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, 1999
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. X
--------
As of September 22, 1999, 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 $241,022,000.
As of September 22, 1999, there were 34,393,397 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 in December 1999 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 real-time financial and
business information on a subscription basis to a broad range of individual
and professional investors and businesses. The Company operates in two
business segments: (1) Market Information ("MI") and (2) BondEdge. The
principal services of MI are eSignal, Signal, BMI MarketCenter, Quotrek,
InSite, BondVu, Global Treasury Information Services ("GTIS"), Federal News
Service ("FNS") and various sports services. Historically, this segment
included the agribusiness service of AgCast, which was sold on May 20, 1999.
The BondEdge product, delivered by the Company's Capital Management Sciences
division ("CMS"), is classified in its own segment. In addition to these two
segments, the Company owns approximately 33 percent of the outstanding common
stock of MarketWatch.Com, Inc., which provides an Internet business
information site for individual investors, business professionals and the
general public.
MI sells access to its networks which provide real-time financial market and
sports information, primarily to individual investors. This includes stock
and commodity market quotes, equity analytics, financial and sports news and
information, access to historical databases, customizable portfolio tracking,
exclusive news coverage and commentary and historical and technical charting.
MI also provides government transcripts and foreign exchange data. BondEdge
distributes fixed income portfolio analytics to a broad base of institutional
investment managers including banks, insurance companies, brokerage firms and
investment management companies for valuation and risk management purposes.
The Company distributes its services via the Internet or communication devices
that rely on FM subcarriers, satellite transmission, cable television systems
or telephone lines. For its broadcast services, the Company provides
subscribers with proprietary equipment and software needed to access its
networks and databases. Subscribers to Internet-delivered services download
the software directly to their computers without the need for proprietary
equipment.
For the last three fiscal years, the percentage of total revenue contributed
by the Company's operating segments was as follows (see Note 16 to the
financial statements):
1999 1998 1997
---- ---- ----
Market Information 78% 80% 82%
BondEdge 22% 20% 18%
----- ----- -----
Total 100% 100% 100%
==== ==== ====
Information Transmission Technology
- -----------------------------------
The Company's data feeds are created by gathering ticker and news feeds from
stock exchanges and other sources and processing them into consolidated data
feeds. The Company has two such information processing and ticker plants: one
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, using multiple satellite systems, including Echostar's Dish
Network. The data feeds are also provided to local servers which support the
Company's Internet-based services. In addition to the ticker plants and
Internet-hosting facilities in California and Utah, the Company has co-located
Web servers at facilities operated by UUNET in Virginia and AboveNet in
California.
The trend in the retail MI business is the transition from broadcast-delivered
subscriptions to Internet-delivered subscriptions. The Company expects its
Internet subscriber base to continue to grow quickly while its broadcast
subscriber base declines.
<PAGE>
Internet subscribers receive their data through their standard Internet access
and can download the necessary software from the Company's World Wide Web
("Web") sites (www.dbc.com, www.esignal.com and www.insite.dbc.com). In
addition, DBC is able to deliver its data to eSignal and InSite customers via
wireless Internet service providers with a wireless CDPD modem. This results
in substantial flexibility for mobile traders.
DBC 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. The television signals of these
programmers are carried by various cable systems throughout the country. DBC
is presently in the second year of a three-year agreement with one of the
multiple-system operators offering carriage in these systems.
DBC's FM broadcast network consists of long-term agreements with 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
network provides coverage in most major North American cities and reaches over
75 percent of the U.S. population. Subscribers receive this one-way
transmission through a proprietary FM receiver. In fiscal 2000, certain of
these FM radio agreements are due for renewal. The Company believes it will
be able to renew these contracts on commercially reasonable terms but will
evaluate each agreement relative to the number of subscribers being served.
DBC offers subscribers optional software to display and analyze the data. In
addition, there are over 20 major 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, stock modeling and analysis.
DBC's broadcast subscribers are 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.
The BondEdge database is updated daily and accessed by clients via the
Internet or the CMS Bulletin Board System. BondVu subscribers have access to
pricing updates through its Web site (www.bondvu.com). FNS transmits its
services via satellite, FM side-band, telephone, cable and the Internet.
Data feeds for GTIS are created by gathering data from banks and brokers
around the world and consolidating it in one of its ticker plants located in
California, London or Tokyo. The content is then delivered to end users via
the Internet, various packet-switching networks, via other RMI products and
networks of other data providers.
InSite combines the Company's various data feeds and BondVu pricing
information to provide complete market coverage.
Principal Services
- ------------------
The Company generates revenue primarily through subscriptions to its principal
services. In addition, broadcast subscribers are charged certain installation
and service initiation fees, depending upon the service and broadcast delivery
method.
Market Information
DBC's data feed contains real-time securities prices for over 300,000
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.
The capacity of the data feed during hours in which the stock market is closed
is an additional resource of the Company. This capacity is currently being
used to broadcast sports information, as sporting events typically occur
during these off-hours.
The principal Market Information services are discussed below.
eSignal
eSignal delivers continuously updating real-time securities prices from the
DBC data feed using "active push" technology on the Internet. In addition,
eSignal provides portfolio features, charting and 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. The Company
also offers access to Dow Jones News Retrieval databases and proprietary DBC
news via modem, news from MarketWatch.Com 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. eSignal also includes Nasdaq Level II Market
Maker information, over-the-counter bulletin board stock quotes and access to
online trading. eSignal is also available in an "equities-only" version at a
reduced price.
Broadcast
Signal FM/Cable/Satellite(TM) is a real-time service offering many of the same
features as eSignal in a broadcast environment. Signal also offers a delayed
service and an end-of-day data service, which provides each day's market
settlement prices. Signal is also available in an "equities-only" version at
a reduced price.
BMI MarketCenter(R) 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 The service is delivered via cable or
satellite.
QuoTrek(TM) is a hand-held wireless quotation monitor which receives the DBC
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 50,000 securities. The service offers full portability to
users as they travel to any city covered by the Company's extensive FM
broadcast network.
DBC provides a variety of sports services (www.dbcsports.com), including real-
time sports scores and news, live odds feeds from Las Vegas casinos, opening-
line odds and historical databases of sports statistics. The Company has
executed a letter of intent to sell its sports operations for $10,000,000.
Institutional
InSite (www.insite.dbc.com) is an Internet delivered real-time market
information service for the institutional investment community. InSite
provides access to equities, fixed income, foreign exchange, commodities, news
and commentary, research, fundamental information and charting. Analytics and
portfolio valuation designed by CMS complete the comprehensive service.
Content, reliability, flexibility and portability are InSite's strengths.
These features as well as cost effectiveness make it the choice over
traditional market data providers. InSite provides continuous real-time
quotes from all major U.S. equities, futures and options exchanges, real-time
foreign exchange rates, European futures exchanges, treasury and other fixed
income pricing, over 200 live indices and includes mutual fund market
information. Windows-based technology lets users have flexibility to
personalize pricing information, analytics, news and charts in a format that
suits their needs. Push delivery technology combines with DBC's high-speed
network to use the Internet as both a delivery tool and product platform.
This fast and reliable technology makes InSite completely portable for
convenient use anywhere, anytime.
BondVu (www.bondvu.com) 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 portfolio valuation feature
which calculates portfolios in real-time.
<PAGE>
FNS (www.fnsg.com) 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 provides
Commerce Department statistics and 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.
GTIS (www.gtiscorp.com), acquired August 31, 1998, has been a leading supplier
of information on non-exchange-traded instruments used by traders,
corporations and financial institutions for over 15 years. GTIS provides
real-time domestic and international fixed income, foreign exchange, money
market and precious metal information to institutional, corporate and consumer
clients worldwide.
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.
BondEdge is provided to institutional fixed income managers on both the buy-
ide and sell-side. The securities covered by this product 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, commercial mortgage-backed securities, money
markets and futures/options. For tax-exempt managers, automated access is
provided to municipal databases.
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.
Investment in MarketWatch.Com, Inc.
MarketWatch.Com, Inc. ("MarketWatch") is a venture formed in October 1997 with
CBS Broadcasting, Inc. It has an Internet web site (cbs.marketwatch.com) that
delivers a broad range of financial market information to individual
investors, business professionals and the general public. In January 1999,
MarketWatch completed an initial public offering of its common stock, reducing
DBC's ownership interest from 50 percent to 37 percent. DBC's investment has
been further diluted to 33 percent, due to MarketWatch's issuance of stock for
an acquisition. MarketWatch derives its revenues from four sources:
advertising, transaction fees, the sale of news to DBC and subscriptions.
Other Investments
The Company owns two other investments in privately-held companies: 8 percent
of the outstanding common stock of Internet Financial Network, Inc. ("IFN")
and convertible preferred stock in Farm Journal Corporation ("FJ"). IFN is a
financial information company, providing over 200 sources of third-party news
and data sources and real-time SEC filings. FJ is an agribusiness information
company, providing magazines and database marketing. DBC received this
investment through the sale of its AgCast business to FJ.
Customers and Competition
- -------------------------
MI competes in the retail and institutional sectors of the securities industry
information market, including individual and professional investors. These
clients seek either real-time, delayed or end-of-day quotations, analytical
and portfolio tracking services or some combination thereof. The target
market for the real-time retail services of MI consists primarily of
individuals who make their own investment decisions, trade frequently and earn
a substantial portion of their income from trading.
