UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________________
Commission file number 0-4028
TRANSMEDIA NETWORK INC.
---------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 84-6028875
------------------------------- ---------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11900 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33181
--------------------------------------------------------------
(Address of principal executive offices) (zip code)
305-892-3300
--------------------------------
(Registrant's telephone number,
including area code)
Indicate by (X) whether the registrant (1) has filed all reports required to be
filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's Common Stock, $.02 par value,
as of January 31, 1997: 10,126,926
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I N D E X
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Consolidated Balance Sheets -- 3, 4
December 31, 1996 (unaudited)
and September 30, 1996 (audited)
Consolidated Statements of Income 5
Three months ended December 31,
1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows-- 6, 7
Three months ended December 31, 1996
and 1995 (unaudited)
Notes to Unaudited Consolidated 8, 9
Financial Statements
Item 2. Management's Discussion and Analysis 9, 10
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 11
SIGNATURE 12
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Part I
Financial Information
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
December 31, *September 30,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,409,835 $ 3,603,409
Accounts receivable, net of
allowance for doubtful accounts 5,721,781 2,616,586
Rights-to-Receive 3,655,079 37,525,957
Prepaid expenses and other current assets 875,235 1,035,083
Unamortized advertising costs 371,111 343,385
Income taxes receivable 806,797 307,377
Deferred income taxes 242,908 242,908
------------ ------------
Total current assets 25,082,746 45,674,705
------------ ------------
Securities available for sale, at fair value 1,499,369 1,868,375
------------ ------------
Property and equipment 8,680,522 7,794,349
Less accumulated depreciation 2,608,406 2,130,656
------------ ------------
6,072,116 5,663,693
------------ ------------
Other assets 3,172,452 1,307,482
------------ ------------
Total assets $ 35,826,683 $ 54,514,255
============ ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
(continued)
December 31, *September 30,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ -- $ 15,000,000
Accounts payable - rights-to-receive 2,652,670 4,784,352
Accounts payable - reimbursable
tax and tips 506,486 485,245
Accounts payable - other 2,567,661 2,679,290
Income taxes payable -- --
Accrued expenses 437,869 773,340
------------ ------------
Total current liabilities 6,164,686 23,722,227
Deferred membership fee income 3,546,075 4,102,786
Deferred income taxes 796,123 936,344
------------ ------------
Total liabilities 10,506,884 28,761,357
------------ ------------
Stockholders' equity:
Preferred stock - par value $.10 per share;
authorized 1,000,000 shares; none issued -- --
Common stock - par value $.02 per share;
authorized 20,000,000 shares; issued and
outstanding: 10,126,926 shares at
December 31, 1996 and September 30, 1996 202,539 202,539
Additional paid-in capital 10,546,612 10,546,612
Unrealized gain on securities available
for sale 756,009 984,792
Retained earnings 13,814,639 14,018,955
------------ ------------
Total stockholders' equity 25,319,799 25,752,898
------------ ------------
Total liabilities and stockholders' equity $ 35,826,683 $ 54,514,255
============ ============
</TABLE>
See notes to consolidated financial statements
* The balance sheet at September 30, 1996 is derived from the registrant's
audited consolidated financial statements.
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<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Three Months Ended
December 31,
1996 1995
---- ----
<S> <C> <C>
Revenues:
Net sales $ 14,707,261 $ 15,474,748
Net revenues from securitized assets 868,836 --
Membership and renewal fee income 2,006,968 1,478,249
Continuing franchise fee and royalty income 579,168 549,482
Commission income 179,966 168,292
Servicing income 36,667 --
------------ ------------
18,378,866 17,670,771
Cost of Sales 9,730,751 10,353,183
------------ ------------
8,648,115 7,317,588
Selling, general & administrative expenses 7,238,086 5,456,547
Cardmember acquisition expenses 1,439,781 570,726
Servicing expenses 33,000 --
------------ ------------
Operating income (loss) (62,752) 1,290,315
------------ ------------
Other income (expense):
Interest and other income 51,295 42,960
Interest expense (318,059) (74,288)
------------ ------------
(266,764) (31,328)
------------ ------------
Income (loss) before taxes (329,516) 1,258,987
Income tax expense (benefit) (125,200) 478,400
------------ ------------
Net income (loss) $ (204,316) $ 780,587
============ ============
Income (loss) per common and common equivalent share:
Primary $(.02) $.08
============ ============
Fully diluted $(.02) $.08
============ ============
Weighted average number of common and
common equivalent shares outstanding:
Primary 10,222,333 10,343,211
============ ============
Fully diluted 10,222,333 10,343,211
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (204,316) $ 780,587
Adjustments to reconcile net income/(loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 480,250 269,200
Proceeds from sale of rights to receive 29,572,366 --
Increase (decrease) from changes in:
Accounts receivable (698,833) (591,112)
