SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998.
Commission file number 0-20311
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DATA BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3668779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7050 Union Park Center, Suite 600, Midvale, Utah 84047
(Address of principal administrative offices)
Registrant's telephone number, including area code: (801) 562-2252
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- ----
The number of shares of common stock, par value $.01 per share, of the
registrant outstanding as of November 11, 1998 was 32,231,349.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
-------------------
1998 1997
------ ------
REVENUES $22,491 $23,143
COSTS AND EXPENSES
Cost of services and sales 9,351 8,974
Selling, general and administrative 8,336 7,626
Depreciation and amortization 4,041 3,723
------ ------
Total costs and expenses 21,728 20,323
------ ------
INCOME FROM OPERATIONS 763 2,820
Losses from joint ventures (923) -
Other income (expense), net 343 122
------ ------
INCOME BEFORE INCOME TAXES 183 2,942
Provision for income taxes (112) (1,250)
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INCOME FROM CONTINUING OPERATIONS 71 1,692
Loss from discontinued
operations, net of taxes - (767)
------ ------
NET INCOME $71 $925
====== ======
NET INCOME (LOSS) PER SHARE
Basic:
Income from continuing operations $0.00 $0.05
Loss from discontinued operations - (0.02)
------ ------
Net income $0.00 $0.03
====== ======
Diluted:
Income from continuing operations $0.00 $0.05
Loss from discontinued operations - (0.02)
------ ------
Net income $0.00 $0.03
====== ======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 32,967 32,700
Diluted 33,586 33,271
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, June 30,
1998 1998
-------- ---------
ASSETS
- - ------
Current Assets:
Cash and cash equivalents $ 19,443 $ 26,256
Accounts receivable, net 7,355 7,478
Income taxes receivable 1,363 1,161
Net assets of discontinued operations 1,988 1,180
Prepaid expenses and other current assets 1,040 885
-------- --------
Total Current Assets 31,189 36,960
Property and equipment, net 16,477 17,369
Software development costs, net of accumulated
amortization of $6,669 and $6,037 4,468 4,794
Goodwill, net of accumulated amortization
of $12,896 and $11,957 49,447 46,093
Deferred tax assets, net 13,658 13,658
Other non-current assets 8,271 7,590
-------- --------
TOTAL ASSETS $123,510 $126,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Accounts payable $5,726 $6,798
Accrued liabilities 6,493 5,462
Deferred tax liabilities 538 538
Current maturities of long-term debt 1,000 1,000
Other current liabilities 710 733
-------- --------
14,467 14,531
Deferred revenue 6,327 7,545
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Total Current Liabilities 20,794 22,076
Long-term debt 250 500
Other non-current liabilities 989 1,363
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TOTAL LIABILITIES 22,033 23,939
-------- --------
Commitments and contingencies
Stockholders' Equity:
Common stock 345 345
Additional paid-in capital 101,225 101,241
Retained earnings 10,120 10,049
Treasury stock (10,213) (9,110)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 101,477 102,525
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $123,510 $126,464
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
September 30,
----------------------
1998 1997
-------- --------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $71 $925
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,781 4,995
Equity in loss of joint venture 923 -
Other non-cash items, net 558 587
Changes in operating assets and liabilities, net (2,291) (2,221)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 4,042 4,286
------- -------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Cash paid for acquisitions (3,922) (3)
Purchase of property and equipment (3,273) (1,948)
Investment in joint ventures (1,983) (250)
Capitalized software development costs (306) (452)
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NET CASH USED IN INVESTING ACTIVITIES (9,484) (2,653)
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CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Purchase of treasury stock (1,198) (233)
Payments of long-term debt (252) (273)
Exercise of common stock options and warrants 79 329
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NET CASH USED IN FINANCING ACTIVITIES (1,371) (177)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (6,813) 1,456
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,256 10,524
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $19,443 $11,980
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------
The accompanying unaudited consolidated financial statements have been
prepared by Data Broadcasting Corporation and Subsidiaries (the "Company" or
"DBC") in accordance with generally accepted accounting principles for interim
financial reporting and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. In the opinion of management, all adjustments considered
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows have been included. All such adjustments are of
a normal recurring nature. This report on Form 10-Q for the three months
ended September 30, 1998 should be read in conjunction with the Company's
annual report on Form 10-K for its fiscal year ended June 30, 1998. Certain
prior year amounts have been reclassified to conform with current year's
presentation.
