Back to GetFilings.com



Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
(Mark One)
   
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended June 30, 2003
 
or
 
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
    For the transition period from           to           .

Commission file number: 000-26247

VERITAS Software Corporation

(Exact Name of Registrant as Specified in Its Charter)
     
Delaware
   77-0507675
(State or Other Jurisdiction of
Incorporation or Organization)		   (I.R.S. Employer
Identification No.)

350 Ellis Street

Mountain View, California 94043
(650) 527-8000
(Address, including Zip Code, of Registrant’s Principal Executive Offices and
Registrant’s Telephone Number, including Area Code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      The number of shares of the registrant’s common stock outstanding as of July 31, 2003 was 425,707,885 shares.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT INDEX
EXHIBIT 4.01
EXHIBIT 4.02
EXHIBIT 10.01
EXHIBIT 10.02
EXHIBIT 10.03
EXHIBIT 31.01
EXHIBIT 31.02
EXHIBIT 32.01
EXHIBIT 99.01

Table of Contents

VERITAS SOFTWARE CORPORATION

INDEX

             
Page
PART I:  FINANCIAL INFORMATION
Item 1.
  Condensed Consolidated Financial Statements:        
    Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002     2  
    Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003 and 2002     3  
    Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002     4  
    Notes to Condensed Consolidated Financial Statements     5  
Item 2.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     23  
Item 3.
  Quantitative and Qualitative Disclosures About Market Risk     56  
Item 4.
  Controls and Procedures     59  
PART II:  OTHER INFORMATION
Item 1.
  Legal Proceedings     59  
Item 4.
  Submission of Matters to a Vote of Security Holders     60  
Item 5.
  Other Information     60  
Item 6.
  Exhibits and Reports on Form 8-K     61  
Signature     62  

1

Table of Contents

PART I:     FINANCIAL INFORMATION

 
Item 1. Condensed Consolidated Financial Statements

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

                     
June 30, December 31,
2003 2002
(Unaudited)
(In thousands)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 1,017,018     $ 764,062  
 
Short-term investments
    1,353,932       1,477,259  
 
Accounts receivable, net of allowance for doubtful accounts of $11,176 at June 30, 2003 and $11,308 at December 31, 2002.
    131,556       170,204  
 
Other current assets
    72,641       74,178  
 
Deferred income taxes
    60,781       59,995  
     
     
 
   
Total current assets
    2,635,928       2,545,698  
Property and equipment, net
    216,702       230,261  
Other intangibles, net
    88,823       72,594  
Goodwill, net
    1,733,122       1,196,593  
Other non-current assets
    19,653       26,624  
Deferred income taxes
    127,744       127,863  
     
     
 
    $ 4,821,972     $ 4,199,633  
     
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 40,847     $ 33,823  
 
Accrued compensation and benefits
    97,645       97,233  
 
Merger consideration payable
    64,496       —  
 
Accrued acquisition and restructuring costs
    47,662       37,742  
 
Other accrued liabilities
    95,760       92,431  
 
Income taxes payable
    180,781       123,569  
 
Deferred revenue
    309,710       280,314  
     
     
 
   
Total current liabilities
    836,901       665,112  
Convertible subordinated notes
    468,740       460,252  
Accrued acquisition and restructuring costs
    71,266       77,402  
Deferred and other income taxes
    113,100       113,100  
     
     
 
   
Total liabilities
    1,490,007       1,315,866  
Stockholders’ equity:
               
 
Common stock
    443       431  
 
Additional paid-in capital
    6,696,150       6,334,581  
 
Accumulated deficit
    (1,654,447 )     (1,745,712 )
 
Deferred stock-based compensation
    (18,740 )     —  
 
Accumulated other comprehensive income (loss)
    10,623       (3,469 )
 
Treasury stock, at cost; 18,675 shares at June 30, 2003 and December 31, 2002.
    (1,702,064 )     (1,702,064 )
     
     
 
   
Total stockholders’ equity
    3,331,965       2,883,767  
     
     
 
    $ 4,821,972     $ 4,199,633  
     
     
 

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                         
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
(Unaudited) (Unaudited)
(In thousands, except per share amounts)
Net revenue:
                               
 
User license fees
  $ 260,962     $ 241,876     $ 515,526     $ 501,587  
 
Services
    151,894       122,814       291,716       233,552  
     
     
     
     
 
   
Total net revenue
    412,856       364,690       807,242       735,139  
Cost of revenue:
                               
 
User license fees
    11,716       8,778       23,134       17,972  
 
Services
    50,345       44,852       98,134       86,007  
 
Amortization of developed technology
    10,554       16,903       25,336       33,806  
     
     
     
     
 
