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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission file number:0-11770
FDP CORP.
(Exact name of registrant as specified in its charter)
Florida 59-138243
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2140 South Dixie Highway 33133
Miami, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 858-8200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of class)
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The aggregate market value of voting Common Stock held by non-affiliates (based
upon the closing price as reported by the National Association of Securities
Dealers) on January 31, 1999 was approximately $45,440,000.
As of January 31, 1999, there were 6,045,612 shares of Common Stock, par value
$.01 per share, outstanding.
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PART I
ITEM 1. BUSINESS
GENERAL
FDP Corp., a Florida corporation ("FDP" or the "Company"), has been engaged in
the development, marketing and support of computer applications software to
meet the needs of the life insurance and employee benefit industry since 1968.
The Company is owned 50.1% as of January 31, 1999 by an individual shareholder
who has voting control. The software is available for operation on standalone
mainframe, mini- and/or microcomputers and/or may be accessed on a timeshare
basis. In the Pension Partner division, software products are developed for use
by actuaries, life insurance agents, life insurance companies, third party
administrators, employee benefit plan consultants, lawyers, bankers,
accountants and others. The products are used to promote sales of, and assist
in the administration of, defined benefit, defined contribution and cafeteria
plans by providing clients with an analysis of tax benefits and funding
assumptions. Products in the Company's Agency Partner division are used by life
insurance agents in demonstrating to their clients interest-sensitive and other
life insurance policies and to market and manage their prospects and clients.
In the Home Office Systems division, software systems are developed for use by
life insurance company home offices and other financial institutions in
handling the unique administration and processing requirements of life
insurance, pension and annuity products.
Life insurance products are based on intricate mathematical calculations and
are sensitive to a wide variety of constantly changing factors, including
fluctuations in interest rates, the availability and desirability of other
investment vehicles and changes in governmental regulations and tax laws. The
Company's software systems, which are enhanced and updated to reflect changes
in the economic and regulatory environment, facilitate the efforts by insurance
companies to keep existing products current and to develop new products in
response to these changes.
Because the design, marketing and administration of life insurance products and
pension and other employee benefit plans is complex, customer support personnel
for such software systems must possess actuarial skills, computer programming
ability and familiarity with the product. The Company has developed a customer
support organization by hiring actuaries and mathematicians and providing them
with training in computer programming, employee benefits and life insurance
products. The Company services its client base by maintaining a "hot-line" to
provide technical support and consultation.
The Company provides limited consulting services with respect to the
application of its products to technically enhance systems. In addition to
generating revenue and satisfying customer needs, these consulting services
have, in the past, contributed to decisions by the Company to enhance existing
products and develop entirely new products. The Company expects to continue its
policy of providing such consulting services.
The revenues from sales of software systems in the Home Office Systems division
are usually derived from large contracts. Due to normal delays and factors
associated with the size of these contracts, the effect of these revenues on a
fiscal quarter or fiscal year can be variable. (See Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations)
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RECENT DEVELOPMENTS
On January 15, 1999, the Company entered into a merger agreement pursuant to
which it will acquired by SunGard Data Systems Inc. Under the terms of the
merger, FDP shareholders will receive shares of SunGard common stock in
exchange for their shares of FDP common stock based on an exchange ratio. The
exchange ratio is designed to give FDP shareholders $14.40 in value of SunGard
common stock for each share of FDP common stock owned by them so long as the
average trading price of Sungard common stock is between $30 and $35. If the
average trading price is $30 or less, the exchange ratio will be fixed at .48
and if the average trading price is $35 or more, the exchange ratio will be
fixed at .4114. The Company anticipates that the merger will be consummated
prior to May 1999.
ACQUISITION
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 75,000 shares of the
Company's Common Stock $.01 par value ("Common Stock") valued at $5.25 per
share. The transaction was accounted for as a purchase, and the results of
operations for System Innovations are included in the consolidated statements
of earnings from the acquisition date. Goodwill of $313,000 was recorded as a
result of the transaction. System Innovations based in Littleton, Colorado, has
been in business since 1984 and develops software applications for the life
insurance industry. The acquisition agreement provides for the issuance of up
to an additional 75,000 shares of the Company's Common stock in two equal
installments in the event that System Innovations achieves certain earnings for
fiscal years ending November 30, 1998 and 1999. System Innovations achieved its
earnings target for fiscal 1998 and, accordingly, the Company issued 37,500
shares of Common stock to Michael Bain, the former sole shareholder of System
Innovations.
In connection with the acquisition, the Company entered into a five-year
employment agreement with Michael Bain, the sole shareholder of System
Innovations, providing for an annual base salary of $210,000.
STRATEGY
FDP/VISION represents the Company's strategy to offer a total solution for the
marketing and administration needs of the life insurance, financial services
and employee benefits industries. This total solution will completely integrate
the respective product lines of Agency Partner, Pension Partner and Home Office
Systems.
Over the years, insurance agents, employee benefits professionals and insurance
company home offices have been buying various application packages to support
their marketing and administration needs. Each application has its own database
leading to duplicate data entry. This nonintegrated environment of multiple
applications and multiple databases results in added expense through
duplication of training, duplication of resources and lost productivity.
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FDP/VISION addresses these issues. At the core of the FDP/VISION solution lies
a relational database which enables all systems used within FDP/VISION to
access and share the same information. The ability to share data will eliminate
repetitive data entry, reduce the risk of error and provide easy access to
data. Another part of the FDP/VISION solution is a common user interface. FDP
will not only coordinate the look and feel of all its applications but also
will utilize the standard interface elements of Microsoft Windows. The
consistency with these familiar elements will reduce the learning curve
required for the user to learn the systems developed under FDP/VISION. The
FDP/VISION design is also based upon object modeling, allowing the various
systems to make use of reusable business objects. These objects have been
designed to comply with emerging standards such as OLE for Life Insurance
(OLifE) and Microsoft's DNAfs.
During 1998, the VISION Team continued to lead the development, coordination
and implementation of the entire FDP/VISION strategy, bringing all systems one
step closer to utilizing the same databases, languages and codes. With the
Vision Team's help, the Company was able to bring many of the systems to
client/server, 32-bit technology. The Team also continued to work on the
Company's next generation of products to ensure they will be global,
web-enabled, OLifE compliant, object oriented and Year 2000 compliant.
The FDP/VISION strategy gives the Company a competitive advantage in the life
insurance, employee benefits and financial services industries. Potential and
current clients have the choice of developing their software in-house, or
utilizing multiple vendors for various applications. The Company is uniquely
positioned and has expertise in all areas of agency development and home office
systems. Since technology, government regulations and products are changing
rapidly, it is no longer feasible or cost effective for clients to develop
their systems in-house. The year 2000 has also caused companies to look for
compliant solutions. The Company's ability to leverage proven software,
capitalize on its excellent reputation and utilize Windows technology makes its
systems a cost-effective solution to meet industry needs.
PRODUCTS
The Company's software systems have been designed to permit ease of use and
adaptability to individual customer requirements. Most of the systems have a
modular structure that facilitates the application of updates and enhancements
and are based on a parameter-driven design so that key variables are not
embedded in the individual programs. Rather, these variables or parameters are
stored in central files which permit easy access without modifying the basic
program modules.
PENSION PARTNER
The Company's Pension Partner systems are designed to compute and illustrate
interactively various pension and employee benefit plans based upon assumed
financial and tax parameters governed by considerable Federal tax regulations,
economic conditions, actuarial concepts, and certain standard business factors
in the industry. These systems are used to assist self-employed individuals and
owners of small businesses to maximize the use of existing tax law to shelter
income and provide significant tax free death benefits to their survivors
through pension and employee benefit plans.
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The Pension Partner systems are utilized by thousands of companies and agents
throughout the nation, as well as consultants and other users. These systems
include:
- FDP/PEN Complete proposal and administration system software
for all types of qualified plans, including Defined
Benefit, Target Benefit, Money Purchase, Profit
Sharing, 401(K), ESOP and Keogh Plans.
- Easy Laser 5500 software that automates the completion of
laser-printed IRS 5500 forms and related schedules.
- Easy Laser 5300 software that automates the completion of
laser-printed IRS 5300 forms and related schedules.
- Easy Forms 1099 software that automates the preparation of 1099R's
and related forms.
- PDQ IRS-approved automated pension plan document
generation systems for Master or Regional Prototype
plans and Volume Submitter Individualized Plans.
- Pension Manager software designed to control and coordinate pension
office work flow.
- FDP/PTA pension trust accounting database and asset
reconciliation system.
- FDP/Distpack software that illustrates the amount of excise taxes
payable on excess distributions and excess
accumulations.
- FDP/125 software for enrollment and administration software
for Section 125 cafeteria plans.
- FDP/A4 software for nondiscrimination testing system for
401(k) plans.
- FDP/DAILY software for daily processing of participants
records and plan administration for 401(k) plans.
- FDP/VOICE voice response system that works in conjunction with
FDP/Daily.
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AGENCY PARTNER
FDP's Agency Partner division is responsible for developing integrated software
applications to support the needs and requirements of today's life insurance,
employee benefits and financial services professionals. These Windows-based
systems are designed to assist users in increasing sales, enhancing marketing,
servicing clients and managing day-to-day business functions. The products in
the Agency Partner division performing these integrated operations include
Contact Partner(TM), FDP/XL and FINPACK.
Contact Partner is a database system that incorporates sales, marketing and
client/contact management functions. Contact Partner includes all of the
features required for life insurance and pension professionals to perform
automatic client/prospect tracking, service and manage life insurance policies,
investments and pension plans, investment tracking, time management, report
management, targeted marketing and professional report and letter creation. The
system also includes custom screen generation, data conversion features, Agent
View Security (AVS) and an import feature, FDP/LINK, which facilitates the
download of data from life insurance and investment companies. Contact Partner
is also available in an international version, which is compatible with foreign
languages and international data requirements.
Contact Partner is fully integrated with three separate modules that assist
users with tracking and management of commissions, pension plans and
investments. The Commission Tracking Module is designed to assist life
insurance agents and agencies clearly and easily track and reconcile their
commissions. Agents can view and reconcile commissions by agent, agency,
policy, line of business or carrier, identify commission splits, track
productivity and generate commission reports. The Plan Tracking Module is
designed to be a launching place to create, view and modify plans, and perform
workflow tasks related to the administration of pension plans. The Investment
Tracking Module allows users to easily manage client financial and investment
information and generate a variety of reports such as Investment Portfolio
Summaries, Internal Rate of Return reports, Daily Blotter reports, as well as
Asset Allocation analyses.
FDP/XL is a sales illustration system that provides a broad range of
capabilities to present the benefits of life insurance policies while
implementing NAIC compliance requirements. This system also illustrates a
diverse range of strategies including Ledgers, Executive Bonus, Group
Carve-Out, Split Dollar and Deferred Compensation. FDP/XL provides for full
customization, enabling users to create reports and graphs that can be saved
for use in any illustration. With its open-ended architecture, FDP/XL can
quickly accommodate changes in the life insurance industry. FDP/XL also has an
international version, which has the ability to be customized to operate in any
language and accommodate various international requirements.
FINPACK is a comprehensive financial and estate analysis system that allows
agents to analyze a client's financial profile through family needs and cash
flow analysis, estate tax analysis and other financial tools. The system has
the power to discover estate liquidity needs and suggest several techniques to
fund the necessary life insurance-based financial plan. Among the analysis
tools included are Charitable Remainder, Grantor Retained Income, and
Irrevocable Life Insurance Trusts, several gifting techniques, and a number of
Will and Testamentary Trust options. The system assists users in conveying
recommendations to their clients in a clear and professional manner through
graphical reports and integration with Microsoft PowerPoint(R).
