<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
Commission File No. 0-21527
MEMBERWORKS INCORPORATED
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1276882
(State of Incorporation) (I.R.S. Employer
Identification No.)
9 West Broad Street;
Stamford, Connecticut 06902
- --------------------- -----
(Address of principal executive offices) (Zip Code)
(203) 324-7635
--------------
(Registrant's telephone number,
including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's capital stock:
15,615,361 shares of Common Stock, $0.01 par value as of January 29, 1999.
<PAGE> 2
MEMBERWORKS INCORPORATED
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1998
and June 30, 1998. 3
Condensed Consolidated Statements of Operations for the three and six
month periods ended December 31, 1998 and 1997. 4
Condensed Consolidated Statements of Cash Flows for the six
month periods ended December 31, 1998 and 1997. 5
Notes to Condensed Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
Certain Factors That May Affect Future Results 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
--------- ---------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 46,933 $ 35,933
Accounts receivable 9,901 7,107
Prepaid membership materials 4,021 2,931
Prepaid expenses 1,548 1,060
Membership solicitation and other deferred costs 60,341 51,771
--------- ---------
Total current assets 122,744 98,802
Fixed assets, net 14,278 9,677
Intangible and other assets 25,531 25,450
--------- ---------
Total assets $ 162,553 $ 133,929
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $ 120 $ 380
Accounts payable 20,785 21,967
Accrued liabilities 30,162 20,680
Deferred membership fees 83,448 61,753
--------- ---------
Total current liabilities 134,515 104,780
Long-term obligations 19 69
--------- ---------
Total liabilities 134,534 104,849
--------- ---------
Shareholders' equity:
Common stock, $0.01 par value --
40,000 shares authorized; 15,781 shares issued
(15,653 shares at June 30, 1998) 158 156
Capital in excess of par value 74,991 74,478
Deferred compensation (744) (978)
Accumulated deficit (40,503) (40,073)
Treasury stock, 428 shares at cost (377 shares at
June 30, 1998) (5,883) (4,503)
--------- ---------
Total shareholders' equity 28,019 29,080
--------- ---------
$ 162,553 $ 133,929
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues .................................................................... $ 50,128 $ 27,317 $ 94,581 $ 51,870
Expenses:
Operating .............................................................. 10,023 5,759 18,259 10,846
Marketing .............................................................. 29,314 16,252 55,721 30,908
General and administrative ............................................. 9,563 5,262 18,518 10,123
Other income, net principally interest ................................. (420) (429) (854) (827)
-------- -------- -------- --------
Total expenses .............................................................. 48,480 26,844 91,644 51,050
-------- -------- -------- --------
Income (loss) before income taxes and cumulative
effect of accounting change ............................................ 1,648 473 2,937 820
Cumulative effect of accounting change ...................................... -- -- (3,367) --
Provision for income taxes .................................................. -- -- -- --
-------- -------- -------- --------
Net income (loss) ........................................................... $ 1,648 $ 473 $ (430) $ 820
======== ======== ======== ========
Earnings (loss) per share (note 2):
Basic ............................................................. $ 0.11 $ 0.03 $ (0.03) $ 0.06
======== ======== ======== ========
Diluted ........................................................... $ 0.10 $ 0.03 $ (0.03) $ 0.05
======== ======== ======== ========
Pro forma amounts assuming new accounting principle is retroactively applied:
Net income ............................................................... $ 1,648 $ 296 $ 2,937 $ 678
Earnings per share assuming no dilution ........................... 0.11 0.02 0.19 0.05
Earnings per share assuming dilution .............................. 0.10 0.02 0.17 0.04
Shares used in earnings per share calculations:
Basic ............................................................. 15,357 14,721 15,330 14,728
======== ======== ======== ========
Diluted ........................................................... 16,913 16,176 16,861 16,179
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
December 31,
-------------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (430) $ 820
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Cumulative effect of accounting change 3,367 --
Membership solicitation and other deferred costs (62,434) (40,045)
Amortization of membership solicitation and other deferred costs 50,497 33,895
Deferred membership fees 21,695 7,164
Depreciation and amortization 2,459 776
Other 234 280
Change in assets and liabilities affecting operating cash flows:
Accounts receivable (2,794) (1,805)
Prepaid membership materials (1,090) (277)
Prepaid expenses (488) (391)
Other assets (727) 12
Accounts payable (1,182) 332
Accrued liabilities 9,482 3,396
-------- --------
Net cash provided by operating activities 18,589 4,157
-------- --------
INVESTING ACTIVITIES
Acquisition of fixed assets and other (6,414) (1,749)
-------- --------
Net cash used in investing activities (6,414) (1,749)
-------- --------
FINANCING ACTIVITIES
Payments of long-term obligations (310) (348)
Treasury stock purchases (1,380) (1,966)
Proceeds from issuance of Common Stock 515 221
-------- --------
Net cash (used in) financing activities (1,175) (2,093)
-------- --------
Net increase in cash and cash equivalents 11,000 315
Cash and cash equivalents at beginning of period 35,933 40,758
-------- --------
Cash and cash equivalents at end of period $ 46,933 $ 41,073
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
MEMBERWORKS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, such statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended December 31, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ended June 30, 1999. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K with respect to the fiscal year ended
June 30, 1998.
