UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| (Mark One) | |||
 |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For
the quarterly period ended September 30, 2004 |
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OR |
|||
 |
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 Number 000-25469 |
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iVillage
Inc.
(Exact Name of Registrant as Specified
in Its Charter)
| Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
13-3845162 (IRS Employer Identification No.) |
| 500 Seventh Avenue, New York, New York | 10018 |
| (Address of Principal Executive Offices) | (Zip Code) |
| (212) 600-6000 | |
| (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
No
Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of November 10, 2004, the registrant had outstanding 71,601,345 shares of common stock.
iVillage Inc.
Form 10-Q
For the Quarter ended September 30,
2004
INDEX
TRADEMARKS
iVillage®, iVillage.com®, gURL.com®, Newborn Channel®, WebStakes.com®, iVillage Consulting®, iVillage Solutions® and iVillageAccess® are registered trademarks of iVillage Inc. The stylized iVillage logo, “the Internet for Women”, Astrology.com, Baby Steps, Public Affairs Group, Inc., Business Women’s Network, Business Women’s Network Government, Diversity Best Practices, Best Practices In Corporate Communications and Promotions.com are trademarks of iVillage Inc. All other brand names, trademarks or service marks referred to in this report are the property of their owners.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
iVillage Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
| September 30, | December 31, | |||||
| 2004 | 2003 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents. | $ | 84,465 | $ | 15,823 | ||
Accounts receivable, less allowance
for doubtful accounts of $1,003 and $1,134 as of September 30, 2004 and
December 31, 2003, respectively
|
7,456 | 5,980 | ||||
| Accounts receivable – related parties | 447 | 1,537 | ||||
| Prepaid rent | 318 | 318 | ||||
| Other current assets | 4,530 | 3,520 | ||||
| Total current assets | 97,216 | 27,178 | ||||
| Fixed assets, net | 7,483 | 7,269 | ||||
| Goodwill, net | 22,580 | 22,580 | ||||
| Intangible assets, net | 9,153 | 11,989 | ||||
| Prepaid rent, net of current portion | 3,241 | 3,354 | ||||
| Other assets | 135 | 158 | ||||
| Total assets | $ | 139,808 | $ | 72,528 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 10,720 | $ | 10,237 | ||
| Accounts payable and accrued expenses – related parties | 44 | 204 | ||||
| Deferred revenue | 3,008 | 3,323 | ||||
| Deferred rent | 144 | 144 | ||||
| Other current liabilities. | 97 | 190 | ||||
| Total current liabilities | 14,013 | 14,098 | ||||
| Deferred rent, net of current portion | 1,375 | 1,483 | ||||
| Total liabilities | 15,388 | 15,581 | ||||
| Commitments and contingencies (Note 7) | — | — | ||||
| Stockholders’ equity: | ||||||
Preferred stock – par
value $.01, 5,000,000 shares authorized; no shares issued and outstanding
as of September 30, 2004 and December 31, 2003,
respectively
|
— | — | ||||
Common stock – par value
$.01, 200,000,000 shares authorized; 72,629,409 and 57,233,470 shares
issued at September 30, 2004 and December 31, 2003, respectively; 71,588,558
and 56,230,024 shares outstanding as of September 30, 2004 and December
31, 2003, respectively
|
726 | 572 | ||||
| Additional paid-in capital | 617,868 | 550,892 | ||||
Treasury stock at cost (1,040,851
and 1,003,446 shares as of September 30, 2004 and December 31, 2003, respectively)
|
(643 | ) | (430 | ) | ||
| Stockholders’ notes receivable | (44 | ) | (241 | ) | ||
| Accumulated deficit | (493,487 | ) | (493,846 | ) | ||
| Total stockholders’ equity | 124,420 | 56,947 | ||||
| Total liabilities and stockholders’ equity | $ | 139,808 | $ | 72,528 | ||
The accompanying notes are an integral part of these condensed consolidated financial statements
1
iVillage Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
