U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
X Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
- ----- Act of 1934
For the fiscal year ended June 30, 1997
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
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 Identification No.)
Incorporation or Organization)
7050 Union Park Center
Suite 600 3490 Clubhouse Drive, I-2
Midvale, Utah 84047 Jackson, Wyoming 83014
(Address of Principal Administrative Offices) (Address of Principal
Executive Offices)
Registrant's telephone number, including area code:
(801) 562-2252 (307) 733-9742
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value
(Title of Class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. _____
As of September 15, 1997, the aggregate market value of the Common Stock of
the Registrant (based upon the closing transaction price) on such date held by
nonaffiliates of the Registrant was approximately $171,040,000.
As of September 15, 1997, there were 33,836,997 shares of Common Stock of the
Registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Annual Meeting of Stockholders expected to
be held December 9, 1997 are incorporated by reference into Part III hereof.
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
Data Broadcasting Corporation ("DBC", the "Registrant" or the "Company"),
directly and through its subsidiaries, distributes financial data and business
information on a subscription basis to a broad range of individual and
professional investors and businesses. The Company provides its services
principally through DBC West, Market Information Corporation (operating under
the trade name "BMI") and Capital Management Sciences ("CMS"). DBC West's and
BMI's principal services are Signal, Quotrek, BMI MarketCenter, StockEdge,
MarketWatch, AgCast and Federal News Service. CMS' principal services are
BondEdge and BondVu. DBC West and BMI sell access to their networks which
provide real-time financial market and sports information. This includes
stock market quotes, equity analytics, financial and sports news and
information, international news and government information, access to
historical databases and customized portfolio tracking services. CMS
distributes fixed income portfolio analytics and real-time fixed income data
to a broad base of institutional investment managers including banks,
insurance companies, brokerage firms and investment management companies for
valuation and risk management purposes. In September 1997, the Company
launched the Lawyers Communications Network ("LCN") which provides continuing
legal education and other information via satellite to legal professionals.
The LCN is a limited liability company with the American Bar Association. 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. The Company provides
subscribers with proprietary equipment and software needed to access its
networks and databases.
The Company currently owns two other businesses that have been classified as
discontinued operations since the third quarter of fiscal 1997. InStore
Satellite Network ("ISN") delivers point to multipoint communication services,
primarily to retail merchants and business associations. CheckRite
International, Inc. ("CRI") provides check recovery and check verification
data and services to retail merchants. Management decided to sell these
businesses to concentrate its efforts and resources on its core financial
information services businesses and their significant expansion opportunities.
On May 8, 1995, the Company sold substantially all of the assets of Shark
Information Services Corp. ("Shark"), an indirect, wholly-owned subsidiary of
the Company. Shark provided expansive financial data, analytical capabilities
and business information on a subscription basis to professional investors
through its own data network, utilizing leased telephone lines.
On June 30, 1995, the Company completed its acquisition of Broadcast
International, Inc. ("BII"), comprising its BMI, ISN and CRI operating units.
The acquisition of BMI has significantly expanded the Company's market position
as a leading provider of wireless financial information services.
For the last three fiscal years, the percentage of total revenue contributed by
the Company's operating units and subsidiaries was as follows:
1997 1996 1995
DBC West/BMI 80% 81% 55%
CMS 20 19 18
Shark - - 27
100% 100% 100%
Subsequent to the decision to sell the ISN and CRI businesses, the Company
operates in one business segment, providing a variety of actionable market
data and news to its subscribers.
Information Transmission Technology
DBC West and BMI create their data feeds by gathering ticker and news feeds
from stock exchanges and other sources and processing them into consolidated
data feeds. The Company has three such information processing and ticker
plants: two in California and one in Utah. The data feeds are transmitted
from ticker plants to multiple satellite transponders which broadcast the feed
to FM radio stations, cable television networks and directly to individual
satellite subscribers, including Echostar's Dish Network.
DBC West's FM broadcast network consists of long-term agreements with 68 radio
stations throughout the United States and Canada which are contracted to
broadcast the Company's data feed on their FM side-bands. This extensive
<PAGE>
network provides coverage in 62 major North American cities and reaches at
least 75 percent of the U.S. population. Subscribers receive this one-way
transmission through a proprietary FM receiver. Three such FM radio
agreements are due for renewal in fiscal 1998 and the Company believes they
will be renewed. BMI's FM subscribers are currently serviced through four FM
stations in four U.S. cities.
DBC West also utilizes a proprietary technology to access unoccupied portions
of cable television broadcast signals (vertical blanking interval ("VBI")) to
transmit the Company's data feed along with the cable providers' broadcasts.
The Company has insertion agreements with several national cable programmers
which reach virtually every U.S. cable subscriber (approximately 60 million
homes). The television signals of these programmers are carried by various
cable systems throughout the country. DBC is presently in the first year of a
three-year extension to its previous five-year agreement with one of the
multiple-system operators ("MSOs") offering carriage in these systems.
DBC West's data carrying capacity during stock market sessions is particularly
unique with respect to its satellite and VBI data expansion capabilities. DBC
West currently uses a multiple 19,200 baud VBI feed, but has the rights and
technical abilities to increase the feed in 9,600 baud steps. FM subscribers
receive a 9,600 baud data feed while cable and European satellite subscribers
are able to receive a 19,200 baud data feed. In 1998, the Company expects to
upgrade to 56,000 baud on VBI and satellite. BMI currently operates 19,200
baud and 56,000 baud VBI and satellite feeds, respectively.
DBC West also provides, to the non-professional consumer, financial market
data, news and sports information via its Web sites (http://www.dbc.com and
http://www.mw.dbc.com). The Company's Brand Labeled Quotes service involves
partnerships with other high-usage consumer Web sites for which DBC provides
stock market quotes and other financial data. The innovative program with
leading Internet site operators such as USA Today, The Washington Post, U.S.
News and World Report, American Express Financial Direct, T. Rowe Price and
approximately 35 other sites has succeeded in building usage on DBC's sites to
an average of approximately 4 million hits, 1.8 million page views and 200,000
users per day. The Company believes that this strategy will make DBC's data
services available to significantly broader market segments and attract
further advertising interest.
Both DBC West and BMI offer subscribers optional software which is compatible
with their data feeds, which is the mechanism used to display and analyze the
data. In addition, there are over 130 third-party software packages,
including Omega Research's TradeStation, Metastock, Ensign and Option Vue
Plus, that are compatible with the Company's data feeds and range in features
from simple quote displays to sophisticated charting and analysis.
DBC West and BMI subscribers are also provided certain hardware that enables
them to receive the Company's data feeds. The Company is responsible for
repairs and maintenance of such equipment through limited warranty periods.
Customers must pay for repair costs subsequent to the expiration of the
warranty period. After a customer cancels, the equipment is refurbished, if
necessary, before it is provided to new customers.
CMS updates its database for its BondEdge service daily and transmits the
information to clients via the internet or the CMS Bulletin Board System.
CMS' Bondvu subscribers have access to intra-day updates of pricing data
through CMS' Web site (http://www.bondvu.com).
Principal Services
The Company generates revenue primarily through subscriptions to its principal
services. In addition, subscribers are charged certain installation and
service initiation fees, depending upon the service and broadcast delivery
method.
DBC West and BMI
DBC West's data feed contains real-time securities prices for over 160,000
securities from all major domestic markets and several international exchanges
including equities, mutual funds, options, bonds, futures, commodities,
indices and foreign exchange rates. The data feed also contains news
headlines from Dow Jones, Options News Exchange and Futures World News,
headlines and research reports such as Hightower and sports information
including news, scores and betting odds from six major Las Vegas casinos.
BMI's data feed contains real time securities prices for over 300,000
securities from all major and regional U.S. and Canadian exchanges and several
international exchanges, including equities, options, mutual funds, bonds,
futures, commodities, indices and foreign exchange rates. The BMI data feed
also includes real-time business and financial news from Dow Jones, S & P
MarketScope and Futures World News.
<PAGE>
The capacity of the data feed during hours in which the stock market is closed
is an additional resource of DBC West and BMI. This capacity is now being
used to broadcast sports information, as sporting events typically occur
during these off-hours. Similarly, the capacity may be used in the future to
broadcast information such as traffic, weather and other consumer information,
none of which tend to fall within the stock market hours.
The principal DBC West and BMI services are discussed below.
Signal(TM), Signal for Networks and SignalCard(TM)
Signal is a one-way broadcast system which delivers continuously updating
real-time securities prices from the DBC West data feed. Signal also offers
a delayed service and an end-of-day data service, which provides each day's
market settlement prices. Signal functions in both the Windows and DOS
environments and can be broadcast directly to local area networks for
redistribution to subscribers' PCs. In addition, Signal provides news and
news retrieval capabilities which were developed jointly by DBC and Dow Jones.
News related to specific securities pre-selected by a customer is provided via
"News Alerts" and "News Headlines" from Dow Jones and other sources. DBC West
also offers access to Dow Jones News Retrieval databases and proprietary DBC
news via modem and links to the Signal Private Network internet site, which
contains information on Nasdaq Bulletin Board stocks, a large database of
historical and fundamental data, charts, commentary, comprehensive research
and business descriptions of thousands of public and private companies.
Signal for Networks is a multi-user network version of Signal.
SignalCard is a small, wireless receiver that plugs into the PCMCIA slot of
laptop computers. It enables users to receive the complete DBC West data
feed, including both financial and sports information. When used in
conjunction with third-party software programs, a portable market analysis and
portfolio system is created, previously available only in fixed location
computers.
QuoTrek(TM)
QuoTrek is a hand-held wireless quotation monitor about the size of a small
cellular telephone which receives the DBC West data feed via FM broadcast
signals and displays continuously updating real-time market quotes on up to
127 securities, as selected by the subscriber from a universe of over 140,000
securities. The service offers full portability to users as they travel to
any city covered by DBC West's extensive FM broadcast network. The latest
release of QuoTrek also receives news headlines and sports information similar
to SporTrax.
BMI MarketCenter(R)
The BMI data feed contains over 300,000 symbols. MarketCenter for DOS stores
data for over 100,000 securities from this data feed. The service provides
continuously updating real-time and delayed access to pricing and fundamental
information. The system also features charting, technical analysis and a
portfolio feature that subscribers use to obtain real-time valuation of their
portfolios. Market Center for Windows takes full advantage of the Windows
multi-tasking operating system, allowing the subscriber to run other
applications while maintaining continuous reception of market data and news.
StockEdge and StockEdge Online
StockEdge delivers continuously updating real-time equity security prices,
news headlines and intra-day charting via FM, cable, satellite or the
internet. It contains many of the same features as Signal, including third-
arty software compatibility and access to the Signal Private Network, at a
price that is accessible to more individuals. StockEdge Online is the
Company's first internet-delivered system which provides dynamic updating of
pricing information using "active push" technology.
MarketWatch(TM)
MarketWatch is an Internet financial data service offering snapshot real-time
stock market quotes, fundamental and historical data, a specialized business
news service, portfolio features, links to online brokerage services and other
investment related services to non-professional users.
<PAGE>
AgCast(TM)
AgCast is a broad-based agricultural data service including continuously
updating commodities and futures pricing, news, weather and other
agribusiness information. The service, launched in fiscal 1997, is available
over the internet (http:/www.agcast.com) and via direct broadcast satellite
dish over Echostar's Dish Network.
Federal News Service
FNS is a subscription service providing verbatim transcripts of hearings,
briefings, press conferences and interviews by U.S. government officials,
including the White House, Congress and its committees, the State and Defense
Departments, the U.S. Supreme Court, the Federal Reserve Bank, the United
Nations and many other governmental agencies. FNS also covers other
politically-related activities, such as speeches at the International Trade
Representative's office, the National Press Club, the Brookings Institute, the
Atlantic Council and many others. Similarly, FNS covers the major events of
the Russian government and its agencies, embassies and consulates. FNS
transmits its services via satellite, FM sideband, telephone, cable and the
internet.
Sports
SporTrax is a hand-held wireless monitor similar in design to QuoTrek. Using
DBC West's FM broadcast network, SporTrax receives and displays real-time
sports data and Las Vegas odds from the DBC West data feed, including detailed
scoring updates from virtually every professional football, baseball,
basketball and hockey game and most college football and basketball games, as
well as updates and results from major golf and tennis tournaments and less
frequent events such as the Olympics and World Cup Soccer.
SportSignal is a Windows-based system that receives the extensive sports data
feed on a personal computer via FM, VBI or satellite, providing subscribers
with access to news headlines and the scoring updates mentioned above.
Through Casino Instant Odds, an add-on service, SportSignal subscribers can
receive the only live feed of odds from six major casinos in Las Vegas. DBC
has also begun to supply its odds feeds to virtually all major resellers and
has become the primary supplier of such information to most major on-line and
internet sports services, including USA Today and SportsLine.
Las Vegas Sports Consultants, a fiscal 1997 acquisition, is the leading
"opening-line" odds maker in Las Vegas. The Company also transmits
electronically real-time betting odds from six major casinos in Las Vegas.
Scorecast is an extensive database of statistical sports information covering
football, basketball, hockey and baseball. User-friendly software allows the
subscriber to query the database and analyze what-if scenarios.
CMS
CMS provides two primary software products, BondEdge and BondVu. These
products are provided to institutional fixed income managers on both the buy-
side and sell-side. The securities covered in these products include over
1,000,000 government, agency, and corporate debt instruments, asset-backed
securities, fixed and adjustable rate pass-throughs, collateralized mortgage
obligations, private placements, and futures/options. For tax-exempt
managers, CMS also provides automated access to municipal databases.
BondEdge(TM)
BondEdge is a Windows-based fixed income portfolio analytic system which
provides risk management, regulatory reporting, and compliance tools.
BondEdge portfolio applications include daily market valuations, effective
duration and convexity, standard and custom appraisals, what if analysis, bond
index comparisons, cash flow and book value simulations, performance
measurement, performance attribution, and total return optimization.
The open architecture of BondEdge allows for the import and export of
calculated and descriptive data. BondEdge interfaces with all of the major
third-party accounting and asset/liability software packages to eliminate
duplicate data entry and to improve accuracy and efficiency within an
organization.
<PAGE>
BondVu(TM)
BondVu is a cost-effective service which combines real-time fixed income
prices with accurate security descriptions and superior fixed income
analytics. Delivered via the Internet directly to a client's personal
computer, BondVu provides access to real-time market pages, historical
prices/yields, bond swap, horizon return, and a new portfolio valuation
feature which calculates portfolios in real-time.
Customers and Competition
DBC West and BMI compete in several sectors of the securities industry
information market, including individual and professional investors, money
managers, banks and insurance companies. These sectors consist of clients who
seek either real-time, delayed or end-of-day quotations, analytical and
portfolio tracking services or some combination thereof.
The target market of DBC West and BMI consists primarily of individuals who
make their own investment decisions, trade frequently and earn a substantial
portion of their income from trading. The Company estimates that this total
market currently consists of approximately 200,000 to 300,000 potential
subscribers. The introduction of Signal for Networks and the wide-scale
implementation and growing acceptance of the internet broadens the market to
include small and medium sized brokerage houses, corporate accounts, money
managers and banks.
The Company believes its Signal, BMI and Quotrek products, with an estimated
70% market share, have set the standard for delivery of real-time market data
to the non-professional trader. In the delayed segment, the Company's
competition consists of numerous suppliers and the Company competes mainly in
the high quality, higher price segment of this market. The Company believes
the principal competitive factors in the industry include data availability
and reliability, ease of use, compatibility with third-party software packages
and price.
The Company believes that its established FM broadcast network, cable TV
contracts, Echostar Dish Network contract and satellite leases provide the
most extensive high-speed data coverage in North America given the number of
facilities in the network, the relative broadcast power of those facilities
and the long-term nature of the contracts. The Company believes this provides
it with a competitive advantage in the wireless broadcast market. The Company
also believes its open architecture, compatibility with over 130 third-party
software packages and its network reliability are competitive advantages.
The Company's internet-based web sites compete against numerous other web
sites providing real-time and delayed financial data. The Company believes
that its web sites are among the most visited financial sites on the world
wide web.
CMS' BondEdge competes with other vendors of fixed income portfolio analytics,
primarily Salomon Brothers and Bloomberg. The target market for BondEdge is
the institutional fixed income managers (managing in excess of $300 million in
bonds) who also invest in a broad range of security types that require
specialized modeling. Users in an organization are typically portfolio
managers, quantitative research analysts, and institutional brokers.
BondEdge targets the premium end of the market where clients, on average,
spend $35,000 annually for advanced analytics packages. CMS believes it has
the largest installed base of users, primarily located in North America, with
an estimated 50% of the market.
Within small institutions (community banks, credit unions, municipalities,
pension funds), CMS' BondVu has little competition. Due to the high price of
other real-time services, this market segment has previously been unable to
acquire real-time fixed income information. Within the larger institutions,
BondVu supplements and occasionally replaces more expensive services provided
by Bloomberg, Telerate, Reuters, and Bridge.
Business Expansion and Product Development
The historical growth of the DBC West and BMI subscriber bases has been
primarily attributable to the expansion of the overall market for financial
information, advertising efforts of the Company and the introduction of new
services, including sports information.
<PAGE>
CMS' growth has been positively impacted by increased regulation in the
financial marketplace, the issuance of increasingly complex securities,
volatility in the bond market and the industry's growing awareness of the
risks associated with fixed income securities and derivatives. CMS' ability
to help subscribers manage those risks keeps the Company well-positioned to
take advantage of these trends.
In July 1996, the Company acquired Las Vegas Sports Consultants, the leading
provider of gaming odds to casinos, newspapers and other users, and Instant
Odds Network, which has exclusive rights to transmit real-time betting odds
from six major casinos in Las Vegas. These acquisitions have enhanced DBC's
existing sports content.
In October 1996, the Company also acquired Federal News Service ("FNS"), the
leading provider of verbatim transcripts from all major U.S. and Russian
government branch and agency activities.
During fiscal 1997, the Company introduced several new services, including
AgCast and StockEdge, described earlier.
In fiscal 1997, the Company signed a joint venture agreement with the
American Bar Association ("ABA"), to develop and operate a nationwide video
programming and data network that was launched to the ABA's 380,000 members
in September 1997. The network uses Echostar's Dish Network to broadcast
continuing legal education courses and related legal news and information to
law firms, law libraries, law schools and corporate settings. The network
also features DBC's financial information and other proprietary programming.
During fiscal 1997, the Company saw its European customer base grow, although
European subscribers still represent a small portion of the overall subscriber
base. The Company's Signal product line, delivered by satellite across Europe
and the Middle East, is being marketed through its London sales office. In
December 1996, DBC discontinued the core product of its joint venture in Hong
Kong given the lack of acceptance in the market.
During the fiscal years ended June 30, 1997, 1996 and 1995, the Company
expensed approximately $7.1 million, $4.3 million and $4.5 million,
respectively, for research and development, including development of new
products, maintenance and upgrading of existing products and development
and maintenance of internal systems.
DBC plans to continue to expand its businesses, both domestically and
internationally:
- expansion into the professional market of users of real-time and other
financial information;
- selling continuously updating products, such as StockEdge Online,
directly over the internet;
- internal expansion and development of product lines and services,
including continued development of software interfaces to other
complementary third-party products;
- alliances and joint ventures with complementary businesses in order to
expand the scope of products offered and geographic reach of the
business; and
- business and content acquisitions.
Marketing Strategy
DBC West and BMI market their financial market services through telemarketing
and direct advertising in Investor's Business Daily, Barron's, Stocks and
Commodities, The Wall Street Journal and other print media, as well as radio
and spot advertising on the Consumer News and Business Channel ("CNBC") and
Cable News Network's CNNfn. They also offer free trial periods of
approximately one month to induce potential subscribers of these products to
commit to a monthly payment plan or a discounted one-year prepaid
subscription. Most DBC West and BMI subscribers sign monthly contracts that
are automatically renewed if the customer does not cancel, although the
Company is beginning to sign more one-year service agreements, due to the
discounted prepayment plans. DBC uses similar efforts to market its sports
services. SporTrax is marketed under a licensing agreement with The Sporting
News, the nation's oldest weekly sports publication. DBC also markets its
services over the internet on its own and other popular web sites.
CMS markets its BondEdge and BondVu services through a dedicated sales force,
product demonstrations and trials and sponsorship of seminars and workshops on
fixed income analysis. Users typically sign monthly contracts which are
automatically renewed unless canceled. CMS also has an agreement with ILX
Systems, a leading equity market data provider to the retail brokerage
community, to distribute BondVu. In addition, the Company is pursuing other
such distribution agreements. The CMS sales force will be expanded to begin
marketing the Company's equity and debt services to the professional
investment community.
<PAGE>
Seasonality
The Company has not experienced any material seasonal fluctuations in its
business. However, financial information market demand, which is segmented
according to types of information provided, is largely dependent upon activity
levels in the securities markets. In the event that the U.S. financial
markets were to suffer a prolonged period of investor inactivity in trading
securities, the Company's business could be adversely affected. The degree
of such consequences is uncertain.
Backlog
Given the nature of the Company's businesses, DBC has no material backlog
orders.
Employees
The Company employed 805 people as of August 31, 1997 (including 328 at BI and
CRI, of which 104 are part-time), none of whom are represented by a collective
bargaining unit. The Company believes that its relationship with employees is
satisfactory.
Regulation
The Federal Communications Commission ("FCC") regulates the broadcasting of
satellite, FM-SCA and other airwave transmissions in the United States. The
FCC has licensed ISN and BMI to transmit data from their uplink facilities in
Salt Lake City, Utah. Monitoring and compliance are carried out through the
space segment suppliers. Although the Company uses its FCC license to
transmit data to third-party satellites for further transmission, the loss of
such license would not be expected to have a long-term material adverse effect
on the Company because of other transmission alternatives.
The Company's check and bank card services business, offered by CRI, one of
the discontinued operations, is subject to various federal and state laws and
regulations. The Federal Fair Debt Collection Practices Act prohibits certain
practices with respect to debt collections, including the use of the telephone
for purposes of abusing or harassing a debtor. The Communications Act of 1934
and regulations promulgated by the FCC likewise prohibit the use of the
telephone to abuse or harass a debtor. The Federal Trade Commission, pursuant
to authority granted to it by the Federal Trade Commission Act, regulates
unfair or deceptive acts or practices by companies providing services such as
those offered by the Company. The Federal Fair Credit Reporting Act regulates
the use and dissemination of information in the computer databases maintained
by the CRI-owned offices. The Federal Fair Credit Billing Act governs certain
credit and collection practices related to consumer disputes of billing
statement amounts. In addition, most states have laws which regulate the
collection of debts and the collection practices of debt collection agencies.
The Company believes that CRI is in material compliance with federal and state
laws and regulations concerning the collection of debts and that compliance
with these laws and regulations will not impair the ability of CRI to conduct
business. CRI is a licensed collection agency in each state in which it does
business, if required by applicable state law.
Executive Officers of the Registrant
The following table contains information as of September 15, 1997 as to the
executive officers of the Company:
Name Age Office Held with Company
Alan J. Hirschfield 61 Co-Chief Executive Officer
Allan R. Tessler 60 Co-Chief Executive Officer
Mark F. Imperiale 46 President
Dwight H. Egan 44 President - BII
James A. Kaplan 54 President - CMS
ALAN J. HIRSCHFIELD and ALLAN R. TESSLER serve as Co-Chairmen of the Board and
Co-Chief Executive Officers of the Company.
<PAGE>
Prior to joining DBC, Mr. Hirschfield served as Managing Director of Schroder
Wertheim & Co. and as a consultant to the entertainment and media industry.
He formerly served as Chief Executive Officer of Twentieth Century Fox Film
Corp. and Columbia Pictures Inc. from 1980 to 1985 and 1973 to 1978,
respectively. Mr. Hirschfield currently serves on the boards of Cantel
Industries, Inc., a manufacturer of infection control equipment and
distributor of diagnostic services, and Chyron Corporation, a manufacturer of
equipment used to enhance video and audio production.
Mr. Tessler has been Chairman of the Board and CEO of International Financial
Group, Inc. an international merchant banking firm, since 1987. He is also
Chairman of the Board of Enhance Financial Services Group Inc., a provider of
financial guaranty insurance and reinsurance, and Jackpot Enterprises, Inc. a
gaming machine and casino operator. He formerly served as Chairman of the
Board of Great Dane Holdings, Inc. From December 1991 through September 1993
Mr. Tessler was Chairman and CEO of Ameriscribe Inc. ("Ameriscribe"), a
national provider of facilities management services. Mr. Tessler also serves
on the boards of The Limited, Inc., a speciality retailer, and Allis-Chalmers
Corporation, a machine repair business.
MARK F. IMPERIALE was named as President, Chief Operating Officer and Chief
Financial Officer in September 1996, having served as Executive Vice President
and Chief Financial Officer since July 1994. Mr. Imperiale was formerly
Executive Vice President and Chief Financial Officer of Ameriscribe from May
1992 through October 1993, when Ameriscribe was acquired by Pitney Bowes
Inc., and where he continued as a consultant through December 1993. Mr.
Imperiale spent the prior 10 years in the securities industry, as Senior Vice
President and Controller of Broker Dealer Operations for Prudential Securities
from May 1991 to May 1992, as a Vice President of Merrill Lynch from November
1987 through January 1991, and as a Vice President, Finance of the First
Boston Corporation from 1983 to 1987. Mr. Imperiale, a certified public
accountant, worked with Arthur Young & Company from 1973 to 1983 in the public
accounting field.
DWIGHT H. EGAN is co-founder, President and Chief Executive Officer of
Broadcast International, Inc. ("BII"), a subsidiary of the Company. He has
held these positions since 1985. Acquired by DBC in 1995, BII supplies
business information and communications services to retail, financial and
other business customers. Mr. Egan also serves on the board of Gentner
Communications, Inc., a provider of audio equipment and services.
JAMES A. KAPLAN is founder and President of Capital Management Sciences
("CMS"), a division of the Company. He has held this position since 1979.
Acquired by DBC in 1994, CMS distributes fixed income portfolio analytics,
prices and information.
Item 2. PROPERTIES
The Company owns no real estate but leases the following principal facilities:
Current
Location Operating Unit Square Feet Annual Rate Expiration
Los Angeles, CA CMS 25,498 $701,000 October 2002
San Mateo, CA DBC West 38,072 $635,000 March 1999
DBC West 10,164 $235,000 July 2000
Midvale, UT ISN* 13,881 $251,000 October 2001
Salt Lake
City, UT BMI 19,492 $240,000 September 2003
New York, NY CMS 5,737 $192,000 October 2000
Midvale, UT CRI* 10,758 $183,000 October 2000
Washington, DC FNS 4,834 $182,000 July 2001
Midvale, UT ISN* 15,193 $90,000 August 1998
<PAGE>
West Des
Moines, IA AgCast 5,367 $80,000 May 1999
Belmont, CA and
Burlingame, CA DBC West 5,280 $51,000 April 1998
Jackson, WY Corporate 1,595 $46,000 June 2001
West Orange, NJ Corporate 1,482 $30,000 December 1998
* Discontinued operation
The Company also has approximately 7,700 square feet of property under lease
in various locations that was previously used by Shark. The leases expire no
later than March 2000. In addition to the above facilities, the Company
maintains several other offices and facilities throughout the United States,
all of which are leased. Subsequent to year end, the Company entered into a
15-year lease agreement for approximately 44,000 square feet of office space
in Hayward, California. The Company plans to move its DBC West operations to
this location by the summer of 1998. The lease has an initial annual base
rent of approximately $660,000, with provisions for inflationary increases.
Item 3. 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 alleges that
the Registrant's advertising constituted a deceptive act or practice.
Although the Registrant denies all such allegations, the parties have reached
a Stipulation of Settlement setting forth the terms of a proposed settlement.
Pursuant to Court Order, a Notice of Settlement of Class Action was mailed to
all members of the class by July 18, 1997. The mailing contained an offer to
upgrade service to take advantage of new products and technologies the Company
is introducing. Persons receiving such Notice had until August 26, 1997 to
request exclusion from the class or to file objections to the proposed
settlement. The initial mailing was sent to approximately 32,000 members, of
which approximately 50 members chose to opt out of the settlement and three
members objected to the settlement. The Court preliminarily approved the
settlement on September 5, 1997, pending the results of a supplemental mailing
to approximately 4,000 additional members of the class. A final hearing is
scheduled to take place on October 31, 1997.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
Item 5. PRINCIPAL MARKET AND PRICES FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Principal Market and Prices
The Company has two classes of authorized stock: 75 million shares of common
stock, $0.01 par value, of which 33,836,997 were outstanding as of September
15, 1997, and 5 million shares of preferred stock, $0.01 par value, none of
which has been issued.
The Company's common stock trades on The Nasdaq Stock Market ("Nasdaq") under
the symbol DBCC. The Company began trading under this symbol on June 29,
1992. As of September 15, 1997, there were 2,133 holders of record of the
Company's common stock, and the Company believes it had in excess of 10,000
beneficial owners of its common stock. The Company has paid no dividends, and
under the terms of certain indebtedness the Company is restricted from paying
dividends on its common stock (see Liquidity and Capital Resources under Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations).
The range of high and low bid quotations for the common stock of DBC as
reported by Nasdaq for each quarterly period during the fiscal years ended
June 30, 1997 and June 30, 1996 is shown below.
High Low
Fiscal Year 1997:
FIRST QUARTER (07/01/96 TO 09/30/96) ....... $10 1/8 $6 1/2
SECOND QUARTER (10/01/96 TO 12/31/96)....... 9 1/4 6 5/8
THIRD QUARTER (01/01/97 TO 3/31/97) ........ 8 5/8 5 3/8
FOURTH QUARTER (04/01/97 TO 06/30/97) ...... 6 1/4 4 3/8
Fiscal Year 1996:
FIRST QUARTER (07/01/95 TO 09/30/95) .......$ 10 1/8 $5 3/8
SECOND QUARTER (10/01/95 TO 12/31/95)....... 15 6 3/8
THIRD QUARTER (01/01/96 TO 3/31/96) ........ 13 1/2 9 7/8
FOURTH QUARTER (04/01/96 TO 06/30/96) ...... 11 5/8 7 5/8
<PAGE>
Item 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
Year Ended June 30,
1997 1996 1995 1994 1993
REVENUES $92,480 $81,664 $74,243 $66,434 $55,856
INCOME FROM OPERATIONS 7,011 12,432 8,245 7,826 4,045
INCOME FROM
CONTINUING OPERATIONS 3,648 9,088 16,365 4,358 3,247
NET INCOME (LOSS) (18,279) 8,871 16,365 4,608 3,247
PRIMARY INCOME (LOSS) PER SHARE
INCOME FROM
CONTINUING OPERATIONS $.11 $.28 $.68 $.20 $.19
NET INCOME (LOSS) $(.54) $.28 $.68 $.21 $.19
FULLY DILUTED INCOME
(LOSS) PER SHARE
INCOME FROM
CONTINUING OPERATIONS $.11 $.28 $.67 $.19 $.15
NET INCOME (LOSS) $(.54) $.27 $.67 $.20 $.15
WEIGHTED AVERAGE SHARES
PRIMARY 33,581 31,936 24,015 21,533 16,699
FULLY DILUTED 33,726 32,891 24,350 23,985 22,548
TOTAL ASSETS $135,399 $153,967 $163,020 $72,446 $39,440
LONG-TERM DEBT, LESS CURRENT
PORTION 1,500 2,558 8,903 11,079 4,687
STOCKHOLDERS' EQUITY 105,853 116,097 96,715 40,111 19,816
- - Operating results reflect the acquisition of CMS on January 31 1994, the
sale of the assets of Shark effective May 1, 1995, and the acquisition of
BMI on June 30, 1995.
