Delaware |
23-2827736 |
(State or other jurisdiction of |
(I.R.S. Employer |
incorporation or organization) |
Identification Number) |
|
|
12020 Sunrise Valley Drive, Suite 250 |
20191 |
Reston, Virginia |
(zip code) |
(Address of principal executive offices) |
|
Title of each class |
Name of each exchange on which registered |
|
|
None |
Not applicable |
| ||
1 | ||
| ||
|
Year Ended December 31, | |||||||||||||||
| ||||||||||||||||
|
2003 |
2002 |
2001 |
2000 |
1999 | |||||||||||
|
|
|
|
|
||||||||||||
|
(In Thousands, Except For Per Share Amounts) | |||||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|||||||||||
Revenue |
$ |
382,663 |
$ |
317,507 |
$ |
488,158 |
$ |
525,712 |
$ |
516,548 |
||||||
Costs and expenses: |
|
|
|
|
|
|||||||||||
Network and line costs |
181,682 |
155,567 |
235,153 |
292,931 |
289,029 |
|||||||||||
General and administrative expenses |
57,503 |
53,510 |
82,202 |
65,360 |
39,954 |
|||||||||||
Provision for doubtful accounts |
11,599 |
9,365 |
92,778 |
53,772 |
28,250 |
|||||||||||
Sales and marketing expenses |
48,277 |
27,148 |
73,973 |
152,028 |
96,264 |
|||||||||||
Depreciation and amortization |
18,344 |
17,318 |
34,390 |
19,257 |
6,214 |
|||||||||||
Impairment and restructuring charges |
-- |
-- |
170,571 |
-- |
-- |
|||||||||||
Significant other charges (income) |
-- |
-- |
-- |
-- |
(2,718 |
) | ||||||||||
|
|
|
|
|
||||||||||||
Total costs and expenses |
317,405 |
262,908 |
689,067 |
583,348 |
456,993 |
|||||||||||
|
|
|
|
|
||||||||||||
Operating income (loss) |
65,258 |
54,599 |
(200,909 |
) |
(57,636 |
) |
59,555 |
|||||||||
Other income (expense): |
|
|
|
|
|
|||||||||||
Interest income |
388 |
802 |
1,220 |
4,859 |
3,875 |
|||||||||||
Interest expense |
(7,353 |
) |
(9,087 |
) |
(6,091 |
) |
(5,297 |
) |
(4,616 |
) | ||||||
Other income (expense), net |
2,470 |
28,448 |
17,950 |
(3,822 |
) |
20,115 |
||||||||||
|
|
|
|
|
||||||||||||
Income (loss) before provision for income taxes |
60,763 |
74,762 |
(187,830 |
) |
(61,896 |
) |
78,929 |
|||||||||
Provision (benefit) for income taxes |
(17,698 |
) |
(22,300 |
) |
-- |
-- |
-- |
|||||||||
|
|
|
|
|
||||||||||||
Income (loss) before cumulative effect of an accounting change |
78,461 |
97,062 |
(187,830 |
) |
(61,896 |
) |
78,929 |
|||||||||
Cumulative effect of an accounting change |
-- |
-- |
(36,837 |
) |
-- |
-- |
||||||||||
|
|
|
|
|
||||||||||||
Net income (loss) |
$ |
78,461 |
$ |
97,062 |
$ |
(224,667 |
) |
$ |
(61,896 |
) |
$ |
78,929 |
||||
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|||||||||||
Income (loss) per share Basic: |
|
|
|
|
|
|||||||||||
Income (loss) before cumulative effect of an accounting change per share |
$ |
2.97 |
$ |
3.56 |
$ |
(7.11 |
) |
$ |
(2.63 |
) |
$ |
3.87 |
||||
Cumulative effect of an accounting change per share |
-- |
-- |
(1.40 |
) |
-- |
-- |
||||||||||
|
|
|
|
|
||||||||||||
Net income (loss) per share |
$ |
2.97 |
$ |
3.56 |
$ |
(8.51 |
) |
$ |
(2.63 |
) |
$ |
3.87 |
||||
|
|
|
|
|
||||||||||||
Weighted average common shares outstanding |
26,376 |
27,253 |
26,414 |
23,509 |
20,395 |
|||||||||||
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|||||||||||
Income (loss) per share Diluted: |
|
|
|
|
|
|||||||||||
Income (loss) before cumulative effect of an accounting change per share |
$ |
2.75 |
$ |
3.15 |
$ |
(7.11 |
) |
$ |
(2.63 |
) |
$ |
3.68 |
||||
Cumulative effect of an accounting change per share |
-- |
-- |
(1.40 |
) |
-- |
-- |
||||||||||
|
|
|
|
|
||||||||||||
Net income (loss) per share |
$ |
2.75 |
$ |
3.15 |
$ |
