Attached files
| file | filename |
|---|---|
| 8-K/A - EASYLINK SERVICES INTERNATIONAL CORP | v206749_8ka.htm |
| EX-99.1 - EX-99.1 - EASYLINK SERVICES INTERNATIONAL CORP | v206749_ex99-1.htm |
| EX-99.2 - EX-99.2 - EASYLINK SERVICES INTERNATIONAL CORP | v206749_ex99-2.htm |
| EX-23.1 - EX-23.1 - EASYLINK SERVICES INTERNATIONAL CORP | v206749_ex23-1.htm |
Exhibit
99.3
EasyLink
Services International Corporation
Unaudited
Pro Forma Combining Financial Statements as of and for the year ended July 31,
2010
On
October 21, 2010, EasyLink Services International Corporation (the “Company”) a
Delaware corporation, acquired the iSend and iNotify advanced messaging
businesses (the “Xpedite Business”) from Premiere Global Services, Inc. (“PGI”)
(NYSE: PGI) for $105 million in cash, through the purchase of PGI’s wholly-owned
subsidiaries Xpedite Systems, LLC (“Xpedite”) and Premiere Global Services (UK)
Limited and certain related assets owned by PGI’s subsidiary Premiere
Conferencing (Canada) Limited (“Canada Holdco”). The Company
completed the acquisition by entering into a Securities and Asset Purchase
Agreement (the “Purchase Agreement”), dated as of October 21, 2010, by and among
the Company, PGI, Xpedite, Xpedite Systems Holdings (UK) Limited and Canada
Holdco, and by entering into a Bill of Sale, Assignment and Assumption
Agreement, dated October 21, 2010, by and between the Company and Canada
Holdco.
EasyLink
recapitalized its existing debt and paid for the acquisition with $5 million of
cash on hand and a new credit facility consisting of a $110 million term loan
and a $20 million revolving loan. The Company established the new
credit facility by entering into a Revolving Credit and Term Loan Agreement (the
“Credit Agreement”), dated as of October 21, 2010, by and among the Company, as
borrower, the lenders from time to time party thereto (collectively, the
“Lenders”), and SunTrust Bank, in its capacities as Administrative Agent (in
such capacity, the “Agent”), Swingline Lender, and Issuing Bank, pursuant to
which the Lenders: (i) made a term loan in the original principal amount of
$110,000,000 to the Company (the “Term Loan”), evidenced by Term Notes issued to
each of the Lenders (the “Term Notes”), and (ii) established a revolving credit
facility in an aggregate principal amount of up to $20,000,000 in favor of the
Company, with a $5,000,000 letter of credit sub-facility and a $5,000,000
swingline loan sub-facility (the “Revolving Loan” and, together with the
Term Loan, the “Credit Facility”), evidenced by Revolving Notes issued to each
of the Lenders (the “Revolving Notes”) and a Swingline Note issued to the
Swingline Lender (the “Swingline Note”), all as more fully described in the
Credit Agreement, the Term Notes, the Revolving Notes and the Swingline
Note.
On
October 21, 2010, the Company used the proceeds of the Term Loan and an initial
$12,000,000 advance under the Revolving Loan to (i) fund the acquisition of the
Xpedite Business and other amounts owing pursuant to the Purchase Agreement or
in connection with the acquisition of the Xpedite Business; (ii) pay off
the outstanding obligations of the Company under that certain Revolving Credit
and Term Loan Agreement, dated as of May 19, 2009, as amended, by and among the
Company, the lenders from time to time party thereto and SunTrust Bank, as
administrative agent; and (iii) pay transaction fees and expenses in connection
with the acquisition of the Xpedite Business and the Credit
Agreement. Borrowings under the Revolving Loan may also be used to
finance capital expenditures and for working capital and other general corporate
purposes
The
unaudited pro forma consolidated balance sheet as of July 31, 2010 gives
effect to the acquisition of the Xpedite Business as if it had occurred as of
July 31, 2010. The unaudited pro forma combining statements of operations
for the year ended July 31, 2010 combines the operating results of EasyLink
for the year ended July 31, 2010 and the operating results for Xpedite for the
year ended June 30, 2010, and was prepared under the assumption that the
acquisition of the Xpedite Business had occurred as of August 1, 2009.