- - Net loss in 1997 includes a loss of $21.3 million on the disposal of
discontinued operations, primarily due to the non-cash write-off of the net
assets of the businesses and the related tax expense.
- - Income from operations in 1996 includes a charge of $1.9 million related to
merger and consolidation costs. Net income also includes a non-recurring,
pre-tax benefit of $3.3 million attributable to proceeds received from
Consumer News and Business Channel ("CNBC") under a previous agreement and
an extraordinary loss of $0.2 million on the prepayment of debt.
- - Income from operations in 1995 includes a charge of $0.9 million related to
merger and consolidation costs. Net income also includes a non-recurring,
pre-tax benefit of $14.1 million attributable to proceeds received from CNBC
under a previous agreement and a non-recurring, pre-tax gain of $5.4 million
from the sale of the assets of Shark.
- - Long-term debt includes capital lease obligations.
- - During the five-year period ended June 30, 1997, the Company paid no cash
dividends.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
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, equity and
fixed income analytics, financial market information and news, access to
historical financial databases, and other information to individual investors,
traders and portfolio managers on a subscription basis. They also provide
sports 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 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.
Effective May 1, 1995, the Company sold substantially all of the assets and
assigned certain liabilities of Shark Information Services Corp. ("Shark"), a
provider of financial market information and analytical capabilities to
institutional investors. The BMI, ISN and CRI operations were part of the
June 30, 1995 acquisition of Broadcast International, Inc.
In the following discussion, all references to specific years refer to the
Company's fiscal year ending June 30, unless otherwise noted.
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA ($ Millions)
Year Ended June 30,
1997 1996 1995
Revenues
DBC West/BMI $72.5 $65.9 $40.7
CMS 18.9 15.8 13.3
Other* 1.1 - -
Shark - - 20.2
92.5 81.7 74.2
Cost of services and sales 33.2 25.1 30.5
Selling, general and administrative:
Sales and marketing 20.2 18.3 12.0
G&A 17.7 12.9 12.5
Depreciation and amortization:
Equipment and leasehold improvements 8.6 7.1 7.0
Goodwill 3.5 2.4 1.7
Software development and other 2.3 1.6 1.3
Merger and consolidation costs - 1.9 0.9
Income from operations $7.0 $12.4 $ 8.3
Income (loss) from operations by unit
DBC West/BMI $15.3 $14.3 $9.1
CMS 5.3 4.2 2.7
Other initiatives* (10.2) (2.6) -
Shark - - 0.5
Corporate and unallocated (3.4) (3.5) (4.0)
$ 7.0 $12.4 $8.3
*New product and infrastructure development initiatives, including AgCast,
BondVu, DBC Online and the Lawyers Communications Network.
<PAGE>
In the third quarter of fiscal 1997 the Company adopted a plan to sell its CRI
and ISN businesses. Accordingly, the results of operations for these
businesses are being reported as discontinued operations. The loss from
discontinued operations was $21.9 million ($0.65 per share) for 1997. This
loss was primarily due to the non-cash write-off of the net assets of the
businesses and the related tax expense. Prior to the write-off, the net
assets included $34.2 million of unamortized goodwill. These operations have
continued to generate positive operating cash flow and are expected to do so
until they are sold.
1997 versus 1996
Revenues from continuing operations grew by 13 percent due to growth at all
operations. Of the 10 percent growth in DBC West/BMI revenue, from $65.9
million to $72.5 million, $4.5 million (seven percent) was due to the
acquisitions of Federal News Service, Instant Odds Network and Las Vegas
Sports Consultants. Subscription revenues increased but were partially offset
by a decline in service initiation fees. This decline resulted from the
Company's program to discount these fees in exchange for subscription
prepayments on annual contracts. CMS' revenues grew 20 percent from $15.8
million to $18.9 million due to growth in its BondEdge service.
Income from operations, excluding $1.9 million of costs in 1996 incurred with
the acquisition of BII, decreased from $14.3 million to $7.0 million. The
decrease was primarily due to (i) development activities for AgCast, the LCN,
and the Company's Online services, (ii) initial stage marketing and
development activities for BondVu and (iii) market repositioning for the
Company's Signal, QuoTrek and BMI products. In total the Company expensed
$10.2 million for these activities in 1997, net of $1.1 million of revenues,
as compared with $2.6 million for similar activities in 1996.
A substantial portion of the increase in expenses is attributable to the
acquisitions and the development initiatives. Of the $8.1 million increase in
cost of services and sales, $1.9 million and $2.2 million were due to
acquisitions and development initiatives, respectively. Of the $6.7 million
increase in selling, general and administrative expenses, $0.9 million and
$5.7 million were caused by the acquisitions and development initiatives,
respectively. Finally, $1.1 million and $0.8 million of the depreciation and
amortization increase was attributable to the acquisitions and development
initiatives, respectively.
Other increases to cost of services and sales are largely attributable to
higher compensation and benefits costs and data acquisition and distribution
expenses. Other increases in depreciation and amortization are due to: (i)
higher depreciation due to the purchase of fixed assets in 1997 and 1996;
(ii) higher amortization of software development due to the development of
BondVu, AgCast, BondEdge for Windows and Signal for Windows in 1997 and 1996;
and (iii) higher goodwill amortization due to the accrual of the contingent
earnout payments for CMS.
Also included in 1997 were the following non-recurring items: (i) a pre-tax
charge of $0.6 million for the write-off of the Company's joint venture in
Hong Kong, (ii) pre-tax benefits of $1.0 million related to the fiscal 1995
sale of substantially all of the assets of Shark and proceeds received in
fiscal 1996 from Consumer News and Business Channel ("CNBC"), and (iii) a
pre-tax charge of $0.7 million related to the settlement of class action
litigation. The Hong Kong write-off occurred as management concluded that
the operation's core product should be discontinued due to the lack of
acceptance in the market. The benefits resulted from the resolution of
certain contingencies and the revision of certain estimates associated with
the Shark and CNBC transactions. The pre-tax benefit of the CNBC transaction
in fiscal 1996 was $3.3 million, as further described below.
In addition to the $0.6 million write-off noted above, the Company incurred
$0.2 million of equity losses on its joint venture investment in Hong Kong in
fiscal 1997, prior to the write-off, compared to equity losses of $0.8 million
in fiscal 1996. Interest income (expense), net increased by $0.4 million
despite lower cash balances, due primarily to the refinancing and prepayment
of bank debt in late 1996.
The effective tax rate for 1997 was approximately 46 percent. This was higher
than 1996 due to the impact of nondeductible goodwill amortization and a lower
level of pretax income from continuing operations.
Net income from continuing operations for 1997 was $3.6 million, equal to
$0.11 per primary and fully diluted share, including $0.18 per share in net
expenses for new product and infrastructure initiatives and a $0.01 per share
charge for the settlement of class action litigation. Net income from
continuing operations in 1996 was $9.1 million, or $0.28 per primary and fully
diluted share, including a $0.06 per share benefit from the CNBC proceeds and
$0.05 per share in net expenses for new product and infrastructure
initiatives. Primary and fully diluted weighted average shares outstanding
grew by five percent and three percent, respectively, principally due to the
shares issued for the acquisitions of Check Network, Las Vegas Sports
<PAGE>
Consultants, and Federal News Service, and the exercise of stock options,
partially offset by the Company's stock buyback program.
1996 versus 1995
The Company's revenues grew by 10 percent, primarily attributable to the
acquisition of the BMI subscriber base and increases in subscribers at DBC
West and CMS. The Company believes these increases are attributable to the
growing demand for financial information, the introduction of new services and
the strengthening of the Company's brands in these markets.
Operating income increased 56 percent and operating margins improved from 12
percent to 18 percent excluding, $1.9 million and $0.9 million of costs in
1996 and 1995, respectively, incurred with the acquisition of BII. The
margin improvement was largely caused by the sale of the assets of Shark,
which had only a two percent operating margin during 1995. Operating margins
for the other businesses decreased overall due to the Company's investment in
new online businesses, international markets, AgCast and CMS' new BondVu
service, which totaled approximately $5.1 million during 1996, including the
$2.6 million mentioned above. Such costs included research and development
expenses, data and transmission costs and selling, general and administrative
expenses.
Selling expenses increased to $18.3 million from $12.0 million. The increase
was caused by selling costs at the newly-acquired BMI division and increased
marketing efforts at DBC West and CMS to generate higher sales, partially
offset by the absence of marketing costs at Shark.
Merger and consolidation costs approximating $1.9 million were incurred during
1996 in connection with the acquisition of BII. These costs are primarily
related to salaries and benefits of certain duplicative employees of BII prior
to their termination and costs to consolidate certain operations in San Mateo,
California.
During 1996, the Company's joint venture in Hong Kong commenced operations.
DBC recorded $0.8 million of losses on this investment.
Interest income (expense), net dropped by $0.7 million as higher interest
income and lower interest expense at DBC were partially offset by the
assumption of BII's debt as part of the acquisition. Interest income
increased due to higher cash balances during the year, attributable to the
substantial cash inflows at the end of 1995 from the sale of the assets of
Shark and the CNBC net proceeds, as described below, cash generated from
operations and the exercise of 2.1 million stock options. During 1996, the
Company refinanced its bank debt, resulting in significantly lower levels of
debt at June 30, 1996 versus June 30, 1995, as well as reduced interest
expense during the year.
Other income, net in 1996 includes a one-time receipt of $0.3 million, net of
legal expenses, received as a settlement from Crum & Forster from a prior year
insurance claim.
As a result of the arbitration of matters related to CNBC's purchase of
certain Financial News Network, Inc. ("FNN") media assets in 1991, DBC
received a final payment of approximately $7.7 million in March 1996 from
CNBC. The net proceeds after commissions, expenses, payments to claim holders
under FNN's Plan of Reorganization and taxes (the "CNBC net proceeds")
approximated $1.9 million ($3.3 million before taxes). In 1995, DBC received
an initial $26.6 million payment from CNBC. The net impact of this payment
was $8.9 million ($14.1 million before taxes).
Net income from continuing operations for 1996 totaled $9.1 million, equal to
$0.28 per primary and fully diluted share, including $0.06 per share from the
CNBC net proceeds and a $0.03 charge related to merger and consolidation
costs. Net income from continuing operations in 1995 was $16.4 million, or
$0.68 per primary share, including $0.37 attributable to the CNBC net
proceeds, $0.11 attributable to the sale of the assets of Shark and a $0.02
charge related to merger and consolidation costs. These results reflect a 33
percent increase in weighted average shares outstanding mainly due to the
issuance of 6.1 million shares and options to acquire 1.0 million shares
related to the BII acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $20.4 million, $22.7 million and
$9.4 million in 1997, 1996 and 1995, respectively. The decrease from 1996 to
1997 was largely caused by expenses incurred for new product introductions
and infrastructure development activities. The significant increase from
<PAGE>
1995 to 1996 was mainly due to the increase in operating income before
depreciation and amortization, attributable to the BII acquisition and growth
in the other businesses.
In 1997, the Company used $6.2 million for acquisitions, including contingent
earnout payments associated with the CMS acquisition and the purchase of
Instant Odds Network. Capitalized software development costs were primarily
due to the development of BondEdge and BondVu at CMS and AgCast at DBC West.
The joint venture investments of $1.8 million related to DBC's activities in
Hong Kong and Internet Financial Network.
In 1996, the Company used $18.5 million to complete the acquisition of BII,
make contingent earnout payments associated with the CMS acquisition and
acquire a former CRI franchisee. DBC received $4.9 million from CNBC, net of
payments to claimholders. Capitalized software development costs of $1.8
million were substantially attributable to the development of BondEdge and
BondVu at CMS and MarketWatch at DBC West. The Company also collected $1.3
million associated with the 1995 sale of the assets of Shark.
Investing activities generated $22.1 million of net cash in 1995, including
$16.7 million from the sale of the assets of Shark and $15.7 million from
CNBC, net of payments to claimholders. Capitalized software development costs
were $1.9 million in 1995, largely as a result of the development of BondEdge
for Windows and Signal for Windows.
In 1997, the Company used $3.8 million to pay down long-term debt, of which
$2.7 million was associated with the acquisition of CMS. The exercise of 1.5
million stock options generated $4.9 million and $8.8 million was used to
purchase treasury shares in a buyback program announced in November 1996. The
Company is authorized to buy up to 2 million shares, of which 1.4 million were
repurchased through June 30, 1997.
The Company received cash of $6.6 million from the exercise of 2.1 million
stock options in 1996. DBC received $3.5 million in 1996 from a new debt
agreement and used $13.2 million to pay off existing bank debt.
The Company used $2.6 million in 1995 to make scheduled debt payments, mainly
associated with the financing of the CMS acquisition and equipment financing
at Shark. In addition, DBC used $1.5 million to pay down its revolving line
of credit.
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 June 30, 1997, the
Company was in compliance with these covenants.
The Company currently expects cash generated from operations to increase
further during 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.
The Company expects to receive substantial after-tax proceeds from the sale of
discontinued operations during 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
During 1997, the Company introduced several new services, and enhancements of
existing services including:
<PAGE>
- - AgCast, an agricultural data service including real-time commodities and
futures pricing, news, weather and other agribusiness information,
delivered via small dish satellite or the internet.
- - StockEdge, a financial data service including real-time securities
prices, news headlines and intra-day charting via FM, cable, satellite
or the internet.
- - BondVu, a service offering real-time fixed income prices and
sophisticated fixed income analytics to the professional investor.
Revenues in 1997 from these new services were not significant but are expected
to be substantial in the future. The Company expects to continue to commit
its resources to the development of new services. Management expects such
development efforts to be financed through cash generated from operations.
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.
INCOME TAXES
Under current accounting requirements, the Company recognizes future tax
benefits or expenses attributable to its temporary differences, net operating
loss carryforwards and tax credit carryforwards. Recognition of deferred tax
assets is subject to the Company's determination that realization is more
likely than not. As of June 30, 1997, the Company has recorded $5.2 million
of net deferred tax assets, net of a valuation allowance of $2.6 million and
deferred tax liabilities of $15.0 million. Based on taxable income
projections, management believes that the recorded net deferred tax assets
will be realized.
INFLATION
Although management believes that inflation has not had a material effect on
the results of its operations during the past three years, there can be no
assurance that the Company's results of operations will not be affected by
inflation in the future.
