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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File Number 0-21989
Medialink Worldwide Incorporated
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1481284
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
708 Third Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
(212) 682-8300
--------------
(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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on November 10, 2000:
Common Stock - 5,726,009
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of September 30,
2000 (unaudited) and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations
for the nine months ended September 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Operations
for the three months ended September 30, 2000 and 1999 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2000 and 1999 6
Notes to Unaudited Condensed Consolidated Financial Statements 7 - 9
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10 - 13
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 2. Changes in Securities and Use of Proceeds 14
ITEM 3. Defaults Upon Senior Securities 14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports on Form 8-K 14
</TABLE>
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,733,105 $ 3,883,708
Accounts receivable, net 14,115,385 12,271,664
Prepaid expenses and other current assets 1,954,154 1,695,273
Deferred tax assets 199,000 128,000
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Total current assets 19,001,644 17,978,645
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Property and equipment, net 4,148,884 3,452,324
Goodwill, customer list and other intangibles, net 12,209,717 11,524,386
Investment in joint venture 1,264,873 2,002,032
Deferred tax assets 929,000 715,000
Other assets 1,532,026 1,309,805
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Total assets $ 39,086,144 $ 36,982,192
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 107,942 $ 128,517
Borrowings on credit facilities - 2,000,000
Accounts payable 3,441,740 2,670,676
Accrued expenses and other current liabilities 2,421,081 1,590,778
Income taxes payable 1,070,566 472,372
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Total current liabilities 7,041,329 6,862,343
Long-term debt, net of current portion 119,686 182,831
Note payable - stockholder 50,000 50,000
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Total liabilities 7,211,015 7,095,174
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Stockholders' Equity:
Common stock; $.01 par value. Authorized 15,000,000 shares;
issued and outstanding 5,726,009 shares in 2000 and
5,636,859 shares in 1999 57,260 56,369
Additional paid-in capital 23,706,242 23,506,200
Retained earnings 8,329,666 6,516,357
Accumulated other comprehensive income (218,039) (191,908)
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Total stockholders' equity 31,875,129 29,887,018
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Total liabilities and stockholders' equity $ 39,086,144 $ 36,982,192
============= =============
</TABLE>
See notes to condensed consolidated financial statements
3
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 42,345,848 $ 32,228,652
Direct costs 15,431,252 10,934,011
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Gross Profit 26,914,596 21,294,641
Selling, general and administrative expenses 23,111,099 18,932,176
Loss from joint venture 774,000 -
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Operating income 3,029,497 2,362,465
Interest income, net 88,812 187,339
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Income before income taxes 3,118,309 2,549,804
Provision for income taxes 1,305,000 1,030,000
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Net income $ 1,813,309 $ 1,519,804
============ ============
Basic earnings per share $ 0.32 $ 0.28
============ ============
Diluted earnings per share $ 0.30 $ 0.25
============ ============
</TABLE>
See notes to condensed consolidated financial statements
4
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 13,782,156 $ 10,511,465
Direct costs 4,826,067 3,839,736
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Gross Profit 8,956,089 6,671,729
Selling, general and administrative expenses 7,801,553 6,654,810
Loss from joint venture 275,905 -
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Operating income 878,631 16,919
Interest income, net 29,394 54,547
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Income before income taxes 908,025 71,466
Provision for income taxes 373,000 30,000
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Net income $ 535,025 $ 41,466
============ ============
Basic earnings per share $ 0.09 $ 0.01
============ ============
Diluted earnings per share $ 0.09 $ 0.01
============ ============
</TABLE>
See notes to condensed consolidated financial statements
5
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,813,309 $ 1,519,804
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,136,523 1,705,604
Deferred income taxes (285,000) (189,000)
Equity loss from joint venture 774,000 -
Changes in assets and liabilities, net of acquisitions
Accounts receivable (1,921,375) (1,269,855)
Other assets (222,221) (469,410)
Prepaid expenses and other current assets (258,881) 233,572
Accounts payable and accrued expenses 1,154,167 (704,861)
Income taxes payable 598,194 (650,596)
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Net cash provided by operating activities 3,788,716 175,258
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired,
and acquisition costs (1,492,051) (2,955,009)
Investment in joint venture - (2,235,869)
Purchases of property and equipment (1,466,004) (610,589)
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Net cash used in investing activities (2,958,055) (5,801,467)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock in connection
with the exercise of stock options 102,456 421,356
Repayments of long term debt (83,720) (563,409)
Payments on note payable - stockholder - (88,664)
Payments on line of credit - bank (2,000,000) (200,000)
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Net cash used in financing activities (1,981,264) (430,717)
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Net decrease in cash and cash equivalents (1,150,603) (6,056,926)
Cash and cash equivalents at the beginning of period 3,883,708 8,593,392
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Cash and cash equivalents at end of period $ 2,733,105 $ 2,536,466
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</TABLE>
See notes to condensed consolidated financial statements
6
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of presentation
The condensed consolidated financial statements included herein have been
prepared by Medialink Worldwide Incorporated and Subsidiaries (collectively, the
"Company" or "Medialink"), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Form 10-K filing for the year ended December 31, 1999.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
nine and three month periods ended September 30, 2000 and 1999. The results for
the nine and three month periods ended September 30, 2000 are not necessarily
indicative of the results expected for the full fiscal year.
