<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 MARCH 31, 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 May 5, 2000 was 91,200,592.
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<PAGE> 2
INDEX
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements Of Operations and
Comprehensive Loss (unaudited) for the Three Months Ended
March 31, 2000 and 1999
Condensed Consolidated Balance Sheets at March 31, 2000
(unaudited) and December 31, 1999
Condensed Consolidated Statement of Stockholders' Equity for
the Three Months Ended March 31, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 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 4. Submission to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signature
</TABLE>
1
<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
MARCH 31,
------------------
2000 1999
------- -------
<S> <C> <C>
REVENUES.................................................... $65,404 $37,658
COSTS AND EXPENSES
Cost of services............................................ 22,886 11,982
Selling, general and administrative......................... 23,833 13,717
Depreciation................................................ 2,163 1,067
Amortization................................................ 15,268 6,536
------- -------
Total costs and expenses.................................... 64,150 33,302
------- -------
INCOME FROM OPERATIONS...................................... 1,254 4,356
Equity in loss from MarketWatch.com, Inc. .................. (6,382) --
Other income, net........................................... 133 (18)
------- -------
INCOME (LOSS) BEFORE INCOME TAXES........................... (4,995) 4,338
Provision for income taxes.................................. 227 2,567
------- -------
NET INCOME (LOSS)........................................... (5,222) 1,771
Foreign currency translation adjustment..................... (980) (231)
------- -------
COMPREHENSIVE INCOME (LOSS)................................. $(6,202) $ 1,540
======= =======
NET INCOME (LOSS) PER SHARE
Basic....................................................... $ (0.08) $ 0.03
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic....................................................... 68,634 56,424
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 4
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 57,261 $ 12,008
Accounts receivable, net.................................. 54,045 40,914
Receivable from affiliate................................. 20,887 19,224
Prepaid expenses and other current assets................. 3,583 1,925
Deferred income taxes..................................... 957 10,744
-------- --------
Total Current Assets.............................. 136,733 84,815
-------- --------
Property and equipment, net................................. 37,714 20,862
Goodwill, net of accumulated amortization of $67,286 and
$60,249................................................... 416,940 222,868
Other intangible assets, net................................ 198,476 122,764
Investment in MarketWatch.com, Inc.......................... 186,578 --
Other assets................................................ 6,863 1,393
-------- --------
TOTAL ASSETS...................................... $983,304 $452,702
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 18,599 $ 10,644
Payable to affiliate...................................... 20,935 20,000
Accrued liabilities....................................... 54,125 42,842
Income taxes payable...................................... 4,451 7,189
Other current liabilities................................. 2,005 --
Deferred revenue....................................... 35,485 15,390
-------- --------
Total Current Liabilities......................... 135,600 96,065
-------- --------
Deferred tax liabilities............................... 82,050 15,684
-------- --------
TOTAL LIABILITIES................................. 217,650 111,749
-------- --------
Commitments and contingencies
Stockholders' Equity:
Common stock, .01 par value, 200,000,000 authorized
91,195,000 issued and outstanding...................... 912 --
Additional paid-in capital................................ 788,671 --
Parent's investment....................................... -- 358,680
Accumulated deficit....................................... (21,193) (15,971)
Accumulated other comprehensive income (loss)............. (2,736) (1,756)
-------- --------
TOTAL STOCKHOLDERS' EQUITY........................ 765,654 340,953
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $983,304 $452,702
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<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 PAR PAID IN PARENT'S COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL INVESTMENT INCOME 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..... 185 2 371 -- -- -- 373
Other comprehensive loss...... -- -- -- -- (980) -- (980)
Net loss...................... -- -- -- -- -- (5,222) (5,222)
------ ---- -------- --------- ------- -------- --------
Balance, March 31, 2000....... 91,195 $912 $788,671 $ -- $(2,736) $(21,193) $765,654
====== ==== ======== ========= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 6
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income (loss)........................................... $ (5,222) $ 1,771
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in loss of MarketWatch.com, Inc.................... 6,382 --
Depreciation and amortization............................. 17,431 7,603
Deferred income taxes..................................... (4,963) (89)
Other non-cash items, net................................. (60) 234
Changes in operating assets and liabilities, net............ (3,273) (8,151)
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 10,295 1,368
-------- -------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment........................ (2,556) (1,416)
Cash acquired through merger.............................. 48,402 --
-------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES......... 45,846 (1,416)
-------- -------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Contribution from (distribution to) parent................ (10,764) 29,558
Proceeds from exercise of common stock options............ 373 --
-------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... (10,391) 29,558
Effect of exchange rate on cash............................. (497) (15)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 45,253 29,495
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 12,008 13,945
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 57,261 $43,440
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<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. This report on Form 10-Q for the three months ended
March 31, 2000 should be read in conjunction with the Company's financial
statements on Form 8-K/A for the fiscal years ended December 31, 1999.
