EXHIBIT 99.3
Quarterly Information
Second Quarter 2003 Results of Operations
Consolidated revenues from continuing operations were $94.9 million for the second quarter of 2003 compared to $87.4 million in the second quarter of 2002. Premiere Conferencing’s second quarter 2003 revenue grew 13.4%, totaling $39.7 million versus $35.0 million in the same period in 2002. Premiere Conferencing’s gross profit margin (gross profit as a percentage of total revenue) was 82.9% and 80.5% for the three months ended June 30, 2002 and 2003, respectively, and its contribution margin (gross profit less direct operating costs as a percentage of total revenue) was 58.6% and 60.3% for the three months ended June 30, 2002 and 2003, respectively. Revenue for Xpedite grew 5.3% during the second quarter of 2003, totaling $55.2 million versus $52.4 million in the same period last year. Xpedite’s gross profit margin was 78.9% and 78.8% for the three months ended June 30, 2002 and 2003, respectively, and its contribution margin was 69.6% and 68.8% for the three months ended June 30, 2002 and 2003, respectively. Income from continuing operations increased to $6.8 million in the second quarter of 2003 from $2.9 million in the comparable prior year period. Diluted earnings per share from continuing operations increased to $0.12 from $0.05 in the second quarter of 2002. EBITDA(a) was $20.8 million in the second quarter of 2003 versus $16.0 million in the second quarter of 2002. During the second quarter of 2003, we repurchased $39.5 million face value of our existing convertible notes due 2004, leaving an outstanding balance of $133.0 million.
Year-to-date 2003 Results of Operations
Consolidated revenues from continuing operations for the six months ended June 30, 2003, were $184.1 million compared to $170.7 million in the comparable prior year period. Premiere Conferencing’s revenue for the six months ended June 30, 2003, totaled $76.3 million, an increase of 11.6% from $68.4 million for the comparable prior year period. Premiere Conferencing’s gross profit margin was 83.6% and 81.3% for the six months ended June 30, 2002 and 2003, respectively, and its contribution margin was 58.6% and 60.2% for the six months ended June 30, 2002 and 2003, respectively. Xpedite revenue for the first six months of 2003 grew 5.4% to $107.9 million from $102.4 million in the comparable prior year period. Xpedite’s gross profit margin was 77.9% and 79.1% for the six months ended June 30, 2002 and 2003, respectively, and its contribution margin was 68.7% and 69.1% for the six months ended June 30, 2002 and 2003, respectively. Income from continuing operations during the six months ended June 30, 2003 increased to $11.5 million from $5.0 million in the comparable prior year period. Diluted EPS from continuing operations for the first six months of 2003 were $0.21, up from $0.09 in the first six months of 2002. EBITDA(a)was $39.3 million for the six months ended June 30, 2003, compared to $31.7 million in the comparable prior year period.
(a) | “EBITDA” is considered a measure of liquidity. EBITDA is defined as income from continuing operations before interest, taxes, depreciation and amortization. Management uses this measure as an indicator of cash generated solely from operating activities and is an important measurement of each business unit’s contribution towards overall liquidity. Further, it provides management with a consistent measurement tool for evaluating the operating activities of a business unit before investing activities, interest and taxes. EBITDA is a non-GAAP financial measure. “GAAP” refers to United States generally accepted accounting principles. Management believes the most directly comparable GAAP financial measure is “net cash provided by operating activities from continuing operations” presented in the Company’s consolidated statements of cash flows in its financial statements. EBITDA is reconciled directly to net cash provided by operating activities from continuing operations below (in thousands): |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2002 | 2003 | 2002 | 2003 | |||||||||||||
(unaudited) | ||||||||||||||||
EBITDA: | $ | 15,960 | $ | 20,830 | $ | 31,687 | $ | 39,311 | ||||||||
Add: | ||||||||||||||||
Equity based compensation | 181 | 541 | 1,326 | 1,125 | ||||||||||||
Movement in prepaids and other assets | (407 | ) | 3,839 | 8,691 | 3,280 | |||||||||||
