<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Act of 1934
[Fee Required]
For the fiscal year ended December 31, 1995 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required] For the transition period from _______________ to
_______________
Commission file number: 0-19598
AMERICAN BUSINESS INFORMATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0751545
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 South 86th Circle, Omaha, Nebraska 68127
(Address of principal executive offices)
Registrant's telephone number, including area code: (402) 593-4500
__________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0025 par value
__________________________________________________
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.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
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The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 15,
1996 as reported on the NASDAQ National Market System, was approximately
$138,090,425. Shares of Common Stock held by each officer and director and by
each person who owns 5% of more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of March 15, 1996 registrant had outstanding
20,791,735 shares of Common Stock.
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PART I
ITEM 1. BUSINESS.
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The Company is a leading provider of business-to-business marketing
information which it supplies from its proprietary database containing
information on approximately 10 million businesses in the United States and 1
million businesses in Canada. The increased cost of marketing efforts has caused
many businesses to seek more efficient methods to identify and target potential
customers. These efforts have been hindered by the lack of comprehensive,
accurate and affordable information on such prospects from a single source. To
address this business opportunity, the Company has made substantial investments
to create, maintain and enhance its database. In 1995, over 100,000 customers
purchased the Company's products and services for market analysis, customer
profile analysis, sales lead generation, direct mail and telemarketing
campaigns, competitive analysis, sales territory assignment, business reference
and other purposes.
The Company believes its business information database is one of the most
comprehensive and accurate in the United States. The Company's database is
compiled and updated annually from approximately 5,000 yellow page telephone
directories as well as other publicly available sources including business white
pages directories, annual reports and other SEC information, press releases,
business magazines, newsletters and top newspapers. The Company then places
telephone calls to each business to verify the information and capture or verify
additional information such as: name of owner or manager, number of employees,
and primary line of business. The Company makes approximately 15 million of
these calls per year. From this database, the Company extracts, manipulates and
sorts information to create multiple products and services, such as prospect
lists, mailing labels, 3x5 sales lead cards, diskettes, magnetic tapes, CD-ROMs,
business directories, market research services, on-line information services and
800-number telephone and fax information services. Information from the database
can be readily customized to meet the user's specific marketing needs.
BACKGROUND
The use of direct marketing by businesses to target and communicate with the
customers most likely to buy their products has increased rapidly in the last
decade. In the years prior to and during the 1970's, the costs associated with
selling products and services on a mass market basis were relatively low, while
the costs of computer processing and data management were prohibitive for all
but the largest businesses. In the 1980's, the cost of computer technology
declined while marketing and selling costs increased dramatically. Businesses
have responded to these trends by increasing the use of computer technology to
collect information about prospective customers thereby allowing them to use
direct marketing techniques to target potential customers more precisely and
efficiently. In addition, the declining cost of computer resources has afforded
businesses, particularly smaller businesses, the opportunity to develop and
implement more sophisticated marketing programs in-house.
Business-to-business marketing has created a substantial need for accurate
and timely information to identify potential purchasers from the millions of
businesses in the United States and Canada. Such information may be used in all
aspects of business marketing: market sizing, distribution channel selection and
balancing, sales lead generation, territorial resource allocation, and
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customer prioritization and qualification. In the absence of this information,
the selling process often results in prohibitively high expense per sales
contact or lost revenues from unidentified prospects. These factors have created
increasing demand for lower cost information regarding the identity, location,
and status of small businesses. For many small businesses with limited
resources, the purchase of business information can be one of their most
fundamental marketing tools.
Despite this need, comprehensive information from any single source was not
readily available. Moreover, the available information was often inaccurate due
to significant and frequent changes in the ownership, size, address, phone
number, or operating status of businesses. Publicly available sources including
the yellow pages, white pages, association membership lists and other available
resources are often fragmented by design and are therefore not comprehensive.
The Company was formed in 1972 in response to this market opportunity and
has made substantial investments to create and maintain its database. Since its
founding, the Company has continuously expanded the breadth and depth of its
database and developed new products and services. The Company has also expanded
its channels of distribution to include direct mail, telemarketing, direct
sales, licensees, and sales through third party resellers such as advertising
agencies and list brokers. The Company believes the comprehensiveness and
accuracy of its database combined with the breadth of its product offerings
present significant barriers to entry to potential competitors.
STRATEGY
The Company's strategy is to focus on developing and marketing business
information products and services utilizing its copyrighted database. The
Company's strategy comprises the following elements:
Comprehensive, accurate database. The Company has invested significant
--------------------------------
resources to develop what the Company believes is one of the most comprehensive
and accurate business information data bases available in the United States. The
Company continues to devote significant resources to increase the accuracy of
its database and to enhance its content.
Product delivery. Based on the customer requirements for timeliness, cost
----------------
and convenience, the Company extracts, manipulates and sorts information from
its database to create products and services which are available in various
formats. New product offerings are designed to leverage the Company's database,
to focus on increasing the efficiency and effectiveness of a customer's
marketing program and to ease access to the information.
Affordability. The Company has emphasized pricing and packaging options
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that are generally affordable to even the smallest businesses. The Company is
able to achieve attractive margins at low price points based on the low variable
costs associated with incremental sales of its information and the overall
efficiency of its operations.
Focus on small business customers. The Company believes its combination of
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reliable information, broad product offerings, affordable pricing and a high
level of service are particularly attractive to small businesses. The Company
believes these factors have enabled it to maintain a
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leadership position within the small business segment of the business
information market and to achieve high levels of repeat orders.
Multiple distribution channels. The Company employs a multi-channel
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distribution strategy. Historically, the Company has relied primarily on direct
mail to develop its customer base. In recent years, the Company has made
important acquisitions to expand its distribution capabilities with national
accounts, sales through third party resellers and direct sales. The Company
intends to continue to expand its marketing efforts in each of these channels.
In 1995, the Company began to re-evaluate its field sales office activities, and
expects direct selling activities to become a more important component of its
overall distribution strategy over time. In addition, the Company seeks to
establish strategic alliances, and may seek to make acquisitions, to expand its
distribution channels and customer base to further leverage the Company's
investment in its database.
Strategic Alliances. The Company believes that a significant opportunity
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exists to market additional business information that is not available from the
Company's database. An example of this relationship is the Company's agreement
with TRW Business Credit Services ("TRW"), whereby the Company offers business
credit profiles to its customers to assist them in their credit management
decisions. Other possibilities include national information services and
additional databases.
THE COMPANY'S DATABASE
The Company's products and services are created from the information
contained in its database. Due to the formation of new businesses, entities
going out of business and changes among existing businesses, the database must
be continually maintained to keep the information up-to-date and accurate. The
Company believes it has developed one of the most comprehensive and accurate
databases of business information in the United States. This proprietary,
copyrighted database contains information on approximately 10 million U.S.
businesses and 1 million Canadian businesses. Information in the database is
compiled in two phases.
First, the Company inputs from over 5,000 yellow page telephone directories
as well as other publicly available sources the following information, where
available, for each business entry: name of business; contact person; street
address, city, state; phone number, fax number; yellow page classification, SIC
code; product brands sold by businesses; franchises; professional specialties
and size of yellow page advertisement; year of first appearance in the yellow
pages; zip code, zip+4, carrier route; county code, population code,
metropolitan statistical area and area code.
Second, the Company makes telephone calls to the businesses in the database
to verify the information and to obtain or confirm additional information for
inclusion in the database. This information includes: name of the owner or
manager; number of employees; primary business activity; and address
verification (including suite numbers).
The Company has devoted significant time and resources to the creation,
maintenance and enhancement of its proprietary database and related applications
software. The database requires sophisticated computer hardware and software to
handle rapid compilation, order processing, accounting, storage and sorting, and
quality control. The computer system must allow a sizable work
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force to compile, program and process data simultaneously. More than 1,500
proprietary software programs operate the data compilation, demographic
enhancement and order fulfillment process.
