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 March 31, 1999
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 1-13806
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 May 10, 1999: 12,952,709
<PAGE>
I N D E X
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE NO.
- ---- ------------------------ --------
Item 1. Financial Statements:
Consolidated Balance Sheets -- 3
March 31, 1999 (unaudited)
and September 30, 1998 (audited)
Consolidated Statements of Income 4-5
And Comprehensive Income
Three and six months ended March 31,
1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows-- 6-7
Six months ended March 31,
1999 and 1998 (unaudited)
Notes to Unaudited Consolidated 8-10
Financial Statements
Item 2. Management's Discussion and Analysis 11-14
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosure
About Market Risk 14
PART II. OTHER INFORMATION 15-17
- --------------------------
SIGNATURE 18
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
ASSETS MARCH 31, *SEPTEMBER 30,
1999 1998
----------- --------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,578 $ 4,632
Restricted cash 3,177 3,518
Accounts receivable, net 2,528 2,061
Rights-to-receive, net
Unrestricted 7,298 7,909
Securitized and owned by Trust 34,192 34,438
Prepaid expenses and other current assets 6,632 5,067
------- -------
Total current assets 56,405 57,625
Securities available for sale, at fair value 688 1,267
Equipment held for sale or lease, net 842 988
Property and equipment, net 6,662 6,832
Other assets 1,110 1,142
Restricted deposits and investments 1,980 1,980
Excess of cost over net assets acquired and other intangible assets 4,979 4,591
------- -------
Total assets $72,666 $74,425
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - rights-to-receive $ 4,179 $ 4,181
Accounts payable - trade 3,216 3,348
Accrued expenses and other 2,164 1,507
Deferred membership fee income 3,705 2,594
------- -------
Total current liabilities 13,264 11,630
Secured non-recourse notes payable 33,000 33,000
Other long-term liabilities 1,946 2,061
------- -------
Total liabilities 48,210 46,691
------- -------
Commitments -- --
Stockholders' equity:
Common stock 260 258
Additional paid-in capital 21,800 21,496
Accumulated other comprehensive income 253 612
Retained earnings 2,143 5,368
------- -------
Total stockholders' equity 24,456 27,734
------- -------
Total liabilities and stockholders' equity $72,666 $74,425
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
* The balance sheet at September 30, 1998 is derived from the registrant's
audited consolidated financial statements.
3
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three months and six months ended March 31, 1999 and 1998
(unaudited)
(in thousands, except income per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- --------------------
MARCH 31, MARCH 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating revenue:
Sales of rights-to-receive:
Owned by Company 2,495 1,024 4,940 1,633
Owned by Trust 21,710 23,737 42,021 46,164
------- ------- ------- -------
Gross dining sales 24,205 24,761 46,961 47,797
Cost of sales 13,635 14,179 26,694 27,170
Cardmember discounts 5,619 5,497 10,815 10,669
------- ------- ------- -------
Net revenue from rights-to-receive 4,951 5,085 9,452 9,958
Membership and renewal fee income 1,980 1,792 3,730 3,822
Franchise fee income 259 276 518 609
Commission income 31 119 71 213
Processing income 378 392 754 739
------- ------- ------- -------
Total operating revenues 7,599 7,664 14,525 15,341
------- ------- ------- -------
Operating expenses:
Selling, general and administrative 7,320 6,583 14,844 12,922
Cardmember acquisition and promotion 1,586 1,246 2,767 2,295
Amended compensation agreements -- -- -- 3,081
------- ------- ------- -------
Total operating expenses 8,906 7,829 17,611 18,298
------- ------- ------- -------
Operating loss (1,307) (165) (3,086) (2,957)
Other income (expense):
Realized gain on sale of securities available
for sale 77 -- 1,119 --
Interest and other income 96 131 220 262
Interest expense and financing cost (737) (757) (1,478) (1,491)
------- ------- ------- -------
Loss before income taxes (1,871) (791) (3,225) (4,186)
Income tax benefit -- (301) -- (1,591)
------- ------- ------- -------
Net loss (1,871) (490) (3,225) (2,595)
------- ------- ------- -------
</TABLE>
(Continued)
4
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME, CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDE
-------------------- --------------------
MARCH 31, MARCH 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss (1,871) (490) (3,225) (2,595)
