<PAGE>
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, 1998
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 1-10263
THE OFFICIAL INFORMATION COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 73-1341805
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
888 Seventh Avenue, 28th Floor, New York, New York 10106
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 247-5160
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OR 12(g) OF THE ACT: NONE
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 (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
As of May 10, 1998, 112,367 shares of common stock were outstanding, of
which 72,367 were owned by VS&A-T/SF, L.L.C. and 1,628, 3,831 and 34,541 were
owned by Fir Tree Value Fund LP., Fir Tree Institutional Value Fund L.P. and
Fir Tree Value Partners L.D.C., respectively.
<PAGE>
PART I
Item 1. Financial Information
2
<PAGE>
THE OFFICIAL INFORMATION COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS MARCH 31, DECEMBER 31,
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................. $11,449 $10,564
Accounts receivable, less reserve for doubtful accounts 13,567 11,018
Inventories ........................................... 260 329
Deferred tax assets ................................... 1,620 1,520
Notes receivable and other current assets ............. 2,011 1,345
Refundable income taxes ............................... 3,102 3,166
------- -------
Total current assets ......................... 32,009 27,942
------- -------
Notes receivable and investments ........................... 1,755 1,769
------- -------
Property, plant and equipment, at cost: .................... 17,953 16,963
Less accumulated depreciation ......................... 10,278 9,910
------- -------
Property, plant and equipment, net ........... 7,675 7,053
------- -------
Deferred tax assets ........................................ 1,150 1,150
Intangibles and other assets, net .......................... 32,332 33,052
------- -------
$74,921 $70,966
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable ........................................................ $ 4,208 $ 4,505
Accrued liabilities ..................................................... 11,495 9,261
Deferred revenue ........................................................ 4,984 2,843
Current portion of long-term debt ....................................... 1,211 1,232
--------- ---------
Total current liabilities ........................................ 21,898 17,841
--------- ---------
Long-term debt ............................................................... 101,997 102,302
Other liabilities ............................................................ 1,543 1,425
Minority interest ............................................................ 4,646 --
Stockholders' equity (deficit):
Common stock, $.10 par value, 150,000 and 10,000,000 shares authorized at
March 31, 1998 and December 31, 1997, respectively....................... 42 419
Additional paid-in capital .............................................. 48,197 47,820
Retained earnings ....................................................... 11,075 11,528
--------- ---------
59,314 59,767
Treasury stock .......................................................... (114,477) (110,369)
--------- ---------
Total stockholders' equity (deficit) ............................. (55,163) (50,602)
--------- ---------
$ 74,921 $ 70,966
========= =========
</TABLE>
4
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THE OFFICIAL INFORMATION COMPANY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Revenues
Operating revenues ........................................... $ 21,061 $ 17,130
Interest and other income .................................... 170 296
Gain on sale of assets, net .................................. 48 --
-------- --------
Total revenues ........................................ 21,279 17,426
-------- --------
Costs and expenses:
Operating costs .............................................. 13,596 10,744
General and administrative ................................... 4,008 3,763
Interest ..................................................... 2,692 155
Depreciation and amortization ................................ 1,313 1,112
-------- --------
21,609 15,774
-------- --------
Income (loss) before minority interest and income taxes (330) 1,652
Minority interest in earnings of consolidated entity .............. (146) --
Income tax (expense) benefit ...................................... 22 (716)
-------- --------
Net income (loss) ..................................... $ (454) $ 936
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
THE OFFICIAL INFORMATION COMPANY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1998 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................ $ (454) 936
-------- --------
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization ............................. 1,313 1,112
(Gain) loss on sale of assets ............................. (48) 206
Minority interest in earnings of consolidated
entity ............................................... 146 --
Deferred income taxes ..................................... 64 242
Other ..................................................... 80
Changes in assets and liabilities ......................... 221 217
-------- --------
Total adjustments ................................ 1,696 1,857
-------- --------
Net cash provided by operating activities .................. 1,242 2,793
-------- --------
Cash flows from investing activities:
Collections on contract and notes receivable ..................... 14 533
Capital expenditures ............................................. (1,245) (1,455)
Proceeds from the sale of assets ................................. 303 35
Payments for acquisition, net of cash acquired ................... -- (328)
Payments on deferred contract liabilities ........................ (103) (216)
-------- --------
Net cash provided by (used in) investing
activities ............................................. (1,031) (1,431)
-------- --------
Cash flows from financing activities:
Principal payments of long-term debt ............................. (326) (831)
Borrowings under bank lines-of-credit ............................ -- 1,500
Issuance of common stock ......................................... -- 40
Minority interest ................................................ 4,500
Repurchase of common stock ....................................... (3,500) (1,373)
-------- --------
Net cash provided by (used in) financing activities ........ 674 (664)
-------- --------
Net increase (decrease) in cash and cash equivalents .................. 885 698
Cash and cash equivalents at beginning of period ...................... 10,564 2,257
-------- --------
Cash and cash equivalents at end of period ............................ $ 11,449 2,955
======== ========
See accompanying notes to consolidated condensed financial statements.
6
<PAGE>
THE OFFICIAL INFORMATION COMPANY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated condensed financial statements of
The Official Information Company ("TOIC" or the "Company"), formerly T/SF
Communications Corporation ("T/SF"), include the accounts of TOIC, its
wholly-owned subsidiaries, T/SF Holdings, LLC ("Holdings LLC"), T/SF
Operating LLC ("Operating LLC") and the limited liability companies
wholly owned by Holdings LLC and Operating LLC (the "Subsidiary LLCs").
Through its priority interest in Holdings LLC and Operating LLC, TOIC has
voting, operational and management control of Holdings LLC, Operating LLC
and the Subsidiary LLCs and, accordingly, the financial statements of
these entities are consolidated herein. Income allocated to TOIC from
Holdings LLC and Operating LLC is the lesser of net earnings or the
preferred return, such amount being defined as an 11% cumulative annual
compounded return on TOIC's undistributed capital in each, respectively.
Losses are allocated first to the common members of Holdings LLC and
Operating LLC. TOIC, Holdings LLC and Operating LLC share common
management, resources and control. Prior to the drop down restructuring
(see Note B) in February 1998, the operations of Holdings LLC, Operating
LLC and the Subsidiary LLCs were wholly-owned by TOIC.
INTERIM REPORTING. The accompanying interim consolidated condensed
financial statements reflect all adjustment which, in the opinion of
management are considered necessary for a fair presentation of the
interim periods presented. All such adjustments are of a normal recurring
nature. Due to the seasonal nature of the business, the results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31,
1998. For further information, refer to the consolidated financial
statements and related notes thereto included in TOIC's annual report on
Form 10-K for the year ended December 31, 1997.
RECLASSIFICATION. Certain amounts in the 1997 consolidated condensed
financial statements have been reclassified to conform with the 1998
presentation.
B. DROP DOWN RESTRUCTURING
During 1997, the Company adopted a two phased leveraged recapitalization
plan of the Company's ownership and capital structure. Phase I included a
tender offer for substantially all of TOIC's outstanding common stock;
selling newly-issued common stock to a new investor, VS&A-T/SF, L.L.C.
and repurchasing substantially all of the outstanding stock options.
Phase II was completed on February 27, 1998 and included a reverse stock
split to eliminate all shares of the Company's common stock other than
those owned by the Equity Investors (as defined below) and a
restructuring of the Company and its subsidiaries. As of March 31, 1998,
VS&A-T/SF and entities controlled by Fir Tree Partners (together referred
to as the Equity Investors) own approximately 64% and 36% of TOIC's
common stock, respectively.
The reverse stock split provided that each then outstanding share of
common stock other than treasury stock and stock owned by the Equity
Investors was converted into the right to receive $40.25 for each
pre-split share.
7
<PAGE>
In the drop down restructuring, TOIC and certain of its wholly owned
subsidiaries contributed substantially all of the assets and liabilities
of TOIC's Business to Business Communication Segment into Holdings LLC in
exchange for a $45 million priority equity interest which carries an 11%
annual distribution. Simultaneous with this event, Holdings LLC
contributed the assets received to the Subsidiary LLCs in exchange for a
99% interest. TOIC also purchased a priority interest in Operating LLC,
which holds the remaining 1% interest in the Subsidiary LLCs. The Equity
Investors purchased common equity interests in Holdings LLC and Operating
LLC for approximately $4.5 million in the same proportion as their
ownership of TOIC. TOIC has voting, operational and management control of
Holdings LLC and Operating LLC.
