<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
------------------------
CURRENT REPORT
AMENDMENT NO.1
DATED AS OF MAY 12, 2000
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 29, 2000
DATA BROADCASTING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 0-20311 13-3668779
(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
22 CROSBY DRIVE, BEDFORD, MASSACHUSETTS 01730
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 687-8800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. Changes in Control of Registrant.
On February 29, 2000, Data Broadcasting Corporation (the "Registrant"), a
Delaware corporation, completed a merger between its wholly-owned subsidiary
Detective Merger-Sub, Inc. ("Merger Sub"), a Delaware corporation and
Interactive Data Corporation ("Interactive Data"), a Delaware corporation and a
wholly-owned subsidiary of Pearson Longman, Inc. ("Pearson"), a Delaware
corporation. As a result of the merger, Pearson has voting control of the
Registrant.
The merger was completed on the terms and conditions set forth in the
Agreement and Plan of Merger, (the "Merger Agreement") dated as of November 14,
1999, among the Registrant, Merger Sub, Interactive Data and Pearson, which was
amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of
January 10, 2000, among the Registrant, Merger Sub, Interactive Data and Pearson
(the "Amendment").
On February 29, 2000, Merger Sub was merged with and into Interactive Data
(the "Merger") with Interactive Data as the surviving corporation and a wholly
owned subsidiary of the Registrant following the Merger. Upon the Merger, the
issued and outstanding capital stock of Interactive Data was converted into
56,423,949 newly issued shares of the Registrant's common stock which resulted
in the ownership by Pearson of approximately 60% of the Registrant. Prior to
this transaction no individual entity possessed a controlling interest in the
Registrant. The Merger will be 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 will become
the historical financial statements of the Registrant.
Pursuant to the terms of the Merger Agreement, as amended by the Amendment,
the following parties were elected to the Registrant's board of directors:
Robert Berkley, Stuart Clark, John Fallon, Donald Greenberg, Stephen Hill, Alan
Hirschfield, Philip Hoffman, John Makinson, Carl Spielvogel and Allan Tessler.
The Stock Option Agreement dated as of November 14, 1999, among the
Registrant and Interactive Data and the Voting and Standstill Agreements, dated
as of November 14, 1999, between the Registrant and the Alan J. Hirschfield
Living Trust and between the Registrant and AFT/FGT Family Partners Ltd. and the
Tessler Family Limited Partnership terminated pursuant to their terms upon the
effectiveness of the Merger.
Page 2
<PAGE> 3
ITEM 7. Financial Statements
<TABLE>
<S> <C> <C>
(a) Interactive Data Corporation Management's Discussion &
Analysis of Financial Condition & Results of Operations A-1
(b) Interactive Data Corporation Financial Statements as of and
for the year ended December 31, 1999
Report of Independent Accountants F-2
Combined Balance Sheets F-3
Combined Statement of Operations and Comprehensive Income F-4
Combined Statement of Stockholder's Equity F-5
Combined Statement of Cash Flows F-6
Notes to Combined Financial Statements F-7
</TABLE>
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 hereunto duly authorized.
DATA BROADCASTING CORPORATION
By: /s/ Stuart J. Clark
------------------------------------
Name: Stuart J. Clark
Title: President and Chief
Executive Officer
Date: May 12, 2000
Page 3
<PAGE> 4
INTERACTIVE DATA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction with
the combined financial statements and the notes thereto of Interactive Data
included elsewhere herein. The following table sets forth certain combined
financial data of Interactive Data. This data is represented to reflect the
comparative periods discussed in the financial analysis.
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
($ THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue
North America............................................ $ 89,024 $ 98,338 $127,366
UK/Europe................................................ 48,330 51,218 56,983
Asia/Pacific............................................. 3,180 4,121 4,607
-------- -------- --------
140,534 153,677 188,956
-------- -------- --------
Cost of services........................................... 44,403 47,992 55,031
SG&A....................................................... 60,945 65,661 77,743
Depreciation............................................... 5,066 5,293 6,681
Amortization............................................... 31,036 31,114 31,897
Restructuring expense...................................... 4,457 3,647
-------- -------- --------
Income / (loss) from Operations............................ $ (5,373) $ (30) $ 17,604
======== ======== ========
Net income(loss)........................................... $ (6,944) $ (3,215) $ 6,197
======== ======== ========
EBITDA (1)................................................. $ 30,750 $ 36,160 $ 56,130
======== ======== ========
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization expense. We believe that EBITDA is a widely accepted financial
indicator used by investors and analysts to analyze and compare companies on
the basis of operating performance. EBITDA is not intended to represent cash
flows for the periods presented, nor has it been presented as an alternative
to operating income or as an indicator of operating performance. You should
not consider EBITDA in isolation or as a substitute for measures of
performance prepared in accordance with accounting principles generally
accepted in the United States. We understand that, while EBITDA is
frequently used by securities analysts in the evaluation of companies,
EBITDA is not necessarily comparable to other similarly titled measures of
other companies due to potential inconsistencies in the methods of
calculation.
