-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F23bVA0Tf5pQvl/Od/4KKvSBFF6sU1xXolv/xiBDqjTU6f93uwhrHBp9ohe9EDsa Sn42MXIDX3U04r1hyQ5hiQ== 0000070033-96-000002.txt : 19960416 0000070033-96-000002.hdr.sgml : 19960416 ACCESSION NUMBER: 0000070033-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960415 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL DATA CORP CENTRAL INDEX KEY: 0000070033 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [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: 96547072 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 FEB 29, 1996 NATIONAL DATA CORPORATION Condensed Consolidated Statement of Income (In Thousands Except Per Share Data) Quarter Ended February 29,28 1996 1995 ---- ---- Revenue $67,500 $62,155 Operating expenses: Cost of service 33,729 33,781 Sales, general and administrative 24,853 22,113 ------- ------- 58,582 55,894 Operating income 8,918 6,261 Other income (expense): Interest and other income 1,318 411 Interest and other expense (622) (649) -------- ------- 696 (238) Income before income taxes 9,614 6,023 Provision for income taxes 3,268 2,168 ------- ------- Net income 6,346 3,855 ------- ------- Earnings per common and common equivalent share (Note 2) $0.26 $0.19 ------- ------- Earnings per common and common equivalent share, assuming full dilution (Note 2) $0.26 $0.19 ------- ------- See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NATIONAL DATA CORPORATION Condensed Consolidated Statement of Income (In Thousands Except Per Share Data) Nine Months Ended February 29,28 1996 1995 ---- ---- Revenue $198,635 $177,936 Operating expenses: Cost of service 101,782 97,286 Sales, general and administrative 72,469 63,594 ------- ------- 174,251 160,880 Operating income 24,384 17,056 Other income (expense): Interest and other income 3,622 1,214 Interest and other expense (1,932) (1,944) -------- ------- 1,690 (730) Income before income taxes 26,074 16,326 Provision for income taxes 9,020 5,877 ------- ------- Net income $17,054 $10,449 ------- ------- Earnings per common and common equivalent share (Note 2) $0.70 $0.52 ------- ------- Earnings per common and common equivalent share, assuming full dilution (Note 2) $0.70 $0.51 ------- ------- See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NATIONAL DATA CORPORATION P. 1 of 2 Condensed Consolidated Balance Sheet (In Thousands) February 29, May 31, 1996 1995 ASSETS ------------ ----------- Current assets: Cash and cash equivalents $98,501 $30,740 Accounts receivable (less allowances of $1,359 and $1,409) 40,293 38,348 Net merchant processing receivable 2,586 - Deferred income taxes 601 601 Inventory 2,019 2,900 Prepaid expenses and other current assets 4,925 5,261 ------- ------- Total current assets 148,925 77,850 Property and equipment, at cost 128,421 140,141 Less-Accumulated depreciation and amortization (98,437) (111,307) ------- ------- 29,984 28,834 Property acquired under capital leases, net of accumulated amortization 7,525 9,033 ------- ------- 37,509 37,867 Deposits 166 439 Other assets: Acquired intangibles and goodwill, net of accumulated amortization of $44,080 and $38,132 78,151 78,094 Other 2,078 2,320 ------- ------- 80,229 80,414 Total Assets $266,829 $196,570 ========== ========== See Notes to Unaudited Condensed Consolidated Financial Statements NATIONAL DATA CORPORATION P. 2 of 2 Condensed Consolidated Balance Sheet (In Thousands) February 29, May 31, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY ------------ ----------- Current liabilities: Accounts payable $7,232 $9,042 Notes payable on acquired business, current portion 1,443 1,958 Earn-out payable on acquired businesses, current portion 32 1,180 Accrued compensation and benefits 4,828 6,199 Net merchant processing payable - 2,172 Income tax payable 7,079 7,989 Obligations under capital leases, current portion 2,838 2,785 Mortgage payable, current portion 10,978 164 Deferred income 5,104 4,766 Other accrued liabilities 11,290 11,149 ------- ------- Total current liabilities 50,824 47,404 Mortgage payable - 10,936 Notes payable on acquired business 1,259 2,580 Deferred income taxes 3,193 3,193 Obligations under capital leases 4,720 6,140 Other long-term liabilities 3,431 3,402 ------- ------- Total liabilities 63,427 73,655 Minority interest in equity of subsidiary 689 392 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; 