-----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, GxeJYRNo+hEu4nFRXDNKASg6s5j9Wblw12riWiq89/S2MhVvgTfQqggFi0RLgEiA 3wdaC61nr2073TvRpfISUA== 0000950144-96-003401.txt : 19960719 0000950144-96-003401.hdr.sgml : 19960719 ACCESSION NUMBER: 0000950144-96-003401 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABR INFORMATION SERVICES INC CENTRAL INDEX KEY: 0000920985 STANDARD INDUSTRIAL CLASSIFICATION: 7374 IRS NUMBER: 593228107 STATE OF INCORPORATION: FL FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24132 FILM NUMBER: 96580319 BUSINESS ADDRESS: STREET 1: 34125 US HGHWY 19 N CITY: PALM HARBOR STATE: FL ZIP: 34684 BUSINESS PHONE: 8137852819 MAIL ADDRESS: STREET 1: 34125 US HGHWY 19 N CITY: PALM HARBOR STATE: FL ZIP: 34684 10-Q 1 ABR INFORMATION SERVICES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File Number: 0-24132 ABR INFORMATION SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) Florida 59-3228107 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 34125 U.S. Highway 19 North, Palm Harbor, Florida 34684-2116 ------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including area code: (813) 785-2819
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 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Class: Voting Common Stock, $.01 Par Value Outstanding at May 31, 1996: 13,433,675 Class: Nonvoting Common Stock, $.01 Par Value Outstanding at May 31, 1996: None
1 2 ABR INFORMATION SERVICES, INC. INDEX TO FORM 10-Q
Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three and nine months ended April 30, 1995 and 1996 3 Consolidated Balance Sheets as of July 31, 1995 and April 30, 1996 4 Consolidated Statements of Cash Flows for the nine months ended April 30, 1995 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
2 3 PART I. FINANCIAL INFORMATION Item 1. ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Nine months ended April 30, April 30, --------------------------- ----------------------------- 1995 1996 1995 1996 ----------- ------------ ------------- ------------- Revenue $4,199,073 $8,278,494 $11,943,507 $19,389,195 Operating expenses: Cost of services 2,184,910 4,764,970 6,289,572 10,542,081 Selling, general and administrative 1,024,014 1,697,975 2,872,821 4,148,584 Other operating 63,856 60,129 184,651 163,307 ----------- ----------- ----------- ----------- Total operating expenses 3,272,780 6,523,074 9,347,044 14,853,972 ----------- ----------- ----------- ----------- Operating income 926,293 1,755,420 2,596,463 4,535,223 Interest income (expense): Interest income 133,274 728,799 416,193 1,021,226 Interest expense - (97,491) (4) (125,559) ----------- ----------- ----------- ----------- 133,274 631,308 416,189 895,667 ----------- ----------- ------------- ------------ Income before income taxes 1,059,567 2,386,728 3,012,652 5,430,890 Income taxes 401,405 918,591 1,141,730 2,089,899 ----------- ----------- ------------- ------------ Net income $ 658,162 $ 1,468,137 $ 1,870,922 $ 3,340,991 =========== =========== ============= ============ Net income per share $.07 $.13 $.19 $.32 Weighted average number of common and common equivalent shares outstanding 9,893,372 11,518,754 9,893,372 10,632,659
The accompanying notes are an integral part of these statements. 3 4 ABR INFORMATION SERVICES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
July 31, 1995 April 30, 1996 (Unaudited) ------------- --------------- CURRENT ASSETS Cash and cash equivalents $ 19,184,372 $ 68,726,343 Investments 4,974,035 94,816,187 Accounts receivable, net of allowance for doubtful accounts of $26,202 and $41,702, respectively 2,361,545 2,980,751 Prepaid expenses and other 658,200 1,300,359 ------------ ------------- Total current assets 27,178,152 167,823,640 PROPERTY AND EQUIPMENT, net 2,300,964 8,118,544 GOODWILL AND OTHER INTANGIBLES, net - 15,528,020 SOFTWARE DEVELOPMENT COSTS, net of accumulated amortization of $128,388 and $170,383, respectively 2,984,737 4,883,422 OTHER ASSETS 141,853 155,011 ------------ ------------- TOTAL ASSETS $ 32,605,706 $ 196,508,637 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 214,158 $ 772,957 Accrued expenses 762,389 608,890 Customer accounts deposits 11,783,187 16,151,632 Unearned revenue 271,375 650,050 Income taxes payable 53,448 36,702 ------------ ------------- Total current liabilities 13,084,557 18,220,231 DEFERRED INCOME TAXES 550,450 1,202,501 SHAREHOLDERS' EQUITY Preferred Stock - authorized 2,000,000 shares of $.01 par value; no shares issued Common Stock - authorized, 20,250,000 shares of $.01 par value; issued and outstanding, 6,497,804 and 13,417,072 shares, respectively 64,978 134,171 Additional paid in capital 13,665,092 168,370,118 Retained earnings 5,240,629 8,581,616 ------------ ------------- TOTAL SHAREHOLDERS' EQUITY 18,970,699 177,085,905 ------------ ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 32,605,706 $ 196,508,637 ============ =============
