-----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, QYeffvoACOXuEs6ygk55C4Q0Z4j9+zB159BYDCb/wpODc8cesfVmi/NTDr0UZhER GgJMDIopHL1xeUZ4Mk7YUg== 0000912057-96-017984.txt : 19960918 0000912057-96-017984.hdr.sgml : 19960918 ACCESSION NUMBER: 0000912057-96-017984 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERITAS SOFTWARE CORP CENTRAL INDEX KEY: 0000867666 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 942823068 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22712 FILM NUMBER: 96615655 BUSINESS ADDRESS: STREET 1: 1600 PLYMOUTH STREET CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4153358000 MAIL ADDRESS: STREET 1: 1600 PLYMOUTH ST CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 10-Q 1 FORM 10-Q 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 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 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 VERITAS Software Corporation Condensed Consolidated Statements of Income (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 1996 1995 1996 1995 -------- -------- -------- -------- 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 -------- -------- -------- -------- -------- -------- -------- --------
See accompanying notes to condensed consolidated financial statements. 4 VERITAS Software Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)
Six Months Ended June 30, ------------------------ 1996 1995 --------- --------- 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 --------- --------- --------- ---------
See accompanying notes to condensed consolidated financial statements. 5 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 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 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 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 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 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 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:
AFFIRMATIVE VOTES NEGATIVE VOTES BROKER NON-VOTES ----------------- -------------- ---------------- 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
12 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 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 EX-27 2 EX-27
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,405 31,192 2,131 125 48 35,214 6,277 3,496 39,372 4,429 0 0 0 67,898 (33,759) 39,372 15,784 15,784 1,245 1,245 11,396 0 0 3,948 809 3,139 0 0 0 3,139 0.33 0.33
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