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FINPACK also provides Internet links to industry-related sites and a Conceptual
Support Library to enhance sales presentations.
HOME OFFICE
The Home Office Systems division is responsible for the development of systems
for use by life insurance home offices and financial institutions to handle the
administration and processing requirements of life, pension and annuity
products for either Group or Individual benefit and investment plans.
The systems provided by the FDP Home Office division are:
o FDP/CLAS (Comprehensive Life Administration System) supports universal
life and variable universal life as well as traditional life products in
the individual and annuity marketplaces.
o FDP/COMPASS (COMPrehensive Annuity Support System) provides for
administration of group and individual pension/annuity products (both
qualified and non-qualified), including participant recordkeeping and plan
administration for corporate defined contribution arrangements such as
money purchase, profit sharing, 401(k), superannuation, preservation, and
cafeteria plans.
FDP/CLAS and FDP/COMPASS support the administration requirements for insurance
company and investment products with a full range of automated financial
functions. These functions include premium calculation, billing, collection,
commissioning, claims payment, and general ledger accounting for all
transactions. There are also comprehensive management information and report
generation facilities. The functionality contained within the systems enables
FDP clients to perform the service tasks required to operate an entire home
office product administration area.
Utilizing a relational database design along with a Graphical User Interface
(GUI) front-end, FDP/CLAS and FDP/COMPASS operate in a client/server
environment and utilize a state-of-the-art technical architecture, allowing for
tremendous flexibility and ease of use. Capable of running on hardware ranging
from inexpensive workstations to multi-processor computers with the power of
mainframes, the UNIX and NT-based FDP/CLAS and FDP/COMPASS systems can be
quickly installed and easily maintained on a standalone basis at the client's
site. FDP/CLAS is also available on a timesharing basis for those companies
that prefer to handle their administrative needs by outsourcing.
COMPUTER INFORMATION SYSTEMS
The Company provides timesharing services on its in-house Hewlett-Packard 3000
computer systems. The demand for the Company's timesharing services in the
Pension Partner and Agency Partner divisions continues to decline as their
various software programs are now more frequently requested for standalone
personal computers. Timeshare access for FDP/CLAS also
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decreased in fiscal 1998 and 1997 after increasing in fiscal 1996. The data
processing center of the Company operates multiple computers, approximately
two-thirds of which are for in-house software development. The Company believes
its computers and communication lines are sufficient for its processing needs.
OTHER
The Company is a Microsoft Solutions Provider Partner, Value Added Reseller for
Hewlett-Packard and Oracle and an Authorized Applications Specialist in the IBM
Business Partner Program.
CUSTOMERS
The clients of the Company include thousands of life insurance agents, numerous
insurance companies, many consulting firms specializing in pension and employee
benefits, and several nationally recognized accounting firms, law firms and
banks, domestic and international.
The Company's major customers include The Prudential, Metropolitan Life, New
York Life, Massachusetts Mutual, New England Mutual, Mutual Life Insurance
Company of New York (MONY), Continental Assurance (CNA), General American Life,
Guardian Life, National Life of Vermont, Minnesota Mutual, American United
Life, Union Central, Indianapolis Life, Safeco Life, ITT/Hartford Life,
National Mutual Life Association of Australia Ltd., VVAA, Principal Mutual Life
Insurance Company, The Travelers Insurance Company, Liberty Life, Alexander
Forbes, Plum Financial Services, Empire Life Insurance Company, Sanlam, Levob
Veraekeringen, B.A., and Imperial Life.
REVENUE RECOGNITION AND RELATED MATTERS
The Company's business has not historically been of the nature that results in
a backlog of unfilled firm customer orders although some contracts may take
several years for completion. Large contracts for the sale and installation of
software are billed as phases of the contracts are substantially complete.
Sales relating to software license agreements are billed upon shipment of the
products to the customer. The Company bills its customers for timesharing
services on a monthly basis. Timesharing agreements continue for indefinite
terms and are terminable by the customer at any time. Equipment sales are
billed upon shipment. The backlog of software sales was insignificant at
November 30, 1998.
On sales where significant enhancements are required, the Company recognizes
revenue on the percentage of completion method based upon the labor hours
incurred to date to total estimated labor hours. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Amounts
received or billed in excess of revenues recognized to date are classified as
"billings in excess of costs and estimated earnings on uncompleted contracts",
whereas, revenues recognized in excess of amounts billed are classified as
"costs and estimated earnings in excess of billings on uncompleted contracts".
Revenue
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from separately priced extended software maintenance arrangements is deferred
and recognized in income on a straight-line basis over the contract period.
International revenues provided by export sales were $18,595,000 or 45%,
$13,384,000 or 41% and $6,307,000 or 24% of consolidated revenues for the years
ended November 30, 1998, 1997 and 1996, respectively, and were primarily from
customers in South Africa, the United Kingdom, Australia, Netherlands and
Canada.
MARKETING AND CUSTOMER SUPPORT
The Company's marketing philosophy is to provide potential and existing
customers with solutions to specific needs or problems. This approach requires
a high level of customer support and assistance and is one of the most
important factors in maintaining existing clients and increasing its client
base. The Company attributes much of its present client base to referrals from
existing clients. The Company also participates at industry trade shows and is
active in industry organizations.
In 1998, the joint marketing agreement between the Company and Pension
Publications of Denver (PPD), a firm specializing in the preparation of
employee benefit documents was terminated. The Company decided to offer its own
employee benefit documents service and entered into a new agreement with Global
Benefit Advisors, LLC and TRI Pension Services to develop National Regional
Protoype Plan Documents for Defined Contribution and Defined Benefit Plans. The
agreements compensate the parties for their services and contained a provision
for the Company to pay royalties based upon revenues generated from sales of
the respective plan documents.
FDP's acceptance as a Microsoft Solutions Provider Partner provides the Company
with the technical knowledge and marketing support to build upon the wide
acceptance of Microsoft Windows in the life insurance and employee benefit
industries.
The Company has developed a customer support organization by hiring actuaries
and mathematicians and providing them with training in computer programming,
employee benefits and life insurance products. Most of the Company's officers
function as software consultants providing technical advice with regard to the
Company's software systems.
Users of the software are trained by the Company's staff concerning the use of
a system and are provided with documentation including reference manuals. The
Company maintains a staff that is available over a toll-free WATS telephone
line to support its clients. In addition, the Company sponsors periodic
training sessions and seminars to update and train users on new features of a
system.
WARRANTIES AND RETURNS
The Company generally does not offer express warranties and limits implied
warranties in its timesharing and software licensing agreements. The standard
agreement for licensing the Company's systems under base fee arrangements
contains provisions purporting to limit warranty liability to the correction of
any deviation of a system from its specifications. The Company has not incurred
any significant warranty expense to date. The amount of sales
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returns of hardware and software has been immaterial in the fiscal years ended
November 30, 1998, 1997 and 1996.
PRODUCT DEVELOPMENT AND ENHANCEMENT
The computer software industry is characterized by continual technological
change, requiring a high level of expenditures for the development and
improvement of computer software products. To date, the Company has adapted to
such changes by developing substantial functional enhancements to its products.
The Company anticipates that it will continue to provide such enhancements to
its systems. A substantial amount of the Company's cost of services is
associated with the maintenance, enhancement and development of existing and
new products, as well as customer service. Research and development expenses
charged to cost of sales and services were approximately $5.6 million, $6.2
million, and $5.8 million during fiscal years 1998, 1997 and 1996,
respectively.
In 1998, the Company's development efforts centered on the development of the
suite of products under FDP/VISION. The Agency Partner division completed the
conversion of Contact Partner from a 16-bit product to 32-bit product, which
allows for the utilization of technology found in Windows 95, Windows 98 and
Windows NT. This development permits the use of more powerful databases, such
as SQL Server 7.0, and provides increased stability, memory management and
scalability. In addition, the Company neared completion of a client/server,
32-bit version of FDP/XL. This system will integrate with the other Agency
Partner products, rounding out the enterprise solution provided by the
division. In the Pension Partner division, the Company released a 32-bit,
Windows version of FDP/PEN. The division also began offering an employee
benefit document service to clients. These documents will be offered in
conjunction with the Company's new document generation software system called
FDP/PDQ. In the Home Offices System division, the expansion of the
international client base resulted in new functionality and product
capabilities being added to the systems. The Company also continued its efforts
towards the integration of FDP/CLAS and FDP/COMPASS under the FDP/VISION
strategy. System Innovations released its advanced marketing illustration
system named "ISP System" to five insurance companies that are using the system
in a production environment.
The Company believes that its future success will depend on its ability to
improve existing software products and develop or acquire additional software
products. There can be no assurance that such developments will occur or that
such acquisitions will be made.
COMPETITION
The Company believes that its major competition is the in-house data processing
capability of life insurance companies. In addition, other independent software
producers compete in certain market segments served by the Company. The Company
believes that its products compete favorably with the competition, although it
may be at a competitive disadvantage against companies with greater financial,
technological, marketing service and support resources.
The Company believes that the most important considerations for potential
purchasers of systems software packages are product capability, customer
support and service, integration of
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the product line, continuity of product enhancement, ease of installation and
use, documentation and training, the experience and financial stability of the
vendor and to a lesser extent, price. By virtue of its 30 years of experience
in developing software for use by the life insurance industry, the Company
believes that it has the ability to compete successfully with the data
processing systems of life insurance companies and other independent software
producers. The Company considers that its competitive position is in part
dependent upon its ability to continue to develop software applications in
response to the changing conditions of the employee benefit, life insurance and
financial planning markets.
PRODUCT PROTECTION
The Company does not sell or transfer title to its products to customers. The
products are licensed on a "right to use" basis pursuant to license agreements.
Each license is nontransferable and restricts use of the products to the
customer's internal purposes at one or more designated computer sites.
The Company regards its software as proprietary and relies for protection upon
trade secret laws and internal nondisclosure safeguards as well as restrictions
on disclosure and transferability incorporated in its software license
agreements. Despite these restrictions, it may be possible for competitors or
users to copy aspects of the Company's products or to obtain information which
the Company regards as its trade secrets. Computer software generally cannot be
patented, and existing copyright laws afford only limited protection. The
Company believes that the rapid pace of technological change in the computer
industry makes patent or copyright protection of less significance than such
factors as the knowledge and experience of management and other personnel and
the Company's ability to develop, enhance, market and acquire new systems and
services.
EMPLOYEES
The Company seeks to employ and retain highly skilled personnel who possess
actuarial, marketing and computer programming skills. The Company employs
approximately 440 employees, most of whom are employed at the Company's home
office and none of who are members of a union. The Company has experienced a
low turnover rate and believes that its relations with its employees are
excellent.
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ITEM 2. PROPERTIES
The Company currently rents approximately 61,000 square feet of office space,
occupying two locations, and constituting the Company's headquarters, in Miami,
Florida, from a partnership, of which the Company's principal shareholder is
the general partner of (the "Partnership"). The space is rented pursuant to a
5-year lease effective December 1, 1994 which provides for a base rental
amount, subject to increases based on increases in the consumer price index,
plus taxes, insurance and certain operating expenses. Currently, the annual
rent relating to this building is approximately $1,515,000 per year. The
Company has the option to renew this lease for another 5 years under the same
terms and conditions.
The Company also rents office space at three other locations: 1) 24,200 square
feet of office space in Natick, Massachusetts for an annual rent of
approximately $508,000 under a lease expiring on November 30, 2002; 2) 10,500
square feet of office space in Littleton, Colorado for an annual rent of
approximately $144,000 under a lease expiring on August 31, 2002; 3) 1,600
square feet of office space in Parktown, South Africa for an annual rent of
approximately $20,000 under a lease expiring June 30, 2000 and 4) shared office
space in Livingston, Scotland for an annual rental of $20,000 under a lease
expiring December 31, 1999.
