Attached files
file | filename |
---|---|
8-K/A - 8-K/A - GTT Communications, Inc. | form8-kaxosn.htm |
EX-23.1 - EXHIBIT 23.1 - GTT Communications, Inc. | ex-231consentofuhyllp1.htm |
EX-23.2 - EXHIBIT 23.2 - GTT Communications, Inc. | ex-232consentofmaxwelllock.htm |
EX-99.3 - EXHIBIT 99.3 - GTT Communications, Inc. | exhibit993-unauditedfinanc.htm |
EX-99.1 - EXHIBIT 99.1 - GTT Communications, Inc. | exhibit991-auditedfinancia.htm |
EX-99.2 - EXHIBIT 99.2 - GTT Communications, Inc. | exhibit992-auditedfinancia.htm |
EXHIBIT 99.4
GTT Communications, Inc.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of GTT Communications, Inc. and its wholly owned subsidiaries (hereinafter referred to as "GTT", "we," "our," "us" and similar terms unless the context indicates otherwise) and One Source Networks, Inc. ("One Source") after giving effect to GTT's acquisition of One Source that was completed on October 22, 2015 (the "Acquisition Date"). The unaudited pro forma condensed combined financial information gives effect to our acquisition of One Source based on the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined balance sheet as of September 30, 2015 is presented as if the acquisition of One Source had occurred on September 30, 2015. The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2015 and the year ended December 31, 2014 are presented as if the acquisition had occurred on January 1, 2014. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the condensed combined statements of income, expected to have a continuing impact on the combined results.
The determination and preliminary allocation of the purchase consideration used in the unaudited pro forma condensed combined financial information are based upon preliminary estimates, which are subject to change during the measurement period (up to one year from the Acquisition Date) as we finalize the valuations of the net tangible and intangible assets acquired. The unaudited pro forma adjustments are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been consummated as of the dates indicated or that may be achieved in the future. The actual results reported by the combined company in periods following the acquisition may differ significantly from those reflected in these unaudited pro forma condensed combined financial information for a number of reasons, including cost saving synergies from operating efficiencies and the effect of the incremental costs incurred to integrate the two companies.
The unaudited pro forma condensed combined financial information should be read in conjunction with our historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2014, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, the historical financial statements of One Source for the year ended December 31, 2014, and the historical unaudited financial statements of One Source as of and for the nine months ended September 30, 2015 which are contained in this Form 8-K/A.
1
EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 2015
(Amounts in thousands)
Historical | ||||||||||||||||
GTT | One Source | Pro forma Adjustments | Pro forma Combined | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 19,713 | 3,502 | (3,502 | ) | (a) | 13,860 | ||||||||||
(169,305 | ) | (b) | ||||||||||||||
163,452 | (c) | |||||||||||||||
Accounts receivable, net | 46,779 | 7,989 | (70 | ) | (d) | 54,698 | ||||||||||
Deferred contract costs | 3,688 | — | — | 3,688 | ||||||||||||
Prepaid expenses and other current assets | 4,883 | 2,356 | — | 7,239 | ||||||||||||
Total current assets | 75,063 | 13,847 | (9,425 | ) | 79,485 | |||||||||||
Property and equipment, net | 40,537 | 3,869 | (1,797 | ) | (e) | 42,609 | ||||||||||
Deferred financing costs, net | 4,532 | 1,197 | (1,197 | ) | (f) | 8,646 | ||||||||||
(4,532 | ) | (h) | ||||||||||||||
8,646 | (c) | |||||||||||||||
Intangible assets, net | 90,376 | 831 | 94,173 | (i) | 185,380 | |||||||||||
Other assets | 7,189 | 104 | (104 | ) | (j) | 7,189 | ||||||||||
Goodwill | 176,197 | — | 71,642 | (i) | 247,839 | |||||||||||
38,001 | (l) | 38,001 | ||||||||||||||
Total assets | $ | 393,894 | $ | 19,848 | $ | 195,407 | $ | 609,149 |
The accompanying notes are an integral part this unaudited pro forma condensed combined financial information.
2
EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS (contd.)
