UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Period Ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From _________________ to _________________
Commission File Number 0-23394
XPEDITE SYSTEMS, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 22-2903158
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
446 Highway 35
Eatontown, New Jersey 07724
(Address of principal executive offices) (Zip Code)
(908) 389-3900
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes_X_ No ___
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes _____ No _____
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value, 8,829,648 shares as of November 11, 1996.
<PAGE>
XPEDITE SYSTEMS, INC.
- INDEX -
PAGE NO.
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements (unaudited)
Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995 3
Consolidated Statements of Income
- Three and nine months ended September 30, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity (Deficit)
- Nine months ended September 30, 1996 5
Consolidated Statements of Cash Flows
- Nine months ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Page 2
<PAGE>
PART I
ITEM 1.
Xpedite Systems, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................................... $ 7,211,268 $ 9,076,250
Accounts receivable, net........................................................ 23,359,046 16,567,118
Deferred income taxes.......................................................... 2,406,663 2,406,663
Other current assets............................................................ 4,611,619 2,324,129
-------------- -------------
Total current assets..................................................... 37,588,596 30,374,160
Property, plant and equipment, net................................................... 20,255,549 16,235,393
Customer lists, net.................................................................. 7,383,494 6,935,206
Purchased software, net.............................................................. 3,188,779 3,591,852
Costs in excess of fair value of net assets acquired, net............................ 9,247,972 8,226,593
Investments in affiliates, at cost................................................... 2,074,945 510,390
Loans to affiliate................................................................... 3,367,696 2,525,102
Deferred income taxes................................................................ 1,815,237 1,815,237
Other assets......................................................................... 2,565,192 2,668,838
-------------- -------------
Total.................................................................... $ 87,487,460 $ 72,882,771
============== =============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable................................................................ $ 8,363,490 $ 10,712,562
Accrued expenses................................................................ 9,301,410 7,127,162
Current portion of long-term debt............................................... 7,785,025 10,652,747
Current portion of capital lease obligations.................................... 260,617 307,232
Income taxes payable............................................................ 4,734,913 3,254,114
Other current liabilities....................................................... 813,355 588,115
-------------- -------------
Total current liabilities................................................ 31,258,810 32,641,932
Long-term debt....................................................................... 27,501,363 35,763,421
Long-term portion of capital lease obligations....................................... 421,091 559,257
Deferred income taxes................................................................ 4,782,342 4,786,300
Other liabilities.................................................................... 905,912 247,809
Stockholders' equity (deficit):
Common Stock, $.01 par value, authorized 15,000,000; issued and outstanding
8,831,384 at September 30, 1996, and 7,773,399 shares at
December 31, 1995............................................................ 88,314 77,734
Additional paid-in capital...................................................... 64,587,986 48,921,115
Accumulated deficit............................................................. (41,842,358) (49,898,797)
Less: Treasury stock; 72,000 shares at September 30, 1996, and
December 31, 1995; at cost................................................... (216,000) (216,000)
-------------- -------------
Total stockholders' equity (deficit)..................................... 22,617,942 (1,115,948)
-------------- -------------
Total.................................................................... $ 87,487,460 $ 72,882,771
============== =============
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
Xpedite Systems, Inc.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
1996 1995 1996 1995
---------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Domestic service revenues.............. $ 57,931,365 $ 33,391,876 $ 20,132,396 $ 11,418,370
International service revenues......... 31,384,851 - 11,168,384 -
System sales and other................. 5,451,028 2,592,156 1,870,473 730,481
-------------- -------------- ------------- --------------
Total net revenues................... 94,767,244 35,984,032 33,171,253 12,148,851
Cost of sales:
Operations, line charges and
support engineering................ 41,393,892 12,023,408 14,715,966 4,002,539
Cost of sales of systems............... 2,021,610 987,677 461,992 229,726
-------------- -------------- ------------- --------------
