<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000.
COMMISSION FILE NUMBER 0-20311
------------------------
DATA BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
DELAWARE 13-3668779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
22 CROSBY DRIVE, BEDFORD, MASSACHUSETTS 01730
(Address of principal administrative offices)
(781) 687-8800
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
------------------------
The number of shares of common stock, par value $.01 per share, of the
registrant outstanding as of October 27, 2000 was 91,202,428.
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<PAGE> 2
INDEX
PART I FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements Of Operations and
Comprehensive Loss (unaudited) for the Three and Nine Months
Ended September 30, 2000 and 1999
Condensed Consolidated Balance Sheets at September 30, 2000
(unaudited) and December 31, 1999
Condensed Consolidated Statement of Stockholders' Equity for
the Nine Months Ended September 30, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Nine Months Ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Report on Form 8-K.
Signature
</TABLE>
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -------------------
2000 1999 2000 1999
-------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUES............................................. $ 85,021 $53,200 $234,321 $132,811
COSTS AND EXPENSES
Cost of services................................ 29,587 14,099 84,404 37,963
Selling, general and administrative............. 29,237 21,481 83,926 52,263
Depreciation.................................... 3,516 1,948 9,065 4,301
Amortization.................................... 21,156 9,439 57,670 20,135
-------- ------- -------- --------
Total costs and expenses................... 83,496 46,967 235,065 114,662
-------- ------- -------- --------
INCOME (LOSS) FROM OPERATIONS........................ 1,525 6,233 (744) 18,149
Equity in loss from MarketWatch.com, Inc. ...... (19,376) -- (45,776) --
Other income, net............................... 228 69 591 540
-------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.................... (17,623) 6,302 (45,929) 18,689
Provision (benefit) for income taxes............ (434) 3,817 (4,685) 10,379
-------- ------- -------- --------
NET INCOME (LOSS).................................... (17,189) 2,485 (41,244) 8,310
Foreign currency translation adjustment......... (877) 1,519 (4,957) 238
COMPREHENSIVE INCOME (LOSS).......................... $(18,066) $ 4,004 $(46,201) $ 8,548
======== ======= ======== ========
NET INCOME (LOSS) PER SHARE
Basic and diluted............................... $ (0.19) $ 0.04 $ (0.49) $ 0.15
======== ======= ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted............................... 91,202 56,424 83,679 56,424
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 35,018 $ 12,008
Accounts receivable, net............................... 53,335 40,914
Receivable from affiliate.............................. 1,351 19,224
Prepaid expenses and other current assets.............. 4,977 1,925
Deferred income taxes.................................. 1,651 10,744
-------- --------
Total current assets.............................. 96,332 84,815
-------- --------
Property and equipment, net................................. 38,189 20,862
Goodwill, net of accumulated amortization of $81,420 and
$60,249................................................... 398,318 222,868
Other intangible assets, net................................ 177,377 122,764
Investment in MarketWatch.com, Inc.......................... 189,961 --
Other assets................................................ 20,575 1,393
-------- --------
Total Assets...................................... $920,752 $452,702
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 13,071 $ 10,644
Payable to affiliate................................... 5,631 20,000
Accrued liabilities.................................... 51,595 42,842
Income taxes payable................................... 5,558 7,189
Other current liabilities.............................. 2,481 --
Deferred revenue....................................... 36,627 15,390
-------- --------
Total current liabilities......................... 114,963 96,065
-------- --------
Deferred tax liabilities............................... 75,914 15,684
Other liabilities...................................... 4,191
-------- --------
Total Liabilities................................. 195,068 111,749
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, .01 par value, 200,000,000 authorized
91,202,000 issued and outstanding..................... 912 --
Additional paid-in capital............................. 788,700 --
Parent's investment.................................... -- 358,680
Accumulated deficit.................................... (57,215) (15,971)
Accumulated other comprehensive income (loss).......... (6,713) (1,756)
-------- --------
Total Stockholders' Equity........................ 725,684 340,953
-------- --------
Total Liabilities and Stockholders' Equity........ $920,752 $452,702
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
--------------------- ADDITIONAL OTHER TOTAL
NUMBER OF PAID-IN PARENT'S COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL INVESTMENT INCOME (LOSS) DEFICIT EQUITY
--------- --------- ---------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999
(Audited).................. -- $ -- $ -- $ 358,680 $ (1,756) $(15,971) $340,953
Distribution to parent....... -- -- -- (7,764) -- -- (7,764)
Reorganization (Note 2)...... 56,424 564 350,352 (350,916) -- -- --
Issuance of Shares associated
with merger (Note 2)....... 34,586 346 437,948 -- -- -- 438,294
