As filed with the Securities and Exchange Commission on November 14, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2003 |
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Or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
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Commission File No. 0-20570
InterActiveCorp
(Formerly USA Interactive)
(Exact name of registrant as specified in its charter)
| Delaware | 59-2712887 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
152 West 57th Street, New York, New York 10019 (Address of Registrant's principal executive offices) |
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(212) 314-7300 (Registrant's telephone number, including area code) |
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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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).Yes ý No o
As of October 31, 2003, the following shares of the Registrant's common stock were outstanding:
| Common Stock, including 454,027 shares of restricted stock | 646,998,981 | |
| Class B Common Stock | 64,629,996 | |
| Total outstanding Common Stock | 711,628,977 | |
The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of October 31, 2003 was $18,926,475,432. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.
Item 1. Consolidated Financial Statements
INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2003 |
2002 |
2003 |
2002 |
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(In thousands, except per share data) |
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| Product sales | $ | 548,679 | $ | 449,324 | $ | 1,644,100 | $ | 1,358,438 | ||||||
| Service revenue | 1,061,591 | 735,832 | 2,879,415 | 1,892,447 | ||||||||||
| Net revenue | 1,610,270 | 1,185,156 | 4,523,515 | 3,250,885 | ||||||||||
| Cost of sales-product sales | 320,632 | 275,604 | 958,632 | 856,830 | ||||||||||
| Cost of sales-service revenue | 562,943 | 430,461 | 1,551,481 | 1,128,170 | ||||||||||
| Gross profit | 726,695 | 479,091 | 2,013,402 | 1,265,885 | ||||||||||
| Selling and marketing | 253,335 | 155,833 | 668,689 | 454,873 | ||||||||||
| General and administrative | 185,741 | 115,406 | 508,710 | 280,315 | ||||||||||
| Other | 27,933 | 21,265 | 87,147 | 57,737 | ||||||||||
| Amortization of cable distribution fees | 16,749 | 12,615 | 45,538 | 38,679 | ||||||||||
| Amortization of non-cash distribution and marketing expense | 21,470 | 10,416 | 44,685 | 27,485 | ||||||||||
| Amortization of non-cash compensation expense | 81,552 | 2,930 | 106,194 | 10,002 | ||||||||||
| Amortization of intangibles | 76,890 | 62,944 | 184,604 | 113,921 | ||||||||||
| Depreciation | 50,514 | 46,670 | 134,373 | 124,453 | ||||||||||
| Restructuring charges | 708 | 31,411 | 383 | 54,345 | ||||||||||
| Goodwill impairment | — | — | — | 22,247 | ||||||||||
| Merger costs | 940 | 2,976 | 11,465 | 2,976 | ||||||||||
| Operating profit | 10,863 | 16,625 | 221,614 | 78,852 | ||||||||||
| Other income (expense): | ||||||||||||||
| Interest income | 46,175 | 38,231 | 130,531 | 73,381 | ||||||||||
| Interest expense | (20,641 | ) | (10,052 | ) | (67,259 | ) | (31,322 | ) | ||||||
| Equity in gains (losses) of VUE | 12,157 | (2,739 | ) | (226,861 | ) | (2,739 | ) | |||||||
| Equity in losses in unconsolidated subsidiaries and other expenses | (4,849 | ) | (15,417 | ) | (6,899 | ) | (131,279 | ) | ||||||
| Total other income (expense), net | 32,842 | 10,023 | (170,488 | ) | (91,959 | ) | ||||||||
| Earnings (loss) from continuing operations before income taxes and minority interest | 43,705 | 26,648 | 51,126 | (13,107 | ) | |||||||||
| Income tax expense | (13,116 | ) | (36,052 | ) | (10,625 | ) | (75,498 | ) | ||||||
| Minority interest | (8,261 | ) | (17,235 | ) | (62,403 | ) | (29,305 | ) | ||||||
| Earnings (loss) from continuing operations before cumulative effect of accounting change | 22,328 | (26,639 | ) | (21,902 | ) | (117,910 | ) | |||||||
| Gain on contribution of USA Entertainment to VUE, net of tax | — | — | — | 2,378,311 | ||||||||||
| Discontinued operations, net of tax | (348 | ) | (6,725 | ) | 33,280 | 5,975 | ||||||||
| Earnings (loss) before cumulative effect of accounting change | 21,980 | (33,364 | ) | 11,378 | 2,266,376 | |||||||||
| Cumulative effect of accounting change, net of tax | — | — | — | (461,389 | ) | |||||||||
| Earnings (loss) before preferred dividends | 21,980 | (33,364 | ) | 11,378 | 1,804,987 | |||||||||