2. EARNINGS PER SHARE
------------------
In the second quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Earnings per
share presented for prior periods have been restated to conform to the new
presentation. In each period, the difference between basic and diluted shares
is the dilutive effect of stock options and warrants.
3. JOINT VENTURE
-------------
In October 1998, Marketwatch.Com LLC, the Company's 50-50 joint venture with
CBS Broadcasting, Inc., filed a registration statement with the Securities and
Exchange Commission for an initial public offering of common stock.
4. ACQUISITIONS
------------
On August 31, 1998, the Company completed its acquisition of substantially all
of the assets of the Global Treasury Information Services division of ADP
("GTIS") for $3,922,000 in cash, including $135,000 in transaction expenses.
GTIS provides real-time domestic and international fixed income, foreign
exchange, money market and precious metal information to institutional,
corporate and consumer clients worldwide. The transaction has been accounted
for as a purchase and goodwill will be amortized over 15 years.
5. STOCKHOLDERS' EQUITY
--------------------
During the quarter ended September 30, 1998 the company repurchased 243,716
shares of common stock for $1,198,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
The Company's continuing operations include DBC's real-time stock market
quotes, equity analytics, foreign exchange data, financial market information
and news, access to historical financial databases, and other information to
individual and institutional investors, traders and portfolio managers on a
subscription basis. The Company's continuing operations also include Capital
Management Sciences' ("CMS") BondEdge fixed income data and analytics service.
The continuing operations also provide sports information to sports
<PAGE>
enthusiasts, and international news and government transcripts to media,
government agencies, and corporations. The Company distributes its services
via the Internet or communication devices that rely on FM subcarriers,
satellite transmission, cable television systems or telephone lines.
Discontinued operations include Instore Satellite Network ("ISN") which
delivers point to multipoint communication services, primarily to retail
merchants and business associations, and Lawyers Communications Network
("LCN"), a limited liability company formed with the American Bar Association
which provides continuing legal education and other information to legal
professionals.
Marketwatch.Com LLC ("Marketwatch"), a joint venture with CBS Broadcasting,
Inc., delivers a broad range of financial news and information, including
real-time and delayed market prices of stocks, bonds, options and mutual funds
and original news and commentary from financial market analysts, economists
and reporters, via the Company's Internet business information site.
RESULTS OF CONTINUING OPERATIONS
- - --------------------------------
SELECTED FINANCIAL DATA ($ Thousands)
For the Three Months Ended September 30,
1998 1997
---- ----
Revenues
DBC - market data and news $16,969 $18,243
CMS - fixed income data and analytics 5,522 4,900
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Total 22,491 23,143
Cost of services and sales 9,351 8,974
Selling, general and
administrative
Sales and marketing 4,861 4,378
G&A 3,475 3,248
Depreciation and amortization
Equipment and leasehold
improvements 2,424 2,225
Goodwill 971 924
Software development
and other 646 574
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Income from operations $ 763 $ 2,820
======= =======
Income (loss) from operations
DBC - market data and news $ (372) $2,396
CMS - fixed income data and analytics 2,055 1,293
Corporate and unallocated (920) (869)
------- -------
$ 763 $ 2,820
======= =======
Revenues from continuing operations decreased by three percent overall. This
decrease reflects declines in net subscribers of broadcast services. Although
these subscriber declines were largely offset by subscriber increases for
Internet-delivered services, lower prices for Internet-delivered services
resulted in a revenue decline. The revenue increase for CMS BondEdge is
primarily due to price increases.
<PAGE>
Operating income decreased by $2.1 million over last year's first quarter, due
in part to the revenue decline and substantial marketing and product
development costs for the InSite and AgCast initiatives.