Since the Xpedite Business has historically reported financial results using a
calendar year, the Xpedite Business operating results for the year ended July
31, 2010 were obtained by adding the operating results for the six months ended
June 30, 2010 and the period from July 1, 2009 to Decemeber 31,
2009.
The unaudited pro forma financial
information is not necessarily indicative of the results of operations that
would have been reported if the combination had been completed as presented in
the accompanying unaudited pro forma combining balance sheet and statements of
operations. The unaudited pro forma combined financial information presented is
based on, and should be read in conjunction with, the historical financial
statements and the related notes thereto for both EasyLink and the Xpedite
Business.
EasyLink
Services International Corporation
Unaudited
Pro Forma Combining Balance Sheet
As
of July 31, 2010
(in
thousands)
|
Historical
|
||||||||||||||||
|
EasyLink
July
31, 2010
|
Xpedite
June
30, 2010
|
Pro
Forma
Adjustments
|
Combined
|
|||||||||||||
|
ASSETS
|
||||||||||||||||
|
Current
assets:
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 20,475 | $ | 12,637 | $ | (13,073 | ) a | $ | 22,039 | |||||||
|
Accounts
receivable, net
|
11,481 | 19,033 | 30,514 | |||||||||||||
|
Prepaid
expenses and other current assets
|
1,865 | 2,959 | 4,824 | |||||||||||||
|
Deferred
tax asset
|
6,598 | 3,450 | (3,450 | ) b | 6,598 | |||||||||||
|
Total
current assets
|
40,419 | 38,079 | (14,523 | ) | 63,975 | |||||||||||
|
Restricted
cash
|
417 | 97 | 514 | |||||||||||||
|
Property
and equipment, net
|
5,521 | 41,116 | (18,444 | ) c | 28,193 | |||||||||||
|
Goodwill
|
34,455 | 465 | 11,689 | d1,d2 | 44,609 | |||||||||||
|
Other
intangible assets, net
|
15,874 | 271 | 52,129 | e | 68,274 | |||||||||||
|
Deferred
tax asset
|
7,588 | 5,953 | (5,953 | ) b | 7,588 | |||||||||||
|
Other
assets
|
212 | 1,729 | 1,941 | |||||||||||||
|
Total
assets
|
$ | 104,486 | $ | 87,710 | $ | (22,898 | ) | $ | 215,094 | |||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||||||
|
Current
liabilities:
|
||||||||||||||||
|
Accounts
payable
|
$ | 2,310 | $ | 9,542 | $ | — | $ | 11,852 | ||||||||
|
Accrued
expenses
|
8,740 | 3,874 | — | 12,614 | ||||||||||||
|
Current
maturities of long term debt
|
15,258 | 209 | 553 | f1,f2 | 16,020 | |||||||||||
|
Other
current liabilities
|
1,497 | 5,658 | (4,060 | ) g | 3,095 | |||||||||||
|
Total
current liabilities
|
27,805 | 19,283 | (3,507 | ) | 43,581 | |||||||||||
|
Long
term debt - less current portion
|
9,684 | 264 | 94,775 | f3,f4 | 104,723 | |||||||||||
|
Deferred
tax liability
|
— | 6,143 | (6,143 | ) b | — | |||||||||||
|
Other
liabilities
|
285 | 2,937 | (1,743 | ) g | 1,479 | |||||||||||
|
Total
liabilities
|
37,774 | 28,627 | 83,382 | 149,783 | ||||||||||||
|
Commitments
and contingencies
|
||||||||||||||||
|
Stockholders'
Equity:
|
||||||||||||||||
|
Preferred
stock
|
— | — | — | — | ||||||||||||
|
Common
stock:
|
303 | — | — | 303 | ||||||||||||
|
Additional
paid-in capital
|
132,799 | — | — | 132,799 | ||||||||||||
|
Treasury
Stock
|
(2,122 | ) | — | — | (2,122 | ) | ||||||||||
|
Other
Comprehensive Income
|
(5,797 | ) | 2,643 | (2,643 | ) h | (5,797 | ) | |||||||||
|
Accumulated
deficit
|
(58,471 | ) | 56,440 | (57,841 | ) i1,i2 | (59,872 | ) | |||||||||
|
Total
stockholders' equity
|
66,712 | 59,083 | (60,484 | ) | 65,311 | |||||||||||
|
Total
liabilities and stockholders' equity
|
$ | 104,486 | $ | 87,710 | $ | (22,898 | ) | $ | 215,094 | |||||||
EasyLink
