NATIONAL DATA CORPORATION
Condensed Consolidated Statement of Income
(In Thousands Except Per Share Data)
Three Months Ended August 31,
1995 1994
---- ----
Revenue $65,625 $55,969
Operating expenses:
Cost of service 33,928 30,658
Sales, general and administrative 24,343 20,371
------- -------
58,271 51,029
Operating income 7,354 4,940
Other income (expense):
Interest and other income 1,127 455
Interest and other expense (709) (587)
------- -------
418 (132)
Income before income taxes 7,772 4,808
Provision for income taxes 2,798 1,731
------- -------
Net income 4,974 3,077
------- -------
Earnings per common and
common equivalent share (Note 2) $0.21 $0.16
------- -------
Earnings per common and common equivalent
share, assuming full dilution (Note2) $0.21 $0.15
------- -------
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NATIONAL DATA CORPORATION P. 1 of 2
Condensed Consolidated Balance Sheet
(In Thousands)
AUGUST 31, MAY 31,
1995 1995
ASSETS ------------ -----------
Current assets:
Cash and cash equivalents $88,519 $30,740
Short-term investments 25 25
Accounts receivable:
Trade (less allowances of
$1,363, and $1,409) 39,023 38,348
Other (less allowances of
$5,123, and $4,869) 19,412 21,082
Deferred income taxes 601 601
Inventory 2,777 2,900
Prepaid expenses and other current assets 4,361 4,345
------- -------
Total current assets 154,718 98,041
Property and equipment, at cost:
Land 402 402
Building 6,503 6,503
Equipment 78,392 79,536
Software 21,719 25,777
Leasehold improvements 13,735 14,052
Furniture and fixtures 10,125 10,238
Work in progress 4,120 3,633
------- -------
134,996 140,141
Less-Accumulated depreciation
and amortization (106,389) (111,307)
------- -------
28,607 28,834
Property acquired under capital leases,
net of accumulated amortization 8,605 9,033
------- -------
37,212 37,867
Deposits 139 439
Other assets:
Acquired intangibles and goodwill,
net of accumulated amortization
of $40,120 and $38,132 76,469 78,094
Other 1,911 2,320
------- -------
78,380 80,414
Total Assets $270,449 $216,761
========== ==========
See Notes to Unaudited Condensed Consolidated Financial Statements
NATIONAL DATA CORPORATION P. 2 of 2
Condensed Consolidated Balance Sheet
(In Thousands)
AUGUST 31, MAY 31,
1995 1995
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ -----------
Current liabilities:
Accounts payable $5,863 $9,042
Notes payable on acquired
business, current portion 1,931 1,958
Earn-out payable on acquired
businesses, current portion 869 1,180
Accrued compensation and benefits 4,029 6,199
Merchant processing payables 18,608 22,363
Income tax payable 4,536 7,989
Obligations under capital leases,
current portion 2,770 2,785
Mortgage payable, current portion 168 164
Deferred income 4,387 4,766
Other accrued liabilities 11,393 11,149
------- -------
Total current liabilities 54,554 67,595
Mortgage payable 10,892 10,936
Notes payable on acquired business 1,415 2,580
Deferred income taxes 3,193 3,193
Obligations under capital leases 5,808 6,140
Other long-term liabilities 3,292 3,402
------- -------
Total liabilities 79,154 93,846
Minority interest in equity of subsidiary 508 392
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; 22,696,233
and 19,306,733 shares issued 2,837 2,413
Capital in excess of par value 97,735 33,145
Retained earnings 91,066 87,789
Cumulative translation adjustment (634) (550)
------- -------
191,004 122,797
Less:
Deferred compensation (217) (274)
------- -------
Total Stockholders' Equity 190,787 122,523
Total Liabilities and Stockholders' Equity $270,449 $216,761
========== ==========
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NATIONAL DATA CORPORATION
Condensed Consolidated Statement of Cash Flows
(In Thousands)
Three Months
Ended August 31,
1995 1994
Cash flows from operating activities: ----- -----
Net income $ 4,974 $ 3,077
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,821 3,335
Amortization of acquired intangibles and goodwill 1,985 1,655
Provision for bad debts 219 246
