-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ASDrlzqjly/hLaEhu6llvzOVyVGoElhb+CCrmeOfn9HC7MphaJn07N7qaxTEG/pO XDmz/h3kxXwzn1h3EorO9g== 0000070033-94-000010.txt : 19941021 0000070033-94-000010.hdr.sgml : 19941021 ACCESSION NUMBER: 0000070033-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941017 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL DATA CORP CENTRAL INDEX KEY: 0000070033 STANDARD INDUSTRIAL CLASSIFICATION: 7389 IRS NUMBER: 580977458 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12392 FILM NUMBER: 94552909 BUSINESS ADDRESS: STREET 1: NATIONAL DATA COPRORATION STREET 2: NATIONAL DATA PLAZA CITY: ATLANTA STATE: GA ZIP: 30329 BUSINESS PHONE: 4047282000 MAIL ADDRESS: STREET 1: NATIONAL DATA PLZ CITY: ATLANTA STATE: GA ZIP: 30329-2010 10-Q 1 10-Q FOR QUARTERLY PERIOD ENDED AUG 31, 1994 NATIONAL DATA CORPORATION Condensed Consolidated Statements of Income (In Thousands Except Per Share Data) Quarter Ended August 31, 1994 1993 ---- ---- Revenue $55,969 $50,717 Operating Expenses: Cost of service 30,658 29,937 Sales, general and administration 20,371 16,833 ------- ------- 51,029 46,770 Operating income 4,940 3,947 Other income (expense): Investment and other income 72 153 Interest expense, net (204) (465) ------- ------- (132) (312) Income before income taxes and extraordinary item 4,808 3,635 Provision for income taxes 1,731 1,527 ------- ------- Net income before extraordinary item 3,077 2,108 Extraordinary item: Settlement of shareholder lawsuit (net of income tax of $1,050) (Note 2) - (1,450) ------- ------- Net income $3,077 $658 ------- ------- Earnings per common and common equivalent share Income before extraordinary item 0.23 0.17 Extraordinary item - (0.12) ------- ------- Net Income $0.23 $0.05 ------- ------- Earnings per common and common equivalent share, assuming full dilution: Income before extraordinary item 0.23 0.16 Extraordinary item - (0.11) ------- ------- Net Income $0.23 $0.05 ------- ------- See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NATIONAL DATA CORPORATION P. 1 of 2 Condensed Consolidated Balance Sheets (In Thousands) AUGUST 31, MAY 31, 1994 1994 ASSETS ------------ ----------- Current assets: Cash and cash equivalents $30,686 $38,012 Short-term investments 25 25 Accounts receivable: Trade receivables (less allowances of $1,702, and $1,168) 36,917 31,763 Other (less allowances of $4,643, and $968) 17,151 19,701 Investment in sales-type leases, current portion, (less allowances of $522 and $575) 1,252 2,357 Inventory 4,003 3,518 Prepaid expenses and other current assets 4,567 4,429 ------- ------- Total current assets 94,601 99,805 Investment in sales-type leases (less allowances of $435 and $367) 1,115 1,500 Property and equipment, at cost: Land 402 402 Building 6,503 6,503 Equipment 73,728 71,213 Software 29,106 27,519 Leasehold improvements 13,993 13,949 Furniture and fixtures 9,044 8,744 Work in progress 471 2,736 ------- ------- 133,247 131,066 Less-Accumulated depreciation and amortization (105,593) (102,754) ------- ------- 27,654 28,312 Property acquired under capital leases, net of accumulated amortization 6,914 7,317 ------- ------- 34,568 35,629 Deposits 2,033 2,029 Other assets: Acquired intangibles and goodwill, net of accumulated amortization of $32,537 and $30,882 47,966 41,250 Other 2,556 3,113 ------- ------- 50,522 44,363 Total Assets $182,839 $183,326 ========== ========== See Notes to Unaudited Condensed Consolidated Financial Statements NATIONAL DATA CORPORATION P. 2 of 2 Condensed Consolidated Balance Sheets (In Thousands) AUGUST 31, MAY 31, 1994 1994 LIABILITIES AND STOCKHOLDERS' EQUITY ------------ ----------- Current liabilities: Accounts payable $6,744 $6,783 Earn-out payable on acquired businesses, current portion 1,682 2,598 Accrued compensation and benefits 3,564 4,462 Merchant processing payables 17,733 15,154 Income tax payable 4,843 6,358 Deferred income taxes, current portion 776 776 Obligations under capital leases, current portion 2,115 1,985 Mortgage payable, current portion 153 149 Other accrued liabilities 13,235 12,667 ------- ------- Total current liabilities 50,845 50,932 Mortgage payable 11,060 11,100 Earn-out payable on acquired businesses 860 1,238 Deferred income taxes 1,685 1,685 Obligations under capital leases 4,692 5,193 Other long-term liabilities 1,839 3,847 ------- ------- Total Liabilities 70,981 73,995 Stockholders' Equity: Preferred stock, par value $1.00 per share, 1,000,000 shares authorized; none issued - - Common stock, par value $.125 per share, 30,000,000 shares authorized; 12,687,403 and 12,610,262 shares issued 1,586 1,576 Capital in excess of par value 31,162 30,215 Retained earnings 80,550 78,865 Minority interest in equity of subsidiaries 53 - Cumulative translation adjustment (502) (533) ------- ------- 112,849 110,123 Less: Deferred compensation (991) (792) ------- ------- Total Stockholders' Equity 111,858 109,331 Total Liabilities and Stockholders' Equity $182,839 $183,326 ========== ========== See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NATIONAL