8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 12, 2003

ASCENTIAL SOFTWARE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	0-15325	94-3011736
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

50 Washington Street, Westborough, MA 01581

(Address of principal executive office)

(508) 366-3888

Registrant’s telephone number, including area code:

Not Applicable

(Former name or former address, if changed since last report)

TABLE OF CONTENTS

EX-23.1 Consent of KPMG LLP

EX-99.1 Pro Forma Financial Information

This Amendment includes information (the “Financial Information”) required by Items 7(a) and (b) of Form 8-K that was omitted from the Registrant’s initial filing on Form 8-K, filed with the Securities and Exchange Commission on September 26, 2003 in connection with the acquisition by the Registrant of Mercator Software, Inc. Certain of the Financial Information, as indicated herein, has been previously reported, within the meaning of Rule 12b-2 of the Securities Exchange Act of 1934 and, accordingly, pursuant to General Instruction B.3 of Form 8-K, is incorporated herein by reference and not filed herewith.

Item 7.    Financial Statements, Pro Forma Financial Information and Exhibits

(a) Financial Statements of Business Acquired

1.	The following audited Financial Statements of Mercator Software, Inc., including the notes thereto, are incorporated by reference to Mercator Software, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission:
	Consolidated Balance Sheet as of December 31, 2002;
	Consolidated Statement of Operations for the year ended December 31, 2002;
	Consolidated Statement of Stockholders’ Equity and Comprehensive Loss for the year ended December 31, 2002;
	Consolidated Statement of Cash Flows for the year ended December 31, 2002; and
	Independent Auditors’ Report as of and for the year ended December 31, 2002.
2.	The following unaudited interim Financial Statements of Mercator Software, Inc., including the notes thereto, are incorporated by reference to Mercator Software, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2003 filed with the Securities and Exchange Commission:
	Consolidated Balance Sheet as of June 30, 2003;
	Consolidated Statement of Operations and Comprehensive Income (Loss) for the six month period ended June 30, 2003; and
	Consolidated Statements of Cash Flow for the six month period ended June 30, 2003.

(b)	Pro Forma Financial Information
	The following Unaudited Pro Forma Combined Condensed Financial Information, including the notes thereto are filed as Exhibit 99.1 hereto and are incorporated herein by reference.

Unaudited Pro Forma Combined Condensed Balance Sheet as of June 30, 2003

Unaudited Pro Forma Combined Condensed Statement of Operations for the year ended December 31, 2002 and for the six months ended June 30, 2003

(c)	Exhibits
	23.1    Consent of KPMG LLP, Independent Auditors
	99.1    Unaudited Pro Forma Combined Condensed Financial Information

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned hereunto duly authorized.

		ASCENTIAL SOFTWARE CORPORATION
Date:	November 26, 2003	/s/ ROBERT C. MCBRIDE Robert C. McBride Chief Financial Officer

EX-23.1 3 b48521asexv23w1.htm EX-23.1 CONSENT OF KPMG LLP

Exhibit 23.1

INDEPENDENT AUDITORS’ CONSENT

The Board of Directors
Ascential Software Corporation

     We consent to incorporation by reference in the following registration statements of Ascential Software Corporation, (Nos. 333-98925, 333-43238, 33-50608, 33-50610, 333-61843, 333-31670, 333-70323, 333-87396, and 333-08782) on Form S-8 of Ascential Software Corporation of our report dated February 5, 2003, except as to note 16, which is as of March 17, 2003, with respect to the consolidated balance sheets of Mercator Software, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders’ equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2002, which report is incorporated by reference in the Form 8-K/A of Ascential Software Corporation dated September 12, 2003. Our report refers to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” in the year ended December 31, 2002.

/s/  KPMG LLP

New York, New York
November 25, 2003

EX-99.1 4 b48521asexv99w1.htm EX-99.1 PRO FORMA FINANCIAL INFORMATION

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     The following unaudited pro forma condensed combined financial information gives effect to the acquisition by Ascential Software Corporation (the “Company” or “Ascential”) of all the issued shares of Mercator Software, Inc. (“Mercator”). The Company acquired Mercator to broaden its enterprise data integration capabilities, increase the Company’s size and scale and leverage the increased customer base of the combined companies.

