1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
Commission File Number 0-13069
SOFTKEY INTERNATIONAL INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-2562108
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(Address of Principal Executive Offices)
(617) 494-1200
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 X No
--- ---
As of August 4, 1995, there were 23,289,499 outstanding shares of the
issuer's Common Stock, par value $.01 per share.
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SOFTKEY INTERNATIONAL INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
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ITEM 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
June 30, 1995 and December 31, 1994...................................... 3
Condensed Consolidated Statements of
Operations for the Three and Six Months
Ended June 30, 1995 and 1994............................................. 4
Condensed Consolidated Statements of
Cash Flows for the Six Months
Ended June 30, 1995 and 1994............................................ 5
Notes to Condensed Consolidated Financial Statements..................... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings........................................................ 11
ITEM 4. Submission of Matters to a Vote of Security Holders ..................... 11
ITEM 6. Exhibits and Reports on Form 8-K......................................... 11
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30, December 31,
1995 1994
-------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 93,398 $ 12,205
Accounts receivable (less allowances for returns and
doubtful accounts of $6,385 and $6,744 respectively) 21,063 16,745
Inventories 9,982 9,795
Other current assets 7,882 8,247
-------- --------
132,325 46,992
Property and equipment, net 11,326 9,325
Goodwill, net 31,337 32,051
Other assets 2,648 2,447
-------- --------
$177,636 $ 90,815
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 16,958 $ 29,455
Current portion of long-term obligations 1,991 2,016
-------- --------
18,949 31,471
Long-term obligations 6,925 17,536
Deferred income taxes 4,339 4,323
-------- --------
30,213 53,330
STOCKHOLDERS' EQUITY 147,423 37,485
-------- --------
$177,636 $ 90,815
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1995 1994 1995 1994
---- ---- ---- ----
REVENUES $ 33,717 $ 26,786 $ 74,721 $ 62,090
COST OF REVENUES 9,953 9,333 22,414 21,743
------------- ------------- ------------- -------------
GROSS MARGIN 23,764 17,453 52,307 40,347
OPERATING EXPENSES:
Sales, marketing and support 6,702 6,442 15,416 12,941
General and administrative 4,945 5,154 10,336 11,117
Research and development 2,472 1,356 4,776 3,308
------------- ------------- ------------- -------------
14,119 12,952 30,528 27,366
------------- ------------- ------------- -------------
OPERATING INCOME 9,645 4,501 21,779 12,981
OTHER INCOME (EXPENSE), net
(342) 570 (689) 315
------------- ------------- ------------- -------------
INCOME BEFORE TAXES 9,303 5,071 21,090 13,296
PROVISION FOR INCOME TAXES 1,349 1,117 3,117 3,051
------------- ------------- ------------- -------------
NET INCOME $ 7,954 $ 3,954 $ 17,973 $ 10,245
============= ============= ============= =============
NET INCOME PER SHARE $ 0.35 $ 0.21 $ 0.79 $ 0.53
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 23,012,000 20,228,000 22,713,000 20,079,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Six Months Ended
June 30,
--------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 17,973 $ 10,275
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and amortization 3,304 1,640
Changes in operating assets and liabilities:
Accounts receivable (4,318) (662)
Accounts payable and accruals (12,497) (5,332)
Other (1,733) (9,600)
--------- ---------
2,729 (3,679)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets, net (4,329) (1,409)
Other -- 518
--------- ---------
(4,329) (891)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases and long-term debt (1,472) (5)
Issuance of common stock, net 91,686 5,606
Repayment of line of credit (7,700) --
Redemption of series B preferred stock -- (4,660)
--------- ---------
82,514 941
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
279 684
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 81,193 (2,945)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,205 22,797
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 93,398 $ 19,852
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SOFTKEY INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements for the three and six months
ended June 30, 1995 and 1994 are unaudited and reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1994. The results of operations for the three and six months ended June 30,
1995 are not necessarily indicative of the results for the entire year ending
December 31, 1995.
