Shutterfly, Inc. Proposed Offering of $220 Million Convertible Senior Notes

Shutterfly, Inc. Proposed Offering of $220 Million Convertible Senior Notes

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Shutterfly, Inc. (NAS: SFLY) (the "Company"), the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands, announced today that it intends to offer, subject to market conditions and other factors, $220 million aggregate principal amount of convertible senior notes due 2018 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). In connection with the offering of the notes, the Company expects to grant the initial purchasers a 30-day option to purchase up to an additional $30 million aggregate principal amount of such notes.

The initial conversion rate, interest rate and certain other terms of the notes will be determined by negotiations between the Company and the initial purchasers. When issued, the notes will be unsecured senior obligations of the Company. The notes will pay interest semi-annually. The notes will mature in 2018, unless repurchased or converted in accordance with their terms prior to such date. Prior to December 15, 2017, the notes will be convertible at the option of holders only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the notes may be settled in shares of the Company's common stock, cash or a combination of cash and shares of the Company's common stock, at the Company's option. Holders of the notes will have the right to require the Company to repurchase all or some of their notes at 100% of their principal, plus any accrued and unpaid interest, upon the occurrence of certain events.

The Company intends to use a portion of the net proceeds from the offering of the notes to fund acquisitions and other strategic transactions. The Company also intends to use a portion of the net proceeds from the offering of the notes to pay the cost of certain convertible note hedge transactions (described below), taking into account the proceeds to the Company of certain warrant transactions (described below) and to repurchase up to $30 million of shares of the Company's common stock in privately negotiated transactions, which could affect the market price of the Company's common stock concurrently with, or shortly after, the pricing of the notes, and could result in a higher effective conversion price for the notes. The Company expects to use the remainder of the net proceeds from the offering of the notes for general corporate purposes.

If the initial purchasers exercise their option to purchase additional notes, the Company intends to use the resulting additional proceeds of the sale of the additional notes and any additional warrants to pay the cost of entering into additional convertible note hedge transactions and for general corporate purposes.

In connection with the pricing of the notes, the Company expects to enter into convertible note hedge transactions with one or more financial institutions, which may include one or more of the initial purchasers or their respective affiliates (the "option counterparties"). The convertible note hedge transactions are expected generally to reduce the potential dilution and/or offset the potential cash payments the Company is required to make in excess of the principal amount upon conversion of the notes in the event that the market price of the Company's common stock is greater than the strike price of the convertible note hedge transactions. The Company also expects to enter into warrant transactions with the option counterparties. The warrant transactions could separately have a dilutive effect if the market price of the Company's common stock exceeds the strike price of the warrant transactions, unless the Company elects, subject to certain conditions, to settle the warrant transactions in cash.

The Company has been advised by the option counterparties that in connection with establishing their initial hedge of the convertible note hedge transactions and warrant transactions, the option counterparties and/or their respective affiliates expect to enter into various derivative transactions with respect to the Company's common stock and/or purchase shares of the Company's common stock in privately negotiated transactions and/or open market transactions concurrently with, or shortly after, the pricing of the notes. This activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the notes at that time.

In addition, the Company has been advised by the option counterparties that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to the Company's common stock and/or purchasing or selling the Company's common stock in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so during any observation period related to a conversion of the notes). This activity could also cause an increase or avoid a decrease in the market price of the Company's common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs during any observation period related to a conversion of the notes, it could affect the amount and value of the consideration that noteholders will receive upon conversion of the notes.

The notes will be offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Neither the notes nor the shares of common stock issuable upon conversion of the notes, if any, have been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such a registration requirement.

This press release does not and shall not constitute an offer to sell or the solicitation of an offer to buy any notes or common stock, nor shall there be any sale of notes or common stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state or any jurisdiction. Any offer, if at all, will be made only pursuant to Rule 144A under the Securities Act.

Notice Regarding Forward-Looking Statements

This press release includes certain forward-looking statements related to Shutterfly, Inc. within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including all statements regarding the proposed offering of the notes, are forward-looking statements. These statements are based on management's current estimates, assumptions, expectations or beliefs and are subject to uncertainty and changes in circumstances. These forward-looking statements are estimates reflecting the judgment of the Company's senior management and actual results may vary materially from those expressed or implied by the forward-looking statements herein. All of Shutterfly's forward-looking statements, whether written or oral, are expressly qualified by this safe harbor statement and any other cautionary statements that may accompany such forward-looking statements. Shutterfly is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

Shutterfly, Inc.
Investor Relations:
Michael Look, 650-610-5910
mlook@shutterfly.com
Media Relations:
Nicole Stier, 650-610-6013
nstier@shutterfly.com

KEYWORDS: United States North America California

INDUSTRY KEYWORDS:

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