AS OF SEPTEMBER 30, 2015
(Amounts in thousands, except for share and per share data)
Historical | ||||||||||||||||
GTT | One Source | Pro forma Adjustments | Pro forma Combined | |||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | 11,763 | 1,992 | (70 | ) | (d) | 13,685 | ||||||||||
Accrued expenses and other current liabilities | 56,115 | 3,363 | — | 59,478 | ||||||||||||
Current term debt | 11,500 | — | (11,500 | ) | (c) | 8,000 | ||||||||||
8,000 | (c) | |||||||||||||||
Current capital lease obligation | 1,656 | — | — | 1,656 | ||||||||||||
Deferred revenue | 14,004 | 794 | 14,798 | |||||||||||||
Tax payable | — | 1,649 | (1,649 | ) | (k) | — | ||||||||||
Total current liabilities | 95,038 | 7,798 | (5,219 | ) | 97,617 | |||||||||||
Long-term debt | 212,750 | 42,370 | (42,370 | ) | (f) | 389,000 | ||||||||||
(212,750 | ) | (c) | ||||||||||||||
389,000 | (c) | |||||||||||||||
Deferred tax liability | — | — | 38,001 | (l) | 38,001 | |||||||||||
Capital leases, less current portion | 1,284 | — | — | 1,284 | ||||||||||||
Deferred revenue and other long-term liabilities | 5,189 | — | — | 5,189 | ||||||||||||
Total liabilities | 314,261 | 50,168 | 166,662 | 531,091 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders' equity: | ||||||||||||||||
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 34,026,212 shares issued and outstanding as of March 31, 2015 | 3 | 200 | (200 | ) | (m) | 3 | ||||||||||
Additional paid-in capital | 179,211 | 4,305 | (4,305 | ) | (m) | 182,820 | ||||||||||
3,609 | (n) | |||||||||||||||
Retained earnings (accumulated deficit) | (97,489 | ) | (34,825 | ) | 34,825 | (m) | (102,673 | ) | ||||||||
(4,532 | ) | (h) | ||||||||||||||
(652 | ) | (o) | ||||||||||||||
Accumulated other comprehensive income (loss) | (2,092 | ) | — | — | (2,092 | ) | ||||||||||
Total stockholders' equity | 79,633 | (30,320 | ) | 28,745 | 78,058 | |||||||||||
Total liabilities and stockholders' equity | $ | 393,894 | $ | 19,848 | $ | 195,407 | $ | 609,149 |
The accompanying notes are an integral part this unaudited pro forma condensed combined financial information.
3
EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(Amounts in thousands, except for share and per share data)
Historical | ||||||||||||||||
GTT | One Source | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | ||||||||||||||||
Telecommunications services sold | $ | 254,425 | $ | 60,646 | (742 | ) | (p) | $ | 313,156 | |||||||
(1,173 | ) | (q) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Cost of telecommunications services provided | 142,521 | 34,306 | (742 | ) | (p) | 175,498 | ||||||||||
(587 | ) | (q) | ||||||||||||||
Selling, general and administrative expense | 69,410 | 15,888 | (1) | (1,042 | ) | (r) | 86,126 | |||||||||
1,870 | (r) | |||||||||||||||
Severance, restructuring and other exit costs | 7,747 | — | — | 7,747 | ||||||||||||
Depreciation and amortization | 32,472 | 1,932 | 9,641 | (i) | 43,279 | |||||||||||
(766 | ) | (e) | ||||||||||||||
Total operating expenses | 252,150 | 52,126 | 8,374 | 312,650 | ||||||||||||
Operating income (loss) | 2,275 | 8,520 | (10,289 | ) | 506 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest expense, net | (7,829 | ) | (4,737 | ) | (6,784 | ) | (c) | (19,059 | ) | |||||||
291 | (g) | |||||||||||||||
Loss on debt extinguishment | (1,056 | ) | — | — | (1,056 | ) | ||||||||||
Other expense, net | (1,798 | ) | (34 | ) | — | (1,832 | ) | |||||||||
Total other expense | (10,683 | ) | (4,771 | ) | (6,493 | ) | (21,947 | ) | ||||||||
Income (loss) before taxes | (8,408 | ) | 3,749 | (16,782 | ) | (21,441 | ) | |||||||||
(Benefit from) provision for income taxes | (124 | ) | 1,495 | (6,713 | ) | (s) | (6,991 | ) | ||||||||
$ | (1,649 | ) | (k) | |||||||||||||
Net income (loss) | $ | (8,284 | ) | $ | 2,254 | $ | (8,420 | ) | $ | (14,450 | ) | |||||
Earnings per share | ||||||||||||||||
Basic | $ | (0.24 | ) | $ | (0.41 | ) | ||||||||||
Diluted | $ | (0.24 | ) | $ | (0.41 | ) | ||||||||||
Weighted average shares: | ||||||||||||||||
Basic | 34,603,144 | 475,001 | (t) | 35,078,145 | ||||||||||||
Diluted | 34,603,144 | 475,001 | (t) | 35,078,145 |
(1) One Source selling, general and administrative expenses include stock-based compensation of $1.04 million and non-recurring expenses of $484 thousand.