The second quarter reporting period for 1995 ended on July 1, 1995 and the
second quarter reporting period for 1994 ended on July 2, 1994. For clarity of
presentation and comparison, the periods from January 1, 1995 to July 1, 1995
and from January 1, 1994 to July 2, 1994 are referred to as the "Six Months
Ended June 30, 1995" and "Six Months Ended June 30, 1994" respectively,
throughout these financial statements.
2. GOODWILL
Goodwill represents the excess of purchase price over fair market value of
identifiable assets acquired. The Company evaluates the carrying value of
goodwill for possible impairment on a quarterly basis. Based upon its most
recent analysis, the Company believes that no impairment of goodwill exists at
June 30, 1995.
3. LONG-TERM OBLIGATIONS
June 30, 1995 December 31, 1994
------------- -----------------
Revolving line-of-credit $ -- $ 7,700
Related party debt 964 2,123
Capital leases 2,098 2,411
Accrued minimum royalties 2,210 2,415
Other 3,644 4,903
--------- ---------
8,916 19,552
Less: current portion (1,991) (2,016)
--------- ---------
$ 6,925 $ 17,536
========= =========
4. INVENTORIES
Inventories consist primarily of finished goods at June 30, 1995 and
December 31, 1994.
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5. COMPUTATION OF EARNINGS PER SHARE
Net income per share is computed using the weighted average number of common and
dilutive common stock equivalent shares outstanding during the period. Dilutive
common stock equivalent shares consist of convertible debentures and notes,
convertible Series A and Series B preferred stock in the Second Quarter 1994 and
stock options and warrants using the treasury stock method in both reporting
periods. The computations do not include common stock equivalents where the
effect would not be dilutive. Primary earnings per share computations do not
materially differ from fully diluted earnings per share.
6. COMMITMENTS AND CONTINGENCIES
Competition Act Inquiry (Canada)
On June 10, 1994, the Director of Investigation and Research under the
Competition Act (Canada) (the "Act") commenced an inquiry in Canada under the
non-criminal, reviewable practices provisions of the Act with respect to the
activities of SoftKey Software Products Inc. ("SoftKey Software") in the tax
preparation software business in Canada. On June 28, 1994, a court order
requiring SoftKey Software, along with other companies in the Canadian tax
preparation software business, to produce certain documents and information with
respect to the Canadian tax preparation software industry was issued by the
Federal Court of Canada Trial Division. SoftKey Software has had discussions
with the staff of the Canadian Bureau of Competition Policy and is currently
cooperating to provide the documents and information specified in the order. At
this time no formal application has been made seeking remedy under the Act.
Management does not currently expect that the outcome of this inquiry will have
a material adverse effect on the Company.
Other Litigation
The Company is involved in various legal proceedings involving copyrights,
breach of contract and various other claims incident to the conduct of its
business. Management does not expect the Company to suffer any material
liability by reason of such actions.
7. SUBSEQUENT EVENTS
Agreement to acquire of Future Vision Holding, Inc.
On July 17, 1995, the Company announced it had signed a definitive acquisition
agreement to acquire all the outstanding capital stock of Future Vision Holding,
Inc., a multimedia software company, in exchange for the issuance of up to
1,116,784 shares of common stock. The transaction is expected to be accounted
for as a pooling-of-interests. The closing of the transaction is subject to
certain conditions, including expiration of applicable waiting periods under
pre-merger notification regulations.
Acquisition of tewi Verlag GmbH
On July 21, 1995, the Company acquired tewi Verlag GmbH ("Tewi"), a publisher
and distributor of CD-ROM software and computer related books, located in
Munich, Germany. The purchase price was settled by a combination of cash and
issuance of common stock. The Company issued 99,045 shares of common stock and
paid $13,024 for all of the share capital of Tewi. The transaction will be
accounted for as a purchase.