Total cost of sales.................. 43,415,502 13,011,085 15,177,958 4,232,265
-------------- -------------- ------------- --------------
Gross margin................................... 51,351,742 22,972,947 17,993,295 7,916,586
Operating expenses:
Selling and marketing.................. 20,704,174 10,164,937 7,399,286 3,532,595
General and administrative............. 6,172,830 2,430,974 2,158,328 819,201
Research and development............... 3,687,757 2,420,014 1,204,361 823,623
Depreciation and amortization.......... 5,515,645 1,608,151 2,017,341 571,423
-------------- -------------- ------------- --------------
Total operating expenses............. 36,080,406 16,624,076 12,779,316 5,746,842
-------------- -------------- ------------- --------------
Operating income............................... 15,271,336 6,348,871 5,213,979 2,169,744
Interest income ............................... 356,137 603,388 110,706 192,651
Interest expense............................... (2,826,175) - (823,284) -
Other income................................... 146,773 - 16,712 -
-------------- -------------- ------------- --------------
Income before income taxes..................... 12,948,071 6,952,259 4,518,113 2,362,395
Income tax expense............................. 5,276,302 2,294,300 1,815,485 779,600
-------------- -------------- ------------- --------------
Net income..................................... $ 7,671,769 $ 4,657,959 $ 2,702,628 $ 1,582,795
============== ============== ============= ==============
Net income per Common Share ................... $ 0.91 $ 0.68 $ 0.30 $ 0.23
============== ============== ============= ==============
Weighted average shares outstanding............ 8,415,100 6,883,600 8,890,800 6,870,800
============== ============== ============= ==============
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE>
Xpedite Systems, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
(unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------ Paid-in Accumulated --------------
Shares Amount Capital Deficit Shares Amount Total
------ ------ ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 7,773,399 $77,734 $ 48,921,115 $(49,898,797) (72,000) $(216,000) $(1,115,948)
Exercise of stock options........... 74,485 745 171,411 - - - 172,156
Cumulative translation
adjustment....................... - - - 384,670 - - 384,670
Issuance of Common Stock ........... 632,500 6,325 10,305,823 - - - 10,312,148
Conversion of subordinated debt..... 351,000 3,510 5,189,637 - - - 5,193,147
Net income.......................... - - - 7,671,769 - - 7,671,769
----------------------------------- ------------------------ ---------- -------------
BALANCE, SEPTEMBER 30, 1996 8,831,384 $88,314 $ 64,587,986 $(41,842,358) (72,000) $(216,000) $22,617,942
=========== ======= ============ ============= ======= ========= ===========
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
Xpedite Systems, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................ $ 7,671,769 $ 4,657,959
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 6,119,053 1,849,442
Other non-cash losses ........................... 182,001 --
Deferred income taxes ........................... 60,076 --
Change in operating assets and liabilities:
Accounts receivable ............................ (6,768,726) (1,940,444)
Other current assets ........................... (2,177,846) (270,159)
Other assets ................................... (76,960) (535,273)
Accounts payable ............................... (2,834,878) --
Accrued expenses ............................... 2,743,952 (294,219)
Other liabilities .............................. 795,355 (111,381)
Income taxes payable ........................... 1,372,843 89,036
------------ ------------
Net cash provided by operating activities ............. 7,086,639 3,444,961
INVESTING ACTIVITIES:
Acquisition of property, equipment, computer software (7,540,912) (2,779,819)
Acquisition of businesses ........................... (2,914,692) --
Purchase of held-to-maturity securities ............. -- (1,974,639)
Investments in affiliates ........................... (1,630,928) --
Loans to affiliate .................................. (842,594) (1,111,888)
------------ ------------
Net cash used in investing activities ................. (12,929,126) (5,866,346)
FINANCING ACTIVITIES:
Proceeds from loans and notes payable ............... 2,901,187 --
Repayments of loans and notes payable ............... (9,112,248) --
Repayments of capital lease obligations ............. (176,897) (23,806)
Net proceeds from issuance of Common Stock .......... 10,484,304 83,267
------------ ------------
Net cash provided by (used in) financing activities ... 4,096,346 59,461
Effect of exchange rate changes on cash ............... (118,841) 831
------------ ------------
(Decrease) in cash and cash equivalents ............... (1,864,982) (2,361,093)
Cash and cash equivalents at beginning of period ...... 9,076,250 10,320,933
------------ ------------
Cash and cash equivalents at end of period ............ $ 7,211,268 $ 7,959,840
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 6
<PAGE>
Notes to Consolidated Financial Statements
1. General
A. The financial information included herein is unaudited; however, such
information has been prepared in accordance with generally accepted
accounting principles and reflects all adjustments, consisting solely
of normal recurring adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods. Operating results for the three and nine month periods ended
September 30, 1996, are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Xpedite Systems, Inc. 1995 Annual
Report.
