QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
_________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE| Delaware | 95-4782077 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
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 No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
As of November 1, 2004, there were outstanding 423,861,705 shares of the registrant’s Common Stock, par value $0.01 per share.
| PART I. | FINANCIAL INFORMATION | Page |
|---|---|---|
| Item 1. | Condensed Consolidated Financial Statements | |
| Condensed Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003 | 1 | |
| Condensed Consolidated Statements of Operations--Unaudited for the three and nine months ended September 30, 2004 and 2003 | 2 | |
| Condensed Consolidated Statements of Stockholders' Equity--Unaudited for the three and nine months ended September 30, 2004 and 2003 | 3 | |
| Condensed Consolidated Statements of Cash Flows--Unaudited for the nine months ended September 30, 2004 and 2003 | 4 | |
| Notes to Condensed Consolidated Financial Statements--Unaudited | 5 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 18 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 |
| Item 4. | Controls and Procedures | 39 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 40 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 |
| Item 6. | Exhibits | 40 |
| Signature | 41 |
Items 3, 4 and 5 of PART II are not applicable and have been omitted.
| September 30, | December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 | |||||||
| (Unaudited) |
||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 570,901 | $ | 257,360 | ||||
| Restricted cash | 38,760 | 37,546 | ||||||
| Marketable securities | 5,311 | 4,897 | ||||||
| Receivables, net | 122,020 | 131,531 | ||||||
| Deferred tax asset, net | 15,742 | 21,175 | ||||||
| Other current assets | 31,579 | 26,884 | ||||||
| Total current assets | 784,313 | 479,393 | ||||||
| Property and equipment, net | 43,644 | 51,115 | ||||||
| Indefinite-lived intangible assets | 66,272 | 125,673 | ||||||
| Finite-lived intangible assets, net | 127,260 | 180,860 | ||||||
| Goodwill | 263,543 | 380,070 | ||||||
| Income taxes receivable | 68,472 | 69,329 | ||||||
| Other assets | 41,421 | 47,729 | ||||||
| $ | 1,394,925 | $ | 1,334,169 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Current liabilities: | |||||||||
| Accounts payable | $ | 48,575 | $ | 30,529 | |||||
| Accrued expenses | 168,583 | 245,397 | |||||||
| Current portion of long-term debt and capital lease obligations | 730 | 2,104 | |||||||
| Current portion of deferred revenue | 166,801 | 186,147 | |||||||
| Total current liabilities | 384,689 | 464,177 | |||||||
| Deferred tax liability, net | 147,901 | 156,645 | |||||||
| Long-term debt and capital lease obligations, less current portion | 13,406 | 138,736 | |||||||
| Deferred revenue, less current portion | 500,096 | 137,047 | |||||||
| Other liabilities | 39,328 | 61,591 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders' equity: | |||||||||
| Preferred stock, par value $0.01 per share | -- | -- | |||||||
| Common stock, par value $0.01 per share | 4,335 | 4,279 | |||||||
| Additional paid-in capital | 8,479,058 | 8,452,702 | |||||||
| Accumulated deficit | (8,079,340 | ) | (7,983,239 | ) | |||||
| Accumulated other comprehensive income, net of tax | 499 | 743 | |||||||
| Unearned compensation | (3 | ) | (246 | ) | |||||
| Treasury stock, at cost | (95,044 | ) | (98,266 | ) | |||||
| Total stockholders' equity | 309,505 | 375,973 | |||||||
| $ | 1,394,925 | $ | 1,334,169 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1
| Three Months Ended | Nine Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | ||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||
| Revenues: | |||||||||||||||||
| Publishing | $ | 90,645 | $ | 101,820 | $ | 284,095 | $ | 317,934 | |||||||||
| Cable and satellite | 61,533 | 39,143 | 166,681 | 117,229 | |||||||||||||
