Prepared by R.R. Donnelley Financial -- Form 8-K
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported) September 19, 2002
 
PHOENIX TECHNOLOGIES LTD.
(Exact name of registrant as specified in its charter)
 
Delaware
  
0-17111
  
04-2685985
(State or other jurisdiction
of incorporation)
  
(Commission File Number)
  
(IRS Employer
Identification No.)
 
411 E. Plumeria Drive San Jose, CA
  
95134
(Address of principal executive offices)
  
(Zip Code)
 
Registrant’s telephone number, including area code (408) 570-1000
 
(Former name or former address if changed since last report)
 

 
Item 2.    Acquisition or Disposition of Assets
 
As described in a Current Report on Form 8-K filed by Phoenix Technologies Ltd. (“Phoenix”) on July 25, 2002, Phoenix entered into a Tender and Voting Agreement dated July 23, 2002 with Synopsys, Inc., a Delaware corporation (“Synopsys”) to tender its shares in inSilicon Corporation, a Delaware corporation (“inSilicon”), to Synopsys in response to a cash tender offer that Synopsys planned to make for all outstanding shares of inSilicon pursuant to an Agreement and Plan of Merger dated July 23, 2002 among Synopsys, InSilicon, and Ferrite Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Synopsys.
 
On September 19, 2002, Phoenix completed the sale of 10,450,010 shares, or 100% of its ownership interest in inSilicon, in the Synopsys tender offer for $4.05 per share pursuant to the terms of the Tender and Voting Agreement.
 
The above description of Phoenix’s sale of its shares of inSilicon is a summary and as such is not intended to be complete. It is subject to, and qualified by reference to, the Tender and Voting Agreement, which is attached as Exhibit 2.1 to Phoenix’s Current Report on Form 8-K filed on July 25, 2002, the press release announcing execution of the Tender and Voting Agreement, which is attached as Exhibit 99.1 to Phoenix’s Current Report on Form 8-K filed on July 25, 2002, and the press release announcing the closing of the transaction attached as Exhibit 99.2 to this Current Report on Form 8-K. Each of the foregoing documents is incorporated herein by reference.
 
Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits
 
(a)  Financial Statements of Businesses Acquired.
 
Not applicable.
 
(b)  Pro Forma Financial Information.
 
On September 19, 2002, Phoenix Technologies Ltd. completed the sale of its ownership interest in inSilicon for a total cash payment of $42.3 million. Based upon inSilicon’s net worth at June 30, 2002, Phoenix’s ownership percentage on that date, and the estimated costs and expenses incurred in connection with the sale, Phoenix anticipates that it will record a gain of $5.7 million, net of tax. The anticipated gain will be adjusted to reflect inSilicon’s final net worth on the date of the sale and related tax expense.
 
The following unaudited pro forma condensed financial statements and the notes related thereto are being filed herewith:
 
 
—
 
Unaudited Pro Forma Condensed Balance Sheet as of June 30, 2002
 
 
—
 
Unaudited Pro Forma Condensed Statements of Operations for the nine months ended June 30, 2002

2

 
—
 
Unaudited Pro Forma Condensed Statements of Operations for the year ended September 30, 2001
 
The pro forma adjustments represent, in the opinion of management, all adjustments necessary to present Phoenix’s pro forma results of operations and financial position in accordance with Article 11 of SEC Regulation S-X and are based upon available information and certain assumptions considered reasonable under the circumstances.
 
The pro forma condensed financial statements should be read in conjunction with Phoenix’s unaudited condensed consolidated financial statements and notes thereto included in the Company’s quarterly report on Form 10-Q for the period ended June 30, 2002 and audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended September 30, 2001, filed on August 5, 2002 and December 5, 2001, respectively. The pro forma information may not necessarily be indicative of what the Company’s results of operations or financial position would have been had the transaction been in effect as of and for the periods presented, nor is such information necessarily indicative of the Company’s results of operations or financial position for any future period or date.

3

 
PHOENIX TECHNOLOGIES LTD.
 
PRO FORMA CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
 
The following table shows the unaudited pro forma condensed consolidated balance sheet of the Company at June 30, 2002 as if the transaction had taken place on June 30, 2002.
 