2. MERGER WITH INTERACTIVE DATA CORPORATION
On February 29, 2000, DBC completed a merger with Interactive Data
Corporation ("IDC"). 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 IDC 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 IDC are the historical financial
statements of DBC.
6
<PAGE> 8
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
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>
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. 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 by $148,686. This excess is being
amortized over three years. Accordingly, amortization of $4,130 is included for
the one month ended March 31, 2000 together with DBC's share of MarketWatch's
losses for the month.
DBC purchased news and web advertising from MarketWatch in the amount of
$164 and $20, respectively, for the one month ended March 31, 2000. The Company
provides services to MarketWatch including accounting, network operations, web
hosting and data feeds. DBC charged MarketWatch $72 for such services for the
one month ended March 31, 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 March 31, 2000, no
amounts had been advanced under such agreement.
7
<PAGE> 9
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
4. STOCK BASED COMPENSATION
The Company has 2,838,690 stock options outstanding under its stock option
plan as of March 31, 2000, with a weighted average exercise price of $5.54. Of
these options, 1,551,973 are currently exercisable and have a weighted average
exercise price of $5.30.
5. SEGMENT INFORMATION
Due to the merger with Interactive Data, management has reevaluated its
reportable segments.
DBC's reportable segments are as follows:
Institutional -- delivery of time sensitive pricing, dividend,
corporate 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
The Company evaluates its segments on the basis of revenue, operating
income and earnings before interest, taxes, depreciation and amortization
("EBITDA") and capital expenditures.
Segment financial information is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------- -------
<S> <C> <C>
Revenues
Institutional............................................ $60,020 $37,658
Retail................................................... 5,384 --
------- -------
Total.......................................... $65,404 $37,658
======= =======
Income (loss) from operations
Institutional.......................................... $ 4,484 $ 4,356
Retail................................................. (1,092) --
Corporate and unallocated.............................. (2,138) --
------- -------
Total.......................................... $ 1,254 $ 4,356
======= =======
EBITDA
Institutional.......................................... $19,014 $11,959
Retail................................................. 47 --
Corporate and unallocated.............................. (376) --
------- -------
Total.......................................... $18,685 $11,959
======= =======
</TABLE>
6. EARNINGS (LOSS) PER SHARE
Weighted average basic shares outstanding as of March 31, 2000 were
68,634,000. Due to losses in the quarter, the effect of the options would have
been anti-dilutive and therefore no diluted earnings per share has been
presented.
8
<PAGE> 10
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
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. SUBSEQUENT EVENTS
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.
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. Itex (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., 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 will be recognized by the Company.
9
<PAGE> 11
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 America's
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 dialup 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 high quality 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 "InSite" product delivers via the Internet equity and fixed income
data to institutional investors.
- The GTIS division provides real-time domestic and international fixed
income, foreign exchange, money market and precious metal information.