Changes in assets and liabilities, net
of the effects of acquisitions:
Increase in trade accounts receivable, net (901) (4,817)
Decrease in other accounts receivable, net 1,669 2,634
Decrease in investment in sales-type leases 168 1,489
Decrease (increase) in inventory 123 (460)
Decrease in prepaid expenses and other assets 527 645
Decrease in accounts payable
and accrued liabilities (9,229) (206)
Decrease in income taxes payable and
deferred income taxes payable (3,452) (1,515)
--------- --------
Net cash (used in) provided by operating activities (96) 6,083
Cash flows from investing activities:
Capital expenditures (2,846) (1,757)
Business acquisitions, net of cash acquired - (8,985)
Proceeds from the sale of equipment 71 -
-------- --------
Net cash used in investing activities (2,775) (10,742)
Cash flows from financing activities:
Payments on notes payable (1,189) -
Principal payments under mortgage, capital lease
arrangements and other long-term debt (785) (536)
Principal payments on earn-out payable (686) (1,294)
Net proceeds from secondary public offering 63,652 -
Net proceeds from the issuance of stock
under employee stock plan 1,362 549
Effect of exchange rates on cash (7) 4
Dividends paid (1,697) (1,390)
-------- --------
Net cash provided by (used in) financing activities 60,650 (2,667)
Increase (decrease) in cash and cash equivalents 57,779 (7,326)
Cash, beginning of period 30,740 38,012
-------- --------
Cash, end of period $88,519 $30,686
======== ========
Supplemental schedule of noncash investing
and financing activities:
Capital leases entered into in exchange
for property and equipment $ 332 $ 6
======== ========
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 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 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.
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 August 31,
1995 1994
Primary 24,137 19,752
Fully Diluted 24,236 19,967
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, added approximately
$63,652,000 in cash to the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The first quarter of fiscal year 1996, ended August 31, 1995 compared to the
same quarter last year is reflected as follows:
($ Millions)
FY 1996 FY 1995 Inc.(Dec.)
$ % $ % %
--- --- --- --- -----------
Revenue:
Payment Systems 37.1 57% 32.3 58% 15%
Health Care 22.9 35% 16.8 30% 37%
Information Systems & Services 5.6 8% 6.7 12% (16%)
Other - - .2 - -
------ ----- ------ ----- -------
Total Revenue 65.6 100% 56.0 100% 17%
Cost of Service:
Operations 26.2 40% 24.2 43% 8%
Deprec. & Amort. 5.0 8% 4.1 8% 22%
Hardware Sales 2.7 4% 2.4 4% 13%
------ ----- ------ ----- -------
Total Cost of Service 33.9 52% 30.7 55% 10%
Gross Margin 31.7 48% 25.3 45% 25%
Sales, General &
Administrative 24.3 37% 20.4 36% 19%
------ ----- ------ ----- -------
Operating Margin 7.4 11% 4.9 9% 51%
Interest and Other Income 1.1 2% 0.5 1% 120%
Interest and Other Expense (0.7) (1%) (0.6) (1%) 17%
------ ----- ------ ----- -------
Income Before Income Taxes 7.8 12% 4.8 8% 63%
Provision for Income Taxes 2.8 4% 1.7 3% 64%
------ ----- ------ ----- -------
Net Income 5.0 8% 3.1 5% 62%
------ ----- ------ ----- -------
Revenue
Total revenue for the first quarter of fiscal 1996 was $65,625,000, an
increase of $9,656,000 (17%) from the same period of the prior year.
The revenue increase in the first quarter was the result of increased
revenue in Health Care, $6,150,000 (37%), and Payment Systems,
$4,769,000 (15%), partially offset by a decrease in Information
Systems and Services revenue of $1,073,000 (16%).
Health Care.
Revenue for the first quarter of fiscal 1996 increased 37% as compared
to the same period in fiscal 1995 as a result of (i) increases in
electronic claims processing and (ii) increases in revenue for the
Company's practice management systems for the pharmacy, dental,
physician and institutional sectors, including the impact of
acquisitions completed after the first quarter of fiscal 1995.
Payment Systems.
