<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
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 0-19598
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AMERICAN BUSINESS INFORMATION, INC.
- --------------------------------------------------------------------------------
(exact name of registrant specified in its charter)
Delaware 47-0751545
- --------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5711 South 86th Circle, Omaha, Nebraska 68127
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 593-4500
------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
20,791,735 shares of common stock at April 26, 1996
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AMERICAN BUSINESS INFORMATION, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I - FINANCIAL INFORMATION 2
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8 - 10
PART II - OTHER INFORMATION 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
</TABLE>
<PAGE>
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of March 31, 1996 and December 31, 1995
(In thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS March 31, 1996 December 31, 1995
------ --------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 8,974 $11,999
Marketable securities............................................. 24,004 23,350
Trade accounts receivable, net.................................... 20,051 19,215
Prepaid expenses.................................................. 3,001 1,733
Deferred marketing costs.......................................... 1,972 996
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Total current assets............................................. 58,002 57,293
Property and equipment, net........................................ 15,375 13,885
Note receivable.................................................... 2,960 2,972
Intangible assets, net of accumulated amortization................. 14,960 14,642
Other assets....................................................... 1,999 1,999
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$93,296 $90,791
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LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt................................. $ 463 $ 969
Accounts payable.................................................. 4,124 4,254
Income taxes payable.............................................. 1,529 143
Accrued payroll expenses.......................................... 1,990 2,205
Accrued expenses.................................................. 1,466 1,891
Deferred income taxes............................................. 1,334 123
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Total current liabilities........................................ 10,906 9,585
Long-term debt, net of current portion............................. 792 1,070
Deferred income taxes.............................................. 1,471 1,707
Shareholders' equity:
Preferred stock, $.0025 par value. Authorized 5,000,000 shares;
none issued or outstanding....................................... - -
Common stock, $.0025 par value. Authorized 25,000,000 shares;
issued and outstanding 20,791,735 shares at March 31, 1996
and 20,776,860 at December 31, 1995.............................. 51 51
Paid-in capital................................................... 24,416 27,342
Net unrealized holding gain (loss), net of tax.................... (331) (246)
Retained earnings................................................. 55,991 51,282
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Total shareholders' equity....................................... 80,127 78,429
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$93,296 $90,791
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1996 and 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
1996 1995
--------- --------
<S> <C> <C>
Net sales.............................................. $24,785 $20,696
Costs and expenses:
Database and production costs........................ 6,536 5,141
Selling, general and administrative.................. 10,152 8,255
Depreciation and amortization........................ 902 790
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17,590 14,186
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Operating income....................................... 7,195 6,510
Other income (expense):
Investment income.................................... 410 31
Interest expense..................................... (11) (56)
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Income before income taxes and discontinued operation.. 7,594 6,485
Income taxes........................................... (2,885) (2,420)
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Income from continuing operations...................... 4,709 4,065
Loss on discontinued operation......................... - (252)
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Net income............................................. $ 4,709 $ 3,813
======= =======
Earnings per share:
Income from continuing operations..................... $ 0.23 $ 0.20
Loss on discontinued operation........................ $ - $ (0.01)
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Net income............................................ $ 0.23 $ 0.19
======= =======
Weighted average shares outstanding.................... 20,783 20,685
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 4,709 $ 3,813
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 902 832
Deferred income taxes..................................... 975 487
Other..................................................... 39 287
Changes in assets and liabilities:
Trade accounts receivable................................. (836) (731)
Prepaid expenses.......................................... (1,268) (1,097)
Deferred marketing costs.................................. (976) -
Accounts payable.......................................... (130) 1,451
Income taxes payable...................................... 1,386 1,588
Accrued expenses.......................................... (763) 1,170
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Net cash provided by operating activities............... 4,038 7,800
Cash flows from investing activities:
Proceeds from sale of marketable securities.................. 1,483 5,108
Purchases of marketable securities........................... (2,337) (9,490)
Purchases of property and equipment.......................... (1,972) (1,175)
Purchase of minority interest................................ - (900)
Capitalization of software development costs................. (620) -
Other........................................................ 88 (149)
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Net cash used in investing activities................... (3,358) (6,606)
Cash flows from financing activities:
Repayment of long-term debt.................................. (779) (210)
Proceeds from long-term debt................................. - 289
Repurchase and retirement of common stock.................... (5,589) -
Proceeds from exercise of stock options...................... 2,663 89
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Net cash provided by (used in) investing activities..... (3,705) 168
Net increase (decrease) in cash and cash equivalents........... (3,025) 1,362
Cash and cash equivalents, beginning........................... 11,999 13,491
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Cash and cash equivalents, ending.............................. $ 8,974 $14,853
======= =======
Supplemental disclosure of cash flow information:
Interest paid................................................ $ 11 $ 24
======= =======
Income taxes paid............................................ $ 1,236 $ 200
======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
5
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AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited financial statements have been prepared on the same
basis as the audited consolidated financial statements and, in the opinion of
management, contain all adjustments, consisting of normal recurring adjustments,
necessary to fairly present the financial information included therein. The
December 31, 1995 Consolidated Balance Sheet was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles.