The accompanying notes are an integral part this unaudited pro forma condensed combined financial information.
4
EXHIBIT 99.4
GTT COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(Amounts in thousands, except for share and per share data)
Historical | ||||||||||||||||
GTT | One Source | Pro forma Adjustments | Pro forma Combined | |||||||||||||
Revenue: | ||||||||||||||||
Telecommunications services sold | $ | 207,343 | $ | 65,407 | (978 | ) | (p) | $ | 269,949 | |||||||
(1,823 | ) | (q) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Cost of telecommunications services provided | 128,086 | 39,066 | (978 | ) | (p) | 165,615 | ||||||||||
(559 | ) | (q) | ||||||||||||||
Selling, general and administrative expense | 45,613 | 15,082 | (2) | (304 | ) | (r) | 64,131 | |||||||||
3,740 | (r) | |||||||||||||||
Restructuring costs, employee termination and other items | 9,425 | — | — | 9,425 | ||||||||||||
Depreciation and amortization | 24,921 | 1,587 | 12,855 | (i) | 38,342 | |||||||||||
(1,021 | ) | (e) | ||||||||||||||
Total operating expenses | 208,045 | 55,735 | 13,733 | 277,513 | ||||||||||||
Operating (loss) income | (702 | ) | 9,672 | (16,534 | ) | (7,564 | ) | |||||||||
Other income (expense): | ||||||||||||||||
Interest expense, net | (8,454 | ) | (6,166 | ) | (14,349 | ) | (c) | (28,581 | ) | |||||||
388 | (g) | |||||||||||||||
Loss on debt extinguishment | (3,104 | ) | 419 | (4,532 | ) | (h) | (7,217 | ) | ||||||||
Other expense, net | (8,636 | ) | (103 | ) | — | (8,739 | ) | |||||||||
Total other expense | (20,194 | ) | (5,850 | ) | (18,493 | ) | (44,537 | ) | ||||||||
(Loss) income before taxes | (20,896 | ) | 3,822 | (35,027 | ) | (52,101 | ) | |||||||||
(Benefit from) provision for income taxes | 2,083 | 1,733 | (14,011 | ) | (s) | (10,195 | ) | |||||||||
Net (loss) income | $ | (22,979 | ) | $ | 2,089 | $ | (21,016 | ) | $ | (41,906 | ) | |||||
Loss per share | ||||||||||||||||
Basic | $ | (0.85 | ) | $ | (1.52 | ) | ||||||||||
Diluted | $ | (0.85 | ) | $ | (1.52 | ) | ||||||||||
Weighted average shares: | ||||||||||||||||
Basic | 27,011,381 | 475,001 | (t) | 27,486,382 | ||||||||||||
Diluted | 27,011,381 | 475,001 | (t) | 27,486,382 |
(2) One Source selling, general and administrative expenses include stock-based compensation of $304 thousand and non-recurring expenses of $586 thousand.
The accompanying notes are an integral part this unaudited pro forma condensed combined financial information.
5
EXHIBIT 99.4
GTT Communications, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1. Basis of Presentation
The unaudited pro forma condensed combined balance sheet as of September 30, 2015 combines our historical condensed consolidated balance sheet with the historical condensed balance sheet of One Source and has been prepared as if our acquisition of One Source had occurred on September 30, 2015. The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2015 and for the year ended December 31, 2014 combine our historical condensed consolidated statements of income with One Source's historical statements of operations and have been prepared as if the acquisition had occurred on January 1, 2014. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the proposed acquisition, (2) factually supportable, and (3) with respect to the condensed combined statements of income, expected to have a continuing impact on the combined results.
We have accounted for the acquisition in this unaudited pro forma condensed combined financial information using the acquisition method of accounting. We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the Acquisition Date. Goodwill as of the Acquisition Date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.
The pro forma adjustments described below were developed based on GTT management’s assumptions and estimates,
including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed
from One Source based on preliminary estimates of fair value. The final purchase consideration and the allocation of the purchase consideration will differ from that reflected in the unaudited pro forma condensed combined financial information after final valuation procedures are performed and amounts are finalized following the completion of the acquisition.
