CNET Networks, Inc. (Nasdaq:CNET) today reported results for the
fourth quarter and year ended December 31, 2006. �We were able to
deliver solid performance in the fourth quarter,� said Neil Ashe,
chief executive officer of CNET Networks. �We will continue to
demonstrate our ability to build interactive media brands for
people and the things they are passionate about. Our brands,
combined with our ability to generate, fund and promote emerging
media, provide us the platform for success in the evolving media
landscape.� Total revenues for the fourth quarter were $118.4
million, a 14 percent increase compared to revenues of $103.7
million for the same period of 2005. Operating income totaled $9.7
million during the fourth quarter of 2006 compared to operating
income of $23.0 million in the year ago quarter. Reported operating
income also reflects $6.5 million in costs related to the Company�s
restatement and stock option investigation. Operating income before
depreciation, amortization, impairments, and stock compensation
expense was $26.6 million for the fourth quarter of 2006. Excluding
stock option investigation costs of $6.5 million, operating income
before depreciation, amortization, asset impairments, and stock
compensation expense was $33.1 million, a 7 percent increase
compared to $31.0 million during the fourth quarter of 2005. The
profit margin of operating income before depreciation,
amortization, impairments, and stock compensation expense was 22
percent as compared to 30 percent in the fourth quarter of 2005.
Excluding stock option investigation costs, the profit margin of
operating income before depreciation, amortization, asset
impairments, and stock compensation expense was 28 percent. Net
cash provided by operating activities for the fourth quarter of
2006 was $8.6 million, down from $8.8 million in the fourth quarter
of 2005. Free cash flow for the fourth quarter of 2006 was $2.7
million. Free cash flow is defined as cash flow from operating
activities less capital expenditures. On a reported basis, net
income for the fourth quarter of 2006 was $6.3 million, or $0.04
per diluted share. This compares with net income of $20.7 million,
or $0.13 per diluted share during the fourth quarter of 2005.
Reported net income for the fourth quarter of 2006 was negatively
impacted by $6.5 million in stock option investigation costs.
Excluding stock compensation expense, stock option investigation
costs, impairments, realized gains on investments and loss from
discontinued operations, adjusted net income for the fourth quarter
of 2006 was $19.6 million, or a $0.13 per diluted share, compared
to $23.3 million, or $0.15 per diluted share, during the same
period of 2005. Financial highlights for the year ended December
31, 2006 are as follows: Total revenues of $387.7 million, a 15
percent increase compared to revenues of $338.0 million for the
same period of 2005. Operating income totaled $9.4 million during
2006 compared to operating income of $29.9 million for the same
period of 2005. Reported operating income also reflects $13.7
million in costs related to the Company�s restatement and stock
option investigation. Operating income before depreciation,
amortization, impairments, and stock compensation expense was $66.7
million for the year ended December 31, 2006. Excluding stock
option investigation costs of $13.7 million, operating income
before depreciation, amortization, asset impairments, and stock
compensation expense was $80.5 million, a 24 percent increase
compared to $65.0 million during 2005. The profit margin of
operating income before depreciation, amortization, asset
impairments, and stock compensation expense was 17 percent.
