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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q

(Mark One)

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2003

OR

[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _____ to _____

Commission file number 0 - 26728
 
 

Talk America Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation)
23-2827736
(I.R.S. Employer Identification No.)


12020 Sunrise Valley Drive, Suite 250, Reston, Virginia
(Address of principal executive offices)
20191
(Zip Code)


(703) 391-7500
(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____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes X No____

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

26,351,570 shares of Common Stock, par value of $0.01 per share, were issued and outstanding as of August 11, 2003.

 
     
 

TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES

Index

 
Page
 
 
PART I - FINANCIAL INFORMATION
 
 
 
Item 1. Consolidated Financial Statements
 
 
 
1
 
 
2
 
 
3
 
 
4
 
 
5
 
 
10
 
 
19
 
 
19
 
 
PART II - OTHER INFORMATION
 
 
 
20
 
 
Item 6. Exhibits and Reports on Form 8-K
 
 
 
20
20

 

 
     
 

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
 

 
  
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
    
2003

 

 
2002

 

 
2003

 

 
2002
 
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Sales
 
$
93,748
 
$
77,673
 
$
181,591
 
$
157,120
 
 
    
 
    
 
    
 
    
 
  
Costs and expenses:
   
 
    
 
    
 
    
 
  
Network and line costs
   
43,268
   
37,652
   
87,152
   
77,871
 
General and administrative expenses
   
13,193
   
13,647
   
26,658
   
28,208
 
Provision for doubtful accounts
   
2,895
   
2,801
   
5,117
   
6,808
 
Sales and marketing expenses
   
10,985
   
6,913
   
19,770
   
12,808
 
Depreciation and amortization
   
4,380
   
4,429
   
8,688
   
8,872
 
   
 
 
 
 
Total costs and expenses
   
74,721
   
65,442
   
147,385
   
134,567
 
   
 
 
 
 
Operating income
   
19,027
   
12,231
   
34,206
   
22,553
 
 
    
 
    
 
    
 
    
 
  
Other income (expense):
   
 
    
 
    
 
    
 
  
Interest income
   
186
   
94
   
295
   
183
 
Interest expense
   
(2,027
)
 
(2,899
)
 
(4,506
)
 
(4,373
)
Other income (expense), net
   
314
   
(9
)
 
2,465
   
(816
)
   
 
 
 
 
Income before provision for income taxes
   
17,500
   
9,417
   
32,460
   
17,547
 
                           
Provision for income taxes
   
6,825
   
-
   
12,659
   
-
 
   
 
 
 
 
Net income
 
$
10,675
 
$
9,417
 
$
19,801
 
$
17,547
 
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
Income per share – Basic:
   
 
    
 
    
 
    
 
  
Net income per share
 
$
0.41
 
$
0.35
 
$
0.75
 
$
0.65
 
   
 
 
 
 
Weighted average common shares outstanding
   
26,226
   
27,222
   
26,301
   
27,204
 
   
 
 
 
 
Income per share – Diluted:
   
 
    
 
    
 
    
 
  
Net income per share
 
$
0.37
 
$
0.30
 
$
0.69
 
$
0.58
 
   
 
 
 
 
 Weighted average common and common equivalent shares outstanding
   
29,563
   
31,368
   
29,345
   
30,382
 
   
 
 
 
 

See accompanying notes to consolidated financial statements.

 
  1  
 

TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)


 

 

 
June 30,
2003

 

 
December 31, 2002
 
   
 
 
 
    
(Unaudited)  
    
 
  
Assets
   
 
    
 
  
Current assets:
   
 
    
 
  
Cash and cash equivalents
 
$
25,858
 
$
33,588
 
Accounts receivable, trade (net of allowance for uncollectible accounts of $7,954 and $7,821 at June 30, 2003 and December 31, 2002, respectively)
   
33,905
   
27,843
 
Deferred income taxes
   
10,653
   
17,500
 
Prepaid expenses and other current assets
   
1,957
   
2,330
 
   
 
 
Total current assets
   
72,373
   
81,261
 
 
    
 
    
 
  
Property and equipment, net
   
64,383
   
66,915
 
Goodwill
   
19,503
   
19,503
 
Intangibles, net
   
5,956
   
7,379
 
Deferred income taxes
   
--
   
4,800
 
Other assets
   
7,103
   
7,653
 
   
 
 
 
  
$
169,318
 
$
187,511
 
   
 
 
Liabilities and Stockholders’ Equity
   
 
    
 
  
Current liabilities:
   
 
    
 
  
Accounts payable
 
$
32,009
 
$
30,588
 
Sales, use and excise taxes
   
12,794
   
11,439
 
Deferred revenue
   
8,707
   
6,480
 
Current portion of long-term debt
   
58
   
61
 
Accrued compensation
   
4,264
   
5,609
 
Other current liabilities
   
7,172
   
9,013
 
   
 
 
Total current liabilities
   
65,004
   
63,190
 
   
 
 
Long-term debt: