FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: September 30, 1997 ------------------ OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-26540 ------- DESKTOP DATA, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-3016142 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 80 Blanchard Road Burlington, Massachusetts 01803 (Address of principal executive offices) (617) 229-3000 (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 60 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. Title of each class Outstanding at September 30, 1997 - ------------------- --------------------------------- Common Stock, par value $.01 8,670,411 DESKTOP DATA, INC. AND SUBSIDIARIES TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements Condensed Consolidated Balance Sheets at September 30, 1997 and December 31, 1996................................ 3 Condensed Consolidated Statements of Income for the three and nine months ended September 30, 1997 and 1996......... 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996................... 5 Notes to the Condensed Consolidated Financial Statements..................... 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 8 PART II - OTHER INFORMATION Item 6(a) - Exhibits..................................................................... 12 Item 6(b) - Reports on Form 8-K.......................................................... 12 Signature................................................................................ 13 Exhibit Index............................................................................ 14 Exhibits................................................................................. 15 2 ITEM 1 DESKTOP DATA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) Unaudited September 30, December 31, 1997 1996 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $29,220 $10,735 Short-term investments 13,157 18,120 Accounts receivable 4,865 4,948 Prepaid expenses and deposits 2,569 1,814 ------------- ------------ Total current assets 49,811 35,617 ------------- ------------ Long-term investments - 7,928 ------------- ------------ Property and equipment, net 5,591 4,640 ------------- ------------ Other assets 143 142 ------------- ------------ Total assets $55,545 $48,327 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,149 $ 878 Accrued expenses 6,053 3,572 Deferred revenue, current 15,122 13,631 Obligation under capital leases, current 34 34 ------------- ------------ Total current liabilities 23,358 18,115 ------------- ------------ Obligation under capital leases, noncurrent 12 38 ------------- ------------ Deferred revenue, noncurrent 2 190 ------------- ------------ Commitments (Note 2) Stockholders' equity: Common stock 87 86 Additional paid-in capital 31,925 31,782 Retained earnings (deficit) 161 (1,884) ------------- ------------ Total stockholders' equity 32,173 29,984 ------------- ------------ Total liabilities & stockholders' equity $55,545 $48,327 ============= ============ The accompanying notes are an integral part of these condensed consolidated financial statements. 3 DESKTOP DATA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 1997 1996 1997 1996 -------- ------- ------- ------- Subscription and royalty revenues $10,218 $8,062 $29,227 $22,457 Other revenues 630 690 2,086 1,645 -------- ------- ------- ------- Total revenues 10,848 8,752 31,313 24,102 -------- ------- ------- ------- Cost of revenues 3,424 2,409 9,600 6,519 Customer support expenses 1,372 898 3,852 2,547 Development expenses 1,345 1,024 3,817 3,184 Sales and marketing expenses 3,886 3,199 10,973 8,649 General and administrative expenses 583 359 1,560 1,124 -------- ------- ------- ------- Total costs and expenses 10,610 7,889 29,802 22,023 -------- ------- ------- ------- Income from operations 238 863 1,511 2,079 Interest income, net 575 490 1,640 1,370 -------- ------- ------- ------- Income before provision for income taxes 813 1,353 3,151 3,449 Provision for income taxes 260 151 1,107 384 -------- ------- ------- ------- Net income $ 553 $ 1,202 $ 2,044 $ 3,065 ======== ======= ======= ======= Net income per common and common equivalent share $ 0.06 $ 0.14 $ 0.23 $ 0.35 ======== ======= ======= ======= Weighted average number of common and common equivalent shares outstanding 8,792 8,795 8,750 8,811 ======== ======= ======= ======= The accompanying notes are an integral part of these condensed consolidated financial statements. 4 DESKTOP DATA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Nine Months Ended September 30, ---------------------------------------- 1997 1996 ------------------ ------------------ Cash flows from operating activities: Net income $ 2,044 $ 3,065 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,152 664 Changes in assets and liabilities: Accounts receivable 83 (884) Prepaid expenses and deposits (755) (687) Accounts payable 1,271 339 Accrued expenses 2,481 613 Deferred revenue 1,303 4,078 -------- -------- Net cash provided by operating activities 7,579 7,188 ======== ======== Cash flows from investing activities: (Increase) decrease in investments, net 12,891 (15,051) Purchases of property and equipment (2,103) (2,838) Increase in other assets - (149) -------- -------- Net cash provided by (used in) investing activities 10,788 (18,038) ======== ======== Cash flows from financing activities: Proceeds from exercise of stock options 81 124 Proceeds from stock issuance under employee stock purchase plan 63 154 Payments on obligation under capital leases (26) (22) -------- -------- Net cash provided by financing activities 118 256 ======== ======== Increase (decrease) in cash and cash equivalents 18,485 (10,594) Cash and cash equivalents, beginning of period 10,735 19,301 -------- -------- Cash and cash equivalents, end of period $ 29,220 $ 8,707 ======== ======== Supplemental disclosure of cash flow information Cash paid for income taxes $ 138 $ 205 ======== ======== Cash paid for interest $ 5 $ 4 ======== ======== Supplemental disclosure of noncash transactions Equipment acquired under capital lease obligations $ - $ 25 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 5 DESKTOP DATA, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Operations and Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements of Desktop Data, Inc. (the "Company") presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 1996 included in the Company's Form 10-K. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company and its subsidiaries. Quarterly operating results are not necessarily indicative of the results which would be expected for the full year. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Desktop Data Canada, Inc. and Desktop Data Securities Corp. All material intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents and Investments Cash equivalents consist of highly liquid investments purchased with an original maturity of three months or less. Those securities with maturities of three months to twelve months as of the balance sheet date are classified as short-term investments and securities with maturities of greater than twelve months are classified as long-term investments. At September 30, 1997, cash equivalents included approximately $2,258,000 in money market investments and $23,134,000 in U.S. government agency securities. At September 30, 1997, short-term investments included approximately $8,049,000 in U.S. Treasury Notes and $5,108,000 in U.S. government agency securities. As of September 30, 1997, all of the Company's investments are classified and accounted for as held to maturity. Net Income Per Common and Common Equivalent Share For the three and nine month periods ended September 30, 1997 and 1996, net income per common and common equivalent share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during that period. Common equivalent shares from stock options have been included in the computation using the treasury-stock method. In February 1997, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 specifies revised computational guidelines, presentation and disclosure requirements for earnings per share and supersedes Accounting Principles Board Opinion No. 15. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Earlier application is not permitted; however, upon adoption, SFAS No. 128 requires restatement of all prior period earnings per share information. The difference between earnings per share for the three and nine months ended September 30, 1997 and 1996, calculated in accordance with SFAS No. 128, and net income per common and common equivalent share computed using the existing rules, is not expected to be significant. 6 DESKTOP DATA, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2. Commitments On August 31, 1995, the Company entered into an operating lease for office facilities, which commenced in February 1996 and expires in fiscal 2003. The Company will pay out a total of approximately $2.3 million in monthly lease payments over the period of the lease. As of September 30, 1997, the Company has paid a deposit of approximately $150,000 related to the lease. 3. Subsequent Events On November 2, 1997, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Agreement") with Individual, Inc. ("Individual"), a publicly-held company that develops and markets a suite of customized news and information services that provide knowledge workers with daily personalized current awareness reports. Individual's proprietary systems filter incoming information, prepare for each user a daily news briefing, and deliver its services across a range of delivery platforms, including facsimile, electronic mail, groupware, intranets and the Internet. Under the terms of the Agreement, the Company will issue one-half (1/2) of a share of Common Stock for each outstanding share of Individual common stock (the "Exchange Ratio"). In addition, each outstanding option, warrant or right to purchase Individual common stock pursuant to outstanding warrants or rights to purchase common stock under Individual's various stock option and purchase plans will be assumed by the Company and will become an option, warrant or right to purchase the Company's Common Stock after giving effect to the Exchange Ratio. Consummation of the merger contemplated by the Agreement is conditioned upon the affirmative vote of both companies' stockholders, among other conditions. 7 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Desktop Data, through its NewsEDGE products, delivers a large variety of news and information sources in real time to professionals' personal computers, automatically monitoring and filtering the news, and alerting the users to stories of interest to them. NewsEDGE is delivered via both corporations' intranets and the internet. The Company's revenues consist primarily of NewsEDGE subscription fees and related royalties received from news providers in connection with sales of their newswires through NewsEDGE. Historically, royalties have constituted less than 10% of this amount. The Company's other revenues consist principally of NewsEDGE installation services and related computer hardware system sales, and non-recurring custom development projects related to the Company's software. NewsEDGE subscriptions are generally for an initial term of twelve months, payable in advance, and are automatically renewable for successive one year periods unless the customer delivers notice of termination prior to the expiration date of the then current agreement. NewsEDGE