     On August 2, 2003, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Greek Acquisition Corporation, a wholly-owned subsidiary of the Company (“Merger Sub”), and Mercator, pursuant to which the Company, through Merger Sub, offered to purchase all of the outstanding common shares of Mercator (such shares, together with any associated preferred stock rights, the “Mercator Shares”), at a price per share of $3.00 in cash without interest thereon (the “Offer Price”), upon the terms and subject to the conditions set forth in an Offer to Purchase and related Letter of Transmittal (which together with any amendments or supplements thereto constitute the “Offer”) distributed to Mercator’s stockholders on August 8, 2003.

     On September 12, 2003, the Company completed its acquisition of Mercator pursuant to the Merger Agreement. Following expiration of the Offer on September 11, 2003, Ascential accepted for payment the Mercator Shares tendered and exercised an option (the “Option”) granted to it by Mercator to purchase 19.99% of the then outstanding common stock of Mercator at a price of $3.00 per share. As a result of the purchase of the Mercator Shares and the exercise of the Option, Ascential, through Merger Sub, owned more than 90% of the Mercator Shares.

     On September 12, 2003, the Company effected a short form merger (the “Merger”) whereby Mercator was merged with and into Merger Sub, with Mercator surviving as a wholly-owned subsidiary of the Company. In the Merger, each outstanding Mercator Share (other than (i) Mercator shares owned by the Company, Merger Sub or the Company or their respective subsidiaries, and (ii) Mercator Shares that were held by stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law), were converted into the right to receive $3.00 per share in cash, without interest thereon. Substantially all of the remaining merger consideration was paid by November, 2003. In addition, all outstanding options to purchase Mercator Shares granted pursuant to the TSI International Software Ltd. 1993 Stock Option Plan, the 1996 Novera Software Inc. Stock Option Plan and the Mercator Software, Inc. 1998 Equity Incentive Plan were converted into options to purchase shares of common stock of the Company, subject to certain adjustments.

     On November 14, 2003, the Company filed its Quarterly Report on Form 10-Q for the period ended September 30, 2003 (the “Form 10-Q”), which gives effect to the acquisition of Mercator. The acquisition was accounted for using the purchase method, and accordingly the respective assets acquired and liabilities assumed were recorded at their fair values. The unaudited pro forma condensed combined financial information is based on the historical consolidated financial information of Ascential and Mercator and not on the actual results for the period ended September 30, 2003 which are included in the Form 10-Q. The estimates and assumptions used are set forth in the notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information has been prepared on the same basis as Ascential’s audited consolidated financial statements, and includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of Ascential’s financial condition and results of operations for such periods.

     The unaudited pro forma condensed combined balance sheet as of June 30, 2003 is presented as if the acquisition had occurred on June 30, 2003. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2003 and for the year ended December 31, 2002 assume that the acquisition of Mercator occurred as of January 1, 2002.

     The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial information of Ascential and of Mercator set forth in the annual reports on Form 10-K and quarterly reports on Form 10-Q filed by each of Ascential and Mercator with the Securities and Exchange Commission. The unaudited pro forma condensed combined financial information does not purport to represent what Ascential’s financial position or results of operations would actually have been if this acquisition had been consummated on the indicated dates, nor are they necessarily indicative of Ascential’s financial position or results of operations for any future period.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(In thousands)

