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
June 23, 1994
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(Date of Report [Date of earliest event reported])
COMPUTER ASSOCIATES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-10180 13-2857434
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1 Computer Associates Plaza, Islandia, New York 11788
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(Address of principal executive office) (Zip Code)
(516) 342-5224
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(Registrant's telephone, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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Item 2 Acquisition or Disposition of Assets
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(a) On May 25, 1994, Computer Associates International, Inc.
(the "Registrant") through a wholly owned subsidiary,
Speedbird Merge, Inc. ("Speedbird"), commenced a tender offer
for all of the approximately 23.5 million issued and
outstanding shares of The ASK Group, Inc. ("ASK") common stock
at a price of $13.25 per share in cash. The purchase price was
determined through a series of arms length negotiations
between officers and representatives of the Registrant and
ASK's representatives and Board of Directors. The offer was
made pursuant to a definitive Agreement and Plan of Merger
dated as of May 18, 1994 (the "Agreement") among the
Registrant, Speedbird and ASK. On June 23, 1994, the
Registrant through Speedbird accepted for payment
approximately 23.2 million shares of ASK's outstanding common
stock validly tendered in the offer.
ASK is in the business of developing, marketing and selling
computer-based relational database management systems, data
access and connectivity products, manufacturing and financial
software application development tools and providing related
consulting and support services. ASK's assets consist of cash,
receivables, property and equipment, purchased software
products and other tangible and intangible assets. ASK's
liabilities consist primarily of trade payables, normal
accruals, restructuring cost accruals taken during ASK's third
quarter ended March 31, 1994 and bank debt under revolving and
term loan facilities. The purchase price and associated
charges will be allocated among the identifiable tangible and
intangible assets of ASK based on their fair market value at
the acquisition date under the purchase method of accounting
for business combinations. The cost of purchased research and
development for that portion of the acquired technology that
has not reached the working model stage and has no alternative
future use will be written off against the Registrant's
earnings in its first quarter ending June 30, 1994. The after-
tax charge against earnings is initially estimated to be
approximately $155 million, or approximately $.89 per share.
The pending merger of ASK and Speedbird will become effective
as reasonably practicable after the satisfaction of the
conditions set forth in, and subject to the terms of, the
Agreement (including, without limitation, the resolution of
certain matters, and the expiration of applicable notice
periods, under certain of ASK's stock option plans). Once the
pending merger becomes effective, ASK will become a wholly
owned subsidiary of the Registrant.
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The total funds needed to consummate the offer and the merger
is approximately $330 million. The Registrant has obtained and
will continue to obtain such funds from the Registrant's
general corporate funds and drawings under the Registrant's
$500 million Credit Agreement dated as of June 21, 1994,
between the Registrant, the banks and other financial
institutions party thereto and Credit Suisse, as Agent.
(b) ASK utilized its assets in its computer software business,
and the Registrant intends to continue such use in its own
software business.
Item 7 Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired.
The required financial statements of ASK were previously
reported in ASK's Annual Report on Form 10-K for the year
ended June 30, 1993 and Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1993, December 31, 1993 and March
31, 1994, respectively, and incorporated herein by reference.
(b) Pro Forma Financial Information.
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The following unaudited pro forma combined condensed balance
sheet as of March 31, 1994 and the unaudited pro forma
combined condensed income statement for the year ended March
31, 1994 gives effect to the merger of ASK as if it had
occurred on April 1, 1993 for purposes of the income statement
and as of March 31, 1994 for purposes of the balance sheet.
The unaudited pro forma information is based on the historical
financial statements of the Registrant and ASK giving effect
to the transaction under the "purchase" method of accounting
and the assumptions and adjustments in the accompanying notes
to the pro forma financial statements.
The Registrant has a fiscal year end of March 31 while ASK has
a fiscal year end of June 30. As a result, the operations for
the twelve months ended March 31, 1994 for the Registrant have
been combined with the twelve months ended March 31, 1994 for
ASK. ASK's twelve month period was derived by adding ASK's
three months ended June 30, 1993 with its nine months ended
March 31, 1994.