(8.51 |
) |
$ |
(2.63 |
) |
$ |
3.68 |
||||
|
|
|
|
|
||||||||||||
Weighted average common and common equivalent shares outstanding |
28,514 |
30,798 |
26,414 |
23,509 |
21,471 |
|||||||||||
|
|
|
|
|
|
At December 31, | |||||||||||||||
| ||||||||||||||||
|
2003 (1)
(as restated) |
|
|
2002 |
|
|
2001 |
|
|
2000 |
|
|
1999 |
|||
|
|
|
|
|
||||||||||||
|
(In Thousands) | |||||||||||||||
Consolidated Balance Sheet Data: |
|
|
|
|
|
|||||||||||
Cash and cash equivalents |
$ |
35,242 |
$ |
33,588 |
$ |
22,100 |
$ |
40,604 |
$ |
78,937 |
||||||
Total current assets |
105,595 |
82,825 |
51,214 |
97,203 |
150,893 |
|||||||||||
Goodwill and intangibles, net |
24,169 |
26,882 |
29,672 |
218,639 |
1,068 |
|||||||||||
Total assets |
245,923 |
189,075 |
165,737 |
407,749 |
215,008 |
|||||||||||
Current portion of long-term debt |
16,806 |
61 |
14,454 |
2,822 |
-- |
|||||||||||
Total current liabilities |
94,441 |
64,754 |
87,789 |
100,271 |
71,168 |
|||||||||||
Contingent obligations |
-- |
-- |
-- |
114,630 |
114,630 |
|||||||||||
Long-term debt |
31,791 |
100,855 |
152,370 |
103,695 |
84,985 |
|||||||||||
Stockholders' equity (deficit) |
99,787 |
23,466 |
(74,422 |
) |
82,700 |
(69,375 |
) |
2 | ||
| ||
3 | ||
| ||
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Revenue |
100.0 |
% |
100.0 |
% |
100.0 |
% | ||||
Costs and expenses: |
|
|
|
|||||||
Network and line costs |
47.5 |
49.0 |
48.2 |
|||||||
General and administrative expenses |
15.0 |
16.8 |
16.8 |
|||||||
Provision for doubtful accounts |
3.0 |
2.9 |
19.0 |
|||||||
Sales and marketing expenses |
12.6 |
8.6 |
15.2 |
|||||||
Depreciation and amortization |
4.8 |
5.5 |
7.0 |
|||||||
Impairment and restructuring charges |
-- |
-- |
35.0 |
|||||||
|
|
|
||||||||
Total costs and expenses |
82.9 |
82.8 |
141.2 |
|||||||
|
|
|
||||||||
Operating income |
17.1 |
17.2 |
(41.2 |
) | ||||||
Other income (expense): |
|
|
|
|||||||
Interest income |
0.1 |
0.3 |
0.3 |
|||||||
Interest expense |
(1.9 |
) |
(2.9 |
) |
(1.2 |
) | ||||
Other, net |
0.6 |
9.0 |
3.6 |
|||||||
|
|
|
||||||||
Income (loss) before income taxes |
15.9 |
23.6 |
(38.5 |
) | ||||||
Provision (benefit) for income taxes |
(4.6 |
) |
(7.0 |
) |
-- |
|||||
|
|
|
||||||||
Income (loss) before cumulative effect of an accounting change |
20.5 |
30.6 |
(38.5 |
) | ||||||
Cumulative effect of an accounting change |
-- |
-- |
(7.5 |
) | ||||||
|
|
|
||||||||
Net income (loss) |
20.5 |
% |
30.6 |
% |
(46.0) |
% | ||||
|
|
|
|
Year Ended December 31, | ||||||
|
2003 |
|
|
2002 |
|||
|
|
||||||
Revenue |
20.5 |
% |
(35.0) |
% | |||
Costs and expenses: |
|
|
|||||
Network and line costs |
16.8 |
(33.8 |
) | ||||
General and administrative expenses |
7.5 |
(34.9 |
) | ||||
Provision for doubtful accounts |
23.9 |
(89.9 |
) | ||||
Sales and marketing expenses |
77.8 |
(63.3 |
) | ||||
Depreciation and amortization |
5.9 |
(49.6 |
) | ||||
Impairment and restructuring charges |
-- |
(100.0 |
) | ||||
|
|
||||||
Total costs and expenses |
20.7 |
(61.8 |
) | ||||
|
|
||||||
Operating income |
19.5 |
127.2 |
|||||
Other income (expense): |
|
|
|||||
Interest income |
(51.6 |
) |
(34.3 |
) | |||
Interest expense |
(19.1 |
) |
49.2 |
||||
Other, net |
(91.3 |
) |
58.5 |
||||
|
|
||||||
Income before income taxes |
(18.7 |
) |
139.8 |
||||
Benefit for income taxes |
(20.6 |
) |
-- |
||||
|
|
||||||
Income before cumulative effect of an accounting change |
(19.2 |
) |
151.7 |
||||
Cumulative effect of an accounting change |
-- |
(100.0 |
) | ||||
|
|
||||||
Net income (loss) |
(19.2) |