NOTE 2 - EARNINGS PER SHARE
Basic and diluted earnings per share amounts are determined in accordance with
the provisions of FASB Statement No. 128 "Earnings per Share" (FAS 128). The
following table sets forth the reconciliation of the numerators and denominators
in the computation of basic and diluted earnings per share (in thousands, except
per share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
---------------------- ------------------------
1998 1997 1998 1997
------- ------- -------- -------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income (loss) available to common shareholders $ 1,648 $ 473 $ (430) $ 820
======= ======= ======== =======
Denominator for basic earnings per share:
Weighted average number of common shares
outstanding-basic 15,357 14,721 15,330 14,728
Effect of dilutive securities:
Options and warrants 1,556 1,455 1,531 1,451
------- ------- -------- -------
Weighted average number of common shares
outstanding-diluted 16,913 16,176 16,861 16,179
======= ======= ======== =======
Basic earnings (loss) per share $ 0.11 $ 0.03 $ (0.03) $ 0.06
======= ======= ======== =======
Diluted earnings (loss) per share $ 0.10 $ 0.03 $ (0.03) $ 0.05
======= ======= ======== =======
</TABLE>
NOTE 3 - ALLOWANCE FOR MEMBERSHIP CANCELLATIONS
Accrued liabilities set forth in the accompanying condensed consolidated balance
sheets as of December 31, 1998 and June 30, 1998 include an allowance for
membership cancellations of $21,024,000 and $16,362,000, respectively.
NOTE 4 - CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective July 1, 1998, the Company changed its method of accounting for
printing and mailing of membership materials. Historically, the Company has
accounted for the costs of printing and mailing of membership materials by
amortizing these costs ratably over the membership period as revenue is
recognized. Effective July 1, 1998, the Company started expensing these costs
upon the mailing of membership materials. The cumulative effect of this change
in accounting principle as of July 1, 1998 of $3.4 million was recorded in the
first fiscal quarter ended September 30, 1998 as a reduction of membership
solicitation and other deferred costs and net income.
6
<PAGE> 7
MEMBERWORKS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MemberWorks addresses the needs of organizations seeking to leverage the
expertise of an outside provider in offering membership service programs.
Membership service programs offer selected products and services from a variety
of vendors intended to enhance existing relationships between businesses and
consumers. The Company derives its revenues principally from annually renewable
membership fees. The Company generally receives full payment of annual fees at
or near the beginning of the membership period, but recognizes revenue ratably
over the membership period. Similarly, the costs associated with soliciting each
new member, as well as the cost of royalties, are amortized ratably over the
same period. Profitability and cash flow generated from renewal memberships
exceed that of new memberships due to the absence of solicitation costs
associated with new member procurement.
On September 1, 1998, the Company issued a press release that stated it had
contacted the Securities and Exchange Commission ("SEC") to determine whether
the SEC staff's view regarding the timing of revenue recognition for companies
such as MemberWorks Incorporated that sell services has changed in the wake of
Cendant Corporation's agreement (announced on August 27, 1998) with the SEC to
modify its revenue recognition practices. The Company had requested the SEC
staff to comment on and has provided the SEC staff with information
demonstrating the continued appropriateness of its revenue recognition
practices. The Company has consistently followed these practices in accordance
with generally accepted accounting practices and with the concurrence of
PricewaterhouseCoopers LLP, its independent accountants. As a result of this
review and several discussions with the SEC staff, the staff has not objected to
the Company's decision to presently continue to follow its revenue recognition
practices, as described above. The SEC staff did request the Company to change
its method of accounting for printing and mailing of membership materials,
beginning as of July 1, 1998. The Company has recorded the cumulative effect of
this change in accounting principle in the first quarter of fiscal 1999. See
footnote 4 for a description of the change and its financial impact.
