Attached files
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On June 16, 2010, Savvis, Inc. (Savvis or the Company) completed its acquisition of Fusepoint Inc. (Fusepoint), a portfolio company of M/C Venture Partners, pursuant to the Agreement and Plan of Merger (the Merger Agreement) dated May 28, 2010. Pursuant to the Merger Agreement, Savvis acquired Fusepoint for $121.0 million in cash, after adjustment for estimated working capital and debt levels. The $121.0 million in cash was partially funded by the Consent and Amendment Nos. 7 and 8 to Amended and Restated Credit Agreement between Savvis and Wells Fargo Capital Finance, LLC (the Amended Credit Agreements), dated May 28, 2010 and June 16, 2010, respectively. For further information on the Merger Agreement and the Amended Credit Agreements, please see Exhibits 2.1 and 10.1 included in the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission (SEC) on June 1, 2010, and Exhibit 10.1 included in the Company’s Current Report on Form 8-K, as filed with the SEC on June 17, 2010, respectively.
The merger will be accounted for using the acquisition method of accounting, with Savvis identified as the acquirer. Under the acquisition method of accounting, the Company will record all assets acquired and liabilities assumed at their respective acquisition-date fair values. The excess purchase price over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recognized as goodwill. For further information regarding purchase price allocation, please see Note 2 of Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.
The following unaudited pro forma combined condensed consolidated balance sheet as of March 31, 2010 and the unaudited pro forma combined condensed consolidated statements of operations for the three months ended March 31, 2010 and the fiscal year ended December 31, 2009 are based on the historical financial statements of Savvis and Fusepoint after giving effect to the acquisition of Fusepoint by Savvis and the debt assumed by Savvis to finance the acquisition, and after applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed consolidated financial statements. These unaudited pro forma combined condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements for Savvis included in its Annual Report on Form 10-K and Quarterly Report on Form 10-Q as filed with the SEC on March 5, 2010 and May 6, 2010, respectively, along with the consolidated financial statements of Fusepoint included as Exhibits 99.1 and 99.2 in this Current Report on Form 8-K/A.
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UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2010
(in thousands)
| Historical | Pro Forma | |||||||||||||||
| Savvis | Fusepoint | Adjustments | Combined | |||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 145,928 | $ | 8,492 | $ | (13,526 | )(a) | $ | 140,894 | |||||||
| Trade accounts receivable, net |
51,823 | 3,993 | — | 55,816 | ||||||||||||
| Prepaid expenses and other current assets |
27,686 | 1,343 | (180 | )(b) | 28,849 | |||||||||||
| Total Current Assets |
225,437 | 13,828 | (13,706 | ) | 225,559 | |||||||||||
| Property and equipment, net |
792,376 | 15,228 | — | 807,604 | ||||||||||||
| Goodwill |
— | 1,845 | 94,799 | (c) | 96,644 | |||||||||||
| Other non-current assets |
12,893 | 5,941 | 1,436 | (d) | 20,270 | |||||||||||
| Total Assets |
$ | 1,030,706 | $ | 36,842 | $ | 82,529 | $ | 1,150,077 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current Liabilities: |
||||||||||||||||
| Payables and other trade accruals |
$ | 59,742 | $ | 902 | $ | — | $ | 60,644 | ||||||||
| Current portion of long-term debt and lease obligations |
18,385 | 3,305 | (812 | )(e) | 20,878 | |||||||||||
| Other current accrued liabilities |
68,965 | 3,299 | (1,834 | )(f) | 70,430 | |||||||||||
| Total Current Liabilities |
147,092 | 7,506 | (2,646 | ) | 151,952 | |||||||||||
| Long-term debt, net of current portion |
374,551 | — | 110,000 | (g) | 484,551 | |||||||||||
| Capital and financing method lease obligations, net |
221,211 | 12,666 | (8,155 | )(h) | 225,722 | |||||||||||
| Other non-current accrued liabilities |
79,407 | 1,615 | (1,615 | )(i) | 79,407 | |||||||||||
| Total Liabilities |
822,261 | 21,787 | 97,584 | 941,632 | ||||||||||||
| Stockholders’ Equity: |
||||||||||||||||
| Preferred stock |
— | 42,549 | (42,549 | )(j) | — | |||||||||||
| Common stock |