| Three months ended | Nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
| Revenues: | ||||||||||||
| Revenues | $ | 15,015 | $ | 11,674 | $ | 42,939 | $ | 34,201 | ||||
| Revenues – related parties | 1,683 | 1,888 | 5,764 | 5,157 | ||||||||
| Total revenues | 16,698 | 13,562 | 48,703 | 39,358 | ||||||||
| Operating expenses: | ||||||||||||
| Editorial, product development and technology | 7,740 | 7,551 | 22,264 | 22,180 | ||||||||
| Sales and marketing | 4,562 | 4,341 | 13,670 | 14,816 | ||||||||
| Sales and marketing – Hearst Communications, Inc.. | — | 135 | — | 218 | ||||||||
| General and administrative | 2,440 | 4,198 | 8,233 | 10,295 | ||||||||
| Lease restructuring charge and related impairment of fixed assets | — | 5,101 | — | 9,126 | ||||||||
| Depreciation and amortization | 1,140 | 1,856 | 4,897 | 6,804 | ||||||||
| Impairment of goodwill, intangible assets and fixed assets | — | — | — | 4,029 | ||||||||
| Total operating expenses | 15,882 | 23,182 | 49,064 | 67,468 | ||||||||
| Income (loss) from operations | 816 | (9,620 | ) | (361 | ) | (28,110 | ) | |||||
| Interest income, net | 236 | 62 | 304 | 192 | ||||||||
| Other income, net | 11 | 139 | 97 | 139 | ||||||||
| Gain on sale of joint venture interest | 76 | 200 | 319 | 425 | ||||||||
| Net income (loss) before minority interest | 1,139 | (9,219 | ) | 359 | (27,354 | ) | ||||||
| Minority interest | — | (47 | ) | — | (107 | ) | ||||||
| Net income (loss) | $ | 1,139 | $ | (9,266 | ) | $ | 359 | $ | (27,461 | ) | ||
| Per share data: | ||||||||||||
| Basic net income (loss) per share | $ | 0.02 | $ | (0.17 | ) | $ | 0.01 | $ | (0.49 | ) | ||
| Diluted net income (loss) per share | $ | 0.02 | $ | (0.17 | ) | $ | 0.01 | $ | (0.49 | ) | ||
Weighted average shares of common stock outstanding used
in computing basic net income (loss) per share |
70,891 | 55,753 | 62,834 | 55,613 | ||||||||
Weighted average shares of common stock outstanding used
in computing diluted net income (loss) per share |
75,230 | 55,753 | 67,902 | 55,613 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
2
iVillage Inc. and Subsidiaries
Condensed Consolidated Statements of Cash
Flows
(in thousands)
(Unaudited)
Three
months ended |
Nine
months ended |
|||||||||||
September
30, |
September
30, |
|||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income (loss) | $ | 1,139 | $ | (9,266 | ) | $ | 359 | $ | (27,461 | ) | ||
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities: |
||||||||||||
| Impairment of goodwill, intangible assets and fixed assets | — | — | — | 4,029 | ||||||||
| Depreciation and amortization | 1,140 | 1,856 | 4,897 | 6,804 | ||||||||
| Deferred rent amortization | (36 | ) | (42 | ) | (108 | ) | (210 | ) | ||||
| Bad debt expense | (62 | ) | 20 | (62 | ) | 208 | ||||||
| Non-cash print advertising expense | — | 315 | — | 398 | ||||||||
Expense recognized in connection with issuance/modification
of terms of stock options |
— | 320 | 19 | 395 | ||||||||
| Minority interest | — | 47 | — | 107 | ||||||||
| Lease restructuring charge and related impairment of fixed assets | — | 350 | — | 4,375 | ||||||||
| Gain on sale of joint venture interest | (76 | ) | (200 | ) | (319 | ) | (425 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | 647 | (239 | ) | (324 | ) | (473 | ) | |||||
| Prepaid rent | 38 | (3,710 | ) | 113 | (3,710 | ) | ||||||
| Restricted cash and other assets | (306 | ) | 8,592 | (987 | ) | 9,120 | ||||||
| Accounts payable and accrued expenses | 226 | 712 | 323 | 10 | ||||||||
| Lease restructuring | — | (59 | ) | — | (90 | ) | ||||||
| Deferred revenue | (896 | ) | (392 | ) | (315 | ) | 858 | |||||
| Net cash provided by (used in) operating activities | 1,814 | (1,696 | ) | 3,596 | (6,065 | ) | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of fixed assets | (592 | ) | (209 | ) | (2,201 | ) | (899 | ) | ||||
| Purchase of intangible assets | (75 | ) | (150 | ) | (75 | ) | (150 | ) | ||||
| Cash paid less cash
acquired for acquisition of Promotions.com, Inc. |
