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 January 31, 2005
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.) | |
| 1100 Winter Street Waltham, Massachusetts |
02451 | |
| (Address of principal executive offices) | (Zip Code) | |
(781) 663-5001
(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 March 4, 2005, there were 482,344,694 shares of the registrant’s Common Stock, $.01 par value per share, outstanding.
FORM 10-Q
INDEX
| Page Number | ||||
| Part I. FINANCIAL INFORMATION | ||||
| Item 1. | Condensed Consolidated Financial Statements | 3 | ||
| Condensed Consolidated Balance Sheets—January 31, 2005 and July 31, 2004 (unaudited) | 3 | |||
| Condensed Consolidated Statements of Operations—Three and six months ended January 31, 2005 and 2004 (unaudited) | 4 | |||
| Condensed Consolidated Statements of Cash Flows—Six months ended January 31, 2005 and 2004 (unaudited) | 5 | |||
| Notes to Condensed Consolidated Financial Statements (unaudited) | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 49 | ||
| Item 4. | Controls and Procedures | 50 | ||
| Part II. OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 51 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 51 | ||
| Item 5. | Other Information | 52 | ||
| Item 6. | Exhibits | 52 | ||
| SIGNATURE | 53 | |||
| EXHIBIT INDEX | 54 | |||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
| January 31, 2005 |
July 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 188,297 | $ | 271,871 | ||||
| Available-for-sale securities |
301 | 292 | ||||||
| Accounts receivable, trade, net of allowance for doubtful accounts of $2,174 and $573 at January 31, 2005 and July 31, 2004, respectively |
192,459 | 54,296 | ||||||
| Inventories |
72,350 | 34,460 | ||||||
| Prepaid expenses and other current assets |
16,504 | 21,364 | ||||||
| Current assets of discontinued operations |
82 | 83 | ||||||
| Total current assets |
469,993 | 382,366 | ||||||
| Property and equipment, net |
40,675 | 7,246 | ||||||
| Investments in affiliates |
24,982 | 18,635 | ||||||
| Goodwill and other intangible assets |
204,440 | 22,122 | ||||||
| Other assets |
5,842 | 3,383 | ||||||
| Non-current assets of discontinued operations |
14 | 14 | ||||||
| $ | 745,946 | $ | 433,766 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 381 | $ | 178 | ||||
| Current portion of capital lease obligations |
315 | — | ||||||
| Revolving line of credit |
15,785 | 15,785 | ||||||
| Accounts payable |
160,748 | 37,055 | ||||||
| Current portion of accrued restructuring |
11,791 | 8,872 | ||||||
| Accrued income taxes |
30,341 | 24,352 | ||||||
| Accrued expenses |
46,904 | 32,298 | ||||||
| Other current liabilities |
2,955 | 2,565 | ||||||
| Current liabilities of discontinued operations |
— | 155 | ||||||
| Total current liabilities |
269,220 | 121,260 | ||||||
| Long-term debt, net of current portion |
1,738 | 1,544 | ||||||
| Long-term portion of accrued restructuring |
8,993 | 6,269 | ||||||
| Long-term portion of capital lease obligations |
1,055 | — | ||||||
| Other long-term liabilities |
15,486 | 10,857 | ||||||
| Non-current liabilities of discontinued operations |
98 | 98 | ||||||
| Minority interest |
99 | 423 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value per share. Authorized 5,000,000 shares; zero issued or outstanding at January 31, 2005 and July 31, 2004 |
— | — | ||||||
| Common stock, $0.01 par value per share. Authorized 1,400,000,000 shares; issued and outstanding 481,741,218 at January 31, 2005 and 401,572,283 at July 31, 2004 |