Other comprehensive income, net of tax:
Unrealized gain (loss) on available-
for-sale securities 285 185 (32) 271
Beginning unrealized gain for 79 -- 543 --
securities sold
Tax effect of unrealized gain (138) (70) (194) (103)
Comprehensive loss $(1,645) (375) 2,908 (2,427)
======= ======= ======= =======
Operating loss per common and common
equivalent share:
Basic and Diluted $ (.10) (.01) (.24) (.28)
======= ======= ======= =======
Net loss per common and common equivalent share:
Basic and Diluted $ (.14) (.04) (.25) (.24)
======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding:
Basic 12,959 11,110 12,917 10,669
======= ======= ======= =======
Diluted 13,072 11,172 13,000 10,714
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended March 31, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,225) (2,595)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,703 1,612
Amortization of deferred financing cost 135 142
Provision for rights-to-receive losses 1,878 1,912
Gain on sale of investments available for sale (1,119) --
Deferred income taxes -- (557)
Changes in assets and liabilities:
Accounts receivable (467) 63
Rights-to-receive (1,023) (1,988)
Prepaid expenses and other current assets (1,820) (63)
Other assets (228) (553)
Accounts payable (160) 835
Income taxes receivable 253 (1,229)
Accrued expenses 684 (20)
Deferred membership fee income 1,111 (513)
------- -------
Net cash used in operating activities (2,278) (2,954)
------- -------
Cash flows from investing activities:
Additions to property and equipment (1,111) (1,216)
Excess of cost over net assets acquired and
intangible assets (536) --
Proceeds from sale of securities available for sale 1,119 --
Change in capital lease obligation 158 --
Increase in restricted deposits and investments (53)
------- -------
Net cash used in investing activities (423) (1,216)
------- -------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 9,825
Increase in restricted cash 341 380
Issuance of common stock 306 --
Dividends paid -- (202)
Net cash provided by financing activities 647 10,003
------- -------
</TABLE>
6
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
(UNAUDITED)
1999 1998
-------- --------
<S> <C> <C>
Net (decrease) increase in cash (2,054) 5,833
Cash and cash equivalents:
Beginning of year 4,632 7,223
------- -------
End of year 2,578 13,056
======= =======
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest 1,023 1,307
======= =======
Income taxes (254) (3)
======= =======
</TABLE>
Supplemental schedule of noncash and investing activities: Noncash investing and
financing activities:
The acquisition of the rights-to-receive and cancellation of the
franchise of East American Trading Company, for 170,000 shares of
common stock, was recorded during the first quarter of fiscal year 1998
as follows:
Fair value of assets acquired:
Rights-to-receive $ 267
Excess of cost over
net assets acquired 740
------
Equity 1,007
======
See accompanying notes to unaudited consolidated financial statements.
7
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The balance sheet as of September 30, 1998 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 for a fair statement of the results
for all interim periods. The results for the three and six-month
periods ended March 31, 1999 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, 1998 are presented in Transmedia Network Inc
and Subsidiaries' (the "Company") Form 10-K filing which includes
audited consolidated financial statements.
Cost of sales is composed of the cost of rights-to-receive sold,
provision for rights-to-receive losses and processing fees.
Certain prior year amounts have been reclassified to conform to the
current presentation.
(2) INVESTMENT BY EQUITY GROUP INVESTMENTS, INC.
On March 4, 1998, the Company sold 2.5 million newly-issued common
shares and non-transferable warrants to purchase an additional 1.2
million common shares for a total of $10,625 to affiliates of Equity
Group Investments, Inc., a privately held investment company. Net
proceeds from the investment amounted to $9,825 after transaction cost.
The non-transferable warrants have a term of five years; one third of
the warrants are exercisable at $6.00 per share, another third are
exercisable at $7.00 per share and the final third are exercisable at
$8.00 per share. As part of this strategic investment, Equity Group
nominated and the stockholders elected two candidates to the Board of
Directors who joined three of the Company's existing directors and two
new independent directors.
