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 March 31, 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 1-13806
iDINE REWARDS NETWORK INC.
(Exact name of registrant as specified in its charter)
| DELAWARE |
84-6028875 | |
| (State of other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 11900 Biscayne Boulevard, North Miami, |
Florida 33181 | |
| (Address of principal executive offices) |
(zip code) |
305-892-3343
(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. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
As of May 7, 2003, there were 22,411,408 shares of the Registrant’s $.02 par value common stock outstanding.
iDINE REWARDS NETWORK INC. AND SUBSIDIARIES
| PAGE NO. | ||||
| PART I. |
FINANCIAL INFORMATION |
|||
| Item 1. |
Financial Statements: |
|||
| Consolidated Balance Sheets—March 31, 2003 (unaudited) and December 31, 2002 |
3 | |||
| Consolidated Statements of Operations—Three months ended March 31, 2003 and 2002 (unaudited) |
4 | |||
| Consolidated Statements of Cash Flows—Three months ended March 31, 2003 and 2002 (unaudited) |
5 | |||
| 6-12 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13-20 | ||
| Item 3. |
20 | |||
| Item 4. |
21 | |||
| PART II. |
21-22 | |||
| 22 | ||||
iDINE REWARDS NETWORK INC. AND SUBSIDIARIES
(in thousands, except per share data)
| March 31, 2003 |
December 31, 2002* |
|||||||
| (unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
10,366 |
|
$ |
8,266 |
| ||
| Short term investments |
|
1,702 |
|
|
1,183 |
| ||
| Accounts receivable, net |
|
7,179 |
|
|
6,178 |
| ||
| Rights to receive, net |
|
108,400 |
|
|
111,962 |
| ||
| Deferred income taxes |
|
5,537 |
|
|
5,537 |
| ||
| Prepaid expenses and other current assets |
|
1,890 |
|
|
1,150 |
| ||
| Total current assets |
|
135,074 |
|
|
134,276 |
| ||
| Property and equipment, net |
|
7,889 |
|
|
7,813 |
| ||
| Other assets |
|
332 |
|
|
383 |
| ||
| Excess of cost over net assets acquired |
|
9,671 |
|
|
9,671 |
| ||
| Total assets |
$ |
152,966 |
|
$ |
152,143 |
| ||
| Liabilities and Shareholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Secured non-recourse revolving debt |
|
60,000 |
|
|
60,000 |
| ||
| Accounts payable—Rights to receive |
|
13,496 |
|
|
17,009 |
| ||
| Accounts payable—trade |
|
14,589 |
|
|
13,951 |
| ||
| Accrued expenses and other |
|
3,763 |
|
|
6,311 |
| ||
| Deferred membership fee income |
|
2,143 |
|
|
2,216 |
| ||
| Deferred income taxes |
|
1,160 |
|
|
49 |
| ||
| Total current liabilities |
|
95,151 |
|
|
99,536 |
| ||
| Other long-term liabilities |
|
346 |
|
|
206 |
| ||
| Total liabilities |
|
95,497 |
|
|
99,742 |
| ||
| Shareholders’ equity : |
||||||||
| Preferred stock, par value $0.10 per share (1,000 shares authorized; none issued and outstanding) |
|
— |
|
|
— |
| ||
| Preferred stock—Series A, senior convertible redeemable, par value $0.10 per share; authorized 10,000 shares; issued 0 and 1,330 shares, respectively, and outstanding 0 and 1,218 shares, respectively |
|
— |
|
|
133 |
| ||
| Common stock, par value $0.02 per share; authorized 70,000 shares; issued 22,327 and 20,530 shares, respectively, and outstanding 22,045 and 20,381 shares, respectively |
|
447 |
|
|
411 |
| ||
| Additional paid-in capital |
|
50,351 |
|
|
48,573 |
| ||
| Cumulative other comprehensive income |
|
2 |
|
|
4 |
| ||
| Retained earnings |
|
8,879 |
|
|
5,490 |
| ||
| Treasury stock, at cost (282 and 260 shares, respectively) |
|
(2,210 |
) |
|
(2,210 |
) | ||
| Total shareholders’ equity |
|
57,469 |
|
|
52,401 |
| ||
| Total liabilities and shareholders’ equity |
$ |
152,966 |
|
$ |
152,143 |
| ||
| * | The balance sheet at December 31, 2002 is derived from the registrant’s audited consolidated financial statements. |
See accompanying notes to unaudited consolidated financial statements.
3
iDINE REWARDS NETWORK INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 2003 and 2002
(unaudited)
(in thousands, except earnings per share)
| 2003 |
2002 |
|||||||
| Operating revenue: |
||||||||
| Gross dining sales |
$ |
82,595 |
|
$ |
56,971 |
| ||
| Cost of sales |
|
44,237 |
|
|
31,019 |
| ||
| Member rewards and savings |
|
16,867 |
|
|
11,064 |
| ||
| Net revenue from dining sales |
|
21,491 |
|
|
14,888 |
| ||
| Membership and renewal fee income |
|
1,346 |
|
|
1,412 |
| ||
| Other operating revenue |
|
41 |
|
|
67 |
| ||
| Total operating revenues |
|
22,878 |
|
|
16,367 |
| ||
| Operating expenses: |
||||||||
| General and administrative |
|
4,871 |
|
|
4,060 |
| ||
| Salaries and benefits |
|
4,833 |
|
|
4,639 |
| ||
| Sales commission and expense |
|
3,903 |
|
|
1,582 |
| ||
| Printing and postage |
|
1,777 |
|
|
1,251 |
| ||
| Member and merchant marketing expenses |
|
1,625 |
|
|
1,145 |
| ||
| Total operating expenses |
|
17,009 |
|
|
12,677 |
| ||
| Operating income |
|
5,869 |
|
|
3,690 |
| ||
| Other income (expense): |
||||||||
| Interest and other investment gain (loss) |
|
33 |
|
|
(69 |
) | ||
| Interest expense and financing cost |
|
(439 |
) |
|
(604 |
) | ||
| Income before income taxes |
|
5,463 |
|
|
3,017 |
| ||
| Income tax expense (benefit) |
|
2,074 |
|
|
(81 |
) | ||
| Net income |
$ |
3,389 |
|
$ |
3,098 |
| ||
| Net income per share of common stock: |
||||||||
| Basic |
$ |
0.16 |
|
$ |
0.18 |
| ||
| Diluted |
$ |
0.14 |
|
$ |
0.15 |
| ||
| Weighted average number of common and common equivalent shares outstanding: |
||||||||
| Basic |
|
21,597 |
|
|
15,827 |
| ||
| Diluted |
|
23,884 |
|
|
21,103 |
| ||
See accompanying notes to unaudited consolidated financial statements.
4
iDINE REWARDS NETWORK INC. AND SUBSIDIARIES
Three months ended March 31, 2003 and 2002
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ |
3,389 |
|
$ |
3,098 |
| ||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
|
1,099 |
|
|
1,073 |
| ||
| Amortization of deferred financing cost |
|
63 |
|
|
171 |
| ||
| Deferred income taxes |
|
2,074 |
|
|
— |
| ||
| Provision for losses on Rights to receive |
|
4,215 |
|
|
3,214 |
| ||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
|
(1,001 |
) |
|
(1,694 |
) | ||
| Rights to receive |
|
(4,166 |
) |
|
(5,871 |
) | ||
| Prepaid expenses and other current assets |
|
(738 |
) |
|
(228 |
) | ||
| Other assets |
|
(12 |
) |
|
61 |
| ||
| Accounts payable |
|
1,193 |
|
|
2,494 |
| ||
| Income taxes |
||||||||