— | — | — | (9 | ) | |||||||
| Proceeds from the sale of joint venture interest | 76 | 75 | 227 | 642 | ||||||||
| Net cash used in investing activities | (591 | ) | (284 | ) | (2,049 | ) | (416 | ) | ||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from exercise of stock options and warrants | 1,130 | 455 | 2,224 | 522 | ||||||||
| Proceeds from securities offering, net of offering costs | 64,674 | — | 64,674 | — | ||||||||
| Principal payments on stockholders’ notes receivable | — | 7 | 197 | 21 | ||||||||
| Net cash provided by financing activities | 65,804 | 462 | 67,095 | 543 | ||||||||
| Net increase (decrease) in cash for the period | 67,027 | (1,518 | ) | 68,642 | (5,938 | ) | ||||||
| Cash and cash equivalents, beginning of period | 17,438 | 16,966 | 15,823 | 21,386 | ||||||||
| Cash and cash equivalents, end of period | $ | 84,465 | $ | 15,448 | $ | 84,465 | $ | 15,448 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
3
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Note 1 – Organization and Basis of Presentation
iVillage is “the Internet for women” and consists of several online and offline media-based properties, including the iVillage.com Web site, or iVillage.com, iVillage Consulting, Promotions.com, Inc., or Promotions.com, Knowledgeweb, Inc., operator of the Astrology.com Web site, or Astrology.com, iVillage Parenting Network, Inc., or IVPN, and Public Affairs Group, Inc., or PAG. Following is a synopsis of our principal operational activities:
| iVillage.com | An online destination providing practical solutions on a range of topics and everyday support for women 18 years of age and over. |
| iVillage Consulting | Assists companies in the creation and development of Web sites, digital commerce platforms and other aspects of technological infrastructures, primarily for Hearst Communications, Inc., and its affiliates, or Hearst, a related party. |
| Promotions.com | Includes Promotions.com and Webstakes.com, which offer online and offline promotions and direct marketing programs that are integrated with customers’ marketing initiatives. |
| Astrology.com | An online destination for individuals seeking daily horoscopes, astrological content and personalized forecasts. |
| IVPN | Through IVPN, iVillage operates iVillage Integrated Properties Inc., or IVIP, the operator of The Newborn Channel, and Lamaze Publishing Company, or Lamaze Publishing, publisher of Lamaze Parents, which collectively provide informational and instructional magazines, custom publications, television programming, videos and online properties of interest to expectant and new parents. |
| PAG | Comprised of Business Women’s Network, Diversity Best Practices and Best Practices in Corporate Communications, each offering an extensive database of pertinent information and events to subscribing companies and members, and relevant publications. |
iVillage has historically incurred net losses and negative cash flows on an annual basis. However, management believes that iVillage’s current funds will be sufficient to enable iVillage to meet its planned expenditures through the next twelve months. Factors that could adversely affect iVillage’s ability to achieve profitable operations include the loss of any of iVillage’s major customers, a significant downturn in the advertising market or economy in general, and iVillage’s ability to generate significantly increased annual revenues.
iVillage is subject to the risks and uncertainties frequently encountered by companies in the rapidly evolving markets for Internet and media products and services. These risks include the failure to develop and extend iVillage’s brands, the non-acceptance or rejection of iVillage’s services by Web consumers, vendors, sponsors and/or advertisers and the inability of iVillage to maintain and increase the levels of traffic on its online services. In the event iVillage does not successfully implement its business plan, certain assets may not be recoverable.