(3) PROPOSED ACQUISITION OF DINING A LA CARD
On March 17, 1999, the Company entered into an Asset Purchase Agreement
("the Purchase Agreement") with SignatureCard, Inc., providing for the
sale to the Company of certain assets of SignatureCard related to a
membership program operated under the Dining A La Card trade name and
service mark. SignatureCard is an indirect subsidiary of Montgomery
Ward & Co., Incorporated. The consideration includes (i) cash, in an
amount equal to the cash funded by SignatureCard for certain
"qualified" rights-to-receive (currently estimated at $35.0 million),
(ii) 400,000 shares of common stock with a put price of $8 per share,
and (iii) options to purchase an additional 400,000 shares of common
stock at any time during the three-year period following the closing at
an exercise price of $4.00 per share. In addition, upon satisfaction of
certain conditions, the Company may be required to share with
SignatureCard certain amounts recovered by Company from other
rights-to-receive acquired but not paid for by the Company.
8
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN THOUSANDS)
The waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 has already expired and the closing of the transaction is
now subject to the Company obtaining financing to complete the
transaction.
The Purchase Agreement is terminable by the Company if it is unable to
obtain financing on terms acceptable to it; however, the Company will
be obligated to reimburse SignatureCard for its expenses in connection
with the execution of the Purchase Agreement up to a maximum of $250.
The Purchase Agreement is also terminable by either party if the
transactions contemplated thereby have not been consummated before May
31, 1999.
In connection with the acquisition of the assets by the Company,
SignatureCard and the Company will enter into a Services Collaboration
Agreement (the "Services Agreement") which will provide for an on-going
relationship whereby SignatureCard will continue to provide dining
members from its airline frequent flyer partner programs and other
marketing programs. The Services Agreement provides for profit sharing
between the Company and SignatureCard, for 12.5 years from the closing
date, on those profits attributable to SignatureCard generated members
as well as sharing membership fees for those fee paying members either
acquired in this transaction or subsequently acquired through
SignatureCard.
(4) AMENDED COMPENSATION AGREEMENTS
On December 29, 1997, the Company and Melvin Chasen, the former
Chairman of the Board, Chief Executive Officer and President, agreed to
amend his employment agreement and to terminate his consulting
agreement. As part of this agreement, Mr. Chasen agreed to a five year
non-compete and confidentiality agreement with the Company and
relinquished his right to receive $1 million in the event of the sale
of a control block of stock. Pursuant to this agreement, the Company
made a cash payment of $2.75 million to Mr. Chasen and recognized a
one-time pre-tax charge of $3.1 million in the quarter ended December
31, 1997. Mr. Chasen continues to serve on the Board of Directors.
(5) PURCHASE OF FRANCHISE
On December 4, 1997, in exchange for 170,000 shares of Transmedia
Network common stock, the Company acquired all the rights-to-receive of
East American Trading Company, its franchisee in the Carolinas and
Georgia. As part of the agreement, the Company assumed operational
control of the sales territories and terminated the franchise
agreement. The excess fair value of the stock exchanged over the value
of rights-to-receive was recorded as excess of cost over net assets
acquired.
On July 15, 1998, the Company acquired, for approximately $1,758, all
the rights to receive and the right to conduct business in the
Dallas/Ft. Worth territory from its franchise, the Texas Restaurant
Card Inc. ("TRC"). In addition, the Company has the option to reacquire
the remaining territories in Texas at a predetermined formula through
July 2000.
On February 10, 1999, the Company exercised its right to purchase the
Houston territory from TRC. The purchase price was approximately $648
of which $112 represented the cost of the franchise and $536 was
recorded as the excess of cost over net assets acquired. The Company
assumed operational control of the territory.
9
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLARS IN THOUSANDS)
(6) LITIGATION
In December 1996, the Company terminated its license agreement with
Sports & Leisure Inc. ("S&L"). In February 1997, S&L commenced an
action against the Company in the 11th Judicial Circuit, Dade County,
Florida, alleging that the Company improperly terminated the S&L
license agreement and seeking money damages. The Company has
counterclaimed against S&L for breach of the license agreement and
intends to pursue the action vigorously. In the quarter ended December
31, 1998, additional reserves were established and recorded in selling,
general and administrative expenses to cover management's estimate of
the potential cost and expenses of this litigation and other legal
matters. While management cannot predict the outcome of this litigation
at this time, it does not expect the outcome of this case to adversely
impact the financial position, cash flows or operating results of the
Company; however, in the event of an unanticipated adverse final
determination, the Company's net income for the relevant period could
be materially affected.
