<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 JUNE 30, 2000.
COMMISSION FILE NUMBER 0-20311
------------------------
DATA BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C>
DELAWARE 13-3668779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
22 CROSBY DRIVE, BEDFORD, MASSACHUSETTS 01730
(Address of principal administrative offices)
(781) 687-8800
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
------------------------
The number of shares of common stock, par value $.01 per share, of the
registrant outstanding as of July 31, 2000 was 91,202,427.
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<PAGE> 2
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements Of Operations and Comprehensive Loss
(unaudited) for the Three and Six Months Ended June 30, 2000 and 1999
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and
December 31, 1999
Condensed Consolidated Statement of Stockholders' Equity for the Six
Months Ended June 30, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited) for the Six
Months Ended June 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signature
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
2000 1999 2000 1999
-------- ------- -------- -------
<S> <C> <C> <C> <C>
REVENUES............................................... $ 83,896 $41,953 $149,300 $79,611
COSTS AND EXPENSES
Cost of services.................................. 31,931 11,882 54,817 23,864
Selling, general and administrative............... 30,856 17,065 54,689 30,782
Depreciation...................................... 3,386 1,286 5,549 2,353
Amortization...................................... 21,246 4,160 36,514 10,696
-------- ------- -------- -------
Total costs and expenses..................... 87,419 34,393 151,569 67,695
-------- ------- -------- -------
INCOME (LOSS) FROM OPERATIONS.......................... (3,523) 7,560 (2,269) 11,916
Equity in loss from MarketWatch.com, Inc.......... (20,018) -- (26,400)
Other income, net................................. 230 489 363 471
-------- ------- -------- -------
INCOME (LOSS) BEFORE INCOME TAXES...................... (23,311) 8,049 (28,306) 12,387
Provision (benefit) for income taxes.............. (4,478) 3,995 (4,251) 6,562
-------- ------- -------- -------
NET INCOME (LOSS)...................................... (18,833) 4,054 (24,055) 5,825
Foreign currency translation adjustment........... 5,060 (1,050) 4,080 (1,281)
-------- ------- -------- -------
COMPREHENSIVE INCOME (LOSS)............................ $(13,773) $ 3,004 $(19,975) $ 4,544
======== ======= ======== =======
NET INCOME (LOSS) PER SHARE
Basic and diluted................................. $ (0.21) $ 0.07 $ (0.30) $ 0.10
======== ======= ======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted................................. 91,200 56,424 79,917 56,424
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 28,654 $ 12,008
Accounts receivable, net............................... 50,291 40,914
Receivable from affiliate.............................. 21,044 19,224
Prepaid expenses and other current assets.............. 5,045 1,925
Deferred income taxes.................................. 1,698 10,744
-------- --------
Total current assets.............................. 106,732 84,815
-------- --------
Property and equipment, net................................. 39,475 20,862
Goodwill, net of accumulated amortization of $72,864 and
$60,249................................................... 405,615 222,868
Other intangible assets, net................................ 188,644 122,764
Investment in MarketWatch.com, Inc.......................... 209,451 --
Other assets................................................ 19,965 1,393
-------- --------
Total Assets...................................... $969,882 $452,702
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 15,977 $ 10,644
Payable to affiliate................................... 35,612 20,000
Accrued liabilities.................................... 56,379 42,842
Income taxes payable................................... 10,115 7,189
Other current liabilities.............................. 2,202 --
Deferred revenue....................................... 33,408 15,390
-------- --------
Total current liabilities......................... 153,693 96,065
-------- --------
Deferred tax liabilities............................... 72,448 15,684
-------- --------
Total Liabilities................................. 226,141 111,749
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, .01 par value, 200,000,000 authorized
91,200,000 issued and outstanding..................... 912 --
Additional paid-in capital............................. 788,691 --
Parent's investment.................................... -- 358,680
Accumulated deficit.................................... (40,026) (15,971)
Accumulated other comprehensive income (loss).......... (5,836) (1,756)
-------- --------
Total Stockholders' Equity........................ 743,741 340,953
-------- --------