The accompanying notes are an integral part of these statements. 4 5 ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended April 30, ----------------------------------- 1995 1996 ------------ ------------ Cash flows from operating activities: Net income $ 1,870,922 $ 3,340,991 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 421,812 1,260,420 Deferred income taxes 170,501 652,051 Change in operating assets and liabilities: Accounts receivable (631,158) 63,461 Prepaid expenses and other (48,833) (587,131) Income taxes recoverable 176,165 - Other assets (49,779) 262,771 Accounts payable (92,761) 260,829 Accrued expenses 294,622 (176,534) Unearned revenue 247,875 378,675 Customer accounts deposits 281,578 2,360,754 Income taxes payable 57,699 (21,540) ------------- ------------- Net cash provided by operating activities 2,698,643 7,794,747 ------------- ------------- Cash flows from investing activities: Maturity of (additions to) investments 9,305,282 (89,842,152) Additions to property and equipment (523,512) (6,391,924) Additions to software development costs (1,530,261) (1,956,073) Cash paid for acquisitions, net - (11,062,985) Disposal of fixed assets 4,600 (13,986) ------------- ------------- Net cash provided by (used in) investing activities 7,256,109 (109,267,120) ------------- ------------- Cash flows from financing activities: Proceeds from long-term bank borrowings - 6,000,000 Payments on bank borrowings - (6,710,581) Proceeds from stock offering, net of cost - 151,137,080 Proceeds from exercise of common stock options 162,276 587,845 ------------- ------------- Net cash provided by financing activities 162,276 151,014,344 ------------- ------------- Net increase in cash and cash equivalents 10,117,028 49,541,971 Cash and cash equivalents at beginning of year 5,123,565 19,184,372 ------------- ------------- Cash and cash equivalents at end of period $ 15,240,593 $ 68,726,343 ============ =============
The accompanying notes are an integral part of these statements. 5 6 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1996 NOTE A - DESCRIPTION OF ORGANIZATION AND BUSINESS ABR Information Services, Inc. is a leading provider of comprehensive benefits administration, compliance and information services to employers seeking to outsource their benefits administration functions. The Company believes it is the largest provider of COBRA compliance services. COBRA is a federally mandated law related to the portability of employee group health insurance. The Company also provides benefits administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. Additionally, the Company provides benefits administration services with respect to benefits provided to active employees, including enrollment, eligibility verification, qualified domestic relations order ("QDRO") administration, HMO consolidation and pension services. These services are offered on either an "a la carte" or a total outsourcing basis, allowing customers to outsource certain benefits administration tasks which they find too costly or burdensome to perform in-house, or to outsource the entire benefits administration function. The Company is headquartered in Palm Harbor, Florida and provides information and support services to more than 20,000 employers including Fortune 500 companies, insurance companies and other employers. The Company's operations are in a single business segment, the information services business. NOTE B - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosure required by generally accepted accounting principles for complete financial statements. The financial statements as of April 30, 1996 and for the three and nine months ended April 30, 1995 and April 30, 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The results of operations for the three and nine months ended April 30, 1996 are not necessarily indicative of results that may be expected for the year ending July 31, 1996. These financial statements should be read in conjunction with the audited financial statements of the Company as of July 31, 1994 and 1995, and for each of the three years in the period ended July 31, 1995, included in the Company's 1995 Annual Report to Shareholders. NOTE C - NET INCOME PER SHARE Net income per common share has been computed using the weighted average of the outstanding Common Stock plus the dilutive Common Stock equivalents (stock options and warrants), using the treasury or the modified treasury stock method. On July 13, 1995 and February 19, 1996, the Company completed three-for-two stock splits. All share and per share data included in this report have been restated to reflect the splits. Primary and fully dilutive calculations result in the same net income per common share. 