4,817 | 4,016 | ||||||
| Additional paid-in capital |
7,451,850 | 7,300,010 | ||||||
| Deferred compensation |
(8,005 | ) | (591 | ) | ||||
| Accumulated deficit |
(7,003,102 | ) | (7,009,785 | ) | ||||
| Accumulated other comprehensive income (loss) |
3,697 | (335 | ) | |||||
| Total stockholders’ equity |
449,257 | 293,315 | ||||||
| $ | 745,946 | $ | 433,766 | |||||
See accompanying notes to interim unaudited condensed consolidated financial statements
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended January 31, |
Six Months Ended January 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Net revenue |
$ | 295,724 | $ | 100,279 | $ | 552,850 | $ | 195,167 | ||||||||
| Operating expenses: |
||||||||||||||||
| Cost of revenue |
257,704 | 94,139 | 483,179 | 181,549 | ||||||||||||
| Selling |
5,425 | 1,010 | 10,975 | 2,207 | ||||||||||||
| General and administrative |
19,726 | 8,785 | 39,205 | 20,422 | ||||||||||||
| Amortization of intangible assets and stock-based compensation |
3,063 | 88 | 5,915 | 190 | ||||||||||||
| Restructuring, net |
977 | 1,069 | 2,313 | 2,755 | ||||||||||||
| Total operating expenses |
286,895 | 105,091 | 541,587 | 207,123 | ||||||||||||
| Operating income (loss) |
8,829 | (4,812 | ) | 11,263 | (11,956 | ) | ||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income |
877 | 1,048 | 1,507 | 2,022 | ||||||||||||
| Interest expense |
(595 | ) | (380 | ) | (1,018 | ) | (776 | ) | ||||||||
| Other gains (losses), net |
(1,158 | ) | 1,049 | (2,603 | ) | 43,760 | ||||||||||
| Equity in income (losses) of affiliates, net |
303 | (355 | ) | 77 | (878 | ) | ||||||||||
| Minority interest |
— | 87 | 3 | (2,194 | ) | |||||||||||
| (573 | ) | 1,449 | (2,034 | ) | 41,934 | |||||||||||
| Income (loss) from continuing operations before income taxes |
8,256 | (3,363 | ) | 9,229 | 29,978 | |||||||||||
| Income tax expense |
1,020 | 1,569 | 2,546 | 4,558 | ||||||||||||
| Income (loss) from continuing operations |
7,236 | (4,932 | ) | 6,683 | 25,420 | |||||||||||
| Discontinued operations, net of income taxes: |
||||||||||||||||
| Loss from discontinued operations |
— | (554 | ) | — | (1,045 | ) | ||||||||||
| Net income (loss) |
$ | 7,236 | $ | (5,486 | ) | $ | 6,683 | $ | 24,375 | |||||||
| Basic earnings (loss) per share: |
||||||||||||||||
| Earnings (loss) from continuing operations |
$ | 0.02 | $ | (0.01 | ) | $ | 0.01 | $ | 0.06 | |||||||
| Loss from discontinued operations |
— | (0.00 | ) | — | (0.00 | ) | ||||||||||
| Net earnings (loss) |
$ | 0.02 | $ | (0.01 | ) | $ | 0.01 | $ | 0.06 | |||||||
| Diluted earnings (loss) per share: |
||||||||||||||||
| Earnings (loss) from continuing operations |
$ | 0.01 | $ | (0.01 | ) | $ | 0.01 | $ | 0.06 | |||||||
| Loss from discontinued operations |
— | (0.00 | ) | — | (0.00 | ) | ||||||||||
| Net earnings (loss) |
$ | 0.01 | $ | (0.01 | ) | $ | 0.01 | $ | 0.06 | |||||||
| Shares used in computing basic earnings (loss) per share |
475,072 | 399,849 | 472,472 | 397,530 | ||||||||||||
| Shares used in computing diluted earnings (loss) per share |
485,719 | 399,849 | 480,905 | 403,758 | ||||||||||||
See accompanying notes to interim unaudited condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six Months Ended January 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities of continuing operations: |
||||||||
| Net income |
$ | 6,683 | $ | 24,375 | ||||
| Loss from discontinued operations |
— | (1,045 | ) | |||||
| 6,683 | 25,420 | |||||||
| Adjustments to reconcile net income to cash used for continuing operations: |
||||||||