Exercise of stock options.... 192 2 400 -- -- -- 402
Other comprehensive loss..... -- -- -- -- (4,957) -- (4,957)
Net loss..................... -- -- -- -- -- (41,244) (41,244)
------ ---- -------- --------- -------- -------- --------
Balance, September 30,
2000....................... 91,202 $912 $788,700 $ -- $ (6,713) $(57,215) $725,684
====== ==== ======== ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2000 1999
-------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income (loss)........................................... $(41,244) $ 8,310
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in loss of MarketWatch.com, Inc................. 45,776 --
Depreciation and amortization.......................... 66,735 24,436
Deferred income taxes.................................. (11,637) (1,552)
Other non-cash items, net.............................. (55) --
Changes in operating assets and liabilities, net............ (8,197) 3,886
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 51,378 35,080
-------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment........................ (12,363) (6,272)
Cash acquired through merger.............................. 48,402
Investment in MarketWatch.com, Inc........................ (43,000) --
Other investing activities................................ 196 --
Acquisition of business................................... (14,766) (147,500)
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES....................... (21,531) (153,772)
-------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Advances from affiliate................................... 4,224 --
Contribution from (distribution to) parent................ (10,764) 147,697
Proceeds from exercise of common stock options............ 402 --
-------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... (6,138) 147,697
Effect of exchange rate on cash............................. (699) 390
-------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 23,010 29,395
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 12,008 15,037
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 35,018 $ 44,432
======== =========
</TABLE>
Non-cash transactions:
As described in Note 8, the Company sold the stock and assets of certain
subsidiaries and product lines for stock with a value of $12.5 million.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared by Data Broadcasting Corporation and Subsidiaries (the "Company"
or "DBC") in accordance with generally accepted accounting principles for
interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. In the opinion of management, all adjustments considered necessary
for a fair presentation of the Company's financial position, results of
operations and cash flows have been included. All such adjustments are of a
normal recurring nature. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited combined
financial statements for the year ended December 31, 1999 filed with the
Securities and Exchange Commission on Form 8-K/A. The results for interim
periods are not necessarily indicative of the results to be expected for the
full year.
2. MERGER WITH INTERACTIVE DATA CORPORATION
On February 29, 2000, DBC completed a merger with Interactive Data
Corporation ("Interactive Data"). Interactive Data Corporation was a wholly
owned subsidiary of Pearson Longman, Inc. Pearson Longman, Inc., through a
series of other entities, is wholly owned by Pearson plc("Pearson"), a company
organized under the laws of England and Wales. Upon the merger, the issued and
outstanding capital stock of Interactive Data was converted into 56,423,949
newly issued shares of DBC's common stock which resulted in the ownership by
Pearson of approximately 60% of DBC.
The merger has been accounted for as a reverse acquisition in accordance
with accounting principles generally accepted in the United States. Accordingly,
the historical financial statements of Interactive Data are the historical
financial statements of DBC.
The merger was accounted for as follows:
<TABLE>
<S> <C>
ASSETS ACQUIRED
Cash and cash equivalents.............................. $ 48,402
Accounts receivable.................................... 12,238
Fixed assets........................................... 16,868
Other assets........................................... 7,637
Goodwill............................................... 198,109
Investment in MarketWatch.com.......................... 192,960
Intangibles:
Customer Lists.................................... 72,300
Workforces........................................ 4,400
Technology........................................ 8,000
--------
560,914
LIABILITIES ASSUMED
Accounts payable and accrued expenses.................. 19,594
Deferred revenue....................................... 12,846
Other liabilities...................................... 2,387
Deferred tax liabilities............................... 78,543
Accrued professional costs............................. 2,300
Accrued acquisition costs.............................. 6,950
--------
122,620
--------
Total Purchase Price.............................. $438,294
========
</TABLE>
7
<PAGE> 8
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
Goodwill is being amortized over ten years. Intangible assets are being
amortized between two and eleven years. Accrued professional costs include
investment banking, accounting and legal services. Accrued acquisition costs
include severance, relocation and lease termination costs. As of September 30,
2000, accrued acquisition costs remaining were $3.433. An additional $3,000 of
acquisition costs were funded by Pearson and treated as additional goodwill and
a capital contribution.
