-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ODBF9VA3J1/x126A8MRngYWE3LcMDMNtXmQI054cEqDZJj9K9Kwox9P6mbXW2SFj V1SMTHdaIQIKtpgveEDN0w== 0000950152-03-007048.txt : 20030724 0000950152-03-007048.hdr.sgml : 20030724 20030724162944 ACCESSION NUMBER: 0000950152-03-007048 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030724 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FREEMARKETS INC CENTRAL INDEX KEY: 0000949968 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 043265483 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27913 FILM NUMBER: 03801230 BUSINESS ADDRESS: STREET 1: 22ND FLOOR, ONE OLIVER PLAZA STREET 2: 210 SIXTH AVENUE CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4124340500 MAIL ADDRESS: STREET 1: FREEMARKETS ONLINE, INC. STREET 2: 22ND FL, ONE OLIVER PLAZA, 210-6TH AVE CITY: PITTSBURGH STATE: PA ZIP: 15222 FORMER COMPANY: FORMER CONFORMED NAME: FREEMARKETS ONLINE INC DATE OF NAME CHANGE: 19990809 8-K 1 j0227101e8vk.txt FREEMARKETS, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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): JULY 24, 2003 FREEMARKETS, INC. (Exact name of registrant as specified in its charter) DELAWARE 000-27913 04-3265483 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) FREEMARKETS CENTER 210 SIXTH AVENUE 15222 PITTSBURGH, PA (Zip code) (Address of principal executive offices) Registrant's telephone number, including area code: (412) 434-0500 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. Exhibit No. Description ----------- ----------- 99.1 Press Release dated July 24, 2003 ITEM 9. REGULATION FD DISCLOSURE (furnished under Item 12). In accordance with Securities and Exchange Commission Release No. 33-8126, the following information, which is intended to be furnished under Item 12, "Results of Operations and Financial Condition," is instead being furnished under Item 9, "Regulation FD Disclosure." This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. On July 24, 2003, FreeMarkets, Inc. issued a press release announcing its 2003 second quarter financial results. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein. The press release includes the following non-GAAP financial measures relating to the Company's performance in the second quarter of 2003: (a) revenues plus fees earned under its contract with Visteon Corporation; (b) supplemental data with respect to the Company's operational earnings performance; and (c) cash flows as the change in cash and investments. A "non-GAAP financial measure" is a numerical measure of financial performance that includes or excludes amounts, or is subject to adjustments that have the effect of including or excluding amounts that are included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the presentation of revenues plus the fees it earns under its contract with Visteon Corporation is useful to investors because the Company views its relationship with Visteon as a typical customer relationship. The Company provides Visteon with access to software, services and information to help them improve their sourcing and supply management processes and enhance the capabilities of their supply management organization. The costs incurred to provide these services are included in our cost of revenues. For all business and operational purposes in which revenue is a factor in the decision, including budgets, forecast, allocation of resources, sales compensation, bonus decisions and other performance indicators, the Company treats the fees it earns from this contract in the same manner as revenues from other customers. The Company believes that the supplemental data presented with respect to its operational earnings performance is useful to investors because the Company believes that the financial results including fees earned under its contract with Visteon Corporation and excluding non-cash based items of expense and other items which are unusual due to their nature and size, are more indicative of normal, recurring operating trends. The Company believes that defining cash flows as the change in cash and investments from period to period is useful to investors because the Company believes that including investments is more indicative of cash inflow or cash outflow. 