SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997
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Commission File Number 0-15405
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Data Transmission Network Corporation
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(Exact name of registrant as specified in its charter)
Delaware 47-0669375
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(State of Incorporation) (I.R.S. Employer ID Number)
9110 West Dodge Road, Suite 200, Omaha, Nebraska 68114
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(Address of principal executive office) (Zip Code)
(402) 390-2328
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of shares of common stock outstanding as of August 15, 1997...11,115,695.
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<TABLE>
<CAPTION>
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FINANCIAL STATEMENTS
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BALANCE SHEETS
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Unaudited June 30, 1997 December 31, 1996
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ASSETS
Current Assets
<S> <C> <C>
Cash $ 222,675 $ 708,053
Accounts receivable, net of allowance for
doubtful accounts of $520,000 6,803,414 9,653,766
Prepaid expenses 731,651 583,985
Deferred commission expense 3,120,996 2,807,330
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Total Current Assets 10,878,736 13,753,134
Property and Equipment
Equipment Used By Subscribers 213,528,480 203,310,661
Equipment and Leasehold Improvements 21,482,363 19,702,330
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235,010,843 223,012,991
Less: Accumulated Depreciation 116,527,998 98,564,288
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Net Property and Equipment 118,482,845 124,448,703
Intangible Assets From Acquisitions, net of accumulated
amortization of $6,677,665 and $3,871,956 38,237,150 36,517,799
Other Assets 2,556,376 3,010,126
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$170,155,107 $177,729,762
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,289,359 $ 7,485,517
Accrued expenses 6,547,701 5,923,628
Current portion of long-term debt 24,144,166 15,092,083
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Total Current Liabilities 38,981,226 28,501,228
Long-Term Debt 63,612,290 83,184,373
Subordinated Long-Term Notes, net of unamortized
discount of $396,860 and $436,550 14,603,140 14,563,450
Equipment Deposits 499,846 515,142
Unearned Revenue 22,729,439 22,675,280
Stockholders' Equity
Common stock, par value $.001, authorized
20,000,000 shares, issued 11,103,270 and 11,074,224 11,103 11,074
Paid-in capital 30,248,624 30,025,990
Retained earnings (deficit) (530,561) (1,404,602)
Treasury stock, at cost, 0 and 45,919 shares - (342,173)
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Total Stockholders' Equity 29,729,166 28,290,289
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$170,155,107 $177,729,762
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<FN>
See notes to interim financial statements.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
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STATEMENTS OF OPERATIONS
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Quarter Ended Six Months Ended
Unaudited June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
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REVENUES
<S> <C> <C> <C> <C>
Subscriptions $25,066,285 $18,235,511 $48,175,824 $32,320,289
Additional services 1,658,832 1,416,483 3,297,618 2,557,207
Communication services 2,469,476 2,146,025 4,782,834 4,145,137
Advertising 934,883 829,302 2,111,615 1,498,269
Service initiation fees 1,261,811 1,567,543 2,490,269 2,786,979
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31,391,287 24,194,864 60,858,160 43,307,881
EXPENSES
Selling, general
and administrative 15,494,553 12,225,598 29,487,166 22,928,561
Sales commissions 2,388,067 2,376,439 4,721,122 4,284,010
Depreciation and
amortization 10,459,090 8,184,319 20,671,061 13,929,847
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28,341,710 22,786,356 54,879,349 41,142,418
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OPERATING INCOME 3,049,577 1,408,508 5,978,811 2,165,463
Interest expense 2,324,826 2,130,222 4,719,690 3,475,467
Other income, net 32,310 20,368 64,559 50,667
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INCOME (LOSS) BEFORE
INCOME TAXES 757,061 (701,346) 1,323,680 (1,259,337)
Income tax provision(benefit) 271,500 (254,000) 476,500 (455,000)
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NET INCOME (LOSS) $ 485,561 $ (447,346) $ 847,180 $ (804,337)
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EARNINGS (LOSS)
PER SHARE $ 0.04 $ (0.04) $ 0.07 $ (0.08)
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Weighted Average
Shares Outstanding 12,068,932 10,629,975 12,041,667 10,300,410
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<FN>
See notes to interim financial statements.
