Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - GTT Communications, Inc. | form8-ka.htm |
| EX-99.3 - EXHIBIT 99.3 - GTT Communications, Inc. | exhibit993.htm |
| EX-99.2 - EXHIBIT 99.2 - GTT Communications, Inc. | exhibit992.htm |
| EX-99.1 - EXHIBIT 99.1 - GTT Communications, Inc. | exhibit991.htm |
EXHIBIT 99.4
GTT Communications, Inc.
Unaudited Pro Forma Condensed Combined Financial Information
Introduction
On April 30, 2013, GTT Communications, Inc. (“GTT” or the “Company”) completed the acquisition of NT Network Services, LLC, SCS by acquiring all of the equity interests. In 2012, Neutral Tandem, Inc. (doing business as Inteliquent) contributed Tinet S.p.A. along with certain other wholly owned subsidiaries to NT Network Services, LLC, SCS to more efficiently deploy capital across the organization (together, “Tinet”). Tinet is one of the largest global Ethernet interconnection networks, a top-five global IP Transit service provider and a leading IPv6 network. With this acquisition, GTT enhances its IP, Ethernet cloud networking, and further expands its service portfolio.
Under the terms of the acquisition agreement, consideration consisted of $49.2 million in cash paid at closing and assumption of $34.8 million of liabilities.
The unaudited pro forma condensed combined balance sheet combines (i) the historical consolidated balance sheets of GTT and Tinet, giving effect to the acquisition as if it had been consummated on March 31, 2013, and (ii) the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2013 and for the year ended December 31, 2012, giving effect to the acquisition as if it had occurred on January 1, 2012.
The historical consolidated financial statements of GTT and Tinet have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results.
The unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results or financial position that would have occurred if the acquisition had been completed at the dates indicated. It may be necessary to further reclassify Tinet’s combined financial statements to conform to those classifications that are determined by the combined company to be most appropriate. While some reclassifications of prior periods have been included in the unaudited pro forma condensed combined financial statements, further reclassifications may be necessary.
The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting with GTT treated as the acquiring entity. Accordingly, consideration paid by GTT to complete the acquisition of Tinet has been allocated to Tinet’s assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition.
The pro forma purchase price allocations are preliminary, subject to further adjustments as additional information becomes available and as additional analyses are performed and have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information presented below. GTT estimated the fair value of Tinet’s assets and liabilities based on discussions with Tinet’s management, due diligence and information presented in financial statements. There can be no assurance that the final determination will not result in material changes. GTT expects to incur significant costs associated with integrating GTT’s and Tinet’s businesses. The unaudited pro forma condensed combined financial statements do not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from any integration activities. In addition, the unaudited pro forma condensed combined financial statements do not reflect one-time fees and expenses of approximately $7.4 million payable by GTT as a result of the acquisition.
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EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF MARCH 31, 2013
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | ||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 4,607 | 5,801 | 46,565 | (c) (h) | 2,014 | |||||||||||
(49,158 | ) | (d) | ||||||||||||||
(5,801 | ) | (e) | ||||||||||||||
Accounts receivable, net | 9,807 | 11,795 | 21,602 | |||||||||||||
Deferred contract costs | 1,279 | — | — | 1,279 | ||||||||||||
Investments | — | 9 | 9 | |||||||||||||
Prepaid expenses and other current assets | 3,875 | 5,542 | — | 9,417 | ||||||||||||
Total current assets | 19,568 | 23,147 | (8,394 | ) | 34,321 | |||||||||||
Property and equipment, net | 6,462 | 10,129 | 5,000 | (f) | 21,591 | |||||||||||
Intangible assets, net | 23,851 | 11 | 25,789 | (g) | 49,651 | |||||||||||
Other assets | 2,633 | 1,038 | 2,360 | (h) | 6,031 | |||||||||||
Goodwill | 50,557 | — | 20,462 | (i) | 71,019 | |||||||||||
Total assets | $ | 103,071 | $ | 34,325 | $ | 45,217 | $ | 182,613 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | 12,844 | 2,989 | — | 15,833 | ||||||||||||
Accrued expenses and other current liabilities | 12,682 | 16,155 | 28,837 | |||||||||||||
Short-term debt | 5,329 | — | 1,235 | (c) | 6,564 | |||||||||||
Deferred revenue | 6,308 | 1,119 | 2,000 | (j) | 9,427 | |||||||||||
Total current liabilities | 37,163 | 20,262 | 3,235 | 60,660 | ||||||||||||