Redemption of Warrants
On July 31, 1995, the Company announced that it would redeem all of its
2,925,000 publicly traded warrants for $.10 per warrant on August 31, 1995 in
accordance with the terms and conditions of the warrants. The redemption is
conditioned on the per share closing price of SoftKey's common stock being at
least equal to $37.50 for 20 of the 30 trading days preceding the redemption
date. In lieu of receiving $.10 per warrant, holders may exercise their warrants
at any time prior to the redemption in accordance with the terms of the
warrants.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and the notes thereto and in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. All
dollar amounts presented in this Management's Discussion and Analysis of
Financial Condition and Results of Operations are presented in thousands, except
per share amounts.
INTRODUCTION
SoftKey International Inc. (the "Company") is a leading developer and publisher
of value-priced, high quality consumer software for PC's, primarily produced on
CD-ROM. The Company develops, licenses, manufactures, distributes and markets a
wide range of consumer titles in the lifestyle, edutainment, productivity,
entertainment and education categories. In addition, the Company develops,
markets and distributes income tax software and provides comprehensive
nationwide tax processing for personal, corporate and trust tax returns in
Canada.
RESULTS OF OPERATIONS
NET INCOME. The Company generated net income of $7,954 ($0.35 per fully
diluted share) on revenues of $33,717 in Second Quarter 1995 and net income of
$17,973 ($0.79 per fully diluted share) on revenues of $74,721 in the Six Months
Ended June 30, 1995 as compared to net income of $3,954 ($0.21 per fully diluted
share) on revenues of $26,786 in Second Quarter 1994 and net income of $10,245
($0.53 per fully diluted share) on revenues of $62,090 in the Six Months Ended
June 30, 1994. The increase in both the Second Quarter 1995 as compared to the
Second Quarter 1994 and in the Six Months Ended June 30, 1995 as compared to the
Six Months Ended June 30, 1994 is a result of several factors, including
increases in revenues and gross margins, reductions in certain operating
expenses as a percentage of revenue and the introduction of new product
offerings.
REVENUES. Revenues by distribution channel for the Second Quarter 1995 as
compared to the Second Quarter 1994 and for the Six Months Ended June 30, 1995
as compared to the Six Months Ended June 30, 1994 are as follows:
Three Months Ended June 30 Six Months Ended June 30
---------------------------------- -----------------------------------
1995 % 1994 % 1995 % 1994 %
------- ---- ------- ---- ------- ----- ------- ----
Retail $16,708 50% $11,116 42% $31,965 43% $19,972 32%
OEM 2,440 7 3,550 13 5,404 7 6,946 11
Catalog -- -- 285 1 -- -- 3,176 5
Direct mail 6,611 20 3,538 13 13,379 18 7,190 12
International 4,433 13 2,856 11 8,502 11 5,808 9
Tax software and services 3,525 10 4,093 15 15,471 21 15,829 26
Lansa software -- -- 1,348 5 -- -- 3,169 5
------- --- ------- --- ------- --- ------- ---
$33,717 100% $26,786 100% $74,721 100% $62,090 100%
======= === ======= === ======= === ======= ===
Total revenues increased 26% in Second Quarter 1995 over Second Quarter 1994 and
20% for the Six Month Ended June 30, 1995 over the Six Months Ended June 30,
1994, in both cases due to several factors including growth in the retail
channel resulted from new product offerings and from an increased number of
retail distribution outlets carrying the Company's products; international sales
increased primarily as a result of the availability of additional translated
foreign language versions of English language products and the continued shift
to Windows-based applications on CD-ROM; tax software sales and services
experienced lower revenue in Canadian dollar terms due to increased competition
in the Canadian computerized tax preparation market; original equipment
manufacturer ("OEM") revenues declined due to continuing pricing pressures and
from a decrease in the percentage of the Company's products being distributed in
this channel; direct mail revenues increased as a result of an increase in the
frequency of product mailings and growth in the number of registered product end
users. Revenues for Second Quarter 1994 and for the Six Months Ended June 30,
1994 include $285 and $3,176, respectively, of revenues from
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the Company's Power Up catalog operation, which was closed in 1994. Revenues
from the Second Quarter 1994 and from the Six Months Ended June 30, 1994 also
include $1,348 and $3,169, respectively, of revenues from the Company's
subsidiary, Lansa USA, Inc. ("Lansa"), which was sold by the Company on
September 30, 1994.