subscription revenues are recognized ratably over the subscription term, beginning on installation of the NewsEDGE service. Accordingly, a substantial portion of the Company's revenues are recorded as deferred revenues until they are recognized over the license term. The Company does not capitalize customer acquisition costs. Certain newswires offered by the Company through NewsEDGE are purchased by the customer directly from the news provider and payments are made directly from the NewsEDGE customer to the provider. For some of these newswires, the Company receives ongoing royalties on payments made by the customer to the news provider, and those royalties constitute part of the Company's subscription and royalty revenues. For other newswires that are resold by Desktop Data to the NewsEDGE customer, the Company includes a fee for the newswire in the NewsEDGE subscription fee paid by the customer and pays a royalty to the news provider. Such royalties are included in the Company's cost of revenues. Results of Operations for the Three and Nine Month Periods Ended September 30, 1997 Total revenues increased 24% to $10.8 million for the three months ended September 30, 1997 as compared to $8.8 million for the same period in 1996. Year-to-date total revenues increased 30% to $31.3 million as compared to $24.1 million for the same period in 1996. For the three months ended September 30, 1997, subscription and royalty revenues increased 27% to $10.2 million, up from $8.1 million for the same period in 1996. Year-to-date subscription and royalty revenues increased 30% to $29.2 million as compared to $22.5 million for the same period in 1996. For the three month period ended September 30, 1997, other revenues decreased 9% to $630,000, down from $690,000 for the same period in 1996. Conversely, year-to-date other revenues increased 27% to $2.1 million, up from $1.6 million for the same period in 1996. The increase in subscription and royalty revenues was due to increased subscription revenues from new customers, the retention and growth of revenues from existing customers and increased royalties from the sale of third party information news. Fluctuations in other revenues occur as a result of increases or decreases in non-recurring custom development projects and installations of NewsEDGE. The number of installed customers increased from 373 customers at September 30, 1996, to 410 customers at September 30, 1997, an increase of 10%. The number of authorized users within customer organizations increased from 110,298 users at September 30, 1996 to 169,438 users at September 30, 1997, an increase of 54%. The average number of users per customer increased from 270 users at September 30, 1996 to 369 users at September 30, 1997, an increase of 37%. The Company's average revenues per customer increased from $63,435 for the nine months ended September 30, 1996 to $73,806 for the nine months ended September 30, 1997, an increase of 16%. 8 Cost of revenues, as a percentage of total revenues, increased to 32% and 31%, respectively, for the three and nine month periods ended September 30, 1997 from 28% and 27%, respectively, for the same periods in 1996. The percentage increases in cost of revenues were due primarily to increases in royalties paid to third party information providers and increases in transmission costs. Customer support expenses increased 53% to $1.4 million for the three months ended September 30, 1997, as compared to $898,000 for the same period in 1996. Year-to-date customer support expenses increased 51% to $3.9 million for the nine months ended September 30, 1997, as compared to $2.5 million for the same period in 1996. These increases resulted primarily from higher staffing levels and the continuing need for the Company to provide additional support to its growing customer base. As a percentage of total revenues, customer support expenses increased to 13% and 12% for the three and nine month periods ended September 30, 1997 from 10% and 11% for the comparable periods in 1996. At September 30, 1997, Desktop Data had 62 employees engaged in field and central customer support operations. Development expenses increased 31% to $1.3 million for the three months ended September 30, 1997, as compared to $1.0 million for same period in 1996. Year-to-date development expenses increased 20% to $3.8 million for the nine months ended September 30, 1997, as compared to $3.2 million for the same period in 1996. Increases in development expenses resulted primarily from higher payroll and recruiting costs deemed necessary to attract and retain new and existing personnel. As a percentage of total revenues, development expenses remained relatively constant at 12% for the three and nine month periods ended September 30, 1997, as compared to 12% and 13% for the comparable periods in 1996. At September 30, 1997, Desktop Data had 44 employees engaged in development and quality assurance operations. Sales and marketing expenses increased 22% to $3.9 million for the three month period ended September 30, 1997, as compared to $3.2 million for the same period in 1996. Year-to-date sales and marketing expenses increased 27% to $11.0 million for the nine month period ended September 30, 1997, from $8.6 million for the same period in 1996. Sales and marketing expenses increased during these periods, primarily due to the expansion of the sales and marketing organizations. As a percentage of total revenues, sales and marketing expenses remained relatively constant at 36% and 35% for the three and nine month periods ended September 30, 1997, as compared with 37% and 36% for the same periods in 1996. As of September 30, 1997, Desktop Data's direct sales force and marketing staff consisted of 75 employees. General