Services International Corporation
Unaudited
Pro Forma Combining Statement of Operations
For
the year ended July 31, 2010
(in
thousands, except per share data)
|
EasyLink
|
Xpedite
|
Pro Forma
|
||||||||||||||
|
July 31, 2010
|
June 30, 2010
|
Adjustments
|
Combined
|
|||||||||||||
|
Services
revenue
|
$ | 81,443 | $ | 123,150 | $ | - | $ | 204,593 | ||||||||
|
Expenses:
|
||||||||||||||||
|
Cost
of services
|
22,549 | 48,298 | - | 70,847 | ||||||||||||
|
Product
development and enhancement
|
7,275 | 6,905 | - | 14,180 | ||||||||||||
|
Selling
and marketing
|
12,560 | 25,105 | - | 37,665 | ||||||||||||
|
General
and administrative
|
27,822 | 53,475 | 5,144 | j1, j2 | 86,441 | |||||||||||
|
Asset
Impairment
|
- | 2,441 | - | 2,441 | ||||||||||||
|
Operating
income (loss)
|
11,237 | (13,074 | ) | (5,144 | ) | (6,981 | ) | |||||||||
|
Other
income and (expense), net
|
1,346 | 2,466 | 4,264 | k1, k2 | 8,075 | |||||||||||
|
Income
(loss) before income taxes
|
9,891 | (15,540 | ) | (9,407 | ) | (15,056 | ) | |||||||||
|
Provision
for income taxes
|
(7,202 | ) | - | 6,566 | l | (636 | ) | |||||||||
|
Net
income (loss)
|
17,093 | (15,540 | ) | (15,974 | ) | (14,420 | ) | |||||||||
|
Dividends
on preferred stock
|
(1,336 | ) | - | - | (1,336 | ) | ||||||||||
|
Loss
attributable to common stockholders
|
$ | 15,757 | $ | (15,540 | ) | $ | (15,974 | ) | $ | (15,756 | ) | |||||
|
Basic
income (loss) per common share
|
$ | 0.57 | $ | (0.57 | ) | |||||||||||
|
Diluted
income (loss) per common share
|
$ | 0.53 | $ | (0.57 | ) | |||||||||||
|
Weighted
average number of common share outstanding – basic
|
27,716 | 27,716 | ||||||||||||||
|
Weighted
average number of common share outstanding – diluted
|
29,653 | 27,716 | ||||||||||||||
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
1.
Basis of Presentation
On
October 21, 2010, EasyLink Services International Corporation (the “Company”) a
Delaware corporation, acquired the iSend and iNotify advanced messaging
businesses (the “Xpedite Business”) from Premiere Global Services, Inc. (“PGI”)
(NYSE: PGI) for $105 million in cash, through the purchase of PGI’s wholly-owned
subsidiaries Xpedite Systems, LLC (“Xpedite”) and Premiere Global Services (UK)
Limited and certain related assets owned by PGI’s subsidiary Premiere
Conferencing (Canada) Limited (“Canada Holdco”). The Company
completed the acquisition by entering into a Securities and Asset Purchase
Agreement (the “Purchase Agreement”), dated as of October 21, 2010, by and among
the Company, PGI, Xpedite, Xpedite Systems Holdings (UK) Limited and Canada
Holdco, and by entering into a Bill of Sale, Assignment and Assumption
Agreement, dated October 21, 2010, by and between the Company and Canada
Holdco.
The
unaudited pro forma consolidated balance sheet as of July 31, 2010 gives
effect to the acquisition of the Xpedite Business as if it had occurred as of
July 31, 2010. The unaudited pro forma combining statements of operations
for the year ended July 31, 2010 combines the operating results of EasyLink
for the year ended July 31, 2010 and the operating results for Xpedite for the
year ended June 30, 2010, and was prepared under the assumption that the
acquisition of the Xpedite Business had occurred as of August 1, 2009.
Since the Xpedite Business has historically reported financial results using a
calendar year, the Xpedite Business operating results for the year ended July
31, 2010 were obtained by adding the operating results for the six months ended
June 30, 2010 and the period from July 1, 2009 to Decemeber 31,
2009.