Total Liabilities and Stockholders' Equity........ $969,882 $452,702
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
--------------------- ADDITIONAL OTHER TOTAL
NUMBER OF PAID IN PARENT'S COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL INVESTMENT INCOME 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......... 191 2 391 -- -- -- 393
Other comprehensive loss.......... -- -- -- -- (4,080) -- (4,080)
Net loss.......................... -- -- -- -- -- (24,055) (24,055)
------ ---- -------- --------- ------- -------- --------
Balance, June 30, 2000............ 91,201 $912 $788,691 $ -- $(5,836) $(40,026) $743,741
====== ==== ======== ========= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
2000 1999
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $(24,055) $ 5,825
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in loss of MarketWatch.com, Inc................. 26,400 --
Depreciation and amortization.......................... 42,063 13,049
Deferred income taxes.................................. (15,434) 254
Other non-cash items, net.............................. (94) --
Changes in operating assets and liabilities, net............ (1,770) (2,959)
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 27,110 16,169
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (9,362) (3,527)
Cash acquired through merger.............................. 48,402 --
Investment in MarketWatch.com, Inc........................ (43,000) --
Other investing activities................................ 52 --
Acquisition of business................................... (11,200)
-------- -------
NET CASH USED IN INVESTING ACTIVITIES....................... (15,108) (3,527)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliate................................... 15,000 --
Contribution from (distribution to) parent................ (10,764) 11,449
Proceeds from exercise of common stock options............ 393 --
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 4,629 11,449
Effect of exchange rate on cash............................. 15 (827)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 16,646 23,264
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 12,008 15,037
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 28,654 $38,301
======== =======
Non-cash transactions:
As described in Note 9, the Company sold the stock and assets of certain
subsidiaries and product lines for stock with a value of $12.5 million.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared by Data Broadcasting Corporation and Subsidiaries (the "Company"
or "DBC") in accordance with generally accepted accounting principles for
interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. In the opinion of management, all adjustments considered necessary
for a fair presentation of the Company's financial position, results of
operations and cash flows have been included. All such adjustments are of a
normal recurring nature. These unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited combined
financial statements for the year ended December 31, 1999 filed with the
Securities and Exchange Commission on Form 8-K/A. The results for interim
periods are not necessarily indicative of the results to be expected for the
full year.
2. MERGER WITH INTERACTIVE DATA CORPORATION
On February 29, 2000, DBC completed a merger with Interactive Data
Corporation ("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.
The merger was accounted for as follows:
<TABLE>
<S> <C>
ASSETS ACQUIRED
Cash and cash equivalents.............................. $ 48,402
Accounts receivable.................................... 12,238
Fixed assets........................................... 16,868
Other assets........................................... 7,637
Goodwill............................................... 198,109
Investment in MarketWatch.com.......................... 192,960
Intangibles:
Customer Lists.................................... 72,300
Workforces........................................ 4,400
Technology........................................ 8,000
--------
560,914
LIABILITIES ASSUMED
Accounts payable and accrued expenses.................. 19,594
Deferred revenue....................................... 12,846
Other liabilities...................................... 2,387
Deferred tax liabilities............................... 78,543
Accrued professional costs............................. 2,300
Accrued acquisition costs.............................. 6,950
--------
122,620
--------
Total Purchase Price.............................. $438,294
========
</TABLE>
7
<PAGE> 8
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
Goodwill is being amortized over ten years. Intangible assets are being
amortized between two and eleven years. Accrued professional costs include
investment banking, accounting and legal services. Accrued acquisition costs
include severance, relocation and lease termination costs. An additional $3,000
of acquisition costs were funded by Pearson and treated as additional goodwill
and a capital contribution.
