U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
Commission File Number 0-24634
TRACK DATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-3181095
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
56 PINE STREET
NEW YORK, NY 10005
(Address of principal executive offices)
(212) 943-4555
(Registrant's telephone number)
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 past 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of April 30, 1997 there
were 14,693,252 shares of common stock outstanding.
<PAGE> 1
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PART I. FINANCIAL INFORMATION
- -------- ----------------------
Item 1. Financial Statements
---------------------
See pages 2-5
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
See pages 6-7
PART II. OTHER INFORMATION
- --------- ------------------
See page 8
<PAGE> 2
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
Unaudited Derived from
audited
financial
statements
ASSETS
CASH AND EQUIVALENTS $ 236,771 $ 63,482
ACCOUNTS RECEIVABLE - net 1,387,718 596,628
FIXED ASSETS - net 9,231,617 9,561,083
INVESTMENT IN AFFILIATE 2,606,773 2,577,662
DUE FROM RELATED PARTIES 910,480 878,084
EXCESS OF COST OVER NET ASSETS ACQUIRED 3,513,925 3,581,029
NET DEFERRED INCOME TAX ASSETS (Note 2) 301,576 511,450
OTHER ASSETS 2,570,312 2,535,937
----------- ------------
TOTAL $20,759,172 $ 21,305,355
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,853,842 $ 4,258,944
Note payable - bank 1,893,085 2,787,082
Notes payable - other 1,634,548 1,695,283
Capital lease obligations 3,727,565 4,185,017
Other liabilities 744,265 722,878
----------- ------------
Total liabilities 12,853,305 13,649,204
----------- ------------
STOCKHOLDERS' EQUITY (Note 3)
Common stock - $.01 par value; 30,000,000 shares authorized;
issued and outstanding - 14,720,452 shares in 1997 and
14,782,552 shares in 1996 147,205 147,826
Additional paid-in capital 13,855,904 13,915,989
Foreign currency translation adjustment 36,678 44,085
Deficit (6,133,920) (6,451,749)
----------- ------------
Total stockholders' equity 7,905,867 7,656,151
----------- ------------
TOTAL $20,759,172 $ 21,305,355
=========== ============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>3
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
----------- -----------
REVENUES $11,709,476 $11,768,294
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 6,505,068 6,669,614
Selling and administrative expenses 4,500,802 4,891,420
Deferred compensation expense - 294,894
Interest expense - net 197,549 222,708
----------- -----------
Total 11,203,419 12,078,636
----------- -----------
INCOME (LOSS) FROM OPERATIONS 506,057 (310,342)
----------- -----------
OTHER INCOME:
Gain on securities 888 288,418
Other income 3,146 -
----------- -----------
4,034 288,418
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
AND EQUITY IN NET (LOSS) INCOME OF AFFILIATE 510,091 (21,924)
INCOME TAXES (BENEFIT) (Note 2) 209,874 (411,058)
----------- -----------
INCOME BEFORE EQUITY IN NET (LOSS) INCOME
OF AFFILIATE 300,217 389,134
EQUITY IN NET (LOSS) INCOME OF AFFILIATE (106,000) 89,082
----------- -----------
NET INCOME $ 194,217 $ 478,216
=========== ===========
NET INCOME PER SHARE (Note 4) $.01 $.03
==== ====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 14,751,000 13,977,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 4
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 194,217 $ 478,216
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 916,077 806,533
Equity in net loss (income) of affiliate 106,000 (89,082)
Deferred compensation - 294,894
Gain on sale and transfer of marketable securities - (335,340)
Deferred income taxes 209,874 (543,329)
Other (3,146) 48,987
Changes in operating assets and liabilities:
Accounts receivable 208,910 216,726
Other assets (136,392) 100,170
Accounts payable and accrued expenses 594,898 309,959
Other liabilities 34,058 (128,947)
----------- -----------
Net cash provided by operating activities 2,124,496 1,158,787
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (192,095) (171,816)
Repayment of related party loans 55,662 540,264
Loans to related parties (98,033) (421,372)
Loans from (to) others 23,474 (10,000)
Purchase of marketable securities - (76,931)
----------- -----------
Net cash used in investing activities (210,992) (139,855)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (717,056) (657,815)
Net payments on note payable - bank (893,997) (505,021)
Net payments on notes payable - other (50,760) (51,274)
Purchase of treasury stock (72,206) -
Net payments on loans from employee savings program (9,526) (12,315)
----------- -----------
Net cash used in financing activities (1,743,545) (1,226,425)
----------- -----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 3,330 14
----------- -----------
NET INCREASE (DECREASE) IN CASH 173,289 (207,479)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 63,482 2,004,827
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 236,771 $ 1,797,348
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 190,815 $ 265,890
Income taxes 13,924 1,509
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by capital leases 259,604 190,233
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE> 5
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position
as of March 31, 1997, and the results of operations and of cash flows for the
three months ended March 31, 1997 and 1996. The results of operations for the
three months ended March 31, 1997 are not necessarily indicative of results
that may be expected for any other interim period or for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1996
included in the Company's Annual Report on Form 10-K. The accounting policies
used in preparing these financial statements are the same as those described
in the December 31, 1996 financial statements.