B. In September 1996, the Company's Korean subsidiary acquired the fax
service business of PosData Company Ltd. for approximately $2.7
million. PosData had been the Company's nodal partner in Korea.
C. In August 1996, the Company completed an offering of 720,000 shares of
its common stock, at a price of $18.75 per share, less underwriting
discounts and commissions. Of the total shares sold, the Company
issued 550,000 shares and certain stockholders of the Company
("Selling Stockholders") sold 170,000 shares. In September 1996, the
underwriters exercised their over-allotment option, resulting in the
issuance by the Company of an additional 82,500 shares of common
stock, and the sale of an additional 25,500 shares by the Selling
Stockholders.
D. In November 1995, the Company issued subordinated notes to the former
owners of ViTel International Holding Company, Inc. ("ViTel") as part
of the purchase price of the acquisition of ViTel. On June 14, 1996,
the Company issued 351,000 shares of Common Stock to prepay the
outstanding subordinated notes, and accrued interest thereon, of
approximately $5.2 million. The shares of Common Stock were placed in
escrow pending approval by the Company's stockholders of such
prepayment. Approval was obtained at a Special Meeting of Stockholders
held on August 30, 1996.
Page 7
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Nine months ended September 30, 1996, Compared to Nine months ended September
30, 1995, and Three Months Ended September 30, 1996, Compared to
Three Months Ended September 30, 1995
The Company acquired Vitel, Swift Global Communications, Inc. ("Swift"), and
Comwave Communications AG ("Comwave") (collectively "the acquisitions") on
November 20, 1995. As a result of the acquisitions, the Company is classifying
net service revenue as either "international" or "domestic". The Company defines
domestic service revenues as those generated by the Company's U.S. and Canadian
sales forces. All other service revenues are defined by the Company as
international service revenues.
Net revenues increased by 163.4% to $94.8 million and 173.0% to $33.2 million
for the nine and three months ended September 30, 1996, respectively, as
compared to the same periods in 1995. Net service revenues increased by 167.5%
to $89.3 million for the nine months ended September 30, 1996, and 174.1% to
$31.3 million for the three months ended September 30, 1996. For the nine month
period ended September 30, 1996, the acquisitions contributed approximately
$43.3 million in net service revenues; $11.9 million in domestic service revenue
and $31.4 million in international service revenue. For the three month period
ended September 30, 1996, the acquisitions contributed approximately $15.0
million in net service revenues; $3.9 million in domestic service revenue and
$11.1 million in international service revenue. Prior to the acquisitions, the
Company had minimal international service revenues. The remaining increases in
domestic net service revenues resulted primarily from the efforts of the
Company's sales force in penetrating new markets and exploring expanded
applications in existing markets.
Compared to the same periods in 1995, system sales and other net revenues
increased by 110.3% to $5.5 million and 156.1% to $1.9 million for the nine and
three months ended September 30, 1996, respectively. The increases were
primarily the result of an increased volume of sales of system upgrades and
expansion equipment, and related royalty revenue.
