-----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, Wk3kIgEruGFlFfN+hflZdsUoFrn2U/SEGQ2UMS9mwZf5lSITXH6Ph58LwUokRpcz jynWspyoluJsxfdAJdF+cg== 0001021408-02-013887.txt : 20021113 0001021408-02-013887.hdr.sgml : 20021113 20021113140405 ACCESSION NUMBER: 0001021408-02-013887 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20021112 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGEX INC/DE CENTRAL INDEX KEY: 0001085098 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 593582217 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26873 FILM NUMBER: 02819412 BUSINESS ADDRESS: STREET 1: DIGEX, INC STREET 2: 14400 SWEITZER LANE CITY: LAUREL STATE: MD ZIP: 20707 BUSINESS PHONE: 2402642000 MAIL ADDRESS: STREET 1: 12050 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705 8-K 1 d8k.txt CURRENT REPORT 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 12, 2002 - -------------------------------------------------------------------------------- Digex, Incorporated (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- Delaware 59-3582217 -------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 000-26873 ------- (Commission File Number) 14400 Sweitzer Lane Laurel, MD 20707 (Address of principal executive offices) (240) 264-2000 (Telephone Number) 1 ITEM 5. OTHER EVENTS On November 12, 2002, Digex issued the attached press release. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits The following exhibit is filed herewith: Exhibit 99.1 Press Release dated November 12, 2002: "Digex Reports Third Quarter Results" 2 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 thereunto duly authorized. Dated: November 13, 2002 DIGEX, INCORPORATED (Registrant) /s/ T. SCOTT ZIMMERMAN ---------------------- T. Scott Zimmerman Chief Financial Officer 3 EXHIBIT INDEX Exhibit No. Description 99.1 Press Release dated November 12, 2002: "Digex Reports Third Quarter Results" 4 EX-99.1 3 dex991.txt PRESS RELEASE EXHIBIT 99.1 News Release Media Contacts: Investor Relations: Secret F. Wherrett Tania C. Almond Digex Digex 240.456.3556 240.456.3800 secret.wherrett@digex.com tania.almond@digex.com Digex Reports Third Quarter 2002 Results Achieves Financial Milestone of Positive EBITDA; Continues Focus on Financial Independence LAUREL, Md., November 12, 2002 - Digex, Incorporated (Nasdaq: DIGX), a leading provider of managed Web and application hosting services, today announced its third quarter results for the period ended September 30, 2002. Revenue totaled $43.2 million for the quarter (which excludes approximately $3.6 million of pre-petition invoiced revenue from the WorldCom re-seller channel from July), compared with $48.7 million in 2Q02 and $52.3 million a year ago. Managed servers totaled 3,758 with average monthly revenue per server of $4,022. EBITDA* totaled $4.5 million in the quarter while net loss available to common stockholders totaled $37.7 million, or $0.58 per share. "We are pleased with our progress toward financial independence as reflected in this quarter's results," said George Kerns, president and CEO of Digex. "Despite the $3.6 million in billings for the first three weeks of July that we were unable to recognize this quarter as a result of WorldCom's bankruptcy petition, we posted improving gross margins, positive EBITDA* and improving net losses." New customers added this quarter include: American Management Association, BestQuote, Castrol Heavy Duty Lubricants, CLEARCUBE Co.,Ltd., Fort Knox National Company, Global Reports, HIT Entertainment, International Fellowships Fund, International Institute for Learning, Inc., National Kidney Foundation, Photonica, The Mechanics Bank, University of Southern California Institute for Creative Technology and Weyerhaeuser Company. A number of customers also upgraded or renewed their services including: American Eagle Systems, American Homeowners Association, Edmunds.com, Elogex, National Association of Home Builders, Readers Digest and Slimo Fast Foods Company. "We ended the quarter with $16.0 million cash and equivalents on hand, up from $4.8 million last quarter. Our cash borrowings this quarter totaled $15.0 million, which increased from $9 million last quarter due to the pre-petition receivables that WorldCom owes Digex" said Scott Zimmerman, chief financial officer of Digex. "Had WorldCom been in a position to pay those re-seller receivables Digex would not have required any borrowings in the quarter." Financial highlights for