<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number 1-13333
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DBT ONLINE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 85-0439411
---------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
5550 W. FLAMINGO ROAD, SUITE B-5
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(Address of Principal Executive Offices)
LAS VEGAS, NEVADA 89103
----------------------------------------
(702) 257-1112
----------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or for such shorter periods 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 [ ]
The number of common shares outstanding as of April 30, 2000 was 20,212,094.
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DBT ONLINE, INC.
TABLE OF CONTENTS
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999..................................................................3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2000
and 1999...............................................................................4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000
and 1999...............................................................................5
Notes to Condensed Consolidated Financial Statements............................................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................9
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS..............................................................................12
Item 2. CHANGES IN SECURITIES..........................................................................12
Item 3. DEFAULTS UPON SENIOR SECURITIES................................................................12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................12
Item 5. OTHER INFORMATION..............................................................................12
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................................12
Signatures.......................................................................................................13
EXHIBIT
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DBT Online, Inc. and subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
2000 1999
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,931 $ 33,016
Accounts receivable, less allowance:
March 31, 2000, $625; December 31, 1999, $839 15,931 12,675
Short-term investments 31,403 16,500
Prepaid expenses and other current assets 2,759 2,276
Prepaid income taxes 587 1,437
--------- ---------
Total current assets 60,611 65,904
Property and equipment, net 33,820 33,369
Patents, less accumulated amortization:
March 31, 2000, $6,130; December 31, 1999, $5,707 7,712 8,135
Goodwill, less accumulated amortization:
March 31, 2000, $3,636; December 31, 1999, $2,765 28,076 28,941
Other assets 106 139
--------- ---------
TOTAL ASSETS $ 130,325 $ 136,488
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 7,644 $ 16,662
Due to other patent interest holders 1,795 1,848
--------- ---------
Total current liabilities 9,439 18,510
DEFERRED INCOME TAXES 1,458 1,580
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 5,000,000 shares
authorized; no shares issued or outstanding
Common stock, $.10 par value, 100,000,000 shares
authorized; 20,212,094 and 20,135,964 shares issued and
outstanding at March 31, 2000 and December 31, 1999, respectively 2,021 2,013
Additional paid-in capital 101,179 99,388
Retained earnings 16,513 15,252
Accumulated other comprehensive loss (285) (255)
--------- ---------
Total stockholders' equity 119,428 116,398
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 130,325 $ 136,488
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
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DBT Online, Inc. and subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
----------------------------
2000 1999
------- -------
Revenues $22,657 $16,535
Patent royalties 1,543 1,653
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Total revenues and royalties 24,200 18,188
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Cost of revenues 9,100 7,432
Sales and marketing 4,510 2,286
Research and development 2,248 1,179
General and administrative 6,821 4,779
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Total expenses 22,679 15,676
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Income from operations 1,521 2,512
Interest income, net 418 443
------- -------
Income before income taxes 1,939 2,955
Provision for income taxes 678 1,005
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Net income $ 1,261 $ 1,950
======= =======
Basic net income per common share $ 0.06 $ 0.10
======= =======
Basic weighted average shares outstanding 20,148 18,914
======= =======
Diluted net income per common share $ 0.06 $ 0.10
======= =======
Diluted weighted average shares outstanding 20,706 19,694
======= =======
See notes to condensed consolidated financial statements.
4
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DBT Online, Inc. and subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,261 $ 1,950
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 3,028 1,968
Deferred income taxes (122) (124)
Stock issued for employee benefit plan 400
Changes in operating assets and liabilities:
Accounts receivable (3,256) (2,028)
Prepaid expenses and other current assets (483) 6
Prepaid income taxes 850 347
Accounts payable and accrued liablities (9,018) 1,533
Due to other patent interest holders (53) 329
-------- --------
Net cash (used in) provided by operating activities (7,393) 3,981
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CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchased (2,191) (2,171)
Increase in other assets 33 (191)
Additions to short-term investments (14,934) (531)
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Net cash used in investing activities (17,092) (2,893)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 1,400 667
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Net cash provided by financing activities 1,400 667
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (23,085) 1,755
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 33,016 21,324
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,931 $ 23,079
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
The following should be read in conjunction with the consolidated
financial statements and the notes thereto, which are included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of DBT Online, Inc. (the "Company") and its wholly owned
subsidiaries. The condensed consolidated financial statements as of March 31,
2000 and for the three month periods ended March 31, 2000 and 1999 are
unaudited. All significant intercompany accounts and transactions have been
eliminated. The accompanying condensed consolidated financial statements reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. Such adjustments consist solely of normal
recurring accruals. Results for the interim periods are not necessarily
indicative of results for a full year.
The weighted-average number of shares for stock options included in the
diluted weighted-average shares outstanding were 557,548 and 779,729 for the
three months ended March 31, 2000 and 1999, respectively.