552 | 10,574 | (10,574 | )(j) | 552 | |||||||||||
| Additional paid-in capital |
875,112 | 626 | (626 | )(j) | 875,112 | |||||||||||
| Accumulated deficit |
(645,778 | ) | (38,694 | ) | 38,694 | (j) | (645,778 | ) | ||||||||
| Accumulated other comprehensive loss |
(21,441 | ) | — | — | (21,441 | ) | ||||||||||
| Total Stockholders’ Equity |
208,445 | 15,055 | (15,055 | ) | 208,445 | |||||||||||
| Total Liabilities and Stockholders’ Equity |
$ | 1,030,706 | $ | 36,842 | $ | 82,529 | $ | 1,150,077 | ||||||||
The accompanying notes are an integral part of these unaudited pro forma combined condensed consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(in thousands, except per share data)
| Historical | Pro Forma | ||||||||||||||
| Savvis | Fusepoint | Adjustments | Combined | ||||||||||||
| Revenue |
$ | 216,587 | $ | 11,829 | $ | — | $ | 228,416 | |||||||
| Operating Expenses: |
|||||||||||||||
| Cost of revenue (1) |
119,368 | 6,517 | 207 | (k) | 126,092 | ||||||||||
| Sales, general, and administrative expenses (1) |
51,719 | 2, 634 | — | 54,353 | |||||||||||
| Depreciation, amortization, and accretion |
40,737 | 1,332 | — | 42,069 | |||||||||||
| Total Operating Expenses |
211,824 | 10,483 | 207 | 222,514 | |||||||||||
| Income from Operations |
4,763 | 1,346 | (207 | ) | 5,902 | ||||||||||
| Other (income) and expense |
15,757 | 179 | 358 | (l) | 16,294 | ||||||||||
| Income (Loss) before Income Taxes |
(10,994 | ) | 1,167 | (565 | ) | (10,392 | ) | ||||||||
| Income tax (benefit) expense |
355 | 76 | — | 431 | |||||||||||
| Net Income (Loss) |
$ | (11,349 | ) | $ | 1,091 | $ | (565 | ) | $ | (10,823 | ) | ||||
| Net Income (Loss) per Common Share |
|||||||||||||||
| Basic |
$ | (0.21 | ) | $ | (0.20 | ) | |||||||||
| Diluted |
$ | (0.21 | ) | $ | (0.20 | ) | |||||||||
| Weighted-Average Common Shares Outstanding |
|||||||||||||||
| Basic |
54,494 | 54,494 | |||||||||||||
| Diluted |
54,494 | 54,494 | |||||||||||||
| (1) | Excludes depreciation, amortization, and accretion, which is reported separately. |
The accompanying notes are an integral part of these unaudited pro forma combined condensed consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(in thousands, except per share data)
| Historical | Pro Forma | |||||||||||||||
| Savvis | Fusepoint | Adjustments | Combined | |||||||||||||
| Revenue |
$ | 874,414 | $ | 41,546 | $ | — | $ | 915,960 | ||||||||
| Operating Expenses: |
||||||||||||||||
| Cost of revenue (1) |
480,335 | 22,772 | 803 | (k) | 503,910 | |||||||||||
| Sales, general, and administrative expenses (1) |
203,158 | 8,582 | — | 211,740 | ||||||||||||
| Depreciation, amortization, and accretion |
150,854 | 5,927 | — | 156,781 | ||||||||||||
| Total Operating Expenses |
834,347 | 37,281 | 803 | 872,431 | ||||||||||||
| Income from Operations |
40,067 | 4,265 | (803 | ) | 43,529 | |||||||||||
| Other (income) and expense |
58,184 | 721 | 1,433 | (l) | 60,338 | |||||||||||
| Income (Loss) before Income Taxes |
(18,117 | ) | 3,544 | (2,236 | ) | (16,809 | ) | |||||||||
| Income tax (benefit) expense |
2,729 | (1,859 | ) | — | 870 | |||||||||||
| Net Income (Loss) |
$ | (20,846 | ) | $ | 5,403 | $ | (2,236 | ) | $ | (17,679 | ) | |||||
| Net Income (Loss) per Common Share |
||||||||||||||||
| Basic |
$ | (0.39 | ) | $ | (0.33 | ) | ||||||||||
| Diluted |
$ | (0.39 | ) | $ | (0.33 | ) | ||||||||||
| Weighted-Average Common Shares Outstanding |
||||||||||||||||
| Basic |
53,786 | 53,786 | ||||||||||||||
| Diluted |
53,786 | 53,786 | ||||||||||||||
| (1) | Excludes depreciation, amortization, and accretion, which is reported separately. |
The accompanying notes are an integral part of these unaudited pro forma combined condensed consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data and where indicated)
NOTE 1 – BASIS OF PRO FORMA PRESENTATION
The preceding unaudited pro forma combined condensed consolidated financial statements and the following related notes thereto combine the historical condensed consolidated financial statements of Savvis and of Fusepoint. The unaudited pro forma combined condensed consolidated balance sheet as of March 31, 2010 gives effect to the acquisition as though it occurred on March 31, 2010. The unaudited pro forma combined condensed consolidated statements of operations for the three months ended March 31, 2010 and the twelve months ended December 31, 2009 give effect to the acquisition as though it occurred on January 1, 2009.