4
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Unaudited Interim Financial Information
The unaudited interim condensed consolidated financial statements of iVillage as of September 30, 2004 and for the three and nine months ended September 30, 2004 and 2003, respectively, included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Article 10 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. These financial statements should be read in conjunction with iVillage’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments and appropriate intercompany elimination adjustments, necessary to present fairly the financial position of iVillage at September 30, 2004 and the results of its operations and its cash flows for the three and nine months ended September 30, 2004 and 2003, respectively. The results for the three and nine months ended September 30, 2004 are not necessarily indicative of the expected results for the full fiscal year or any future period.
Principles of Consolidation
The unaudited interim condensed consolidated financial statements include the accounts of iVillage and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
In accordance with Statement of Financial Accounting Standard, or SFAS, No. 131, “Disclosures About Segments of an Enterprise and Related Information”, or SFAS 131, segment information is being reported consistent with iVillage’s method of internal reporting. In accordance with SFAS 131, operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. iVillage is organized primarily by subsidiaries and divisions. iVillage’s subsidiaries and divisions have no operating managers who report to the chief operating decision maker. The chief operating decision maker reviews information at a consolidated results of operations level, although the chief operating decision maker does review revenue results of subsidiaries and divisions. As a result, iVillage’s discussion of revenue has been organized into separate subsidiaries and divisions, however operating expenses and results of operations are discussed on a combined basis.
5
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Revenues, Receivables and Customer Concentration
Wal-Mart Stores, Inc. and its affiliates, or Wal-Mart, accounted for approximately 11% of total revenues for the three months ended September 30, 2004. No other single customer accounted for more than 10% of total revenues for the three months ended September 30, 2004. Both Hearst, a related party, and Wal-Mart accounted for approximately 11% of total revenues for the nine months ended September 30, 2004. No other single customer accounted for more than 10% of total revenues for the nine months ended September 30, 2004. iVillage’s five largest customers accounted for approximately 30% of total revenues for the three months ended September 30, 2004, and approximately 31% of total revenues for the nine months ended September 30, 2004. Wal-Mart accounted for approximately 12% of total revenues and Hearst accounted for approximately 11% of total revenues for the three months ended September 30, 2003. One customer, Hearst, accounted for approximately 12% of total revenues for the nine months ended September 30, 2003. No other single customer accounted for more than 10% of total revenues for both the three and nine months ended September 30, 2003. iVillage’s five largest customers accounted for approximately 32% of total revenues for the three months ended September 30, 2003 and approximately 28% of total revenues for the nine months ended September 30, 2003. At September 30, 2004, no single customer accounted for more than 10% of total net accounts receivable and at December 31, 2003, Hearst accounted for approximately 20% of total net accounts receivable. The significance of revenues from any of iVillage’s customers can vary on a quarter to quarter basis as a result of the number and timing of such customers’ advertising and marketing initiatives.
Wal-Mart recently indicated to us that they would no longer be utilizing our subsidiary, IVPN, to create and distribute custom publications which were used for baby promotions in Wal-Mart’s United States stores. These publications accounted for approximately $4.8 million, or 10% of our total revenues, for the nine months ended September 30, 2004, and approximately $2.8 million, or 7% of our total revenues, for the nine months ended September 30, 2003. A failure to enter into contracts to replace these revenues would adversely affect our business, financial condition and results of operations.
Included in total revenues are barter transactions which totaled approximately $1.2 million, or 7% of total revenues, for the three months ended September 30, 2004, and approximately $3.2 million, or 7% of total revenues, for the nine months ended September 30, 2004. For the corresponding periods in 2003, barter transactions totaled approximately $1.1 million, or 9% of total revenues, for the three months ended September 30, 2003, and approximately $3.0 million, or 9% of total revenues, for the nine months ended September 30, 2003.