The after-tax charge of $155 million resulting from purchased
research and development costs has been reflected in
stockholders' equity in the pro forma consolidated condensed
balance sheet at March 31, 1994. This same charge has been
excluded from the pro forma consolidated condensed income
statement for the year ended March 31, 1994 consistent with
Rule 11-02 of Regulation S-X.
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The unaudited pro forma statements have been prepared by the
Registrant's management based upon the financial information
of the Registrant and ASK. The pro forma information is
presented for illustrative purposes only and is not
necessarily indicative of the financial position or results of
operations which would actually have been reported had the
acquisition been in effect during these periods or which may
be reported in the future. These unaudited pro forma financial
statements should be read in conjunction with the separate
notes to unaudited pro forma financial statements as well as
the audited financial statements and related notes thereto of
the Registrant and ASK.
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<TABLE>
Pro Forma Condensed Combined Balance Sheets
of the Registrant and ASK
March 31, 1994
(Unaudited)
<CAPTION>
(Amounts in Thousands)
Historical Historical Pro Forma Pro Forma
Registrant ASK(a) Adjustments Results
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents . . . . . . $133,127 $30,804 $163,931
Marketable securities . . . . . . . . 235,071 235,071
Trade and installment
accounts receivable . . . . . . . . 594,854 123,725 718,579
Inventories and other
current assets. . . . . . . . . . . 36,169 15,098 51,267
----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS . . . . . . . 999,221 169,627 1,168,848
INSTALLMENT ACCOUNTS
RECEIVABLE, due after
one year - net. . . . . . . . . . . 626,923 999 627,922
PROPERTY AND EQUIPMENT - net. . . . . 304,590 44,469 349,059
PURCHASED SOFTWARE PRODUCTS - net . . 259,290 15,091 $234,947 (c) 509,328
GOODWILL - net. . . . . . . . . . . . 201,665 42,283 38,635 (c) 282,583
INVESTMENT AND OTHER
NONCURRENT ASSETS. . . . . . . . . . 99,916 14,202 (12,394)(c) 101,724
----------- ----------- ----------- -----------
TOTAL ASSETS $2,491,605 $286,671 $261,188 $3,039,464
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS" EQUITY:
LOANS PAYABLE - BANKS. . . . . . . . . $50,000 $43,100 $330,000 (b) $423,100
OTHER CURRENT LIABILITIES. . . . . . . 498,622 117,498 160,000 (d) 776,120
LONG-TERM DEBT . . . . . . . . . . . . 71,381 71,381
DEFERRED INCOME TAXES. . . . . . . . . 298,914 555 52,500 (c) 351,969
DEFERRED MAINTENANCE . . . . . . . . . 329,555 62,721 (62,721)(c) 329,555
STOCKHOLDERS' EQUITY . . . . . . . . . 1,243,133 62,797 (218,591)(c) 1,087,339
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . . . $2,491,605 $286,671 $261,188 $3,039,464
=========== =========== =========== ===========
</TABLE>
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<TABLE>
Pro Forma Condensed Combined Income Sheets
of the Registrant and ASK
March 31, 1994
(Unaudited)
<CAPTION>
(In thousands, except per share amounts)
Historical Historical Pro Forma Pro Forma
Registrant ASK(a) Adjustments(j) Results
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Product revenue
and other related income. . . . . . $1,455,675 $275,343 $1,731,018
Maintenance fees. . . . . . . . . . . 692,795 120,336 ($56,545)(e) 756,586
----------- ----------- ----------- -----------
TOTAL REVENUE . . . . . . . . . . . 2,148,470 395,679 (56,545) 2,487,604
----------- ----------- ----------- -----------
Selling, marketing and admin. . . . . 1,000,682 308,420 (50,000)(f) 1,259,102
Product development . . . . . . . . . 211,273 42,651 253,924
Commissions and royalties . . . . . . 101,410 35,727 137,137
Depreciation and amortization . . . . 206,317 33,337 106,046 (g) 345,700
Interest expense (income), net. . . . 1,816 3,244 26,400 (h) 31,460
Unusual Expense (k) . . . . . . . . . 49,000 49,000
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES. . . . . . 1,521,498 472,379 82,446 2,076,323
----------- ----------- ----------- -----------
Income (loss) before taxes. . . . . . 626,972 (76,700) (138,991) 411,281
Income tax expense (benefit). . . . . 225,710 7,832 (85,481)(i) 148,061
----------- ----------- ----------- -----------
NET INCOME (LOSS) . . . . . . . . . $401,262 ($84,532) ($53,510) $263,220
=========== =========== =========== ===========
NET INCOME PER SHARE. . . . . . . . $2.34 $1.54
=========== ===========
SHARES USED IN COMPUTATION. . . . . 171,428 171,428
=========== ===========
</TABLE>
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Computer Associates International, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(a) Certain reclassifications were made to conform to the Registrant's
headings.