Excluding stock option investigation expenses, the profit margin of
operating income before depreciation, amortization, impairments,
and stock compensation expense increased to 21 percent from 19
percent during 2005. Net cash provided by operating activities for
the year of 2006 was $61.8 million, up from $43.2 million in the
same period of 2005. Free cash flow for the year of 2006 was $29.0
million. Free cash flow is defined as cash flow from operating
activities less capital expenditures. On a reported basis, net
income for the year of 2006 was $7.8 million, or $0.05 per diluted
share. This compares with net income of $19.6 million, or $0.13 per
diluted share in 2005. Reported net income was negatively impacted
by stock option investigation costs of $13.7 million. Excluding
stock compensation expense, impairment, realized gain (loss) on
investments, loss from discontinued operations and stock option
investigation costs, adjusted net income for the year of 2006 was
$43.6 million, or a $0.29 per diluted share, compared to $36.8
million, or $0.24 per diluted share, in 2005. A reconciliation of
the non-GAAP measures used in this release to the most comparable
GAAP measure and further information regarding the Company's stock
compensation expense, discontinued operations and unusual gains are
included in the accompanying "Operating Income Reconciliation" and
"Reconciliation of Net Gain (Loss) from Unusual Items." Business
Review �In the face of many distractions during the fourth quarter,
we continued to move our business forward. We introduced new
features across our existing brands, launched entirely new brands,
and acquired properties that expanded our business. We are pleased
with the continued growth and expansion of our media network,� said
Ashe. --� CNET Networks' global network of Internet properties
reached an average of 136 million unique monthly users during the
fourth quarter of 20061, an increase of 17 percent from the fourth
quarter of 2005. Average daily page views increased to over 85
million during the fourth quarter1, although down 18 percent from
the year-ago quarter. � --� CNET Networks continued to expand its
network and identify new growth opportunities in the fourth
quarter, including the ongoing development of recent brand
additions like CHOW, the beta launch of FilmSpot, and the
acquisition of new brands in France and China. � --� CHOW
(www.chow.com), a different kind of food Web site for those who
live to eat, continues to grow quickly in popularity, reaching over
a million monthly unique visitors at the end of 2006. CHOW has been
successful in attracting new advertisers into the network, such as
NBC, Visa, American Express, and Bertolli during the quarter. � --�
In December, CNET Networks' Entertainment division launched
FilmSpot (www.filmspot.com) in beta, the latest addition to its
brands which include GameSpot, TV.com, and MP3.com. Leveraging
expertise gained from its other entertainment properties, FilmSpot
aims to combine content and community features in an immersive
environment that satisfies the interests of movie fans. The site is
will be an in-depth online movie resource, featuring movie
summaries, critical opinions, trailers, news, photos, actor and
character guides, celebrity bios, theatrical and DVD release
schedules, and box-office results. � --� This month, CNET Networks
acquired GameKult (www.gamekult.com), a leading Frenchprovider of
interactive content for video game enthusiasts. Ranked among the
top two gaming sites in France with over one million users per
month (NNR Nielsen, December 2006), GameKult is widely recognized
in the industry as an authoritative voice on news, trends and video
game product reviews. � --� During the quarter, CNET Networks
extended its growing online portfolio in China with the acquisition
of EA3W (www.ea3w.com), a leading consumer electronics buying guide
based in Beijing. With an extensive product database, EA3W provides
an opportunity to extend upon ZOL, a Beijing-based personal
technology property that CNET Networks acquired in 2004, adding
broader content coverage and the opportunity to extend its audience
and advertising relationships in the consumer electronics category.
� --� During the fourth quarter, CNET Networks continued to realize
the potential of its existing brands, with advancements that
underscore its focus on being at the cutting-edge of emerging
media. For example, developments across CNET, ZDNet, and MP3.com,
included: � --� The CNET brand launched two blogs during the fourth
quarter -- Crave (crave.cnet.com), focused on gadgets, and Webware
(www.webware.com), focused on Web tools for everyday life. Both
blogs have grown significantly since launch. For example, in
December, just two months after its launch, Crave was visited by
over 800,000 technology enthusiasts. � --� In December, ZDNet
(www.zdnet.com), CNET Networks' leading Web site for professionals
at the intersection of business and technology, launched a new look
and features that represent the Web's ongoing evolution into a
next-generation publishing medium that gives equal weight to the
voices of editorial experts, users, and vendors. Along with news,
product reviews, and content contributed by users and vendors,
ZDNet's redesign spotlights its successful blog network, where more
than 30 well-known IT experts and journalists exclusively blog on
the latest developments in the IT marketplace. � --� In November,
MP3.com (www.mp3.com), CNET Networks' online music resource fueled
by an active community of musicians and fans, announced a
comprehensive suite of online marketing capabilities for
independent music artists as part of its new streamlined site
design. Artists can now upload their music and videos to the site,
and leverage free, easy-to-use promotional tools to gain exposure
before MP3.com's audience of music enthusiasts. Since the feature's
launch thousands of songs have been uploaded and promoted. � --�
During the fourth quarter, CNET Networks continued to expand its
customer base, adding more general consumer advertisers to the
network. Advertiser renewal rates remained strong, with 96 percent
of CNET Networks' top 100 customers renewing during the quarter.
