<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996.
Commission file number 0-20311
DATA BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3668779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7050 Union Park Center, Suite 600, Midvale, Utah 84047
(Address of principal administrative offices)
Registrant's telephone number, including area code: (801) 562-2252
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
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
The number of shares of common stock, par value $.01 per share, of the
registrant outstanding as of November 6, 1996 was 32,999,255.
Exhibit index is located on page 12.
Total number of pages in this report is 13.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
1996 1995
REVENUES $30,193 $28,240
COSTS AND EXPENSES
Cost of services 12,262 11,712
Selling, general and administrative 10,180 8,726
Depreciation and amortization 4,694 4,067
Merger and consolidation costs - 875
Total costs and expenses 27,136 25,380
INCOME FROM OPERATIONS 3,057 2,860
Interest and other (expense) income, net (160) (302)
INCOME BEFORE INCOME TAXES 2,897 2,558
Provision for income taxes 1,308 1,249
NET INCOME $ 1,589 $ 1,309
NET INCOME PER SHARE:
Primary $0.05 $0.04
Fully diluted $0.05 $0.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary 33,261 31,686
Fully diluted 33,463 31,867
See accompanying notes to consolidated financial statements
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DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
September 30, June 30,
1996 1996
ASSETS
Current Assets:
Cash and cash equivalents $16,260 $ 19,667
Restricted cash held for CheckRite merchants 1,831 1,698
Accounts receivable, net 8,632 9,645
Components and supplies 867 1,362
Other current assets 2,458 2,949
Total Current Assets 30,048 35,321
Property and equipment, less accumulated
depreciation of $33,017 and $30,449 23,334 22,838
Software development costs, net of
accumulated amortization of $2,856 and $2,445 4,808 4,783
Goodwill, net of accumulated amortization
of $7,185 and $6,050 76,222 71,539
Deferred tax assets, net 12,833 13,095
Other assets 6,296 6,391
TOTAL ASSETS $153,541 $153,967
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,650 $6,852
Payable to CheckRite merchants 1,831 1,698
Payable to stockholders of acquired companies 387 209
Accrued liabilities 8,146 11,374
Current maturities of long-term debt 3,838 3,851
Other current liabilities 774 668
20,626 24,652
Obligations for billings in advance of services 5,607 6,802
Total Current Liabilities 26,233 31,454
Long-term debt 2,286 2,558
Other non-current liabilities 3,936 3,858
TOTAL LIABILITIES 32,455 37,870
Commitments and contingencies
Stockholders' Equity:
Common stock 320 313
Additional paid-in capital 86,086 82,693
Retained earnings 34,680 33,091
TOTAL STOCKHOLDERS' EQUITY 121,086 116,097
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $153,541 $153,967
See accompanying notes to consolidated financial statments
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DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
1996 1995
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $1,589 $1,309
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation and amortization 4,694 4,067
Other non-cash items, net 2,022 1,278
Changes in operating assets and liabilities, net (2,938) (6,205)
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,367 449
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Cash paid for acquisitions (4,310) (16,692)
Purchase of property and equipment (3,285) (2,088)
Proceeds from the sale of Shark - 871
Investment in joint ventures (668) (851)
Other, net (467) (213)
NET CASH USED IN INVESTING ACTIVITIES (8,730) (18,973)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Exercise of common stock options and warrants 245 1,845
Payments of long-term debt (287) (2,855)
Other, net (2) -
NET CASH USED IN FINANCING ACTIVITIES (44) (1,010)
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,407) (19,534)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 19,667 32,267
CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,260 $12,733
See accompanying notes to consolidated financial statements
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DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared by Data Broadcasting Corporation and Subsidiaries (the "Company" or
"DBC") in accordance with generally accepted accounting principles for interim
financial reporting and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. In the opinion of management, all adjustments considered
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows have been included. All such adjustments are of
a normal recurring nature. This report on Form 10-Q for the three months
ended September 30, 1996 should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1996.
2. ACQUISITIONS
Effective July 1, 1996, the Company acquired by merger all the common stock of
Las Vegas Sports Consultants ("LVSC") in exchange for 330,206 shares of the
Company's common stock, valued at $3,100,000. LVSC is the leading "opening
line" odds maker in Las Vegas.
Effective September 16, 1996, the Company acquired the common stock of Dajoy
Enterprises, Inc., dba Check Network ("CN"), in exchange for 128,700 shares of
the Company's common stock, valued at $1,000,000. CN, located in Colorado,
provides check recovery services.
Effective July 1, 1996, the Company acquired Instant Odds Network, Inc.
("ION") for $2,600,000. ION has the rights to transmit electronically real-
time betting odds from six major casinos in Las Vegas and has been doing so
through DBC's sports products for the past two years. The agreement contains
a contingent earnout provision, payable in DBC common stock, based upon the
results of operations of ION for the three-year period ending June 30, 1999.
These transactions have been accounted for as purchases and goodwill is being
amortized over 5 to 25 years using the straight-line method.
