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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
----------------------------
Commission File Number 000-21949
TICKETS.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1424841
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
555 Anton Boulevard, 12th Floor, Costa Mesa, California 92626
(Address of principal executive offices, including zip code)
(Registrant's telephone number, including area code) (714) 327-5400
Indicate by check mark 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 (or for such shorter period 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 [ ]
As of April 30, 2000, there were 58,237,237 shares of the Registrant's Common
Stock, par value $0.000225 per share, outstanding.
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PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
TICKETS.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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MARCH 31, DECEMBER 31,
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2000 1999
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(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents ........................ $ 73,198 $ 94,173
Accounts receivables, net of allowances of
$476 and $439 .................................. 7,829 7,780
Prepaid expenses and other current assets ........ 17,093 20,506
--------- ---------
Total current assets ......................... 98,120 122,459
--------- ---------
Property and equipment, net ........................... 13,634 11,163
Goodwill and intangible assets, net ................... 84,186 86,838
Other assets .......................................... 18,101 15,320
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Total assets ..................................... $ 214,041 $ 235,780
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 18,358 $ 18,250
Accrued liabilities .............................. 5,728 5,358
Current portion of long-term debt
and capital lease obligations .................. 1,953 2,115
Deferred revenue and other
current liabilities ............................ 3,309 4,418
--------- ---------
Total current liabilities .................... 29,348 30,141
--------- ---------
Long-term debt and capital lease
obligations, net of current portion ................. 1,743 2,117
Other liabilities ..................................... 2,103 2,128
Minority interest ..................................... 287 317
Stockholders' equity:
Common stock, $.000225 par value; 270,000
shares authorized; 58,010 and 57,082 shares
issued and outstanding, respectively............ 13 13
Additional paid-in capital ....................... 318,474 317,378
Deferred compensation ............................ (322) (350)
Accumulated deficit .............................. (137,584) (115,944)
Cumulative other comprehensive loss .............. (21) (20)
--------- ---------
Total stockholders' equity ................... 180,560 201,077
--------- ---------
Total liabilities and stockholders' equity ....... $ 214,041 $ 235,780
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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TICKETS.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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THREE MONTHS ENDED MARCH 31,
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2000 1999
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Revenues:
Ticketing services ..................... $ 8,181 $ 5,070
Software services and other ............ 5,891 1,508
-------- --------
Total revenues ..................... 14,072 6,578
-------- --------
Cost of services:
Ticketing services ..................... 7,261 3,725
Software services and other ............ 3,143 750
-------- --------
Total cost of services ............. 10,404 4,475
-------- --------
Gross profit ................................ 3,668 2,103
-------- --------
Operating expenses:
Sales and marketing .................... 12,436 2,919
Technology development ................. 4,735 1,813
General and administrative ............. 6,713 2,244
Amortization of goodwill and intangibles 2,408 369
-------- --------
Total operating expenses ........... 26,292 7,345
-------- --------
Loss from operations ........................ (22,624) (5,242)
-------- --------
Other (income) expense ................. (985) 791
Minority interest ...................... (29) 11
-------- --------
Total other (income) expense ....... (1,014) 802
-------- --------
Loss before provision for income taxes ...... (21,610) (6,044)
Provision for income taxes ............. 26 3
-------- --------
Net loss .................................... $(21,636) $ (6,047)
======== ========
Basic and diluted net loss per share ........ $ (0.37) $ (0.95)
======== ========
Weighted average common shares outstanding .. 57,720 6,333
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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TICKETS.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED
MARCH 31,
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. $(21,636) $ (6,047)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation ........................................ 1,391 808
Amortization of goodwill and intangibles ............ 2,408 369
Noncash interest expenses ........................... -- 100
Noncash marketing expense (1) ....................... 1,534 --
Noncash compensation expense ........................ 29 --
Minority interest ................................... (29) 11
Changes in operating assets and liabilities:
Accounts receivable ................................. (49) (23)
Notes receivable from affiliates .................... -- (4,700)
Prepaid expenses and other assets ................... (130) (219)
Accounts payable .................................... 129 682
Accrued liabilities ................................. 370 (327)
Deferred revenue and other liabilities .............. (1,041) 270
-------- --------
Net cash used in operating activities ............ (17,024) (9,076)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................... (3,145) (233)
Equity investments in strategic partners .............. (1,500) --
Increase in restricted cash ........................... (7) --
-------- --------
Net cash used in investing activities ............ (4,652) (233)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt .................. (539) (2,467)
Net proceeds from issuance of preferred stock ......... -- 21,279
Proceeds from issuance of common stock ................ 1,240 15
-------- --------
Net cash provided by financing activities ........ 701 18,827
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (20,975) 9,518
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........ 94,173 11,956
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD .............. $ 73,198 $ 21,474
======== ========
</TABLE>
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TICKETS.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
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THREE MONTHS ENDED MARCH 31,
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2000 1999
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid......................................................... $ 82 $ 1,327
=============== ===============
Income taxes paid..................................................... 26 3
=============== ===============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Accretion on redeemable common stock and warrants..................... $ -- $ 126
=============== ===============
</TABLE>
(1) Non-cash marketing expenses represent marketing expenses prepaid in 1999 to
Excite@Home and certain affiliates for advertising, promotional and related
products and services to be provided over a three-year period. The total prepaid
amount was $25 million and is expected to be used through December 2002.
The accompanying notes are an integral part of these consolidated financial
statements.
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TICKETS.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. DESCRIPTION OF BUSINESS
Tickets.com, Inc. (formerly, Advantix, Inc.) and its wholly-owned
subsidiaries Bay Area Seating Service, Inc. ("BASS"), ProTix, Inc. ("ProTix"),
TicketsLive Corporation ("TicketsLive"), dataCulture, Ltd. ("dataCulture") and
Lasergate Systems, Inc. ("Lasergate"), collectively ("we", "us" or
"Tickets.com"), is a leading provider of entertainment ticket sales, event
information, and related products and services. We sell tickets and provide
these services through the Internet, telephone sales centers, interactive voice
response systems, and retail outlets. We provide automated ticketing solutions
to entertainment organizations such as stadiums, performing arts centers,
museums and professional sports franchises. The www.tickets.com web site enables
consumers to obtain information on entertainment organizations and sports and
entertainment events and performances, purchase tickets from multiple sources
and shop for related products. We also develop, license and support proprietary
ticketing software.
We were originally organized as The Entertainment Express, Inc. under
the laws of the State of Delaware on January 25, 1995. The Company commenced
operations in May 1996 with the acquisition of Hill Arts and Entertainment
Systems, Inc. which had developed a proprietary ticketing software system
utilized primarily by performing arts centers, theater groups and regional
ticketing service providers. In December 1996, we acquired the call center and
ticketing operations of an Ohio-based performing arts center and ticketing
services provider, at which time we changed our name to Advantix, Inc. In August
1997, we acquired the assets of Fantastix Ticketing Company, LLC, a regional
ticketing services provider located in Buffalo, New York, and in September 1997
the Company completed the acquisition of all of the outstanding stock of BASS, a
ticketing services provider in Northern California and Nevada. In October 1998,
we acquired all the outstanding common stock of ProTix, a ticketing services
provider and ticketing software developer based in Madison, Wisconsin. In April
1999, we acquired all the outstanding capital stock of California Tickets.com,
Inc. ("CA Tickets.com"), a web-based ticketing service provider, and
TicketsLive, a ticketing software developer based in Syracuse, New York. We then
changed our name to Tickets.com, Inc. These acquisitions were followed by the
purchase, in August 1999, of all the outstanding common stock of dataCulture, a
ticketing software developer located in the United Kingdom and in December 1999,
we completed our acquisition of all the outstanding stock of Lasergate, a
ticketing software developer located in Clearwater, Florida.
2. RECENT ACCOUNTING PRONOUNCEMENTS
On December 3, 1999, the Securities Exchange Commission (SEC) staff
released Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition", as
amended by SAB No. 101A, to provide guidance on the recognition, presentation
and disclosure of revenue in financial statements. SAB No. 101 explains the SEC
staff's general framework for revenue recognition, stating that certain criteria
need to be met in order to recognize revenue. SAB No. 101 also addresses the
disclosure of revenues at gross compared to net presentations as well as
financial statements and Management's Discussion & Analysis (MD&A) disclosures
related to revenue recognition practices. We will adopt the provisions of SAB
No. 101 in the second quarter of this year. We have not yet determined the
impact, if any, SAB No. 101 will have on our revenue and related costs of
services. We believe SAB No. 101 will not have a material impact on our results
of operations, cash flows or financial position.
3. BASIS OF PRESENTATION
The unaudited consolidated financial statements have been prepared in
accordance with the United States' generally accepted accounting principles for
interim financial information and Rule 10-01 of Regulation S-X.
