SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
August 1, 2004
EASYLINK SERVICES CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-26371 13-3787073
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
33 Knightsbridge Road
Piscataway, NJ 08854
(Address of principal executive offices)
Registrant's telephone number, including area code: (732) 652-3500
N/A
---
Former Name or Former Address, if Changed Since Last Report
ITEM 2. ACQUSITION OR DISPOSITION OF ASSETS
On August 1, 2004, the Company sold its MailWatch service line and certain
assets related thereto (the "MailWatch business") to Infocrossing, Inc. Under
the terms of the sale, Infocrossing paid to the Company a purchase price
consisting of $3.5 million in cash and 123,193 shares of Infocrossing common
stock. The shares of common stock have not been registered for resale under
federal or state securities laws and may be resold only in compliance with
applicable registration requirements or any available exemption. The
consideration paid to EasyLink was determined as a result of negotiations
between Infocrossing and EasyLink. In connection with the sale, the Company and
Infocrossing entered into a Transition Services Agreement under which the
Company will provide Infocrossing certain transition services for a period after
the closing.
The net book value of assets for the MailWatch service line that were included
in the sale amounted to $1.1 million and $0.8 million as of December 31, 2003
and June 30, 2004, respectively.
See the Company's historical consolidated financial statements included in
EasyLink's Annual Report on Form 10-K for the year ended December 31, 2003 and
our quarterly report on Form 10-Q for the period ended June 30, 2004 for
additional information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Not applicable.
(b) Unaudited Pro Forma Financial Information
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 2003 and the six months ended June 30, 2004 gives effect
to the sale of the MailWatch service line as if it had occurred on January 1,
2003. The unaudited pro forma condensed consolidated balance sheet as of June
30, 2004 gives effect to the sale of the business as if it had occurred on June
30, 2004.
The Company believes the accounting used for the pro forma adjustments provides
a reasonable basis on which to present the unaudited pro forma condensed
consolidated financial statements except that only directly attributable costs
are included in the proforma adjustments as costs of the MailWatch service line.
No allocation of other costs, particularly sales and marketing and general and
administrative expenses, has been made in the proforma adjustments. Furthermore,
the proforma adjustments do no include any costs reductions that the Company
could have achieved without the MailWatch service line. The pro forma
adjustments also do not include any returns that we might have earned on the
sale proceeds.
The unaudited pro forma condensed consolidated statement of operations and
unaudited pro forma condensed consolidated balance sheet are unaudited and were
derived by adjusting the historical consolidated financial statements of the
Company, which includes the results of the MailWatch service line. The unaudited
pro forma condensed consolidated financial statements are provided for
informational purposes only and should not be construed to be indicative of the
Company's consolidated financial position or results of operations had the
transaction been consummated on the date assumed and do not project the
Company's consolidated financial position or results of operations for any
future date or period.
The unaudited pro forma consolidated financial statements and accompanying notes
should be read in conjunction with the Company's historical consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003.
2
EasyLink Services Corporation
PROFORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year ended December 31, 2003 Six months ended June 30, 2004
-------------------------------------- --------------------------------------
Proforma Proforma
As reported Adjustments Proforma As reported Adjustments Proforma
----------- ----------- -------- ----------- ----------- --------
Revenues .......................... $ 101,347 $ 4,669 $ 96,678 $ 48,390 $ 2,042 $ 46,348
Cost of revenues .................. 49,553 2,061 47,492 20,090 888 19,202
--------- --------- --------- --------- --------- ---------
Gross profit ...................... 51,794 2,608 49,186 28,300 1,154 27,146
--------- --------- --------- --------- --------- ---------
Sales and marketing ............... 18,379 --- 18,379 9,280 --- 9,280
General and administrative ........ 24,405 184 24,221 12,064 94 11,970
Product development ............... 6,383 395 5,988 3,358 221 3,137
Amortization of goodwill
and other intangible assets ..... 2,066 --- 2,066 1,033 --- 1,033
Restructuring charges ............. 1,478 --- 1,478 --- --- ---
--------- --------- --------- --------- --------- ---------
Total operating expenses .......... 52,711 579 52,132 25,735 315 25,420
--------- --------- --------- --------- --------- ---------
Income (loss) from operations ..... (917) 2,029 (2,946) 2,565 839 1,726
Other income (expense), net:
Gain on debt restructurings and
settlements .................. 54,078 --- 54,078 --- --- ---
Other income (expense), net ....... (1,275) --- (1,275) (217) (217) ---
--------- --------- --------- --------- --------- ---------
Total other income (expense), net . 52,803 --- 52,803 (217) --- (217)
--------- --------- --------- --------- --------- ---------
Income from continuing operations
before income taxes ............. 51,886 2,029 49,857 2,348 839 1,509
Provision for Federal
and state income taxes .......... --- --- --- 200 64 136
--------- --------- --------- --------- --------- ---------
