147 1,178 580 3,549 38,301 -------- --------- ------- -------- -------- ------- -------- 70,615 10,174 2,768 1,879 9,285 $ 6,821 86,721 Product development and enhancement.............. 24,853 8,840 2,177 2,049 8,712 33,565 Selling, general and 164,541 administrative........... 134,849 29,453 7,996 8,235 29,692 Purchased research and development.............. 31,879 31,879 Reorganization costs........ 15,810 1,025 3,112 4,137 19,947 -------- --------- ------------- -------- -------- ------- -------- 278,006 49,492 12,941 15,275 51,826 6,821 336,653 -------- --------- ------- -------- -------- ------- -------- Income (loss) before other income and income taxes.. 72,591 4,087 3,066 (1,560) (539) (6,821) 65,231 Other income................ 16,693 877 288 177 766 17,459 -------- --------- ------- -------- -------- ------- -------- Income (loss) before income taxes.................... 89,284 4,964 3,354 (1,383) 227 (6,821) 82,690 Provisions for (benefit of) income taxes............. 33,840 1,819 1,174 (529) 116 (1,534)(b) 32,422 -------- --------- ------- -------- -------- ------- -------- Net income (loss).... $ 55,444 $ 3,145 $ 2,180 $ (854) $ 111 $(5,287) $ 50,268 ======== ========= ======= ======== ======== ======= ======== Net income per common share: Basic.................... $ 0.66 $ 0.58 ======== ======== Diluted.................. $ 0.64 $ 0.56 ======== ======== Shares used to compute net income per common share: Basic.................... 83,561 85,992 ======== ======== Diluted.................. 83,983 89,007 ======== ========
See accompanying notes to unaudited pro forma combined condensed financial statements. STERLING COMMERCE, INC. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
XCELLENET ------------------------------------------------------- STERLING ADD COMMERCE HISTORICAL DEDUCT HISTORICAL PRO FORMA PRO FORMA HISTORICAL YEAR HISTORICAL THREE MONTHS SIX MONTHS PRO FORMA COMBINED SIX MONTHS ENDED NINE MONTHS ENDED ENDED ADJUSTMENTS SIX MONTHS ENDED 3/31/98 12/31/97 ENDED 9/30/97 3/31/98 3/31/98 (NOTE 3) ENDED 3/31/98 ------------- ---------- ------------- ------------ ---------- ----------- ------------- Revenue: Products................. $ 76,860 $ 34,320 $23,780 $ 8,175 $ 18,715 $ 95,575 Product support.......... 45,762 14,942 10,713 4,492 8,721 54,483 Services................. 94,737 4,317 3,079 1,546 2,784 97,521 -------- --------- ------- -------- -------- ------- -------- 217,359 53,579 37,572 14,213 30,220 247,579 Costs and expenses: Cost of sales: Products and product support..... 18,928 6,027 4,437 1,587 3,177 $ 3,411 (a) 25,516 Services............. 25,564 4,147 2,969 1,253 2,431 27,995 -------- --------- ------- -------- -------- ------- -------- 44,492 10,174 7,406 2,840 5,608 3,411 53,511 Product development and enhancement.............. 14,040 8,840 6,663 2,206 4,383 18,423 Selling, general and administrative............. 90,366 29,453 21,457 7,572 15,568 105,934 Reorganization costs........ 1,025 1,025 -------- --------- ------- -------- -------- ------- -------- 148,898 49,492 36,551 12,618 25,559 3,411 177,868 -------- --------- ------- -------- -------- ------- -------- Income (loss) before other income and income taxes.... 68,461 4,087 1,021 1,595 4,661 (3,411) 69,711 Other income................ 11,919 877 589 328 616 12,535 -------- --------- ------- -------- -------- ------- -------- Income (loss) before income taxes............... 80,380 4,964 1,610 1,923 5,277 (3,411) 82,246 Provisions for (benefit of) income taxes........... 29,202 1,819 645 663 1,837 (767)(b) 30,272 -------- --------- ------- -------- -------- ------- -------- Net income (loss).... $ 51,178 $ 3,145 $ 965 $ 1,260 $ 3,440 $(2,644) $ 51,974 ======== ========= ======= ======== ======== ======= ======== Net income per common share: Basic.................... $ 0.57 $ 0.56 ======== ======== Diluted.................. $ 0.55 $ 0.54 ======== ======== Shares used to compute net income per common share: Basic.................... 90,069 92,500 ======== ======== Diluted.................. 93,786 96,810 ======== ========
See accompanying notes to unaudited pro forma combined condensed financial statements. NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. GENERAL The Merger will be accounted for as a purchase business combination by Sterling Commerce. These unaudited pro forma combined condensed financial statements reflect the payment of approximately $74.2 million in cash and the issuance of approximately 2,431,000 shares of Common Stock in exchange for an aggregate of approximately 8,426,000 shares of common stock, par value $0.01, of XcelleNet ("XcelleNet Stock") (amount of XcelleNet Stock outstanding as of May 31, 1998). The pro forma adjustments assume a payment of $8.80 in cash per share of XcelleNet Stock and the issuance of 0.2885 share of Common Stock (the "Stock Factor") for each share of XcelleNet Stock as set forth in the following table: XcelleNet Stock outstanding as of May 31, 1998.. 8,426,266 Stock Factor.................................... 0.2885 --------- Number of shares of Common Stock exchanged...... 