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 effect 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>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements: Page
Report of Independent Accountants 19
Consolidated Statements of Operations 20
Consolidated Balance Sheets 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Stockholders' Equity 23
Notes to Consolidated Financial Statements 24
Quarterly Financial Information (Unaudited) 33
Supplemental Schedule:
Report of Independent Accountants 34
Financial Statement Schedule 35
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of Data Broadcasting Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Data
Broadcasting Corporation and its subsidiaries at June 30, 1997 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Salt Lake City, Utah
August 8, 1997
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended June 30,
1997 1996 1995
REVENUES $92,480 $81,664 $74,243
COSTS AND EXPENSES
Cost of services and sales 33,153 25,083 30,547
Selling, general and administrative 37,883 31,234 24,516
Depreciation and amortization 14,433 11,002 10,012
Merger and consolidation costs - 1,913 923
Total costs and expenses 85,469 69,232 65,998
INCOME FROM OPERATIONS 7,011 12,432 8,245
Gain on sale of Shark 703 - 5,410
Equity in loss of joint venture (828) (752) (53)
Litigation settlement (700) - -
Interest income (expense), net 313 (135) (816)
Other income (expense), net (2) 321 -
INCOME BEFORE REORGANIZATION ITEMS 6,497 11,866 12,786
CNBC proceeds, net of obligations 249 3,299 14,135
Other reorganization items, net - - 263
INCOME BEFORE INCOME TAXES 6,746 15,165 27,184
Provision for income taxes 3,098 6,077 10,819
INCOME FROM CONTINUING OPERATIONS 3,648 9,088 16,365
Income (loss) from discontinued operations,
including taxes (21,927) 8 -
Extraordinary loss on debt prepayment, net of tax - (225) -
NET INCOME (LOSS) $(18,279) $ 8,871 $16,365
INCOME (LOSS) PER SHARE:
Primary -Income from continuing operations $0.11 $0.28 $0.68
-Income (loss) from discontinued
operations (0.65) - -
-Extraordinary loss on debt prepayment - - -
Net income (loss) $(0.54) $0.28 $0.68
Fully diluted
-Income from continuing operations $0.11 $0.28 $0.67
-Income (loss) from discontinued
operations (0.65) - -
-Extraordinary loss on debt prepayment - (0.01) -
Net income (loss) $(0.54) $0.27 $0.67
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares)
June 30,
1997 1996
ASSETS
Current Assets:
Cash and cash equivalents $10,524 $19,667
Accounts receivable, less allowance for doubtful
accounts of $1,982 and $1,321 9,366 9,645
Income taxes receivable 300 1,330
Net assets of discontinued operations 28,576 -
Prepaid expenses and other current assets 716 4,679
Total Current Assets 49,482 35,321
Property and equipment, net 18,337 22,838
Software development costs, net of accumulated
amortization of $4,467 and $2,445 4,918 4,783
Goodwill, net of accumulated amortization of
$8,229 and $6,050 48,279 71,539
Deferred tax assets, net of valuation allowance 10,944 13,095
Other non-current assets 3,439 6,391
TOTAL ASSETS $135,399 $153,967
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $4,963 $6,852
Accrued liabilities 7,556 11,374
Deferred tax liabilities 5,705 -
Current maturities of long-term debt 1,000 3,851
Other current liabilities 869 2,575
20,093 24,652
Deferred revenue 6,759 6,802
Total Current Liabilities 26,852 31,454
Long-term debt 1,500 2,558
Other non-current liabilities 1,194 3,858
TOTAL LIABILITIES 29,546 37,870
Commitments and contingencies
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized - 75,000,000 shares:
Issued and Outstanding - 32,709,162
Shares in 1997 and 31,337,984 Shares in 1996 341 313
Additional paid-in capital 99,325 82,693
Retained earnings 14,812 33,091
Treasury stock (8,625) -
TOTAL STOCKHOLDERS' EQUITY 105,853 116,097
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $135,399 $153,967
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended June 30,
1997 1996 1995
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income (loss) $(18,279) $8,871 $16,365
Adjustments to reconcile net income to
net cash provided by operating activities:
Write-down of net assets of discontinued
operations, net of tax 21,264 - -
Depreciation and amortization 19,845 16,621 10,012
Provision for losses on accounts receivable 2,333 2,120 600
Equity in loss of joint venture 828 752 53
Gain on sale of Shark (703) - (5,410)
Effect of tax provision on reorganization
value and deferred tax assets 81 2,245 6,436
CNBC proceeds, net of obligations and taxes - (1,847) (8,949)
Other non-cash items, net 291 1,123 901
Changes in operating assets and liabilities,
net of acquisitions and divestitures:
Accounts receivable (4,257) (5,548) (1,341)
Income taxes payable 1,000 (1,108) (5,529)
Accounts payable and accrued liabilities (399) (3,815) (4,806)
Deferred revenue 367 (743) 1,106
Other assets and liabilities, net (1,950) 4,056 (31)
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,421 22,727 9,407
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment (11,693) (14,718) (8,311)
Cash paid for acquisitions, net of cash
acquired (6,155) (18,478) (1,107)
Capitalized software development costs (2,158) (1,805) (1,878)
Investment in joint ventures (1,818) (1,370) -
Receipt of contingent payments from CNBC - 7,738 26,611
Payments to claimholders from CNBC proceeds - (4,649) (10,930)
Proceeds from the sale of Shark - 1,331 16,662
Other, net 34 (161) 1,034
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (21,790) (32,112) 22,081
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Purchase of treasury stock (8,835) - -
Exercise of stock options and warrants 4,896 6,634 1,091
Payments of long-term debt and capital
lease obligations (3,807) (13,204) (4,060)
Issuance of long-term debt - 3,500 -
Other, net (28) (343) (19)
NET CASH USED IN FINANCING ACTIVITIES (7,774) (3,413) (2,988)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (9,143) (12,798) 28,500
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 19,667 32,465 3,965
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,524 $19,667 $32,465
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except for number of shares)
Common Stock Total
Shares Additional Stock-
Out- Paid-In Retained Treasury holder's
standing Amount Capital Earnings Stock Equity
BALANCE AT JUNE 30,
1994 22,385,891 $224 $32,032 $7,855 $40,111
Issuance of stock
and options for
acquisitions 6,091,791 61 37,545 - 37,606
Exercise of stock
options and
warrants 819,488 8 1,474 - 1,482
Tax benefit from
exercise of stock
options - - 833 - 833
Reduction of deferred
tax valuation allowance
applicable to pre-
Effective Date
items - - 314 - 314
Other (24,493) - 4 - 4
Net income - - - 16,365 16,365
BALANCE AT JUNE 30,
1995 29,272,677 293 72,202 24,220 96,715
Exercise of stock
options and
warrants 2,065,528 20 6,591 - 6,611
Tax benefit from
exercise of stock
options - - 3,900 - 3,900
Other (221) - - - -
Net income - - - 8,871 8,871
BALANCE AT JUNE 30,
1996 31,337,984 313 82,693 33,091 116,097
Issuance of stock for
acquisitions 1,263,747 14 10,772 - 10,786
Exercise of stock
options and
warrants 1,525,347 14 4,882 - 4,896
Tax benefit from
exercise of stock
options - - 1,188 - 1,188
Purchase of treasury
stock (1,417,916) - (210) - (8,625) (8,835)
Net loss - (18,279) - (18,279)
BALANCE AT JUNE 30,
1997 32,709,162 $341 $99,325 $14,812 $(8,625) $105,853
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Data Broadcasting Corporation and subsidiaries
(the "Company" or "DBC") currently operates in one business segment,
providing real-time stock market quotes, equity and fixed income
analytics, financial market and governmental information and news and
access to historical financial databases and sports information.
DBC's customer base consists mainly of individual investors, traders and
portfolio managers. Customers are located principally in North America,
with additional customers in Europe, Hong Kong and the Middle East.
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.
Basis of Presentation - The Company is the successor registrant to
Financial News Network Inc. ("FNN") pursuant to the First Amended Plan
of Reorganization of Financial News Network Inc., dated March 10, 1992,
as amended (the "Plan"). The Plan became effective on June 26, 1992
("the Effective Date").
Principles of Consolidation - The consolidated financial statements
include the results of the Company and all majority-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated.
Cash and Cash Equivalents - The Company considers all highly liquid
temporary cash investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment - Fixed assets are recorded at cost and are
depreciated using the straight-line method over their estimated useful
lives ranging from three to seven years. Leasehold improvements are
recorded at cost and are depreciated using the straight-line method over
the shorter of their useful lives or the remaining lease term.
Software Development Costs - The Company capitalizes certain costs
incurred to produce certain software used by subscribers to access,
manage and analyze information in the Company's databases. Such costs,
including coding, testing and product quality assurance, are capitalized
once technological feasibility has been established. Amortization is
computed on a case-by-case basis over the estimated economic life of the
software, which ranges from three to five years. In fiscal 1997, 1996
and 1995, such amortization amounted to $2,023,000, $1,239,000 and
$896,000, respectively.
Goodwill - Goodwill represents the excess of the cost of acquisitions
over the fair value of the net assets acquired and is being amortized on
a straight-line basis over 5 to 25 years. At each balance sheet date
management assesses whether there has been a permanent impairment in the
value of these assets. If the carrying value of goodwill exceeds the
undiscounted future cash flows from operating activities of the related
businesses, a permanent impairment is deemed to have occurred. In this
event, the assets would be written down to an amount equivalent to the
discounted future cash flows from operating activities of the related
businesses.
Revenue Recognition - Prepaid subscription revenue is deferred and
recorded as income on a straight-line basis over the term of the
subscription agreement. One-time service initiation fees are recognized
as revenue when billed to the extent that no future performance
obligations exist and such fees do not exceed direct selling costs,
which are expensed as incurred. In fiscal 1997, 1996 and 1995 such fees
aggregated approximately $5,300,000, $6,500,000 and $4,900,000,
respectively, and did not exceed direct selling costs.
Research and Development Costs - Expenditures for research and
development are expensed as incurred. The Company expensed approximately
$7,100,000, $4,300,000 and $4,500,000 in research and development costs
during the years ended June 30, 1997, 1996 and 1995, respectively,
including maintenance and upgrading of existing products, development of
new products and development and maintenance of internal systems.
Stock-Based Compensation - The Company elected to continue following
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB No. 25") in accounting for its employee stock
options, rather than adopt the fair value method of accounting provided
under Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123"). Under APB No. 25, the
Company does not recognize compensation expense on stock options granted
to employees because the exercise price of each option is equal to the
market price of the underlying stock on the date of the grant.
Income Taxes - Should there be a need to increase the deferred tax
valuation allowance in the future, a charge to income tax expense will be
required. However, in the event there is a need to decrease the
<PAGE>
valuation allowance, Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7")
requires a direct addition to stockholders' equity. This treatment only
applies to the deferred tax assets and related valuation allowance
applicable to pre-Effective Date items. As of June 30, 1997, the entire
valuation allowance is related to pre-Effective Date items.
Earnings per Share - Primary and fully diluted income (loss) per share
is computed by dividing net income by the weighted average number of
shares of common stock and common stock equivalents outstanding for the
period, calculated in accordance with the treasury stock method.
Accounting Principles Board Opinion No. 15 limits the assumed repurchase
of shares under the treasury stock method to twenty percent of the shares
outstanding. Any excess proceeds from the assumed exercise of options
are assumed to be used to pay down debt, resulting in interest savings.
Fiscal 1995 net income is adjusted for such assumed interest savings, net
of applicable income taxes, for purposes of these calculations. Earnings
per share for fiscal 1996 have been restated as a result of the
classification of certain of certain businesses as discontinued
operations.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"), which is effective for financial
statements for periods ending after December 15, 1997, was issued. SFAS
No. 128 establishes new standards for computing and presenting earnings
per share ("EPS"). Management is currently assessing the impact of SFAS
No. 128 and will provide the required disclosures upon adoption in the
second quarter of fiscal 1998.
The weighted average number of shares of common stock and common stock
equivalents outstanding used in the computations are (in thousands):
1997 1996 1995
Primary 33,581 31,936 24,015
Fully Diluted 33,726 32,891 24,350
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect amounts reported
in the financial statements. Actual results could differ from those
estimates.
Reclassifications - Certain prior year amounts have been reclassified
to conform with the current year's presentation.
2. ACQUISITIONS
Effective July 1, 1996, the Company acquired by merger all of the
outstanding common stock of Las Vegas Sports Consultants, Inc. ("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 July 1, 1996, the Company acquired all of the outstanding
common stock of Instant Odds Network, Inc. ("ION") for $2,600,000 in
cash. ION has the rights to transmit electronically real-time betting
odds from six major casinos in Las Vegas. The agreement contains a
contingent earnout provision, payable in the Company's common stock,
based upon the results of operations of ION for the three-year period
ending June 30, 1999.
Effective September 16, 1996, the Company acquired all of the outstanding
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, which was merged into CheckRite International ("CRI"),
provides check recovery services.
Effective October 31, 1996, the Company acquired substantially all of the
assets of Federal News Service Group, Inc. ("FNS"), subject to certain
liabilities, for 804,841 shares of the Company's common stock, valued at
$6,650,000. The agreement also provides for a contingent earnout,
payable in the Company's 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 news organizations,
political associations and corporations around the world.
In conjunction with this acquisition, the Company agreed to loan an
executive of FNS ("Executive"), up to $1,845,000. The loan bears
interest at nine percent and is collateralized by certain of Executive's
personal stock holdings, which include no less than 300,000 shares of DBC
common stock. The loan is payable from the FNS earnout. As of June 30,
1997, the loan balance is $1,598,600, including accrued interest and is
included in Prepaid expenses and other current assets.
Effective January 1, 1996, CRI acquired all of the outstanding stock of
Northwest CheckRite, Inc., ("NCI") a former franchisee of CRI, for
$1,200,000.
On June 30, 1995, the Company consummated its acquisition of all of the
outstanding common stock of BII, for approximately $51,041,000,
<PAGE>
comprising cash of $13,484,000, 6,077,000 shares of DBC common stock
valued at $35,673,000, and options to purchase approximately 993,000
shares of DBC common stock valued at $1,884,000. In addition, the
Company assumed BII's debt of approximately $8,437,000. The Company also
incurred acquisition costs of approximately $2,750,000.
Effective April 1, 1995, the Company acquired all of the outstanding
stock of Computer Sports World, Inc. ("CSW"), a leading on-line sports
database company, for approximately $133,000 in cash and approximately
15,000 shares of DBC common stock, valued at $50,000.
The above transactions have been accounted for as purchases and goodwill
is being amortized over 5 to 25 years using the straight-line method.
The acquisitions of LVSC, ION, CN, FNS, NCI and CSW did not have a
material effect on the results of operations in the year of acquisition.
Accordingly, no pro forma results have been presented.
In connection with the acquisition of BII, management developed and
implemented restructuring plans to combine certain BII operations with
the Company's existing operations in San Mateo, California and
consolidate certain of BII's facilities in Utah. As a result,
approximately 85 BII employees in the customer service, development,
sales and finance functions were terminated in 1995. The Company also
incurred obligations for leased space that became idle as a result of the
consolidation of facilities. In addition, certain contractual
obligations of BII became redundant based on the Company's consolidation
plans. The estimated cost of these actions as of June 30, 1995 was
approximately $1,369,000 and was accrued in purchase accounting. During
fiscal 1996, the Company charged approximately $1,017,000 of severance
and lease costs against this accrual and increased the estimated cost by
approximately $505,000. During fiscal 1997, the Company charged
approximately $400,000 of severance and lease costs against this accrual.
In addition to the restructuring actions, the Company recorded certain
other assets and liabilities in purchase accounting. During fiscal 1996,
DBC wrote off additional assets and increased certain liabilities in the
aggregate amount of approximately $659,000. These adjustments have been
recorded as an increase to goodwill and will be amortized over the
remaining life of goodwill.
The following unaudited pro forma combined results of operations for the
year ended June 30, 1995 assume the acquisition of BII had occurred on
July 1, 1994. These results also include (a) assumed cost reductions of
$4,000,000 directly related to consolidation of certain operations of DBC
and BII, (b) assumed interest savings from the assumed repayment of BII
debt and (c) the elimination of non-recurring hostile proxy contest
expenses incurred by BII. These results are not indicative of results
that would have been obtained had the acquisitions occurred on the
assumed date and are not intended to be a projection of future results.
(In thousands,
except per share
amounts)
Revenues $87,212
Income from continuing operations $19,439
Loss from discontinued operations $(1,166)
Net income $18,273
Primary
Income from continuing operations $0.65
Loss from discontinued operations (0.04)
Net income $0.61
Fully diluted
Income from continuing operations $0.64
Loss from discontinued operations (0.04)
Net income $0.60
The former shareholders of Capital Management Sciences ("CMS") were
eligible for up to $6,840,000 of additional cash based on the pre-tax
earnings of CMS over the three-year period ending January 31, 1997. As
of June 30, 1997, the maximum payment had been earned and paid.
Contingent cash payments were added to the acquisition cost when
determined and amortized prospectively over the then remaining life of
goodwill.