<PAGE>
The Company believes its retail Internet-based MI products have set the
standard for delivery of real-time market data to the non-professional trader.
Its primary competitors are services from Data Transmission Network,
PCQuote.com, Inc. and Track Data Corporation. 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.
While DBC's broadcast network has long been a competitive advantage, the
broadcast business is declining in favor of Internet-based services. The
Company believes its open architecture, compatibility with over 20 third-party
software packages and its network reliability are competitive advantages.
InSite and BondVu are targeted at the investment management institutions and
professional brokers requiring comprehensive equity and/or fixed income
information and analytics. InSite has advantages when compared to the
competition, both high-end products (i.e. Bloomberg, Bridge/Telerate, and
Reuters) and the lower tier products (i.e. AT Financial, ILX and Quotron).
Against the high-end products InSite has the edge with Internet delivery, ease
and timeliness of installation, quick set-up and portability. It is also cost
effective in competition with these systems. Compared with the lower tier
products InSite has superior market coverage, proprietary fixed income
analytics and a sophisticated look and feel. BondVu is primarily marketed to
community banks, credit unions, municipalities and pension funds. 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, Reuters, and Bridge Telerate.
BondEdge competes with other vendors of fixed income portfolio analytics,
primarily Salomon Smith Barney's Yield Book service. The target market for
BondEdge is the institutional fixed income managers (managing in excess of
$300 million in bonds) who 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 $50,000 annually for advanced analytics packages. The Company believes
it dominates the North American market, with an estimated 50% of the market.
MarketWatch markets its RT subscription services and its free information to
the casual investor. In this arena, it competes with many Web sites that
provide financial information, much of it for free. The more sophisticated
Live subscription service competes with other Internet and broadcast-based
providers of financial information. Because MarketWatch derives the majority
of its revenues from advertising and transaction fees, it also competes with
many other Web sites, financially oriented or not, in trying to attract
visitors.
Marketing Strategy
- ------------------
MI services are marketed aggressively through several channels: advertising,
marketing alliances, third party developer relationships, seminars, trade
shows, direct mail and referrals. Advertising is used to generate telephone
calls to sales representatives. Television advertising is placed on CNBC,
CNNfn and Bloomberg and print advertising is placed in Investors Business
Daily, Barron's, Stocks and Commodities and other business and investment
publications. DBC also uses web advertising, including CBS MarketWatch,
TheStreet.com and Yahoo. The Company has developed marketing alliances with
online brokers (e.g. Ameritrade, Dreyfus, Charles Schwab and Lind Waldock)
whereby those firms will market DBC's Internet-delivered products to their
customers. DBC has long encouraged third-party software developers to write
trading system software that is integrated with the Company's systems. This
has resulted in numerous sales leads amongst the developers' customers.
Beginning with the launch of eSignal, DBC conducted product seminars for the
first time. The Company believes this to be a very effective marketing method
and will continue to hold them. DBC has used direct mail campaigns on a
limited basis, focusing on prospects obtained from purchased mailing lists and
former customers. The Company also provides incentives to existing
subscribers for referrals.
<PAGE>
InSite also has a dedicated sales force. It is directed at the institutional
investment community with the main efforts on direct sales to buy-side and
brokerage marketplaces. Alliances with brokers for wholesale sales
opportunities are also in place. These are augmented by print advertising,
target mailings and selective trade show presence.
BondEdge is marketed through a dedicated sales force, product demonstrations
and sponsorship of seminars and workshops on fixed income analysis. Users
typically sign monthly contracts which are automatically renewed unless
canceled.
MarketWatch markets to potential users by advertising on CBS television and
radio and on other Web sites. MarketWatch employs a direct sales force to
reach advertisers and transaction partners.
Business Expansion and Product Development
- ------------------------------------------
In fiscal 1999, the Company experienced a net increase in its overall retail
subscriber base despite declines in its broadcast subscriber base. The
broadcast declines have been more than offset by new Internet-based
subscribers. The Company believes it has become the dominant Internet-based
provider of real-time financial market information.
The Company's acquisitions of GTIS and FNS, and the development of InSite,
have helped to expand its presence in the institutional market.
BondEdge's 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. BondEdge's
ability to help subscribers manage those risks keeps the Company well-
positioned to take advantage of these trends. However, BondEdge has lost
certain customers due to consolidation in the banking, insurance and
investment management industries.
During the fiscal years ended June 30, 1999, 1998 and 1997, the Company
expensed approximately $6.3 million, $8.4 million and $7.1 million,
respectively, for research and development, including development of new
products, maintenance and upgrading of existing products and development of
internal systems.
DBC plans to continue to expand its businesses, both domestically and
internationally through:
- - expansion into the institutional market of users of real-time and other
financial information;
- - selling continuously updating products, such as eSignal, directly over the
Internet to a broader customer base;
- - 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.
- - incubation of other Internet ventures.
Seasonality
- -----------
The Company has not experienced any material seasonal fluctuations in its
business. However, financial information market demand 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 580 people as of August 31, 1999, 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 BMI to transmit data from their uplink facilities in Salt
<PAGE>
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.
Executive Officers of the Registrant
The following table contains information as of August 31, 1999 as to the
executive officers of the Company:
Name Age Office Held with Company
- ---- --- ------------------------
Alan J. Hirschfield 63 Co-Chief Executive Officer
Allan R. Tessler 62 Co-Chief Executive Officer
Mark F. Imperiale 48 President
Dwight H. Egan 46 Executive Vice President - Marketing
James A. Kaplan 56 Vice Chairman
ALAN J. HIRSCHFIELD and ALLAN R. TESSLER serve as Co-Chairmen of the Board and
Co-Chief Executive Officers of the Company.
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
MarketWatch.com, Inc. ("MarketWatch"), 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 operator. Since January 1997, Mr. Tessler has also served as
Chairman of Checker Holdings Corp. IV, a private holding company. 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 MarketWatch, 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, with Prudential
Securities, Merrill Lynch, and First Boston Corporation. Mr. Imperiale, a
certified public accountant, started his career with Arthur Young & Company.
Mr. Imperiale also serves on the boards of MarketWatch and Sorbent Products
Corporation, a privately-held manufacturer and distributor of oil absorption
products.
DWIGHT H. EGAN was appointed Executive Vice President of Marketing for DBC in
June 1998. He co-founded Broadcast International, Inc. ("BII"), a former
subsidiary of the Company which was acquired by DBC in 1995. Mr. Egan also
serves on the board of Gentner Communications, Inc., a provider of audio
communication equipment and services.
JAMES A. KAPLAN served as President of CMS during the last five years and is
currently President of Commontech, LLC. He retired as President of CMS as of
June 30, 1999 but remains Vice Chairman of the Board.
<PAGE>
Item 2. PROPERTIES
The Company owns no real estate but leases the following principal facilities:
Square Current
------ -------
Location Operating Unit Feet Annual Rate Expiration
- -------- ------------- ---- ----------- ----------
Hayward, CA DBC West (1) 60,158 $942,000 June 2013
New York, NY Various 27,386 $398,000 November 2009
Los Angeles, CA CMS (3) 25,498 $704,000 October 2002
Salt Lake City, UT BMI (1) 17,196 $304,000 December 2003
Midvale, UT ISN (2) 15,193 $101,000 November 2002
Midvale, UT ISN (2) 13,881 $257,000 October 2001
Washington, DC FNS 6,688 $235,000 July 2001
Las Vegas, NV Sports 5,969 $102,000 February 2002
London, England DBC West 5,940 $94,000 November 2008
New York, NY CMS (3) 5,737 $64,000 October 2000
West Orange, NJ Corporate 1,482 $33,000 December 2000
Jackson, WY Corporate (1) 2,030 $39,000 June 2001
Paris, France GTIS 861 $17,000 February 2002
Tokyo, Japan GTIS 108 $34,000 March 2000
(1) Certain of this space has been sublet under agreements of various terms.
(2) Discontinued operation.
(3) These properties are used by the BondEdge segment. All other properties
are used by the Market Information segment, except those noted as Corporate.
The Company also has approximately 2,300 square feet of property under lease
that was previously used by a former operation. This lease expires in 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.
Item 3. LEGAL PROCEEDINGS
-----------------
Newman v. CheckRite of California, Inc., et al, CIV-S-93-1557-LKK/PAN. On
September 28, 1993, plaintiffs filed a complaint in the United States District
Court for the Eastern District of California, alleging violations of the
Federal Fair Debt Practices Act and the California Unfair Business Practices
Act. The allegations include charging check writers unauthorized fees for
returned checks and threatening litigation against check writers where none
was actually contemplated. The case was certified as a class action on August
2, 1996. The Company has negotiated a settlement and has fully funded the
settlement by posting a letter of credit. The settlement has not had a
material effect on the financial condition or results of operations of the
Company.
There are no other material pending legal proceedings to which the Registrant
is a party, other than ordinary routine litigation incidental to the business.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
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 34,393,397 were outstanding as of September
22, 1999, 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 22, 1999, there were 1,825 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, 1999 and June 30, 1998 is shown below.