- 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 the leading real-time, Internet delivered
subscription quote service for serious 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> 12
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
(UNAUDITED)
RESULTS OF CONTINUING OPERATIONS
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA ($ THOUSANDS)
FOR THE PERIODS ENDED MARCH 31,
------------------------------------------
HISTORICAL PRO FORMA
THREE MONTHS THREE MONTHS
------------------ --------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Institutional................................... $60,020 $37,658 $ 66,438 $ 59,005
Retail:
-- eSignal................................... 2,282 -- 8,396 2,670
-- Broadcast................................. 3,102 -- 8,367 15,987
------- ------- -------- --------
Total................................... 65,404 37,658 83,201 77,662
Cost of services.................................. 22,886 11,982 32,430 30,343
Selling, general and Administrative............... 23,833 13,717 31,214 32,298
------- ------- -------- --------
EBITDA 18,685.. 11,959 19,557 15,021
Depreciation and amortization..................... 17,431 7,603 24,473 27,148
------- ------- -------- --------
INCOME (LOSS) FROM OPERATIONS..................... 1,254 4,356 (4,916) (12,127)
Equity in loss from MarketWatch.com............... (6,382) -- (18,696) (13,613)
Other income, net................................. 133 (18) 501 389
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES................. (4,995) 4,338 (23,111) (25,351)
Provision (benefit) for income taxes.............. 227 2,567 (5,874) (3,761)
------- ------- -------- --------
NET INCOME (LOSS)................................. $(5,222) $ 1,771 $(17,237) $(21,590)
======= ======= ======== ========
Earnings per share................................ $ (0.08) $ .03 $ (0.19) $ (0.24)
Weighted average shares outstanding............... 68,634 56,424 91,058 91,284
Cash flow from operations......................... $10,295 $ 1,368 $ 19,944 $ 7,799
</TABLE>
Proforma Results
The Proforma amounts reflect the results as if DBC and IDC had been
combined on January 1, 1999. In addition they reflect IDC'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.
On a proforma basis, revenue increased by 7%. Strong growth in the
institutional business of 13% and the eSignal business of 214% was partially
offset by a decline in the business using broadcast delivery of 48%. 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 $15,021 in 1999 to $19,557 in 2000, an increase of
$4,536 or 30%. This increase was due to the increased revenue discussed above
and the synergy benefits from the combination of the acquired businesses.
The operating loss declined from $12,127 in 1999 to $4,916 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,
lower goodwill amortization and the end of amortization of a non-compete
agreement relating to a 1995 acquisition.
Cash flow from operations increased from $7,799 to $19,944, an increase of
$12,145. The main reasons for improvement was higher EBITDA and improvements in
account receivable.
11
<PAGE> 13
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
(UNAUDITED)
Historical Results
The historical results include one month results from the Data Broadcasting
business and three month results of the Interactive Data business acquired from
Pearson plc.
Revenue increased by 74% overall against the Interactive Data business
results in the corresponding three month period in 1999. The increase was
primarily due to the inclusion of the results in 2000 of the Muller, Muniview
and Valorinform businesses, the inclusion of one month of results from the Data
Broadcasting business and growth from the core Interactive Data business.
EBITDA increased from $11,959 in 1999 to $18,685 in 2000, an increase of
$6,726 or 56%. The increase was also primarily due to the inclusion of the
results in 2000 of the Muller, Muniview and Valorinform businesses, one month
results from the Data Broadcasting business and growth from the core Interactive
Data business.
Operating income declined from $4,356 in 1999 to $1,254. 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, 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
$6,382 in the current quarter, representing Data Broadcasting's equity interest
in the net loss of MarketWatch for the month ended March 2000, 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 by $151. This increase was mainly due to higher
interest income from higher cash balances.
The effective tax rate was 5% for the quarter ended March 31, 2000 compared
with 59% for the corresponding period of the prior year. The change is 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 $5,222 in the quarter ended March 2000
compared with net income of $1,771 for the comparable period in 1999. This
reduction was due to higher EBITDA being offset by higher amortization and the
Company's share of MarketWatch's losses.
Weighted average shares outstanding grew by 22% due to the shares
associated with the Interactive Data and Data Broadcasting merger which were
issued on February 29, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased by $8,927 from the three
month comparative period in 1999. This was due to higher EBITDA and smaller
changes in operating assets.
The company invested $2,556 in the current three month period for property
and equipment, compared with $1,416 in the prior year's corresponding period.
The increase was due to expenditure on the integration of the Muller, Muniview
and Valorinform businesses.
Cash used in financing activities was $10,391 in the quarter ended March
2000 compared to cash provided by financing activities of $29,558 in the prior
year's corresponding period. This is primarily due to a reorganization of IDC
prior to the merger with DBC and settlement of intercompany balances with
Pearson.
Management believes that cash generated by operating activities, together
with its existing cash, are sufficient to meet the short-term needs of the
Company.
12
<PAGE> 14
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
(UNAUDITED)
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.
- 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.
