<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
UNITED STATES
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended August 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 Commission File Number: 0-11770
FDP CORP.
(Exact name of registrant as specified in its charter)
Florida 59-2138243
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2140 South Dixie Highway, Miami, Florida 33133
(Address of principal executive offices) (Zip Code)
(305) 858-8200
(Registrant's telephone number, including area code)
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
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value per share,
3,633,051 shares outstanding as of September 30, 1996
<PAGE> 2
FDP CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
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PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
August 31, 1996 and November 30, 1995 3
Consolidated Condensed Statements of Earnings
Three and Nine Months Ended August 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
Nine Months Ended August 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II. OTHER INFORMATION
Item 1. Legal 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FDP CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
1996 1995
(Unaudited)
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,923,794 $ 3,301,112
Marketable securities 5,353,123 4,953,370
Accounts receivable, less allowance for
uncollectible accounts of $299,132 in
1996 and $317,174 in 1995 5,343,711 3,747,309
Notes receivable - current 494,864 675,436
Prepaid expenses 180,191 113,426
Deferred income taxes 116,937 230,351
Costs and earnings in excess of billings on
uncompleted contracts 399,333 124,364
Other 257,610 64,428
----------- -----------
Total current assets 14,069,563 13,209,796
Property and equipment at cost, less acc-
umulated depreciation of $3,787,778 in 1996
and $3,755,975 in 1995 2,706,815 2,193,194
Other assets:
Marketable securities 9,617,160 7,856,804
Notes receivable - non-current 218,343 367,859
Goodwill 255,414 --
Other 65,066 32,479
----------- -----------
Total assets $26,932,361 $23,660,132
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,127,322 $ 2,781,700
Income taxes payable 294,076 223,465
Billings in excess of costs and earnings on
uncompleted contracts 733,362 49,550
----------- -----------
Total current liabilities 4,154,760 3,054,715
Deferred income taxes 246,871 543,612
----------- -----------
Total liabilities 4,401,631 3,598,327
----------- -----------
Stockholders' equity:
Preferred stock; $.01 par value. Authorized
10,000,000 shares; none issued
Common stock; $.01 par value. Authorized
30,000,000 shares; shares issued and outstanding
3,628,551 in 1996 and 3,467,701 in 1995 36,286 34,677
Paid-in capital 8,912,749 7,811,270
Retained earnings 13,581,695 12,215,858
----------- -----------
Total stockholders' equity 22,530,730 20,061,805
----------- -----------
Total liabilities and stockholders' equity $26,932,361 $23,660,132
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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FDP CORP
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------------- --------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Software $ 5,883,230 $ 4,008,596 $ 16,572,567 $ 12,307,406
Information services 811,030 708,224 2,399,807 2,250,660
------------ ------------ ------------ ------------
Total Revenues 6,694,260 4,716,820 18,972,374 14,558,066
------------ ------------ ------------ ------------
Cost of sales and services:
Product development, maintenance
and enhancements:
Software 4,646,052 3,045,697 13,094,471 9,247,251
Information services 304,427 451,102 945,850 1,440,995
Telecommunications 122,671 129,538 349,607 393,454
Selling, general and administrative
expenses 1,048,330 869,016 3,048,703 2,630,551
------------ ------------ ------------ ------------
Total cost of sales and services 6,121,480 4,495,353 17,438,631 13,712,251
------------ ------------ ------------ ------------
Operating profit 572,780 221,467 1,533,743 845,815
Interest income 276,426 250,125 786,794 719,530
Foreign currency loss and other 2,529 2,115 (4,256) (7,333)
------------ ------------ ------------ ------------
Earnings before income taxes 851,735 473,707 2,316,281 1,558,012
Provision for income taxes 270,255 110,200 734,921 452,200
------------ ------------ ------------ ------------
Net earnings $ 581,480 $ 363,507 $ 1,581,360 $ 1,105,812
============ ============ ============ ============
Earnings per common and
common equivalent share: $ .15 $ .10 $ .42 $ .31
============ ============ ============ ============
Weighted average number of
shares used in per share
calculations 3,872,747 3,578,033 3,808,974 3,581,609
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,581,360 $ 1,105,812
----------- -----------
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of property,
equipment and intangibles 619,959 382,853
Changes in assets and liabilities, net of effects
from acquistion of business:
Increase in accounts receivable, net (1,141,848) (306,799)
Increase in prepaid expenses (62,218) (109,216)
Increase in costs and earnings in excess
of billings on uncompleted contracts (274,969) (198,140)
Increase in other current assets (193,182) (82,417)
(Decrease) increase in accounts payable
and accrued liabilities (352,610) 25,654
Increase in billings in excess of
costs and earnings on uncompleted contracts 683,812 38,894