</FN>
</TABLE>
3
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<TABLE>
<CAPTION>
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STATEMENTS OF CASH FLOWS
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Six Months Ended
Unaudited June 30, 1997 June 30, 1996
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Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) $ 847,180 $ (804,337)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 20,671,061 13,929,847
Amortization of debt issue costs and discount 73,940 65,802
Deferred income taxes 419,500 (464,000)
Change in assets and liabilities:
Accounts receivable 1,547,442 126,349
Prepaid expenses (86,142) (608,087)
Deferred commission expense (218,493) (503,161)
Deferred debt issuance costs - (72,964)
Accounts payable 778,461 773,651
Accrued expenses (526,934) 372,670
Equipment deposits (15,297) (7,667)
Unearned revenue 2,279,159 1,380,672
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Net Cash Provided By Operating Activities 25,769,877 14,188,775
Cash Flows From Investing Activities
Capital expenditures:
Equipment used by subscribers (9,475,479) (20,931,811)
Equipment and leasehold improvements (1,635,178) (2,284,939)
Acquisition of Subscribers (5,216,299) (63,567,035)
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Net Cash Used By Investing Activities (16,326,956) (86,783,785)
Cash Flows From Financing Activities
Proceeds (payments) from revolving credit agreement (500,000) 12,750,000
Proceeds from long-term debt - 48,190,000
Principal payments on long-term debt (10,020,000) (4,427,083)
Proceeds from the exercise of stock options 591,701 500,724
Proceeds from the issuance of common stock - 15,010,000
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Net Cash Provided (Used) By Financing Activities (9,928,299) 72,023,641
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Net Decrease in Cash (485,378) (571,369)
Cash at Beginning of Period 708,053 780,018
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Cash at End of Period $ 222,675 $ 208,649
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<FN>
See notes to interim financial statements.
</FN>
</TABLE>
4
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NOTES TO INTERIM FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The information furnished herein relating to interim periods
has not been audited by independent Certified Public Accountants. The
interim financial information in this report reflects all adjustments
which are, in the opinion of management, necessary for a fair statement
of results for the interim periods presented in accordance with
generally accepted accounting principles. All such adjustments are of a
normal recurring nature. The accounting policies followed by the
Company, and additional footnotes, are set forth in the audited
financial statements included in the Company's 1996 Annual Report,
which report was incorporated by reference in Form 10-K for the fiscal
period ended December 31, 1996. The results of operations for the three
and six months ended June 30, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full year.
2. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is calculated on the basis of the
weighted average outstanding common shares and, when applicable, those
outstanding options and warrants that are dilutive. All share and per
share data, for all periods presented, have been adjusted to reflect a
three-for-one stock split effectuated on June 28, 1996, for shares of
record on June 14, 1996.
3. ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128, Earnings Per Share which specifies the
computation, presentation and disclosure requirements for earnings per
share. The objective of the statement is to simplify the computation of
earnings per share. The impact on the Company's earning per share is
not materially different than earnings per share determined in
accordance with current guidance. SFAS No. 128 is applicable for fiscal
years ending after December 15, 1997.
4. ACQUISITIONS
BROADCAST PARTNERS
Effective May 3, 1996, the Company closed on an "Asset
Acquisition" of Broadcast Partners, an information provider primarily in
the agricultural industry. The Company acquired substantially all the
assets of Broadcast Partners for $63.5 million cash and the assumption
of certain current liabilities of approximately $9.8 million. In the
acquisition, the Company received 39,000 agricultural subscribers. Also
included was approximately $38.2 million of equipment which is being
depreciated using the straight-line method over five years. In addition,
an intangible asset (goodwill) of approximately $35 million cash was
capitalized and is being amortized using the straight-line method over
eight years.
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MARKET QUOTERS, NORTHERN DATA & MARKET COMMUNICATIONS GROUP
During the first quarter of 1997, the Company acquired 2,900
real-time commodity subscribers through two separate acquisitions.
Approximately 500 of the subscribers were acquired from Market Quoters
and Northern Data Services for $750,000. The remaining 2,400
subscribers were acquired from Market Communications Group, LLC (MCG),
a joint venture between Reuters America Inc., and Farmland Industries,
Inc. The Company paid $3.6 million cash for the 2,400 subscribers,
certain assets and certain assumed liabilities. In total, approximately
$4.5 million was capitalized as intangible assets (goodwill) and is
being amortized using the straight line method over eight years. Also
important with the MCG acquisition was the acquisition of the preferred
rights to distribute relevant Reuters real-time news and information to
the commodities, energy and metals markets.