2 SIGNATURE 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 hereunto duly authorized. FREEMARKETS, INC. Date: July 24, 2003 By: /s/ Joan S. Hooper ---------------------------------------- Joan S. Hooper Executive Vice President, Chief Financial Officer, Treasurer and Secretary EXHIBIT INDEX Exhibit No. Description ----------- ----------- 99.1 Press Release dated July 24, 2003 EX-99.1 3 j0227101exv99w1.txt PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE CONTACTS: Karen Kovatch Director, Corporate Communications FreeMarkets (412) 297-8767 kkovatch@freemarkets.com Gary Doyle Director, Investor Relations FreeMarkets (412) 297-8849 gdoyle@freemarkets.com FREEMARKETS REPORTS SECOND QUARTER RESULTS Company beats estimates for revenue and earnings per share; generates positive cash flow ahead of schedule. PITTSBURGH, PA - JULY 24, 2003 - FreeMarkets, Inc. (NASDAQ: FMKT), the leading provider of global supply management (GSM) solutions, today reported results for the second quarter ended June 30, 2003. Revenues for the second quarter were $34.6 million. Revenues and fees (including $2.8 million in fees earned from Visteon) were $37.4 million. The Company's guidance for revenues and fees for the second quarter was between $36 and $37 million. Net loss for the second quarter was $6.0 million, or $0.14 per share. Operational loss for the second quarter was $1.5 million, or $0.04 per share. The operational loss includes fees from Visteon and excludes stock-based expense and patent settlement receipts. The Company's operational EPS estimate for the second quarter was a $0.06 per share. The Company generated positive cash flow of $1.5 million in the second quarter. The Company had expected a slight decline in its cash flow in the second quarter. The Company defines cash flow as the change in cash and investments from quarter to quarter. "We are pleased with our performance in the second quarter," said FreeMarkets Executive Vice President and Chief Financial Officer Joan Hooper. "We continued to execute the plan we laid out at the beginning of the year and our business is moving in the right direction." "FreeMarkets has made significant strides in delivering a much broader portfolio of technology-based solutions, and we are beginning to see results from our investment in this growth," said FreeMarkets President and CEO Dave McCormick. "During the second quarter, our new products continued to gain momentum, with both new and existing customers accessing offerings such as FreeMarkets(R) ES(TM), FreeMarkets(R) Spend Visibility Solution and FreeMarkets(R) Supplier Implementation Solution. In addition, our customers continued to leverage FreeMarkets(R) FullSource(TM) and FreeMarkets(R) QS(TM) to solve the broad range of GSM challenges they face. We will continue to enhance our current offerings and develop and deliver new solutions to meet the evolving needs of our customers and spur the growth of our business." EUROPE RESTRUCTURING In an effort to improve its service to European customers and operate in a more cost-effective manner, FreeMarkets is considering closing its Brussels office and shifting operations to regional locations throughout Europe, as well as the United States and Asia. In addition to allowing FreeMarkets to better serve and grow its customer base, these proposed changes will enable the Company to create a more leveraged, profitable and efficient business across Europe. If the Company ultimately decides to close its Brussels office, it would record a restructuring charge in the range of $6 million to $8 million in the third and/or fourth quarters. This charge would cover severance payments, remaining lease obligations and asset write-offs. The Company expects significant operational savings if the proposed restructuring plan is implemented. The Company's current estimate of 2004 run rate savings is approximately $5 million. FINANCIAL GUIDANCE The Company provided guidance for the third quarter of 2003, as well as the full year. All guidance excludes the impact of the potential Europe restructuring activity outlined above:
Q3 2003 Full-Year 2003 ------- -------------- Revenue $35.2 million to $36.2 million $143.75 million Revenue and Fees* $38.0 million to $39.0 million $155.0 million GAAP EPS ($0.07) ($0.52) Operational EPS# $0.04 $0.02 * Includes Visteon fees of $2.8 million per quarter. # GAAP EPS ($0.07) ($0.52) Fees from Visteon $0.07 $0.27 Stock-based expense $0.05 $0.19 Restructuring charge - $0.11 Patent settlement receipts ($0.01) ($0.03) ----- ----- Operational EPS $0.04 $0.02 ===== =====