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Accordingly, they do not include all of the information and footnotes required
by the United States' generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been reflected in these condensed consolidated financial
statements. Operating results for the quarter are not necessarily indicative of
the results that may be expected for the year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in Tickets.com's Annual Report on Form 10-K for the
year ended December 31, 1999.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with the United
States' generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
5. NET LOSS PER SHARE
Basic net loss per share is computed by dividing the net loss available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted net loss per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or result in the issuance of
common stock that would then share in Tickets.com's earnings. Potentially
dilutive securities are excluded from our calculation of diluted loss per share
since their inclusion would be antidilutive.
6. ACQUISITIONS
During 1999, we completed several business acquisitions. The following
unaudited pro forma information discloses the net sales and net income as if the
material combinations took place at the beginning of 1999 (amounts in
thousands):
For the three months ended March 31, 1999
(unaudited) Other
-------------------------------------------------- --------
Total revenues.................................... $ 9,542
Net loss.......................................... $(12,382)
Basic and diluted net loss per share.............. $ (0.87)
7. LITIGATION
On July 23, 1999, Ticketmaster Corporation and Ticketmaster
Online-CitySearch filed a lawsuit against us in the United States District Court
for the Central District of California seeking unspecified damages and a court
order to prohibit us from, among other things, linking Internet consumers to
internal pages within Ticketmaster's web site. In addition, the suit alleges
that we have engaged in other wrongful acts, such as providing false and
misleading information on our web site regarding the availability of tickets and
related information on the Ticketmaster web site and taking copyrighted
information from the Ticketmaster web site for use on the Tickets.com web site.
The suit seeks an injunction to prohibit us from further engaging in any alleged
unlawful activity, treble damages, attorneys' fees and other unspecified
damages. In response to the Company's Motion to Dismiss, Ticketmaster
Corporation and Ticketmaster Online-CitySearch filed on January 7, 2000, a First
Amended Complaint which modified their previous allegations and added two claims
alleging violations of the Lanham Act. The Company filed a Motion to Dismiss the
Amended Complaint. In response to the Motion, the Court on March 27, 2000,
dismissed four claims for misappropriation, trespass, breach of contract, and
unjust
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enrichment, with leave to amend. Ticketmaster Corporation and Ticketmaster
Online-CitySearch filed a Second Amended Complaint on April 21, 2000,
reasserting their claims for trespass and breach of contract. Ticketmaster
Corporation and Ticketmaster Online-CitySearch have also filed a Motion for
Preliminary Injunction seeking an order precluding the Company from, among other
things, providing links to Ticketmaster pages. The Company has filed an
opposition and the Court has scheduled a hearing to take place on June 5, 2000.
If Ticketmaster Corporation and Ticketmaster Online-CitySearch successfully
assert their claims against us, our web site could be severely impacted. Any
injunction could, among other things, eliminate our ability to directly refer
consumers to tickets to events sold by Ticketmaster at Ticketmaster's web site.
The Ticketmaster suit could result in limitations on how we implement our
e-commerce strategy, delays and costs associated with redesigning our web site
and substantial payments to Ticketmaster Corporation and Ticketmaster
Online-CitySearch. In addition, the litigation could result in significant
expenses and diversion of our management's time and other resources.
On February 28, 2000 we were served with a complaint filed by Ascott
Group, Inc., in the Superior Court of the State of California, County of San
Diego, alleging, among other things, that we wrongfully refused to transfer
shares of Tickets.com Common Stock to the plaintiff pursuant to a stock purchase
agreement between the plaintiff and certain of our shareholders. The complaint
sought actual damages in the amount of $7.5 million as well as exemplary
damages. The entire action was dismissed by the plaintiff on April 14, 2000.
8. STOCKHOLDERS' EQUITY
In 1997, we entered into an agreement with our Senior lender to issue a
warrant for the purchase of our common stock at $0.0225 per share. In accordance
with the agreement, a warrant to purchase 177,778 shares was issued. The warrant
was subject to certain antidilution provisions and as a result of this provision
436,648 additional shares became issuable over the term of the agreement. In
1999, the Senior lender sold its warrant to a third party. In November 1999,
concurrent with the completion of our initial public offering ("IPO"), the
holder of the warrant notified us of their intent to exercise the warrant
subject to the approval by both parties of the calculation of the number of
shares to be issued. On January 21, 2000 614,426 shares of Tickets.com common
stock were issued to the holder of the warrant.
In January 2000, we issued 34,089 shares in conjunction with our
Employee Stock Purchase Plan. The issuance represented $362,000 in participant
contributions. Additionally, 279,942 shares of common stock were issued,
excluding those warrants discussed above, to employees and non-employee holders
of options and warrants.
9. SEGMENT INFORMATION
The operating segments below reflect the segmentation of our business
under which management evaluates financial data internally to make operating
decisions and assess performance. We have sales to external customers only.
There have been no intersegment sales. We evaluate the performance of our
operating segments and allocate resources based on gross profit and therefore,
segment information has been provided at that level. Additionally, assets are
not allocated to specific products and accordingly cannot be reported by
segment.
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For the three months ended March 31, 2000
------------------------------------------------------------
Ticketing Services Software Services Other Total
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Revenues $8,181 $5,010 $ 881 $14,072
Gross Profit 920 2,192 556 3,668
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For the three months ended March 31, 1999
------------------------------------------------------------
Ticketing Services Software Services Other Total
------------------ ----------------- ----- -------
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Revenues $5,070 $1,508 $ -- $6,578
Gross Profit 1,345 758 -- 2,103
</TABLE>
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10. FIRST CALL INTERNATIONAL
In February 2000, we signed a letter of intent to acquire all of the
outstanding capital stock of First Call International, Ltd., a privately held
ticketing services and software provider based in the United Kingdom. Under the
terms of the letter of intent, we will commence an exchange offer to be
registered with the Securities and Exchange Commission for between 7.6 million
and 9.3 million shares of Tickets.com's common stock to be exchanged for all of
First Call's outstanding capital stock. Under the letter of intent, our common
stock issued in the transaction will be valued at the average closing price over
a 30-day period prior to the effective date of the registration statement
relating to the offer.
In addition to standard closing conditions, the exchange offer is
subject to the negotiation and execution of a definitive agreement providing for
the transaction, and the subsequent acceptance of the exchange offer by holders
of First Call shares.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Tickets.com is a leading source of entertainment tickets, event
information, and related products and services. We sell tickets and provide
these services through the Internet, telephone sales centers, interactive voice
response systems and retail stores. We provide automated ticketing solutions to
over 4,100 entertainment organizations and venues such as stadiums, performing
arts centers, museums and professional sports franchises. We have two operating
segments, ticketing services and software services and other.
SOURCES OF REVENUE
Ticketing Services
We primarily generate ticketing services revenue from per ticket
service fees charged directly to consumers who purchase tickets through the
Internet, telephone sales centers, interactive voice response systems and retail
stores. In addition, we charge a per order handling fee to consumers for all
tickets we sell, other than through retail stores. The sale of the tickets for
an event often commences several months prior to the scheduled date of the
event. Ticketing services revenues relating to these sales are recognized when
the tickets are sold. If an event is cancelled, an allowance is established for
potential refunds; however, our clients are responsible for funding the refund
of the price of tickets. The amount of the service fees we charge varies from
client to client, depending upon a number of factors, including the nature of
the services to be rendered to the client, the amount and cost of equipment to
be installed in the client's box office, the amount of advertising and
promotional allowances provided, the type of event and the distribution channels
used. The service fee for each client is determined by us and our clients
through arms-length negotiations during the contract process. We generally do
not purchase these tickets from our clients for resale to the public. In the
event that we do purchase the tickets for resale, or guarantee the sale of a
certain amount of tickets, we recognize the entire sales price of those tickets
we purchased and sold or guaranteed as revenue.
In 1999 we began to enable several of our software licensees to sell
tickets over the Internet. This technology allows our licensees to sell their
tickets on either the www.tickets.com web site or on their own web site. We
generate revenues on the sale of tickets to events for these Internet enabled
licensees from service fees on a per ticket basis, similar to our traditional
ticketing services clients. We generally are not involved in the delivery of
these tickets and therefore we do not generate revenue from handling fees for
these ticket sales.
We have also generated ticketing services revenues through the auction
of tickets on our web site. In 1999 we entered into arrangements with several
performers to provide online ticket auctions
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for their live concerts. Under these arrangements, the performer's tickets are
allocated to us for auction on our web site and certain amounts collected above
face value are donated to a charity of the performer's choice. Under these types
of arrangements, we have agreed generally to purchase, at face value, any unsold
tickets that were allocated to us for auction. If we are unable to sell tickets
that we have agreed to purchase, or sell them at less than face value, we will
incur losses on the tickets purchased. The gross value of the sale of these
tickets is recorded as revenues. The amount paid for the tickets, the amount
donated to charity and the cost of delivering the tickets to the consumers are
recognized as cost of services for the related auction ticketing services.