% |
143.2 |
% | |||
|
|
4 | ||
| ||
5 | ||
| ||
6 | ||
| ||
7 | ||
| ||
Contractual Obligations |
Total |
|
|
1 year or
less
(as restated) |
|
|
2 3
Years |
|
|
4 5
Years
(as restated) |
|
|
Thereafter |
|||
|
|
|
|
|
| |||||||||||
Talk America Holdings, Inc.: |
|
|
|
|
|
|||||||||||
|
||||||||||||||||
12% Senior Subordinated Notes due 2007 (1) |
$ |
40,730 |
$ |
15,000 |
$ |
-- |
$ |
25,730 |
$ |
-- |
||||||
8% Convertible Senior Subordinated Notes due 2007 (2) |
3,778 |
-- |
-- |
3,778 |
-- |
|||||||||||
5% Convertible Subordinated Notes due 2004 |
670 |
670 |
-- |
-- |
-- |
|||||||||||
|
|
|
|
|
|
|||||||||||
Talk America Inc. and other subsidiaries: |
|
|
|
|
|
|||||||||||
|
||||||||||||||||
Capital lease obligations |
3,419 |
1,136 |
2,283 |
-- |
-- |
|||||||||||
|
|
|
|
|
||||||||||||
|
$ |
48,597 |
$ |
16,806 |
$ |
2,283 |
$ |
29,508 |
$ |
-- |
||||||
|
|
|
|
|
|
|||||||||||
Operating leases |
$ |
8,248 |
$ |
2,960 |
$ |
4,306 |
$ |
501 |
$ |
481 |
||||||
Carrier commitments (3) |
81,650 |
19,250 |
41,600 |
20,800 |
-- |
|||||||||||
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|||||||||||
Total Contractual Obligations |
$ |
138,495 |
$ |
39,016 |
$ |
48,189 |
$ |
50,809 |
$ |
481 |
||||||
|
|
|
|
|
8 | ||
| ||
9 | ||
| ||
10 | ||
| ||
11 | ||
| ||
12 | ||
| ||
13 | ||
| ||
|
|
FORM 10-K/A
PAGE |
| ||
|
|
|
Reports of Independent Auditors |
|
15 |
Consolidated statements of operations for the years ended December 31, 2003, 2002 and 2001 |
|
16 |
Consolidated balance sheets as of December 31, 2003 and 2002 |
|
17 |
Consolidated statements of cash flows for the years ended December 31, 2003, 2002 and 2001 |
|
18 |
Consolidated statements of stockholders' equity (deficit) for the years ended December 31, 2003, 2002 and 2001 |
|
19 |
Notes to consolidated financial statements |
|
20 |
|
|
|
14 | ||
| ||
15 | ||
| ||
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
|
|
|
|
|||||||
Revenue |
$ |
382,663 |
$ |
317,507 |
$ |
488,158 |
||||
|
|
|
|
|||||||
Costs and expenses: |
|
|
|
|||||||
Network and line costs |
181,682 |
155,567 |
235,153 |
|||||||
General and administrative expenses |
57,503 |
53,510 |
82,202 |
|||||||
Provision for doubtful accounts |
11,599 |
9,365 |
92,778 |
|||||||
Sales and marketing expenses |
48,277 |
27,148 |
73,973 |
|||||||
Depreciation and amortization |
18,344 |
17,318 |
34,390 |
|||||||
Impairment and restructuring charges |
-- |
-- |
170,571 |
|||||||
|
|
|
||||||||
Total costs and expenses |
317,405 |
262,908 |
689,067 |
|||||||
|
|
|
||||||||
|
|
|
|
|||||||
Operating income (loss) |
65,258 |
54,599 |
(200,909 |
) | ||||||
Other income (expense): |
|
|
|
|||||||
Interest income |
388 |
802 |
1,220 |
|||||||
Interest expense |
(7,353 |
) |
(9,087 |
) |
(6,091 |
) | ||||
Other income (expense), net |
2,470 |
28,448 |
17,950 |
|||||||
|
|
|
||||||||
Income (loss) before provision for income taxes |
60,763 |
74,762 |
(187,830 |
) | ||||||
Provision (benefit) for income taxes |
(17,698 |
) |
(22,300 |
) |
-- |
|||||
|
|
|
||||||||
Income (loss) before cumulative effect of an accounting change |
78,461 |
97,062 |
(187,830 |
) | ||||||
Cumulative effect of an accounting change |
-- |
-- |
(36,837 |
) | ||||||
|
|
|
||||||||
Net income (loss) |
$ |
78,461 |
$ |
97,062 |
$ |
(224,667 |
) | |||
|
|
|
||||||||
|
|
|
|
|||||||
Income (loss) per share Basic: |
|
|
|
|||||||
Income (loss) before cumulative effect of an accounting change per share |
$ |
2.97 |
$ |
3.56 |
$ |
(7.11 |
) | |||
Cumulative effect of an accounting change per share |