Net income from continuing
operations ...................... $ 51,886 $ 2,029 $ 49,857 $ 2,148 $ 775 $ 1,373
========= ========= ========= ========= ========= =========
Basic net income from continuing
operations per share ............ $ 1.47 $ 0.06 $ 1.41 $ 0.05 $ 0.02 $ 0.03
========= ========= ========= ========= ========= =========
Diluted net income from continuing
operations per share ............ $ 1.46 $ 0.06 $ 1.40 $ 0.05 $ 0.02 $ 0.03
========= ========= ========= ========= ========= =========
Weighted-average basic
shares outstanding .............. 35,402 35,402 35,402 43,963 43,963 43,963
Weighted-average diluted
shares outstanding .............. 35,653 35,653 35,653 44,604 44,604 44,604
See accompanying notes to unaudited condensed consolidated financial statements
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EASYLINK SERVICES CORPORATION
UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
June 30, 2004
--------------------------------------
Proforma
As reported Adjustments Proforma
----------- ----------- --------
ASSETS
Current assets:
Cash and cash equivalents......................................... $5,761 $3,500 $9,261
Accounts receivable, net.......................................... 10,949 10,949
Assets held for sale.............................................. 807 (807) --
Prepaid expenses
and other current assets....................................... 2,243 2,243
------ ------- ------
Total current assets.............................................. 19,760 2,693 22,453
------ ------- ------
Property and equipment, net....................................... 8,482 8,482
Goodwill and
other intangible assets, net..................................... 16,541 16,541
Other assets...................................................... 1,255 1,500 2,755
------- ------ -------
Total assets...................................................... $46,038 $4,193 $50,231
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $7,898 $7,898
Accrued expenses.................................................. 12,690 12,690
Current portion of notes payable.................................. 4,406 4,406
Other current liabilities......................................... 4,448 1,577 6,025
----- ----- ------
Total current liabilities......................................... 29,442 1,577 31,019
------ ----- ------
Notes payable, less current portion............................... 7,780 7,780
Other long term liabilities....................................... 1,736 1,736
------ ------ ------
Total liabilities................................................. 38,958 1,577 40,535
------ ------ ------
Stockholders' equity:
Common stock...................................................... 441 441
Additional paid-in capital........................................ 553,235 553,235
Accumulated other comprehensive loss.............................. (409) (409)
Accumulated deficit............................................... (546,187) 2,616 (543,571)
-------- ----- --------
Total stockholders' equity........................................ 7,080 2,616 9,696
------- ------ -------
Total liabilities and stockholders' equity........................ $46,038 $4,193 $50,231
======= ====== =======
See accompanying notes to unaudited condensed consolidated financial statements
4
EasyLink Services Corporation
Notes to Unaudited Proforma Condensed Consolidated Financial Statements
1. The proforma adjustments in the proforma condensed consolidated statements of
operations for the year ended December 31, 2003 and the six months ended June
30, 2004 include the elimination of revenues for the MailWatch service line
and the elimination of only directly attributable costs of the MailWatch
service line.
The gain on the sale of the MailWatch Service line and the related tax effect
of the transaction are not reflected in the proforma condensed consolidated
statements of operations for any period.
No adjustments are included in the proforma condensed consolidated statements
of operations for any period that would represent income from cost
reimbursements under the Transitions Services Agreement related to the sale
as these amounts are not expected to have a continuing impact on the Company.
2. The proforma adjustments to the unaudited proforma condensed consolidated
balance sheet as of June 30, 2004 include the proceeds from the sale of $3.5
million in cash and restricted stock valued at approximately $1.5 million and
the related tax effect of the sale of approximately $1.6 million.
5
(c) Exhibits
99.1* Asset Purchase Agreement, dated July 31, 2004, by and between EasyLink
Services Corporation, a Delaware corporation, EasyLink Services USA, Inc., a
Delaware corporation, Infocrossing Services, Inc., a Delaware corporation, and
Infocrossing, Inc., a Delaware corporation.
99.2* Transition Services Agreement, dated July 31, 2004, by and between
EasyLink Services Corporation and Infocrossing Services, Inc.
* Disclosure schedules and other attachments are omitted, but will be furnished
supplementally to the Commission upon request.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 16, 2004
EASYLINK SERVICES CORPORATION
By: s/Michael Doyle
--------------------------------
Michael Doyle, Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit No. Description
99.1* Asset Purchase Agreement, dated July 31, 2004, by and between
EasyLink Services Corporation, a Delaware corporation, EasyLink
Services USA, Inc., a Delaware corporation, Infocrossing Services,
Inc., a Delaware corporation, and Infocrossing, Inc., a Delaware
corporation.
99.2* Transition Services Agreement, dated July 31, 2004, by and
between EasyLink Services Corporation and Infocrossing Services,
Inc.
* Disclosure schedules and other attachments are omitted, but will be furnished
supplementally to the Commission upon request.