U. S. 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 in the Initial Report):
JUNE 23, 2004
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INFOCROSSING, INC.
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(Exact name of issuer as specified in its charter)
DELAWARE 0-20824 13-3252333
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(State or other jurisdiction of Commission (IRS Employer
incorporation or organization) File Number Identification No.)
2 CHRISTIE HEIGHTS STREET LEONIA, NEW JERSEY 07605
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(Address of principal executive offices)
(201) 840-4700
(Issuer's telephone number)
N/A
(Former name or former address, if changed since last report.)
ITEM 9. REGULATION FD DISCLOSURE
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. These statements include
the projections set forth below and, in some cases, can otherwise be identified
terminology such as "may," "will," "should," "expect," "anticipate," "intend,"
"plan," "believe," "estimate," "potential," or "continue," the negative of these
terms or other comparable terminology. These statements involve a number of
risks and uncertainties including, but not limited to: incomplete or preliminary
information; changes in government regulations and policies; continued
acceptance of the Company's products and services in the marketplace;
competitive factors; new products; technological changes; the Company's
dependence on third party suppliers; intellectual property rights; difficulties
with the integration of acquired businesses; and other risks. For any of these
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, Public Law 104-67, as amended.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report and based on
information currently and reasonably known. The Company undertakes no obligation
to release any revisions to or update these forward-looking statements to
reflect events or circumstances that occur after the date of this report or to
reflect the occurrence or effect of anticipated or unanticipated events.
The Company elects to make public the following forward-looking information:
SUMMARY CONSOLIDATED PROJECTED INCOME STATEMENTS
(IN MILLIONS EXCEPT PER SHARE DATA)
QUARTERS ENDING YEARS ENDING
------------------------------------------------------------- --------------------------------------
MARCH JUNE SEPTEMBER DECEMBER DECEMBER DECEMBER
31, 2004 (A) 30, 2004 30, 2004 31, 2004 31, 2004 31, 2005
------------- ------------- ------------- ------------- -------------- --------------------
Revenues $ 15.2 $ 24.4 $ 26.2 $ 29.6 $ 95.4 $ 132.0 - 135.0
--------- --------- --------- ---------- ---------- -----------------
Net income (b) $ 0.8 $ 1.0 $ 1.9 $ 3.9 $ 7.6 $ 17.9 - 18.6
========= ========= ========= ========== ========== =================
Net income per diluted
common share $ 0.05 $ 0.05 $ 0.09 $ 0.19 $ 0.40 $ 0.86 - 0.89
========= ========= ========= ========== ========== =================
Weighted average
common shares and
equivalents outstanding 17.1 20.8 20.8 20.8 19.2 20.8
========= ========= ========= ========== ========== =================
SUMMARY CONSOLIDATED PROJECTED INCOME STATEMENTS
RECONCILIATION OF NET INCOME TO EBITDA
(IN MILLIONS EXCEPT PER SHARE DATA)
QUARTERS ENDING YEARS ENDING
------------------------------------------------------------- ----------------------------------
MARCH JUNE SEPTEMBER DECEMBER DECEMBER DECEMBER
30, 2004 (A) 30, 2004 30, 2004 31, 2004 31, 2004 31, 2005
-------------- ------------ ----------- ------------ -------------- -----------------
Net income (b) $ 0.8 $ 1.0 $ 1.9 $ 3.9 $ 7.6 $ 17.9 - 18.6
Income tax
provision (benefit) (0.2) 0.1 0.2 0.3 0.4 6.9 - 7.2
Interest expense (b) 0.7 1.1 1.1 1.1 4.0 3.8
Depreciation and
amortization expense 1.6 2.1 2.2 2.3 8.2 8.1
---------- ---------- ---------- ---------- ---------- -------------
Earnings before interest,
taxes, and depreciation
and amortization
(EBITDA) $ 2.9 4.3 5.4 7.6 20.2 36.7 - 37.7
========== ========== ========== ========== ========== =============
(a) Actual results.
(b) Excludes the effect of a proposed financing. See Forecast Assumptions.
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EBITDA represents net income before interest, taxes, depreciation and
amortization. The Company presents EBITDA because it considers such information
an important supplemental measure of its performance and believes it is
frequently used by securities analysts, investors and other interested parties
in the evaluation of companies with comparable market capitalization, many of
which present EBITDA when reporting their results. The Company also uses EBITDA
for the following purposes: (1) EBITDA is one of the factors used to determine
the total amount of bonuses available to be awarded to executive officers and
other employees; (2) the Company's credit agreement uses EBITDA (with additional
adjustments) to measure compliance with covenants such as interest coverage and
debt incurrence; (3) EBITDA is also used by prospective and current lessors as
well as potential lenders to evaluate potential transactions with the Company;
and (4) EBITDA is also used by us to evaluate and price potential acquisition
candidates.
EBITDA has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of the Company's results as reported
under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes
in, or cash requirements for, the Company's working capital needs; (b) EBITDA
does not reflect the significant interest expense, or the cash requirements
necessary to service interest or principal payments, on the Company's debts; and
(c) although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future, and
EBITDA does not reflect any cash requirements for such capital expenditures.
