Back to GetFilings.com

Use these links to rapidly review the document
INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR

FOR THE TRANSITION PERIOD FROM                              TO                             .

COMMISSION FILE NUMBER: 000-29678

INTRADO INC.
(Exact name of registrant as specified in its charter)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        As of August 1, 2002, there were 15,307,632 shares of the Registrant's Common Stock outstanding.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

        This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In particular, we direct your attention to Item 1. Financial Statements, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation and Item 3. Quantitative and Qualitative Disclosures About Market Risk. We intend the forward-looking statements throughout the Quarterly Report on Form 10-Q and the information incorporated by reference to be covered by the safe harbor provisions for forward-looking statements. All projections and statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other words and phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on information available as of the date of this report on Form 10-Q and on numerous assumptions and developments that are not within our control. Although we believe these forward-looking statements are reasonable, we cannot assure you they will turn out to be correct. Actual results could be materially different from our expectations due to a variety of factors, including the following:

•

our reliance on large contracts from a limited number of significant telecommunications customers and, especially in light of recent competitive pressures in the telecommunications industry, their ability to pay for our services;

•

fluctuations in quarterly operating results, including those that are due to adverse trends in the telecommunications industry, bankruptcy filings by WorldCom and other customers, and other factors that are beyond our control;

•

whether our investments in research and development will expand our service offerings and prove to be economically viable;

•

our ability to retain key executives, particularly George K. Heinrichs, our co-founder, President, Chief Executive Officer and Chairman of the Board;

•

service and price competition from entities with substantially greater resources than us;

•

our ability to integrate businesses and assets that we may acquire;

•

constraints on our sales and marketing channels due to the fact that many of our customers compete with each other;

•

our ability to accurately predict and recoup the large amount of up-front expenditures necessary to serve new customers over a lengthy sales cycle;

•

our ability to expand our services beyond our traditional business and into the highly competitive data management industry, such as our proposed IntelliBase^SM National Repository Line Level Database ("IntelliBase^SM NRLLDB") and our IntelliCast^SM Target Notification services (formerly EWE^SM);

•

the unpredictable rate of adoption of wireless 9-1-1 services, including possible delays in the Federal Communications Commission's mandated deployment of Phase I and Phase II wireless location services;

•

the potential for liability claims, including product liability claims relating to our software;

•

technical difficulties and network downtime, including that caused by sabotage or unauthorized access to our systems; and

•

developments in telecommunications regulation and the unpredictable manner in which existing or new legislation and regulation may be applied to our business.

        This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report on Form 10-K under the caption "Item 1. Business—Risk Factors," our other Securities and Exchange Commission filings, and our press releases.

INDEX

INTRADO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

INTRADO INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.

INTRADO INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands; Unaudited)

The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1—BASIS OF PRESENTATION

        The unaudited consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly present the consolidated financial position, results of operations and cash flows of Intrado Inc. (the "Company") for the periods presented. Certain information and footnote disclosures normally included in audited financial information prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. The results of operations for the period ended June 30, 2002 are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2002. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Reclassifications

        Certain prior period amounts have been re-classified to conform with the current period's presentation.

Deferred Equipment Costs

        Deferred equipment costs represent computer equipment purchased specifically for a customer's existing system or inventory shipped to a customer site. These costs will be expensed when all of the revenue recognition criteria has been met.

Revenue and Cost Recognition

        The Company generates the vast majority of its revenue from four of its five segments, or "business units:" ILEC, CLEC, Wireless and Direct. The revenue from these business units is derived primarily from monthly data management and maintenance services, systems upgrades, new products and professional services. The Corporate business unit captures costs that are not directly related to the other business units, but does generate a small amount of revenue from the Company's new IntelliBase^SM NRLLDB service.