NOTE 2. BUSINESS COMBINATIONS
On September 24, 1999, we acquired KnowX.com and Informed from
Information America, Inc. for $25,000 in cash and warrants to purchase 329,172
shares of common stock of the Company. The warrants have a strike price of
$52.50 per share and expire on March 24, 2001. KnowX.com is a leading
Internet-based public record research tool for consumers and small office users.
The Informed product line offers qualified users, including commercial lending
and leasing companies, access to public information through the Internet or
dial-up modems. The transaction was accounted for as a purchase and the
Company's results of operations include the results of KnowX.com and Informed
since the date of acquisition. Goodwill resulting from this transaction is
approximately $24,000 and is being amortized on a straight-line basis over ten
years.
Pro-forma results of operations for the three months ended March 31,
1999, assuming the acquisition of KnowX.com and Informed occurred as of the
beginning of 1999, after giving effect to certain adjustments such as interest
and amortization of goodwill resulting from the acquisition, are summarized as
follows:
PROFORMA
THREE MONTHS ENDED
MARCH 31, 1999
--------------
Net revenue $21,302
=======
Income before income taxes $ 2,432
=======
Net income $ 1,520
=======
Earnings per share (diluted) $ 0.08
=======
On May 26, 1999, we acquired all of the common stock of WinSHAPES for
approximately $442 in cash plus the payment of liabilities in the amount of
$704. WinSHAPES is a company engaged in the development of software that
converts data into graphic illustrations that visualize interrelationships among
people, businesses, vehicles and other assets. The transaction was accounted for
as a purchase and the Company's results of operations include the results of
WinSHAPES since the date of acquisition. Goodwill resulting from this
transaction is $1,125, and is being amortized on a straight-line basis over
seven years. Pro forma operating information is not provided for this
acquisition because its effects on the results of operations are not material.
6
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On May 6, 1999, we acquired I.R.S.C., Inc. ("IRSC"), pursuant to the
merger (the "IRSC Merger") of a wholly owned subsidiary of the Company, with and
into IRSC. Upon consummation of the IRSC Merger, IRSC became a wholly owned
subsidiary of the Company. IRSC is a provider of court records and other public
information used to conduct pre-employment screening and other anti-fraud due
diligence services for business customers.
As a result of the IRSC Merger, each share of IRSC common stock was
converted into the right to receive approximately 1.43 shares of Company common
stock or 432,346 common shares of the Company in the aggregate. The IRSC Merger
was accounted for as a pooling-of-interests and, accordingly, the Company's
financial statements for periods prior to the IRSC Merger have been restated to
include the results of IRSC for all periods presented.
NOTE 3. COMPREHENSIVE INCOME
Comprehensive income for the three months ended March 31, 2000 and 1999
is as follows:
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THREE MONTHS ENDED MARCH 31,
2000 1999
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Net income $ 1,261 $ 1,950
Adjustment to reconcile net income to total comprehensive income:
Unrealized loss on investments (30) (29)
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Comprehensive income $ 1,231 $ 1,921
======= =======
</TABLE>
NOTE 4. BUSINESS SEGMENTS
The Company's reportable segments, namely electronic information and
patent enforcement, are organized based on their products and services.
Information concerning the segments in which the Company operates is shown in
the table below. Operating profit is derived as total revenues less operating
expenses; interest expense and general corporate expenses have not been
considered. Identifiable assets by segment are those assets that are used in the
Company's operations in each segment. General corporate assets consist primarily
of cash and cash equivalents and short-term investments. Substantially all
revenues are derived from, and its assets located in, the United States of
America.
7
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Three Months Ended
March 31,
----------------------------
2000 1999
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REVENUES:
Electronic information $ 22,657 $ 16,535
Patent enforcement 1,543 1,653
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Consolidated revenues $ 24,200 $ 18,188
========= =========
OPERATING PROFIT:
Electronic information $ 778 $ 1,817
Patent enforcement 884 953
--------- ---------
Segment operating profit 1,662 2,770
Interest income 418 443
General corporate expense (141) (258)
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Consolidated income before income taxes $ 1,939 $ 2,955
========= =========
CAPITAL EXPENDITURES:
Electronic information $ 2,191 $ 2,169
Patent enforcement -- 2
--------- ---------
Consolidated capital expenditures $ 2,191 $ 2,171
========= =========
DEPRECIATION AND AMORTIZATION OF IDENTIFIABLE ASSETS:
Electronic information $ 2,603 $ 1,542
Patent enforcement 426 426
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Consolidated depreciation and amortization $ 3,029 $ 1,968
========= =========
</TABLE>
<TABLE>
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At At
March 31, December 31,
2000 1999
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IDENTIFIABLE ASSETS:
Electronic information $ 93,898 $ 76,362
Patent enforcement 14,606 23,285
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Total identifiable assets 108,504 99,647
General corporate assets 21,821 36,841
--------- ---------
Consolidated assets $ 130,325 $ 136,488
========= =========
</TABLE>
NOTE 5. PROPOSED MERGER WITH CHOICEPOINT, INC.