3. INVESTMENT IN MARKETWATCH.COM, INC.
In connection with the transaction described in Note 2, the Company's
investment in MarketWatch.com, Inc. ("MarketWatch") was written up to its fair
value on February 29, 2000 of $192,960. This amount exceeded the Company's share
of the underlying equity of MarketWatch on that date by $148,686. This excess is
being amortized over three years. Accordingly, amortization of $12,390 and
$16,520 is included for the three and six months ended June 30, 2000 together
with DBC's share of MarketWatch's losses for the three and six month period.
On March 28, 2000, the Company agreed to purchase an additional 1,136,814
shares of MarketWatch common stock for $43,000. This transaction, which was
consummated in May 2000, increased the Company's ownership interest in
MarketWatch to approximately 34.4%. As part of this transaction, the Company
borrowed $15,000 from a Pearson affiliate. Interest on this loan is payable
quarterly at the 3-month LIBOR rate plus 150 basis points. At June 30, 2000, the
balance on this borrowing was $15,000 which is included in the payable to
affiliate in the balance sheet. Outstanding borrowings are due on December 29,
2000.
DBC purchased news and web advertising from MarketWatch in the amount of
$500 and $60, respectively, for the six months ended June 30, 2000. The Company
provides services to MarketWatch including accounting, network operations, web
hosting and data feeds. DBC charged MarketWatch $192 for such services for the
six months ended June 30, 2000; these amounts were recorded as reductions of the
gross expenses incurred by DBC.
Additionally, DBC is required to lend MarketWatch up to $5,000 under a
revolving credit agreement expiring October 29, 2000. As of June 30, 2000, no
amounts had been advanced under such agreement.
4. STOCK BASED COMPENSATION
The Company has 2,808,707 stock options outstanding under its stock option
plan as of June 30, 2000, with a weighted average exercise price of $5.52. Of
these options, 1,581,289 are currently exercisable and have a weighted average
exercise price of $5.38.
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 and
MarketWatch ("EBITDA") and capital expenditures.
8
<PAGE> 9
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
Segment financial information is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues
Institutional............................... $67,547 $41,953 $127,567 $79,611
Retail...................................... 16,349 -- 21,733 --
------- ------- -------- -------
Total.................................. $83,896 $41,953 $149,300 $79,611
======= ======= ======== =======
Income (loss) from operations
Institutional............................... $ 6,249 $ 7,560 $ 10,733 $11,916
Retail...................................... (3,482) -- (4,574) --
Corporate and unallocated................... (6,290) -- (8,428) --
------- ------- -------- -------
Total.................................. $(3,523) $ 7,560 $ (2,269) $11,916
======= ======= ======== =======
EBITDA
Institutional............................... $22,007 $13,006 $ 41,021 $24,965
Retail...................................... 560 -- 607 --
Corporate and unallocated................... (1,458) -- (1,834) --
------- ------- -------- -------
Total.................................. $21,109 $13,006 $ 39,794 $24,965
======= ======= ======== =======
</TABLE>
6. EARNINGS (LOSS) PER SHARE
Weighted average basic shares outstanding for the three months ended June
30, 2000 were 91,200,170. 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.
7. COMMITMENTS AND CONTINGENCIES
Various claims, generally incidental to the conduct of normal business, are
pending or threatened against the Company. The Company intends to vigorously
defend against these claims. While ultimate liability, if any, arising from any
such claims is presently undeterminable, it is management's opinion that the
ultimate resolution of these claims will not have a material adverse effect on
the financial condition or results of operations of the Company.
8. ACQUISITION OF BUSINESS
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.
9. SALE OF BUSINESS
On April 1, 2000, the Company completed the sale of the assets of its
sports business, including the stock of two subsidiaries, to SportsLine.com,
Inc. ("SportsLine"), in exchange for $10,000 in SportsLine common stock. The
assets include the stock of Las Vegas Sports Consultants, Inc., and Instant Odds
Network, Inc., as well as the SporTrax and SportSignal product lines. The
agreement includes a guarantee by SportsLine that the common stock received will
be worth at least $12,500 after approximately one year from the closing, with
any shortfall to be paid in cash by SportsLine. Based on the book value of the
net assets sold, no gain or loss was recognized by the Company.