Movement in accounts receivable, net | (5,902 | ) | 57 | (15,470 | ) | (4,784 | ) | |||||||||
Movement in accruals and other liabilities | 7,251 | (157 | ) | (16,359 | ) | (9,547 | ) | |||||||||
Deferred income tax movement | 324 | 3,163 | 2,065 | 5,429 | ||||||||||||
Less: | ||||||||||||||||
Gain on sale of marketable securities | — | (501 | ) | (789 | ) | (501 | ) | |||||||||
Gain on repurchase of bonds | — | (1,397 | ) | — | (1,397 | ) | ||||||||||
Tax expense | (2,142 | ) | (4,663 | ) | (3,883 | ) | (8,268 | ) | ||||||||
Interest, net | (2,774 | ) | (2,256 | ) | (5,656 | ) | (4,822 | ) | ||||||||
Net cash provided by operating activities from continuing operations | $ | 12,491 | $ | 19,456 | $ | 1,612 | $ | 19,826 | ||||||||
PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2003 | June 30, 2002 | June 30, 2003 | June 30, 2002 | |||||||||||||
REVENUES | $ | 94,851 | $ | 87,408 | $ | 184,071 | $ | 170,729 | ||||||||
TELECOMMUNICATIONS COSTS | 19,444 | 17,077 | 36,800 | 33,878 | ||||||||||||
GROSS PROFIT | 75,407 | 70,331 | 147,271 | 136,851 | ||||||||||||
DIRECT OPERATING COSTS | 13,490 | 13,378 | 26,806 | 26,458 | ||||||||||||
CONTRIBUTION MARGIN | 61,917 | 56,953 | 120,465 | 110,393 | ||||||||||||
OTHER OPERATING EXPENSES: | ||||||||||||||||
Selling and marketing | 26,845 | 22,729 | 51,109 | 44,998 | ||||||||||||
General and administrative | 13,548 | 12,928 | 27,044 | 25,777 | ||||||||||||
Research and development | 2,178 | 1,828 | 4,182 | 4,036 | ||||||||||||
Depreciation | 5,740 | 5,782 | 11,273 | 11,016 | ||||||||||||
Amortization | 1,416 | 2,362 | 3,415 | 6,153 | ||||||||||||
Equity based compensation | 541 | 181 | 1,125 | 1,326 | ||||||||||||
Legal settlements, net | — | 3,275 | — | 3,275 | ||||||||||||
Total operating expenses | 50,268 | 49,085 | 98,148 | 96,581 | ||||||||||||
OPERATING INCOME | 11,649 | 7,868 | 22,317 | 13,812 | ||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest expense | (2,453 | ) | (2,888 | ) | (5,262 | ) | (5,904 | ) | ||||||||
Interest income | 197 | 114 | 441 | 248 | ||||||||||||
Gain on sale of marketable securities | 501 | — | 501 | 789 | ||||||||||||
Gain on repurchase of bonds | 1,397 | — | 1,397 | — | ||||||||||||
Other, net | 126 | (53 | ) | 407 | (83 | ) | ||||||||||
Total other income (expense) | (232 | ) | (2,827 | ) | (2,516 | ) | (4,950 | ) | ||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 11,417 | 5,041 | 19,801 | 8,862 | ||||||||||||
INCOME TAX EXPENSE | 4,663 | 2,142 | 8,268 | 3,883 | ||||||||||||
INCOME FROM CONTINUING OPERATIONS | $ | 6,754 | $ | 2,899 | $ | 11,533 | $ | 4,979 | ||||||||
DISCONTINUED OPERATIONS: | ||||||||||||||||
Loss from operations from Voicecom (including loss on disposal of $1,262 and $13,887 for the three and six months ended June 30, 2002) | (132 | ) | (1,262 | ) | (132 | ) | (19,716 | ) | ||||||||
Income tax benefit | (51 | ) | (442 | ) | (51 | ) | (6,901 | ) | ||||||||
Loss on discontinued operations | (81 | ) | (820 | ) | (81 | ) | (12,815 | ) | ||||||||
NET INCOME (LOSS) | $ | 6,673 | $ | 2,079 | $ | 11,452 | $ | (7,836 | ) | |||||||
BASIC EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
Continuing operations | $ | 0.13 | $ | 0.05 | $ | 0.22 | $ | 0.09 | ||||||||
Discontinued operations | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.24 | ) | ||||
Net income (Loss) | $ | 0.13 | $ | 0.04 | $ | 0.22 | $ | (0.15 | ) | |||||||
DILUTED EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
Continuing operations | $ | 0.12 | $ | 0.05 | $ | 0.21 | $ | 0.09 | ||||||||
Discontinued operations | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.23 | ) | ||||
Net income (Loss) | $ | 0.12 | $ | 0.04 | $ | 0.21 | $ | (0.14 | ) | |||||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||||||||
BASIC | 53,168 | 53,739 | 52,591 | 53,296 | ||||||||||||
DILUTED | 55,817 | 56,437 | 54,954 | 55,715 | ||||||||||||
PTEK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT SHARE DATA)
June 30, 2003 | December 31, 2002 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and equivalents | $ | 30,453 | $ | 68,777 | ||||
Restricted cash, current | 1,250 | — | ||||||
Marketable securities, available for sale | 272 | 641 | ||||||
Accounts receivable (less allowances of $6,749 and $7,074, respectively) | 56,694 | 51,909 | ||||||
Prepaid expenses and other | 5,708 | 8,872 | ||||||
Deferred income taxes, net | 13,614 | 15,801 | ||||||
Total current assets | 107,991 | 146,000 | ||||||
PROPERTY AND EQUIPMENT, NET | 60,499 | 63,148 | ||||||
