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 quarter ended April 30, 2003 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 000-23262
CMGI, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 04-2921333 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 100 Brickstone Square Andover, Massachusetts |
01810 | |
| (Address of principal executive offices) | (Zip Code) |
(978) 684-3600
(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 Exchange Act). Yes x No ¨
Number of shares outstanding of the issuer’s common stock, as of June 10, 2003:
| Common Stock, par value $.01 per share |
394,382,024 | |
| Class |
Number of shares outstanding |
CMGI, INC.
FORM 10-Q
| Page Number | ||||
| Part I. FINANCIAL INFORMATION |
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| Item 1. |
Condensed Consolidated Financial Statements | |||
| Condensed Consolidated Balance Sheets—April 30, 2003 and July 31, 2002 (unaudited) | 3 | |||
| Condensed Consolidated Statements of Operations—Three and nine months ended April 30, 2003 and 2002 (unaudited) | 4 | |||
| Condensed Consolidated Statements of Cash Flows—Nine months ended April 30, 2003 and 2002 (unaudited) | 5 | |||
| Notes to Condensed Consolidated Financial Statements | 6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 40 | ||
| Item 4. |
Controls and Procedures | 41 | ||
| Part II. OTHER INFORMATION |
||||
| Item 1. |
Legal Proceedings | 42 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 43 | ||
| 44 | ||||
| 45 | ||||
| 47 | ||||
2
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| April 30, 2003 |
July 31, 2002 |
|||||||
| (in thousands, except share and per share amounts) |
||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 207,883 | $ | 196,099 | ||||
| Available-for-sale securities |
43,037 | 10,327 | ||||||
| Trading security |
— | 94,271 | ||||||
| Accounts receivable, trade, net of allowance for doubtful accounts |
52,593 | 38,221 | ||||||
| Inventories |
41,158 | 32,177 | ||||||
| Prepaid expenses and other current assets |
22,503 | 19,307 | ||||||
| Current assets of discontinued operations |
2,416 | 151,697 | ||||||
| Deferred loss on disposal of subsidiary |
— | 31,869 | ||||||
| Total current assets |
369,590 | 573,968 | ||||||
| Property and equipment, net |
15,923 | 29,636 | ||||||
| Investments in affiliates |
21,506 | 57,770 | ||||||
| Goodwill |
22,123 | 24,341 | ||||||
| Non-current assets of discontinued operations |
45 | 190,245 | ||||||
| Other assets |
19,152 | 34,307 | ||||||
| $ | 448,339 | $ | 910,267 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Notes payable |
$ | — | $ | 94,271 | ||||
| Current installments of long-term debt |
1,585 | 1,316 | ||||||
| Accounts payable |
42,810 | 20,970 | ||||||
| Accrued restructuring |
12,344 | 23,783 | ||||||
| Accrued income taxes |
95,076 | 93,515 | ||||||
| Accrued expenses |
38,794 | 28,055 | ||||||
| Other current liabilities |
5,348 | 2,256 | ||||||
| Current liabilities of discontinued operations |
561 | 105,923 | ||||||
| Total current liabilities |
196,518 | 370,089 | ||||||
| Long-term debt, less current installments |
7,266 | 7,814 | ||||||
| Other long-term liabilities |
24,519 | 12,423 | ||||||
| Non-current liabilities of discontinued operations |
1,899 | 102,460 | ||||||
| Minority interest |
535 | 785 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value per share. Authorized 5,000,000 shares; zero issued or outstanding as of April 30, 2003 and July 31, 2002 |
— | — | ||||||
| Common stock, $0.01 par value per share. Authorized 1,405,000,000 shares; issued and outstanding 394,107,018 shares at April 30, 2003 and 392,679,011 shares at July 31, 2002 |
3,941 | 3,926 | ||||||
| Additional paid-in capital |