2. Deferred taxes which were previously provided at state and local rates
and which related to Track Data prior to its merger into Global Market
Information, Inc. (the "Merger") were recalculated based on the changed status
to a C corporation. This resulted in a recognition of additional deferred tax
assets deemed realizable by management of approximately $400,000 for the three
months ended March 31, 1996.
3. During the three months ended March 31, 1997 the Company purchased and
retired 62,100 shares for $72,206.
4. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share," which changes the methodology of calculating earnings per share. The
Company plans to adopt SFAS No. 128 in December 1997. Early adoption is not
permitted. Had the Company adopted SFAS No. 128 as of March 31, 1997, the
related per share disclosure for both basic and diluted earnings per share
would have been $.01 for the first quarter ended March 31, 1997 and $.03 for
the same period in 1996.
<PAGE> 6
TRACK DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Company provides real-time financial market data, fundamental
research, charting and analytical services to both institutional and
individual investors. The Company also disseminates news and third party data
base information from more than 100 sources worldwide. The Company's lead
products include MarkeTrack MX and MarkeTrack NT, Dial/Data, Track OnLine and
InfoVest. Its AIQ Systems division provides expert systems software,
including artificial intelligence products for market timing and stock
selection.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues for the three months ended March 31, 1997 and 1996 were
$11,709,476 and $11,768,294, respectively.
Direct operating costs were $6,505,068 for the first three months of 1997
and $6,669,614 for the similar period in 1996, a decrease of 2%. Direct
operating costs as a percentage of revenues was 56% and 57% for the three
months ended March 31, 1997 and 1996, respectively. The decrease in direct
operating costs was principally due to decreased communications costs. Direct
operating costs include direct payroll, direct telecommunication costs,
computer supplies, depreciation and equipment lease expense and the
amortization of software development costs.
Selling and administrative expenses were $4,500,802 and $4,891,420 in the
1997 and 1996 periods, respectively, a decrease of 8%. Selling and
administrative expenses as a percentage of revenues was 38% in 1997 and 42% in
1996. The dollar and percentage decrease primarily reflects a contribution
expense of approximately $200,000 in the 1996 period and a reduction of
approximately $150,000 in salary expense in the 1997 period.
Deferred compensation expense was $294,894 in 1996 related to the
Company's phantom stock plan which was discontinued as of March 31, 1996.
Interest expense decreased to $197,549 in the 1997 period compared to
$222,708 in 1996 due to decreased borrowings.
Other income was $4,034 and $288,418 for the three months ended March 31,
1997 and 1996, respectively. The gains in 1996 are principally from Innodata
Corporation common stock placed in a trust to satisfy obligations to employees
in 1996. The gain represents the difference between the carrying value of
such securities and the market price at date of disposition.
<PAGE> 7
The income tax benefit in the 1996 period of $411,058 was due to the
recognition of the anticipated realizable amount of tax benefits from a change
in tax status, effective upon the Merger of Track at March 31, 1996, from an S
corporation, for which the majority of taxes were paid by the former sole
stockholder, to a C corporation.
As a result of the above mentioned factors, the Company realized net
income before equity in net (loss) income from an affiliate of $300,217 in the
1997 period compared to $389,134 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1997 and 1996, cash provided by
operating activities was $2,124,496 and $1,158,787, respectively. The
increase was due principally to profitable operations in 1997. Cash flows
used in investing activities was $210,992 and $139,855 for the three months
ended March 31, 1997 and 1996, respectively. Cash used in financing activities
was $1,743,545 and $1,226,425 for the three months ended March 31, 1997 and
1996, respectively. The increase in 1997 is primarily due to a repayment of
bank loans.
The Company has a line of credit with a bank. The line is collateralized
by the assets of the Company and is guaranteed by its principal stockholder.
Interest is charged at 1.75% above the bank's prime rate and is due on demand.
The Company may borrow up to 80% of eligible accounts receivable and is
required to maintain a compensating balance of 10% of the outstanding loans.
The Company did not meet this requirement from time to time during 1996. The
line of credit is sufficient for the Company's cash requirements. There are
no major capital expenditures anticipated beyond the normal replacement of
equipment and additional equipment to meet increased customer demand.
INFLATION AND SEASONALITY
To date, inflation has not had a significant impact on the Company's
operations. The Company's services are generally terminable by its customers
at-will. The Company's revenues are not affected by seasonality.
<PAGE> 8
PART II. OTHER INFORMATION
- --------- ------------------
Item 1. Legal Proceedings. Not Applicable
------------------
Item 2. Changes in Securities. Not Applicable
-----------------------
Item 3. Defaults upon Senior Securities. Not Applicable
----------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------
Not Applicable
Item 5. Other Information. None
------------------
Item 6. (a) Exhibits.
--------
Exhibit 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed during the first
quarter of 1997.
<PAGE>
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.
TRACK DATA CORPORATION
Date: 5/13/97 /s/
------- -------------------------------
Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 5/13/97 /s/
------- -------------------------------
Martin Kaye
V.P. Finance,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000922811
<NAME> TRACK DATA CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 236,771
<SECURITIES> 0
<RECEIVABLES> 1,387,718
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,231,617
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<TOTAL-ASSETS> 20,759,172
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<TOTAL-REVENUES> 11,709,476
<CGS> 0
<TOTAL-COSTS> 11,203,419
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> 510,091
<INCOME-TAX> 209,874
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<CHANGES> 0
<NET-INCOME> 194,217
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