9
<PAGE> 10
DATA BROADCASTING CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company primarily supplies financial and business information to
institutional and individual investors worldwide. The Company is 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> 11
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
RESULTS OF CONTINUING OPERATIONS
SELECTED FINANCIAL DATA ($ THOUSANDS)
FOR THE PERIODS ENDED JUNE 30,
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PROFORMA PROFORMA
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
------------------- ------------------- -------------------- -------------------
2000 1999 2000 1999 2000 1999 2000 1999
-------- ------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Institutional................ $ 67,547 $41,953 $127,567 $79,611 $ 67,547 $ 63,475 $133,985 $122,750
Retail:
- eSignal.................. 9,639 11,921 -- 9,639 5,370 18,035 8,040
- Broadcast................ 6,710 9,812 -- 6,710 11,885 15,077 27,872
-------- ------- -------- ------- -------- -------- -------- --------
TOTAL................ 83,896 41,953 149,300 79,611 83,896 81,000 167,097 158,622
Cost of Services............. 31,931 11,882 54,817 23,864 31,931 30,301 64,361 60,644
Selling, General &
Administrative............. 30,856 17,065 54,689 30,782 30,856 34,600 62,070 66,898
-------- ------- -------- ------- -------- -------- -------- --------
EBITDA (1)................... 21,109 13,006 39,794 24,965 21,109 16,099 40,666 31,120
Depreciation &
Amortization............... 24,632 5,446 42,063 13,049 24,632 24,141 49,105 51,288
-------- ------- -------- ------- -------- -------- -------- --------
INCOME (LOSS) FROM
OPERATIONS................. (3,523) 7,560 (2,269) 11,916 (3,523) (8,042) (8,439) (20,168)
Equity in loss from
MarketWatch.com, Inc....... (20,018) -- (26,400) -- (20,018) (16,383) (38,714) (29,996)
Other income, net............ 230 489 363 471 230 765 731 1,154
-------- ------- -------- ------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES...................... (23,311) 8,049 (28,306) 12,387 (23,311) (23,660) (46,422) (49,010)
Provision (benefit) from
income taxes............... (4,478) 3,995 (4,251) 6,562 (4,478) (7,108) (10,352) (10,869)
-------- ------- -------- ------- -------- -------- -------- --------
NET INCOME (LOSS)............ $(18,833) $ 4,054 $(24,055) $ 5,825 $(18,833) $(16,552) $(36,070) $(38,141)
======== ======= ======== ======= ======== ======== ======== ========
Earnings per share........... $ (0.21) $ 0.07 $ (0.30) $ 0.10 $ (0.21) $ (0.18) $ (0.40) $ (0.42)
Weighted average shares
outstanding................ 91,200 56,424 79,917 56,424 91,200 91,200 91,200 91,194
</TABLE>
---------------
(1) "EBITDA" is defined as net income before net interest expense/income, income
taxes, deprecation and amortization expense and equity in losses of
MarketWatch.com. EBITDA is presented because it is a widely accepted
indicator of funds available to business, although it is not a measure of
liquidity or financial performance under generally accepted accounting
principles. We believe that EBITDA, while providing useful information,
should not be considered in isolation or as an alternative to net income or
cash flows as determined under generally accepted accounting principles.
EBITDA, as presented here, may differ from similarly titled measures
reported by other companies due to potential inconsistencies in methods of
calculation.
HISTORICAL RESULTS
Three Months Results
The historical results for the quarter ended June 30, 2000 include both the
Data Broadcasting and Interactive Data businesses while the historical results
for the quarter ended June 30, 1999 include only the Interactive Data business.
This is due to the merger between Interactive Data Corporation and Data
Broadcasting Corporation as described in Note 2.