Fixed Assets and Intangibles
Depreciation of equipment, furniture and fixtures, and computer software is provided for by the straight-line method over their estimated useful lives ranging from one to five years. Amortization of leasehold improvements is provided for over the lesser of the term of the related lease or the estimated useful life of the improvement. The cost of additions and expenditures which extend the useful lives of existing assets are capitalized, and repairs and maintenance costs are charged to operations as incurred. Amortization of intangible assets are over the expected life of the related asset and range from one to ten years. Effective January 1, 2002, iVillage adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, or SFAS 144, regarding the recognition and measurement of the impairment of long-lived assets to be held and used.
iVillage assesses the recoverability of its fixed assets and intangible assets by determining whether the unamortized balance over the assets’ remaining lives can be recovered through undiscounted forecasted cash flows. If undiscounted forecasted cash flows indicate that the unamortized amounts will not be recovered, an adjustment will be made to reduce the net amounts to an amount consistent with forecasted future cash flows, discounted at a rate commensurate with the risk associated when estimating future discounted cash flows. Future cash flows are based on trends of historical performance and iVillage’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions.
6
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Web Site Development Costs
iVillage accounts for Web site development costs in accordance with the provisions of Emerging Issues Task Force, or EITF, Issue No. 00-2, “Accounting for Web Site Development Costs”, or EITF 00-2, which requires that certain costs to develop Web sites be capitalized or expensed, depending on the nature of the costs. Amortization of Web site development costs is provided for by the straight-line method over the estimated useful life of two years. Development costs of approximately $0.3 million for the three months ended September 30, 2004, and approximately $0.4 million for the nine months ended September 30, 2004, were capitalized. The development costs capitalized for the nine months ended September 30, 2004 were associated with the redesign of iVillage’s and gURL.com’s Web sites. Amortization expense of Web site development costs was approximately $30,000 for the three months ended September 30, 2004 and approximately $0.1 million for the nine months ended September 30, 2004. No development costs were capitalized for both the three and nine months ended September 30, 2003. No amortization expense was recorded for the three months ended September 30, 2003, and approximately $0.3 million was recorded for the nine months ended September 30, 2003.
Goodwill
Goodwill is not subject to amortization and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, or SFAS 142. The impairment test consists of a comparison of the fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess. Fair value is typically based upon future cash flows discounted at a rate commensurate with the risk involved. After an impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis. (See Note 2 – Goodwill).
Reclassifications
Certain reclassifications have been made in the prior period condensed consolidated financial statements to conform to the current period presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates and assumptions made by iVillage include those related to the useful lives of fixed assets and intangible assets, the recoverability of fixed assets, goodwill, intangible assets and deferred tax assets, the allowance for doubtful accounts and the assessment of expected probable losses (if any) of claims and potential claims. Significant estimates and assumptions made by iVillage include those related to the useful lives of fixed assets and intangible assets, the recoverability of fixed assets, goodwill, intangible assets and deferred tax assets, the allowance for doubtful accounts and the assessment of expected probable losses (if any) of claims and potential claims.
7
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Accrued Expenses
In the ordinary course of business, iVillage utilizes estimates to determine the accrual of certain operating expenses. These estimates are reviewed on an ongoing basis to determine the adequacy of these accruals. iVillage reversed approximately $0.1 million for the three months ended September 30, 2004, and approximately $0.4 million for the nine months ended September 30, 2004, of accruals included in operating expenses. The reversal of accruals for the nine months ended September 30, 2004 was primarily due to the renegotiation of a vendor contract in the second quarter of 2004 which had substantial changes in the terms and conditions from the original contract and provided for a one-time benefit of approximately $0.3 million.. iVillage reversed approximately $0.1 million for the three months ended September 30, 2003, and approximately $0.2 million for the nine months ended September 30, 2003, of accruals included in operating expenses due to changes in estimates previously provided for. These amounts were offset by additional accruals for various operating expenses.