High Low
------ ------
Fiscal Year 1999:
FIRST QUARTER (07/01/98 to 09/30/98). 7 1/2 4
SECOND QUARTER (10/01/98 to 12/31/98). 18 9/16 2 9/16
THIRD QUARTER (01/01/99 to 03/31/99) .. 46 1/8 12 7/8
FOURTH QUARTER (04/01/99 to 06/30/99) . 22 3/8 8 3/4
Fiscal Year 1998:
FIRST QUARTER (07/01/97 TO 09/30/97) . 7 1/4 $4 3/4
SECOND QUARTER (10/01/97 TO 12/31/97). 8 5/16 4 7/8
THIRD QUARTER (01/01/98 TO 3/31/98) ... 6 5/8 4 1/4
FOURTH QUARTER (04/01/98 TO 06/30/98) .....9 1/8 5
<PAGE>
Item 6. SELECTED FINANCIAL DATA
-----------------------
(In thousands, except per share amounts)
Year Ended June 30,
---------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
REVENUES $108,294 $102,613 $105,702 $81,664 $74,243
INCOME (LOSS)
FROM OPERATIONS (1,016) 5,434 9,174 12,432 8,245
INCOME (LOSS) FROM
CONTINUING OPERATIONS (4,189) 2,993 5,396 9,088 16,365
NET INCOME (LOSS) (4,189) (4,763) (18,279) 8,871 16,365
BASIC INCOME (LOSS) PER
SHARE INCOME (LOSS)
FROM CONTINUING
OPERATIONS $(.12) $.09 $.17 $.30 $.73
NET INCOME (LOSS) $(.12) $(.15) $(.56) $.29 $.73
DILUTED INCOME (LOSS)
PER SHARE
INCOME (LOSS)
FROM CONTINUING
OPERATIONS $(.12) $.09 $.16 $.28 $.67
NET INCOME (LOSS) $(.12) $(.14) $(.54) $.27 $.67
WEIGHTED AVERAGE SHARES
BASIC 33,902 32,841 32,526 30,599 22,497
DILUTED 34,760 33,447 33,676 32,734 24,350
TOTAL ASSETS $188,492 $126,464 $134,183 $153,967 $163,020
LONG-TERM DEBT, LESS
CURRENT PORTION - 500 1,500 2,558 8,903
STOCKHOLDERS' EQUITY 154,158 102,525 105,853 116,097 96,715
- - Operating results reflect the sale of the assets of Shark Information
Services Corp. effective May 1, 1995, the acquisition of BMI on June 30,
1995 and the acquisition of GTIS on August 31, 1998.
- - Net loss in 1998 includes a loss of $6.1 million on the disposal of
discontinued operations, primarily due to the non-cash write-off of the net
assets of the business, net of a tax benefit.
- - 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.
- - Exchange fees have been reclassified as revenues and expenses, amounting to
$13.6 million, $12.7 million and $13.2 million in 1999, 1998 and 1997,
respectively. No such reclassification was made for 1996 and 1995.
- - During the five-year period ended June 30, 1999, the Company paid no cash
dividends.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
GENERAL
- -------
The Company delivers a wide range of information and analytical tools used
primarily by investors to make investment decisions. The Company will
primarily deliver these services over the Internet as a result of its decision
to transition away from the Company's historical broadcast platforms. These
services include the following:
- - Real-time financial market prices - equities, mutual funds, options, bonds,
indices, futures, commodities and foreign exchange rates.
- - News - proprietary business articles, news headlines, press releases, wire
services, and transcripts from U.S. and Russian government activities.
- - Access to historical financial databases - stock prices, technical charts,
research reports and SEC filings.
- - Analytical tools - Technical stock charting and detailed fixed income
portfolio analysis.
These services are delivered on a subscription basis via the Internet or
communication devices that rely on FM subcarriers, satellite, cable television
or telephone lines. While the majority of customers receive services via a
broadcast technology, most of the Company's new customers are choosing
Internet-delivered services. The Company expects the trend toward Internet
services to continue to grow and the number of broadcast customers to decline.
The Company also plans to use broadband, multi-cast technology to deliver its
information and services in a multimedia format.
With the exception of certain fixed income services, which are targeted toward
fixed income portfolio managers, most of the Company's customers have
historically been individual investors. However, the Company expects the
number of its institutional customers will increase as a result of growth in
BondEdge and InSite.
The Company operates in two business segments:
- Market Information - including financial and sports information services
targeted toward individual and institutional investors.
- BondEdge - fixed-income analytical software marketed to fixed-income
portfolio managers.
In May 1999, the Company sold its AgCast business to Farm Journal Corporation
("FJ"), in exchange for $3,100,000 of convertible preferred stock in FJ, a
privately-held agribusiness information company.
MarketWatch.Com, Inc. ("MarketWatch") is a venture formed in October 1997
with CBS Broadcasting, Inc. It operates Internet web sites that deliver a
broad range of financial market information. The Company believes that most
of the visitors to this site are individual investors. Although much of the
information on MarketWatch is free to visitors, it does offer paid
subscriptions to certain of its data. MarketWatch currently derives the bulk
of its revenue from advertising. In January 1999, MarketWatch completed an
initial public offering of its common stock, reducing DBC's ownership interest
from 50 percent to 37 percent. The Company's ownership interest has been
further diluted to 33 percent, due to MarketWatch's issuance of stock for the
acquisition of BigCharts Inc., a leading provider of securities charts on the
Web.
DBC purchased substantially all of the assets of GTIS on August 31, 1998.
GTIS provides real-time domestic and international fixed income, foreign
exchange, money market and precious metal information to institutional,
corporate and consumer clients worldwide. This acquisition expands the
Company's reach to institutional customers.
DBC owns two businesses which have been classified as discontinued operations
for accounting purposes. Instore Satellite Network ("ISN") installs and
operates point to multipoint satellite services for retail merchants. Lawyers
Communications Network ("LCN") is a limited liability company formed with the
American Bar Association which provides continuing legal education and news
via the Internet or satellite to legal professionals. Subsequent to year-end,
the Company sold ISN and closed LCN. DBC will continue to operate a business
video operation, formerly part of ISN, through the end of its existing
contracts, in accordance with the agreement to sell ISN.
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
SELECTED FINANCIAL DATA ($ Thousands)
Year Ended June 30,
---------------------------------
1999 1998 1997
---- ---- ----
Revenues
Market Information:
Broadcast $54,566 $72,069 $81,654
eSignal 16,107 3,256 570
Institutional 14,127 7,138 4,559
BondEdge 23,494 20,150 18,919
------ ------ ------
108,294 102,613 105,702
Cost of services 55,219 47,955 45,627
Selling, general and administrative:
Sales and marketing 21,849 18,221 19,799
General and administrative 17,137 15,407 16,691
Depreciation and amortization:
Equipment and leasehold
improvements 8,749 9,622 8,581
Goodwill 3,989 3,728 3,548
Software development and other 2,367 2,246 2,282
------ ----- -----
Income (loss) from operations $(1,016) $5,434 $9,174
====== ====== ======
Income (loss) from
operations by unit
Market Information $(3,678) $3,685 $7,318
BondEdge 8,595 6,094 5,288
Corporate and unallocated (5,933) (4,345) (3,432)
------ ------ ------
$(1,016) $5,434 $9,174
====== ===== =====
In the third quarter of 1997 the Company adopted a plan to dispose of its
CheckRite ("CRI") and ISN businesses. In the second quarter of 1998 DBC
adopted a plan to dispose of its interest in LCN due to the disappointing pace
of subscriber additions. The results of operations for these businesses have
been reported as discontinued operations. The loss from discontinued
operations was $23,675,000 ($0.73 per share) for 1997 and $7,756,000 ($0.24
per share) for 1998. These losses were primarily due to the non-cash write-
off of the net assets of the businesses and the related tax expense. Prior to
the initial write-off, the net assets included $34,239,000 of unamortized
goodwill. CRI was sold in 1998. Subsequent to year-end, DBC sold ISN and
closed LCN.
1999 versus 1998
Overall, revenues from continuing operations increased by six percent.
eSignal revenues increased dramatically, from $3,256,000 to $16,107,000, while
Broadcast revenues declined from $72,069,000 to $54,566,000. This change in
the mix of customers, which is expected to continue, resulted in a decrease in
revenues, despite an overall increase in subscribers, due to lower average
revenues for eSignal subscribers. Institutional revenues grew from $7,138,000
to $14,127,000, due to the August 1998 acquisition of GTIS and the initial
market acceptance of InSite. BondEdge revenues increased by 17 percent due to
price increases, growth in the subscriber base and the sale of additional
analytical modules to existing customers.
The Company recorded an operating loss of $1,016,000, down from operating
income of $5,434,000 a year ago. This decline is largely attributable to the
decline in Broadcast revenues with little reduction in Broadcast's fixed
distribution expense, substantial increases in sales and marketing expenses
for eSignal and Insite, offset by significant growth in the operating income
of BondEdge.
The Company's share of MarketWatch's losses grew from $576,000 in 1998 to
$6,500,000 in 1999. This venture was formed during 1998 and DBC's results for
1998 included only eight months results versus a full year in 1999.
MarketWatch's losses increased significantly with the June 1999 acquisition of
BigCharts, Inc., which will result in significant non-cash charges over the
next three years for the amortization of goodwill. As a result, the Company's
share of MarketWatch's losses in fiscal 2000 is expected to increase.
In January 1999, MarketWatch completed an initial public offering ("IPO"). As
a result of the IPO and MarketWatch's issuance of shares for the BigCharts
acquisition, DBC was required to increase the carrying value of its investment
in MarketWatch by $52,631,000, less deferred income taxes of $21,134,000. The
net adjustment was recorded as an increase to additional paid-in capital.