The Company's gross margins were 54.2% and 63.8% for the nine months ended
September 30, 1996, and 1995, respectively. For the three months ended September
30, 1996, and 1995, gross margins were 54.2% and 65.2%, respectively. Service
margins decreased to 53.7% for the first nine months of 1996, as compared to
64.0% for the same period in 1995, and decreased to 53.0% for the three months
ended September 30, 1996, as compared to 64.9% for the same period in 1995. The
decline in service margins resulted primarily from the historically lower
margins on international service revenues of the acquired companies. Partially
offsetting the impact of the lower international gross margins were lower
domestic long distance rates resulting from favorable negotiations with the
Company's primary domestic telecommunications service providers, completion of
additional direct interconnections with local exchange carriers, and the
interconnection of the Company's systems with those acquired in November 1995,
in connection with the acquisitions. Domestic service margins were also impacted
by a reduction of approximately 16% in the average price charged to customers to
deliver a Fax Broadcast page, as compared with the first nine months of the
prior year. This reduction was in response to competition in the markets in
which the Company operates. The Company expects both prices and
telecommunications costs to continue to decline in the future. Margin rates on
system sales and other revenues increased to 75.3% for the three months ended
September 30, 1996, compared to 68.6% for the same period in 1995, and increased
to 62.9% for the nine months ended September 30, 1996 as compared to 61.9% for
the same period in 1995, primarily as a result of product mix.
Page 8
<PAGE>
Selling and marketing expenses increased by 103.7% to $20.7 million and by
109.5% to $7.4 million, respectively, for the nine and three months ended
September 30, 1996, as compared to the same periods in 1995. Selling and
marketing expenses decreased as a percentage of net revenues, to 21.8% for the
nine months ended September 30, 1996, from 28.2% for the nine months ended
September 30, 1995. Selling and marketing expenses also decreased as a
percentage of net revenues, to 22.3% for the three months ended September 30,
1996, from 29.1% for the three months ended September 30, 1995. The acquisitions
accounted for $8.1 million of the nine month increase, and $2.9 million of the
three month increase. The remainder of the increases are attributable primarily
to the expansion of the Company's domestic direct sales force, customer care and
sales support functions, in response to the increase in revenues. As of
September 30, 1996, the Company employed 221 direct sales employees both
domestically and internationally, as compared with 117 domestically and none
internationally at September 30, 1995.
General and administrative expenses increased by 153.9% to $6.2 million for the
nine months ended September 30, 1996, as compared to the same period in 1995,
and increased by 163.5% to $2.2 million for the three months ended September 30,
1996, as compared to the same period in 1995. The acquisitions accounted for
$2.9 million of the increase for the nine month period and $0.8 million of the
increase for the three month period, with the remainder primarily resulting from
additional administrative overhead costs relating to the Company's growth.
General and administrative expenses as a percentage of net revenues were 6.5%
for the nine and three months ended September 30, 1996, respectively, as
compared with 6.8% and 6.7% for the nine and three months ended September 30,
1995.
Research and development expenses increased by 52.4% for the nine months ended
September 30, 1996, to $3.7 million, as compared to the same period in 1995. For
the three months ended September 30, 1996, research and development expenses
increased by 46.2% to $1.2 million from the comparable period in 1995. The
acquisitions accounted for $0.9 million of the nine month increase, and $0.2
million of the three month increase. The remaining increases were primarily due
to costs for developing product enhancements and new services and features, and
integration of the Company's systems. Research and development expenses as a
percentage of net revenues decreased to 3.9% for the nine months ended September
30, 1996, from 6.7% for the nine months ended September 30, 1995, and decreased
to 3.6% for the three months ended September 30, 1996, from 6.8% for the three
months ended September 30, 1995.
Depreciation and amortization increased by 242.9% to $5.5 million and by 253.0%
to $2.0 million for the nine and three months ended September 30, 1996,
respectively, as compared to the same periods in the prior year. The increases
in depreciation and amortization are attributable to additional capital
equipment for expansion of the Company's systems to support the growth in
revenue, combined with depreciation and amortization of tangible and intangible
assets related to the acquisitions.
Operating income increased by 140.5% to $15.3 million for the nine months ended
September 30, 1996, as compared with the same period in 1995. For the three
months ended September 30, 1996, operating income increased by 140.3% to $5.2
million, as compared with the three months ended September 30, 1995. The
increases primarily resulted from growth in net service revenues. Operating
income as a percentage of net revenues decreased to 16.1% and 15.7% for the nine
and three months ended September 30, 1996, respectively, as compared with 17.6%
and 17.9% for the nine and three months ended September 30, 1995.