Because of these limitations, EBITDA should not be considered as a principal
indicator of the Company's performance. The Company compensates for these
limitations by relying primarily on the Company's GAAP results and using EBITDA
only supplementally.
FORECAST ASSUMPTIONS
The Company's forecasted operations are consolidated and include the operating
results of ITO Acquisition Corporation, doing business as Strategic Management
Specialists ("SMS"), acquired in April 2004.
The Company is forecasting earnings of $0.40 per diluted share for 2004 and
earnings between $0.86 and $0.89 per diluted share for 2005. Diluted earnings
per share are computed using the anticipated number of shares and equivalents to
be outstanding during 2004 and 2005.
Projected revenues for 2004 consists of revenues from customer contracts
including contracts secured through acquisitions.
Projected operating costs and expenses reflect current expense levels plus
forecasted incremental costs to support the new revenues. Forecasted operating
costs and expenses in 2004 reflect planned synergistic savings from the
integration of SMS. Operating results also reflect depreciation and interest on
projected new capital leases for additional equipment required to support new
clients. Increasing economies of scale are expected to enhance operating margins
in 2004 and 2005.
Taxes are provided for state income taxes in 2004. The Company believes that it
can utilize between $6.5 and $7.0 million of Federal net operating loss
carryforwards ("NOLs") in 2004 and 2005, and it expects to incur no Federal
income tax in 2004. In addition, the Company realized a tax benefit of $0.2
million from the sale of certain state NOLs in the first quarter of 2004. As a
result, the Company is forecasting a combined Federal and state income tax rate
of 5% for 2004. In 2005, it is anticipated that approximately 60% of the
Company's pre-tax income will be in excess of the NOLs it can utilize for the
year and therefore, it will be subject to Federal income tax. Accordingly, the
Company is forecasting a combined Federal and state income tax rate of 28% for
2005.
This forecast was announced today by means of the press release attached as
Exhibit 99.
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The Company's forecast for 2004 and 2005 does not reflect a proposed offering
announced separately, subject to market conditions and other factors, of $60
million of Convertible Senior Notes due in 2024. The Company intends to use
approximately $40 million of the net proceeds from the offering to redeem its
senior secured debt,s which currently bears an interest rate of 9%, and to use
the remaining net proceeds for general corporate purposes, including potential
acquisitions.
As a result of the repayment of the existing indebtedness, the Company will no
longer have principal payment obligations of $0.3 million in 2004, and at least
$3.8 million in 2005.
If the proposed private offering closes, as expected in the second quarter of
2004, the Company will incur a one-time, non-cash charge of approximately $1.3
million, or approximately $.06 per diluted share, in additional expenses related
to the write-off of previously deferred financing costs. This one-time, non-cash
charge is not reflected in the forecast for 2004.
The Pro Forma Summary Consolidated Projected Income Statement below reflects the
impact of the proposed offering:
PRO FORMA SUMMARY CONSOLIDATED PROJECTED INCOME STATEMENTS
(IN MILLIONS EXCEPT PER SHARE DATA)
QUARTERS ENDING YEARS ENDING
----------------------------------------------------------------- ----------------------------------
MARCH JUNE SEPTEMBER DECEMBER DECEMBER DECEMBER
31, 2004 (C) 30, 2004 30, 2004 31, 2004 31, 2004 31, 2005
-------------- -------------- -------------- -------------- -------------- ------------------
Revenues $ 15.2 $ 24.4 $ 26.2 $ 29.6 $ 95.4 $ 132.0 - 135.0
---------- ---------- ---------- ---------- ----------- --------------
Net income (d) $ 0.8 $ (0.2) $ 2.1 $ 4.0 $ 6.7 $ 17.8 - 18.5
========== ========== ========== ========== =========== ==============
Net income per diluted
common share $ 0.05 $ (0.01) $ 0.10 $ 0.19 $ 0.35 $ 0.86 - 0.89
========== ========== ========== ========== =========== ==============
Weighted average
common shares and
equivalents outstanding 17.1 20.8 20.8 20.8 19.2 20.8
========== ========== ========== ========== =========== ==============
(c) Actual results.
(d) Includes the effect of the proposed financing in the amount of $60 million.
These forecasts should be read together with the Company's audited consolidated
financial statements in the Annual Report on Form 10-K for December 31, 2003,
and the unaudited consolidated financial statements in the Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2004, respectively, that can be
obtained from the Securities and Exchange Commission on its Internet website
(www.sec.gov) or the Company's Internet website (www.infocrossing.com).
The projections were not prepared with a view to compliance with published
guidelines of the Securities and Exchange Commission nor the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or forecasts. The projections do not purport to present operations
in accordance with generally accepted accounting principles, and the Company's
independent auditors have not examined, compiled or performed any procedures
with respect to the projections presented herein, nor have they expressed any
opinion or any other form of assurance of such information or its achievability,
and accordingly assume no responsibility for them.
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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.
INFOCROSSING, INC.
Date: June 23, 2004 /s/ WILLIAM J. McHALE
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William J. McHale
Senior Vice President of Finance
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