<PAGE>
3. DISCONTINUED OPERATIONS
Effective March 31, 1997, the Company adopted a plan to sell its CRI and
Instore Satellite Network ("ISN") businesses which have historically made
up the Company's Business Services segment. Accordingly, these
businesses have been accounted for as discontinued operations in the
accompanying financial statements. The Company expects that these
businesses will be sold by December 31, 1997. The Company incurred net
losses of $663,000 on these operations for the nine months ended March
31, 1997.
The estimated loss on the disposal of CRI and ISN is $21,264,000
(including taxes of $8,231,000), consisting of an estimated loss on
disposal of the business of $20,653,000 and a provision of $611,000 for
anticipated operating losses until disposal. This loss resulted
primarily from the non-cash write-off of the net assets of the
businesses. Prior to the write-off, the net assets included $34,239,000
of unamortized goodwill. These operations have continued to generate
positive operating cash flows. Estimated costs associated with these
disposals, including taxes, have been recorded as accrued liabilities.
Net losses of $946,000 were incurred by the discontinued operations
during the fourth quarter of fiscal 1997.
Revenues for these operations were as follows:
1997 1996
CRI $17,710,000 $15,021,000
ISN $14,468,000 $17,948,000
Net assets of the discontinued operations consisted of the following as
of June 30, 1997 (in thousands):
Goodwill $22,252
Property and equipment 5,247
Prepaid expenses 3,409
Accounts receivable 2,526
Accrued liabilities (2,276)
Other current liabilities (2,094)
Other net assets (488)
$28,576
4. SALE OF SHARK
On May 8, 1995, under the terms of a definitive agreement dated April 13,
1995, a subsidiary of Automatic Data Processing, Inc. ("ADP") purchased
substantially all of the assets and assumed specified liabilities of
Shark Information Services Corp. ("Shark"), a subsidiary of the Company,
for $17,993,000 plus the assumption of approximately $1,903,000 in debt.
The net assets of Shark were approximately $7,113,000. In connection
with the sale, DBC recorded obligations of approximately $2,756,000 for
future payments of non-cancellable office space leases not assumed by
ADP, severance, compensation, and benefits costs of approximately
$1,500,000 and transaction and other costs of approximately $1,214,000.
DBC recorded a pre-tax gain of $5,410,000 ($2,628,000 after taxes). In
fiscal 1997, the Company increased its pre-tax gain by $703,000 due to
the reduction of certain reserves recorded at the time of the sale.
Management has determined that these reserves are no longer necessary due
to the resolution of certain contingencies and the revision of certain
estimates.
5. MERGER AND CONSOLIDATION COSTS
During fiscal 1996, the Company expensed approximately $1,913,000 of
merger and consolidation costs, primarily related to the cost of certain
duplicative employees of BII prior to their termination and costs to
consolidate certain operations in San Mateo, California.
In connection with the acquisition of BII, management committed to
product plans based upon BII's technology that was expected to render
certain of the Company's receiver equipment obsolete by July 1, 1996.
Consequently, at June 30, 1995, those assets were written down to their
net realizable value, resulting in a non-recurring, pre-tax charge of
approximately $647,000.
In connection with the acquisition of BII and the sale of the assets of
Shark, management decided to combine the corporate functions of the
Company at BII's corporate headquarters in Salt Lake City, Utah. This
resulted in a decision to terminate 13 DBC employees in New York in the
areas of finance, administration and human resources. In the fourth
quarter of fiscal 1995, the Company expensed approximately $276,000 to
cover compensation costs and termination benefits for these employees.
<PAGE>
6. JOINT VENTURE
In fiscal 1997, the Company recorded a pre-tax charge of $606,000 to
write-off its remaining investment obligation in a joint venture in Hong
Kong and $222,000 of equity losses from this investment. The Company and
its joint venture partner concluded that its core product should be
discontinued, given the lack of acceptance in the market.
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, (in
thousands):
1997 1996
Receiver equipment held by subscribers $26,776 $29,128
Computer and communication equipment 18,539 21,279
Furniture and fixtures 1,594 1,888
Leasehold improvements 1,027 992
47,936 53,287
Less accumulated depreciation
and amortization 29,599 30,449
$18,337 $22,838
Property and equipment includes approximately $166,000 of assets recorded
under capital leases at June 30, 1996. Depreciation expense, including
amortization of capital leases, was $8,603,000, $7,119,000 and $7,020,000
for fiscal years 1997, 1996, and 1995, respectively.
8. LONG-TERM DEBT
Long-term debt consisted of the following at June 30, (in thousands):
1997 1996
Key Bank term loan $2,500 $3,500
CMS shareholders' note - 2,700
Other - 209
2,500 6,409
Less current maturities 1,000 3,851
Long-term debt $1,500 $2,558
In March 1996, the Company entered into a $36,500,000 loan agreement with
Key Bank National Association. The agreement provided for an acquisition
line of credit of $30,000,000, a revolving line of credit of $3,000,000
and a term loan of $3,500,000. The lines of credit are available until
December 31, 2000, with the amount available under the acquisition line
of credit decreasing each quarter. As of June 30, 1997, the total amount
available under the acquisition line of credit had been reduced to
$26,250,000. The term loan matures on December 31, 1999 with principal
payments of $250,000 due quarterly. Under this agreement substantially
all of the assets of the Company and its subsidiaries are collateralized.
All facilities accrue interest at variable rates with the interest rate
on the term loan being 8.03 percent as of June 30, 1997. DBC had not
drawn on the line of credit facilities as of June 30 1997. Unused
commitment fees of 0.25 percent and 0.325 percent are charged to DBC
based on the average daily balance of the unused portion of the
acquisition line of credit and revolving line of credit, respectively.
This agreement includes various restrictive covenants, including a
restriction on the payment of dividends, and requires the Company to
maintain certain financial ratios. At June 30, 1997, the Company was in
compliance with these covenants. At June 30, 1997 and 1996, $750,000 was
included in Other Assets, representing a cash balance in an interest-
bearing account, required to be maintained as long as any amounts are
outstanding under this agreement.
In conjunction with this agreement, DBC prepaid its outstanding bank debt
during fiscal 1996 using the proceeds from the term loan and existing
cash reserves. DBC recorded an extraordinary loss of approximately
$225,000, net of tax of $148,000 in the fourth quarter of fiscal 1996 as
a result of the prepayment of one of its bank obligations.
Amounts due associated with long-term debt and are as follows (in
thousands): 1998 - $1,000, 1999 - $1,000 and 2000 - $500.
The Company paid approximately $591,000, $1,078,000 and $1,219,000 of
interest on long-term debt during the fiscal years ended June 30, 1997,
1996 and 1995, respectively. Interest expense for the fiscal years ended
June 30, 1997, 1996 and 1995, was $616,000, $1,322,000 and $1,436,000,
respectively.
<PAGE>
9. STOCK BASED COMPENSATION
In connection with the Data Broadcasting Stock Option Plan (the "Option
Plan"), the Company has reserved 7,250,000 shares of DBC common stock.
The Option Plan provides for the discretionary issuance of stock
options to employees. The exercise price of options granted equals the
market price at the date of grant. Options expire five to ten years from
the date of grant and generally vest ratably over three years. In
certain cases options have been granted with no vesting requirements. In
the past, the Company has also issued stock options and warrants as
partial consideration for the acquisition of businesses and other
transactions. These securities are not part of the Option Plan but are
included in the activity below.
Weighted Average
Shares Exercise Price
Outstanding, June 30, 1995 6,643 $3.65
Granted 1,140 8.42
Exercised (2,066) 3.20
Cancelled (145) 3.89
Outstanding, June 30, 1996 5,572 4.78
Granted 663 7.01
Exercised (1,525) 3.21
Cancelled (251) 4.44
Outstanding, June 30, 1997 4,459 5.67
Exerciseable, June 30, 1996 2,902 4.13
Exerciseable, June 30, 1997 3,271 5.20
Range of option exercise prices:
Outstanding Exerciseable
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
$1.22 to $2.47 (Avg.
life: 2.93 years) 686 2.09 686 2.09
$2.96 to $6.00 (Avg.
life: 4.56 years) 1,731 4.53 1,446 4.42
$6.69 to $8.81 (Avg.
life: 6.71 years) 1,611 7.21 817 7.23
$9.00 to $12.06 (Avg.
life: 8.80 years) 431 10.22 322 10.18
4,459 3,271
The weighted average fair value per share of options granted was $2.53 and
$3.06 for the years ended June 30, 1997 and 1996, respectively.
The following pro forma information presents DBC's net income (loss) and
primary and fully diluted earnings per share for the years ended June 30, 1997
and 1996 as if compensation cost had been measured under the fair value method
of SFAS No. 123.
1997 1996
Net income (loss) $(18,965) $7,760
Primary income (loss) per share $(0.56) $0.24
Fully diluted income (loss) per share $(0.56) $0.24
The fair value of these options was estimated as of the date of grant using a
Black-Scholes option pricing model with the following assumptions: risk free
interest rate of 6.05%; expected life of 3.5 years; expected volatility of
50%; and expected dividend yield of 0%. Because the Company's stock options
have characteristics significantly different from traded options, and because
changes in the subjective input assumptions can materially affect the fair
value estimate, management's opinion is that the existing valuation models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options. The initial impact on pro forma net income and net
income per share may not be representative of pro forma compensation expense
in future years, depending upon the amount of stock options awarded in the
future and their related vesting periods.
<PAGE>
10. STOCKHOLDERS' EQUITY
In addition to the Company's common stock, the Company is authorized to
issue 5,000,000 preferred shares, $0.01 par value, none of which have
been issued.
On November 12, 1996, the Company announced that its board of directors
authorized the repurchase of up to two million shares of common stock.
This plan will continue to be implemented from time to time in either
open market or private transactions. As of June 30, 1997, the Company
had repurchased approximately 1,418,000 shares at a cost of $8,835,000.
In fiscal 1995, the Company sold 1,000 shares of common stock and issued
a warrant to Timex Corporation at an above-market price to purchase
100,000 shares of common stock in connection with an agreement to develop
and market a wristwatch receiver. The warrant is exercisable at $7.00
per share and expires on December 16, 1999.
In fiscal 1995, Bank of America exercised a warrant by purchasing 250,000
shares of DBC common stock, applying the exercise price of $375,000 to
amounts owed to it by the Company under terms of a note.
11. COMMITMENTS AND CONTINGENCIES
The Company leases communication and test equipment, office facilities
and equipment, and has distribution agreements for satellite and cable
space and FM radio channels, generally under noncancellable lease
arrangements that expire on various dates through fiscal 2004. Certain
of the lease agreements for premises require the Company to pay operating
costs, including property taxes and maintenance costs, and include rent
adjustment clauses.
Rent expense approximated $7,750,000, $5,967,000 and $5,892,000 in fiscal
1997, 1996, and 1995, respectively. At June 30, 1997, future minimum
operating lease payments, including approximately $1,141,000 recorded as
a liability in connection with the sale of the assets of Shark and the
acquisition of BII, are as follows (in thousands):
Real Estate and Equipment Distribution Agreements
1998 $3,146 $5,000
1999 2,584 3,888
2000 1,431 2,324
2001 1,293 1,652
2002 1,026 760
Thereafter 285 334
Total minimum lease payments 9,765 $13,958
Less amounts accrued 1,141
$8,624
Certain subscribers have brought a class action litigation against the
Company related to its performance under certain subscriber contracts.
In July 1997, the Company commenced a mailing to current and former
subscribers to certain of its services, which contained an offer to
upgrade their service to take advantage of new products and technologies
the Company is introducing. This settlement was preliminarily approved
by the court in September 1997 with a final hearing scheduled for October
1997. The Company accrued $700,000 in the fourth quarter of 1997 to
cover the estimated costs of this settlement, principally legal fees and
expenses.
The Company is a party to various other legal proceedings incidental to
its business operations, none of which is expected to have a material
effect on the financial condition or results of operations of the
Company. See Note 2 for a discussion of contingencies related to
acquisitions.
12. CNBC PROCEEDS AND OBLIGATIONS
Under terms of a previous agreement, DBC received a payment of
approximately $26,611,000 on March 31, 1995 from the Consumer News and
Business Channel ("CNBC"), as additional consideration for CNBC's
purchase of certain FNN media assets in May 1991. The agreement
specified that the Company was to receive a payment of 50 percent of the
cumulative revenues of CNBC in excess of $227,000,000 for the three
fiscal years ending December 31, 1994. To satisfy its obligations for
this item under the Plan, DBC paid approximately $12,476,000 for
commissions, expenses and obligations to claimholders.
On March 1, 1996, DBC received a final payment of approximately
$7,738,000 from CNBC as the result of arbitration of certain matters
related to the fiscal 1995 payment. The gross amounts payable for
<PAGE>
commissions, expenses and obligations to claimholders approximating
$4,560,000, less claims owned by DBC of approximately $345,000, were paid
in the fourth quarter of fiscal 1996. In fiscal 1997, the Company
increased its pre-tax gain by $249,000 due to the reduction of certain
reserves recorded at the time of the initial transaction. Management has
determined that these reserves are no longer necessary due to the
resolution of certain contingencies and the revision of certain
estimates.
13. INCOME TAXES
The components of net deferred tax assets as of June 30, 1997 and 1996 are as
follows (in thousands):
1997 1996
Deferred tax assets
Federal net operating loss carryforwards $8,545 $9,987
Sale of discontinued operations 5,450 -
Property and equipment 3,526 4,180
Purchase accounting liabilities 933 1,708
State net operating loss carryforwards 1,117 1,291
Minimum tax credit carryforward 1,044 1,026
Expenses - sale of Shark 384 199
Lease obligations 75 476
Other 1,793 753
Gross deferred tax assets 22,867 19,620
Valuation allowance 2,601 2,601
Total deferred tax assets 20,266 17,019
Deferred tax liabilities
Sale of discontinued operations 13,374 -
Sale/leaseback obligations 1,146 1,860
Subscriber contracts 502 1,057
Other 5 521
Total deferred tax liabilities 15,027 3,438
Net deferred tax assets $5,239 $13,581
The Company has net operating loss carryforwards ("NOLs") of $24,415,000.
The use of certain NOLs is limited by the Internal Revenue Code due to prior
ownership changes. These NOLs expire through 2007 and are subject to an
annual limitation of approximately $2,200,000.
In fiscal 1995, the Company reduced its valuation allowance by $2,859,000,
principally due to the realization of deferred tax assets and the reduction of
the rate at which certain pre-Effective Date items are expected to be
realized. In accordance with SOP 90-7, the decrease attributable to the
realization of pre-Effective Date deferred tax assets was recorded by reducing
reorganization value by $2,545,000 and increasing additional paid-in capital
by $314,000.
The(benefit)/provision for taxes are as follows for the years ended June 30,
(in thousands):
1997 1996 1995
Federal:
Current $2,344 $3,987 $3,652
Deferred 178 1,203 5,362
State:
Current 673 502 731
Deferred (97) 385 1,074
Tax on continuing operations 3,098 6,077 $10,819
Tax on discontinued operations 8,312 965
Benefit on extraordinary loss - (148)
$11,410 $6,894
<PAGE>
The consolidated (benefit)/provision for taxes for consolidated
operations are (in thousands) as follows:
1997 1996 1995
Federal:
Current 2,344 3,873 3,652
Deferred 6,844 2,044 5,362
State:
Current 802 924 731
Deferred 1,420 201 1,074
Benefit on extraordinary loss - ( 148) -
$11,410 $6,894 $10,819
The Company's effective tax rate for continuing operations differs from
federal statutory rate, as shown in the following reconciliation for the
three years ended June 30, 1997:
1997 1996 1995
Income tax expense at federal statutory rate 35.0% 35.0% 35.0%
State income tax expense, net of federal benefit 5.2 4.2 5.7
Amortization of goodwill 3.8 0.8 -
Other, net 1.9 0.1 (0.9)
Effective income tax rate on
continuing operations 45.9% 40.1% 39.8%
The Company paid approximately $881,000, $925,000 and $4,761,000 in
federal and state income taxes during the years ended June 30, 1997, 1996
and 1995, respectively.
