<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission file number 0-16151/2-66729
------------------- --------------------
COMDATA HOLDINGS CORPORATION/COMDATA NETWORK, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE/MARYLAND 13-3396750/62-0813252
- - ----------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5301 Maryland Way Brentwood, Tennessee 37027
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 370-7000
-----------------------------
N/A
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether each registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X No
------ ------.
As of August 10, 1994, there were outstanding 14,806,115 shares of
Common Stock of Comdata Holdings Corporation, and 1,000 shares of
Comdata Network, Inc.
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PART I
Item 1. Financial Statements
Comdata Holdings Corporation and Subsidiary
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------------- -----------------
(In thousands, except share data)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,173 $ 13,332
Accounts receivable, less allowance for doubtful accounts $5,666, 1994;
$6,087, 1993 137,861 107,555
Prepaid expenses and other 1,849 2,226
-------- --------
Total current assets 154,883 123,113
Property and equipment, net of accumulated depreciation 10,192 9,616
Cost in excess of fair value of net assets acquired, net 82,182 79,618
Other assets, net 15,565 13,824
-------- --------
$262,822 $226,171
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Drafts payable $ 6,408 $ 8,211
Settlements payable 79,782 65,897
Accounts payable 10,595 10,410
Other accrued liabilities 22,111 17,312
Customer security deposits 6,409 6,632
Current maturities of long-term debt 649 702
-------- --------
Total current liabilities 125,954 109,164
Deferred credit 4,933 6,125
Long-term debt, net of current maturities 239,450 230,208
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized 5,000,000 shares:
Series A, issued and outstanding 686,902 shares and 645,902 shares,
respectively; stated at liquidation preference, $25 per share plus
accrued dividends 17,262 16,232
Series B, issued and outstanding 562,033 shares, stated at liquidation
preference, $100 per share plus accrued dividends 67,757 63,713
Series C, issued and outstanding 250,500 shares, stated at liquidation
preference, $100 per share plus accrued dividends 30,044 28,285
Common stock, par value $.01 per share; authorized 100,000,000
shares;issued and outstanding 14,760,449 and 14,721,929 shares,
respectively 148 147
Paid-in capital 102,209 101,885
Accumulated deficit (324,935) (329,588)
-------- --------
Total stockholders' equity (deficit) (107,515) (119,326)
-------- --------
$262,822 $226,171
======== ========
</TABLE>
See notes to consolidated financial statements.
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COMDATA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands, except per share data)
<S> <C> <C>
REVENUE
(net of $97 paid to a related party in 1993) $ 60,521 $ 52,001
-------- --------
OPERATING COSTS:
Salaries and employee benefits 14,948 13,350
Agent commissions 10,314 6,733
Telecommunications (including amounts paid to a related party, $4,255 in
1994; $2,386 in 1993) 6,420 6,724
Depreciation and amortization 2,210 3,712
Other operating costs 11,169 10,881
-------- --------
Total operating costs 45,061 41,400
-------- --------
Income before interest and taxes 15,460 10,601
Interest expense (7,681) (7,522)
Interest income 3 7
-------- --------
Income before income taxes 7,782 3,086
Income tax expense (924) (75)
-------- --------
Net income 6,858 3,011
Preferred stock dividend requirement, payable in shares of stock or
accreting to liquidation preference (3,463) (3,102)
-------- --------
Net income (loss) for common stock $ 3,395 $ (91)
EARNINGS PER SHARE:
Net income $ 0.22 $ 0.21
Preferred stock dividend requirement (0.01) (0.21)
-------- --------
Net income (loss) per common and dilutive common equivalent share $ 0.21 $ --
Weighted average common and dilutive common equivalent shares 30,668 14,433
</TABLE>
See notes to consolidated financial statements.