5. LONG-TERM DEBT AND LOAN AGREEMENTS
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
Revolving Credit Agreement
<S> <C> <C>
Revolving credit line $ 0 $38,500,000
Term notes 43,057,289 10,786,456
Term Credit Agreement
Term notes 44,449,167 48,490,000
Stock Repurchase Agreement
Term notes 250,000 500,000
Total Loan Agreements 87,756,456 98,276,456
Less current portion 24,144,166 15,092,083
Total Long-Term Debt $63,612,290 $83,184,373
</TABLE>
The Company has a revolving credit agreement, as amended, with a group
of banks (the "Revolving Credit Agreement"). The Revolving Credit Agreement,
which expires June 30, 1999 unless extended, provides for a total commitment of
up to $33,000,000 in new borrowings. As of June 30, 1997, the total commitment
of $33,000,000 was available to the Company subject to certain restrictions as
discussed below.
Additional borrowings under the Revolving Credit Agreement are
available to the Company, as long as at the time of the advance, no default
exists with any of the Company loan agreements or the subordinated notes
agreement (see Note 6), and total debt outstanding (including term notes
outstanding but excluding long-term subordinated debt) does not exceed
thirty-six times monthly operating cash flow (as defined). As of June 30, 1997
based on current operating cash flow, the Company would be able to borrow all of
the $33,000,000 total commitment available.
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In addition to the restrictions mentioned above with respect to
advances, total debt outstanding (excluding long-term subordinated debt) is
limited to forty-eight times monthly operating cash flow. Additionally, total
debt outstanding (including subordinated debt) is limited to sixty times monthly
operating cash flow. The Company is also required to maintain total
stockholders' equity of at least $23,500,000 plus fifty percent (50%) of net
income (but not losses) at fiscal year end through June 30, 1999 and, a ratio of
quarterly operating cash flow to interest expense (as defined) of at least 2.25
to 1. The Company is permitted to pay cash dividends in any one year, which are,
in the aggregate, less than 25% of the Company's net operating profit after
taxes in the previous four quarters.
Interest on the outstanding borrowings (prior to when the borrowings
might be converted to term loans, as discussed below) is at a variable rate,
depending on the ratio of the Company's total borrowings (excluding long-term
subordinated debt) to operating cash flow (the "Leverage Ratio"). The following
table outlines the "Leverage Ratio", the applicable Margin, Unused Commitment
Fees and Fixed Note Margin to be discussed below.
<TABLE>
<CAPTION>
Leverage Ratio Margin Unused Commitment Fee Fixed Note Margin
<S> <C> <C> <C>
Greater than 42 .250% .375% 2.25%
Greater than 36 and less than or equal to 42 .500% .250% 2.25%
Greater than 30 and less than or equal to 36 .750% .250% 2.00%
Greater than 24 and less than or equal to 30 1.000% .250% 2.00%
Greater than 18 and less than or equal to 24 1.250% .125% 1.75%
Less than or equal to 18 1.375% .125% 1.75%
</TABLE>
The Revolving Credit Rate is the First National Bank of Omaha's
"National Base Rate", minus the applicable Margin. The base rate is adjusted
monthly, with the interest rate margin (as defined above) changed quarterly.
Effective June 30, 1997, the Revolving Credit Rate is 7.25%.
The Company has the option to convert the outstanding revolving credit
borrowings to term loans at any time, payable in forty-eight equal principal
installments, plus interest. Interest on the converted term loans is at the
Company's option, a variable interest rate of 1/4% over the Revolving Credit
Rate or at a fixed rate of 1/2% over the Revolving Credit Rate or the applicable
Fixed Note Margin (based on the "Leverage Ratio") over the average of the 3 and
5 year U. S. treasury securities, as quoted in the prior month "Federal Reserve
Statistical Release", whichever is greater. As of June 30, 1997, all of the
total borrowings outstanding had been converted to term loans. As of June 30,
1997, all term loans outstanding with monthly installments due up through 2001
have interest rates ranging from 7.865% to 9.25%.
The Company pays a commitment fee of 1/8 - 3/8% on the unused portion
of the total revolving credit commitment based on the "Leverage Ratio".