New advertisers during the quarter include Alamo, Peugeot, and
Applebee's. Also during the year, CNET Networks did business with
59 of the Ad Age Top 100 advertisers. By combining its broad reach
as one of the world's largest Internet properties, its engagement
with influential audiences around their areas of passion, and the
high level of service and attention it gives its customers, CNET
Networks is well positioned to gain further share of general
consumer dollars in 2007. � --� Today, CNET Networks filed restated
financial statements as well as delinquent quarterly reports with
the Securities and Exchange Commission to correct for errors in the
Company's historical accounting for stock options. The Company's
restated financial statements for the years ended December 31,
2003, 2004, and 2005 were filed as an amended 2005 Annual Report on
Form 10-K/A. The company also filed with the Securities and
Exchange Commission an amended Quarterly Report on Form 10-Q/A for
the quarter ended March 31, 2006, as well as the delinquent
Quarterly Reports on Form 10-Q for the quarters ended June 30,
2006, and September 30, 2006. By completing these filings, CNET
Networks expects to meet the conditions of the Nasdaq Listing
Qualifications Panel for continued listing of its common stock on
The Nasdaq Global Select Market. Further details on the specifics
of the restated financials can be found in a separate press release
issued today, January 29, 2007. Business Outlook For the first
quarter of 2007, management anticipates total revenues of $90
million to $94 million. Including approximately $5.5 million in
non-cash stock compensation expense, management estimates an
operating loss of between $4.5 million and $8.5 million for the
first quarter. Management expects operating income before
depreciation, amortization and stock compensation expense of
between $7 million and $11 million for the quarter. Including stock
compensation expense of approximately $0.04 per diluted share,
earnings per share is expected to be in the range of a loss of
$0.06 to a loss of $0.03 in the first quarter. Excluding stock
compensation expense, the company anticipates first quarter
earnings per diluted share to be in the range of a loss of $0.02 to
$0.00 per share. For 2007, management estimates total annual
revenues to be in the range of $425 million to $445 million.
Including $23 million in stock compensation expense, management
estimates operating income between $23 million and $38 million.
Management expects operating income before depreciation,
amortization and stock compensation expense to be between $90
million and $105 million. Including stock compensation expense of
approximately $0.15 per diluted share, earnings per share is
expected to be in the range of $0.12 to $0.22 for the year.
Excluding stock compensation expense, adjusted earnings per diluted
share is expected to be in the range of $0.27 and $0.37 for the
year. Operating income guidance for the first quarter and full-year
2007 does not consider ongoing fees associated with the Company�s
stock option investigation. Earnings per share guidance for the
full-year 2007 does not reflect the non-cash financial statement
impact of any adjustments to the Company�s deferred tax assets and
the likely release of the related valuation analysis. More detailed
guidance, as well as a table that reconciles operating income
(loss) before depreciation, amortization, and asset impairment
guidance to operating income (loss) guidance can be found on the
"Guidance to the Investment Community" sheet that accompanies this
press release. Conference Call and Webcast CNET Networks will host
a conference call to discuss its fourth quarter and full year 2006
financial results and business outlook beginning at 5:00 pm ET
(2:00 pm PT), today, January 29, 2007. To listen to the discussion,
please visit http://ir.cnetnetworks.com and click on the link
provided for the webcast conference call or dial (800) 344-1035
(international dial-in: (706) 679-3076). A replay of the conference
call will be available via webcast at the URL listed above or by
calling (800) 642-1687 (international dial-in: (706) 645-9291) and
entering the conference ID number 5679070. The Company�s past
financial news releases, related financial and operating
information, and access to all Securities and Exchange Commission
filings, can also be accessed at http://ir.cnetnetworks.com. Safe
Harbor This press release and its attachments include
forward-looking information and statements that are subject to
risks and uncertainties that could cause actual results to differ
materially. These forward-looking statements include the statements
regarding CNET Network�s expectations with respect to continued
listing on The Nasdaq Global Market and statements under the
sections entitled �Business Outlook� and �Guidance to the
Investment Community� which set forth our estimated financial
performance for the first quarter and full year of 2007, and
statements regarding our growth prospects and expectations
regarding the future success of our products and services. In
addition, management expects to provide forward-looking information
statements on the conference call to be held shortly following the
issuance of this release, which are also subject to risks and
uncertainties that could cause actual results to differ materially.