COST OF REVENUES. Cost of revenues includes the cost of manuals, packaging,
diskettes, duplication, assembly and fulfillment charges. In addition, cost of
revenues includes royalties paid to third-party developers, inventory
obsolescence reserves and amortization of capitalized software development
costs. Gross margins for both the Second Quarter 1995 and for the Six Months
Ended June 30, 1995 increased to 70% as compared to 65% for Second Quarter 1994
and the Six Months Ended June 30, 1994, respectively. The improvement in both
periods is due primarily to the higher percentage of CD-ROM based sales and
direct mail sales. Cost of revenues were also lower on a percentage basis in
both periods due to the closing of the Power Up catalog operation and the sale
of the Lansa operation, each of which generated lower gross margins than the
Company's current operations.
OPERATING EXPENSES. The Company's operating expenses and the respective
percentages of revenues for Second Quarter 1995 as compared to Second Quarter
1994 and for the Six Months Ended June 30, 1995 as compared to the Six Months
Ended June 30, 1994 are as follows:
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------ ------------------------------------------
% of % of % of % of
1995 Revenues 1994 Revenues 1995 Revenues 1994 Revenues
------- -------- ------- -------- ------- -------- ------- --------
Sales, marketing and support $ 6,702 20% $ 6,442 24% $15,416 21% $12,941 21%
General and administrative 4,945 15% 5,154 19% 10,336 14% 11,117 18%
Research and development 2,472 7% 1,356 5% 4,776 6% 3,308 5%
------- -- ------- -- ------- -- ------- --
$14,119 42% $12,952 48% $30,528 41% $27,366 44%
======= == ======= == ======= == ======= ==
Total operating expenses decreased as a percentage of revenues to 42% and 41% in
Second Quarter 1995 and in the Six Months Ended June 30, 1995, respectively,
compared with 48% and 44% in Second Quarter 1994 and in the Six Months Ended
June 30, 1994, respectively. The decrease in both periods is primarily the
result of reductions in operating infrastructure since the Three-Party
Combination, closures of the Power Up catalog operations and the sale of Lansa.
Sales, marketing and support expenses decreased to 20% of revenues in Second
Quarter 1995 compared to 24% of revenues in Second Quarter 1994. The decrease in
these expenses as a percentage of revenues is attributable primarily to the
overall revenue growth of the Company.
General and administrative expenses decreased to 15% and 14% of revenues in
Second Quarter 1995 and in the Six Month Period Ended June 30, 1995,
respectively, compared to 19% and 18% of revenues in Second Quarter 1994 and in
the Six Month Period ended June 30, 1994, respectively. The decrease in both
periods is principally attributable to a reduction in the number of employees as
a result of closure of the Power Up catalog operation and facilities in Barbados
and Marina del Rey, California and the sale of Lansa.
Research and development costs increased to 7% and 6% of revenues in Second
Quarter 1995 and in the Six Month Period Ended June 30, 1995, respectively,
compared to 5% of revenues in both the Second Quarter 1994 and in the Six Month
Period ended June 30, 1994. The increase in both periods is primarily the result
of a number of new product offerings which have been developed and introduced to
the market in 1995 as compared to 1994 including development of Windows95
platform based software titles.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $12,205 at December 31, 1994 to $93,398
at June 30, 1995. This increase is attributed primarily to the issuance of
2,713,106 shares of common stock in an underwritten public offering which
generated net proceeds of $74,434 to the Company, cash generated from operations
and cash received from the exercise of employee stock options.