Rights-to-receive 870,878 (1,555,712)
Income taxes receivable (499,420) --
Prepaid expenses 159,848 (2,567)
Unamortized advertising costs (27,726) (51,303)
Other assets -- (7,097)
Accounts payable - Rights to receive (2,131,682) (1,345,883)
Accounts payable - reimbursable
tax and tips 21,241 123,749
Accounts payable - other (111,627) (187,583)
Income taxes payable -- 227,322
Accrued expenses (134,585) (267,847)
Deferred membership income (556,711) 278,356
------------- -----------
Net cash provided by (used in)
operating activities 26,739,683 (2,329,890)
------------- -----------
Cash flows from investing activities:
Increase in other assets (846,198) --
Additions to property and equipment (886,173) (747,869)
------------- -----------
Net cash used in investing activities (1,732,371) (747,869)
------------- -----------
</TABLE>
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<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(Continued)
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net borrowings (repayments) on note payable to bank
under revolving line of credit (15,000,000) 2,500,000
Dividends paid (200,886) (200,657)
Conversion of warrants and options for
common stock, net of tax benefits -- 4,192
------------ -----------
Net cash provided by (used in) financing activities (15,200,886) 2,303,535
------------ -----------
Net increase/(decrease) in cash and
cash equivalents 9,806,426 (774,224)
Cash and cash equivalents at beginning of
period 3,603,409 2,270,322
------------ -----------
Cash and cash equivalents at end of period $ 13,409,835 $ 1,496,098
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest $ 377,885 $ 57,119
============ ===========
Income taxes $ 374,220 $ 69,474
============ ===========
</TABLE>
See notes to consolidated financial statements
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The balance sheet as of September 30, 1996 was derived from the
registrant's audited consolidated financial statements.
The information presented in each of the included unaudited
consolidated financial statements, in the opinion of management, reflects all
adjustments necessary to a fair statement of the results for all interim
periods. The results for the three months ended December 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
The consolidated financial statements, as presented, are in summarized
form, and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles, have been
condensed or omitted. Complete disclosures for the year ended September 30, 1996
are presented in the Company's 10K filing which includes audited consolidated
financial statements.
2. Sale of Rights-to-Receive
On December 24, 1996, the Company sold $33 million of its
rights-to-receive as part of a revolving securitization. The rights-to-receive
were sold without recourse to a special purpose corporation ("SPC") which issued
$33 million of fixed-rate securities in a private placement to various
third-party investors. In exchange for the rights-to-receive, the Company will
receive approximately $32 million after costs of the transaction of which $29.6
million was received before the end of the quarter. In addition, the Company
retained a residual interest in the future excess cash flows which will be
generated as the rights-to-receive are exchanged for meals by the Company's
cardholders. This excess cash flow of the SPC for the period December 24, 1996
to December 31, 1996 amounted to $868,836 calculated as follows:
Net sales after cardmember discounts $2,739,831
Less: Cost of rights-to-receive sold 1,775,111
----------
964,720
----------
Less: Trustee fees 550
Servicing fees 36,667
Interest expense 54,267
Preferred distribution 4,400
----------
95,884
----------
Net revenue from securitized assets $ 868,836
==========
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The Company also receives a fee for servicing the rights-to-receive
which offsets the cost of servicing. Because the private placement certificates
have a term of five years before their principal is amortized, the Company will
replenish the pool of rights to receive in the SPC as they are utilized. This
on-going replenishment by the Company will generate additional revenue as the
new rights-to-receive are utilized by cardholders.
3. Line of Credit
The Company formerly maintained a $20 million line of credit. As a
result of the sale of rights-to-receive described in Note 2 above, the line of
credit was terminated on December 24, 1996 and the principal balance of
$17,000,000 was repaid to the bank from the proceeds from the sale of
rights-to-receive.
4. Purchase of Franchise
On November 15, 1996, the Company entered into a purchase agreement
with The Western Transmedia Company, Inc. ("Western"), a franchisee of the
Company. Under the terms of the agreement, the Company will reacquire the right
to operate its business in California, Oregon, Washington and a portion of
Nevada. In addition, the Company will acquire Western's rights-to-receive, its
furniture, fixtures and equipment. The transaction closed on January 2, 1997.
The purchase price was $7,454,480, of which $4,750,000 represented the cost of
the franchise.
5. Income (Loss) per Common and Common Equivalent Share
Primary earnings (loss) per share were based on the weighted average
number of common and common equivalent shares outstanding during the period
presented. Equivalent shares consist of those shares issuable upon the assumed
exercise price of stock options and warrants calculated under the treasury stock
method, based on stock market price at the end of the periods.