ITEM 3. LEGAL PROCEEDINGS
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
No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of fiscal 1998.
On October 10, 1997, the Company filed with the Securities and Exchange
Commission an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended, relating to the approval by written consent of
shareholder of an increase to 1,220,868 in the number of shares of Common Stock
reserved for issuance pursuant to the Company's 1994 Employee Stock Option Plan
(the "1994 Plan"). Mr. Michael C. Goldberg, the record and beneficial owner of
approximately 53.7% of the then outstanding shares of Common Stock, voted all
such shares in favor of the increase in the number of shares of Common Stock
reserved for issuance pursuant to the 1994 Plan, which vote was sufficient to
approve the increase.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on The Nasdaq National Market under the
symbol FDPC. The following table sets forth for the periods indicated, the high
and low sales prices of the Common Stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FISCAL 1998: High Low
- -------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $11 3/8 $10
Second Quarter 14 1/4 9 3/8
Third Quarter 13 1/2 9 1/2
Fourth Quarter 11 8 3/8
- -------------------------------------------------------------------------------
FISCAL 1997: High Low
- -------------------------------------------------------------------------------
First Quarter $10 $6 1/8
Second Quarter 7 7/8 6 1/8
Third Quarter 8 5/8 6 7/8
Fourth Quarter 11 3/8 7 3/4
</TABLE>
As of November 30, 1998, there were approximately 97 record holders of the
Common Stock excluding security position listings. The Company would have
approximately 853 record holders if security positions listings were included.
On April 24, 1996, the Company's Board of Directors approved an annual cash
dividend of $.04 per share of Common Stock and paid to shareholders of record
on May 10, 1996.
On February 13,1997, the Company's Board of Directors approved a quarterly cash
dividend of $.0125 per share of Common Stock, totaling $.05 per share for
fiscal 1997.
On February 13, 1998, the Company's Board of Directors approved a quarterly
cash dividend of $.0125 per share of Common Stock, totaling $.05 per share for
fiscal 1998.
On February 16, 1999, the Company's Board of Directors approved a quarterly
cash dividend of $.0125 per share of Common Stock.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data set forth below has been derived from
the consolidated financial statements of the Company. The consolidated
financial statements as of November 30, 1998 and 1997 and for the three years
ended November 30, 1998 have been audited by KPMG LLP, independent auditors,
and such consolidated financial statements and the report thereon are included
elsewhere herein. The consolidated financial statements as of November 30,
1996, 1995 and 1994 and for the two years ended November 30, 1995 have also
been audited by KPMG LLP and are not included herein.
<TABLE>
<CAPTION>
Historical summary 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Results of Operations
Revenues $ 40,934 $ 32,817 $ 26,445(a) $ 19,389 $ 18,371
Operating profit 4,468 3,343 2,191 1,069 427
Interest income 1,189 1,235 1,073 968 725
Foreign exchange (loss) gain and other (21) 6 (3) (7) 9
Earnings before income taxes 5,636 4,584 3,261 2,030 1,161
Net earnings 3,832 2,980 2,225 1,468 652
Net earnings per share (b):
Basic .65 .53 .41 .28 .13
Diluted .62 .50 .39 .27 .13
Weighted averages shares outstanding (b)
Used to compute basic 5,937 5,631 5,386 5,166 5,059
Used to compute diluted 6,227 5,938 5,751 5,385 5,164
Financial Condition
Working capital $ 19,460 $ 12,799 $ 13,723 $ 10,155 $ 9,694
Total assets 39,667 33,088 29,112 23,660 21,520
Stockholders' equity 32,886 27,471 23,562 20,062 18,240
</TABLE>
- ----------------
(a) Fiscal year 1996 revenues include revenues of $3,186 related to System
Innovations; an acquisition accounted for as a purchase. See Note 1 to the
Consolidated Financial Statements.
(b) In fiscal year 1996, the Company declared a three-for-two stock split.
Prior year share and per share amounts have been restated to reflect the split.
14
<PAGE> 15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (continued)
<TABLE>
<CAPTION>
Quarterly results (Unaudited) First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal 1998:
Revenues $ 9,190 $ 9,674 $10,267 $11,803
Operating profit 837 1,136 1,340 1,155
Net earnings 729 919 1,068 1,116
Net Earnings per share:
Basic .12 .15 .18 .19
Diluted .12 .15 .17 .18
Weighted average shares outstanding:
Used to compute basic 5,839 5,942 5,978 5,986
Used to compute diluted 6,136 6,251 6,274 6,219
Fiscal 1997:
Revenues $ 7,262 $ 7,892 $ 8,286 $ 9,377
Operating profit 490 778 891 1,184
Net earnings 529 705 788 958
Net Earnings per share:
Basic .10 .13 .14 .17
Diluted .09 .12 .13 .16
Weighted average shares outstanding:
Used to compute basic 5,526 5,558 5,558 5,758
Used to compute diluted 5,840 5,850 5,977 6,079
</TABLE>
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company develops and sells a variety of applications software systems that
facilitate the marketing and administrative functions for the life insurance
and employee benefit industries. Support services such as design, installation,
customization, maintenance, consulting and training are routinely performed.
Information services are provided to clients for calculating certain values
within life insurance policies, pension contracts and sales illustrations. The
Company is a Microsoft(R) Solutions Provider Partner, Value Added Reseller for
Hewlett-Packard and Oracle, and an Authorized Applications Specialist in the
IBM Business Partner Program.
ACQUISITION
On December 28, 1995, the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 75,000 shares of the
Company's Common Stock $.01 par value ("Common stock") valued at $5.25 per
share. The transaction was accounted for as a purchase, and the results of
operations for System Innovations are included in the consolidated statements
of earnings from the acquisition date. Goodwill of $313,000 was recorded as a
result of the transaction. System Innovations based in Littleton, Colorado, has
been in business since 1984 and develops software applications for the life
insurance industry. The acquisition agreement provides for the issuance of up
to an additional 75,000 shares of the Company's Common stock in two equal
installments in the event that System Innovations achieves certain earnings for
fiscal years ending November 30, 1998 and 1999. System Innovations achieved its
earnings target for fiscal 1998, and accordingly, the Company issued 37,500
shares of Common stock to Michael Bain, the former sole shareholder of System
Innovations.
RESULTS OF OPERATIONS
Annual 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.
The Company's total revenues, exclusive of interest earnings, were $40,934,000,
$32,817,000 and $26,445,000, for the fiscal years ended November 30, 1998, 1997
and 1996, respectively. Total revenues in 1998 and 1997 increased by 25% and
24%, respectively. The Company reports its revenues by two major types:
software and information services.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SOFTWARE REVENUES
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGENCY PARTNER $ 9,067 22% $ 7,446 8% $ 6,900
PENSION PARTNER 4,634 10% 4,202 9% 3,844
HOME OFFICE SYSTEMS 21,118 37% 15,396 65% 9,357
SYSTEM INNOVATIONS 4,096 14% 3,588 13% 3,186
------- ------- ------- ------- -------
Total Software $38,915 27% $30,632 32% $23,287
% of total Revenue 95% 93% 88%
</TABLE>
Total software-related revenues, which include software sales, maintenance,
service revenue (time and materials), net equipment sales and other, for fiscal
1998 increased $8,283,000 or 27% as compared to the prior year. For fiscal
1997, software-related revenues increased by $7,345,000 or 32% as compared to
the prior year.
The increase in software revenues for fiscal 1998 was principally driven by the
HOME OFFICE SYSTEMS division that includes the products FDP/COMPASS and
FDP/CLAS. Revenues for these products increased by 49% and 17%, respectively.
More than half of the increase in FDP/COMPASS revenues was related to two new
multi-million dollar contracts executed for the product with major insurance
companies in Australia and the United Kingdom. The remainder of the increase
related to license fees and service revenue earned from existing contracts.
FDP/CLAS revenues increased due to higher service revenue related to continuing
modifications and enhancements to the product. In fiscal 1997, the software
revenue increase was also driven by FDP/COMPASS and FDP/CLAS which increased by
102% and 24%, respectively, as compared to the prior year.
Agency Partner revenues, which include the products Contact Partner(TM), FDP/XL
and FINPACK, were up $1,621,000 or 22% for fiscal 1998. The 1998 increase was
mainly related to a 54% increase in Contact Partner(TM) revenues. Contact
Partner (TM) revenues increased due to higher service revenue and a new
multi-million dollar licensing agreement executed with a life insurance company
in South Africa. The Company expects this contract to make a significant
contribution towards Agency Partner revenues in fiscal 1999. Revenues related
to the other Agency Partner products, FDP/XL and Finpack, were up slightly as
compared to the prior year. In fiscal 1997 revenues for the Agency Partner
products were up 8%.
Pension Partner revenues increased 10% in fiscal 1998 due to higher licensing
fees and maintenance revenues as a result of sales of the new Windows versions
of the FDP/PEN Administration and Proposal systems. In fiscal 1997, software
related revenues had increased by 9%.
System Innovation revenues in fiscal 1998 increased 14% as compared to last
year as the advanced-technology life insurance proposal system (ISP) that was
under development with six major insurance companies was released. In fiscal
1997, revenues for the group increased 13%.
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INFORMATION SERVICES REVENUE
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
AGENCY PARTNER $ 106 -21% $ 135 -46% $ 249
PENSION PARTNER 412 -16% 493 -33% 733
HOME OFFICE SYSTEMS:
FDP/CLAS 1,501 -4% 1,557 -28% 2,176
------ ---- ------ ---- ------
Total Information Services $2,019 -8% $2,185 -31% $3,158
% of total Revenue 5% 7% 12%
</TABLE>
Total information services revenue, consisting primarily of timesharing
charges, for fiscal 1998, decreased by 8%. Information services revenue in
Agency and Pension Partner continues to decline as customers that access the
various programs on a time-sharing basis are purchasing the products for use on
personal computers. Information services revenue for FDP/CLAS decreased
slightly as compared to the prior year. In fiscal 1997, information service
revenue decreased by 31% as a major customer of FDP/CLAS purchased the system
to do its processing in-house. Information services revenue as a percentage of
total revenues continues to decline as software related revenues have
increased.
COSTS AND EXPENSES
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Product development,
maintenance and enhancements:
Software $29,019 25% $23,184 27% $18,240
Information Services 990 -11% 1,107 -9% 1,211
Selling, general and admin. 6,195 30% 4,776 10% 4,329
Telecommunications 262 -36% 407 -14% 474
------- ------- ------- ------- -------
Total costs & expenses $36,466 24% $29,474 22% $24,254
% of total revenue 89% 90% 92%
</TABLE>
The Company's costs and expenses for fiscal 1998, increased by $6,992,000 or
24% after increasing $5,220,000 or 22%, in fiscal 1997. The increase in costs
for both years was mainly the result of higher personnel costs in the
FDP/COMPASS division and development efforts related to the suite of products
under FDP/VISION.
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
For fiscal 1998 and fiscal 1997, costs and expenses related to software
continue to increase, whereas the costs and expenses related to information
services have decreased. This trend reflects the shifting of Company resources
away from information services, a decreasing revenue base, to software product
development, a growing revenue base. Total selling, general and administrative
expenses for fiscal 1998 increased by $1,419,000 or 30% after increasing
$447,000 or 10%, in fiscal 1997. The increase in fiscal 1998 was mainly related
to a higher allowance for doubtful accounts and an increase in selling related
expenses and administrative costs. In 1998, the allowance for doubtful accounts
was increased by $650,000 as a result of a higher accounts receivable balance
and a potential one-time write-off relating to a customer. In fiscal 1997, the
increase in selling, general and administrative costs was related to higher
selling related expenses and administrative costs.
