<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 JUNE 30, 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 1-10263
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.)
250 West 57th, Suite #2421, 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 August 13, 1999, 112,367 shares of common stock were outstanding,
of which 72,367 were owned by VS&A T/SF, L.L.C. 34,541, 3,831 and 1,628 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 JUNE 30, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,754 $ 3,878
Accounts receivable, less reserve for doubtful
accounts 22,213 17,555
Inventories 200 231
Deferred tax assets 112 260
Prepaid expenses and other current assets 2,596 1,726
------- -------
Total current assets 27,875 23,650
------- -------
Notes receivable and investments 313 411
------- -------
Property, plant and equipment, at cost: 24,613 21,609
Less accumulated depreciation 14,621 12,584
------- -------
Property, plant and equipment, net 9,992 9,025
------- -------
Deferred tax assets 1,185 1,185
Intangibles and other assets, net 59,612 40,263
------- -------
$98,977 $74,534
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) JUNE 30, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,022 $ 2,967
Accrued liabilities 10,593 9,984
Customer deposits 20,539 --
Deferred revenue 7,702 6,680
Current portion of long-term debt 1,885 1,367
--------- ---------
Total current liabilities 42,741 20,998
--------- ---------
Long-term debt 98,671 99,385
Other liabilities 1,287 1,353
Minority interest 10,984 6,991
Stockholders' equity (deficit):
Common stock, $.10 par value, 150,000 shares authorized
at June 30, 1999 and December 31, 1998, respectively 42 42
Additional paid-in capital 48,197 48,197
Retained earnings 11,531 12,044
--------- ---------
59,770 60,283
Treasury stock (114,476) (114,476)
--------- ---------
Total stockholders' equity (deficit) (54,706) (54,193)
--------- ---------
$ 98,977 $ 74,534
========= =========
</TABLE>
4
<PAGE>
THE OFFICIAL INFORMATION COMPANY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Operating revenues $ 26,049 $ 20,754 $ 49,231 $ 39,817
Interest and other income 21 232 26 344
Loss on sale of assets, net -- (134) -- (86)
-------- -------- -------- --------
Total revenues 26,070 20,852 49,257 40,075
-------- -------- -------- --------
Costs and expenses:
Operating costs 11,965 9,975 22,543 19,358
General and administrative 7,970 6,375 15,639 12,540
Interest 2,762 2,682 5,415 5,374
Depreciation and amortization 2,155 1,493 3,980 2,806
-------- -------- -------- --------
24,852 20,525 47,577 40,078
-------- -------- -------- --------
Income (loss) before minority interest
and income taxes 1,218 327 1,680 (3)
Minority interest in earnings of consolidated
entity (1,431) (456) (1,993) (602)
Income tax expense (80) (68) (200) (46)
-------- -------- -------- --------
Net loss $ (293) $ (197) $ (513) $ (651)
======== ======== ======== ========
</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>
SIX MONTHS ENDED
JUNE 30,
--------
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (513) $ (651)
Adjustments to reconcile net loss to net
Cash provided by operating activities:
Depreciation and amortization 3,980 2,806
Loss on sale of assets -- 86
Minority interest in earnings of consolidated entity 1,993 602
Deferred income taxes 145 (85)
Changes in operating assets and liabilities 2,006 (870)
-------- --------
Total adjustments 8,124 2,539
-------- --------
Net cash provided by operating activities 7,611 1,888
-------- --------
Cash flows from investing activities:
Collections on contract and notes receivable 18 15
Capital expenditures (2,622) (2,916)
Proceeds from the sale of assets -- 308
Payments for acquisitions, net of cash acquired (7,844) (2,009)
Payments on deferred contract liabilities (90) (205)
-------- --------
Net cash used in investing activities (10,538) (4,807)
-------- --------
Cash flows from financing activities:
Principal payments of long-term debt-net (197) (767)
Minority interest 2,000 4,500
Repurchase of common stock -- (3,600)
-------- --------
Net cash provided by financing activities 1,803 133
-------- --------
Net decrease in cash and cash equivalents (1,124) (2,786)
Cash and cash equivalents at beginning of period 3,878 10,564
-------- --------
Cash and cash equivalents at end of period $ 2,754 $ 7,778
======== ========
</TABLE>
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"), include the
accounts of TOIC, its wholly-owned subsidiaries, TOIC Holdings, LLC
("Holdings LLC") and the limited liability companies wholly owned by
Holdings LLC (the "Subsidiary LLCs"). Through its priority interest in
Holdings LLC, TOIC has voting, operational and management control of
Holdings LLC and the Subsidiary LLCs and, accordingly, the financial
statements of these entities are consolidated herein. Income allocated to
TOIC from Holdings 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 LLC, respectively. Losses are
allocated first to the common members of Holdings LLC. TOIC and Holdings LLC
share common management, resources and control. Prior to the drop down
restructuring (see Note B) in February 1998, the operations of Holdings 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 and
six months ended June 30, 1999 are not necessarily indicative of the results
to be expected for the year ending December 31, 1999. 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, 1998.
