SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-24205
FACTUAL DATA CORP.
--------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-1449911
- ----------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5200 Hahns Peak Drive, Loveland Colorado 80538
- ----------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
(970) 663-5700
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(Issuer's telephone number, including area code)
Indicate by check mark whether the issuer (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. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 12, 1998.
Common Stock 3,232,499
------------------------------------------------------------
Class Number of Shares
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
FACTUAL DATA CORP.
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INDEX
PART I. Financial Information Page No.
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Item 1. Financial Statements
Unaudited Consolidated Statements of Income --
For the Three Months Ended September 30, 1998
and September 30, 1997 and For the Nine Months
Ended September 30, 1998 and September 30, 1997 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 4-7
PART II. Other Information
-----------------
Item 6. Exhibits 8
SIGNATURES 9
Index to Exhibits 10
<PAGE>
FACTUAL DATA CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
-------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue
System affiliates ..... $ 899,779 $ 536,940 $2,826,712 $1,434,106
Information services .. 1,756,516 116,263 2,800,570 407,584
Proceeds from the sale
of Company operated
territories .......... - 15,000 - 774,679
Training, license and
other ............... - 154,503 1,005 154,503
---------- ---------- ---------- ----------
Total revenue .... 2,656,295 822,706 5,628,287 2,770,872
Operating Expenses
Costs of services
provided ............. 1,463,144 397,549 2,371,885 1,023,874
Costs of Company
operated territories
sold ................. - - - 506,415
Selling, general and
administrative ...... 515,131 172,086 1,401,608 702,156
---------- ---------- ---------- ----------
Total operating
expenses ........ 1,978,275 569,635 3,773,493 2,232,445
---------- ---------- ---------- ----------
Income from operations ... 678,020 253,071 1,854,794 538,427
Other income (expense)
Other income .......... 106,992 12,830 165,468 50,187
Interest expense ...... (15,172) (20,225) (59,245) (63,696)
---------- ---------- ---------- ----------
Total other income
(expense) ........ 91,820 (7,395) 106,223 (13,509)
---------- ---------- ---------- ----------
Income before income taxes 769,840 245,676 1,961,017 524,918
Income tax expense ....... 284,841 83,597 725,576 178,539
---------- ---------- ---------- ----------
Net income and
comprehensive income .... $ 484,999 $ 162,079 $1,235,441 $ 346,379
========== ========== ========== ==========
Basic earnings per share . $ .15 $ .09 $ .50 $ .19
========== ========== ========== ==========
Weighted average shares
outstanding ............. 3,193,487 1,800,000 2,484,496 1,800,000
========== ========== ========== ==========
Diluted earnings per share $ .14 $ .09 $ .49 $ .19
========== ========== ========== ==========
Weighted average shares
outstanding ............. 3,351,791 1,800,000 2,515,749 1,800,000
========== ========== ========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these consolidated statements.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
This filing contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. These forward-looking
statements include the plans and objectives of management for future operations,
including plans and objectives relating to services offered by and future
economic performance of the Company.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties that might adversely affect the
Company's operating results in the future in a material way. Such risks and
uncertainties include but are not limited to the following: interest rate
fluctuations, effects of national and regional economic and market conditions,
seasonal housing market fluctuations, labor and marketing costs, operating costs
such as telephone and repositories costs, intensity of competition, success of
the Company's consolidation plan, legal claims and the contingencies associated
with year 2000 compliance.
Overview
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The Company provides a broad range of credit, employment and other information
services to mortgage lenders, consumer lenders, employers, landlords, and other
businesses. The Company specializes in preparing mortgage credit reports that
are customized to meet each lender's individual needs.
The Company provides its services through two different methods. The first
involves services sold directly by the Company to third party customers such as
mortgage lenders, financial institutions, private enterprises, and individuals
(referred to as "information services"). Secondly, the Company sells its
services through franchisees and licensees ("System Affiliates"). The Company
markets its services nationally through 45 combined locations, including Company
operated offices, franchisees and licensees. The System Affiliates provide
information services to customers using the Company's technology and pay
royalty, license and other fees to the Company.
