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UNITED STATES
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 September 30, 2002
 
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 333-88799
 
 
INFONET SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
  
95-4148675
(State or other jurisdiction
of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
2160 East Grand Avenue, El Segundo, California
(Address of principal executive offices)
 
90245-1022
(Zip Code)
 
(310) 335-2600
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
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 ¨
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed under Sections 12, 13 or 15(d) of the Securities Exchange of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ¨    No ¨
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of November 6, 2002, the registrant had the following number of shares outstanding:
 
Class A common stock:  161,403,358
Class B common stock:  306,975,629
 

PART I
 
ITEM 1.    FINANCIAL STATEMENTS
 
INFONET SERVICES CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except per Share Amounts)
 
    
March 31, 2002
     
September 30, 2002
  
           
(Unaudited)
  
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
147,180
 
   
$
186,337
 
Short-term investments
   
 
370,591
 
   
 
324,998
 
Accounts receivable, net
   
 
130,748
 
   
 
104,606
 
Deferred income taxes
   
 
24,773
 
   
 
49,975
 
Prepaid expenses
   
 
20,721
 
   
 
22,993
 
Other current assets
   
 
33,650
 
   
 
25,741
 
    
  
Total current assets
   
 
727,663
 
   
 
714,650
 
    
  
Property, Equipment And Communication Lines, Net
   
 
494,401
 
   
 
438,598
 
Deferred Income Taxes
   
 
142,699
 
   
 
138,549
 
Intangible And Other Assets, Net
   
 
45,376
 
   
 
52,877
 
    
  
Total Assets
   
$
1,410,139
 
   
$
1,344,674
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Current portion of long-term obligations
   
$
10,315
 
   
$
17,719
 
Current portion of capital lease obligations
   
 
2,727
 
   
 
2,695
 
Accounts payable
   
 
51,185
 
   
 
34,098
 
Network communications
   
 
24,927
 
   
 
19,482
 
Accrued salaries and related benefits
   
 
18,947
 
   
 
16,761
 
Income taxes payable
   
 
4,669
 
   
 
4,737
 
Advance billings
   
 
26,996
 
   
 
22,628
 
Deferred installation revenues
   
 
10,714
 
   
 
11,040
 
Other accrued expenses
   
 
19,440
 
   
 
29,413
 
    
  
Total current liabilities
   
 
169,920
 
   
 
158,573
 
    
  
Deferred Revenue And Compensation
   
 
35,849
 
   
 
33,508
 
Capital Lease Obligations
   
 
6,227
 
   
 
4,892
 
Long Term Obligations
   
 
98,902
 
   
 
85,065
 
Minority Interest
   
 
1,450
 
   
 
1,721
 
Commitments and Contingencies
                  
Stockholders’ Equity:
                  
Class A common stock, $0.01 par value per share:
                  
400,000 shares authorized; 364,160 shares issued as of March 31, 2002 and September 30, 2002 and 161,403 shares outstanding as of March 31, 2002 and September 30, 2002; 202,757 shares held in treasury
   
 
66,078
 
   
 
66,078
 
Class B common stock $0.01 par value per share:
                  
600,000 shares authorized, 310,287 and 310,920 shares issued as of March 31, 2002 and September 30, 2002; 309,116 and 307,394 shares outstanding as of March 31, 2002 and September 30, 2002; 1,171 and 3,526 shares held in treasury as of March 31, 2002 and September 30, 2002
   
 
1,174,577
 
   
 
1,182,630
 
Treasury stock, at cost, 203,928 and 206,283 shares as of March 31, 2002 and September 30, 2002
   
 
(123,753
)
   
 
(129,063
)
Notes receivable from issuance of common stock
   
 
(8,577
)
   
 
(8,626
)
Accumulated deficit
   
 
(5,827
)
   
 
(48,464
)
Accumulated other comprehensive loss
   
 
(4,707
)
   
 
(1,640
)
    
  
Total stockholders’ equity
   
 
1,097,791
 
   
 
1,060,915
 
    
  
Total Liabilities and Stockholders’ Equity
   
$
1,410,139
 
   
$
1,344,674
 
    
  
 
See accompanying notes to consolidated financial statements.