DATA CORPORATION Condensed Consolidated Statements of Cash Flows (In Thousands) Three Months Ended August 31, 1994 1993 Cash flows from operating activities: ----- ----- Net income $3,077 $ 658 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,335 2,860 Amortization of acquired intangibles and goodwill 1,655 1,515 Provision for bad debt, sales allowances and operational losses 1,877 1,610 Loss on disposal of fixed assets - 19 Changes in assets and liabilities, net of the effects of acquisitions: (Increase) decrease in trade accounts receivable (5,568) 2,847 Decrease (increase) in other accounts receivable 1,754 (4,947) Decrease in investment in sales-type leases 1,489 1,312 Increase in inventory (460) (119) Decrease in prepaid expenses and other assets 645 399 (Decrease)increase in accounts payable and accrued liabilities (206) 5,387 Decrease in income taxes payable and deferred income taxes payable (1,515) (2,016) --------- -------- Net cash provided by operating activities 6,083 9,525 Cash flows from investing activities: Proceeds from the sale of equipment - 7 Capital expenditures (1,757) (1,572) Business acquisitions, net of cash acquired (8,985) - Increase in investments & other non-current assets - 5 -------- -------- Net cash used in investing activities (10,742) (1,560) Cash flows from financing activities: Principal payments under mortgage, capital lease arrangements and other long-term debt (536) (424) Principal payments on earn-out payable (1,294) (944) Net proceeds from the issuance of stock under employee stock plan 549 597 Dividends paid (1,390) (1,356) -------- -------- Net cash used in financing activities (2,671) (2,127) Effect of exchange rate changes on cash 4 (20) (Decrease) Increase in cash & cash equivalents (7,326) 5,818 Cash, beginning of period 38,012 17,150 -------- -------- Cash, end of period $30,686 $22,968 ======== ======== Supplemental schedule of noncash investing and financing activities: Capital leases entered into in exchange for property and equipment $ 6 $ 562 ======== ======== See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. In addition, certain reclassifications have been made to the fiscal 1994 consolidated financial statements to conform to the fiscal 1995 presentation. It is suggested that these financial statements be read in conjunction with financial statements and the notes thereto included in the Company's latest annual report on Form 10-K for the fiscal year ended May 31, 1994. In the opinion of management, the information furnished reflects all adjustments necessary to present fairly the results for such interim periods. NOTE 2 - SHAREHOLDER SUIT: The Company and certain of its previous officers were party to three lawsuits, which were consolidated as "National Data Corporation Shareholder Litigation." The plaintiffs, purporting to act on behalf of a class, alleged violations of rule 10(b)(5) under the Securities and Exchange Act of 1934 under a "fraud on the market" theory for alleged misrepresentations and omissions relating to expected earnings which resulted in, the plaintiffs contend, the Company's common stock being overvalued in the market. The Company and the plaintiffs signed an agreement on September 27, 1993 to settle this matter for $6,950,000. The Company's insurer bore two-thirds of the settlement and related future costs. The cost to the Company, net of income taxes, was approximately $1,450,000. Both the Company and its insurer paid their full share of the settlement amount and the settlement received final approval from the court on December 16, 1993. NOTE 3 - EARNINGS PER SHARE: Earnings per common share and common equivalent share on a primary basis are computed by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the period. Common equivalent shares represent stock options that, if exercised, would have a dilutive effect on earnings per share. All options with an exercise price less than the average market share price for the period are assumed to have a dilutive effect on earnings per share. Earnings per common and common equivalent share on a fully diluted basis are computed by the same method as described for primary earnings per share except that the higher of (1) the ending market share price or (2) the average market share price is used to compute the fully diluted earnings per share, as compared to the average market share price for primary earnings per share. The primary and fully diluted weighted average number of common and common equivalent shares outstanding is as follows (in thousands): Quarter Ending August 31, 1994 1993 ------ ------ Primary 13,168 12,775 Fully Diluted 13,311 12,877 NOTE 4 - BUSINESS ACQUISITIONS In June 1994, certain assets and liabilities of Yes Check,Inc. were acquired by the Company. Yes Check,Inc. is a Chicago- based check guarantee company. In July 1994, the Company acquired the assets and certain liabilities of Lytec Systems, Inc., a Salt Lake City company that develops and markets medical and dental practice management software. Both acquired businesses