OTHER INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Personnel costs $24,340 24% $19,595 20% $16,273
% of total revenue 59% 60% 62%
Research and development
Expenditures $ 5,554 -11% $ 6,225 8% $ 5,778
% of total revenue 14% 19% 22%
</TABLE>
In fiscal 1998 and 1997 personnel costs, which include employee compensation,
payroll taxes and employee benefits, increased by $4,745,000 or 24% and
$3,322,000 or 20%, respectively.
The decrease in research and development ("R&D") expenditures for fiscal 1998
was mainly related to the FDP/COMPASS product. The increases in research and
development ("R&D") expenditures for fiscal 1997 were mainly related to the
development and upgrade of products under FDP/VISION.
FDP supports a variety of research and development programs in an effort to
continuously provide leading edge products to the life insurance and pension
industries. Capitalizable software development costs relating to new products
have not been significant and have been charged to research and development
expense as incurred. Many of the Company's research and development
expenditures, especially those related to product enhancements and
modifications, are billed to the customer.
19
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
--------- ---- --------- ------ ------
<S> <C> <C> <C> <C> <C>
Interest income $ 1,189 -4% $ 1,235 15% $1,073
Average interest-earning rate 5.67% 6.09% 5.90%
</TABLE>
The Company's investment income principally relates to the marketable
securities portfolio that consists of U.S. Treasury Securities. The amount of
interest income earned is primarily the result of the average interest rates on
the instruments in the securities portfolio.
INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Provision for income taxes $1,804 12% $1,604 55% $1,036
Effective income tax rate 32% 35% 32%
</TABLE>
The Company provides for federal and state income taxes on sources of income
effectively connected with trade or business within the United States and
within each applicable state. In fiscal 1998, the effective income tax rate
decreased as compared to 1997 due to an increase in benefits provided by the
foreign sales corporation (FSC) benefit as a result of the Company qualifying
to be treated as a "Large FSC". The 1997 income tax rate increase was due to
the reduction in research and development credits and the foreign sales
corporation (FSC) benefit.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a highly liquid and virtually debt-free
balance sheet. Expenditures for property and equipment used for software
development, information services and other operations were $3,287,000,
$2,047,000, $1,200,000 for fiscal years 1998, 1997 and 1996, respectively. The
increase in expenditures for 1998 related to leasehold improvements and
furniture for new office space to accommodate the Company's growth. In 1997,
the increase was related to leasehold improvements on new office space for the
Company.
Management believes 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. At November 30, 1998,
there were no long-term commitments for the Company's working capital other
than for leases of premises.
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 Change 1997 Change 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and
marketable securities-
End of year $20,819 5% $19,831 6% $18,779
Working capital $19,460 52% $12,799 -7% $13,723
</TABLE>
Cash, cash equivalents and marketable securities for 1998 and 1997 grew due to
cash flow from operating activities and cash received upon the exercise of
stock options.
FOREIGN CURRENCY EXCHANGE
International sales are sometimes invoiced and paid for in foreign currencies.
Therefore, revenues from these sales will be affected by fluctuations of
foreign currencies versus the U.S. dollar. The Company attempts to minimize its
foreign currency exposure by executing its contracts in U.S. currency. The
foreign exchange (losses) gains were minimal for fiscal years ended 1998, 1997
and 1996.
EFFECTS OF INFLATION
Although the effects of inflation upon the Company's costs and expenses cannot
be precisely measured, inflation has caused increases in personnel and other
operating costs. Within the limits imposed by the respective marketplace, the
Company attempts to control its expenditures through a variety of
management-supervised policies.
STATEMENT OF POSITION (SOP) 97-2 SOFTWARE REVENUE RECOGNITION
In October 1997, the AICPA issued Statement of Position (SOP) 97-2, SOFTWARE
REVENUE RECOGNITION, which supersedes SOP 91-1. The Company adopted SOP 97-2
for software transactions entered into beginning November 1, 1997, as
retroactive application to years prior to adoption is prohibited. SOP 97-2
generally requires revenue earned on software arrangements involving multiple
elements (i.e., software products, upgrades/enhancements, postcontract customer
support, installation, training, etc.) to be allocated to each element based on
the relative fair values of the elements. The fair value of an element must be
based on evidence which is specific to the vendor. The revenue allocated to
software products (including specified upgrades/enhancements) generally is
recognized upon delivery of the products. The revenue allocated to postcontract
customer support generally is recognized ratably over the term of the support
and revenue allocated to service elements (such as training and installation)
generally is recognized as the services are performed. If a vendor does not
have evidence of fair value for all elements in a multiple-element arrangement,
all revenue from the arrangement is deferred until such evidence exists or
until all elements are delivered. The adoption of SOP 97-2 did not have a
material impact on the Company's results of operations.
Revenue from contracts for the licensing of software and installation of
software where significant enhancements are required is recognized on the
percentage of completion method based on the labor hours incurred to date to
total labor hours. Changes in job performance, job conditions, estimated
profitability and final contract settlements which may result in
21
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
revisions to costs and income are recognized in the period in which the
revisions are determined. Anticipated losses are recognized in the period in
which they are identified. Amounts received or billed in excess of revenues
recognized to date are classified as "billings in excess of costs and estimated
earnings on uncompleted contracts", whereas, revenues recognized in excess of
amounts billed are classified as "costs and estimated earnings in excess of
billings on uncompleted contracts". The Company recognizes revenue for
timesharing services as earned and bills the customers on a monthly basis.
Timesharing agreements continue for indefinite terms and are terminable by the
customer at any time. Revenue from separately priced extended software
maintenance arrangements is deferred and recognized in income on a straight-line
basis over the contract period.
YEAR 2000 COMPLIANT ISSUE
Many companies that use and/or develop computer software are addressing the
potential problem that may exist if their software is not "year 2000
compliant." The potential problem that exists with some computer software is
that it will not process transactions properly for dates commencing in the year
2000. This is due to the fact that many software programs were designed to make
date calculations based on the last two digits of the year. As a result, dates
in the year 2000 may be identified as dates in the year 1900, which may cause
incorrect calculations, cause the transaction to not be processed or, in some
cases, cause an entire computer system to malfunction.
The Company has been aware of this problem and has been addressing it, both for
its software that is being developed for sale to users and for applications
affecting internal operations that potentially may not be year 2000 compliant.
On software developed for sale to users, the Company believes that its complete
suite of current Windows-based products is already year 2000 compliant, and
modifications to its older DOS-based products and legacy systems are currently
in progress to make them year 2000 compliant. These modifications are currently
being tested by the Company's quality assurance staff and by the Company's
clients. This process is expected to be completed by the second quarter of
fiscal 1999.
The Company is currently nearing completion in assessing all of its internal
technical applications to ascertain whether they are year 2000 compliant. The
Company has conducted an internal assessment of its internal information and
telecommunication systems and believes based upon findings that these systems
are already, or in the process of being altered to become, year 2000 compliant.
Components of those systems which are in the process of becoming year 2000
compliant are expected to be completed and tested for compliance by the end of
the second quarter of 1999. The assessment and estimation of completion dates
for having those systems year 2000 compliant were conducted by the Company's
information technology and telecommunication staff based on their expertise in
those areas and discussions with representatives of vendors who support those
systems. The Company is also nearing completion in assessing its non-technical
applications to identify areas that are not year 2000 compliant. Although the
Company cannot determine at this time the extent of the problem that may exist
in these non-technical areas for not being year 2000 compliant, the Company
22
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
does not expect this area to pose any significant problems. The Company
believes that the cost of bringing its non-technical applications into year
2000 compliance will be immaterial.
Additionally, the Company is in the final stages of assessing its relationship
with major third parties whose inability to be year 2000 compliant in a timely
manner could have an adverse effect on the Company's operations. These third
parties are primarily vendors (banks, telephone companies, freight companies
and other suppliers for the Company's software products) whose inability to be
year 2000 compliant could delay or cancel customer orders for the Company's
products and services, delay receipt of payments by customers for products
shipped and services rendered, and disrupt other aspects of the Company's
operations. Any one of these potential events could adversely affect the
Company's financial condition and results of operations.
The Company anticipates making formal inquiries with these major third parties
with respect to their year 2000 compliance programs and, more importantly,
those specific parts of their program that directly affect the Company's
operations. The Company plans to identify and categorize its third parties so
that those parties who are identified as being critical to the Company's
operations receive higher priority and more attention than those third parties
who are deemed to be not as critical to the Company's operations. The Company
expects to solicit information for these third parties and monitor the progress
of their year 2000 compliant programs.
The Company is developing a contingency plan in the event the Company or any of
these third parties fail to become year 2000 compliant in a timely manner. Such
a plan will be completed after the Company has finished its assessment of its
third party vendors' and service providers' year 2000 programs and the testing
of its own year 2000 program. The Company believes that a reasonable worst-case
scenario for not being year 2000 compliant would be that the Company's software
products sold to users do not address all aspects or conditions related to the
year 2000 compliance issue and that the Company's vendors are not able to
supply components related to its software products. If such a scenario occurs,
the Company will have to redirect some of its product development staff to work
on the software to make it year 2000 compliant for events it did not originally
consider in the development of the software. The Company's users may also seek
to hold the Company liable for damages if the software does not function
properly.
Additionally, there could be delays in delivering software to customers as the
Company finds new suppliers or methods of delivery.
The Company does not separately track the internal costs incurred relating to
the year 2000 issue. Such costs that have been incurred relate principally to
payroll related expenses for the product development groups. Based on the
assessment the Company has made to date on the year 2000 compliance issue, the
Company does not believe that it will have an adverse effect on the Company's
financial condition and results of operations. The Company will continue to
update its assessment of its year 2000 readiness as it receives updated
information from its year 2000 program.
23
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CAUTIONARY STATEMENTS RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations and beliefs concerning future events, including, but not
limited to, statements regarding growth in sales of the Company's products,
profit margins, year 2000 compliance and sufficiency of the Company's cash flow
for the Company's future liquidity and capital resource needs. The Company
cautions that these statements are further qualified by important factors that
could cause actual results to differ materially from those in forward-looking
statements, including, without limitation, the following: technological
changes, decline in the demand for the Company's software products; and the
effect of general economic conditions generally and factors affecting the
insurance and employee benefits industries. These statements by their nature
involve substantial risks and uncertainties and actual events or results may
differ as a result of these and other factors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates and
foreign exchange rates. To manage the interest rate exposure, the Company
invests its cash in money market funds and U.S. Treasury securities. The U.S.
Treasury securities have maturity dates less than three years from the date of
purchase and the Company holds these securities to maturity. In addition, at
November 30, 1998, the Company had a debt-free balance sheet. To control the
risk relating to foreign exchange, the Company attempts to execute its
international contracts in U.S. dollars. Currently, the Company only has two
contracts that are denoted in foreign currency that the Company has decided not
to hedge its exposure. The Company continually monitors its economic exposure
to changes in foreign exchange rates and in the future may enter into foreign
exchange forward or option contracts if conditions were to change.
24
<PAGE> 25
ITEM 8. REPORT OF INDEPENDENT AUDITORS FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Report of Independent Auditors Page 26
Consolidated Balance Sheets as of November 30, 1998 and 1997 Page 27
Consolidated Statements of Earnings for the years ended Page 28
November 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended Page 29
November 30, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the years ended November 30, 1998, 1997 and 1996 Page 30
Notes to Consolidated Financial Statements Page 33-41
</TABLE>
25
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FDP Corp.:
We have audited the accompanying consolidated balance sheets of FDP Corp. and
subsidiaries as of November 30, 1998 and 1997, and the related consolidated
statements of earnings, stockholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended November 30, 1998.
In connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule, Schedule II - Valuation and
Qualifying Accounts. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position of FDP Corp. and
subsidiaries as of November 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
Miami, Florida
January 19, 1999
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FDP Corp. and Subsidiaries
Consolidated Balance Sheets
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
November 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,432 $ 4,109
Marketable securities 5,336 4,825
Accounts receivable, less allowance for uncollectible
Accounts of $1,034 in 1998 and $384 in 1997 9,892 6,967
Notes receivable - current 262 671
Prepaid expenses 455 145
Deferred income taxes 745 246
Costs and estimated earnings in excess of billings on uncompleted contracts 787 774
Other 52 69
-------- --------
Total current assets 24,961 17,806
Property and equipment, net 5,755 3,848
Other assets:
Marketable securities 8,051 10,897
Notes receivable - non-current 93 109
Goodwill, net 401 137
Other 406 291
======== ========
Total assets $ 39,667 $ 33,088
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,303 $ 4,095
Income taxes payable 827 399
Billings in excess of costs and estimated earnings on uncompleted contracts 371 513
-------- --------
Total current liabilities 5,501 5,007
Deferred income taxes 1,280 610
-------- --------
Total liabilities 6,781 5,617
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 5,987 in 1998 and 5,777 in 1997 60 58
Paid-in capital 12,405 10,500
Retained earnings 20,456 16,922
Accumulated other comprehensive income -foreign currency translation adjustment (35) (9)
-------- --------
Total stockholders' equity 32,886 27,471
-------- --------
Total liabilities and stockholders' equity $ 39,667 $ 33,088
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 28
FDP Corp. and Subsidiaries
Consolidated Statements of Earnings
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended November 30,
-----------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Software $ 38,915 $ 30,632 $ 23,287
Information services 2,019 2,185 3,158
-------- -------- --------
40,934 32,817 26,445
Cost of sales and services:
Product development, maintenance and enhancements
Software 29,019 23,184 18,240
Information services 990 1,107 1,211
Selling, general and administrative expenses 6,195 4,776 4,329
Telecommunications 262 407 474
-------- -------- --------
36,466 29,474 24,254
-------- -------- --------
Operating profit 4,468 3,343 2,191
Other:
Interest income 1,189 1,235 1,073
Foreign currency gain (loss) and other, net (21) 6 (3)
-------- -------- --------
Net other income 1,168 1,241 1,070
-------- -------- --------
Earnings before income taxes 5,636 4,584 3,261
Provision for income taxes 1,804 1,604 1,036
-------- -------- --------
Net earnings $ 3,832 $ 2,980 $ 2,225
======== ======== ========
BASIC EPS COMPUTATION:
Numerator 3,832 $ 2,980 $ 2,225
Denominator:
Weighted average number of shares 5,937 5,631 5,386
Basic net earnings per share $ .65 $ .53 $ .41
======== ======== ========
DILUTED EPS COMPUTATION:
Numerator 3,832 $ 2,980 $ 2,225
Denominator:
Weighted average number of shares 5,937 5,631 5,386
Incremental shares from assumed conversions of
stock options 290 307 365
-------- -------- --------
6,227 5,938 5,751
Diluted net earnings per share $ .62 $ .50 $ .39
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 29
FDP Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,832 $ 2,980 $ 2,225
------- ------- -------
Adjustments to reconcile net earnings to
Net cash provided by operating activities:
Depreciation and amortization of property,
Equipment and intangibles 1,500 972 866
Increase (decrease) in deferred taxes 171 194 (163)
Changes in assets and liabilities; net of effects
from acquisition of business:
Increase in accounts receivable, net (2,925) (1,318) (1,447)
(Increase) decrease in prepaid expenses (310) (54) 27
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (13) (212) (438)
Increase in other assets (99) (154) (3)
Increase (decrease) in accounts payable
and accrued expenses 208 1,122 (580)
(Decrease) increase in billings in excess of
costs and estimated earnings on uncompleted
contracts (141) (1,401) 1,865
Increase (decrease) in income taxes payable 427 160 (16)
------- ------- -------
Total adjustments (1,182) (691) 111
------- ------- -------
Net cash provided by operating activities 2,650 2,289 2,336
Cash flows from investing activities:
Proceeds from redemption of marketable securities 4,776 2,121 4,960
Purchase of marketable securities (2,440) (5,364) (4,629)
Proceeds from the sale of equipment 26 -- 10
Proceeds from note receivable 1,119 867 882
Acquisition of note receivable (694) (1,059) (426)
Acquisition of business, net of cash acquired -- -- 185
Equipment acquired (3,287) (2,047) (1,200)
------- ------- -------
Net cash used in investing activities (500) (5,482) (218)
Cash flows from financing activities:
Proceeds from exercise of stock options 991 727 629
Stock option income tax benefit 503 494 468
Cumulative translation adjustment (26) (9) --
Dividend payment (295) (210) (216)
------- ------- -------
Net cash provided by financing activities 1,173 1,002 881
Net increase (decrease) in cash and cash equivalents 3,323 (2,191) 2,999
Cash and cash equivalents at beginning of year 4,109 6,300 3,301
------- ------- -------
Cash and cash equivalents at end of year $ 7,432 $ 4,109 $ 6,300
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 30
FDP Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock
------------------------------
Accumulated
Other Total
Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income Equity
----- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1995 5,202 52 $ 7,794 $12,216 $ 20,062
Exercise of stock options 241 2 627 629
Stock option income tax benefit 468 468
Stock issued for acquisition 75 1 393 394
Dividend payment (216) (216)
Net earnings 2,225 2,225
----- ------- -------- ------- -------- --------
Balance at November 30, 1996 5,518 55 9,282 14,225 -- 23,562
Exercise of stock options 259 3 724 727
Stock option income tax benefit 494 494
Dividend payment (283) (283)
Comprehensive Income
Net earnings 2,980 2,980
Foreign currency translation
adjustment (9) (9)
--------
Total comprehensive income 2,971
----- ------- -------- ------- -------- --------
Balance at November 30, 1997 5,777 58 10,500 16,922 (9) 27,471
Exercise of stock options 210 2 989 991
Stock option income tax benefit 503 503
Stock issued for acquisition 413 413
Dividend payment (298) (298)
Comprehensive Income
Net earnings 3,832 3,832
Foreign currency translation
adjustment (26) (26)
--------
Total comprehensive income 3,806
----- ------- -------- ------- -------- --------
Balance at November 30, 1998 5,987 $ 60 $ 12,405 $20,456 $ (35) $ 32,886
----- ------- -------- ------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 31
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FDP Corp. and its subsidiaries (the "Company") develop, market and support a
wide variety of applications and software systems for mainframe, mini- and
microcomputers and for access on a timesharing basis. The systems are used by
life insurance agents, insurance company home offices, employee benefit
consultants and others to market and administer life insurance products and
employee benefit plans.
ACQUISITION
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 75,000 shares of the
Company's Common Stock $.01 par value ("Common Stock") valued at $5.25 per
share. The transaction was accounted for as a purchase, and the results of
operations for System Innovations are included in the consolidated statements
of earnings from the acquisition date. Goodwill of $313,000 was recorded as a
result of the transaction. System Innovations based in Littleton, Colorado, has
been in business since 1984 and develops software applications for the life
insurance industry. The acquisition agreement provides for the issuance of up
to an additional 75,000 shares of the Company's Common stock in two equal
installments in the event that System Innovations achieves certain earnings for
fiscal years ending November 30, 1998 and 1999. System Innovations achieved its
earnings target for fiscal 1998, and accordingly, the Company issued 37,500
shares of Common stock to Michael Bain, the former sole shareholder of System
Innovations.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles. The following summarizes the more significant
of these policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of FDP Corp. and its
wholly-owned subsidiaries, Financial Data Planning Corp., Actuarial Research &
Development Corp., FDP Leasing Corp., FDP International Corp., System
Innovations and FDP Software South Africa (Proprietary) Limited. All
inter-company accounts and transactions have been eliminated.
CASH EQUIVALENTS
For financial statement purposes, cash equivalents include interest bearing
accounts. The Company considers all highly liquid debt instruments with
original maturities of less than three months to be cash equivalents.
31
<PAGE> 32
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
MARKETABLE SECURITIES
Marketable securities are classified as held-to-maturity and are recorded at
amortized cost, adjusted for the amortization or accretion of premiums or
discounts. Premiums and discounts are amortized or accreted over the life of
the related held-to maturity security as an adjustment to yield using the
effective interest method.
Dividend and interest income are recognized when earned.
A decline in the market value of any held-to-maturity security below cost that
is deemed to be other than temporary results in a reduction in carrying amount
to fair value. The impairment is charged to earnings and a new cost basis for
the security is established.
Marketable securities consist of U.S. Treasury securities and the market value
of these securities at each year end approximated their amortized cost.
Maturities of marketable securities at November 30, 1998 and 1997 were as
follows (in thousands):
November 30,
------------------------
Maturity 1998 1997
------- -------
Less than 1 year $ 5,336 $ 4,825
1 to 2 years 5,601 5,316
2 to 3 years 2,450 5,581
------- -------
$13,387 $15,722
------- -------
INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Deferred tax liabilities and assets are recognized for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
basis of assets and liabilities using the enacted tax rates in effect for the
year in which the differences are expected to reverse.
The amount of federal and state income taxes paid during 1998, 1997 and 1996
were $701,000, $755,000 and $638,000, respectively.
FOREIGN CURRENCY EXCHANGE
International sales are sometimes invoiced and paid for in foreign currencies.
Therefore, revenues will be affected by fluctuations of foreign currencies
versus the U.S. dollar. The resulting foreign exchange gain or loss for the
period is reflected in the Company's consolidated financial statements.
International revenues provided by export sales were $18,595,000 or 45%,
$13,384,000 or 41% and $6,307,000 or 24% of consolidated revenues for the years
ended November 30, 1998, 1997 and 1996, respectively, and were primarily from
customers in South Africa, the United Kingdom, Australia, the Netherlands and
Canada.
32
<PAGE> 33
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
REVENUE RECOGNITION AND RELATED MATTERS
Revenue from contracts for the licensing of software and installation of
software where significant enhancements are required is recognized on the
percentage of completion method based on the labor hours incurred to date to
total labor hours. Changes in job performance, job conditions, estimated
profitability and final contract settlements which may result in revisions to
costs and income are recognized in the period in which the revisions are
determined. Anticipated losses are recognized in the period in which they are
identified. Amounts received or billed in excess of revenues recognized to date
are classified as "billings in excess of costs and estimated earnings on
uncompleted contracts", whereas, revenues recognized in excess of amounts billed
are classified as "costs and estimated earnings in excess of billings on
uncompleted contracts". The Company recognizes revenue for timesharing services
as earned and bills the customers on a monthly basis. Timesharing agreements
continue for indefinite terms and are terminable by the customer at any time.
Revenue from separately priced extended software maintenance arrangements is
deferred and recognized in income on a straight-line basis over the contract
period.
Concentrations of credit risk with respect to receivables are limited due to
the large number of customers and their dispersion across geographic areas. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
The Company provides its services primarily to the life insurance and employee
benefit industries. The Company performs ongoing credit evaluations of its major
customers and maintains reserves for potential credit losses. Historically such
losses have been immaterial.
No single customer accounted for 10% or more of total revenues in the years
ended 1998, 1997 and 1996.