Increase in income taxes payable 38,894 2,600
Decrease in deferred income taxes (203,327) (53,967)
Decrease in other assets 30,565 21,650
----------- -----------
Net adjustments (854,924) (278,888)
----------- -----------
Net cash provided by
operating activities 726,436 826,924
----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable securities 2,468,410 4,681,262
Purchase of marketable securities (4,628,519) (5,762,038)
Proceeds from sale of equipment -- 12,524
Acquisition of business. net of cash acquired 184,829 --
Proceeds from note receivable 611,777 404,086
Acquistion of note receivable (281,689) (851,161)
Equipment acquired (952,382) (561,554)
----------- -----------
Net cash used in investing activities (2,597,574) (2,076,882)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 436,488 229,375
Stock option income tax benefit 272,855 53,967
Dividend payment (215,523) --
----------- -----------
Net cash provided by financing activities 493,820 283,342
----------- -----------
Net decrease in cash and cash equivalents (1,377,318) (966,616)
Cash and cash equivalents at beginning of year 3,301,112 1,989,902
----------- -----------
Cash and cash equivalents at end of period $ 1,923,794 $ 1,023,286
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
AUGUST 31, 1996
(Unaudited)
Note A
In the opinion of management of FDP Corp. (the "Company"), the accompanying
unaudited consolidated condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position, the results of operations and the
statement of cash flows in conformity with generally accepted accounting
principles.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these consolidated
condensed financial statements be read in conjunction with the consolidated
financial statements and the notes included in the Company's latest annual
report on Form 10K.
The results of operations for the nine months ended August 31, 1996, are not
necessarily indicative of the results for the full year.
Note B
The Board of Directors approved a annual cash dividend of $.06 per share,
payable May 25, 1996 to shareholders of record on May 10,1996.
Note C
Net primary earnings per common share for the periods presented has been
computed using the weighted average number of common and common equivalent
shares (stock options) outstanding except in the periods where the effect is
anti-dilutive. Fully-dilutive earnings per share is not materially different
from primary earnings per share in the periods presented.
Note D
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 50,000 shares of FDP Corp.
common stock valued at $7.875 per share and an additional 50,000 shares will be
issuable in the event that System Innovations achieves certain earnings levels.
The transaction was accounted for as a purchase, and the results of operations
for System Innovations are included in the statement of earnings from the
acquisition date. Goodwill of $306,496 was recorded as a result of the
transaction. System Innovations, a privately held company
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based in Littleton, Colorado, has been in business since 1984 and develops
software applications for the life insurance industry.
Note E
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock - Based
Compensation" ("SFAS No. 123"). SFAS No. 123 is effective for fiscal years
beginning after December 15, 1995.
SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees".
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the
stock at grant date, or other measurement date, over the amount an employee
must pay to acquire the stock.
Management has elected to continue to measure compensation cost using the APB
Opinion No. 25 prescribed method and therefore believes that SFAS No. 123 will
not have a material effect on the Company's consolidated financial statements.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
Revenues reflect the Company's ability to develop new computer software
products, or enhance existing ones, then successfully market its software and
related services. Several factors influence the Company's results of operations
including advances in computer technology and changes in governmental
regulations. The Company's business is not seasonal even though quarterly
revenues and net earnings may vary. The variation is primarily due to uncertain
timing of customers' decisions, over which the Company has little control,
regarding the purchase of software systems and computer hardware.
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 50,000 shares of FDP Corp.
common stock and an additional 50,000 shares issuable in the event that Systems
Innovations achieves certain earnings levels over the next few years. System
Innovations, a privately held company based in Littleton, Colorado, has been in
business since 1984 and develops software applications for the life insurance
industry. System Innovations employs 28 people and generates approximately $3
million in annual revenue and is currently developing an advanced technology
life insurance proposal system in partnership with six major insurance
companies. The Company believes that the acquisition will provide the ability
to leverage its technical and insurance industry expertise and the joint
partnership with the six insurance companies provides opportunities for the
cross-selling of the Company's products. Included in the financial statements
is the activity related to the acquisition subsequent to December 28, 1995.