    
June 30, 2002
  
    
Historical
     
Business to be disposed
     
Pro forma adjustments
     
Pro forma
  
ASSETS
                                    
Current assets:
                                    
Cash and cash equivalents
   
$
46,206
 
   
$
(27,873
)
   
$
42,323
  A
   
$
60,656
 
Short-term investments
   
 
11,787
 
   
 
—  
 
   
 
—  
 
   
 
11,787
 
Accounts receivable, net
   
 
27,637
 
   
 
(3,201
)
   
 
—  
 
   
 
24,436
 
Receivables from affiliated parties
   
 
—  
 
   
 
1,986
 
   
 
—  
 
   
 
1,986
 
Prepaid royalties and maintenance
   
 
2,312
 
   
 
(337
)
   
 
—  
 
   
 
1,975
 
Deferred income taxes
   
 
5,186
 
   
 
(513
)
   
 
—  
 
   
 
4,673
 
Other current assets
   
 
5,379
 
   
 
(1,542
)
   
 
—  
 
   
 
3,837
 
    
  
  
  
Total current assets
   
 
98,507
 
   
 
(31,480
)
   
 
42,323
 
   
 
109,350
 
Property and equipment, net
   
 
9,629
 
   
 
(876
)
   
 
—  
 
   
 
8,753
 
Computer software costs, net
   
 
19,942
 
   
 
(4,476
)
   
 
—  
 
   
 
15,466
 
Goodwill and intangible assets, net
   
 
19,645
 
   
 
(5,549
)
   
 
—  
 
   
 
14,096
 
Deferred income taxes
   
 
8,743
 
   
 
513
 
   
 
(4,296
)B
   
 
4,960
 
Prepaid royalties—non current
   
 
8,041
 
   
 
—  
 
   
 
—  
 
   
 
8,041
 
Other assets
   
 
2,280
 
   
 
(51
)
   
 
—  
 
   
 
2,229
 
    
  
  
  
Total assets
   
$
166,787
 
   
 
(41,919
)
   
 
38,027
 
   
 
162,895
 
    
  
  
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                    
Current liabilities:
                                    
Accounts payable
   
$
1,483
 
   
 
(298
)
   
 
—  
 
   
 
1,185
 
Accrued compensation and related liabilities
   
 
9,991
 
   
 
(802
)
   
 
—  
 
   
 
9,189
 
Deferred revenue
   
 
7,881
 
   
 
(3,113
)
   
 
—  
 
   
 
4,768
 
Accrued acquisition costs
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
Income taxes payable
   
 
1,473
 
   
 
(422
)
   
 
7,689
  B
   
 
8,740
 
Other accrued liabilities
   
 
5,243
 
   
 
(1,340
)
   
 
1,000
  A
   
 
4,903
 
    
  
  
  
Total current liabilities
   
 
26,071
 
   
 
(5,975
)
   
 
8,689
 
   
 
28,785
 
Long-term obligations
   
 
1,126
 
   
 
—  
 
   
 
—  
 
   
 
1,126
 
    
  
  
  
Total liabilities
   
 
27,197
 
   
 
(5,975
)
   
 
8,689
 
   
 
29,911
 
Minority interest
   
 
12,296
 
   
 
—  
 
   
 
(12,296
)C
   
 
—  
 
    
  
  
  
Stockholders’ equity:
                                    
Preferred stock
   
 
—  
 
   
 
—  
 
   
 
—  
 
         
Common stock
   
 
31
 
   
 
—  
 
   
 
—  
 
   
 
31
 
Additional paid-in capital
   
 
177,299
 
   
 
(51
)
   
 
—  
 
   
 
177,248
 
Retained earnings
   
 
32,244
 
   
 
—  
 
   
 
5,690
  A
   
 
37,934
 
Accumulated other comprehensive income (loss)
   
 
(1,534
)
   
 
51
 
   
 
—  
 
   
 
(1,483
)
Less: Cost of treasury stock
   
 
(80,746
)
   
 
—  
 
   
 
—  
 
   
 
(80,746
)
    
  
  
  
Total stockholders’ equity
   
 
127,294
 
   
 
—  
 
   
 
5,690
 
   
 
132,984
 
    
  
  
  
Total liabilities and stockholders’ equity
   
$
166,787
 
   
$
(5,975
)
   
$
2,083
 
   
$
162,895
 
    
  
  
  

4

 
PHOENIX TECHNOLOGIES LTD.
 
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
 
The following table shows the unaudited pro-forma condensed consolidated results of operations for the 9 months ended June 30, 2002 as if the transaction had taken place as of October 1, 2001.
 