3. CONTINGENCIES
Under the terms of the merger agreement whereby the Company acquired Capital
Management Sciences ("CMS"), DBC may pay the former CMS shareholders up to
$6,840,000 of additional cash based on the pre-tax earnings of CMS over the
three-year period commencing January 31, 1994 and ending January 31, 1997.
Contingent cash payments will be added to the acquisition cost when
determinable and amortized prospectively over the then remaining life of
goodwill. As of September 30, 1996, the Company had paid $4,133,000 under
these provisions and accrued $1,710,000 of additional payments.
4. SUBSEQUENT EVENTS
On October 31, 1996, the Company completed its acquisition of substantially
all of the assets of Federal News Service Group, Inc. ("FNS"), subject to
certain liabilities for 804,841 shares of DBC common stock, valued at
$6,650,000. The agreement also provides for a contingent earnout, payable in
DBC common stock, based upon FNS' results of operations for the year ending
October 31, 1997. FNS provides verbatim transcripts of major federal
government hearings to approximately 350 news organizations, political
associations and corporations around the world.
On November 12, 1996, the Company announced that its board of directors
authorized the repurchase of up to 2 million shares of common stock. This
plan will be implemented from time to time in either open market or private
transactions.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Information Services Division ("ISD") includes DBC West, Market
Information Corporation (operating under the trade name "BMI") and Capital
Management Sciences ("CMS"). ISD provides real-time stock market quotes,
equity and fixed income analytics, financial market information and news,
access to historical databases, and other information to individual investors,
traders and institutional clients. ISD also provides sports data and
information to sports enthusiasts. The Business Services Division ("BSD")
includes Instore Satellite Network ("ISN") which delivers point to multipoint
communication services, primarily to retail merchants and business
associations, and CheckRite International, Inc. ("CRI") which provides check
recovery and check verification data and services to retail merchants. The
Company distributes its services via communication devices that rely on FM
subcarriers, satellite transmission, cable television systems, telephone
lines, the Internet and other means of transmission.
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RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA ($ Millions)
For The Three Months Ended September 30,
1996 1995
Revenues
Information Services Division
DBC West $12.7 $11.5
BMI 5.2 4.0
CMS 4.6 3.6
22.5 19.1
Business Services Division
ISN 3.4 5.7
CRI 4.3 3.4
7.7 9.1
Total 30.2 28.2
Cost of services 12.2 11.7
Selling, general and administrative:
Sales and marketing 6.4 5.3
G&A 3.8 3.4
Depreciation and amortization
Equipment and leasehold improvements 2.7 2.8
Goodwill 1.1 0.9
Software development 0.4 0.3
Customer contracts and other 0.5 0.1
Merger and consolidation costs - 0.9
Income from operations $3.1 $ 2.8
Income (loss) from operations by unit
DBC West/BMI $3.1 $2.4
CMS 0.8 0.8
ISN (0.4) 0.2
CRI 0.4 0.3
Corporate and unallocated (0.8) (0.9)
$3.1 $2.8
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ISD revenues grew by 18 percent due to growth at all operations. DBC West
experienced a 12 percent increase in subscribers to 27,744 at September 30,
1996 from 24,700 at September 30, 1995. Over that period, DBC West's revenues
grew 10 percent from $11.5 million to $12.7 million. BMI's revenues increased
by 30 percent over the prior year mainly due to an 18 percent increase in
subscribers from 7,364 at September 30, 1995 to 8,676 at September 30, 1996.
CMS' revenues grew from $3.6 million to $4.6 million primarily as a result of
an 11 percent increase in its customer base from September 30, 1995 to
September 30, 1996.
BSD revenues for the first quarter of fiscal 1997 decreased by 15 percent when
compared with the first quarter of fiscal 1996. ISN's revenues decreased by
40 percent over the prior year, primarily due to a decrease in
equipment sales revenue. In the first quarter of fiscal 1996 ISN recorded
$1.8 million in equipment sales revenue related to the installation
of three new networks. CRI's revenues increased by 26 percent over the prior
year, primarily reflecting the addition of several large clients and the
acquisition of Northwest CheckRite, Inc. in January 1996.
Income from operations increased by $0.3 million over last year's first
quarter. However, excluding $0.9 million of costs incurred in the first
quarter of fiscal 1996 in connection with the acquisition and consolidation of
BII, operating income decreased from $3.7 million to $3.1 million and
operating margins decreased. This decrease was due to (i) development
activities for AgCast, an online agricultural information service, the Lawyers
Communications Network, a joint venture in conjunction with the American Bar
Association, and DBC Online services, (ii) initial stage marketing for BondVu
and BusinessVision and (iii) market repositioning for the Company's Signal,
QuoTrek and BMI products. In total the Company expensed $1.7 million for
these activities in this year's first quarter as compared with $0.3 million
in last year's first quarter. In addition, the Company capitalized
$0.4 million and $0.1 million related to these activities during the three
months ended September 30, 1996 and 1995, respectively.