FINANCIAL RESULTS
For the quarter ended August 31, 1996, revenues reached a record high
increasing 42% to $6,694,260 as compared to $4,716,820 for the same period last
year. Operating profit for the third quarter was up 159% to $572,780 as
compared to $221,467 for the prior year. Net earnings for the third quarter
increased 60% to $581,480 or $.15 per share versus $363,507 or $.10 per share a
year ago.
For the nine month period ended August 31, 1996, total revenues also reached a
record high increasing 30% to $18,972,374 as compared to $14,558,066 for the
same period last year. Operating profit for the nine month period increased 81%
to $1,533,743 as compared to $845,815 for the prior year. Net earnings for the
nine months increased by 43% to $1,581,360 or $.42 per share, up from
$1,105,812 or $.31 per share for last year.
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The Company reports its revenues by two categories, Software and Information
Services.
<TABLE>
<CAPTION>
SOFTWARE REVENUE Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1996 1995 1996 1995
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENSION PARTNER $ 937 $ 934 $ 2,857 $ 2,911
- ------------------------------------------------------------------------------------------------
AGENCY PARTNER
Advanced Underwriting 1,081 1,069 3,304 3,326
Agency Database 749 490 1,970 1,339
- ------------------------------------------------------------------------------------------------
Subtotal 1,830 1,559 5,274 4,665
- ------------------------------------------------------------------------------------------------
SYSTEM INNOVATIONS 805 -- 2,164 --
- ------------------------------------------------------------------------------------------------
HOME OFFICE SYSTEMS
FDP/CLAS 994 1,160 3,262 3,623
FDP/COMPASS 1,317 356 3,016 1,108
- ------------------------------------------------------------------------------------------------
Subtotal 2,311 1,516 6,278 4,731
- ------------------------------------------------------------------------------------------------
TOTAL SOFTWARE $ 5,883 $ 4,009 $16,573 $12,307
- ------------------------------------------------------------------------------------------------
</TABLE>
SOFTWARE REVENUE:
Total software related revenue which includes software licenses, maintenance,
service revenue (time and materials) and other for the three and nine months
ended August 31,1996 increased by 47% and 35%, respectively. The increase for
the quarter and nine month periods was principally due to higher revenues in
FDP/COMPASS and AGENCY PARTNER as well as revenues earned relating to the first
quarter acquisition of System Innovations.
Revenues for FDP/COMPASS, the Company's client/server software for
pension/annuity administration, was up 270% for the quarter. Two new
international contracts for installation of the product were executed in the
quarter representing approximately two and a half million dollars in new
revenue continuing into next fiscal year. For the current fiscal year, five new
international contracts have been executed for FDP/COMPASS spanning South
Africa, the United Kingdom and Australia and representing approximately eight
million dollars in total revenue continuing through fiscal 1997. Revenues in
AGENCY PARTNER for the quarter were up 17% principally due to a 53% revenue
increase in the Agency Database division. Agency Database revenues increased as
a result of sales of Contact Partner, (formerly known as Agency Database), the
Company's comprehensive client management system designed for the insurance or
financial planning professional. Since its
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introduction, Contact Partner, the flagship product of FDP/VISION, has been
sold to 16 insurance company home offices for use by their agents. The
remainder of the software revenue increase relates to System Innovations which
reported revenues for the quarter of $805,000 and contributed 42% of the
overall software revenue increase for the Company.
PENSION PARTNER revenues for the quarter were basically unchanged as compared
to last year as higher maintenance revenue was offset by lower sales of
software licenses. Software license fee revenue has decreased as customers have
delayed purchasing awaiting the release of the Pension Partner products under
FDP/VISION. Software revenues for FDP/CLAS for the quarter were down 14% as a
result of a one-time cost adjustment on a specific project.
