-----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, JhV3nANnqKQmihU38pyo63PtwQJ5tQ+5potHxFzk2ttcfvFwDc30GhX9b4/vbZRP 24RQUxel+2QyrSVX2gwTMQ== 0001021408-97-000274.txt : 19971111 0001021408-97-000274.hdr.sgml : 19971111 ACCESSION NUMBER: 0001021408-97-000274 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971110 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/A SEC ACT: SEC FILE NUMBER: 001-12392 FILM NUMBER: 97712020 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/A 1 AMENDMENT NO.1 TO FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A Amendment No. 1 [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended August 31, 1997. ----------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-12392 --------- NATIONAL DATA CORPORATION ------------------------- (Exact name of registrant as specified in charter) DELAWARE 58-0977458 ----------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) National Data Plaza, Atlanta, Georgia 30329-2010 ------------------------------------- --------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 404-728-2000 ------------ NONE (Former name, former address and former fiscal year, if changed since last year) 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 90 days. Yes [x] No [ ]. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock, Par Value $.125 - 26,651,244 shares -------------------------------------------------- Outstanding as of September 30, 1997 ------------------------------------ UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME NATIONAL DATA CORPORATION (in thousands except per share data) - ------------------------------------------------------------------ Three Months Ended August 31, ------------------- 1997 1996 -------- -------- Revenue $120,102 $101,164 -------- -------- Operating Expenses: Cost of service 58,970 49,076 Sales, general and administrative 41,499 38,154 -------- -------- 100,469 87,230 -------- -------- Operating income 19,633 13,934 -------- -------- Other income (expense): Interest and other income 485 319 Interest and other expense (2,314) (935) Minority interest (701) (498) -------- -------- (2,530) (1,114) -------- -------- Income before income taxes 17,103 12,820 Provision for income taxes 6,499 4,615 -------- -------- Net income $ 10,604 $ 8,205 -------- -------- Earnings per common and common equivalent shares $ 0.38 $ 0.30 -------- -------- See Notes to Unaudited Condensed Consolidated Financial Statements. 2
CONSOLIDATED STATEMENTS OF CASH FLOWS NATIONAL DATA CORPORATION (In thousands) ------------------------------------------------------------------------------------------------------------- Three Months Ended August 31, 1997 1996 ------------ -------------- Cash flows from operating activities: Net income $ 10,604 $ 8,205 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 5,449 4,450 Amortization of acquired intangibles and goodwill 4,679 2,806 Minority interest in earnings 701 498 Provision for bad debts 167 416 Other, net 263 - Changes in current assets and liabilities which provided (used) cash, net of the effects of acquisitions: Accounts receivable, net (2,514) (5,517) Merchant processing working capital (2,843) 5,738 Inventory 144 (784) Prepaid expenses and other assets (280) 1,075 Accounts payable and accrued liabilities (3,288) 751 Income taxes payable 2,624 3,018 -------- -------- Net cash provided by operating activities 15,706 20,656 -------- -------- Cash flows from investing activities: Capital expenditures (4,132) (3,566) Business acquisitions, net of cash acquired (8,632) (449) -------- -------- Net cash used in investing activities (12,764) (4,015) -------- -------- Cash flows from financing activities: Net repayments under lines of credit - (15,000) Payments on notes and earn-out payable (1,092) (28) Net principal payments under capital lease arrangements and other long-term debt (706) (985) Net proceeds from the issuance of stock plans 1,126 650 Distributions to minority interests (1,299) (390) Dividends paid (1,987) 0 -------- -------- Net cash used in financing activities (3,958) (15,753) -------- -------- Increase (decrease) in cash and cash equivalents (1,016) 888 Cash and cash equivalents, beginning of period 19,240 9,768 -------- -------- Cash and cash equivalents, end of period $ 18,224 $ 10,656 ======== ======== See Notes to Unaudited Condensed Financial Statements.