Payment Systems revenues increased 15% in the first quarter of fiscal
1996 as compared to the same period last year. Direct Payment Systems
revenue increased due to higher volume of merchant sales processed and
equipment sales. Offsetting this increase, revenue in the Company's
Indirect Payment Services (distribution through banks) business
decreased for the first quarter of fiscal 1996, as compared to the
same period last year, as a result of price adjustments, generally
made in return for increased volume and term commitments.
Information Systems and Services.
Revenue decreased 16% for the first quarter of fiscal 1996 primarily
as a result of a decline in revenue associated with software licenses
for electronic data interchange (EDI) applications as compared to the
same period in fiscal 1995.
Other.
As a result of the Company's decision to exit the communication
services market in 1991, there is no longer any residual revenue from
these activities. The customer contracts associated with this
business expired in the first quarter of fiscal 1995.
Costs and Expenses
Total cost of service for the first quarter of fiscal 1996 was
$33,928,000, an increase of $3,270,000 (10%) from the same period last
year. While the cost of operations increased $2,005,000 (8%) from the
same period last year, the cost of operations as a percentage of
revenue decreased from 43% last year to 40% this year. Depreciation
and amortization as a percentage of revenue increased 22%, primarily
as a result of acquisitions made during 1995.
Gross margin increased to 48% in the first quarter of fiscal 1996 as
compared to 45% in the same period last year.
Sales, general and administrative expenses were $24,343,000 in the
quarter ended August 31, 1995. This is an increase of $3,972,000
(19%) from the prior year. This increase is 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 first quarter of fiscal 1996 was
$1,127,000, an increase of $672,000 (148%) from last year. This
increase is principally the result of increased cash balances
associated with the secondary stock offering.
Interest and Other Expense
Interest and other expense for the first quarter of fiscal 1996
increased $122,000 (21%). This was primarily as a result of interest
paid associated with refunded customer deposits.
Income Taxes
The provision for income taxes, as a percentage of taxable income, was
36% for the quarters ended August 31, 1995 and 1994, respectively.
Net Income
Net income for the first quarter of fiscal 1996 was $4,974,000, an
increase of $1,897,000, as compared to the same period of the prior
year. Earnings per share for the period ended August 31, 1995 and 1994
were $0.21 and $0.15, respectively. The fully diluted number of common
and common equivalent shares outstanding for the first quarter of
fiscal 1996 was 24,236,000, an increase of 4,269,000 (21%) 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 employee stock option plans.
Liquidity and Capital Resources
Cash flows from operations for the first quarter of fiscal 1996
consisting of net income adjusted for depreciation, amortization and
provision for bad debts totaled $10,999,000, an increase over the
same period in the previous fiscal year of $2,686,000. Net cash used
in operating activities was $96,000 for the three months ended August 31,
1995, a decrease of $6,179,000 (102%) from the prior year amount
provided of $6,083,000. The working capital decrease includes income
tax payments and refunds of customer deposits.
Cash used in investing activities was $2,775,000 compared to the prior
year of $10,742,000. In the first three months of fiscal 1995, two
business acquisitions were made totaling $8,985,000, net of cash
acquired.
Net cash provided by financing activities was $60,650,000, an increase
of $63,317,000 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 the employee stock purchase
plan increased $813,000 over the same three month period last year.
Dividends of approximately $1,697,000 and $1,390,000 were paid in the
three month periods ending August 31, 1995 and 1994, respectively.
The Company has entered into a $15,000,000, working capital line of
credit expiring in August 1996. In addition, the Company has a
$40,000,000 acquisition line of credit which expires in August 1996.
The Company believes funds generated from operations along with its
committed lines of credit and the $88,519,000 cash on hand is adequate
to meet normal business operating needs, including possible
acquisitions.
Stockholders' Equity
Stockholders' equity increased $68,264,000 (56%), from May 31, 1995 to
$190,787,000 at August 31, 1995, principally the result of the
secondary offering as previously discussed.
Part II
ITEM 1 - PENDING LEGAL PROCEEDINGS
_____________________________________
None
ITEM 2 - OTHER INFORMATION
_____________________________
None
ITEM 3 - EXHIBITS AND REPORTS FILED ON FORM 8-K
___________________________________________________
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 13, 1995 By: /s/ Jerry W. Braxton
- ------------------------- ----------------------
Jerry W. Braxton
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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