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 SEPTEMBER 30, 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) 422-4300
(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 October 31, 1997 there
were 14,401,537 shares of common stock outstanding.
1
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PART I. FINANCIAL INFORMATION
- -------- ----------------------
Item 1. Financial Statements
---------------------
See pages 2-6
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
See pages 7-9
PART II. OTHER INFORMATION
- --------- ------------------
See page 10
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TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
Unaudited Derived from
audited
financial
statements
ASSETS
CASH AND EQUIVALENTS $ 126,376 $ 63,482
ACCOUNTS RECEIVABLE - net 1,562,650 1,596,628
FIXED ASSETS - net 9,046,745 9,561,083
INVESTMENT IN AFFILIATE 1,447,662 2,577,662
DUE FROM RELATED PARTIES 960,760 878,084
EXCESS OF COST OVER NET ASSETS ACQUIRED 3,379,717 3,581,029
NET DEFERRED INCOME TAX ASSETS (Note 2) - 511,450
OTHER ASSETS 2,453,318 2,535,937
-------------- ------------
TOTAL $ 18,977,228 $ 21,305,355
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,547,056 $ 4,258,944
Note payable - bank 2,383,810 2,787,082
Notes payable - other 1,100,984 1,695,283
Capital lease obligations 3,419,035 4,185,017
Other liabilities 727,769 722,878
-------------- ------------
12,178,654 13,649,204
-------------- ------------
STOCKHOLDERS' EQUITY (Note 3)
Common stock - $.01 par value; 30,000,000 shares authorized;
Issued and outstanding - 14,422,737 shares in 1997 and
14,782,552 shares in 1996 144,228 147,826
Additional paid-in capital 13,322,054 13,915,989
Foreign currency translation adjustment 29,030 44,085
Deficit (6,696,738) (6,451,749)
-------------- ------------
Total stockholders' equity 6,798,574 7,656,151
-------------- ------------
TOTAL $ 18,977,228 $ 21,305,355
============== ============
<FN>
See notes to condensed consolidated financial statements
</TABLE>
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TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
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REVENUES $34,833,451 $35,173,529
OPERATING COSTS AND EXPENSES:
Direct operating costs 19,181,506 19,251,148
Selling and administrative expenses 13,679,352 14,982,603
Deferred compensation expense (Note 1) - 294,894
Interest expense - net 550,032 638,997
----------- -----------
Total 33,410,890 35,167,642
----------- -----------
INCOME FROM OPERATIONS 1,422,561 5,887
OTHER INCOME (PRINCIPALLY GAIN ON SECURITIES) 5,755 288,418
----------- -----------
INCOME BEFORE INCOME TAXES (BENEFIT)
AND EQUITY IN NET LOSS OF AFFILIATE 1,428,316 294,305
INCOME TAXES (BENEFIT) (Note 4) 543,303 (279,058)
----------- -----------
INCOME BEFORE EQUITY IN NET LOSS OF AFFILIATE 885,013 573,363
EQUITY IN NET LOSS OF AFFILIATE (1,130,000) (23,391)
----------- -----------
NET (LOSS) INCOME $ (244,987) $ 549,972
=========== ===========
NET (LOSS) INCOME PER SHARE $(.02) $.04
===== ====
WEIGHTED AVERAGE SHARES OUTSTANDING 14,610,000 14,574,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
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TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
REVENUES $11,497,208 $11,778,620
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OPERATING COSTS AND EXPENSES:
Direct operating costs 6,337,030 6,482,723
Selling and administrative expenses 4,511,681 4,887,464
Interest expense - net 171,824 196,483
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Total 11,020,535 11,566,670
----------- -----------
INCOME FROM OPERATIONS 476,673 211,950
OTHER INCOME 4,586 -
----------- -----------
INCOME BEFORE INCOME TAXES AND EQUITY
IN NET LOSS OF AFFILIATE 481,259 211,950
INCOME TAXES (Note 4) 191,912 85,000
----------- -----------
INCOME BEFORE EQUITY IN NET LOSS OF AFFILIATE 289,347 126,950
EQUITY IN NET LOSS OF AFFILIATE (360,000) (115,973)
----------- -----------
NET (LOSS) INCOME $ (70,653) $ 10,977
=========== ===========
NET (LOSS) INCOME PER SHARE $ - $ -
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 14,465,000 14,870,000
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (244,987) $ 549,972
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization 2,757,090 2,535,234
Equity in net loss of affiliate 1,130,000 23,391
Deferred compensation - 294,893
Gain on sale and transfer of marketable securities - (335,340)
Allowance for decline in market value of securities - 46,922
Deferred income taxes 511,450 (413,329)
Changes in operating assets and liabilities:
Accounts receivable 33,978 199,817
Other assets (166,953) (181,687)
Accounts payable and accrued expenses 288,112 369,617
Other liabilities (21,306) 9,110
----------- -----------
Net cash provided by operating activities 4,287,384 3,098,600
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (487,451) (800,139)
Repayment of related party loans 463,855 702,050
Loans to related parties (990,178) (1,201,380)
Loans from (to) others 43,015 (24,450)
Purchase of marketable securities (10,000) (76,931)
Purchase of shares of affiliate - (30,650)
----------- -----------
Net cash used in investing activities (980,759) (1,431,500)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (2,136,351) (2,059,370)
Net payments on note payable - bank (403,272) (915,866)
Net proceeds from notes payable - other 36,848 25,579
Net proceeds (payments) on loans from employee savings program 42,996 (18,195)
Purchase of treasury stock (597,533) (34,187)
Payments of acquisition notes (187,500) (187,500)
----------- -----------
Net cash used in financing activities (3,244,812) (3,189,539)
----------- -----------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 1,081 (10,315)
----------- -----------
NET INCREASE (DECREASE) IN CASH 62,894 (1,532,754)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 63,482 2,004,827
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 126,376 $ 472,073
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 532,620 $ 696,749
Income taxes 29,115 22,450
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by capital leases $ 1,375,798 $ 1,311,274
13
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 1997, and the results of operations for the three and nine
month periods ended September 30, 1997 and 1996 and of cash flows for the nine
months ended September 30, 1997 and 1996. The results of operations for the
nine months ended September 30, 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 statement.