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On September 30, 1994, SoftKey Inc., a wholly owned subsidiary of the Company,
amended its revolving line of credit (the "Line"), as amended on May 17, 1995,
to provide for a maximum availability of $20,000, subject to eligible accounts
receivable limits. Borrowings under the Line become due on July 1, 1997 and bear
interest at the prime rate. The Line is subject to certain financial covenants,
is secured by a general security interest in the assets of SoftKey Inc. and
certain other subsidiaries of the Company and is guaranteed by the Company.
During Second Quarter 1995, the $7,700 outstanding on the Line was repaid.
Income generated by the Company's subsidiaries in certain foreign countries
cannot be repatriated to the Company in the United States without payment of
additional taxes since the Company does not currently receive a U. S. tax credit
with respect to income taxes paid by the Company (including its subsidiaries) in
those foreign countries. The Company also conducts its tax software business in
Canada, which has experienced foreign currency exchange rate fluctuation. In
order to mitigate this exposure, the Company has purchased a Cdn $2,000 180 day
foreign exchange option contract expiring July 28, 1995. The Company believes
the existing cash is sufficient to meet its current and planned requirements for
the foreseeable future.
Cash flow from operations on a short-term basis is positively impacted by the
seasonality of the income tax software business in the first two quarters of the
calendar year. At the present time, the Company expects that its cash flows from
operations will be sufficient to finance the Company's operations for at least
the next twelve months. Longer term cash requirements are dictated by a number
of external factors, which include the Company's ability to launch new and
competitive products, the strength of competition in the consumer software
industry and the growth of the home computer market. The Company is continuously
evaluating products and technologies for acquisitions, however, no estimation of
short-term or long-term cash requirements for such acquisitions can be made at
this time.
FUTURE OPERATING RESULTS
The Company's future operating results are subject to a number of uncertainties,
including its ability to develop and introduce new products, the introduction of
competitive products and general economic conditions. In addition, the Company
expects the level of competition in the consumer software industry to become
more intense and that companies with greater access to capital, new products and
retail shelf space may enter its market. The Company may plan to seek
acquisitions of businesses, products or technologies in the future that are
complementary to its current business. There can be no assurance that the
Company will not encounter difficulties in integrating any such business,
product or technology.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations is provided pursuant to applicable
regulations of the Securities and Exchange Commission and is not intended to
serve as a basis for projections of future events.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 10, 1994, the Director of Investigation and Research under the
Competition Act (Canada) (the "Act") commenced an inquiry in Canada under the
non-criminal, reviewable practices provisions of the Act respecting the
activities of SoftKey Software Products Inc. ("SoftKey Software") in the tax
preparation software business in Canada. SoftKey Software is an Ontario
corporation and a wholly owned subsidiary of the Company. On June 28, 1994, a
court order requiring SoftKey Software, along with other companies in the
Canadian tax preparation software business, to produce certain documents and
information respecting the Canadian tax preparation software industry was issued
by the Federal Court of Canada Trial Division. SoftKey Software has had
discussions with the staff of the Canadian Bureau of Competition Policy and is
currently cooperating to provide the documents and information specified in the
order. At this time no formal application has been made seeking a remedy under
the Act. Management does not currently expect that the outcome of this inquiry
will have a material adverse effect on the Company.
The Company is involved in various legal proceedings involving, breach of
contract and various other claims incident to the conduct of its business.
Management does not expect the company to suffer any material liability by
reason of such actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Company's 1995 Annual Meeting of Stockholders was held on May 25,
1995.
(b) The following directors were elected at the meeting, and no other
directors' terms of office continued after the meeting: Michael A. Bell, Robert
Gagnon, Kevin O'Leary, Michael J. Perik, Robert Rubinoff and Scott M. Sperling.