(7) LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Basic loss per share was based on the weighted average number of common
shares outstanding during the period presented.
Diluted loss per share was 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 (if dilutive), based on average stock market prices at the
end of the periods.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Some of the matters discussed in this quarterly report contain
forward-looking statements regarding the Company's future business
which are subject to certain risks and uncertainties, including
competitive pressures, adverse economic conditions and government
regulations. These issues, and other factors, which may be identified
from time to time in the Company's reports filed with the SEC, could
cause actual results to differ materially from those indicated in the
forward-looking statements.
(a) RESULTS OF OPERATIONS - COMPARISON OF THREE AND SIX MONTHS ENDED MARCH
31, 1999 AND 1998
Sales of rights-to-receive for the three and six-month periods ended
March 31, 1999 were $24,205 and $46,961, respectively, which
represented a decrease of 2.2% and 1.7%, respectively, over the
comparable periods in the prior year. Included in the 1999 sales are
$1,178 and $2,069, respectively, of sales relating to
Carolinas/Georgia, Dallas/Ft. Worth and Houston territories which were
reacquired in December 1997, July 1998 and February 1999, respectively.
On a same territory basis, sales decreased $911 and $1,711 for the
three and six-month periods ended March 31, 1999, respectively.
Partially offsetting the decreased sales in New York, Boston and South
Florida were higher sales volume in North Florida, Chicago, Indiana,
Wisconsin, Phoenix, and San Francisco; steady growth in Georgia and the
Carolinas; and the addition of the new territories in Texas.
Cardmember discounts as a percentage of sales were 23.2% and 23.0% in
the current three and six-month periods, respectively, compared to
22.2% and 22.3% in the prior year periods reflecting the continued
growth in new membership and spending by the 25% fee membership
category.
Provision for rights-to-receive losses, which are included in cost of
sales, amounted to $734 and $1,644 for the three and six-month periods
ended March 31, 1999, respectively, compared to $1,152 and $1,912,
respectively, in the prior year periods reflecting more favorable
write-off and recovery trends. Processing fees based on transactions
processed was 3.6% and 3.0% for the three-months ending March 31, 1999
and 1998, respectively, and 3.2% and 3.3% for the six-months ending
March 31, 1999 and 1998, respectively.
Membership and renewal fee income for the three and six-month periods
ending March 31, 1999 were $1,980 and $3,730, respectively, compared to
$1,792 and $3,822, respectively, for the comparable prior year periods.
The increase in the current quarter over prior year reflects the
Company's more recent focus of working with financial institution
marketing partners to solicit fee paying members. However, the
membership has not yet offset the attrition, year to date, in renewal
members. As discussed further in card acquisition and promotional
expenses, it is the Company's intention to significantly increase
solicitation efforts over the remaining two fiscal quarters, and
correspondingly, continue to increase the fee paying member base. Fee
income is recognized over a twelve-month period beginning in the month
the fee is received.
11
<PAGE>
Continuing franchise fee income decreased by $17 and $91 in the three
and six-month periods ended March 31,1999, compared with the prior year
primarily reflecting the repurchase of the formerly franchised
territories.
Commission income for the three and six-month periods ending March 31,
1999 were $31 and $71, respectively, compared to $119 and $213,
respectively, for the comparable prior year periods. Commission income
represents fees collected from third party marketing partners.
Processing income comprises the sale or lease of point-of-sale
terminals to merchants, principally restaurants, as well as income
received for serving as the merchants' processor for all of their
credit card transactions, net of interchange fees.
Selling, general and administrative expenses for the three and
six-months ended March 31, 1999 increased by $737 and $1,922 or 11.2%
and 14.9%, respectively, compared with the prior year periods. As a
percentage of gross dining usage, selling general and administrative
expenses were 30.2% this quarter compared to 26.6% in the same quarter
last year as a result of the lower sales volume and higher expenses.