Revenue increased by 100% compared to the corresponding quarter in 1999.
The increase was primarily due to the inclusion of the results in 2000 of the
Muller, Muniview and Valorinform businesses, the inclusion of a full quarter's
results from the Data Broadcasting business and growth from the core Interactive
Data business.
EBITDA increased from $13,006 in 1999 to $21,109 in 2000, an increase of
$8,103 (62%). The increase was also primarily due to the inclusion of the
results in 2000 of the Muller, Muniview and
11
<PAGE> 12
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
Valorinform businesses, a full quarters results from the Data Broadcasting
business and growth from the core Interactive Data business.
Operating income declined from $7,560 in 1999 to a loss of $3,523 in 2000.
The decline in the operating income was primarily due to the inclusion of the
amortization of the goodwill and intangibles relating to the acquired
businesses, 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
$20,018 in the quarter, representing Data Broadcasting's equity interest in the
net loss of MarketWatch, and amortization of the fair value of the Company's
investment in excess of the Data Broadcasting's share of the equity in
MarketWatch.
Other income, net, decreased from $489 in 1999 to $230 in 2000. This
decrease was mainly due to lower invested cash balances in 2000 as compared to
1999.
The change in the Company's effective tax rate 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 $18,833 in the quarter ended June 30,
2000 compared with net income of $4,054 for the comparable period in 1999. This
reduction was due to higher amortization and the Company's share of
MarketWatch's losses.
Weighted average shares outstanding grew by 62% due to the shares
associated with the Interactive Data and Data Broadcasting merger which were
issued on February 29, 2000.
Six Months Results
The historical results for six months include four months results from the
Data Broadcasting business and six months results of the Interactive Data
business. The historic results for the current quarter include both businesses
for 2000 but only the Interactive Data business in 1999.
Revenue increased by 88% overall against the Interactive Data business
results in the corresponding six month period in 1999. The increase was
primarily due to the inclusion of the results in 2000 of the Muller, Muniview
and Valorinform businesses, which were acquired in the latter half of 1999, the
inclusion of four months of results from the Data Broadcasting business and
growth from the core Interactive Data business.
EBITDA increased from $24,965 in 1999 to $39,794 in 2000, an increase of
$14,829 (+59%). The increase was primarily due to the inclusion of the results
in 2000 of the Muller, Muniview and Valorinform businesses, four month results
from the Data Broadcasting business subsequent to the merger date and growth
from the core Interactive Data business.
Operating income declined from $11,916 in 1999 to a loss of $2,269 in 2000.
The decline in the operating income was primarily due to the inclusion of the
amortization of the goodwill and intangibles relating to Muller, Muniview and
Valorinform business acquisitions, which were consumated in the latter half of
1999, and goodwill and intangible amortization arising from the merger between
Interactive Data and Data Broadcasting.
The Company's pre tax share of the net losses from MarketWatch totaled
$26,400 in the six months, representing Data Broadcasting's equity interest in
the net loss of MarketWatch, subsequent to the date of the merger between
Interactive Data and Data Broadcasting, and amortization of the fair value of
the Company's investment in excess of the Data Broadcasting's share of the
equity in MarketWatch.
12
<PAGE> 13
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
Other income, net, decreased from $471 in 1999 to $363 in 2000. This
decrease was mainly due to lower invested cash balances in 2000 compared with
the same period in 1999.
The change in the effective tax rate for the six month period ended June
30, 2000 compared with the effective rate for the corresponding period of the
prior year 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 $24,055 in the six month period ended
June 30, 2000 compared with net income of $5,825 for the comparable period in
1999. This reduction was due to higher amortization and the Company's share of
MarketWatch's losses.
Weighted average shares outstanding grew by 42% due to the shares
associated with the Interactive Data and Data Broadcasting merger which were
issued on February 29, 2000.
