UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
| ¨ | 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 001-15713
ASIAINFO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 752506390 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
4TH FLOOR, ZHONGDIAN INFORMATION TOWER
6 ZHONGGUANCUN SOUTH STREET, HAIDIAN DISTRICT
BEIJING 100086, CHINA
(Address of principal executive office, including zip code)
+8610 6250 1658
(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 x No ¨
The number of shares outstanding of the Registrant’s common stock as of November 5, 2004 was 46,462,100
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS
| Page | ||||
| PART I. |
||||
| Item 1. |
3 | |||
| a) |
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2004 | 3 | ||
| b) |
Condensed Consolidated Balance Sheets as of December 31, 2003 and September 30, 2004 |
4 | ||
| c) |
5 | |||
| d) |
Notes to Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2003 and 2004 | 7 | ||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 | ||
| Item 3. |
35 | |||
| Item 4. |
35 | |||
| PART II. |
36 | |||
| Item 1. |
36 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
37 | ||
| Item 5. |
38 | |||
| Item 6. |
40 | |||
| 41 | ||||
- 2 -
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited)
(In US Dollars thousands, except per share amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
||||||||||||
| Revenues: |
|||||||||||||||
| Software products and solutions |
$ | 8,441 | $ | 9,614 | $ | 21,956 | $ | 28,615 | |||||||
| Network service |
6,759 | 4,304 | 17,028 | 14,849 | |||||||||||
| Third party hardware |
12,784 | 6,088 | 46,577 | 31,031 | |||||||||||
| Total revenues |
27,984 | 20,006 | 85,561 | 74,495 | |||||||||||
| Cost of revenues: |
|||||||||||||||
| Software products and solutions |
4,098 | 4,536 | 10,505 | 12,799 | |||||||||||
| Network service |
1,745 | 1,328 | 6,106 | 5,904 | |||||||||||
| Third party hardware |
12,145 | 5,784 | 44,248 | 29,480 | |||||||||||
| Total cost of revenues |
17,988 | 11,648 | 60,859 | 48,183 | |||||||||||
| Gross profit |
9,996 | 8,358 | 24,702 | 26,312 | |||||||||||
| Operating expenses: |
|||||||||||||||
| Sales and marketing |
2,820 | 3,092 | 8,265 | 8,687 | |||||||||||
| General and administrative |
3,116 | 2,413 | 8,399 | 6,396 | |||||||||||
| Research and development |
2,037 | 2,279 | 7,248 | 6,593 | |||||||||||
| Impairment of goodwill and acquired intangible assets |
— | — | 30,221 | — | |||||||||||
| Amortization of deferred stock compensation |
— | — | 105 | — | |||||||||||
| Amortization of acquired intangible assets |
41 | 151 | 128 | 480 | |||||||||||
| Total operating expenses |
8,014 | 7,935 | 54,366 | 22,156 | |||||||||||
| Income (loss) from operations |
1,982 | 423 | (29,664 | ) | 4,156 | ||||||||||
| Other income |
|||||||||||||||
| Interest income |
362 | 674 | 1,182 | 1,589 | |||||||||||
| Interest expense |
— | — | (2 | ) | — | ||||||||||
| Gain from disposal of investment |
— | 4,018 | — | 4,018 | |||||||||||
| Other expenses, net |
(1 | ) | — | (32 | ) | (20 | ) | ||||||||
| Total other income, net |
361 | 4,692 | 1,148 | 5,587 | |||||||||||
| Income (loss) before income taxes, minority interests and equity in loss of affiliates |
2,343 | 5,115 | (28,516 | ) | 9,743 | ||||||||||
| Income tax expense (benefit) |
— | 137 | (958 | ) | 718 | ||||||||||
| Income (loss) before minority interests |
2,343 | 4,978 | (27,558 | ) | 9,025 | ||||||||||
| Minority interests |
— | — | (12 | ) | — | ||||||||||
| Equity in loss of affiliate |
(94 | ) | — | (281 | ) | (42 | ) | ||||||||
| Net income (loss) |
$ | 2,249 | $ | 4,978 | $ | (27,851 | ) | $ | 8,983 | ||||||
| Net income (loss) per share: |
|||||||||||||||
| Basic |
$ | 0.05 | $ | 0.11 | $ | (0.63 | ) | $ | 0.20 | ||||||
| Diluted |
$ | 0.05 | $ | 0.11 | $ | (0.63 | ) | $ | 0.19 | ||||||
| Shares used in computation: |
|||||||||||||||
| Basic |
44,521,025 | 45,426,451 | 44,329,684 | 45,377,384 | |||||||||||
| Diluted |
46,971,126 | 46,705,356 | 44,329,684 | 46,988,388 | |||||||||||
See notes to condensed consolidated financial statements.
- 3 -
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In US Dollars thousands, except per share amounts)
| December 31, 2003 (1) |
September 30, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 119,395 | $ | 131,284 | ||||
| Restricted cash |
14,827 | 15,453 | ||||||
| Short-term investments |
13,218 | 14,624 | ||||||
| Notes receivable |
3,832 | 1,824 | ||||||
| Accounts receivable (net of allowances of $3,095 and $2,878 as of December 31, 2003 and September 30, 2004 respectively) |
51,923 | 59,383 | ||||||
| Inventories |
3,235 | 3,672 | ||||||
| Other receivables |
8,528 | 2,397 | ||||||
| Deferred income taxes – current |
1,842 | 1,715 | ||||||
| Prepaid expenses and other current assets |
2,680 | 3,664 | ||||||
| Total current assets |
219,480 | 234,016 | ||||||
| Property and equipment-net |
2,348 | 1,987 | ||||||
| Goodwill |
15,368 | 14,782 | ||||||
| Other acquired intangible assets-net |
2,341 | 1,896 | ||||||
| Investment in affiliate |
331 | — | ||||||
| Deferred income taxes |
154 | 394 | ||||||
| Total Assets |
$ | 240,022 | $ | 253,075 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Short-term bank loans |
$ | 60 | $ | — | ||||
| Notes payable |
2,609 | 3,807 | ||||||
| Accounts payable |
13,945 | 12,777 | ||||||
| Accrued expenses |
12,822 | 13,559 | ||||||
| Deferred revenue |
11,738 | 12,965 | ||||||
| Accrued employee benefits |
5,971 | 7,032 | ||||||
| Other payables |
2,776 | 2,152 | ||||||
| Other taxes payables |
2,212 | 2,100 | ||||||
| Income taxes payables |
1,232 | 1,857 | ||||||
| Total current liabilities |
53,365 | 56,249 | ||||||
| Commitments and contingencies (Note 13) |
||||||||
| Stockholders’ Equity: |
||||||||
| Common stock, 100,000,000 shares authorized, $0.01 par value, shares issued and outstanding: 2004: 45,431,424; 2003: 45,112,278 |
451 | 454 | ||||||
| Additional paid-in capital |
205,154 | 206,340 | ||||||
| Accumulated deficit |
(19,009 | ) | (10,026 | ) | ||||
| Accumulated other comprehensive income |
61 | 58 | ||||||
| Total stockholders’ equity |
186,657 | 196,826 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 240,022 | $ | 253,075 | ||||
| (1) | December 31, 2003 balances were obtained from audited financial statements. |
See notes to condensed consolidated financial statements.
- 4 -
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In US Dollars thousands, except per share amounts)
| Nine Months Ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| (unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
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