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS NATIONAL DATA CORPORATION (In thousands, except share data) - ------------------------------------------------------------------------------------------------- August 31, May 31, 1997 1997 -------- --------- ASSETS Current assets: Cash and cash equivalents $ 18,224 $ 19,240 Accounts receivable (less allowances of $2,348 and $2,868) 81,484 78,269 Deferred income taxes 2,584 2,584 Inventory 2,346 2,260 Prepaid expenses and other current assets 7,437 6,271 -------- -------- Total current assets 112,075 108,624 -------- -------- Property and equipment, net 50,829 49,907 Intangible assets, net 352,102 348,476 Deferred income taxes 9,037 9,037 Other 5,360 5,639 -------- -------- Total Assets $529,403 $521,683 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 49,768 $ 51,789 Notes and earn-out payable 298 1,372 Income taxes payable 6,904 4,282 Obligations under capital leases 2,484 2,513 Deferred income 6,090 7,389 -------- -------- Total current liabilities 65,544 67,345 -------- -------- Long-term debt 150,048 149,750 Obligations under capital leases 2,890 2,287 Other long-term liabilities 3,469 3,653 -------- -------- Total liabilities 221,951 223,035 -------- -------- Minority interest in equity of subsidiaries 20,540 21,178 Commitments and contingencies Shareholders' Equity: Preferred stock, par value $1.00 per share, 1,000,000 shares authorized; none issued - - Common stock, par value $.125 per share, 100,000,000 shares authorized; 26,630,420 and 26,564,668 shares issued and outstanding, respectively 3,329 3,321 Capital in excess of par value 183,813 182,695 Retained earnings 101,759 93,099 Cumulative translation adjustment (1,001) (727) -------- -------- 287,900 278,388 Less: Deferred compensation (988) (918) -------- -------- Total Shareholders' Equity 286,912 277,470 -------- -------- Total Liabilities and Shareholders' Equity $529,403 $521,683 ======== ========
See Notes to Unaudited Condensed Consolidated Financial Statements. 4 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 1997 consolidated financial statements to conform to the fiscal 1998 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, 1997. In the opinion of management, the information furnished reflects all adjustments necessary to present fairly the financial position, results of operations, and cash flows 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 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. 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. The convertible notes issued in fiscal 1997 have an antidilutive effect on fully diluted earnings per share; accordingly, the notes are excluded from earnings per share calculations. Earnings per share calculations are presented in the accompanying financial statements. The primary and fully diluted number of common and common equivalent shares outstanding are as follows (In thousands):
Quarter Ended August 31, 1997 1996 ---- ---- Primary 28,201 27,723 Fully Diluted 28,201 27,800
In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share". SFAS No. 128 requires primary earnings per share to be replaced with "basic earnings per share". Basic earnings per share is computed by dividing reported earnings available to common stockholders by weighted average shares outstanding. No dilution for any potentially dilutive securities is included. Fully diluted earnings per share will be called "diluted earnings per share". The standard is intended to simplify existing computational guidelines, revise the disclosure requirements, and increase comparability of earnings per share on an international basis. The pronouncement is effective for financial statements issued after December 15, 1997 and is not expected to have a material impact on the Company's reported earnings per share. 5 NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION: Supplemental cash flow disclosures, including non-cash investing and financing activities, for the three months ended August 31, 1997 and 1996 are as follows (In thousands):
1997 1996 ---- ---- Income taxes paid $3,877 $1,597 Interest paid 368 772 Capital leases entered in exchange for property and equipment -- 675
NOTE 4 PENDING ACQUISTIONS: On August 20, 1997, the Company entered into agreements to acquire two related health care database information management businesses based in Phoenix, Arizona. Under the first agreement, the Company will acquire the stock of Source Informatics Inc., a privately held company ("Source"), in exchange for 1,555,556 shares of the Company's Common Stock and $31.9 million in cash. The second agreement provides for the acquisition of the stock of a subsidiary of Pharmaceutical Marketing Services Inc. ("PMSI"), which holds its Over-The- Counter Physician Survey business unit as well as PMSI's interest in a joint venture it formed with Source. PMSI will receive 1,059,829 shares of the Company's Common Stock and $6.5 million in cash for this subsidiary. The amount of cash and shares of the Company's Common Stock to be paid to the stockholders of Source and to PMSI was determined based on a per share value for the Company's Common Stock of $43.875, the market price for the Company's Common Stock at the time the Company, Source and PMSI commenced negotiations. The Company filed two separate SEC Forms S-4 regarding these proposed transactions on September 19, 1997. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- REVENUE (In millions)
