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): November 25, 2003
VERISIGN, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 000-23593 | 94-3221585 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
| 487 East Middlefield Road, Mountain View, CA | 94043 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (650) 961-7500
| ITEM 2: | ACQUISITION OR DISPOSITION OF ASSETS. |
On November 25, 2003, VeriSign Inc. completed the sale of its Network Solutions domain name registrar business to Pivotal Private Equity. VeriSign received approximately $100 million of consideration, consisting of $60 million in cash and a $40 million senior subordinated note that bears interest at 7% per annum for the first three years and 9% per annum thereafter and matures five years from the date of closing. The principal amount of this senior subordinated note will be reduced to the extent of Verisign’s indemnification obligations under the Purchase Agreement, if any. The principal and interest are due upon maturity. This note is subordinated to a term loan made by ABLECO Finance to the Network Solutions business in the principal amount of approximately $40 million as of the closing date. VeriSign will retain a 15% equity stake in the Network Solutions business.
The Network Solutions business provides domain name registrations, and value added services such as business e-mail, websites, hosting and other web presence services. Approximately 580 former VeriSign employees are now employed by the Network Solutions business as a result of the transaction. In connection with the sale, VeriSign assigned the lease for its facility located in Drums, Pennsylvania to the purchaser and will sublease some facilities located in Herndon, Virginia to the purchaser.
| ITEM 7: | FINANCIAL STATEMENTS AND EXHIBITS |
| (a) | Financial statements of business acquired: |
Not Applicable
| (b) | Pro forma financial information: |
The following unaudited pro forma consolidated financial information is being filed herewith:
| • | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2003. |
| • | Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2003. |
| • | Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2002. |
| • | Notes to Unaudited Pro Forma Condensed Consolidated Financial Information. |
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2003 gives effect to the sale as if it had occurred as of September 30, 2003 and removes the assets sold and liabilities assumed of the Network Solutions business of VeriSign.
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2003, and the year ended December 31, 2002, give effect to the sale as if it had occurred at the beginning of each period presented. The unaudited pro forma condensed consolidated statements of operations were prepared based on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2003, and the audited consolidated statements of operations of VeriSign for the year ended December 31, 2002.
The unaudited pro forma condensed consolidated financial information is based on estimates and assumptions. These estimates and assumptions have been made solely for purposes of developing this pro forma information. Unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated financial position or results of operations of future periods or the results that actually would have been realized had the Network Solutions business been sold during this period. This unaudited pro forma condensed consolidated financial information is based upon the historical consolidated financial statements of VeriSign, Inc.
VERISIGN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
(In thousands, except share data)
| VeriSign, Inc. |
Network Solutions (1) |
Adjustments |
Pro Forma |
||||||||||||
| ASSETS |
|||||||||||||||
| Current assets: |
|||||||||||||||
| Cash and cash equivalents |
$ | 380,824 | $ | — | $ | 60,000 | (2) | $ | 440,824 | ||||||
| Short-term investments |
218,014 | — | — | 218,014 | |||||||||||
| Accounts receivable, net |
99,660 | — | — | 99,660 | |||||||||||
| Prepaid expenses and other current assets |