The forward-looking statements in this release and on the
conference call are identified by the words �expect,� �estimate,�
�target,� �believe,� �goal,� �anticipate,� �intend� and similar
expressions or are otherwise identified in the context in which
they are made as being forward-looking. These statements are only
effective as of the date of this release and we undertake no duty
to publicly update these forward-looking statements, whether as a
result of new information, future developments or otherwise. The
risks and uncertainties that could cause actual results to differ
materially from those projected include: a lack of growth or a
decrease in marketing spending on the Internet due to failure of
marketers to adopt the Internet as an advertising medium at the
rate that we currently anticipate; a lack of growth or decrease in
marketing spending on CNET Networks� properties in particular,
which could be prompted by competition from other media outlets,
both on and off the Internet; dissatisfaction with CNET Networks�
services, or economic difficulties in our clients� businesses; an
increase in the competitiveness of the market for qualified
employees or changes in our stock price or volatility, both of
which could increase our estimated stock compensation expenses for
2006; economic conditions such as weakness in corporate or consumer
spending, which could prompt a reduction in overall advertising
expenditures or expenditures specifically on our properties; the
failure of existing advertisers to meet or renew their advertising
commitments as we anticipate, which would cause us to not meet our
financial projections; the failure to attract advertisers outside
of our traditional technology and consumer electronics categories,
which would cause us to not meet our financial projections; a
continued decline in revenues from our print publications as
advertising dollars shift to other media; the acquisition of
businesses or the launch of new lines of business, which could
decrease our cash position, increase operating expense, and dilute
operating margins; an increase in intellectual property licensing
fees, which could increase operating expense, including
amortization; the risk of future impairment of our intangible
assets, goodwill or investments based on a decline in our business
or investments; and general risks associated with our business. For
additional discussion regarding the risks related to CNET Networks�
business, see its Amended Annual Report on Form 10-K/A for the year
ended December 31, 2005 and subsequent Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, including disclosures under
the captions �Risk Factors� and �Management�s Discussion and
Analysis of Financial Conditions and Results of Operations,� which
are filed with the Securities and Exchange Commission and are
available on the SEC's website at www.sec.gov. About CNET Networks,
Inc. CNET Networks, Inc. (Nasdaq:CNET) (www.cnetnetworks.com) is an
interactive media company that builds brands for people and the
things they are passionate about, such as gaming, music,
entertainment, technology, business, food, and parenting. The
Company's leading brands include CNET, GameSpot, TV.com, MP3.com,
Webshots, CHOW, ZDNet and TechRepublic. Founded in 1993, CNET
Networks has a strong presence in the US, Asia, and Europe. 1 CNET
Networks Internal Log Data, October 2006 to December 2006. �
Consolidated Statements of Operations Unaudited (in thousands,
except per share data) � Three Months Ended Year Ended December 31,
December 31, 2006� 2005� 2006� 2005� � Revenues $ 118,367� $
103,686� $ 387,689� $ 338,047� � Operating expenses: Cost of
revenues 45,667� 39,488� 169,920� 152,215� Sales and marketing
27,335� 21,163� 98,277� 78,940� General and administrative 17,597�
13,023� 58,786� 48,192� Stock option investigation 6,519� -�
13,745� -� Depreciation 6,881� 4,549� 22,848� 17,331� Amortization
of intangible assets 3,244� 2,506� 11,896� 9,906� Asset impairment
-� -� -� 1,613� Goodwill impairment 1,375� -� 2,793� -� Total
operating expenses 108,618� 80,729� 378,265� 308,197� � Operating
income 9,749� 22,957� 9,424� 29,850� � Non-operating income
(expense): Realized gains (loss) on investments -� 1,345� 558�
(170) Interest income 874� 730� 4,871� 1,989� Interest expense
(3,009) (764) (5,023) (3,086) Other, net (538) 187� (488) 19� Total