3. INVESTMENT IN MARKETWATCH.COM, INC.
In connection with the transaction described in Note 2, the Company's
investment in MarketWatch.com, Inc. ("MarketWatch") was written up to its fair
value on February 29, 2000 of $192,960. This amount exceeded the Company's share
of the underlying equity of MarketWatch on that date by $148,686. This excess is
being amortized over three years. Accordingly, amortization of $12,390 and
$28,910 is included for the three and nine months ended September 30, 2000,
respectively, together with DBC's share of MarketWatch's losses for the three
and nine month period.
On March 28, 2000, the Company agreed to purchase an additional 1,136,814
shares of MarketWatch common stock for $43,000. This transaction, which was
consummated in May 2000, increased the Company's ownership interest in
MarketWatch to approximately 34.4%. As part of this transaction, the Company
borrowed $15,000 from a Pearson affiliate. Interest on this loan is payable
quarterly at the 3-month LIBOR rate plus 150 basis points. At September 30,
2000, the balance on this borrowing was $5,000 which is included in the payable
to affiliate in the balance sheet. Outstanding borrowings are due on December
29, 2000.
DBC purchased news and web advertising from MarketWatch in the amount of
$1,154 and $150, respectively, for the seven months ended September 30, 2000.
The Company provides services to MarketWatch including accounting, network
operations, web hosting and data feeds. DBC charged MarketWatch $439 for such
services for the seven months ended September 30, 2000; these amounts were
recorded as reductions of the gross expenses incurred by DBC.
Additionally, DBC is required to lend MarketWatch up to $5,000 under a
revolving credit agreement expiring October 29, 2000. As of September 30, 2000,
no amounts had been advanced under such agreement.
4. STOCK BASED COMPENSATION
The Company has 3,545,907 stock options outstanding under its stock option
plan as of September 30, 2000, with a weighted average exercise price of $5.33.
Of these options, 1,781,039 are currently exercisable and have a weighted
average exercise price of $5.42.
5. SEGMENT INFORMATION
Due to the merger with Interactive Data, management has reevaluated its
reportable segments.
DBC's reportable segments are as follows:
<TABLE>
<S> <C>
delivery of time sensitive pricing, dividend, corporate
INSTITUTIONAL action, hard-to-value unlisted fixed income instruments, and
descriptive information for more than 3.5 million securities
traded around the world, and fixed income portfolio
analytics to institutional customers.
RETAIL delivery of real-time financial market information to retail
customers
</TABLE>
The Company evaluates its segments on the basis of revenue, operating
income and earnings before interest, taxes, depreciation and amortization, and
equity in the loss of MarketWatch.com, Inc. ("EBITDA") and capital expenditures.
8
<PAGE> 9
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
Segment financial information is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Institutional.................................... $69,210 $53,200 $196,777 $132,811
Retail........................................... 15,811 -- 37,544
------- ------- -------- --------
Total....................................... $85,021 $53,200 $234,321 $132,811
======= ======= ======== ========
Income (loss) from operations
Institutional.................................... $ 9,208 $ 6,233 $ 19,941 $ 18,149
Retail........................................... (1,661) -- (6,235) --
Corporate and unallocated........................ (6,022) -- (14,450) --
------- ------- -------- --------
Total....................................... $ 1,525 $ 6,233 $ (744) $ 18,149
======= ======= ======== ========
EBITDA
Institutional.................................... $25,577 $17,620 $ 66,598 $ 42,585
Retail........................................... 1,679 -- 2,286 --
Corporate and unallocated........................ (1,059) -- (2,893) --
------- ------- -------- --------
Total....................................... $26,197 $17,620 $ 65,991 $ 42,585
======= ======= ======== ========
</TABLE>
6. EARNINGS (LOSS) PER SHARE
Weighted average basic shares outstanding for the three months ended
September 30, 2000 were 91,202,189. Due to losses in the quarter, the effect of
the options would have been anti-dilutive and therefore diluted earnings per
share equal basic earnings per share.