6 7 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE D - CASH AND CASH EQUIVALENTS The Company invests excess cash balances in short-term investment grade securities, such as money market investments, obligations of the U.S. government and its agencies, and obligations of state and local government agencies. NOTE E - LINES OF CREDIT AND COMMITMENTS The Company has a five year, $15.0 million unsecured credit facility. The Company has agreed to maintain all of its assets free and clear of all liens, encumbrances and pledges, except purchase money security interests in specific equipment in an aggregate amount of less than $500,000 as long as the credit facility remains outstanding or any indebtedness thereunder remains unpaid. Interest on the principal balance outstanding under this line of credit accrues at a floating interest rate equal to the prime rate or, at the Company's option, to the 30 day London Interbank Offering Rate (LIBOR), plus an applicable interest rate margin between 1% and 2% based on certain financial ratios. The credit facility contains certain financial covenants requiring the maintenance of cash and cash equivalents and investments equal to or greater than customer account deposits, a funded debt to EBITDA ratio of a maximum of 2.25 to 1, a debt service coverage ratio of not less than 1.35 to 1, as well as the maintenance of certain funded debt to tangible net worth ratio. As of April 30, 1996, the Company was in compliance with all such covenants. As of April 30, 1996, there were no outstanding amounts under the credit facility. The Company recently purchased a 110,000 square foot facility situated on 12.7 acres of land in Palm Harbor, Florida. The cost of improvements to be made by the Company to such facility has been estimated to be $5.5 million. Management estimates that as of the end of April 30, 1996, approximately $5.0 million will be required in order for the Company to purchase equipment for and to upgrade the Company's information processing systems. Subsequent to the end of the quarter, the Company purchased 72 acres of land for $2.1 million in Tarpon Springs, Florida to hold for future expansion of operating facilities. NOTE F - BUSINESS ACQUISITIONS New Jersey Acquisition: On December 15, 1995, the Company acquired all of the outstanding capital stock of Bullock Associates, Inc. ("BAI") for $12.5 million, with an additional $2.0 million payable upon the attainment of certain revenue requirements during 1996 and 1997. BAI, which was renamed ABR Benefits Services, Inc. ("BSI"), is located in Princeton, New Jersey, and provides COBRA administration, retiree insurance administration, insurance continuation billing and collection, pension benefits administration, QDRO administration and educational benefit administration, as well as administration of other employee benefits programs such as employee discount plans, adoption programs, program rebates and emergency loans. The following unaudited pro forma summary combines the results of operations of the Company with the operations of BSI as if the acquisitions had occurred at the beginning of the respective periods. This pro forma summary does not necessarily reflect the results of operations as they would have been if the Company and the operations of BSI operated as a single entity during such periods. 7 8 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE F - BUSINESS ACQUISITIONS - Continued
Three months ended Nine months ended April 30, April 30, (in thousands, except per share data) (in thousands, except per share data) ------------------------------------- ------------------------------------- 1995 1996 1995 1996 -------- -------- -------- -------- Revenue $ 6,400 $ 8,278 $ 18,508 $ 22,967 Operating income 1,417 1,755 3,911 5,418 Net income 836 1,468 2,314 3,682 Net income per share $ .08 $ .13 $ .23 $ .35
California Acquisition. Effective February 1, 1996, the Company acquired all of the outstanding capital stock of Total COBRA Services ("TCS") for 132,712 shares of Common Stock. TCS is located in Irvine, California and provides COBRA administration and retiree billing services. For the fiscal year ended December 31, 1995, TCS had revenues of less than $2 million. The Company has not provided pro forma financial information with respect to TCS as it is not a significant acquisition. Amortization of goodwill and other intangibles is based upon the allocation of the total purchase price and amortization periods, using the straight-line method, as follows:
Estimated Allocation Useful Lives ------------ ------------ Non-competition agreements $ 600,000 5 years Contracts 2,000,000 10 years Goodwill 13,198,756 25 years