23,044,094 and 19,306,733 shares issued 2,881 2,413 Capital in excess of par value 101,152 33,145 Retained earnings 99,698 87,789 Cumulative translation adjustment (817) (550) ------- ------- 202,914 122,797 Less: Deferred compensation (201) (274) ------- ------- Total Stockholders' Equity 202,713 122,523 Total Liabilities and Stockholders' Equity $266,829 $196,570 ========== ========== See Notes to Unaudited Condensed Consolidated Financial Statements ============================================================================== NATIONAL DATA CORPORATION Condensed Consolidated Statement of Cash Flows (In Thousands) Nine Months Ended February 29,28 1996 1995 Cash flows from operating activities: ----- ----- Net income $17,054 $10,449 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,941 10,279 Amortization of acquired intangibles and goodwill 5,953 5,277 Provision for bad debts 933 574 Changes in assets and liabilities which provided (used) cash net of the effects of acquisitions: Accounts receivable, net (2,693) (4,990) Inventory 910 675 Prepaid expenses and other assets 493 5,354 Accounts payable and accrued liabilities (2,861) (1,255) Merchant processing working capital (4,758) 5,465 Income taxes payable and deferred income taxes (906) 269 --------- -------- Net cash provided by operating activities 25,066 32,097 Cash flows from investing activities: Capital expenditures (9,554) (6,367) Business acquisitions, net of cash acquired (5,736) (38,081) Decrease in investments and other non-current assets 275 1,933 Proceeds from the sale of equipment 128 - -------- -------- Net cash used in investing activities (14,887) (42,515) Cash flows from financing activities: Payments on notes payable (1,873) (285) Principal payments under mortgage, capital lease arrangements and other long-term debt (2,385) (1,963) Principal payments on earn-out payable (1,493) (2,213) Net proceeds from secondary public offering 63,652 - Net proceeds from the issuance of stock under employee stock plans 4,823 2,272 Dividends paid (5,142) (4,207) -------- -------- Net cash provided by (used in) financing activities 57,582 (6,396) Increase (decrease) in cash and cash equivalents 67,761 (16,814) Cash, beginning of period 30,740 38,012 -------- -------- Cash, end of period $ 98,501 $ 21,198 ======== ======== Supplemental schedule of noncash investing and financing activities: Promissory notes entered into in exchange for capital stock - $ 3,506 Capital leases entered into in exchange for property and equipment 791 1,057 ======== ======== 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 m isleading. In addition, certain reclassifications have been made to the fiscal 1995 consolidated financial statements to conform to the fiscal 1996 presentation. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report on Form 10-K for the fiscal year ended May 31, 1995. In the opinion of management, the information furnished reflects all adjustments necessary to present fairly the results for such interim periods. NOTE 2 - EARNINGS PER SHARE: Primary earnings per common share and common equivalent share 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 op tions 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. Fully diluted earnings per common and common equivalent share are computed by the same method as described for primary earnings per share except that the higher of (1) the ending market share price for the period or (2) the average market share price for the period is used to compute the fully diluted earnings per share, as compared to the average market share price for primary earnings per share. Earnings per share calculations are presented in the accompanying financial statements. The primary and fully diluted number of common and common equivalent shares outstanding is as follows (in thousands): Quarter Ended Nine Months Ended February 29,28, February 29,28, 1996 1995 1996 1995 ---- ---- ---- ---- Primary 24,270 20,480 24,241 20,100 Fully Diluted 24,372 20,480 24,297 20,307 NOTE 3 - COMMON STOCK OFFERING: In June, 1995, the Company completed a secondary public offering of 3,162,500 shares of its Common Stock. The stock was sold at a price of $21.25 per share. This transaction, net of underwriting discount and expenses associated with this offering, a dded approximately $63,652,000 in cash to the Company. NOTE 