(2) Earnings per Share
Basic earnings per common share is computed using net income applicable to
common stock and the weighted average number of shares outstanding. Diluted
earnings per common share is computed using the weighted average number of
shares outstanding adjusted for the incremental shares attributed to outstanding
options to purchase common stock. The weighted average number of shares for the
nine and three month periods ended September 30, 2000 and 1999 are as follows:
Weighted Average Shares Outstanding
For the nine months ended September 30,
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2000 1999
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Basic 5,685,157 5,519,695
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Diluted 5,957,177 5,986,645
========= =========
For the three months ended September 30,
---------------------------------------
2000 1999
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Basic 5,713,405 5,548,710
========= =========
Diluted 5,903,525 6,019,529
========= =========
7
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(3) Comprehensive Income
The components of comprehensive income consist of the following:
<TABLE>
<CAPTION>
For the nine months ended September 30,
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2000 1999
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<S> <C> <C>
Net income $1,813,309 $1,519,804
Other comprehensive income (loss):
Foreign currency translation
adjustments (26,131) (88,705)
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Comprehensive income $1,787,178 $1,431,099
========== ==========
<CAPTION>
For the three months ended September 30,
---------------------------------------
2000 1999
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<S> <C> <C>
Net income $535,025 $41,466
Other comprehensive income (loss):
Foreign currency translation
adjustments (726) 121,868
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Comprehensive income $534,299 $163,334
========== ========
</TABLE>
Accumulated other comprehensive income at September 30, 2000 and December 31,
1999 consists of foreign currency translation adjustments.
(4) Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts and hedging
activities. In June 1999, SFAS No. 137 was issued which delayed the effective
date of SFAS No. 133 to January 1, 2001. In June 2000, the Financial Accounting
Standards Board issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an Amendment of FASB Statement No.
133" which intended to simplify the accounting for derivatives under SFAS 133
and is effective upon adoption of SFAS 133. Our management has not yet
determined the impact of adopting SFAS 133 as amended.
8
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statement" ("SAB No. 101") which summarizes certain of
the SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The Company will be required to
adopt the accounting provisions of SAB No. 101, no later than the fourth quarter
of 2000. The Company does not believe that the implementation of SAB No. 101
will have a significant effect on its results of operations.
9
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended September 30, 2000 compared to nine months ended September 30,
1999
On March 12, 1999, through a wholly owned subsidiary, the Company acquired 100%
of the outstanding shares of The Delahaye Group, Inc. ("Delahaye"). The
acquisition, which was accounted for as a pooling of interests, was completed
through the issuance of 185,666 shares of Medialink common stock valued at
approximately $2,800,000. Accordingly, the following management discussion and
analysis includes the combined results of operations, financial condition and
cash flows as though Delahaye had always been part of Medialink for all periods
presented.
Revenues increased by $10.12 million, or 31%, from $32.23 million in the nine
months ended September 30, 1999 ("1999") to $42.35 million in the nine months
ended September 30, 2000 ("2000"). This increase represented increases in
production and live broadcast services of $3.02 million, internet services,
which increased by $2.71 million, distribution services, which increased by
$2.12 million and research and other services, which increased by $2.27 million.
Direct costs increased by $4.50 million, or 41%, from $10.93 million in 1999 to
$15.43 million in 2000. Direct costs as a percentage of revenue increased from
34% in 1999 to 36% in 2000 mainly as a result of the increase in the proportion
of revenue from internet services and production and live broadcast services to
total revenue in 2000 as compared to 1999. Revenue on these projects generally
has lower gross profit margins as compared with revenue on distribution and
research services.
Selling, general and administrative expenses and loss from joint venture
increased by $4.95 million or 26%, from $18.93 million in 1999 to $23.89 million
in 2000. Included in the increase were costs related to Medialink's various
investments including Teletrax and NewsIQ. Selling, general and administrative
expenses as a percentage of revenue were 56% and 59% for 2000 and 1999,
respectively. Selling, general and administrative expenses in 1999 included
approximately $350,000 of costs relating to the acquisition of Delahaye.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $1.09 million, or 27%, from $4.07 million in 1999 to $5.16 million
in 2000. As a percentage of revenue, EBITDA was 12% and 13% in 2000 and 1999,
respectively. The decrease is represented by lower gross margins related to the
increase in revenue from internet, live broadcast and production services as a
percentage of total revenue from 1999 to 2000.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $425,000, or 25%, from $1.71 million in
1999 to $2.14 million in 2000. The increase was due primarily to amortization
expense arising from earn out payments on Medialink's various acquisitions.
10
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
As a result of the foregoing, operating income increased by $667,000, or 28%,
from $ 2.36 million in 1999 to $3.03 million in 2000. As a percentage of
revenue, operating income was 7% for both 2000 and 1999.
Interest and other income, net, decreased by $99,000 from $187,000 in 1999 to
$89,000 in 2000 as a result of lower balances in cash and cash equivalents in
2000 as compared to 1999.