Digex include: . Capital investments for the quarter totaled $5.2 million, down about 85% from the year-ago level . Quota-carrying salespeople totaled 52 for the quarter compared with 114 last quarter and 157 in the year-ago period . Total employees ending September 30, 2002 was 818, compared with 1,182 last quarter and 1,404 in the year-ago period 3Q02 2Q02 1Q02 4Q01 3Q01 Revenue Mix by customer type: Enterprise 83% 80% 81% 78% 75% Non-Enterprise 17% 20% 19% 22% 25% Customer Data: Gross Adds 48 119 56 80 82 Normalized Gross Adds* 61 114 Customers (Net) 653 689 599 601 601 Avg. Annualized Rev/Cust $272,000 $299,000 $325,000 $324,000 $319,000 * Normalized Gross Adds reflect what the gross adds would have been less the timing effects from a system conversion Note: for peer comparison this Customer Data is based on quarterly billing not sales bookings Churn (Revenue) 5.9% 4.3% 4.9% 4.6% 4.3% Additional quarterly highlights for Digex include: .. Improved the structure, efficiency and quality of the Digex team through workforce and management changes - This quarter Digex announced a rightsizing effort to realign proportionate staffing ratios with current revenue streams and client base. Digex also announced several executive appointments and the forming of a new organization to spearhead the development and management of solutions and services, a key step in executing a solutions-based market approach. In September, Digex announced the appoints of three independent board members, Howard Frank, Max Hopper and Paul Kozlowski, who bring years of leadership, technology and business expertise to the management of Digex. .. Enhanced Interactive Client Portal with ClientCentral 3.0 - Initially launched in late 2000, the award-winning ClientCentral is an innovative, interactive, self-service customer portal that delivers the tools and technologies enterprises need to rapidly deploy and view Internet operations around-the-clock. ClientCentral is built around an XML framework, which allows Digex clients to "plug in" to Digex, permitting real-time interaction with the data in Digex's monitoring, server performance management, billing and trouble ticketing systems. The interface offers a variety of convenient online options for customers, including, service administration, case management, online billing, user administration, and a reference for Digex products and services. The standard ClientCentral portal is available to Digex customers at no additional cost. .. Demonstrated its commitment to bringing well-engineered platforms to the development of client solutions by successfully certifying every Digex Solution Consultant in either Microsoft Certified Systems Engineer (MSCE) or Solaris Certified Systems Administrator. Digex Solution Consultants advise clients on their IT solutions and corresponding technical architectures during the proposal process. Digex has consistently placed a great deal of emphasis in training customer support and service delivery teams, and have the opportunity to extend the same "economies of knowledge" in a pre-sales client engagement. In this way, clients are assured of the right IT solution prior to signing on with Digex. .. Received CIO-100 Award for Technology and Process Integration from IDG's CIO magazine - Digex won the award based on its successful implementation of CRM, sourcing, supply chain, and knowledge management initiatives targeted at revamping internal and client facing processes. By completing these company wide projects and integrating them with the industry-leading ClientCentral customer portal, Digex is able to achieve higher levels of customer and employee satisfaction and better operating margins. In addition, these improvements allow Digex to more efficiently deliver services for fault isolation and problem avoidance. 