Effective June 30, 1997 the commitment fee was 1/8% on all unused revolving
credit commitment. Additionally, if total
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borrowings (excluding long-term subordinated debt) exceed 36 times the Operating
Cash Flow (as defined), the Company will be required to pay a closing fee of
1/2% on all new borrowings made after that point in time. In the event the total
borrowings exceed 36 times Operating Cash Flow, any term note accruing interest
at less than 7.5% is included in a "Trigger Event". The Company is obligated to
pay the holders of such term notes a fee of 0.375% of the outstanding balance of
the notes upon the occurrence of the Trigger Event and like amounts on the six
month anniversary and the twelve month anniversary of the Trigger Event.
The Company has a Term Credit Agreement dated February 26, 1997, with a
group of banks providing for an aggregate principal amount of $48,490,000 to be
repaid in 72 equal principal installments beginning January 31, 1997. Effective
April 1, 1997, the variable interest rate on $25,400,000 of the principal
balance is accruing at the NY Prime rate less one-half of one percent, or 8.00%.
Interest on the remainder is fixed, accruing at interest rates ranging from
8.25% to 8.36%.
During 1992, the Company entered into a loan agreement and borrowed
$2,000,000 solely for the repurchase of the Company's outstanding common stock
(the "Stock Repurchase" Agreement). Currently, this commitment is being repaid
in equal quarterly principal payments, plus interest, due through December,
1997. As of June 30, 1997, the amounts borrowed under the Stock Repurchase
Agreement, are accruing interest at 7.69% and 8.00%.
Substantially all of the Company's assets are pledged as collateral
under the Company's long-term debt and loan agreements.
The revolving credit lines are classified as long-term debt since the
Company has the ability and the intent to maintain these obligations for longer
than one year.
6. SUBORDINATED LONG-TERM NOTES
On June 30, 1994, the Company sold to one investor $15,000,000 of its
11.25% subordinated long-term notes in a private placement transaction (the
"subordinated debt"). The subordinated debt is subordinated in right of payment
to all current and future senior debt. Interest on the subordinated debt is to
be paid quarterly, with principal due in five equal annual installments
beginning on June 30, 2000.
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The Company has the option to prepay the subordinated debt on any date
after June 30, 1997 at a premium beginning at 7.5% of the principal prepaid, and
decreasing by 1.5% per year until June 30, 2002 when no premium is required.
There are provisions for mandatory prepayment upon a change in ownership control
(as defined), at a premium beginning at 12.0% of the principal prepaid during
the period ended June 30, 1995 and decreasing by 1.5% per year until June 30,
2002 when no premium is required.
The subordinated debt agreement contains a cross-acceleration clause,
whereby the subordinated debt will become immediately due and payable upon a
payment default on the revolving and term credit agreements. Other subordinated
debt financial covenants and restrictions are generally less restrictive than
those of the other loan agreements.
The Company also issued a warrant to the investor to purchase 75,000
shares of the Company's $.001 par value common stock at $7.39 per share (as
adjusted after the three-for-one stock split) on or before June 30, 2004. In
connection with the issuance of the warrant to purchase common stock, the
Company recorded a $635,000 credit to additional paid in capital and a related
debt discount, which represents an estimate of the fair value of the warrant
issued.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
GENERAL OVERVIEW
The equipment used by subscribers is a large capital investment for the
Company. This equipment accounts for 65% of the Company's total assets. The
Company has also made significant investments during 1995, 1996 and the first
quarter of 1997 to acquire subscribers. The net intangible assets (goodwill)
resulting from the acquisition of subscribers is 22% of the Company's total
assets. The acquisitions of subscribers is expected to enhance the long-term
operating performance and financial condition of the Company. The investments in
subscriber equipment require the Company to increase long-term debt until cash
generated from operating activities is sufficient to support future investments.
The Company's strategy is to utilize long-term debt financing versus equity,
whenever possible, to prevent the dilution of shareholders value.
NET CASH PROVIDED BY OPERATING ACTIVITIES
Net cash provided by operating activities for the first six months of
1997 was $25,769,877 compared to $14,188,775 for the same period in 1996. This
increase of $11,581,102 was primarily the result of the $10,554,562 increase in
operating cash flow plus the $3,180,233 of additional cash generated from the
change in assets and liabilities, including taxes, offset by the $1,244,223
increase in interest expense related to the Company's investing activities.