RECLASSIFICATIONS
Certain 1998 account balances have been reclassified to conform to the 1999
consolidated financial statement presentation.
B. RECAPITALIZATION
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 June 30, 1999, 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 another limited liability company
("Operating LLC"), which held 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. Effective as of December 31, 1998, Operating LLC
merged with and into Holdings LLC, with Holdings LLC being the surviving
entity. TOIC has voting, operational and management control of Holdings LLC.
C. DEBT GUARANTORS
Atwood Publishing LLC, Galaxy Information Services LLC, GEM Communications
LLC, I.T.S. Information Services, LLC, Holdings LLC (collectively the "LLC
Guarantors"), TISI and Corsearch, (collectively, the "Subsidiary Guarantors"
and, together with the LLC Guarantors, the "Guarantors") are included in the
consolidated results of the Company. Because the Company, directly or
indirectly, owns all of the voting interests in the LLC Guarantors, the LLC
Guarantors are considered wholly owned subsidiaries of the Company as
defined by Regulation S-X. The Company indirectly owns all of the voting
shares of the Subsidiary Guarantors.
Each of the Guarantors jointly and severally guarantee all of the Company's
debt, on a full and unconditional basis. For accounting purposes, all
Guarantors are consolidated. Separate financial statements and other
disclosures concerning the Guarantors are not presented because the
Company's management has determined that they are not material to investors.
The Senior Credit Facility contains covenants, among others, restricting the
ability of the Company and the Guarantors to: (i) declare dividends or
redeem or purchase capital stock; (ii) prepay, redeem or purchase debt;
(iii) incur liens and engage in sale-leaseback transactions; (iv) make loans
and investments; (v) issue more debt; (vi) amend or otherwise alter debt and
other material agreements; (vii) make capital expenditures; (viii) engage in
mergers, acquisitions and asset sales; (ix) transact with affiliates and (x)
alter its lines of business. The net assets of the Guarantors approximated
$63,373,000 as of June 30, 1999.
Included in the 1999 financial results of the LLC Guarantors are the six
months activity of Atwood Publishing LLC, Galaxy Information Services LLC,
GEM Communications LLC, Holdings LLC and two months (from May 1, 1999)
activity of I. T. S. Information Services, LLC. Included in the 1998
financial results of the Subsidiary Guarantors are the two months of
operations of Atwood Publishing, Inc., Galaxy Information Services, Inc.,
GEM Communications, Inc. and the six months results of TISI and Corsearch.
8
<PAGE>
The following are condensed consolidating financial statements of The
Official Information Company and the Guarantors for each period presented:
<TABLE>
<CAPTION>
JUNE 30,1999
BALANCE SHEET
(UNAUDITED)
ASSETS
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 2,811 $ 10,811 $ 14,252 $ 25,063 -- $ 27,875
Notes receivable and
investments 35 73 205 278 -- 313
Investment in
subsidiaries & affil 56,276 -- 7,096 7,096 (63,373) --
PPE-Net 226 5,292 4,473 9,766 -- 9,992
Deferred tax assets 1,185 -- -- -- -- 1,185
Intangibles and other
assets-net 3,192 35,572 20,874 56,420 -- 59,612
--------------------------------------------------------------------------------
Total assets $ 63,727 $ 51,748 $ 46,874 $ 98,622 $(63,373) $ 98,977
======== ======== ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 10,151 $ 26,370 $ 6,221 $ 32,591 $ -- $ 42,741
Long term debt 98,541 -- 130 130 98,671
Other liabilities 792 104 391 495 1,287
Minority interest 8,949 2,035 -- 2,035 10,984
Total stockholders'
equity (deficit) (54,706) 23,240 40,133 63,373 (63,373) (54,706)
--------------------------------------------------------------------------------
Total liabilities and
Stockholders' equity $ 63,727 $ 51,748 $ 46,874 $ 98,622 $(63,373) $ 98,977
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,1999
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ (77) $ 29,213 $ 20,121 $ 49,334 $ -- $ 49,257
Costs and expenses:
Operating costs -- 15,491 7,052 22,543 -- 22,543
General & admin 1,713 7,285 6,640 13,926 -- 15,639
Interest 5,378 3 34 37 -- 5,415
Deprec. & amort 252 1,961 1,766 3,727 -- 3,980
--------------------------------------------------------------------------------
Total costs 7,344 24,740 15,493 40,233 -- 47,577
Income (loss) before
income taxes (7,421) 4,472 4,628 9,101 -- 1,680
Minority interest -- (35) -- (35) (1,958) (1,993)
Income tax expense (200) -- -- -- -- (200)
Earnings (losses) of
subsidiaries 2,479 -- -- -- (2,479) --
--------------------------------------------------------------------------------
Net income (loss) $ (5,142) $ 4,437 $ 4,628 $ 9,066 $ (4,437) $ (513)
======== ======== ======== ======== ======== ========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,1999
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (5,141) $ 4,437 $ 4,628 $ 9,065 $ (4,437) $ (513)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities, net 397 1,997 1,766 3,763 1,958 6,118
Changes in assets and
liabilities, net 3,890 1,168 (5,531) (4,363) 2,479 2,006
------------------------------------------------------------------------------
Net cash (used in)
provided by operating
activities (854) 7,602 864 8,465 -- 7,611
Cash flows from
investing activities:
Collections on
Contract & notes
Receivable 18 -- -- -- 18
Capital expenditures (62) (957) (1,603) (2,560) (2,622)
Proceed from the
Sale of assets -- -- -- --
Payments for --
Acquisitions, net of
Cash acquired -- (7,844) -- (7,844) (7,844)
Payments on
Deferred contract
Liabilities (90) -- -- -- (90)
------------------------------------------------------------------------------
Net cash used in by
investing activities (134) (8,801) (1,603) (10,404) (10,538)
Cash flows from financing
activities:
Principal payments
of long-term
debt-net (197) -- -- -- (197)
Debt financing cost -- -- -- -- --
Retirement of bonds -- -- -- -- --
Minority interest -- 2,000 -- 2,000 2,000
Repurchase of
Common stock -- -- -- -- --
------------------------------------------------------------------------------
Net cash (used in)
provided by financing
activities (197) 2,000 -- 2,000 1,803
------------------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (1,185) 801 (739) 61 (1,124)
Cash equivalents at
beginning of period 1,078 2,339 461 2,800 3,878
------------------------------------------------------------------------------
Cash equivalents at end
of period $ (107) $ 3,319 $ (278) $ 2,861 $ 2,754
======== ======== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
BALANCE SHEET
ASSETS
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 9,973 $ 4,337 $ 9,340 $ 13,677 $ -- $ 23,650
Notes receivable and
investments (4,727) 5,138 -- 5,138 -- 411
Investment in
subsidiaries & affil 46,694 517 7,096 7,613 (54,307) --
PPE-Net 193 4,462 4,370 8,832 9,025
Deferred tax assets 1,185 -- -- -- -- 1,185
Intangibles and other
assets-net 3,417 15,646 21,200 36,846 -- 40,263
-------------------------------------------------------------------------------
Total assets $ 56,735 $ 30,100 $ 42,006 $ 72,106 $(54,307) $ 74,534
======== ======== ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 4,529 $ 10,673 $ 5,796 $ 16,469 $ -- $ 20,998
Long term debt 99,043 -- 342 342 -- 99,385
Other liabilities 882 107 364 471 -- 1,353
Minority interest 6,474 517 -- 517 -- 6,991
Total stockholders'
equity (deficit) (54,193) 18,803 35,504 54,307 (54,307) (54,193)
-------------------------------------------------------------------------------
Total liabilities and
Stockholders' equity $ 56,735 $ 30,100 $ 42,006 $ 72,106 $(54,307) $ 74,534
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,1998
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 258 $ 21,792 $ 18,025 $ 39,817 $ -- $ 40,075
Costs and expenses:
Operating costs -- 12,699 6,659 19,358 -- 19,358
General & admin 1,018 5,625 5,896 11,521 -- 12,540
Interest 5,325 -- 49 49 -- 5,374
Deprec. & amort 220 1,105 1,482 2,587 -- 2,806
-------------------------------------------------------------------------------
Total costs 6,563 19,429 14,086 33,515 -- 40,078
Income (loss) before
income taxes (6,305) 2,363 3,939 6,302 (3)
Minority interest -- -- -- -- (602) (602)