Our ticketing services clients determine all face values for tickets
sold through our services. These clients also generally determine when tickets
for their events will be sold to the public and the number and type of tickets
that will be available for sale through us. We usually sell only a portion of
our clients' total tickets. The number of tickets that our clients sell in-house
varies from client to client and varies as to any single client from year to
year. Tickets allocated by our clients to us are sold to the public directly
through our distribution network. For outsourcing services clients and software
licensees who are enabled to sell tickets on our web site, their entire ticket
inventory is generally available on the www.tickets.com web site.
If an event is cancelled, we will refund the per ticket convenience fee
directly to consumers. However, our outsourcing services clients are responsible
for funding all refunds of ticket prices for a cancelled event. To the extent
that the funds we are holding on behalf of a client are insufficient to cover
all refunds, the client is contractually required to provide us with additional
funds within a specified period of time, typically within 24 to 72 hours, of
cancellation. Historically, our clients have fulfilled these obligations.
Software Services and Other
We generate a portion of our revenue from license and support fees
charged to licensees of our in-house systems products. We recognize these
revenues in accordance with the contracts we enter into with our licensees when
they license our in-house systems and purchase maintenance and other support
services. We generally recognize our license revenues when our software is
installed and accepted by our licensees. Support and maintenance are recognized
over the term of the contract. Our support and maintenance contracts have terms
ranging from one to five years with automatic one-year renewals. Our licensees
generally pay a one-time license fee for the right to use our software and
annual fees for support and maintenance. We also provide custom programming for
certain clients with special ticketing needs. The revenue and costs associated
with these long-term contracts are generally recognized on the percentage of
completion method.
We also generate revenues from advertising on our web site,
consumer-to-consumer auctions and travel and package sales, which may include
travel, hotel, tickets to an event and related merchandise. Revenues for
advertising are recognized when the ads are placed on our web site.
Consumer-to-consumer auction revenues are derived from a fee paid by the seller
and are recognized when the transactions are complete. The majority of our
travel revenues are commissions received from our travel services provider.
Packages are purchased for sale in advance or are sold through our travel
service provider. Sales of packages purchased in advance or packages which we
retain full risk of return, are recognized at the gross sales value of the
package when the package is sold; therefore, if a package is left unsold or
sells for less than the aggregate cost of the package, we incur losses on those
packages. We receive commissions for packages sold through our travel service
provider.
During December 1999 we entered into a long-term barter transaction
whereby we provide various products and services in exchange for a cash payment
and sponsorship. Revenues and expenses from this barter transaction are valued
at the fair market value based on the amount that would be charged on a cash
basis for similar products and services. Revenues and expenses from barter
transactions are recognized in accordance with the established guidelines
related to the type of the underlying revenue or expense.
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COST STRUCTURE
Cost of Services. Cost of services associated with ticketing services
primarily includes expenses related to the distribution and delivery of tickets.
These expenses include primarily telephone sales center and distribution
payroll, telecommunications and data communications, commissions paid on tickets
distributed through outlets and our clients' share of service fees. In the event
that we purchase tickets for sale or guarantee the sale of a certain amount of
tickets, the face value of those tickets purchased or guaranteed are recorded as
a cost of ticketing services revenues. Ticket auction costs of services are
comprised of the face value of the ticket and the cost of processing the orders
and delivery of the ticket. In addition, under current arrangements with
performers, the costs of ticket auctions also include certain amounts, above the
face value of the tickets, that are donated to a charity of the performer's
choice. Cost of services associated with software services and other includes
primarily costs related to the installation and support of our in-house systems
mainly consisting of payroll and travel services related costs, the cost of
hardware and software that we resell to our licensees and the cost of packages
purchased for resale which may include, hotel costs, merchandise costs and the
face value of the event tickets related to auctions for which we agree to
purchase unsold tickets.
Operating Expenses. Our operating expenses are comprised of three
primary categories: sales and marketing, technology development and general and
administrative expenses. Sales and marketing expenses are expensed as incurred
and consist principally of personnel expenses, consulting fees, advertising,
trade shows and conventions, and promotional expenditures. Technology
development expenditures are generally expensed as incurred and consist
primarily of personnel and related compensation costs, contract labor to support
software development, and configuration and implementation of our ticketing
systems, telecommunications, web site and connectivity and support system
infrastructure. General and administrative expenses consist of personnel
expenses for management, accounting and administrative personnel, recruiting,
professional services, facilities and other administrative expenses.
Amortization of goodwill and intangibles is recorded on a straight-line basis
over various estimated useful lives primarily ranging from three to 25 years.
Covenants not to compete are amortized on a straight-line basis over the
corresponding contract period of three years. Our corresponding intangibles
consist primarily of the portion of the purchase price of businesses acquired
allocated to existing technology, client relationships, tradenames, assembled
workforce and covenants not to compete. Goodwill represents the excess of cost
over the fair value of identified net assets acquired in business combinations
accounted for under the purchase method.
SEASONALITY
Our operations and revenues from ticketing services are largely
seasonal in nature, with second and third quarter revenues generally being
higher than first and fourth quarter revenues. Several of our largest clients
are outdoor venues or promoters of musical concerts, which schedule a
significant number of events during the summer months and typically do not
generate substantial activities in the late fall, winter and early spring.
Therefore, the seasonality of our business causes a significant variation in our
quarterly operating results. To the extent we do not broaden our revenue base to
offset seasonality, we expect that this seasonality will continue to cause
significant variations in our future quarterly operating results.
RESULTS OF OPERATIONS
General
Our historical operations consist primarily of (1) the provision of
outsourcing and related services to clients such as performing arts centers,
amphitheaters, professional sports franchises, and concert promoters and (2) the
licensing, maintenance and support of our proprietary in-house systems.
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THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
Revenues
Ticketing Services. Revenues from ticketing services increased 61% to
$8.2 million for the three months ended March 31, 2000 from $5.1 million for the
three months ended March 31, 1999. The increase in revenues was due to an
increase in total tickets sold and to new revenues related to our performer
charity ticket auctions. The number of tickets sold increased 25% to 1.3 million
for the three months ended March 31, 2000 from 1.1 million for the three months
ended March 31, 1999, resulting in an increase in revenues of $1.7 million. This
increase is net of the loss of approximately $600,000 in the first quarter of
2000 as compared to the first quarter of 1999 from a client who terminated its
contract with us effective December 31, 1999. The loss of this revenue was more
than offset by the increase in ticket volume attributable to several new
clients, and our existing clients who recorded large first quarter ticket
sales for their events.
Software Services and Other. Revenues from software services and other
increased 291% to $5.9 million for the three months ended March 31, 2000 from
$1.5 million for the three months ended March 31, 1999. The revenues from the
acquisition of TicketsLive in April 1999 contributed the majority of the
increase. Net of acquisitions, software sales and other revenue remained
constant.
Cost of Services
Ticketing Services. Costs of ticketing services increased 95% to $7.3
million for the three months ended March 31, 2000 from $3.7 million for the
three months ended March 31, 1999. The increase was mainly attributable to costs
related to charity ticket auctions during the first quarter of 2000, which
primarily consist of the face value of the tickets and amounts due to the
charitable organizations. The remaining increase reflects increases related to
the increase in ticket volume including increases in telecom expenses, credit
card fees and labor costs. As a percentage of ticketing services revenues, total
cost of ticketing services increased to 89% from 73%, primarily due to the high
cost of services associated with our ticket auctions.
Software Services and Other. Costs of software services and other
increased 319% to $3.1 million for the three months ended March 31, 2000 from
$750,000 for the three months ended March 31, 1999. The increase was primarily
caused by costs of sales from our acquired subsidiaries. As a percentage of
software services and other revenues, costs of software services and other
increased to 53% from 50% for the same quarter in the prior year. The increase
in costs of sales as a percentage of revenues is partially attributable to high
margin custom programming that we were conducting during the quarter ended March
31, 1999. Additionally, costs currently associated with software license and
support sales from companies we acquired in 1999, are slightly higher than our
historical software license and support costs.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased 326% to
$12.4 million for the three months ended March 31, 2000 from $2.9 million for
the three months ended March 31, 1999. Sales and marketing expenses attributable
to acquired companies accounted for $1.4 million of the increase. As a
percentage of total revenues, sales and marketing expenses increased to 88% from
44%. In an effort to continue the development of our sales and marketing
infrastructure, to develop the Tickets.com brand, and to support our growth
plans and to increase consumer awareness, we have increased our sales and
marketing expenses significantly. Excluding acquisitions, we have increased
advertising, promotions and trade show expenses by $5.5 million, professional
services by $1.8 million and personnel and related expenses including facilities
and travel by $619,000.