Amortization expense totaled $270,736 for the nine months ended April 30, 1996. 8 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Form 10-Q. OVERVIEW The Company's revenues currently are generated from three sources. First, the Company generates revenues through its COBRA compliance services. Second, the Company generates revenue from providing administration services with respect to benefits provided to retirees and inactive employees. Third, the Company generates revenue from providing administration services with respect to benefits provided to active employees. The first source of revenues for the Company is COBRA compliance services and is generated primarily from its qualifying event agreements with employers and through capitation agreements with insurance companies. Through qualifying event agreements, the Company receives a fixed, per occurrence fee from its customers for each qualifying event. A qualifying event occurs when an employee or his or her dependents experience a loss of coverage under a group healthcare plan. The amount of the fixed fee varies depending on the method of the qualifying event notification mailing, which is selected by the customer. Through capitation agreements, insurance companies designate the Company as the administrator of COBRA compliance for their group insurance clients that are subject to COBRA. The Company is paid a monthly fee for each employee covered by the group plan. The revenue generated under a capitation agreement is not dependent on the triggering of a qualifying event, but is determined based on the number of employees covered by the group plan at the beginning of each month. The Company also receives an administrative fee typically equal to 2% of the monthly health insurance premium that is paid by or on behalf of each continuant. In addition, the Company generates revenues from customers for additional COBRA compliance and healthcare administration services, both on a one-time and continuous basis. These additional revenues include new account fees paid to the Company when it is retained by a new customer. During the first nine months of fiscal 1995 and the first nine months of fiscal 1996, 91.4% and 77.8%, respectively, of the Company's revenues were attributable to the Company's COBRA compliance services. The second source of the Company's revenues is administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. During the first nine months of fiscal 1995 and the first nine months of fiscal 1996, 7.1% and 15.3%, respectively, of the Company's revenues were attributable to the Company's administration services for retirees and inactive employees. The third source of the Company's revenues is administration services with respect to benefits provided to active employees. Through this service, the Company provides benefits administration services for active employees, such as enrollment, eligibility verification, QDRO administration, HMO consolidation and pension services. During the first nine months of fiscal 1995 and the first nine months of fiscal 1996, 0.5% and 6.9%, respectively, of the Company's revenues were attributable to benefits administration services for active employees. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) RESULTS OF OPERATIONS The following table sets forth, as a percentage of revenues, certain financial data for the Company for the periods indicated:
Three months ended Nine months ended April 30, April 30, -------------------- ------------------- 1995 1996 1995 1996 ------ ------ ------ ------ Revenue 100.0% 100.0% 100.0% 100.0% Cost of services 52.0 57.6 52.7 54.4 Selling, general and administrative expenses 24.4 20.5 24.1 21.4 Other operating expenses 1.5 .7 1.5 .8 ----- ----- ----- ----- Operating income 22.1 21.2 21.7 23.4 Interest expense (income) (3.2) (7.6) (3.5) (4.6) Income taxes 9.6 11.1 9.5 10.8 ----- ----- ----- ----- Net income 15.7% 17.7% 15.7% 17.2% ===== ===== ===== =====
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 30, 1995 Revenues increased $4.1 million, or 97.2%, to $8.3 million during the three months ended April 30, 1996 from $4.2 million in the three months ended April 30, 1995. Of the $4.1 million increase in revenues, $2.1 million was attributable to increased revenues from COBRA compliance services, $1.4 million was attributable to increased revenues from retiree/inactive employee benefits administration, and approximately $588,000 was due to increased revenues from active employee benefits administration. The increase in COBRA compliance revenues increased as a result of the addition of new customers and as a result of the New Jersey and California acquisitions. These revenues also increased due to an increase in revenues from the 2% administration fee on the monthly health insurance premiums during the three months ended April 30, 1996 compared to the three months ended April 30, 1995. The increase in revenues from retiree/inactive employee benefits administration was primarily attributable to the addition of new customers obtained by the Company and as a result of the New Jersey and California acquisitions during the three months ended April 30, 1996 who were not customers of the Company during the three months ended April 30, 1995. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers obtained by the Company and as a result of the New Jersey Acquisition during the three months ended April 30, 1996 who were not customers of the Company during the same period of 1995. Cost of services increased 118.1% to $4.8 million during the three months ended April 30, 1996 from $2.2 million during the three months ended April 30, 1995. The increase in cost of services was attributable to the addition of data processing, information systems and customer service personnel to support growth as well as the result of the New Jersey and California acquisitions. As a percentage of revenues, cost of services increased to 57.6% from 52.0% for the same periods. This increase as a percentage of revenues resulted from increasing the operating infrastructure to support the Company's growth. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased 65.8% to $1.7 million during the three months ended April 30, 1996 from $1.0 million in the three months ended April 30, 1995. The increase in selling, general and administrative expenses was primarily attributable to the addition of marketing, management and administrative personnel to support the Company's growth. As a percentage of revenues, selling, general and administrative expenses decreased to 20.5% from 24.4% for the same periods. The decrease as a percentage of revenues resulted primarily from the acquisitions which had lower selling, general and administrative expenses as a percent of revenue, and from allocating expenses over a larger revenue base. Other operating expenses decreased 5.8% to $60,000 during the three months ended April 30, 1996 from $64,000 in the three months ended April 30, 1995. The reduction in other operating expenses as a percentage of revenues resulted from operating efficiencies associated with the allocation of these expenses over a larger revenue base. Income taxes increased 128.8% to $919,000 during the three months ended April 30, 1996 from $401,000 during the three months ended April 30, 1995. The Company's effective tax rate increased to 38.5% from 37.9% for the same period. As a result of the foregoing, the Company's net income increased 123.1% to $1.5 million during the three months ended April 30, 1996 from $658,000 in the three months ended April 30, 1995. Net income per share was $.13 for the quarter ended April 30, 1996 compared to $.07 for the prior year period. NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO NINE MONTHS ENDED APRIL 30, 1995 Revenues increased $7.4 million, or 62.3%, to $19.4 million during the nine months ended April 30, 1996 from $12.0 million in the same period of 1995. Of the $7.4 million increase in revenues, $4.2 million was attributable to increased revenues from COBRA compliance services, $2.1 million was attributable to increased revenues from retiree/inactive employee benefits administration and $1.1 million was due to increased revenues from active employee benefits administration. COBRA compliance revenues increased as a result of the addition of new customers and as a result of the New Jersey and California acquisitions. These revenues also increased due to an increase in revenues from the 2% administrative fee on monthly health insurance premiums during the nine months ended April 30, 1996 compared to the same period of 1995. The increase in revenues from retiree/inactive employee benefits administration was primarily attributable to the addition of new customers obtained by the Company and as a result of the New Jersey and California acquisitions during the nine months of fiscal 1996 who were not customers of the Company during the same period of 1995. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers obtained by the Company and as a result of the New Jersey Acquisition during the nine months ended April 30, 1996 who were not customers of the Company during the same period of 1995. Cost of services increased 67.6% to $10.5 million during the nine months ended April 30, 1996 from $6.3 million in the same period of 1995. As a percentage of revenues, cost of services increased to 54.4% from 52.7% for the same periods. The increase in cost of services was attributable to the addition of data processing, information systems and customer service personnel to support growth and an increase in operating expenses to service the additional revenues. This increase as a percentage of revenues resulted from increasing the operating infrastructure to support the Company's growth. 