<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 February 28, 1997.
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,
5,540,832 shares outstanding as of March 31, 1997.
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FDP CORP.
TABLE OF CONTENTS
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Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
February 28, 1997 and November 30, 1996 3
Consolidated Condensed Statements of Earnings
Three Months Ended February 28, 1997 and February 29, 1996 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended February 28, 1997 and February 29, 1996 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 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FDP CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except per share data) February 28, November 30,
1997 1996
(Unaudited)
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,639 $ 6,300
Marketable securities 2,490 5,365
Accounts receivable, less allowance for
uncollectible accounts of $442 in 1997
and $444 in 1996 5,542 5,649
Notes receivable - current 431 403
Prepaid expenses 241 91
Deferred income taxes 317 327
Costs and earnings in excess of billings on
uncompleted contracts 684 562
Other 310 79
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Total current assets 13,654 18,776
Property and equipment at cost, less acc-
umulated depreciation of $3,660 in 1997
and $3,629 in 1996 2,722 2,719
Other assets:
Marketable securities 13,163 7,114
Notes receivable - non-current 164 185
Goodwill 239 241
Other 82 77
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Total assets $30,024 $29,112
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,301 $ 2,900
Income taxes payable 427 239
Billings in excess of costs and earnings on
uncompleted contracts 1,614 1,914
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Total current liabilities 5,342 5,053
Deferred income taxes 513 497
------- -------
Total liabilities 5,855 5,550
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Stockholders' equity:
Preferred stock; $.01 par value. Authorized
10,000 shares; none issued
Common stock; $.01 par value. Authorized
30,000 shares; shares issued and outstanding
5,535 in 1997 and 5,518 in 1996 55 55
Paid-in capital 9,360 9,282
Retained earnings 14,754 14,225
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Total stockholders' equity 24,169 23,562
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Total liabilities and stockholders' equity $30,024 $29,112
======= =======
</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
(In thousands, except per share data) February 28, February 29,
1997 1996
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Revenues:
Software $6,638 $ 5,117
Information services 624 783
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Total revenues 7,262 5,900
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Cost of sales and services:
Product development, maintenance and enhancements:
Software 5,202 4,010
Information services 329 345
Selling, general and administrative expenses 1,116 1,008
Telecommunications 125 110
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Total cost of sales and services 6,772 5,473
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Operating profit 490 427
Interest income 289 251
Foreign currency loss and other 35 (2)
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Earnings before income taxes 814 676
Provision for income taxes 285 214
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Net earnings $ 529 $ 462
====== =======
Earnings per common and common
equivalent share $ 0.09 $ 0.08
====== =======
Weighted average number of shares used in per
share calculations 5,840 5,524
====== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
(In thousands, except per share data) February 28, February 29,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 529 $ 462
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Adjustments to reconcile net earnings to net
cash provided by (used in)
operating activities:
Depreciation and amortization of property,
equipment and intangibles 227 199
Changes in assets and liabilities, net of effects
from acquisition of business:
Decrease in accounts receivable, net 107 263
Increase in prepaid expenses (150) (97)
Increase in costs and earnings in excess
of billings on uncompleted contracts (122) (65)
Increase in other current assets (231) (141)
Increase (Decrease) in accounts payable
and accrued expenses 401 (756)
Decrease in billings in excess of costs
and earnings on uncompleted contracts (300) (76)
Increase in income taxes payable 188 134
Increase (Decrease) in deferred income taxes 26 (98)
Increase in other assets (5) --
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Net adjustments 141 (637)
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Net cash provided by (used in)
operating activities 670 (175)
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Cash flows from investing activities:
Proceeds from sale of marketable investment
securities (6,040) --
Purchase of marketable investment securities 2,866 (2,324)
Acquisition of business, net of cash acquired -- 185
Proceeds from note receivable 190 247
Acquisition of note receivable (197) (111)
Equipment acquired (229) (309)
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Net cash used in investing activities (3,410) (2,312)
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Cash flows from financing activities:
Proceeds from exercise of stock options 43 86
Stock option income tax benefit 36 39
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Net cash provided by financing activities 79 125
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Net decrease in cash and cash equivalents (2,661) (2,362)
Cash and cash equivalents at beginning of year 6,300 3,301
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Cash and cash equivalents at end of period $ 3,639 $ 939
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
February 28, 1997
(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 three months ended February 28, 1997, are not
necessarily indicative of the results for the full year.
Note B
- ------
The Board of Directors approved a quarterly cash dividend of $.0125 per share,
payable March 13, 1997 to shareholders of record on February 26, 1997.
Note C
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On November 11, 1996 the Board of Directors approved a three-for-two common
split distributable on December 10, 1996 to shareholders of record at the close
of business on November 26, 1996.
Note D
- ------
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 E
- ------
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
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Innovations are included in the statement of earnings from the acquisition date.
Goodwill of $313,000 was recorded as a result of the transaction. 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.
Note F
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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.
Note G
- ------
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Adoption of this
Statement will not have a material impact on the Company's financial position,
results of operations, or liquidity.
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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 February 28, 1997, revenues increased 23% to $7,262,000 as
compared to $5,900,000 for the same period last year. Operating profit for the
first quarter was up 15% to $490,000 as compared to $427,000 for the prior year.
Net earnings for the first quarter increased 15% to $529,000 or $.09 per share
versus $462,000 or $.08 per share a year ago.