Technology Development. Technology development expenses increased 161%
to $4.7 million for the three months ended March 31, 2000 from $1.8 million for
the three months ended March 31, 1999. Of this increase, $662,000 was related to
technology developments costs from our acquired subsidiaries. As a percentage of
total revenues, technology development
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expenses increased to 34% from 28%. We invested approximately $2.3 million to
develop and enhance our web site as well as expand the scalability of our
infrastructure. This investment is reflected by increased personnel and related
costs of $1.2 million, professional services of $419,000 and computer related
expenses of $425,000. We will continue to expand our technology development to
enhance system functionality and broaden reporting capabilities and service
delivery methods. Additionally, we have developed an aggressive schedule to
complete the Internet connections for our software licensees to enable them to
sell tickets on our web site as well as their own web sites.
General and Administrative. General and administrative expenses
increased 199% to $6.7 million for the three months ended March 31, 2000 from
$2.2 million for the three months ended March 31, 1999. General and
Administrative expenses associated with acquired companies accounted for $1.6
million of the increase. As a percentage of revenues, general and administrative
expenses increased to 48% from 34%. Excluding acquisitions, the increase was
primarily due to increased payroll and related expenses, including facilities,
travel, supplies and equipment of $1.7 million due to our continued investment
in our managerial and administrative infrastructure commensurate with and to
facilitate our growth. In addition, professional services increased by $577,000
related primarily to legal and consulting fees.
Amortization of Goodwill and Intangibles. Amortization of goodwill and
intangibles increased 553% to $2.4 million for the three months ended March 31,
2000 from $369,000 for the three months ended March 31, 1999. The increase was
due to acquisitions that occurred after the first quarter of 1999.
Other (Income) Expense
Interest Income Expense. Other (income) expense consists principally of
interest income and interest expense. Interest income is generated primarily
from cash and cash equivalents held in interest bearing accounts. Interest
income increased 693% to $1.2 million for the three months ended March 31, 2000
from $149,000 for the three months ended March 31, 1999. The increase is mainly
due to higher cash balances that resulted from our financing activities.
Interest expense decreased 79% to $197,000 for the three months ended March 31,
2000 from $940,000 for the three months ended March 31, 1999, reflecting the
reduction of our long-term debt in connection with our initial public offering
in November 1999.
Net Loss
For the three months ended March 31, 2000, our net loss was $21.6
million or $0.37 per share. For the three months ended March 31, 1999, our net
loss was $6.0 million or $0.95 per share. The increase in the net loss before
extraordinary item was primarily due to:
- - Increased amortization expense of $2.0 million;
- - Increased operating expenses net of acquisitions, most significantly:
- Personnel and related expenses of $4.0 million;
- Advertising, public relations and trade show expenses of $5.5
million related to increased promotions and the development of
our brand; and
- Professional service expenses of $2.8 million.
- - Losses from acquired subsidiaries of $1.9 million.
The decrease in the net loss per share reflects an increase in our
basic and diluted weighted average shares of 51.4 million. This increase is due
primarily to the conversion of our preferred shares to 29.6 million shares of
common stock, the issuance of 8.4 million common shares related to 1999
acquisitions and our initial public
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offering totaling 7.6 million common shares that was completed in November 1999.
Potentially dilutive securities (including stock options) were antidilutive and
therefore were excluded from the calculation of diluted loss per share.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 2000 the Company's cash and cash
equivalents decreased by $21.0 million to $73.2 million from December 31, 1999.
The decrease resulted primarily from net cash used in operating activities of
$17.0 million, purchases of property and equipment of $3.1 million, equity
investments in strategic partners of $1.5 million and payments on long-term debt
and leases of $539,000. These uses were offset by proceeds from issuance of
common stock of $1.2 million. Cash used in operating activities was primarily in
connection with the funding of losses before depreciation, amortization and
certain non-cash marketing expenses of $16.3 million and decreases in deferred
revenue and other liabilities of $1.0 million. These uses of cash were partially
offset by increases in accounts payable and accrued liabilities of $500,000.
From December 31, 1998 to March 31, 1999, cash and cash equivalents
increased by $9.5 million. The increase resulted mainly from $21.3 million in
proceeds from the issuance of 9,477,655 shares of Series D convertible preferred
stock, net of issuance costs. The increase in cash was primarily offset by cash
used in operating activities of $9.1 million, purchases of property and
equipment of $233,000 and principal payments on long term debt of $2.5 million.
Cash used in operating activities was primarily for funding of the first quarter
losses before depreciation and amortization of $4.9 million, and pre-acquisition
cash advances of $3.7 million to California Tickets.com and $1.0 million to
TicketsLive Corporation.
We believe that cash on hand as of March 31, 2000 will be sufficient to
fund operations and meet debt and other obligations through at least the next 12
months. However, we may need to raise additional funds in order to support more
rapid expansion, develop new or enhanced services or technologies, respond to
competitive pressures, acquire complementary businesses, or respond to
unanticipated requirements. If additional funds are raised through the issuance
of equity securities, the percentage ownership of our stockholders will be
reduced and stockholders may experience additional dilution in net book value
per share, or such equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. There can be no assurance
that we will be able to obtain additional financing when needed on favorable
terms, if at all. If adequate funds are not available on acceptable terms, we
may be unable to take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements, any of which could have a
material adverse effect on our business, financial condition and results of
operations.
RISK FACTORS
Before deciding to invest in our company or to maintain or increase
your investment, you should carefully consider the risks described below, in
addition to the other information in this report and our other filings with the
SEC, including our annual report on form 10-K and subsequent reports on forms
10-Q and 8-K. The risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also affect our business operations. If
any of these risks actually occur, there could be serious harm to our business
financial condition or results of operations. In that event, the market price
for our common stock could decline and you may lose all or part of your
investment.
Because Of Our Limited Operating History And Limited Internet
Experience, Our Revenues Are Unpredictable, Which May Cause Significant
Fluctuations In Our Operating Results. Our limited operating history makes it
difficult for us to predict future results of operations and difficult for you
to evaluate us or our prospects. We believe that period-to-period comparisons of
a our operating results are not meaningful and that the results for any period
should not be relied upon as an indication of future performance. Our operating
results may
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fall below the expectations of market analysts or investors in some future
quarter. If this occurs, the price of our common stock would likely decrease.
The emerging nature of the markets in which we compete makes forecasting more
difficult and potentially unreliable. Our current and future expense levels are
based predominantly on our operating plans and estimates of future revenues, and
are to a large extent fixed. We may be unable to adjust spending in a timely
manner to compensate for any unexpected shortfall in revenues. Accordingly, if
our revenues in any particular quarter are lower than anticipated, our operating
results would likely fall short of market expectations.
The Seasonality Of The Live Entertainment Industry Could Cause Our
Quarterly Operating Results To Fall Below The Expectations Of Market Analysts
And Investors, Which Could Adversely Affect The Market Price Of Our Common
Stock. Many popular live entertainment events are held during the warm weather
months. In addition, ticket sales for such events generally commence several
months prior to the event date. Because of these factors, our business generally
has lower revenues in the first and fourth fiscal quarters. These seasonality
issues could cause our quarterly operating results to fall below market
expectations, and adversely affect the market price of our common stock. Other
related seasonality issues that could cause our quarterly operating results to
fluctuate in the future include:
- - the dates event tickets are released for sale by our clients;
- - the decisions of one or more clients to cancel or postpone events;
- - the timing of large, nonrecurring events; and
- - the concentration of events in any given quarter.
If We Fail To Retain Clients Of Acquired Companies, We May Experience A
Loss Of Revenue. In order to achieve our intended growth and market presence, we
must satisfy our current clients' needs, as well as the needs of clients of
acquired companies. If we fail to do so, we may lose significant clients and the
revenue we generate from those clients, as in the case of Bay Area Seating
Service discussed earlier in this section.
We May Lose Key Personnel Of Acquired Companies, Which Could Adversely
Affect Our Relationships With Major Clients Or Strategic Partners And Impair The
Effectiveness Of Our Operations. Key personnel of acquired companies may choose
not to continue their employment with us after an acquisition for reasons
including compensation, location, and the perception of career opportunities
with us, our competitors, or in other industries. If we lose key personnel of
any acquired companies, our relationships with major clients or strategic
partners who had close relationships with these personnel may be impaired. In
addition, if we are unable to replace any key personnel that we may lose, we may
suffer a disruption of operations and a decline in revenue.
