-----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, V0cLB2G58Q85m/4FI6tF6lsAFb95weAof/q3ABcJ9uMkUKAhLEyWmzlk0+Juxw1p VttDTTKuylPMXSZgLs9iIw== 0001104659-04-026533.txt : 20040901 0001104659-04-026533.hdr.sgml : 20040901 20040831203853 ACCESSION NUMBER: 0001104659-04-026533 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040831 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20040901 DATE AS OF CHANGE: 20040831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCO GROUP INC CENTRAL INDEX KEY: 0001102542 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 870662823 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29911 FILM NUMBER: 041009605 BUSINESS ADDRESS: STREET 1: 355 S 520 W, SUITE 100 CITY: LINDON STATE: UT ZIP: 84042 BUSINESS PHONE: 8017654999 FORMER COMPANY: FORMER CONFORMED NAME: CALDERA INTERNATIONAL INC/UT DATE OF NAME CHANGE: 20001101 FORMER COMPANY: FORMER CONFORMED NAME: CALDERA SYSTEMS INC DATE OF NAME CHANGE: 20000104 8-K 1 a04-10124_18k.htm 8-K

 

UNITED STATES
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):  August 31, 2004

 

The SCO Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

0-29911

 

87-0662823

(State or other jurisdiction of
incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

355 South 520 West

Lindon, Utah 84042

(Address of principal executive offices, including Zip Code)

 

Registrant’s telephone number, including area code:  (801) 765-4999

 

N/A

(Former name or former address, if changed since last report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 



 

Item 2.02.                  Results of Operations and Financial Condition.

 

On August 31, 2004, The SCO Group, Inc. (“SCO” or the “Company”) issued a press release announcing financial results for its third quarter ended July 31, 2004.  A copy of the press release is furnished as Exhibit 99.1 to this report, which press release is incorporated herein by reference.

 

Except as specifically set forth below in “Item 8.01. Other Events,” the information in this report, including Exhibit 99.1, is being furnished and shall not be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 

Item 7.01.                  Regulation FD Disclosure.

 

SCO announced in its press release dated August 31, 2004 that it had adopted a stockholder rights plan.  A copy of the press release is furnished as Exhibit 99.2 to this report, which press release is incorporated herein by reference.  The information set forth under this Item 7.01, including Exhibit 99.2, is being furnished and shall not be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 

Item 8.01.                  Other Events.

 

In its press release issued August 31, 2004, as described more fully above under “Item 2.02.  Results of Operations and Financial Condition,” SCO announced financial results for its third quarter ended July 31, 2004.  Revenue for the third quarter of fiscal year 2004 was $11,205,000 as compared to $20,055,000 from the comparable quarter of the prior year.  The decrease in revenue in the third quarter of fiscal year 2004 from the comparable quarter of the prior year was primarily due to a decrease in SCOsource licensing revenue to $678,000 in the third quarter of fiscal year 2004 from $7,280,000 in the third quarter of fiscal year 2003.  However, SCOsource licensing revenue did increase by $667,000 from the prior quarter ended April 30, 2004.

 

The net loss for the third quarter of fiscal year 2004 was $7,423,000 as compared to net income of $3,096,000 for the comparable quarter of the prior year.  The net income applicable to common stockholders for the third quarter of fiscal year 2004 was $7,501,000, or $0.38 per diluted common share.  Included in the net income applicable to common stockholders for the third quarter of fiscal year 2004 was a contribution to capital of $15,475,000 related to the repurchase and retirement of the remaining 40,000 shares of the Company’s Series A-1 Convertible Preferred Stock.

 

For the first three quarters of fiscal year 2004, revenue was $32,734,000 compared to revenue for the first three quarters of fiscal year 2003 of $54,964,000.  For the first three quarters of fiscal year 2004, the net loss was $16,834,000 and the net loss applicable to common stockholders was $9,711,000, or $0.67 per diluted common share, compared to net income of $6,872,000, or $0.47 per diluted common share for the first three quarters of fiscal year 2003.  Despite the net loss reported for first three quarters of fiscal year 2004, cash and available-for-sale securities positions were $43,027,000 at July 31, 2004.

 

Item 9.01.                  Financial Statements and Exhibits.

 

(c)                                  Exhibits.  The following items are filed as exhibits to this report:

 

99.1                           Press Release dated August 31, 2004 announcing financial results for its third quarter ended July 31, 2004.

 

2



 

99.2                           Press Release dated August 31, 2004 announcing the adoption of a stockholder rights plan.

 

3



 

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.

 

Dated:  August 31, 2004

 

 

THE SCO GROUP, INC.

 

 

 

 

By:

/s/  Bert Young

 

Name:

Bert Young

 

Title:

Chief Financial Officer

 

4



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated August 31, 2004 announcing financial results for its third quarter ended July 31, 2004.

