EASYLINK SERVICES INTERNATIONAL CORP

CIK:0000894738|SEC Filings

EARNINGS PER SHARE

9 Months Ended

Apr. 30, 2012

EARNINGS PER SHARE

Basic earnings per common share is computed by dividing the net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during each period. The weighted-average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding at April 30, 2012 and 2011, are considered contingently returnable until the restrictions lapse and will not be included in the basic earnings per share calculation until the shares are vested. Diluted earnings per share is calculated by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding and all potential dilutive common shares that were outstanding during the period. The difference between basic and diluted weighted-average shares outstanding in the three and nine months ended April 30, 2012 and 2011 is due to the effects of restricted stock and assumed conversion of employee incentive stock options awards.

The following table represents a reconciliation of the shares used in the calculation of basic and diluted net income per share contained in the accompanying Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended April 30, 2012 and 2011:



	Three Months				Nine Months
	2012		2011		2012		2011
Net income	$	4,329	$	4,340	$	10,500	$	8,246
Less: Series C preferred dividends	—		—		—		(2,012		)
Net income available to common stockholders	$	4,329	$	4,340	$	10,500	$	6,234

Weighted average shares outstanding:
—Basic	32,040		30,184		31,882		29,625
Add: Stock options & restricted stock	1,320		2,112		1,308		1,728
—Diluted	33,360		32,296		33,190		31,353
Basic net income per share	$	0.14	$	0.14	$	0.33	$	0.21
Diluted net income per share	$	0.13	$	0.13	$	0.32	$	0.20

The following options and shares were outstanding, but were not included in the computation of weighted average diluted common share amounts as the effect of doing so would be anti-dilutive:



	Three Months		Nine Months
	2012	2011	2012	2011
Anti-dilutive stock options, restrictive stock, and series C preferred stock	1,819	721	1,694	351

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Apr. 30, 2012	Apr. 30, 2011
Cash flows from operating activities:
Net Income	$ 10,500	$ 8,246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,634	9,955
Bad debt expense	(82)	1,001
Amortization of discount and other non-cash interest expense	476	849
Deferred income taxes, net	2,821	4,382
Non-cash charges for equity instruments issued for compensation and services	2,093	927
Changes in assets and liabilities:
Accounts receivable	2,204	(5,447)
Prepaid expenses and other assets	1,631	(3,282)
Accounts payable	(8)	489
Accrued expenses	(2,985)	502
Other liabilities	(2,942)	1,672
Net cash provided by operating activities	23,342	19,294
Cash flows from investing activities:
Purchases of property and equipment	(2,397)	(1,696)
Acquisition, net of cash acquired	0	(101,166)
Net cash used in investing activities	(2,397)	(102,862)
Cash flows from financing activities:
Proceeds from sale of stock and exercise of options	1,314	570
Borrowings of notes payable	5,350	122,000
Repayments of notes payable and capital lease	(34,424)	(31,770)
Dividends paid	0	(200)
Net cash (used in) provided by financing activities	(27,760)	90,600
Effect of foreign exchange rate changes on cash and cash equivalents	(828)	421
Net decrease in cash and cash equivalents	(7,643)	7,453
Cash and Cash Equivalents, beginning of period	30,178	20,475
Cash and Cash Equivalents, end of period	$ 22,535	$ 27,928

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Apr. 30, 2012	Jul. 31, 2011
Current assets:
Cash and cash equivalents	$ 22,535	$ 30,178
Accounts receivable, net of allowance for doubtful accounts and allowance for sales returns and allowances of $2,097 and $2,897, respectively	28,087	29,752
Prepaid expenses and other current assets	3,310	3,956
Deferred income taxes	2,127	3,709
Total current assets	56,059	67,595
Property and equipment, net of accumulated depreciation of $24,067 and $21,083, respectively	9,432	10,127
Goodwill	73,238	73,494
Other intangible assets, net	61,629	68,615
Deferred income taxes, net	22,532	22,507
Other assets	562	721
Total assets	223,452	243,059
Current liabilities:
Accounts payable	5,595	5,527
Notes payable	15,978	28,088
Accrued expenses	15,964	19,051
Deferred revenue and other current liabilities	1,889	3,360
Total current liabilities	39,426	56,026
Notes payable, net of current portion	63,654	80,174
Deferred income taxes, net	7,279	6,940
Other liabilities	741	814
Total liabilities	111,100	143,954
Commitments and Contingencies
Preferred stock:
Preferred Stock — 5,000 shares authorized, including 3 shares of series E and 100 shares of series F; no shares issued or outstanding	0	0
Common stock:
Class A — par value $.01 per share, 300,000 shares authorized, one vote per share; 33,113 and 32,432 shares issued at April 30, 2012 and July 31, 2011, respectively	331	324
Additional paid-in capital	140,876	137,467
Treasury stock — 1,000 shares as of April 30, 2012 and July 31, 2011	(2,122)	(2,122)
Accumulated other comprehensive loss	(3,458)	(2,789)
Accumulated deficit	(23,275)	(33,775)
Total stockholders’ equity	112,352	99,105
Total liabilities and stockholders’ equity	$ 223,452	$ 243,059