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 April 30, 2004
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 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.) | |
| 425 Medford Street Charlestown, Massachusetts |
02129 | |
| (Address of principal executive offices) | (Zip Code) | |
(617) 886-4500
(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 ¨
As of June 7, 2004, there were 401,315,770 shares of the registrant’s Common Stock, $.01 par value per share, outstanding.
CMGI, INC.
FORM 10-Q
| Page Number | ||||
| Part I. |
FINANCIAL INFORMATION |
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| Item 1. |
Condensed Consolidated Financial Statements (unaudited) |
|||
| Condensed Consolidated Balance Sheets—April 30, 2004 and July 31, 2003 (unaudited) |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 | ||
| Item 3. |
36 | |||
| Item 4. |
36 | |||
| Part II. |
OTHER INFORMATION |
|||
| Item 1. |
37 | |||
| Item 2. |
37 | |||
| Item 6. |
37 | |||
| 38 | ||||
| 39 | ||||
2
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
| April 30, 2004 |
July 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 259,716 | $ | 196,916 | ||||
| Available-for-sale securities |
486 | 79,151 | ||||||
| Accounts receivable, trade, net of allowance for doubtful accounts of $837 and $996 at April 30, 2004 and July 31, 2003, respectively |
58,493 | 55,209 | ||||||
| Inventories |
43,275 | 30,475 | ||||||
| Prepaid expenses and other current assets |
33,080 | 35,356 | ||||||
| Current assets of discontinued operations |
84 | 1,876 | ||||||
| Total current assets |
395,134 | 398,983 | ||||||
| Property and equipment, net |
7,234 | 8,598 | ||||||
| Investments in affiliates |
17,745 | 19,470 | ||||||
| Goodwill |
22,122 | 22,122 | ||||||
| Other assets |
3,444 | 6,093 | ||||||
| Non-current assets of discontinued operations |
14 | 75 | ||||||
| $ | 445,693 | $ | 455,341 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current installments of long-term debt |
$ | 5,322 | $ | 6,622 | ||||
| Revolving line of credit |
11,000 | — | ||||||
| Accounts payable |
41,743 | 39,254 | ||||||
| Current portion of accrued restructuring |
9,126 | 9,268 | ||||||
| Accrued income taxes |
24,622 | 95,653 | ||||||
| Accrued expenses |
30,782 | 28,956 | ||||||
| Other current liabilities |
1,732 | 1,081 | ||||||
| Current liabilities of discontinued operations |
— | 214 | ||||||
| Total current liabilities |
124,327 | 181,048 | ||||||
| Long-term debt, less current installments |
1,590 | 1,673 | ||||||
| Long-term portion of accrued restructuring |
7,220 | 10,878 | ||||||
| Other long-term liabilities |
11,449 | 12,460 | ||||||
| Non-current liabilities of discontinued operations |
98 | 1,805 | ||||||
| Minority interest |
1,742 | 465 | ||||||
| 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, 2004 and July 31, 2003 |
— | — | ||||||
| Common stock, $0.01 par value per share. Authorized 1,400,000,000 shares; issued and outstanding 401,311,604 shares at April 30, 2004 and 395,591,493 shares at July 31, 2003 |
4,013 | 3,956 | ||||||
| Additional paid-in capital |
7,298,913 | 7,296,230 | ||||||
| Deferred compensation |
(662 | ) | — | |||||
| Accumulated deficit |
(7,002,984 | ) | (7,096,760 | ) | ||||
| Accumulated other comprehensive income (loss) |
(13 | ) | 43,586 | |||||
| Total stockholders’ equity |
299,267 | 247,012 | ||||||
| $ | 445,693 | $ | 455,341 | |||||
See accompanying notes to interim unaudited condensed consolidated financial statements
3
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended April 30, |
Nine Months Ended April 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net revenue |
$ | 105,789 | $ | 106,109 | $ | 300,956 | $ | 339,105 | ||||||||
| Operating expenses: |
||||||||||||||||
| Cost of revenue |
100,352 | 98,582 | 281,901 | 313,494 | ||||||||||||
| Selling |
1,365 | 1,066 | 3,572 | 5,346 | ||||||||||||
| General and administrative |
7,641 | 13,557 | 28,063 | 48,927 | ||||||||||||
| Amortization of stock-based compensation |
72 | 55 | 262 | 164 | ||||||||||||
| Impairment of long-lived assets |
— | 432 | — | 456 | ||||||||||||
| Restructuring, net |
2,811 | 19,938 | 5,566 | 29,144 | ||||||||||||
| Total operating expenses |
112,241 | 133,630 | 319,364 | 397,531 | ||||||||||||
| Operating loss |
(6,452 | ) | (27,521 | ) | (18,408 | ) | (58,426 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
799 | 710 | 2,821 | 2,662 | ||||||||||||
| Interest (expense) recovery, net |
(451 | ) | (432 | ) | (1,227 | ) | 730 | |||||||||
| Other gains (losses), net |
431 | (11,608 | ) | 43,483 | (45,680 | ) | ||||||||||
| Equity in income (losses) of affiliates, net |
199 | (1,049 | ) | 29 | (1,937 | ) | ||||||||||
| Minority interest |
76 | 99 | (2,118 | ) | 250 | |||||||||||
| 1,054 | (12,280 | ) | 42,988 | (43,975 | ) | |||||||||||
| Income (loss) from continuing operations before income taxes |
(5,398 | ) | (39,801 | ) | 24,580 | (102,401 | ) | |||||||||
| Income tax expense (benefit) |
(74,739 | ) | 1,073 | (70,181 | ) | 2,667 | ||||||||||
| Income (loss) from continuing operations |
69,341 | (40,874 | ) | 94,761 | (105,068 | ) | ||||||||||
| Discontinued operations, net of income taxes: |
||||||||||||||||
| Income (loss) from discontinued operations, net of income taxes |
61 | 117,806 | (984 | ) | (94,850 | ) | ||||||||||
| Net income (loss) |
$ | 69,402 | $ | 76,932 | $ | 93,777 | $ | (199,918 | ) | |||||||
| Basic earnings (loss) per share: |
||||||||||||||||
| Earnings (loss) from continuing operations |
$ | 0.17 | $ | (0.10 | ) | $ | 0.24 | $ | (0.27 | ) | ||||||
| Earnings (loss) from discontinued operations |
— | 0.30 | — | (0.24 | ) | |||||||||||
| Net earnings (loss) |
$ | 0.17 | $ | 0.20 | $ | 0.24 | $ | (0.51 | ) | |||||||
| Diluted earnings (loss) per share: |
||||||||||||||||
| Earnings (loss) from continuing operations |
$ | 0.17 | $ | (0.10 | ) | $ | 0.23 | $ | (0.27 | ) | ||||||
| Earnings (loss) from discontinued operations |
— | 0.30 | — | (0.24 | ) | |||||||||||
| Net earnings (loss) |
$ | 0.17 | $ | 0.20 | $ | 0.23 | $ | (0.51 | ) | |||||||
| Shares used in computing basic earnings (loss) per share |
400,721 | 393,542 | 398,581 | 393,106 | ||||||||||||
| Shares used in computing diluted earnings (loss) per share |
405,650 | 393,542 | 404,291 | 393,106 | ||||||||||||
See accompanying notes to interim unaudited condensed consolidated financial statements
4
CMGI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine Months Ended April 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities of continuing operations: |
||||||||
| Net income (loss) |
$ | 93,777 | $ | (199,918 | ) | |||
| Loss from discontinued operations |
(984 | ) | (94,850 | ) | ||||
| Income (loss) f | ||||||||