and administrative expenses increased 62% to $583,000 for the three months ended September 30, 1997 from $359,000 for the same period in 1996. Year-to-date general and administrative expenses increased 39% to $1.6 million for the nine months ended September 30, 1997 from $1.1 million for the same period in 1996. The increases in general and administrative expenses were due primarily to additions to staff and new administrative functions to support the Company's growth. General and administrative expenses, as a percentage of total revenues, remained relatively constant at 5% for the three and nine month periods ended September 30, 1997, as compared to 4% and 5% for the same periods in 1996. At September 30, 1997, Desktop Data had 15 employees engaged in general and administrative operations. Interest income, net increased to $575,000 and $1.6 million for the three and nine month periods ended September 30, 1997, from $490,000 and $1.4 million for the comparable periods in 1996 due to higher cash and investment balances generated from operations and higher interest rates earned on cash, cash equivalent and investment balances. The provision for income taxes increased to $260,000 and $1.1 million, respectively, for the three and nine month periods ended September 30, 1997 from $151,000 and $384,000, respectively, for the comparable periods in 1996. The increase in the tax provision is due to both a reduction in the tax loss carryforwards and higher expected taxable income from the Company's operations. 9 Liquidity and Capital Resources The Company's combined cash, cash equivalent and investment balance was $42.4 million at September 30, 1997, as compared to $36.8 million at December 31, 1996, an increase of $5.6 million. Net cash of $7.6 million was generated from operations for the nine months ending September 30, 1997 as a result of the Company's profitability and increases in current liabilities since the beginning of the year. Net cash provided by investing activities for the nine months ended September 30, 1997 was $10.8 million, due to the maturity of certain investments. Net cash provided by financing activities in the nine months ended September 30, 1997 was $118,000, due primarily to employee stock option exercises and stock purchases pursuant to the employee stock purchase plan. As previously announced, on November 2, 1997, the Company entered into an Agreement and Plan of Merger and Reorganization (the "Agreement") with Individual, Inc. ("Individual"), a publicly-held company that develops and markets a suite of customized news and information services that provide knowledge workers with daily personalized current awareness reports. Under the terms of the Agreement, Individual will merge with and into the Company, with the Company remaining as the surviving entity (the "Merger"). Direct transaction costs associated with the Merger of Desktop and Individual, which are not currently reasonably estimable, will be charged to operations upon consummation of the Merger. The Company continues to investigate the possibility of additional investments in or acquisitions of complementary businesses, products or technologies. The Company believes that its current cash, cash equivalent and investment balances combined with funds anticipated to be generated from future operations will be sufficient to satisfy working capital and capital expenditure requirements for at least the next twelve months. Certain Factors Affecting Future Operating Results The Company operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company's control. The following discussion highlights some of the risks which may affect future operating results. Competition. The business information services industry is intensely competitive and is characterized by rapid technological change and the entry into the field of extremely large and well-capitalized companies as well as smaller competitors. Increased competition, on the basis of price or otherwise, may require price reductions or increased spending on marketing or software development, which could have material adverse effect on the Company's business and results of operations. In the recent past, competition has increased as several new companies and Internet-based technologies have entered the market. The Company believes that this has resulted in a lengthening of its customers' decision making process and may adversely affect the Company's business and results of operations in the future. Dependence on NewsEDGE Service. The Company currently derives substantially all of its revenues from NewsEDGE service subscriptions and related royalties. Although the Company intends to increase the number of news and other information sources available through NewsEDGE and to otherwise enhance NewsEDGE, the Company's strategy is to continue to focus on providing the NewsEDGE service as its sole line of business. In addition, there can be no assurance that the Company will be able to increase the number of news sources or otherwise enhance NewsEDGE. As a result, any factor adversely affecting sales of NewsEDGE would have a material adverse effect on the Company. The Company's future financial performance will depend principally on the market's acceptance of NewsEDGE and the Company's ability to sell NewsEDGE to additional customers and to increase revenue derived from existing customers by increasing the number of users within each customer, adding additional newswires or adding additional NewsEDGE servers. Dependence on News Providers. The Company currently makes over 650 news and information sources available through NewsEDGE, pursuant to agreements between the Company and numerous news providers. A significant percentage of the Company's customers subscribe to services