The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not
purport to represent what the actual consolidated results of operations or the consolidated financial position of the combined
company would have been had the acquisition occurred on the dates assumed, nor are they necessarily indicative of future
consolidated results of operations or financial position.
The unaudited pro forma condensed combined financial information does not reflect any integration activities or cost savings
from operating efficiencies, synergies, asset dispositions or other restructurings that could result from the acquisition. In addition, the unaudited pro forma combined financial statements do not reflect non-recurring exit costs, transaction and integration expenses, which we expect to be approximately $7 to $9 million in aggregate, and which will be recognized in the quarters ending December 31, 2015 and March 31, 2016.
Note 2. Preliminary Purchase Consideration and Related Purchase Price Allocation
Pursuant to the terms of the merger agreement, the purchase price was $175 million plus approximately $5 million of closing date adjustments related to estimated working capital. The purchase price is subject to a final post-closing reconciliation for closing date cash, working capital, transaction expenses, indebtedness and certain tax payments. In connection with the transactions contemplated by the merger agreement, certain equityholders of One Source reinvested an aggregate of $10,697,000 of their proceeds in the transaction to purchase 475,001 shares of newly issued Company common stock. This resulted in net cash of $169.3 million being paid at closing to the selling shareholders of One Source.
For purposes of calculating the purchase consideration in accordance with the acquisition accounting method, the 475,001 newly issued common stock is valued at the closing price on the Acquisition Date of $19.41. Further, a portion of the common stock issued include a continuous employment requirement of 18 months. This common stock is deemed to represent compensation and excluded from the purchase consideration. The stock compensation expense associated with this compensatory stock is reflected as an adjustment to the unaudited pro forma condensed combined statements of operations, see Note 3(q).
The following table summarizes the components of the purchase consideration transferred based on the closing price of $19.41 per share of our common stock on the Acquisition Date (in thousands):
6
EXHIBIT 99.4
Cash paid at closing, incl working capital | $ | 169,305 | |
Common stock (475,001 shares $19.41 per share) | 9,220 | ||
178,525 | |||
Less: compensatory common stock | (5,611 | ) | |
Purchase consideration | $ | 172,914 |
The following table summarizes the preliminary allocation of the assets acquired and liabilities assumed based on their fair values on the assumed acquisition date and the related estimated useful lives of the amortizable intangible assets acquired (in thousands, except for estimated useful life):
Preliminary estimated useful life | |||||
Assets acquired: | |||||
Current Assets | |||||
Accounts receivable | 7,989 | ||||
Prepaid and other current assets | 2,356 | ||||
Property, plant and equipment | 2,072 | ||||
Intangible assets - Customer Lists | 78,266 | 7 years | |||
Intangible assets - Intellectual Property | 16,738 | 10 years | |||
Goodwill | 109,643 | ||||
Total assets acquired | 217,064 | ||||
Liabilities assumed: | |||||
Accounts payable and accrued expenses | (5,355 | ) | |||
Billings in advance | (794 | ) | |||
Deferred tax liability | (38,001 | ) | |||
Total liabilities assumed | (44,150 | ) | |||
Net assets acquired | $ | 172,914 |
Goodwill is not expected to be deductible for tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. In the event that goodwill has become impaired, we will record an expense for the amount impaired during the fiscal quarter in which the determination is made.
Upon completion of the fair value assessment, it is anticipated that the final purchase price allocation will differ from the preliminary assessment outlined above. Any changes to the preliminary estimates of the fair value of the assets acquired and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.