The effective tax rate for the three months ended September 30, 1996 was 45
percent. This was lower than the 49 percent rate in the fiscal 1996 first
quarter, but was comparable with the 44 percent effective tax rate for the
fiscal year ended June 30, 1996.
Net income for the first quarter of fiscal 1997 totaled $1.6 million, equal to
$0.05 per primary and fully diluted share. Weighted average shares
outstanding grew by five percent, principally due to the shares issued for the
acquisitions of Las Vegas Sports Consultants and Check Network. Last year's
first quarter net income was $1.3 million, or $0.04 per share, including a
$0.02 charge associated with the aforementioned merger and consolidation
costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $5.4 million and $0.4 million for
the three months ended September 30, 1996 and 1995, respectively. The
increase was principally due to improved operating earnings, adjusted for non-
cash items including depreciation and amortization, and a decrease in accounts
receivable during the first quarter of fiscal 1997 as compared
with an increase during the fiscal 1996 first quarter. The Company
paid $4.3 million for acquisitions during the first quarter of fiscal
1997, including the cash payment for the acquisition of Instant Odds Network,
Inc. and contingent earnout payments for the CMS acquisition. The Company
invested $3.8 million of cash in the first quarter of fiscal 1997 for property
and equipment and capitalized software development compared to $2.4 million in
the comparable fiscal 1996 period. The decrease in long-term debt payments
from the first quarter of fiscal 1996 to the first quarter of fiscal 1997 was
principally due to the debt refinancing that occurred during fiscal 1996.
The Company currently expects cash generated from operations to increase
further during fiscal 1997, should current market conditions remain stable.
Management believes that the cash generated by operating activities, together
with its existing cash and financing facilities, are sufficient to meet the
short- and long-term needs of the current operations of the Company.
DBC's debt agreement with Key Bank National Association requires the Company
to maintain certain financial ratios with respect to operations and financial
position. This agreement also restricts the payment of dividends to DBC's
stockholders and limits the purchase of treasury stock. At September 30,
1996, the Company was in compliance with these covenants.
<PAGE>
BUSINESS DEVELOPMENT AND OUTLOOK
The Company expects to continue the aforementioned development and marketing
efforts at about the same rate for the remainder of fiscal 1997. The
Company also expects that these expenditures will be funded by cash generated
from operations.
Demand for financial market information is largely dependent upon activity
levels in the securities markets. The Company's share of that demand is based
on its ability to compete effectively with other financial information
providers. In the event that the U.S. financial markets were to experience a
prolonged period of investor inactivity in trading securities, the Company's
business could be adversely affected. The degree of such consequences is
uncertain. The Company is pursuing a number of projects to increase its share
of its current markets and to broaden the scope of the markets in which the
Company competes.
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following:
. The presence of competitors with greater financial resources
and their strategic response to the Company's new services.
. The response of customers to the Company's new marketing
strategies.
. Activity levels in the securities markets.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various legal proceedings incidental to its business
operation, none of which is expected to have a material effect on the
financial condition or results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
a. The following exhibits are filed as part of this report:
Exhibit
Number Description of Exhibit
11 Statement re Computation of Earnings per Share
27 Financial Data Schedule
b. Reports on Form 8-K
During the quarter ended September 30, 1996, the Registrant
did not file a Current Report on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATA BROADCASTING CORPORATION
(Registrant)
Dated: November 13, 1996 By: /s/ Allan R. Tessler
Allan R. Tessler
Co-Chief Executive Officer
Dated: November 13, 1996 By: /s/ Alan J. Hirschfield
Alan J. Hirschfield
Co-Chief Executive Officer
Dated: November 13, 1996 By: /s/ Mark F. Imperiale
Mark F. Imperiale
President, Chief Operating
Officer and
Chief Financial Officer
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EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
11 Statement re Computation of Earnings per Share 13
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
September 30,
(In thousands, except share amounts) 1996 1995
Primary Earnings per Common share
Net income $1,589 $1,309
Common shares outstanding at beginning of period 31,668 29,273
Shares issuable from assumed exercise of
stock options and warrants 1,482 2,086
Shares issued for acquisitions 21 -
Shares issued from conversion of
stock options and warrants 90 327
Weighted average number of common shares outstanding 33,261 31,686
Primary earnings per share $0.05 $0.04
Fully Diluted Earnings per Common Share
Net income $1,589 $1,309
Common shares outstanding at beginning of period 31,668 29,273
Shares issuable from assumed exercise of
stock options and warrants 1,685 1,990
Shares issued for acquisitions 21 -
Shares issued from conversion of
stock options and warrants 89 604
Weighted average number of common shares outstanding 33,463 31,867
Fully diluted earnings per share $0.05 $0.04
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of income and balance sheets and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-END> SEP-30-1996
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<PP&E> 56,351
<DEPRECIATION> 33,017
<TOTAL-ASSETS> 153,541
<CURRENT-LIABILITIES> 26,233
<BONDS> 2,286
0
0
<COMMON> 320
<OTHER-SE> 120,766
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<SALES> 0
<TOTAL-REVENUES> 30,193
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<EPS-DILUTED> .05
</TABLE>