Interest income, net, increased by $820,000. This increase was
mainly caused by higher interest income of $681,000 which resulted from higher
cash balances during the period. Interest expense decreased by $139,000 due
to lower levels of debt and other credit facilities.
Loss from continuing operations and net loss in 1999 amounted to $4,189,000 or
$0.12 per share, including losses of $0.13 related to MarketWatch. Income
from continuing operations in 1998 was $2,993,000 or $0.09 per share,
including a charge of $0.01 for MarketWatch losses. Basic weighted average
shares outstanding increased by three percent due to the issuance of shares
associated with the exercise of stock options and warrants. The increases
were partially offset by the Company's purchases of treasury shares.
1998 versus 1997
Overall revenues from continuing operations decreased by 3 percent. Broadcast
revenues decreased by $9,585,000 (12 percent), while the Company recorded an
increase in revenues for eSignal of $2,686,000. While there was a slight
overall decrease in subscribers for these two businesses, revenues dropped
more sharply as the eSignal services are priced lower. BondEdge revenues
increased by seven percent due to subscriber increases and sales of additional
analytical modules to existing customers. Institutional revenues increased by
57 percent. This was due to strong increases in InSite and the European
subscriber base, and the inclusion of a full year of revenues from the October
1996 acquisition of Federal News Service.
Overall operating income decreased by $3,740,000. Market Information's
operating income declined by $3,633,000 due to the revenue losses described
above and the development and initial marketing for InSite. BondEdge's
operating income increased by 15 percent due to the revenue growth. Also
included in 1998 operating income were $1,040,000 of other charges, including
professional fees related to potential acquisitions and the organization of
MarketWatch, moving certain operations in California and the settlement of a
sales tax audit.
Included in 1998 were losses from MarketWatch of $576,000. There were no
comparable losses in the prior year as the venture was not formed until
October 1997.
In 1997, other expense included a $700,000 charge associated with the
settlement of class action litigation. In 1998, the Company recorded a
benefit of $177,000, due to the positive resolution of certain contingencies
included in the 1997 charge and the 1998 settlement of other litigation in the
Company's favor.
Also included in 1997 was $952,000 in non-recurring gains associated with
previous transactions involving Shark Information Services Corp. and the
Consumer News and Business Channel. These gains resulted from the resolution
of certain contingencies and the revision of certain estimates associated with
these transactions.
Interest income, net increased by $339,000 due to lower levels of
bank debt and higher cash balances, attributable to overall positive cash flow
and the receipt of $15,500,000 in May 1998 from the sale of CRI.
The effective tax rate for 1998 was approximately 45 percent. This was
significantly higher than 1997 due to the impact of nondeductible goodwill
amortization on a lower level of pretax income from continuing operations.
Net income from continuing operations in 1998 was $2,993,000, equal to $0.09
per share. Net income from continuing operations in 1997 was $5,396,000,
equal to $0.17 per share. Basic weighted average shares were flat as shares
issued for acquisitions and the exercise of stock options were offset by the
Company's stock buyback program.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash provided by operating activities was $21,404,000, $15,941,000 and
$20,421,000 in 1999, 1998 and 1997, respectively. The increase from 1998 to
1999 resulted from favorable swings in income tax payments and accounts
payable and an increase in deferred revenue, offset by operating losses and an
increase in accounts receivable. The decrease from 1997 to 1998 was mainly
due to lower operating earnings and the payment of income taxes on the gain on
the sale of CRI.
The Company's capital expenditures have continued to decline due in part to
the shift to Internet-delivered services which require less Company-owned
equipment. However, DBC has entered into a new lease for office space in New
York, which will be used to consolidate its existing operations in New York
and provide space for their growth. In connection with this transaction, the
Company expects to incur expenditures for leasehold improvements during 2000.
Capitalized software development costs totaled $1,385,000 in 1999, mainly for
the development of updated versions of InSite and eSignal and enhancements to
BondEdge. Such costs in 1998 and 1997 amounted to $2,052,000 and $2,158,000,
respectively, and were primarily related to the development of InSite, AgCast
and BondEdge.
In 1999, DBC used $3,926,000 for acquisitions, primarily for the purchase of
GTIS, including $135,000 of transaction expenses. DBC received $15,500,000 in
1998 from the sale of substantially all of the assets of CRI. The Company
invested $3,168,000 in its MarketWatch and Internet Financial Network ("IFN")
joint ventures. In 1997, the Company used $6,155,000 for acquisitions,
including contingent earnout payments associated with the CMS acquisition and
the purchase of Instant Odds Network. The joint venture investments of
$1,818,000 related to DBC's activities in Hong Kong and IFN.
In 1999, DBC received $16,045,000 from the exercise of 3,073,000 stock options
and warrants. The Company purchased 1,321,313 shares of treasury stock for
$8,000,000. The Company also paid down $1,008,000 of debt in 1999.
In 1998, the Company paid down $1,053,000 of long-term debt and purchased
179,000 shares of treasury stock for $908,000. Only 180,000 stock options
were exercised, generating $714,000.
In 1997, the Company used $3,807,000 to pay down long-term debt, of which
$2,700,000 was associated with the acquisition of CMS. The exercise of
1,525,000 stock options generated $4,896,000 and $8,835,000 was used to
purchase treasury shares in a repurchase program that began in November 1996.
Subsequent to year end, the Company has continued to buyback its own shares.
The Company is currently authorized to buy up to 4,000,000 shares, of which
3,160,000 had been purchased through September 22, 1999. In August 1999, DBC
received $3,995,000 for the sale of ISN. Due to significant tax losses
generated in 1999 by the exercise of stock options, the Company expects to
receive tax refunds of $5,800,000 in 2000.
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 June 30, 1999, the
Company was in compliance with these covenants.
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.
BUSINESS DEVELOPMENT AND OUTLOOK
- --------------------------------
During 1999, the Company's main development efforts were to increase the
markets for eSignal and Insite. The purchase of the GTIS business helped to
expand the Company's institutional market presence.
Demand for financial market information is largely dependent upon activity
levels in the securities markets. In the event that the U.S. financial
markets were to experience a prolonged period of investor inactivity in
trading securities, the Company's business could be adversely affected. The
degree of such consequences is uncertain.
<PAGE>
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, 1999, the Company has recorded $5,386,000 of
net deferred tax assets, net of a valuation allowance of $2,601,000 and
deferred tax liabilities of $19,247,000. 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.
YEAR 2000
- ---------
The Company has substantially completed a comprehensive review of its
products, information systems and critical suppliers to identify those that
may be affected by the year 2000 ( Y2K ) issue. The Company s Y2K status is
as follows:
- - Most of the Company s products and networks are substantially Y2K compliant
already. However, there is one older product with a small number of
subscribers that is not Y2K compliant and will not be supported beyond
December 31, 1999. The Company has informed those customers affected and
will try to meet the customers needs with another DBC product.
- - The Company has sought compliance statements from each of its significant
suppliers, most of which have provided positive assurances regarding their
compliance. DBC will continue to work with those who are not yet Y2K
compliant.
- - In the normal course of business, the Company is replacing its
administrative systems for accounting, billing and customer management. The
new systems will be fully Y2K compliant and will cost approximately
$3,200,000, most of which will be capitalized as fixed assets. At June 30,
1999, approximately $2,500,000 has been capitalized. These costs were
capitalized because they related to the implementation of new systems which
include substantial new functionality in addition to being Y2K compliant.
All historical and future costs have been and will continue to be funded out
of existing cash and cash flows from operations.
The Company has developed certain contingency options that are available in
the event of a Y2K failure. For example, if any of the satellites that are
used by DBC s financial network were to fail, it is possible that the Company
could shift all of its satellite customers to its Internet-based products. In
another example, if one data provider fails, it is possible that there is
another data provider that provides substantially similar information that
could be integrated into DBC s data feed. There are certainly no foolproof
contingency plans that cover every possible failure. However, the Company
will continue to develop potential solutions so that it is as prepared as
possible in the event of a failure. In addition, the Company will continue to
work with its insurers so that it effectively manages its financial risk in
the event of a business interruption.
Based upon currently available information, management has no reason to
believe that the Company will not meet its compliance goals and does not
anticipate that the cost of effecting Y2K compliance will have a material
impact on the Company s financial condition, results of operations or
liquidity. Nevertheless, achieving Y2K compliance is dependent upon many
factors, some of which are not completely within the Company s control.
Should either the Company s internal systems or the internal systems of one or
more of its critical vendors fail to achieve Y2K compliance, the Company s
business and its results of operations could be adversely affected.
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
<PAGE>
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 acceptance of the Internet as a reliable real-time distribution platform
by institutional customers.
- - The ability of the Company to broaden its subscriber base by adding more
individual investors outside of the Company's traditional "active-trader"
market.
- - The Company's failure, or the failure of material third parties, to complete
their year 2000 compliance plan on a timely basis.
- - The potential obsolescence of the Company's services due to the introduction
of new technologies.
- - 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 and Comprehensive Loss.........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)...............................34
Supplemental Schedule:
Report of Independent Accountants....................................35
Financial Statement Schedule.........................................36
<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, 1999 and 1998, and
the results of their operations and their cash flows for each of the three
years in the period ended June 30, 1999, 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.
