8-K

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

October 9, 2001

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

CRITICAL PATH, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

California	000-25331	91-1788300
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

532 FOLSOM STREET, SAN FRANCISCO, CALIFORNIA 94105
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(415) 808-8800

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

TABLE OF CONTENTS

	Item 5. Other Events.
	Item 7. Financial Statements and Exhibits.
SIGNATURE
INDEX TO EXHIBITS FILED WITH THE CURRENT REPORT ON FORM 8-K DATED OCTOBER 15, 2001
Pro Forma Balance Sheet as of June 30, 2001
Press Release dated as of October 9, 2001

Item 5. Other Events.

     During the third quarter ended September 30, 2001, Critical Path, Inc., a California corporation and the Registrant herein (the "Company"), engaged in a balance sheet restructuring by repurchasing approximately $192 million of face value of its outstanding 5.75% Convertible Subordinated Notes due April 1, 2005. The purchase resulted in a net gain, and increased equity, of approximately $138.7 million. The Nasdaq National Market has indicated to the Company that it finds the restructuring results satisfactory to meet the minimum stockholders' equity requirement for continued listing on The Nasdaq National Market. A Pro Forma Balance Sheet evidencing compliance with The Nasdaq National Market Marketplace Rules' minimum stockholders' equity requirement is attached to this Current Report on Form 8-K as Exhibit 99.1. The Company also issued a Press Release on October 9, 2001 describing the general results of its recent restructuring efforts including the balance sheet restructuring described above. A copy of the Company's Press Release is attached as Exhibit 99.2 to this Current Report on Form 8-K.

Item 7. Financial Statements Pro Forma Information and Exhibits.

     (a)  Not applicable.

     (b)  Not applicable.

     (c)  Exhibits.

Exhibit No.	Description
99.1	Pro Forma Balance Sheet as of June 30, 2001
99.2	Press Release dated as of October 9, 2001

SIGNATURE

     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.

	CRITICAL PATH, INC
Date: October 15, 2001		/s/ Lauren DeBuono
		Laureen DeBuono Interim Chief Financial Officer

INDEX TO EXHIBITS FILED WITH
THE CURRENT REPORT ON FORM 8-K DATED OCTOBER 15, 2001

Exhibit No.	Description
99.1	Pro Forma Balance Sheet as of June 30, 2001
99.2	Press Release dated as of October 9, 2001

EX-99.1 3 f76314ex99-1.htm PRO FORMA BALANCE SHEET AS OF JUNE 30, 2001

EXHIBIT 99.1

The condensed consolidated balance sheets of Critical Path, Inc. reflect the actual audited condensed consolidated balance sheet as of December 31, 2000, the actual unaudited condensed consolidated balance sheet as of June 30, 2001 and the unaudited condensed consolidated pro forma balance sheet as of June 30, 2001. The pro forma balance sheet reflects certain adjustments related to the repurchase of $192 million of face value of its outstanding convertible subordinated notes, which occurred during the third quarter of 2001, as if the purchases had occurred on June 30, 2001.

In aggregate the pro forma balance sheet reflects cash paid of $50.7 million in principle and accrued interest and includes the affects of the reduction in cash related to the payment of principal of approximately $47.9 million and accrued interest of approximately $2.8 million and the elimination of the related outstanding principle of approximately $192.0 million and accrued interest of approximately $2.8 million. At June 30, 2001 unamortized debt issuance costs for Critical Path were approximately $8.2 million, and accordingly the pro forma balance sheet reflects a $5.4  million adjustment to write down the debt issuance costs related to the portion of the notes, which were repurchased. The repurchase of $192 million of face value of its outstanding convertible subordinated notes resulted in a significant net gain, and accordingly the pro forma balance sheet reflects an adjustment to shareholders' equity of approximately $138.7 million in extraordinary gain.

CRITICAL PATH, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)

				Actual		Actual				Pro Forma
				December 31,		June 30,				June 30,
				2000		2001				2001
			(Unaudited)
ASSETS
Current assets
	Cash, cash equivalents and short-term investments			$	216,542	$	132,586		$	81,890
	Restricted cash				215		1,032			1,032
	Accounts receivable, net				38,938		29,437			29,437
	Other current assets				10,252		6,997			6,997
		Total current assets			265,947		170,052			119,356
Long-term investments					10,610		8,349			8,349
Notes receivable from officers					2,702		2,370			2,370
Property and equipment, net					85,304		73,000			73,000
Intangible assets, net					77,339		44,298			44,298
Other assets					8,953		9,298			3,886
		Total assets		$	450,855	$	307,367		$	251,259
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities
	Accounts payable			$	43,710	$	34,059		$	31,296
	Accrued expenses				10,377		7,645			7,645
	Deferred revenue				15,720		15,593			15,593
	Capital lease and other obligations, current				9,363		6,899			6,899
		Total current liabilities			79,170		64,196			61,433
Convertible subordinated notes payable					300,000		295,000			102,990
Capital lease and other obligations, long-term					4,687		2,303			2,303
		Total liabilities			383,857		361,499			166,726
Commitments and contingencies
Minority interest in consolidated subsidiary					649		—			—
Shareholders’ Equity (Deficit)					66,349		(54,132	)		84,533
		Total liabilities and shareholders’ equity (deficit)		$	450,855	$	307,367		$	251,259

EX-99.2 4 f76314ex99-2.htm PRESS RELEASE DATED AS OF OCTOBER 9, 2001

EXHIBIT 99.2

CRITICAL PATH ANNOUNCES SUBSTANTIAL COMPLETION
OF RESTRUCTURING PLAN

SAN FRANCISCO — Oct. 10, 2001 — Critical Path, Inc. (Nasdaq: CPTH), a global leader in communication technologies and integrated messaging solutions, announced today that it has substantially completed its restructuring plan, including the divestiture of many of its non-core products and services, a restructuring of its balance sheet, a significant reduction in operating expenses and a successful reduction in headcount.