On-line proprietary data compilation software allows the Company's data
entry clerks to access the database, update, change or verify each record at a
rate of approximately 1.5 million records per month. A separate quality control
group checks input quality to ensure that the information that reaches the
Company's database is approximately 99% accurate from the original source. The
Company has implemented a proprietary automated dialing system and a predictive
dialing system which greatly improve the overall efficiency of the telephone
verification process. The Company has also developed proprietary software to
check the database for spelling, abbreviations and phone prefixes, and to verify
that no inappropriate language appears in the database.
PRODUCTS AND SERVICES
The Company offers an extensive suite of business information products
designed to assist business-to-business marketers with a variety of marketing
activities, such as identifying and qualifying prospective business customers,
initiating direct mail programs, telemarketing, estimating market potential,
monitoring the effectiveness of marketing efforts, and surveying competitive
markets. The Company offers its products in multiple formats at the cutting edge
of information delivery: customers can obtain information on CD-ROM or online as
well as on hard copy, on diskettes, and by telephone or fax. Due to the
continuous change in business information, the Company's customers often need to
obtain new information-based products and services annually. For each of the
last three years, approximately two-thirds of the Company's revenues were from
existing customers.
Sales Lead Generation Products
The Company's principal products are its sales lead generation products
which are used by its customers primarily for new customer acquisitions. Lead
generation products are compiled from the Company's database using any
combination of sorting criteria to meet the specific marketing objectives of the
customer. Typically, a business wants to learn basic information about its
prospective customers to market efficiently to that targeted group. The customer
may wish to sort the information according to type of business, geographic area,
size of business or credit rating code. For example, a customer may want a list
of manufacturers and service companies with over 20 employees in the Phoenix
area in order to market its fax machines to such businesses.
Lead generation products can be delivered in the following formats: prospect
lists, mailing labels, 3x5 sales lead cards, computer diskettes and magnetic
tapes. In addition, the Company offers a mailing list software package for IBM-
compatible personal computers that facilitates the sorting of information and
the generation of mailing labels, lists, cards and reports.
Because a substantial amount of the Company's revenue is derived from small
businesses that are not large enough to employ sophisticated marketing
techniques, the Company believes that customer service is an important part of
its custom business information products. Larger, more sophisticated businesses
generally can specify their orders with a higher degree of precision. Small
businesses, however, are often unsure of the type of information they want or
how to use it. The Company's
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telemarketing sales representatives work with prospective customers to help them
understand how the database can be sorted and how the information can be used.
The Company believes that this emphasis on service leads to greater usage of the
Company's products by both its prospective and existing customers.
Generally, business information products are priced on a per name basis.
Pricing varies according to the number of names supplied, the type of
information delivered (standard database information or enhanced database
information) and the medium on which the information is delivered.
Business Directories
The Company offers a variety of printed business directories derived from
its database including State Business Directories, SIC Business Directories, an
American Manufacturers Directory, a Big Business Directory and a Credit
Reference Directory, which are updated and printed annually. The business
directories were developed to serve the special needs of both small and large
business-to-business marketers. The Company found many companies were not
initially interested in lists, but were receptive to the use of directories for
lead generation, telemarketing and reference. Customers are attracted to
business directories due to their affordability, convenience and reference
value. In addition, to provide a full range of services to its customers, the
Company also resells government directories that provide listings of federal,
state, county and municipal agencies and officials.
Information Brokerage Services
As a result of its marketing efforts to prospective customers, the Company
receives numerous customer requests for other information. In response to these
customer needs, the Company leases information from other compilers and owners
for resale to its customers. This service allows the Company to be a single
source for virtually all information requested by a customer and also generates
additional sales of the Company's other products. Examples of brokered
information include consumers identified by age or income, millionaires, car and
boat owners, high school and college students, international businesses, and
real estate and insurance agents. Business-to-consumer marketers can select a
consumer list by age group, income ranges, homeowners, hobbies or interests, or
geographical area and order from the Company a range of lead generation
products. Brokered information is priced on a per name basis.