non-operating income (expense) (2,673) 1,498� (82) (1,248) Income
before income taxes 7,076� 24,455� 9,342� 28,602� � Income tax
expense (benefit) 768� 765� 1,469� (80) � Income from continuing
operations 6,308� 23,690� 7,873� 28,682� � Discontinued operations
(Loss) from operations of discontinued operations -� (2,949) (37)
(9,099) � � Net income $ 6,308� $ 20,741� $ 7,836� $ 19,583� � �
Basic net income per share $ 0.04� $ 0.14� $ 0.05� $ 0.13� �
Diluted net income per share $ 0.04� $ 0.13� $ 0.05� $ 0.13� �
Shares used in calculating basic net income per share 149,805�
148,469� 149,076� 146,030� � Shares used in calculating diluted net
income per share 152,559� 155,638� 152,313� 152,615� � Noncash
stock compensation expense is included in the above expense
categories: Cost of revenues $ 1,625� $ 173� $ 7,709� $ 1,664�
Sales and marketing 829� 92� 3,604� 743� General and administrative
2,904� 681� 8,438� 3,937� $ 5,358� $ 946� $ 19,751� $ 6,344� �
Consolidated Balance Sheets Unaudited (in thousands, except per
share data) � � December 31, December 31, 2006� 2005� ASSETS
Current Assets: Cash and cash equivalents $ 31,327� $ 55,895�
Investments in marketable debt securities 30,372� 41,591� Accounts
receivable, net 90,414� 85,312� Other current assets 10,439�
14,337� Total current assets 162,552� 197,135� � Restricted cash
2,200� 2,248� Investments in marketable debt securities 13,915�
12,432� Property and equipment, net 72,625� 57,765� Other assets
15,554� 18,948� Intangible assets, net 34,838� 37,380� Goodwill
133,199� 129,658� Total assets $ 434,883� $ 455,566� � LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $
10,055� $ 8,330� Accrued liabilities 80,410� 52,140� Revolving
credit facility 60,000� -� Current portion of long-term debt
13,750� 2,652� Total current liabilities 164,215� 63,122� �
Non-current liabilities: Long-term debt 4,598� 139,114� Other
liabilities 727� 794� Total liabilities 169,540� 203,030� �
Stockholders' equity: Common stock; $0.0001 par value; 400,000
shares authorized; 149,805 outstanding at December 31, 2006 and
148,685 outstanding at December 31, 2005 15� 15� Additional
paid-in-capital 2,857,238� 2,857,175� Deferred stock compensation
-� (2,871) Accumulated other comprehensive loss (11,357) (13,394)
Treasury stock, at cost (30,453) (30,453) Accumulated deficit
(2,550,100) (2,557,936) Total stockholders' equity 265,343�
252,536� Total liabilities and stockholders' equity $ 434,883� $
455,566� � Statements of Cash Flows Unaudited (in thousands) � Year
Ended December 31, 2006� 2005� Cash flows from operating
activities: Net Income $ 7,836� $ 19,583� Adjustments to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization 34,744� 27,405� Stock compensation
expense 19,751� 6,344� Asset impairments 2,793� 12,257� Asset
disposals 302� 133� Noncash interest (583) 290� Deferred taxes -�
159� Allowance for doubtful accounts 2,475� 1,769� Gain on sale of
business, net (298) -� Realized gain on investments (558) (1,913)
Realized loss on investments -� 2,083� Changes in operating assets
and liabilities, net of acquisitions: Accounts receivable (7,541)
(19,958) Other assets (2,343) 1,341� Accounts payable 1,400� 1,415�
Accrued liabilities 3,929� (7,620) Other long-term liabilities (59)
(60) Net cash provided by operating activities 61,848� 43,228� �
Cash flows used in investing activities: Purchase of marketable
debt securities (45,546) (58,803) Proceeds from sale of marketable
debt securities 57,620� 49,049� Release of restrictions on cash 62�
17,526� Proceeds from sales of investments in privately held
companies 3,058� 1,913� Investments in privately held companies -�
(1,934) Net cash paid for acquisitions (14,482) (25,105) Capital
expenditures (32,833) (23,359) Net cash used in investing
activities (32,121) (40,713) � Cash flows provided by (used in)
financing activities: Net proceeds from exercise of stock options
6,500� 29,417� Net proceeds from employee stock purchase plan 780�
1,266� Write-off of debt issuance costs 2,163� -� Proceeds from
borrowings on credit facility 60,000� -� Principal payments on
borrowings (125,096) (5,873) Net cash provided by (used in)
financing activities (55,653) 24,810� Net increase (decrease) in
cash and cash equivalents (25,926) 27,325� Effect of exchange rate
changes on cash and cash equivalents 1,358� (990) Cash and cash
