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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 7, 1998
MINDSPRING ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 0-27890 58-2113290
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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1430 WEST PEACHTREE ST., SUITE 400, ATLANTA, GA 30309
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(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 815-0770
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
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INDEX TO FINANCIAL STATEMENTS
MINDSPRING ENTERPRISES, INC.
Unaudited Pro Forma Financial Data....................................... F-2
Unaudited Pro Forma Balance Sheet as of September 30, 1998............... F-3
Unaudited Pro Forma Statement of Operations for the nine months ended
September 30, 1998 and the twelve months ended December 31, 1997.. F-5
F-1
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UNAUDITED PRO FORMA FINANCIAL DATA
The following pro forma balance sheet reflects the acquisition of Spry,
Inc. ("Spry") as if it had occurred on September 30, 1998. The following pro
forma statements of operations for the year ended December 31, 1997 and the nine
months ended September 30, 1998 reflect the acquisition of Spry as if it had
occurred on January 1, 1997. The statements of operations for Spry included
herein reflect the results of operations for the year ended January 31, 1998
and the nine months ended September 30, 1998. The pro forma financial
information does not purport to represent what the Company's consolidated
results of operations would have been if the acquisition had in fact occurred
on these dates, nor does it purport to indicate the future consolidated
financial position or future consolidated results of operations of the Company.
The pro forma adjustments are based on currently available information and
certain assumptions that management believes are reasonable.
F-2
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UNAUDITED PRO FORMA
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
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<CAPTION>
Total Assets: MindSpring Spry Subtotal Adjustments Pro Forma
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<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 62,498 $ - $ 62,498 $ (25,000) (a) $ 37,498
Accounts receivable, net 2,370 3,241 5,611 (3,241) (a) 2,370
Due to parent - 2,002 2,002 (2,002) (a) -
Other 602 161 763 (161) (a) 602
--------- --------- --------- ----------- ---------
Total current assets 65,470 5,404 70,874 (30,404) 40,470
--------- --------- --------- ----------- ---------
Property and equipment, net 28,375 1,740 30,115 (1,130) (a) 28,985
--------- --------- --------- ----------- ---------
Intangibles, net 5,280 34,883 40,163 (10,493) (a) 29,670
--------- --------- --------- ----------- ---------
Other assets 890 143 1,033 (143) (a) 890
--------- --------- --------- ----------- ---------
Total assets $ 100,015 $ 42,170 $ 142,185 $ (42,170) $ 100,015
========= ========= ========= =========== =========
Liabilities and Stockholders' equity:
Accounts payable $ 2,036 $ 935 $ 2,971 $ (935) (a) $ 2,036
Accrued expenses 8,270 9,254 17,524 (9,254) (a) 8,270
Deferred revenue 4,961 - 4,961 - 4,961
Current portion of debt 593 - 593 - 593
Current portion of capital leases 2,715 - 2,715 - 2,715
--------- --------- --------- ----------- ---------
Total current liabilities 18,575 10,189 28,764 (10,189) 18,575
--------- --------- --------- ----------- ---------
Capital leases--non-current 3,077 - 3,077 - 3,077
--------- --------- --------- ----------- ---------
Total Liabilities 21,652 10,189 31,841 (10,189) 21,652
--------- --------- --------- ----------- ---------
Stockholders' equity:
Preferred stock - - - - -
Common stock 259 - 259 - 259
Additional paid-in-capital 84,967 37,500 122,467 (37,500) (a) 84,967
Accumulated deficit (6,863) (5,519) (12,382) 5,519 (a) (6,863)
--------- --------- --------- ----------- ---------
Total stockholders' equity 78,363 31,981 110,344 (31,981) 78,363
--------- --------- --------- ----------- ---------
Total Liabilities and Stockholders' equity $ 100,015 $ 42,170 $ 142,185 $ (42,170) $ 100,015
========= ========= ========= =========== =========
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(a) Reflects the preliminary purchase price allocation based on $25 million
paid at initial closing. Such estimate will be revised upon final closing
during the first quarter of 1999 when the final subscribers are
determined under the terms of the agreement. Management's best estimate
based on currently available information is that the final purchase price
will be between $35-45 million (such increase will be entirely reflected
as an
F-3
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increase in intangibles). In addition to the customer subscriber base,
the Company is acquiring certain fixed assets of Spry, which have also
been included in this allocation based on management's estimate of their
fair market value of $610 thousand. All other assets and liabilities are
not being acquired. Accordingly, they have been eliminated in the
accompanying pro forma balance sheet.