The Company suggests that this financial data be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended
December 31, 1995 included in the Company's 1995 Annual Report to the Securities
and Exchange Commission on Form 10-K. Results for the interim period presented
are not necessarily indicative of results to be expected for the entire year.
2. CONSOLIDATED BALANCE SHEET DETAIL (IN THOUSANDS):
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Property and equipment:
Land and improvements $ 1,287 $ 1,032
Building and improvements 6,922 7,157
Furniture and equipment 17,509 15,439
Capitalized equipment leases 1,437 1,437
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27,155 25,065
Less accumulated depreciation
and amortization 11,780 11,180
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$15,375 $13,885
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</TABLE>
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Intangible assets:
Goodwill $ 5,012 $ 5,012
Distribution networks 11,871 11,871
Noncompete agreements 150 150
Acquisition costs 1,319 1,319
Software development costs 1,051 431
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19,403 18,783
Less accumulated amortization 4,443 4,141
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$14,960 $14,642
======= =======
</TABLE>
6
<PAGE>
3. DISCONTINUED OPERATIONS
On February 28, 1995, the Company agreed to acquire the minority interest of
American Business Communications, Inc. ("ABC") for $900,000. On June 1, 1995,
the Company disposed of substantially all of the assets and liabilities of its
wholly-owned subsidiary, ABC to a wholly-owned subsidiary of Baker University.
The Company received $3.0 million for the sale in the form of a 7.52% promissory
note, due in equal monthly installments through 2005.
The loss on disposition of ABC has been accounted for as discontinued operations
and prior period financial statements have been restated to reflect the
discontinuance of ABC. Revenues of ABC were $1,661,000 from January 1, 1995 to
March 31, 1995.
4. STOCK SPLIT
On July 18, 1995, the Company's Board of Directors declared a three-for-two
stock split of the Company's common shares, effected in the form of a stock
dividend, to be paid on August 14, 1995 to stockholders of record as of the
close of business on July 31, 1995. All presentations of shares outstanding and
amounts per share have been restated to reflect the stock split.
7
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
American Business Information, Inc. ("ABI") and its subsidiaries, ("the
Company"), provide business and consumer information to organizations engaged in
business-to-business and consumer marketing through products and services
derived from the Company's database. These products include customized business
lists, business directories, consumer lists and other information services, such
as CD-ROM directories, Online Access and Internet Access.
In addition, ABI provides business and consumer directories for home use. These
directories are available in a series of CD-ROM titles, which are distributed
through national and local computer software retail outlets.
RESULTS OF OPERATIONS
The following table sets out for the three month periods indicated, certain
items from the Company's statement of operations data expressed as a percentage
of net sales:
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
---- ----
<S> <C> <C>
Statement of Operations Data:
Net Sales 100% 100%
Costs and expenses:
Database and production costs 26 25
Selling, general and administrative 41 40
Depreciation and amortization 4 4
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Total costs and expenses 71 69
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Operating income 29 31
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Other income (expense) 2 -
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Income before income taxes and
discontinued operation 31 31
Income taxes 12 11
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Income from continuing operations 19 20
Loss from discontinued operation - 1
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Net Income 19% 19%
=== ===
</TABLE>
- --------------------------
* Less than 1%.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, CONTINUED
Net Sales
- ---------
Net sales increased 20% to $24.8 million in the first quarter of 1996 from $20.7
million in the same period of 1995. CD-ROM products posted the largest gain,
increasing 119% to $4.4 million from $2.0 million in the prior year. The
increase is a result of increased demand in consumer retail channels as well as
additional titles released in the third quarter of 1995. Lead generation
products increased 11% to $18.3 million from $16.5 million in the prior year.
The increase is largely the result of increased marketing efforts which began
late in 1995. Directory products posted a modest 7% decrease to $1.7 million
from $1.9 million in the prior year. Voice and on-line service revenues
accounted for $400 thousand of net sales in 1996 as compared to $300 thousand in
1995.