4- SUBSEQUENT EVENT: On April 1, 1996, the Registrant organized a new Georgia limited liability company. This new company, Global Payment Systems LLC ("GPS"), acquired a business unit from MasterCard International Incorporated ("MasterCard"). The business unit acquired , MasterCard Merchant Automated Point-of-Sale Program ("MAPP"), consisted of tangible personal property, leased personal and real property, customer contracts, assembled work force and the goodwill of the business. The purchase price paid for MAPP by GPS was $110,000,000 in cash plus the granting of a 7.5% equity ownership in GPS to MasterCard. Additional information regarding this transaction may be obtained by reviewing the Registrant's Form 8-K, dated April 1, 1996, File no. 03966. The following pro forma information for the acquisition discussed above is presented for information purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition taken place on June 1, 1994, nor are they necessarily indicative of future operations. (In thousands, Fiscal Year Quarter Nine Months except per share data) ended ended ended May 31,1995 February 29,1996 February 29,1996 ------------- ----------------- ----------------- Revenue $ 285,880 $ 80,515 $ 237,137 Net Income $ 15,534 $ 6,242 $ 16,736 Earnings per share, fully diluted $ .65 $ .26 $ .69 The pro forma results listed above are unaudited and reflect purchase price accounting adjustments assuming the acquisition 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 third quarter of fiscal 1996, ended February 29, 1996, compared to the same quarter last year is reflected as follows: ($ Millions) FY 1996 FY 1995 Inc.(Dec.) $ % $ % % --- --- --- --- ----------- Revenue: Payment Systems 36.6 55% 34.3 55% 7% Health Care 25.2 37% 22.2 36% 14% Information Systems & Services 5.7 8% 5.7 9% - ------ ----- ------ ----- ------- Total Revenue 67.5 100% 62.2 100% 9% Cost of Service: Operations 26.4 39% 26.6 43% (1%) Depreciation & Amortization 4.5 7% 4.5 7% - Hardware Sales 2.8 4% 2.7 4% 4% ------ ----- ------ ----- ------- Total Cost of Service 33.7 50% 33.8 54% - Gross Margin 33.8 50% 28.4 46% 19% Sales, General & Administrative 24.9 37% 22.1 36% 13% ------ ----- ------ ----- ------- Operating Margin 8.9 13% 6.3 10% 41% Interest and Other Income 1.3 2% 0.4 1% 225% Interest and Other Expense (0.6) (1%) (0.7) (1%) (14%) ------ ----- ------ ----- ------- Income Before Income Taxes 9.6 14% 6.0 10% 60% Provision for Income Taxes 3.3 5% 2.1 4% 57% ------ ----- ------ ----- ------- Net Income 6.3 9% 3.9 6% 62% ------ ----- ------ ----- ------- Results of Operations The first nine months of fiscal 1996, ended February 29, 1996, compared to the same period last year is reflected as follows: ($ Millions) FY 1996 FY 1995 Inc.(Dec.) $ % $ % % --- --- --- --- ----------- Revenue: Payment Systems 109.9 55% 100.0 56% 10% Health Care 71.7 36% 59.0 33% 22% Information Systems & Services 17.0 9% 18.9 11% (9%) ------ ----- ------ ----- ------- Total Revenue 198.6 100% 177.9 100% 12% Cost of Service: Operations 78.6 40% 76.6 43% 3% Depreciation & Amortization 14.5 7% 12.7 7% 14% Hardware Sales 8.7 4% 8.0 5% 9% ------ ----- ------ ----- ------- Total Cost of Service 101.8 51% 97.3 55% 5% Gross Margin 96.8 49% 80.6 45% 20% Sales, General & Administrative 72.4 37% 63.6 36% 14% ------ ----- ------ ----- ------- Operating Margin 24.4 12% 17.0 9% 44% Interest and Other Income 3.6 2% 1.2 1% 200% Interest and Other Expense (1.9) (1%) (1.9) (1%) - ------ ----- ------ ----- ------- Income Before Income Taxes 26.1 13% 16.3 9% 60% Provision for Income Taxes 9.0 4% 5.9 3% 53% ------ ----- ------ ----- ------- Net Income 17.1 9% 10.4 6% 64% ------ ----- ------ ----- ------- Total revenue for the third quarter of fiscal 1996 was $67,500,000, an increase of $5,345,000 (9%) from the same period of the prior year. The revenue increase in the third quarter was the result of increased revenue in Healthcare, $3,031,000 (14%), Payment Systems, $2,308,000 (7%), and Information Systems and Services revenue of $6,000 (less than 1%). Total revenue for the nine months ended February 29, 1996 was $198,635,000, an increase of $20,699,000 (12%) from the same period of the prior year. The revenue increase was the result of increased revenue in Health Care, $12,713,000 (22%) and Payment Systems, $9,805,000 (10%), partially offset by a decrease in Information Systems