C. CONSOLIDATING SCHEDULE OF NET INCOME
The following consolidating schedule of net income (loss) for the three
months ended March 31, 1998 includes the accounts of TOIC and the
combined accounts of Holdings LLC, Operating LLC and the Subsidiary LLCs.
All material intercompany transactions have been eliminated.
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS T/SF
TOIC LLC ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUE:
Business to Business Communication ................................ 6,929 5,277 12,206
Information services .............................................. 8,854 -- 8,854
Other income ...................................................... 217 2 219
---------- -------- ------------ ------------
16,000 5,279 21,279
---------- -------- ------------ ------------
COST AND EXPENSES:
Business to Business Communication ................................ 5,029 3,842 8,871
Information services .............................................. 4,725 -- 4,725
General and administrative ........................................ 3,282 726 4,008
Interest .......................................................... 2,692 -- 2,692
Depreciation and amortization ..................................... 1,164 149 1,313
---------- -------- ------------ ------------
Total cost and expenses ........................................... 16,892 4,717 21,609
---------- -------- ------------ ------------
INCOME BEFORE PRIORITY AND MINORITY INTERESTS AND INCOME TAXES (892) 562 (330)
Priority interest in net earnings of Holdings LLC ................. 416 (416)
---------- -------- ------------ ------------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS ............ (476) 562 (416) (330)
Income tax (expense) benefit ...................................... 22 22
Minority interest in net earnings of consolidated entity .......... (146) (146)
---------- -------- ------------ ------------
NET INCOME (LOSS) ............................................ (454) 562 (562) (454)
========== ======== ============ ============
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
The Company is a diversified business media company which principally
operates two lines of business: (i) business and professional information
services and (ii) business to business communications, publishing and related
service. In February 1997, the Company increased its ownership in Casino
Publishing Company, publisher of the trade journal, Casino Executive, to 88%,
which is included in the Company's consolidated operations since that date.
Effective January 31, 1998, the Company acquired the remaining interests in
Casino Publishing Company. Effective May 1, 1997, the Company acquired a
majority ownership in Galaxy Expocard Europe B.V. and increased its ownership
to 73% effective July 1, 1997.
Information Services provides specialized information and database
management services to selected market segments. Total Information Services,
Inc. ("TISI") is a leading supplier of pre-employment screening information to
the trucking industry and a provider of risk assessment and underwriting
information to agents, underwriters and others in the insurance industry.
CORSEARCH, Inc. acquired by the Company in 1996, is the second largest supplier
in the United States of trademark and trade name searches and information
research.
The Company's Business to Business Communications operations are
conducted through several individual businesses, each of which is
characterized by leading competitive positions within specialized market
niches. Business to Business Communications includes: (i) Atwood Publishing,
LLC and its affiliates (collectively, "Atwood"), the largest domestic
independent publisher of exposition and association related publications and
directories; (ii) Galaxy Information Services, LLC ("Galaxy"), the largest
independent provider of trade show and convention registration, exhibitor
information and "lead" management services in the United States and (iii) GEM
Communications, LLC and its affiliates (collectively, "GEM"), the owner and
operator of the World Gaming Congress, the world's largest trade show catering
to the legalized gaming industry and the publisher of trade magazines directed
to the legalized gaming industry, principally IGWB, the leading gaming
industry magazine, and Casino Executive, the major magazine for casino
management.
As part of the Recapitalization, VS&A-T/SF and Fir Tree caused the
Company, directly or indirectly, to contribute to T/SF Holdings, LLC
("Holdings LLC") substantially all of the assets and liabilities of the
predecessors of Atwood, Galaxy and GEM in exchange for a $45.0 million
preferred equity interest in Holdings LLC and VS&A-T/SF and Fir Tree
contributed $4.5 million to acquire the common equity interests in Holdings
LLC in the same proportion as their ownership of the common stock immediately
following the consummation of the Recapitalization. The preferred equity
interest held, directly or indirectly, by the Company carries an 11% annual
distribution rate and, together with a voting agreement among its wholly owned
subsidiaries, gives the Company voting, operational and management control of
Holdings LLC. As part of the Recapitalization, Holdings LLC contributed
substantially all of the assets of the predecessors of Galaxy, Atwood and GEM
into several limited liability companies (the "Subsidiary LLCs"). 99% of the
common equity interests of each Operating LLC is owned by Holdings LLC and
gives Holdings LLC voting, operational and management control of such entities
and a 1% common equity interest of each Subsidiary LLC is owned by T/SF
Operating, LLC ("Operating LLC"). The preferred equity interest in Operating
LLC is owned by Holdings LLC and the common equity interests of Operating LLC
are held by VS&A-T/SF and Fir Tree in the same proportion as their ownership
of the common stock immediately following the consummation of the
Recapitalization. Through its priority interest in Holdings LLC and Operating
LLC, the Company has voting, operational and management control of Holdings
LLC, Operating LLC and the Subsidiary LLCs. As a result of such control, the
financial results of Holdings LLC, Operating LLC and the Subsidiary LLCs are
included in the consolidated financial statements of the Company.