| Consumer electronics licensing | 22,894 | 24,144 | 98,581 | 89,000 | |||||||||||||
| 175,072 | 165,107 | 549,357 | 524,163 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Publishing | 93,066 | 111,450 | 277,384 | 308,230 | |||||||||||||
| Lease settlement | -- | -- | (10,088 | ) | -- | ||||||||||||
| Cable and satellite | 30,992 | 29,850 | 89,023 | 84,670 | |||||||||||||
| Consumer electronics licensing | 20,855 | 17,647 | 60,199 | 54,386 | |||||||||||||
| Corporate | 21,101 | 23,688 | 62,682 | 73,512 | |||||||||||||
| Operating expenses, exclusive of expenses shown below | 166,014 | 182,635 | 479,200 | 520,798 | |||||||||||||
| Stock compensation | 89 | 246 | 326 | 33,109 | |||||||||||||
| Depreciation and amortization | 15,183 | 15,224 | 32,668 | 125,850 | |||||||||||||
| Impairment of intangible assets | 131,637 | -- | 131,637 | -- | |||||||||||||
| 312,923 | 198,105 | 643,831 | 679,757 | ||||||||||||||
| Operating loss | (137,851 | ) | (32,998 | ) | (94,474 | ) | (155,594 | ) | |||||||||
| Interest income (expense), net | 2,402 | (711 | ) | 2,849 | (3,521 | ) | |||||||||||
| Other income, net | 13,160 | 835 | 13,331 | 3,204 | |||||||||||||
| Loss from continuing operations before income taxes | (122,289 | ) | (32,874 | ) | (78,294 | ) | (155,911 | ) | |||||||||
| Income tax benefit | (23,946 | ) | (10,665 | ) | (7,705 | ) | (54,400 | ) | |||||||||
| Loss from continuing operations | (98,343 | ) | (22,209 | ) | (70,589 | ) | (101,511 | ) | |||||||||
| Discontinued operations: | |||||||||||||||||
| Income from discontinued operations | 27 | 6,826 | 15,612 | 25,500 | |||||||||||||
| Loss on disposal of discontinued operations | -- | -- | (28,882 | ) | -- | ||||||||||||
| Income tax expense | 13 | 2,754 | 12,242 | 10,022 | |||||||||||||
| Income (loss) from discontinued operations | 14 | 4,072 | (25,512 | ) | 15,478 | ||||||||||||
| Net loss | $ | (98,329 | ) | $ | (18,137 | ) | $ | (96,101 | ) | $ | (86,033 | ) | |||||
| Basic and diluted loss per share: | |||||||||||||||||
| Loss from continuing operations | $ | (0.23 | ) | $ | (0.05 | ) | $ | (0.17 | ) | $ | (0.25 | ) | |||||
| Income (loss) from discontinued operations | 0.00 | 0.01 | (0.06 | ) | 0.04 | ||||||||||||
| Net loss | $ | (0.23 | ) | $ | (0.04 | ) | $ | (0.23 | ) | $ | (0.21 | ) | |||||
| Weighted average shares outstanding - basic and diluted | 423,531 | 408,515 | 422,314 | 408,276 | |||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
2
| Three Months Ended | Nine Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | ||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | ||||||||||||||
| Balance at beginning of period | $ | 405,846 | $ | 855,418 | $ | 375,973 | $ | 894,470 | |||||||||
| Net loss | (98,329 | ) | (18,137 | ) | (96,101 | ) | (86,033 | ) | |||||||||
| Other comprehensive income (loss) | 131 | 176 | (244 | ) | (3,860 | ) | |||||||||||
| Comprehensive loss | (98,198 | ) | (17,961 | ) | (96,345 | ) | (89,893 | ) | |||||||||
| Treasury shares issued in conjunction with shareholder settlement | 1,668 | -- | 1,668 | -- | |||||||||||||
| Other, principally shares issued pursuant to stock option plans, including tax benefit, and amortization of unearned compensation | 189 | 6,716 | 28,209 | 39,596 | |||||||||||||
| Balance at end of period | $ | 309,505 | $ | 844,173 | $ | 309,505 | $ | 844,173 | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
| Nine Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, | ||||||||
| 2004 | 2003 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (96,101 | ) | $ | (86,033 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 32,668 | 155,454 | ||||||
| Impairment of intangible assets | 131,637 | -- | ||||||
| Deferred income taxes | (3,311 | ) | (44,033 | ) | ||||
| Stock compensation expense | 326 | 33,109 | ||||||
| Loss on disposal of discontinued operations | 28,882 | -- | ||||||
| Gain on sale of marketable securities | (51 | ) | (2,755 | ) | ||||
| Gain on sale of equity investment | (13,172 | ) | -- | |||||
| Gain on lease settlement | (10,088 | ) | --</ | |||||