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): August 18, 1999
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CMGI, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-22846 04-2921333
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
100 Brickstone Square, Andover, MA 01810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 684-3600
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Not Applicable
(Former name or former address, if changed since last report)
The undersigned Registrant hereby amends paragraphs (b) and (c) of Item 7
of its Current Report on Form 8-K dated August 18, 1999, as amended by Amendment
No. 1 thereto, to read in their entireties as follows. This amendment includes a
change in the assumed amortization period for goodwill and other intangible
assets associated with the acquisition of the AltaVista Business from five years
to three years in the Pro Forma Financial Information below:
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information:
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On August 18, 1999, CMGI, Inc. ("the Company" or "CMGI") acquired an 81.495%
equity stake in the former AltaVista division of Digital Equipment Corporation
("the AltaVista Business") from Compaq Computer Corporation ("Compaq) and its
wholly-owned subsidiary Digital Equipment Corporation ("Digital"), for
consideration preliminarily valued at approximately $2.420 billion, including
approximately $4 million of direct costs of the acquisition. The AltaVista
Business includes the assets and liabilities constituting the AltaVista Internet
search service ("AltaVista Search"), which was a division of Digital, and also
includes former Compaq/Digital wholly-owned subsidiaries Zip2 Corporation and
Shopping.com. In consideration for the acquisition, the Company issued
18,994,975 shares of its common stock valued at approximately $1.816 billion,
18,090.45 shares of its Series D Preferred Stock (which were converted into
1,809,045 shares of CMGI common stock on October 28, 1999) valued at
approximately $173 million and promissory notes for an aggregate principal
amount of $220 million. Additionally, AltaVista Business and CMGI stock options
issued in the transaction, preliminarily valued at approximately $203 million
and $4 million, respectively, have been included in the purchase consideration.
The unaudited Pro Forma Condensed Combined Statement of Operations (the "Pro
Forma Statement of Operations") for the year ended July 31, 1999 gives effect to
the acquisition of the AltaVista Business as if it had occurred on August 1,
1998. The Pro Forma Statement of Operations is based on historical results of
operations of the Company for the year ended July 31, 1999 and the historical
results of the components of the AltaVista Business as follows: the carve-out
historical results of AltaVista Search and the historical results of Zip2
Corporation for the twelve months ended June 30, 1999 and the historical results
of Shopping.com for the twelve months ended July 31, 1999. The unaudited Pro
Forma Condensed Combined Balance Sheet as of July 31, 1999 (the "Pro Forma
Balance Sheet") gives effect to the acquisition of the AltaVista Business as if
the acquisition had occurred on that date. The Pro Forma Balance Sheet is based
on the historical balance sheet of the Company as of July 31, 1999 and the
historical balance sheet of the AltaVista Business as of June 30, 1999. The Pro
Forma Statements of Operations and Pro Forma Balance Sheet and the accompanying
notes (collectively the "Pro Forma Financial Information") should be read in
conjunction with and are qualified by the historical financial statements of the
Company 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 AltaVista Business, or of the financial position or results of operations
of the consolidated company that would have actually occurred had the
acquisition of the AltaVista Business been effected as of the dates described
above.