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COMDATA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands, except per share data)
<S> <C> <C>
REVENUE
(net of $346 paid to a related party in 1993) $117,911 $101,024
-------- --------
OPERATING COSTS:
Salaries and employee benefits 29,329 26,322
Agent commissions 19,595 12,898
Telecommunications (including amounts paid to a related party, $8,002 in
1994; $4,560 in 1993) 12,694 13,012
Depreciation and amortization 3,993 7,284
Other operating costs 23,622 20,912
-------- --------
Total operating costs 89,233 80,428
-------- --------
Income before interest and taxes 28,678 20,596
Interest expense (15,353) (15,174)
Interest income 7 26
-------- --------
Income before income taxes 13,332 5,448
Income tax expense (1,801) (130)
-------- --------
Net income 11,531 5,318
Preferred stock dividend requirement, payable in shares of stock or
accreting to liquidation preference (6,834) (6,090)
-------- --------
Net income (loss) for common stock $ 4,697 $ (772)
EARNINGS PER SHARE:
Net income $ 0.78 $ 0.37
Preferred stock dividend requirement (0.46) (0.42)
-------- --------
Net income (loss) per common and dilutive common equivalent share $ 0.32 $ (0.05)
Weighted average common and dilutive common equivalent shares 14,845 14,405
</TABLE>
See notes to consolidated financial statements.
3
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COMDATA HOLDINGS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,531 $ 5,318
-------- --------
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amortization 3,993 7,284
Amortization of debt issuance costs and discount 1,453 1,405
Provision for losses on accounts receivable 2,534 2,728
Amortization of deferred credit (1,192) (1,452)
Deferred tax benefit (1,968) -
-------- --------
Total adjustments before changes in
assets and liabilities 4,820 9,965
-------- --------
Change in assets and liabilities, net of effects from purchase business
combinations:
Accounts receivable (33,166) (25,743)
Prepaid expenses and other 377 (501)
Drafts and settlements payable 12,082 112
Other accrued liabilities 4,764 (1,315)
Other 29 151
-------- --------
Total changes in assets and liabilities net of effects from purchase
combinations (15,914) (27,296)
-------- --------
Net cash provided by (used for) operating activities 437 (12,013)
-------- --------
Cash flows from investing activities:
Capital expenditures (2,874) (2,338)
Payment for purchase business combinations, net of cash acquired (3,386) -
Additions to other assets (1,345) (165)
-------- --------
Net cash used for investing activities (7,605) (2,503)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 238 50
Net borrowings of revolving credit loans 8,997 11,402
Principal payments on long-term debt and capital leases (104) (952)
Payment of debt issuance costs (122) (425)
-------- --------
Net cash provided by investing activities 9,009 10,075
-------- --------
Net increase (decrease) in cash & short-term investments 1,841 (4,441)
Cash & cash equivalents, beginning of period 13,332 15,716
-------- --------
Cash & cash equivalents, end of period $15,173 $11,275
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
COMDATA HOLDINGS CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The accompanying financial statements include the accounts of
Comdata Holdings Corporation ("Comdata", or the "Company") and its wholly-owned
subsidiary, Comdata Network, Inc. ("Network"). Comdata has no operations
except for its ownership of Network. Network is the obligor for all of the
debt instruments included in the accompanying consolidated balance sheet.
The accompanying unaudited financial statements include all
adjustments (which are of a normal recurring nature) that are, in the opinion
of management, necessary for a fair statement of the results for the interim
period presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. The statements should be read in conjunction with the Summary of
Significant Accounting Policies and Notes to Consolidated Financial Statements
included in the Company's annual report for the year ended December 31, 1993.
Because of seasonal and other factors, the earnings for the
three month and six month periods ended June 30, 1994 and 1993 should not be
taken as an indication of earnings for all or any part of the balance of the
year.
2. In February 1994, Network acquired the net assets of RoTec, a
software development company with applications for the transportation industry.
The purchase price was $0.5 million plus contingent payments of up to $8.8
million to be made over three years based on the earnings of the acquired
business. In April 1994, Network acquired the net assets of a service of
Western Union Financial Services, Inc. ("Western Union") engaged in providing
gaming cash advance services. The purchase price consisted of $3.0 million in
cash paid at closing, and up to an additional $.9 million depending upon the
future results of the acquired operations. These acquisitions have been
accounted for as purchases, and the results of operations of the acquired
businesses have been included in the consolidated financial statements from the
effective date of the respective acquisitions. The purchase price will be
allocated to the net assets acquired based on their fair values. The prior
results of operations of the acquired businesses are not material to those of
the Company.