7. COMMITMENTS AND CONTINGENCIES
Various claims, generally incidental to the conduct of normal business, are
pending or threatened against the Company. The Company intends to vigorously
defend against these claims. While ultimate liability, if any, arising from any
such claims is presently undeterminable, it is management's opinion that the
ultimate resolution of these claims will not have a material adverse effect on
the financial condition or results of operations of the Company.
8. ACQUISITION AND DISPOSITION OF BUSINESSES
On August 31, 2000, the Company acquired Trading Techniques, Inc. for
consideration totaling $5,566, comprised of cash if $3,566 and a deferred
payment of $2,000. Trading Techniques, Inc. develops, sells, and supports
technical analysis financial software, targeted at individual investors and
institutional traders.
On April 1, 2000, the Company acquired Itex (FIT) Limited for consideration
totaling $12,800, comprised of a cash payment of $11,200 plus relief against an
accounts receivable due to IDC's UK subsidiary of $1,600. Item (FIT) Limited is
a service delivery agent and software and technology partner of the Company.
On April 1, 2000, the Company completed the sale of the assets of its
sports business, including the stock of two subsidiaries, to SportsLine.com,
Inc. ("SportsLine"), in exchange for $10,000 in SportsLine common stock. The
assets include the stock of Las Vegas Sports Consultants, Inc., and Instant Odds
Network, Inc., as well as the SporTrax and SportSignal product lines. The
agreement includes a guarantee by SportsLine that the common stock received will
be worth at least $12,500 after approximately one year from the closing, with
any shortfall to be paid in cash by SportsLine. Based on the book value of the
net assets sold, no gain or loss was recognized by the Company.
9
<PAGE> 10
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company primarily supplies financial and business information to
institutional and individual investors worldwide. The Company is a leading
provider of time sensitive pricing, dividend, corporate action and descriptive
information for more than 3.5 million hard-to-value unlisted fixed income
instruments. At the core of the business are its extensive database expertise
and technology resources.
The Company delivers real-time, end of day and historically archived data
to customers through a variety of products featuring Internet, dedicated line,
satellite and dial-up delivery protocols. Through a broad range of partnerships
and alliances, the Company provides links to leading financial service and
software companies for trading, analysis, portfolio management and valuation.
The Company operates in two business segments:
Institutional -- delivery of time sensitive pricing, dividend, corporate
action, hard to value unlisted fixed income instruments, and descriptive
information and fixed income portfolio analytics to institutional customers.
Retail -- delivery of real-time financial market information to retail
customers.
The services provided by the Company include the following:
Institutional:
- Interactive Data (US) and Financial Times Information (UK, Europe, Asia
Pacific) divisions provide a wide range of financial information to trading
houses, custodians, and fund managers worldwide. The financial information
collected and distributed includes pricing, descriptive and corporate action
information on equities from all over the world.
- Capital Management Sciences supplies fixed income analytical tools and models
designed for investment managers, broker dealers, insurance companies and bank
and pension fund managers.
- The Federal News Service division provides verbatim transcripts of hearings,
briefings, press conferences and interviews by US government officials and
government agencies.
Retail:
- The eSignal product is a real-time Internet delivered subscription quote
service for traders offering charts, news, research and alerts direct to a
laptop, PC or telephone.
- The Quotrek and Signal services deliver real time quotes to communication
devices that rely on FM subcarriers, satellite, and cable television or
telephone lines.