and Services revenue of $1,639,000 (9%). Health Care. Revenue increased 14% in the third quarter and 22% for the nine months ended February 29, 1996. Revenue growth was related to increases in the information network portion of the business and new product portions of pharmacy systems, including the impact of acquisitions completed after the first quarter of fiscal 1995. This was offset by declines in the federal government portions of the business and a strategic shift of dental to software and services and new distribution channels . Payment Systems. Revenue increased 7% in the third quarter and 10% for the nine months ended February 29, 1996 compared to the same periods last year. Direct Payment Systems revenue increased due to higher volume of merchant sales processed and equipment sales as well as increased volume in the check verification/guarantee business. Revenue in the Indirect Payment Services business increased for the third quarter of fiscal 1996 due to higher transaction volume processed and decreased slightly for the nine month period as a result of price adjustments generally made in return for increased volume and term commitments from customers. Information Systems and Services. Revenue was essentially flat for the third quarter and decreased 9% for the first nine months of fiscal 1996. Declines during the first six months were associated with software license order rates during the previous year's comparable period. Costs and Expenses Total cost of service for the third quarter of fiscal 1996 was $33,729,000, a decrease of $52,000 (less than 1%) from the same period last year. Total cost of service as a percentage of revenue decreased to 50% this year from 54% last year. While the cost of operations increased $216,000 (1%), the cost of operations as a percentage of revenue decreased from 43% last year to 39% this year. Depreciation and amortization as a percentage of revenue was essentially flat. Cost of hardware sold was 4% for both periods. Cost of service for the nine month period ended February 29, 1996 was $101,782,000, an increase of $4,496,000 (5%) from the same period last year. Total cost of service as a percentage of revenue decreased to 51% this year from 55% last year. Cost of operations increased $2,044,000 (3%). Cost of operations as a percentage of revenue decreased to 40% for the first nine months of this fiscal year as compared to 43% for the same period last year. Depreciation and amortization as a percentage of revenue was essentially flat. Cost of hardware decreased to 4% of revenue as compared to 5% last year. Gross margin increased to 50% from 46% in the third quarter and increased to 49% from 45% for the nine months ended February 29, 1996. Sales, general and administrative expenses were $24,853,000 in the quarter. This is an increase of $2,740,000 (12%) from the prior year. Sales, general and administrative expense increased $8,875,000 (14%) for the nine month period. These increases are primarily due to increased product development and sales expansion programs in the Payment Systems and Health Care areas as well as increased sales, general, administrative and product development expenses associated with acquired businesses. Interest and Other Income Interest and other income for the third quarter of fiscal 1996 was $1,318,000, an increase of $907,000 (221%) from last year. Interest and other income for the first nine months of fiscal year 1996 was $3,622,000 an increase of $2,408,000 (198%). These increases are principally the result of interest earnings on increased cash balances associated with cash flow from business operations and a secondary equity offering completed in the first quarter of fiscal 1996. Interest and Other Expense Interest and other expense for the third quarter of fiscal 1996 decreased $27,000 (4%) as a result of lower imputed interest associated with acquired merchant portfolios. Interest and other expense for the nine months ended February 29, 1996 was essentially flat. Income Taxes The provision for income taxes, as a percentage of taxable income, was 34% and 36% for the third quarter of fiscal 1996 and 1995, respectively and 35% and 36% for the nine month periods of fiscal 1996 and 1995, respectively. These decreased tax rates are a result of research and development tax credits and tax exempt interest income. Net Income Net income for the