GOODWILL
Goodwill related to the acquisition of System Innovations represents the excess
of the purchase price over fair market value of the net assets acquired and is
being amortized over the expected periods to be benefited, four years on a
straight-line basis. During the fourth quarter of fiscal 1998, the Company
committed to issue 37,500 shares of common stock with a fair market value of
$412,500. The issuance of the pending shares was recorded as an increase to the
original goodwill and will be amortized over the remaining life of the original
goodwill. The amortization expense recorded in fiscal 1998 was $148,263. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
33
<PAGE> 34
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
SOFTWARE DEVELOPMENT COSTS
Software development costs are to be capitalized upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs requires
considerable judgment by management with respect to certain external factors
such as anticipated future revenue, estimated economic life, and changes in
software and hardware technologies. Capitalizable software development costs
relating to new products have not been significant and have been charged to
research and development expense as incurred.
Research and development expenses charged to cost of sales and services were
$5,554,000 in 1998, $6,225,000 in 1997 and $5,778,000 in 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and would impact future
results of operations.
FINANCIAL ACCOUNTING PRONOUNCEMENTS
STATEMENT OF POSITION (SOP) 97-2 SOFTWARE REVENUE RECOGNITION
In October 1997, the AICPA issued Statement of Position (SOP) 97-2, SOFTWARE
REVENUE RECOGNITION, which supersedes SOP 91-1. The Company adopted SOP 97-2
for software transactions entered into beginning November 1, 1997, as
retroactive application to years prior to adoption is prohibited. SOP 97-2
generally requires revenue earned on software arrangements involving multiple
elements (i.e., software products, upgrades/enhancements, postcontract customer
support, installation, training, etc.) to be allocated to each element based on
the relative fair values of the elements. The fair value of an element must be
based on evidence which is specific to the vendor. The revenue allocated to
software products (including specified upgrades/enhancements) generally is
recognized upon delivery of the products. The revenue allocated to postcontract
customer support generally is recognized ratably over the term of the support
and revenue allocated to service elements (such as training and installation)
generally is recognized as the services are performed. If a vendor does not
have evidence of fair value for all elements in a multiple-element arrangement,
all revenue from the arrangement is deferred until such evidence exists or
until all elements are delivered. The adoption of SOP 97-2 did not have a
material impact on the Company's results of operations. Statement of Position
(SOP) 97-2
34
<PAGE> 35
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
COMPREHENSIVE INCOME
On December 1, 1997 the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income consists of net income and foreign currency translation
adjustments and is presented in the consolidated statements of stockholders'
equity and comprehensive income. The Statement requires only additional
disclosure in the consolidated financial statements; it does not affect the
Company's financial position or results of operations. Prior year financial
statements have been reclassified to conform to the requirements of SFAS No.
130.
NOTE 2
PROPERTY AND EQUIPMENT
Property and equipment which is recorded at cost and depreciated or amortized
using the straight-line method, over the estimated useful lives of the assets,
consists of the following (in thousands):
<TABLE>
<CAPTION>
November 30,
Estimated useful ------------------------
Lives in years 1997 1997
---------------- ------- -------
<S> <C> <C> <C>
Computer and communication
equipment 5-7 $ 5,652 $ 4,902
Furniture and fixtures 7 2,321 1,431
Leasehold improvements 5-10 2,620 1,805
Vehicles 3 16 16
------- -------
10,609 8,154
Less accumulated depreciation 4,854 4,306
------- -------
$ 5,755 $ 3,848
------- -------
</TABLE>
Maintenance expense on all owned and leased computer equipment was $166,000 in
1998, $216,000 in1997 and $223,000 in1996.
NOTE 3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
November 30,
----------------------
1998 1997
------ ------
Accounts payable $ 641 $ 185
Accrued liabilities:
Salaries 1,683 1,715
Profit sharing plan 360 328
Deferred revenues 1,144 1,181
Other 475 686
------ ------
$4,303 $4,095
------ ------
35
<PAGE> 36
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, marketable securities,
accounts receivable, notes receivable, prepaid expenses, other assets, accounts
payable and accrued liabilities approximate fair value because of the short
maturity of these instruments.
NOTE 5
COMMITMENTS
The Company rents its principal office and certain other facilities for
approximately $126,000 per month from a partnership whose general partner is
the principal stockholder of the Company. Additional office space is leased
from four other parties for approximately $57,000 per month. Total rent expense
was $1,996,000 in 1998, $1,414,000 in1997 and $1,265,000 in1996. Minimum future
rentals on non-cancelable leases with terms greater than one year are as
follows (in thousands):
Year ending
November 30,
----------------------
1999 $2,229
2000 $ 704
2001 $ 691
2002 $ 655
2003 $ -0-
NOTE 6
PROFIT SHARING PLAN
The Company has a qualified profit sharing plan that conforms with Section
401(k) of the Internal Revenue Code. The plan provides for the Company to match
employee elective contributions in an amount of 50% of such contributions, to a
maximum of 3% of annual employee compensation. Company contributions were
$364,000 in 1998, $337,000 in 1997 and $325,000 in 1996. Employee vesting in
Company contributions increases in increments of 20% per year starting after
one year of service with full vesting of 100% after six years.
36
<PAGE> 37
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 7
INCOME TAXES
The provision for income taxes is comprised of the following (in thousands):
Year ended November, 30,
---------------------------------
1998 1997 1996
------- ------- -------
Current:
U.S. Federal $ 1,067 $ 1,136 $ 996
State and Local 408 233 139
Foreign Sales Corp. (FSC) 158 41 44
------- ------- -------
$ 1,633 $ 1,410 $ 1,179
------- ------- -------
Deferred:
U.S. Federal $ 215 $ 181 $ (138)
State and Local (44) 13 (5)
------- ------- -------
171 194 (143)
------- ------- -------
$ 1,804 $ 1,604 $ 1,036
------- ------- -------
A reconciliation of the Federal income tax statutory rate with the effective
tax rate is as follows:
<TABLE>
<CAPTION>
Year ended November 30,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Federal income tax at statutory rate 34% 34% 34%
Research and development credit (2)% (2)% (4)%
State income tax, net of federal tax benefit 4% 4% 4%
Foreign Sales Corp. benefit (FSC) (4)% (1)% (2)%
-------- -------- --------
32% 35% 32%
-------- -------- --------
</TABLE>
37
<PAGE> 38
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The tax effects of temporary differences which give rise to significant
portions of deferred tax assets and deferred tax liabilities at November 30,
1998 and 1997 are as follows (in thousands):
1998 1997
------- -------
Deferred income tax assets:
Allowance for uncollectible accounts $ 380 $ 105
Accrual for vacation 284 178
Other 154 24
------- -------
$ 818 $ 307
------- -------
Deferred income tax liabilities:
Property and equipment, principally due to
Difference in depreciation $ (244) $ (203)
Tax credits (1,109) (465)
Other 0 (3)
------- -------
$(1,353) $ (671)
------- -------
Net deferred tax liability $ (535) $ (364)
------- -------
Management has determined, based on the Company's history of prior operating
earnings and its expectations for the future, that operating income of the
Company will be sufficient to fully recognize the deferred tax assets therefore
no valuation allowance is necessary.
NOTE 8
COMMON STOCK SPLIT
On November 11, 1996, the Board of Directors approved a three-for-two common
stock split distributable on December 10, 1996 to shareholders of record at the
close of business on November 26, 1996. In this report, all prior year per
share amounts and numbers of shares have been restated retroactively to reflect
the stock split.
NOTE 9
STOCK OPTIONS
The 1984 Non-Qualified Stock Option Plan (the "Stock Option Plan") was
established for the benefit of key employees on November 7, 1983. Under the
provisions of the Stock Option Plan, employees have the option of paying for
exercised options with cash or Company common stock. On April 18, 1994, the
Board of Directors, adopted the 1994 Employee Stock Option Plan and approved
471,000 newly reserved shares. The exercise price of the options granted under
the stock option plans approximated the market price of the Company's common
stock on the date of the grant.
38
<PAGE> 39
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
At November 30, 1998, under the 1984 Non-Qualified Stock Option Plan, there
were options outstanding for the purchase of 34,000 shares of the Company's
stock of which all were vested and exercisable. Under the 1994 Employee Stock
Option Plan, there were options outstanding for the purchase of 873,000 shares
of the Company's stock of which 807,000 were vested and exercisable. In total,
at November 30, 1998, under the 1984 Non-Qualified Stock Option Plan and the
1994 Employee Stock Option Plan, there were options outstanding for 907,000
shares of the Company stock of which 841,000 were vested and exercisable.
A summary of the transactions in shares under the Stock Option Plans is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1984 Non-Qualified Option Price
Stock Options Per Share
------------------ ------------
<S> <C> <C> <C>
Outstanding at November 30, 1995 443 $ 2.17-$3.08
---- ------------
Transactions during fiscal 1996:
Granted -- --
Exercised (179) $ 2.17-$2.83
Forfeited -- --
---- ------------
Outstanding at November 30, 1996 264 $ 2.50-$3.08
---- ------------
Transactions during fiscal 1997
Granted -- --
Exercised (176) $ 2.50
Forfeited -- --
---- ------------
Outstanding at November 30, 1997 88 $ 2.50-$3.08
---- ------------
Transactions during fiscal 1998
Granted -- --
Exercised (54) $ 2.50-$3.08
Forfeited -- --
---- ------------
Outstanding at November 30, 1998 34 $ 2.83
1994 Employee Option Price
Stock Options Per Share
------------- ------------
Outstanding at November 30, 1995 414 $ 2.83-$3.75
---- ------------
Transactions during fiscal 1996:
Granted 67 $ 5.00-$5.25
Exercised (62) $ 2.83
Forfeited -- --
---- ------------
Outstanding at November 30, 1996 419 $ 2.83-$5.25
---- ------------
Transactions during fiscal 1997
Granted 411 $ 7.25-$7.75
Exercised (83) $ 2.83-$5.00
Forfeited -- --
---- ------------
Outstanding at November 30, 1997 747 $ 2.83-$7.75
---- ------------
Transactions during fiscal 1998
Granted 282 $10.50-$12.00
Exercised (156) $ 2.83-$7.75
Forfeited -- --
---- ------------
Outstanding at November 30, 1998 873 $2.83-$12.00
</TABLE>
39
<PAGE> 40
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On December 1,1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" (SFAS No.123). As
permitted by SFAS No. 123, the Company has chosen to apply APB Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for the Plans. Accordingly, no compensation cost has been
recognized for options granted under the Plans. Had compensation cost for the
Plans been determined based on the fair value at the date of grant for awards
under the Plans consistent with the method of SFAS No.123, the Company's net
earnings and net earnings per share would have been reduced to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
1998 1997
---------------------- ------------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ----- -------- -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net earnings $3,832 $2,888 $2,980 $2,019
Net earnings per share (diluted) $ .62 $ .46 $ .50 $ .34
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes multiple option-pricing model with the following assumptions used
for grants in 1998 and 1997: approximate dividend yield of .5% based upon
$11.00 closing stock value at November 30, 1998, expected volatility of 64%,
risk-free interest rate range of 5.5%-5.7% and expected life of three years.