First Quarter Ending August 31, 1997 1996 Increase ------------------------- ------------------------- ------------ Revenue: Health Care $ 47.5 40% $ 38.1 38% 25% Integrated Payment Systems 38.8 32% 31.9 31% 22% Global Payment Systems 40.4 34% 36.5 36% 11% Intercompany Revenue (6.6) (6%) (5.3) (5%) 25% Total Revenue $120.1 100% $101.2 100% 19% ========================= ========================= ============
Total revenue for the first quarter of fiscal 1998 was $120.1 million, an increase of $18.9 million (19%) from the same period in fiscal 1997. The increase was the result of increased revenue in Health Care, $9.4 million (25%); Integrated Payment Systems, $6.9 million (22%); and Global Payment Systems, $3.9 million (11%). Health Care. Health Care revenue growth (25%) during the first quarter of ------------ fiscal 1998 reflected the acquisitions and integration of Equifax Healthcare EDI Services, Inc. and Health Communication Services, Inc., completed after the first quarter in fiscal 1997. Revenue growth was also realized from increases in existing products and services, primarily electronic transaction processing. During the quarter, the company took action to enter the health care data base management business (see Note 4 to the Unaudited Condensed Consolidated Financial Statements), established a base to pursue health care opportunities in Europe through the acquisition of two United Kingdom-based pharmacy systems companies, and announced a number of new health care network information service alliances. As a result of these actions, the company expects annualized health care revenue to exceed 50 percent of total revenues. Integrated Payment Systems. The Integrated Payment Systems revenue --------------------------- increase of $6.9 million (22%) during the first quarter was primarily due to higher volumes of merchant sales processed, which resulted from new vertical industry offerings, new sales programs, and distribution relationships. Global Payment Systems. Global Payment Systems ("Global") revenue reflects ----------------------- the impact of the purchase of a portion of Electronic Data Systems Corporation's ("EDS") card processing business and launch of a joint marketing and service alliance with EDS in the third quarter fiscal 1997. Intercompany. A portion of Global's revenue was derived from intercompany ------------- sales of services primarily to the Integrated Payment Systems business unit. 7 COSTS AND EXPENSES The following table represents the primary components of cost of service as a percentage of total revenue for the first quarter ending August 31, 1997 and 1996: 1997 1996 Cost of Service: ---- ---- Operations 39% 38% Depreciation and Amortization 7% 7% Hardware Sales 3% 4% --------------------------------- 49% 49% - ------------------------------------- ================================= Total cost of service as a percentage of revenue remained constant at 49% for the first quarter of fiscal 1998 and 1997. Cost of operations increased $9.0 million (23%) in the first quarter of fiscal 1998 when compared to the same period last year, primarily as a result of increased operating costs associated with revenue growth and acquisitions. As a percentage of revenue, cost of operations was 39% for the first quarter of fiscal 1998, compared to 38% for the same period last year. The increase is attributable to the gross margins realized from the acquisitions completed after January 1, 1997. Depreciation and amortization expense increased $2.2 million (34%) as a result of the six acquisitions accounted for as purchase transactions completed during fiscal 1997. However, as a percentage of revenue, depreciation and amortization costs remained constant at 7% in both first quarter periods. Hardware sales costs decreased $1.4 million (33%) as a result of the decreased sales of hardware for pharmacy and physician practice management systems during first quarter of fiscal 1998. As a percentage of revenue, hardware costs decreased from 4% in the first quarter of fiscal 1997 to 3% for the same period of the current fiscal year. This decrease reflects a shift away from one-time sales activity to increasing the recurring revenue base. Sales, general and administrative ("SG&A") expense increased $3.3 million (9%) as compared to the first quarter of fiscal 1997. This increase was primarily due to expenses associated with investments made in product development and distribution channel expansion for future revenue growth. In addition, SG&A expenses grew as a result of higher expense ratios in acquired businesses. As a percentage of revenue, these expenses decreased to 35% for the first quarter of fiscal 1998 from 38% for the same period in fiscal 1997. SG&A expenses decreased as a percentage of revenue as revenues grew at a faster rate than these expenses. OPERATING INCOME Operating income increased 41%, from $13.9 million to $19.6 million, in the first quarter of fiscal 1998. As a percentage of revenue, operating income increased to 16.3% in the first quarter of fiscal 1998 from 13.8% in the same quarter of fiscal 1997. Earnings before interest, taxes, depreciation and amortization ("EBITDA") were $29.8 million for the first quarter of fiscal 1998 and $21.2 million for the same quarter of fiscal 1997, a 41% gain. As a percentage of revenue, EBITDA was 25% in the first quarter of fiscal 1998 versus 21% for the same period in fiscal 1997. The Company's EBITDA formula and results as a percentage of revenue may not be comparable to similarly titled measures reported by other companies. However, management believes this statistic is a relevant form of measurement and provides a comparable operating income measure excluding the impact of the amortization of acquired intangibles and potential timing differences associated with capital expenditures and the related depreciation charges. 