9
<PAGE>
RESULTS OF OPERATION
Revenues. Revenues for the three months ended March 31, 1998 totaled
$21.3 million, an increase of $3.9 million (22%) over the first quarter of
1997. The Business to Business Communications segment Revenue totaled $12.2
million for the three months ended March 31, 1998, an increase of $3.3 million
or 37% over the first quarter 1997. At Galaxy, the return of several bi-annual
trade shows, an overall increase of 26% in the number of shows completed and
Galaxy Europe, which was not consolidated in the first quarter of 1997,
contributed $1.5 million to the revenue growth. At Atwood, the addition of the
Dallas Market Center business and strong periodical publishing led to a 41%
increase in revenue in the first quarter of 1998 compared with the first
quarter of 1997. The addition of a new show managed by GEM for Dion
Entertainment, Inc. -- "Bingo World Expo and Conference" -- contributed to a
30% increase in Revenue at GEM.
The Information Services segment produced first quarter 1998 revenue of
$8.9 million, an increase of $622,000 (8%) over the first quarter of 1997.
CORSEARCH increased revenue 11% during the first quarter of 1998 compared with
the first quarter of 1997. This return to double digit growth from relatively
flat revenue growth during 1997, compared with 1996, resulted from the
addition of research capacity during the first quarter 1997 and increased
sales and marketing efforts. TISI's first quarter 1998 revenue increased 7%
over the first quarter of 1997. TISI's revenue growth was impacted somewhat by
anticipated enactment in late 1997 of Fair Credit Reporting Act regulations
which have slowed the processing of employment history records. TISI's
Crimesearch affiliate, acquired in 1996, experienced a 90% increase in first
quarter revenue reflecting growing demand for criminal records.
Operating Costs. Operating Costs increased $2.8 million or 26% during the
first quarter of 1998 compared with the same period in 1997. Business to
Business Communications first quarter 1998 Operating Costs increased by $2.3
million (36%) on 37% higher revenue compared with first quarter 1997. Growth
was attributable principally to a 40% increase in volume at Atwood, additional
trade shows at Galaxy, inclusion of Galaxy Europe, and the new "Bingo World
Expo" show managed by GEM.
Information Services Operating Costs increased 12% during the first
quarter of 1998 compared with the first quarter of 1997. The increase was
attributable principally to the expansion of research capacity at CORSEARCH
and higher criminal record and pre-employment screening volume at TISI, offset
partially by lower costs resulting from elimination of National Employment
Screening Services, Inc., an unprofitable business venture, closed by TISI in
1997.
General and Administrative Expenses. General and Administrative Expenses
increased $245,000 (6%) during the first quarter of 1998 compared with the
first quarter of 1997. Approximately $300,000 of the increase was attributable
to the consolidation of Galaxy Europe which was not included in the first
quarter 1997 results. General and Administrative Expenses were favorably
impacted during the first quarter of 1998 by elimination of NESS,
restructuring of two unprofitable magazines to consolidate overhead and lower
corporate overhead resulting principally from elimination of the Tulsa,
Oklahoma corporate office and establishment of a smaller corporate office in
New York City.
Depreciation and Amortization. Depreciation and Amortization increased
$201,000 (18%) during the first quarter of 1998 compared with the same period
in 1997. Capital spending at CORSEARCH to support its new online product and
expansion of capacity and a new project at TISI accounted for the increase.
10
<PAGE>
Interest Expense. Interest Expense totaled $2.7 million for the three
months ended March 31, 1998, compared with $155,000 for the same period in
1997. The increase of $2.5 million resulted from interest on new debt incurred
in connection with the Recapitalization.