Income tax expense (46) -- -- -- (46)
Earnings (losses) of
subsidiaries 1,671 -- -- -- (1,671) --
-------------------------------------------------------------------------------
Net income (loss) $ (4,680) $ 2,363 $ 3,939 $ 6,302 $ (2,273) $ (651)
======== ======== ======== ======== ======== ========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,1998
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (4,680) $ 3,939 $ 2,363 $ 6,302 $(2,273) $ (651)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities, net 221 1,104 1,482 2,586 602 3,409
Changes in assets and
liabilities, net 2,456 (1,358) (3,639) (4,997) 1,671 (870)
-------------------------------------------------------------------------------
Net cash (used in)
provided by operating
activity (2,003) 3,685 206 3,891 -- 1,888
Cash flows from
investing activities:
Collections on
Contract & notes
Receivable 15 -- -- -- -- 15
Capital expenditures (73) (1,837) (1,006) (2,843) -- (2,916)
Proceed from the
Sale of assets 308 -- -- -- -- 308
Payments for
Acquisitions, net of
Cash acquired -- (2,009) -- (2,009) -- (2,009)
Payments on
Deferred contract
Liabilities (205) -- -- -- -- (205)
-------------------------------------------------------------------------------
Net cash provided by
(used in) investing
activities 45 (3,846) (1,006) (4,852) -- (4,807)
Cash flows from
financing activities:
Principal payments (767)
of long-term debt (767) -- -- -- --
Minority interest 4,500 -- -- -- -- 4,500
Repurchase of
common stock (3,600) -- -- -- -- (3,600)
-------------------------------------------------------------------------------
Net cash provided by
financing activities 133 -- -- -- -- 133
-------------------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (1,825) (162) (800) (962) -- (2,786)
Cash equivalents at
beginning of period 7,541 2,170 854 3,024 -- 10,564
-------------------------------------------------------------------------------
Cash equivalents at end
of period $ 5,716 $ 2,008 $ 54 $ 2,062 $ -- $ 7,778
======== ======== ======== ======== ======= ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,1999
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ (82) $ 15,988 $ 10,165 $ 26,153 $ -- $ 26,070
Costs and expenses:
Operating costs -- 8,325 3,639 11,965 -- 11,965
General & admin 823 3,848 3,300 7,148 -- 7,970
Interest 2,747 -- 16 16 -- 2,762
Deprec. & amort 126 1,138 891 2,029 -- 2,155
-------------------------------------------------------------------------------
Total costs 3,696 13,311 7,846 21,157 -- 24,852
Income (loss) before
income taxes (3,778) 2,677 2,319 4,996 -- 1,218
Minority interest -- (35) -- (35) (1,396) (1,431)
Income tax (expense)
benefit (80) -- -- -- -- (80)
Earnings (losses) of
subsidiaries 1,246 -- -- -- (1,246) --
-------------------------------------------------------------------------------
Net income (loss) $ (2,612) $ 2,642 $ 2,319 $ 4,961 $(2,642) $ (293)
======== ======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,1998
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
TOIC LLC SUBSIDIARY SUBTOTAL TOIC
CORPORATE GUARANTORS GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 98 $ 11,556 $ 9,198 $ 20,754 $ -- $ 20,852
Costs and expenses:
Operating costs -- 6,426 3,549 9,975 -- 9,975
General & admin 616 2,795 2,964 5,759 -- 6,375
Interest 2,659 -- 23 23 -- 2,682
Deprec. & amort 110 624 759 1,383 -- 1,493
-------------------------------------------------------------------------------
Total costs 3,385 9,845 7,295 17,140 -- 20,525
Income (loss) before
income taxes (3,287) 1,711 1,903 3,614 -- 327
Minority interest -- (35) -- (35) (456) (456)
Income tax expense (68) -- -- -- -- (68)
Earnings (losses) of
subsidiaries 1,671 -- -- -- (1,671) --
-------------------------------------------------------------------------------
Net Income (loss) $ (1,684) $ 1,711 $ 1,903 $ 3,614 $ (2,217) $ (197)
======== ======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
D. BUSINESS SEGMENT INFORMATION
The FASB issued Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information (SFAS
No. 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
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. The Company adopted SFAS 131 in 1998.