In the third quarter 1998 the Company acquired two Factual Data franchises, two
licensees and one competitor with combined trailing 12 month revenues of $9.5
million. In addition to acquisitions the Company launched its third service,
Tenant Qualifier, addressing the demand for tenant screening. The Company became
the first to provide software for mortgage services via Freddie Mac's
Goldworks(R) web site and released the first multi- vendor integrated software
for credit and flood determinations.
The Company's mortgage credit reporting business is subject to fluctuation due
to seasonal effects, which influence the public's home buying tendencies.
Various seasonal events such as holidays and school calendars impact the
mortgage industry overall, particularly as it relates to new and existing home
sales. Seasonality is expected to continue to influence the Company's results of
operations.
<PAGE>
Results of Operations
- ---------------------
The following table sets forth for the periods indicated, as a percentage of
total revenue, those items included in the Company's Unaudited Consolidated
Statements of Income:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue
System affiliates .... 33.9 % 65.3 % 50.2 % 51.7 %
Information services . 66.1 14.1 49.8 14.7
Proceeds from the sale
of Company operated
territories ......... 0.0 1.8 0.0 28.0
Training, license and
other ............... 0.0 18.8 0.0 5.6
------ ------ ------ ------
Total revenue ... 100.0 % 100.0 % 100.0 % 100.0 %
------ ------ ------ ------
Operating expenses
Costs of services
provided ............ 55.1 48.3 42.1 37.0
Costs of Company
operated territories
sold ............... 0.0 0.0 0.0 18.3
Selling, general and
administrative ...... 19.4 20.9 24.9 25.3
------ ------ ------ ------
Total operating
expenses ........ 74.5 % 69.2 % 67.0 % 80.6 %
------ ------ ------ ------
Income from operations .. 25.5 30.8 33.0 19.4
Other income ......... 4.0 1.6 2.9 1.8
Interest expense ..... (0.5) (2.5) (1.0) (2.3)
------ ----- ------ ------
Income before income
taxes .................. 29.0 % 29.9 % 34.9 % 18.9 %
------ ------ ------ ------
Income tax expense ...... 10.7 % 10.2 % 12.9 % 6.4 %
------ ------ ------ ------
Net income and
comprehensive income ... 18.3 % 19.7 % 22.0 % 12.5 %
====== ====== ====== ======
</TABLE>
Comparison of three months ended September 30, 1998 and September 30, 1997
- --------------------------------------------------------------------------
Continued momentum in the real estate market, partial contributions from year to
date acquisitions, the introduction of Tenant Qualifier services and the
increased demand for EMPFacts, the Company's emerging service line addressing
the demand for employee screening, contributed to the financial performance for
the third quarter 1998.
In comparing the improved 1998 third quarter results to third quarter 1997,
management attributes the growth in part to enhancements to the Company's core
mortgage services, the introduction of new services, acquiring offices in active
markets and continued increased demand for the fully automated, thirty to ninety
second reporting services.
Revenue from System Affiliates, which consists of royalties, license fees and
ancillary service fees from the Company's franchisees and licensees, increased
68%, from $536,940 in the third quarter 1997 to $899,779 in the third quarter
1998. This increase generally reflects the current economy and growth in the
mortgage industry. Ancillary services contributed $172,372 to revenue in third
quarter 1998, as compared with $18,503 in third quarter 1997.
Company information services revenue increased 1414% from $116,263 in third
quarter 1997 to $1,756,516 in third quarter 1998. Included in this increase is a
three month contribution from Mirocon, Inc. a franchise acquired in December,
1997, two month contributions from Heritage Credit Reporting, Inc., American
Credit Connection and FDC Northwest, acquired in August 1998, and one month
contributions from FDC Minnesota and Residential Reporting, Inc. acquired in
September 1998.
Proceeds from the sale of Company operated territories decreased by $15,000, or
100%, from third quarter 1997 to third quarter 1998. Revenue generated in third
quarter 1997 represented a transfer fee for the sale of one franchise office to
another franchise office. No territory sales occurred in the third quarter 1998.
The Company does not intend to sell Company operated territories in the
foreseeable future.