10
<PAGE> 11
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
RESULTS OF CONTINUING OPERATIONS
SELECTED FINANCIAL DATA ($ THOUSANDS)
FOR THE PERIODS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PROFORMA(1) PROFORMA(1)
THREE MONTHS NINE MONTHS THREE MONTHS NINE MONTHS
------------------ ------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999 2000 1999
-------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Institutional.................... $ 69,210 $53,200 $196,777 $132,811 $ 69,210 $ 66,447 $203,195 $189,197
Retail:
- eSignal...................... 10,271 22,192 -- 10,271 6,760 28,306 14,800
- Broadcast.................... 5,540 15,352 -- 5,540 10,532 20,617 38,404
-------- ------- -------- -------- -------- -------- -------- --------
TOTAL.................... 85,021 53,200 234,321 132,811 85,021 83,739 252,118 242,401
Cost of Services................. 29,587 14,099 84,404 37,963 29,587 30,366 93,948 91,010
Selling, General &
Administrative................. 29,237 21,481 83,926 52,263 29,237 31,642 91,307 98,540
-------- ------- -------- -------- -------- -------- -------- --------
EBITDA (2)....................... 26,197 17,620 65,991 42,585 26,197 21,731 66,863 52,851
-------- ------- -------- -------- -------- -------- -------- --------
Depreciation & Amortization...... 24,672 11,387 66,735 24,436 24,672 24,406 73,777 75,694
INCOME (LOSS) FROM OPERATIONS.... 1,525 6,233 (744) 18,149 1,525 (2,675) (6,914) (22,843)
Equity in loss from
MarketWatch.com, Inc........... (19,376) -- (45,776) -- (19,376) (19,643) (58,090) (49,639)
Other income, net................ 228 69 591 540 228 489 959 1,643
-------- ------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES.......................... (17,623) 6,302 (45,929) 18,689 (17,623) (21,829) (64,045) (70,839)
Provision (benefit) from income
taxes.......................... (434) 3,817 (4,685) 10,379 (434) (1,779) (10,786) (12,648)
-------- ------- -------- -------- -------- -------- -------- --------
NET INCOME (LOSS)................ $(17,189) $ 2,485 $(41,244) $ 8,310 $(17,189) $(20,050) $(53,259) $(58,191)
======== ======= ======== ======== ======== ======== ======== ========
Earnings per share............... $ (0.19) $ 0.04 $ (0.49) $ 0.15 $ (0.19) $ (0.22) $ (0.58) $ (0.64)
Weighted average shares
outstanding.................... 91,202 56,424 83,679 56,424 91,202 91,202 91,202 91,202
</TABLE>
---------------
(1) The proforma amounts reflect the results as if DBC and Interactive Data had
been combined on January 1, 1999. In addition, they reflect Interactive
Data's July 1999 acquisition of Muller Data Corporation and the assets of
Muniview and Valorinform, as if the acquisition had occurred on January 1,
1999.
(2) "EBITDA" is defined as net income before net interest expense/income, income
taxes, deprecation and amortization expense and equity in losses of
MarketWatch.com. EBITDA is presented because it is a widely accepted
indicator of funds available to business, although it is not a measure of
liquidity or financial performance under generally accepted accounting
principles. We believe that EBITDA, while providing useful information,
should not be considered in isolation or as an alternative to net income or
cash flows as determined under generally accepted accounting principles.
EBITDA, as presented here, may differ from similarly titled measures
reported by other companies due to potential inconsistencies in methods of
calculation.
HISTORICAL RESULTS
Three Months Results
The historical results for the quarter ended September 30, 2000 include
both the Data Broadcasting and Interactive Data businesses while the historical
results for the quarter ended September 30, 1999 include only the Interactive
Data business. This is due to the merger between Interactive Data Corporation
and Data Broadcasting Corporation as described in Note 2.
11
<PAGE> 12
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
Revenue increased by 60% compared to the corresponding quarter in 1999. The
increase was primarily due to the inclusion of the results in 2000 of the
Muller, Muniview and Valorinform businesses (Acquired Businesses), which were
acquired in the latter half of 1999. The inclusion of results from the Data
Broadcasting business and growth from the core Interactive Data business.
EBITDA increased from $17,620 in 1999 to $26,197 in 2000, an increase of
$8,577 (49%). The increase was also primarily due to the inclusion of the
results in 2000 of the Muller, Muniview and Valorinform businesses, results from
the Data Broadcasting business and growth from the core Interactive Data
business.
Operating income declined from $6,233 in 1999 to $1,525 in 2000. The
decline in the operating income was primarily due to the inclusion of the
amortization of the goodwill and intangibles relating to the Acquired
Businesses, which were acquired in the latter half of 1999, and goodwill and
intangible amortization arising from the merger between Interactive Data and
Data Broadcasting.