56,121 | 87,455 | 78,557 | (3) | 47,223 | ||||||||||
| Deferred tax assets |
6,537 | — | — | 6,537 | |||||||||||
| Total current assets |
761,156 | 87,455 | 138,557 | 812,258 | |||||||||||
| Property and equipment, net |
578,692 | 59,840 | — | 518,852 | |||||||||||
| Goodwill and other intangible assets, net |
820,225 | 194,979 | — | 625,246 | |||||||||||
| Restricted cash |
18,371 | — | — | 18,371 | |||||||||||
| Long-term investments |
23,249 | — | — | 23,249 | |||||||||||
| Other assets, net |
13,235 | 7,959 | — | 5,276 | |||||||||||
| Notes receivable |
— | — | 40,000 | (2) | 40,000 | ||||||||||
| Total long-term assets |
1,453,772 | 262,778 | 40,000 | 1,230,994 | |||||||||||
| Total assets |
$ | 2,214,928 | $ | 350,233 | $ | 178,557 | $ | 2,043,252 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||||||
| Current liabilities: |
|||||||||||||||
| Accounts payable and accrued liabilities |
$ | 287,028 | $ | — | $ | 4,185 | (5) | $ | 291,213 | ||||||
| Accrued restructuring costs |
27,272 | — | — | 27,272 | |||||||||||
| Deferred revenue |
321,042 | 114,181 | 33,162 | (4) | 240,023 | ||||||||||
| Total current liabilities |
635,342 | 114,181 | 37,347 | 558,508 | |||||||||||
| Long-term deferred revenue |
185,532 | 140,444 | 45,395 | (4) | 90,483 | ||||||||||
| Other long-term liabilities |
13,732 | — | — | 13,732 | |||||||||||
| Total long-term liabilities |
199,264 | 140,444 | 45,395 | 104,215 | |||||||||||
| Total liabilities |
834,606 | 254,625 | 82,742 | 662,723 | |||||||||||
| Stockholders’ equity: |
|||||||||||||||
| Preferred stock — par value $.001 per share |
|||||||||||||||
| Authorized shares: 5,000,000 |
|||||||||||||||
| Issued and outstanding shares: none |
— | — | — | — | |||||||||||
| Common stock — par value $.001 per share |
|||||||||||||||
| Authorized shares: 1,000,000,000 |
|||||||||||||||
| Issued and outstanding shares: 241,081,385 (excluding 1,690,000 shares held in treasury ) |
241 | — | — | 241 | |||||||||||
| Additional paid-in capital |
23,096,408 | — | — | 23,096,408 | |||||||||||
| Unearned compensation |
(3,254 | ) | — | — | (3,254 | ) | |||||||||
| Accumulated deficit |
(21,707,764 | ) | — | 207 | (6) | (21,707,557 | ) | ||||||||
| Accumulated other comprehensive loss |
(5,309 | ) | — | — | (5,309 | ) | |||||||||
| Total stockholders’ equity |
1,380,322 | — | 207 | 1,380,529 | |||||||||||
| Total liabilities and stockholders’ equity |
$ | 2,214,928 | $ | 254,625 | $ | 82,949 | $ | 2,043,252 | |||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information
VERISIGN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(In thousands, except per share data)
| VeriSign, Inc. |
Network Solutions (7) |
Adjustments |
Pro Forma |
|||||||||||||
| Revenues |
$ | 803,180 | $ | 180,256 | $ | 40,508 | (4) | $ | 663,432 | |||||||
| Costs and expenses: |
||||||||||||||||
| Cost of revenues |
345,831 | 105,463 | 40,508 | (3) | 280,876 | |||||||||||
| Sales and marketing |
153,125 | 33,666 | — | 119,459 | ||||||||||||
| Research and development |
40,850 | — | — | 40,850 | ||||||||||||
| General and administrative |
130,156 | 29,160 | — | 100,996 | ||||||||||||
| Restructuring and other charges |
31,416 | 9,687 | — | 21,729 | ||||||||||||
| Amortization and write-down of other intangible assets and goodwill |
309,762 | 59,787 | — | 249,975 | ||||||||||||
| Total costs and expenses |
1,011,140 | 237,763 | 40,508 | 813,885 | ||||||||||||
| Operating loss |
(207,960 | ) | (57,507 | ) | — | (150,453 | ) | |||||||||
| Other income (expense), net |
(10,510 | ) | (283 | ) | — | (10,227 | ) | |||||||||
| Loss before income taxes |
(218,470 | ) | (57,790 | ) | — | (160,680 | ) | |||||||||
| Income tax expense |
(9,119 | ) | (54 | ) | — | (9,065 | ) | |||||||||
| Net loss |
$ | (227,589 | ) | $ | (57,844 | ) | $ | — | $ | (169,745 | ) | |||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (0.95 | ) | $ | (0.71 | ) | ||||||||||
| Shares used in per share computation: |
||||||||||||||||
| Basic and diluted |
239,167 | 239,167 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information