KEY BUSINESS METRICS
In reviewing the ongoing performance of the business, Interactive Data is
focused on revenue growth, cash generation and controlling expenses. The key
metrics that Interactive Data reviews on a regular basis are revenue growth,
EBITDA, the EBITDA margin (EBITDA to revenue), and the ratio of the two key cost
categories (cost of services and SG&A) to revenue. The following table outlines
these metrics:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, % CHANGE
----------------------------- --------------
1997 1998 1999 1998 1999
------- ------- ------- ----- -----
% %
----- -----
<S> <C> <C> <C> <C> <C>
Revenue ($000s)............................. 140,534 153,677 188,956 +9.4% +23.0%
EBITDA ($000s).............................. 30,750 36,160 56,130 +17.6% +55.2%
EBITDA Margin............................... 21.9% 23.5% 29.7% +8.2% +25.3%
Cost of services to Revenue................. 31.6% 31.2% 29.1% -1.3% -6.7%
SG&A to Revenue............................. 43.4% 42.7% 41.1% -1.6% -3.7%
</TABLE>
Page A-1
<PAGE> 5
1999 VERSUS 1998
REVENUE
Overall revenue in 1999 was $189.0 million, an increase of $35.3 million (23%)
from 1998. Revenue for 1999 includes $19.6 million representing five months'
revenue from the three businesses, Muller Data Corporation and the assets of
Valorinform and Muniview, that were acquired by Interactive Data in 1999 ("the
acquired businesses"). Excluding revenue from the acquired businesses, "core"
revenue increased by $15.7 million (10.2%).
North American revenue was $127.4 million, an increase of $29.0 million (29.5%)
from 1998. Of this increase $18.2 million related to the acquired businesses.
Excluding the acquired businesses, revenue grew by 11%. UK/Europe revenue was
$57.0 million, an increase of $5.8 million (11.3%) from 1998. Of this increase,
$1.4 million related to the acquired businesses. Excluding the acquired
businesses, revenues grew by 8.6%. Asia Pacific revenue was $4.6 million, an
increase of $0.5 million (11.8%) from 1998.
The main drivers of revenue growth across all three regions were new sales of
data products to end users and redistributors, growth from existing
redistributors and, to a lesser extent, moderate price increases.
EXPENSES
Cost of services was $55.0 million in 1999, an increase of $7.0 million (14.7%)
from 1998, mainly as a result of the inclusion of five months of costs from the
acquired businesses. Excluding costs for the acquired businesses, the cost of
services declined by 2.7%, reflecting the benefit of the restructuring carried
out in 1998. In addition, the percentage of revenue expended on cost of services
declined from 31.2% in 1998 to 29.1% in 1999.
SG&A costs increased by $12.1 million (18.4%), but excluding the acquired
businesses, the costs increased by $3.5 million (5.3%), due mainly to the
increase in commissions and royalties associated with achieving the
aforementioned revenue growth. However SG&A declined as a percentage of revenue
from 42.7% in 1998 to 41.1% in 1999.
EBITDA increased from $36.2 million (23.5% of revenue) in 1998 to $56.1 million
(29.7% of revenue) in 1999 due to the factors mentioned above.
Depreciation expense was $6.7 million, an increase of $1.4 million from 1998.
This increase was due to a higher level of capital expenditures on the
integration of the acquired businesses and the upgrading of Interactive Data's
production center in London. Amortization expense was $31.9 million, an increase
of $0.8 million from 1998. This increase was primarily due to the additional
amortization from the acquired businesses being virtually offset by the end of
the amortization period of the non-compete agreement associated with certain
assets acquired in 1995.
Income from operations was $17.6 million in 1999 compared with a loss of $30,000
for 1998.
Interactive Data recognized income tax expense of $11.6 million for 1999
compared to an income tax expense of $3.6 million for 1998. The effective income
tax rate for the year ended December 31, 1999 was 65.3%. The primary difference
between the U.S. statutory tax rate and Interactive Data's effective tax rate in
1999 resulted from amortization expense deducted for financial reporting
purposes which was non-deductible for tax purposes.
As a result of the factors discussed above, Interactive Data generated net
income of $6.2 million in 1999 compared to a loss of $3.2 million in 1998.
Page A-2
<PAGE> 6
1998 VERSUS 1997
REVENUE
Overall revenue in 1998 was $153.7 million, an increase of $13.1 million (9.4%)
from 1997.
North American revenue was $98.3 million, an increase of $9.3 million (10.5%)
from 1997. UK/Europe revenue was $51.2 million, an increase of $2.9 million (6%)
from 1997. Asia Pacific revenue was $4.1 million, an increase of $0.9 million
(29.6%) from 1998.
The main drivers of revenue growth across all three regions were new sales of
data products to end users and redistributors, growth from existing
redistributors and to a lesser extent, moderate price increases.
EXPENSES
Cost of services was $48.0 million in 1998, an increase of $3.6 million (8.1%)
from 1997. As a percentage of revenue cost of services declined from 31.6% in
1997 to 31.2% in 1998. SG&A costs were $65.7 million in 1998, an increase of
$4.7 million (7.7%) from 1997. SG&A, as a percentage of revenue, declined from
43.4% in 1997 to 42.7% in 1998.
Depreciation expense was $5.3 million in 1998, an increase of $0.2 million from
1997. This increase was due to a higher level of capital expenditure.
Amortization expense was $31.1 million in 1998, an increase of $0.1 million from
1997. Amortization relates to the acquisition of Extel Financial Limited, a UK
data provider, in 1993, the acquisition of the assets of the Information Express
business, an Australian data provider, in 1994, and the acquisition of
Interactive Data Corporation in the US in 1995.
Primarily as a result of the improvement in expense margins, the EBITDA
increased from $30.8 million (21.9% of revenue) in 1997 to $36.2 million (23.5%
of revenue) in 1998.
Loss from operations was $30,000 in 1998, compared with a loss of $5.4 million
in 1997.
Interactive Data recognized income tax expense of $3.6 million for 1998 compared
to an income tax expense of $2.0 million for 1997. The primary difference
between the U.S. statutory tax rate and Interactive Data's effective rate in
1998 and 1997 resulted from amortization deducted for financial reporting
purposes but which was not deductible for federal and state tax purposes.
