1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
October 25, 1999 (October 21, 1999)
CNET, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-20939 13-3696170
-------- ------- ----------
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
150 Chestnut Street
San Francisco, California 94111
-------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(415) 395-7800
2
ITEM 5. OTHER EVENTS.
On October 21, 1999, CNET, Inc. announced its operating results for the
third quarter and for the nine months ended September 30, 1999. The operating
results are as follows:
CNET reported net revenues of $28.4 million for the third quarter ended
September 30, 1999, a 93 percent increase over revenues of $14.7 million for the
third quarter ended September 30, 1998. Pro forma net loss for the third quarter
was $23.1 million or $0.32 per share, excluding goodwill amortization, equity
losses, gain on investment sales and related taxes. For the comparable period in
1998, CNET reported pro forma net income of $1.7 million or $0.02 per diluted
share. As expected, the decline in operating profit compared to previous
quarters is due to a $25 million increase in marketing expenses related to
CNET's brand advertising campaign announced July 1, 1999. Including goodwill
amortization, equity losses, gain on investment sales and related taxes, net
income for the third quarter ended September 30, 1999 was $29.3 million, or
$0.35 per diluted share. In the quarter, CNET realized a gain of $98 million
from the sale of certain equity investments. CNET has cash and investments that
are currently valued at over $700 million, including CNET's interest in Snap.com
which will be converted into a 13 percent stake in NBC Interactive. CNET intends
to monetize these securities over time to create value for shareholders and to
fund CNET growth.
For the nine months ended September 30, 1999, revenues were $74.0 million, a 96
percent increase over revenues of $37.9 million for the comparable period in
1998. Proforma net loss for the nine-month period ended September 30, 1999 was
$15.4 million, or $0.22 per share. Including goodwill amortization, equity
losses, gain on investment sales and related taxes, net income for the nine
month period was $60.3 million or $0.76 per diluted share.
CNET also reported that previously capitalized merger-related charges of $1.2
million, incurred for acquisitions completed in the first quarter of 1999,
should have been accounted for as expenses during that period. As a result,
including these merger-related charges, CNET's first quarter net income was
$0.29 per diluted share compared to the previously reported $0.30 per diluted
share.
CNET Online
Revenues for CNET Online were $26.8 million for the quarter, a 108 percent
increase over revenues of $12.9 million in the third quarter of 1998. In the
quarter, CNET launched of a $100 million marketing campaign designed to
significantly increase awareness of CNET and grow its user base. The campaign,
which launched on July 1, includes online advertising, national and spot
television, radio, print and outdoor, as well as events and promotions. The
first phase of the campaign focused on building brand awareness. In the fourth
quarter, the advertising campaign will focus on explaining CNET benefits to
users. In August, CNET launched its Business Computing Channel, offering a
complete resource for enterprise computer buyers and sellers.
This Current Report on Form 8-K contains forward-looking statements that are
subject to significant risks and uncertainties. Although the Company believes
that the expectations reflected in its forward looking statements are
reasonable, it can give no assurance that such expectations
3
or any of its forward-looking statements will prove to be correct. Important
cautionary statements and risk factors that could cause actual results to differ
materially from those reflected in the Company's forward looking statements are
disclosed in "Management's Discussion and Analysis" and in the Company's latest
quarterly report on Form 10-Q and under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Cautionary Statement
Regarding Factors that May Affect our Business" in the Company's latest annual
report on Form 10-K, copies of which may be obtained from the Company.
4
CNET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000's Omitted)
September 30, December 31,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 118,021 $ 52,483
Marketable securities 240,859 --
Accounts receivable, net 22,772 16,785
Other current assets 12,058 1,705
Total current assets 393,710 70,973
Property and equipment, net 23,692 15,326
Other assets 102,626 2,060
520,028 88,359
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 16,639 3,477
Accrued liabilities 13,241 6,727
Current portion of long-term debt 5,750 1,113
Income taxes payable 36,349 --
Deferred tax liability 36,780 --
Total current liabilities 108,759 11,317
Long-term debt 179,086 569
Total liabilities 287,845 11,886
Stockholders' equity:
Common stock 7 7
Additional paid in capital 167,831 127,357
Other comprehensive income 55,161 --
Retained earnings 9,184 (50,891)
Total stockholders' equity 232,183 76,473
$ 520,028 $ 88,359
5
CNET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(000's Omitted)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
CNET Online $ 26,838 $ 12,930 $ 69,041 $ 32,442
Television 1,571 1,771 4,995 5,421
Total revenues 28,409 14,701 74,036 37,863
Cost of revenues:
CNET Online 9,155 5,484 23,611 16,677
Television 2,324 1,668 5,699 5,205
Total cost of revenues 11,479 7,152 29,310 21,882
Gross profit 16,930 7,549 44,726 15,981
Operating expenses:
Sales & marketing 32,998 3,971 45,117 9,712
Development 1,904 688 5,069 2,105
Corporate 4,807 1,719 10,002 4,849
Total operating expenses
before goodwill 39,709 6,378 60,188 16,666
Total operating profit
(loss) before goodwill (22,779) 1,171 (15,462) (684)
Goodwill amortization 5,224 -- 6,461 --
Total operating profit
(loss) (28,003) 1,171 (21,923) (684)
Other income (expense)
Equity losses -- (3,126) -- (11,773)
Gain on investment sales 97,791 5,327 122,365 10,450
Interest income(expense), net (312) 495 112 647
Total other income
(expense) 97,479 2,696 122,477 (676)
Net income (loss) before
income taxes 69,476 3,867 100,554 (1,360)
Income taxes 40,222 -- 40,222 --
Net income (loss) $ 29,254 $ 3,867 $ 60,332 $ (1,360)
Proforma diluted net income
(loss) per share before
goodwill, gain on investment
sales, and income taxes
related to equity gain $ (0.32) $ 0.02 $ (0.22) $ (0.00)
Basic net income (loss) per
share $ 0.40 $ 0.06 $ 0.85 $ (0.02)
Diluted net income (loss)
per share $ 0.35 $ 0.05 $ 0.76 $ (0.02)
Shares used in calculating
basic per share data 72,536 67,255 70,790 62,944
Shares used in calculating
diluted per share data 86,105 72,634 79,096 62,944
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 25, 1999 CNET, INC.
By: /s/ Douglas J. Woodrum
Name: Douglas J. Woodrum
Title: Chief Financial Officer