11 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased 44.4% to $4.1 million during the nine months ended April 30, 1996 from $2.9 million in the same period of 1995. The increase in selling, general and administrative expenses was primarily attributable to the addition of management, marketing and administrative personnel to support the Company's growth. As a percentage of revenues, selling, general and administrative expenses decreased to 21.4% from 24.1% for the same periods. The decrease as a percentage of revenues resulted primarily from the acquisitions which had lower selling, general and administrative expenses as a percent of revenue and from allocating expenses over a larger revenue base. Other operating expenses remained fairly constant during the nine months ended April 30, 1996 as compared to the same period of 1995 and, as a percentage of revenues, decreased to 0.8% from 1.5% for the same periods. The reduction in other operating expenses as a percentage of revenues resulted from operating efficiencies associated with the allocation of these expenses over a larger revenue base. Income taxes increased 83.0% to $2.1 million during the nine months ended April 30, 1996 from $1.1 million during the same period of 1995. The Company's effective tax rate remained fairly constant, increasing slightly to 38.5% from 37.9% for the same periods. As a result of the foregoing, the Company's net income increased 78.6% to $3.3 million during the nine months ended April 30, 1996 from $1.9 million in the same period of 1995. Net income per share was $.32 compared to $.19 for the same period of 1995. LIQUIDITY AND CAPITAL RESOURCES In March 1996, the Company completed a secondary stock offering which provided, net cash after offering expenses, $151 million to its operations. Net cash provided by operating activities was $7.8 million for the nine months ended April 30, 1996 compared to $2.7 million for the same period of 1995. As of April 30, 1996 and July 31, 1995, the Company's working capital and current ratio were $149.6 million and 9.2-to-1 and $14.1 million and 2.1-to-1, respectively. The Company invests excess cash balances in short-term investment grade securities, such as money market investments, obligations of the U.S. government and its agencies, and obligations of state and local government agencies. During the nine months ended April 30, 1996, the Company's capital expenditures were $6.4 million. The Company recently purchased a 110,000 square foot facility situated on 12.7 acres of land in Palm Harbor, Florida. The cost of improvements to be made by the Company to such facility has been estimated to be $5.5 million. Management estimates that as of the end of April 30, 1996, approximately $5.0 million will be required in order for the Company to purchase equipment for and to upgrade the Company's information processing systems. Subsequent to the end of the quarter, the Company purchased 72 acres of land for $2.1 million in Tarpon Springs, Florida to hold for future expansion of operating facilities. 12 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) The Company has a five-year, $15.0 million unsecured credit facility. The Company has agreed to maintain all of its assets free and clear of all liens, encumbrances and pledges, except purchase money security interests in specific equipment in an aggregate amount of less than $500,000 as long as the credit facility remains outstanding or any indebtedness thereunder remains unpaid. Interest on the principal balance outstanding under this line of credit accrues at a floating interest rate equal to the prime rate or, at the Company's option, to the 30-day London Interbank Offering Rate (LIBOR), plus an applicable interest rate margin between 1% and 2% based on certain financial ratios. The credit facility contains certain financial covenants requiring the maintenance of cash and cash equivalents and investments equal to or greater than customer account deposits, a funded debt to EBITDA ratio of a maximum of 2.25-to-1, a debt service coverage ratio of not less than 1.35-to-1, as well as the maintenance of certain funded debt to tangible net worth ratio. As of April 30, 1996, the Company was in compliance with all such covenants. As of April 30, 1996, there were no amounts outstanding under the credit facility. The Company believes that its cash flow from operations and the funds available from its credit facilities will be adequate to meet the Company's expected capital requirements for the foreseeable future. 13 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K None 14 15 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. Date: June 12, 1996 ABR INFORMATION SERVICES, INC. /s/ Vincent Addonisio ------------------------------------- Vincent Addonisio Senior Vice President, Chief Financial Officer and Treasurer 15 EX-27 2 FINANCIAL DATA SCHEDULE (FOR SEC USE ONLY)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABR INFORMATION SERVICES, INC. THIRD QUARTER 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JUL-31-1996 AUG-01-1995 APR-30-1996 68,726,343 94,816,187 3,022,453 41,702 0 167,823,640 10,454,633 2,336,089 196,508,637 18,220,231 0 0 0 134,171 176,951,734 196,508,637 19,389,195 19,389,195 10,542,081 4,148,584 163,307 0 (895,667) 5,430,890 2,089,899 3,340,991 0 0 0 3,340,991 .32 .32
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