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
September 8, 1999
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(Date of earliest event reported)
METROMEDIA FIBER NETWORK, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 000-23269 11-3168327
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
One North Lexington Avenue,
White Plains, New York 10601
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(Address of principal executive offices, including zip code)
(914) 421-6700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 8, 1999, Metromedia Fiber Network, Inc. (the "Company")
completed its merger with AboveNet Communications Inc., a Delaware corporation
("AboveNet"), pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") among the Company, Magellan Acquisition, Inc. and AboveNet, dated as
of June 22, 1999.
AboveNet is a leading provider of facilities-based, managed services
for customer-owned webservers and related equipment, known as co-location, and
high performance Internet connectivity solutions for electronic commerce and
other business critical Internet operations. AboveNet has developed a network
architecture based upon strategically located facilities. These facilities,
known as Internet service exchanges, allow Internet content providers direct
access to Internet service providers.
Pursuant to the Merger Agreement, the Company's wholly-owned subsidiary
Magellan Acquisition, Inc. was merged with and into AboveNet and each share of
AboveNet common stock was converted into the right to receive 1.175 shares of
the Company's Class A Common Stock. Following consummation of the merger,
AboveNet became a wholly-owned subsidiary of the Company. In connection with the
consummation of this transaction, the Company, AboveNet and Magellan
Acquisition, Inc. entered into an amendment and waiver to the Merger Agreement
pursuant to which the parties agreed to waive and amend certain provisions of
the Merger Agreement relating to certain filing obligations of the Company. A
copy of the amendment and waiver is attached as Exhibit 99.1 hereto and is
hereby incorporated by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Pursuant to Item 7(a)(4) of this Form 8-K, financial statements of
AboveNet will be filed by the Company on a current report on Form 8-K no later
than November 5, 1999.
(b) Pro Forma Financial Information.
3
METROMEDIA FIBER NETWORK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
The following unaudited pro forma condensed combining financial
information illustrates the effect of the merger of AboveNet Communications,
Inc. ("AboveNet") with a wholly-owned subsidiary of Metromedia Fiber Network,
Inc. ("Metromedia") under the terms of the merger agreement. Under the terms
of the merger agreement, the holders of AboveNet common stock will receive
1.175 shares of Metromedia class A common stock for each share of AboveNet
common stock. The share price used to determine the acquisition cost was
derived from taking the average of the closing price of Metromedia class A
common stock for the two days prior to and subsequent to the announcement of
the proposed merger, which was June 23, 1999.
On June 21, 1999, AboveNet acquired the assets and assumed
obligations related to the Palo Alto Internet Exchange ("PAIX") from Compaq
Computer Corporation ("Compaq") for approximately $76.5 million, consisting
of $70 million in cash, an obligation to provide various services to Compaq
with a value currently estimated to be approximately $5 million and expenses
of approximately $1.5 million.
The unaudited pro forma condensed combining financial information
presented herein gives effect to Metromedia's acquisition of AboveNet and
AboveNet's acquisition of PAIX. The unaudited pro forma condensed combining
financial information is based on the historical financial statements of
Metromedia, AboveNet and PAIX.
AboveNet has a fiscal year end of June 30. The unaudited historical
financial information for AboveNet for the year ended December 31, 1998 consists
of the period from January 1, 1998 to June 30, 1998 combined with the period
from July 1, 1998 to December 31, 1998 derived from AboveNet's historical
unaudited financial statements.
The unaudited pro forma condensed combining statements of operations
for the six months ended June 30, 1999 and for the year ended December 31,
1998 give effect to the above transactions as if they had been consummated on
January 1, 1998. The unaudited Pro forma condensed combining balance sheets,
as of June 30, 1999, give effect to Metromedia's acquisition of AboveNet as
if it had been consummated on June 30, 1999.
ACCOUNTING TREATMENT
Metromedia plans to record the acquisition of AboveNet using the
purchase method of accounting. Accordingly, the assets acquired and liabilities
assumed will be recorded at their estimated fair values, which are subject to
further adjustment based upon appraisals and other analyses.
AboveNet recorded the acquisition of PAIX using the purchase method of
accounting. Accordingly, the assets acquired and obligations assumed have been
recorded at their estimated fair values, which are subject to further
adjustments based upon appraisals and other analyses.
The pro forma adjustments are based upon available information and
assumptions that we believe are reasonable at the time made. The unaudited
pro forma condensed combining financial statements do not purport to present
our financial position or results of operations had the acquisitions occurred
on the dates specified, nor are they necessarily indicative of the financial
position or results of operations that may be achieved in the future. The
unaudited pro forma condensed combining statements of operations do not
reflect any adjustments for synergies that we expect to realize following
consummation of the acquisitions. No assurances can be made as to the amount
of cost savings or revenue enhancements, if any, that may be realized.
The unaudited pro forma condensed combining financial statements should
be read in conjunction with the consolidated financial statements and notes of
Metromedia, AboveNet and PAIX.
