<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 5, 1999
PRODIGY COMMUNICATIONS CORPORATION
____________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE
__________________________________________________
(State or other jurisdiction of incorporation)
000-25333 04-3323363
__________________________ _________________________________
(Commission File Number) (IRS Employer Identification No.)
44 SOUTH BROADWAY, WHITE PLAINS, NY 10601
______________________________________________________
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code): (914) 448-8000
NA
_______________________________________________________________
(Former name or former address, if changed since last report)
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This Amendment No. 2 to the Current Report on Form 8-K dated October 5,
1999, as amended on December 20, 1999, is filed solely to refile Exhibit 99.2 in
its entirety.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Pro-forma financial information.
See Exhibit 99.2.
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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 thereunto duly authorized.
Date: December 29, 1999 PRODIGY COMMUNICATIONS CORPORATION
By:/s/ Andrea S. Hirsch
------------------------
Andrea S. Hirsch
Executive Vice President and General
Counsel
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EXHIBIT INDEX
Exhibit Number Title
- -------------- -----
2.1* Asset Purchase Agreement, dated as of
September 7, 1999, by and among
Prodigy, USR, VarTec, VarTec Telecom
Holding Company, T. Gary Remy and
Tom D. Johnson
23.1 + Consent of Ernst & Young LLP
99.1 + Audited financial statements Web Hosting
Business of U.S. Republic Communications,
Inc. as of December 31, 1998 and for the
period from January 6, 1998 (inception) to
December 31, 1998 and unaudited financial
statements of Web Hosting Business of U.S.
Republic Communications, Inc. as of
September 30, 1999 and for the nine months
ended September 30, 1999
99.2 Prodigy Communications Corporations
Unaudited Pro Forma Condensed Consolidated
Balance Sheets as of September 30, 1999
Prodigy Communications Corporation
Unaudited Pro Forma Condensed Statement of
Operations for the Nine Months Ended
September 30, 1999
Prodigy Communications Corporation
Unaudited Pro Forma Condensed Statement of
Operations for the Year Ended December 31,
1998
__________________
* Previously filed. Confidential treatment requested as to certain portions.
+ Previously filed.
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Exhibit 99.2
Prodigy Communications Corporation
Unaudited Pro Forma Financial Information
On October 5, 1999, Prodigy Communications Corporation ("Prodigy")
acquired the BizOnThe.Net web hosting business and subscribers (the "Business,"
or "BizOnThe.Net") of U.S. Republic Communications, Inc. ("USR"), an indirect
majority-owned subsidiary of VarTec Telecom, Inc. ("VarTec"). The acquisition
was effected pursuant to an Asset Purchase Agreement, dated as of September 7,
1999, by and among Prodigy, USR, VarTec, VarTec Telecom Holding Company, T. Gary
Remy and Tom D. Johnson (the "Agreement").
At the closing, Prodigy issued to USR 2,113,721 shares of Prodigy
common stock and repaid a $9 million loan from VarTec to USR. Prodigy also
issued an additional 727,272 shares into an escrow account. Some or all of these
escrowed shares will be released to USR at various times over the two-year
period following the closing. The escrow account secures the indemnification
obligations of USR and USR's shareholders as well as certain post-closing
adjustments, as more fully described in the Agreement. In addition to the
shares and amounts paid at closing, in 2001 Prodigy will be required to issue up
to 727,272 shares, contingent upon the attainment by the acquired business of
specified earn-out targets.
The unaudited Pro Forma Condensed Consolidated Statement of Operations
(the "Pro Forma Statement of Operations") for the year ended December 31, 1998
and the nine months ended September 30, 1999 gives effect to the acquisition of
the Business as if it had occurred January 1, 1998 and 1999, respectively. The
Pro Forma Statement of Operations is based on historical results of operations
of Prodigy for the year ended December 31, 1998 and the nine months ended
September 30, 1999 and the historical results of the Business for the period
from January 6, 1998 (inception) to December 31, 1998 and the nine months ended
September 30, 1999. The unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1999 (the "Pro Forma Balance Sheet") gives effect to the
acquisition of the Business as if the acquisition had occurred on that date. The
Pro Forma Balance Sheet is based on the historical balance sheet of Prodigy as
of September 30, 1999 and the historical balance sheet of the Business as of
September 30, 1999. The Pro Forma Statement of Operations and Pro Forma Balance
Sheet and the accompanying notes (collective the "Pro Forma Financial
Information") should be read in conjunction with the historical financial
statements of the Prodigy and notes thereto.