(c) The first matter voted upon at the meeting was the election of
Directors. Upon motion duly made and seconded, each of the nominees was elected
as a director to serve until the Company's 1996 Annual Meeting and until his
successor is elected and qualified. The votes for each of the nominees were
reported as follows:
Michael A. Bell For: 17,086,564
Withheld: 259,336
Robert Gagnon For: 17,063,528
Withheld: 284,880
Kevin O'Leary For: 17,064,028
Withheld: 284,380
Michael J. Perik For: 17,077,808
Withheld: 270,600
Robert Rubinoff For: 17,077,808
Withheld: 268,092
Scott M. Sperling For: 17,086,706
Withheld: 259,194
The second matter voted upon at the meeting was the ratification of the
Board's appointment of Coopers & Lybrand L.L.P. as independent public
accountants for the 1995 fiscal year. Upon motion duly made and seconded, such
appointment was approved. The votes were reported as follows:
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Coopers & Lybrand L.L.P. For: 17,223,492
Against: 10,002
Abstain: 112,472
The third matter voted upon at the meeting was the approval and adoption of
a proposed amendment to the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock of the Company from
24,500,000 to 60,000,000. Upon motion duly made and seconded, such proposal was
approved and adopted. The votes were reported as follows:
Increase of Authorized Shares For: 14,381,824
Against: 2,667,074
Abstain: 263,260
Non-Votes: 33,808
The fourth matter voted upon at the meeting was a proposal to approve the
Company's 1994 Non-Employee Director Stock Option Plan (the "1994 Plan"). Upon
motion duly made and seconded, such proposal was approved. The votes were
reported as follows:
Approval of 1994 Plan For: 11,249,384
Against: 3,559,870
Abstain: 1,185,967
Non-Votes: 1,350,745
The fifth matter voted upon at the meeting was a proposal to approve certain
amendments to the Company's Long Term Equity Incentive Plan (the "LTIP"),
including increasing the number of shares issuable under the LTIP from 3,000,000
to 5,000,000. Upon motion duly made and seconded, such proposal was approved.
The votes were reported as follows:
Approval LTIP Amendments For: 12,115,117
Against: 3,705,333
Abstain: 140,793
Non-Votes: 1,384,723
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Amended and Restated Combination Agreement by and among
WordStar International Incorporated, SoftKey Software Products
Inc., Spinnaker Software Corporation and SSC Acquisition
Corporation dated as of August 17, 1993, as amended(1)
3.1 Restated Certificate of Incorporation, as amended
3.2 Bylaws of the Company, as amended(2)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(3)
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10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(4)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(4)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(3)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(2)
10.6 1991 Employee Payroll Stock Purchase Plan(5)
10.7 1994 Non-Employee Director Stock Option Plan(2)
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(4)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(4)
10.10 Credit Agreement dated as of September 30, 1994 between
SoftKey Inc. and Fleet Bank of Massachusetts, N.A.(6)
10.11 Employment Agreement dated March 1, 1994 by and between
SoftKey Software Products Inc. and Robert Gagnon(2)
10.12 Amendment No. 1 dated as of March 1, 1995, to Employment
Agreement dated as of February 1, 1994 by and between R. Scott
Murray and the Company(3)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(2)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by
the Company in favor of Mellon Financial Services Corporation
#1.(2)
10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(7)
10.17 Amendment dated as of May 17, 1995 by and between SoftKey Inc.
and Fleet Bank of Massachusetts, N.A., to Credit Agreement
dated as of September 30, 1994.
10.18 Stock Purchase Agreement by and among the Company, Flextech
Holdings Pte Ltd, Harry Fox, Joseph Abrams, Sol Rosenberg,
Mathew Barlow, Samuel Zemsky, K.H. Trustees Ltd., Seth Altholz
and Shelly Abrahami dated July 17, 1995
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(8)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(8)
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11.1 Statement re: Computation of Per Share Earnings
--------------------
(1) Incorporated by reference to schedules included in the Company's
definitive Joint Management Information Circular and Proxy Statement
dated December 27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(6) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(7) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(8) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated July 21 1995.