(b) Represents borrowings used to finance the acquisition of ASK common
stock.
(c) Estimated valuation adjustments of ASK assets and liabilities resulting
from the preliminary allocation of the purchase price, elimination of
stockholders' equity and the estimated $155 million after tax charge
taken at time of acquisition for purchased research and development
costs. See (j) below for additional information.
(d) Accrued expenses associated with preliminary cost estimates, including
severence costs, termination of leases, cost to provide maintenance
contracts existing at date of acquisition and other reserves.
(e) Ratable recognition of maintenance assuming acquisition had taken place
on April 1, 1993.
(f) Cost of providing maintenance contracts existing at date of acquisition
and accrued at that time.
(g) Additional amortization of purchased software and goodwill resulting from
ASK acquisition assuming acquisition had taken place on April 1, 1993.
Amortization of purchased software was based on 5-year life. Goodwill is
amortized on a 20-year basis.
(h) Interest expense associated with purchase consideration assuming 7% per
annum.
(i) Income tax benefit to bring the combined pro forma results to the
Registrant's combined effective tax rate of 36%.
(j) The income statement presentation EXCLUDES the effect of an estimated
$155 million after tax charge to operations taken at time of acquisition
for purchased research and development costs related to acquired
technology that has not reached the working model stage and has no
alternative future use.
(k) The Unusual Expense related to restructuring charges taken by ASK during
its second quarter ended December 31, 1994 ($4 million) and during its
third quarter ended March 31, 1994 ($45 million).
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(c) Exhibits.
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1. The ASK Group, Inc. Annual Report on Form 10-K (File 0-
10625) for the year ended June 30, 1993 previously filed and
incorporated by reference herein.
2. The ASK Group, Inc. Form 10-Q (File 0-10625) for the
quarter ended September 30, 1993 previously filed and
incorporated herein by reference.
3. The ASK Group, Inc. Form 10-Q (File 0-10625) for the
quarter ended December 31, 1993 previously filed and
incorporated herein by reference.
4. The ASK Group, Inc. Form 10-Q (File 0-10625) for the
quarter ended March 31, 1994 previously filed and incorporated
herein by reference.
5. Computer Associates International, Inc. Annual Report on
Form 10-K (File 0-10180) for the year ended March 31, 1994
previously filed and incorporated herein by reference.
6. Agreement and Plan of Merger dated as of May 18, 1994 among
the Registrant, Speedbird and ASK previously filed as an
Exhibit to the Registrant's 14D-1/13D (File 005-34725) and
incorporated herein by reference.
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 thereunto duly authorized.
Computer Associates International, Inc.
(Registrant)
By: /s/Sanjay Kumar
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Sanjay Kumar
President and Chief Operating Officer
Date: July 1, 1994
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