Component increases for the three and six months ending March 31, 1999,
respectively, relates primarily to information technology (mainly Y2K
programming) of $427 and $789, respectively, telephone charges of $89
and $157, and professional fees and the establishment of additional
legal reserves of $123 and $1,394, respectively. Offsetting the
increases for the six-months ending March 31, 1999 were decreases in
printing and postage of $256, and salaries and benefits of $41.
In the three and six-month periods ended March 31, 1999, cardmember
acquisition expenses were $1,586 and $2,767, respectively, versus
$1,246 and $2,295, respectively, in the prior year's comparable
periods. Included in cardmember acquisition expenses was the
amortization of previously capitalized advertising costs amounting to
$866 and $1,409 in the fiscal 1999 periods versus $133 and $232 in the
fiscal 1998 comparable periods. Costs capitalized in the 1999 periods
were $805 and $2,607 versus $191 and $333 in 1998. The Company is
implementing a strategy of aggressively marketing only fee-based
memberships, and over the last six months, has tested a series of
offers and rollouts with large marketing partners, principally
financial institutions. The Company believes that on a going forward
basis, the incremental cost of solicitation and promotion may be
substantially offset by the initial fee income and that future renewal
income may have a positive contribution towards profitablity.
Additionally, the Company's experience is that cardmembers who pay a
fee tend to spend at a higher rate. Over the next two fiscal quarters,
the Company has scheduled solicitation mailings with marketing partners
of approximately ten million pieces which could yield an increase in
new membership ranging from 175,000 to 225,000 members, depending on
the final response rate.
The amended employment agreement and termination of the consulting
agreement of the Chief Executive Officer resulted in a one-time $3,081
charge in the first quarter of 1998. Components included a lump-sum
cash payment of $2,750, cancellation of indebtedness of $135, and
health insurance for the remainder of his life (Note 4). The after-tax
impact of the charge was approximately $1.9 million.
12
<PAGE>
Interest and other expense was $737 in the 1999 three-month period and
$1,478 in the 1999 six-month period compared with $757 and $1,491,
respectively, in the comparable 1998 periods attributable to the
expiration of a $10 million line of credit.
Net loss for the three and six months periods ended March 31, 1999 were
$1,871 or 14 cents per share and $3,225 or 25 cents per share,
respectively, compared with a net loss of $490 or 4 cents per share and
a net loss of $2,595 or 24 cents per share, respectively, in the prior
year comparable periods.
(b) LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents amounted to $2,578 at March 31,
1999. The Company believes that cash on hand will be sufficient to fund
the Company's normal cash requirements. While the Company expects to
significantly increase its marketing expenditures over the remainder of
the fiscal year, recent response rate results have indicated that the
overall member acquisition cost can be substantially funded by the
initial fee income. Furthermore, the Company believes that the rights
to receive inventory levels in the existing markets, currently
averaging over nine months on hand on an aggregate basis, are
sufficient to absorb new member demand over the remainder of the year.
(c) YEAR 2000 COMPUTER COMPLIANCE
In 1998, the Company initiated a plan ("Plan") to identify, assess, and
remediate "Year 2000" issues within each of its computer programs and
certain equipment which contain micro-processors. The Plan is
addressing the issue of computer programs and embedded computer chips
being unable to distinguish between the year 1900 and 2000, if a
program or chip uses only two digits rather than four to define the
applicable year. The Company has divided the Plan into six major
phases: assessment, planning, validation, conversion, implementation
and testing. After completing the assessment and planning phase in late
last 1998, the Company hired an independent consulting firm to validate
the Plan. All software development and installation effected during
1998 is currently in compliance. The Company is working with an outside
vendor on the conversion, implementation and testing phases. Systems
which have been determined not to be Year 2000 compliant are being
either replaced or reprogrammed, and thereafter tested for Year 2000
compliance. The Plan anticipates that by June 1999 the conversion,
implementation and testing phases will be completed. The original
budget for the total cost of remediation (including replacement
software and hardware) and testing, as set forth in the Plan, was $500.
The Company expects aggregate spending on the Year 2000 remediation to
be $700.