Operations of the Company are conducted primarily through two business
segments primarily within the continental United States. These segments and
the primary operations of each are as follows:
BUSINESS TO BUSINESS COMMUNICATIONS
Publisher (Atwood) of various convention/trade show publications and trade
journals, provider (Galaxy) of registration services, exhibitor marketing
and information services all to the exposition industry, provider (I.T.S.)
of travel and hotel reservation services to the exposition industry and
owner (GEM) of the World Gaming Congress, a trade show catering to the
legalized gaming industry, and the publisher of several trade magazines and
newsletters.
INFORMATION SERVICES
Provider (TISI) of pre-employment screening information including motor
vehicle reports, truck driver employment information, worker's compensation
information, credit reports, criminal record reports and other
pre-employment screening information and services to the trucking, gaming
and other industries and motor vehicle reports to the insurance industry.
Provider (Corsearch) of trademark research and information services, using
both proprietary and public databases.
Corporate revenues consist principally of revenues from interest,
covenants-not-to-compete and miscellaneous non-operating income. Operating
profit is net revenues less applicable operating expenses and segment
general and administrative expenses. Corporate general and administrative
expenses are generally not allocated to each segment.
Identifiable assets by segment are those assets that are used in the
operations of each segment. Corporate assets consist principally of cash and
cash equivalents, notes receivable, prepaid expenses and corporate
furniture, fixtures and equipment. Capital expenditures include additions to
property, plant and equipment, goodwill and truck driver employment and
trademark information files.
During the second quarter of 1999 and 1998, no customer represented ten
percent or more of the Company's revenue or operating profit.
14
<PAGE>
Summarized financial information by industry segment is as follows:
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30, 1999
1999 1998 1999 1998
---- ---- ---- ----
(In thousands) (In thousands)
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES FROM SALES TO UNAFFILIATED CUSTOMERS:
Business to Business Communications $ 15,885 $ 11,556 $ 29,110 $ 21,792
Information Services 10,165 9,198 20,121 18,025
Corporate and other 21 98 26 258
-------- -------- -------- --------
26,070 20,852 49,257 40,075
======== ======== ======== ========
OPERATING INCOME (LOSS):
Business to Business Communications $ 2,574 $ 1,710 $ 4,372 $ 2,363
Information Services 2,335 1,926 4,662 3,988
-------- -------- -------- --------
Operating profit from segments 4,909 3,636 9,034 6,351
Corporate expenses, net (929) (627) (1,939) (980)
Interest expense (2,762) (2,682) (5,415) (5,374)
-------- -------- -------- --------
Income (loss) before income taxes $ 1,218 $ 327 $ 1,680 $ (3)
======== ======== ======== ========
DEPRECIATION AND AMORTIZATION:
Business to Business Communications $ 1,138 $ 624 $ 1,961 $ 1,105
Information Services 891 759 1,766 1,482
Corporate 126 110 252 220
-------- -------- -------- --------
$ 2,155 $ 1,493 $ 3,980 $ 2,806
======== ======== ======== ========
CAPITAL EXPENDITURES:
Business to Business Communications $ 468 $ 1,093 $ 957 $ 1,837
Information Services 972 539 1,603 1,006
Corporate 25 39 62 73
-------- -------- -------- --------
$ 1,455 $ 1,671 $ 2,622 $ 2,916
======== ======== ======== ========
IDENTIFIABLE ASSETS AT JUNE 30 AND DECEMBER 31: 1999 1998
---- ----
Business to Business Communications $ 51,748 $ 34,206
Information Services 39,778 33,804
Corporate 7,451 6,524
-------- --------
$ 98,977 $ 74,534
======== ========
</TABLE>
E. ACQUISITION
On April 30, 1999, the Company, through a subsidiary, acquired substantially
all of the assets and assumed substantially all of the liabilities of
International Travel Services, Inc. ("ITS") for an aggregate purchase price
of $22,650,000 plus transaction costs. Of the total purchase price of this
transaction, $11,134,000 was paid out of proceeds from the Company's line of
credit, $2,000,000 was paid from a contemporaneous minority equity
investment in Galaxy Information Services, LLC by certain former ITS
shareholders and the remainder was paid from existing cash. The acquisition
was accounted for under the purchase method of accounting.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
The Company is a diversified business information and media company which
principally operates two lines of business: (i) business and professional
information services and (ii) business to business marketing communications,
publishing and related service.
Information Services provides specialized information and database
management services to selected market segments. Total Information Services,
Inc. ("TISI") is a leading supplier of preemployment screening information to
the trucking, gaming and other industries and is 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. (iii) I.T.S. Information Services, LLC
("I.T.S."), a provider of housing, travel, event planning and registration
services for the tradeshow convention and exposition industry and (iv) 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.