NET CASH USED BY INVESTING ACTIVITIES
Net cash used by investing activities for the first six months of 1997
was $16,326,956 compared to $86,783,785 for the same period in 1996. This
decrease was primarily the result of the Company's acquisition of Broadcast
Partners in May of 1996. This decrease was also brought on by the Company's
ability to utilize a build-up of subscriber equipment inventory created at the
end of 1996, thus reducing the need for new purchases. This decrease was
slightly offset by the purchase of 2,900 subscribers through two separate
acquisitions in the first quarter of 1997.
During the first quarter of 1997, the Company acquired 2,900 real-time
commodity subscribers through two separate acquisitions. Approximately 500 of
the subscribers were acquired from Market Quoters and Northern Data Services for
$750,000. The remaining 2,400 subscribers were acquired from Market
Communications Group, LLC (MCG), a joint venture between Reuters America Inc.,
and Farmland Industries, Inc. The Company paid $3.6 million cash for the 2,400
subscribers, certain assets and certain assumed associated liabilities. In
total, approximately $4.5 million was capitalized as intangible assets
(goodwill) and is being amortized using the straight line method over eight
years. Also important with the MCG acquisition was the acquisition of the energy
and metals markets.
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The Company had $28,102,490 of negative working capital compared to
$18,333,376 for the first six months of 1997 and 1996, respectively. This
increase in working capital deficiency was primarily created by the growth in
the current portion of long-term debt of $12,461,666, from the debt related to
subscriber acquisitions and the conversion of revolving debt to term notes at
the end of the first quarter.
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
Net cash provided (used) by financing activities resulted in a use of
funds of $9,928,299 for the first six months of 1997 and a source of funds of
$72,023,641 for the same period of 1996. For the first six months of 1997, the
Company was able to pay down its debt by $10.5 million primarily due to the
excess cash generated by operating activities and the ability to use existing
inventory for its subscriber equipment needs. The source of funds needed for the
first six months of 1996 was primarily the result of the Broadcast Partners
acquisition.
The Company anticipates that internally generated cash flow and its
bank credit lines will be sufficient to fund operating activities, capital
expenditures and principal payments on long-term debt.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company believes that inflationary trends have a limited effect on
the business. However, since a large percentage of the Company's subscribers and
revenues are related to agricultural industries, the general state of the
agricultural economy may impact the Company's business operations and financial
condition.
RESULTS OF OPERATIONS
GENERAL OVERVIEW
The financial dynamics of the Company's business operations are similar
to businesses that sell monthly subscriptions such as electronic publications
and communications and cable TV companies. The financial dynamics are such that
the Company makes an initial investment of variable marketing costs to obtain
new subscribers and the Company makes a capital expenditure to provide the
subscriber with the necessary equipment to receive the Company's services.
REVENUES
Total revenues for the second quarter and first six months of 1997
increased 30% and 41% compared with the same periods of 1996. This increase was
the result of three components: 1) End of second quarter 1997 subscribers grew
8% to 153,700 from 142,000 in 1996, 2) Total revenue per subscriber per month
increased from $61.72 for the second quarter of 1996 to $68.50 for the same
period of 1997 or 11% and 3) The acquisition of Broadcast partners which
generated approximately 8% of the 30% increase in second quarter 1997 revenues.
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<PAGE>
Subscriptions:
Subscription revenue grew 38% for the second quarter of 1997 compared
to the same period of 1996. For the first six months of 1997,
subscription revenue grew 49% over the first six months of 1996. These
increases were mainly due to the increases in total subscribers, the
ability to move the subscribers to higher priced services and the
acquisitions mentioned above.
Additional Services:
Additional service revenue increased 17% and 29% during the second
quarter and first six months of 1997 over the same periods in 1996.
These increases were the result of subscriber increases and an
expanding list of services available on an "a la carte" basis.
Communication Services:
Communication services revenue continued steady growth with a 15%
increase during the second quarter and first six months of 1997
compared to the same periods of 1996. This growth is primarily due to
refiners continuing to send more messages and other communications to
its wholesalers via the DTNergy services.
Advertising:
Advertising revenue grew 13% for the second quarter of 1997 compared to
the second quarter of 1996. For the first six months of 1997,
advertising revenue grew 41% over the same period of 1996 primarily due
to the large subscriber base which advertisers are finding attractive,
especially in the agricultural industries.