F-4
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UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
MindSpring Spry Subtotal Adjustments (a) Pro Forma
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<S> <C> <C> <C> <C> <C>
Revenues $ 75,139 $ 34,754 $ 109,893 $ - $ 109,893
--------- --------- --------- --------- ---------
Costs and expenses:
Selling, general and administrative 37,240 16,444 53,684 - 53,684
Cost of revenue 22,167 20,792 42,959 - 42,959
Depreciation and amortization 9,244 3,656 12,900 1,484 (b) 13,982
(402) (c)
--------- --------- --------- --------- ---------
68,651 40,892 109,543 1,082 110,625
--------- --------- --------- --------- ---------
Operating income (loss) 6,488 (6,138) 350 (1,082) (732)
--------- --------- --------- --------- ---------
Interest income (expense), net 590 (70) 520 - 520
--------- --------- --------- --------- ---------
Income before income tax expense 7,078 (6,208) 870 (1,082) (212)
Income tax expense (212) - (212) - (212)
--------- --------- --------- --------- ---------
Net income $ 6,866 $ (6,208) $ 658 $ (1,082) $ (424)
========= ========= ========= ========= =========
Shares:
Primary 24,043 1,644 (d) 25,687
Diluted 25,446 241 (d) 25,687
Earnings per share:
Primary $ 0.29 $ (0.02)
========= =========
Diluted $ 0.27 $ (0.02)
========= =========
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UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
12 MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
MindSpring Spry Subtotal Adjustments (a) Pro Forma
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 52,557 $ 50,190 $ 102,747 $ - $ 102,747
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Selling, general and administrative 30,784 29,279 60,063 - 60,063
Cost of revenue 16,823 29,689 46,512 - 46,512
Depreciation and amortization 8,695 4,191 12,886 6,897 (b) 17,930
(1,853) (c)
---------- ---------- ---------- ---------- ----------
56,302 63,159 119,461 5,044 124,504
---------- ---------- ---------- ---------- ----------
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F-5
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<TABLE>
<S> <C> <C> <C> <C> <C>
---------- ---------- ---------- ---------- ----------
Operating income (loss) (3,745) (12,969) (16,714) (5,044) (21,757)
---------- ---------- ---------- ---------- ----------
Interest income (expense), net (338) (8) (346) 0 (346)
---------- ---------- ---------- ---------- ----------
Net income $ (4,083) $ (12,977) $ (17,060) $ (5,044) $ (22,103)
========== ========== ========== ========== ==========
Shares:
Primary 22,542 3,000 (d) 25,542
Diluted 22,542 3,000 (d) 25,542
Earnings per share:
Primary $ (0.18) $ (0.87)
========== ==========
Diluted $ (0.18) $ (0.87)
========== ==========
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(a) Adjustments have not been made to cost of revenue and selling, general
and administrative costs since the amounts expected to be incurred by
MindSpring are not readily determinable. However, such cost recorded by
Spry include allocations from its Parent Corporations and other
third-party vendors which may not be indicative of the costs that would
have been incurred on a stand alone basis. Accordingly, cost of revenue
and selling, general and administrative costs incurred by MindSpring in
future periods may be materially different from the amounts reflected in
MindSpring's historical statements.
(b) Represents additional amortization based on preliminary purchase price
allocation (as noted in footnote (a) to the pro forma balance sheet)
using a three-year amortization period. Management currently estimates
that the final purchase price will increase between $10-20 million, which
would result in $3.3-6.6 million in additional amortization expense per
annum.
(c) Represents the adjustment to conform the accounting policy of the
acquired company to those of the Company with respect to depreciable
lives.
(d) Reflects the 3 million shares of common stock issued on May 29, 1998 as
if they were outstanding since January 1, 1997. Also, the nine months
ended September 30, 1998 excludes the effect of stock options for
purposes of the diluted calculation since the effect for pro forma
purposes is antidilutive.
F-6
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SIGNATURES
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.
MINDSPRING ENTERPRISES, INC.
/s/ Michael G. Misikoff
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Michael G. Misikoff
Vice President and Chief Financial Officer
Date: December 11, 1998