 

 

 

99.2

 

Press Release dated August 31, 2004 announcing the adoption of a stockholder rights plan.

 

5


EX-99.1 2 a04-10124_1ex99d1.htm EX-99.1

EXHIBIT 99.1

 

THE SCO GROUP ANNOUNCES THIRD QUARTER 2004 RESULTS

 

The Company’s UNIX Business Achieves Profitability

 

Company Also Announces Adoption of Shareholder Rights Plan and

 

Letter of Intent to Complete a Revised Fee Agreement with Boies, Schiller & Flexner

 

LINDON, UtahAugust 31, 2004The SCO Group, Inc. (Nasdaq: SCOX), owner of the UNIX operating system and a leading provider of UNIX-based solutions, today reported results for the fiscal third quarter ended July 31, 2004.

 

Revenue for the third quarter of fiscal year 2004 was $11,205,000 as compared to $20,055,000 from the comparable quarter of the prior year.  The decrease in revenue in the third quarter of fiscal year 2004 from the comparable quarter of the prior year was primarily due to a decrease in SCOsource licensing revenue to $678,000 in the third quarter of fiscal year 2004 from $7,280,000 in the third quarter of fiscal year 2003.  However, SCOsource licensing revenue did increase by $667,000 from the prior quarter ended April 30, 2004.

 

The net loss for the third quarter of fiscal year 2004 was $7,423,000 as compared to net income of $3,096,000 for the comparable quarter of the prior year.  The net income applicable to common stockholders for the third quarter of fiscal year 2004 was $7,501,000, or $0.38 per diluted common share.  Included in the net income applicable to common stockholders for the third quarter of fiscal year 2004 was a contribution to capital of $15,475,000 related to the repurchase and retirement of the remaining 40,000 shares of the Company’s Series A-1 Convertible Preferred Stock.

 

“Several positive developments fell into place for us this quarter that strengthened the Company’s overall position,” said Darl McBride, president and CEO, The SCO Group. “We successfully delivered on our strategy to restore profitability within our UNIX business which is generating positive cash flow. At the same time, we saw a nice uplift from SCOsource licensing revenue. In addition, we closed the BayStar transaction and as announced today, we implemented a Shareholder Rights Plan that will help protect the Company from any potential undervalued takeover attempt.  Finally, we are pleased to have entered into a letter of intent with Boies, Schiller & Flexner that not only demonstrates their belief in SCO’s legal case but will also provide SCO with greater financial flexibility.”

 

McBride concluded, “We remain steadfastly committed to enforcing our intellectual property rights on behalf of our customers, employees and shareholders. Through the combination of the quarter’s positive developments and our current cash position, we are well-positioned to pursue our current litigation through its conclusion.”

 

For the first three quarters of fiscal year 2004, revenue was $32,734,000 compared to revenue for the first three quarters of fiscal year 2003 of $54,964,000.  For the first three

 

 



 

quarters of fiscal year 2004, the net loss was $16,834,000 and the net loss applicable to common stockholders was $9,711,000, or $0.67 per diluted common share, compared to net income of $6,872,000, or $0.47 per diluted common share for the first three quarters of fiscal year 2003.  Despite the net loss reported for first three quarters of fiscal year 2004, cash and available-for-sale securities positions were $43,027,000 at July 31, 2004.

 

BayStar Capital

 

As the Company previously announced on July 23, 2004 and reaffirmed on August 25, 2004, SCO completed its transaction with BayStar Capital II, L.P. regarding the retirement of BayStar’s 40,000 shares of SCO’s Series A-1 Convertible Preferred Stock in exchange for $13 million in cash and 2,105,263 shares of the Company’s common stock. Upon completion of this transaction, all outstanding shares of the Company’s preferred stock were retired.

 

Shareholder Rights Plan

 

SCO announced today in a separate press release that the Company’s board of directors has adopted a Shareholder Rights Plan. This plan is designed to ensure that potential acquirers of the Company’s stock recognize fair value for the Company’s assets and opportunities. Additional details of the Shareholder Rights Plan have been made available through a press release that was distributed today and through a current report on Form 8-K to be filed by the Company.

 

Legal Fee Re-negotiation

 

The Company has entered into a letter of intent with Boies, Schiller & Flexner LLP, its outside legal counsel, to enter into a revised fee agreement with respect to pending intellectual property and licensing litigation, to limit overall cash costs of the Company’s litigation to $31 million.  The terms also stipulate that Boies, Schiller & Flexner will lead SCO’s efforts through the duration and completion of the pending litigation in return for increased contingency.

 

SCO will release further details of the new contract upon finalization of the agreement.

 

Financial Outlook

 

The following statements are forward looking and actual results may differ materially. See the discussion of certain risks and uncertainties related to this financial outlook at the end of this release under “Forward-Looking Statements.”