Service Initiation Fees:
Service initiation fees revenue fell 20% and 11% for the second quarter
and first six months of 1997 compared to the same periods of 1996. The
increased sales volume in these periods of 1997 over 1996, was offset
by the recognition of previously deferred revenues during early 1996.
These revenues were no longer deferred due to marketing costs exceeding
the initiation fees.
EXPENSES
Total expenses increased 24% and 33% for the second quarter and first
six months of 1997 compared to the same periods of 1996. The primary
factor for this increase was the higher depreciation and amortization
costs brought on by the subscriber acquisitions. In addition, expanding
sales and distribution support areas have contributed to these
increases.
Selling, General & Administrative:
Selling, general and administrative expenses rose 27% during the second
quarter of 1997 over the same period in 1996. As a percentage of
revenue, these expenses declined to 49% down from 51% one year earlier.
On a per subscriber per month basis, these costs were
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$31.19 and $33.81 for the second quarter of 1997 and 1996 respectively.
For the first six months of 1997, selling, general and administrative
expenses grew 29% over the same period of 1996.
Sales Commissions:
Sales commissions were flat for the second quarter of 1997 compared to
the second quarter of 1996. For the first six months of 1997 over the
same period of 1996, sales commissions grew 10% primarily due to the
increased sales activities while being offset by a lower renegotiated
DTNergy Commission agreement which is based on DTNergy revenues.
However, as a percentage of revenue, commission expense decreased to 8%
compared to 10% one year ago.
Depreciation And Amortization:
Depreciation and amortization expense rose 28% and 48% for the second
quarter and first six months of 1997 over the same periods of 1996.
These increases were primarily due to subscriber equipment and
intangible assets (goodwill) from the acquisitions and also by the
increase in total subscribers.
Net Development Costs:
Net development costs are defined as 1) market research activities, 2)
the expenses of hardware and software engineering, research and
development, and 3) the negative operating cash flow (prior to
corporate allocations plus interest) of new services. These costs
remained steady, growing 2% during the first six months of 1997 over
the same period of 1996. For the second quarter of 1997 compared to
1996 these costs grew 4%.
OPERATING CASH FLOW
Operating cash flow (operating income before depreciation and
amortization expense) grew 41% in the second quarter of 1997 compared to the
second quarter of 1996. For the first six months of 1997, operating cash flow
grew 66% over the same period of 1996. These increases can be attributed to the
above mentioned growth in revenue and corresponding efficiencies gained in
operating expenses. As a percentage of revenue, operating cash flow grew to 43%
and 44% in the second quarter and first six months of 1997, up from 40% and 37%
one year earlier. This is one measurement the Company uses to monitor its
success.
INTEREST EXPENSE
Interest expense grew by 9% for the second quarter of 1997 over the
second quarter of 1996. For the first six months, interest expense grew 36% from
1996 to 1997. This increase was primarily due to the $48.5 million of borrowings
needed for the acquisition in May of 1996.
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NET INCOME (LOSS)
Net income for the second quarter of 1997 was $485,561 or $.04 per
share compared to a net loss of $447,346 or ($0.04) per share for the second
quarter of 1996. For the six months ended June 30, 1997, net income was $847,180
or $.07 per share compared to a net loss of $804,337 or ($.08) per share in
1996. These results were primarily due to increased revenues and improved
efficiencies throughout the Company.
INCOME TAX PROVISION (BENEFIT)
The Company's effective income tax rate was 36% for both the second
quarter and first six months of 1997 and 1996.
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FORM 10-Q
DATA TRANSMISSION NETWORK CORPORATION
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
(a) Date of Annual Meeting of Stockholders - April 23,
1997.
(b) Directors Elected - Roger R. Brodersen, Robert S.
Herman, David K. Karnes, J. Michael Parks, Jay E.
Ricks, Greg T. Sloma and Roger W. Wallace.
(c) Other Matters Voted Upon
- Proposal to amend the Company's Stock Option
Plan of 1989, 6,083,324 votes for, 1,136,353
votes against and 84,595 votes abstained.
- Ratification of the appointment of Deloitte
and Touche LLP as independent auditors for
1997, 9,732,690 votes for 6,270 votes
against and 19,852 votes abstained.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) Exhibits - 11 - Statement re computation of per share
earnings.