The following table summarizes information about the Company's stock options at
November 30, 1998:
(in thousands, except per share data)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- ----------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE WEIGHTED OUTSTANDING WEIGHTED
AS OF REMAINING AVERAGE AS OF AVERAGE
NOVEMBER CONTRACTUAL EXERCISE NOVEMBER EXERCISE
GRANT PRICE 30, 1998 YEARS PRICE 30, 1998 PRICE
- ------------------ -------- ----- ----- -------- -----
<S> <C> <C> <C> <C> <C>
$2.83 209 .17-.38 2.83 209 2.83
$3.75 34 1.50 3.75 34 3.75
$5.00 12 2.04 5.00 12 5.00
$5.25 27 2.08 5.25 27 5.25
$7.75 343 3.10 7.75 316 7.75
$10.50 222 4.04 10.50 219 10.50
$11.06 15 4.34 11.06 5 11.06
$11.63 30 4.51 11.63 10 11.63
$12.00 15 4.42 12.60 9 12.00
- ------------------ -------- ------ ------ -------- ------
$2.83 - 12.00 907 2.66 7.28 841 6.56
- ------------------ -------- ------ ------ -------- ------
</TABLE>
40
<PAGE> 41
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
On December 12, 1996, the Company filed with the Securities and Exchange
Commission an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended, relating to an increase to 920,868 in the
number of shares of Common Stock reserved for issuance pursuant to the
Company's 1994 Employee Stock Option Plan. Mr. Michael C. Goldberg, the record
and beneficial owner of approximately 55.8% of the then outstanding shares of
Common Stock, voted all such shares in favor of the increase in the number of
shares of Common Stock reserved for issuance pursuant to the 1994 Plan, which
vote was sufficient to approve the increase.
On October 10, 1997, the Company filed with the Securities and Exchange
Commission an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended, relating to an increase to 1,220,868 in the
number of shares of Common Stock reserved for issuance pursuant to the
Company's 1994 Employee Stock Option Plan. Mr. Michael C. Goldberg, the record
and beneficial owner of approximately 53.7% of the then outstanding shares of
Common Stock, voted all such shares in favor of the increase in the number of
shares of Common Stock reserved for issuance pursuant to the 1994 Plan, which
vote was sufficient to approve the increase
SUBSEQUENT EVENT
On January 15, 1999, the Company announced that it has entered into a
definitive merger agreement under which it will be acquired by SunGard Data
Systems (NYSE: SDS) in a stock-for-stock transaction. Under the terms of the
merger, FDP shareholders will receive shares of SunGard common stock in
exchange for their shares of FDP common stock. The exchange ratio will depend
on the average trading price per share of the SunGard common stock during the
twenty day period ending and including the trading days two days before the
closing of the merger. The exchange ratio is designed to give FDP shareholders
$14.40 of SunGard common stock if the average trading price is between $30 and
$35. If the average trading price is $30 or less, the exchange ratio will be
fixed at .48 and if the average trading price is $35 or more, the exchange
ratio will be fixed at .4114. The completion of the merger is subject to
approval by a majority of the Company's shareholders, customary regulatory
approvals and the satisfaction of certain other conditions set forth in the
merger agreement. Directors and shareholders holding approximately 53% of the
outstanding shares of FDP have agreed to vote their shares in favor of the
merger. The merger, if approved will be accounted for as a
pooling-of-interests.
41
<PAGE> 42
PART II
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements on any matter of accounting principles or
practice or financial statement disclosure at any time during the preceding 24
months.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ----------- --- ----------------------
<S> <C> <C>
Michael C. Goldberg 61 Chairman of the Board, Chief Executive
Officer and President
Cindy Goldberg 51 Secretary, Treasurer and Director
Bruce I. Nierenberg 52 Director
Cesar L. Alvarez 51 Director
Albert J. Schiff 56 Director
Richard B. Fleischman 47 Senior Vice President, Home Office Systems
Scott L. Price 40 Senior Vice President, Agency Systems
Mark S. Silverman 42 Senior Vice President, Chief Financial Officer
Christine Stroud 44 Vice President
Edward Pick 48 Vice President
Beverly Price 47 Vice President
Kathleen Muro 47 Vice President
</TABLE>
Mr. Goldberg, founder of the Company, has been the Chairman, Chief
Executive Officer and President of the Company since its formation in 1968. He
is an Associate of the Society of Actuaries and a member of the American
Academy of Actuaries.
Mrs. Goldberg has been a director and the Secretary and Treasurer of
the Company since 1968 and served as its Vice President--Administration from
its formation until 1982. Mrs. Goldberg is the wife of Michael C. Goldberg.
Mr. Nierenberg became a director of the Company in June 1983. He is
currently Partner and President of Premier Cruise Lines. From 1984 to 1991 he
was Executive Vice President of Premier Cruise Lines located in Port Canaveral,
Florida. From 1992 to 1994 he was President and Chief Executive Officer of
Costa Cruise Lines and American Family Cruises. From 1995 to 1996 he was
President of Bruce Nierenberg & Associates, consultants to the tourism
industry. During 1997 he was Executive Vice President of Norweigen Cruise
Lines.
42
<PAGE> 43
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Mr. Alvarez became a director of the Company in January 1986. Mr.
Alvarez has been President and Chief Executive Officer of Greenberg Traurig,
P.A., a law firm in Miami, Florida, since February 1997 and a principal
shareholder of such firm since January 1983. Mr. Alvarez served as Executive
Vice President of such firm from January 1996 until February 1997. Mr. Alvarez
also serves on the Board of Directors of CompuTrac, Inc. (computer software),
Dallas, Texas, Cosmo Communications Corporation (electronics manufacturer),
Miami, Florida and Texpack N.V. (paper cone manufacturer), Netherlands
Antilles.
Mr. Schiff became a director of the Company in April 1992. Mr. Schiff
previously served as a director of the Company from June 1983 to January 1986.
Mr. Schiff has served as Chief Executive Officer and President of Insurance
Alliance's Group Inc., an executive benefit consulting firm located in
Stamford, Connecticut, since 1989. He was Senior Vice President and Member of
the Board of Trustees of Mutual Life Insurance Company of New York (MONY) from
1986 to 1989 and served as Chief Executive Officer and President of Albert J.
Schiff Associates, Inc., an employee benefit consulting firm located in Darien,
Connecticut, from 1968 to 1986. In 1985, he served as President Elect of the
Association of Advanced Life Underwriters (AALU).
Mr. Fleischman originally joined the Company in May 1981 as a
consulting actuary, heading the group pension area. In 1985, Mr. Fleischman
became a corporate Vice President. In November 1997, he was promoted to Senior
Vice President of Home Office Systems. He is a member of the American Academy
of Actuaries, an Enrolled Actuary, and a Fellow of the Society of Actuaries.
Mr. Price joined the Company in January 1981 in charge of technical
services. He became Senior Vice President of Agency Systems in November 1997.
He is responsible for managing Agency Systems and directing the Company's
research and development efforts.
Mr. Silverman joined the Company in September 1992 as Chief Financial
Officer. He became Senior Vice President of the Company in November 1997. He is
a Certified Public Accountant. Prior to joining the Company, he was the
Controller for Spectrum Concepts, a software development company.
Ms. Stroud joined the Company in June 1978 as an actuarial trainee and
in 1983 moved to the marketing department. Ms. Stroud became a corporate Vice
President in 1990. She is a member of the American Academy of Actuaries and the
American Society of Pension Actuaries and is an Enrolled Actuary.
Mr. Pick joined the Company in April 1978 as a programmer in the
Pension Partner Systems department and became a corporate Vice President in
January 1992. He is responsible for the development of employee benefit related
software products for the Company.
43
<PAGE> 44
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Ms. Price joined the Company in December 1979 as a programmer in the
Agency Partner Systems department. She became head of this department in
January 1986 and became a corporate Vice President in January 1992.
Ms. Muro joined the Company in June 1981 as a programmer in the life
administration department. Ms. Muro became head of the FDP/CLAS department in
1988 and a corporate Vice President in January 1992.
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors. The Company's directors
hold office until the next annual meeting of shareholders and until their
successors have been duly elected and qualified.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
met.
44
<PAGE> 45
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth for the fiscal years ended
November 30, 1998, 1997 and 1996, the cash and certain other compensation paid
or accrued by the Company and its subsidiaries to its Chief Executive Officer
and to each of the four most highly compensated executive officers (other than
the Chief Executive Officer) whose total annual compensation during the fiscal
year ended November 30, 1998 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> Long--term
Name and Fiscal All Other Compensation Awards
Principal Position Year Salary Bonus Compensation Option (#)
------------------- ------ ------ ----- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Michael C. Goldberg 1998 $409,539 $6,489 (1) --
Chairman of the Board, Chief 1997 $401,000 -- $5,895 (2) --
Executive Officer and President 1996 $401,000 -- -- --
Richard B. Fleischman 1998 $199,039 $16,000 $4,800 (3) 20,000 (4)
Senior Vice President 1997 $175,000 $50,000 $4,500 (3) 50,000 (5)
Home Office Systems 1996 $150,000 -- $4,500 (3) --
Kathleen Muro 1998 $132,375 $20,000 $3,971 (3) --
Vice President 1997 $126,000 -- $3,780 (3) 10,000 (5)
1996 $126,000 -- $3,750 (3) --
Scott L. Price 1998 $127,558 -- $3,827 (3) 25,000 (4)
Senior Vice President 1997 $110,000 -- $3,297 (3) --
Agency Systems 1996 $105,000 $3,150 (3)
Beverly Price 1998 $126,327 -- $3,790 (3) 25,000 (4)
Vice President 1997 $120,000 -- $3,597 (3) --
1996 $115,000 -- $3,450 (3) --
</TABLE>
- -------------------
(1) Includes $4,800 related to Company funded profit sharing contributions
and $1,689 for the FDP/Michael C. Goldberg split dollar program.
(2) Includes $4,800 related to Company funded profit sharing contributions
and $1,395 for the FDP/Michael C. Goldberg split dollar program.
(3) Represents Company funded profit sharing contributions for each Named
Executive Officer.
(4) Represents options granted under the 1994 Employee Stock Option Plan
at an exercise price of $10.50 per share.
(5) Represents options granted under the 1994 Employee Stock Option Plan
at an exercise price of $7.75 per share.
45
<PAGE> 46
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock
options granted to the Named Executive Officers during the fiscal year ended
November 30, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
% of Total Rate of Stock Price
Securities Options/SARs Exercise Appreciation for Option
Underlying Granted to or Base Term(1)
Name and Options Employees in Price Expiration -------------------------
Principal Position Granted (#) Fiscal Year ($/SH) Date 5% ($) 10% ($)
- ------------------ ----------- ------------ ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Goldberg --- --- --- --- --- ---
Chairman of the Board, Chief
Executive Officer and
President
Richard B. Fleischman 20,000 7% 10.50 12/12/02 58,019(1) 132,068(1)
Senior Vice President
Home Office Systems
Kathleen Muro --- --- --- --- --- ---
Vice President
Scott L. Price 25,000 9% 10.50 12/12/02 72,524(1) 165,085(1)
Senior Vice President
Agency Systems
Beverly Price 25,000 9% 10.50 12/12/02 72,524(1) 165,085(1)
Vice President
</TABLE>
- ---------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
46
<PAGE> 47
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth-certain information concerning (i) the
exercise of stock options by the Named Executive Officers during the fiscal
year ended November 30, 1998 and (ii) unexercised stock options held by the
Named Executive Officers as of November 30, 1998.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares Held at November 30, 1998 Held at November 30, 1998
Name and Acquired on Value --------------------------- ---------------------------
Principal Position Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Goldberg -- -- -- -- -- --
Chairman of the Board, Chief
Executive Officer
and President
Richard Fleischman 20,000 $207,500 70,000 -- $160,670 --
Vice President
Kathleen Muro 2,250 $ 22,781 60,250 -- $432,710 --
Vice President
Scott L. Price 5,000 $ 66,875 72,500 -- $374,425 --
Senior Vice President
Agency Systems
Beverly Price 5,000 $ 66,875 72,500 -- $377,852 --
Vice President
</TABLE>
- ----------------------
(1) Calculated on the basis of the average of the high ask and low bid
quotations for the Company's Common Stock as reported by NASDAQ on
November 30, 1998, which was $10.831 per share. Value is calculated by
multiplying (a) the difference between $10.831 and the option exercise
price by (b) the number of shares of common stock underlying the option.
