UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/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 DECEMBER 31, 1995
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, 1996: 10,119,333.
1 of 12
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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, 1995 (unaudited)
and September 30, 1995 (audited)
Consolidated Statements of Income-- 5
Three months ended December 31,
1995 and 1994 (unaudited)
Consolidated Statements of Cash Flows-- 6, 7
Three months ended December 31, 1995
and 1994 (unaudited)
Notes to Unaudited Consolidated 8, 9
Financial Statements
Item 2. Managements Discussion and Analysis 10, 11
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 12
- -------- -----------------
SIGNATURE 12
2 of 12
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Part I-Item 1
Financial Information
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1995
December 31, * September 30,
1995 1995
(unaudited)
----------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,496,098 $ 2,270,322
Accounts receivable, less
allowance for doubtful accounts:
December 31, 1995: $15,000
September 30, 1995: $15,000 2,362,933 1,771,821
Rights to receive 27,703,112 26,147,400
Prepaid expenses and other
current assets 710,820 708,253
Unamortized advertising costs 590,421 539,118
Deferred income taxes 441,285 441,285
---------- ----------
Total current asssets 33,304,669 31,878,199
---------- ----------
Securities available for sale,
at fair value 2,657,065 2,899,691
---------- ----------
Property and equipment 5,313,152 4,565,283
Less accumulated depreciation 1,360,283 1,093,583
---------- ----------
3,952,869 3,471,700
Other assets 138,027 133,430
---------- ----------
Total assets $40,052,630 $38,383,020
========== ==========
(continued)
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1995
(continued)
December 31, * September 30,
1995 1995
(unaudited)
------------ ---------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - Rights to receive $ 3,587,187 $ 4,933,070
Accounts payable - reimbursable
tax and tips 551,749 428,000
Accounts payable - other 1,476,170 1,663,754
Income taxes payable 249,922 22,600
Accrued expenses 560,057 1,028,561
---------- ----------
Total current liabilities 6,425,085 8,075,985
Line of credit 4,500,000 2,000,000
Deferred membership fee income 3,145,272 2,866,916
Deferred income taxes 1,154,247 1,248,870
---------- ----------
Total liabilities 15,224,604 14,191,771
---------- ----------
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: 10,119,333 shares at
December 31, 1995 and 10,118,770 shares
at September 30, 1995 202,387 202,375
Additional paid-in capital 10,517,235 10,513,055
Unrealized gain on securities available
for sale 1,450,009 1,598,011
Retained earnings 12,658,395 11,877,808
---------- ----------
Total stockholders' equity 24,828,026 24,191,249
Total liabilities and stockholders' ---------- ----------
equity $40,052,630 $38,383,020
========== ==========
See notes to consolidated financial statements
* The balance sheet at September 30, 1995 is derived from the registrant's
audited financial statements.
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
Three Months Ended,
December 31,
--------------------
1995 1994
---- ----
Revenues:
Net sales $15,474,748 $13,313,903
Membership and renewal fee income 1,478,249 887,660
Continuing franchise fee and
royalty income 549,482 679,400
Commissions income 168,292 155,655
---------- ----------
17,670,771 15,036,618
Cost of sales 10,353,183 8,931,060
---------- ----------
Gross profit 7,317,588 6,105,558
Selling, general and administrative
expenses 5,456,547 4,189,879
Cardmember acquisition expenses 570,726 227,158
---------- ----------
Operating income 1,290,315 1,688,521
---------- ----------
Other income (expense):
Interest and other income 42,960 58,555
Interest expense and financing costs (74,288) (1,875)
Initial franchise fee and license
income, net of expenses -- 95,000
---------- ----------
(31,328) 151,680
---------- ----------
Income before income taxes 1,258,987 1,840,201
Income taxes 478,400 717,700
---------- ----------
Net income $ 780,587 $ 1,122,501
========== ==========
Income per common and common
equivalent share:
Primary $ .08 $ .11
===== =====
Fully diluted $ .08 $ .11
===== =====
Weighted average number of common
and common equivalent shares outstanding:
Primary 10,343,211 10,011,418
========== ==========
Fully diluted 10,343,211 10,011,418
========== ==========
See notes to consolidated financial statements
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
1995 1994
------ ------
Cash flows from operating activities:
Net income $ 780,587 $ 1,122,501
--------- ----------
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 269,200 174,385
Changes in assets and liabilities:
Accounts receivable (591,112) 83,292
Rights to receive (1,555,712) (1,285,708)
Prepaid expenses (2,567) 80,427
Unamortized advertising costs (51,303) (72,470)
Other assets (7,097) (50,415)
Accounts payable - Rights to
receive (1,345,883) (676,890)
Accounts payable - reimbursable
tax and tips 123,749 (5,964)
Accounts payable - other (187,583) (119,707)
Income taxes payable 227,322 74,456
Accrued expenses (267,847) (136,499)
Deferred membership income 278,356 200,687
---------- ----------
Total adjustments (3,110,477) (1,734,406)
---------- ----------
Net cash used in operating
activities (2,329,890) (611,905)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (747,869) (314,039)
---------- ----------
Net cash used in investing activities (747,869) (314,039)
---------- ----------
(Continued)
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Continued)
1995 1994
------ ------
Cash flows from financing activities:
Borrowings on note payable to bank
under revolving line of credit 2,500,000 --
Dividends paid (200,657) (190,594)
Conversion of warrants and
options for common stock,
net of tax benefits 4,192 --
---------- ----------
Net cash provided by (used in)
financing activities 2,303,535 (190,594)
---------- ----------
Net decrease in cash and
cash equivalents (774,224) (1,116,538)
Cash and cash equivalents at beginning
of period 2,270,322 2,478,899
---------- ----------
Cash and cash equivalents at
end of period $ 1,496,098 $ 1,362,361
========== ==========
Supplemental disclosure of cash flow
information:
Cash paid during the periods for:
Interest $ 57,119 $ --
========== ==========
Income taxes $ 69,474 $ 612,313
========== ==========
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, 1995 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, 1995 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, 1995
are presented in the Company's 10K filing which includes audited consolidated
financial statements.