3. In May 1994, Network sold the net assets of its breakdown
assistance service, which had been a division of the operations acquired in
connection with the Saunders purchase in 1993. The sales price consisted of
$0.3 million cash and an additional payment equal to the net assets sold, which
has been
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recorded as a reduction of the goodwill related to the Saunders acquisition.
In addition, Network will receive 15% of future revenues, as defined, for a
period of three years.
4. The Company's Series A Preferred Stock is convertible into
common stock at a price of $10.74 per share, and its Series B and Series C
Preferred Stock are convertible into common stock at $6.00 per share.
Dividends on the Series A preferred shares are paid in additional shares of
Series A Preferred Stock. Dividends on the Series B and Series C preferred
shares are currently accreting to the liquidation value of the stock,
increasing the number of common shares issuable on conversion. At June 30,
1994, an additional 17.9 million shares of common stock would be issued if all
preferred shares were converted.
5. The computation of net income (loss) per share is presented
below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------
1994 1993 1994 1993
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income (loss)
Net income (loss) $ 6,858 $ 3,011 $11,531 $ 5,318
Preferred stock dividend requirement:
Series A (523) (463) (1,031) (909)
Series B - (1,848) (4,044) (3,628)
Series C - (791) (1,759) (1,553)
----------- ---------- ------- ----------
Pro forma income (loss) applicable to common
stock $ 6,335 $ (91) $ 4,697 $ (772)
========== ========== ======= ==========
Shares
Weighted average number of common shares
outstanding 14,757 14,433 14,743 14,405
Additional shares assuming conversion of:
Convertible preferred stock:
Series A - - - -
Series B 10,952 - - -
Series C 4,859 - - -
Stock options 100 - 102 -
---------- ---------- ------- ----------
30,668 14,433 14,845 14,405
========== ========== ======= ==========
Net income (loss) per common and dilutive common
equivalent share $ 0.21 $ - $ 0.32 $ (0.05)
========== ========== ======= ==========
</TABLE>
The effects of assumed conversion of Holdings' convertible preferred
stock into common stock, and the elimination of the related dividend
requirement, is considered in the
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computation of earnings per share to the extent that conversion would
have a dilutive impact on earnings per share calculations. This
determination is made on a period by period basis for each series of
preferred stock. The Series B and C preferred stock had a dilutive
effect in the three month period ended June 30, 1994, and the conversion
of Series B and C preferred stock is assumed for earnings per share
calculations for that period. For all other periods presented in this
quarterly report on Form 10-Q, the assumed conversion of preferred stock
has an antidilutive impact on earnings per share, and is therefore
excluded from earnings per share computations.
Item 2. Management's Discussion and Analysis of Financial Condition &
Results of Operations.
The Company's services may be separated into the following
groups: funds transfer and related services for the trucking industry; cash
advance services in the gaming industry; and retail check payment services.
The following table sets forth revenues in each of these areas for the three
month and six month periods ended June 30, 1994 and 1993.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Transportation Services
Funds Transfer Services $ 20,575 $ 17,754 $ 40,794 $ 34,880
Permit Services 8,013 6,730 15,056 12,598
Telecommunication Services 4,874 4,714 9,248 8,836
Other 2,555 1,711 4,911 3,196
-------- -------- -------- --------
36,017 30,909 70,009 59,510
Gaming Services 22,193 18,145 42,797 35,549
Retail Services 2,311 2,947 5,105 5,965
-------- -------- -------- --------
Total Revenue $ 60,521 $ 52,001 $117,911 $101,024
======== ======== ======== ========
</TABLE>
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The Company's operating costs, as a percentage of revenue, for
such periods were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue 100.00% 100.00% 100.00% 100.00%
Salaries and employee benefits 24.70 25.67 24.87 26.05
Agent commissions 17.04 12.95 16.62 12.77
Telecommunications 10.61 12.93 10.77 12.88
Depreciation and amortization 3.65 7.14 3.39 7.21
Other operating costs 18.46 20.92 20.03 20.70
------ ------ ------ ------
Total operating costs 74.46 79.61 75.68 79.61
------ ------ ------ ------
Income before interest and taxes 25.54% 20.39% 24.32% 20.39%
====== ====== ====== ======
</TABLE>
RESULTS OF OPERATIONS
Revenue increased from $52.0 million in the second quarter of
1993 to $60.5 million in the second quarter of 1994, an increase of $8.5
million, or 16.4%. For the six months ended June 30, 1994, revenue increased
from $101.0 million to $117.9 million, an increase of $16.9 million, or 16.7%.