1

INFONET SERVICES CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except per Share Amounts)
(Unaudited)
 
    
Three Months Ended September 30,
     
Six Months Ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
Revenues, Net
   
$
160,230
 
   
$
142,815
 
   
$
332,084
 
   
$
290,122
 
    
  
  
  
Expenses:
                                    
Country representative compensation
   
 
56,092
 
   
 
29,767
 
   
 
117,531
 
   
 
67,982
 
Bandwidth and related costs
   
 
32,849
 
   
 
27,679
 
   
 
62,309
 
   
 
96,818
 
Network operations
   
 
26,028
 
   
 
26,965
 
   
 
51,651
 
   
 
53,498
 
Selling, general and administrative
   
 
56,118
 
   
 
71,284
 
   
 
111,333
 
   
 
139,330
 
    
  
  
  
Total expenses
   
 
171,087
 
   
 
155,695
 
   
 
342,824
 
   
 
357,628
 
    
  
  
  
Operating Loss
   
 
(10,857
)
   
 
(12,880
)
   
 
(10,740
)
   
 
(67,506
)
Other Income (Expense):
                                    
Interest income
   
 
6,692
 
   
 
3,601
 
   
 
15,096
 
   
 
7,923
 
Interest expense
   
 
(2,855
)
   
 
(2,174
)
   
 
(5,845
)
   
 
(4,443
)
Other, net
   
 
718
 
   
 
(545
)
   
 
430
 
   
 
2,471
 
    
  
  
  
Total other income, net
   
 
4,555
 
   
 
882
 
   
 
9,681
 
   
 
5,951
 
    
  
  
  
Loss Before Credit For Income Taxes and Minority Interest
   
 
(6,302
)
   
 
(11,998
)
   
 
(1,059
)
   
 
(61,555
)
Credit For Income Taxes
   
 
(2,946
)
   
 
(5,985
)
   
 
(556
)
   
 
(19,189
)
    
  
  
  
Loss Before Minority Interest
   
 
(3,356
)
   
 
(6,013
)
   
 
(503
)
   
 
(42,366
)
Minority Interest
   
 
146
 
   
 
204
 
   
 
469
 
   
 
271
 
    
  
  
  
Net Loss
   
 
(3,502
)
   
 
(6,217
)
   
 
(972
)
   
 
(42,637
)
Other Comprehensive Income (Loss):
                                    
Foreign currency translation adjustments
   
 
1,563
 
   
 
285
 
   
 
752
 
   
 
3,960
 
Unrealized gains on securities, net of income tax
   
 
1,676
 
   
 
538
 
   
 
1,036
 
   
 
828
 
Cumulative effect of accounting changes, net of
income tax
   
 
—  
 
   
 
—  
 
   
 
(544
)
   
 
—  
 
Unrealized loss on derivative instruments, net of
income tax
   
 
(1,208
)
   
 
(928
)
   
 
(1,052
)
   
 
(1,721
)
    
  
  
  
Total other comprehensive income (loss), net
   
 
2,031
 
   
 
(105
)
   
 
192
 
   
 
3,067
 
    
  
  
  
Comprehensive Loss
   
$
(1,471
)
   
$
(6,322
)
   
$
(780
)
   
$
(39,570
)
    
  
  
  
Basic and Diluted Loss Per Common Share
   
$
(0.01
)
   
$
(0.01
)
   
$
0.00
 
   
$
(0.09
)
    
  
  
  
Basic Weighted Average Number of Common Shares Outstanding
   
 
471,056
 
   
 
469,496
 
   
 
470,909
 
   
 
469,381
 
Diluted Weighted Average Number of Common Shares Outstanding
   
 
471,056
 
   
 
469,496
 
   
 
470,909
 
   
 
469,381
 
 
 
See accompanying notes to consolidated financial statements.

2

INFONET SERVICES CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
    
Six Months Ended September 30,
  
    
2001
     
2002
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
Net loss
   
$
(972
)
   
$
(42,637
)
Adjustments to reconcile net loss to net cash provided by operating activities:
                  
Depreciation and amortization
   
 
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