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Webmediabrands Inc Reports Operating Results (10-Q)

November 04, 2010 | About:
10qk

10qk

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Webmediabrands Inc (WEBM) filed Quarterly Report for the period ended 2010-09-30.

Webmediabrands Inc has a market cap of $26.7 million; its shares were traded at around $0.6999 with and P/S ratio of 4.3. WEBM is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Cost of revenues primarily consists of payroll and benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and Website hosting. Cost of revenues excludes depreciation and amortization. Cost of revenues was $941,000 for the three months ended September 30, 2009 and $1.3 million for the three months ended September 30, 2010, representing an increase of 39%. This change was primarily due to an increase in employee-related costs of $238,000 and freelance contributor costs of $107,000.

Cost of revenues was $3.1 million for the nine months ended September 30, 2009 and $4.0 million for the nine months ended September 30, 2010, representing an increase of 29%. This change was primarily due to an increase in employee-related costs of $609,000 and freelance contributor costs of $339,000. These increases were partially offset by a decrease in education-related costs due to fewer in-person courses being held during the third quarter of 2010 compared to the third quarter of 2009.

General and administrative expenses consist primarily of payroll and benefits costs for administrative personnel, office-related costs and professional fees. General and administrative expenses were $2.2 million for the three months ended September 30, 2009 and $1.3 million for the three months ended September 30, 2010, representing a decrease of 41%. This decrease was due primarily to a decrease in employee-related costs of $509,000, a decrease in professional fees of $243,000, a decrease in office-related costs of $105,000 and a decrease in insurance-related costs of $52,000. The primary reason for the reduction in employee-related costs, professional fees and insurance-related costs was due to cost reduction efforts initiated in conjunction with the sales of our Online images and Internet.com businesses and the decreased size of the continuing business. The decrease in office-related costs was due to the termination of our Darien, Connecticut office lease during the second quarter of 2009, which resulted in reduced rent expense beginning in October 2009.

General and administrative expenses were $9.6 million for the nine months ended September 30, 2009 and $4.3 million for the nine months ended September 30, 2010, representing a decrease of 55%. This change was primarily due to a decrease in stock-based compensation of $1.8 million, a decrease in employee-related costs of $1.5 million, a decrease in professional fees of $1.2 million, a decrease in office-related costs of $347,000 and a decrease in insurance-related costs of $240,000. The primary reason for the reduction in employee-related costs, professional fees and insurance-related costs was due to cost reduction efforts initiated in conjunction with the sales of our Online images and Internet.com businesses and the decreased size of the continuing business. The decrease in office-related costs was due to the termination of our Darien, Connecticut office lease noted above.

Amortization expense was $62,000 for the three months ended September 30, 2009 and $102,000 for the three months ended September 30, 2010, representing an increase of 65%. This increase was due to adjustments made in finalizing the valuation of certain assets purchased in conjunction with acquisitions that were consummated during the fourth quarter of 2009. Amortization expense was $230,000 for the nine months ended September 30, 2009 and $134,000 for the nine months ended September 30, 2010, representing a decrease of 42%. This decrease was due primarily to the write-off of amortized intangible assets during the fourth quarter of 2009.

We recorded a provision for income taxes of $1.4 million and a benefit for income taxes of $1.5 million during the three and nine months ended September 30, 2009, respectively. The income tax provision for the three months ended September 30, 2009 is primarily due to the reversal of the income tax benefit previously recognized on the carryforward of 2005 net operating losses and the carryback of 2007 and 2008 net operating losses to 2006. The 2006 federal income tax return was amended during the third quarter of 2009 in order to include stock option expense and other adjustments that were not included in the original 2006 return. Along with the amendment of our 2006 federal income tax return, we previously amended our 2004 and 2005 federal income tax returns for additional stock option deductions. Those deductions resulted in a benefit of $3.2 million to additional paid-in capital during the third quarter of 2009. During the nine months ended September 30, 2009, the tax benefit for income taxes consisted primarily of a net income tax benefit of $2.9 million recorded on the reclassification of the fair value adjustments on the interest rate swap from other comprehensive income to loss from continuing operations. The income tax benefit was partially offset by a provision for income taxes of $1.4 million for the nine months ended September 30, 2009, which was primarily due to the reversal of the income tax benefit mentioned above, the reversal of a portion of the reserve for uncertain tax positions and additional tax amortization on indefinite lived assets. We recorded a provision for income taxes of $0 and $20,000 during the three and nine months ended September 30, 2010, respectively.

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