Transportation services revenue increased by $5.1 million, or 16.5%, during the
second quarter, and by $10.5 million, or 17.6%, for the six month period.
Within transportation services, the largest revenue growth came from funds
transfer services, which increased by $2.8 million, or 15.9%, during the second
quarter, and by $5.9 million, or 17.0%, during the six month period. In
December 1993, Network acquired Saunders, Inc. ("Saunders"), a supplier of fuel
purchase, funds transfer, fuel tax, licensing and permit services to the
trucking industry. This acquisition accounted for approximately $1.3 million
and $2.8 million of the revenue growth in funds transfer services during the
three month and six month periods, respectively, with the remainder of the
growth due to increases in transactions and rates.
Permit services revenue increased from $6.7 million in the
second quarter of 1993 to $8.0 million in the second quarter of 1994, an
increase of $1.3 million, or 19.1%. During the six month period, permit
services revenue increased from $12.6 million to $15.1 million, an increase of
$2.5 million, or 19.5%. The Saunders acquisition accounted for revenue growth
of approximately $1.0 million and $2.0 million in the three month and six month
periods, respectively.
Telecommunications services revenue increased by $0.2 million,
or 3.4%, compared to the second quarter of 1993, and by $0.4 million, or 4.7%,
during the six month period. These
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increases were primarily due to the introduction of a new debit card service.
Revenue from other transportation services increased by $0.8
million, or 49.3%, during the second quarter, and by $1.7 million, or 53.7%,
during the six month period. Revenue from software sales accounted for
increased revenue of approximately $0.8 million and $1.1 million during the
three month and six month periods. These revenue increases are primarily due
to the RoTec acquisition.
Gaming services revenue increased during the second quarter of
1994 by $4.0 million, or 22.3%, and by $7.2 million, or 20.4%, during the six
month period, primarily due to increases in the number of transactions at
gaming establishments. Growth in gaming at nontraditional locations, such as
riverboats and Indian reservations, has helped increase these transactions.
These increases have offset the effects of a reduction in revenue from
nongaming locations resulting from MasterCard and VISA regulations limiting the
Company's ability to do business in nongaming locations. Revenues from
nongaming locations were approximately $0.8 million lower during the second
quarter of 1994, and were $1.4 million lower during the six month period.
Revenue from retail services decreased by $0.6 million, or
21.6%, during the second quarter, and by $0.9 million, or 14.4%, during the six
month period. The decline is the result of the loss of the Company's largest
retail customer. Annual revenues from this customer were approximately $2.0
million.
Salaries and employee benefits increased by $1.6 million, or
12.0%, during the second quarter, and by $3.0 million, or 11.4%, during the six
month period. This increase was primarily due to the Saunders and RoTec
acquisitions, which added $1.4 million and $2.8 million to salaries and
employee benefits expense during the three month and six month periods,
respectively.
Agent commissions increased from $6.7 million during the
second quarter of 1993 to $10.3 million during the second quarter of 1994, an
increase of $3.6 million, or 53.2%. During the six month period, agent
commissions increased from $12.9 million to $19.6 million, an increase of $6.7
million, or 51.9%. These commissions are paid to locations offering gaming
cash advance services. This increase was the result of increases in the number
of gaming transactions, as discussed above, and increases in the rates paid for
these commissions, in response to competitive pressures.
Telecommunications expense was approximately $0.3 million
lower in both the three month and six month periods, compared to 1993. Rate
reductions negotiated at the end of 1993 offset the increases from increased
transactions to keep this cost approximately equal to 1993 amounts.