2. Restatement of Financial Statements
THE FINANCIAL STATEMENTS FOR 1994, 1995 AND THE FIRST QUARTER OF 1996
HAVE BEEN RESTATED TO REFLECT THE WRITEDOWN OF CERTAIN COSTS OF ACQUIRING
CARDMEMBERS. PREVIOUSLY, TO THE EXTENT THAT MEMBERSHIP AND RENEWAL FEES WERE
EXPECTED TO BE RECEIVED, THE COMPANY HAD BEEN DEFERRING CERTAIN COSTS OF
ACQUIRING CARDMEMBERS AND AMORTIZING THEM OVER THE AVERAGE LIFE OF A CARDMEMBER,
24 MONTHS. THE RESTATEMENT REFLECTS THE DEFERRAL OF COSTS OF ACQUIRING FEE
PAYING MEMBERS ONLY TO THE EXTENT THAT INITIAL MEMBERSHIP FEES ARE GENERATED AND
THE AMORTIZATION OF THESE COSTS, AS REQUIRED BY GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, OVER TWELVE MONTHS, THE PERIOD OF INITIAL MEMBERSHIP.
THE EFFECT OF THE RESTATEMENT FOR THE THREE-MONTH PERIODS ENDED
DECEMBER 31, 1995 AND 1994 IS AS FOLLOWS:
Three Months Ended December 31,
1995 1994
------------ --------
REVENUE:
- -------
PREVIOUSLY REPORTED $17,338,991 $14,920,410
-------------------
AS RESTATED 17,670,771 15,036,618
-----------
GROSS PROFIT:
- ------------
PREVIOUSLY REPORTED 6,985,808 5,989,350
-------------------
AS RESTATED 7,317,588 6,105,558
-----------
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Three Months Ended December 31,
1995 1994
------------ --------
NET INCOME
- ----------
PREVIOUSLY REPORTED 906,933 1,167,551
-------------------
AS RESTATED 780,587 1,122,501
-----------
EARNINGS PER SHARE:
- ------------------
PREVIOUSLY REPORTED $.09 $.12
-------------------
AS RESTATED $.08 $.11
-----------
3. Line of Credit
In June 1995, the Company signed a revolving credit agreement with
NationsBank of Florida, N.A. The funds available to the Company under the
agreement amount to $6,000,000.00, increasing to $7,500,000 on May 15, 1996. The
agreement terminates on May 15, 1997 and bears interest at the floating prime
rate and is unsecured. At December 31, 1995, the outstanding balance was
$4,500,000.
In January 1996, the revolving credit was amended to increase the funds
available to the Company under the agreement to $20,000,000. The amended
agreement terminates on January 26, 1999.
4. Income per Common and Common Equivalent Share
Primary earnings per share were based on the weighted average number of
common and common equivalent shares outstanding during the periods presented.
Equivalent shares consist of those shares issuable upon the assumed exercise of
stock options and warrants calculated under the treasury stock method, based on
average stock market prices in the periods.
Fully diluted earnings 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.
5. Reclassification
Certain prior year amounts have been reclassified to conform with the
1995 presentation.