| Preferred dividend | (3,264 | ) | (3,264 | ) | (9,792 | ) | (8,495 | ) | ||||||
| Net income (loss) available to common shareholders | $ | 18,716 | $ | (36,628 | ) | $ | 1,586 | $ | 1,796,492 | |||||
| Income (loss) per share: | ||||||||||||||
| Basic earnings (loss) per share from continuing operations | $ | 0.03 | $ | (0.07 | ) | $ | (0.06 | ) | $ | (0.30 | ) | |||
| Diluted earnings (loss) per share from continuing operations | $ | 0.02 | $ | (0.07 | ) | $ | (0.07 | ) | $ | (0.31 | ) | |||
| Basic earnings (loss) per share before cumulative effect of accounting change | $ | 0.03 | $ | (0.08 | ) | $ | 0.00 | $ | 5.39 | |||||
| Diluted earnings (loss) per share before cumulative effect of accounting change | $ | 0.02 | $ | (0.08 | ) | $ | (0.01 | ) | $ | 5.38 | ||||
| Basic earnings (loss) per share | $ | 0.03 | $ | (0.08 | ) | $ | 0.00 | $ | 4.29 | |||||
| Diluted earnings (loss) per share | $ | 0.02 | $ | (0.08 | ) | $ | (0.01 | ) | $ | 4.28 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
2
INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30, 2003 |
December 31, 2002 |
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(unaudited) |
(audited) |
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(In thousands) |
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| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 2,418,435 | $ | 3,077,410 | ||||
| Restricted cash equivalents | 39,367 | 40,696 | ||||||
| Marketable securities | 2,059,723 | 849,762 | ||||||
| Accounts and notes receivable, net of allowance of $23,668 and $29,036, respectively | 392,068 | 308,377 | ||||||
| Inventories, net | 258,173 | 192,751 | ||||||
| Deferred tax assets | 69,013 | 2,007 | ||||||
| Other current assets, net | 138,604 | 145,059 | ||||||
| Current assets of discontinued operations | 891 | 8,079 | ||||||
| Total current assets | 5,376,274 | 4,624,141 | ||||||
| PROPERTY, PLANT AND EQUIPMENT | ||||||||
| Computer and broadcast equipment | 622,450 | 542,998 | ||||||
| Buildings and leasehold improvements | 149,042 | 141,063 | ||||||
| Furniture and other equipment | 153,670 | 137,388 | ||||||
| Land | 18,381 | 15,802 | ||||||
| Projects in progress | 37,578 | 20,487 | ||||||
| 981,121 | 857,738 | |||||||
| Less accumulated depreciation and amortization | (537,523 | ) | (427,491 | ) | ||||
| Total property, plant and equipment | 443,598 | 430,247 | ||||||
| OTHER ASSETS | ||||||||
| Goodwill | 10,785,058 | 5,997,842 | ||||||
| Intangible assets, net | 2,041,661 | 1,258,070 | ||||||
| Long-term investments | 1,411,543 | 1,582,182 | ||||||
| Preferred interest exchangeable for common stock | 1,428,530 | 1,428,530 | ||||||
| Cable distribution fees, net | 137,452 | 167,249 | ||||||
| Note receivables and advances, net of current portion ($5,331 and $14,834, respectively, from related parties) | 12,939 | 19,090 | ||||||
| Deferred charges and other, net | 110,156 | 140,816 | ||||||
| Non-current assets of discontinued operations | 410 | 10,825 | ||||||
| Total other assets | 15,927,749 | 10,604,604 | ||||||
| TOTAL ASSETS | $ | 21,747,621 | $ | 15,658,992 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30, 2003 |
December 31, 2002 |
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(unaudited) |
(audited) |
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(In thousands, except share data) |
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| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Current maturities of long-term obligations | $ | 1,295 | $ | 24,957 | ||||
| Accounts payable, trade | 704,912 | 478,043 | ||||||
| Accounts payable, client accounts | 221,622 | 131,348 | ||||||
| Cable distribution fees payable | 38,265 | 39,107 | ||||||
| Deferred merchant bookings | 277,138 | 149,348 | ||||||
| Deferred revenue | 195,701 | 128,580 | ||||||
| Income tax payable | 119,605 | 177,019 | ||||||
| Other accrued liabilities | 488,412 | 401,510 | ||||||
| Current liabilities of discontinued operations | 16,509 | 24,713 | ||||||
| Total current liabilities | 2,063,459 | 1,554,625 | ||||||
| Long-Term Obligations, net of current maturities | 1,123,822 | 1,211,145 | ||||||
| Other Long-Term Liabilities | 85,577 | 77,843 | ||||||
| Deferred Income Taxes | 2,225,585 | 2,374,112 | ||||||
| Minority Interest | 90,461 | 1,081,274 | ||||||
| Common Stock Exchangeable For Preferred Interest | 1,428,530 | 1,428,530 | ||||||
| Shareholders' Equity | ||||||||