13
<PAGE> 15
DATA BROADCASTING CORPORATION
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 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS
The Registrant's Annual Meeting of Stockholders was held on February 23,
2000. Stockholders voted as follows:
a. Approval of the Agreement and Plan of Merger, dated as of November
14, 1999, and amended as of January 10, 2000, among the Registrant,
Interactive Data Corporation, Pearson Longman, Inc. and Detective
Merger-Sub, and the related issuance of 56,423,949 shares of DBC common
stock to Pearson Longman, Inc. in the merger.
<TABLE>
<S> <C>
For...................................................... 18,081,121
Against.................................................. 763,952
Abstain.................................................. 112,163
</TABLE>
b. Approval of an amendment to Registrant's certificate of
incorporation to increase the number of authorized shares of common stock
to 200,000,000 shares.
<TABLE>
<S> <C>
For...................................................... 17,554,439
Against.................................................. 1,235,519
Abstain.................................................. 167,278
</TABLE>
c. Election of ten members to the Registrant's board of directors,
whose terms shall commence immediately upon the completion of the merger
and who will serve until the next annual meeting or until their successors
have been duly elected and qualified or their earlier death, resignation or
removal.
<TABLE>
<S> <C> <C>
Robert Berkley................................ For 30,132,501
Against 1,011,040
Stuart Clark.................................. For 30,187,384
Against 956,157
John Fallon................................... For 30,131,110
Against 1,012,431
Donald P. Greenberg........................... For 30,187,884
Against 955,657
Stephen Hill.................................. For 30,133,501
Against 1,010,040
Alan J. Hirschfield........................... For 30,132,501
Against 1,011,040
Philip J. Hoffman............................. For 30,191,201
Against 952,340
John Makinson................................. For 30,191,201
Against 952,340
Carl Spielvogel............................... For 30,191,201
Against 952,340
Allan R. Tessler.............................. For 30,132,501
Against 1,011,040
</TABLE>
14
<PAGE> 16
d. Granting to the board of directors discretionary authority to
postpone or adjourn the annual meeting in order to solicit additional votes
to approve any of the above matters.
<TABLE>
<S> <C>
For...................................................... 16,280,186
Against.................................................. 2,416,041
Abstain.................................................. 261,009
</TABLE>
e. Approval of the Registrant's 2000 long-term incentive plan.
<TABLE>
<S> <C>
For...................................................... 15,312,802
Against.................................................. 3,269,693
Abstain.................................................. 374,741
</TABLE>
f. Ratification of the appointment of PricewaterhouseCoopers LLP as
the Registrant's independent auditor for the fiscal year ending June 30,
2000.
<TABLE>
<S> <C>
For...................................................... 30,692,639
Against.................................................. 305,192
Abstain.................................................. 145,710
</TABLE>
ITEM 6. EXHIBITS AND REPORTS 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 Financial Data Schedule
</TABLE>
b. During the quarter ended March 31, 2000, the Registrant filed a current
report on Form 8-K, dated February 29, 2000 reporting the merger with
Interactive Data Corporation and the change of address of its executive offices.
This 8-K was amended on May 5, 2000, to include the required financial
statements.
15
<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: May 11, 2000
By: /s/ STEVEN G. CRANE
------------------------------------
Name: Steven G. Crane
Chief Financial Officer
Dated: May 11, 2000
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 57,261 0
<SECURITIES> 0 0
<RECEIVABLES> 58,828 0
<ALLOWANCES> 4,783 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 136,733 0
<PP&E> 127,228 0
<DEPRECIATION> 89,514 0
<TOTAL-ASSETS> 983,304 0
<CURRENT-LIABILITIES> 135,600 0
<BONDS> 0 0
0 0
0 0
<COMMON> 912 0
<OTHER-SE> 764,742 0
<TOTAL-LIABILITY-AND-EQUITY> 765,654 0
<SALES> 0 0
<TOTAL-REVENUES> 65,404 37,658
<CGS> 22,886 11,982
<TOTAL-COSTS> 64,150 33,302
<OTHER-EXPENSES> 0 18
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,995) 4,338
<INCOME-TAX> 227 2,567
<INCOME-CONTINUING> (5,222) 1,771
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,222) 1,771
<EPS-BASIC> (.08) .03
<EPS-DILUTED> 0 0
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