4
METROMEDIA FIBER NETWORK, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
FOR
ABOVENET PAIX ACQUIRED METROMEDIA METROMEDIA
HISTORICAL HISTORICAL ADJUSTMENTS ENTITIES HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- --------- ---------- ----------- ----------
Revenue ............................... $ 9,522 $ 3,171 $ -- $ 12,693 $ 38,673 $ -- $ 51,366
Expenses:
Cost of sales ......................... 13,882 2,013 -- 15,895 14,819 -- 30,714
Selling, general and administrative ... 12,309 301 -- 12,610 13,786 -- 26,396
Consulting and employment incentives .. 519 -- -- 519 -- -- 519
3,280 (1) (3,280) (2)
Depreciation and amortization ......... 2,209 1,696 (1,696) (1) 5,489 5,058 38,335 (3) 45,602
--------- ------- -------- --------- --------- --------- ---------
Income (loss) from operations ........ (19,397) (839) (1,584) (21,820) 5,010 (35,055) (51,865)
Other income (expense):
Interest income ....................... 2,665 -- -- 2,665 13,512 -- 16,177
Interest expense ...................... (1,080) -- -- (1,080) (30,407) -- (31,487)
Loss in joint venture ................. (200) -- -- (200) (393) -- (593)
--------- ------- -------- --------- --------- --------- ---------
Net loss before income taxes .......... (18,012) (839) (1,584) (20,435) (12,278) (35,055) (67,768)
Income taxes .......................... -- -- -- -- -- -- --
--------- ------- -------- --------- --------- --------- ---------
Net loss .............................. $ (18,012) $ (839) $ (1,584) $ (20,435) $ (12,278) $ (35,055) $ (67,768)
--------- ------- -------- --------- --------- --------- ---------
--------- ------- -------- --------- --------- --------- ---------
Net loss per share--basic ............. $ (0.06) $ (0.29)
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Net loss per share--diluted ........... n/a n/a
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Weighted average number of
shares outstanding--basic (4) ....... 189,098 230,692
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Weighted average number of
shares outstanding--diluted ......... n/a n/a
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See accompanying notes to unaudited pro forma
condensed combining financial statements
5
METROMEDIA FIBER NETWORK, INC.
PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PROFORMA FOR
ABOVENET ACQUIRED METROMEDIA
HISTORICAL PAIX HISTORICAL ADJUSTMENTS ENTITIES HISTORICAL
---------- --------------- ----------- ------------ -----------
REVENUE................................ $ 6,777 $ 4,362 $ -- $ 11,139 $ 36,436
EXPENSES:
COST OF SALES.......................... 7,551 2,583 -- 10,134 13,937
SELLING, GENERAL AND ADMINISTRATIVE.... 7,843 450 -- 8,293 14,712
CONSULTING AND EMPLOYMENT INCENTIVES... 2,396 -- -- 2,396 3,648
(1,944) (1)
DEPRECIATION AND AMORTIZATION.......... 1,497 2,349 7,313 (1) 9,215 1,532
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INCOME (LOSS) FROM OPERATIONS.......... (12,510) (1,020) (5,369) (18,899) 2,607
OTHER INCOME (EXPENSE):
INTEREST INCOME........................ 337 -- -- 337 8,788
INTEREST EXPENSE....................... (529) -- -- (529) (6,861)
LOSS IN JOINT VENTURE.................. -- -- -- -- (146)
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NET INCOME (LOSS) BEFORE INCOME TAXES (12,702) (1,020) (5,369) (19,091) 4,388
INCOME TAXES........................... -- -- -- -- 3,402
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NET INCOME (LOSS)...................... $ (12,702) $ (1,020) $ (5,369) $ (19,091) $ 986
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NET LOSS PER SHARE - BASIC............. $ 0.01
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NET LOSS PER SHARE - DILUTED........... 0.00
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING BASIC............ 186,990
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED........ 219,524
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METROMEDIA PRO
ADJUSTMENTS FORMA
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REVENUE................................ -- 47,575
EXPENSES:
COST OF SALES.......................... $ -- $ 24,071
SELLING, GENERAL AND ADMINISTRATIVE.... -- 23,005
CONSULTING AND EMPLOYMENT INCENTIVES... -- 6,044
(7,313) (2)
DEPRECIATION AND AMORTIZATION.......... 76,671 (3) 80,105
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INCOME (LOSS) FROM OPERATIONS.......... (69,358) (85,650)
OTHER INCOME (EXPENSE):
INTEREST INCOME........................ -- 9,125
INTEREST EXPENSE....................... -- (7,390)
LOSS IN JOINT VENTURE.................. -- (146)
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NET INCOME (LOSS) BEFORE INCOME TAXES (69,358) (84,061)
INCOME TAXES........................... (3,402) (5) --
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NET INCOME (LOSS)...................... $ (65,956) $ (84,061)
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NET LOSS PER SHARE - BASIC............. $ (0.37)
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NET LOSS PER SHARE - DILUTED........... n/a
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING-BASIC............ 228,584
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED........ n/a
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SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINING FINANCIAL STATEMENTS
6
METROMEDIA FIBER NETWORK, INC.