/s/ PricewaterhouseCoopers LLP
Salt Lake City, Utah
August 18, 1999, except as to Note 17 which is as of August 31, 1999
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share data)
Year Ended June 30,
------------------------------
1999 1998 1997
---- ---- ----
REVENUES $108,294 $102,613 $105,702
COSTS AND EXPENSES
Cost of services 55,219 47,955 45,627
Selling, general and
administrative 38,986 33,628 36,490
Depreciation and amortization 15,105 15,596 14,411
-------- ------ -------
Total costs and expenses 109,310 97,179 96,528
-------- ------ -------
INCOME (LOSS) FROM OPERATIONS (1,016) 5,434 9,174
Equity in loss of
MarketWatch.com, Inc. (6,500) (576) -
Gain on sale of Shark - - 703
Equity in loss of Hong Kong
joint venture - (43) (828)
Interest income, net 1,472 652 313
Other expense, net (169) (7) (702)
------ ------ -----
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS (6,213) 5,460 8,660
CNBC proceeds, net of obligations - - 249
------- ------- -------
INCOME (LOSS) BEFORE INCOME
TAXES (6,213) 5,460 8,909
Provision (benefit) for
income taxes (2,024) 2,467 3,513
------ ------- -------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (4,189) 2,993 5,396
Loss from discontinued operations,
including taxes - (7,756) (23,675)
------ ------- ------
NET LOSS (4,189) (4,763) (18,279)
Other comprehensive income
Foreign currency translation
adjustment (74) - -
------- ------- ------
COMPREHENSIVE LOSS $(4,263) $(4,763) $(18,279)
======= ======= ========
INCOME (LOSS) PER SHARE:
Basic
Income (loss)
from continuing operations $(0.12) $0.09 $0.17
Loss from discontinued operations - (0.24) (0.73)
------ ------- -------
Net loss $(0.12) $(0.15) $(0.56)
====== ====== ======
Diluted
Income (loss)
from continuing operations $(0.12) $0.09 $0.16
Loss from discontinued
operations - (0.23) (0.70)
------ ------- -----
Net loss $(0.12) $(0.14) $(0.54)
====== ====== ======
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,
1999 1998
---- ----
ASSETS
- ------
Current Assets:
Cash and cash equivalents $41,507 $26,256
Accounts receivable, net of
allowance for doubtful
accounts of $2,034 and $1,366 8,782 7,478
Income taxes receivable 6,141 1,161
Net assets of discontinued operations 1,373 1,180
Prepaid expenses and other current assets 1,187 885
------ ------
Total Current Assets 58,990 36,960
Property and equipment, net 14,853 17,369
Software development costs, net of
accumulated amortization of $8,159 and
$6,037 3,460 4,794
Goodwill, net of accumulated amortization
of $15,914 and $11,957 45,784 45,669
Investment in MarketWatch.com, Inc. 47,554 424
Deferred tax assets, net 11,917 13,658
Other non-current assets 5,934 7,590
-------- --------
TOTAL ASSETS $188,492 $126,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $7,655 $6,798
Accrued liabilities 8,541 5,462
Deferred tax liabilities 6,531 538
Current maturities of long-term debt 500 1,000
Other current liabilities 545 733
------- -------
23,772 14,531
Deferred revenue 9,077 7,545
------- -------
Total Current Liabilities 32,849 22,076
Long-term debt - 500
Other non-current liabilities 1,485 1,363
------- -------
TOTAL LIABILITIES 34,334 23,939
------- -------
Commitments and contingencies
Stockholders' Equity:
Common stock, $0.01 par value:
Authorized: 75,000,000 shares;
Issued and Outstanding:
34,741,640 Shares in 1999
and 32,989,923 Shares in 1998 375 345
Additional paid-in capital 164,795 101,241
Retained earnings 5,860 10,049
Accumulated other comprehensive income (74) -
Treasury stock (16,798) (9,110)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 154,158 102,525
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $188,492 $126,464
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended June 30,
----------------------
1999 1998 1997
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net loss $(4,189) $(4,763) $(18,279)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 17,871 20,067 19,845
Write-down of net assets of
discontinued operations,
including taxes - 6,109 21,264
Equity in loss of MarketWatch.com,
Inc. 6,500 576 -
Deferred tax provision (benefit) (4,102) (2,971) 81
Provision for losses on accounts
receivable 1,820 2,359 2,333
Equity in loss of Hong Kong joint
venture - 43 828
Gain on sale of Shark - - (703)
Other non-cash items, net 569 516 291
Changes in operating assets and
liabilities, net:
Accounts receivable (3,590) (1,352) (4,257)
Income taxes payable 2,574 (1,957) 1,000
Accounts payable and accrued
liabilities 2,833 (1,824) (399)
Deferred revenue 1,605 562 367
Other assets and liabilities,
net (487) (1,424) (1,950)
------ ------ ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 21,404 15,941 20,421
------ ------ ------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Purchase of property and equipment (8,751) (9,122) (11,693)
Cash received from joint ventures 4,503 - -
Investment in and advances to
joint ventures (3,592) (3,168) (1,818)
Cash paid for acquisitions, net of
cash acquired (3,985) (198) (6,155)
Capitalized software development costs (1,385) (2,052) (2,158)
Proceeds from the sales of businesses - 15,500 -
Other, net 20 98 34
------ ------ ------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (13,190) 1,058 (21,790)
------ ------ ------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Exercise of stock options
and warrants 16,045 714 4,896
Purchase of treasury stock (8,000) (908) (8,835)
Payments of long-term debt
and capital lease obligations (1,008) (1,053) (3,807)
Other, net - (20) (28)
------ ------ ------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,037 (1,267) (7,774)
------ ------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 15,251 15,732 (9,143)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 26,256 10,524 19,667
------ ------ ------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $41,507 $26,256 $10,524
======= ======= =======
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 Additional Other Total
------------
Shares Paid-In Retained Comp. Treasury Stock-
Outstanding Amount Capital Earnings Income Stock Equity
----------- ------ ------- -------- ------ -------- ------
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/
retirement 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
Issuance of
stock for
acquisitions 280,291 3 1,363 - - 1,366
Exercise of
stock options
and warrants 179,745 2 712 - - 714
Tax benefit
from exercise
of stock
options - - 263 - - 263
Purchase/
retirement of
treasury
stock (179,275) (1) (422) - (485) (908)
Net loss - - - (4,763) - (4,763)
------- - --- ----- --- ------
BALANCE AT
JUNE 30,
1998 32,989,923 345 101,241 10,049 (9,110) 102,525
Exercise of
stock
options
and
warrants 3,073,030 30 16,015 - - 16,045
Tax benefit
from exercise
of stock
options - - 16,354 - - 16,354
Purchase/
retirement of
treasury
stock (1,321,313) - (312) - (7,688) (8,000)
Write-up of
investment in
Market-
Watch.com - - 31,497 - - 31,497
Accumulated
other
comprehen-
sive income - - - - $(74) - (74)
Net loss - - - (4,189) - (4,189)
------- - --- ----- -- --- ------
BALANCE AT
JUNE 30,
1999 34,741,640 $375 $164,795 $5,860 $(74) $(16,798) $154,158
========== === ======= ===== == ====== =======
See accompanying notes to consolidated financial statements.
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Nature of Business - Data Broadcasting Corporation and subsidiaries
------------------
(the "Company" or "DBC") operates in two business segments, providing a
variety of actionable market data and news to its subscribers. This
data consists of 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
institutional portfolio managers. Customers are located principally in
North America, with additional customers in Europe and Asia.
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.
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 ten 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. During
fiscal 1998, the Company adopted Statement of Position 98-1, "Accounting
for Costs of Computer Software Developed or Obtained for Internal Use".
This pronouncement requires the capitalization of internal use software
under certain circumstances. The Company capitalized approximately
$2,113,000 and $1,201,000 during the years ended June 30, 1999 and 1998,
respectively, primarily related to the purchase and development of new
computer systems.
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 1999, 1998
and 1997, such amortization amounted to approximately $2,348,000,
$2,176,000 and $2,023,000 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 revenue 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 1999, 1998 and 1997 such fees
aggregated approximately $2,347,000, $4,793,000 and $5,300,000
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
$6,348,000, $8,400,000 and $7,100,000 in research and development costs
during the years ended June 30, 1999, 1998 and 1997, respectively,
including maintenance and upgrading of existing products and development
of new products.
Stock-Based Compensation - The Company follows Accounting Principles
------------------------
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
No. 25") in accounting for its employee stock options, rather than 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.
<PAGE>
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
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 items that arose prior to June 26, 1992, the effective date
of the reorganization plan of the Company's predecessor. As of June 30,
1999, the entire valuation allowance is related to such items.
Earnings per Share - In fiscal 1998, the Company adopted Statement of
------------------
Financial Accounting Standards No. 128, "Earnings per Share". Earnings
per share presented for 1997 have been restated to conform to the new
presentation. Below is a reconciliation of shares outstanding (in
thousands) between the basic and diluted calculations for each period.
1999 1998 1997
---- ---- ----
Basic shares 33,902 32,841 32,526
Stock options and warrants 858 606 1,150
------ ------ ------
Diluted shares 34,760 33,447 33,676
====== ====== ======
Issuance of Stock by Investees - When an investee sells its stock to
-----------------
unrelated parties at a price in excess of its book value, the Company's
net investment in that investee increases. This increase is typically
recorded as a gain in the Company's statement of operations. However,
in instances where realization of such gain is not assured, the gain
would be recorded as an increase to additional paid-in capital.