14. 401(k) PLAN
The Company has a 401(k) plan covering substantially all full-time
employees of the Company. Employer contributions to the plan are
determined annually by the Company and are made on behalf of participants
who have elected to defer receipt of a portion of their compensation
otherwise payable in a plan year. Such Company contributions totaled
approximately $470,000, $380,000, and $137,000 in fiscal years 1997,
1996, and 1995, respectively.
15. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and accounts receivable. The Company has deposited its
temporary cash investments with 14 banks and two financial institutions
of high credit quality, thereby seeking to maximize interest income while
limiting the amount of credit exposure to any entity and reducing amounts
in excess of federal insurance. At June 30, 1997, approximately
$9,736,000 of cash and cash equivalents was deposited in four money
market accounts. These accounts invest largely in U. S. Government
obligations and investment grade commercial paper, thereby limiting
credit risk. Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of customers comprising
the Company's customer base and their dispersion across different
geographical regions of North America. At June 30, 1997, the Company
believes that it had no significant concentrations of credit risk.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In thousands, except per share data)
Quarter Year Ended
First Second Third Fourth June 30, 1997
Revenues $22,513 $23,096 $23,579 $23,292 $92,480
Total costs and
expenses 19,485 20,278 22,037 23,669 85,469
Income (loss) from
operations 3,028 2,818 1,542 (377) 7,011
Provision (benefit)
for income taxes 1,138 1,438 589 (67) 3,098
Income (loss) from continuing
operations 1,666 1,759 998 (775) 3,648
Loss from discontinued
operations (77) (159) (21,691) - (21,927)
Net income 1,589 1,600 (20,693) (775) (18,279)
Earnings (loss) per share - continuing operations
Primary $0.05 $0.05 $0.03 $(0.02) $0.11
Fully diluted $0.05 $0.05 $0.03 $(0.02) $0.11
Earnings (loss) per share - net
Primary $0.05 $0.05 $(0.61) $(0.02) $(0.54)
Fully diluted $0.05 $0.05 $(0.61) $(0.02) $(0.54)
Quarter Year Ended
First Second Third Fourth June 30, 1996
Revenues $19,113 $19,862 $20,613 $22,076 $81,664
Total costs and
expenses 16,810 16,721 16,834 18,867 69,232
Income from operations before merger
and consolidation
costs 3,178 3,976 3,934 3,257 14,345
Income from
operations 2,303 3,141 3,779 3,209 12,432
Reorganization
items, net - - 3,299 - 3,299
Provision for
income taxes 917 1,454 2,760 946 6,077
Income from continuing
operations 1,233 1,428 4,120 2,307 9,088
Income (loss) from
discontinued
operations 76 238 - (306) 8
Net income 1,309 1,666 4,120 1,776 8,871
Earnings per share - continuing operations
Primary $0.04 $0.04 $0.13 $0.07 $0.28
Fully diluted $0.04 $0.04 $0.12 $0.07 $0.28
Earnings per share - net
Primary $0.04 $0.05 $0.13 $0.06 $0.28
Fully diluted $0.04 $0.05 $0.12 $0.05 $0.27
Note: Fiscal 1996 amounts have been restated to reflect discontinued
operations.
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors and Stockholders
of Data Broadcasting Corporation:
Our audits of the consolidated financial statements referred to in our report
dated August 8, 1997 appearing in this Annual Report to stockholders of
Data Broadcasting Corporation also included an audit of the Financial
Statement Schedule listed in Item 14 (a) of this Form 10-K. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse LLP
Salt Lake City, Utah
August 8, 1997
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
For the Years Ended June 30, 1997, 1996 and 1995
(in thousands)
Schedule VIII - Valuation and Qualifying Accounts
Additions
Balance at Charged Balance
Beginning to Costs Charged Write at End
of and to Other Offs/ of
Period Expenses Accounts Recoveries Period
Description
Allowance for doubtful accounts:
Year Ended June 30, 1995 $703 $600 $579 (A) $645 (B) $1,237
Year Ended June 30, 1996 1,237 2,120 2,036 1,321
Year Ended June 30, 1997 1,321 1,954 62 (A) 1,355 (C) 1,982
Deferred income tax valuation allowance:
Year Ended June 30, 1995 $5,460 ($1,279) (D) $1,580 $2,601
Year Ended June 30, 1996 2,601 2,601
Year Ended June 30, 1997 2,601 2,601
(A) Allowance for doubtful accounts recorded through acquisitions.
(B) Includes $86 recorded through the sale of Shark.
(C) Includes $430 reclassified to discontinued operations.
(D) Recorded as a reduction of reorganization value and an increase in
equity, in accordance with Statement of Position 90-7.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
That portion of the Company's definitive Proxy Statement appearing under the
caption "Election of Board of Directors - Nominees" to be filed with the
Commission pursuant to Regulation 14A within 120 days after June 30, 1997 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held on December 9, 1997 is hereby incorporated by reference.
Information regarding Executive Officers of the Company is located under the
heading "Executive Officers of the Registrant" included in Part I of this Form
10-K.
Item 11. EXECUTIVE COMPENSATION
That portion of the Company's definitive Proxy Statement appearing under the
caption "Executive Compensation and Other Information" to be filed with the
Commission pursuant to Regulation 14A within 120 days after June 30, 1997 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held on December 9, 1997 is hereby incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
That portion of the Company's definitive Proxy Statement appearing under the
caption "Security Ownership" to be filed with the Commission pursuant to
Regulation 14A within 120 days after June 30, 1997 and to be used in
connection with its Annual Meeting of Stockholders expected to be held on
December 9, 1997 is hereby incorporated by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
That portion of the Company's definitive Proxy Statement appearing under the
caption "Certain Relationships and Other Transactions" to be filed with the
Commission pursuant to Regulation 14A within 120 days after June 30, 1997 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held on December 9, 1997 is hereby incorporated by reference.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
1. Financial Statements
The financial statements and report of independent accountants
required by this item are included in Part II, Item 8. See pages
19 to 32, herein.
2. Financial Statement Schedule
Schedule VIII, Valuation and Qualifying Accounts, and the related
report of independent accountants are included in Part II, Item 8.
See pages 34 to 35 herein.
3. Exhibits*
The exhibits to this Form 10-K are listed below.
Exhibit
Number Description of Exhibit
2.1 Plan and Agreement of Merger between Data
Broadcasting Corporation and Capital Management
Sciences (Exhibit 1 to Form 8-K, filed on May 16,
1994).
2.2 First Amendment to Plan and Agreement of Merger
between Data Broadcasting Corporation and Capital
Management Sciences (Exhibit 2 to Form 8-K, filed on
May 16, 1994).
2.3 Agreement and Plan of Reorganization among Data
Broadcasting Corporation, BII Acquisition Corp. and
Broadcast International, Inc. dated as of January 24,
1995 (Annex A to the Proxy Statement/Prospectus
included as part of Form S-4, declared effective on
May 25, 1995).
3.1 Restated Certificate of Incorporation of Data
Broadcasting Corporation, as amended.
3.2 Bylaws of Data Broadcasting Corporation, as amended
(Exhibit 3.2 to Form 8-A, filed on June 15, 1992).
4.1 Form of Amended Basic Option Agreement between Data
Broadcasting Corporation and shareholders of Capital
Management Sciences (Exhibit 4 to Form 8-K/A, filed on
July 13, 1994).
4.2 Form of Amended Incentive Option Agreement between
Data Broadcasting Corporation and shareholders of
Capital Management Sciences (Exhibit 6 to Form 8-K/A,
filed on July 13, 1994).
10.1 Registration Rights Agreement dated June 25, 1992
between Data Broadcasting Corporation, on the one
hand, and Allan R. Tessler and Alan J. Hirschfield, on
the other hand (Exhibit 28.5 to Form 8-K, filed on
June 30, 1992).
________________________
*Exhibits followed by a parenthetical reference are incorporated by
reference herein from the document described therein.
<PAGE>
10.2 Data Broadcasting Corporation Stock Option Plan, as amended
through September 13, 1994.
10.3 Employment Agreement between Data Broadcasting Corporation and
Alan J. Hirschfield.**
10.4 Employment Agreement between Data Broadcasting Corporation and
Allan R. Tessler.**
10.5 Employment Agreement between Data Broadcasting Corporation and
B. Douglas Smith (Exhibit 10.9 to Form 10-K for year ended
June 30, 1993).**
10.6 Employment Agreement between Data Broadcasting Corporation and
James A. Kaplan (Exhibit 9 to Form 8-K, filed on May 16,
1994).**
10.7 Employment Agreement between Data Broadcasting Corporation and
Mark F. Imperiale.**
10.8 Dwight H. Egan Termination Benefits Agreement dated December
18, 1991 (Exhibit 10.25 to Form S-4, declared effective on May
25, 1995).**
10.9 Dennis L. Crockett Termination Benefits Agreement dated
December 18, 1991 (Exhibit 10.26 to Form S-4, declared
effective on May 25, 1995).**
10.10 Employment Agreement with Nicholas Ruitenberg dated July 18,
1994 (Exhibit 10.32 to Form S-4, declared effective on May 25,
1995).**
10.11 Employment Agreement with Reed L. Benson dated July 18, 1994
(Exhibit 10.33 to Form S-4, declared effective on May 25,
1995).**
10.12 Promissory Note between Data Broadcasting Corporation, as
Maker, and Del, Rubel, Shaw, Mason & Derin, as Payee (Exhibit
3 to Form 8-K, filed on May 16, 1994).
10.13 Option Shares Registration Rights Agreement between Data
Broadcasting Corporation and shareholders of Capital
Management Sciences (Exhibit 5 to Form 8-K, filed on May 16,
1994).
10.14 Shareholders' Agreement between Data Broadcasting Corporation
and shareholders of Capital Management Sciences (Exhibit 7 to
Form 8-K, filed on May 16, 1994).
10.15 Negative Pledge and Springing Lien Agreement between Data
Broadcasting Corporation and Del, Rubel, Shaw, Mason & Derin,
as collateral agent (Exhibit 10 to Form 8-K, filed on May 16,
1994).
10.16 Transponder Service Agreement between Broadcast International,
Inc. and Hughes Communications Satellite Services, Inc. dated
July 1, 1990 (Exhibit 10.21 to Form S-4, declared effective on
May 25, 1995).
10.17 Satellite Transmission and Reception Service Agreement between
Broadcast International, Inc. and U.S. Satellite Corporation,
Inc. dated June 22, 1987 (Exhibit 10.23 to Form S-4, declared
effective on May 25, 1995).
10.18 Transponder Sale Agreement between Broadcast International,
Inc. and GTE Spacenet Corporation dated December 8, 1992
(Exhibit 10.24 to Form S-4, declared effective on May 25,
1995).
10.19 Asset Purchase Agreement Among ADP Financial Information
Services, Inc., Shark Information Services Corp. and Data
Broadcasting Corporation (Exhibit 1 to Form 8-K filed on May
23, 1995).
____________________
** Management contract or compensation plan or arrangement
<PAGE>
10.20 Loan Agreement by and among Data Broadcasting Corporation, as
the Borrower, and Society National Bank, as Agent (Exhibit 1
to Form 8-K filed on April 9, 1996).
10.21 ILX/CMS Distribution Agreement (Exhibit 1 to Form 8-K filed on
May 16, 1996).
11 Statement re Computation of Earnings Per Share.
21 Subsidiaries of the Registrant.
23 Consent of Price Waterhouse LLP.
27 Financial Data Schedule.
B. Reports on Form 8-K
During the quarter ended June 30, 1997, the Registrant did not file a
Current Report on Form 8-K.
<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.
DATA BROADCASTING CORPORATION
By: /s/
Alan J. Hirschfield
Co-Chief Executive Officer
September 25, 1997
By: /s/
Allan R. Tessler
Co-Chief Executive Officer
September 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
Principal Executive Officers:
By: /s/
Alan J. Hirschfield
Co-Chief Executive Officer
September 25, 1997
By: /s/
Allan R. Tessler
Co-Chief Executive Officer
September 25, 1997
Principal Financial Officer: By: /s/
Mark F. Imperiale
President, Chief Operating
Officer and Chief Financial
Officer
September 25, 1997
Principal Accounting Officer: By: /s/
Andrew P. Schlotterbeck
Vice President and Controller
September 25, 1997
<PAGE>
Directors:
/s/ /s/
Alan J. Hirschfield James A. Kaplan
Co-Chairman of the Board Director
September 25, 1997 September 25, 1997
/s/
Allan R. Tessler David R. Markin
Co-Chairman of the Board Director
September 25, 1997 September , 1997
/s/ /s/
Charles M. Diker Herbert S. Schlosser
Director Director
September 19, 1997 September 25, 1997
/s/ /s/
Dwight H. Egan Carl Spielvogel
Director Director
September 25, 1997 September 18, 1997
/s/
Donald P. Greenberg
Director
September 18, 1997
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of the 14th day of
March 1997 between DATA BROADCASTING CORPORATION, a Delaware corporation (the
"Company"), and ALAN J. HIRSCHFIELD, having its principal offices at 3490
Clubhouse Drive, Jackson, Wyoming 83001 (the "Executive"), an individual
residing at 1150 Fall Creek Road, Wilson, WY 83014.
WITNESSETH:
WHEREAS, the Company desires to continue the employment of the Executive
and the Executive desires to be employed by the Company as its Co-Chairman and
Co-Chief Executive Officer upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual premises and agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment; Term of Employment. The Company hereby employs
the Executive and the Executive agrees to serve the Company as its Co-Chairman
and Co-Chief Executive Officer, upon the terms and conditions contained
herein, for a term commencing as of January 1, 1997 and continuing until
December 31, 2000 (the "Employment Term"); provided, however, that unless
either the Company or the Executive gives notice that it or he desires to
terminate this Agreement at least sixty (60) days prior to the date of its
termination, this Agreement (including this Section 1) shall automatically be
renewed for additional successive periods of one (1) year.
2. Duties and Powers as Employee.
(a) During the Employment Term, the Executive shall be employed by
the Company as its Co-Chairman and Co-Chief Executive Officer. The Executive
<PAGE>
agrees to devote such time and efforts to the performance of his duties under
this Agreement as shall be reasonably necessary. In the performance of his
duties, the Executive shall be subject to the direction of the Board of
Directors of the Company. The Executive shall be available to travel as the
needs of the business require.
(b) During the Employment Term, the Executive shall be nominated to
be a director of the Company.
3. Compensation.
(a) As compensation for his services hereunder, the Company shall
pay the Executive, during the Employment term, a base salary (the "Base
Salary") payable in equal semi-monthly installments at the annual rate of
$325,000 for the year ended December 31, 1997, $350,000 for the year ended
December 31, 1998, and $400,000 for the year ended December 31, 1999 and for
each year thereafter. Additionally, the Executive shall be participate in
the present or future employee benefit plans of the Company provided that he
meets the eligibility requirements therefor.
(b) In addition to the Base Salary provided herein, the Executive
shall receive as a performance bonus payment (a "Bonus"), on an annual basis,
a sum equal to up to 100% of the Executive's Base Salary for the fiscal year
then ended. The exact percentage shall be determined in the absolute sole
discretion of the Compensation Committee of the Board of Directors of the
Company based upon an evaluation of the performance of the Executive and the
Company during the previous fiscal year. The Bonus shall be paid to the
Executive within ninety (90) days after the end of the Company's fiscal year
notwithstanding that such date may be after the expiration of the Employment
Term.
