-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HqJ0VvWRbLMKn+k/1hr8wN+e9HTFNOyMR3JnOW7eA65Ivgha1V+cKIQzkjpad+0M I78i8fBxALIPDXAHpcdQxw== 0001157523-07-005125.txt : 20070514 0001157523-07-005125.hdr.sgml : 20070514 20070514161026 ACCESSION NUMBER: 0001157523-07-005125 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070514 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070514 DATE AS OF CHANGE: 20070514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Switch & Data Facilities Company, Inc. CENTRAL INDEX KEY: 0001371011 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 593641081 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33302 FILM NUMBER: 07846569 BUSINESS ADDRESS: STREET 1: 1715 NORTH WESTSHORE BOULEVARD STREET 2: SUITE 650 CITY: TAMPA STATE: FL ZIP: 33607 BUSINESS PHONE: 813-207-7700 MAIL ADDRESS: STREET 1: 1715 NORTH WESTSHORE BOULEVARD STREET 2: SUITE 650 CITY: TAMPA STATE: FL ZIP: 33607 FORMER COMPANY: FORMER CONFORMED NAME: Switch & Data, Inc. DATE OF NAME CHANGE: 20060801 8-K 1 a5402626.txt SWITCH & DATA FACILITIES COMPANY, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 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): May 14, 2007 ------------ Switch & Data Facilities Company, Inc. (Exact Name of Registrant as Specified in its Charter) ------------ Delaware 001-33302 59-3641081 (State or Other Jurisdiction (Commission File Number) (I.R.S. Employer of Incorporation) Identification Number) 1715 North Westshore Boulevard, Suite 650, Tampa, FL 33607 (813) 207-7700 (Addresses of principal executive offices) ------------ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Item 2.02 Results of Operations and Financial Condition; and Item 7.01 Regulation FD Disclosure. On May 14, 2007, Switch & Data Facilities Company, Inc. issued a press release announcing its results of operations for the quarter ended March 31, 2007, as well as certain other information. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference. The information furnished herewith pursuant to Items 2.02 and 7.01 of this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing. - -------------------------------------------------------------------------------- Item 9.01. Financial Statements and Exhibits. (d) Exhibits The following exhibit is furnished herewith: Exhibit No. Description - ----------- -------------------------------------------------------------- 99.1 Press Release dated May 14, 2007. - -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Switch & Data Facilities Company, Inc. DATE: May 14, 2007 By: /s/ George Pollock, Jr. -------------------------- George Pollock, Jr. Chief Financial Officer - -------------------------------------------------------------------------------- EXHIBIT INDEX Exhibit No. Description - ----------- ------------------------------------------------------------ 99.1 Press Release dated May 14, 2007. EX-99.1 2 a5402626ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Switch and Data Reports First Quarter 2007 Financial Results -- Reports 18% Increase in Revenues Over Same Quarter Prior Year -- Adjusted EBITDA, a Non-GAAP Measure, Increases 18% Over First Quarter 2006 -- 857 Customers: Excellent Quarter for New Customers and Key Customer Expansions including 121 Media, NTT America and Time Warner Cable Business Editors/Technology Editors TAMPA, Fla.--(BUSINESS WIRE)--May 14, 2007--Switch & Data Facilities Company, Inc. (NASDAQ:SDXC), a leading provider of network neutral interconnection and colocation services, today reported financial results for the three months ended March 31, 2007. For the three months ended March 31, 2007 total revenue increased 18% to $31.5 million from $26.6 million in the comparable period in 2006. Recurring revenue, which consists of colocation and interconnection services, was $29.8 million in first quarter 2007, an increase of 17% over the comparable period in 2006. The increase in recurring revenue was primarily due to the sale of services to new and existing customers. For the first quarter 2007, non-recurring revenue, representing one time installation fees and services, was $1.6 million, compared to $1.0 million in the prior year. Cost of revenues, excluding depreciation and amortization, for the three months ended March 31, 2007 was $16.5 million as compared to $14.5 million for the three months ended March 31, 2006. The increase in cost of revenues was primarily due to the expansion of the Company's facilities in several markets and increased demand for power. As a percent of revenue, cost of revenues in the first quarter of 2007 was 52%, an improvement from 54% in the same period of the prior year. For the three months ended March 31, 2007, sales and marketing costs were $3.8 million as compared to $3.1 million in the comparable quarter in 2006. The increase was due primarily to an increase in sales commissions due to revenue performance, wage expense due to increased headcount and stock based compensation expense. General and administrative expenses increased by $1.6 million for the three months ended March 31, 2007 to $3.9 million from $2.3 million for the three months ended March 31, 2006. The increase was due primarily to an increase in professional fees, stock compensation expense and costs related to being a public company. Stock based compensation expense recorded in general and administrative expense