As a result of the factors discussed above, Interactive Data generated a net
loss of $3.2 million in 1998 compared to a net loss of $6.9 million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the period covered by the financial statements included in this report,
Interactive Data's treasury functions were managed centrally by its parent,
Pearson plc. Pearson provides all lines of credit.
Cash provided by operating activities was $39.3 million for 1999 compared to
$38.0 million for 1998 and $24.2 million in 1997. The increase from 1998 to 1999
was due to the generation of $6.2 million in net income in 1999 being partially
offset by unfavorable variances among several working capital components. The
increase from 1997 to 1998 was due to a lower net loss and favorable changes
among several working capital components.
Interactive Data's capital expenditures increased in 1999 by $3.1 million over
the $4.8 million spent in 1998, compared to the $4.9 million spent in 1997. The
increase in 1999 was due to expenditure on the integration of the acquired
businesses and the upgrading of Interactive Data's production center in London.
Capital expenditures will increase as Interactive Data continues to integrate
the acquired businesses and introduce common technology across the entire
operation.
In 1999, Interactive Data acquired the businesses of Muller Data Corporation,
and the assets of Valorinform and Muniview for a total consideration of $149.1
million, which was wholly funded in the form of a capital contribution by
Pearson.
Page A-3
<PAGE> 7
Management believes that the cash generated by operating activities is
sufficient to meet the short and long-term needs of the current operations of
Interactive Data.
NON-US REVENUE
Approximately 33% of Interactive Data's revenues in 1999 were derived from
non-US operations, compared to 36% in 1998 and 37% in 1997. The reduction in
1999 is due to the addition of the acquired businesses, where the majority of
the revenue is derived from the US. Interactive Data does not hedge its foreign
currency exposure.
INCOME TAXES
Interactive Data is included in Pearson Inc.'s consolidated US federal income
tax return and certain state income tax returns. However, for financial
reporting purposes, Interactive Data calculates federal and state income taxes
as if it had filed its income tax returns on a stand-alone basis and is required
to pay to Pearson, Inc. this amount. Similarly Interactive Data's foreign tax
operations are responsible for their income taxes computed on a stand-alone
basis.
Deferred taxes are recorded for differences between the financial statements and
tax basis of assets and liabilities using tax rates in effect for the year in
which the differences are expected to reverse.
INFLATION
We believe that inflation has not had a material effect on the results of
Interactive Data's operations but there can be no assurances that results of
operations will not be affected by inflation in the future.
FORWARD LOOKING STATEMENTS
From time to time, the Company may publish forward looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development 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 Interactive Data's services which could result in
Interactive Data's failure to grow its business as planned.
- - Changes in technology, which could affect the competitiveness of Interactive
Data's products and services.
- - A decline in activity levels in the securities markets, which could lower
demand for Interactive Data's products and services.
- - 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 Interactive Data's products and services.
- - Retention of key employees assigned to work associated with the integration of
the recently acquired businesses with Interactive Data. 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 Interactive Data's data centers. While Interactive
Data employs high reliability hardware at its London, Melbourne and Waltham
data centers, a prolonged outage at either the London or Waltham data center
could have a material impact on revenues.
Page A-4
<PAGE> 8
INTERACTIVE DATA CORPORATION
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Combined Balance Sheets..................................... F-3
Combined Statement of Operations and Comprehensive Income... F-4
Combined Statement of Stockholder's Equity.................. F-5
Combined Statement of Cash Flows............................ F-6
Notes to Combined Financial Statements...................... F-7
</TABLE>
Page F-1
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Interactive Data Corporation
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and comprehensive income, of stockholder's
equity and of cash flows present fairly, in all material respects, the combined
financial position of Interactive Data Corporation at December 31, 1999 and
1998, and the combined results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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.
PricewaterhouseCoopers LLP
Boston, MA
February 8, 2000
except as to Note 1
which is as of February 29, 2000
Page F-2
<PAGE> 10
INTERACTIVE DATA CORPORATION
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 15,037 $ 12,008
Accounts receivable, net of sales allowances of $1,587 and
$4,807................................................. 23,577 40,914
Receivable from affiliate................................. 19,224 19,224
Prepaid expense and other assets.......................... 3,927 1,925
Deferred income taxes..................................... 5,554 10,744
-------- --------
Total current assets................................... 67,319 84,815
-------- --------
Goodwill, net of accumulated amortization of $46,566 and
$60,249................................................... 181,141 222,868
Other intangible assets, net................................ 19,070 122,764
Fixed assets, net........................................... 17,927 20,862
Deferred income taxes....................................... 8,578 --
Other assets................................................ 1,013 1,393
-------- --------
Total assets........................................... $295,048 $452,702
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable, trade................................... $ 9,964 $ 10,644
Deferred revenue.......................................... 6,772 15,390
Accrued data charges...................................... 4,393 6,002
Promissory note payable to affiliate...................... -- 20,000
Income taxes payable...................................... 9,614 7,189
Other current liabilities and accrued expenses............ 21,795 36,840
-------- --------
Total current liabilities.............................. 52,538 96,065
-------- --------
Promissory note payable to affiliate........................ 20,000 --
Deferred tax liabilities.................................... 774 15,684
-------- --------
Total liabilities...................................... 73,312 111,749
-------- --------
Commitments and contingencies (Note 10)
Stockholder's equity
Parent's investment....................................... 244,609 358,680