Long-term debt | 37,334 | — | 43,715 | (c) | 81,049 | |||||||||||
Deferred revenue and other long-term liabilities | 6,470 | 770 | 1,505 | (k) | 16,330 | |||||||||||
7,585 | (m) | |||||||||||||||
Total liabilities | 80,967 | 21,032 | 56,040 | 158,039 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders' equity: | ||||||||||||||||
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 18,921,798 shares issued and outstanding as of March 31, 2012 | 2 | 1 | (1 | ) | (l) | 2 | ||||||||||
Additional paid-in capital | 70,817 | — | 2,470 | (c) | 73,287 | |||||||||||
Retained earnings (accumulated deficit) | (47,958 | ) | 11,078 | (11,078 | ) | (l) | (47,958 | ) | ||||||||
Accumulated other comprehensive income (loss) | (757 | ) | 2,214 | (2,214 | ) | (l) | (757 | ) | ||||||||
Total stockholders' equity | 22,104 | 13,293 | (10,823 | ) | 24,574 | |||||||||||
Total liabilities and stockholders' equity | $ | 103,071 | $ | 34,325 | $ | 45,217 | $ | 182,613 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | |||||||||||||||||
Telecommunications services sold | $ | 26,433 | $ | 21,775 | — | $ | 48,208 | ||||||||||
Operating expenses: | |||||||||||||||||
Cost of telecommunications services provided | 17,657 | 14,118 | — | 31,775 | |||||||||||||
Selling, general and administrative expense | 5,364 | 6,000 | — | 11,364 | |||||||||||||
Restructuring costs, employee termination and other items | 242 | — | — | — | |||||||||||||
Depreciation and amortization | 2,395 | 932 | 1,290 | (a) | 4,617 | ||||||||||||
Total operating expenses | 25,658 | 21,050 | 1,290 | 47,998 | |||||||||||||
Operating income (loss) | 775 | 725 | (1,290 | ) | 210 | ||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense, net | (1,306 | ) | (11 | ) | (894 | ) | (b) | (2,212 | ) | ||||||||
Other income (expense), net | (1,799 | ) | 101 | (513 | ) | (k) | (2,211 | ) | |||||||||
Total other income (expense) | (3,105 | ) | 90 | (1,408 | ) | (4,423 | ) | ||||||||||
Income (loss) before taxes | (2,330 | ) | 815 | (2,698 | ) | (4,213 | ) | ||||||||||
Provision for income taxes | 191 | 303 | — | 494 | |||||||||||||
Net income (loss) | $ | (2,521 | ) | $ | 512 | $ | (2,698 | ) | $ | (4,707 | ) | ||||||
Loss per share | |||||||||||||||||
Basic | $ | (0.13 | ) | $ | (0.24 | ) | |||||||||||
Diluted | $ | (0.13 | ) | $ | (0.24 | ) | |||||||||||
Weighted average shares: | |||||||||||||||||
Basic | 19,264,481 | 19,264,481 | |||||||||||||||
Diluted | 19,264,481 | 19,264,481 | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in thousands, except for share and per share data) | GTT | Tinet | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | |||||||||||||||||
Telecommunications services sold | $ | 107,877 | $ | 72,094 | — | $ | 179,971 | ||||||||||
Operating expenses: | |||||||||||||||||
Cost of telecommunications services provided | 76,000 | 40,876 | — | 116,876 | |||||||||||||
Selling, general and administrative expense | 18,957 | 26,349 | — | 45,306 | |||||||||||||
Loss on disposal of fixed assets | — | 869 | — | 869 | |||||||||||||
Impairment of investments | — | 304 | — | 304 | |||||||||||||
Impairment of goodwill, fixed and intangible assets | — | 26,483 | — | 26,483 | |||||||||||||
Restructuring costs, employee termination and other items | 701 | — | — | 701 | |||||||||||||
Depreciation and amortization | 7,296 | 8,805 | 5,160 | (a) | 21,261 | ||||||||||||
Total operating expenses | 102,954 | 103,685 | 5,160 | 211,799 | |||||||||||||
Operating income (loss) | 4,923 | (31,592 | ) | (5,160 | ) | (31,829 | ) | ||||||||||
Other income (expense): | |||||||||||||||||
Interest expense, net | (4,686 | ) | (154 | ) | (3,577 | ) | (b) | (8,417 | ) | ||||||||
Other income (expense), net | (1,054 | ) | (757 | ) | (713 | ) | (k) | (2,524 | ) | ||||||||
Total other income (expense) | (5,740 | ) | (911 | ) | (4,290 | ) | (10,941 | ) | |||||||||
Loss before taxes | (817 | ) | (32,503 | ) | (9,450 | ) | (42,769 | ) | |||||||||
Provision for income taxes | 746 | 2,097 | — | 2,843 | |||||||||||||
Net loss | $ | (1,563 | ) | $ | (34,599 | ) | $ | (9,450 | ) | $ | (45,612 | ) | |||||
Loss per share | |||||||||||||||||
Basic | $ | (0.08 | ) | $ | (2.41 | ) | |||||||||||
Diluted | $ | (0.08 | ) | $ | (2.41 | ) | |||||||||||
Weighted average shares: | |||||||||||||||||
Basic | 18,960,347 | 18,960,347 | |||||||||||||||
Diluted | 18,960,347 | 18,960,347 | |||||||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.
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EXHIBIT 99.4
GTT Communications, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited pro forma condensed combined financial statements present the pro forma condensed combined financial position and results of operations of the combined company based upon the historical financial statements of GTT and Tinet, after giving effect to the acquisition and adjustments described in these footnotes, and are intended to reflect the impact of the acquisition on GTT.