was $0.5 million in the first quarter of 2007. Total stock based compensation expense was $0.9 million in the first quarter of 2007. Depreciation and amortization was $6.2 million in first quarter 2007, up from $5.8 million in the same period of the prior year. The increase was attributable to expansion of the Company's facilities. Adjusted EBITDA, which is a non-GAAP measure, and which the Company defines as operating income from operations, plus depreciation and amortization, stock-based compensation expense and other non-cash items such as deferred rent and asset impairment, was $8.9 million in the first quarter of 2007 as compared to $7.5 million for the first three months of 2006. A reconciliation of adjusted EBITDA to operating income can be found at the end of this release. Results for first quarter 2007 included a $2.6 million lease litigation settlement expense and a $2.8 million loss from debt extinguishment. Excluding the impact of the non-recurring items: -- Income from operations would be $1.1, compared to $0.8 million in the same period in the prior year; -- Net loss would be ($1.2) million as compared to a net loss of ($2.3) million in first quarter 2006. Loss per common share was affected by a $225.8 million deemed preferred stock dividend recorded in connection with the corporate reorganization and accretion on preferred stock. A reconciliation of net income excluding one-time items can be found at the end of this release. Balance Sheet and Cash Flow The Company had cash and cash equivalents of $42.0 million on March 31, 2007. Total debt outstanding on March 31, 2007 was $39.5 million down from $144.2 million as of December 31, 2006. Keith Olsen, CEO and President commented, "We had an excellent first quarter. The success of our first quarter results can be measured by our financial and operating results. We ended the quarter with strong operating metrics. We won bigger deals, added more new logos than in any quarter in 2006, experienced increased demand from our existing customers, as well as growth in our interconnection services." Mr. Olsen further added, "The macro drivers in the industry continue to scale, and Switch and Data benefits from this industry growth." Business Outlook Switch and Data is reiterating its guidance for 2007. The Company expects total revenue to be approximately $127 million, with $122 million from recurring revenue. Adjusted EBITDA is expected to be approximately $40 million. Adjusted EBITDA margins are projected to be approximately 32%. Capital expenditures for 2007 are estimated to be between $28 million and $30 million. Switch and Data does not provide forward-looking guidance for certain financial data, such as depreciation, amortization, net income (loss) from operations, cash generated from operating activities and cash used in investing activities, and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data. The Company intends to calculate the various non-GAAP financial measures in future periods consistent with the calculation method utilized for the three months ended March 31, 2007 as presented within this press release. A reconciliation between GAAP information and non-GAAP information contained in this press release can be found in the table immediately following the Consolidated Statements of Cash Flow as well as on the Company's website in the Investor Relations section. Conference Call Info The Company will host a conference call to discuss first quarter 2007 results on Monday, May 14, 2007 at 4:30 p.m. ET. To listen to the conference call live, please dial 1-888-396-2386 or 1-617-847-8712 (international callers) and reference Passcode 25298771. The conference call will be webcast and can be accessed from the Company's website at www.switchanddata.com under the Investor Relations section. A replay of the conference call will be available for one week beginning at 6:30 p.m. ET on Monday, May 14, 2007 until May 21, 2007. The replay can be accessed by calling 1-888-286-8010 or 1-617-801-6888 (international) and reference Passcode 60041494. In addition, the webcast will be archived on the Company's website at www.switchanddata.com. About the Company Switch and Data is a leading provider of Internet exchange and colocation services. Based in Tampa, Florida, Switch and Data operates one of the largest footprints of neutral Internet exchange and colocation facilities in North America serving more than 850 customers. Switch and Data's PAIX is recognized worldwide as the premier name in peering and Internet exchange services and is home to one of the largest commercial exchange points in North America. For more information, please visit http://www.switchanddata.com/. Forward-Looking Statements Certain statements herein are "forward-looking statements". Such forward-looking statements are not historical facts but instead reflect Switch and Data's current expectations or beliefs concerning future events and results of operations, many of which, by their nature, are inherently uncertain and outside of Switch and Data's control. It is possible that actual results may differ, possibly materially, from those anticipated in these forward-looking statements. The information set forth under the caption "Business Outlook" are forward-looking statements. Words such as expects, believes, estimates, anticipates and similar language indicate forward-looking