    
Nine months ended June 30, 2002
    
Historical
     
Business to be disposed
     
Pro forma adjustments
     
Pro Forma
Revenues:
                                  
License fees
   
$
81,142
 
   
$
(9,935
)
   
$
—  
 
   
$
71,207
Services
   
 
10,887
 
   
 
(4,356
)
   
 
—  
 
   
 
6,531
    
  
  
  
Total revenues
   
 
92,029
 
   
 
(14,291
)
   
 
—  
 
   
 
77,738
    
  
  
  
Cost of revenues:
                                  
License fees
   
 
4,485
 
   
 
(1,249
)
   
 
—  
 
   
 
3,236
Services
   
 
4,791
 
   
 
(166
)
   
 
—  
 
   
 
4,625
Amortization of purchased technology
   
 
3,723
 
   
 
(1,499
)
   
 
—  
 
   
 
2,224
Restructuring related write-off and impairment of capitalized software
   
 
1,172
 
   
 
(1,172
)
   
 
—  
 
   
 
—  
    
  
  
  
Total cost of revenues
   
 
14,171
 
   
 
(4,086
)
   
 
—  
 
   
 
10,085
    
  
  
  
Gross Margin
   
 
77,858
 
   
 
(10,205
)
   
 
—  
 
   
 
67,653
Operating expenses:
                                  
Research and development
   
 
26,737
 
   
 
(5,962
)
   
 
879
  D
   
 
21,654
Sales and marketing
   
 
29,875
 
   
 
(5,799
)
   
 
879
  D
   
 
24,955
General and administrative
   
 
17,390
 
   
 
(3,409
)
   
 
440
  D
   
 
14,421
Amortization of goodwill and acquired intangible assets
   
 
3,495
 
   
 
(1,757
)
   
 
—  
 
   
 
1,738
Stock-based compensation
   
 
690
 
   
 
(347
)
   
 
—  
 
   
 
343
Restructuring and related charges
   
 
5,142
 
   
 
(1,216
)
   
 
—  
 
   
 
3,926
    
  
  
  
Total operating expenses
   
 
83,329
 
   
 
(18,490
)
   
 
2,198
 
   
 
67,037
    
  
  
  
Income (loss) from operations
   
 
(5,471
)
   
 
8,285
 
   
 
(2,198
)
   
 
616
Interest and other income, net
   
 
555
 
   
 
(440
)
   
 
—  
 
   
 
115
Minority interest
   
 
2,615
 
   
 
—  
 
   
 
(2,615
) C
   
 
—  
    
  
  
  
Income (loss) before income taxes
   
 
(2,301
)
   
 
7,845
 
   
 
(4,813
)
   
 
731
Income tax expense (credit)
   
 
1,343
 
   
 
(428
)
   
 
(666
) E
   
 
249
    
  
  
  
Net Income (loss)
   
$
(3,644
)
   
$
8,273
 
   
$
(4,147
)
   
$
482
    
  
  
  
Earnings (loss) per share:
                                  
Basic
   
$
(0.14
)
                     
$
0.02
Diluted
   
$
(0.14
)
                     
$
0.02
Shares used in earnings (loss) per share calculation:
                                  
Basic
   
 
25,702
 
                     
 
25,702
Diluted
   
 
25,702
 
                     
 
26,317

5

 
PHOENIX TECHNOLOGIES LTD.
 
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
 
The following table shows the unaudited pro-forma condensed consolidated results of operations for the 12 months ended September 30, 2001 as if the transaction had taken place as of October 1, 2000.
 
    
Fiscal Year Ended September 30, 2001
  
    
Historical
     
Business to be disposed
     
Pro forma adjustments
     
Pro Forma
  
Revenues:
                                    
License fees
   
$
103,324
 
   
$
(13,095
)
   
$
—  
 
   
$
90,229
 
Services
   
 
18,113
 
   
 
(5,984
)
   
 
—  
 
   
 
12,129
 
    
  
  
  
Total revenues
   
 
121,437
 
   
 
(19,079
)
   
 
—  
 
   
 
102,358
 
    
  
  
  
Cost of revenues:
                                    
License fees
   
 
3,796
 
   
 
(1,498
)
   
 
—  
 
   
 
2,298
 
Services
   
 
15,138
 
   
 
(208
)
   
 
—  
 
   
 
14,930
 
Amortization of purchased technology
   
 
2,131
 
   
 
(1,321
)
   
 
—  
 
   
 
810
 
    
  
  
  
Total cost of revenues
   
 
21,065
 
   
 
(3,027
)
   
 
—  
 
   
 
18,038
 
    
  
  
  
Gross Margin
   
 
100,372
 
   
 
(16,052
)
   
 
—  
 
   
 
84,320
 
Operating expenses:
                                    
Research and development
   
 
45,526
 
   
 
(11,113
)
   
 
1,223
  D
   
 
35,636
 
Sales and marketing
   
 
37,213
 
   
 
(9,314
)
   
 
1,223
  D
   
 
29,122
 
General and administrative
   
 
24,743
 
   
 