Effective January 31, 1998, the Company acquired the remaining interests in
Casino Publishing Company. In June, 1998, GEM acquired all the assets and rights
to the International Gaming Business Exposition, a conference and trade show
serving the casino gaming industry. On September 1, 1998, GEM acquired all the
stock of UK based InterGame Limited, the publisher of the leading series of
publications for the international coin-operated amusement and gaming machines
and amusement park businesses. During 1998, GEM had a 49% interest in Gaming for
Africa Expo, a gaming trade show and conference held in South Africa, and Gaming
for Africa, the leading trade magazine for gaming in Sub-Saharan Africa.
Effective as of January 1, 1999, GEM acquired, in a series of transactions, the
business of Gaming for Africa Expo and Gaming for Africa. The investment had
previously been accounted for under the equity method. On April 30, 1999, the
Company, though I.T.S. Information Services, LLC, acquired substantially all of
the assets and assumed substantially all of the liabilities of International
Travel Service, Inc.
RESULTS OF OPERATION
Revenues. Revenues of $26.1 million and $49.3 million for the three and six
months periods ended June 30, 1999 respectively, were $5.2 million (25%) and
$9.2 million (23%) higher, respectively, than the same periods in the prior
year. Business to Business Communications segment Revenue totaled $15.9 million
and $29.1 million for the three and six months ended June 30, 1999,
respectively, an increase of $4.3 million (38%) and $7.3 million (34%),
respectively, over the three and six months ended June 30, 1998. At
16
<PAGE>
Galaxy, increased registration and exhibitor volume, and the growth of new lead
management and interactive services and inclusion of International Travel
Service ($2.1 million) as of May 1, 1999 contributed $2.5 million and $3.9
million to the revenue growth, respectively, over the same periods in the prior
year. At Atwood, growth in new directories business, a strong increase in new
digital products and expansion of proprietary publishing led to a 18% and 15%
increase in revenue in the three and six months periods of 1999, respectively,
compared to the same periods in 1998. The inclusion of InterGame ($1.5 million)
and Gaming for Africa ($533,000) which were not included in consolidated 1998
results until September 1, 1998 and January 1, 1999, respectively, contributed
to a 77% and 78% increase in the three and six months, respectively, in revenue
at GEM. Excluding the impact of acquisitions, the Business to Business
Communications segment revenue increased revenue 10% and 15%, respectively, for
the three and six months ended June 30, 1999, compared with the same period in
the prior year.
The Information Services segment produced revenue of $10.2 million and
$20.1million for the three and six month periods ended June 30, 1999,
respectively, an increase of $967,000 (11%) and $2.1 million (12%),
respectively, over the same three and six month periods of 1998. TISI's revenue
increased 20% and 18% for the three and six months ended June 30, 1999,
respectively, over the same periods of 1998 due principally to increased
criminal record volume and employment history searches, as compared to the prior
year and launch of World Gaming Network (WGN). WGN provides pre-employment
screening services to the casino gaming industry based on the successful DAC
model. TISI's Crimesearch affiliate, acquired in 1996, experienced a 76%
increase in first half 1999 revenue reflecting growing demand for criminal
records. Corsearch revenue decreased 15% and 9% during the three and six months
of 1999, respectively, compared with 1998, due principally to lower search
volume.
Operating Costs. Operating Costs increased $2.0 million (20%) and $3.2
million (17%) for the three and six month periods ended June 30, 1999,
respectively. Operating Costs of the Business to Business Communications segment
increased by $1.9 million (30%) and $2.8 million (22%) for the three and six
months ended June 30, 1999, respectively, on 38% and 34% higher revenue compared
with the same periods in 1998. Growth was attributable principally to increased
volume at Atwood and Galaxy and the inclusion of InterGame, Gaming for Africa at
GEM and I.T.S. at Galaxy, which were not included in consolidated 1998 results
until September 1, 1998, January 1, 1999 and May 1, 1999, respectively.
Operating Costs of the Information Services segment increased 3% and 6% for
the three and six month periods ended June 30, 1999, respectively, compared to
the same periods of 1998. The increase was attributable principally to higher
criminal record and pre-employment screening volume at TISI, offset partially by
cost control measures instituted at Corsearch.