        Payments received in advance are deferred until the service is provided. Up-front fees received, such as implementation fees and non-recurring engineering fees, are deferred and recognized over the longer of the contractual period or the expected customer relationship. In accordance with Staff Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition in Financial Statements," and Statement of Position No. 97-2 "Software Revenue Recognition," the Company's policy is to recognize revenue when the applicable revenue recognition criteria have been met, which generally include the following:

•

persuasive evidence of an arrangement exists;

•

the price is fixed or determinable;

•

delivery has occurred or services have been rendered; and

•

collectibility is reasonably assured.

        The majority of the Company's revenue is derived from long-term contracts with its customers and is recognized ratably over the term of the contract as services are performed. The Company also sells software enhancements and professional services to its customer base that may not be subject to deferral under SAB 101. For the three months and six months ended June 30, 2002, the Company recognized $3.1 million and $6.3 million, respectively, in revenue from the sale of software enhancements and licenses, and professional services that were not deferred under SAB 101.

        As of June 30, 2002, the Company had total deferred contract revenue of approximately $18.2 million and deferred contract costs of approximately $4.5 million. Of the total deferred contract revenue at June 30, 2002, the Company anticipates that approximately $5.2 million will be recognized in 2002 when all the revenue recognition criteria have been met. Of the $5.2 million of current deferred contract revenue, approximately $1.8 million has already been received and approximately $3.4 million is included in accounts receivable as of June 30, 2002. As of June 30, 2002, the non-current deferred contract revenue balance of approximately $13.0 million represents non-recurring engineering fees and certain enhancements where revenue recognition criteria had not yet been met. The non-current deferred contract revenue, net of deferred contract costs, is estimated to be recognized as follows:

Provision for Income Taxes

        For the period January 1, 2000 through December 31, 2001, the Company did not record an income tax benefit for any generated net operating loss carryforwards or net increases in deferred tax assets because the Company believed the criteria for recognition was not met. To the extent the Company is able to generate taxable income in 2002, it will first utilize the net operating losses for which it recognized benefit in the pre-2000 period. As of June 30, 2002, the Company had net operating loss carryforwards of approximately $19.9 million available to offset current and future net income for U.S. federal income tax purposes. During the six months ended June 30, 2002, no income tax benefit or expense was recorded as the criteria for recognition has not been met.

NOTE 2—EARNINGS (LOSS) PER SHARE

        The Company presents basic and diluted earnings or loss per share in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share," which establishes standards for computing and presenting basic and diluted earnings per share. Under this statement, basic earnings (loss) per share is determined by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted income (loss) per share includes the effects of potentially issuable common stock, but only if dilutive. A loss per share is never reduced or diluted. The treasury stock method, using the average price of the Company's common stock for the period, is applied to determine dilution from options and warrants. The as-if-converted method is used for convertible securities. Since a net loss was generated for both the three months ended and the six months ended June 30, 2002 and June 30, 2001, all common stock options were considered antidilutive and excluded from the calculation of diluted EPS. The number of antidilutive stock options totaled to 1,476,720 and 1,231,228 in the three months ended June 30, 2002 and 2001, respectively, and to 1,571,091 and 824,380 for the six months ended June 30, 2002 and 2001, respectively.

NOTE 3—REPORTABLE SEGMENTS

        The management approach to segment identification designates the internal organization that is used by management for making operational decisions and assessing performance as the source of the Company's reportable segments. Based on this approach, the Company has five reportable segments, or "business units": ILEC, CLEC, Wireless, Direct, and Corporate. The Company's business units are segmented by the type of customer each business unit serves. The ILEC, CLEC and Wireless business units address ILEC, CLEC and wireless carriers, respectively. The Direct business unit addresses sales, either directly or indirectly, to state and local government entities. The Corporate business unit captures costs that are not directly related to a specific business unit. The Company measures its reportable business units based on revenue and costs directly related to each business unit. Substantially all of the Company's customers are in the United States. These segments are managed separately because the nature of and the resources used for each segment are unique.

        Revenue and costs are segregated in the following Statements of Operations for the reportable segments. The Company does not segregate assets between the segments as it is impractical to do so.