CMGI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
July 31, 1999
(In thousands)
AltaVista Pro Forma Pro Forma
CMGI, Inc. Business Adjustments As Adjusted
--------------- --------------- --------------- ---------------
Assets
- ------
Cash and cash equivalents $ 468,912 $ 16,753 $ (16,753) (A) $ 468,912
Available-for-sale securities 1,532,327 1,532,327
Other current assets 56,095 32,383 88,478
--------------- --------------- --------------- ---------------
Total current assets 2,057,334 49,136 (16,753) 2,089,717
Goodwill and other intangible assets, net of
accumulated amortization 149,703 733,906 1,790,898 (A) 2,674,507
Other non-current assets 197,557 64,935 262,492
--------------- --------------- --------------- ---------------
Total assets $ 2,404,594 $ 847,977 $ 1,774,145 $ 5,026,716
=============== =============== =============== ===============
Liabilities and Stockholders' Equity
- ------------------------------------
Deferred income taxes $ 508,348 $ -- $ $ 508,348
Other current liabilities 167,981 55,462 4,000 (A) 227,443
--------------- --------------- --------------- ---------------
Current liabilities 676,329 55,462 4,000 735,791
Non-current liabilities 70,007 3,811 220,000 (A) 293,818
Minority interest 184,514 -- 142,849 (A) 327,363
Convertible, redeemable preferred stock 411,283 -- 173,000 (A) 584,283
Stockholders' equity 1,062,461 788,704 1,234,296 (A) 3,085,461
--------------- --------------- --------------- ---------------
Total liabilities and stockholders' equity $ 2,404,594 $ 847,977 $ 1,774,145 $ 5,026,716
=============== =============== =============== ===============
CMGI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Twelve Months Ended July 31, 1999
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AltaVista Pro Forma Pro Forma
CMGI, Inc. Business Adjustments As Adjusted
--------------- --------------- --------------- ---------------
Net revenues $ 175,666 $ 97,838 $ $ 273,504
Operating expenses:
Cost of revenues 168,909 64,155 233,064
Research and development 22,478 27,105 49,583
In-process research and development 6,061 -- 6,061
Selling 45,667 79,210 124,877
General and administrative 59,210 203,748 679,559 (B), (C) 942,517
--------------- --------------- --------------- ---------------
Total operating expenses 302,325 374,218 679,559 1,356,102
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Operating loss (126,659) (276,380) (679,559) (1,082,598)
Other income (expense):
Interest income (expense), net 269 (7,555) (23,100) (D) (30,386)
Equity in losses of affiliates (15,737) -- (15,737)
Minority interest 2,331 -- 75,870 (E) 78,201
Non-operating gains, net 889,041 -- 889,041
--------------- --------------- --------------- ---------------
875,904 (7,555) 52,770 921,119
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Income (loss) from continuing operations
before income taxes 749,245 (283,935) (626,789) (161,479)
Income tax expense (benefit) 325,402 -- (292,309) (F) 33,093
--------------- --------------- --------------- ---------------
Income (loss) from continuing operations 423,843 (283,935) (334,480) (194,572)
Preferred stock accretion (1,662) -- (1,662)
--------------- --------------- --------------- ---------------
Income (loss) from continuing operations
available to common stockholders $ 422,181 $ (283,935) $ (334,480) $ (196,234)
=============== =============== =============== ===============
Basic earnings (loss) from continuing
operations per share $ 4.53 $ (1.73) (G)
=============== ===============
Diluted earnings (loss) from continuing
operations per share $ 4.10 $ (1.73) (G)
=============== ===============
Shares used in computing earnings (loss)
from continuing operations per share:
Basic 93,266 113,718 (G)
=============== ===============
Diluted 103,416 113,718 (G)
=============== ===============
CMGI, INC.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(1) Pro Forma Adjustments and Assumptions
(A) The Company acquired an 81.495% equity stake in the AltaVista Business
for consideration preliminarily valued at approximately $2.420 billion
on August 18, 1999, including costs of acquisition (see description of
the components of the consideration above). The following represents
the allocation of the purchase price over 81.495% of the historical
net book values of the acquired assets and liabilities of the
AltaVista Business as of the date of the Pro Forma Balance Sheet, and
is for illustrative purposes only. The actual purchase price
allocation will be based on fair values of the acquired assets and
liabilities as of the actual acquisition date (August 18, 1999).
Assuming the transaction occurred on July 31, 1999, the allocation
would have been as follows (in thousands):
Working capital deficit $ (18,808)
Property, plant and equipment 34,301
Other non-current assets 18,618
Other non-current liabilities (3,106)
Goodwill and other intangible assets 2,388,995
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Purchase price $2,420,000
==========
The pro forma adjustment reconciles the historical balance sheet of
the AltaVista Business to the allocated purchase price above and
includes the accrual of approximately $4.0 million of estimated
acquisition costs to be paid by CMGI. The cash and cash equivalents of
the AltaVista Business as of August 18, 1999 were retained by Compaq
at the date of acquisition and, accordingly, the pro forma adjustment
and the allocation of the purchase price as of July 31, 1999 include
the effect of this event.