PROFORMA RESULTS
The Proforma amounts reflect the results as if DBC and IDC had been
combined on January 1, 1999. In addition they reflect Interactive Data's July
1999 acquisition of Muller Data Corporation and the assets of Muniview and
Valorinform, as if the acquisition had occurred on January 1, 1999.
Three Months Results
On a proforma basis, for the current quarter, revenue increased by 4%
compared with the same period in the prior year. Growth in the institutional
business (+6%) and the eSignal business (+79%) were partially offset by a
decline in the business using broadcast delivery (-44%). 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 $16,099 in 1999 to $21,109 in 2000, an increase of
$5,010 (+31%). This increase was due to the increased revenue discussed above
and the continued synergy benefits from the combination of the acquired
businesses.
The operating loss declined from $8,042 in 1999 to $3,523 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.
Six Months Results
On a proforma basis, for the first six months of the year, revenue
increased by 5% compared with the same period in the prior year. Strong growth
in the institutional business (+9%) and the eSignal business (+124%) was
partially offset by a decline in the business using broadcast delivery (-46%).
This decline in broadcast customers is expected to continue. Institutional
revenues increased due to new sales of data products to new customers, growth to
existing redistributors and price increases.
EBITDA increased from $31,120 in 1999 to $40,666 in 2000, an increase of
$9,546 (+31%). This increase was due to the increased revenue discussed above
and the continued synergy benefits from the combination of the acquired
businesses.
The operating loss declined from $20,168 in 1999 to $8,439 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.
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<PAGE> 14
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased by $10,941 from the
six-month comparative period in 1999. This was due to higher EBITDA being
partially offset by higher working capital requirements.
The Company invested $9,362 in the current six-month period for property
and equipment, compared with $3,527 in the prior year's corresponding period.
The increase was due to expenditure on the integration of the Muller, Muniview
and Valorinform businesses and the fact that the 1999 expenditure reflects only
the Interactive Data business. The Company also invested an additional $43,000
in MarketWatch.com, Inc. The company also acquired Itex (FIT) Limited a service
delivery agent and software technology partner for a net cash consideration of
$11,200.
Cash provided in financing activities was $4,636 in the six months ended
June 30, 2000 compared to $11,449 in the prior year's corresponding period. This
is primarily due to a reorganization of IDC prior to the merger with DBC,
settlement of intercompany balances with Pearson, and borrowings of $15,000.
Management believes that cash generated by operating activities, together
with its existing cash, are sufficient to meet the short-term needs of the
Company.
INFLATION
The Company does not believe that its financial performance has been
materially affected by inflation.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include the following:
- The presence of competitors with greater financial resources and their
strategic response to the Company's services and products.
- Changes in technology, which could affect the competitiveness of the
Company's products and services.
- A decline in activity levels in the securities markets, which could lower
demand for the Company's products and services.
- 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.
14
<PAGE> 15
DATA BROADCASTING CORPORATION AND SUBSIDIARIES -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
- The ability of the Company to broaden its subscriber base by adding more
individual investors outside of the Company's traditional "active-trader"
market.
- The potential obsolescence of the Company's services due to the introduction
of new technologies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of risks, including changes in interest
rates on its borrowings and fluctuation in foreign currency exchange rates.
There have been no material changes in market risk exposures since December 31,
1999.
15
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings incidental to its
business operation, none of which is expected to have a material effect on the
financial condition or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
b. During the quarter ended June 30, 2000, the Registrant amended its
current report on Form 8-K, dated February 29, 2000, to include the
required financial statements related to the merger with Interactive
Data Corporation.
16
<PAGE> 17
DATA BROADCASTING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATA BROADCASTING CORPORATION
(Registrant)
By: /s/ STUART J. CLARK
------------------------------------
Stuart J. Clark
President and Chief Executive
Officer
Dated: August 3, 2000
By: /s/ STEVEN G. CRANE
------------------------------------
Steven G. Crane
Chief Financial Officer
Dated: August 3, 2000
17