were accounted for under the purchase method and, accordingly, the operating results of each have been included in the consolidated operating results since the dates of acquisition. Earn-out payments required for both acquisitions are not estimable at this time. Subsequent to the end of the first quarter, the Company also acquired all of the capital stock of Mercantile Systems, Inc. This is a Chicago-based check guarantee company. This acquisition has not been reflected in the financial statements presented for the period ending August 31, 1994. The aggregate price paid for these three acquisitions was $21,177,000. Goodwill and intangibles resulting from these three acquisitions will be amortized over periods not exceeding 20 years. The following pro forma information for the three acquisitions discussed above is presented for information purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions taken place on June 1, 1993, nor are they necessarily indicative of future operations. Fiscal Year Quarter Ended Ended May 31, August 31, (In thousands, except per share data) 1994 1993 __________________________________________________________________ Revenue $225,051 $58,662 Net Income Before Extraordinary Item 11,965 3,132 Net Income 10,515 3,132 Earnings Per Share, fully diluted .81 .24 The pro forma results listed above are unaudited and reflect purchase price accounting adjustments assuming the acquisitions occurred at the beginning of the fiscal year and include estimates for differences in year-end. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The first quarter of fiscal year 1995 ended August 31, 1994 compared to the same quarter last year is reflected as follows ($ Millions): % FY1995 FY 1994 Inc.(Dec.) $ % $ % of Dollars --- --- --- --- ----------- Revenue: Integrated Payments 32.3 58% 29.1 57% 11% Health Care 16.8 30% 14.1 28% 19% Government & Corporate 5.3 9% 5.0 10% 6% Other 1.6 3% 2.5 5% (36%) ------ ----- ------ ----- ------- Total Revenue 56.0 100% 50.7 100% 10% Cost of Service: Operations 24.4 44% 24.0 47% 2% Deprec. & Amort. 3.9 7% 3.5 7% 11% Hardware Sales 2.3 4% 2.5 5% (8%) ------ ----- ------ ----- ------- Total Cost of Service 30.6 55% 30.0 59% 2% Gross Margin 25.4 45% 20.7 41% 23% Sales, General & Administration 20.4 36% 16.8 33% 21% ------ ----- ------ ----- ------- Operating Margin 5.0 9% 3.9 8% 28% Investment & Other Income 0.0 0% 0.2 0% (100%) Interest Expense,(net) (0.2) (0%) (0.5) (1%) (60%) ------ ----- ------ ----- ------- Income Before Taxes and Extraordinary Item 4.8 9% 3.6 7% 33% Provision for Income Taxes 1.7 3% 1.5 3% 13% ------ ----- ------ ----- ------- Net Income Before Extraordinary Item 3.1 6% 2.1 4% 48% Extraordinary Item, (net of taxes) - 0% (1.4) (3%) n/a ------ ----- ------ ----- ------- Net Income 3.1 6% .7 1% 343% ------ ----- ------ ----- ------- Revenue Total revenue for the first quarter was $55,969,000, an increase of $5,252,000 (10%) from revenue of $50,717,000 for the same period of the prior year. The revenue increase in the period was the result of increased revenue in Health Care Application Systems and Services, $2,664,000 (19%), Integrated Payment Systems, $3,172,000 (11%) and Government and Corporate Information Systems and Services, $323,000 (6%), partially offset by a decrease in Other revenue of $907,000 (36%). Health Care revenue growth was principally related to increases in electronic claims processing which increased $2,871,000 (48%) in the period compared to the prior year. Transaction volume increased 40 million (50%) from prior year's volume. Overall revenue from the Company's practice management systems for the pharmacy, dental, government and institutional sectors decreased 3%, while revenue from recurring maintenance fees increased 17%. The overall reduction in revenue reflects the Company's transition in the products' life cycles. Integrated Payments Systems (IPS) revenues increased 11% over the same period last year. The increase is a result of several factors. The direct (merchant processing) business increased $4,147,000 (27%) and now accounts for 61% of total IPS revenue. This increase was primarily due to increased volume (9%) and increased equipment sales (32%). In addition, a check guarantee business was acquired during the first quarter of fiscal year 1995. Revenue in the Company's indirect (distribution through banks) business decreased 8% as a result of lower revenue per electronic transaction. This decrease was primarily a result of obtaining longer term commitments in exchange for price concessions. Government and Corporate Information Systems and Services (GCISS) revenue increased 6% over the same period last year primarily due to increased sales of applications for electronic data interchange (EDI). This reverses the declining revenue trend experienced over the past few quarters. The decrease in other revenue of 36% is principally related to the Company's decision to exit the communication services market in 1991. The customer contracts associated with this business expired in the first quarter