statements. Further information concerning Switch and Data and its business, including factors that potentially could materially affect Switch and Data's financial results and conditions, as well as its other achievements, are contained in Switch and Data's filings with the Securities and Exchange Commission. Switch and Data does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise. Switch & Data Facilities Company, Inc. Consolidated Statement of Operations ($000) (Unaudited) For the three months ended March 31, -------------------------- 2006 2007 ------------ ------------ Revenues $ 26,601 $ 31,470 Costs and operating expenses: Cost of revenues, exclusive of depreciation and amortization 14,480 16,496 Sales and marketing 3,145 3,817 General and administrative 2,305 3,884 Depreciation and amortization 5,796 6,163 Lease litigation settlement - 2,600 Asset impairment 52 - ------------ ------------ Total costs and operating expenses 25,778 32,960 ------------ ------------ Operating income (loss) 823 (1,490) Interest income 23 222 Interest expense (2,769) (2,608) Loss from debt extinguishment - (2,809) Other income (expense), net 3 (104) ------------ ------------ Income (loss) from continuing operations before income taxes (1,920) (6,789) Provision for income taxes (33) (12) ------------ ------------ Loss from continuing operations (1,953) (6,801) Income (loss) from discontinued operations (378) 170 ------------ ------------ Net loss (2,331) (6,631) Preferred stock accretions and dividends (3,289) (227,522) ------------ ------------ Net loss, attributable to common shareholders $ (5,620) $(234,153) ============ ============ Loss per share - basic and diluted: Continuing operations, attributable to common shareholders $ (0.05) $ (3.61) Discontinued operations (0.00) - ------------ ------------ Net loss, attributable to common shareholders $ (0.05) $ (3.61) ============ ============ Weighted average shares outstanding 107,638 64,937 Switch & Data Facilities Company, Inc. Condensed Consolidated Balance Sheet ($000) (Unaudited) December 31, March 31, 2006 2007 ------------ ----------- Assets Cash and cash equivalents 3,671 42,021 Current assets 8,735 10,352 Long-term assets 139,650 134,300 ------------ ----------- Total assets $ 152,056 $ 186,673 ============ =========== Liabilities, Preferred Stock and Stockholders' Equity (Deficit) Current liabilities $ 16,261 $ 21,495 Current portion of long-term debt 4,125 2,250 Other long-term liabilities 11,785 12,242 Long-term debt, less current portion 140,031 37,251 ------------ ----------- Total liabilities 172,202 73,238 Series C redeemable preferred stock 14,376 - Series B convertible preferred stock 179,798 - Commitments and contingencies Stockholders' equity (deficit) Common stock - Successor - 3 Common stock - Predecessor 4 - Series B common stock 7 - Series D-2 preferred stock 5 - Unearned stock compensation (137) (102) Additional paid in capital - 336,047 Accumulated deficit (214,971) (223,336) Accumulated other comprehensive income 772 823 ------------ ----------- Total stockholders' equity (deficit) (214,320) 113,435 ------------ ----------- Total liabilities, preferred stock and stockholders' equity (deficit) $ 152,056 $ 186,673 ============ =========== Switch & Data Facilities Company, Inc. Condensed Consolidated Statement of Cash Flows ($000) (Unaudited) For the three months ended March 31, -------------------------- 2006 2007 ------------ ----------- Cash flows from operating activities Net loss $ (2,331) $ (6,631) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 3,852 4,348 Amortization of debt issuance costs 209 157 Amortization of other intangible assets 1,957 1,805 Stock compensation expense 68 913 Loss on debt extinguishment - 2,359 Provision for bad debts, net of recoveries 240 42 Deferred rent 536 222 Change in fair value of derivative asset and derivative liability (817) 256 Asset impairment 403 - Loss on disposal of fixed assets - 24 Changes in operating assets and liabilities, net of acquired amounts (8) 4,220 ------------ ----------- Net cash provided by operating activities 4,109 7,715 ------------ ----------- Cash flows from investing activities Purchase of property and equipment, and other (7,735) (5,931) ------------ ----------- Net cash used in investing activities (7,735) (5,931) ------------ ----------- Cash flows from financing activities Principal payments under long-term debt (63) (104,655) Public offering costs - (1,024) Proceeds from initial public offering - 142,290 Debt issuance and amendment costs - (55) ------------ ----------- Net cash provided by (used in) financing activities (63) 36,556 ------------ ----------- Net increase (decrease) in cash and cash equivalents (3,689) 38,340 Effect of exchange rate changes on cash (3) 10 Cash and cash equivalents Beginning of the period 10,417 3,671 ------------ ----------- End of the period $ 6,725 $ 42,021 ============ =========== Additional Company Information - ---------------------------------------------------------------------- Three Months Ended March 31, ----------------------------------------- 2006 2007 -------------------- -------------------- ($000) As % of Rev. ($000) As % of Rev. ------- ------------ ------- ------------ Revenue - ----------------------------- Colocation 15,441 58% 18,917 60% Interconnection 10,117 38% 10,916 35% ------- ------------ ------- ------------ Recurring Total 25,558 96% 29,833 95% Non-recurring 1,043 4% 1,637 5% ------- ------------ ------- ------------ TOTAL 26,601 100% 31,470 100% ======= ============ ======= ============ As of March 31, --------------- 2006 2007 Number of customers 794 857 Number of cross connects 16,602 18,194 Cabinet equivalents billed 5,127 5,987 Utilization rate 65% 67% Three Months Ended March 31, ------------------ 2006 2007 New Sales -------------------------- Monthly Recurring Revenue* $ 658 $ 896 Non-recurring Revenue ** $ 809 $1,617 -------- -------- TOTAL $1,467 $2,513 ======== ======== *Monthly recurring revenue represents new service agreements entered into by new and existing customers during the given quarter. Revenue from these agreements will recur monthly over the life of the agreement. **Non recurring revenue represents the one-time installation fees associated with new service agreements. These one-time fees are billed to customers upon completion of the installation service and such revenue is recognized on a straight-line basis over the life of the agreement. GAAP RECONCILIATIONS - ---------------------------------------------------------------------- Reconciliation of Net Income, excluding one-time items For the three months ended ------------------------------- March 31, 2006 March 31, 2007 -------------- --------------- Operating income (loss) $ 823 $ (1,490) Lease litigation expense - 2,600 -------------- --------------- Operating income, excluding the impact of non-recurring items. $ 823 $ 1,110 ============== =============== For the three months ended ------------------------------- March 31, 2006 March 31, 2007 -------------- --------------- Net loss $ (2,331) $ (6,631) Lease litigation expense - 2,600 Loss from debt extinguishment - 2,809 -------------- --------------- Net loss, attributable to common shareholders, excluding the impact of non-recurring items $ (2,331) $ (1,222) ============== =============== Adjusted EBITDA Reconciliation The following is a reconciliation of the Company's operating income (loss) for the three month periods ended March 31, 2006 and March 31, 2007 to Adjusted EBITDA. Switch and Data uses Adjusted EBITDA: -- As measurements of operating performance because they assist management in comparing the results on a consistent basis as they remove the impact of items not directly resulting from operations; -- For planning purposes, including the preparation of its internal annual operating budget; -- To establish targets for certain management compensation; and -- To evaluate the Company's capacity to incur and service debt, fund capital expenditures and expand the business. Adjusted EBITDA as calculated by the Company is not necessarily comparable to similarly titled measures used by other companies. In addition, Adjusted EBITDA: (a) does not represent net income or cash flows from operating activities as defined by GAAP; (b) is not necessarily indicative of cash available to fund the Company's cash flow needs; and (c) should not be considered as alternatives to net income, operating income, cash flows from operating activities or the Company's other financial information as determined under GAAP. The Company prepares Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items that it does not consider indicative of its core operating performance. Investors are encouraged to evaluate each adjustment and the reasons the Company considers them appropriate. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, investors should be aware that in the future the Company may incur expenses similar to the adjustments in this presentation. Switch and Data's presentation of Adjusted EBITDA should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items. For the Three Months Ended -------------------------- Mar 31, 2006 Mar 31, 2007 ------------- ------------ Operating income (loss) $ 823 $ (1,490) Depreciation and amortization 5,796 6,163 Asset impairment 52 - Lease litigation settlement accrual - 2,600 Deferred rent expense, non-cash (1) 630 388 Loss on disposal of fixed assets (2) - 24 Stock-based compensation expense (3) 68 913 Legal expenses for real estate litigation (4) 165 328 ------------- ------------ Adjusted EBITDA $ 7,534 $ 8,926 ============= ============ Footnotes: - ------------------------------------------- (1) Rent is accrued as a straight-line expense that incorporates future lease cost escalations. The Deferred rent line item on the Statement of Cash Flows accounts for the difference between cash paid for rent and accrued rent expense for the period. The 1st Quarter 2007 amount is $165 higher than the Statement of Cash Flows to account for discontinued operations deferred rent. (2) Loss on disposal of fixed assets is a non-cash expense that can be found on the Statement of Cash Flows. (3) Stock compensation expense is a non-cash accrued expense to the company that can be found on the Statement of Cash Flows. (4) We have incurred legal expenses for lawsuits brought by several landlords for alleged breaches of lease agreements. These expenses are included in the General and administrative line item of our Statement of Operations. CONTACT: Switch & Data Facilities Company, Inc. Investor Relations: Kathleen Heaney, 203-803-3585 ir@switchanddata.com or Media: Brian Ruby, 203-682-8268 pr@switchanddata.com -----END PRIVACY-ENHANCED MESSAGE-----