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, 1997.
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 10, 1997 was 33,973,509.
<PAGE>
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,
----------------------
1997 1996
---- ----
REVENUES $23,151 $22,513
COSTS AND EXPENSES
Cost of services and sales 9,721 7,658
Selling, general and administrative 8,185 8,553
Depreciation and amortization 3,738 3,274
------- -------
Total costs and expenses 21,644 19,485
------- -------
INCOME FROM OPERATIONS 1,507 3,028
Losses from Hong Kong Joint venture - (222)
Other income (expense), net 122 (2)
------- -------
INCOME BEFORE INCOME TAXES 1,629 2,804
Provision for income taxes (704) (1,138)
------- -------
INCOME FROM CONTINUING OPERATIONS 925 1,666
Loss from discontinued operations, including taxes - (77)
------- -------
NET INCOME $925 $1,589
======= =======
INCOME (LOSS) PER SHARE:
Primary
Income from continuing operations $0.03 $0.05
Loss from discontinued operations - (0.00)
------- -------
Net income $0.03 $0.05
======= =======
Fully diluted
Income from continuing operations $0.03 $0.05
Loss from discontinued operations - (0.00)
------- -------
Net income $0.03 $0.05
======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Primary 33,228 33,261
Fully diluted 33,613 33,463
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, June 30,
1997 1997
--------- --------
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 11,980 $ 10,524
Accounts receivable, net 10,223 9,366
Net assets of discontinued operations 28,522 28,576
Prepaid expenses and other current assets 931 1,016
-------- --------
Total Current Assets 51,656 49,482
Property and equipment, less accumulated
depreciation of $31,776 and $29,599 17,594 18,337
Software development costs, net of accumulated
amortization of $5,031 and $4,467 4,806 4,918
Goodwill, net of accumulated amortization of
$9,153 and $8,229 47,287 48,279
Deferred tax assets, net 10,827 10,944
Other non-current assets 3,876 3,439
-------- --------
TOTAL ASSETS $136,046 $135,399
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $4,228 $4,963
Accrued liabilities 6,940 7,556
Deferred tax liabilities 5,705 5,705
Current maturities of long-term debt 1,000 1,000
Other current liabilities 1,185 869
-------- --------
19,058 20,093
Deferred revenue 7,611 6,759
-------- --------
Total Current Liabilities 26,669 26,852
Long-term debt 1,250 1,500
Other non-current liabilities 1,155 1,194
-------- --------
TOTAL LIABILITIES 29,074 29,546
Commitments and contingencies
Stockholders' Equity:
Common stock 342 341
Additional paid-in capital 99,518 99,325
Retained earnings 15,737 14,812
Treasury stock (8,625) (8,625)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 106,972 105,853
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $136,046 $135,399
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
September 30,
----------------------------
1997 1996
------------ ------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income $925 $1,589
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,995 4,694
Other non-cash items, net 587 2,022
Changes in operating assets and liabilities,
net (2,221) (2,938)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,286 5,367
------- -------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Purchase of property and equipment (1,948) (3,285)
Capitalized software development costs (452) (467)
Investment in joint ventures (250) (668)
Cash paid for acquisitions (3) (4,310)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,653) (8,730)
------- -------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Exercise of common stock options and warrants 329 245
Payments of long-term debt (273) (287)
Purchase of treasury stock (233) -
Other, net - (2)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (177) (44)
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,456 (3,407)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 10,524 19,667
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,980 $16,260
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
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, 1997 should be read in conjunction with
the Company's annual report on Form 10-K for its fiscal year ended June 30,
1997.
2. SUBSEQUENT EVENTS
On October 30, 1997, the Company announced the formation of Marketwatch.com,
LLC, a 50-50 joint venture with CBS, Inc. The new venture was formed to
expand the Company's internet business information site for individual
investors, business professionals and the general public. The Company will
contribute $2 million in cash over two years and certain of its internet-
related assets to the joint venture. CBS will contribute national
television and other advertising with a rate card value of at least $50
million over a five-year period and has licensed the trade name "CBS" to the
joint venture.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's continuing operations include DBC West, Market Information
Corporation (operating under the trade name "BMI") and Capital Management
Sciences ("CMS"), which provide real-time stock market quotes, fixed income
prices, agribusiness information, equity and fixed income analytics,
financial market information and news, access to historical data bases, and
other information to individual investors, traders and portfolio managers on
a subscription basis. They also provide sports data and information to
sports enthusiasts, and international news and government information to
media, government agencies and corporations. The Lawyers Communications
Network ("LCN"), is a limited liability company with the American Bar
Association which provides continuing legal education and other information
via satellite to legal professionals. The Company distributes its services
via communication devices that rely on FM subcarriers, satellite
transmission, cable television systems, telephone lines, the Internet and
other means of transmission.
Discontinued operations include Instore Satellite Network ("ISN") which
delivers point to multipoint communication services, primarily to retail
merchants and business associations, and CheckRite International, Inc.
("CRI") which provides check recovery and check verification data and
services to retail merchants.
RESULTS OF CONTINUING OPERATIONS
SELECTED FINANCIAL DATA ($ Millions)
For the Three Months Ended September 30,
1997 1996
---- ----
Revenues
DBC West/BMI $17.8 $17.7
CMS 4.9 4.6
Other* 0.4 0.2
----- -----
Total 23.1 22.5
Cost of services and sales 9.7 7.6
Selling, general and administrative
Sales and marketing 4.6 5.3
G&A 3.6 3.3
Depreciation and amortization
Equipment and leasehold improvements 2.2 2.0
Goodwill 0.9 0.8
Software development and other 0.6 0.5
----- -----
Income from operations $1.5 $3.0
===== =====
Income (loss) from operations by unit
DBC West/BMI $3.9 $3.9
CMS 1.3 1.4
Other initiatives* (2.8) (1.5)
Corporate and unallocated (0.9) (0.8)
----- -----
$1.5 $3.0
===== =====
*New product and infrastructure development initiatives, including AgCast,
BondVu, DBC Online and the Lawyers Communications Network.