 

For the fourth fiscal quarter ending October 31, 2004 the Company expects total revenue to be in the range of $10,000,000 to $12,000,000.  As previously indicated, SCOsource revenue remains extremely difficult to predict, including the timing and level of revenue in the near term or any given quarter.  Operating expenses for the fourth quarter relating to UNIX products and services, exclusive of any charges from restructuring activities, are

 



 

anticipated to slightly decline from the third quarter of fiscal year 2004 and comparable quarters. Expenses relating to SCOsource, including legal fees, are expected to vary from quarter to quarter depending on the level of, and activity surrounding, our intellectual property claims, and therefore are difficult to predict.  The Company will continue to take the necessary legal steps to protect its UNIX intellectual property and aggressively pursue its legal claims through the court system.

 

Conference Call

 

As previously announced, The SCO Group will host a conference call at 5:00 p.m. EDT today, August 31, 2004, to discuss our third quarter results and key corporate developments. To participate in the teleconference, please call 800- 289-0436 or 913- 981-5507; confirmation code: 824670, approximately five minutes prior to the time stated above. A listen-only Web cast of the call will be broadcast live with a replay available the following day. The Web cast and replay may be accessed from http://ir.sco.com/medialist.cfm.

 

About SCO

 

The SCO Group, Inc. (Nasdaq: SCOX - News) helps millions of customers in more than 82 countries to grow their businesses everyday.  Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 4,000 developers.  SCO Global Services provides reliable localized support and services to partners and customers.  For more information on SCO products and services, visit http://www.sco.com.

 

SCO and the associated SCO logo are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX is a registered trademark of The Open Group. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.

 

Forward-Looking Statements

 

This press release, particularly the “Financial Outlook” section, contains forward-looking statements representing our current expectations and beliefs, including, among other things: (i) the expectation that we will continue to focus on our SCOsource initiatives and enforce our intellectual property rights; (ii) expected consolidated revenue in the fourth quarter of fiscal year 2004 of $10,000,000 to $12,000,000; (iii) the expectation that expenses related to UNIX products and services, exclusive of any restructure costs, will slightly decline for the fourth quarter compared to the third quarter of fiscal year 2004 and comparable quarters of the prior year; (iv) the expectation that expenses related to SCOsource are expected to vary from quarter to quarter depending on the level of, and activity surrounding, our intellectual property claims, and therefore are difficult to predict: (v) our intent to continue to take the necessary legal steps to protect our UNIX intellectual property and aggressively pursue our legal claims and (vi) our expectation that we will enter into a revised fee agreement with our law firms handling our litigation.  These forward-looking statements and related assumptions are subject to risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements contained herein.  These risks and uncertainties include, without limitation: (a) risks that we will not be successful in our efforts to protect and enforce our intellectual property rights; (b) risks that our core UNIX business may continue to decline; (c) risks that we will face increasing competition from competing providers of operating system products and services, particularly Linux; (d) risks that the U.S. and international economic and political conditions will worsen and adversely affect technology purchases; (e) risks that our SCOsource licensing initiatives will yield fewer licenses or less licensing revenue than anticipated or that such licensing revenue will not be generated when or in amounts currently anticipated; (f) risks that we will require more capital to sustain our business objectives than we have and that such capital may not be available; (g) we may not be able to enter into a revised fee agreement with our law firms; and (h) other risks and uncertainties set forth in our filings with the Securities and Exchange Commission.  These forward-looking statements speak only as of the date hereof, and we undertake no obligation to update such forward-looking statements after the date hereof.

 



 

The SCO Group Announces Third Quarter 2004 Results

 

Condensed Consolidated Balance Sheets

 

(unaudited, in thousands)

 

 

 

July 31,
2004

 

October 31,
2003

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

15,982

 

$

64,428

 

Restricted cash

 

13,506

 

2,025

 

Available-for-sale securities

 

27,045

 

4,095

 

Accounts receivable, net

 

5,954

 

9,282

 

Other current assets

 

2,466

 

2,450

 

Total current assets

 

64,953

 

82,280

 

Property and equipment, net

 

799

 

1,148

 

Goodwill and intangibles, net

 

6,090

 

10,452

 

Other assets

 

1,390

 

1,072

 

Total assets

 

$

73,232

 

$

94,952

 

Liabilities:

 

 

 

 

 

Accounts payable

 

$

1,825

 

$

1,978

 

Accrued payroll and accrued expenses

 

13,824

 

8,506

 

Payable to BayStar Capital II, LLP

 

13,000

 

 

Accrued compensation to law firms

 

7,956

 

10,556

 

Deferred revenue

 

5,936

 

5,501

 

Derivative related to Series A convertible preferred stock

 

 

15,224

 

Other current liabilities

 

2,038

 

3,347

 

Total current liabilities

 