Accumulated other comprehensive income.................... (705) (1,756)
Accumulated deficit....................................... (22,168) (15,971)
-------- --------
Total stockholder's equity............................. 221,736 340,953
-------- --------
Total liabilities and stockholder's equity............. $295,048 $452,702
-------- --------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
Page F-3
<PAGE> 11
INTERACTIVE DATA CORPORATION
COMBINED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue.................................................... $140,534 $153,677 $188,956
Costs and expenses:
Cost of services......................................... 44,403 47,992 55,031
Selling, general and administrative...................... 60,945 65,661 77,743
Amortization expense..................................... 31,036 31,114 31,897
Depreciation expense..................................... 5,066 5,293 6,681
Restructuring expense.................................... 4,457 3,647 --
-------- -------- --------
Total costs and expenses................................. 145,907 153,707 171,352
-------- -------- --------
Income (loss) from operations.............................. (5,373) (30) 17,604
Interest income, net....................................... 434 599 293
Other income (expense), net................................ 21 (217) (52)
-------- -------- --------
Income (loss) before income taxes.......................... (4,918) 352 17,845
Provision for income taxes................................. 2,026 3,567 11,648
-------- -------- --------
Net income (loss).......................................... (6,944) (3,215) 6,197
Other comprehensive income:
Foreign currency translation adjustment.................. (200) 19 (1,051)
-------- -------- --------
Comprehensive income (loss)................................ $ (7,144) $ (3,196) $ 5,146
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
Page F-4
<PAGE> 12
INTERACTIVE DATA CORPORATION
COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
PARENT'S COMPREHENSIVE ACCUMULATED TOTAL STOCKHOLDER'S
INVESTMENT INCOME DEFICIT EQUITY
---------- ------------- ----------- -------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996............ $250,342 $ (524) $(12,009) $237,809
Distribution to Parent................ (15,970) (15,970)
Other comprehensive income............ (200) (200)
Net loss.............................. (6,944) (6,944)
-------- ------- -------- --------
Balance, December 31, 1997............ 234,372 (724) (18,953) 214,695
Investment by Parent.................. 10,237 10,237
Other comprehensive income............ 19 19
Net loss.............................. (3,215) (3,215)
-------- ------- -------- --------
Balance, December 31, 1998............ 244,609 (705) (22,168) 221,736
Investment by Parent.................. 114,071 114,071
Other comprehensive income............ (1,051) (1,051)
Net income............................ 6,197 6,197
-------- ------- -------- --------
Balance, December 31, 1999............ $358,680 $(1,756) $(15,971) $340,953
-------- ------- -------- --------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
Page F-5
<PAGE> 13
INTERACTIVE DATA CORPORATION
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $(6,944) $(3,215) $ 6,197
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................... 36,102 36,407 38,578
(Gain) on disposal of fixed assets.......................... (641) (15) --
Write-down of fixed assets.................................. 1,591 -- --
Deferred income taxes....................................... (7,065) (6,878) (5,963)
Changes in assets and liabilities:
Accounts receivable....................................... 1,548 725 (6,923)
Prepaid expenses and other assets......................... 6,083 912 1,960
Accounts payable, trade................................... 7,235 2,072 556
Other current liabilities and accrued expenses............ (13,082) 7,902 7,166
Deferred revenue.......................................... (675) 94 (2,261)
------- ------- ---------
Net cash provided by operating activities................. 24,152 38,004 39,310
Cash flows from investing activities:
Purchases of fixed assets................................. (4,917) (4,812) (7,920)
Acquisition of business................................... -- -- (149,078)
Proceeds from sale of fixed assets........................ 734 431 --
------- ------- ---------
Net cash used in investing activities.................. (4,183) (4,381) (156,998)
Cash flows from financing activities:
Contribution (distribution) of capital from/to parent..... (15,970) 10,237 114,071
Advances to/from affiliate................................ 480 (35,438) --
------- ------- ---------
Net cash (used) provided by financing activities....... (15,490) (25,201) 114,071
Effect of exchange rate on cash............................. (102) (88) 588
------- ------- ---------
Net increase (decrease) in cash and cash equivalents........ 4,377 8,334 (3,029)
Cash and cash equivalents, beginning of period.............. 2,326 6,703 15,037
------- ------- ---------
Cash and cash equivalents, end of period.................... $ 6,703 $15,037 $ 12,008
------- ------- ---------
Supplemental disclosure of cash flow information:
Cash (paid)/received for taxes............................ $ (431) $ 1,214 $ (13,217)
Cash (paid)/received for interest......................... $(2,681) $(2,594) $ 1,138
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
Page F-6
<PAGE> 14
INTERACTIVE DATA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION
Interactive Data Corporation is a wholly owned subsidiary of Pearson Longman,
Inc. Pearson Longman, Inc., through a series of other entities, is wholly owned
by Pearson plc, a company organized under the laws of England and Wales.
Interactive Data Corporation provides financial data, including securities,
commodities, and derivatives information, to its customers in the United States,
Europe and Asia. The data includes pricing, descriptive and related financial
data and corporate action data. This information is used to support securities
operations, fund pricing, research and portfolio management within banks,
brokerage firms and investment managers.
On November 14, 1999, Pearson Longman, Inc. and Interactive Data Corporation
entered into an agreement and plan of merger, which was subsequently amended on
January 10, 2000, with Data Broadcasting Corporation ("DBC"), a publicly traded
corporation, whereby DBC will issue 56,424 shares of its stock to Pearson
Longman, Inc. in exchange for all of the stock of Interactive Data Corporation.
As a result of this transaction, Pearson Longman, Inc. will own approximately
60% of the then outstanding common stock of DBC.
The merger agreement with DBC provides that, prior to consummation of the
transaction between Pearson Longman, Inc. and DBC, Pearson plc will undertake a
reorganization which will result in the capital stock of certain other Pearson
plc subsidiaries being transferred to Interactive Data Corporation. These
subsidiaries are engaged in businesses similar to Interactive Data Corporation.