-- |
-- |
(1.40 |
) | ||||||
|
|
|
||||||||
Net income (loss) per share |
$ |
2.97 |
$ |
3.56 |
$ |
(8.51 |
) | |||
|
|
|
||||||||
|
|
|
|
|||||||
Weighted average common shares outstanding |
26,376 |
27,253 |
26,414 |
|||||||
|
|
|
||||||||
|
|
|
|
|||||||
Income (loss) per share Diluted: |
|
|
|
|||||||
Income (loss) before cumulative effect of an accounting change per share |
$ |
2.75 |
$ |
3.15 |
$ |
(7.11 |
) | |||
Cumulative effect of an accounting change per share |
-- |
-- |
(1.40 |
) | ||||||
|
|
|
||||||||
Net income (loss) per share |
$ |
2.75 |
$ |
3.15 |
$ |
(8.51 |
) | |||
|
|
|
||||||||
|
|
|
|
|||||||
Weighted average common and common equivalent shares outstanding |
28,514 |
30,798 |
26,414 |
|||||||
|
|
|
16 | ||
| ||
|
December 31, 2003
(as restated, see Note 16) |
|
|
December 31, 2002 |
|||
|
|
||||||
Assets |
|
|
|||||
Current assets: |
|
|
|||||
Cash and cash equivalents |
$ |
35,242 |
$ |
33,588 |
|||
Accounts receivable, trade (net of allowance for uncollectible accounts of $9,414 and $7,821 at December 31, 2003
and 2002, respectively) |
40,321 |
27,843 |
|||||
Deferred income taxes |
24,605 |
17,500 |
|||||
Prepaid expenses and other current assets |
5,427 |
3,894 |
|||||
|
|
||||||
Total current assets |
105,595 |
82,825 |
|||||
|
|
|
|||||
Property and equipment, net |
68,069 |
66,915 |
|||||
Goodwill |
19,503 |
19,503 |
|||||
Intangibles, net |
4,666 |
7,379 |
|||||
Deferred income taxes |
40,543 |
4,800 |
|||||
Other assets |
7,547 |
7,653 |
|||||
|
|
||||||
|
$ |
245,923 |
$ |
189,075 |
|||
|
|
||||||
|
|
|
|||||
Liabilities and Stockholders Equity |
|
|
|||||
Current liabilities: |
|
|
|||||
Accounts payable |
$ |
35,296 |
$ |
32,152 |
|||
Sales, use and excise taxes |
14,551 |
11,439 |
|||||
Deferred revenue |
10,873 |
6,480 |
|||||
Current portion of long-term debt |
16,806 |
61 |
|||||
Accrued compensation |
9,888 |
5,609 |
|||||
Other current liabilities |
7,027 |
9,013 |
|||||
|
|
||||||
Total current liabilities |
94,441 |
64,754 |
|||||
|
|
||||||
|
|
|
|||||
Long-term debt |
31,791 |
100,855 |
|||||
|
|
|
|||||
Deferred income taxes |
19,904 |
-- |
|||||
|
|
|
|||||
Commitments and contingencies |
|
|
|||||
|
|
|
|||||
Stockholders' equity: |
|
|
|||||
Preferred stock - $.01 par value, 5,000,000 shares authorized; no shares outstanding |
-- |
-- |
|||||
Common stock - $.01 par value, 100,000,000 shares authorized; 26,662,952 and 27,469,593 shares issued and
outstanding at December 31, 2003 and 2002, respectively
|
280 |
275 |
|||||
Additional paid-in capital |
354,847 |
351,992 |
|||||
Accumulated deficit |
(250,340 |
) |
(328,801 |
) | |||
Treasury stock - $.01 par value, 1,315,789 shares at December 31, 2003 |
(5,000 |
) |
-- |
||||
|
|
||||||
Total stockholders' equity |
99,787 |
23,466 |
|||||
|
|
||||||
|
$ |
245,923 |
$ |
189,075 |
|||
|
|
17 | ||
| ||
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Cash flows from operating activities: |
|
|
|
|||||||
Net income (loss) |
$ |
78,461 |
$ |
97,062 |
$ |
(224,667 |
) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|||||||
Provision for doubtful accounts |
11,599 |
9,365 |
92,778 |
|||||||
Depreciation and amortization |
18,344 |
17,318 |
34,390 |
|||||||
Non-cash compensation |
-- |
194 |
-- |
|||||||
Non-cash interest and amortization of accrued interest liabilities |
(260 |
) |
832 |
-- |
||||||
Provision for uncollectible note |
-- |
-- |
77 |
|||||||
Loss on sale and retirement of assets |
23 |
205 |
116 |
|||||||
Impairment of goodwill and intangibles |
-- |
-- |
168,684 |