44,579

 

45,112

 

Long-term liabilities

 

501

 

508

 

Minority interest

 

 

145

 

Convertible preferred stock

 

 

29,671

 

Stockholders’ equity

 

28,152

 

19,516

 

Total liabilities and stockholders’ equity

 

$

73,232

 

$

94,952

 

 

4



 

The SCO Group Announces Third Quarter 2004 Results

 

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

 

 

 

Three Months Ended
July 31,

 

Nine Months Ended,
July 31,

 

 

 

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Products revenue

 

$

8,929

 

$

10,804

 

$

27,056

 

$

33,016

 

Services revenue

 

1,598

 

1,971

 

4,969

 

6,418

 

SCOsource licensing revenue

 

678

 

7,280

 

709

 

15,530

 

Total revenue

 

11,205

 

20,055

 

32,734

 

54,964

 

Cost of products revenue

 

825

 

1,284

 

2,614

 

3,676

 

Cost of services revenue

 

878

 

1,538

 

3,273

 

5,008

 

Cost of SCOsource licensing revenue

 

7,312

 

1,712

 

15,236

 

3,875

 

Total cost of revenue

 

9,015

 

4,534

 

21,123

 

12,559

 

Gross margin

 

2,190

 

15,521

 

11,611

 

42,405

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

4,233

 

5,930

 

13,952

 

18,421

 

Research and development

 

2,592

 

2,950

 

8,167

 

8,142

 

General and administrative

 

1,889

 

1,413

 

6,475

 

4,525

 

Restructuring charges

 

 

614

 

 

498

 

Loss on impairment of long-lived assets

 

 

 

2,139

 

 

Amortization of intangibles

 

593

 

895

 

1,973

 

2,295

 

Stock-based compensation

 

270

 

309

 

868

 

927

 

Total operating expenses

 

9,577

 

12,111

 

33,574

 

34,808

 

Income (loss) from operations

 

(7,387

)

3,410

 

(21,963

)

7,597

 

Equity in income (loss) of affiliates

 

41

 

(71

)

115

 

(171

)

Other income (expense), net

 

99

 

(55

)

6,284

 

(59

)

Income (loss) before income taxes

 

(7,247

)

3,284

 

(15,564

)

7,367

 

Provision for income taxes

 

(176

)

(188

)

(1,270

)

(495

)

Net income (loss)

 

(7,423

)

3,096

 

(16,834

)

6,872

 

Dividends on convertible preferred stock

 

14,924

 

 

7,123

 

 

Net income (loss) applicable to common stockholders

 

$

7,501

 

$

3,096

 

$

(9,711

)

$

6,872

 

Basic net income (loss) per common share

 

$

0.49

 

$

0.25

 

$

(0.67

)

$

0.58

 

Diluted net income (loss) per common share

 

$

0.38

 

$

0.19

 

$

(0.67

)

$

0.47

 

Weighted average basic common shares outstanding

 

15,242

 

12,469

 

14,389

 

11,753

 

Weighted average diluted common shares outstanding

 

19,912

 

16,180

 

14,389

 

14,744

 

 

5


EX-99.2 3 a04-10124_1ex99d2.htm EX-99.2

EXHIBIT 99.2

 

The SCO Group, Inc. Adopts Shareholder Rights Plan

 

LINDON, Utah—August 31, 2004—The SCO Group, Inc. (Nasdaq: SCOX) announced today that on August 10, 2004 its board of directors adopted a shareholder rights plan designed to deter coercive takeover tactics, including the accumulation of shares in the open market or through private transactions and to prevent an acquiror from gaining control of SCO without offering a fair price to all of its shareholders.

 

The plan, similar to plans adopted by many other companies, was not adopted in response to any current hostile takeover attempt.

 

“The rights plan is designed to ensure that our stockholders realize the long-term value of their investment in the company and is similar to those adopted by over two-thirds of the Fortune 200,” commented SCO Chairman Ralph Yarro, III.  “The plan will not prevent a takeover attempt, but should encourage anyone seeking to acquire the company to negotiate fair value directly with the board of directors.”

 

Under the terms of the rights plan, preferred stock purchase rights will be distributed as a dividend at the rate of one Right for each share of SCO’s common stock held by stockholders of record as of the close of business on August 30, 2004.  The plan would be triggered if a person or group acquires beneficial ownership of 15% or more of the Company’s common stock other than pursuant to a board-approved tender or exchange offer or commences, or publicly announces an intention to commence, a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company’s common stock.

 

Details of the stockholder rights plan are outlined in a letter that will be mailed to all SCO stockholders as of the record date.  In addition, a copy of the rights plan will be filed with the Securities and Exchange Commission as an exhibit to the Company’s Current Report on Form 8-K.

 


-----END PRIVACY-ENHANCED MESSAGE-----