Market Research Services
The Company uses its database to offer a variety of market research services
to its customers. These services include customer and market profile analyses,
market segmentation reports, statistical marketing reports, list enhancements to
update a customers in-house database, a computerized name search service, and
other analytical tools and reports. The information provided by these services
allows customers to make more informed business decisions, whether for
identifying the highest potential prospect group, determining the size of a
market, budgeting, lead generation, competitive analysis or determining sales
goals, marketing plans, site locations, or territory assignments.
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The Company's market research services provide an effective way to cross-
sell the Company's other products and services. For example, when the Company's
statistical reports or market profiles suggest industries or geographic areas of
opportunity, a customer may subsequently order a business information product to
identify and target specific prospects in those industries or geographic areas.
On-Line Information Services
American Business Lists-Online provides a customer with immediate access to
the Company's database 24-hours a day, seven days a week. Using a personal
computer with a modem, a customer can define a target, retrieve a count of the
number of businesses in a particular market or obtain a profile on a particular
company, and then download the information directly into a personal computer.
Through a licensing arrangement with TRW, American Business Lists-Online
customers download full TRW credit reports on current or potential customers or
suppliers. Customers may either pay for individual sessions using a major credit
card or may pay an annual subscription fee and be billed according to their
usage. Billing is based on connect time and the number of names retrieved.
Additionally, American Business Lists-Online is available to Dialog, Compuserve
and America Online; national on-line information services that license the
Company's service and offer it to their customers as part of an integrated
information package.
CD-ROM Products
The Company has developed a variety of CD-ROM products, which allow
customers to access and manipulate the Company's database on a personal
computer. These products include Business America on CD-ROM, which contains the
Company's complete database of U.S. businesses, and business and household
directories such as 16 Million Businesses and 88 Million Households on CD-ROM
for consumers. The customer can view and select information for printing lists,
labels or cards or download information to a disk drive. An annual license fee
enables a customer to access and use a specified number of names. Proprietary
metering and clock technologies monitor the number of names printed or
downloaded, and the length of time since the product was installed. When the
specified number of names is reached, the customer must contact the Company to
purchase additional names. An internal clock prohibits use of the product after
one year from the installation date. Customers that renew the annual license
receive an updated version of the product immediately.
Telephone Business Information Services
The Company's InfoAccess service provides business directory assistance for
business and consumer callers, company profiles and business credit profiles for
use in making credit management decisions. This service enables callers dialing
1-800-808-INFO to obtain business information quickly from live operators, which
often cannot be obtained using telephone company directory assistance. For
example, through InfoAccess, a caller can learn, within seconds, the name of all
the Mazda dealers in the Chicago area or detailed information on a company known
as "ACME Manufacturing" which the caller believes is located somewhere in the
Midwest.
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Business Credit Profiles allows callers to obtain TRW credit reports over
the phone or fax machine to determine whether a prospective customer is likely
to pay bills on time, or to check credit histories on suppliers or competitors.
Products for Niche Markets
As existing customers seek greater amounts of information on narrower ranges
of potential customers, the Company expects products directed at niche markets
to play an increasingly important part in its business in the future. The
Company currently offers products specific to the healthcare and medical
industry, small business owners and female executives and will continue to
specialize information as market opportunities are identified.
SALES AND MARKETING
The Company markets its products and services through direct marketing,
sales through third party resellers, licensees, and direct sales. The Company
maintains separate marketing staffs for each product category described above
which enables the marketing personnel to keep abreast of customer demands and
market developments. The Company advertises its products and services through
direct mail, space advertising and trade shows. The Company is currently
expanding its marketing efforts through third party resellers, direct sales to
national accounts and local sales offices.