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Depreciation and amortization expense decreased from $3.7
million in the second quarter of 1993 to $2.2 million in the second quarter of
1994, and decreased from $7.3 million to $4.0 million in the six month period,
due to lower amortization charges for goodwill and other intangible assets that
were written off at the end of 1993. As discussed in the consolidated
financial statements for 1993 and the 1993 10-K, the Company wrote off
approximately $230 million in goodwill and other intangibles related to its
transportation and retail division based on its assessment of the future
operations of the related divisions. The effect of this write-off in 1993 was
to reduce amortization charges in the second quarter and six month periods by
approximately $2.0 million and $4.0 million, respectively.
Other operating costs increased from $10.9 million in the
second quarter of 1993 to $11.2 million in the second quarter of 1994, an
increase of $0.3 million, or 2.6%. During the six month period, other
operating costs increased from $20.9 million to $23.6 million, an increase of
$2.7 million, or 13.0%. During the first quarter of 1994, the Company incurred
expenses of approximately $1.2 million with a consulting firm to assist it in
evaluating the efficiency of its work force and procedures. Reductions in
salaries and benefits have been realized as a result of workforce reductions
that resulted from this evaluation. The remaining increase in other operating
costs is primarily related to the acquisitions of Saunders and RoTec.
Interest expense, net of interest income, was $7.5 million in
the second quarter of 1993, and $7.7 million in the second quarter of 1994.
Interest expense net, was $15.1 million in the six months ended June 30, 1993,
and $15.3 million in the six months ended June 30, 1994. Interest on
borrowings for the Saunders, RoTec, and Western Union acquisitions have offset
interest savings resulting from reductions in debt from operating cash flows.
Income tax expense increased approximately $0.8 million during
the second quarter of 1994, and $1.7 million during the six month period. The
Company's net operating loss carryforwards, which totaled approximately $12
million at December 31, 1993, are expected to be fully utilized during 1994,
resulting in an increase in income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Network's Revolving Credit Facility provides for revolving
credit loans and letters of credit aggregating up to $50.0 million, with a
$25.0 million sublimit for letters of credit. In December 1994, the total
amount of the Revolving Credit Facility will be reduced by $12.5 million to
$37.5 million. As of June 30, 1994, there were outstanding loans under the
Revolving Credit Facility of $22.0 million and letters of credit totaling $13.2
million. Network is not required to make any
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<PAGE> 12
scheduled principal repayments on its senior bank debt or subordinated debt
until December 1995, when the Revolving Credit Facility terminates. In June
1995, Network is required to repay a $5.7 million note. In addition, $6.2
million of 11% Junior Subordinated Notes mature in October 1997. Scheduled
payments on Network's 12.5% Senior Notes begin in 1998.
Network's obligations under the Revolving Credit Facility are
secured by substantially all the assets of Network and its subsidiaries, are
guaranteed by Comdata and bear interest at prime plus 1.75% or an adjusted
Eurodollar rate plus 3%. The amount of credit available under this arrangement
is subject to limitations based on the amount and nature of outstanding
receivables.
The Revolving Credit Facility has provisions that require
Network to maintain and transfer excess cash balances, as defined, into bank
accounts managed by the lenders. Such lenders have certain discretionary
rights to apply such cash balances against Network's outstanding loan amounts.
At June 30, 1994, Network had $15.7 million in these accounts. Network, on a
daily basis, monitors its cash position and makes transfers and other
transactions necessary to comply with these provisions of the Revolving Credit
Facility.
Subject to certain exceptions, the Revolving Credit Facility
requires prepayment of indebtedness outstanding under the facility with the
entire net cash proceeds received by the Network or its subsidiaries from asset
sales over a certain minimum amount, 50% of the net cash proceeds received by
Comdata or Network from permitted issuances of debt or equity and any excess
cash flow of Network and its subsidiaries on a consolidated basis. The amount
of the Revolving Credit Facility is permanently reduced by an amount equal to
such mandatory prepayments.