VERISIGN, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(In thousands, except per share data)
| VeriSign, Inc. |
Network Solutions (7) |
Adjustments |
Pro Forma |
|||||||||||||
| Revenues |
$ | 1,221,668 | $ | 311,169 | $ | 88,257 | (4) | $ | 998,756 | |||||||
| Costs and expenses: |
||||||||||||||||
| Cost of revenues |
571,367 | 191,715 | 88,257 | (3) | 467,909 | |||||||||||
| Sales and marketing |
248,170 | 67,217 | — | 180,953 | ||||||||||||
| Research and development |
48,353 | — | — | 48,353 | ||||||||||||
| General and administrative |
172,123 | 51,001 | — | 121,122 | ||||||||||||
| Restructuring and other charges |
88,574 | 27,297 | — | 61,277 | ||||||||||||
| Amortization and write-down of other intangible assets and goodwill |
4,894,714 | 2,051,670 | — | 2,843,044 | ||||||||||||
| Total costs and expenses |
6,023,301 | 2,388,900 | 88,257 | 3,722,658 | ||||||||||||
| Operating loss |
(4,801,633 | ) | (2,077,731 | ) | — | (2,723,902 | ) | |||||||||
| Other income (expense), net |
(149,289 | ) | 55 | — | (149,344 | ) | ||||||||||
| Loss before income taxes |
(4,950,922 | ) | (2,077,676 | ) | — | (2,873,246 | ) | |||||||||
| Income tax expense |
(10,375 | ) | (71 | ) | — | (10,304 | ) | |||||||||
| Net loss |
$ | (4,961,297 | ) | $ | (2,077,747 | ) | $ | — | $ | (2,883,550 | ) | |||||
| Net loss per share: |
||||||||||||||||
| Basic and diluted |
$ | (20.97 | ) | $ | (12.19 | ) | ||||||||||
| Shares used in per share computation: |
||||||||||||||||
| Basic and diluted |
236,552 | 236,552 | ||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information
VERISIGN, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(1) Represents the removal of assets sold and liabilities assumed related to VeriSign’s sale of its Network Solutions business.
(2) Represents consideration for VeriSign’s sale of its Network Solutions domain name registrar business to Pivotal Private Equity. VeriSign received approximately $100 million of consideration, consisting of $60 million in cash and a $40 million senior subordinated note that bears interest at 7% per annum for the first three years and 9% per annum thereafter and matures five years from the date of closing. The principal amount of this senior subordinated note will be reduced to the extent of VeriSign’s indemnification obligations under the Purchase Agreement, if any. The principal and interest are due upon maturity. This note is subordinated to a term loan made by ABLECO Finance to the Network Solutions business in the principal amount of approximately $40 million as of the closing date.
(3) Represents prepaid registry fees, which were a cost of goods sold for the Network Solutions business and revenue for the VeriSign registry, which were previously eliminated in VeriSign’s consolidated financial statements.
(4) Represents VeriSign registry deferred revenue and revenue from the Network Solutions business, which was previously eliminated in VeriSign’s consolidated financial statements.
(5) Represents the accrual of transaction costs related to VeriSign’s sale of its Network Solutions business for investment banking fees and related transaction commissions.
(6) Represents the estimated gain on VeriSign’s sale of its Network Solutions business as if sold on September 30, 2003.
(7) Represents removal of results of operations of the Network Solutions business for the respective periods. Network Solutions costs were based on charges made directly to the business unit. Other general corporate charges directly attributable to Network Solutions support were allocated.
| (c) | Exhibits |
The following exhibit is filed herewith:
| 2.1 | Purchase Agreement, dated as of October 14, 2003, as amended |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| VERISIGN, INC. | ||||||||
| Date: December 10, 2003 | By: |
/s/ James M. Ulam | ||||||
| James M. Ulam Senior Vice President, General Counsel and Secretary | ||||||||
EXHIBIT INDEX
| Exhibit Number |
Exhibit Description |
Filed Herewith | ||
| 2.1 | Purchase Agreement dated as of October 14, 2003, as amended | X | ||