provided by one or more of Press Association Inc., a subsidiary of The Associated Press, Dow Jones & Company, Inc., The Financial Times (London), Reuters America, Inc. and Thomson. The Company's agreements with news providers are generally for a term of one year, with automatic renewal unless notice of termination is provided before the end of the term by either party. These 10 agreements may also be terminated by the provider if Desktop Data fails to fulfill its obligations under the agreement and, under some of the agreements, upon the occurrence of a change in control of the Company. Many of these news and information providers compete with one another and, to some extent, with the Company. Termination of one or more significant news provider agreements would decrease the news and information which the Company can offer its customers and would have a material adverse effect on the Company's business and results of operations. Dependence on News Transmission Sources. NewsEDGE news and information is transmitted using one or more of three methods: leased telephone lines, satellites or FM radio transmission. None of these methods of news transmission is within the control of the Company, and the loss or significant disruption of any of them could have a material adverse effect on the Company's business. Many newswire providers have established their own broadcast communications networks using one or more of these three vehicles. In these cases, Desktop Data's role is to arrange communications between the news provider and the NewsEDGE customer's server. For sources which do not have their own broadcast communications capability, news and information is delivered to the Company's news consolidation facility, where it is reformatted for broadcast to NewsEDGE servers and retransmitted to customers through an arrangement between the Company and WavePhore ("WavePhore"), a common carrier communications vendor. WavePhore is also the communications provider for many newswires offered by the Company through NewsEDGE. The Company's agreement with WavePhore expires on December 31, 1998. This agreement can be terminated earlier in the event of a material breach by the Company of the agreement. If the agreement with WavePhore were terminated on short notice, or if WavePhore were to encounter technical or financial difficulties adversely affecting its ability to continue to perform under the agreement or otherwise, the Company's business would be materially and adversely affected. The Company believes that if WavePhore were unable to fulfill its obligations, other sources of retransmission would be available to the Company, although the transition from WavePhore to those sources could result in delays or interruptions of service that could have a material adverse affect on the Company's business. Rapid Technological Change. The business information services, software and communications industries are subject to rapid technological change, which may render existing products and services obsolete or require significant unanticipated investments in research and development. The Company's future success will depend, in part, upon its ability to enhance NewsEDGE and keep pace with technological developments. Dependence on Key Personnel. The Company's success depends to a significant extent upon the continued service of its executive officers and other key management, sales and technical personnel, and on its ability to continue to attract, retain and motivate qualified personnel. The competition for such employees is intense. The Company has no long-term employment contracts with any of its employees. The loss of the services of one or more of the Company's executive officers, sales people, design engineers or other key personnel or the Company's inability to recruit replacements for such personnel or to otherwise attract, retain and motivate qualified personnel could have a material adverse effect on the Company's business and results of operations. 11 DESKTOP DATA, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports Filed on Form 8-K. - ----------------------------------------------- 6(a) Exhibits. 10.1 - 1995 Employee Stock Purchase Plan, as amended 11.1 - Computation of Earnings Per Share 27.0 - Financial Data Schedule 6(b) REPORTS ON FORM 8-K A Form 8-K was filed by the Company on November 14, 1997 which reported that the Company entered into an Agreement and Plan of Merger and Reorganization (the "Agreement") with Individual, Inc. ("Individual") on November 2, 1997. Under the terms of the Agreement, the Company will issue one-half (1/2) of a share of Common Stock for each outstanding share of Individual common stock (the "Exchange Ratio"). In addition, each outstanding option, warrant or right to purchase common stock pursuant to outstanding warrants or rights to purchase common stock under Individual's various stock option and purchase plans will be assumed by the Company and will become an option, warrant or right to purchase the Company's Common Stock after giving effect to the Exchange Ratio. Consummation of the Merger contemplated by the Agreement is conditioned upon the affirmative vote of both companies' stockholders, among other conditions. 12 DESKTOP DATA, INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DESKTOP DATA, INC. (Registrant) Date: November 14, 1997 /s/ Edward R. Siegfried -------------------------------------- Edward R. Siegfried Vice President--Finance and Operations, Treasurer and Assistant Secretary 13 DESKTOP DATA, INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit No. Description Page - ----------- ----------- ---- 10.1 - 1995 Employee Stock Purchase Plan, as amended 15 11.1 - Computation of earnings per share 24 27.0 - Financial Data Schedule 25 14