On September 28, 1998, the SEC issued a press release and stated the "SEC will
formulate and augment new and existing accounting rules and interpretations
covering revenue recognition, restructuring reserves, materiality, and
disclosure;" for all publicly-traded companies. Until such time as the SEC staff
issues such interpretative guidelines, it is unclear what, if any, impact such
interpretative guidance will have on the Company's current accounting practices.
However, the potential changes in accounting practice being considered by the
SEC staff could have a material impact on the manner in which the Company
recognizes revenue. Any such changes would have no effect on reported cash flow
or the economic value of the Company's memberships.
THREE MONTHS ENDED DECEMBER 31, 1998 VS. THREE MONTHS ENDED DECEMBER 31, 1997
REVENUES. Revenues increased 83% to $50.1 million for the quarter ended
December 31, 1998 from $27.3 million for the quarter ended December 31, 1997 due
to an increase in the Company's membership base and an increase in the weighted
average program fee. The Company's membership base increased to approximately
4.4 million members at December 31, 1998 from 2.3 million members at December
31, 1997. If revenues from Coverdell and Company, acquired on April 2, 1998,
were included in both periods on a pro-forma basis, second quarter revenues
would have increased 63%. The increase in the Company's membership base was due
to increased demand for the Company's existing programs, new programs introduced
in fiscal 1998, and members acquired through the Coverdell acquisition. The
increase in the weighted average program fee was due to an increase in the
percentage of members enrolled in programs with higher fees. Revenues from
renewals increased to $22.3 million in 1998 from $10.9 million in 1997. As a
percentage of individual membership revenues, these amounts represented 47% in
1998 and 42% in 1997.
7
<PAGE> 8
MEMBERWORKS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING EXPENSES. Operating expenses consist of costs incurred in
servicing the Company's membership base, including personnel, telephone and
computer processing costs, as well as expenses associated with the production
and distribution of membership information kits. Operating expenses increased
74% to $10.0 million in 1998 from $5.8 million in 1997 due to the servicing
requirements of the larger membership base of the Company. As a percentage of
revenues, operating expenses decreased to 20.0% in 1998 from 21.1% in 1997. The
decrease in this percentage is primarily due to the increase in the weighted
average program fee and improved member retention.
MARKETING EXPENSES. Marketing expenses consist of fees to telemarketers to
solicit potential members, royalties to clients, direct mail costs and other
solicitation expenses. Marketing expenses increased 80% to $29.3 million in 1998
from $16.3 million in 1997 due to increased telemarketing and royalty expenses
associated with the larger membership base. As a percentage of revenues,
marketing expenses decreased to 58.5% in 1998 from 59.5% in 1997. The decrease
was due to the favorable effect of an increase in the weighted average program
fee, improved member retention rates and an overall improvement in marketing
efficiency.
In addition to marketing expenses, the Company also monitors the
spending for membership solicitation and other deferred costs. These costs
increased 54% to $34.4 million in 1998 from $22.4 million in 1997 primarily due
to increased marketing efforts incurred to grow the membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of personnel and facilities expenses associated with the Company's
executive, sales, marketing, finance, product and account management functions.
General and administrative expenses increased 82% to $9.6 million in 1998 from
$5.3 million in 1997. This increase was attributable to the costs incurred for
additional personnel in all areas and related facilities costs as well as
amortization expense of intangibles related to the Coverdell acquisition. As a
percentage of revenues, general and administrative expenses decreased to 19.1%
in 1998 from 19.3% in 1997. Excluding the amortization expense related to the
Coverdell acquisition in April 1998, general and administrative expenses would
have decreased to 18.1% in 1998 from 19.3% in 1997.
OTHER INCOME, NET. Other income, net is primarily composed of interest
income from cash and cash equivalents. Other income of $0.4 million was reported
in 1998 and 1997.
PROVISION FOR INCOME TAXES. The Company was not required to record a
provision for income taxes for the three months ended December 31, 1998 due to
tax losses realized.