On February 14, 2000, the Company signed a definitive agreement to
merge with Choicepoint, Inc. Under the terms of this agreement, the Company's
shareholders will receive 0.525 shares of Choicepoint, Inc. common stock for
each share of the Company's common stock. The transaction is expected to close
in the second quarter of 2000 and is subject to regulatory and shareholders'
approval.
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The following should be read in conjunction with the consolidated
financial statements and the notes thereto contained in the Company's 1999 Form
10K. This information contains certain statements regarding future trends, the
accuracy of which is subject to many risks and uncertainties. Such trends, and
their anticipated impact upon the Company, could differ materially from those
presented in this Form 10-Q.
OVERVIEW OF THE COMPANY
We are a leading nationwide provider of online public records data and
other publicly available information operating through our Electronic
Information Group (EIG). We also operate in the patent exploitation and
enforcement business through our Patent Enforcement Group (PEG). EIG provides
online integrated database services and related reports to law enforcement and
other government agencies, law firms, insurance companies, and licensed
investigation companies. PEG exploits and enforces two laser patents, generating
its revenues through patent royalties.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
We acquired KnowX.com and Informed in September 1999 and WinSHAPES in
May 1999. These acquisitions were accounted for as purchases and, accordingly,
the operating results of these companies are reflected in the Company's results
of operations from the dates of the respective acquisitions. Changes in the
Company's results of operations from the quarter ended March 31, 1999 to the
quarter ended March 31, 2000 are attributable, in part, to these acquisitions.
REVENUES
EIG's revenues increased 37.0% to $22,657 for the three months ended
March 31, 2000, from $16,535 for the same period in 1999. In addition to the
increase caused by the acquisitions, the increase in EIG's revenues was
attributable to an overall increase in the core business and the introduction of
IRSC's new web-based screening product. Without the acquisitions, EIG's revenues
increased 15.6% to $19,120. PEG's revenues decreased 6.7% to $1,543 for the
three months ended March 31, 2000, from $1,653 for the same period in 1999.
Total consolidated revenues increased 33.1% to $24,200 for the three months
ended March 31, 2000, from $18,188 for the same period in 1999.
COST OF REVENUES
EIG's cost of revenues increased 23.8% to $8,673 for the three months
ended March 31, 2000, from $7,005 for the same period in 1999. In addition to
the increase caused by the acquisitions, the increase in EIG's cost of revenues
was due primarily to increases in both purchased data costs and depreciation
expense as EIG continued to invest both in its computer facilities and in the
expansion of its databases. Without the acquisitions, EIG's cost of revenue
increased 14.2% to $7,997. As a percentage of EIG's revenues, cost of revenues
decreased to 38.3% for the three months ended March 31, 2000, from 42.4% for the
same period in 1999. The decrease in cost of revenues as a percentage of EIG's
revenues was due to the scale benefits associated with our accelerated revenue
growth. PEG's cost of revenues remained the same at $427 for the three months
ended March 31, 2000 and for the same period in 1999 and consists solely of the
amortization costs associated with the purchase of the PEG's patents. Total
consolidated cost of revenues increased 22.4% to $9,100 for the three months
ended March 31, 2000, from $7,432 for the same period in 1999.
SALES AND MARKETING
EIG's sales and marketing expenses increased 97.3% to $4,510 for the
three months ended March 31, 2000, from $2,286 for the same period in 1999. As a
percentage of EIG's revenues, sales and marketing expense increased to 19.9% for
the three months ended March 31, 2000, from 13.8% for the same period in 1999.
In addition to the increase caused by the acquisitions, the increase was
primarily due to increases in advertising expenses and sales and marketing
personnel. Without the acquisitions, EIG's sales and marketing expenses
increased 12.6% to $2,574. PEG did not have sales and marketing expenses.
9
<PAGE> 10
RESEARCH AND DEVELOPMENT
EIG's research and development expenses increased 90.7% to $2,248 for
the three months ended March 31, 2000, from $1,179 for the same period in 1999.
As a percentage of EIG's revenues, research and development expenses increased
to 9.9% for the three months ended March 31, 2000, from 7.1% for the same period
in 1999. In addition to the increase caused by the acquisitions, the increase
was due to an increase in both salaries and personnel associated with our new
product development. Without the acquisitions, EIG's research and development
expenses increased 41.1% to $1,664. PEG did not have research and development
expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
EIG's general and administrative expenses increased 46.2% to $6,588 for
the three months ended March 31, 2000, from $4,506 for the same period in 1999.