9 of 12
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Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
a. Restatement
THE FINANCIAL STATEMENTS FOR 1994, 1995 AND THE FIRST QUARTER OF 1996
HAVE BEEN RESTATED TO REFLECT THE WRITEDOWN OF CERTAIN COSTS OF
ACQUIRING CARDMEMBERS. PREVIOUSLY, TO THE EXTENT THAT MEMBERSHIP AND
RENEWAL FEES WERE EXPECTED TO BE RECEIVED, THE COMPANY HAD BEEN
DEFERRING CERTAIN COSTS OF ACQUIRING CARDMEMBERS AND AMORTIZING THEM
OVER THE AVERAGE LIFE OF A CARDMEMBER, 24 MONTHS. THE RESTATEMENT
REFLECTS THE DEFERRAL OF COSTS OF ACQUIRING FEE PAYING MEMBERS ONLY TO
THE EXTENT THAT INITIAL MEMBERSHIP FEES ARE GENERATED AND THE
AMORTIZATION OF THESE COSTS, AS REQUIRED BY GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, OVER TWELVE MONTHS, THE PERIOD OF INITIAL
MEMBERSHIP. ACCORDINGLY, THE RESTATEMENT RESULTED IN A WRITEDOWN OF
PREVIOUSLY CAPITALIZED AND DEFERRED COSTS AND A CORRESPONDING INCREASE
IN CARDMEMBER ACQUISITION EXPENSES FOR THE RESPECTIVE PERIODS,
INDICATIVE OF THE RECENT TREND AWAY FROM THE COMPANY'S UTILIZATION OF
AN INITIAL FEE REQUIREMENT AND THE GROWING PRACTICE OF NO-FEE
MEMBERSHIPS. THE IMPACT OF THE RESTATEMENT CAN BE SEEN IN FOOTNOTE 2 TO
THE CONSOLIDATED FINANCIAL STATEMENTS.
b. Results of Operations - Comparison of Three Months ended
December 31, 1995 and 1994.
Net sales for the three-month period ended December 31, 1995 increased
by $2,160,845 or 16%, compared with 1994. The sales increase was due to
a greater number of cardmembers supported by additional participating
restaurants and from sales recorded in a formerly franchised territory
which was repurchased in July 1995. Membership and renewal fee income
increased by $590,589 or 67% in the three-month period ended December
31, 1995, compared with the prior period because of an increased number
of new cardmembers as well as renewals.
Continuing franchise fee income decreased by $129,918 or 19% in the
three months ended December 31, 1995, versus the prior year's
comparable period, primarily because one of the franchises from which
continuing franchise fee income was obtained was reacquired by the
Company in July 1995.
As a result of the growth in the components of revenue, gross profit
increased by $1,212,030 to $7,317,588 for the three month period ended
December 31, 1995.
Selling, general and administrative expenses for the three months ended
December 31, 1995 increased by $1,266,668 compared to the prior year
and represented an increase of 30%.
10 of 12
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Expenses contributing to the increase in the current period included
costs associated with operating new areas started up or reacquired
since the first quarter of last year. These areas include Chicago,
Detroit, Tampa, Milwaukee and Indianapolis and costs directly related
to sales such as sales commission and processing costs. Additionally,
mailing and printing costs also increased.
In the three-month period ended December 31, 1995, cardmember
acquisition expense was $570,726, versus $227,158 in the prior year.
Included in cardmember acquisition expenses was the amortization of
deferred advertising costs amounting to $273,824 in 1995 and $156,440
in 1994. Costs capitalized in 1995 and 1994 were $325,130 and $228,910,
respectively.
Income before income taxes amounted to $1,258,987 in the three months
ended December 31, 1995, compared with $1,840,201 in the 1994
comparable period.
Net income for the three months ended December 31, 1995 was $780,587 or
$.08 per share, compared with $1,122,501 or $.11 per share in the
comparable period of the prior year.
c. Liquidity and Capital Resources
The Company's working capital at December 31, 1995 was $26,879,584,
compared with $23,802,214 at September 30, 1995. The increase of
$3,077,370 was due primarily to the Company's profit during the period
and borrowings under the Company's line of credit which were used to
acquire Rights to Receive. Cash in the amount of $747,869 was used to
continue to upgrade the Company's computer hardware and software. Cash
and cash equivalents amounted to $1,496,098 at December 31, 1995. The
Company has available at February 5, 1996, $14,000,000 under a
revolving line of credit. The Company believes that cash generated from
operations, cash on hand, and cash available under its line of credit
will satisfy its cash requirements.
11 of 12
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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, 1995.
S I G N A T U R E S
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.
TRANSMEDIA NETWORK INC.
(Registrant)
FEBRUARY 24, 1997 /S/DAVID L. WEINBERG
-----------------------
Vice President and
Chief Financial Officer
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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-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,496,098
<SECURITIES> 0
<RECEIVABLES> 2,377,933
<ALLOWANCES> 15,000
<INVENTORY> 27,703,112
<CURRENT-ASSETS> 33,304,669
<PP&E> 5,313,152
<DEPRECIATION> 1,360,283
<TOTAL-ASSETS> 40,052,630
<CURRENT-LIABILITIES> 6,425,085
<BONDS> 0
0
0
<COMMON> 202,387
<OTHER-SE> 24,625,639
<TOTAL-LIABILITY-AND-EQUITY> 40,052,630
<SALES> 15,474,748
<TOTAL-REVENUES> 17,670,771
<CGS> 10,353,183
<TOTAL-COSTS> 16,380,456
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,288
<INCOME-PRETAX> 1,258,987
<INCOME-TAX> 478,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780,587
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