Long-lived Assets - The Company evaluates the recoverability of its
-----------------
long-lived assets in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121
requires recognition of impairment of long-lived assets in the event the
net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets.
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. This
included the reclassification of exchange fees as revenues and expenses
in all periods, which amounted to $13,581,000, $12,721,000 and
$13,224,000 in fiscal 1999, 1998 and 1997, respectively.
Segment Information - In fiscal 1999, DBC adopted Statement of
-------------------
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information". FASB No. 131 establishes standards
for the disclosure using the management approach which designates the
internal organization used by management for performance assessment to
be the source of the Company's reportable segments.
2. INVESTMENT IN MARKETWATCH.COM INC.
On January 15, 1999, MarketWatch.com, Inc. ("MW"), originally
Marketwatch.com LLC, the Company's 50-50 joint venture with CBS
Broadcasting, Inc. ("CBS"), completed an initial public offering of its
common stock (the "Offering"). In connection with the Offering, MW sold
3,162,500 shares for $17 per share, resulting in a reduction in the
Company's ownership interest from 50% to 37%. The selling price per
share in the Offering was greater than the Company's average carrying
amount per share. As a result, the Company recognized an increase in
the carrying value of the investment of $18,045,000. This increase in
carrying value, net of deferred tax liabilities of $7,300,000 was
recorded as an increase to additional paid-in capital. Subsequent to
the Offering, MW issued stock for an acquisition, reducing DBC's
investment to approximately 33 percent. The value of the shares issued
for the acquisition was greater than the Company's average carrying
amount per share. As a result, the Company recognized an increase in
the carrying value of the investment of $34,586,000. This increase in
carrying value, net of deferred tax liabilities of $13,834,000, was
recorded as an increase to additional paid-in capital.
In fiscal 1999 and 1998, the Company recognized equity in losses of MW
of $6,500,000 and $576,000, respectively. Upon the formation of the
joint venture, the Company's 50% interest in the net equity of the joint
venture exceeded the Company's $2 million cash contribution primarily
due to the contribution to the joint venture by CBS of advertising with
a fair value of $30 million. This excess is being amortized as the
<PAGE>
related advertising is utilized. The Company's equity in losses of MW
noted above are net of amortization of this excess of $5,225,000 for the
fiscal year ended June 30, 1999. The remaining amount of this excess at
June 30, 1999 is $4,835,000, which is included in "Investment in
MarketWatch.com, Inc." in the accompanying balance sheet.
There are several other agreements between the Company, MW and
CBS, including an agreement for CBS to license its name and logo to
MW. Additionally, DBC is required to lend MW up to $5,000,000 under a
revolving credit agreement expiring October 29, 2000. As of June 30,
1998, $1,543,000 had been advanced under this provision. This advance
was repaid in January 1999 with proceeds from the Offering.
Additionally, DBC purchased news from MW in the amount of $1,421,000 for
the year ended June 30, 1999. DBC is required to pay a minimum of
$100,000 per month for this news through the month ending October 29,
2002. DBC also purchased web advertising of $483,000 from MW for the
year ended June 30, 1999.
DBC also provides services to MW including accounting, network
operations, web hosting and data feeds. DBC charged MW $1,039,000 for
such services for the year ended June 30, 1999, which amounts were
recorded as reductions of the gross expenses incurred by DBC.
As of June 30, 1999, MW's assets and liabilities, derived from the
unaudited quarterly data, were as follows: current assets, $33,033,000;
total assets, $187,673,000; current and total liabilities, $5,079,000.
MW's unaudited revenue and net loss for the six months ended June 30,
1999 were $7,965,000 and $18,882,000, respectively.
3. ACQUISITIONS
On August 31, 1998, the Company completed its acquisition of
substantially all of the assets of the Global Treasury Information
Services ("GTIS") division of Automatic Data Processing, Inc. for
$3,921,000 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 is being amortized over 15
years.
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. This provision is expected to result in the
issuance of approximately 1,300 shares of DBC common stock in fiscal
2000.
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. FNS provides verbatim transcripts of major
federal government hearings to news organizations, political
associations and corporations around the world. The agreement also
provided for a contingent earnout, based upon FNS' results of operations
for the year ended October 31, 1997. In March 1998, the Company made a
contingent earnout payment of $1,499,000, comprising $133,000 in cash
and approximately 280,000 shares of DBC common stock, valued at
$1,366,000. In conjunction with this acquisition, the Company extended
an interest-bearing loan to an executive of FNS. In January 1999,
payment in full was received on this loan.
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 January 1, 1996,
CRI acquired all of the outstanding stock of Northwest CheckRite, Inc.,
("NCI") a former franchisee of CRI, for $1,200,000. As noted below,
substantially all of the assets of CRI were sold during fiscal 1998,
including the CN and NCI operations.
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 GTIS, LVSC, ION, FNS, CN and NCI did not have a
material effect on the results of operations in the year of acquisition.
Accordingly, no pro forma results have been presented.
<PAGE>
In connection with the acquisition of Broadcast International, Inc.
("BII") on June 30, 1995, management developed and implemented certain
restructuring plans. The estimated cost of these actions as of June 30,
1995 was approximately $1,874,000 and was accrued in purchase
accounting. During fiscal 1999, 1998, and 1997 the Company charged
approximately $8,000, $224,000 and $400,000, respectively, of severance
and lease costs against this accrual.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30,
(in thousands):
1999 1998
---- ----
Receiver equipment held by subscribers $28,177 $28,377
Computer and communication equipment 23,249 21,792
Furniture and fixtures 2,804 2,512
Leasehold improvements 3,071 2,259
------ ------
57,301 54,940
Less accumulated depreciation 42,448 37,571
------ ------
$14,853 $17,369
====== ======
Depreciation expense was $8,749,000, $9,622,000 and $8,581,000 for
fiscal years 1999, 1998, and 1997, respectively.
5. CREDIT ARRANGEMENTS
Long-term debt consisted of the following at June 30, (in thousands):
1999 1998
---- ----
Key Corporate Capital term loan $500 $1,500
Less current maturities 500 1,000
----- -----
Long-term debt $ 0 $ 500
===== =====
In March 1996, the Company entered into a $36,500,000 loan agreement
with Key Corporate Capital, Inc. ("Key"). 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,
1999, the total amount available under the acquisition line of credit
had been reduced to $8,150,000. 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 7.58
percent as of June 30, 1999. To date, DBC has not drawn on the line of
credit facilities. 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,
1999, the Company was in compliance with these covenants. At June 30,
1999 and 1998, $750,000 was included in Other Non-Current Assets,
representing a cash balance in an interest-bearing account, required to
be maintained as long as any amounts are available under this agreement.
The Company paid approximately $140,000, $285,000 and $591,000 of
interest on long-term debt during the fiscal years ended June 30, 1999,
1998 and 1997, respectively. Interest expense for the fiscal years
ended June 30, 1999, 1998 and 1997, was $234,000, $373,000 and $616,000,
respectively.
In April 1999, DBC established a $3,100,000 letter of credit, expiring
December 31, 1999, related to the settlement of the previously-disclosed
class action suit against CheckRite of California, a discontinued
operation of the Company. This letter of credit reduces, by its face
value, the amounts available for borrowing under the Company's debt
agreement with Key. Management does not expect any claims to be made
against this letter of credit. Consequently, it is the Company's
opinion that the fair value of this instrument is zero.
6. SALE OF BUSINESSES
On May 20, 1999, DBC sold substantially all of the assets of its AgCast
business to Farm Journal Corporation, a privately-held company, in
exchange for 3,100 shares of convertible preferred stock with a face
value of $3,100,000 and a put of $1,700,000 exerciseable at the end of
two years. Based upon the put, the gain on the sale is $650,000, which
has been deferred pending future realization.
<PAGE>
In fiscal 1997, the Company increased its pre-tax gain on the fiscal
1995 sale of substantially all of the assets of Shark Information
Services Corp. by $703,000 due to the reduction of certain reserves
recorded at the time of the sale. Management determined that these
reserves were no longer necessary due to the resolution of certain
contingencies and the revision of certain estimates.
7. OTHER NON-CURRENT ASSETS
Other non-current assets primarily consists of the Company's investments
in Internet Financial Network ("IFN") of $2,607,000 and Farm Journal
Corporation (Note 6) and the compensating balance requirement further
described in Note 5. As a result of a recapitalization of the business
of IFN, DBC converted its advances to IFN to an investment in April
1999.
In fiscal 1998 and 1997, the Company recorded pre-tax charges of $43,000
and $606,000, respectively, to write-off its investment in a joint
venture in Hong Kong and an additional $222,000 of equity losses in
fiscal 1997 from this investment. The Company and its joint venture
partner concluded that its core product should be discontinued, given
the lack of market acceptance.
