UNITED STATES
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): June 29, 2007
SAVVIS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 0-29375 | 43-1809960 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1 SAVVIS Parkway, Town & Country, Missouri | 63017 | |
(Address of Principal Executive Office) | (Zip Code) |
Registrant’s telephone number, including area code: (314) 628-7000
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On June 29, 2007, SAVVIS Communications Corporation (“SAVVIS”), a wholly-owned subsidiary of SAVVIS, Inc. (“Registrant”), sold assets and assigned a lease for two data centers in Santa Clara, California to Microsoft Corporation (“Microsoft”) pursuant to an Asset Purchase Agreement dated as of June 29, 2007 (the “Purchase Agreement”). Under the terms of the Purchase Agreement, Microsoft paid SAVVIS $190 million in cash for the assets and forgave the repayment of approximately $10 million of advanced revenue paid by Microsoft to SAVVIS. In addition, the service contract between Microsoft and SAVVIS related to the data centers was terminated, and SAVVIS was released from all potential contractual claims and obligations under the service contract.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to such document, a copy of which is filed as Exhibit 2.1 to this report on Form 8-K and is incorporated herein by reference.
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
On June 29, 2007, the Registrant prepaid its Series A Subordinated Notes (the “Notes”) in full for approximately $342.5 million. The Notes were originally issued in February 2004 and accrued interest at a rate of 15% per annum, payable semi-annually through the issuance of additional Notes. Pursuant to the terms of the Notes, the Registrant was entitled to prepay the Notes prior to January 30, 2008 for an amount equal to the outstanding principal amount, all accrued and unpaid interest on the Notes to the date of prepayment and a make-whole premium. Holders of the Notes agreed to a reduction in the make-whole premium of approximately $8.6 million in consideration for the prepayment.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
The information set forth in Item 1.01 of this Form 8-K is hereby incorporated into this Item 2.01 by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(b) | Pro forma financial information. |
SAVVIS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
The following unaudited pro forma condensed consolidated financial statements present the pro forma financial position and results of operations of SAVVIS, Inc. and Subsidiaries (the “Company”) based upon historical financial information after giving effect to the sale of assets, the assignment of a facility lease, and the assumption and forgiveness of certain liabilities related to two of the Company’s data centers to Microsoft Corporation (“Microsoft”), pursuant to the Purchase Agreement.
The unaudited pro forma condensed consolidated financial statements presented herein have been prepared in accordance with Article 11 of Regulation S-X and are based upon the Company’s audited consolidated financial statements for the year ended December 31, 2006, and the unaudited consolidated financial statements as of and for the three months ended March 31, 2007, and certain assumptions, as set forth in the related notes, that the Company believes are reasonable. The unaudited pro forma condensed consolidated balance sheet is presented as if the sale had been completed on March 31, 2007, and the unaudited pro forma condensed consolidated statements of operations are presented as if the sale had been completed on January 1, 2006. The pro forma adjustments presented herein are based on estimates and certain information that is currently available and may change as additional information becomes available. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results of operations or the financial position that would have been achieved had the sale been completed at the beginning of or as of the periods presented, nor are they indicative of the future results of operations or future financial position of the Company.
SAVVIS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2007
(in thousands)
SAVVIS Historical | Disposition and Pro Forma Adjustments | SAVVIS Pro Forma | ||||||||||||
ASSETS | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | 221,574 | $ | 190,000 | (b) | $ | 411,574 | |||||||
Trade accounts receivable, net | 43,033 | (160 | ) | (a) | 44,541 | |||||||||
1,668 | (c) | |||||||||||||
Prepaid expenses and other current assets | 24,296 | (2,415 | ) | (a) | 21,881 | |||||||||
Total Current Assets | 288,903 | 189,093 | 477,996 | |||||||||||
Property and equipment, net | 336,744 | (29,401 | ) | (a) | 307,343 | |||||||||
Other non-current assets | 14,522 | (4,777 | ) | (a) | 9,745 | |||||||||
Total Assets | $ | 640,169 | $ | 154,915 | $ | 795,084 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||