“The rapid implementation and execution of the restructuring plan demonstrates our commitment to our customers and shareholders, to whom we owe a debt of gratitude,” said David Hayden, Critical Path Executive Chairman. “The progress we have made allows us to focus on reaching break-even in the near term and to continue our technological leadership in the messaging market.”

In April 2001, Critical Path announced a strategic restructuring plan designed to place the Company back on the path to profitability. Chief among the mandates, to allow for a $30 million to $50 million reduction in annual expenses, were a strategic refocusing on core communications solutions and services, a 450 employee head count reduction and the consolidation of two-thirds of its facilities.

Refocusing on Core Communications Solutions and Services
Critical Path has successfully sold or discontinued nearly all of its thirteen non-core products and services. The Company has closed the transactions of six of seven non-core products being sold, inclusive of the sales of the InJoin Trans, Batch and PATH/3270 products to Sun Microsystems, the InJoin Broker product family to 2AB, Inc., and the InLine Project Collaboration product to ENACTEX, Inc. Additionally, the Company has strategically discontinued four of six non-core products and services that it has decided to exit and the remaining two are expected to be discontinued no later than the first quarter of 2002.

Expense Reduction
During the second quarter, Critical Path’s total costs and expenses, excluding special charges, decreased by $7.4 million, and the company expects its expenses, excluding special charges, to continue to decrease through the third and fourth quarters. These significant savings were accomplished by the divestiture of non-core products and services, the reduction in headcount from 1,011 at March 31, 2001 to 564 at September 30, 2001, and the continued consolidation of facilities from 77 at March 31, 2001 to the current level of 38, with approximately 15 additional facilities expected to close no later than the first quarter of 2002.

“We have continued to execute on our strategic restructuring plan, as evidenced by our progress on headcount reduction, facilities consolidation and our effort to refocus on core

communications solutions and services. As a result, we are updating our estimated expense reduction from an initial range of $30 to $50 million on an annual basis to $40 to $60 million,” said Laureen DeBuono, Interim Chief Financial Officer.

Financial Restructuring
The Company completed a balance sheet restructuring by repurchasing over $197 million of face value of its outstanding convertible subordinated notes. The action resulted in a net gain, and increased equity, of approximately $143 million. The Nasdaq National Market has found that the restructuring results satisfactorily meet the minimum equity requirement for continued listing on the Nasdaq National Market and the Company will be filing, by October 15, 2001, a Form 8-K to evidence compliance with the minimum equity requirement. Additionally, the Board of Directors of the Nasdaq Stock Market announced that it has implemented an across the board moratorium on minimum bid and public float requirements for continued listing until January 2, 2002, at which time the Company will have 90 days to comply with these requirements.

About Critical Path, Inc.

Critical Path, Inc. (Nasdaq:CPTH) is a global leader in communication technology and complete messaging solutions for wireless and wireline carriers, service providers and corporations through its integrated platform of messaging applications and directory infrastructure. Critical Path is headquartered in San Francisco, with offices throughout North America, Europe, Asia and Latin America. More information on Critical Path can be found at http://www.cp.net/.

Safe Harbor
This press release contains forward-looking statements, including the Company’s statements regarding the restructuring of the debt and equity position of Critical Path, anticipated charges and cost savings as a result of headcount and facilities reduction, operational and financial restructuring, the strategic sale of certain product lines, and our belief as to our ability to successfully emerge from the debt and operational restructuring. The words “anticipate,” “expect,” “intended to,” “designed to,” “plan,” “believe,” “seek,” and “estimate” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to the, response of financial markets and investors to our restructuring plans, difficulties of forecasting future results due to our limited operating history, evolving business strategy and the emerging nature of the market for our products and services, pending litigation and SEC investigation, turnover of senior management, board of directors members and other key personnel, difficulties in implementing our strategic plan to exit certain products and services offerings, difficulties of integrating acquired businesses, failure to expand our sales and marketing activities, potential difficulties associated with strategic relationships, investments and uncollected bills, risks associated with continued compliance with various NASDAQ National Market listing requirements, risks associated with our international operations, foreign currency fluctuations, unplanned system interruptions and capacity constraints, software defects, and those discussed elsewhere in this announcement. These and other risks and uncertainties are described in more detail in the Critical Path’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as amended, and the quarterly reports on Form 10-Q for the quarters ended June 30, 2001 and March 30, 2001,respectively, both as may be amended from time to time, and all subsequent filings with the Securities and Exchange Commission (www.sec.gov).

# # #

Note to Editors: Critical Path and the Critical Path logo are the trademarks of Critical Path, Inc. All other trademarks are the property of their holders.

For additional information, contact:
Mike Bishop, Investor Relations	Roger Fortier, Media
Critical Path, Inc.	McGrath/Power PR
mikebishop@cp.net	rogerf@mcgrathpower.com
(415) 344-5059	(408) 727-0351

EX-99.1

Pro Forma Balance Sheet as of June 30, 2001

EX-99.2

Press Release dated as of October 9, 2001