UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
Commission File Number: 0-24983
NetSolve, Incorporated
(Exact name of the registrant as specified in its charter)
| Delaware |
75-2094811-2 | |
| (State or Other Jurisdiction of |
(IRS Employer | |
| Incorporation or Organization) |
Identification No.) |
9500 Amberglen Boulevard
Austin, Texas 78729
(Address of principal executive offices, including zip code)
(512) 340-3000
(Registrant’s telephone number, including area code)
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 x No ¨
Number of shares outstanding of the issuer’s common stock, $.01 par value, as of February 10, 2003: 11,585,455
NETSOLVE, INCORPORATED
| Page | ||||
| PART I. |
FINANCIAL INFORMATION |
|||
| Item 1. |
Financial Statements |
|||
| Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2002 (unaudited) |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | ||
| Item 3. |
21 | |||
| Item 4. |
21 | |||
| PART II. |
OTHER INFORMATION |
|||
| Item 1. |
22 | |||
| Item 2. |
22 | |||
| Item 6. |
23 |
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NETSOLVE, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| 3/31/2002 |
12/31/2002 |
|||||||
| (unaudited) |
||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
47,160 |
|
$ |
41,197 |
| ||
| Short-term investments |
|
— |
|
|
3,973 |
| ||
| Restricted cash |
|
349 |
|
|
353 |
| ||
| Accounts receivable, net of allowance for doubtful accounts of $202 at March 31, 2002 and $205 at December 31, 2002 |
|
6,169 |
|
|
7,301 |
| ||
| Prepaid expenses and other assets |
|
1,586 |
|
|
2,068 |
| ||
| Deferred tax assets |
|
2,082 |
|
|
2,082 |
| ||
| Total current assets |
|
57,346 |
|
|
56,974 |
| ||
| Property and Equipment: |
||||||||
| Computer equipment and software |
|
10,337 |
|
|
11,918 |
| ||
| Furniture, fixtures and leasehold improvements |
|
5,316 |
|
|
4,649 |
| ||
| Other equipment |
|
410 |
|
|
373 |
| ||
|
|
16,063 |
|
|
16,940 |
| |||
| Less accumulated depreciation and amortization |
|
(8,094 |
) |
|
(10,085 |
) | ||
| Net property and equipment |
|
7,969 |
|
|
6,855 |
| ||
| Deferred tax assets, net of current portion |
|
1,962 |
|
|
1,946 |
| ||
| Other assets |
|
492 |
|
|
211 |
| ||
| Total assets |
$ |
67,769 |
|
$ |
65,986 |
| ||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
959 |
|
$ |
424 |
| ||
| Accrued liabilities |
|
3,872 |
|
|
5,011 |
| ||
| Future rentals for idle facility |
|
1,602 |
|
|
1,499 |
| ||
| Deferred revenue |
|
1,055 |
|
|
1,008 |
| ||
| Total current liabilities |
|
7,488 |
|
|
7,942 |
| ||
| Deferred revenue, net of current portion |
|
891 |
|
|
498 |
| ||
| Future rentals for idle facility, net of current portion |
|
1,048 |
|
|
— |
| ||
| Stockholders' equity: |
||||||||
| Common stock, $.01 par value; 25,000,000 shares authorized at March 31, 2002 and December 31, 2002; 15,063,591 issued and 12,133,275 outstanding at March 31, 2002 and 15,101,603 issued and 11,722,478 outstanding at December 31, 2002 |
|
150 |
|
|
150 |
| ||
| Additional paid-in capital |
|
81,110 |
|
|
81,198 |
| ||
| Treasury stock |
|
(21,059 |
) |
|
(24,235 |
) | ||
| Deferred compensation |
|
(27 |
) |
|
(5 |
) | ||
| Retained earnings (accumulated deficit) |
|
(1,832 |
) |
|
438 |
| ||
| Total stockholders' equity |
|
58,342 |
|
|
57,546 |
| ||
| Total liabilities and stockholders' equity |
$ |
67,769 |
|
$ |
65,986 |
| ||
Certain reclassifications have been made to prior year balances to conform to the current year presentations.
See accompanying notes.
3
NETSOLVE, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Three Months Ended |
Nine Months Ended |
||||||||||||||
| 12/31/2001 |
12/31/2002 |
12/31/2001 |
12/31/2002 |
||||||||||||
| (unaudited) |
(unaudited) |
||||||||||||||
| Revenues: |
|||||||||||||||
| Network management services |
$ |
9,931 |
|
$ |
10,434 |
$ |
28,222 |
|
$ |
30,606 |
| ||||
| Maintenance and equipment |
|
2,437 |
|
|
2,607 |
|
7,680 |
|
|
7,126 |
| ||||
| Total revenues |
|
12,368 |
|
|
13,041 |
|
35,902 |
|
|
37,732 |
| ||||
| Costs of revenues: |
|||||||||||||||
| Network management services |
|
5,800 |
|
|
6,089 |
|
16,570 |
|
|
18,110 |
| ||||
| Maintenance and equipment |
|
1,607 |
|
|
1,859 |
|
5,230 |
|
|
4,877 |
| ||||
| Total costs of revenues |
|
7,407 |
|
|
7,948 |
|
21,800 |
|
|
22,987 |
| ||||
| Gross profits: |
|||||||||||||||
| Network management services |
|
4,131 |
|
|
4,345 |
|
11,652 |
|
|
12,496 |
| ||||
| Maintenance and equipment |
|
830 |
|
|
748 |
|
2,450 |
|
|
2,249 |
| ||||
|
|
4,961 |
|
|
5,093 |
|
14,102 |
|
|
14,745 |
| |||||
| Operating expenses: |
|||||||||||||||
| Development |
|
1,007 |
|
|
1,050 |
|
2,720 |
|
|
2,801 |
| ||||
| Selling and marketing |
|
1,688 |
|
|
1,867 |
|
4,650 |
|
|
5,386 |
| ||||
| General and administrative |
|
1,297 |
|
|
1,450 |
|
3,658 |
|
|
3,583 |
| ||||
| Amortization of deferred compensation |
|
9 |
|
|
7 |
|
27 |
|
|
22 |
| ||||
| Total operating expenses |
|
4,001 |
|
|
4,374 |
|
11,055 |
|
|
11,792 |
| ||||
| Operating income |
|
960 |
|
|
719 |
|
3,047 |
|
|
2,953 |
| ||||
| Other income (expense): |
|||||||||||||||
| Interest income |
|
268 |
|
|
186 |
|
1,211 |
|
|
604 |
| ||||
| Interest expense |
|
(2 |
) |
|
— |
|
(8 |
) |
|
(1 |
) | ||||
| Other, net |
|
1 |
|
|
5 |
|
16 |
|
|
20 |
| ||||
|
| |||||||||||||||