The Company's pre-tax share of the net losses of Marketwatch totaled $0.9
million in the current quarter equal to $0.01 per share. There were no losses
in the prior year period as the joint venture was formed in October 1997.
The effective tax rate on continuing operations was 61 percent for the quarter
ended September 30, 1998, compared with 42 percent for the first quarter of
the prior year. The increase is mainly due to the impact of non-deductible
goodwill amortization on lower levels of income.
Income from continuing operations for the first quarter of fiscal 1999 totaled
$0.1 million, equal to $0.00 per basic and diluted share. Last year's first
quarter income from continuing operations was $1.7 million or $0.05 per basic
and diluted share. Last year's net income per share was $0.03, net of a
$0.02 loss from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Cash provided by operating activities was $4.0 million and $4.3 million for
the three months ended September 30, 1998 and 1997, respectively. This
decrease was principally due to lower operating earnings, adjusted for non-
ash items including depreciation and amortization. The Company invested $3.6
million of cash in the first quarter of fiscal 1999 for property and equipment
and capitalized software development (including $1.3 million in leasehold
improvements for new office space) compared to $2.4 million in the comparable
fiscal 1998 period. The Company paid $3.9 million for the acquisition of GTIS
during the first quarter of fiscal 1999.
The Company advanced $2.0 million to Marketwatch during the most recent
quarter. In addition, the Company spent $1.2 million during the current
quarter to repurchase its own shares, compared with $0.2 million in the
corresponding prior year period.
In October 1998, the Company announced that its Board of Directors had
increased its authorization to repurchase shares from 2,000,000 to 4,000,000
shares. Subsequent to September 30, 1998, the Company repurchased 696,097
shares for $2.9 million.
Management believes that the cash generated by operating activities, together
with its existing cash and financing facilities, are sufficient to meet the
short- and long-term needs of the current operations of the Company.
DBC's debt agreement with Key Corporate Capital, Inc. requires the Company to
maintain certain financial ratios with respect to operations and financial
position. This agreement also restricts the payment of dividends to DBC's
stockholders and limits the purchase of treasury stock. At September 30,
1998, the Company was in compliance with these covenants.
BUSINESS DEVELOPMENT AND OUTLOOK
- - --------------------------------
In October 1998, Marketwatch filed a registration statement with the
Securities and Exchange Commission for an initial public offering of common
stock.
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
<PAGE>
trading securities, the Company's business could be adversely affected. The
degree of such consequences is uncertain.
FORWARD-LOOKING STATEMENTS
- - --------------------------
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following:
- The presence of competitors with greater financial resources and their
strategic response to the Company's new services.
- The acceptance of the Internet as a reliable real-time distribution
platform by institutional customers.
- The ability of the Company to broaden its subscriber base with less
expensive but valuable services.
- The potential obsolescence of the Company's services due to the
introduction of new technologies.
- The Company's failure to complete its year 2000 compliance plan on a
timely basis.
- Activity levels in the securities markets.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is a party to various legal proceedings incidental to its business
operation, none of which is expected to have a material effect on the
financial condition or results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. The following exhibits are filed as part of this report:
Exhibit
Number Description of Exhibit
------ ----------------------
27 Financial Data Schedule
b. Reports on Form 8-K
During the quarter ended September 30, 1998, the Registrant did not file
a Current Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATA BROADCASTING CORPORATION
(Registrant)
Dated: November 16, 1998 By: /s/ Allan R. Tessler
-------------------- ---------------------------
Allan R. Tessler
Co-Chief Executive Officer
Dated: November 16, 1998 By: /s/ Alan J. Hirschfield
-------------------- ---------------------------
Alan J. Hirschfield
Co-Chief Executive Officer
Dated: November 16, 1998 By: /s/ Mark F. Imperiale
-------------------- ---------------------------
Mark F. Imperiale
President, Chief Operating
Officer and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements of income and balance sheets and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
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<S> <C>
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<PERIOD-END> SEP-30-1998
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<COMMON> 345
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