In connection with this reorganization, certain inter-company balances with
other Pearson plc entities are required to be contributed to capital or
eliminated and certain assets and liabilities are required to be conveyed to
other Pearson plc subsidiaries. The capital stock of the following Pearson plc
entities will be reorganized into Interactive Data Corporation.
- Interactive Data Canada Inc., a company organized under the laws of the
Province of Ontario, Canada
- Financial Times Information (H.K.) Limited, a company organized under the
laws of Hong Kong
- Financial Times Information (Australia) Pty Limited, a company organized
under the laws of Victoria, Australia
- Financial Times Information (Singapore) Pte Ltd., a company organized
under the laws of Singapore
- FT Information (Ireland) ltd., a company organized under the laws of
Ireland
- Exshare Financial Limited, a company organized under the laws of England
and Wales
- Exshare Computing Ltd., a company organized under the laws of England and
Wales
- The Exchange Telegraph Company, a company organized under the laws of
England and Wales
- Exshare Financial (US) Ltd., a company organized under the laws of
England and Wales
- W&W Ltd., a company organized under the laws of England and Wales
- Exshare Statistical Services Ltd., a company organized under the laws of
England and Wales
- Exshare Financial Inc., a Delaware corporation
These combined financial statements include Interactive Data Corporation and the
entities listed above (collectively "Interactive Data" or the "Company"). The
combined financial statements of Interactive Data have been prepared assuming
the reorganization described above. Deemed capital contributions/distributions
arising from the assumed reorganization are reflected in the Combined Statement
of Cash Flows and the Combined Statement of Changes in Stockholder's Equity.
Prior to consummation of the transaction with DBC, all cash except for $776 will
be distributed to Pearson plc or Pearson Longman Inc.
Page F-7
<PAGE> 15
Certain prior year amounts have been reclassified to conform with the current
year presentation. These reclassifications had no effect on net income.
On February 23, 2000 the shareholders of DBC approved the transaction and on
February 29, 2000 the transaction was completed, and the reorganization of
Interactive Data and the Pearson plc subsidiaries listed above was affected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
Cash and cash equivalents include cash on hand and short-term investments with
an original maturity of three months or less.
Fair value of financial instruments
The carrying amount of cash, cash equivalents, trade receivables and trade
payables approximates their fair value because of the short maturity of these
financial instruments.
Inter-company Transactions
All significant transactions and balances between the business listed in Note 1
have been eliminated in combination.
Revenue Recognition
Revenues are recognized over contractual periods as services are performed. The
Company accounts for subscription revenues received in advance by deferring such
amounts until the related services are performed.
Accounts Receivable, Concentration of Credit Risk and Uncertainties
The Company is subject to credit risk through trade receivables. Credit risk
with respect to trade receivables is mitigated by the diversification of the
Company's operations, as well as its large client base and its geographical
dispersion. No single customer accounts for more than 10% of revenues or more
than 10% of accounts receivable for any period presented. Ongoing credit
evaluations of customers' financial condition are performed and collateral is
not required. The Company maintains reserves for potential credit losses and
such losses, in the aggregate, have not exceeded management's expectations.
Income Taxes
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax
basis of assets and liabilities and are measured by applying enacted tax rates
and laws to taxable years in which such differences are expected to reverse. The
Company's practice is to provide currently for taxes that will be payable upon
remittance of foreign earnings of subsidiaries and affiliates to the extent that
such earnings are not considered to be reinvested indefinitely.
Goodwill
Goodwill of $56,686 and $228,469 at December 31, 1999 was recorded in connection
with business acquisitions and is being amortized on a straight-line basis over
ten and twenty years, respectively. Goodwill represents the excess purchase
price over the fair value of identifiable net assets at the acquisition date.
The Company reviews the recoverability of goodwill based on estimated
undiscounted future cash flows from operating activities.
Page F-8
<PAGE> 16
Other Intangible Assets
Other intangible assets include securities databases, computer software,
covenants not to compete, customer lists, work forces and a trademark arising
principally from acquisitions. Such intangibles are valued on the acquisition
dates based on a combination of replacement cost and comparable purchase
methodologies by a third party appraiser and are amortized over periods ranging
from two to fifteen years. The carrying amount of these balances is evaluated
periodically in relation to the operating performance and estimated undiscounted
future cash flows of the underlying businesses. Adjustments are made if the sum
of expected future net cash flows is less than book value.
Fixed Assets
Fixed assets are recorded at cost. Equipment is depreciated using the
straight-line method over its estimated useful life of one and one-half to eight
years. Leasehold improvements are amortized using the straight-line method over
the terms of the respective leases or useful lives, whichever is shorter.
Maintenance and repairs are charged to operations as incurred. Retirements,
sales and disposals of assets are recorded by removing the cost and accumulated
depreciation from the asset and accumulated depreciation accounts.
Translation of Foreign Currencies
The functional currency of certain businesses within the combined financial
statements is the local currency. Assets and liabilities of foreign companies
are translated into U.S. dollars at exchange rates in effect at the balance
sheet date; income and expense items and cash flows are translated at average
exchange rates for the period. Cumulative net translation adjustments are
included in stockholder's equity as other comprehensive income. Gains and losses
resulting from foreign currency transactions, not significant in amount, are
included in the results of operations as other income (expense).
Use of Estimates
The preparation of the Combined Financial Statements in conformity with
accounting principles generally accepted in the United States, requires the
extensive use of management's estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the combined financial statement date. Actual results could
differ from those estimates.