OTHER ASSETS | ||||||||
Goodwill | 123,066 | 123,066 | ||||||
Intangibles, net | 15,040 | 7,802 | ||||||
Deferred income taxes, net | 3,546 | 6,648 | ||||||
Notes receivable—employees | 2,086 | 2,083 | ||||||
Restricted cash, non-current | 3,438 | — | ||||||
Other assets | 3,227 | 3,346 | ||||||
$ | 318,893 | $ | 352,093 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 32,613 | $ | 37,110 | ||||
Accrued taxes | 8,160 | 8,250 | ||||||
Accrued expenses | 30,723 | 32,319 | ||||||
Current maturities of long term debt & capital lease obligations | 4,002 | 4,320 | ||||||
Accrued restructuring costs | 883 | 1,898 | ||||||
Total current liabilities | 76,381 | 83,897 | ||||||
LONG TERM LIABILITIES | ||||||||
Convertible subordinated notes | 133,000 | 172,500 | ||||||
Long term debt & capital lease obligations | 1,534 | 3,407 | ||||||
Other accrued expenses | 10,935 | 7,951 | ||||||
Total long term liabilities | 145,469 | 183,858 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock $0.01 par value; 150,000,000 shares authorized, 53,603,148 and 58,733,628 shares issued in 2003 and 2002 and 53,603,148 and 53,540,828 shares outstanding in 2003 and 2002, respectively | 536 | 587 | ||||||
Unrealized gain on marketable securities | 74 | 276 | ||||||
Additional paid-in capital | 581,966 | 603,883 | ||||||
Unearned restricted stock compensation | (1,256 | ) | (1,913 | ) | ||||
Treasury stock, at cost | — | (22,112 | ) | |||||
Note receivable, shareholder | (5,193 | ) | (5,042 | ) | ||||
Cumulative translation adjustment | (2,065 | ) | (2,810 | ) | ||||
Accumulated deficit | (477,019 | ) | (488,531 | ) | ||||
Total shareholders’ equity | 97,043 | 84,338 | ||||||
$ | 318,893 | $ | 352,093 | |||||
PTEK HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(IN THOUSANDS, UNAUDITED)
2003 | 2002 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Income (loss) | $ | 11,452 | $ | (7,836 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Loss on discontinued operations | 81 | 12,815 | ||||||
Depreciation | 11,273 | 11,016 | ||||||
Amortization | 3,415 | 6,153 | ||||||
Gain on sale of marketable securities, available for sale | (501 | ) | (789 | ) | ||||
Gain on repurchase of bonds | (1,397 | ) | — | |||||
Deferred income taxes | 5,429 | 2,065 | ||||||
Payments for restructuring costs | (549 | ) | (1,770 | ) | ||||
Equity based compensation | 1,125 | 1,326 | ||||||
Changes in assets and liabilities: | — | — | ||||||
Accounts receivable, net | (4,784 | ) | (15,470 | ) | ||||
Prepaid expenses and other | 3,280 | 8,691 | ||||||
Accounts payable and accrued expenses | (8,998 | ) | (14,589 | ) | ||||
Total adjustments | 8,374 | 9,448 | ||||||
Net cash provided by operating activities from continuing operations | 19,826 | 1,612 | ||||||
Net cash provided by operating activities from discontinued operations | — | 164 | ||||||
Net cash provided by operating activities | 19,826 | 1,776 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Capital expenditures | (7,124 | ) | (6,813 | ) | ||||
Proceeds from sale of business | — | 7,248 | ||||||
Business acquisitions | (6,782 | ) | — | |||||
Increase in restricted cash for acquisitions, net | (4,688 | ) | — | |||||
Sale of marketable securities | 541 | 875 | ||||||
Net cash (used in) provided by investing activities from continuing operations | (18,053 | ) | 1,310 | |||||
Net cash used in investing activities from discontinued operations | — | (155 | ) | |||||
Net cash (used in) provided by investing activities | (18,053 | ) | 1,155 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Principal payments under borrowing arrangements | (2,192 | ) | (1,476 | ) | ||||
Principal payments from bond repurchase | (37,901 | ) | — | |||||
Proceeds from long term borrowing arrangements | — | 4,000 | ||||||
Purchase of treasury stock, at cost | (627 | ) | (537 | ) | ||||
Exercise of stock options | 363 | 181 | ||||||
Net cash (used in) provided by financing activities from continuing operations | (40,357 | ) | 2,168 | |||||
Net cash used in financing activities from discontinued operations | — | (1,086 | ) | |||||
Net cash (used in) provided by financing activities | (40,357 | ) | 1,082 | |||||
Effect of exchange rate changes on cash and equivalents | 260 | 1,370 | ||||||
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS | (38,324 | ) | 5,383 | |||||
CASH AND EQUIVALENTS, beginning of period | 68,777 | 48,023 | ||||||
CASH AND EQUIVALENTS, end of period | $ | 30,453 | $ | 53,406 | ||||