(B) The pro forma adjustment includes $796.3 million in amortization of
goodwill and other intangible assets (per the allocation in "(A)"
above) that would have been recorded during the period covered by the
Pro Forma Statement of Operations. The adjustment amount has been
reduced by $132.8 million, which represents 81.495% of the
amortization of goodwill and other intangible assets recorded in the
historical financial statements of the AltaVista Business. The
historical financial statements of the AltaVista Business represented
in the Pro Forma Statement of Operations include amortization of
goodwill and other intangible assets totaling $163.0 million. These
amounts relate to Compaq's acquisition of Digital in June 1998 and
Compaq/Digital's acquisitions of Shopping.com and Zip2 Corporation in
January 1999 and April 1999, respectively. The pro forma adjustment
also includes an increase in expense of $24.9 million, which
represents 18.505% of the incremental amount of goodwill and other
intangible assets amortization that would have been recorded in the
historical financial statements of the AltaVista Business if
Compaq/Digital's acquisitions of Shopping.com and Zip2 Corporation had
occurred on August 1, 1998.
The pro forma adjustment is based on the assumption that the entire
amount identified as goodwill and other intangible assets in CMGI's
acquisition of the AltaVista Business will be amortized on a straight-
line basis over a three-year period. The Company has not yet completed
the valuation of the actual intangible assets acquired at August 18,
1999. When completed, certain amounts identified as intangible assets
may be amortized over periods other than the three-year period
represented in the Pro Forma Statement of Operations. Additionally, a
portion of the purchase price may be identified as in-process research
and development. This amount, if any, will be charged to operating
results in the Company's fiscal 2000 when the acquisition accounting
and valuation are determined. The Pro Forma Statement of Operations
does not give effect to any potential in-process research and
development charge related to the acquisition of the AltaVista
Business.
(C) The pro forma adjustment is a reduction in expense of $8.9 million,
which relates to stock-based compensation charges recorded in the
historical financial statements of the AltaVista Business. The value
of the stock options to which these charges related have been included
in the calculation of the purchase consideration, or would have been
included in the pre-acquisition financial statements of the AltaVista
Business. Accordingly, on a pro forma basis, these expenses have been
eliminated.
CMGI, INC.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(Continued)
(D) The pro forma adjustment reflects the interest expense that would have
been recorded by CMGI related to the $220 million of aggregate
principal amounts of notes payable issued in the acquisition of the
AltaVista Business. The notes bear interest at an annual rate of
10.5%.
(E) The pro forma adjustment reflects the 18.505% minority interest in the
results of operations of the AltaVista Business assuming that CMGI's
acquisition of 81.495% of the AltaVista Business occurred on August 1,
1998.
(F) The pro forma adjustment reflects the income tax benefit that would
have been recorded by the Company in its consolidated statement of
operations related to the AltaVista Business' net loss and the income
tax effect, if any, of the other pre-tax pro forma adjustments. The
pro forma adjustment assumes that the Company would be able to
recognize a federal tax benefit for the amortization of goodwill and
other intangible assets related to the acquisition of the AltaVista
Business. The pro forma adjustment also assumes that the Company would
record a valuation allowance for all state tax benefits associated
with the AltaVista Business. Actual effective tax rates may differ
from pro forma rates reflected herein.
(G) Since the Pro Forma Statement of Operations results in a loss from
continuing operations, the pro forma basic and diluted loss from
continuing operations per common share are computed by dividing the
loss from continuing operations available to common stockholders by
the weighted average number of common shares outstanding. The
calculation of the weighted average number of common shares
outstanding assumes that the 18,994,975 shares of the Company's common
stock issued in the acquisition of the AltaVista Business were
outstanding for the entire period. The calculation of the weighted
average number of common shares outstanding also assumes that the
18,090.45 shares of the Company's Series D preferred stock were
converted into 1,809,045 shares of the Company's common stock on
October 11, 1998 (the 71/st/ day after the assumed acquisition date of
August 1, 1998) and that such common shares were outstanding for the
entire period thereafter. The Series D preferred shares were converted
into common stock on October 28, 1999 (the 71/st/ day after the actual
acquisition date of August 18, 1999).