3. ACQUISITION
On July 29, 1999, the Company acquired 100% of the outstanding capital stock of
Muller Data Corporation ("Muller Data") and the assets of Muniview and
Valorinform (collectively, the "Acquired Businesses"). The Acquired Businesses
were under common control at the time of the acquisition, and primarily engaged
in the business of the collection, analysis, marketing and distribution of
financial information relating to certain securities. The price paid for the
Acquired Businesses was $149.1 million and was funded via a capital contribution
from Pearson Longman, Inc. In addition, the Company incurred acquisition costs
of $2.5 million, including $1.1 million for the termination of certain
employees. As of December 31, 1999, the accrued acquisition costs relating to
this transaction were $1.7 million.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the purchase price assigned to the assets acquired and liabilities
assumed was based on the fair market value on the acquisition date. The excess
of the consideration paid over the estimated fair value of net tangible assets
acquired has been recorded as goodwill and intangibles. Goodwill is being
amortized over a period of ten years and intangibles are being amortized over
periods ranging from two to fifteen years. The Company's combined financial
statements include the results of operations subsequent to the acquisition date.
Page F-9
<PAGE> 17
The purchase price allocation for the Acquired Businesses was as follows:
<TABLE>
<S> <C>
ASSETS
Accounts receivable, net.................................... $ 10,360
Fixed assets................................................ 1,409
Other assets................................................ 1,199
Goodwill.................................................... 56,686
Intangibles:
Non-compete agreement..................................... 37,500
Customer lists............................................ 68,200
Workforce................................................. 4,600
Municipal bond database................................... 7,500
Trademark................................................. 5,000
--------
$192,454
LIABILITIES
Accounts payable and accrued expenses....................... 5,422
Deferred revenue............................................ 10,864
Accrued acquisition costs................................... 2,500
Deferred tax liabilities.................................... 24,590
--------
43,376
--------
Total Purchase Price........................................ $149,078
--------
</TABLE>
The following unaudited pro forma financial information reflects the transaction
as if it occurred on January 1, 1999:
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA RESULTS FOR THE
YEAR ENDING
DECEMBER 31, 1999
-------------------------
<S> <C> <C>
Revenue.................................... $217,712
Net loss................................... $ (5,402)
</TABLE>
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Computer equipment................................. $39,147 $44,903
Leasehold improvements............................. 12,965 12,932
Furniture and fixtures............................. 5,906 7,921
------- -------
58,018 65,756
Less: accumulated depreciation..................... (40,091) (44,894)
------- -------
$17,927 $20,862
------- -------
</TABLE>
Page F-10
<PAGE> 18
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
USEFUL DECEMBER 31, DECEMBER 31,
LIFE 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Non-compete agreements.................... 2-3 1/2 years $50,000 $ 87,500
Securities databases...................... 3-5 years 2,656 10,156
Computer software......................... 7 years 35,775 35,271
Workforce................................. 9 years -- 4,600
Customer lists............................ 14 years -- 68,200
Trademark................................. 15 years -- 5,000
---------- ------- --------
88,431 210,727
Less: accumulated amortization................ (69,361) (87,963)
------- --------
$19,070 $122,764
------- --------
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Accrued bonus.............................................. $ 4,329 $ 6,382
Accrued payroll taxes...................................... 70 825
Accrued employee related costs............................. 4,616 8,850
Accrued commissions........................................ 1,040 1,663
Accrued professional services.............................. 1,943 2,862
Accrued acquisition costs.................................. -- 3,179
Accrued data center costs.................................. 3,547 3,271
Accrued property costs..................................... 998 1,615
Accrued travel costs....................................... 1,331 803
Accrued royalties.......................................... 582 2,858
Accrued sales taxes........................................ 1,683 1,802
Accrued other.............................................. 1,656 2,730
------- -------
$21,795 $36,840
------- -------
</TABLE>
7. RESTRUCTURING
During 1997 the Company commenced a restructuring of operations in the United
Kingdom. The purpose of the restructuring was to reduce costs and streamline
operations. The restructuring charge recorded in 1997 consisted of $2,866 of
severance costs and $1,591 of asset write-downs. The 1998 restructuring charge
consisted of severance costs of $3,647. All of the costs associated with each
year's restructuring were paid prior to the end of the applicable year.
8. RELATED PARTY TRANSACTIONS
Intercompany charges are incurred related to corporate management and
administrative functions performed by Pearson plc on behalf of the combining
companies. These charges were $2 million in each of the three years ended
December 31, 1999. Although the combined financial statements include
allocations of expenses incurred by any Pearson plc companies for corporate
management and administrative functions pertaining to the combining companies,
the combined financial statements may not be indicative of the financial results
which would have been achieved if the Company were not a wholly-owned
subsidiary.
Page F-11
<PAGE> 19
The Company has entered into a revolving demand loan with Rycade Capital
Corporation ("Rycade"), a Pearson plc subsidiary, and a $20,000 promissory note
with Pearson plc.
The Company promises to pay Rycade, on demand, all of the unpaid principal
amount of all revolving loans. The Company generally applies excess cash against
this note. Interest accrues daily on any principal outstanding under this loan
at an interest rate equal to either the three-month LIBOR plus 0.75% or, if less
than this rate, the maximum legal rate of interest from August 31, 1995 through
the date on which such principal becomes due. To the extent that cash is applied
in excess of the outstanding borrowings, the Company earns interest at an
equivalent rate. At December 31, 1998 and December 31, 1999, the Company had
applied cash in excess of its outstanding borrowings, and, therefore, had a note
receivable from affiliate of $19,224 with an interest rate of 5.81% and 6.83%,
respectively.