The Company's net sales on a quarterly basis can be affected by the timing and
extent of the Company's own direct marketing activities and the release of new
products. There have been no significant price increases for the majority of the
Company's existing products and services during the period.
Database and Production Costs
- -----------------------------
Database and production costs for the first quarter of 1996 were $6.5 million,
or 26% of net sales, compared to $5.1 million, or 25% of net sales, in the prior
year quarter. These amounts primarily represent the costs of compiling and
telephone verifying information in the database, fulfilling customer orders, the
direct costs associated with the production of CD-ROM titles, and royalty costs.
The increase is primarily the result of increased sales of CD-ROM products which
bear a slightly higher level of costs than the Company's traditional lead
generation products as well as production and shipping of free trial products as
part of the Company's increased marketing and promotional activities.
Selling, General, and Administrative
- ------------------------------------
Selling, general and administrative expenses in the first quarter of 1996 were
$10.1 million, or 41% of net sales, compared to $8.3 million, or 40% of net
sales, in the prior year quarter. The dollar increase is principally the result
of higher levels of direct marketing activities, including catalog and
promotional material mailings, as well as an overall increase in sales
personnel.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expense for the three months ended March 31, 1996
increased to $902,000 from $790,000 in the comparable 1995 period, primarily due
to increased depreciation on property and equipment.
9
<PAGE>
Operating Income
- ----------------
Operating income for the first quarter of 1996 increased 11% to $7.2 million, or
29% of net sales, compared to $6.5 million, or 31% of net sales in the first
quarter of 1995.
Other Income
- ------------
Investment income for the 1996 first quarter was $399,000 compared to $(25,000)
in the same quarter of 1995. This increase is attributable to realized losses in
the amount of $287,000 due to the investment restructuring of the Company's
investment portfolio in the prior year quarter.
Provision for Income Taxes
- --------------------------
A provision for income taxes has been recorded on the Company's first quarter
1996 earnings at a combined effective federal and state tax rate of 38%,
compared to the first quarter 1995 combined effective rate of 37%. The increase
in the effective rate is a result of state income taxes and the mix of states in
which the Company conducts its business.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's principal sources of liquidity included cash
and cash equivalents of $9.0 million and marketable securities of $24.0 million.
The Company also has a revolving line of credit totaling $5.0 million, which had
no outstanding balance at March 31, 1996.
Net cash provided by operating activities for the first quarter 1996 totaled
$4.0 million as compared to $7.8 million in the first quarter 1995. The decrease
was attributable primarily from higher levels of receivables from sales of
consumer CD-ROM products, deferred marketing costs due to an increase in direct
marketing programs and from the payment of accrued expenses. The Company spent
approximately $1.5 million on upgrades to data processing equipment and $500,000
related to building and improvements to its Omaha facility. The Company
anticipates spending an additional $4.5 million in 1996 for equipment and
facility expansion.
The Company believes that cash flows from operations, its cash and short term
investments, and its borrowing facilities will be sufficient to fund its
operations for at least the next twelve months. However, if the Company acquires
additional companies or products, additional financing may be required.
10
<PAGE>
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART II
OTHER INFORMATION
11
<PAGE>
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
11 Statement regarding computation of per share
earnings
(b) Report on Form 8-K
None
12
<PAGE>
S I G N A T U R E S
-------------------
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.
AMERICAN BUSINESS INFORMATION, INC.
-----------------------------------
Date:__________________________ __________________________________
Jon H. Wellman
Chief Financial Officer
13
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ------------
11 Statement regarding computation of
per share earnings
14
<PAGE>
EXHIBIT 11
AMERICAN BUSINESS INFORMATION,INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the three months ended March 31, 1996 and 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
1996 1995
-------- ------
<S> <C> <C>
Average shares outstanding...................... 20,783 20,685
Net additional common equivalent shares......... 137 351
-------- ------
Average number of common and common equivalent
shares outstanding............................. 20,920 21,036
======== ======
Net income for per share computation............ $ 4,709 $3,813
======== ======
Net income per average common and common
equivalent share outstanding (1).............. $ 0.23 $ 0.18
======== ======
</TABLE>
____________________
(1) This calculation is submitted pursuant to Regulation S-K item 601(b)(11)
although not required by footnote 2 to paragraph 14 of APB Opinion No. 15
because it will result in dilution of less than 3 percent.