Interest income decreased to $0.3 million for the nine months ended September
30, 1996, and decreased to $0.1 million for the three months ended September 30,
1996, as compared with $0.6
Page 9
<PAGE>
million and $0.2 million for the nine and three months ended September 30, 1995,
respectively. The Company utilized its available cash balances in connection
with the acquisitions. The Company also incurred interest expense of $2.8
million for the nine months ended September 30, 1996, and $0.8 million for the
three months ended September 30, 1996, primarily related to the Company's $40.0
million term loan, which was entered into in November 1995, to finance the
acquisitions.
Income tax expense for the nine months ended September 30, 1996, was $5.3
million or 41% of income before income taxes, and for the three months ended
September 30, 1996, was $1.8 million or 40% of income before income taxes,
compared to 33% for both the nine and three months ended September 30, 1995. The
effective rates for the nine months and three months ended September 30, 1996,
exclusive of amortization of costs in excess of fair value of the net assets
acquired (a non-deductible item), were 39%, and 38%, respectively.
As a result of the factors discussed above, the Company's net income increased
by 64.7% to $7.7 million for the nine months ended September 30, 1996, as
compared with $4.7 million for the comparable period in 1995. Net income for the
three months ended September 30, 1996, increased by 70.8% to $2.7 million as
compared with $1.6 million for the same period in 1995. Net income per common
share increased by 33.8% to $0.91 for the nine months ended September 30, 1996,
from $0.68 for the nine months ended September 30, 1995, and increased by 30.4%
to $0.30 for the three months ended September 30, 1996, from $0.23 for the three
months ended September 30, 1995.
Liquidity and Capital Resources
The Company entered into a credit facility in November 1995, consisting of a
$40.0 million term loan and a $5.0 million revolving loan. As of September 30,
1996, the Company had no outstanding balance on its revolving loan. The term
loan was entered into to finance the acquisitions of ViTel, Swift, and Comwave.
The term loan is payable in quarterly installments of $1.25 million increasing
periodically to $2.25 million with a final payment in November 2001. During the
nine months ended September 30, 1996, the Company made principal payments on the
term loan amounting to $7.8 million. In connection with the acquisitions of
ViTel, subordinated notes in the aggregate principal amount of $5.1 million were
issued to the sellers of ViTel. On June 14, 1996, the Company prepaid the notes,
and related accrued interest, with 351,000 shares of the Company's Common Stock,
which prepayment was approved by the Company's stockholders at a Special Meeting
of Stockholders held on August 30, 1996. The Company has notes payable to banks
and to former owners of ViTel totaling $1.4 million at September 30, 1996,
payable in monthly and quarterly payments through September 1998. In connection
with the acquisition of certain assets from PosData in September 1996, the
Company obtained a $2.2 million loan from the Korean branch of a U.S. bank,
which was collateralized by a cash deposit of the same amount in the domestic
branch.
At September 30, 1996, the Company had $7.2 million in cash and cash
equivalents, and working capital of $6.3 million. Operations generated $7.1
million in cash for the nine months ended September 30, 1996, compared to $3.4
million for the same period in 1995.
Net cash used in investing activities for the nine months ended September 30,
1996, was $12.9 million as compared with $5.9 million for the same period in
1995. The Company's primary capital expenditures are investments in computer
systems and equipment, and telecommunications systems. During the nine months
ended September 30, 1996, the Company made additional loans to Xpedite Systems,
GmbH ("Xpedite Germany") of $0.8 million, and
Page 10
<PAGE>
increased its minority equity investment in Xpedite Systems, SA ("Xpedite
France") by $1.6 million. The Company also used $1.3 million to acquire the
domestic customer base of a foreign company, and approximately $2.7 million to
acquire the fax business of PosData Company Ltd. in Korea.
The Company has "put" and "call" arrangements relating to the outstanding shares
of each of Xpedite Systems, Ltd. ("Xpedite UK"), Xpedite Germany and Xpedite
France, (collectively "the European Affiliates"). The purchase prices payable in
connection with the exercise of such "put" or "call" options is based on, among
other things, the achievement of certain financial results as set forth in the
put and call agreements. The Company has also been granted a "special option" to
purchase approximately 17% of the outstanding shares of Xpedite Germany from a
current shareholder at a cost of approximately $33,000. Due to the uncertainties
as to the ability of each of the European Affiliates to achieve or continue to
achieve such financial results and as to whether the conditions set forth in
such agreements will be met, the Company does not consider the exercise of these
options to be probable during the next twelve months.