						June 30, 2003
			Ascential			Mercator			Pro Forma				Pro Forma
			Software			Software			Adjustments				Combined
ASSETS
Current assets:
	Cash and cash equivalents		$	352,408		$	19,691			(109,200	)	[D]	$	—
										(8,750	)	[D]		254,149
	Short—term investments			272,153			—			—				272,153
	Accounts receivable, net			25,730			15,562			—				41,292
	Receivable from sale of database business			—			—			—				—
	Recoverable income taxes			1,212			—			—				1,212
	Other current assets			12,600			5,109			(2,145	)	[L]
										(569	)	[L]
										941		[K]		15,936
		Total current assets		664,103			40,362			(119,723	)			584,742
	Property and equipment, net			5,774			7,471			(853	)	[B]		12,392
	Software development costs, net			14,458			—			—				14,458
	Long—term investments			1,246			—			—				1,246
	Goodwill			162,301			43,960			160,702		[C]
										(43,960	)	[A]		323,003
	Intangible assets, net			8,452			3,098			15,200		[C]
										(3,098	)	[A]		23,652
	Deferred income taxes			28,412			—			784		[K]		29,196
	Other assets			10,339			1,322			(599	)	[H]		11,062
		Total assets	$	895,085		$	96,213		$	8,453			$	999,751
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities :
	Accounts payable		$	8,992		$	4,674		$	—			$	13,666
	Accrued expenses and other current liabilities			22,261			11,702			5,000		[E]
										(563	)	[A]		38,400
	Accrued employee compensation			13,315			—			—				13,315
	Current portion of long—term debt			—			4,571			(2,500	)	[D]		2,071
	Income taxes payable			86,634			—			—				86,634
	Deferred revenue			23,233			22,799			(1,348	)	[L]
										(494	)	[L]		44,190
	Accrued merger, realignment and other charges			10,054			11,384			33,700		[E]		55,138
	Deferred income taxes			33,168			—			—				33,168
		Total current liabilities		197,657			55,130			33,795				286,582
Deferred revenue				—			231			(231	)	[L]		—
Deferred tax liability				—			779			(779	)	[A]		—
Long—term debt, less current portion				—			7,027			(6,250	)	[D]		777
Other long—term liabilities				—			3,682			—				3,682
		Total liabilities		197,657			66,849			26,535				291,041
	Stockholders’ equity
		Common stock		665			353			(353	)	[A]		665
		Additional paid—in capital		603,614			251,048			(251,048	)	[A]
										15,703		[I]		619,317
		Treasury stock, at cost		(98,454	)		—			—				(98,454	)
		Retained earnings		202,404			(221,135	)		221,135		[A]
										(2,000	)	[M]		200,404
		Deferred compensation		(160	)		—			(2,421	)	[I]		(2,581	)
		Accumulated other comprehensive loss		(10,641	)		(902	)		902		[A]		(10,641	)
	Total stockholders’ equity			697,428			29,364			(18,082	)			708,710
	Total liabilities and stockholders’ equity		$	895,085		$	96,213		$	8,453			$	999,751

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2002
(in thousands, except per share data)

			Ascential			Mercator			Pro Forma				Pro Forma
			Software			Software			Adjustments				Combined
NET REVENUES
	Licenses		$	59,611		$	45,102		$	—			$	104,713
	Services			53,407			66,828			—				120,235
				113,018			111,930			—				224,948
COSTS AND EXPENSES
	Cost of licenses			18,350			4,435			(3,845	)	[C]
										301		[I]
										1,400		[C]		20,641
	Cost of services			33,089			31,467			(84	)	[B]		64,472
	Sales and marketing			73,080			47,015			(77	)	[B]
										1,400		[C]
										275		[I]		121,693
	Research and development			24,044			20,872			(73	)	[B]
										261		[I]		45,104
	General and administrative			41,054			24,411			(50	)	[B]
										1,200		[C]
										179		[I]
										(906	)	[C]		65,888
	Merger, realignment and other charges			23,669			10,880			—				34,549
	Write—off of acquired in—process research and development			1,170			—			—				1,170
				214,456			139,080			(19	)			353,517
	Operating income (loss)			(101,438	)		(27,150	)		19				(128,569	)
OTHER INCOME (EXPENSE)
		Interest income		20,194			512			(2,552	)	[F]		18,154
		Interest expense		(84	)		(689	)		—				(773	)
		Gain on Sale of database business		3,040			—			—				3,040
		Impairment of long—term investments		(2,187	)		—			—				(2,187	)
		Other, net		(929	)		(1,152	)		—				(2,081	)
LOSS BEFORE INCOME TAXES				(81,404	)		(28,479	)		(2,533	)			(112,416	)
		Income tax expense (benefit)		(17,831	)		929			(13,334	)	[J]		(30,236	)
NET INCOME (LOSS)			$	(63,573	)	$	(29,408	)	$	10,801			$	(82,180	)
NET LOSS PER COMMON SHARE
		Basic	$	(1.03	)								$	(1.33	)
		Diluted	$	(1.03	)								$	(1.33	)
SHARES USED IN PER SHARE CALCULATIONS
		Basic		61,931										61,931
		Diluted		61,931										61,931

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2003
(in thousands, except per share data)