8. STOCK BASED COMPENSATION
In connection with the Data Broadcasting Corporation 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, 1996 5,572 4.78
Granted 663 7.01
Exercised (1,525) 3.21
Canceled (251) 4.44
-----
Outstanding, June 30, 1997 4,459 5.67
Granted 841 5.16
Exercised (180) 3.97
Canceled (118) 7.51
-----
Outstanding, June 30, 1998 5,002 5.13
Granted 331 7.38
Exercised (3,073) 5.22
Canceled (164) 5.48
----- ----
Outstanding, June 30, 1999 2,096 5.08
====== ====
Exercisable, June 30, 1999 1,293 4.37
====== ====
Outstanding Exercisable
----------- -----------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
Range of option
exercise prices:
$1.22 to $2.44
(Avg. life: 3.47
years) 450 2.03 450 2.03
$2.96 to $5.38
(Avg. life: 7.42
years) 988 4.90 468 4.87
$5.50 to $9.79
(Avg. life: 7.37
years) 601 6.72 375 6.56
$12.62 to $18.55
(Avg. life: 9.75
years) 57 16.63 - -
----- -----
2,096 1,293
===== =====
On June 22, 1998, the Board of Directors ratified the Stock Option
Committee's recommendation to re-price all stock options with an
exercise price of $6.81 or higher held by active directors and
employees. This re-pricing reduced the exercise price of 882,833 stock
options to $5.19 and excluded options issued to executive officers under
contractual agreements.
<PAGE>
The weighted average fair value per share of options granted was $3.36,
$2.21 and $2.53 for the years ended June 30, 1999, 1998 and 1997,
respectively.
The following pro forma information presents DBC's net income (loss) and
basic and diluted earnings per share for the years ended June 30, 1999,
1998 and 1997 as if compensation cost had been measured under the fair
value method of SFAS No. 123.
1999 1998 1997
---- ---- ----
Net loss $(5,034) $(5,631) $(18,965)
Basic loss per share $(0.15) $(0.17) $(0.58)
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:
1999 1998 1997
---- ---- ----
Risk free interest rate 5.80% 5.75% 6.05%
Expected life (in years) 3.8 4.0 3.5
Volatility 76% 62% 50%
Expected dividend yield 0% 0% 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 impact on pro forma net income and net
income per share in current years 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.
9. 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.
The Board of Directors previously authorized the repurchase of up to
4,000,000 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, 1999, the Company had repurchased
approximately 2,919,000 shares at a cost of $17,743,000.
10. DISCONTINUED OPERATIONS
Effective March 31, 1997, the Company adopted a plan to sell its CRI and
Instore Satellite Network ("ISN") businesses which had historically made
up the Company's Business Services segment. Accordingly, these
businesses have been accounted for as discontinued operations in the
accompanying financial statements. On May 1, 1998, the Company
consummated the sale of substantially all of the assets of CRI for
$15,500,000 in cash.
The initial estimated loss on the disposal of CRI and ISN was
$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. The ISN operations have continued to generate
positive operating cash flows. Estimated costs associated with these
disposals, including taxes, have been recorded as accrued liabilities.
Although DBC held discussions with potential buyers of ISN, there was no
assurance that a transaction would be completed. Therefore, in the
second quarter of fiscal 1998, the Company recorded a second charge for
ISN. The additional charge amounted to $5,202,000, including a net tax
benefit of $3,006,000. This additional loss was primarily a non-cash
writedown of net assets to adjust the carrying value of ISN to the net
present value of the expected cash flow from its current customer
contracts, net of related service costs.
In February 1998, the Company adopted a plan to dispose of its interest
in the Lawyers Communications Network due to the disappointing pace of
subscriber additions to date. Accordingly, this business has also been
accounted for as discontinued operations in the accompanying financial
statements. The estimated loss on disposal, including remaining
contractual obligations and other exit costs, was $907,000, net of a tax
benefit of $593,000, and was recorded in the second quarter of fiscal
1998.
<PAGE>
Revenues for these operations were as follows:
1999 1998 1997
---- ---- ----
ISN $12,118,000 $12,651,000 $14,468,000
LCN $194,000 $46,000 -
CRI - $16,366,000 $17,710,000
Net assets of the discontinued operations consisted of the following as
of June 30, 1999 (in thousands):
Property and equipment $1,838
Accounts receivable 1,418
Prepaid expenses 297
Accrued liabilities (2,584)
Other net assets 404
-------
$ 1,373
=======
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 2013. 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 $8,359,000, $8,219,000 and $7,750,000 in
fiscal 1999, 1998 and 1997, respectively, net of sublease income. At
June 30, 1999, future minimum operating lease payments, including
approximately $418,000 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 Distribution
Equipment Agreements
--------------- ------------
2000 $3,139 $3,614
2001 3,403 2,677
2002 3,112 1,697
2003 2,270 892
2004 2,138 330
Thereafter 14,392 -
------ ------
Total minimum lease payments 28,454 $9,209
=====
Less amounts accrued 418
------
$28,036
======
These minimum lease payments have not been reduced by minimum future
sublease rentals of $898,000.
DBC is also committed to approximately $3,335,000 associated with the
build-out of new office space in New York and related equipment and
furniture purchases.
Certain subscribers previously 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 approved
by the court in October 1997.
The Company accrued $700,000 in fiscal 1997 to cover the estimated costs
of this settlement, principally legal fees and expenses. In fiscal
1998, this accrual was reduced by $103,000 due to the revision of
certain estimates. As of June 30, 1999 all obligations relative to the
settlement have been paid.
Certain check writers have brought a class action suit against CheckRite
of California, a subsidiary of the Company, alleging violations of the
federal Fair Debt Practices Act and the California Unfair Business
Practices Act. The Company has denied the allegations but has
negotiated a settlement which required the posting of a letter of credit
(Note 5). The settlement of this case has not had a material effect on
the financial condition or results of operations of the Company.
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.
<PAGE>
12. CNBC PROCEEDS AND OBLIGATIONS
In fiscal 1996, DBC received a final payment from the Consumer News and
Business Channel as the result of arbitration of certain matters related
to a previous transaction. In fiscal 1997, the Company increased its
pre-tax gain from this transaction by $249,000 due to the reduction of
certain reserves recorded at the time of the initial transaction.
Management determined that these reserves were 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, 1999 and 1998 are as
follows (in thousands):
1999 1998
---- ----
Deferred tax assets
Federal net operating loss carryforwards $16,885 $8,132
State net operating loss carryforwards 2,780 1,046
Property and equipment 2,605 1,458
Amortization of goodwill and capitalized software 2,371 2,428
Accrued compensation 1,209 958
Sale of AgCast 811 -
Lease obligations 698 42
Expenses - sale of Shark 161 245
Sale of discontinued operations - 1,281
Purchase accounting liabilities - 699
Other 250 172
------ ------
Gross deferred tax assets 27,770 16,461
Valuation allowance 2,601 2,601
------ ------
Total deferred tax assets 25,169 13,860
------ ------
Deferred tax liabilities
Investment in MarketWatch.com 18,030 -
Sale/leaseback obligations 1,128 522
Subscriber contracts - 195
Other 625 23
------ ------
Total deferred tax liabilities 19,783 740
------ ------
Net deferred tax assets $5,386 $13,120
====== =======
The Company has net operating loss carryforwards ("NOLs") of
$22,334,000, the use of which 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. The
Company has additional NOLs of $36,271,000, which have no annual
limitation and expire in 2014.
The (benefit)/provision for taxes are as follows for the years ended
June 30, (in thousands):
1999 1998 1997
---- ---- ----
Federal:
Current $1,839 $2,503 $2,344
Deferred (3,630) (415) 564
State:
Current 239 617 673
Deferred (472) (238) (68)
------ ------ ------
Tax (benefit) on continuing operations (2,024) 2,467 3,513
Tax (benefit) on discontinued operations - (4,662) 7,897
------ ------ ------
$(2,024) $(2,195) $11,410
======= ======= =======
<PAGE>
The consolidated (benefit)/provision for taxes for consolidated
operations are as follows (in thousands):
1999 1998 1997
---- ---- ----
Federal:
Current $1,839 $4,104 $2,344
Deferred (3,630) (5,908) 6,844
State:
Current 239 1,264 802
Deferred (472) (1,655) 1,420
------ ------ ------
$(2,024) $(2,195) $11,410
======= ======= =======
The Company's effective tax rate for continuing operations differs from
the federal statutory rate, as shown in the following reconciliation for
the three years ended June 30, 1999:
1999 1998 1997
---- ---- ----
Income tax expense at federal statutory rate (35.0%) 35.0% 35.0%
State income tax expense, net of federal
benefit (3.6) 4.5 4.9
Amortization of goodwill 5.0 5.5 2.9
Other, net 1.0 0.2 (3.4)
--- --- ----
Effective income tax rate (32.6%) 45.2% 39.4%
====== ===== =====
For the year ended June 30, 1999, the Company received $305,000 of
income tax refunds, net of income taxes paid. The Company paid
approximately $4,439,000 and $881,000 in federal and state income taxes
during the years ended June 30, 1998 and 1997, 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 $645,000, $516,000, and $470,000 in
fiscal years 1999, 1998, 1997, 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 eleven banks and two financial
institutions of high credit quality. At June 30, 1999, approximately
$39,596,000 of cash and cash equivalents was deposited in four money
market accounts. These accounts are largely invested 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, 1999, the
Company believes that it had no significant concentrations of credit
risk.
16. SEGMENT INFORMATION
DBC's reportable segments are as follows:
- Market Information - delivery of real-time financial market
information to retail and institutional customers.
- BondEdge - fixed income portfolio analytics.