Training license and other revenue decreased 100% or $154,503 from third quarter
1997. The decrease is attributed to a one-time fee, to System Affiliates, for
technical development costs for a interface with an automated underwriting
system.
Costs of services provided increased $1,065,595 when compared with the same
period of the prior year. This increase directly relates to the costs of
information services revenue associated with the Mirocon, Inc. acquisition in
December of 1997, and the five acquisitions made in the third quarter of 1998.
Included in the costs of services are direct costs such as salaries, employment
taxes, telephone, rent and repository costs. Although costs of services
increased during the third quarter, 1998, management is highly encouraged by the
profit margins shown by these acquisitions. The improved profit margins are a
result of increased economy's of scale in the technology center and
insignificant increases to fixed costs. As indicated in the table above, cost of
services as a percentage of total revenue increased by 6.8% in comparison to the
52.0% increase in information services revenue as a percentage of total revenue
for the third quarter 1998.
Selling, general and administrative expenses increased 199% from $172,086 in
third quarter 1997 to $515,131 in third quarter 1998. This increase was due to
the integration of the five acquisitions made in the third quarter of 1998.
These costs include rent, travel, depreciation, amortization and additional
office expenses.
Other income increased by $94,162 for the three months ended September 30, 1998,
this increase was due to the interest income earned on short-term investments
from the IPO proceeds.
Interest expense decreased by $5,053 due to the reduction of long-term debt of
$425,000 to retire a note payable to a financial institution.
The Company's income taxes increased $201,244, from $83,597 for the third
quarter 1997 to $284,841 for the third quarter 1998.
As a result of the above-mentioned factors, net income and comprehensive income
increased $322,920, 199%, from $162,079 in the third quarter 1997 to $484,999
for the third quarter 1998. Basic earnings rose to $0.15 per share for the
quarter from the prior years quarter of $0.09 per share, a 67 % increase. This
basic earnings per share comparison takes into account a 77% increase in
weighted average number of shares outstanding, from 1,800,000 in the third
quarter 1997 to 3,193,487 in the third quarter 1998. Diluted earnings rose to
$0.14 per share for the quarter from the prior years quarter of $0.09 per share,
a 55% increase. This diluted earnings per share comparison takes into account a
86% increase in weighted average number of shares outstanding, from 1,800,000 in
the third quarter 1997 to 3,351,791 equivalent shares (giving effect to
warrants) in the third quarter 1998.
<PAGE>
Comparison of nine months ended September 30, 1998 and September 30, 1997
- -------------------------------------------------------------------------
Revenue from System Affiliates, which consists of royalties, license fees and
ancillary fees from the Company's franchisees and licensees, increased 97%, from
$1,434,106 for the nine months ended September 30, 1997 to $2,826,712 for the
nine months ended September 30, 1998. This increase is attributed to increased
market share in the mortgage and employment screening industries and the
continued growth of several system affiliates. New ancillary services,
introduced by the Company in October of 1997, contributed $594,793 for the nine
months ended September 30, 1998, as compared with $18,503 for the nine months
ended September 30, 1997.
Company information services revenue increased 587% from $407,584 for the nine
months ended September 30, 1997 to $2,800,570 for the nine months ended
September 30, 1998. The acquisitions of Mirocon, Inc. in December 1997, Heritage
Credit Reporting, Inc., American Credit Connection and FDC Northwest, in August
1998, FDC Minnesota and Residential Reporting, Inc. in September 1998
contributed largely to the $2,392,986 increase. The remaining increase in
information services is a result of same location sales growth and increased
demand for the Company's emerging services.
Training, license and other revenue decreased $153,498, or 153% for the nine
months ended September 30, 1998 compared to the nine months ended September 30,
1997. The majority of this decrease was a one-time charge to System Affiliates
for a marketing software interface.
Proceeds from the sale of Company operated territories decreased by $774,679, or
100%, for the nine months ended September 30, 1998 compared to the nine months
ended September 30, 1997. Revenue generated for the nine months ended September
30, 1997 represented the territory sales of Texas, Virginia, and the Colorado
Western slope. This $774,679 represented 28% of total revenue for the nine
months ended September 30, 1997. The decrease of $506,415 in cost of Company
operated territories sold is in direct relation to the sale of the Texas
territory formerly operated by the Company. No territory sales occurred in the
nine months ended September 30, 1998. The Company does not intend to sell
Company operated territories in the foreseeable future.