The Company's pre tax share of the net losses from MarketWatch totaled
$19,376 in the quarter, representing Data Broadcasting's equity interest in the
net loss of MarketWatch, and amortization of the fair value of the Company's
investment in excess of the Data Broadcasting's share of the equity in
MarketWatch.
Other income, net, increased from $69 in 1999 to $228 in 2000. This
increase was mainly due to higher invested cash balances in 2000 as compared to
1999.
The Company's effective tax rate decreased primarily due to current period
net losses compared with net income in the prior year period. The difference
between the Company's statutory tax rate and effective tax rate is primarily due
to amortization deducted for financial reporting purposes but which is not
deductible for federal and state tax purposes.
The Company generated a net loss of $17,189 in the quarter ended September
30, 2000 compared with net income of $2,485 for the comparable period in 1999.
This was due to higher amortization and the Company's share of MarketWatch's
losses.
Weighted average shares outstanding grew by 62% due to the shares
associated with the Interactive Data and Data Broadcasting merger which were
issued on February 29, 2000.
Nine Months Results
The historical results for the nine months ended September 30, 2000 include
seven months results from the Data Broadcasting business and nine months results
of the Interactive Data business. The historic results for the same period of
1999 include only the Interactive Data business. This is due to the merger
between Interactive Data Corporation and Data Broadcasting Corporation as
described in Note 2.
Revenue increased by 76% against the Interactive Data business results in
the corresponding nine month period in 1999. The increase was primarily due to
the inclusion of the results in 2000 of the Muller, Muniview and Valorinform
businesses, which were acquired in the latter half of 1999, the inclusion of
seven months of results from the Data Broadcasting business and growth from the
core Interactive Data business.
EBITDA increased from $42,585 in 1999 to $65,991 in 2000, an increase of
$23,406 (+55%). The increase was primarily due to the inclusion of the results
in 2000 of the Muller, Muniview and Valorinform businesses, seven month results
from the Data Broadcasting business subsequent to the merger date and growth
from the core Interactive Data business.
Operating income declined from $18,149 in 1999 to a loss of $744 in 2000.
The decline in the operating income was primarily due to the inclusion of the
amortization of the goodwill and intangibles relating to Muller, Muniview and
Valorinform business acquisitions,which were consummated in the latter half of
1999,
12
<PAGE> 13
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
and goodwill and intangible amortization arising from the merger between
Interactive Data and Data Broadcasting.
The Company's pre tax share of the net losses from MarketWatch totaled
$45,776 in the nine months ended September 30,2000 representing Data
Broadcasting's equity interest in the net loss of MarketWatch, subsequent to the
date of the merger between Interactive Data and Data Broadcasting,and
amortization of the fair value of the Company's investment in excess of the Data
Broadcasting's share of the equity in MarketWatch.
Other income, net, increased from $540 in 1999 to $591 in 2000. This
increase was mainly due to higher cash balances in 2000 compared with the same
period in 1999.
The Company's effective tax rate decreased for the nine month period ended
September 30, 2000 compared with the effective rate for the corresponding period
of the prior year primarily due to current period net losses compared with net
income in the prior year period. The difference between the Company's statutory
tax rate and effective tax rate is primarily due to amortization deducted for
financial reporting purposes but which is not deductible for federal and state
tax purposes.
The Company generated a net loss of $41,244 in the nine month period ended
September 30, 2000 compared with net income of $8,310 for the comparable period
in 1999. This reduction primarily was due to higher amortization and the
Company's share of MarketWatch's losses.
Weighted average shares outstanding grew by 48% due to the shares
associated with the Interactive Data and Data Broadcasting merger which were
issued on February 29, 2000.
PROFORMA RESULTS
The Proforma amounts reflect the results as if DBC and IDC had been
combined on January 1, 1999. In addition they reflect Interactive Data's July
1999 acquisition of Muller Data Corporation and the assets of Muniview and
Valorinform, as if the acquisition had occurred on January 1, 1999.
Three Months Results
On a proforma basis, for the current quarter, revenue increased by 2%
compared with the same period in the prior year. Growth in the institutional
business(+4%) and the eSignal business (+52%) were partially offset by a decline
in the business using broadcast delivery (-47%). This decline in broadcast
customers is expected to continue. Institutional revenues increased due to new
sales of data products to new customers, growth to existing redistributors and
price increases.