In addition to the increase caused by the acquisitions, the increase was due to
increases in occupancy expenses, payroll, and other expenses related to the
reorganization of our administrative infrastructure. As a percentage of EIG
revenues, general and administrative expenses increased to 29.1% for the three
months ended March 31, 2000, from 27.3% for the same period in 1999. Without the
acquisitions, EIG's general and administrative expenses increased 18.4% to
$5,333 which was 27.9% of EIG's revenues. PEG's general and administrative
expenses decreased to $233 for the three months ended March 31, 2000, from $273
for the same period in 1999. Total consolidated general and administrative
expenses increased 42.7% to $6,821 for the three months ended March 31, 2000,
from $4,779 for the same period in 1999.
OPERATING PROFIT
EIG's operating profit decreased 59.1% to $637 for the three months
ended March 31, 2000, from $1,559 for the same period in 1999. Without the
acquisitions, EIG's operating profit decreased slightly to $1,552 as revenue
growth was offset by increased cost of revenues and other operating expenses.
PEG's operating profit decreased 7.2% to $884 for the three months ended March
31, 2000, from $953 for the same period in 1999. Total operating profit
decreased 39.5% to $1,521 for the three months ended March 31, 2000, from $2,512
for the same period in 1999.
INTEREST INCOME
Net interest income was $418 for the three months ended March 31, 2000,
compared to $443 for the same period in 1999. The decrease was due to lower cash
and investment balances as our capital expenditures increased significantly in
1999, reducing our average investment balances in 2000.
INCOME TAXES
Our effective income tax rate remained the same at 35% for the three
months ended March 31, 2000, and for the same period in 1999. The effective tax
rates for both of these periods were favorably impacted by non-taxable interest
income and reduced state income taxes.
NET INCOME
Our net income decreased 35.3% to $1,261 for the three months ended
March 31, 2000, from $1,950 for the same period in 1999. In addition to the
decrease caused by the acquisitions, the decrease was due to the slight decrease
in the operating profit of EIG and PEG, and reduced interest income during the
period. Without the acquisitions, our net income decreased 4.8% to $1,856. The
KnowX.com and Informed acquisitions are expected to be dilutive to net income
until September 2000 due to royalties being paid to the company from which we
acquired these products from.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operations were $7,393 for the three months ended
March 31, 2000, compared to cash provided by operations of $3,981 for the same
period in 1999. We had working capital at March 31, 2000 of $51,172 (including
cash, cash equivalents and short-term investments of $41,334) compared to
$47,394 (including, cash equivalents and short-term investments $49,516) at
December 31, 1999. We expect to fund future working capital requirements with
our existing cash and short-term investment balances and with cash generated
from operations.
Capital expenditures were $2,191 for the three months ended March 31,
2000, compared to $2,171 for the same period in 1999. These expenditures were
primarily attributable to the acquisition of computer equipment.
We currently have no debt and believe that our existing cash and
short-term investment balances together with our cash flows from both EIG and
PEG operations will be sufficient to meet our anticipated cash and capital
requirements through 2000.
INFLATION
The rate of inflation has not had a material impact on the operations
of the Company. Moreover, if inflation remains at its recent levels, it is not
expected to have a material impact on the operations of the Company for the
foreseeable future.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
DBT Online is involved in litigation from time to time in the ordinary
course of business. The Company does not believe that the outcome of any pending
or threatened litigation will have a material adverse effect on the financial
position or results of operations of the Company. However, as is inherent in
legal proceedings where issues may be decided by finders of fact, there is a
risk that unpredictable decisions adverse to the Company could be reached.
ITEM 2. CHANGES IN SECURITIES
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1* Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
- ------------
* Filed herewith.
12
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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.
DBT ONLINE, INC.
/s/ JUDITH D. BROWN
------------------------------------------
JUDITH D. BROWN
(Principal Accounting Officer)
/s/ J. HENRY MUETTERTIES
------------------------------------------
J. HENRY MUETTERTIES
(Vice President General Counsel and Secretary)
Date: May 15, 2000
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 9,931
<SECURITIES> 31,403
<RECEIVABLES> 16,556
<ALLOWANCES> (625)
<INVENTORY> 0
<CURRENT-ASSETS> 60,611
<PP&E> 54,995
<DEPRECIATION> (21,175)
<TOTAL-ASSETS> 130,325
<CURRENT-LIABILITIES> 9,439
<BONDS> 0
0
0
<COMMON> 2,021
<OTHER-SE> 117,407
<TOTAL-LIABILITY-AND-EQUITY> 130,325
<SALES> 22,657
<TOTAL-REVENUES> 24,200
<CGS> 9,100
<TOTAL-COSTS> 9,100
<OTHER-EXPENSES> 13,579
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,939
<INCOME-TAX> 678
<INCOME-CONTINUING> 1,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,261
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