				Ascential						Pro Forma				Pro Forma
				Software			Mercator Software			Adjustments				Combined
	NET REVENUES
		Licenses		$	40,186		$	13,119		$	—			$	53,305
		Services			35,039			31,929			—				66,968
					75,225			45,048			—				120,273
	COSTS AND EXPENSES
		Cost of licenses			6,954			2,080			(1,922	)	[C]
											150		[I]
											700		[C]		7,962
		Cost of services			16,075			13,288			(42	)	[B]		29,321
		Sales and marketing			33,544			15,732			(39	)	[B]
											700		[C]
											138		[I]		50,075
		Research and development			10,880			10,131			(37	)	[B]
											131		[I]		21,105
		General and administrative			13,371			11,537			(112	)	[H]
											89		[I]
											(25	)	[B]
											(401	)	[C]		24,459
		Merger, realignment and other charges			432			5,106			—				5,538
					81,256			57,874			(670	)			138,460
		Operating income (loss)			(6,031	)		(12,826	)		670				(18,187	)
	OTHER INCOME (EXPENSE)
			Interest income		6,215			182			(1,364	)	[F]		5,033
			Interest expense		(30	)		(632	)		426		[G]		(236	)
			Other, net		76			(364	)		—				(288	)
	INCOME (LOSS) BEFORE INCOME TAXES				230			(13,640	)		(268	)			(13,678	)
			Income tax expense (benefit)		69			(133	)		(2,992	)	[J]		(3,056	)
	NET INCOME (LOSS)			$	161			(13,507	)		2,724			$	(10,622	)
NET LOSS PER COMMON SHARE
			Basic	$	—									$	(0.18	)
			Diluted	$	—										(0.18	)
SHARES USED IN PER SHARE CALCULATIONS
			Basic		57,942										57,942
			Diluted		57,942										57,942

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial information.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 – Basis of Presentation

     The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2003 and the year ended December 31, 2002 give effect to the acquisition of the outstanding shares of Mercator as if the acquisition had occurred at January 1, 2002. The unaudited pro forma condensed combined balance sheet as of June 30, 2003 gives effect to the above-mentioned acquisition as if it had occurred on June 30, 2003.

     The unaudited condensed combined financial information has been prepared on the same basis as Ascential’s audited consolidated financial statements, and includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of Ascential’s financial condition and results of operations for such periods.

     The acquisition has been accounted for under the purchase method and, accordingly, the respective assets acquired and liabilities assumed have been recorded at their fair value. The Company paid approximately $109.2 million in cash to acquire the Mercator Shares. The purchase price includes $5.0 million for transaction costs and $15.7 million for the fair value of options to purchase shares of common stock of Ascential exchanged for Mercator stock options, offset by $2.4 million recorded in deferred compensation for the intrinsic value of unvested options to purchase common stock of Ascential that were issued for Mercator stock options, which will be amortized over the remaining vesting period of the underlying options.

     In purchase accounting, the acquired net assets of Mercator have been adjusted to their fair market value and consolidated into the net assets of Ascential. A summary of the purchase price for the acquisition as of June 30, 2003 is as follows (in millions):

Cash paid to acquire stock, net of cash acquired of $19.7 million					$	89.5
Accrued transaction costs						5.0
Fair value of stock options exchanged						13.4
Accrued merger expenses						33.7
		Total			$	141.6
The purchase price was allocated as follows:
	Net liabilities assumed, net of cash acquired				$	(38.0	)
	Deferred income taxes					1.7
	Intangible assets:
			Existing technology			7.0
			Covenant not to compete			1.2
			Customer relationships			7.0
			Goodwill			160.7
				Total intangible assets		175.9
			In-process research and development			2.0
Total					$	141.6

     Based upon a preliminary purchase price allocation, the total purchase price exceeded the net assets acquired and liabilities assumed when adjusted to fair market value and resulted in goodwill in the pro forma condensed combined financial information of approximately $160.7 million. The identified intangible assets acquired, including developed technology, customer relationships, and agreements not to compete between the Company and former Mercator executives, were assigned fair values based upon a preliminary appraisal and amounted to $15.2 million in the aggregate. The portion of the purchase price allocated to in-process research and development costs in the Mercator acquisition was $2.0 million, or approximately 1% of purchase price. Because this expense is directly attributable to the acquisition and will not have a continuing impact, it is not reflected in the pro forma condensed combined statement of operations.