(4,930
)
   
 
611
  D
   
 
20,424
 
Amortization of goodwill and acquired intangible assets
   
 
5,027
 
   
 
(3,883
)
   
 
—  
 
   
 
1,144
 
Stock-based compensation
   
 
1,713
 
   
 
(978
)
   
 
—  
 
   
 
735
 
Impairment of long-lived assets
   
 
9,393
 
   
 
(9,393
)
   
 
—  
 
   
 
—  
 
Restructuring and related charges
   
 
1,525
 
   
 
(48
)
   
 
—  
 
   
 
1,477
 
    
  
  
  
Total operating expenses
   
 
125,140
 
   
 
(39,659
)
   
 
3,057
 
   
 
88,538
 
    
  
  
  
Income (loss) from operations
   
 
(24,768
)
   
 
23,607
 
   
 
(3,057
)
   
 
(4,218
)
Interest and other income, net
   
 
2,866
 
   
 
(1,592
)
   
 
—  
 
   
 
1,274
 
Gain (loss) on investments
   
 
(2,824
)
   
 
(1,302
)
   
 
—  
 
   
 
(1,522
)
Minority interest
   
 
5,891
 
   
 
—  
 
   
 
(5,891
)C
   
 
—  
 
    
  
  
  
Income (loss) before income taxes
   
 
(18,835
)
   
 
23,317
 
   
 
(8,948
)
   
 
(4,466
)
Income tax expense (credit)
   
 
(833
)
   
 
2,053
 
   
 
(1,223
)E
   
 
(3
)
    
  
  
  
Net Income (loss)
   
$
(18,002
)
   
$
21,264
 
   
$
(10,171
)
   
$
(4,463
)
    
  
  
  
Earnings (loss) per share:
                                    
Basic
   
$
(0.72
)
                     
$
(0.18
)
Diluted
   
$
(0.72
)
                     
$
(0.18
)
Shares used in earnings (loss) per share calculation:
                                    
Basic
   
 
25,141
 
                     
 
25,141
 
Diluted
   
 
25,141
 
                     
 
25,141
 

6

 
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
 
Basis of Presentation
 
The above unaudited pro forma condensed consolidated financial statements present financial information for Phoenix giving effect to the sale of all of its ownership interest in inSilicon, which was effective as of September 19, 2002. The unaudited pro forma condensed balance sheet as of June 30, 2002 is presented as if the transaction occurred on that date. The unaudited pro forma condensed statements of operations for the nine months ended June 30, 2002 and for the year ended September 30, 2001 are presented as if the transaction had occurred at the beginning of the respective periods and excluded the anticipation gain to be realized.
 
Unaudited Pro Forma Financial Adjustments
 
(A)  Reflects the sale of all of its ownership interest in inSilicon to Synopsys for a total cash payment of $42.3 million at September 19, 2002. The pro forma adjustments to other current liabilities reflect the estimated costs and expenses incurred in connection with the sale. Included in pro forma retained earnings at June 30, 2002 is the resulting estimated $5.7 million gain, net of tax, as if the sale occurred on June 30, 2002.
 
(B)  Represents a pro forma adjustment to income tax payable and deferred income taxes relating to taxable gain on the sale.
 
(C)  Reflects the reversal of the minority interest in inSilicon that was included in Phoenix’s historical consolidated Balance Sheet and Statements of Operations.
 
(D)  Reflects the reversal of the cost allocation to inSilicon that was previously included in inSilicon’s Statements of Operations. Phoenix will continue to incur those costs without reimbursement from inSilicon, resulting in higher operating expenses going forward.
 
(E)  Represents the tax benefit resulting from additional costs that were previously allocated to inSilicon.
 
 
 
(c)  Exhibits
 
See attached Exhibit Index

7

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
PHOENIX TECHNOLOGIES LTD.    
(Registrant)
By:
  
/s/    LINDA MOORE        
   
Linda V. Moore     
Secretary
 
 
Date: October 4, 2002
 

8

 
EXHIBIT INDEX
 
Exhibit No.
  
Description
  2.1
  
Tender and Voting Agreement by and between Synopsys, Inc. and Phoenix Technologies Ltd. dated July 23, 2002
   
(A)
  2.2
  
Irrevocable proxy grant by Phoenix Technologies Ltd. to Synopsys, Inc. on Jul 23, 2002
   
(A)
99.1
  
Press Release, dated July 23, 2002
   
(A)
99.2
  
Press Release, dated September 23, 2002
     
(A)
 
Incorporated by reference to Phoenix Technologies Current Report on Form 8-K filed on July 25, 2002.