8 LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations provides the Company with a significant source of liquidity to meet its needs. At August 31, 1997, the Company and its subsidiaries had cash and cash equivalents totaling $18.2 million. Net cash provided by operating activities decreased 24% to $15.7 million for the first quarter of fiscal 1998, from $20.7 million in the same period in fiscal 1997. However, cash provided by operations before changes in working capital was $21.9 million for the first quarter of fiscal 1998, an increase of $5.5 million (34%) compared to the same quarter in the prior year. This difference is primarily driven by the increase in depreciation and amortization resulting from the fiscal 1997 acquisition activities and higher net income in the first quarter. Cash was required in the first quarter of fiscal 1998 to fund net changes in working capital of $6.2 million, compared to cash provided by net changes in working capital of $4.3 million for the first quarter of fiscal 1997. The change in working capital resulted primarily from changes in net merchant processing funds. The changes in net merchant processing working capital reflect normal fluctuations in the timing of credit card sales processed. For the first quarter of fiscal 1998, cash used in investing activities increased to $12.8 million, compared to $4.0 million in the same period of fiscal 1997. Capital expenditures increased 16% during the first quarter of fiscal 1998, as the Company continues to invest in capital programs related to growth in the business and acceleration of certain strategic initiatives. Also during the first quarter of fiscal 1998, the Company completed the acquisition of two United Kingdom-based pharmacy systems companies. The Company has financed its acquisition program through cash flows from operations, equity and debt offerings. Net cash used in financing activities decreased to $4.0 million for the quarter ending August 31, 1997 from $15.8 in the same period of the prior year. During the first quarter of the prior fiscal year, the Company repaid $15.0 million on its line of credit, with the balance paid-in-full during the second quarter of that fiscal year. Also, debt repayments and distributions to minority interests increased $0.8 million and $0.9 million, respectively, during the first quarter of fiscal 1998. The Company has an unsecured $50.0 million revolving line of credit which expires in May 1999. Additionally, the Company's Global Payment Systems subsidiary has an unsecured $50.0 million revolving line of credit which expires in July 1999. As of August 31, 1997, there were no amounts outstanding under either facility. Management believes that its current level of cash and borrowing capability, along with future cash flows from operations, are sufficient to meet the needs of its existing operations and its planned operations for the foreseeable future. The Company regularly evaluates cash requirements for current operations, commitments, development activities and strategic acquisitions. The Company may elect to raise additional funds for these purposes, either through the issuance of additional debt, equity or otherwise, as appropriate. 9 FORWARD-LOOKING INFORMATION When used in this report, press releases and elsewhere by management or the Company from time to time, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements concerning the Company's operations, economic performance and financial condition, including in particular, the likelihood of the Company's success in developing and expanding its business. These statements are based on a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. A variety of factors could cause actual results to differ materially from those anticipated in the Company's forward-looking statements, some of which include competition in the market for the Company's services, continued expansion of the Company's processing and payment systems markets, successfully completing and integrating acquisitions in existing and new markets and other risk factors that are discussed from time to time in the Company's Securities and Exchange Commission ("SEC") reports and other filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligations to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events. 10 PART II ITEM 1 - PENDING LEGAL PROCEEDINGS - ---------------------------------- The Company is party to a number of claims and lawsuits incidental to its business. In the opinion of management, the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on the Company's financial position, liquidity or results of operations. ITEM 2 - CHANGES IN SECURITITES - -------------------------------- None ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - ---------------------------------------- None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ None ITEM 5 - OTHER INFORMATION - -------------------------- None ITEM 6 - EXHIBITS AND REPORTS FILED ON FORM 8-K - ----------------------------------------------- (a) Exhibits: None (b) Reports Filed on Form 8-K: None 11 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: November 10, 1997 By: /s/ E. Michael Ingram __________________________________ E. Michael Ingram Senior Vice President 12 -----END PRIVACY-ENHANCED MESSAGE-----