Pro Forma Condensed Combining Balance Sheets
(unaudited)
June 30, 1999
(in thousands)
ABOVENET METROMEDIA METROMEDIA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 220,871 $ 341,897 $ (25,000)(2) $ 537,768
Short-term investments -- 19,716 -- 19,716
Pledged securities -- 63,142 -- 63,142
Accounts receivable 3,355 86,258 -- 89,613
Other current assets 3,850 2,761 -- 6,611
------------ ------------ ----------- ------------
Total current assets 228,076 513,774 (25,000) 716,850
Fiber optic transmission network
and related equipment, net 12,904 417,803 -- 430,707
Property and equipment, net 46,591 3,909 -- 50,500
Restricted cash 21,476 51,920 25,000 (2) 98,396
Other assets 5,378 47,288 -- 52,666
Intangible assets 69,474 -- (69,474)(2) 1,533,414
1,533,414 (2)
------------ ------------ ----------- ------------
Total assets $ 383,899 $ 1,034,694 $ 1,463,940 $ 2,882,533
============ ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,593 $ 7,276 $ -- $ 20,869
Accrued expenses 2,122 134,736 -- 136,858
Current portion of deferred revenue 2,511 8,106 -- 10,617
Current portion of long-term obligations 5,985 55 -- 6,040
------------ ------------ ----------- ------------
Total current liabilities 24,211 150,173 -- 174,384
Notes payable -- 650,000 -- 650,000
Capital lease obligation, net of current portion 5,173 23,202 -- 28,375
Deferred revenue 4,375 68,530 -- 72,905
Long-term obligations 16,416 -- -- 16,416
Total stockholders' equity 333,724 142,789 1,463,940 (2) 1,940,453
------------ ------------ ----------- ------------
Total liabilities and stockholders' equity $ 383,899 $ 1,034,694 $ 1,463,940 $ 2,882,533
============ ============ =========== ============
See accompanying notes to unaudited pro forma
condensed combining financial statements
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METROMEDIA FIBER NETWORK, INC.
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
(1) Reflects the acquisition by AboveNet of PAIX at January 1, 1998 for the
income statements as follows:
(i) the payment of cash for the acquisition of PAIX in the amount
of $70 million; and
(ii) the excess of cost (currently estimated to be approximately
$69.7 million) over net tangible assets acquired of PAIX of
$1.8 million.
AboveNet has made a preliminary allocation to intangible assets of
excess cost over estimated net tangible assets as PAIX's tangible
assets and liabilities approximate fair value. However, there can be no
assurance that the actual allocation will not differ significantly from
the pro forma allocation.
(2) Reflects the acquisition by Metromedia of AboveNet at June 30, 1999 for
the balance sheet and January 1, 1998 for the income statements as
follows:
(i) the issuance of approximately 41.6 million shares of
Metromedia class A common stock in exchange for shares of
AboveNet common stock at a ratio of 1.175;
(ii) the placement of cash into a restricted account to secure
AboveNet's renegotiated credit facility;
(iii) the elimination of AboveNet's historical net tangible assets
acquired; and
(iv) issuance of shares of Metromedia class A common stock:
Number of shares issued to acquire AboveNet ........... 41,594,140
Per share price of stock .............................. $ 40.36
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Value of shares issued ................................ $ 1,678,739,000
Value of Metromedia options and warrants issued in
exchange for AboveNet's options and warrants ........ 98,925,000
Transaction costs ..................................... 20,000,000
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Total acquisition cost ................................ 1,797,664,000
AboveNet's net tangible assets acquired ............... 264,250,000
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Excess of cost over net tangible assets acquired ...... $ 1,533,414,000
===============
Metromedia has made a preliminary allocation to intangible assets
of excess cost over estimated net tangible assets acquired as
AboveNet's tangible assets and liabilities are estimated to
approximate fair value. However, there can be no assurance that
the actual allocation will not differ significantly from the
pro forma allocation.
(3) Reflects amortization of the excess of cost over net tangible assets
acquired in the merger by use of the straight-line method over 20
years.
(4) The average common shares outstanding used in calculating pro forma
loss per common share are calculated assuming that the estimated number
of shares of Metromedia class A common stock to be issued in the merger
were outstanding from the beginning of the periods presented.
(5) Reflects the adjustment of the tax provision.
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(c) Exhibits
99.1 Amendment and Waiver, dated as of September 8, 1999,
among the Company, AboveNet and Magellan Acquisition,
Inc.
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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.
METROMEDIA FIBER NETWORK, INC.
By: /s/ Howard Finkelstein
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Name: Howard Finkelstein
Title: President
Date: September 10, 1999
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EXHIBIT INDEX
Page in Sequential
Exhibit No. Numbering System
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99.1 Amendment and Waiver, dated as of September 8, 1999,
among the Company, AboveNet and Magellan Acquisition,
Inc.
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