(c) In addition, the Company shall request that the Stock Option
<PAGE>
Committee of the Board of Directors of the Company issue the Executive
incentive stock options ("Options") to acquire 125,000 shares of common stock
of the Company effective as of January 2, 1997. The Options shall have an
exercise price equal to the fair market value on the trading day preceding
the date of grant, and shall vest in equal installments over three years,
subject to earlier vesting as described in this Agreement and in the
Company's Stock Option Plan. It is also anticipated that the Executive will
be granted additional options effective as of January 2, 1999 as shall be
determined in the absolute sole discretion of the Compensation Committee of
the Board of Directors of the Company.
4. Expenses; Vacations. The Executive shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses
necessarily incurred in the performance of his duties hereunder, upon
submission and approval of written statements and bills in accordance with
the then regular procedures of the Company. The Executive shall be entitled
to reasonable vacation time in accordance with then regular procedures of the
Company governing executives as determined from time to time by the Company's
Board of Directors but in no event less than twenty-five days per year.
5. Representations and Warranties of Employee. The Executive
represents and warrants to the Company that (a) he is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights
of the Company hereunder; and (b) he is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition. The Executive agrees that he will not (a) during
the period he is employed under this Agreement engage in, or otherwise
directly or indirectly be employed by, or act as a consultant or lender to,
be a director, officer, employee, owner, or partner of, any other business
or organization that is or shall then be competing with the Company, and (b)
<PAGE>
for a period of two (2) years after he ceases to be employed by the Company
under this Agreement, directly or indirectly compete with or be engaged in
the same business as the Company, or be employed by, or act as consultant or
lender to, or be a director, officer, employee, owner, or partner of, any
business or organization which at the time of such cessation, competes with
or is engaged in the same business as the Company, except that in each case
the provisions of this Section 6 will not be deemed breached merely because
the Executive owns not more than five percent (5.0%) of the outstanding
common stock of a corporation, if, at the time of its acquisition by the
Executive, such stock is listed on a national securities exchange, is
reported on NASDAQ, or is regularly traded in the over-the-counter market by
a member of national securities exchange.
7. Confidential Information. All confidential information which the
Executive may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under
this Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible
by him to any other person, form, or corporation during the Employment Term
or any time thereafter without the prior written consent of the Company. The
Executive shall return all tangible evidence of such confidential information
to the Company prior to or at the termination of his employment.
8. Termination.
(a) Notwithstanding anything herein contained, if on or after the
date hereof and prior to the end of the Employment Term, the Executive is
terminated "For Cause" (as defined below) then the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on
the date so specified. Termination "For Cause" shall mean the Executive
<PAGE>
shall (i) be convicted of a felony crime, (ii) commit any act or omit to take
any action in bad faith and to the detriment of the Company, (iii) commit an
act of moral turpitude, (iv) commit an act of fraud against the Company, or
(v) materially breach any term of this Agreement and fail to correct such
breach within thirty (30) days after commission thereof.
(b) In the event that the Executive shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his duties
hereunder for a period of six months, then this Agreement shall terminate
upon 90 days' written notice to the Executive, and no further compensation
shall be payable to the Executive, except as may otherwise be provided under
any disability insurance policy.
(c) In the event that the Executive shall die, then this Agreement
shall terminate on the date of the Executive's death, and no further
compensation shall be payable to the Executive, except as may otherwise be
provided under any insurance policy or similar instrument.
(d) In the event that this Agreement is terminated "For Cause"
pursuant to Section 9(a), then the Executive shall be entitled to receive
only his Base Salary at the rate provided in Section 3 to the date on which
termination shall take effect.
(e) In the event this Agreement is terminated by the Company other
than the reasons set forth in Sections 8(a) or 8(b) or upon a Section 9
Event, the Executive shall be entitled to receive severance pay consisting of
a lump sum distribution (with no present value adjustment) equal to the Base
Salary at the rate provided in Section 3 plus the Bonus (fixed at the rate of
50% of such Base Salary) for the greater of (i) two (2) years,
notwithstanding that such two-year period might extend beyond the Employment
Term or (i) the remainder of the Employment Term. In such case any of the
Executive's issued but unvested options (including the Options described in
<PAGE>
this Agreement) shall vest immediately upon such termination. In addition,
in such case the two (2) year period described in Section 6(b) of this
Agreement shall be reduced to one (1) year.
(f) Nothing contained in this Section 8 shall be deemed to limit
any other right the Company may have to terminate Employee's employment
hereunder upon any ground permitted by law.
9. Change of Control.
In the event of a future disposition of (or including) the
properties and business of the Company, substantially as an entirety, by
merger, consolidation, sale of assets, or otherwise, the Company shall assign
this letter and all of its rights and obligations hereunder to the acquiring
or surviving corporation, such corporation shall assume in writing all of the
obligations of the Company, and the Company (in the event and so long as it
remains in business as an independent going enterprise) shall remain liable
for the performance of its obligations hereunder in the event of an
unjustified failure of the acquiring corporation to perform its obligations
under this letter.
Notwithstanding the foregoing, in any such event, or in the event of
the acquisition by any person or group of persons acting in concert (other
than Allan R. Tessler or Alan J. Hirschfield) of shares of capital stock of
the Company enabling such person or persons to cast 20% or more of the votes
entitled to be voted at any meeting to elect directors (each such event of
disposition or acquisition of stock being hereinafter referred to as a
"Section 9 Event"), the Executive or the Company shall have the right to
terminate this Agreement by written notice given within six (6) months of the
date (the "Section 9 Date") of such Section 9 Event. Upon such termination,
the Executive shall receive severance pay consisting of a single lump sum
distribution (with no present value adjustment) equal to the Base Salary as
provided in Section 3 plus the Bonus (fixed at the rate of 50% of such Base
Salary) for the greater of (i) two (2) years, notwithstanding that such two-
<PAGE>
year period might extend beyond the Employment Term or (ii) the remainder of
the Employment Term. Upon such Section 9 Event, any of the Executive's
issued but unvested options (including the options described in this
Agreement) shall vest immediately upon such Section 9 Event. In addition,
upon such Section 9 Event the Executive shall receive an amount equal to the
per share price paid to the stockholders of the Company less the Pre-
Announcement Price multiplied by 125,000.
10. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
Executive's termination of employment, irrespective of any investigation made
by or on behalf of any party.
11. Modification. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
12. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested, or delivered against receipt to the party to
whom it is to be given at the address of such party set forth in the preamble
to this Agreement (or to such other address as the party shall have furnished
in writing in accordance with the provisions of this Section 12). In the
case of a notice to the Company, a copy of such notice (which copy shall not
constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740
Broadway, New York, New York 10019-4315, Attn. Alan I. Annex, Esq. Notice to
the estate of the Executive shall be sufficient if addressed to the Executive
provided in this Section 12. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
<PAGE>
13. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must
be in writing.
14. Binding Effect. The Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of the Executive's
creditors, and any attempt to do any of the foregoing shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors and
those who are its assigns under Section 9.
15. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
16. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by, and construed in accordance with, the laws of the State of
Wyoming, without given effect to the rules governing the conflicts of laws.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
DATA BROADCASTING CORPORATION
By: /s/ Mark F. Imperiale
Name: Mark F. Imperiale
Title: President
/s/ Alan J. Hirschfield
Name: Alan J. Hirschfield
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of the 14th day of
March 1997 between DATA BROADCASTING CORPORATION, a Delaware corporation (the
"Company"), and ALLAN R. TESSLER, having its principal offices at 3490
Clubhouse Drive, Jackson, Wyoming 83001 (the "Executive"), an individual
residing at 1100 Pine Siskin, Jackson, WY 83001.
WITNESSETH:
WHEREAS, the Company desires to continue the employment of the Executive
and the Executive desires to be employed by the Company as its Co-Chairman and
Co-Chief Executive Officer upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual premises and agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment; Term of Employment. The Company hereby employs
the Executive and the Executive agrees to serve the Company as its Co-Chairman
and Co-Chief Executive Officer, upon the terms and conditions contained
herein, for a term commencing as of January 1, 1997 and continuing until
December 31, 2000 (the "Employment Term"); provided, however, that unless
either the Company or the Executive gives notice that it or he desires to
terminate this Agreement at least sixty (60) days prior to the date of its
termination, this Agreement (including this Section 1) shall automatically be
renewed for additional successive periods of one (1) year.
2. Duties and Powers as Employee.
(a) During the Employment Term, the Executive shall be employed by
the Company as its Co-Chairman and Co-Chief Executive Officer. The Executive
<PAGE>
agrees to devote such time and efforts to the performance of his duties under
this Agreement as shall be reasonably necessary. In the performance of his
duties, the Executive shall be subject to the direction of the Board of
Directors of the Company. The Executive shall be available to travel as the
needs of the business require.
(b) During the Employment Term, the Executive shall be nominated to
be a director of the Company.
3. Compensation.
(a) As compensation for his services hereunder, the Company shall
pay the Executive, during the Employment term, a base salary (the "Base
Salary") payable in equal semi-monthly installments at the annual rate of
$325,000 for the year ended December 31, 1997, $350,000 for the year ended
December 31, 1998, and $400,000 for the year ended December 31, 1999 and for
each year thereafter. Additionally, the Executive shall be participate in
the present or future employee benefit plans of the Company provided that he
meets the eligibility requirements therefor.
(b) In addition to the Base Salary provided herein, the Executive
shall receive as a performance bonus payment (a "Bonus"), on an annual basis,
a sum equal to up to 100% of the Executive's Base Salary for the fiscal year
then ended. The exact percentage shall be determined in the absolute sole
discretion of the Compensation Committee of the Board of Directors of the
Company based upon an evaluation of the performance of the Executive and the
Company during the previous fiscal year. The Bonus shall be paid to the
Executive within ninety (90) days after the end of the Company's fiscal year
notwithstanding that such date may be after the expiration of the Employment
Term.
(c) In addition, the Company shall request that the Stock Option
<PAGE>
Committee of the Board of Directors of the Company issue the Executive
incentive stock options ("Options") to acquire 125,000 shares of common stock
of the Company effective as of January 2, 1997. The Options shall have an
exercise price equal to the fair market value on the trading day preceding
the date of grant, and shall vest in equal installments over three years,
subject to earlier vesting as described in this Agreement and in the
Company's Stock Option Plan. It is also anticipated that the Executive will
be granted additional options effective as of January 2, 1999 as shall be
determined in the absolute sole discretion of the Compensation Committee of
the Board of Directors of the Company.
4. Expenses; Vacations. The Executive shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses
necessarily incurred in the performance of his duties hereunder, upon
submission and approval of written statements and bills in accordance with
the then regular procedures of the Company. The Executive shall be entitled
to reasonable vacation time in accordance with then regular procedures of the
Company governing executives as determined from time to time by the Company's
Board of Directors but in no event less than twenty-five days per year.
5. Representations and Warranties of Employee. The Executive
represents and warrants to the Company that (a) he is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights
of the Company hereunder; and (b) he is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition. The Executive agrees that he will not (a) during
the period he is employed under this Agreement engage in, or otherwise
directly or indirectly be employed by, or act as a consultant or lender to,
be a director, officer, employee, owner, or partner of, any other business
or organization that is or shall then be competing with the Company, and (b)
<PAGE>
for a period of two (2) years after he ceases to be employed by the Company
under this Agreement, directly or indirectly compete with or be engaged in
the same business as the Company, or be employed by, or act as consultant or
lender to, or be a director, officer, employee, owner, or partner of, any
business or organization which at the time of such cessation, competes with
or is engaged in the same business as the Company, except that in each case
the provisions of this Section 6 will not be deemed breached merely because
the Executive owns not more than five percent (5.0%) of the outstanding
common stock of a corporation, if, at the time of its acquisition by the
Executive, such stock is listed on a national securities exchange, is
reported on NASDAQ, or is regularly traded in the over-the-counter market by
a member of national securities exchange.
7. Confidential Information. All confidential information which the
Executive may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under
this Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible
by him to any other person, form, or corporation during the Employment Term
or any time thereafter without the prior written consent of the Company. The
Executive shall return all tangible evidence of such confidential information
to the Company prior to or at the termination of his employment.
8. Termination.
(a) Notwithstanding anything herein contained, if on or after the
date hereof and prior to the end of the Employment Term, the Executive is
terminated "For Cause" (as defined below) then the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on
the date so specified. Termination "For Cause" shall mean the Executive
<PAGE>
shall (i) be convicted of a felony crime, (ii) commit any act or omit to take
any action in bad faith and to the detriment of the Company, (iii) commit an
act of moral turpitude, (iv) commit an act of fraud against the Company, or
(v) materially breach any term of this Agreement and fail to correct such
breach within thirty (30) days after commission thereof.
(b) In the event that the Executive shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his duties
hereunder for a period of six months, then this Agreement shall terminate
upon 90 days' written notice to the Executive, and no further compensation
shall be payable to the Executive, except as may otherwise be provided under
any disability insurance policy.
(c) In the event that the Executive shall die, then this Agreement
shall terminate on the date of the Executive's death, and no further
compensation shall be payable to the Executive, except as may otherwise be
provided under any insurance policy or similar instrument.
(d) In the event that this Agreement is terminated "For Cause"
pursuant to Section 9(a), then the Executive shall be entitled to receive
only his Base Salary at the rate provided in Section 3 to the date on which
termination shall take effect.
(e) In the event this Agreement is terminated by the Company other
than the reasons set forth in Sections 8(a) or 8(b) or upon a Section 9
Event, the Executive shall be entitled to receive severance pay consisting of
a lump sum distribution (with no present value adjustment) equal to the Base
Salary at the rate provided in Section 3 plus the Bonus (fixed at the rate of
50% of such Base Salary) for the greater of (i) two (2) years,
notwithstanding that such two-year period might extend beyond the Employment
Term or (i) the remainder of the Employment Term. In such case any of the
Executive's issued but unvested options (including the Options described in
<PAGE>
this Agreement) shall vest immediately upon such termination. In addition,
in such case the two (2) year period described in Section 6(b) of this
Agreement shall be reduced to one (1) year.
(f) Nothing contained in this Section 8 shall be deemed to limit
any other right the Company may have to terminate Employee's employment
hereunder upon any ground permitted by law.
9. Change of Control.
In the event of a future disposition of (or including) the
properties and business of the Company, substantially as an entirety, by
merger, consolidation, sale of assets, or otherwise, the Company shall assign
this letter and all of its rights and obligations hereunder to the acquiring
or surviving corporation, such corporation shall assume in writing all of the
obligations of the Company, and the Company (in the event and so long as it
remains in business as an independent going enterprise) shall remain liable
for the performance of its obligations hereunder in the event of an
unjustified failure of the acquiring corporation to perform its obligations
under this letter.
Notwithstanding the foregoing, in any such event, or in the event of
the acquisition by any person or group of persons acting in concert (other
than Allan R. Tessler or Alan J. Hirschfield) of shares of capital stock of
the Company enabling such person or persons to cast 20% or more of the votes
entitled to be voted at any meeting to elect directors (each such event of
disposition or acquisition of stock being hereinafter referred to as a
"Section 9 Event"), the Executive or the Company shall have the right to
terminate this Agreement by written notice given within six (6) months of the
date (the "Section 9 Date") of such Section 9 Event. Upon such termination,
the Executive shall receive severance pay consisting of a single lump sum
distribution (with no present value adjustment) equal to the Base Salary as
provided in Section 3 plus the Bonus (fixed at the rate of 50% of such Base
Salary) for the greater of (i) two (2) years, notwithstanding that such two-
<PAGE>
year period might extend beyond the Employment Term or (ii) the remainder of
the Employment Term. Upon such Section 9 Event, any of the Executive's
issued but unvested options (including the options described in this
Agreement) shall vest immediately upon such Section 9 Event. In addition,
upon such Section 9 Event the Executive shall receive an amount equal to the
per share price paid to the stockholders of the Company less the Pre-
Announcement Price multiplied by 125,000.
10. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
Executive's termination of employment, irrespective of any investigation made
by or on behalf of any party.