equivalents at the beginning of the period 55,895� 29,560� Cash and
cash equivalents at the end of the period $ 31,327� $ 55,895� �
Business Segments � CNET's primary areas of measurement and
decision-making include two principal business segments.��CNET has
determined that its business segments are U.S. Media and
International Media. U.S. Media consists of an online network
focused on four content categories: personal technology,
entertainment, business and community.�� International Media
includes the delivery of online technology information and several
technology print publications in non-U.S. markets.��Management
believes that segment operating income (loss) before depreciation,
amortization and stock compensation expenses is an appropriate
measure of evaluating the operating performance of the company's
segments.��However, segment operating income (loss) before
depreciation, amortization and stock compensation expense should
not be considered a substitute for operating income, cash flows or
other measures of financial performance prepared in accordance with
generally accepted accounting principles. � (Unaudited) (in
thousands) U.S. International Media Media Other (1) Total Three
Months Ended December 31, 2006 Revenues $ 93,907� $ 24,460� $ -� $
118,367� Operating expenses � 64,687� � 20,554� � 23,377� �
108,618� � Operating income $ 29,220� $ 3,906� $ (23,377) $ 9,749�
� Three Months Ended December 31, 2005 Revenues $ 82,952� $ 20,734�
$ -� $ 103,686� Operating expenses � 56,056� � 16,672� � 8,001� �
80,729� � Operating income $ 26,896� $ 4,062� $ (8,001) $ 22,957� �
Year Ended December 31, 2006 Revenues $ 307,942� $ 79,747� $ -� $
387,689� Operating expenses � 232,961� � 74,271� � 71,033� �
378,265� � Operating income $ 74,981� $ 5,476� $ (71,033) $ 9,424�
� Year Ended December 31, 2005 Revenues $ 271,027� $ 67,020� $ -� $
338,047� Operating expenses � 208,327� � 64,676� � 35,194� �
308,197� � Operating income $ 62,700� $ 2,344� $ (35,194) $ 29,850�
� (1) For the three months ended December 31, 2006, Other
represents operating expenses related to depreciation of $6.9
million, amortization of $3.2 million, impairments of $1.4 million,
stock option investigation expenses of $6.5 million and stock
compensation expense of $5.4 million.�� For the three months ended
December 31, 2005, Other represents operating expenses related to
depreciation of $4.6 million, amortization of $2.5 million and
stock compensation expense of $0.9 million. � For the year ended
December 31, 2006, Other represents operating expenses related to
depreciation of $22.8 million, amortization of $11.9 million,
impairments of $2.8 million, stock option investigation expenses of
$13.7 million and stock compensation expense of $19.8 million.��
For the year ended December 31, 2005, Other represents operating
expenses related to depreciation of $17.3 million, amortization of
$9.9 million, impairments of $1.6 million and stock compensation
expense of $6.4 million. Quarterly Statistical Highlights Unaudited
� Q4-06 Q3-06 Q2-06 Q1-06(a) Q4-05(a) � Total Quarterly Revenue
($mm) $ 118.4� $ 93.3� $ 92.4� $ 83.6� $ 103.7� � Revenue
Distribution (%) (b) Marketing Services 89% 86% 86% 85% 89%
Licensing, Fees and User 11% 14% 14% 15% 11% � Segment Revenue
($mm) U.S. Media $ 93.9� $ 73.5� $ 72.8� $ 67.8� $ 83.0�
International Media $ 24.5� $ 19.8� $ 19.6� $ 15.8� $ 20.7� �
Advertiser Metrics CNET Networks Top 100 US Advertisers' Renewal
Rate (Q-to-Q) 96% 96% 100% 96% 100% CNET Networks Top 100 US
Advertisers' % of Network Revenue 57% 54% 55% 53% 55% � Select
Business Metrics Network Unique Users (mm) 135.8� 124.5� 116.2�
116.8� 116.1� Network Average Daily Page Views (mm) 84.8� 86.3�
92.8� 98.7� 103.6� � Balance Sheet Highlights ($mm) Cash $ 31.3� $
78.7� $ 79.1� $ 74.2� $ 55.9� Marketable Debt Securities � 44.3� �
60.9� � 62.0� � 62.1� � 54.1� Total Cash and Investments $ 75.6� $
139.6� $ 141.1� $ 136.3� $ 110.0� � Days Sales Outstanding (DSO)
69� 73� 67� 70� 71� � Total Debt $ 78.3� $ 143.3� $ 143.3� $ 141.7�
$ 141.8� � � (a) Results for 2005 and Q1 2006 exclude revenue
related to Computer Shopper due to the sale of the Computer Shopper
magazine business in Q1 2006. Results are reflected in discontinued
operations on the consolidated statements of operations. (b) Due to
the sale of Computer Shopper magazine on February 2, 2006, CNET