The unaudited pro forma financial
information is not necessarily indicative of the results of operations that
would have been reported if the combination had been completed as presented in
the accompanying unaudited pro forma condensed combining balance sheet and
statements of operations. The unaudited pro forma combined financial information
presented is based on, and should be read in conjunction with, the historical
financial statements and the related notes thereto for both EasyLink and the
Xpedite Business.
The allocation of the initial
purchase price consideration paid at closing to the assets acquired and
liabilities assumed included in the pro forma condensed combining financial
information was based upon estimates of the fair market value of the acquired
assets and assumed liabilities. These estimates of fair market value
may change based upon completion of EasyLink’s final valuation of the assets and
liabilities of the Xpedite Business.
2.
Explanation of pro forma adjustments
Adjustments
to Pro Forma Balance Sheets as of July 31, 2010 and June 30, 2010:
|
(a)
|
This
adjustment reflects the cash paid by the Company representing the purchase
price of the acquisition from cash on hand. The total purchase
price of $107 million includes a $105 million initial purchase price and a
$2 million working capital
adjustment.
|
|
(b)
|
This
adjustment reflects the fair market value adjustment to the identified
assets and liabilities of the Xpedite
Business.
|
|
(c)
|
This
adjustment reflects the fair market value adjustment to the internally
developed software of the Xpedite
Business.
|
|
(d1)
|
This
adjustment reflects the removal of the pre acquisition Xpedite Business
goodwill of
$465,000.
|
|
(d2)
|
This
adjustment reflects the recording of the preliminary goodwill from the
acquisition of
$12,154,000.
|
|
(e1)
|
This
adjustment reflects the removal of the pre acquisition Xpedite Business
identifiable intangible assets of
$271,000.
|
|
(e2)
|
This
adjustment reflects the recording of the preliminary post acquisition
identifiable intangible assets of $52.4 million which is comprised of
$34.8 million for customer relationships, $16.4 million for internally
developed software and $1.2 million for non compete
assets.
|
|
(f1)
|
This
adjustment reflects the removal of the pre-acquisition Company current
debt of
$15,258,000.
|
|
(f2)
|
This
adjustment reflects addition of current portion of the new loan borrowings
of $15,811,000.
|
|
(f3)
|
This
adjustment reflects the removal of the pre-acquisition Company long-term
debt of
$9,209,000.
|
|
(f4)
|
This
adjustment reflects the addition of the long-term portion of the new loan
borrowings of
$103,984,000
|
|
(g)
|
This
adjustment reflects the removal of the pre-acquisition restructuring
reserve for the Xpedite
business.
|
|
(h)
|
This
adjustment reflects the elimination of the Xpedite Business other
comprehensive income prior to the
acquisition.
|
|
(i1)
|
This
adjustment reflects the elimination of the pre-acquisition Xpedite
Business retained earnings amounting to
$56,440,000.
|
|
(i2)
|
This
adjustment reflects the recording of the transaction costs and debt
refinancing of
$1,401,000.
|
Adjustments
to Pro Forma Statement of Operations for the Years ended July 31, 2010 and June
30, 2010:
|
(j1)
|
This
adjustment reflects the elimination of the pre-acquisition amortization
expense for the Xpedite Business of
$82,000.
|
|
(j2)
|
This
adjustment reflect the amortization expense of the newly identifiable
intangible assets acquired in the acquisition as if the acquisition had
occurred on August 1, 2009 of $5,226,000. The amortization expense of the
newly identified intangibles was included as general and administrative
expense in the pro forma financial statements and was calculated using the
straight-line method. The preliminary valuations and estimated useful
lives used in calculating amortization expense are shown below in
thousands:
|
|
Acquired Intangible Assets
|
Estimated
Fair
Value
|
Weighted
Average
Estimated
Useful Life (yrs)
|
Amortization
|
||||||||
|
Customer
Relationships
|
$ | 34,800 |
10-12
|
$ | 3,164 | ||||||
|
Internally
developed software
|
$ | 16,400 |
8-10
|
$ | 1,822 | ||||||
|
Non-competes
|
$ | 1,200 |
5
|
$ | 240 | ||||||
|
(k1)
|
This
adjustment reflects the removal of the pre-acquisition interest expense
for the Company of
$1,642,000.
|
|
(k2)
|
This
adjustment records the expense for the new borrowings of $5,906,000 as if
the acquisition had occurred on August 1,
2009.
|
|
(l)
|
This
adjustment reflects the change in tax expense due to the pro forma
adjustments noted
above.
|