The Revolving Credit Facility and the indentures governing the
Senior Notes and Senior Subordinated Debentures contain certain covenants that
limit or prohibit, among other things, Comdata's ability to incur additional
indebtedness, to pay dividends or make other distributions, to engage in
certain transactions with affiliates, to issue or sell stock of subsidiaries to
third parties, to repay certain indebtedness prior to its stated maturity, to
create liens, to sell assets, to make certain capital expenditures, to enter
into a transaction that would result in a change of control, to incur certain
subordinated debt and to merge or consolidate with or to acquire any other
business. In addition, the Revolving Credit Facility requires the Company to
maintain certain specified financial ratios. As of June 30, 1994, the Company
was required to maintain a tangible net worth deficit of less than $197.1
million, an interest coverage ratio in excess of 1.75 to 1, a current ratio in
excess of 0.93 to 1, and a debt to net worth ratio not to exceed 2.50 to 1, all
as defined. As of June 30, 1994, the Company was in compliance with all
covenants and ratios, and its actual measures under these
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<PAGE> 13
financial ratio covenants were as follows: tangible net worth deficit, $189.9
million; interest coverage ratio, 1.99 to 1; current ratio, 1.05 to 1; debt to
net worth ratio, 2.02 to 1.
Working Capital
The Company's principal uses of funds for the next several
years will be for working capital, for debt service and for capital
expenditures consisting of routine replacements of field computer equipment and
back office equipment. New services offered by the Company will require
additional investments in working capital to fund growth in accounts
receivable. Management believes that funds generated from operations and
borrowed under the Revolving Credit Facility should provide sufficient cash to
meet the Company's anticipated liquidity needs during the next 24 months, even
with the reduction in December 1994 of the total amount of the Revolving Credit
Facility by $12.5 million.
Accounts Receivable
In accordance with the Company's revenue recognition policy,
revenue from the Company's funds transfer, regulatory permit and gaming cash
advance services consists of the transaction fees charged to customers and does
not include the cost of goods or services provided by the Company (e.g., fuel
purchased, permit provided or cash advanced). The Company's accounts
receivable include both the cost of the goods and services provided and the
transaction fees, and drafts and settlements payable include the amount due to
the issuing agent for the cost of the goods and services. Accounts receivable,
net, increased by $30.3 million, or 28.2%, between the end of 1993 and June 30,
1994. Total revenue increased by 16.7% during the six months ended June 30,
1994, as compared to the same period in the prior year. For the six months
ended June 30, 1994, the average days in accounts receivable outstanding,
calculated based on the average accounts receivable outstanding for such
period, was approximately 6.16 days. Because the Company does not recognize
the entire amount of accounts receivable for settled transactions as revenue,
management believes that the average days in accounts receivable are
appropriately measured by the amounts transferred through its cash advance
system.
Cash Flow
Comdata's principal source of internal liquidity has
historically been its cash flow from operations. In 1994, operating activities
provided $0.4 million. In 1993, operating activities used $12.0 million of
cash, primarily due to increases in accounts receivable. The consolidated
statement of cash flows is substantially affected by the particular day of the
week on which the accounting period ends, primarily because of the large volume
of weekend transactions in gaming services. In addition, the volume of funds
transferred by Comdata for its customers is very high relative to the average
level of accounts receivable.
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<PAGE> 14
Finally, small changes in the timing of customer remittances may have a
relatively greater effect on the amounts of accounts receivable.
Net cash used for investing activities in 1994 and 1993 was
$7.6 million and $2.5 million, respectively. These amounts primarily represent
payment for purchase business combinations, capital expenditures and additions
to other assets.
Financing activities provided $9.0 million of cash in 1994 and
$10.1 million of cash in 1993, primarily consisting of net borrowings under the
Revolving Credit Facility.
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<PAGE> 15
PART II
Item 1. Legal Proceedings
Please refer to the Company's Annual Report on Form 10-K for a discussion of
legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMDATA HOLDINGS CORPORATION
August 11, 1994 /S/ Dennis R. Hanson
- - ---------------------------------- -----------------------------------
On behalf of the registrant
and as Executive Vice President
and Chief Financial Officer
August 11, 1994 /S/ L. Glynn Riddle, Jr.
- - ---------------------------------- -----------------------------------
On behalf of the registrant
and as Senior Vice President
and Controller
COMDATA NETWORK, INC
--------------------
August 11, 1994 /S/ Dennis R. Hanson
- - ---------------------------------- -----------------------------------
On behalf of the registrant
and as Executive Vice President
and Chief Financial Officer
August 11, 1994 /S/ L. Glynn Riddle, Jr.
- - ---------------------------------- -----------------------------------
On behalf of the registrant
and as Senior Vice President
and Controller
15