(b) REPORTS ON FORM 8-K
The registrant filed a report on Form 8-K dated June 9, 1995 reporting
the filing of a registration statement for a public offering of common
stock.
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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.
SOFTKEY INTERNATIONAL INC.
August 14, 1995
/s/ R. Scott Murray
-------------------------------------------
R. Scott Murray
Chief Financial Officer
(principal financial and accounting officer)
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EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION Number
------ ----------- ------
2.1 Amended and Restated Combination Agreement by and among
WordStar International Incorporated, SoftKey Software Products
Inc., Spinnaker Software Corporation and SSC Acquisition
Corporation dated as of August 17, 1993, as amended(1)
3.1 Restated Certificate of Incorporation, as amended
3.2 Bylaws of the Company, as amended(2)
10.1 SoftKey Product Agreement dated April 6, 1994 by and between
the Company and R.R. Donnelley & Sons Company(3)
10.2 Employment Agreement dated May 27, 1994 by and between the
Company and Michael Perik(4)
10.3 Employment Agreement dated May 27, 1994 by and between the
Company and Kevin O'Leary(4)
10.4 Employment Agreement dated February 1, 1994 by and between the
Company and R. Scott Murray(3)
10.5 Employment Agreement dated October 8, 1993 by and between
SoftKey Software Products Inc. and David E. Patrick(2)
10.6 1991 Employee Payroll Stock Purchase Plan(5)
10.7 1994 Non-Employee Director Stock Option Plan(2)
10.8 Employment Agreement dated September 15, 1993 by and between
WordStar International Incorporated and Edward Sattizahn(4)
10.9 Employment Agreement dated June 20, 1994 by and between the
Company and Neal S. Winneg(4)
10.10 Credit Agreement dated as of September 30, 1994 between
SoftKey Inc. and Fleet Bank of Massachusetts, N.A.(6)
10.11 Employment Agreement dated March 1, 1994 by and between
SoftKey Software Products Inc. and Robert Gagnon(2)
10.12 Amendment No. 1 dated as of March 1, 1995, to Employment
Agreement dated as of February 1, 1994 by and between R. Scott
Murray and the Company(3)
10.13 Sublease Agreement dated as of January 5, 1995 by and between
Mellon Financial Services Corporation #1 and SoftKey Inc.(2)
10.14 Continuing Guaranty of Lease dated as of January 5, 1995 by
the Company in favor of Mellon Financial Services Corporation
#1.(2)
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10.15 1990 Long Term Equity Incentive Plan, as amended and restated
through June 2, 1995.
10.16 1982 Employee and Consultant Stock Option and Purchase Plan(7)
10.17 Amendment dated as of May 17, 1995 by and between SoftKey Inc.
and Fleet Bank of Massachusetts, N.A., to Credit Agreement
dated as of September 30, 1994.
10.18 Stock Purchase Agreement by and between SoftKey International
Inc., Flextech Holdings Pte Ltd,Harry Fox, Joseph Abrams, Sol
Rosenberg, Mathew Barlow, Samuel Zemsky, K.H. Trustees Ltd.,
Seth Altholz and Shelly Abrahami dated July 17, 1995
10.19 Share Purchase Agreement dated July 21, 1995 by and among the
Company, Ziff-Davis Verlag GmbH and Helmut Kunkel(8)
10.20 Earn-Out Agreement dated July 21, 1995 by and between the
Company and Helmut Kunkel(8)
11.1 Statement re: Computation of Per Share Earnings
--------------------
(1) Incorporated by reference to schedules included in the Company's
definitive Joint Management Information Circular and Proxy Statement
dated December 27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(3) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended April 2,
1994.
(4) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July 2,
1994.
(5) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the Transition period ended September 30, 1992.
(6) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended October 1,
1994.
(7) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the year ended June 30, 1991.
(8) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated July 21, 1995.
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