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
==============================================================================
<PAGE>
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
==============================================================================
<PAGE>
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
<PAGE>
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
==============================================================================
<PAGE>
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
==============================================================================
<PAGE>
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.
<PAGE>
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.
<PAGE>
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%
------ ----- ------ ----- -------
<PAGE>
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%
------ ----- ------ ----- -------
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<PERIOD-TYPE> QTR-3
<CASH> 98,501
<SECURITIES> 0
<RECEIVABLES> 40,293
<ALLOWANCES> 1,359
<INVENTORY> 2,019
<CURRENT-ASSETS> 148,925
<PP&E> 128,421
<DEPRECIATION> 98,437
<TOTAL-ASSETS> 266,829
<CURRENT-LIABILITIES> 50,824
<BONDS> 0
<COMMON> 2,881
0
0
<OTHER-SE> 199,831
<TOTAL-LIABILITY-AND-EQUITY> 266,829
<SALES> 198,635
<TOTAL-REVENUES> 198,635
<CGS> 174,251
<TOTAL-COSTS> 174,251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,932
<INCOME-PRETAX> 26,074
<INCOME-TAX> 9,020
<INCOME-CONTINUING> 17,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,054
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