|||||||
Cumulative effect of accounting change of contingent redemptions |
-- |
-- |
36,837 |
|||||||
Gain from restructuring of convertible debt |
-- |
(28,909 |
) |
-- |
||||||
Gain from restructuring of contingent redemptions |
-- |
-- |
(16,867 |
) | ||||||
Gain from extinguishment of debt |
(2,475 |
) |
(431 |
) |
(3,781 |
) | ||||
Unrealized loss on increase in fair value of contingent redemptions |
-- |
-- |
2,372 |
|||||||
Deferred income taxes |
(19,740 |
) |
(22,300 |
) |
-- |
|||||
Gain on legal settlement |
-- |
(1,681 |
) |
-- |
||||||
Changes in assets and liabilities: |
|
|
|
|||||||
Accounts receivable, trade |
(24,078 |
) |
(10,560 |
) |
(65,788 |
) | ||||
Prepaid expenses and other current assets |
(1,605 |
) |
(1,902 |
) |
(527 |
) | ||||
Other assets |
1,475 |
2,211 |
1,142 |
|||||||
Accounts payable |
3,144 |
(11,462 |
) |
(27,181 |
) | |||||
Deferred revenue |
4,393 |
(3,713 |
) |
(9,004 |
) | |||||
Sales, use and excise taxes |
3,112 |
3,101 |
404 |
|||||||
Other current liabilities and accrued compensation |
773 |
2,568 |
5,418 |
|||||||
|
|
|
||||||||
Net cash provided by (used in) operating activities |
73,166 |
51,898 |
(5,597 |
) | ||||||
|
|
|
||||||||
|
|
|
|
|||||||
Cash flows from investing activities: |
|
|
|
|||||||
Acquisition of intangibles |
(133 |
) |
(50 |
) |
(154 |
) | ||||
Capital expenditures |
(11,842 |
) |
(4,781 |
) |
(2,949 |
) | ||||
Capitalized software development costs |
(2,739 |
) |
(2,501 |
) |
(1,406 |
) | ||||
|
|
|
||||||||
Net cash used in investing activities |
(14,714 |
) |
(7,332 |
) |
(4,509 |
) | ||||
|
|
|
||||||||
|
|
|
|
|||||||
Cash flows from financing activities: |
|
|
|
|||||||
Payments of borrowings |
(52,914 |
) |
(17,983 |
) |
(2,624 |
) | ||||
Payments of capital lease obligations |
(61 |
) |
(1,036 |
) |
(1,022 |
) | ||||
Acquisition of convertible debt and senior notes |
-- |
(14,691 |
) |
(1,227 |
) | |||||
Proceeds from exercise of options and warrants |
1,177 |
632 |
-- |
|||||||
Payments in connection with restructuring contingent redemptions |
-- |
-- |
(3,525 |
) | ||||||
Purchase of treasury stock |
(5,000 |
) |
-- |
-- |
||||||
|
|
|
||||||||
Net cash used in financing activities |
(56,798 |
) |
(33,078 |
) |
(8,398 |
) | ||||
|
|
|
||||||||
|
|
|
|
|||||||
Net increase (decrease) in cash and cash equivalents |
1,654 |
11,488 |
(18,504 |
) | ||||||
Cash and cash equivalents, beginning of year |
33,588 |
22,100 |
40,604 |
|||||||
|
|
|
||||||||
Cash and cash equivalents, end of year |
$ |
35,242 |
$ |
33,588 |
$ |
22,100 |
||||
|
|
|
18 | ||
| ||
|
|
|
|
|
|
|
| |||||||||||||||
|
Common Stock |
|
Treasury Stock |
| ||||||||||||||||||
|
Additional
Paid-In |
Accumulated |
|
|||||||||||||||||||
|
Shares |
Amount |
Capital |
Deficit |
Shares |
Amount |
Total | |||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance, December 31, 2000 |
26,148 |
$ |
261 |
$ |
287,486 |
$ |
(201,196 |
) |
(91 |
) |
$ |
(3,851 |
) |
$ |
82,700 |
|||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Net (loss) |
-- |
-- |
-- |
(224,667 |
) |
-- |
-- |
(224,667 |
) | |||||||||||||
Issuance of common stock for
compensation |
-- |
-- |
(2,451 |
) |
-- |
68 |
2,858 |
407 |
||||||||||||||
Cumulative effect of an accounting change |
-- |
-- |
65,617 |
-- |
-- |
-- |
65,617 |
|||||||||||||||
Issuance of common stock in connection with AOL restructuring |
1,003 |
11 |
440 |
-- |
24 |
993 |
1,444 |
|||||||||||||||
Acquisition of treasury stock |
-- |
-- |
-- |
-- |
(1 |
) |
-- |
-- |
||||||||||||||
Issuance of warrants for services |