INFORMATION CONCERNING DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $2,000, payable quarterly, and a $200 fee for each meeting attended.
47
<PAGE> 48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of January 31,1999 by (a) each person known by
the Company to be the beneficial owner of more than 5 percent of the
outstanding Common Stock, (b) each director and nominee for election as a
director of the Company, (c) the Named Executive Officers (as defined in
"Executive Compensation") and (d) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned (2)
Name and Address ---------------------------------
of Beneficial Owner (1) Shares Percent
- ----------------------- --------------- -----------
<S> <C> <C>
Michael C. Goldberg and Cindy Goldberg 3,031,431 (3) 50.1%
Fidelity Management & Research Company 558,800 (4) 9.2%
Michael S. Barrish Group 357,450 (5) 5.9%
Richard B. Fleischman 70,000 (6) 1.2%
Kathleen Muro 70,000 (7) 1.2%
Scott L. Price 87,500 (8) 1.4%
Beverly Price 87,500 (9) 1.4%
Cesar L. Alvarez -- --
Albert J. Schiff -- --
Bruce I. Nierenberg -- --
All directors and executive officers
as a group (12 persons) 3,436,431 (10) 56.8%
</TABLE>
- --------------------------
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 2140 South Dixie Highway, Miami, Florida 33133.
(2) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all such shares.
(3) Includes 750,000 shares of Common Stock beneficially owned by Mr. Goldberg
as sole Trustee under a charitable remainder unitrust created in 1994 by
Mr. Goldberg and his wife, Cindy Goldberg. Mr. and Mrs. Goldberg are the
income beneficiaries of the trust.
(4) Based on the Schedule 13G dated February 14, 1998 filed by Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, Fidelity is the beneficial owner of 558,800 shares or 9.2% of
the Common Stock outstanding of FDP Corporation ("FDP") as a result of
acting as investment advisor to various investment companies registered
under Section 8 of the Investment Company Act of 1940.
The ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 558,800 shares or 9.2% of the outstanding Common Stock.
Fidelity Low-Priced Stock Fund has its principal business office at 82
Devonshire Street, Boston, Massachusetts 02109.
48
<PAGE> 49
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the
funds each has sole power to dispose of the 558,800 shares owned by the
Funds. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp.,
has the sole power to vote or direct the voting of the shares owned
directly by the Fidelity Funds, which power resides with the Funds' Boards
of Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Funds' Board of Trustees.
Members of the Edward C. Johnson 3d family and trusts for their benefit are
the predominant owners of the Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr. Johnson
3d owns 12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is the Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group and
all other Class B shareholders have entered into a shareholders' voting
agreement under which all Class B shares will be voted in accordance with
the majority vote of Class B shares. Accordingly, through their ownership
of voting common stock and the execution of the shareholder's voting
agreement, members of the Johnson family may be deemed, under the
Investment Company Act of 1940, to form a controlling group with respect to
FMR Corp.
(5) Based on the Schedule 13D dated February 24, 1995. Includes (i) an
aggregate of 244,500 shares of Common Stock owned by Michael Barish for
which he has sole voting and dispositive power; (ii) 75,000 shares of
Common Stock owned by Michael Barish either jointly with his spouse or as
custodian for his children; (iii) 9,000 shares of Common Stock owned by
Fred Klinghoffer, Trustee under will of Emanuel Klinghoffer, for which
voting power for such shares is shared by Michael Barish, Carl Barish and
Fred Klinghoffer and (iv) 28,950 shares held by clients of Cambiar
Investors Inc. for which Michael Barish shares voting and dispositive
power. Mr. Barish's address is c/o Cambiar Investors Inc., 8400 East
Prentice Avenue, Suite 460, Englewood, Colorado 80111.
(6) Consists of 70,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days from the date of this Form-10K.
(7) Includes 60,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date of this Form-10K. Also includes
9,750 shares of Common Stock owned by Ms. Muro.
(8) Includes 72,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date of this Form-10K. Also includes
15,000 shares of Common Stock owned by Ms. Price jointly with her husband,
an officer of the Company.
(9) Includes 72,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date of this Form-10K. Also includes
15,000 shares of Common Stock owned by Mr. Price jointly with his wife, an
officer of the Company.
(10) Includes 365,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date of this Form-10K.
49
<PAGE> 50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company rents its principal office and certain other facilities for
approximately $126,000 a month from a partnership (the "Partnership"), of which
Michael Goldberg, the principal shareholder of the Company, its Chairman of the
Board, Chief Executive Officer and President, is the general partner and Cindy
Goldberg, the Company's Secretary and Treasurer and a director, is the limited
partner. The lease provides for expiration on December 1, 1999 with an option
to renew for 5 years.
Cesar L. Alvarez, a director of the Company, is a principal shareholder,
President, Chief Executive Officer and a director of Greenberg Traurig, P.A., a
law firm that has from time-to-time provided legal services to the Company.
50
<PAGE> 51
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The consolidated financial statements of FDP Corp. are included in
Item 8:
Consolidated Balance Sheets as of November 30, 1998 and 1997
Consolidated Statements of Income for the years ended November 30,
1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended November
30, 1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
November 30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedule. Schedule II - Valuation and Qualifying
Accounts
3. Exhibits.
Document
Incorporated by
Exhibit Description Reference
------- ----------- ---------------
3.1 Articles of Incorporation of Exhibit 3.1 of the
the Company, as amended Registration
Statement on
Form S-1
(no.2-84919)(the
"Registration Statement)
3.2 Bylaws of the Company Exhibit 3.2 of the
Registration
Statement
51
<PAGE> 52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
10.1 The Company's 1984 Non-Qualified Registrant's 1984
Stock Option Plan. Proxy Statement
10.2 The Company's Profit Sharing Plan Exhibit 10.3 of
the Registration
Statement
10.3 IBM Personal Computer Retail Exhibit 10.6 of
Dealer Agreement, between the the Registration
Company and IBM Statement
10.4 Computer Products Purchase Exhibit 10.8 of
Agreement, dated January 19, 1982 the Registration
between Hewlett-Packard Company Statement
and the Company
10.5 Lease agreement, dated December 1, Exhibit 10.9 of
1986 between the Company and 1987 Form 10-K
Key Investment, Ltd.
10.6 Form of Indemnification Agreement Exhibit 10.11 of
with the Company's Directors and 1989 Form 10-K
certain of its Officers
10.7 Lease agreement, dated December 1, Exhibit 10.13 of
1994 between the Company and 1994 Form 10-K
Key Investment, Ltd.
10.8 1994 Employee Stock Option Plan Exhibit 10.15 of
1995 Form 10-K
10.9 Rider to Lease agreement, dated Exhibit 10.17 of
December 1, 1994 between the 1995 Form 10-K
Company and Key Investment, Ltd.
10.10 Acquisition Agreement dated Exhibit 10.19 of
December 21,1995 between the 1995 Form 10-K
Company, Existential Systems,
Inc. (d/b/a) as System Innovations,
SI Acquisition Corp. and Michael R. Bain.
52
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
10.11 Employment agreement dated Exhibit 10.21 of
December 21, 1995 between the 1995 Form 10-K
Company and Existential Systems,
Inc. (D/B/A) as System Innovations
and Michael R. Bain.
10.12 The Company's Profit Sharing Plan Exhibit 10.23 of
Amendment of Existing Plan dated 1995 Form 10-K
August 31, 1995
10.13 Software Development Agreement Exhibit 10.25 of
(ISP Illustration System) dated 1995 Form 10-K
December 21, 1995
10.14 Agreement and Plan of Reorganization Filed on Form 8-K
dated January 15, 1999, by and among January 26, 1999
SunGard Data Systems Inc., a Delaware
corporation, Development Corp., a Florida
corporation, and FDP Corp., a Florida
Corporation
10.15 Agreement and Plan of Merger dated January Filed on Form 8-K
15, 1999, by and among SunGard Data January 26, 1999
Systems Inc., a Delaware corporation,
Development Corp., a Florida corporation.
and FDP Corp., a Florida corporation
21.2 The Company's Subsidiaries (filed herewith)
23.1 Consent of KPMG LLP (filed herewith)
27.1 Financial Data Schedule (for SEC use only) (filed herewith)
(b) No current reports on Form 8-K were filed by the Company during the
fourth quarter of the fiscal year ended November 30, 1998.
53
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: February 26, 1999 FDP CORP.
By: /s/ Michael C. Goldberg
-------------------------------------
MICHAEL C. GOLDBERG
Chairman of Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated:
February 26, 1999 /s/ Michael C. Goldberg
----------------------------------------------
MICHAEL C. GOLDBERG
Chairman of Board of Directors,
Chief Executive Officer and President
February 26, 1999 /s/ Mark S. Silverman
----------------------------------------------
MARK S. SILVERMAN
Senior Vice President, Chief Financial Officer
Principal Accounting Officer
February 26, 1999 /s/ CESAR L. ALVAREZ
----------------------------------------------
CESAR L. ALVAREZ
Director
February 26, 1999 /s/ CINDY L. GOLDBERG
----------------------------------------------
CINDY L. GOLDBERG
Director
February 26, 1999 /s/ ALBERT J. SCHIFF
----------------------------------------------
ALBERT J. SCHIFF
Director
February 26, 1999 /s/ BRUCE I. NIERENBERG
----------------------------------------------
BRUCE I. NIERENBERG
Director
54
<PAGE> 55
ITEM 14 (A) 2 FINANCIAL STATEMENT SCHEDULE
FDP CORP. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
For the Three Years Ended November 30, 1998 (in thousands)
<TABLE>
<CAPTION>
A B C D E
Allowance for Balance at Charged to Balance at
Uncollectible Beginning of Costs and End of
Accounts Period Expenses Deductions Period
- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
November 30, 1998: $384 $903 $253 $1,034
November 30, 1997: $444 $ 0 $ 60 $ 384
November 30, 1996: $317 $150 $ 23 $ 444
</TABLE>
55
<PAGE> 1
EXHIBIT 21.2
FDP CORP.
THE COMPANY'S SUBSIDIARIES
Financial Data Planning Corp.
FDP Leasing Corp.
Actuarial Research and Development Corp.
F.D.P. International Corp.
Existential Systems, Inc. (d/b/a System Innovations)
FDP Software South Africa (Proprietary) Limited
FDP Europe Limited
56
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
FDP Corp.:
We consent to incorporation by reference in the Registration Statements (No.
2-88446 and 333-3244, respectively) on Form S-8 of FDP Corp. of our report
dated January 19, 1999 relating to the consolidated balance sheets of FDP Corp.
and subsidiaries as of November 30, 1998 and 1997, the consolidated statements
of earnings, stockholders' equity and comprehensive income, and cash flows and
related schedule of valuation and qualifying accounts for each of the years in
the three-year period ended November 30, 1998, which report appears in the
November 30, 1998 annual report on Form 10-K of FDP Corp.
KMPG LLP
February 26, 1999
57
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<CASH> 7,432
<SECURITIES> 13,387
<RECEIVABLES> 10,926
<ALLOWANCES> 1,034
<INVENTORY> 0
<CURRENT-ASSETS> 24,961
<PP&E> 10,609
<DEPRECIATION> 4,854
<TOTAL-ASSETS> 39,667
<CURRENT-LIABILITIES> 5,501
<BONDS> 0
0
0
<COMMON> 60
<OTHER-SE> 32,826
<TOTAL-LIABILITY-AND-EQUITY> 39,667
<SALES> 0
<TOTAL-REVENUES> 40,934
<CGS> 0
<TOTAL-COSTS> 36,466
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,189)
<INCOME-PRETAX> 5,636
<INCOME-TAX> 1,804
<INCOME-CONTINUING> 3,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,832
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.62
</TABLE>