EBITDA increased from $21,731 in 1999 to $26,197 in 2000, an increase of
$4,466 (+21%). This increase was due to the increased revenue discussed above
and the continued synergy benefits from the combination of the acquired
businesses.
The operating income increased from a loss of $2,675 in 1999 to operating
income of $1,525 in 2000. The higher operating income was due to synergy savings
coming through from the combination of the acquired businesses with the existing
institutional business.
Nine Months Results
On a proforma basis, for the first nine months of the year, revenue
increased by 4% compared with the same period in the prior year. Strong growth
in the institutional business(+7%) and the eSignal business (+91%) was partially
offset by a decline in the business using broadcast delivery (-46%). This
decline in broadcast customers is expected to continue. Institutional revenues
increased due to new sales of data products to new customers, growth to existing
redistributors and price increases.
13
<PAGE> 14
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
EBITDA increased from $52,851 in 1999 to $66,863 in 2000, an increase of
$14,012 (+27%). This increase was due to the increased revenue discussed above
and the continued synergy benefits from the combination of the acquired
businesses.
The operating loss declined from $22,843 in 1999 to $6,914 in 2000. The
lower operating loss was due to synergy savings coming through from the
combination of the acquired businesses with the existing institutional business,
and the end of amortization of a non-compete agreement relating to a 1995
acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased by $16,298 from the
nine-month comparative period in 1999. This was due to higher EBITDA being
partially offset by higher working capital requirements.
Cash used in investing activities was $21,531 in the nine months ended
September 30, 2000 compared to $153,772 in the prior year's corresponding
period. The Company invested $12,363 in the current nine-month period for
property and equipment, compared with $6,272 in the prior year's corresponding
period. The increase was due to expenditure on the integration of the Muller,
Muniview and Valorinform businesses and the fact that the 1999 expenditure
reflects only the Interactive Data business. The Company also invested an
additional $43,000 in MarketWatch.com, Inc. The Company acquired Itex (FIT)
Limited a service delivery agent and software technology partner for a net cash
consideration of $11,200 and acquired Trading Techniques, Inc., a developer of
financial software that targets individual investors and institutional traders
for a cash consideration of $3,566.
Cash used in financing activities was $6,138 in the nine months ended
September 30, 2000 compared to $147,697 in the prior year's corresponding
period. This is primarily due to a reorganization of IDC prior to the merger
with DBC, settlement of intercompany balances with Pearson including a repayment
of $10,000 on borrowings.
Management believes that cash generated by operating activities, together
with its existing cash, are sufficient to meet the short-term needs of the
Company.
INFLATION
The Company does not believe that its financial performance has been
materially affected by inflation.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following:
- The presence of competitors with greater financial resources and their
strategic response to the Company's services and products.
- Changes in technology, which could affect the competitiveness of the
Company's products and services.
- A decline in activity levels in the securities markets, which could lower
demand for the Company's products and services.
14
<PAGE> 15
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
- Consolidation of financial services. This consolidation has two forms:
consolidations within an industry (such as banking) and across industries
(such as consolidations of insurance, banking and brokerage companies). Such
consolidation could lower demand for the Company's products and services.
- Retention of key employees assigned to work associated with the integration
of the recently acquired businesses of the Company. Loss of these employees
could result in a delay in integration work designed to provide operational
synergies and product enhancements.
- Prolonged outage at one of Company's data centers. While the Company employs
high reliability hardware at its data centers, a prolonged outage at one of
its data centers could have a material impact on revenues.
- 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 potential obsolescence of the Company's services due to the introduction
of new technologies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of risks, including changes in interest
rates on its borrowings and fluctuation in foreign currency exchange rates.
There have been no material changes in market risk exposures since December 31,
1999.
15
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings incidental to its
business operation, none of which is expected to have a material effect on the
financial condition or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
a. The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<C> <S>
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
16
<PAGE> 17
DATA BROADCASTING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATA BROADCASTING CORPORATION
(Registrant)
By: /s/ STUART J. CLARK
------------------------------------
Name: Stuart J. Clark
President and Chief Executive
Officer
Dated: November 2, 2000
By: /s/ STEVEN G. CRANE
--------------------------------------
Steven G. Crane
Chief Financial Officer
Dated: November 2, 2000
17