Current Liabilities: | ||||||||||||||
Payables and other trade accruals | $ | 48,516 | $ | (234 | ) | (a) | $ | 48,282 | ||||||
Current portion of capital and financing method lease obligations | 2,313 | — | 2,313 | |||||||||||
Other accrued liabilities | 92,589 | (8,705 | ) | (a) | 94,666 | |||||||||
10,782 | (c) | |||||||||||||
Total Current Liabilities | 143,418 | 1,843 | 145,261 | |||||||||||
Long-term debt | 283,527 | — | 283,527 | |||||||||||
Capital and financing method lease obligations, net of current portion | 143,112 | — | 143,112 | |||||||||||
Other accrued liabilities | 83,669 | (30,542 | ) | (a) | 53,127 | |||||||||
Total Liabilities | 653,726 | (28,699 | ) | 625,027 | ||||||||||
Stockholders' Equity (Deficit): | ||||||||||||||
Common stock | 527 | — | 527 | |||||||||||
Additional paid-in capital | 708,568 | — | 708,568 | |||||||||||
Accumulated deficit | (719,951 | ) | 183,614 | (d) | (536,337 | ) | ||||||||
Accumulated other comprehensive loss | (2,701 | ) | — | (2,701 | ) | |||||||||
Total Stockholders' Equity (Deficit) | (13,557 | ) | 183,614 | 170,057 | ||||||||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 640,169 | $ | 154,915 | $ | 795,084 | ||||||||
SAVVIS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007
(in thousands, except share data)
SAVVIS Historical | Disposition and Pro Forma Adjustments | SAVVIS Pro Forma | ||||||||||||
Revenue | $ | 205,248 | $ | (8,125 | ) | (e) | $ | 197,123 | ||||||
Operating Expenses: | ||||||||||||||
Cost of revenue | 116,675 | (3,604 | ) | (e) | 113,071 | |||||||||
Sales, general, and administrative expenses | 53,171 | (503 | ) | (e) | 52,668 | |||||||||
Depreciation, amortization, and accretion | 21,645 | (1,303 | ) | (e) | 20,342 | |||||||||
Gain on sale of CDN assets | (125,198 | ) | — | (125,198 | ) | |||||||||
Total Operating Expenses | 66,293 | (5,410 | ) | 60,883 | ||||||||||
Income from Operations | 138,955 | (2,715 | ) | 136,240 | ||||||||||
Net interest expense and other | 18,337 | (149 | ) | (e) | 18,188 | |||||||||
Net Income before Income Taxes | 120,618 | (2,566 | ) | 118,052 | ||||||||||
Income taxes | 6,077 | (128 | ) | (e) | 5,949 | |||||||||
Net Income | $ | 114,541 | $ | (2,438 | ) | $ | 112,103 | |||||||
Net Income per Common Share | ||||||||||||||
Basic | $ | 2.20 | $ | 2.15 | ||||||||||
Diluted | $ | 2.13 | $ | 2.09 | ||||||||||
Weighted-Average Common Shares Outstanding | ||||||||||||||
Basic | 52,023,994 | 52,023,994 | ||||||||||||
Diluted | 53,749,503 | 53,749,503 | ||||||||||||
SAVVIS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006
(in thousands, except share data)
SAVVIS Historical | Disposition and Pro Forma Adjustments | SAVVIS Pro Forma | ||||||||||||
Revenue | $ | 763,971 | $ | (32,924 | ) | (e) | $ | 731,047 | ||||||
Operating Expenses: | ||||||||||||||
Cost of revenue | 464,924 | (17,344 | ) | (e) | 447,580 | |||||||||
Sales, general, and administrative expenses | 196,059 | (1,782 | ) | (e) | 194,277 | |||||||||
Depreciation, amortization, and accretion | 77,538 | (4,713 | ) | (e) | 72,825 | |||||||||
Total Operating Expenses | 738,521 | (23,839 | ) | 714,682 | ||||||||||
Income from Operations | 25,450 | (9,085 | ) | 16,365 | ||||||||||
Net interest expense and other | 67,503 | (353 | ) | (e) | 67,150 | |||||||||
Net Loss before Income Taxes | (42,053 | ) | (8,732 | ) | (50,785 | ) | ||||||||
Income taxes | 1,905 | — | 1,905 | |||||||||||
Net Loss | (43,958 | ) | (8,732 | ) | (52,690 | ) | ||||||||
Accreted and deemed dividends on Series A | 262,810 | — | 262,810 | |||||||||||
Net Loss Attributable to Common Stockholders | $ | (306,768 | ) | $ | (8,732 | ) | $ | (315,500 | ) | |||||
Net Loss per Common Share | ||||||||||||||
Basic and Diluted | $ | (9.54 | ) | $ | (9.81 | ) | ||||||||
Weighted-Average Common Shares Outstanding | ||||||||||||||
Basic and Diluted | 32,159,178 | 32,159,178 | ||||||||||||
SAVVIS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. | Pro Forma Adjustments |
(a) | To eliminate historical assets and liabilities associated with the assets sold. |
(b) | To reflect the cash proceeds from the sale of $190.0 million. |
(c) | To account for estimated working capital adjustments and accrued liabilities related to the sale including, among others, transaction costs, taxes, and severance. |
(d) | To reflect the gain, net of estimated income taxes. |
(e) | To eliminate the historical revenues and expenses related to the assets sold. |
(d) | Exhibits. |
Exhibit No. | Description | |
2.1 | Asset Purchase Agreement dated as of June 29, 2007, between SAVVIS Communications Corporation and Microsoft Corporation. |
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.
SAVVIS, INC. | ||||||
Date: July 5, 2007 | By: | /s/ Jeffrey H. Von Deylen | ||||
Name: | Jeffrey H. Von Deylen | |||||
Title: | Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | Description | |
2.1 | Asset Purchase Agreement dated as of June 29, 2007, between SAVVIS Communications Corporation and Microsoft Corporation. |