-- |
-- |
77 |
-- |
-- |
-- |
77 |
|||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2001 |
27,151 |
272 |
351,169 |
(425,863 |
) |
-- |
-- |
(74,422 |
) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
-- |
-- |
-- |
97,062 |
-- |
-- |
97,062 |
|||||||||||||||
Issuance of common stock for services |
67 |
1 |
82 |
-- |
-- |
-- |
83 |
|||||||||||||||
Exercise of common stock options |
252 |
2 |
741 |
-- |
-- |
-- |
743 |
|||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance, December 31, 2002 |
27,470 |
275 |
351,992 |
(328,801 |
) |
-- |
-- |
23,466 |
||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Net income |
-- |
-- |
-- |
78,461 |
-- |
-- |
78,461 |
|||||||||||||||
Acquisition of treasury stock |
-- |
-- |
-- |
-- |
1,316 |
(5,000 |
) |
(5,000 |
) | |||||||||||||
Exercise of common stock options |
509 |
5 |
1,172 |
-- |
-- |
-- |
1,177 |
|||||||||||||||
Income tax benefit related to exercise of common stock options |
-- |
-- |
1,683 |
-- |
-- |
-- |
1,683 |
|||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance, December 31, 2003 |
27,979 |
$ |
280 |
$ |
354,847 |
$ |
(250,340 |
) |
1,316 |
(5,000 |
) |
$ |
99,787 |
|||||||||
|
|
|
|
|
|
|
19 | ||
| ||
20 | ||
| ||
21 | ||
| ||
(In thousands, except for per share data) |
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Net income (loss) as reported |
$ |
78,461 |
$ |
97,062 |
$ |
(224,667 |
) | |||
Add back: Goodwill amortization |
-- |
-- |
17,271 |
|||||||
|
|
|
||||||||
Adjusted net income (loss) |
$ |
78,461 |
$ |
97,062 |
$ |
(207,396 |
) | |||
|
|
|
||||||||
|
|
|
|
|||||||
Basic income (loss) per share: |
|
|
|
|||||||
Net income (loss) as reported per share |
$ |
2.97 |
$ |
3.56 |
$ |
(8.51 |
) | |||
Goodwill amortization per share |
-- |
-- |
0.66 |
|||||||
|
|
|
||||||||
Adjusted net income (loss) per share |
$ |
2.97 |
$ |
3.56 |
$ |
(7.85 |
) | |||
|
|
|
||||||||
|
|
|
|
|||||||
Diluted income (loss) per share: |
|
|
|
|||||||
Net income (loss) as reported per share |
$ |
2.75 |
$ |
3.15 |
$ |
(8.51 |
) | |||
Goodwill amortization per share |
-- |
-- |
0.66 |
|||||||
|
|
|
||||||||
Adjusted net income (loss) per share |
$ |
2.75 |
$ |
3.15 |
$ |
(7.85 |
) | |||
|
|
|
22 | ||
| ||
(In thousands) |
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
||||||||
Net income (loss) as reported |
$ |
78,461 |
$ |
97,062 |
$ |
(224,667 |
) | |||
Add: Stock-based employee compensation expense included in reported net income (loss) |
-- |
110 |
-- |
|||||||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all options |
(1,294 |
) |
(5,208 |
) |
(1,380 |
) | ||||
|
|
|
||||||||
Pro forma net income (loss) |
$ |
77,167 |
$ |
91,964 |
$ |
(226,047 |
) | |||
|
|
|
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Basic earnings (loss) per share: |
|
|
|
|||||||
As reported |
$ |
2.97 |
$ |
3.56 |
$ |
(8.51 |
) | |||
Pro forma |
$ |
2.93 |
$ |
3.38 |
$ |
(8.56 |
) | |||
Diluted earnings (loss) per share: |
|
|
|
|||||||
As reported |
$ |
2.75 |
$ |
3.15 |
$ |
(8.51 |
) | |||
Pro forma |
$ |
2.71 |
$ |
2.96 |
$ |
(8.56 |
) |
23 | ||
| ||
24 | ||
| ||
Year Ended December 31, |
Operating Leases |
Capital Lease |
Total | |||||||
|
|
|
|
|||||||
2004 |
$ |
2,960 |
$ |
1,191 |
$ |
4,151 |
||||
2005 |
2,495 |
1,164 |
3,659 |
|||||||
2006 |
1,811 |
1,164 |
2,975 |
|||||||
2007 |
363 |
-- |
363 |
|||||||
2008 |
138 |
-- |
138 |
|||||||
Thereafter |
481 |
-- |
481 |
|||||||
|
|
|
||||||||
Total minimum lease payments |
$ |
8,248 |
$ |
3,519 |
$ |
11,767 |
||||
Less: interest |
|
100 |