of fiscal year 1995. Costs and Expenses Total cost of service for the first quarter was $30,658,000, an increase of $721,000 (2%) from the same period last year. While the cost of operations increased $463,000 (2%) from the same period last year, cost of operations as a percentage of revenue decreased from 47% last year to 44% this year. Depreciation and amortization as a percentage of revenue was essentially flat. Hardware costs decreased $204,000 (8%), directly related to volume associated with reduced sales of Health Care practice management systems. Gross margin increased to 45% from 41% in the same period last year. Sales, general and administrative expense was $20,371,000 in the quarter ended August 31, 1994. This is an increase of $3,538,000 (21%) from prior year. The increase is primarily due to sales expansion programs in the Integrated Payment Systems and Health Care Applications Systems and Services areas as well as increased sales, general, and administrative expenses related to acquired businesses. Investment and Other Income Investment and other income for the first quarter of fiscal year 1995 was $72,000, a decrease of $81,000 (53%) from last year. This decreased interest income is related to the continued decrease in the Company's pharmacy and dental systems lease portfolio. The Company no longer offers leases directly to its customers. Interest Expense, Net Interest expense for the first quarter decreased $261,000 (56%) from the same period last year. This decrease is primarily attributable to an adjustment of imputed interest expense on acquired merchant portfolios made in the first quarter of fiscal year 1994. Income Taxes The provision for income taxes, as a percentage of taxable income, was 36% and 42% for the quarters ended August 31, 1994 and 1993, respectively. The decreased rate in the current year is primarily due to research and development tax credits. The Company expects this lower rate to continue. Net Income Before Extraordinary Item The Company's net income before extraordinary item for the first quarter of fiscal year 1995 was $3,077,000, an increase of $969,000 (46%) from first quarter 1994 net income before extraordinary item of $2,108,000. Extraordinary Item The Company reported an extraordinary charge of $1,450,000 (net of income taxes) in the first quarter of fiscal 1994, representing the settlement costs of a lawsuit brought against the Company. (See Note 2 of the unaudited condensed consolidated financial statements for further discussion of the extraordinary item). Net Income Net income for the first quarter of fiscal year 1995 was $3,077,000, an increase of $2,419,000, as compared to the prior year net income for the quarter of $658,000. Earnings per share for the period ended August 31, 1994 and 1993 were $0.23 and $0.05, respectively. The weighted average number of common and common equivalent shares outstanding for the first quarter of fiscal 1995 was 13,311,000, an increase of 434,000 (3%) as compared to the same period last year. Liquidity and Capital Resources Net cash provided by operating activities was $6,083,000 in the first quarter of fiscal 1995, a decrease of $3,442,000 (36%) from the prior year amount of $9,525,000. The decrease is primarily related to increased trade receivable balances due to increased first quarter sales over the same period last year. Cash used in investing activities was $10,742,000 compared to the prior year of $1,560,000. In the first quarter of fiscal 1995, two business acquisitions were made totaling $8,985,000. Net cash used in financing activities was $2,671,000, an increase of $544,000 (26%) over the prior year. Principal payments on earn-out agreements increased $350,000 in the current period. Dividends of approximately $1,390,000 and $1,356,000 were paid in the three month period ending August 31, 1994 and 1993, respectively. The Company has entered into a $15,000,000, working capital line of credit with two banks expiring in August 1995. The Company believes funds generated from operations along with its committed line of credit and the $30,686,000 cash on hand will be adequate to meet normal business operating need. In addition to the working capital line of credit, the Company obtained a committed $40,000,000 acquisition line of credit which expires in August of 1996. Stockholder's Equity Stockholders' equity increased $2,527,000 (2%), from May 31, 1994 to $111,858,000 at August 31, 1994. Part II ITEM 1 - PENDING LEGAL PROCEEDINGS _____________________________________ None ITEM 2 - OTHER INFORMATION _____________________________ None 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. National Data Corporation (Registrant) Date: October 14, 1994 By: /s/ Jerry W. Braxton ______________________ Jerry W. Braxton Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 QTR-1 MAY-31-1995 AUG-31-1994 30,686 0 36,917 1,702 4,003 94,601 133,247 105,593 182,839 50,845 0 1,586 0 0 110,272 182,839 55,969 55,969 30,658 51,029 0 0 204 4,808 1,731 3,077 0 0 0 3,077 .23 .23 -----END PRIVACY-ENHANCED MESSAGE-----