Related to the promissory note, the Company promises to pay Pearson plc $20,000
on demand on any day after August 31, 2000, and to pay interest at a rate of
9.20% through August 31, 2000 and, thereafter, at a rate equal to three-month
LIBOR plus 3.00%. Such interest is payable semiannually in arrears beginning
December 31, 1995 and quarterly beginning September 30, 2000.
The Company and its businesses engage in various activities with other Pearson
plc businesses. The related transactions are recorded at fair value. To the
extent that payables or receivables with affiliates arising from such
transactions have not been settled by period end, they have been accounted for
as deemed capital contributions, unless there is a specific agreement that they
will be settled in the future.
9. RETIREMENT PLANS
Pearson, Inc. Savings and Investment Plan
The Company's U.S. employees are eligible to participate in a Pearson plc
subsidiary's U.S. 401(k) Plan (the "401(k) Plan"). The 401(k) Plan allows all
employees to make contributions of a specified percentage of their compensation,
which is subject to a 50% employer match. The 401(k) Plan additionally allows
employees to contribute amounts above the specified percentage which are not
subject to any employer match. Contributions made by the Company for the 401(k)
plan are determined as a percentage of covered salary and amounted to $618, $655
and $806 for the years ended December 31, 1997, 1998 and 1999, respectively.
Pearson, Inc. Pension Plan
Pearson, Inc., a Pearson plc U.S. subsidiary, sponsors a defined benefit plan
(the "Plan") for Pearson's U.S. employees, including substantially all of the
Company's U.S. employees. Pension costs are actuarially determined and Pearson,
Inc.'s policy is to fund pension costs accrued to the extent allowable under IRS
regulations.
Presented below is certain financial information relating to the Company's
portion of the U.S. retirement plan:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period................... $ 2,050 $ 3,004
Service cost................................................ 808 1,077
Interest cost............................................... 133 204
Amendments.................................................. (388) --
Actuarial loss (gain)....................................... 401 (176)
Benefits paid............................................... -- (372)
------- -------
$ 3,004 $ 3,737
------- -------
</TABLE>
Page F-12
<PAGE> 20
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of period............ $ 315 $ 1,264
Actual return on plan assets................................ 104 281
Employer contribution....................................... 845 --
Benefits paid............................................... -- (372)
------- -------
Fair value of plan assets at end of period.................. $ 1,264 $ 1,173
------- -------
Reconciliation of Funded Status:
Benefit obligation at end of year........................... $ 3,004 $ 3,737
Fair value of plan assets at end of period.................. 1,264 1,173
------- -------
Funded status at end of period.............................. (1,740) (2,564)
Unrecognized prior service cost............................. (364) (340)
Unrecognized net actuarial loss............................. 1,041 1,056
------- -------
Accrued benefit cost........................................ $(1,063) $(1,848)
------- -------
Weighted Average Assumptions:
Discount rate............................................... 6.75% 7.25%
Expected return on plan assets.............................. 9.00% 9.00%
Rate of compensation increase............................... 4.50% 4.50%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------
1997 1998 1999
----- ----- -------
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost:
Service cost................................................ $725 $808 $1,077
Interest cost............................................... 70 133 204
Expected return on plan assets.............................. (10) (48) (81)
Amortization of prior service costs......................... -- (24) (24)
---- ---- ------
Net periodic benefit cost................................... $785 $869 $1,176
---- ---- ------
</TABLE>
Foreign Pension Plans
Pearson plc and its subsidiaries maintain certain pension plans for non-U.S.
employees, including the non-U.S. employees of Interactive Data. Information
relating to Interactive Data's portion of the actuarial value of plan benefits,
asset values, and other pension disclosures pertaining to these other Pearson
plc plans are not separately determinable. No pension expense was incurred by
Interactive Data related to these plans in 1997, 1998 or 1999 due to their
overfunded position.
10. COMMITMENTS AND CONTINGENCIES
The Company has obligations under non-cancelable operating leases for real
estate and equipment, which include renewal options and escalation clauses. Real
estate leases are for the Company's corporate headquarters, sales offices, and
data center. Approximate annual future commitments under non-cancelable
operating leases with lease terms in excess of one year are as follows (in
thousands):
<TABLE>
<S> <C>
2000............................................... $ 6,804
2001............................................... 6,739
2002............................................... 6,734
2003............................................... 6,722
2004............................................... 4,138
Thereafter......................................... 23,338
-------
Total minimum lease payments....................... $54,475
-------
</TABLE>
Page F-13
<PAGE> 21
In 1989, the Company acquired certain assets under a ten-year royalty agreement.
Under the agreement, royalty payments are calculated as a percentage of earnings
generated by the acquired assets. Royalty payments are contingent upon the
future earnings of those assets. The Company's policy is to expense royalty
obligations as incurred. Total payments under the agreement cannot exceed $7,000
over the ten years. They have aggregated $3,560 through December 31, 1999.
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.
11. INCOME TAXES
The U.S. operations of Interactive Data are included in the Pearson, Inc.
consolidated U.S. federal income tax return and certain state income tax
returns. However, the Company calculates federal and state income taxes as if it
files its income tax returns on a stand-alone basis and remits such amounts to
Pearson, Inc. Similarly, the Company's foreign operations are responsible for
their income taxes computed on a stand-alone basis.