See our Form 8-K filed today for Management's explanation as to the usefulness of these measures. The Company expects to generate positive cash flow for the remainder of the year. ABOUT FREEMARKETS FreeMarkets is the leader in providing companies with software, services, and information for Global Supply Management (GSM). FreeMarkets' GSM solutions help companies to lower costs, reduce risks, and increase profitability by improving their supply management processes and expanding the reach and capabilities of their supply management organizations. FreeMarkets can be found on the Web at www.freemarkets.com. FORWARD-LOOKING STATEMENTS Statements in this press release that are not historical facts, including those statements that refer to FreeMarkets' plans, prospects, expectations, financial guidance, strategies, intentions, and beliefs, are forward-looking statements. These forward-looking statements are based on information available to FreeMarkets today, and FreeMarkets assumes no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including, without limitation, market acceptance of FreeMarkets' products and services, the competitive nature of the market for global supply management (GSM) products and services, FreeMarkets' ability to predict its revenues and earnings, FreeMarkets' ability to develop competitive new products and services on a timely basis, introduction of new products and services by competitors, declining or uncertain economic and industry conditions, FreeMarkets' ability to attract and retain personnel and other risk factors that are described in more detail in FreeMarkets' most recent Annual Report on Form 10-K, and its other filings with the Securities and Exchange Commission. ### FREEMARKETS, INC. (Unaudited; in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2003 2002 2003 2002 -------- -------- -------- -------- REVENUES & FEES (1) $ 37,445 $ 47,416 $ 74,778 $ 93,402 Less fees characterized as payment for warrant 2,812 2,812 5,625 5,625 -------- -------- -------- -------- REVENUES 34,633 44,604 69,153 87,777 -------- -------- -------- -------- OPERATING COSTS & EXPENSES: Cost of revenues 17,749 19,322 36,148 38,182 Research & development 6,211 6,916 12,701 12,058 Sales & marketing 9,976 10,928 19,345 23,912 General & administrative 5,520 6,351 11,571 12,574 Stock-based expense 1,989 2,010 3,978 4,019 Investment write-down -- -- -- 4,740 Restructuring charges -- -- 4,719 -- -------- -------- -------- -------- TOTAL OPERATING COSTS & EXPENSES 41,445 45,527 88,462 95,485 -------- -------- -------- -------- OPERATING LOSS (6,812) (923) (19,309) (7,708) Interest & other income, net 1,065 1,029 2,054 1,776 -------- -------- -------- -------- (LOSS) / INCOME BEFORE INCOME TAXES (5,747) 106 (17,255) (5,932) Provision for income taxes 216 193 507 346 -------- -------- -------- -------- LOSS BEFORE CHANGE IN ACCOUNTING (5,963) (87) (17,762) (6,278) Cumulative effect of accounting change for goodwill -- -- -- (5,327) -------- -------- -------- -------- NET LOSS $ (5,963) $ (87) $(17,762) $(11,605) ======== ======== ======== ======== Basic & diluted EPS $ (0.14) $ (0.00) $ (0.42) $ (0.28) Weighted average basic & diluted shares 41,705 41,396 41,851 41,144 SUPPLEMENTAL DATA: Gross margin % excluding fees 49% 57% 48% 57% Gross margin % including fees 53% 59% 52% 59% Operational (loss) / income: - ---------------------------- Net loss $ (5,963) $ (87) $(17,762) $(11,605) Fees characterized as payment for warrant 2,812 2,812 5,625 5,625 Stock-based expense 1,989 2,010 3,978 4,019 Investment write-down -- -- -- 4,740 Restructuring charges -- -- 4,719 -- Patent settlement receipts (350) -- (550) -- Cumulative effect of accounting change for goodwill -- -- -- 5,327 -------- -------- -------- -------- Operational (loss) / income (2) $ (1,512) $ 4,735 $ (3,990) 8,106 ======== ======== ======== ======== Weighted average diluted shares 41,705 45,376 41,851 45,899 Per diluted share $ (0.04) $ 0.10 $ (0.10) 0.18 OPERATIONAL DATA: Number of total customers 151 131 151 131 Number of long-term customers 113 84 113 84 Number of employees 1,001 1,044 1,001 1,044
(1) Fees earned from Visteon are not included in GAAP revenues. (2) This supplemental data is for informational purposes only, and is not a substitute for the GAAP financial information presented above under net loss. FREEMARKETS, INC. (Unaudited; $ in thousands)
JUNE 30, DECEMBER 31, 2003 2002 -------- ------------ ASSETS Cash & investments $129,534 $135,023 Accounts receivable, net 22,660 25,673 Other current assets 7,639 8,457 Property & equipment, net 14,656 20,159 Goodwill & other assets, net 4,465 4,355 -------- -------- Total assets $178,954 $193,667 ======== ======== LIABILITIES & STOCKHOLDERS' EQUITY Accounts payable $ 3,998 $ 4,063 Accrued restructuring charge 2,888 119 Accrued incentive compensation 4,326 7,536 Other current liabilities 18,642 21,608 Current portion of long-term debt 1,428 1,502 Long-term debt 438 1,328 -------- -------- Total liabilities 31,720 36,156 Total stockholders' equity 147,234 157,511 -------- -------- Total liabilities & stockholders' equity $178,954 $193,667 ======== ========
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