7,294,432 | 7,292,443 | ||||||
| Accumulated deficit |
(7,080,370 | ) | (6,880,452 | ) | ||||
| Accumulated other comprehensive income (loss) |
(401 | ) | 779 | |||||
| Total stockholders’ equity |
217,602 | 416,696 | ||||||
| $ | 448,339 | $ | 910,267 | |||||
See accompanying notes to interim unaudited condensed consolidated financial statements
3
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Net revenue |
$ | 106,109 | $ | 31,231 | $ | 339,105 | $ | 119,753 | ||||||||
| Operating expenses: |
||||||||||||||||
| Cost of revenue |
98,582 | 25,991 | 313,494 | 110,978 | ||||||||||||
| Research and development |
— | 518 | 354 | 4,269 | ||||||||||||
| Selling |
1,066 | 1,712 | 5,346 | 8,609 | ||||||||||||
| General and administrative |
13,557 | 14,122 | 48,573 | 50,713 | ||||||||||||
| Amortization of intangible assets and stock-based compensation |
55 | 1,751 | 164 | 5,252 | ||||||||||||
| Impairment of long-lived assets |
432 | — | 456 | 2,328 | ||||||||||||
| Restructuring |
19,938 | 1,092 | 29,144 | (6,770 | ) | |||||||||||
| Total operating expenses |
133,630 | 45,186 | 397,531 | 175,379 | ||||||||||||
| Operating loss |
(27,521 | ) | (13,955 | ) | (58,426 | ) | (55,626 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
710 | 1,738 | 2,662 | 10,100 | ||||||||||||
| Interest (expense) recovery, net |
(432 | ) | (1,703 | ) | 730 | 5,425 | ||||||||||
| Other losses, net |
(11,608 | ) | (7,953 | ) | (45,680 | ) | (33,911 | ) | ||||||||
| Equity in losses of affiliates, net |
(1,049 | ) | (2,003 | ) | (1,937 | ) | (15,396 | ) | ||||||||
| Minority interest |
99 | — | 250 | — | ||||||||||||
| Loss from continuing operations before income taxes and extraordinary item |
(39,801 | ) | (23,876 | ) | (102,401 | ) | (89,408 | ) | ||||||||
| Income tax expense (benefit) |
1,073 | (15,000 | ) | 2,667 | (4,215 | ) | ||||||||||
| Loss from continuing operations before extraordinary item |
(40,874 | ) | (8,876 | ) | (105,068 | ) | (85,193 | ) | ||||||||
| Discontinued operations, net of income taxes: |
||||||||||||||||
| Income (loss) from discontinued operations |
117,806 | (116,336 | ) | (94,850 | ) | (380,901 | ) | |||||||||
| Extraordinary gain on retirement of debt, net of income taxes |
— | — | — | 131,281 | ||||||||||||
| Net income (loss) |
76,932 | (125,212 | ) | (199,918 | ) | (334,813 | ) | |||||||||
| Preferred stock accretion |
— | — | — | (2,301 | ) | |||||||||||
| Gain on repurchase of Series C Convertible Preferred Stock |
— | — | — | 63,505 | ||||||||||||
| Net income (loss) available to common stockholders |
$ | 76,932 | $ | (125,212 | ) | $ | (199,918 | ) | $ | (273,609 | ) | |||||
| Basic and diluted earnings (loss) per share available to common stockholders: |
||||||||||||||||
| Loss from continuing operations before extraordinary item |
$ | (0.10 | ) | $ | (0.02 | ) | $ | (0.27 | ) | $ | (0.07 | ) | ||||
| Earnings (loss) from discontinued operations |
$ | 0.30 | $ | (0.30 | ) | $ | (0.24 | ) | $ | (1.01 | ) | |||||
| Extraordinary gain on retirement of debt, net of income taxes |
$ | — | $ | — | $ | — | $ | 0.35 | ||||||||
| Net earnings (loss) available to common stockholders |
$ | 0.20 | $ | (0.32 | ) | $ | (0.51 | ) | $ | (0.73 | ) | |||||
| Shares used in computing basic and diluted earnings (loss) per share |
393,452 | 392,025 | 393,106 | 375,603 | ||||||||||||
See accompanying notes to interim unaudited condensed consolidated financial statements
4
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended April 30, |
||||||||
| 2003 |
2002 |
|||||||
| (in thousands) | ||||||||
| Cash flows from operating activities of continuing operations: |
||||||||
| Net loss |
$ | (199,918 | ) | $ | (334,813 | ) | ||
| Loss from discontinued operations |
(94,850 | ) | (380,901 | ) | ||||