The unaudited pro forma combined condensed consolidated financial statements reflect the $121.0 million cash consideration paid by Savvis to M/C Venture Partners for the acquisition of Fusepoint, which was subject to adjustment based upon the level of net working capital and debt transferred to Savvis at closing. At the closing, $12.5 million of the purchase price was placed in escrow for possible application against this working capital adjustment, certain tax liabilities, and indemnification claims that may be made in the first year following closing. Savvis funded the acquisition through available cash on hand and the incurrence of additional debt, pursuant to the Amended Credit Agreements. Savvis and Fusepoint incurred no acquisition related costs during the three months ended March 31, 2010 The unaudited pro forma combined condensed consolidated financial statements do not reflect the ongoing cost savings that Savvis expects to achieve as a result of the acquisition.
As of the date of this Current Report on Form 8-K/A, the Company, through a third party, had not completed the valuation analysis and calculations necessary to arrive at the final estimates of the fair market value of the Fusepoint assets acquired and liabilities assumed. As such, the assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. The final allocations of acquisition consideration and their effects on the results of operations may differ materially from the estimated allocations presented in the unaudited pro forma combined condensed consolidated financial statements included herein.
NOTE 2 – PRELIMINARY PURCHASE PRICE ALLOCATION
The following presents the preliminary purchase price, which is subject to adjustment based upon the difference of the estimated net working capital and debt transferred pursuant to the Merger Agreement and the actual amount of net working capital and debt transferred on the date of closing.
| Aggregate cash purchase price for the acquisition |
$ | 124,500 | ||
| Estimated working capital adjustment |
(3,531 | ) | ||
| Total estimated purchase price |
$ | 120,969 | ||
Of the $121.0 million total estimated purchase price, $110.0 million was funded through the incurrence of additional debt and the remaining $11.0 million through available cash on hand. The additional debt was available through the utilization of increased borrowing capacity under the Company’s existing revolving credit facility.
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The following presents the preliminary purchase price allocation and estimated goodwill based on historical book values of the acquired assets and assumed liabilities of Fusepoint as of March 31, 2010. Actual fair values will be based on the final valuation analysis and may differ from those shown below. The changes in the purchase price allocation and estimated goodwill based on the final valuation may include changes in (1) historical carrying values of property, plant and equipment, (2) allocations to intangible assets such as trade names, customer lists and customer contracts, (3) changes to fair values of lease agreements, and (4) other changes to assets and liabilities.
| Current assets |
$ | 13,648 | ||
| Noncurrent assets |
20,048 | |||
| Total assets acquired |
33,696 | |||
| Liabilities assumed |
(9,371 | ) | ||
| Net assets acquired |
24,325 | |||
| Less: acquisition consideration |
(120,969 | ) | ||
| Estimated goodwill |
$ | 96,644 | ||
NOTE 3 – PRO FORMA ADJUSTMENTS
The unaudited pro forma combined condensed consolidated financial statements reflect the following pro forma adjustments:
(a) Adjustments to cash and cash equivalents:
| Cash portion of estimated purchase price |
$ | (10,969 | ) | |
| Deferred financing costs related to incurrence of debt |
(2,557 | ) | ||
| $ | (13,526 | ) | ||
(b) Adjustment to prepaid expenses and other current assets removes $0.2 million in current deferred costs on Fusepoint’s books as of March 31, 2010.
(c) Adjustment to goodwill removes $1.8 million of existing goodwill on Fusepoint’s books as of March 31, 2010, and records $96.6 million estimated goodwill assumed as a result of the acquisition.
(d) Adjustment to other non-current assets records $2.6 million of deferred financing costs incurred in relation to the incurrence of additional debt to finance the acquisition, removes $0.4 million of intangible assets and removes $0.7 million of non-current deferred costs on Fusepoint’s books as of March 31, 2010.
(e) Adjustment to current portion of long-term debt and lease obligations removes $0.8 million representing the current portion of a deferred gain related to the sale-leaseback of property on Fusepoint’s books as of March 31, 2010.
(f) Adjustment to other current accrued liabilities removes $0.8 million of deferred revenue from Fusepoint’s books as of March 31, 2010 and eliminates the $1.1 million deferred rent liability that existed due to straight-line rent expense.
(g) Adjustment to long-term debt of $110.0 million records the additional debt assumed to finance the acquisition.
(h) Adjustment to capital and financing method lease obligations, net removes Fusepoint’s $8.2 million long term portion of a deferred gain related to the sale-leaseback of property on Fusepoint’s books as of March 31, 2010.
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(i) Adjustments to other non-current accrued liabilities:
| Fusepoint deferred revenue as of March 31, 2010 |
$ | (978 | ) | |
| Fusepoint warrant liability as of March 31, 2010 |
(637 | ) | ||
| $ | (1,615 | ) | ||
(j) Adjustments to stockholder’s equity remove Fusepoint’s historical equity balances.
(k) Adjustments to cost of revenue remove the recognition of the deferred gain related to the sale-leaseback of property of $0.2 million for the three months ended March 31, 2010 and $0.8 million for the year ended December 31, 2009.
(l) Adjustments to other (income) and expense record the amortization of deferred financing costs and additional quarterly financing fees of $0.4 million for the three months ended March 31, 2010 and $1.4 million for the year ended December 31, 2009 incurred by Savvis with the assumption of additional debt to finance the acquisition.
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