third quarter of fiscal 1996 was $6,346,000, an increase of $2,491,000 (65%), as compared to the same period of the prior year. Earnings per share for the third quarter were $0.26 and $0.19, respectively. The fully diluted number of common and common equivalent shares outstanding for the third quarter of fiscal 1996 was 24,372,000, an increase of 3,892,000 (19%) as compared to the same period last year. This increase is primarily a result of 3,162,500 shares issued in the supplementary stock offering completed in June, 1995, and shares issued under Company stock plans. Net income for the first nine months of fiscal 1996 was $17,054,000, an increase of $6,605,000 (63%), as compared to the same period of the prior year. Earnings per share for the nine month periods of fiscal 1996 and 1995 $0.70 and $0.51, respectivel y. The fully diluted number of common and common equivalent shares outstanding for the nine month period was 24,297,000, an increase of 3,990,000 (20%) as compared to the same period last year. This increase is primarily a result of 3,162,500 shares issued in the supplementary stock offering completed in June, 1995, and shares issued under Company stock plans. Liquidity and Capital Resources Net cash provided by operating activities was $25,057,000 for the nine months ended February 29, 1996, a decrease of $7,052,000 (22%). Cash flows from operations for the first nine months of fiscal 1996, consisting of net income adjusted for depreciation, amortization and provision for bad debts, totaled $34,881,000, an increase over the same period in the previous fiscal year of $8,302,000, offset by a reduction of accounts payable and merchant processing liabilities. Cash used in investing activities was $14,887,000 compared to the prior year of $42,515,000. In the first nine months of fiscal 1995, five business acquisitions were made totaling $38,081,000, net of cash acquired compared to $5,736,000 in fiscal 1996. Net cash provided by financing activities was $57,591,000, an increase of $63,999,000 over the prior year. The net proceeds from the issuance of stock under the secondary offering (as discussed in Note 3) were $63,652,000. Net proceeds from employee stock purchases increased $2,551,000 over the same nine month period last year. Dividends of approximately $5,142,000 and $4,207,000 were paid in the nine month periods ending February 29, 1996 and February 28, 1995, respectively. The Company has entered into a $50,000,000, committed line of credit expiring December 31, 1996. The Company believes funds generated from operations along with its committed line of credit is adequate to meet normal business operating needs, including possible acquisitions. Stockholders' Equity Stockholders' equity increased $80,190,000 (65%), from May 31, 1995 to $202,713,000 at February 29, 1996, principally the result of the secondary offering as discussed in Note 3. Part II ITEM 1 - PENDING LEGAL PROCEEDINGS None ITEM 2 - OTHER INFORMATION None ITEM 3 - EXHIBITS AND REPORTS FILED ON FORM 8-K (a) On April 15, 1996, the Registrant filed Form 8-K, dated April 1, 1996, outlining the organization of a new company, Global Payment Systems LLC and the subsequent purchase of a business unit from MasterCard International, Incorporated. The fo rm 8-K contained the following financial statements of the business acquired: (1) MAPP Balance Sheets for the years ended December 31, 1994 and 1995. (2) MAPP Income Statements for the years ended December 31, 1993, 1994 and 1995. (3) MAPP Statementsof Cash Flows for the years ended December 31, 1993, 1994 and 1995. (4) Notes to Financial Statements (5) Independent Auditors Report (b) Exhibits: (10)(xii) Asset Purchase and Contribution Agreement dated February 22, 1996 (filed as Exhibit no. 2.1 to the Registrant's Form 8-K, dated April 1, 1996, File No. 03966, and incorporated herein by reference). ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 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: April 15, 1996 By: /s/ Jerry W. Braxton _______________ ________________________ Jerry W. Braxton Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 MAY-31-1996 FEB-29-1996 QTR-3 98,501 0 40,293 1,359 2,019 148,925 128,421 98,437 266,829 50,824 0 2,881 0 0 199,831 266,829 198,635 198,635 174,251 174,251 0 0 1,932 26,074 9,020 17,054 0 0 0 17,054 .70 .70 -----END PRIVACY-ENHANCED MESSAGE-----