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 nine months ended September 30, 1997 the Company purchased
and retired 359,815 shares for $597,533. In May 1997 the Company granted
options to employees to purchase 230,500 shares of the Company's common stock
at $2.00 per share.
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. SFAS
No. 128 requires the disclosure of diluted earnings per share regardless of
its difference from basic 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 September 30, 1997 it would not have had a material
affect on the reported amounts.
5. On November 7, 1997 the Company's Chairman and principal stockholder
contributed to the Company his 100% ownership interest in NewsWare, Inc.
NewsWare, Inc. provides on-line news services to its customers. The
transaction will be accounted for as a combination of entities under common
control similar to a pooling-of-interests.
<PAGE>
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 redistributes 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 SEPTEMBER 30, 1997 AND 1996
Revenue for the three months ended September 30, 1997 and 1996 were
$11,497,208 and $11,778,620, respectively.
Direct operating costs were $6,337,030 for the third quarter of 1997 and
$6,482,723 for the similar period in 1996, a decrease of 2%. Direct operating
costs as a percentage of revenues was 55% in 1997 and 1996. 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 $4,511,681 and $4,887,464 in the
1997 and 1996 periods, respectively, a decrease of 8% in the 1997 period from
the 1996 period. Selling and administrative expenses as a percentage of
revenues was 39% in 1997 and 41% in 1996. The dollar and percentage decrease
primarily reflects a reduction of approximately $239,000 in salary expense in
the 1997 period as well as reductions in advertising, professional fees and
telephone expense.
Interest expense decreased to $171,824 in the 1997 period compared to
$196,483 in 1996 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized income
before equity in net loss from an affiliate of $289,347 in the 1997 period
compared to $126,950 in 1996.
The equity in loss from an affiliate was $360,000 in the 1997 period and
$115,973 in 1996. The 1997 loss included a significant charge for losses in
connection with foreign currency forward contracts. As a result of these
losses, the Company's net income was reduced to a net loss of $70,653 for the
1997 quarter and to a profit of $10,977 in 1996.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Revenues for the nine months ended September 30, 1997 and 1996 were
$34,833,451 and $35,173,529, respectively.
Direct operating costs were $19,181,506 for the first nine months of 1997
and $19,251,148 for the similar period in 1996. Direct operating costs as a
percentage of revenues was 55% in each period.
Selling and administrative expenses were $13,679,352 and $14,982,603 in
the 1997 and 1996 periods, respectively, a decrease of 9% in the 1997 period
from the 1996 period. Selling and administrative expenses as a percentage of
revenues was 39% in 1997 and 43% in 1996. The dollar and percentage decrease
primarily reflects a reduction of approximately $589,000 in salary expense and
$230,000 in professional fees, as well as a reduction in advertising and
telephone expense.
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 $550,032 in the 1997 period compared to
$638,997 in 1996 due to decreased borrowings.
Other income was $5,755 and $288,418 for the nine months ended September
30, 1997 and 1996, respectively. The gains in 1996 are principally due 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.
The income tax benefit in the 1996 period of $279,058 is 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 income
before equity in net loss of an affiliate of $885,013 in the 1997 period
compared to $573,363 in 1996.
The equity in net loss from an affiliate was $1,130,000 in the 1997
period and $23,391 in 1996. The 1997 loss included a significant charge by the
affiliate for restructuring costs and an asset impairment write-down as well
as losses on foreign currency futures contracts. As a result of this loss the
Company incurred a net loss of $244,987 for the nine months ended September
30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997 and 1996 cash provided by
operating activities was $4,287,384 and $3,098,600, respectively. The increase
was due principally to increased income from operations. Cash flows used in
investing activities was $980,759 and $1,431,500 for the nine months ended
September 30, 1997 and 1996, respectively. Purchases of fixed assets decreased
by $312,688 in 1997 compared to 1996. Cash used in financing activities was
$3,244,812 and $3,189,539 for the nine months ended September 30, 1997 and
1996, respectively. The increase in 1997 is primarily due to the purchase of
treasury stock offset by lower payments on bank debt.
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 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 revenues are not affected by seasonality.
<PAGE>
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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. Not Applicable.
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Item 6. (a) Exhibits.
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Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K. None.
----------------------
<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: 11/13/97 /s/
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Barry Hertz
Chairman of the Board
Chief Executive Officer
Date: 11/13/97 /s/
-------- ---------------------------
Martin Kaye
V.P. Finance,
Principal Financial Officer
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<ARTICLE> 5
<CIK> 0000922811
<NAME> TRACK DATA CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 126,376
<SECURITIES> 0
<RECEIVABLES> 1,562,650
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,046,745
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,977,228
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 144,228
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,977,228
<SALES> 0
<TOTAL-REVENUES> 34,833,451
<CGS> 0
<TOTAL-COSTS> 33,410,890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 550,032
<INCOME-PRETAX> 1,428,316
<INCOME-TAX> 543,303
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244,987)
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