General and Administrative Expenses. General and Administrative Expenses
increased $1.6 million (25%) and $3.1 million (25%) for the three and six months
ended June 30, 1999, respectively, compared with the same periods in the prior
year. Higher general and administrative expense was primarily due to the
inclusion of InterGame, Gaming for Africa and I.T.S., increased staff to support
volume growth and new product development at TISI and corporate business
development costs, offset partially by cost control actions taken at Corsearch.
Depreciation and Amortization. Depreciation and Amortization increased
$662,000 (44%) and $1.2 million (42%) during the three and six months ended June
30, 1999, respectively, compared with the same periods in 1998. The increase
resulted principally from 1998 capital expenditure to acquire data, expand
exposition and trade show capacity and upgrade information technology and
increased amortization of goodwill due to acquisitions.
17
<PAGE>
Interest Expense. Interest Expense totaled $2.8 million and $5.4 million for
the three and six months ended June 30, 1999, respectively, compared with $2.7
million and $5.4 million for the same periods in 1998. Interest expense results
primarily from debt incurred in connection with the Recapitalization.
EBITDA. EBITDA increased $1.6 million (36%) and $2.8 million (34%) to $6.1
million and $11.1 million for the three and six months ended June 30, 1999,
respectively, compared with $4.5 million and $8.3 million, respectively, during
the same 1998 periods. The increase for the three months ended June 30, 1999 was
principally attributable to higher EBITDA in the Business to Business
Communications segment (up $1.4 million - 59%) and the Information Services
segment (up $540,000 - 20%). The increase for the six months ended June 30, 1999
was principally attributable to higher EBITDA in the Business to Business
Communications segment (up $2.9 million - 83%) and the Information Services
segment (up $960,000 - 18%) and partially offset by higher corporate business
development cost. Excluding the impact of acquisitions, EBITDA in the Business
to Business Communications segment increased 16% and 51% for the three and six
months period ended June 30, 1999, respectively, compared with the same period
in the prior year and EBITDA in total increased 14% and 21% for the same
periods.
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
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. On September 1, 1998, the Company
purchased $1.5 million of the New Notes at a price below par.
18
<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 June 30, 1999, the Company had $24.2
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
1999 will be approximately $7.0 million. The primary capital expenditures will
be for computer equipment and software, "reader boxes" at Galaxy and database
acquisitions at TISI and Corsearch. 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 1999, even after the anticipated capital expenditures for 1999.
Thus, with the Company's available cash reserves and cash flow, management does
not anticipate a need for additional capital during 1999 except for possible
future acquisitions.
INFLATION
Management anticipates the effect of inflation on the Company's operations
during 1999 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
GENERAL
TOIC's company-wide Year 2000 Project is proceeding on schedule. The project
was begun in earnest during the second quarter of 1998 and is addressing the
issue of information systems being unable to distinguish between the year 1900
and the year 2000. The general project phases common to all business units are:
(1) inventorying Year 2000 items; (2) assigning priorities to identified items;
(3) assessing the Year 2000 readiness of items determined to be material to the
Company; (4) repairing or replacing material items that are determined not to be
ready for the Year 2000; (5) testing repaired or replaced items; and (6)
designing and implementing contingency and business continuation plans for all
material items. At
19
<PAGE>
December 31, 1998, the inventory and priority assessment phases for each
business unit had been completed and detailed remediation plans developed by
business units considered to have material Year 2000 issues. Based on the
inventory, only TISI was determined to have material Year 2000 issues.
PROJECT
A dedicated TISI project team has been working on remediating core
processing applications as well as assessing the readiness of the infrastructure
portion of the systems. The project is 80% complete (though slightly behind
schedule), with different phases of the schedule being between 60% and 95%
complete. The second half of 1999 is being reserved for final testing.
TISI's project is broken down by line of business and by steps in the value
chain customer interaction, order processing/delivery, information
production/retrieval, billing, customer service, monitoring/management,
infrastructure and extended enterprise. For packaged software and hardware
components, TISI is evaluating vendors' statements about their products'
readiness and developing test plans where the components are material and
testing is possible. Several items have been identified as not ready for the
Year 2000 and plans are being made for remediation. All remediation in these
areas is scheduled to be complete by the third quarter of 1999.
For applications that have been developed in-house, active inventorying and
remediation has been underway since early in 1998. To date, all PC-based
applications have been found to be ready for the Year 2000 or have required only
minor changes, which have been completed. TISI has completed a general inventory
of its primary VMS-based processing applications and 95% of the detailed
inventory. Remediation of these systems has been divided into two phases and
TISI has completed nearly 90% of the first phase and nearly 60% of the second
phase. All non-critical systems (defined as cosmetically impacted or
internal-use reporting only) will be deferred until all critical systems have
been remediated, tested and put back into production. System level and
comprehensive testing is being performed throughout the remediation process.