<TABLE>
<CAPTION>
Three Months Nine Months
INFORMATION SERVICES REVENUE Ended Ended
----- -----
August 31, August 31, August 31, August 31,
1996 1995 1996 1995
(000) (000) (000) (000)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PENSION PARTNER $ 183 $ 213 $ 573 $ 672
- ------------------------------------------------------------------------------------------------
AGENCY PARTNER 51 72 203 252
- ------------------------------------------------------------------------------------------------
FDP/CLAS 577 423 1,624 1,327
- ------------------------------------------------------------------------------------------------
TOTAL INFORMATION SERVICES $ 811 $ 708 $2,400 $2,251
- ------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION SERVICES REVENUE:
Total information services revenue for the quarter was up 15% as compared to
last year. Higher information service revenues in FDP/CLAS, up 36% was offset
by decreases in PENSION PARTNER and AGENCY PARTNER of 14% and 30%,
respectively. Information service revenue increased in FDP/CLAS due to higher
timesharing usage of the system. Whereas, information services revenue in the
PENSION PARTNER and AGENCY PARTNER continue to decline as customers that access
the various programs on a timesharing basis are purchasing the respective
products for use on personal computers.
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COSTS AND EXPENSES:
The Company's total cost and sales and services for the quarter and nine month
periods ending August 31,1996 were $6,121,480 and $17,438,631 compared to
$4,495,353 and $13,712,251 for the same periods last year representing
increases of 36% and 27%, respectively. Approximately half of the increase for
both periods relates to the acquisition of System Innovations with the
remainder of the increase principally due to higher payroll related expenses.
For the quarter ending August 31,1996, costs related to product development,
maintenance and enhancements for software increased by 53%, whereas costs for
information services decreased by 33%. These changes reflect the trend of the
shifting of the Company resources in the PENSION PARTNER and AGENCY PARTNER
groups away from information services, a decreasing revenue base, to software
product development, a growing revenue base. In addition, the increase in
software related expenses for product development, maintenance and enhancements
was due to the acquisition of System Innovations.
Selling, general and administrative expenses for the quarter and nine months
ended August 31, 1996 were $1,048,330 and $3,048,703 compared to $869,016 and
$2,630,551 for the same periods last year representing increases of 21% and
16%, respectively. Most of this increase for the two periods relates to higher
payroll and selling related expenses and System Innovations.
INTEREST INCOME:
Interest earned primarily on the Company's portfolio of U.S. Treasury Bills and
Notes for the quarter ended August 31, 1996 was $276,426 compared to $250,125
for the same period in 1995. The average interest earning rate for the third
quarter of 1996 was 5.97% as compared to 5.83% for the same period last year.
(See Financial Condition)
PROVISION FOR INCOME TAXES:
The Company's effective income tax rate was 32% and 23% for the quarters ended
August 31, 1996 and 1995, respectively. The tax rate in 1995 reflects an
adjustment to prior year income taxes.
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Financial Condition
The Company continues to maintain a highly liquid and virtually debt free
balance sheet. As of August 31, 1996 and November 30, 1995 cash and marketable
securities were $16,894,077 and $16,111,286, representing 63% and 68% of total
assets for the respective periods.
Other than planned purchases of equipment, no other significant capital
expenditures are anticipated for the remainder of fiscal 1996. Management of
the Company continues to believe that existing working capital and funds
generated by operations will be sufficient to meet the Company's anticipated
capital needs in connection with its present and proposed activities.
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PART II. OTHER INFORMATION
Item 1. Legal
The Company is from time to time involved in routine litigation arising in the
ordinary course of business. No litigation in which the Company is presently
involved is material to its financial position or results of operations.
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 - There were no reports on Form 8-K
filed for the three months ended August 31, 1996.
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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: October 7, 1996 FDP CORP.
By: /s/ Michael C. Goldberg
-------------------------------------
Michael C. Goldberg
Chairman of Board of Directors
Chief Executive Officer and President
(principal executive and financial
officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FDP CORPORATION FOR THE NINE MONTHS ENDED AUGUST 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 1,923,794
<SECURITIES> 14,970,283
<RECEIVABLES> 6,755,383
<ALLOWANCES> 299,132
<INVENTORY> 0
<CURRENT-ASSETS> 14,069,563
<PP&E> 6,494,593
<DEPRECIATION> 3,787,778
<TOTAL-ASSETS> 26,932,361
<CURRENT-LIABILITIES> 4,154,760
<BONDS> 0
0
0
<COMMON> 36,286
<OTHER-SE> 22,494,444
<TOTAL-LIABILITY-AND-EQUITY> 26,932,361
<SALES> 0
<TOTAL-REVENUES> 18,972,374
<CGS> 0
<TOTAL-COSTS> 17,438,631
<OTHER-EXPENSES> 4,256
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (786,794)
<INCOME-PRETAX> 2,316,281
<INCOME-TAX> 734,921
<INCOME-CONTINUING> 1,581,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,581,360
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