<PAGE>
Revenues from continuing operations grew by three percent overall. DBC
West/BMI revenue growth slowed due to increased competition from new internet
offerings, while CMS' revenues increased from $4.6 million to $4.9 million due
to expansion of its BondEdge service.
Income from operations decreased by $1.5 million over last year's first
quarter. This decrease was primarily due to development activities for
AgCast, an online agricultural information service, BondVu, a Windows-based
fixed-income data service from CMS, the Lawyers Communications Network, a
joint venture in conjunction with the American Bar Association, and DBC
Online services. In total the Company incurred net expenses of $1.5 million
for these activities and other infrastructure initiatives in last year's first
quarter compared with net expenses of $2.8 million during the current period.
CMS' operating income was negatively affected by increased levels of
compensation as well as higher occupancy costs stemming from space expansion
and a lease renewal. DBC West/BMI's operating income was flat as a result of
the previously mentioned competition.
Net income for the first quarter of fiscal 1998 totaled $0.9 million, equal
to $0.03 per primary and fully diluted share, including $0.05 per share in
net expenses for new product initiatives. Last year's first quarter net
income was $1.6 million, or $0.05 per share, including a $0.03 charge
associated with the aforementioned development and infrastructure
initiatives. Weighted average shares outstanding remained flat as the shares
issued for the fiscal 1997 acquisition of Federal News Service were offset by
the purchase of treasury stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $4.3 million and $5.4 million for
the three months ended September 30, 1997 and 1996, respectively. This
decrease was principally due to improved operating earnings, adjusted for
non-cash items including depreciation and amortization. The Company invested
$2.4 million of cash in the first quarter of fiscal 1998 for property and
equipment and capitalized software development compared to $3.8 million in the
comparable fiscal 1997 period. 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, and contingent earnout payments for the
CMS acquisition.
The Company currently expects cash generated from operations to increase
further during fiscal 1998, 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,
1997, the Company was in compliance with these covenants.
The Company expects to receive substantial after-tax proceeds from the sale
of discontinued operations during fiscal 1998. Management expects to use
these proceeds for the acquisition of companies that would enhance the
Company's data content or to repurchase additional treasury shares, pending
market conditions and authorization from the Board of Directors for these
transactions. There are no specific acquisitions that are planned, nor can
there be any assurance that any acquisitions can be consummated.
BUSINESS DEVELOPMENT AND OUTLOOK
In October 1997, the Company announced the formation of a 50-50 joint venture
with CBS, Inc. to expand the Company's internet business information site for
individual investors, business professionals and the general public.
Demand for financial market information is largely dependent upon activity
levels in the securities markets. 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.
<PAGE>
FORWARD-LOOKING STATEMENTS
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 potential obsolescence of the Company's services due to the
introduction of new technologies.
- The response of customers to the Company's new marketing strategies
and new services.
- Activity levels in the securities markets.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Cardelle & DeZego v. Data Broadcasting Corporation, No. 398321. On October
17, 1996, plaintiffs filed a complaint in San Mateo County Superior Court on
behalf of a nationwide class of subscribers of the Registrant, alleging that
the Registrant, in certain instances, failed to provide "real-time" quotes of
market data, as opposed to delayed quotes. The complaint further alleged
that the Registrant's advertising constituted a deceptive act or practice.
Although the Registrant denied all such allegations, the parties reached
a Stipulation of Settlement setting forth the terms of a proposed settlement.
A final judicial hearing took place on October 31, 1997, at which time the
settlement received final approval.
There are no other material pending legal proceedings to which the Registrant
is a party, other than ordinary routine litigation incidental to the business.
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
On July 11, 1997, the Registrant filed a Current Report on Form 8-K,
dated July 11, 1997, which reported under Items 5 and 7, the proposed
settlement of certain class action litigation, more fully described in
Item 1 above.
<PAGE>
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, 1997 By: /s/ Allan R. Tessler
Allan R. Tessler
Co-Chief Executive Officer
Dated: November 13, 1997 By: /s/ Alan J. Hirschfield
Alan J. Hirschfield
Co-Chief Executive Officer
Dated: November 13, 1997 By: /s/ Mark F. Imperiale
Mark F. Imperiale
President, Chief Operating Officer
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
11 Statement re Computation of Earnings per Share 12
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
September 30,
-----------------
1997 1996
---- ----
(In thousands, except per share amounts)
Primary Earnings per Common share
Net income $925 $1,589
====== ======
Common shares outstanding at beginning of period 32,709 31,338
Shares issuable from assumed exercise of stock
options and warrants 528 1,482
Shares issued for acquisitions - 351
Shares issued from conversion of stock options
and warrants 12 90
Purchase of treasury shares (21) -
------- ------
Weighted average number of common shares outstanding 33,228 33,261
====== ======
Primary earnings per share $0.03 $0.05
====== ======
Fully Diluted Earnings per Common Share
Net income $925 $1,589
====== ======
Common shares outstanding at beginning of period 32,709 31,338
Shares issuable from assumed exercise of stock
options and warrants 861 1,685
Shares issued for acquisitions - 351
Shares issued from conversion of stock
options and warrants 64 89
Purchase of treasury shares (21) -
------- ------
Weighted average number of common shares outstanding 33,613 33,463
====== ======
Fully diluted earnings per share $0.03 $0.05
====== ======
<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>
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<S> <C>
<PERIOD-TYPE> 3-MOS
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0
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