TISI expects that all critical application remediation will be completed by the
end of the third quarter of 1999.
TISI and the Company's other business units have contacted external entities
whose system interfaces could have a potential material impact on the Company's
internal systems, to assess their Year 2000 readiness and develop action plans,
if necessary. The Company believes that in those cases where responses have been
received all material issues have been identified and have been or will be
appropriately remedied.
In addition, the operating system software supplied by third parties for
certain of CORSEARCH's systems has been identified as not ready for the Year
2000. CORSEARCH's remediation plan called for replacing this operating system
software with a new version, which the vendor had originally represented would
be released during the second quarter of 1999. However, as a result of delays by
the vendor in the release of this new version of the operating system software,
CORSEARCH has begun implementing its contingency plan by acquiring and
installing patches to its existing operating system software rather than wait
for the new version. These patches are expected to be installed and tested by
the end of the third quarter of 1999.
COSTS
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of the Year 2000 Project is approximately $1.4 million.
The total amount expended on the Project through June 30, 1999 was approximately
$1.2 million, nearly all of which related to the cost to repair or replace
software and related hardware problems. The estimated future cost of completing
the Year 2000 Project is estimated to be approximately $200,000. Funds for the
Project are included in existing operating budgets.
RISKS
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
results of operations, liquidity and financial condition. The primary business
risk associated with
20
<PAGE>
Year 2000 is TISI's ability to provide employment screening information to
customers without interruption. Due to the 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 results of operations, liquidity or financial
condition. The Year 2000 Project is expected to reduce significantly the
Company's level of uncertainty about the Year 2000 problem. The Company can not
be certain that all external entities have provided accurate information with
regard to Year 2000 issues and remediation plans or that external entities will
complete remediation plans as represented. The Company believes that, with the
implementation of new business systems and completion of the Project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced. The Company expects to develop contingency plans if it is
determined that the Company or its external entities will not be materially Year
2000 compliant. Readers are cautioned that forward-looking statements contained
in the Year 2000 Update should be read in conjunction with the Company's
disclosures under the heading "Forward-Looking Statements".
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted AICPA Statement of Position ("SOP") No.98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use." SOP No.98-1 requires certain cost in connection with the developing or
obtaining internally used software to be capitalized that previously would have
been expensed as incurred. The adoption of SOP No. 98-1 resulted in the
capitalization of approximately $300,000 related to software development.
The FASB also recently issued Statement of Financial Accounting Standards
No. 132, Employers' Disclosures about Pensions and Other Post-retirement
Benefits (SFAS 132) and Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS
132 revises employer's disclosures about pension and other post-retirement
benefit plans. It does not change the measurement or recognition of those plans.
SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS 133 is not expected to have a material
impact on the Company's financial reporting as the Company does not currently
sponsor pension or other post-retirement benefit plans. The Company is in the
process of evaluating the effect of SFAS 133.
FORWARD-LOOKING STATEMENTS
This Quarterly Report for the quarter ended June 30, 1999 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".
21
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
Financial Data Schedule (Exhibit 27)
(b) Reports on Form 8-K
On May 10, 1999, the Registrant filed a Current Report on Form 8-K that
reported on the acquisition of the assets of International Travel Service, Inc.
(Items 2 and 7). On July 14, 1999, the Registrant filed an amendment to its
initial report to include the financial statements required by Item 7.
22
<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: August 13, 1999
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 JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,754
<SECURITIES> 0
<RECEIVABLES> 23,002
<ALLOWANCES> 789
<INVENTORY> 200
<CURRENT-ASSETS> 27,875
<PP&E> 24,613
<DEPRECIATION> 14,621
<TOTAL-ASSETS> 98,977
<CURRENT-LIABILITIES> 42,741
<BONDS> 98,500
0
0
<COMMON> 42
<OTHER-SE> (54,664)
<TOTAL-LIABILITY-AND-EQUITY> 98,977
<SALES> 49,231
<TOTAL-REVENUES> 49,257
<CGS> 22,543
<TOTAL-COSTS> 22,543
<OTHER-EXPENSES> 3,980
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,415
<INCOME-PRETAX> 1,680
<INCOME-TAX> 200
<INCOME-CONTINUING> (513)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (513)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