     As of the date of the closing of the Mercator acquisition pursuant to an agreement between the Company, Mercator and the lender, the Company became responsible for the then outstanding principal loan balance owed by Mercator to its lender pursuant to the terms and conditions of a term loan facility (the “Loan Agreement”). The outstanding principal loan balance under the Loan Agreement was $8.8 million and $10.0 million as of June 30, 2003 and December 31, 2002, respectively. The acquisition of Mercator constituted a change in control of Mercator, which was an event of default under the Loan Agreement. The lender waived such event of default in connection with the Company’s agreement to repay the balance outstanding. As a result, the Company’s repayment of the entire loan balance has been reflected in the pro forma condensed combined financial information.

Note 2 – Pro Forma Adjustments

     Adjustments have been made to the unaudited pro forma condensed combined financial information to reflect the following:

(A)	The elimination of common shareholders’ equity, deferred income taxes, goodwill and intangible accounts of Mercator.
(B)	The net assets and liabilities of Mercator were recorded at estimated fair market value and, accordingly, fixed assets were reduced by $0.9 million and depreciation expense was adjusted for all periods presented.
(C)	The amount allocated to goodwill of $160.7 million and intangible assets of $15.2 million (see Note 1 – Basis of Presentation) were recorded and amortization of $1.4 million and $4.0 million recorded in the six months ended June 30, 2003 and year ended December 31, 2002, respectively. Amortization expense in the six months ended June 30, 2003 excludes the effect of amortization of certain short lived intangibles, since they are fully amortized during the year ended December 31, 2002. The amortization recorded by Mercator in its historical financial statements of $2.3 million and $4.8 million for the six months ended June 30, 2003 and year ended December 31, 2002, respectively, was eliminated.
(D)	Cash was reduced by $109.2 paid in consideration of the Mercator Shares and $8.8 million for the repayment of the outstanding balance under the Loan Agreement at June 30, 2003.
(E)	Direct costs of the acquisition of $5.0 million and $33.7 million of merger related charges were accrued in purchase accounting.
(F)	Interest income was reduced by $1.4 million and $2.6 million for the six months ended June 30, 2003 and year ended December 31, 2002. This reduction is the result of lower cash balances due to the $109.2 million paid for the Mercator shares and $5.0 million in transaction costs in the six months ended June 30, 2003 and the year ended December 31, 2002. In addition, in the six months ended June 30, 2003 interest income related to the cash used to pay down the $10.0 million Loan Agreement has been eliminated.
(G)	Interest expense in the six months ended June 30, 2003 was reduced by $0.4 million to eliminate the interest expense related to the Loan Agreement that was repaid at the time of the acquisition.
(H)	Amortization expense of $0.1 million of deferred financing costs related to the Loan Agreement has been eliminated in the six months ended June 30, 2003 and deferred financing costs related to the Loan Agreement of $0.6 million have been eliminated in the June 30, 2003 unaudited Pro Forma Condensed Combined Balance Sheet.
(I)	At the date of acquisition, outstanding options to purchase shares of Mercator common stock were converted into options to purchase Ascential common stock. The fair market value of these options was approximately $15.7 million, which was recorded in additional paid in capital and $2.4 million which represents the intrinsic value of the unvested options that were exchanged, was recorded in deferred compensation. The amortization of the deferred compensation resulted in additional amortization expense of $0.5 million and $1.0 million for the six months and year ended June 30, 2003 and December 31, 2002, respectively, and has been recorded in the expense category associated with the payroll classification of the grantee.
(J)	Represents the tax effect of the transaction based upon the estimated tax provision as if the Company and Mercator had been combined.
(K)	The amounts allocated to deferred income taxes consist of a short term and a long term deferred tax asset of $0.9 and $0.8, respectively. The deferred tax assets represents the tax effect of the book and tax basis difference attributable to the fair value adjustments.
(L)	Represents adjustment of deferred revenue and certain prepaid assets to fair market value.
(M)	Represents the expensing of a preliminary estimate of in process research and development costs.

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EX-23.1

EX-23.1 Consent of KPMG LLP

EX-99.1

EX-99.1 Pro Forma Financial Information