Fully diluted earnings (loss) per share were computed using the
weighted average number of common and common equivalent shares outstanding in
the periods, assuming exercise of options and warrants calculated under the
treasury stock method, based on stock market price at the end of the periods.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
a. Results of operations - Comparison of three months ended December 31,
1996 and 1995
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<PAGE>
On December 24, 1996, the Company sold $33 million of its
rights-to-receive as part of a revolving securitization. The rights-to-receive
were sold without recourse to a special purpose corporation ("SPC") which issued
$33 million of fixed-rate securities in a private placement to various
third-party investors. In exchange for the rights-to-receive, the Company
received approximately $32 million after costs of the transaction and retained a
residual interest in the future excess cash flows which will be generated as the
rights-to-receive are exchanged for meals by the Company's cardholders. This
excess cash flow of the SPC for the period December 24, 1996 to December 31,
1996 amounted to $868,836 calculated as follows:
Net sales after cardmember discounts $2,739,831
Less: Cost of rights-to-receive sold 1,775,111
----------
964,720
----------
Less: Trustee fees 550
Servicing fees 36,667
Interest expense 54,267
Preferred distribution 4,400
----------
95,884
----------
Net revenue from securitized assets $ 868,836
==========
The Company also receives a fee for servicing the rights-to-receive
which offsets the cost of servicing. Because the private placement certificates
have a term of five years before their principal is amortized, the Company will
replenish the pool of rights to receive in the SPC as they are utilized. This
on-going replenishment by the Company will generate additional revenue as the
new rights-to-receive are utilized by cardholders.
Net sales for the three months ended December 31, 1996 were
$14,707,261. If the $2,739,831 of net sales which were recorded by the SPC as
noted above are added, then the total net sales representing cardmember usage
after discounts is $17,447,092, which represents a 12.7% increase over the
$15,474,748 of net sales in 1995. The sales increase was due to a greater number
of cardmembers supported by additional participating restaurants.
Membership and renewal fee income increased by $528,719, or 35.8% to
$2,006,968 in the three months ended December 31, 1996, compared with the prior
year, principally because of an increase in renewal fees. Continuing franchise
fee and royalty fee income increased by 5.4% in the current year to $579,168.
The servicing income of $36,667 represents fees for servicing the SPC created
when the rights-to-receive were sold.
Selling, general and administrative expenses for the three months ended
December 31, 1996 increased by $1,781,539, compared with the prior year and
represented an increase of 32.7%. Expenses contributing to the increase in the
current period included costs associated with operating new areas started up
since the first quarter of last year. These areas include Denver and Phoenix.
Other components of selling, general and administrative expense that had
increases, that were anticipated as a result of the Company's growth, included
postage and mailings, processing fees, depreciation, rights-to-receive losses
and salaries.
10 of 12
<PAGE>
In the three month period ended December 31, 1996, cardmember
acquisition expenses were $1,439,781, versus $570,726 in the prior year.
Included in cardmember acquisition expenses was the amortization of deferred
advertising costs amounting to $240,880 in 1996 and $273,824 in 1995. Costs
capitalized in the respective 1996 and 1995 quarterly periods were $268,630 and
$325,130, respectively.
The loss before tax benefit was $329,516 in the three months ended
December 31, 1996, compared with income before income taxes of $1,258,987 in the
1995 comparable period.
The net loss for the three months ended December 31, 1996 was $204,316
or a loss of 2 cents per share, compared with net income of $780,587 or a gain
of 8 cents per share in the comparable period of the prior year.
b. Liquidity and Capital Resources
The Company's cash and cash equivalents amounted to $13,409,835 at
December 31, 1996. The Company paid $7,454,480 in January 1997 to buy out one of
its franchisees as reported in Note 4 to the Consolidated Financial Statements.
The Company believes that cash on hand, plus cash generated from operations,
will meet the Company's cash requirements for the 1997 fiscal year.
Additionally, the revolving nature of the securitization and the continued
replenishment of rights to receive, as discussed in Note 2 provides the Company
with additional liquidity with which to expand and generate additional revenue.
The Company is also presently in negotiations for a replacement line of credit.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5
Items 1, 2, 3, 4 and 5 of Part II are either inapplicable or are
answered in the negative and are omitted pursuant to the instructions to Part
II.
Item 6
Exhibits and reports on Form 8K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8K
No reports on Form 8K were filed during the Quarter
Ending December 31, 1996.
11 of 12
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S I G N A T U R E S
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
TRANSMEDIA NETWORK INC.
(Registrant)
February 18, 1997 /S/DAVID L. WEINBERG
-------------------------
David L. Weinberg
Vice President and
Chief Financial Officer
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,409,835
<SECURITIES> 0
<RECEIVABLES> 5,721,781
<ALLOWANCES> 0
<INVENTORY> 3,655,079
<CURRENT-ASSETS> 25,082,746
<PP&E> 8,680,522
<DEPRECIATION> 2,608,406
<TOTAL-ASSETS> 35,826,683
<CURRENT-LIABILITIES> 6,164,686
<BONDS> 0
0
0
<COMMON> 202,539
<OTHER-SE> 25,117,260
<TOTAL-LIABILITY-AND-EQUITY> 35,826,683
<SALES> 14,707,261
<TOTAL-REVENUES> 18,378,866
<CGS> 9,730,751
<TOTAL-COSTS> 18,444,618
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318,059
<INCOME-PRETAX> (329,516)
<INCOME-TAX> (125,200)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (204,316)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