2 .. Implemented a backup network provider - Digex's infrastructure, including global networking, is designed for high availability. As part of this commitment, Digex has selected and implemented a secondary Internet service network provider, Level 3 Communications, Inc., for fail over connectivity for all U.S. data centers. Digex will continue to utilize WorldCom's facilities-based UUNET global IP network as its primary network provider. .. Achieved the British Standard 7799 Security Certification - This seal of approval from the British Standards Institution. The BS 7799 certification encompasses physical and logical aspects of IT security, to provide Digex customers with robust security methodologies and protection. To receive this certification, Digex had to undergo rigorous evaluations in ten key areas. This certificate is inclusive of Digex's security policies, the security of the organization, asset classification and personnel security, physical and environmental security, systems and network security, access controls, systems development and maintenance, business continuity planning and compliance, escalation processes and procedures. Digex expects to continue recognizing revenue from WorldCom only upon collection, which could have a material impact on future, reported revenue. As of June 30, 2002 pre-petition receivables totaled $17.7 million with an additional $3.6 million invoiced for the period July 1 through July 21, 2002. Quarterly Results Review Digex will broadcast management's review of the quarter's results on Tuesday, November 12th at 11:00 a.m. EST to review its third quarter results. Participation will be listen-only mode. A live audio webcast of this call will be available at http://www.e-meetings.wcom.com. Click on "Join Event - Audio Streaming." The webcast conference ID is: 8624384 and passcode: "DIGEX." Enter your participant information, check the box to accept the terms and conditions, and then select "Proceed" to be joined to the call. A replay of the audio webcast will be available for approximately 30 days by going to http://www.e-meetings.wcom.com and following the directions listed above. An archive of the call will also be available at http://www.digex.com/investors.htm. Forward Looking Statements Statements contained in this news release regarding expected financial results and other planned events are forward looking statements, subject to uncertainties and risks, including, but not limited to, the demand for Digex's services and the ability of Digex to successfully implement its strategies, each of which may be impacted, among other things, by economic, competitive or technological conditions. These and other applicable risks are summarized under the caption "Risk Factors" in the Company's annual 10K filing, and are updated periodically through the filing of reports and registration statements with the Securities and Exchange Commission. Access to Digex's filings with the SEC is available at http://www.digex.com/investors/finance_report.asp. About Digex Digex is a leading provider of managed Web and application hosting services. Digex customers, from mainstream enterprise corporations to Internet-based businesses, leverage Digex's services to deploy secure, scaleable, high performance e-Enablement, Commerce and Enterprise IT business solutions. Additional information on Digex is available at www.digex.com. * EBITDA before certain charges consists of earnings (loss) before interest expense, interest income and other, merger-related expenses, foreign exchange gains (losses), income tax benefit, deferred compensation, impairment loss, and depreciation and amortization. EBITDA before certain charges does not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA before certain charges should also not be construed as a substitute for operating income or a better measure of liquidity than cash flow from operating activities, which are determined in accordance with generally accepted accounting principles. This caption excludes components that are significant in understanding and assessing our results of operations and cash flows. In addition, EBITDA before certain charges is not a term defined by 3 generally accepted accounting principles and as a result our measure of EBITDA before certain charges might not be comparable to similarly titled measures used by other companies. However, we believe that EBITDA before certain charges is relevant and useful information which is often reported and widely used by analysts, investors and other interested parties in the Web and application hosting industry. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance, as an additional meaningful measure of performance and liquidity, and to provide additional information with respect to our ability to meet future debt service, capital expenditure and working capital requirements. See the unaudited consolidated financial statements and notes thereto contained in Digex's Form 10-Q filed with the SEC on August 14, 2002 for more detail. All trademarks, tradenames and service marks mentioned and/or used herein belong to their respective owners. DIGEX, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited (Amounts in thousands, except share and per share data)
Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 Revenue: Revenue $ 30,721 $ $43,130 $ 104,068 $ 144,869 Revenue from WorldCom 12,431 9,194 39,534 14,298 Total revenue 43,152 52,324 143,602 159,167 Costs and expenses: Cost of operations 2,988 2,710 10,716 12,241 Cost of services 19,465 28,792 67,543 79,792 Selling, general and administrative 15,459 31,048 64,330 97,335 Provision for doubtful accounts 740 4,916 2,745 12,415 Provision for doubtful accounts for WorldCom - - 18,578 - Deferred compensation 2,610 683 3,603 2,489 Impairment loss - - 56,990 - Depreciation and amortization 36,899 34,139 119,206 96,029 Total costs and expenses 78,161 102,288 343,711 300,301 Loss from operations (35,009) (49,964) (200,109) (141,134) Other income (expense): Interest expense (2,279) (1,670) (6,414) (3,115) Interest income and other 138 457 434 1,530 Net loss (37,150) (51,177) (206,089) (142,719) Accretion of preferred stock discount (504) (1,006) (2,013) (3,019) Net loss available to common stockholders $ (37,654) $ (52,183) $ (208,102) $ (145,738) Net loss per common share - basic and diluted $ (0.58) $ (0.81) $ (3.22) $ (2.28) Shares used in computing basic and diluted net loss per share 64,869,461 64,138,466 64,628,474 64,055,814 EBITDA (1) $ 4,500 $ (15,142) $ $(20,310) $ (42,616)
(1) EBITDA before certain charges consists of earnings (loss) before interest expense, interest income and other, merger-related expenses, foreign exchange gains (losses), income tax benefit, deferred compensation, impairment loss, and depreciation and amortization. EBITDA before certain charges does not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA before certain charges should not to be considered as an alternative to net loss as an indicator of the 4 Company's operating performance or to cash flows as a measure of liquidity. In addition, EBITDA before certain charges is not a term defined by generally accepted accounting principles, and, as a result, the measure of EBITDA before certain charges presented herein may not be comparable to similarly titled measures used by other companies. DIGEX, INCORPORATED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share information) September 30, December 31, 2002 2001 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 16,049 $ 12,096 Restricted investments 3,136 3,197 Accounts receivable, net of allowance of $3,571 in 2002 and $4,806 in 2001 13,616 25,159 Due from WorldCom, net of allowance of $18,578 in 2002 and $0 in 2001 - 15,179 Deferred costs 5,928 7,302 Prepaid expenses and other current assets 6,313 7,579 Total current assets 45,042 70,512 Property and equipment, net 187,716 327,701 Goodwill, net 11,880 11,880 Intangible assets, net 4,631 7,351 Notes receivable from employees, net 6,036 6,825 Other assets 2,832 3,089 Total assets $258,137 $427,358 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $38,003 $43,491 Due to WorldCom 5,115 4,475 Current portion of deferred liabilities 6,124 7,572 Current portion of notes payable 208 56 Current portion of notes payable to Intermedia 19,163 - Current portion of capital lease obligations 5,921 5,675 Total current liabilities 74,534 61,269 Deferred liabilities 3,779 4,257 Notes payable 3,314 3,208 Notes payable to Intermedia 108,037 90,000 Capital lease obligations 25,735 29,477 Total liabilities 215,399 188,211 Commitments and contingencies Redeemable preferred stock, $.01 par value; 5,000,000 shares authorized; 100,000 shares designated as Series A Convertible; 50,000 and 100,000 Series A Convertible shares issued and outstanding in 2002 and 2001, respectively (aggregate liquidation preference of $50,000) 45,244 81,503 Stockholders' equity (deficit): Class A common stock, $.01 par value; 100,000,000 shares authorized; 25,519,461 and 24,788,466 shares issued and 5 outstanding in 2002 and 2001, respectively 255 248 Class B common stock, $.01 par value; 50,000,000 shares authorized; 39,350,000 shares issued and outstanding in 2002 and 2001 394 394 Additional capital 587,623 545,020 Accumulated deficit (590,417) (384,328) Deferred compensation - (3,448) Accumulated other comprehensive loss (361) (242) Total stockholders' equity (deficit) (2,506) 157,644 Total liabilities and stockholders' equity (deficit) $ 258,137 $ 427,358 ### 6 -----END PRIVACY-ENHANCED MESSAGE-----