Note 3. Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:
a. | To record the distribution of One Source's cash on hand as of September 30, 2015 to the selling share holders immediately prior to closing. |
b. | To record the cash consideration paid to the seller in the transaction (See Note 2). |
c. | To record the effect of the Company entering into a new credit agreement (the "Credit Agreement") in conjunction with the acquisition on the Acquisition Date. The Credit Agreement provided for the extinguishment of the existing Term Loan A for a new Term Loan B facility. |
7
EXHIBIT 99.4
The following table summarizes the movement of cash related to the Credit Agreement (in thousands):
Cash In | |||
Term loan B - current | $ | 3,000 | |
Term Loan B - non-current (1) | 389,000 | ||
Revolver loan - current | 5,000 | ||
Total cash in flow | 397,000 | ||
Cash Out | |||
Term loan A - current | 11,500 | ||
Term loan A - non-current | 212,750 | ||
Partial month interest and fees | 652 | ||
New deferred financing costs on term loan B | 8,646 | ||
Total cash out flow | 233,548 | ||
Net cash in flow | $ | 163,452 |
The table below reflects the additional net interest due as if the term loans payable under the Credit Agreement were outstanding as of the beginning of the period (amounts in thousands):
Year Ended December 31, 2014 | Nine Months Ended September 30, 2015 | ||||||
GTT term loan B under credit agreement | $ | 400,000 | $ | 400,000 | |||
Effective annual interest rate | 6.25 | % | 6.25 | % | |||
Estimated GTT interest on new term debt | 25,000 | 18,750 | |||||
GTT revolving loan under the credit agreement | 5,000 | 5,000 | |||||
Effective annual interest rate | 5.00 | % | 5.00 | % | |||
Estimated GTT interest on revolving loan | 250 | 188 | |||||
GTT term loan A under the original credit agreement | 123,626 | 224,250 | |||||
Effective annual interest rate | 4.77 | % | 4.77 | % | |||
Less: Estimated interest on GTT original term loan | (5,897 | ) | (8,023 | ) | |||
OSN long term notes payable | 37,687 | 42,370 | |||||
Effective annual interest rate | 13.00 | % | 13.00 | % | |||
Less: Estimated interest on OSN long term notes payable | (4,899 | ) | (4,131 | ) | |||
OSN revolving line of credit | 2,500 | — | |||||
Effective annual interest rate | 3.25 | % | 3.25 | % | |||
Less: Estimated interest on OSN revolving line of credit | (81 | ) | — | ||||
OSN convertible debt | 790 | — | |||||
Effective annual interest rate | 3.00 | % | 3.00 | % | |||
Less: Estimated interest on OSN term debt | (24 | ) | — | ||||
Interest Expense Adjustment | $ | 14,349 | $ | 6,784 |
d. | To eliminate intercompany accounts receivable and accounts payable historically recognized between GTT and One Source. |
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EXHIBIT 99.4
e. | To record preliminary fair value of property, plant and equipment acquired in connection with the One Source acquisition (See Note 2) and associated depreciation expenses. Depreciation expense was adjusted to reflect depreciation on the preliminary fair value only. |
f. | To eliminate One Source's outstanding debt that was settled in conjunction with the acquisition. The outstanding debt was in the amount of $42.3 million as of September 30, 2015. The deferred financing costs in connection with the term loans of $1.2 million has also been eliminated. |
g. | To eliminate One Source's amortization of deferred financing costs, per (f) above. |
h. | To eliminate deferred financing costs for Term Loan A, as referenced in (c) above. This has been reflected as an adjustment to retained earnings (accumulated deficit) as of September 30, 2015 and an adjustment to the loss on debt extinguishment on the pro forma income statement for period ended December 31, 2014. |
i. | To record preliminary fair values of the intangible assets acquired in connection with the One Source acquisition and associated amortization expenses (in thousands, except for estimated useful life). |
Preliminary fair value | Preliminary estimated useful life | Nine months amortization based upon preliminary fair values | Annual amortization expense based on preliminary fair values | ||||||||||
Definite-lived intangibles | |||||||||||||
Customer relationships | $ | 78,266 | 7 years | $ | 8,386 | $ | 11,181 | ||||||
Acquired IP | 16,738 | 10 years | 1,255 | 1,674 | |||||||||
Total definite-lived intangibles | 95,004 | 9,641 | 12,855 | ||||||||||
Indefinite-lived intangibles | |||||||||||||
Goodwill | 109,643 | — | — |
j. | To eliminate other non-current assets with a preliminary fair value of $0 in connection with the One Source acquisition. |
k. | To eliminate accrued tax liability of since One Source will have no taxable income in 2015 as a result of the deal costs incurred in connection with the acquisition. |
l. | To record the preliminary non-current deferred tax liability for the non-deductibility of the definite-lived intangibles. The preliminary non-current deferred tax liability is equal to the statutory rate of 40% multiplied by the preliminary fair value of the definite-lived intangibles, per (i) above. |
m. | To eliminate the historical One Source common stock, additional paid in capital and retained earnings (accumulated deficit). |
n. | To record the additional paid in capital associated with the issuance of 185,946 shares, or $3.6 million of additional paid in capital at the Acquisition Date. The remaining 289,055 shares out of 475,001 shares that were issued, are deemed compensation and are recognized as stock based compensation as referenced in (r) below. |
o. | To eliminate the payment of interest expense due upon extinguishment of Term Loan A, as referenced in (c) above. The interest payment has been reflected as an adjustment to retained earnings (accumulated deficit) as of September 30, 2015. |
p.To eliminate intercompany revenue and cost of revenue historically recognized between GTT and One Source.