EBITDA. EBITDA totaled $3.7 million during the first quarter of 1998
compared with $2.9 million during the same 1997 period, an increase of
$758,000 or 26%. The increase resulted from higher EBITDA in the Business to
Business Communications segment (up $358,000 - 46%) and the Information
Services segment (up $270,000 or 11%) and lower corporate expenses net of
other income (down $130,000 or 41%).
EBITDA, as presented, represents operating income plus depreciation and
amortization. EBITDA is included because management understands that such
information is considered by certain investors to be an additional basis on
which to evaluate the Company's ability to pay interest expense, repay debt
and make capital expenditures. Excluded from EBITDA are interest expenses,
income taxes, depreciation and amortization, unusual gains, minority interest
in consolidated subsidiaries, discontinued operations, net and extraordinary
loss, net of tax, each of which can significantly affect the Company's results
of operations and liquidity and should be considered in evaluating the
Company's financial performance. EBITDA is not intended to represent and
should not be considered more meaningful than, or an alternative to, measures
of operating performance as determined in accordance with generally accepted
accounting principles.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. In connection with the Recapitalization, the Company: (i)
borrowed $13 million under a $25.0 million revolving senior credit facility
(the "Senior Credit Facility") with First Union National Bank ("FUNB"); (ii)
issued $80.0 million aggregate principal amount of notes pursuant to a
facility (the "Bridge Financing Facility") provided by First Union
Corporation; and (iii) received $40.0 million of equity contributions (the
"Equity Contributions") from VS&A-T/SF and Fir Tree. On October 29, 1997, the
Company completed the private sale to First Union Capital Markets Corp. (the
"Initial Purchaser") of $100.0 million principal amount of Senior Subordinated
Notes due 2007 (the "Old Notes") at a price of 97% of the principal amount
thereof. The Initial Purchaser resold the Old Notes to a limited number of
qualified institutional buyers at an initial price to investors of 100% of the
principal amount thereof, with net proceeds to the Company of $97.0 million
(the "Offering"). The Offering was a private placement transaction exempt from
the registration requirements of the Securities Act pursuant to Rule 144A and
Section 4 thereof. The net proceeds of the Notes sold pursuant to the Offering
were applied to repay indebtedness incurred in connection with the
Recapitalization under the Senior Credit Facility and the Bridge Financing
Facility. On February 10, 1998, the Company offered to exchange up to
$100,000,000 aggregate principal amount of Old Notes for up to an equal
aggregate principal amount of new notes (the "New Notes" and, together with
the Old Notes, the "Notes")). The New Notes are obligations of the Company
entitled to the benefits of the Indenture (the "Indenture") relating to the
Old Notes and the form and terms of the New Notes are identical in all
material respects to the form and terms of the Old Notes except that the New
Notes have been registered under the Securities Act and do not contain terms
with respect to transfer restrictions.
11
<PAGE>
The Company's principal sources of funds are anticipated to be cash flows
from operating activities and borrowings under the Senior Credit Facility.
Based upon the successful implementation of management's business and
operating strategy, the Company believes that these funds will provide the
Company with sufficient liquidity and capital resources for the Company to
meet its current and future financial obligations, including the payment of
principal and interest on the Notes, as well as to provide funds for the
Company's working capital, capital expenditures and other needs. No assurance
can be given, however, that this will be the case. As of March 31, 1998, the
Company had $25.0 million of availability under the Senior Credit Facility.
The Company's future operating performance and ability to service or refinance
the Notes and to repay, extend or refinance the Senior Credit Facility will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control. In addition, any
future acquisitions by the Company would likely require additional financing.
In the event of a Change of Control (as defined in the Indenture), the
Company will be required to make an offer for cash to repurchase the Notes at
101% of the principal amount thereof, plus accrued and unpaid interest and
Additional Interest (as defined in the Indenture), if any, thereon to the
repurchase date. Certain events involving a Change of Control would result in
an event of default under the Senior Credit Facility or other indebtedness of
the Company that may be incurred in the future. Moreover, the exercise by the
holders of the Notes of their right to require the Company to repurchase the
Notes may cause an event of default under the Senior Credit Facility or such
other indebtedness, even if the Change of Control does not. Finally, there can
be no assurance that the Company will have the financial resources necessary
to repurchase the Notes upon a Change of Control.