The components of (loss) income before income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Domestic.............................................. $(5,113) $(3,517) $ 7,836
Foreign............................................... 195 3,869 10,009
------- ------- -------
Total................................................. $(4,918) $ 352 $17,845
------- ------- -------
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $ 4,018 $ 7,327 $10,652
State............................................... 580 1,407 2,074
Foreign............................................. 4,794 3,148 5,076
------- ------- -------
9,392 11,882 17,802
------- ------- -------
Deferred:
Federal............................................. (3,571) (7,327) (5,146)
State............................................... (531) (1,089) (629)
Foreign............................................. (3,264) 101 (379)
------- ------- -------
(7,366) (8,315) (6,154)
------- ------- -------
Total Provision....................................... $ 2,026 $ 3,567 $11,648
------- ------- -------
</TABLE>
Deferred taxes are recorded for differences between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
Page F-14
<PAGE> 22
The components of the Company's deferred income taxes recognized in the Combined
Financial Statements are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses......................................... $ 2,804 $ 3,813
Covenant not to compete.................................. 14,676 17,015
Other.................................................... 3,072 7,266
------- -------
Gross deferred tax assets............................. 20,552 28,094
Deferred tax liabilities:
Customer lists........................................... -- 26,600
Other intangible assets.................................. 7,183 5,769
Depreciation............................................. 11 665
------- -------
Gross deferred tax liabilities........................ 7,194 33,034
------- -------
Net deferred tax assets (liabilities)...................... $13,358 $(4,940)
------- -------
</TABLE>
It is expected that the Company's deferred tax assets will be realized from
future taxable income.
Income taxes computed using the federal statutory income tax rate differ from
the Company's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
1997 1998 1999
----- ------- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate............................. (35.0%) 35.0% 35.0%
State taxes, net of federal tax benefit..................... 1.0 260.6 9.1
Foreign income taxed at different statutory rates........... 11.0 324.0 9.2
Nondeductible goodwill...................................... 47.6 668.2 16.0
Other, net.................................................. 16.6 (274.5) (4.0)
----- ------- ----
Effective tax rate.......................................... 41.2% 1,013.3% 65.3%
----- ------- ----
</TABLE>
12. SEGMENT REPORTING
Interactive Data operates in one industry segment; providing financial data,
including securities, commodities, and derivatives information to customers. The
data includes pricing, descriptive and related financial data and corporate
action data. This information is used to support securities operations, fund
pricing, research and portfolio management within banks, brokerage firms and
investment managers.
Business segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. Interactive Data's chief
operating decision-maker and decision making group is primarily comprised of the
President and Chief Financial Officer of the Company along with executives from
Pearson plc.
The Company's business units have been aggregated into three reportable
segments: North America, UK/Europe and Asia/Pacific. Each of these segments have
separate management teams and infrastructures. The lead executive for each
business segment manages the profitability and cash flow of each respective
segment. Interactive Data has a diversified customer base with no individual
customer accounting for greater than 10% of the Company's sales in any period
presented.
The accounting policies of the reportable segments are the same as those
described in Note 2 except the disaggregated financial results for Interactive
Data's business segments have been prepared using a management approach, which
is consistent with the basis and manner in which management internally
disaggregates financial information for the purposes of assisting in making
internal operating decisions. The
Page F-15
<PAGE> 23
Company evaluates the performance of its business segments based on sales,
operating income and total assets.
Summarized financial information concerning the Company's reportable business
segments is shown in the following table.
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues:
North America.................................... $ 89,024 $ 98,338 $127,366
UK/Europe........................................ 48,330 51,218 56,983
Asia/Pacific..................................... 3,180 4,121 4,607
-------- -------- --------
$140,534 $153,677 $188,956
-------- -------- --------
Income (loss) from operations:
North America.................................... $ 387 $ 1,500 $ 12,025
UK/Europe........................................ (5,160) (1,640) 4,712
Asia/Pacific..................................... (600) 110 867
-------- -------- --------
$ (5,373) $ (30) $ 17,604
-------- -------- --------
Total assets:
North America.................................... $190,407 $329,966
UK/Europe........................................ 99,355 117,090
Asia/Pacific..................................... 5,286 5,646
-------- --------
$295,048 $452,702
-------- --------
</TABLE>
Page F-16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 140,534
<CGS> 44,403
<TOTAL-COSTS> 145,907
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (434)
<INCOME-PRETAX> (4,918)
<INCOME-TAX> 2,026
<INCOME-CONTINUING> (6,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,944)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 15,037
<SECURITIES> 0
<RECEIVABLES> 25,164
<ALLOWANCES> 1,587
<INVENTORY> 0
<CURRENT-ASSETS> 67,319
<PP&E> 58,018
<DEPRECIATION> 40,091
<TOTAL-ASSETS> 295,048
<CURRENT-LIABILITIES> 52,538
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 221,736
<TOTAL-LIABILITY-AND-EQUITY> 295,048
<SALES> 0
<TOTAL-REVENUES> 153,677
<CGS> 47,992
<TOTAL-COSTS> 153,707
<OTHER-EXPENSES> 217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (599)
<INCOME-PRETAX> 352
<INCOME-TAX> 3,567
<INCOME-CONTINUING> (3,215)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,215)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 12,008
<SECURITIES> 0
<RECEIVABLES> 45,721
<ALLOWANCES> 4,807
<INVENTORY> 0
<CURRENT-ASSETS> 84,815
<PP&E> 65,756
<DEPRECIATION> 44,894
<TOTAL-ASSETS> 452,702
<CURRENT-LIABILITIES> 96,065
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 340,953
<TOTAL-LIABILITY-AND-EQUITY> 452,702
<SALES> 0
<TOTAL-REVENUES> 188,956
<CGS> 55,031
<TOTAL-COSTS> 171,352
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (293)
<INCOME-PRETAX> 17,845
<INCOME-TAX> 11,648
<INCOME-CONTINUING> 6,197
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,197
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