SIX MONTHS ENDED DECEMBER 31, 1998 VS. SIX MONTHS ENDED DECEMBER 31, 1997
REVENUES. Revenues increased 82% to $94.6 million for the six months ended
December 31, 1998 from $51.9 million for the six months ended December 31, 1997
due to an increase in the Company's membership base and an increase in the
weighted average program fee. The Company's membership base increased to
approximately 4.4 million members at December 31, 1998 from 2.3 million members
at December 31, 1997. If revenues from Coverdell and Company, acquired on April
2, 1998, were included in both periods on a pro-forma basis, six month revenues
would have increased 62%. The increase in the Company's membership base was due
to increased demand for the Company's existing programs, new programs introduced
in fiscal 1998, and members acquired through the Coverdell acquisition. The
increase in the weighted average program fee was due to an increase in the
percentage of members enrolled in programs with higher fees. Revenues from
renewals increased to $41.0 million in 1998 from $20.8 million in 1997. As a
percentage of individual membership revenues, these amounts represented 46% in
1998 and 42% in 1997.
OPERATING EXPENSES. Operating expenses increased 68% to $18.3 million in
1998 from $10.8 million in 1997 due to the servicing requirements of the larger
membership base of the Company. As a percentage of revenues, operating expenses
decreased to 19.3% in 1998 from 20.9% in 1997. The decrease in this percentage
is primarily due to the increase in the weighted average program fee and
improved member retention.
8
<PAGE> 9
MEMBERWORKS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MARKETING EXPENSES. Marketing expenses increased 80% to $55.7 million in
1998 from $30.9 million in 1997 due to increased telemarketing and royalty
expense associated with the larger membership base. As a percentage of revenues,
marketing expenses decreased to 58.9% in 1998 from 59.6% in 1997. The decrease
was due to the favorable effect of an increase in the weighted average program
fee, improved member retention rates and an overall improvement in marketing
efficiency.
In addition to marketing expenses, the Company also monitors the spending
for membership solicitation and other deferred costs. These costs increased 56%
to $62.4 million in 1998 from $40.0 million in 1997 primarily due to increased
marketing efforts incurred to grow the membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 83% to $18.5 million in 1998 from $10.1 million in 1997. The increase
was attributable to costs incurred for additional personnel in all areas and
related facilities costs as well as amortization expense of intangibles related
to the Coverdell acquisition. As a percentage of revenues, general and
administrative expenses increased to 19.6% in 1998 from 19.5% in 1997. Excluding
the amortization expense related to the Coverdell acquisition in April 1998,
general and administrative expenses would have decreased to 18.5% in 1998 from
19.5% in 1997.
OTHER INCOME, NET. Other income, net of $0.9 million was reported in 1998
compared to $0.8 million reported in 1997 and is primarily composed of interest
income from cash and cash equivalents.
PROVISION FOR INCOME TAXES. The Company was not required to record a
provision for income taxes for the six months ended December 31, 1998 due to tax
losses realized.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased to $18.6 million in
1998 from $4.2 million in 1997 due to improved operating results and improved
member acquisition costs due to higher retention and more productive and
efficient marketing efforts.
Net cash used in investing activities was $6.4 million in 1998 and $1.7
million in 1997. The Company's capital expenditures increased to $6.0 million in
1998 from $1.7 million in 1997 due to a computer system upgrade and expansion of
the Company's call centers.
Net cash used in financing activities was $1.2 million in 1998 and $2.1
million in 1997. This decrease is primarily related to a reduction in treasury
share repurchases made under the Company's stock repurchase program. The Company
purchased 51,000 shares during the six month period ended December 31, 1998
versus 103,000 shares during the six month period ended December 31, 1997.
Because of ongoing costs in connection with soliciting new members, the
Company expects to continue to utilize net cash generated from operating
activities, if any, to increase the Company's membership base. The Company
believes that existing cash balances together with its available bank credit
facility, will be sufficient to meet its funding requirements for at least the
next twelve months.
9
<PAGE> 10
MEMBERWORKS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 ISSUES
The Company has completed an analysis of its software and hardware and has
determined that its systems are Year 2000 ("Y2K") compliant. As part of the
Company's evaluation, the Company tested Y2K communications compliance with all
of the Company's clients and vendors, including the processing and transmission
of test files between the Company, its customers and its vendors.
The cost of the Y2K project has not been material to the Company and has
been funded through operating cash flows. The Company has expensed all costs
associated with this project as incurred.