The Company has identified and contacted critical suppliers and
customers whose computerized systems interface with the Company's
systems, regarding their plans and progress in addressing their Year
2000 issues. The Company has received varying information from such
third parties on the state of compliance or expected compliance.
Contingency plans are being developed in the event that any critical
supplier or customer is not compliant.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's operations, liquidity and financial condition. Due to the
13
<PAGE>
general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this
time whether the consequences of Year 2000 failures will have a
material impact on the Company's operations, liquidity or financial
conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to various types of market risk, including
changes in interest rates. Market risk is the potential loss arising
from adverse changes in market rates fn prices, such as interest rates.
The Company does not enter into derivatives or other financial
instruments for trading or speculative purposes. The Company's total
investment at March 31, 1999 and 1998 was $688 and $1,267,
respectively, and consisted of equity securities.
14
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5
Items 1, 2, 3, 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 4
Submission of matters to a vote of security holders
(a) Meeting
Annual meeting of stockholders was held on March 3, 1999
(b) Election of Directors
Proxies for the meeting were solicited pursuant to
Regulation 14 under the Act and all nominees were elected.
(c) Matters voted upon
(i) The election of eight directors.
1. F. Philip Handy
For 10,311,703
Withheld/Against 470,894
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
2. Gene M. Henderson
For 10,311,366
Withheld/Against 471,231
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
15
<PAGE>
3. Jack Africk
For 10,310,691
Withheld/Against 471,906
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
4. Melvin Chasen
For 10,309,953
Withheld/Against 472,644
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
5. Rod F. Dammeyer
For 10,331,703
Withheld/Against 470,894
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
6. Herbert M. Gardner
For 10,311,703
Withheld/Against 470,894
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
7. George S. Wiedemann
For 10,311,703
Withheld/Against 470,894
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
16
<PAGE>
8. Lester Wunderman
For 10,310,691
Withheld/Against 471,906
Exceptions/Abstain --
----------
Total Shares voted 10,782,597
Broker no vote 2,065,257
Total shares eligible to vote 12,847,854
==========
(d) Settlement terms
None
Item 6
Exhibits and reports on Form 8K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8K
A Current Report on Form 8K dated April 1, 1999 was
filed with the Securities and Exchange Commission
regarding the Company entering into an Asset Purchase
Agreement with SignatureCard, Inc. on March 17, 1999.
Transmedia will purchase certain assets of SignatureCard
related to a membership program operated under the
Dining A La Card trade name and service mark. The
consideration to include (i) cash, in an amount equal to
the cash funded by SignatureCard for certain
"qualified"rights-to-receive (currently estimated at
$35.0 million), (ii) 400,000 shares of Common Stock, par
value $.02 per share, of the Company and (iii) options
to purchase an additional 400,000 shares of Common Stock
of the Company at any time during the three-year period
following the closing at an exercise price of $4.00 per
share.
17
<PAGE>
SIGNATURES
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)
May 14, 1999 /s/ STEPHEN E. LERCH
---------------------------
Stephen E. Lerch
Executive Vice President
and Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 2,578 13,056
<SECURITIES> 688 2,260
<RECEIVABLES> 2,528 2,197
<ALLOWANCES> 0 0
<INVENTORY> 41,490 40,119
<CURRENT-ASSETS> 56,405 59,971
<PP&E> 13,889 12,454
<DEPRECIATION> (7,227) (5,227)
<TOTAL-ASSETS> 72,666 79,971
<CURRENT-LIABILITIES> 13,264 11,756
<BONDS> 0 0
0 0
0 0
<COMMON> 260 257
<OTHER-SE> 24,196 33,251
<TOTAL-LIABILITY-AND-EQUITY> 72,666 79,971
<SALES> 24,205 24,761
<TOTAL-REVENUES> 7,599 7,664
<CGS> 0 0
<TOTAL-COSTS> (8,906) (7,829)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (737) (757)
<INCOME-PRETAX> (1,871) (791)
<INCOME-TAX> 0 (301)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,871) (490)
<EPS-PRIMARY> (0.14) (0.04)
<EPS-DILUTED> (0.14) (0.04)
</TABLE>