|
|||||||
|
||||||||||
Present value of minimum lease payments |
|
$ |
3,419 |
|
||||||
Less: current installments |
|
1,136 |
|
|||||||
|
||||||||||
Long-term obligations |
|
$ |
2,283 |
|
25 | ||
| ||
|
|
December 31, | ||||||||
| ||||||||||
|
Lives |
|
|
2003 |
|
|
2002 |
|||
|
|
|
||||||||
Land |
|
$ |
330 |
$ |
330 |
|||||
Buildings and building improvements |
39 years |
6,987 |
6,782 |
|||||||
Leasehold improvements |
3-10 years |
1,757 |
397 |
|||||||
Switching equipment |
10-15 years |
64,161 |
59,289 |
|||||||
Software |
3 years |
7,877 |
6,366 |
|||||||
Equipment and other |
3-10 years |
50,830 |
44,770 |
|||||||
|
|
|||||||||
|
|
131,942 |
117,934 |
|||||||
Less: Accumulated depreciation |
|
(63,873 |
) |
(51,019 |
) | |||||
|
|
|||||||||
|
|
$ |
68,069 |
$ |
66,915 |
|||||
|
|
|
|
December 31, | ||||||||
| ||||||||||
|
Lives |
|
|
2003 |
|
|
2002 |
|||
|
|
|
||||||||
|
|
|
|
|||||||
Equipment and other |
3 years |
$ |
3,627 |
$ |
235 |
|||||
Less: Accumulated depreciation |
|
(196 |
) |
(117 |
) | |||||
|
|
|||||||||
|
|
$ |
3,431 |
$ |
118 |
|||||
|
|
|
December 31, | ||||||
| |||||||
|
2003
(as restated) |
|
|
2002 |
|||
|
|
||||||
|
|
|
|||||
12% Senior Subordinated Notes Due 2007 |
$ |
40,730 |
$ |
65,970 |
|||
8% Secured Convertible Notes Due 2006 |
-- |
30,150 |
|||||
8% Convertible Senior Subordinated Notes Due 2007 (1) |
3,778 |
4,038 |
|||||
5% Convertible Subordinated Notes Due 2004 |
670 |
670 |
|||||
Capital lease obligations |
3,419 |
88 |
|||||
|
|
||||||
Total long-term debt and capital lease obligations |
$ |
48,597 |
$ |
100,916 |
|||
Less: current maturities (2) |
16,806 |
61 |
|||||
|
|
||||||
Total long-term debt and capital lease obligations, excluding current maturities |
$ |
31,791 |
$ |
100,855 |
|||
|
|
26 | ||
| ||
27 | ||
| ||
Year Ended December 31, |
| |||
|
||||
2004 |
$ |
16,806 |
||
2005 |
1,131 |
|||
2006 |
1,152 |
|||
2007 |
29,508 |
|||
2008 |
-- |
|||
|
||||
|
$ |
48,597 |
||
|
28 | ||
| ||
|
|
Options
Shares |
|
Exercise
Price Range
Per Share |
|
Weighted Average Exercise Price |
|
|
| ||||
Outstanding, December 31, 2000 |
|
5,023,106 |
|
$2.64 - $51.75 |
|
$ 25.80 |
Granted |
|
365,733 |
|
$0.99 - $5.94 |
|
$ 2.58 |
Exercised |
|
-- |
|
-- |
|
-- |
Cancelled |
|
(2,912,700) |
|
$4.02 - $51.75 |
|
$34.02 |
|
|
| ||||
|
|
|
|
|
|
|
Outstanding, December 31, 2001 |
|
2,476,139 |
|
$0.99 - $47.64 |
|
$12.72 |
Granted |
|
2,248,686 |
|
$1.11 - $11.91 |
|
$1.78 |
Exercised |
|
(250,906) |
|
$0.99 - $7.88 |
|
$2.50 |
Cancelled |
|
(288,218) |
|
$1.26 - $47.64 |
|
$21.66 |
|
|
| ||||
|
|
|
|
|
|
|
Outstanding, December 31, 2002 |
|
4,185,701 |
|
$1.11 - $48.54 |
|
$6.84 |
Granted |
|
1,873,171 |
|
$3.70 - $14.35 |
|
$10.33 |
Exercised |
|
(509,149) |
|
$0.99 - $15.75 |
|
$2.34 |
Cancelled |
|
(112,616) |
|
$1.38 - $30.18 |
|
$12.48 |
|
|
| ||||
|
|
|
|
|
|
|
Outstanding, December 31, 2003 |
|
5,437,107 |
|
$0.99 - $47.63 |
|
$8.35 |
|
|
|
|
Option Shares |
|
Exercise Price Range
Per Share |
|
Weighted Average Exercise Price |
|
|
| |||
2001 |
1,285,508 |
|
$2.64 - $47.64 |
|
$16.74 |
2002 |
2,942,999 |
|
$0.99 - $48.54 |
|
$6.84 |
2003 |
2,939,893 |
|
$0.99 - $47.63 |
|
$7.99 |
29 | ||
| ||
Range of Exercise Prices |
|
Number Outstanding at December 31, 2003 |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Contractual Life (years) |
|
Number Exercisable at December 31, 2003 |
|
Weighted Average Exercise Price |
|
|
|
|
|
| |||||
$0.99 to $10.31 |
|
2,701,243 |
|
$3.12 |
|
6.5 |
|
1,874,437 |
|
$2.20 |
$10.32 to $14.35 |
|
2,355,699 |