Although management believes the Company's systems will be Year 2000
compliant, the Company has begun developing contingency plans to address any
possible system failures. Because the Company uses multiple vendors to process
its billing transactions, its external risk is mitigated as vendors may be used
interchangeably. However, there can be no assurance that these, or other
companies on which the Company relies will be timely converted or that any such
failure to convert would not have an adverse effect on the Company's systems and
operations.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements that involve
risks and uncertainties, including the statements in Liquidity and Capital
Resources regarding the adequacy of funds to meet funding requirements. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. A number of uncertainties exist that could
affect the Company's future operating results, including, without limitation,
the Company's history of losses, the Company's ability to retain existing
clients and attract new clients, the Company's dependence on membership
renewals, intense competition, the Company's continuing ability to develop new
programs which generate consumer interest, and general economic factors. The
Company has incurred significant operating losses since its inception. Although
the Company has experienced revenue growth and has reported net income in recent
quarterly periods, such growth rates and favorable results may not be
sustainable and may not be indicative of future operating results. There can be
no assurance that the Company will be able to maintain profitability in the
future.
10
<PAGE> 11
MEMBERWORKS INCORPORATED
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The effective date of the registration statement pursuant to which the Company
conducted the public offering of its Common Stock was October 18, 1996 and the
file number was 333-10541. The Company filed its initial report on Form SR on
January 27, 1997 for the period ended January 18, 1997.
From the effective date of the registration statement filed in connection with
the offering to December 31, 1998, the net proceeds of the offering were used as
follows (in thousands):
<TABLE>
<S> <C>
Acquisitions of other businesses $ 5,804
Loan to affiliate 250
Purchase and installation of machinery and equipment 12,946
Repayment of indebtedness 2,818
Working capital 4,264
-------
$26,082
=======
</TABLE>
The remaining $10,009,000 of the proceeds has been invested in short-term,
highly rated money market funds, government securities and commercial paper. Of
the $2,818,000 used to repay indebtedness, $1,855,000 represented direct or
indirect payments to directors, officers, general partners of the issuer or
their associates; to persons owning ten percent or more of any class of equity
securities of the issuer; and to affiliates of the issuer.
Item 4. Submission of Matters to a Vote of Security Holders
a) MemberWorks Incorporated's 1998 Annual Meeting of Stockholders was held on
December 8, 1998.
b) At the annual meeting the following Class II Directors were elected to the
Board of Directors as follows: Stephen J. Clearman: For - 13,867,577, Against
- 38,925, Abstain - 0, Nonvotes - 1,693,313; Michael R. O'Brien: For -
13,867,577, Against - 38,925, Abstain - 0, Nonvotes - 1,693,313. Class I
Directors, Marc S. Tesler and Alec L. Ellison, and Class III Directors, Gary
A. Johnson, and Dennis P. Walker, continue to serve as Directors of the
Company.
c) The ratification of PricewaterhouseCoopers LLP, as the Company's independent
auditors, was also approved at the annual meeting as follows: For -
13,860,163, Against - 41,729, Abstain - 4,610, Nonvotes - 1,693,313.
d) The approval of the amendment to the 1996 Stock Option Plan was also ratified
at the annual meeting as follows: For - 6,950,963, Against - 4,695,259,
Abstain - 12,630, Nonvotes - 3,940,963.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule (included in EDGAR copy
only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the quarter ended December 31, 1998.
11
<PAGE> 12
MEMBERWORKS INCORPORATED
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.
MEMBERWORKS INCORPORATED
(Registrant)
Date: February 12, 1998 By: /s/ Gary A. Johnson
-------------------------------------
Gary A. Johnson, President, Chief
Executive Officer and Director
Date: February 12, 1998 By: /s/ James B. Duffy
------------------------------------
James B. Duffy, Senior Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 46,933
<SECURITIES> 0
<RECEIVABLES> 9,901
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122,744
<PP&E> 20,757
<DEPRECIATION> (6,479)
<TOTAL-ASSETS> 162,553
<CURRENT-LIABILITIES> 134,515
<BONDS> 0
0
0
<COMMON> 158
<OTHER-SE> 27,861
<TOTAL-LIABILITY-AND-EQUITY> 162,553
<SALES> 0
<TOTAL-REVENUES> 94,581
<CGS> 0
<TOTAL-COSTS> 92,498
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (854)
<INCOME-PRETAX> 2,937
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (3,367)
<NET-INCOME> (430)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