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EXHIBIT 99.4
q. | To record the deferral of nonrecurring revenue and nonrecurring cost of revenue that have historically been recorded on a cash basis by One Source. Going forward, these amounts will be deferred and recognized ratably over the contractual term. |
r. | To eliminate the stock-based compensation expense recorded for One Source restricted stock that was settled as a result of the acquisition; and to record the stock-based compensation expense of $1.9 million and $3.7 million for the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively, for the GTT common stock that was issued with an 18 month service requirement (See Note 2). |
s.To record pro forma adjustments to reflect benefits from income tax at the statutory rate of 40%:
For the year ended December 31, 2014 | For the nine months ended September 30, 2015 | ||||||
Total pro forma adjustments | (35,027 | ) | (16,782 | ) | |||
Statutory tax rate applicable to pro forma adjustments | 40 | % | 40 | % | |||
Pro forma adjustments to reflect benefits from income taxes | $ | (14,011 | ) | $ | (6,713 | ) |
t. | To reflect on a preliminary pro forma basis the effect of issuing 475,001 common stock shares on weighted average share (both basic and diluted). Actual share counts will differ. |
10
EXHIBIT 99.4
Note 4. Supplemental Quarterly Disclosure
The following table provides selected pro forma information for the trailing four quarters (in thousands):
Unaudited Pro Forma | Three months ended | ||||||||||||||
December 31, 2014 | March 31, 2015 | June 30, 2015 | September 30, 2015 | ||||||||||||
Revenue: | |||||||||||||||
Telecommunications services sold | $ | 17,681 | $ | 19,303 | $ | 20,458 | $ | 20,885 | |||||||
Pro forma adjustments, net | (714 | ) | (736 | ) | (615 | ) | (564 | ) | |||||||
Pro forma revenue | 16,967 | 18,567 | 19,843 | 20,321 | |||||||||||
Operating expenses: | |||||||||||||||
Cost of telecommunications services provided | 10,707 | 11,355 | 11,372 | 11,579 | |||||||||||
Pro forma adjustments, net | (396 | ) | (331 | ) | (475 | ) | (523 | ) | |||||||
Pro forma cost of revenue | 10,311 | 11,024 | 10,897 | 11,056 | |||||||||||
Selling, general and administrative expense | 4,074 | 5,034 | 5,418 | 5,436 | |||||||||||
Pro forma adjustments, net | 859 | 588 | 588 | (347 | ) | ||||||||||
Pro forma SG&A expense | 4,933 | 5,622 | 6,006 | 5,089 | |||||||||||
Depreciation and amortization | 535 | 592 | 661 | 679 | |||||||||||
Pro forma adjustments, net | 2,989 | 2,989 | 2,989 | 2,989 | |||||||||||
Pro forma depreciation and amortization | 3,524 | 3,581 | 3,650 | 3,668 | |||||||||||
Total operating expenses | 15,316 | 16,981 | 17,451 | 17,694 | |||||||||||
Total pro forma adjustments | 3,452 | 3,246 | 3,102 | 2,119 | |||||||||||
Total pro forma operating expenses | 18,768 | 20,227 | 20,553 | 19,813 | |||||||||||
Operating income | 2,365 | 2,322 | 3,007 | 3,191 | |||||||||||
Total pro forma adjustments | $ | (4,166 | ) | $ | (3,982 | ) | $ | (3,717 | ) | $ | (2,683 | ) | |||
Pro forma operating income | $ | (1,801 | ) | $ | (1,660 | ) | $ | (710 | ) | $ | 508 |
Pro forma stock based compensation and non recurring expenses, which are included within pro forma selling, general and administrative expenses above, are summarized in the table below by quarter (in thousands):
Unaudited Pro Forma | Three months ended | ||||||||||||||
December 31, 2014 | March 31, 2015 | June 30, 2015 | September 30, 2015 | ||||||||||||
Stock-based compensation | $ | 935 | $ | 935 | $ | 935 | $ | — | |||||||
Non-recurring expenses | 419 | 166 | 175 | 143 |
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