COMPUTER AND TELECOMMUNICATIONS OPERATIONS
The Company's computer system consists of redundant systems located at its
Omaha, Nebraska and Carter Lake, Iowa facilities. The computers in Omaha are
used primarily for compiling and enhancing the database. By maintaining its data
entry operations in one location, the Company believes it enhances its ability
to control the accuracy and costs of the compilation process. The computers in
the Carter Lake facility are used to fulfill orders, produce directories and
develop new software applications.
The Company's decision to maintain redundant computer equipment at each of
its two data centers provides the Company with backup in the event of a
disaster. Each of the data centers is protected by a Halon fire suppression
system which is designed to extinguish a fire without damaging the computer
equipment. The centers are further protected by uninterrupted power supply
battery backup systems. The data is backed up nightly and stored off-site
weekly. The Company believes its computer systems are adequate for its present
requirements although configured to permit expansion.
The Company's telecommunication equipment is also redundant. In the event of
a disaster at either location, calls could be redirected to the other location
within 12 hours, thereby minimizing the effect of the disaster.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company regards its database and software as proprietary. The Company's
database is copyrighted, and the Company depends on trade secret and non-
disclosure safeguards for protection of
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its software. The Company distributes its products under agreements that grant
customers a license to use the Company's products in the ordinary course of
their businesses and contain terms and conditions prohibiting the unauthorized
reproduction of the Company's products. In addition, the Company generally
enters into confidentiality agreements with its management and programming staff
and limits access to and distribution of its proprietary information. While
there can be no assurance that the steps taken by the Company will be adequate
to deter misappropriation of its proprietary rights or independent third party
development of substantially similar products and technology, the Company
believes that legal protection of its database and software is less significant
than the knowledge and experience of the Company's management and personnel, and
their ability to develop, enhance and market existing and new products and
services.
COMPETITION
The business environment in which the Company competes is highly competitive
and fragmented. A number of small and large competitors are active in specific
aspects of the Company's business. The Company faces competition from different
types of companies including data vendors, directory publishers, list brokers,
marketing consultants, advertising agencies, and the Regional Bell Operating
Companies ("RBOCs"). Many such competitors have substantially greater financial,
technical and marketing resources than the Company.
Data vendors, such as Dun's Marketing Services ("DMS"), a division of Dun &
Bradstreet, Inc., Equifax Inc. ("Equifax") and TRW compete with the Company with
respect to customized business information products. DMS, which relies upon
information compiled from Dun & Bradstreet's credit database, tends to focus on
large companies. Equifax and TRW primarily provide information on consumers
rather than businesses. The Company believes that its focus on small businesses
enables it to compete effectively against these companies.
In business directory publishing, the Company competes primarily with RBOCs,
Donnelley Marketing, Inc., and many smaller, regional directory publishers. In
contrast to the broad directory offerings of the Company, competing directory
publishers tend to serve narrow markets, either focusing on a single industry or
on a limited region. In market research services the Company competes with many
computer services bureaus.
In information brokerage services, the Company both competes with and sells
to a variety of list brokers, marketing consultants and advertising agencies,
and competes with DMS, Acxiom Corporation and many regional computer service
bureaus. Competition in this area is significantly dependent upon the level of
service provided, particularly for smaller business which rely upon the vendor
to provide a variety of consulting and creative marketing services.
In the Company's markets, the primary competitive factors include the
quality, accuracy and completeness of the database, the quality and timeliness
of service provided and pricing. The Company believes that its business
information database is one of the most comprehensive and accurate in the United
States and Canada and enables the Company to compete favorably on the basis of
these factors.
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EMPLOYEES
As of December 31, 1995, the Company employed a total of 870 persons on a
full-time basis. None of the Company's employees is represented by a labor union
or is the subject of a collective bargaining agreement. The Company has never
experienced a work stoppage and believes that its employee relations are good.
ITEM 2. PROPERTIES.