The accounting policies of the segments are the same as those described
in the "Summary of Significant Accounting Policies". The company
evaluates the segments on the basis of operating income, earnings before
interest, taxes, depreciation and amortization ("EBITDA") and capital
expenditures. Segment financial information is as follows (in
thousands):
<PAGE>
1999 1998 1997
---- ---- ----
Revenues
Market Information $84,800 $82,463 $86,783
Bond Edge 23,494 20,150 18,919
------ ------ ------
Total $108,294 $102,613 $105,702
======= ======= =======
Income (loss) from operations
Market Information $(3,678) $3,685 $7,318
BondEdge 8,595 6,094 5,288
Corporate and unallocated (5,933) (4,345) (3,432)
------ ------ ------
Total $(1,016) $5,434 $9,174
====== ===== =====
EBITDA
Market information $7,658 $15,400 $17,687
BondEdge 12,339 9,941 9,277
Corporate and unallocated (5,908) (4,311) (3,379)
------ ------ ------
Total $14,089 $21,030 $23,585
====== ====== ======
Identifiable assets
Market Information $98,639 $50,064
BondEdge 27,815 30,993
Corporate and unallocated 62,038 45,407
------ ------
Total $188,492 $126,464
======= =======
The Company's geographic distribution is as follows (in thousands):
1999 1998 1997
---- ---- ----
Revenues
United States $100,993 $98,308 $102,109
Foreign 7,301 4,305 3,593
------- ------ -------
Total $108,294 $102,613 $105,702
======= ======= =======
Identifiable assets
United States $186,454 $126,290
Foreign 2,038 174
------- -------
Total $188,492 $126,464
======= =======
17. SUBSEQUENT EVENTS
In August 1999, the Company sold its music and ad business know as
InStore Satellite Network, to Muzak LLC for $4,700,000. DBC received
$3,995,000 in August, with the remaining $705,000 held in escrow pending
performance of the business over a six-month period. This business was
previously classified as a discontinued operation. In August 1999, the
Company closed Lawyers Communication Network. These transactions had no
material impact on the results of operations of the Company.
<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, 1999
---- ------ ----- ------ -------------
Revenues $25,670 $27,458 $27,652 $27,514 $108,294
Total costs and
expenses 24,907 26,797 29,213 28,393 109,310
Income (loss)
from operations 763 661 (1,561) (879) (1,016)
Equity in losses
of MarketWatch.com (923) (1,166) (1,223) (3,188) (6,500)
Provision (benefit) for
income taxes 112 (140) (456) (1,540) (2,024)
Income (loss) from
continuing operations 71 (88) (1,921) (2,251) (4,189)
Net income (loss) 71 (88) (1,921) (2,251) (4,189)
Earnings (loss) per
share - continuing
operations
Basic & Diluted $0.00 $0.00 ($0.06) ($0.06) ($0.12)
Earnings (loss) per
share - net
Basic & Diluted $0.00 $0.00 ($0.06) ($0.06) ($0.12)
Quarter Year Ended
-----------------------
First Second Third Fourth June 30, 1998
---- ------ ----- ------ -------------
Revenues $26,367 $26,127 $25,390 $24,729 $102,613
Total costs and
expenses 23,547 24,249 24,197 25,186 97,179
Income from
operations 2,820 1,878 1,193 (457) 5,434
Provision for income
taxes 1,250 960 563 (306) 2,467
Income from continuing
operations 1,692 1,009 688 (396) 2,993
Loss from discontinued
operations (767) (6,989) - - (7,756)
Net income (loss) 925 (5,980) 688 (396) (4,763)
Earnings per share -
continuing
operations
Basic & Diluted $0.05 $0.03 $0.02 $(0.01) $0.09
Earnings (loss) per
share - net
Basic & Diluted $0.03 $(0.18) $0.02 $(0.01) $(0.15)
<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 18, 1999, except as to Note 17 which is as of August 31, 1999,
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)(2) 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.
/s/ PricewaterhouseCoopers LLP
Salt Lake City, Utah
August 18, 1999
<PAGE>
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
For the Years Ended June 30, 1999, 1998 and 1997
(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, 1997 $1,321 $1,954 $62 (A) $1,355 (B) $1,982
Year Ended
June 30, 1998 1,982 2,177 2,793 1,366
Year Ended
June 30, 1999 1,366 1,512 679 1,523 2,034
Deferred income tax
valuation allowance:
Year Ended
June 30, 1997 2,601 2,601
Year Ended
June 30, 1998 2,601 2,601
Year Ended
June 30, 1999 2,601 2,601
(A) Allowance for doubtful accounts recorded through acquisitions.
(B) Includes $430 reclassified to discontinued operations.
<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, 1999 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held in December 1999 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, 1999 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held in December 1999 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, 1999 and to be used in
connection with its Annual Meeting of Stockholders expected to be held in
December 1999 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, 1999 and
to be used in connection with its Annual Meeting of Stockholders expected to
be held in December 1999 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 33, 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 35 to 36 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).
3.1 Restated Certificate of Incorporation of Data
Broadcasting Corporation, as amended. (Exhibit 3.1
to Form 10-K for the year ended June 30, 1995).
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 (Exhibit 10.3 to Form 10-K for the
year ended June 30, 1997).**
10.4 Employment Agreement between Data Broadcasting Corporation
and Allan R. Tessler (Exhibit 10.4 to Form 10-K for the year
ended June 30, 1997).**
10.5 Employment Agreement between Data Broadcasting Corporation
and James A. Kaplan (Exhibit 9 to Form 8-K, filed on May 16,
1994).**
10.6 Employment Agreement between Data Broadcasting Corporation
and Mark F. Imperiale (Exhibit 10.7 to Form 10-K for the
year ended June 30, 1997).**
10.7 Dwight H. Egan Termination Benefits Agreement dated December
18, 1991 (Exhibit 10.25 to Form S-4, declared effective on
May 25, 1995).**
10.8 Dennis L. Crockett Termination Benefits Agreement dated
December 18, 1991 (Exhibit 10.26 to Form S-4, declared
effective on May 25, 1995).**
10.9 Employment Agreement with Reed L. Benson dated July 18, 1994
(Exhibit 10.33 to Form S-4, declared effective on May 25,
1995).**
10.10 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).
10.11 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).
10.12 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).
10.13 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).
21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
B. Reports on Form 8-K
During the quarter ended June 30, 1999, the Registrant did not file a
Current Report on Form 8-K.
- --------------------
** Management contract or compensation plan or arrangement
<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
-----------------------------------
Alan J. Hirschfield
Co-Chief Executive Officer
September 27, 1999
By: /s/ Allan R. Tessler
-----------------------------------
Allan R. Tessler
Co-Chief Executive Officer
September 27, 1999
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
-----------------------------------
Alan J. Hirschfield
Co-Chief Executive Officer
September 27, 1999
By: /s/ Allan R. Tessler
-----------------------------------
Allan R. Tessler
Co-Chief Executive Officer
September 27, 1999
Principal Financial Officer:
By: /s/ Mark F. Imperiale
-----------------------------------
Mark F. Imperiale
President, Chief Operating
Officer
and Chief Financial Officer
September 27, 1999
Principal Accounting Officer: By: /s/ Andrew P. Schlotterbeck
-----------------------------------
Andrew P. Schlotterbeck
Vice President and Controller
September 27, 1999
<PAGE>
Directors:
/s/ Alan J. Hirschfield /s/ James A. Kaplan
- ------------------------------- --------------------------------
Alan J. Hirschfield James A. Kaplan
Co-Chairman of the Board Director
September 27, 1999 September 16, 1999
/s/ Allan R. Tessler /s/ David R. Markin
- -------------------------------- --------------------------------
Allan R. Tessler David R. Markin
Co-Chairman of the Board Director
September 27, 1999 September 21, 1999
/s/ Charles M. Diker /s/ Herbert S. Schlosser
- ------------------------------- ------------------------------
Charles M. Diker Herbert S. Schlosser
Director Director
September 27, 1999 September 27, 1999
/s/ Dwight H. Egan /s/ Carl Spielvogel
- ------------------------------ ---------------------------------
Dwight H. Egan Carl Spielvogel
Director Director
September 27, 1999 September 17, 1999
- ------------------------------
Donald P. Greenberg
Director
September , 1999
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
State or
Other Jurisdiction Percentage
Name of Subsidiary of 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
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
MarketWatch.com, Inc. Delaware 32.70
GTIS Corporation Delaware
GTIS Europe Limited England and Wales
eSignal.com, Inc. Delaware
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 dated August 18,
1999, except as to the subsequent event described in Note 17 which is as of
August 31, 1999, relating to the financial statements which appear in this
Form 10-K. We also consent to the incorporation by reference of our report
on the financial statement schedule, which also appears in this form 10-K.
/s/ PricewaterhouseCoopers LLP
Salt Lake City, Utah
September 27, 1999
<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-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 41,507
<SECURITIES> 0
<RECEIVABLES> 8,782
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,990
<PP&E> 57,301
<DEPRECIATION> 42,448
<TOTAL-ASSETS> 188,492
<CURRENT-LIABILITIES> 32,849
<BONDS> 0
0
0
<COMMON> 375
<OTHER-SE> 153,783
<TOTAL-LIABILITY-AND-EQUITY> 188,492
<SALES> 0
<TOTAL-REVENUES> 108,294
<CGS> 0
<TOTAL-COSTS> 55,219
<OTHER-EXPENSES> 15,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,213)
<INCOME-TAX> (2,024)
<INCOME-CONTINUING> (4,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,189)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