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The Company reports its revenues by two categories, Software and Information
Services.
Three Months Ended
SOFTWARE REVENUE
February 28, February 29,
1997 1996
(000) (000)
------------ ------------
PENSION PARTNER $1,051 $1,043
AGENCY PARTNER 1,802 1,715
SYSTEM INNOVATIONS 852 605
HOME OFFICE SYSTEMS 2,933 1,754
TOTAL SOFTWARE $6,638 $5,117
SOFTWARE REVENUE:
Total software related revenue which includes software licenses, maintenance,
service revenue (time and materials) and other for the three months ended
February 28,1997 increased by 30%. The increase for the quarter was principally
due to higher revenues in Home Office Systems and System Innovations.
Revenues for Home Office Systems increased as FDP/COMPASS, the Company's
client/server software for pension/annuity administration, was up 171% to $1.9
million as compared to $.7 million for the prior year. The increase in revenue
related to the five contracts executed for the product in fiscal 1996 and a new
three million licensing deal executed in the first quarter of 1997. Revenues for
System Innovations were higher as three full months of revenue were reported in
the first quarter of 1997 as compared to only two months of revenue in 1996.
The increase in revenues in AGENCY PARTNER was mainly due to FDP/XL, the
Company's sales illustration system under Windows (TM). Revenues for FDP/XL
increased 57% to $1.1 million as compared to $.7 million for the prior year.
PENSION PARTNER revenues for the quarter were basically unchanged as customers
have delayed purchasing awaiting the release of the Pension Partner Windows (TM)
based products under FDP/VISION.
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Three Months
------------
INFORMATION SERVICES REVENUE
Ended
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February 28, February 29,
1997 1996
(000) (000)
------------ ------------
PENSION PARTNER $153 $188
AGENCY PARTNER 34 82
Home Office Systems:
FDP/CLAS 437 513
TOTAL INFORMATION SERVICES $624 $783
INFORMATION SERVICES REVENUE:
Total information services revenue for the quarter decreased by 20% as compared
to last year. Information service revenue for Pension Partner and Agency Partner
has been on a downward trend as customers that access the various software
programs on a time-sharing basis are purchasing the products for use on personal
computers. Information service revenue for FDP/CLAS also decreased 15% as a
major customer purchased a license to take the system in-house.
COSTS AND EXPENSES:
The Company's total cost of sales and services for the quarter ending February
28,1997 was $6,772,000 as compared to $5,473,000 for the same period last year
representing an increase 24% Most of the increase for the first quarter related
to higher personnel related costs for the Company mainly concentrated in the
FDP/COMPASS division.
For the quarter ending February 28, 1997, costs related to product development,
maintenance and enhancements for software increased by 30%, whereas costs for
information services decreased by 5%. These changes reflect the continuing 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.
Selling, general and administrative expenses for the quarter ended February 28,
1997 were $1,116,000 compared to $1,008,000 for the same period last year
representing an increase of 11%. The increase in costs was related to higher
selling related expenses.
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INTEREST INCOME:
Interest earned primarily on the Company's portfolio of U.S. Treasury Bills and
Notes for the quarters ended February 28, 1997 and February 29, 1996 was
$289,000 and $251,000, respectively. The average interest earning rate for the
first quarter of 1997 was 5.85% as compared to 6.18% for the same period last
year. The increase in interest income in 1997 was related to a higher portfolio
value. (See Financial Condition)
PROVISION FOR INCOME TAXES:
The Company's effective income tax rate was 35% and 32% for the quarters ended
February 28, 1997 and February 29, 1996, respectively. The tax rate in 1997
increased due to a reduction in benefits provided by research and development
credits.
Financial Condition
-------------------
The Company continues to maintain a highly liquid and virtually debt free
balance sheet. As of February 28, 1997 and November 30, 1996 cash and marketable
securities were $19,292,000 and $18,779,000, representing 64% and 65% 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 1997. 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 4. Submission of Matters to a Vote of Security Holders
The registrant will hold its Annual Meeting of Stockholders on April 15, 1997.
The purpose of this meeting is to consider and vote upon the following matters:
(1) the election of nominees Cesar L. Alvarez, Michael C. Goldberg, Cindy
Goldberg, Douglas Kennedy, Bruce I. Nierenberg and Albert J. Schiff to serve on
the Company's Board of Directors until the next annual stockholders' meeting,
and (2) a proposal to ratify the reappointment of KPMG Peat Marwick LLP,
independent certified public accountants, as auditors for the Company for the
year ending November 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - Exhibit 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 February 28, 1997.
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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: April 11, 1997 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
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> FEB-28-1997
<CASH> 3,639
<SECURITIES> 15,653
<RECEIVABLES> 6,579
<ALLOWANCES> 442
<INVENTORY> 0
<CURRENT-ASSETS> 13,654
<PP&E> 6,382
<DEPRECIATION> 3,660
<TOTAL-ASSETS> 30,024
<CURRENT-LIABILITIES> 5,342
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 24,114
<TOTAL-LIABILITY-AND-EQUITY> 30,024
<SALES> 0
<TOTAL-REVENUES> 7,262
<CGS> 0
<TOTAL-COSTS> 6,772
<OTHER-EXPENSES> (35)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (289)
<INCOME-PRETAX> 814
<INCOME-TAX> 285
<INCOME-CONTINUING> 529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