The Pro Forma Financial Information is intended for informational
purposes only and is not necessarily indicative of the future financial position
or future results of operations of the consolidated company after the
acquisition of the Business, or of the financial position or results of
operations of the consolidated company that would have actually occurred had the
acquisition of the Business been effected as of the dates described above.
Moreover, the results for the nine months ended September 30, 1999 are not
necessarily indicative of the results for the fill year.
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Prodigy Communications Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheets
As of September 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
Prodigy and
Prodigy BizOnThe.Net Adjustments BizOnThe.Net
------------------------------------------------------ ---------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $10,380 ($9,000) 1(a) $1,380
Accounts Receivable, Net 3,997 $1,622 5,619
Due from affiliate 1,201 1,201
Restricted cash 52,500 52,500
Prepaid expense 3,079 24 3,103
Other current assets 181 181
----------------------------------------------------- ---------------------
Total current assets 71,338 1,646 (9,000) 63,984
----------------------------------------------------- ---------------------
Restricted cash 4,624 4,624
Property and equipment, net 16,550 1,630 700 1(c) 18,880
Goodwill and Other Intangibles 178,365 36,988 1(b) 220,853
5,500 1(d)
Other assets 4,386 4,386
------------------------------------------------------------------------------------
Total assets $275,263 $3,276 $34,188 $312,727
====================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $36,000 $9,000 (9,000)1(a) $36,000
Accounts payable and accrued expenses 73,520 1,984 834 1(b) 74,354
(1,984)1(b)
Accrued compensation 3,805 46 (46)1(b) 3,805
Unearned revenue 15,437 591 16,028
Accrued purchase and restructuring costs 3,851 3,851
----------------------------------------------------- ---------------------
Total current liabilities $132,613 $11,621 (10,196) $134,038
----------------------------------------------------- ---------------------
Stockholders' equity/Net Liabilities (8,345) 8,345 1(e)
Common stock $612 $21 1(f) $633
Additional paid-in capital - common stock 486,882 36,018 1(f) 522,900
Accumulated deficit (343,511) $0 (343,511)
----------------------------------------------------- ---------------------
143,983 (8,345) 44,384 180,022
Less note receivable from stockholder (1,333) (1,333)
----------------------------------------------------- ---------------------
Total stockholders' equity 142,650 (8,345) 44,384 178,689
----------------------------------------------------- ---------------------
Total liabilities and stockholders' equity $275,263 $3,276 $34,188 $312,727
===================================================== ====================
</TABLE>
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Prodigy Communications Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
(In thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
Pro Forma
Prodigy and
Prodigy BizOnThe.Net Adjustments BizOnThe.Net
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Internet and online service revenues $113,622 $113,622
Web Hosting $18,683 18,683
Other 8,293 8,293
-------------------------------------------- -------------------
121,915 18,683 140,598
Operating costs and expenses:
Costs of revenue 71,694 345 2(a) 72,039
Amortization of subscriber acquisition costs 8,604 8,604
Marketing 36,958 12,418 (345)2(a) 49,031
Product development 9,616 9,616
General and administrative 42,341 6,571 48,912
Depreciation and amortization 12,477 289 10,797 2(b) 23,563
-------------------------------------------- -------------------
181,690 19,278 10,797 211,765
-------------------------------------------- -------------------
Operating income (loss) (59,775) (595) (10,797) (71,167)
Interest (income) / expense, net (4,033) 226 (226) 2(c) (4,033)
Gain on sale of equity investment (3,319) (3,319)
Gain on settlement of note payable (1,714) (1,714)
Gain on asset sale 15 15
---------------------------------------------------------------------
Net loss ($50,724) ($821) ($10,571) ($62,116)
=====================================================================
Basic and diluted loss per share ($0.87) ($1.02)