(b) Reports on Form 8-K
None
(27) Financial Data Schedule (Required)
SIGNATURE
- ---------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
DATA TRANSMISSION NETWORK CORPORATION
By /s/ Roger R. Brodersen
-------------------------------------------
Roger R. Brodersen
Chairman and CEO
By /s/ Greg T. Sloma
-------------------------------------------
Greg T. Sloma
President and Chief Operating Officer
By /s/ Brian L. Larson
-------------------------------------------
Brian L. Larson
V.P., CFO, Secretary and Treasurer
Dated this 15th day of August, 1997.
15
<PAGE>
FORM 10-Q
DATA TRANSMISSION NETWORK CORPORATION
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
(a) Date of Annual Meeting of Stockholders - April 23,
1997.
(b) Directors Elected - Roger R. Brodersen, Robert S.
Herman, David K. Karnes, J. Michael Parks, Jay E.
Ricks, Greg T. Sloma and Roger W. Wallace.
(c) Other Matters Voted Upon
- Proposal to amend the Company's Stock Option
Plan of 1989, 6,083,324 votes for, 1,136,353
votes against and 84,595 votes abstained.
- Ratification of the appointment of Deloitte
and Touche LLP as independent auditors for
1997, 9,732,690 votes for 6,270 votes
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) Exhibits - 11 - Statement re computation of per share
earnings.
(b) Reports on Form 8-K
None
(27) Financial Data Schedule (Required)
SIGNATURE
- ---------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
DATA TRANSMISSION NETWORK CORPORATION
By --------------------------------------------
Roger R. Brodersen
Chairman and CEO
By --------------------------------------------
Greg T. Sloma
President and Chief Operating Officer
By --------------------------------------------
Brian L. Larson
V.P., CFO, Secretary and Treasurer
Dated this 15th day of August, 1997.
15
<PAGE>
<TABLE>
Exhibit 11
- -------------------------------------------------------------------------------------------------------------------
COMPUTATION OF NET INCOME (LOSS) PER SHARE
- -------------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------
Computation of income (loss)
per common and common
equivalent share:
<S> <C> <C> <C> <C>
Net income (loss) $ 485,561 $ (447,346) $ 847,180 $ (804,337)
=========== ============ =========== ============
Average shares outstanding 11,089,815 10,629,975 11,072,394 10,300,410
Add shares applicable to stock
options & warrants (1) 968,818 - 958,413 -
Add shares applicable to stock options &
warrants prior to conversion, using
average market price prior to
conversion (1) 10,299 - 10,860 -
----------- ------------ ----------- ------------
Total Primary Shares 12,068,932 10,629,975 12,041,667 10,300,410
=========== ============ =========== ============
Additional dilutive stock options
using ending market price 111,216 - 121,060 -
Total Fully Dilutive Shares 12,180,148 10,629,975 12,162,727 10,300,410
=========== ============= =========== ============
Net income (loss) per common share:
Primary earnings per share (1) $ 0.04 $ (0.04) $ 0.07 $ (0.08)
=========== ============= =========== ============
Fully Dilutive earnings
per share (1) $ 0.04 $ (0.04) $ 0.07 $ (0.08)
=========== ============= =========== ============
- -------------------------------------------------------------------------------------------------------------------
<FN>
(1) Shares applicable to warrants and stock options are included in the
calculation only when their impact is dilutive.
</FN>
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 222,675
<SECURITIES> 0
<RECEIVABLES> 7,323,414
<ALLOWANCES> 520,000
<INVENTORY> 0
<CURRENT-ASSETS> 10,878,736
<PP&E> 235,010,843
<DEPRECIATION> 116,527,998
<TOTAL-ASSETS> 170,155,107
<CURRENT-LIABILITIES> 38,981,226
<BONDS> 78,215,430
0
0
<COMMON> 11,103
<OTHER-SE> 29,718,063
<TOTAL-LIABILITY-AND-EQUITY> 170,155,107
<SALES> 60,858,160
<TOTAL-REVENUES> 60,858,160
<CGS> 0
<TOTAL-COSTS> 54,879,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,719,690
<INCOME-PRETAX> 1,323,680
<INCOME-TAX> 476,500
<INCOME-CONTINUING> 847,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 847,180
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