The accompanying unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not give effect to any cost savings, revenue synergies or restructuring costs which may result from the integration of our and Tinet’s operations.
The unaudited pro forma condensed combined balance sheet reflects the acquisition as if it has been consummated on March 31, 2013 and includes pro forma adjustments for our preliminary valuations of certain intangible assets. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2013 and for the year ended December 31, 2012, reflects the acquisition as if it had occurred on January 1, 2012.
The pro forma condensed combined balance sheet has been adjusted to reflect the allocation of the purchase price to identifiable net assets acquired and the excess purchase price to goodwill. The purchase price allocation included within these unaudited pro forma condensed combined financial statements is based upon a purchase price of approximately $83.9 million. The preliminary consideration is as presented in the following table.
Amounts in thousands | ||||
Purchase Price | ||||
Total cash consideration | $ | 49,158 | ||
Fair value of liabilities assumed | 34,814 | |||
Total consideration | $ | 83,972 | ||
Purchase Price Allocation: | ||||
Acquired Assets | ||||
Current assets | $ | 17,839 | ||
Property and equipment | 15,004 | |||
Other assets | 1,282 | |||
Intangible assets | 25,800 | |||
Total fair value of assets acquired | 59,925 | |||
Goodwill | 24,047 | |||
Total consideration | $ | 83,972 | ||
Upon completion of the fair value assessment after the acquisition, we anticipate that the estimated purchase price and its allocation may differ from that outlined above primarily due to changes in assets and liabilities between the date of the preliminary assessment and that of closing.
The current intangible assets acquired were valued based on a preliminary valuation and consist of customer relationships and trade names. Upon completion of the fair value assessment after the acquisition, we anticipate that the ultimate price allocation may differ from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.
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EXHIBIT 99.4
Note 2. Pro Forma Adjustments
a. | Reflect additional amortization expense related to acquired intangibles as of the beginning of the period. | |
b. | GTT borrowed $65.0 million under a senior term loan from Webster Bank and $8.5 million under a second lien credit facility to finance the transaction and cover additional cash needs involved in the transaction. GTT repaid Silicon Valley Bank $27.0 million with the proceeds of the new loan. | |
(Dollars in thousands) | Year Ended December 31, 2012 | Three Months Ended March 31, 2013 | ||||
Additional GTT debt under senior term loan | $ | 65,000 | $ | 65,000 | ||
Effective annual interest rate | 6.5 | % | 6.5 | % | ||
Estimated GTT interest on senior term loan | $ | 4,225 | $ | 1,056 | ||
Additional GTT debt under second lien credit facility | 8,500 | 8,500 | ||||
Effective annual interest rate | 13.5 | % | 13.5 | % | ||
Estimated GTT interest on second lien facility | $ | 1,148 | $ | 287 | ||
SVB debt under senior term loan | 24,045 | 24,045 | ||||
Effective annual interest rate | 6.75 | % | 6.75 | % | ||
Less: Estimated interest on SVB senior term loan | $ | (1,623 | ) | $ | (406 | ) |
SVB debt under line of credit facility | 3,000 | 3,000 | ||||
Effective annual interest rate | 5.75 | % | 5.75 | % | ||
Less: Estimated interest on SVB line of credit facility | $ | (173 | ) | $ | (43 | ) |
Interest Expense Adjustment | $ | 3,577 | $ | 894 | ||
c. | GTT borrowed $65.0 million under a senior term loan from Webster Bank and $8.5 million under a second lien credit facility to finance the transaction and cover additional cash needs involved in the transaction. The $8.5 million credit facility was discounted $1.5 million to account for the warrants which are included as a separate liability in other long term liabilities. GTT repaid Silicon Valley Bank $27.0 million with the proceeds of the new loan. GTT raised $2.5 million from the sale of common stock on April 30, 2013 to fund the acquisition. |
d. | Cash consideration paid to the seller in the transaction (See Note 1). |
e. | The Tinet acquisition agreement included an adjustment based on cash and cash equivalents in Tinet immediately prior to the acquisition. |
f. | GTT acquired $5.0 million of telecommunications equipment from Inteliquent at the close of the acquisition. |
g. | Intangible assets generated by the transaction represent the customer relationships of $25.0 million and trade name of $0.8 million. |
h. | Deferred financing costs of $2.4 million incurred in financing the transaction paid at closing. |
i. | The goodwill adjustment of $20.5 million includes goodwill created from the acquisition (See Note 1) and working capital differences. |
j. | GTT agreed to provide Inteliquent with certain data services at no charge over a three-year period. The Company values these services at $2.0 million. |
k. | Warrants issued in conjunction with second lien credit facility were recognized and measured at fair value of $1.5 million as of March 31, 2013. Other expense of $0.7 million and $0.5 million were recognized in the year ended December 31, 2012 and three months ended March 31, 2013, respectively, due to the mark to market of the warrants issued. |
l. | Eliminate the historical stockholders’ equity accounts of Tinet at March 31, 2013. |
m. | Deferred tax liability resulting from the tax impact of the intangibles assets acquired in the acquisition. |
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