Capital Expenditures. Management anticipates that capital expenditures in
1998 will be approximately $7.1 million. The primary capital expenditures will
be for computers, software, furniture and office equipment and to acquire
additional "reader boxes" at Galaxy. TISI continues to offer its customers in
the trucking industry credits for providing employment information to be
utilized in its database, which credits can be used against charges for future
services from such division. All of the credits earned are considered capital
expenditures for the acquisition of such data. Management anticipates positive
cash flow from operations in 1998, even after the anticipated capital
expenditures for 1998. Thus, with the Company's available cash reserves and
cash flow, management does not anticipate a need for capital during 1998
except for possible, and as yet unidentified, acquisitions.
INFLATION
Management anticipates the effect of inflation on the Company's
operations during 1998 will be primarily limited to the effects which general
inflation will have on costs in most areas in which the Company operates.
YEAR 2000 COMPLIANCE
The Company is modifying its computer systems to be Year 2000 compliant.
The Company does not expect that the cost of modifying such systems will be
material. The Company believes it will achieve Year 2000 compliance in advance
of the year 2000, and does not anticipate any material disruption in its
operations as the result of any failure by the Company to be in compliance.
The Company does not have any information concerning the Year 2000 compliance
status of its suppliers and customers.
NEW ACCOUNTING PRONOUNCEMENTS
The FASB issued Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information (SFAS
131) in June 1997. SFAS 131 supersedes FASB Statement No. 14, Financial
Reporting for Segments of a Business Enterprise, but retains the requirement to
report information about major customers. SFAS 131 replaces the "industry
segment" concept of Statement 14 with a "management approach" concept as the
basis for identifying reportable segments. The management approach is based on
the way that management organizes the segments within the enterprise for
12
<PAGE>
making operating decisions and assessing performance. Consequently, the
segments are evident from the structure of the enterprise's internal
organization. It focuses on financial information that an enterprise's
decision makers use to make decisions about the enterprise's operating
matters. SFAS 131 is effective for financial statements issued for fiscal
years beginning after December 15, 1997 and is not anticipated to have a
significant impact on the Company's segment reporting. SFAS 131 has not been
adopted for the interim period ending March 31, 1998.
FORWARD-LOOKING STATEMENTS
This Quarterly Report for the quarter ended March 31, 1998 as well as
other public documents of the Company contains forward-looking statements
which involve risks and uncertainties. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for certain forward-looking
statements. When used in this Quarterly Report, the words "estimate,"
"project," "anticipate," "expect," "intend," "believe," "seek," "plan," as
well as variations of such words and similar expressions, are intended to
identify forward-looking statements. While management believes these
statements are reasonable, actual results could differ materially from those
projected by such forward-looking statements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The holders of the Company's common stock unanimously approved (i) by a
written consent dated March 29, 1998 the amendment of the Certificate of
Incorporation of the Company to effectuate a 10-for-1 reverse stock split of
the Company's common stock and (ii) by a written consent dated March 30, 1998
the amendment of the Certificate of Incorporation of the Company to change the
name of the Company to "The Official Information Company."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
Financial Data Schedule (Exhibit 27)
(b) Reports on Form 8-K
The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 1998.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: May 15, 1998
THE OFFICIAL INFORMATION COMPANY
By /s/ Ian L.M. Thomas
-----------------------------------------------
IAN L. M. THOMAS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By /s/ Steven J. Hunt
-----------------------------------------------
STEVEN J. HUNT
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,449
<SECURITIES> 0
<RECEIVABLES> 14,162
<ALLOWANCES> (595)
<INVENTORY> 260
<CURRENT-ASSETS> 32,009
<PP&E> 17,953
<DEPRECIATION> 10,278
<TOTAL-ASSETS> 74,921
<CURRENT-LIABILITIES> 21,898
<BONDS> 101,997
0
0
<COMMON> 42
<OTHER-SE> (55,205)
<TOTAL-LIABILITY-AND-EQUITY> 74,921
<SALES> 21,061
<TOTAL-REVENUES> 21,279
<CGS> 13,596
<TOTAL-COSTS> 13,596
<OTHER-EXPENSES> 1,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,692
<INCOME-PRETAX> (330)
<INCOME-TAX> 22
<INCOME-CONTINUING> (454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (454)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