Income tax expense was calculated using Medialink's effective tax rates of 42%
in 2000 and 40% in 1999. The increase in the rate reflects changes in state and
local taxes as a result of differences in income earned in certain
jurisdictions, the change in the proportion of tax-free income on investments to
total income before taxes and the increase in certain goodwill amortization not
deductible for tax purposes.
Net income increased by $294,000 or 19%, from $1.52 million in 1999 to $1.81
million in 2000. Diluted earnings per share was $0.30 and $0.25 per share in
2000 and 1999, respectively.
Three months ended September 30, 2000 compared to three months ended September
30, 1999
Revenues increased by $3.27 million, or 31%, from $10.51 million in the three
months ended September 30, 1999 ("the 1999 Quarter") to $13.78 million in the
three months ended September 30, 2000 ("the 2000 Quarter"). This increase
represented increases in research and other services of $1.14 million,
production and live broadcast services, which increased by $919,000, internet
services, which increased by $935,000 and distribution services, which increased
by $274,000.
Direct costs increased by $986,000, or 26%, from $3.84 million in the 1999
Quarter to $4.83 million in the 2000 Quarter. Direct costs as a percentage of
revenue decreased from 37% in the 1999 Quarter to 35% in the 2000 Quarter mainly
as a result of the increase in the proportion of revenue from research and other
services to total revenue in the 2000 Quarter as compared to the 1999 Quarter.
Revenue on these projects generally has higher gross profit margins as compared
with revenue on production and live services.
Selling, general and administrative expenses and loss from joint venture
increased by $1.42 million or 21%, from $6.65 million in the 1999 Quarter to
$8.08 million in the 2000 Quarter. Included in the increase were costs related
to Medialink's various investments including Teletrax and NewsIQ. Selling,
general and administrative expenses as a percentage of revenue were 59% and 63%
for the 2000 and 1999 Quarters, respectively.
11
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
EBITDA increased by $944,000, or 153%, from $616,000 in the 1999 Quarter to
$1.56 million in the 2000 Quarter. As a percentage of revenue, EBITDA was 11%
and 6% in the 2000 Quarter and the 1999 Quarter, respectively. The increase is
represented by higher gross margins in the 2000 Quarter compared to the 1999
Quarter.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $82,000, or 14%, from $599,000 in the 1999
Quarter to $681,000 in the 2000 Quarter. The increase was due primarily to
amortization expense arising from earn out payments on Medialink's various
acquisitions.
As a result of the foregoing, operating income increased by $862,000, from
$17,000 in the 1999 Quarter to $879,000 in the 2000 Quarter. As a percentage of
revenue, operating income was 6.4% and less than 1% in the 2000 Quarter and the
1999 Quarter, respectively.
Interest and other income, net, decreased by $25,000 from $55,000 in the 1999
Quarter to $29,000 in the 2000 Quarter as a result of lower balances in cash and
cash equivalents in the 2000 Quarter as compared to the 1999 Quarter.
Income tax expense was calculated using Medialink's effective tax rates of 41%
in the 2000 Quarter and 42% in the 1999 Quarter. The increase in the rate
reflects changes in state and local taxes as a result of differences in income
earned in certain jurisdictions, the change in the proportion of tax-free income
on investments to total income before taxes and the increase in certain goodwill
amortization not deductible for tax purposes.
Net income increased by $494,000, from $41,000 in the 1999 Quarter to $535,000
in the 2000 Quarter. Diluted earnings per share was $0.09 and $0.01 per share in
the 2000 Quarter and the 1999 Quarter, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Medialink has financed its operations primarily through cash generated from
operations. Cash flow from operating activities amounted to $3.79 million for
the nine month period ended September 30, 2000 and $175,000 for the comparable
period in 1999. Capital expenditures which are primarily incurred to support the
Company's sales and operations were $1.47 million in 2000 and $611,000 in 1999.
Medialink has no capital expenditure plans other than in the ordinary course of
business. Cash flows related to investment in joint venture and earn out
payments on the Company's various acquisitions amounted to $1.49 million and
$5.19 million in 2000 and 1999, respectively.
As of September 30, 2000 Medialink had $2.73 million in cash and cash
equivalents as compared to $3.88 million as of December 31, 1999. The decrease
included the repayment of $2.00 million of the Company's line of credit balance.
As of September 30, 2000 long-term debt was $228,000.
12
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
The Company believes that it has sufficient capital resources, including $10
million available under its line of credit facility, and cash flow from
operations to fund its net cash needs for at least the next twelve months,
including those related to the above-mentioned acquisitions.
13
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K:
None
14
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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.
MEDIALINK WORLDWIDE INCORPORATED
By: /s/ LAURENCE MOSKOWITZ
--------------------------------
Laurence Moskowitz,
Chairman of the Board, Chief Executive Officer and President
By: /s/ J. GRAEME MCWHIRTER
--------------------------------
J. Graeme McWhirter
Executive Vice President, Assistant Secretary,
Chief Financial Officer and Director
Dated: November 10, 2000
15
