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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
Amendment No. 2 to
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
July 27, 1999
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Date of Report (Date of Earliest Event Reported)
Exodus Communications, Inc.
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(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-23795 77-0403076
- ------------------------ ------------------------ -----------------------------------
(State of incorporation) (Commission file number) (I.R.S. Employer Identification No)
</TABLE>
2831 Mission College Boulevard Santa Clara, California 95054
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(Address of principal executive offices, including zip code)
(408) 346-2200
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(Registrant's telephone number, including area code)
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ITEM 5: OTHER INFORMATION
On August 11, 1999, Exodus Communications, Inc. ("Exodus") filed a Form 8-K
to report its acquisition of Cohesive Technology Solutions, Inc. ("Cohesive").
Exodus subsequently filed financial information in connection with that
acquisition. The purpose of this amendment to Form 8-K is to provide additional
financial information regarding Cohesive.
The following unaudited pro forma combined condensed financial statements
are presented for illustrative purposes only and are not necessarily indicative
of the combined results of operations for future periods or the results of
operations that actually would have been realized had Exodus and Cohesive been
a combined company during the specified periods. The unaudited pro forma
combined condensed financial statements, including the related notes, are
qualified in their entirety by reference to, and should be read in conjunction
with, the historical consolidated financial statements and related notes
thereto of Exodus, included in its registration statement on Form S-4, filed
on August 19, 1999, as amended, and Cohesive, included elsewhere in the Form
8-K of which this is an amendment.
The following unaudited pro forma combined condensed financial statements
give effect to the merger between Exodus and Cohesive using the purchase method
of accounting. The pro forma combined condensed financial statements are based
on the respective historical audited and unaudited consolidated financial
statements and related notes of Exodus and Cohesive. The pro forma adjustments
are based on management's estimates of the value of the tangible and intangible
assets acquired. In addition, management is continuing to assess its
integration plans, which may result in further costs.
The pro forma combined condensed statements of operations assume the merger
took place as of January 1, 1998 and combine Exodus' audited consolidated
statement of operations for the year ended December 31, 1998 and unaudited
consolidated statement of operations for the six months ended June 30, 1999,
with Cohesive's audited statement of operations for the year ended December 31,
1998 and unaudited statement of operations for the six months ended June 30,
1999, respectively.
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EXODUS COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
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Historical Pro forma
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Exodus Cohesive Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues..................... $ 52,738 $ 41,708 $ $ 94,446
Costs and expenses:
Cost of revenues........... 61,559 28,324 89,883
Marketing and sales........ 28,778 5,672 34,450
General and
administrative............ 15,724 10,219 25,943
Product development........ 3,221 -- 3,221
Amortization of goodwill
and other intangible
assets.................... 141 6,734 (6,734)(a)
14,549 (a) 14,690
Acquisition related
charges................... -- 4,463 4,463
-------- -------- -------- --------
Total costs and
expenses................ 109,423 55,412 7,815 172,650
-------- -------- -------- --------
Operating loss........... (56,685) (13,704) (7,815) (78,204)
Interest income (expense),
net......................... (9,757) 352 (2,510)(b) (11,915)
-------- -------- -------- --------
Loss before taxes........ (66,442) (13,352) (10,325) (90,119)
Income tax benefit........... -- (2,555) (2,555)
-------- -------- -------- --------
Net loss................. (66,442) (10,797) (10,325) (87,564)
Cumulative dividends and
accretion on redeemable
preferred stock............. (2,014) (800) 800 (c) (2,014)
-------- -------- -------- --------
Net loss attributable to
common stockholders..... $(68,456) $(11,597) $ (9,525) $(89,578)
======== ======== ======== ========
Basic and diluted net loss
per share................... $ (1.09) $ (1.41)
======== ========
Shares used to compute basic
and diluted net loss per
share....................... 62,574 800 (d) 63,374
======== ======== ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
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EXODUS COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
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Historical Pro forma
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Exodus Cohesive Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues............................ $ 72,586 $26,089 $ $ 98,675
Costs and expenses:
Cost of revenues.................. 62,706 18,614 81,320
Marketing and sales............... 22,234 3,064 25,298
General and administrative........ 14,458 4,349 18,807
Product development............... 2,836 -- 2,836
Amortization of goodwill and other
intangible assets................ 1,432 4,300 (4,300)(a)
7,274 (a) 8,706
-------- ------- ------- --------
Total costs and expenses........ 103,666 30,327 2,974 136,967
-------- ------- ------- --------
Operating loss...................... (31,080) (4,238) (2,974) (38,292)
Interest expense, net............... (11,985) (495) (1,255)(b) (13,735)
-------- ------- ------- --------
Loss from continuing operations..... (43,065) (4,733) (4,229) (52,027)
Cumulative dividends and accretion
on redeemable preferred stock...... -- (645) 645 (c) --
-------- ------- ------- --------
Loss from continuing operations
attributable to common
stockholders....................... $(43,065) $(5,378) $(3,584) $(52,027)
======== ======= ======= ========
Basic and diluted loss per share
from continuing operations......... $ (0.53) $ (0.63)
======== ========
Shares used to compute basic and
diluted loss per share from
continuing operations.............. 81,693 800 (d) 82,493
======== ======= ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
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EXODUS COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On July 27, 1999, Exodus acquired all of the outstanding capital stock of
Cohesive in exchange for approximately $50 million in cash and 800,398 shares
of Exodus common stock. In addition, Exodus issued options to purchase a total
of 204,356 shares of Exodus common stock in exchange for all issued and
outstanding Cohesive options.
Under purchase accounting, the total purchase price was allocated to
Cohesive's assets and liabilities based on their relative fair values. The
amounts and components of the purchase price along with the allocation of the
purchase price to assets acquired were as follows (in thousands):
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<S> <C>
Cash............................................................... $ 46,500
Common stock....................................................... 52,000
Fair value of Cohesive stock options assumed....................... 9,300
Transaction costs.................................................. 3,700
--------
Total purchase price............................................. $111,500
========
Book value of net tangible assets of Cohesive...................... $ 3,500
Workforce in place................................................. 6,300
Customer lists..................................................... 32,300
Goodwill........................................................... 69,400
--------
Net assets acquired.............................................. $111,500
========
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The pro forma combined condensed statements of operations give effect to the
merger as if it had occurred at the beginning of the period presented.
The following adjustments have been reflected in the unaudited pro forma
combined condensed statements of operations:
(a) Adjustment to remove the amortization of historical goodwill and
other intangible assets previously recorded by Cohesive and to record the
amortization of goodwill and intangible assets resulting from the
allocation of the Cohesive purchase price. The pro forma adjustment assumes
goodwill and other intangible assets will be amortized on a straight-line
basis over the following estimated lives:
<TABLE>
<S> <C>
Workforce in place................................................. 5 years
Customer lists..................................................... 7 years
Goodwill........................................................... 8 years
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(b) To eliminate interest income earned by Exodus on cash paid at the
date of the merger assuming a 5% interest rate which approximates the
Company's actual rate of return during the periods presented.
(c) To remove Cohesive's historical cumulative dividends and accretion
on redeemable preferred stock which are settled in cash at the date of the
merger.
(d) To reflect the shares issued as consideration for the merger based
on the closing price as calculated pursuant to the merger agreement of
Exodus Common Stock of $64.93 per share.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: November 24, 1999
EXODUS COMMUNICATIONS, INC.
By: /s/ Ellen M. Hancock
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Ellen M. Hancock
Chief Executive Officer and President