Because We Have A Limited Operating History As A Consolidated Business,
We Have An Unproven Business Model That Requires A Substantial Move Into
E-Commerce. Since 1996, we have completed nine acquisitions of companies with
diverse backgrounds in the ticketing industry. We have a limited history
operating as a consolidated business, and accordingly, an unproven business
model that is substantially dependent on the growth of revenues from increased
ticket sales and related products and services on the Internet. To date, our
revenues generated from Internet sales have not been significant. Internet
related revenues comprised 23.5% of the first quarter 2000 total revenues. We
cannot be certain that we will be successful in increasing our Internet sales in
future periods. If we are not, our revenues will not grow in accordance with our
business model and may fall short of expectations of market analysts and
investors, which could negatively affect the price of our common stock.
We Have Limited Experience In Offering E-Commerce Services To Consumers
And May Not Be Able To Generate Substantial Revenues From Internet Sales. We
began online ticket sales in the third quarter of 1997. Historically, we have
sold tickets primarily through retail stores and telephone sales centers. In
order to generate substantial revenues from online ticket sales, we must
significantly increase the number of clients who use our
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online ticketing services. We cannot be certain that a substantial number of our
clients will be able or choose to use our on-line ticketing services. The
majority of our clients license our in-house systems for internal use and do not
use any of our other outsourcing services. These clients generally use software
systems that do not enable ticket sales over the Internet without a specific
software upgrade. We have only recently begun to offer this software upgrade,
and as a result, most of these clients have not yet acquired the necessary
software upgrade. Accordingly, to date, only a small portion of our clients are
able to use our Internet ticketing services.
If We Are Unable To Continually Develop New Services To Adapt To The
Evolving Internet Market, Our Reputation And Our Brand May Be Harmed. In order
to implement our business model, we must actively develop and launch new
services and products to attract consumers to our web site. Expansion of our
services may require significant additional expenditures and strain our
management, financial and operational resources. New services that are not
favorably received by consumers could damage our reputation and our brand.
We do not have web site linking arrangements in place with some other
ticket sellers. Because we sometimes provide links to other online ticket
sellers, without having a contractual arrangement in place to do so, it is
possible that one or more of these ticket sellers could prevent us from linking
consumers to certain pages within their website. For example, Ticketmaster
Corporation and Ticketmaster Online-CitySearch, Inc. have sued us to, among
other things, prevent us from linking consumers from our web site to web pages
within the Ticketmaster web site (see Note 6 in Item 1 "Financial Statements").
We have recently entered into an agreement with Shubert Ticketing Services,
whereby we receive up-to-date event information and direct web site links from
them. In return for promoting Shubert's events on our site we receive referral
fees for certain tickets sold on Shubert's site.
As More Of Our Clients Use Our Online Services, We May Encounter
Technological Difficulties That Could Impair Our Ability To Increase Online
Revenues. In order for most of our clients to use our online ticketing
capabilities, we must develop and install additional software to make their
systems compatible with ours. This process can be a difficult one and we may
encounter technological difficulties that may inhibit us from servicing our
clients online, which may cause one or more of our clients to terminate or fail
to renew its contract with us. Because we have a broad portfolio of in-house
systems products, we must either create separate Internet interfaces for each of
these products or consolidate our in-house systems products. We may experience
difficulties in consolidating our portfolio of in-house systems products into a
few comprehensive in-house systems and in developing links from our clients'
various software and hardware systems to our ticketing systems and databases.
Due to these potential technological difficulties, some clients may be averse to
change and may require a lengthy sales cycle before they will upgrade to
Internet ticketing on our system.
Ticketmaster Corporation And Ticketmaster Online-CitySearch Have Filed
A Lawsuit Against Us Which Could Impair Our Ability To Implement Our Business
Model And Result In Substantial Payments To Them. The Ticketmaster suit could
result in limitations on how we implement our e-commerce strategy, delays and
costs associated with payments to Ticketmaster Corporation and Ticketmaster
Online-CitySearch. In addition, the litigation could result in significant
expenses and diversion of our management's time and other resources (see Note 6
in Item 1 "Financial Statements").
Infringement Or Other Claims Could Adversely Affect Our Ability To
Market Our Products, Limit Our Rights To Certain Technology And Harm Our Results
Of Operations. Although we believe we have valid proprietary rights to all of
our intellectual property, we could be subject to claims of alleged trademark,
patent or other infringement as a result of our actions or the actions of our
licensees. For example, as in the Ticketmaster claim, we may in the future be
sued because we link consumers directly to an internal page within other ticket
sellers' web sites and have included the trademarks of these ticket sellers on
our web site. Any litigation over intellectual property rights or business
practices could result in:
- - payment by us of substantial damages;
- - injunctive or other equitable relief that could block our ability to
market or license our products; and
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- - the loss of rights to technologies necessary to operate portions of our
business.
Any litigation, regardless of the outcome, could result in substantial
costs and diversion of managerial and other resources.
Our Proprietary Technology And Intellectual Property May Be
Inadequately Protected, Which Could Harm Our Competitive Position. We regard our
proprietary technology and other intellectual property as critical to our
success. We rely on trademark, trade secret and copyright law to protect our
technology and our brand. We also rely on confidentiality and/or license and
other agreements with employees, customers, and others to protect our
proprietary rights. We have no patents. Despite our efforts to control access to
our proprietary information, it may be possible for a third party to copy or
otherwise obtain and use our products, technologies or other intellectual
property without authorization. In addition, effective copyright, trademark,
trade secret and patent protection may be unavailable or limited in foreign
countries that do not offer protection comparable to that provided by United
States laws. Internet technologies are evolving rapidly, and third parties may
also develop similar or superior technologies independently. Any unauthorized
use of our proprietary information could result in costly and time-consuming
litigation to enforce our proprietary rights. In addition, any third party
development of similar or superior technologies could impede our ability to
compete effectively in the ticketing industry.
Ineffective Protection Of Our Trademarks And Service Marks Could Reduce
The Value Of Our Brands. We are depending on the broad recognition of our
"Tickets.com" and "1-800-TICKETS" brands for our business to grow. We cannot be
certain that the steps we have taken and will take to protect our brands will be
adequate, and such steps may require considerable expenditures. Nor can we be
certain that third parties will not infringe upon or misappropriate the
copyrights, trademarks, trade dress and similar proprietary rights that
currently protect our brands. Ineffective protection of these rights could
reduce the value of our brands. We have applied to register the tradename
"Tickets.com" and the stylized trademark "1.800.TICKETS" and we have registered
the service mark "Advantix" and other trademarks in the United States. We have
also applied to register the tradenames "Tickets.com" in various foreign
countries. Effective trademark, service mark, copyright and trade secret
protection will not be available or sought in every country in which our
products and services are available online or by telephone. We may not be able
to obtain effective trademark or service mark registration until the prolonged
use of our marks has generated secondary meaning for purposes of trademark and
service mark law. In addition, there are other parties who have corporate names
or brand names very similar to ours, and whose names may also include the term
"tickets," and who may, as a result, bring claims against us for trademark
infringement or challenge our rights to register the tradename "Tickets.com,"
the stylized trademark "1.800.TICKETS," or both.
Our Licensees Could Diminish The Quality Of Our Brands And Adversely
Affect Our Reputation. We have licensed in the past, and expect to license in
the future, proprietary rights such as trademarks or copyrighted material to
third parties. While we attempt to ensure that the quality of our brands is
maintained by these licensees, we cannot be certain that these licensees will
not take actions that might materially and adversely affect the value of our
proprietary rights or reputation.
If We Are Not Able To Preserve Our Domain Names We May Not Be Able To
Compete Effectively On The Internet. We currently hold the Internet domain names
"tickets.com," "ProTix.com," "bass-tix.com," "basstickets.com," "fantastix.com"
and others. We may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights. Any such inability could impair our
ability to compete effectively on the Internet. The acquisition and maintenance
of domain names generally is regulated by governmental agencies and their
designees. The regulation of domain names in the United States and in foreign
countries is subject to change. Governing bodies may establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names. As a result, there can be no assurance
that we will be able to acquire or maintain relevant domain names in all
countries in which we conduct or intend to conduct business. In addition,
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the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear.
Online Security Breaches Could Result In A Loss Of Consumer Confidence
In E-Commerce, Which Could Impair Our Ability To Implement Our Business Model.
The secure transmission of confidential information over the Internet is
essential in maintaining consumer and supplier confidence in our services. Any
publicized security problems affecting us or other e-commerce companies could
inhibit the growth of e-commerce and, accordingly, the growth of our Internet
sales revenue as contemplated in our business model. We rely on licensed
encryption and authentication technology to effect secure transmission of
confidential information, including credit card numbers. We cannot be certain
that our security measures will prevent security breaches, including break-ins,
viruses or disruptions by consumers or others. A party that is able to
circumvent our security systems could steal proprietary information, damage our
database or communications lines or otherwise cause interruptions in our
operations. Security breaches also could damage our reputation and expose us to
a risk of loss or litigation and possible liability. Our insurance policies
carry coverage limits that may not be adequate to reimburse us for losses caused
by security breaches.