2,430,978 The actual amount of the cash payment and the actual number of shares of Common Stock to be issued will be determined at the Effective Time of the Merger based on the actual number of shares of XcelleNet Stock outstanding on that date and a Stock Factor of 0.2885, subject to adjustment as provided in the Merger Agreement. The accompanying unaudited pro forma combined condensed financial statements reflect an aggregate purchase price of approximately $225 million, consisting of cash paid, Common Stock issued to XcelleNet shareholders, valued at 45.75 per share, and costs of Sterling Commerce directly related to the Merger as follows (in thousands): Cash paid to XcelleNet shareholders............. $ 74,151 Common Stock issued and XcelleNet options assumed to complete the Merger................. 142,385 Investment advisor, legal, accounting and other professional fees and expenses........... 5,660 Other costs related to the Merger............... 2,520 -------- $224,716 ======== For purposes of the accompanying unaudited pro forma combined condensed balance sheet, the aggregate purchase price has been allocated to the net assets acquired, with the remainder recorded as excess cost over net assets acquired on the basis of preliminary estimates of fair values. These preliminary estimates of fair value were determined by Sterling Commerce's management based primarily on information furnished by management of XcelleNet. Sterling Commerce will retain independent valuation professionals to assist in the determination of the value to be assigned to the individual assets to be acquired, including intangible assets and in-process research and development. While the pro forma information has been presented based on the best information currently available to Sterling Commerce's management, the final allocation of the purchase price will be based on a complete evaluation of the assets and liabilities of XcelleNet. Although the final valuation of the assets to be acquired is not presently expected to result in values that are significantly different from management's estimates as included in the unaudited pro forma combined condensed balance sheet, there can be no assurance with respect thereto. 2. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET The accompanying unaudited pro forma combined condensed balance sheet assumes the Merger was consummated on March 31, 1998 and reflects the following pro forma adjustments: a) To record the aggregate cost of the Merger as described in Note 1 above. b) To eliminate XcelleNet's historical equity balances. c) To record the allocation of the purchase price for the Merger to the assets and liabilities acquired as follows (in thousands): Working capital............................................. $ 39,662 Property and equipment...................................... 4,553 Software.................................................... 20,182 Other assets................................................ 337 Other liabilities........................................... (1,094) Deferred income taxes....................................... (6,774) Purchase in-process research and development to be charged to expense upon consummation of the Merger.............................................. 140,000 Excess cost over net assets acquired........................ 27,850 -------- $224,716 ======== 3. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATION The accompanying unaudited pro forma combined condensed statements of operations have been prepared as if the Merger was consummated as of October 1, 1996 and reflect the following pro forma adjustments: a) To record amortization of software acquired in the Merger computed using the straight-line method over its estimated remaining economic life (five years) and amortization of excess cost over net assets acquired over its estimated remaining economic life (ten years). b) To adjust the provision for income taxes to reflect the impact on the results of operations of the Merger and related pro forma adjustments. 4. UNAUDITED PRO FORMA COMBINED EARNINGS PER COMMON SHARE DATA The unaudited pro forma combined basic net income per common share is computed by dividing pro forma combined net income by the weighted average number of shares of Common Stock outstanding during the period plus 2,430,978, the number of shares of Common Stock currently anticipated to be issued to complete the Merger. The unaudited pro forma combined diluted net income per common share is computed by dividing pro forma combined net income by the weighted average number of shares of Common Stock outstanding during the period, as adjusted for the effect of dilutive stock options, plus 3,024,388, the number of shares of Common Stock currently anticipated to be issued, as adjusted for the effect of dilutive stock options of XcelleNet assumed, to complete the Merger. SIGNATURE 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. STERLING COMMERCE, INC. By: /s/ Albert K. Hoover ------------------------------------------------ Albert K. Hoover, Senior Vice President and General Counsel Dated: June 10, 1998 -----END PRIVACY-ENHANCED MESSAGE-----