| Preferred stock—$.01 par value; authorized 100,000,000 shares; issued and outstanding 13,118,182 | 131 | 131 | ||||||
| Common stock—$.01 par value; authorized 1,600,000,000 shares; issued 674,674,554 and 392,334,359 shares respectively, and outstanding 645,695,049 and 385,698,610 shares, respectively, including 454,207 and 441,169 of restricted stock, respectively | 6,452 | 3,852 | ||||||
| Class B convertible common stock $.01 par value; authorized 400,000,000 shares; issued and outstanding 64,629,996 | 646 | 646 | ||||||
| Additional paid-in capital and unearned compensation | 13,517,610 | 5,941,141 | ||||||
| Retained earnings | 2,124,197 | 2,122,611 | ||||||
| Accumulated other comprehensive income | 29,989 | 15,697 | ||||||
| Treasury stock 28,979,505 and 6,635,749 shares, respectively | (943,840 | ) | (147,617 | ) | ||||
| Note receivable from key executive for common stock issuance | (4,998 | ) | (4,998 | ) | ||||
| Total shareholders' equity | 14,730,187 | 7,931,463 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 21,747,621 | $ | 15,658,992 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
INTERACTIVECORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
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Total |
Preferred Stock |
Common Stock |
Class B Convertible Common Stock |
Addit. Paid-in Capital/ Unearned Comp |
Retained Earnings (Accum. Deficit) |
Accum. Other Comp. Income |
Treasury Stock |
Note Receivable from key executive for common stock issuance |
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Shares |
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Shares |
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Shares |
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(In thousands) |
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| Balance as of December 31, 2002 | $ | 7,931,463 | $ | 131 | 13,118 | $ | 3,852 | 385,699 | $ | 646 | 64,630 | $ | 5,941,141 | $ | 2,122,611 | $ | 15,697 | $ | (147,617 | ) | $ | (4,998 | ) | ||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||
| Net income for the Nine months ended September 30, 2003 | 11,378 | — | — | — | — | — | — | — | 11,378 | — | — | — | |||||||||||||||||||||||
| Increase in unrealized gains in available for sale securities | 179 | — | — | — | — | — | — | — | — | 179 | — | — | |||||||||||||||||||||||
| Foreign currency translation | 14,113 | — | — | — | — | — | — | — | — | 14,113 | — | — | |||||||||||||||||||||||
| Comprehensive income | 25,670 | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the Ticketmaster merger | 875,587 | — | — | 455 | 45,471 | — | — | 875,132 | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the uDate transaction | 132,892 | — | — | 55 | 5,480 | — | — | 132,837 | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the Hotels.com merger | 1,180,675 | — | — | 443 | 44,315 | — | — | 1,180,232 | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the Liberty preemptives | 1,165,901 | — | — | 487 | 48,701 | — | — | 1,165,414 | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the Expedia transaction | 3,486,359 | — | — | 1,008 | 100,762 | — | — | 3,485,351 | — | — | — | — | |||||||||||||||||||||||
| Issuance of securities in connection with the LendingTree transaction | 716,028 | — | — | 188 | 18,765 | — | — | 715,840 | — | — | — | — | |||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants | 8,693 | — | — | 4 | 414 | — | — | 8,689 | — | — | — | — | |||||||||||||||||||||||
| Vesting of restricted stock units | 2,411 | — | — | 1 | 75 | — | — | 2,410 | — | — | — | — | |||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options, restricted stock and other | 225,929 | — | — | 182 | 18,357 | — | — | 225,747 | — | — | — | — | |||||||||||||||||||||||
| Income tax benefit related to stock options exercised | 150,973 | — | — | — | — | — | — | 150,973 | — | — | — | — | |||||||||||||||||||||||
| Purchase of warrants | (439,906 | ) | — | — | — | — | — | — | (439,906 | ) | — | — | — | — | |||||||||||||||||||||
| Dividend on preferred stock | (9,792 | ) | — | — | — | — | — | — | — | (9,792 | ) | — | — | — | |||||||||||||||||||||
| Amortization of non-cash compensation | 73,750 | — | — | — | — | — | — | 73,750 | — | — | — | — | |||||||||||||||||||||||
| Purchase of treasury stock | (796,446 | ) | — | — | (223 | ) | (22,344 | ) | — | — | — | — | — | (796,223 | ) | — | |||||||||||||||||||
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