Income Taxes
The difference between iVillage’s U.S. federal statutory rate of 34%, as well as its state and local rate, net of federal benefit of 7%, when compared to its actual effective tax rate of 0% is principally attributed to a partial reversal of the valuation allowance related to its deferred tax assets. iVillage has a full valuation allowance on its net deferred tax assets. If iVillage continues to generate net income for the remainder of the year, it expects to record no provision for income taxes for the full year as a result of an expected partial reversal of an equivalent amount of the deferred tax asset valuation allowance. In addition, if iVillage continues to generate pre tax income in future periods a partial or full reversal of the valuation allowance against the deferred tax assets may be required, and such reversal may be material in the period in which the reversal is recorded. The decision to reverse the valuation allowance will, among other things, consider the profitability of iVillage in recent periods, as well as consideration of iVillage’s future profitability and available tax planning strategies.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and common stock equivalents outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive.
Included in both the three and nine months ended September 30, 2004 and September 30, 2003 calculation of weighted average number of shares of common stock outstanding are 58,394 shares and 189,478 shares, respectively, which have not been issued. These shares are being held for former Women.com Networks, Inc., or Women.com, and Promotions.com stockholders that have not yet exchanged their respective shares for shares of iVillage during the periods presented, but are entitled to do so.
8
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Stock options and warrants in the amount of 2,039,900 shares for the three months ended September 30, 2004 and 2,038,400 shares for the nine months ended September 30, 2004 were not included in the computation of diluted net income per share as they were anti-dilutive. Stock options and warrants in the amount of 11,353,254 shares for each of the three and nine months ended September 30, 2003, were not included in the computation of diluted net loss per share as they were anti-dilutive as a result of net losses during the periods presented.
Three months ended
September 30, |
Nine months ended
September 30, |
|||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||
($ in thousands except per share data) |
||||||||||||
| Net income (loss) – as reported | $ | 1,139 | $ | (9,266 | ) | $ | 359 | $ | (27,461 | ) | ||
| Weighted average shares of common | ||||||||||||
| stock outstanding – basic | 70,891 | 55,753 | 62,834 | 55,613 | ||||||||
| Assumed conversion of dilutive | ||||||||||||
| securities | 4,339 | — | 5,068 | — | ||||||||
| Weight average shares of common | ||||||||||||
| stock outstanding – diluted | 75,230 | 55,753 | 67,902 | 55,613 | ||||||||
| Basic net income (loss) per share | $ | 0.02 | $ | (0.17 | ) | $ | 0.01 | $ | (0.49 | ) | ||
| Diluted net income (loss) per share | $ | 0.02 | $ | (0.17 | ) | $ | 0.01 | $ | (0.49 | ) | ||
Stock-Based Compensation
iVillage applies Accounting Principles Board Opinion, or APB, No. 25, “Accounting for Stock Issued to Employees”, or APB 25, and related interpretations in accounting for its stock option issuances, and has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, or SFAS 123. No compensation cost related to grants of stock options was reflected in iVillage’s net income (loss), as all options granted under the plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant. Compensation cost related to the modification of stock option terms is measured at the quoted market price of iVillage’s common stock at the new measurement date and is amortized to expense over the remaining vesting period. Compensation costs related to the modification of stock option terms was no amount for the three months ended September 30, 2004, and approximately $0.3 million for the comparable period in 2003. For the nine months ended September 30, 2004, compensation costs related to the modification of stock option terms was approximately $19,000, and approximately $0.4 million for the comparable period in 2003. If compensation cost for iVillage’s stock options, utilizing the Black Scholes model, had been determined based on the fair value of the stock options at the grant date for awards in the three and nine months ended September 30, 2004 and 2003 consistent with the provisions of SFAS 123, iVillage’s net income (loss) would have been adjusted to the pro forma amounts indicated below:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||
| ($ in thousands except per share data) | ||||||||||||
| Net income (loss) – as reported | $ | 1,139 | $ | (9,266 | ) | $ | 359 | $ | (27,461 | ) | ||
| Stock-based compensation expense | ||||||||||||
| determined under SFAS 123 | (1,189 | ) | (1,563 | ) | (2,350 | ) | (6,244 | ) | ||||