Weighted average number of common and
common equivalent shares outstanding 58,564,189 2,113,721 (2d) 60,677,910
========== ========= ==========
</TABLE>
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Prodigy Communications Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1998
(In thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
Pro Forma
Prodigy and
Prodigy BizOnThe.Net Adjustments BizOnThe.Net
------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C>
Revenues:
Internet Online Service Revenue $128,908 $128,908
Web Hosting $6,920 6,920
Other 7,232 7,232
------------------------------------------------------------ -------------------------
136,140 6,920 143,060
------------------------------------------------------------ -------------------------
Operating costs and expenses:
Costs of revenue 93,355 126 2(a) 93,481
Marketing 41,678 11,432 (126) 2(a) 52,984
Product development 10,880 10,880
General and administrative 44,640 3,075 47,715
Depreciation and amortization 16,072 116 14,396 2(b) 30,584
------------------------------------------------------------ -------------------------
206,625 14,623 14,396 235,644
------------------------------------------------------------ -------------------------
Operating loss (70,485) (7,703) (14,396) (92,584)
Gain on sale of assets (5,176) (5,176)
Interest (income) expense, net (226) 82 (82) 2(c) (226)
------------------------------------------------------------ -------------------------
Net loss ($65,083) ($7,785) ($14,314) ($87,182)
============================================================ =========================
Basic and diluted loss per share ($1.60) ($2.03)
Weighted average number of common and
common equivalent shares outstanding 40,745,947 2,113,721 2(d) 42,859,668
=========== ======================== ========================
</TABLE>
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
BizOnThe.net
1. (a) Adjustment to record cash payment of $9,000 in connection with the
payment of a note payable to VarTec.
(b) Adjustment to calculate goodwill and to allocate the purchase price over
the estimated fair value of the BizOnThe.Net net assets acquired, including
other intangible assets acquired, as follows:
<TABLE>
<S> <C>
Cash portion of purchase price $ 9,000
Value of stock portion of purchase price 36,039
Transaction costs 834
----------
Purchase price 45,873
Add: fair value of liabilities assumed 591
Less: fair value of assets acquired (9,476)
----------
Goodwill $36,988
==========
</TABLE>
The BizOnThe.Net liabilities which were assumed by Prodigy exclude liabilities
included in the September 30, 1999 financial statements on an allocated basis
as these amounts were paid by VarTec/USR prior to consummation.
(c) Adjustment to record the fair value of BizOnThe.Net's internally
developed software based on independent valuations performed.
(d) Adjustment to record the fair value of identifiable intangible assets
acquired including tradename and customer relationships based on independent
valuations performed.
(e) Adjustment to eliminate BizOnThe.Net net liability.
(f) Adjustment to reflect the issuance of 2,113,721 shares of common stock
issued in connection with the BizOnThe.Net acquisition valued at $17.05 per
share which represents the average market value of a Prodigy share
immediately before and after the terms of the acquisition were announced.
This resulted in $21 of common stock and $36,018 of additional paid-in
capital. This amount excludes the 727,272 shares held in escrow and the
727,272 shares to be issued in 2001 pending resolution of the related
contingencies.
2. (a) Reclassification of certain costs related to costs of revenue to conform
with Prodigy presentation.
(b) Adjustment of amortization and depreciation to reflect the amortization
of goodwill, software and other intangible assets which will be amortized
over a period of three years, the expected period of benefit.
(c) Adjustment to remove interest expense on VarTec note payable to reflect
the repayment of the Note in connection with the acquisition of
BizOnThe.Net.
(d) Adjustment of the weighted average shares of common stock outstanding
used in computing basic and diluted net loss per share to reflect issuance
of 2,113,721 shares of common stock as of January 1, 1999 and January 1,
1998.
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