   
Total cost of revenue
    72,615       70,533       146,604       137,785  
     
     
     
     
 
     
Gross profit
    340,241       294,157       660,638       597,354  
Operating expenses:
                               
 
Selling and marketing
    123,105       126,731       245,152       253,694  
 
Research and development
    72,584       67,701       143,967       132,885  
 
General and administrative
    38,902       34,612       77,055       67,725  
 
Amortization of other intangibles
    12,250       18,016       30,441       36,032  
 
In-process research and development
    15,300       —       19,400       —  
     
     
     
     
 
   
Total operating expenses
    262,141       247,060       516,015       490,336  
     
     
     
     
 
     
Income from operations
    78,100       47,097       144,623       107,018  
Interest and other income, net
    11,274       13,708       19,669       26,861  
Interest expense
    (7,798 )     (7,462 )     (15,536 )     (15,383 )
Loss on strategic investments
    —       (14,802 )     (3,518 )     (14,802 )
     
     
     
     
 
     
Income before income taxes
    81,576       38,541       145,238       103,694  
Provision for income taxes
    32,837       12,495       53,973       33,182  
     
     
     
     
 
       
Net income
  $ 48,739     $ 26,046     $ 91,265     $ 70,512  
     
     
     
     
 
Net income per share — basic
  $ 0.12     $ 0.06     $ 0.22     $ 0.17  
     
     
     
     
 
Number of shares used in computing per share amounts — basic
    415,621       409,465       414,270       407,776  
     
     
     
     
 
Net income per share — diluted
  $ 0.11     $ 0.06     $ 0.22     $ 0.17  
     
     
     
     
 
Number of shares used in computing per share amounts — diluted
    427,939       418,719       424,275       420,289  
     
     
     
     
 

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

VERITAS SOFTWARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                         
Six Months Ended
June 30,
2003 2002
(Unaudited)
(In thousands)
Cash flows from operating activities:
               
 
Net income
  $ 91,265     $ 70,512  
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
   
Depreciation and amortization
    50,049       52,046  
   
Amortization of other intangibles
    30,441       36,032  
   
Amortization of developed technology
    25,336       33,806  
   
Amortization of original issue discount on convertible notes
    8,488       7,941  
   
In-process research and development
    19,400       —  
   
Provision for doubtful accounts
    1,500       2,031  
   
Stock-based compensation
    1,122       —  
   
Tax benefits from stock plans
    11,065       19,593  
   
Loss on strategic investments
    3,518       14,802  
   
Gain on sale of assets
    (1,389 )     (62 )
   
Deferred income taxes
    (22,149 )     (26,290 )
   
Changes in operating assets and liabilities, net of effects of business acquisitions:
               
     
Accounts receivable
    44,860       37,168  
     
Other assets
    6,361       7,272  
     
Accounts payable
    (464 )     14,231  
     
Accrued compensation and benefits
    (10,960 )     (7,712 )
     
Accrued acquisition and restructuring costs
    (8,560 )     (605 )
     
Other accrued liabilities
    (1,417 )     7,708  
     
Income taxes payable
    50,372       34,555  
     
Deferred revenue
    26,066       36,556  
     
     
 
       
Net cash provided by operating activities
    324,904       339,584  
Cash flows from investing activities:
               
 
Purchases of investments
    (930,935 )     (903,899 )
 
Sales and maturities of investments
    1,159,792       768,756  
 
Purchases of property and equipment
    (36,044 )     (53,139 )
 
Business acquisitions, net of cash acquired
    (333,829 )     —  
 
Payments made for prior year business and technology acquisitions
    (4,122 )     (7,267 )
     
     
 
       
Net cash used in investing activities
    (145,138 )     (195,549 )
Cash flows from financing activities:
               
 
Proceeds from issuance of common stock
    58,984       63,567  
     
     
 
       
Net cash provided by financing activities
    58,984       63,567  
Effect of exchange rate changes
    14,206       974  
     
     
 
 
Net increase in cash and cash equivalents
    252,956       208,576  
Cash and cash equivalents at beginning of period
    764,062       538,419  
     
     
 
 
Cash and cash equivalents at end of period
  $ 1,017,018     $ 746,995  
     
     
 
Supplemental disclosures:
               
 
Cash paid for interest
  $ 5,992     $ 5,992  
     
     
 
 
Cash paid for income taxes
  $ 15,808     $ 6,661  
     
     
 
Supplemental schedule of non-cash transactions:
               
 
Business acquisition for short-term payable
  $ 64,496     $ —  
     
     
 
 
Issuance of common stock for conversion of notes
  $ —     $ 500  
     
     
 

      See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

VERITAS SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.     Basis of Presentation

      The accompanying unaudited condensed consolidated 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