11. Modification. This Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter, and may be
modified only by a written instrument duly executed by each party.
12. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt requested, or delivered against receipt to the party to
whom it is to be given at the address of such party set forth in the preamble
to this Agreement (or to such other address as the party shall have furnished
in writing in accordance with the provisions of this Section 12). In the
case of a notice to the Company, a copy of such notice (which copy shall not
constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740
Broadway, New York, New York 10019-4315, Attn. Alan I. Annex, Esq. Notice to
the estate of the Executive shall be sufficient if addressed to the Executive
provided in this Section 12. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
<PAGE>
13. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must
be in writing.
14. Binding Effect. The Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of the Executive's
creditors, and any attempt to do any of the foregoing shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit
of the Executive and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company and its successors and
those who are its assigns under Section 9.
15. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
16. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by, and construed in accordance with, the laws of the State of
Wyoming, without given effect to the rules governing the conflicts of laws.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
DATA BROADCASTING CORPORATION
By: /s/ Mark F. Imperiale
Name: Mark F. Imperiale
Title: President
/s/ Allan R. Tessler
Name: Allan R. Tessler
Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of the 14th day
of March 1997 between DATA BROADCASTING CORPORATION, a Delaware corporation
(the "Company"), and MARK F. IMPERIALE, having its principal offices at 3490
Clubhouse Drive, Jackson, Wyoming 83001 (the "Executive"), an individual
residing at 12 West Road, West Orange, New Jersey 07052.
WITNESSETH:
WHEREAS, the Company desires to continue the employment of the Executive
and the Executive desires to be employed by the Company as its President and
Chief Operating Officer upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual premises and agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Employment; Term of Employment. The Company hereby
employs the Executive and the Executive agrees to serve the Company as its
President and Chief Operating Officer and, if requested, its Chief Financial
Officer, upon the terms and conditions contained herein, for a term commencing
as of January 1, 1997 and continuing until December 31, 2000 (the "Employment
Term"); provided, however, that unless either the Company or the Executive
gives notice that it or he desires to terminate this Agreement at least sixty
(60) days prior to the date of its termination, this Agreement (including this
<PAGE>
Section 1) shall automatically be renewed for additional successive periods of
one (1) year.
2. Duties and Powers as Employee. During the Employment Term, the
Executive shall be employed by the Company as its President and Chief
Operating Officer. The Executive agrees to devote such time and efforts to
the performance of his duties under this Agreement as shall be reasonably
necessary. In the performance of his duties, the Executive shall be subject
to the direction of the Board of Directors of the Company. The Executive
shall be available to travel as the needs of the business require.
3. Compensation.
(a) As compensation for his services hereunder, the Company shall
pay the Executive, during the Employment Term, a base salary (the "Base
Salary") payable in equal semi-monthly installments at the annual rate of
$275,000 for the year ended December 31, 1997, $300,000 for the year ended
December 31, 1998, and $325,000 for the year ended December 31, 1999 and for
each year thereafter. Additionally, the Executive shall participate in the
present or future employee benefit plans of the Company provided that he meets
the eligibility requirements therefor.
(b) In addition to the Base Salary provided herein, the Executive
shall receive as a performance bonus payment (a "Bonus"), on an annual basis,
a sum equal to up to 100% of the Executive's Base Salary for the fiscal year
then ended. The exact percentage shall be determined in the absolute sole
<PAGE>
discretion of the Compensation Committee of the Board of Directors of the
Company based upon an evaluation of the performance of the Executive and the
Company during the previous fiscal year. The Bonus shall be paid to the
Executive within ninety (90) days after the end of the Company's fiscal year
notwithstanding that such date may be after the expiration of the Employment
Term.
(c) In addition, the Company shall request that the Stock Option
Committee of the Board of Directors of the Company issue the Executive
incentive stock options ("Options") to acquire 100,000 shares of common stock
of the Company effective as of January 2, 1997. The Options shall have an
exercise price equal to the fair market value on the trading day preceding the
date of grant, and shall vest in equal installments over three years, subject
to earlier vesting as described in this Agreement and in the Company's Stock
Option Plan. It is also anticipated that the Executive will be granted
additional options effective as of January 2, 1999 as shall be determined in
the absolute sole discretion of the Compensation Committee of the Board of
Directors of the Company.
4. Expenses; Vacations. The Executive shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses
necessarily incurred in the performance of his duties hereunder, upon
submission and approval of written statements and bills in accordance with the
then regular procedures of the Company. The Executive shall be entitled to
reasonable vacation time in accordance with then regular procedures of the
Company governing executives as determined from time to time by the Company's
<PAGE>
Board of Directors but in no event less than twenty-five days per year.
5. Representations and Warranties of Employee. The Executive
represents and warrants to the Company that (a) he is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights
of the Company hereunder; and (b) he is under no physical or mental disability
that would hinder his performance of duties under this Agreement.
6. Non-Competition. The Executive agrees that he will not (a) during
the period he is employed under this Agreement engage in, or otherwise
directly or indirectly be employed by, or act as a consultant or lender to, or
be a director, officer, employee, owner, or partner of, any other business or
organization that is or shall then be competing with the Company, and (b) for
a period of two (2) years after he ceases to be employed by the Company under
this Agreement, directly or indirectly compete with or be engaged in the same
business as the Company, or be employed by, or act as consultant or lender to,
or be a director, officer, employee, owner, or partner of, any business or
organization which, at the time of such cessation, competes with or is engaged
in the same business as the Company, except that in each case the provisions
of this Section 6 will not be deemed breached merely because the Executive
owns not more than five percent (5.0%) of the outstanding common stock of a
corporation, if, at the time of its acquisition by the Executive, such stock
is listed on a national securities exchange, is reported on NASDAQ, or is
<PAGE>
regularly traded in the over-the-counter market by a member of a national
securities exchange.
7. Confidential Information. All confidential information which the
Executive may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible
by him to any other person, firm, or corporation during the Employment Term or
any time thereafter without the prior written consent of the Company. The
Executive shall return all tangible evidence of such confidential information
to the Company prior to or at the termination of his employment.
8. Termination.
(a) Notwithstanding anything herein contained, if on or after the
date hereof and prior to the end of the Employment Term, the Executive is
terminated "For Cause" (as defined below) then the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on the
date so specified. Termination "For Cause" shall mean the Executive shall
(i) be convicted of a felony crime, (ii) commit any act or omit to take any
action in bad faith and to the detriment of the Company, (iii) commit an act
of moral turpitude, (iv) commit an act of fraud against the Company, or (v)
materially breach any term of this Agreement and fail to correct such breach
within thirty (30) days after commission thereof.
<PAGE>
(b) In the event that the Executive shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six months, then this Agreement shall
terminate upon 90 days' written notice to the Executive, and the Executive
shall be entitled to receive a disability benefit in the form of a lump sum
distribution (with no present value adjustment) equal to the Base Salary at
the rate provided in Section 3 plus the Bonus (fixed at the rate of 50% of
such Base Salary) for the greater of (i) two (2) years, notwithstanding that
such two-year period might extend beyond the Employment Term or (ii) the
remainder of the Employment Term. In such case any of the Executive's issued
but unvested options (including the Options) shall vest immediately upon such
termination.
(c) In the event that the Executive shall die, then this
Agreement shall terminate on the date of the Executive's death, and no further
compensation shall be payable to the Executive, except as may otherwise be
provided under any insurance policy or similar instrument. In such case any
of the Executive's issued but unvested options (including the Options) shall
vest immediately upon such termination.
(d) In the event that this Agreement is terminated "For Cause"
pursuant to Section 9(a), then the Executive shall be entitled to receive only
his Base Salary at the rate provided in Section 3 to the date on which
termination shall take effect.
(e) In the event this Agreement is terminated by the Company other
than the reasons set forth in Sections 9(a) or 9(b) or upon a Section 9 Event,
the Executive shall be entitled to receive severance pay consisting of a lump
sum distribution (with no present value adjustment) equal to the Base Salary
at the
<PAGE>
rate provided in Section 3 plus the Bonus (fixed at the rate of 50% of such Base
Salary) for the greater of (i) two (2) years, notwithstanding that such two-year
period might extend beyond the Employment Term or (ii) the remainder of the
Employment Term. In such case any of the Executive's issued but unvested
options (including the Options) shall vest immediately upon such termination.
In addition, in such case the two (2) year period described in Section 6(b)
of this Agreement shall be reduced to one (1) year.
(f) Nothing contained in this Section 8 shall be deemed to limit any
other right the Company may have to terminate Employee's employment hereunder
upon any ground permitted by law.
9. Change of Control.
In the event of a future disposition of (or including) the properties
and business of the Company, substantially as an entirety, by merger,
consolidation, sale of assets, or otherwise, the Company shall assign this
letter and all of its rights and obligations hereunder to the acquiring or
surviving corporation, such corporation shall assume in writing all of the
obligations of the Company, and the Company (in the event and so long as
it remains in business as an independent going enterprise) shall remain
liable for the performance of its obligations hereunder in the event of an
unjustified failure of the acquiring corporation to perform its obligations
under this letter.
Notwithstanding the foregoing, in any such event, or in the event of the
acquisition by any person or group of persons acting in concert (other than
Allan R. Tessler or Alan J. Hirschfield) of shares of capital stock of
the Company
<PAGE>
enabling such person or persons to cast 20% or more of the votes entitled to be
voted at any meeting to elect directors (each such event of disposition or
acquisition of stock being hereinafter referred to as a "Section 9 Event"), the
Executive or the Company shall have the right to terminate this Agreement by
written notice given within six (6) months of the date (the "Section 9 Date") of
such Section 9 Event. Upon such termination, the Executive shall receive
severance pay consisting of a single lump sum distribution (with no present
value adjustment) equal to the Base Salary as provided in Section 3 plus
the Bonus (fixed at the rate of 50% of such Base Salary) for the greater of
(i) two (2) years, notwithstanding that such two-year period might extend
beyond the Employment Term or (ii) the remainder of the Employment Term.
Upon such Section 9 Event, any of the Executive's issued but unvested
options (including the options described in this Agreement) shall vest
immediately upon such Section 9 Event. In addition, upon such Section 9
Event the Executive shall receive an amount equal to the per share price paid
to the stockholders of the Company less the Pre-Announcement Price multiplied
by 100,000.
10. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive
the Executive's termination of employment, irrespective of any investigation
made by or on behalf of any party.
11. Modification. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes all existing
<PAGE>
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
12. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 12). In the case of a notice
to the Company, a copy of such notice (which copy shall not constitute notice)
shall be delivered to Camhy Karlinsky & Stein LLP, 1740 Broadway, New York, New
York 10019-4315, Attn. Alan I. Annex, Esq. Notice to the estate of the
Executive shall be sufficient if addressed to the Executive provided in this
Section 12. Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof.
13. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
<PAGE>
14. Binding Effect. The Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of the Executive's
creditors, and any attempt to do any of the foregoing shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Executive and his heirs and personal representatives, and shall be binding
upon and inure to the benefit of the Company and its successors and those who
are its assigns under Section 9.
15. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
16. Counterparts; Governing Law. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by, and construed in accordance with, the laws of the State of Wyoming,
without given effect to the rules governing the conflicts of laws.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
DATA BROADCASTING CORPORATION
By: /s/ Allan R. Tessler
Name: Allan R. Tessler
Title: Co-Chairman
/s/ Mark F. Imperiale
Name: Mark F. Imperiale
EXHIBIT 11
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
Year Ended June 30,
(In thousands, except share amounts) 1997 1996 1995
Primary Earnings per Common Share
Income from continuing operations $3,648 $9,088 $16,365
Add: Interest on assumed debt payments, net of tax - - 63
Adjusted income from continuing operations 3,648 9,088 16,428
Income (loss) from discontinued operations,
net of tax (21,927) 8 -
Extraordinary loss, net of tax - (225) -
Net earnings (loss) applicable to common stock $(18,279) $8,871 $16,428
Common shares outstanding at beginning of period 31,338 29,273 22,386
Shares issuable from assumed exercise of stock
options and warrants 1,055 1,997 1,493
Shares issued from conversion of stock options
and warrants 644 666 115
Shares issued for acquisitions 970 - 21
Purchase of treasury shares (426) - -
Weighted average number of common shares
outstanding 33,581 31,936 24,015
Earnings per share from continuing operations $0.11 $0.28 $0.68
Earnings (loss) per share attributable to
discontinued operations (0.65) - -
Earnings per share attributable to extraordinary
loss - - -
Primary earnings (loss) per share $(0.54) $0.28 $0.68
Fully Diluted Earnings per Common Share
Income from continuing operations $3,648 $9,088 $16,365
Add: Interest on assumed debt payments, net of tax - - 22
Adjusted income from continuing operations 3,648 9,088 16,387
Income (loss) from discontinued operations,
net of tax (21,927) 8 -
Extraordinary loss, net of tax - (225) -
Net earnings (loss) applicable to common stock $(18,279) $8,871 $16,387
<PAGE>
(In thousands, except share amounts) 1997 1996 1995
Common shares outstanding at beginning of period 31,338 29,273 22,386
Shares issuable from assumed exercise of stock
options and warrants 1,063 2,087 1,676
Shares issued from conversion of stock options
and warrants 781 1,531 267
Shares issued for acquisitions 970 - 21
Purchase of treasury shares (426) - -
Weighted average number of common shares
outstanding 33,726 32,891 24,350
Earnings per share from continuing operations $0.11 $0.28 $0.67
Earnings (loss) per share from discontinued
operations (0.65) - -
Earnings per share attributable to extraordinary
loss - (0.01) -
Fully diluted (loss) earnings per share $(0.54) $0.27 $0.67
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State or
Other Jurisdiction of Percentage
Name of Subsidiary Incorporation Ownership
Broadcast International, Inc. Utah
BI Purchasing, Inc. Utah
CheckRite International, Inc. Utah
CheckRite, Ltd. Colorado
CheckRite of California, Inc. California
CheckRite of Kansas City, Inc Kansas
CheckRite of Minnesota, Inc. Minnesota
CheckRite of Oregon, Inc. Oregon
CheckRite of Phoenix
(partnership) Arizona 51.00
Lone Star CheckRite, Inc. Texas
Market Information Corporation Utah
DBC Securities, Inc. New York
Data Broadcasting Corporation (B.V.I.) British Virgin Islands
New T&T DBC Ltd. Hong Kong 49.00
Shark Holdings, Inc. Delaware
Federal News Service, Inc. Delaware
Las Vegas Sports Consultants, Inc. Nevada
Instant Odds Network, Inc. Nevada
Lawyers Communications Network, LLC Delaware 50.00
NOTE: All of the subsidiaries listed above are wholly-owned, unless otherwise
noted.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 333-04524, 33-74026 and 33-89146) and in the
Prospectus constituting part of the Registration Statement on Form S-3 (File
No. 333-21557) of Data Broadcasting Corporation of our report appearing on
page 19 of this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 34 of this Form 10-K.
Price Waterhouse LLP
Salt Lake City, Utah
September 26, 1997
<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> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,524
<SECURITIES> 0
<RECEIVABLES> 9,366
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,482
<PP&E> 47,936
<DEPRECIATION> 29,599
<TOTAL-ASSETS> 135,399
<CURRENT-LIABILITIES> 26,852
<BONDS> 1,500
0
0
<COMMON> 341
<OTHER-SE> 105,512
<TOTAL-LIABILITY-AND-EQUITY> 135,399
<SALES> 0
<TOTAL-REVENUES> 92,480
<CGS> 0
<TOTAL-COSTS> 33,153
<OTHER-EXPENSES> 14,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (313)
<INCOME-PRETAX> 6,746
<INCOME-TAX> 3,098
<INCOME-CONTINUING> 3,648
<DISCONTINUED> (21,927)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,279)
<EPS-PRIMARY> (.54)
<EPS-DILUTED> (.54)
</TABLE>