Networks no longer reports publishing revenue. The company's
international publishing revenue is now reported in the marketing
services and licensing, fees and users lines as described below:
Marketing Services - sales of advertisements on our Internet
network through impression-based and activity-based advertising,
and sales of advertisements in our print publications. Licensing,
Fees and Users - licensing our product database, online content,
subscriptions to online services, subscription and newsstand sales
of print publications, and other paid services. � Guidance to the
Investment Community � � � � � � � � � $ in millions, except per
share Q4-06 Q1-07 estimate FY 2007 estimate � Actual Low - High Low
- High � � Total Revenues $118.4� $90.0 - $94.0� $425.0 - $445.0� �
Operating income before depreciation, amortization and stock
compensation expense $26.6� $7.0 - $11.0� $90.0 - $105.0� �
Depreciation expense $6.9� $7.0� $32.0� � Amortization expense
$3.2� $3.0� $12.0� � Stock compensation expense $5.4� $5.5� $23.0�
� Stock inquiry investigation $6.5� -� -� � Goodwill impairment
$1.4� -� -� � Operating income $9.7� ($8.5) - ($4.5) $23.0 - $38.0�
� Interest income (expense), net ($2.1) ($0.5) ($1.3) � Other
income (expense) ($0.5) -� -� � Tax benefit (expense) ($0.8) ($0.1)
($3.0) - ($2.0) � GAAP EPS (including stock compensation expense)
$0.04� ($0.06) - ($0.03) $0.12 - $0.22� � Pro forma EPS (excluding
stock compensation expense) $0.08� ($0.02) - $0.00� $0.27 - $0.37�
� Note: Q107 and FY07 operating income guidance does not consider
ongoing fees related to the stock option investigation. � Note:
Q107 and FY07 earnings per share guidance does not reflect the
non-cash financial statement impact of any adjustments to our
deferred tax assets and the likely release of the related valuation
allowance. � Operating Income Reconciliation (Unaudited) (in
thousands) � � Three Months Ended Year Ended December 31, December
31, � 2006� � � 2005� � 2006� � � 2005� Operating income $ 9,749� $
22,957� $ 9,424� $ 29,850� Stock compensation expense 5,358� 946�
19,751� 6,344� Depreciation 6,881� 4,549� 22,848� 17,331�
Amortization of intangible assets 3,244� 2,506� 11,896� 9,906�
Impairments � 1,375� � � -� � 2,793� � � 1,613� Operating income
before depreciation, amortization, impairments and stock
compensation expense $ 26,607� $ 30,958� $ 66,712� $ 65,044� �
Stock option investigation � 6,519� � � -� � 13,745� � � -�
Operating income before depreciation, amortization, impairments,
stock compensation expense and stock option investigation $ 33,126�
� $ 30,958� $ 80,457� � $ 65,044� � We believe that �operating
income before depreciation, amortization, impairments and stock
compensation expense� is useful to management and investors as a
supplement to our GAAP (generally accepted accounting principles in
the United States) financial measures for evaluating the ability of
the business to generate cash from operations.��Depreciation,
amortization and asset impairments are non-cash items and include
within them amounts related to past transactions and expenditures
that are not necessarily reflective of the current cash or capital
requirements of the business.��Stock compensation expense is a
non-cash item that does not reflect upon the ability of the
business to generate cash from operations. � Management refers to
�operating income before depreciation, amortization, impairments,
stock compensation expense and stock option investigation� in
making operating decisions and for planning and compensation
purposes. A limitation associated with this measure is that it does
not reflect the costs of certain capitalized tangible and
intangible assets used in generating revenue. Management
compensates for these limitations by relying primarily on our GAAP
financial measures, such as capital expenditures, and using
�operating income before depreciation, amortization, impairments,
stock compensation expense and stock option investigation� only on
a supplemental basis.��Although depreciation and amortization are
non-cash charges, the capitalized assets being depreciated and
amortized will often have to be replaced in the future, and
�operating income before depreciation and amortization� does not
reflect any cash requirements for such replacements.��This measure