System Failures Could Damage Our Reputation And Result In The Loss Of
Customers And Clients. Our business is almost entirely dependent on our
telephone sales centers, computer systems and telecommunications systems. Heavy
stress placed on our systems during peak periods could cause our systems to
operate at unacceptably low speeds or fail altogether. Any significant
degradation or failure of our systems or any other systems in the ticketing
process, including telephone or telecommunications services, even for a short
time, could cause consumers to suffer delays in ticket purchases. The resulting
inconvenience to consumers could damage our reputation with the public, cause
consumers to purchase tickets from other sources and deter repeat customers.
Delays in services could also cause substantial losses for clients, which could
result in claims against us. These delays could also result in the termination
or non-renewal of our existing service agreements. We have experienced system
failures and degradation in the past, including a number of failures during the
first half of 1998. We could also experience system failures and degradations in
the future.
In the future, increased volume due to growth, if any, may require us
to expend substantial funds to expand and further upgrade our technology,
transaction processing systems and network infrastructure. Any inability to add
additional software and hardware on a timely basis to accommodate increased
traffic on our web site may cause unanticipated system disruptions and result in
slower response times. In addition, substantially all of our server equipment is
currently located in California in areas that are susceptible to earthquakes. We
do not presently have fully redundant systems, a formal disaster recovery plan
or alternative providers of hosting services, nor do we carry sufficient
business interruption insurance to compensate us for all of the possible losses
that we may incur. In addition, our clients' in-house systems also may be
subject to failures and degradations that could interrupt ticket sales both
through clients' systems and on our web site. Unanticipated problems may cause a
significant system outage or data loss, and result in the loss of clients.
The Process Of Integrating Technologies From Our Current and Future
Acquisitions Could Disrupt Our Ticketing Systems And Damage Our Relationships
With Our Clients. The process of integrating the various technologies of
acquired companies into one interactive system has caused, and may in the future
cause, system downtime and other system disruptions. We expect to integrate and
consolidate several of our in-house systems over the next several years. We may
experience system failures in the future as a result of this integration, which
could impair our relationships with our clients. For example, in connection with
the conversion of the information and telecommunications systems of Bay Area
Seating Service to our system, our Concord, California telephone sales center
experienced a number of system failures during the first half of 1998. Each of
these system failures resulted in the temporary interruption of ticketing
functions for entertainment organizations serviced by that telephone sales
center. Any system failures could cause one or more of our clients to terminate
its contract or fail to renew its contract with us.
We May Not Be Able To Maintain Or Improve Our Competitive Position
Because Of The Intense Competition In The Ticketing Industry. Intense
competition in the ticketing industry presents significant
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challenges to management, marketing and technical personnel. We believe
competition will become more challenging as the market for tickets expands and
technology advances. We have specifically identified two competitors, but
foresee the possibility of additional and increased competition in the future.
Our primary competitors on a national level are Ticketmaster Corporation and
Ticketmaster Online-CitySearch, Inc., which have operations in multiple
locations throughout the United States. Ticketmaster Online-CitySearch has an
exclusive license to do all of the online ticketing for Ticketmaster
Corporation. Ticketmaster Corporation has a widely recognized brand name in the
live event ticketing business, a longer operating history in the ticketing
industry generally and in Internet ticketing specifically, more extensive
ticketing inventory and greater financial and other resources than we do. We
commenced our operations in May 1996 and did not begin to sell tickets on the
Internet until October 1997. Because of our limited operating history, we have
not yet gained the same level of brand recognition or accumulated as broad a
ticketing inventory as Ticketmaster Corporation and Ticketmaster
Online-CitySearch. In addition, because we have developed through the
acquisition of smaller, regional outsourcing services providers and in-house
systems developers, we are still in the early stages of developing a strong
national presence.
Our competitors also include:
- - a number of smaller, regional outsourcing services providers;
- - international and national in-house systems providers;
- - entertainment organizations that handle their own ticket sales and
distribution through online and other distribution channels;
- - international, national and local outsourcing services providers, which
may or may not currently offer online transactional capabilities; and
- - Internet-based live event ticketing companies.
Many of these competitors have greater brand recognition, longer
operating histories and a greater number of well-established client
relationships than we do in the geographic regions in which they operate.
Because of our relatively short operating history and presence in a limited
number of geographic regions prior to our move into e-commerce, we have not yet
established a significant competitive position in a number of geographic areas.
In Order To Maintain Our Competitive Position In The Ticketing
Industry, We Must Be Able To Attract New Clients And Ticket Inventory, And We
Cannot Be Certain That We Will Be Able To Do So. If we cannot attract new
clients and ticket inventory, or if we lose clients to other outsourcing
services providers or otherwise, we may not be able to maintain our competitive
position in the ticketing industry. In recent years, the live entertainment
industry has been moving toward consolidation. As a result, contracts for
outsourcing services are often negotiated on a multi-venue basis, and large
ticket inventories are concentrated in the hands of a few entertainment
conglomerates. Because outsourcing services contracts are often multi-year
contracts and there are fewer potential new clients, competition for their
business is especially intense. Historically, we have grown our business
primarily through acquisitions. Industry consolidation has reduced the number of
viable acquisition candidates and, accordingly, limited future acquisition
opportunities. In order to increase our client base and ticket inventory, we may
need to attract clients who currently have relationships with other outsourcing
services providers. At the same time, other outsourcing services providers will
likely attempt to attract our current clients to use their outsourcing services.
In addition, our clients may terminate their contracts for a variety of reasons,
or may not renew their contracts at the end of their terms.
We May Also Face Competition From Companies With An Established
Internet Presence Who Decide To Offer Products And Services Similar To Ours.
Because barriers to entry in e-commerce are relatively low, we may face
competition from companies in other areas of e-commerce who may seek to exploit
their market
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presence by offering live entertainment event information and related ancillary
products and services that are competitive with ours. These potential
competitors may have a number of advantages over us, including:
- - strong brand recognition;
- - an established presence on the Internet and an established base of
users;
- - greater financial and marketing resources; and
- - complementary lines of business and existing business relationships.
In addition, some Internet portals direct Internet traffic to
particular web sites and may also channel users to services that compete with
ours. Some or all of the products and services offered by competitors may
achieve greater market acceptance than ours. We cannot be certain that we will
be able to successfully compete against these potential competitors.
Our Reliance On Third Party Software And Hardware Makes Us Vulnerable
To Changes In Our Suppliers' Products And Services, Which Could Adversely Affect
Our Ability To Service Our Clients In A Timely Manner. Our automated ticketing
solutions incorporate software products and use computer hardware and equipment
developed by other entities. Our reliance on third party software and hardware
makes us vulnerable to changes in our suppliers' products and services and any
such changes may impair our ability to provide adequate outsourcing services and
in-house systems to our clients in a timely manner. For example, we cannot be
certain that all of our suppliers will remain in business or will continue to
support the product lines that we use. Nor can we be certain that their product
lines will remain viable or will otherwise continue to be available to us. Our
current suppliers could significantly alter their pricing in a manner adverse to
us. If any of these entities ceases to do business, abandons or fails to enhance
a particular product line, or significantly raises its prices, we may need to
seek other suppliers. We cannot be certain that other suppliers will be able to
provide us with necessary products at favorable prices, or at all.
We Depend On Retail Stores, Advertising Agreements And Strategic
Relationships To Reach Consumers, And If We Cannot Maintain These Relationships
And Establish New Relationships, Our Ticket Sales Would Be Adversely Affected. A
significant portion of our ticket sales are generated through arrangements with
retail stores. Our contracts with these retail stores are generally for a
one-year term, and subject to periodic negotiations regarding sales commissions,
customer service and other matters. These stores cater to consumers who are
likely to purchase tickets for sporting and entertainment events, and are
attractive to other ticketing services. In addition, our relationships with
other companies such as Excite, Cox Interactive, MP3.com, Shubert Ticketing
Services, RealNames Corporation and others can provide us with access to
consumers. If we cannot maintain good retail, strategic and advertising
relationships and continue to establish new relationships, our ability to reach
consumers and generate sufficient ticket sales could be materially and adversely
affected.
We May Become Subject To More Restrictive E-Commerce Regulation That
Could Adversely Affect Our Ability To Increase Internet Sales. We are subject to
regulations applicable to businesses generally and laws or regulations directly
applicable to e-commerce. Currently we believe that there are few laws and
regulations directly applicable to the Internet and online ticketing services.
It is likely, however, that a number of laws and regulations may be adopted with
respect to the Internet or commercial online services that could affect our
online ticketing services. Any new legislation or regulation, or the application
of existing laws and regulations to the Internet and commercial online services
could restrict our ability to grow our business according to our plan.