Item 7. Financial Statements and Exhibits
(c) Exhibits:
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2.1* Purchase and Contribution Agreement, dated as of June 29, 1999, by and
among CMGI, Inc., Compaq Computer Corporation, Digital Equipment
Corporation, AltaVista Company and Zoom Newco Inc.
2.2* Amendment No. 1 to Purchase and Contribution Agreement, dated as of
August 18, 1999, by and among CMGI, Inc., Compaq Computer Corporation,
Digital Equipment Corporation, AltaVista Company and Zoom Newco Inc.
4.1* Certificate of Designations, Preferences and Rights of Series D
Preferred Stock of CMGI, Inc.
4.2* Promissory Note, dated August 18, 1999, issued to Digital Equipment
Corporation, in the principal amount of $138,000,000.
4.3* Promissory Note, dated August 18, 1999, issued to Compaq Computer
Corporation, in the principal amount of $82,000,000.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Singer Lewak Greenbaum & Goldstein LLP, independent
auditors.
99.1** Audited financial statements of AltaVista as of and for the years
ended December 31, 1996, 1997 and 1998 and unaudited financial
statements of the AltaVista Business as of March 31, 1999 and for the
three months ended March 31, 1999 and 1998.
99.2** Audited financial statements of Zip2 Corporation as of and for the
years ended December 31, 1996, 1997 and 1998 and unaudited financial
statements of Zip2 Corporation as of March 31, 1999 for the three
months ended March 31, 1999 and 1998.
99.3** Audited financial statements of Shopping.com as of and for the years
ended January 31, 1999, 1998 and 1997.
99.4 Unaudited financial statements of the AltaVista Business as of June
30, 1999 and for the six months ended June 30, 1999 and 1998.
____________________________
* Previously filed.
** Incorporated herein by reference to the Registrant's Current Report on Form
8-K dated June 29, 1999.
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.
Date: November 17, 1999 CMGI, INC.
By: /s/ Andrew J. Hajducky III
--------------------------
Andrew J. Hajducky III
Executive Vice President, Chief Financial
Officer and Treasurer
EXHIBIT INDEX
2.1* Purchase and Contribution Agreement, dated as of June 29, 1999, by and
among CMGI, Inc., Compaq Computer Corporation, Digital Equipment
Corporation, AltaVista Company and Zoom Newco Inc.
2.2* Amendment No. 1 to Purchase and Contribution Agreement, dated as of
August 18, 1999, by and among CMGI, Inc., Compaq Computer Corporation,
Digital Equipment Corporation, AltaVista Company and Zoom Newco Inc.
4.1* Certificate of Designations, Preferences and Rights of Series D
Preferred Stock of CMGI, Inc.
4.2* Promissory Note, dated August 18, 1999, issued to Digital Equipment
Corporation, in the principal amount of $138,000,000.
4.3* Promissory Note, dated August 18, 1999, issued to Compaq Computer
Corporation, in the principal amount of $82,000,000.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Singer Lewak Greenbaum & Goldstein LLP, independent auditors.
99.1** Audited financial statements of AltaVista as of and for the years ended
December 31, 1996, 1997 and 1998 and unaudited financial statements of
the AltaVista Business as of March 31, 1999 and for the three months
ended March 31, 1999 and 1998.
99.2** Audited financial statements of Zip2 Corporation as of and for the years
ended December 31, 1996, 1997 and 1998 and unaudited financial
statements of Zip2 Corporation as of March 31, 1999 for the three months
ended March 31, 1999 and 1998.
99.3** Audited financial statements of Shopping.com as of and for the years
ended January 31, 1999, 1998 and 1997.
99.4 Unaudited financial statements of the AltaVista Business as of June 30,
1999 and for the six months ended June 30, 1999 and 1998.
____________________________
* Previously filed.
** Incorporated herein by reference to the Registrant's Current Report on
Form 8-K dated June 29, 1999.