However, because (i) Xpedite UK has produced operating results in excess of the
minimum earnings required in order to enable the exercise of the put and call
option in the Xpedite UK agreement, and (ii) Xpedite Germany has recently
produced operating results indicating they may attain the minimum earnings
required in order to enable the exercise of the put and call option in the
Xpedite Germany agreement, and if the profitable financial performance of
Xpedite UK and Xpedite Germany continues, it is reasonably likely that the
Company could exercise or be subject to the exercise of these options in early
1998 with respect to Xpedite UK and Xpedite Germany. Assuming that Xpedite
Germany achieves the minimum amount of earnings of $1.1 million (at current
exchange rates) and utilizing the Company's stock price and earnings at and as
of the twelve months ended September 30, 1996, the purchase price payable in
connection with the exercise of 100% of the put option with respect to Xpedite
Germany would be approximately $9.5 million, after utilization of the "special
option". The actual amount of the purchase price will more than likely differ
from this amount due to the variable factors used to determine the purchase
price.
Assuming that Xpedite UK continues its current earnings trend, and utilizing the
Company's stock price and earnings at and as of the twelve months ended
September 30, 1996, the purchase price payable in connection with the exercise
of 100% of the put option with respect to Xpedite UK would be approximately
$83.5 million. The actual amount of the purchase price will more than likely
differ from this amount due to the variable factors used to determine the
purchase price.
Xpedite France has not met the minimum amount of earnings necessary for the put
or call option to be exercisable, and therefore, due to the uncertainties as to
the ability of Xpedite France to achieve the required financial results in the
future, and the uncertainty of future events, the Company does not consider the
exercise of these options to be probable during the next eighteen months.
However, assuming that Xpedite France achieves the minimum amount of earnings of
$1.2 million (at current exchange rates) and utilizing the Company's stock price
and earnings at and as of the twelve months ended September 30, 1996, the
purchase price payable in connection with the exercise of 100% of the put option
would be approximately $12.8 million. The actual amount of the purchase price
will more than likely differ from this amount due to the variable factors used
to determine the purchase price.
If exercised, the purchase price payable in connection with the "put" and "call"
options is payable in cash or any negotiable security, Common Stock, or a
combination of cash, Common Stock, or any negotiable security, at the Company's
option. In addition to the foregoing, the
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Company may purchase one or more of the European Affiliates pursuant to
negotiations with the stockholders thereof (a "Negotiated Purchase"). The
Company has had preliminary discussions with each of the European Affiliates
about this possibility.
The Company believes that its sources of capital, including internally generated
funds, and cash available pursuant to its Credit Facility will be adequate to
satisfy its debt requirements and anticipated capital needs for the next twelve
months. However, the Company may elect to finance its future capital
requirements through additional equity or debt financing. Further, if the
Company exercises or is subject to the exercise of the options described above,
or purchases one or more of the European Affiliates pursuant to a Negotiated
Purchase, and if the Company elects to finance such exercise or purchase using
cash, then the Company may be required to obtain additional equity or debt
financing. The Company cannot predict whether or not the purchase of all or any
portion of one or more of the European Affiliates will have a dilutive effect on
the Company's earnings, as such effect will be dependent upon purchase price
paid, the manner in which the purchase is financed and other variable factors.
Page 12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
Page 13
<PAGE>
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 thereunto duly authorized.
XPEDITE SYSTEMS, INC.
(Registrant)
DATE: November 13, 1996 /s/ ROY B. ANDERSEN, JR.
-------------------------------
Roy B. Andersen, Jr.
President, Chief Executive
Officer and Director
(Principal Executive Officer)
DATE: November 13, 1996 /s/ ROBERT S. VATERS
-------------------------------
Robert S. Vaters
Executive Vice President, Finance
and Chief Financial Officer
(Principal Accounting and Financial Officer)
Page 14
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