also does not take into account interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt. Nor does the measure reflect changes in, or cash
requirements for, our working capital needs. �Operating income
before depreciation, amortization, impairments, stock compensation
expense and stock option investigation� should be considered in
addition to, and not as a substitute for, other measures of
financial performance prepared in accordance with GAAP. � Net
Income Reconciliation (Unaudited) (in thousands, except per share
data) � Three Months Ended Year Ended December 31, December 31, �
2006� � � 2005� � 2006� � � 2005� � Net income $ 6,308� $ 20,741� $
7,836� $ 19,583� � � Stock compensation expense (1) 5,358� 946�
19,751� 6,344� Stock option investigation (2) 6,519� -� 13,745� -�
Asset impairments (3) 1,375� -� 2,793� 1,613� Realized (gain) loss
on investments (4) -� (1,345) (558) 170� Loss from discontinued
Operations (5) � -� � 2,949� � 37� � 9,099� Effect on earnings from
depreciation, amortization, asset impairments, stock compensation
expense and stock option investigation � 13,252� � 2,550� � 35,768�
� 17,226� Net income excluding depreciation, amortization asset
impairments, stock compensation expense and stock option
investigation $ 19,560� $ 23,291� $ 43,604� $ 36,809� Diluted net
income per share excluding depreciation, amortization, asset
impairments, stock compensation expense and stock option
investigation $ 0.13� $ 0.15� $ 0.29� $ 0.24� Shares used in
calculating diluted net income per share � 152,559� � 155,638� �
152,313� � 152,615� � (1)�During the three months and year ended
December 31, 2006, the company recorded $5.4 million and $19.8
million of stock compensation expense.��Stock compensation expense
was $0.9 million and $6.4 million for the three months and year
ended December 31, 2005. (2) During the three months and year ended
December 31, 2006, $6.5 million and $13.7 million of charges
related to the stock option investigation were incurred. (3)�The
company made a decision in the three months ended December 31, 2006
to exit its Korean operations.��An impairment of $1.4 million was
taken representing the write-off of goodwill associated with that
operation. Additionally, the year ended December 31, 2006 includes
an additional impairment of $1.4 million that was recorded in
connection with the company's decision to terminate its U.S. events
operations. The $1.6 million impairment in the year ended December
31, 2005 is related to a loss associated with the evaluation of the
carrying value of an office building in Switzerland that was held
for sale. (4)�The company recognized a gain of $1.3 million on
privately held investments during the three months ended December
31, 2005. The company recognized $0.6 million net gain on sales of
privately held investments during the year ended December 31, 2006
and a $0.2 million net loss on privately held investments during
the year ended December 31, 2005. (5) The company recognized a
small loss from discontinued operations for the year ended December
31, 2006.��The company recognized a loss from discontinued
operations of $2.9 million and $9.1 million in the three months and
year ended December 31, 2005, respectively. � The company believes
that this information is useful to investors because these items
are infrequent in nature and may affect the comparability of the
current quarter and full year results to other quarter and full
year results. � Free Cash Flows (Unaudited) (in thousands) � Three
Months Ended Year Ended December 31, December 31, � 2006� � � 2005�
� 2006� � � 2005� � Cash flows from operating activities $ 8,630� $
8,802� $ 61,848� $ 43,228� � Capital expenditures � (5,942) �
(7,167) � (32,833) � (23,359) � Free cash flow $ 2,688� $ 1,635� $
29,015� $ 19,869� � Free Cash Flow is defined as net cash provided
by operating activities less capital expenditures.��The company
believes that free cash flow provides useful information about the
amount of cash generated by the business after the purchase of
property and equipment.��A limitation of free cash flow is that it
does not represent the total increase or decrease in the cash
balance for the period.��Free cash flow should be considered in
addition to, and not as a substitute for, other measures of
financial performance prepared in accordance with US GAAP.
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