Costs of services provided increased $1,348,011 for the nine months ended
September 30, 1998, when compared with the same nine months of the prior year.
This change directly relates to the increase in information services revenue
associated with Mirocon, Inc. and the five acquisitions in the third quarter of
1998. Included in the costs of services are direct costs such as salaries,
employment taxes, telephone, rent and repositories costs. Although costs of
services increased during the nine months ended September 30, 1998, profit
margins continue to grow due to the acquisitions. As indicated in the previous
table, cost of services as a percentage of total revenue increased by 5.1% in
comparison to the 35.1% increase in information services revenue as a percentage
of total revenue for the nine months ended September 30, 1998.
Selling, general and administrative expenses increased 100% from $702,156 for
the nine months ended September 30, 1997 to $1,401,608 for the nine months ended
September 30, 1998, or by $699,452. This increase was due to the integration of
Mirocon Inc, and the five acquisitions made in the third quarter of 1998. These
costs include rent, travel, depreciation, amortization and additional office
expenses.
Other income increased to $165,468 for the nine months ended September 30,
1998, or 230% as compared to $50,187 for the nine months ended September 30,
1997. This increase was due to the interest income earned on short term
investments from the IPO proceeds.
The Company's income taxes increased $547,037, from $178,539 for the nine months
ended September 30, 1997 to $725,576 for the nine months ended September 30,
1998.
<PAGE>
As a result of the above-mentioned factors, net income and comprehensive income
increased $889,062 from $346,379 for the nine months ended September 30, 1997 to
$1,235,441 for the nine months ended September 30, 1998. Basic earnings rose to
$0.50 per share for the nine months ended September 30, 1998 from $0.19 per
share for the nine months ended September 30, 1997. The basic earnings per share
comparison takes into account a 38% increase in weighted average number of
shares outstanding, from 1,800,000 for the nine months ended September 30, 1997
to 2,484,496 for the nine months ended September 30, 1998. Diluted earnings rose
to $0.49 per share for the nine months ended September 30, 1998 from the nine
months ended September 30, 1997 of $0.19 per share, a 157% increase. The diluted
earnings per share comparison takes into account a 40% increase in weighted
average number of shares outstanding, from 1,800,000 for the nine months ended
September 30, 1997 to 2,515,749 for the nine months ended September 30, 1998
primarily due to warrants.
The Company's mortgage credit reporting business is subject to fluctuation due
to seasonal effects, which influence the public's home buying tendencies.
Various seasonal events such as holidays and school calendars impact the
mortgage industry overall, particularly as it relates to new and existing home
sales. Seasonality is expected to continue to influence the Company's results of
operations.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits
a. Exhibits - The following exhibits are filed herewith:
No. Description
------ ---------------------------
27 Financial Data Schedule
<PAGE>
SIGNATURES
- ----------
In accordance with 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.
Dated: December 2, 1998
FACTUAL DATA CORP.
(Registrant)
/s/ Jerald H. Donnan
--------------------------------------------
Jerald H. Donnan
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Todd A. Neiberger
--------------------------------------------
Todd A. Neiberger
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,807,294
<SECURITIES> 0
<RECEIVABLES> 2,508,518
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,545,838
<PP&E> 1,796,285
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,749,403
<CURRENT-LIABILITIES> 4,191,546
<BONDS> 0
0
0
<COMMON> 6,430,705
<OTHER-SE> 1,880,015
<TOTAL-LIABILITY-AND-EQUITY> 14,749,403
<SALES> 0
<TOTAL-REVENUES> 5,628,287
<CGS> 0
<TOTAL-COSTS> 2,371,885
<OTHER-EXPENSES> 1,401,608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,245
<INCOME-PRETAX> 1,961,017
<INCOME-TAX> 725,576
<INCOME-CONTINUING> 1,235,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,235,441
<EPS-PRIMARY> .50
<EPS-DILUTED> .49
</TABLE>