|
$11.57 |
|
9.0 |
|
685,291 |
|
$14.11 |
$14.36 to $21.00 |
|
150,058 |
|
$19.70 |
|
5.2 |
|
150,058 |
|
$19.70 |
$21.01 to $30.00 |
|
134,998 |
|
$28.16 |
|
2.8 |
|
134,998 |
|
$28.16 |
$30.01 to $47.63 |
|
95,109 |
|
$30.94 |
|
5.4 |
|
95,109 |
|
$30.94 |
Assumption |
|
2003 |
|
2002 |
|
2001 |
|
|
|
| |||
|
|
|
|
|
|
|
Expected Term |
|
5 years |
|
5 years |
|
5 years |
Expected Volatility |
|
98.63% |
|
98.13% |
|
78.95% |
Expected Dividend Yield |
|
--% |
|
--% |
|
--% |
Risk-Free Interest Rate |
|
3.15% |
|
4.33% |
|
5.92% |
30 | ||
| ||
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Current income tax expense: |
||||||||||
Federal |
$ |
1,300 |
$ |
-- |
$ |
-- |
||||
State |
3,470 |
-- |
-- | |||||||
|
|
|
||||||||
|
4,770 |
-- |
-- |
|||||||
|
|
|
||||||||
Deferred income tax expense (benefit): |
|
|
|
|||||||
Federal |
(20,101 |
) |
(22,300 |
) |
-- |
|||||
State |
(2,367 |
) |
-- |
-- |
||||||
|
|
|
||||||||
|
(22,468 |
) |
(22,300 |
) |
-- |
|||||
|
|
|
||||||||
|
|
|
|
|||||||
Total provision (benefit) for income taxes |
$ |
(17,698 |
) |
$ |
(22,300 |
) |
$ |
-- |
||
|
|
|
|
Year Ended December 31, | ||||||
| |||||||
|
2003 |
|
|
2002 |
|||
|
|
||||||
Deferred Tax Assets |
|
|
|||||
Net operating loss carry-forwards |
$ |
80,671 |
$ |
104,032 |
|||
Amortization |
965 |
1,558 |
|||||
Allowance for uncollectible accounts |
3,674 |
3,250 |
|||||
Warrants issued for compensation |
1,070 |
1,070 |
|||||
Accruals not currently deductible |
2,360 |
1,317 |
|||||
Net capital loss carry-forwards |
3,478 |
8,875 |
|||||
|
|
||||||
|
|
|
|||||
Deferred tax assets |
92,218 |
120,102 |
|||||
Less valuation allowance |
27,070 |
77,591 |
|||||
|
|
||||||
Net deferred tax assets |
$ |
65,148 |
$ |
42,511 |
|||
|
|
Deferred Tax Liabilities |
|
|
|||||
Depreciation and amortization |
$ |
18,173 |
$ |
17,386 |
|||
Deductions not currently expensed |
1,731 |
2,825 |
|||||
|
|
||||||
Deferred tax liabilities |
$ |
19,904 |
$ |
20,211 |
|||
|
|
|
Year Ended December 31, | |||||||||
| ||||||||||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Federal income taxes (benefit) computed at the statutory rate |
35.0 |
% |
35.0 |
% |
(35.0) |
% | ||||
Increase (decrease) in income taxes resulting from: |
|
|
|
|||||||
State income taxes less Federal benefit |
4.0 |
0.0 |
0.0 |
|||||||
Valuation allowance changes affecting the provision for income taxes |
(68.2 |
) |
(5.1 |
) |
35.0 |
|||||
Other |
0.1 |
(0.1 |
) |
0.0 |
||||||
|
|
|
||||||||
|
|
|
|
|||||||
Total provision (benefit) for income taxes |
(29.1) |
% |
(29.8) |
% |
-- |
% | ||||
|
|
|
31 | ||
| ||
2011 |
$ |
412 |
||
2012 |
2,942 |
|||
2018 |
1,107 |
|||
2019 |
60,806 |
|||
2020 and thereafter |
61,437 |
32 | ||
| ||
33 | ||
| ||
|
2003 |
|
|
2002 |
|
|
2001 |
|||
|
|
|
||||||||
Supplemental disclosure of cash flow information: |
|
|
|
|||||||
Cash paid during the year for interest |
$ |
9,930 |
$ |
6,252 |
$ |
5,620 |
||||
Cash paid during the year for taxes |
1,980 |
-- |
-- |
|||||||
|
|
|
||||||||
|
|
|
|
|||||||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|||||||
Acquisition of equipment under capital lease obligations |
3,392 |
-- |
2,145 |
|||||||
Interest expense paid in additional principal |
-- |
2,824 |
-- |
|||||||
Issuance of warrants for services |
-- |
-- |
77 |
|||||||
Contingent redemptions exchanged for convertible debt |
-- |
-- |
32,400 |
|||||||
Acquisitions: |
|
|
|
|||||||
Fair value of assets acquired |
-- |
-- |
835 |
|||||||
Goodwill |
-- |
-- |
54 |
|||||||
Less: liabilities assumed |