Laws regulating e-commerce might cover matters such as, among other
things, user privacy and the use of our consumer database for email marketing
purposes, limitations on ticket service fees, the content of our web site,
taxation by states where we sell tickets, copyright protection for us and
competing ticketing services, distribution, direct linking, antitrust and
consumer protection laws.
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<PAGE> 21
In addition, the applicability of a variety of existing laws in various
jurisdictions to the Internet and commercial online services may take years to
resolve. These issues may include property ownership, sales and other taxes,
libel and personal privacy, among others. For example, tax authorities in a
number of states currently are reviewing the appropriate tax treatment of
companies engaged in e-commerce. New state tax regulations may subject us to
additional state sales and income taxes.
We May Be Affected By Changes In Laws And Standards Relating To Data
Collection And Use Practices And The Privacy Of Internet Users. Recent growing
public concern regarding privacy and the collection, distribution and use of
information about Internet users has led to increased federal and state scrutiny
and legislative and regulatory activity concerning data collection and use
practices. Various federal and state governments and agencies have recently
proposed limitations on the collection and use of information regarding Internet
users. In October 1998, the European Union adopted a directive that limits the
collection and use of information regarding Internet users in Europe. In
addition to government activity, a number of industry and privacy advocacy
groups are considering various new, additional or different self-regulatory
standards. This focus, and any legislation, regulations or standards
promulgated, may impact us. Although our compliance with applicable federal and
state laws, regulations and industry guidelines has not had a material adverse
effect on us, governments, trade associations and industry self-regulatory
groups may enact more burdensome laws, regulations and guidelines, including
consumer privacy laws, affecting us and our customers. Since many of the
proposed laws or regulations are just being developed, and a consensus on
privacy and data usage has not been reached, we cannot yet determine the impact
these regulations may have on our business. However, these regulations and
guidelines could adversely affect our business.
Factors which may inhibit us from meeting our expectations related to
decreased costs of services are outlined below.
We May Be Required To Purchase Tickets That Are Allocated For Our
Online Auctions That We May Not Be Able To Sell. We have recently entered into
arrangements with several performers to provide online ticket auctions for their
live concerts. Under those types of arrangements, concert tickets are allocated
by performers for auction on our web site and certain amounts collected above
the minimum bid are donated to a charity of the performer's choice. To date, we
have generally agreed in advance with the performers to purchase at face value
any unsold tickets that were allocated for auction on our web site. Although we
have decided not to enter into any additional agreements, if we are unable to
sell tickets that we have already purchased, or must sell them at less than face
value, we will incur losses on the tickets purchased.
We May Become Subject To State Regulation Of Ticket Sales And Auctions,
Which Could Impose Restrictions On The Manner And Pricing Of Our Ticket Sales
And The Conduct Of Our Auctions. Many states and municipalities have adopted
statutes regulating ticketing transactions within their jurisdictions. We cannot
be certain whether any of these laws and regulations may be determined to be
applicable to our business or whether new laws and regulations potentially
adverse to our business will be adopted. If we become subject to additional laws
and regulations, the manner and pricing of our ticket sales and the conduct of
our auctions may be restricted, which could have an adverse effect on our
revenues. Some states and municipalities require that ticket sellers obtain a
resellers license. One or more states or municipalities could take the position
that a telephonic or electronic ticket sale to one of their residents is a
sufficient basis for application of that jurisdiction's reseller statute.
Because we believe these statutes to be inapplicable to our activities, we may
not be in compliance with these statutes. Governmental agencies or authorities
could also argue that other state or local licensing or "ticket scalping"
statutes apply to our activities. These statutes, among other things, limit the
amount of service charges and other fees that may be charged in connection with
ticket sales. Other state and local regulations establish maximum service fees
on tickets for certain sporting and other events. In addition, many states,
including California, have laws and regulations governing the conduct of
auctions.
Risks that may impede our ability to stabilize and decrease our
operating costs are outlined below.
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<PAGE> 22
If We Cannot Effectively Integrate Our Numerous Recent And Potential
Future Acquisitions, We May Experience Increased Costs, Operating
Inefficiencies, System Disruptions And The Loss Of Clients. In addition to our
recent acquisitions, we plan to continue to acquire businesses as opportunities
arise in the future, and our ability to grow our business will depend in part on
our ability to complete future acquisitions. The integration of acquired
companies into a cohesive business requires the combination of different
business models, financial, accounting and other internal systems, varied
technologies and personnel who have dissimilar expertise and backgrounds. It
also requires the management of companies or operating units that are
geographically dispersed throughout the United States and internationally. We
cannot be certain that we will be able to successfully integrate the operations,
personnel or systems of these acquired companies in a timely fashion, if at all.
If we fail to integrate operations and personnel effectively, we will experience
duplication of costs and operating inefficiencies. If we are unable to integrate
technologies successfully, we may experience system disruptions or failures that
could result in the dissatisfaction or loss of clients. We also cannot be
certain that we will achieve value from our acquisitions commensurate with the
consideration paid. If we are unable to generate sufficient revenue from any
acquired companies, we will experience an unanticipated shortfall in revenue and
may fail to meet the expectations of investors. If this occurs, the market price
of our common stock would likely decline.
The process of integrating our recent acquisitions has placed and will
continue to place a significant burden on our management team. Integration is
complex, and presents numerous risks and uncertainties in addition to those set
forth above, including the following:
If We Cannot Attract And Retain Qualified Personnel In A Cost Effective
And Timely Manner, We May Not Be Able To Execute Our Growth Strategy. The
significant growth of our business over the past two years due to our
acquisition of eight companies has placed substantial demands on our management
and other personnel. Our future growth, if any, will depend in part on our
ability to attract, motivate and retain skilled technical, sales, management and
marketing personnel. Competition for these personnel is intense, and we expect
it to increase as e-commerce expands. We cannot be certain that we will be able
to retain our existing personnel or attract additional qualified personnel in
the future. In addition, a significant portion of our workforce is comprised of
telephone sales representatives. We compete with telemarketing firms, among
others, for telephone sales personnel and sometimes must pay premium hourly
wages to attract and retain them. In addition, their high turnover rate
increases our recruiting and training costs. We cannot be certain that we will
be able to continue to hire and retain qualified personnel to support our
planned growth in a cost effective or timely manner. If we cannot, our ability
to execute our growth strategy could be impaired.
The Loss Of Personnel Could Require Us To Provide Costly Severance
Packages, Which Could Adversely Affect Our Operating Results. Although we have
employment agreements with several of our executive officers, including our
Chief Executive Officer and our President, our executive officers and key
employees may terminate their employment at any time for any reason. In some
circumstances, termination of their employment could result in substantial
payments by us for severance benefits under these employment agreements.
Acquisitions Will Create Charges To Earnings That Could Adversely
Affect Our Operating Results And, Accordingly, The Market Price Of Our Common
Stock. As a result of past acquisitions, we have recorded a significant amount
of goodwill that will adversely affect our operating results for the foreseeable
future. As of March 31, 2000, we had goodwill and other intangible assets of
$84.1 million, which must be amortized in the future and will result in a
reduction of our earnings. If the amount of recorded goodwill or other
intangible assets is increased or we have future losses and are unable to
demonstrate our ability to recover the amount of goodwill, the amount of
amortization could be increased or the period of amortization could be
shortened. This would increase annual amortization charges or result in a
write-off of goodwill in a one-time non-cash charge, which could be significant
based on our acquisitions to date. If the acquisition of First Call
International, Ltd. (see Recent Events earlier in this section) is completed,
the purchase will result in substantial goodwill to us, which would
significantly increase the amount of amortization expense related to goodwill
and intangible assets and have an adverse effect on our results of operations.
Any future acquisitions could also result in amortization expense related to
goodwill and other intangible assets. If any of these events should occur, our
results of
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<PAGE> 23
operations would be adversely affected. In that event, we may fail to meet the
expectations of market analysts and investors, which could adversely affect the
market price of our common stock. In addition, we incurred charges to earnings
of $5.3 million in the second quarter of 1999 for the recognition of purchased
in-process research and development in connection with the acquisitions of
California Tickets.com and TicketsLive. Future acquisitions, including the
acquisition of First Call could result in similar charges.
We May Face Liability For Online Content That May Not Be Covered By Our
Insurance. Because we are disseminating information, we may face liability for
the nature and content of the materials on our web site or on sites to which we
have links. These liability claims could include, among others, claims for
defamation, negligence, indecency, fraud from secondary sales, and copyright,
patent and trademark infringement. These claims have been brought, and sometimes
successfully pressed, against online services. Although we intend to maintain
general liability insurance coverage, it may not cover claims of these types. It
also may not be adequate to indemnify us for any liability that may be imposed.
Any imposition of liability, particularly liability that is not covered by
insurance or is in excess of insurance coverage, could have a material adverse
effect on our reputation and our ability to effectively operate our web site.
We Expect To Continue To Incur Significant Net Operating Losses. We
incurred net operating losses of approximately $22.7 million for the three
months ended March 31, 2000. At March 31, 2000, we had an accumulated deficit of
approximately $137.9 million. We expect to continue to incur significant losses
on a quarterly and annual basis at least for the remainder of this year, and we
cannot be certain that we will achieve or sustain profitability. To the extent
that our expenses grow faster than our revenues, our operating results will be
adversely affected and anticipated net losses in a given quarter may be greater
than expected. If this occurs, the market price of our common stock is likely to
decline. Because we expect to continue to experience negative cash flow, we may
need additional financing in the future, which may not be available or may
require us to issue additional equity securities that could lead to substantial
dilution to our stockholders. We have experienced negative cash flow from
operations since our inception. We expect to continue to experience significant
negative cash flow from consolidated operations for the foreseeable future. We
believe that our existing capital resources, including the proceeds from our
recent initial public offering, will be sufficient to meet our presently
anticipated cash requirements through at least the next 12 months. However, we
may have to raise additional financing prior to such time if we experience
unanticipated revenue shortfalls or encounter unanticipated acquisitions or
other business opportunities. We cannot be certain that additional financing
will be available on acceptable terms if and when we need it. If financing is
not available when required or is not available on acceptable terms, we may be
unable to develop new services or enhance our present services, take advantage
of business opportunities or respond to competitive pressures. If additional
funds are raised through the issuance of equity securities, our stockholders may
experience significant dilution. If we cannot obtain additional financing on
satisfactory terms when we need it, our results of operations could be
materially and adversely affected.
Further factors which put our liquidity and capital resources at risk
are as follows:
Our Stock Price Is Likely To Be Very Volatile, Which May Make Us A
Target Of Securities Class Action Litigation. The market price of our common
stock is likely to be highly volatile and could be subject to wide fluctuations.
In the past, securities class action litigation often has been brought against
companies following periods of volatility in the market price of their
securities. In the future we may be the target of similar litigation. Securities
litigation could result in substantial costs and divert our management's
attention and other resources.
The market prices for stocks of Internet-related and technology
companies, particularly following an initial public offering, may increase to
levels that bear no relationship to the operating performance of such companies.
Such market prices may not be sustainable and are subject to wide variations. If
our common stock trades to such levels it likely will thereafter experience a
significant decline. Other factors, some of which are beyond our control, that
could cause the market price of our common stock to fluctuate include:
- - operating results that vary from the expectations of securities
analysts and investors;
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<PAGE> 24
- - changes in securities analysts' and investors' expectations as to our
future financial performance;
- - changes in market valuations of other Internet or online services
companies;
- - announcements by us or our competitors of technological innovations,
new services, significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- - loss of a major venue or client;
- - announcements by third parties of significant claims or proceedings
against us or developments in those proceedings; and
- - future sales of our common stock.
We Face Risks From International Operations That Could Adversely Affect
Our Cash Flow And Licensing Revenues. We have only recently commenced operations
in a number of international markets and a key component of our strategy is to
expand our business internationally. Our plans to expand internationally are
subject to inherent risks, including:
- - Adverse Fluctuations In Currency Exchange Rates Could Expose Us To
Losses Because Some Of Our Contracts And Liabilities Are Payable In
Foreign Currencies. Payments due to our acquisition of dataCulture Ltd.
are payable in pounds sterling over 12 equal quarterly installments. In
addition, we are also exposed to foreign currency exchange rate risks
inherent in our assets and liabilities denominated in currencies other
than the United States dollar. If the United States dollar becomes
weaker against foreign currencies these payments will be greater in
dollar terms and our cash flow would be adversely affected.
- - If We Cannot Adequately Enforce Our Intellectual Property Rights
Internationally, We May Lose Licensing Revenues. Many of our foreign
business relationships involve the licensing of our software products.
If we are unable to enforce our intellectual property rights because
they are not recognized under foreign laws, our customers could
duplicate or modify our software products without our consent and
deprive us of licensing revenues.
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<PAGE> 25
YEAR 2000 READINESS
As of April 30, 2000 we have not experienced any significant
disruptions as a result of the rollover from 1999 to 2000. However, the success
to date of our Year 2000 efforts cannot guarantee that a Year 2000 problem
affecting third parties, upon which we rely, will not become apparent in the
future that could harm our operations.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are not exposed to material market risks related to fluctuations in
interest rates on our fixed and variable rate debt. Currently, we do not utilize
interest rate swaps, forward or option contracts on foreign currencies or
commodities, or other types of derivative financial instruments.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On July 23, 1999, Ticketmaster Corporation and Ticketmaster
Online-CitySearch filed a lawsuit against us in the United States District Court
for the Central District of California seeking unspecified damages and a court
order to prohibit us from, among other things, linking Internet consumers to
internal pages within Ticketmaster's web site. In addition, the suit alleges
that we have engaged in other wrongful acts, such as providing false and
misleading information on our web site regarding the availability of tickets and
related information on the Ticketmaster web site and taking copyrighted
information from the Ticketmaster web site for use on the Tickets.com web site.
The suit seeks an injunction to prohibit us from further engaging in any alleged
unlawful activity, treble damages, attorneys' fees and other unspecified
damages. In response to the Company's Motion to Dismiss, Ticketmaster
Corporation and Ticketmaster Online-CitySearch filed on January 7, 2000, a First
Amended Complaint which modified their previous allegations and added two claims
alleging violations of the Lanham Act. The Company filed a Motion to Dismiss the
Amended Complaint. In response to the Motion, the Court on March 27, 2000,
dismissed four claims for misappropriation, trespass, breach of contract, and
unjust enrichment, with leave to amend. Ticketmaster Corporation and
Ticketmaster Online-CitySearch filed a Second Amended Complaint on April 21,
2000, reasserting their claims for trespass and breach of contract. Ticketmaster
Corporation and Ticketmaster Online-CitySearch have also filed a Motion for
Preliminary Injunction seeking an order precluding the Company from, among other
things, providing links to Ticketmaster pages. The Company has filed an
opposition and the Court has scheduled a hearing to take place on June 5, 2000.
If Ticketmaster Corporation and Ticketmaster Online-CitySearch successfully
assert their claims against us, our web site could be severely impacted. Any
injunction could, among other things, eliminate our ability to directly refer
consumers to tickets to events sold by Ticketmaster at Ticketmaster's web site.
The Ticketmaster suit could result in limitations on how we implement our
e-commerce strategy, delays and costs associated with redesigning our web site
and substantial payments to Ticketmaster Corporation and Ticketmaster
Online-CitySearch. In addition, the litigation could result in significant
expenses and diversion of our management's time and other resources.
On February 28, 2000 we were served with a complaint filed by Ascott
Group, Inc., in the Superior Court of the State of California, County of San
Diego, alleging, among other things, that we wrongfully refused to transfer
shares of Tickets.com Common Stock to the plaintiff pursuant to a stock purchase
agreement between the plaintiff and certain of our shareholders. The complaint
sought actual damages in the amount of $7.5 million as well as exemplary
damages. The entire action was dismissed by the plaintiff on April 14, 2000.
ITEM 2: EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit Index
27.1 Financial Data Schedule (filed electronically)
26
<PAGE> 26
b) Reports on Forms 8-K
On March 6, 2000 the Registrant filed a Report on Form 8-K
relating a Letter of Intent entered into with First Call
International, Ltd.
27
<PAGE> 27
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.
TICKETS.COM, INC.
-----------------
(Registrant)
Date: May 15, 2000 By: /s/ W. Thomas Gimple
---------------------- ----------------------------
W. Thomas Gimple
Co-Chairman of the Board and
Chief Executive Officer
Date: May 15, 2000 By: /s/ Michael R. Rodriguez
---------------------- -------------------------------
Michael R. Rodriguez
Principal Accounting Officer and
Chief Financial Officer
28
<PAGE> 28
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule (filed electronically)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 73,198,000
<SECURITIES> 0
<RECEIVABLES> 7,829,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 98,120,000
<PP&E> 13,634,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 214,041,000
<CURRENT-LIABILITIES> 29,348,000
<BONDS> 0
0
0
<COMMON> 13,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 214,041,000
<SALES> 0
<TOTAL-REVENUES> 14,072,000
<CGS> 0
<TOTAL-COSTS> 10,404,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,000
<INCOME-PRETAX> 21,610,000
<INCOME-TAX> 26,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,636,000
<EPS-BASIC> (.37)
<EPS-DILUTED> (.37)
</TABLE>