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The Company's headquarters are located in a 108,000 square foot facility in
Omaha, Nebraska, where the Company performs data compilation, telephone
verification, data development services, and sales and administrative
activities. Order fulfillment and shipping are conducted at the Company's 30,000
square foot Carter Lake, Iowa facility, which is located 15 miles from its
headquarters. The Company owns both of these facilities, as well as adjacent
land for possible future expansion. The Company also leases sales office space
at various locations, the aggregate rental obligations of which are not
significant.
ITEM 3. LEGAL PROCEEDINGS.
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Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
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Not Applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Positions Held Age
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<S> <C> <C>
Vinod Gupta Chairman of the Board and Chief Executive 49
Officer since its incorporation in 1972, President
since its inception in 1972 through September
1991 and since December 1995.
Jon H. Wellman Chief Financial Officer since joining the Company 44
in August 1995. Vice President and Chief Financial
Officer at Signal Technology Corporation from
1994 to 1995; Partner with Coopers & Lybrand
from 1989 to 1994.
Edward C. Mallin Senior Vice President since August 1994; Vice 46
President from 1990-1994.
Fred Vakili Senior Vice President since January 1994; Vice 42
President from 1992-1994; various other marketing
and sales management positions; joined the Company
in 1985.
Monica Messer Senior Vice President since January 1996; Vice 33
President from 1988-1996; Vice President of Data
Processing from 1985-1988; Research and Development
Manager from 1984-1985.
Jack Betts Senior Vice President from January 1996; Vice 45
President from 1994-1995; Senior Vice President
from 1988-1994; other various management
positions; joined the Company in 1982.
William Chasse Senior Vice President since July 1995; Vice 37
President from 1992-1995; Director of Online
Information from 1988-1991.
William Kerrey Senior Vice President since August 1994; Vice 48
President from 1989-1994.
Jeff Ferris Vice President since January 1995; Manager of 40
Market Research from 1991-1994.
</TABLE>
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<TABLE>
<CAPTION>
Name Positions Held Age
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<S> <C> <C>
Chris Lundgren Vice President since January 1995; 43
Director of National Accounts since
joining the Company in 1993. Assistant
Vice President at Dun & Bradstreet
from 1974-1993.
Joseph M. Schwaller Vice President since April 1993; Director 31
of Database Processing from 1991-1993;
Manager of Software Development from 1988-1991.
Catherine Farley Vice President since January 1996; 28
Director of Database Operations from 1995-1996;
Director of Database Compilation from 1994-1995;
Manager of Quality Assurance from 1992-1994;
Database Audit Supervisor from 1991-1992.
Timothy Buechler Vice President since January 1996; 35
Director of Database Maintenance from 1989-1995;
Software Development Manager from 1986-1989;
Production Manager from 1993-1985.
Tom Mackey Vice President of Consumer CD-ROM since 39
October 1995; Director of Retail Sales of
Consumer CD-ROM from 1994 to 1995;
Vice President of Sales for Binar Graphics
from 1993-1994; Director of Sales for
AddStar, Inc. from 1991-1993.
Richard Holm Vice President since January 1996; 42
National Director of Sales and Marketing
from 1995-1996; National Training Director
since joining the Company in January 1995.
</TABLE>
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS.
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The Company's Common Stock $0.0025 par value, is traded on the NASDAQ
National Market System under the symbol ABII. The high and low closing prices
for the Company's Common Stock during 1994 and 1995, as adjusted for the stock
dividend in August 1995, were as follows:
<TABLE>
<CAPTION>
1994 High Low
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<S> <C> <C>
First Quarter................................... $12.75 $ 9.17
Second Quarter.................................. $11.17 $ 8.50
Third Quarter................................... $10.00 $ 8.50
Fourth Quarter.................................. $12.33 $ 9.50
1995 High Low
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First Quarter................................... $14.83 $10.83
Second Quarter.................................. $19.83 $14.17
Third Quarter................................... $21.50 $17.17
Fourth Quarter.................................. $21.25 $16.75
</TABLE>
As of March 26, 1996, there were 90 stockholders of record.
The Company currently intends to retain future earnings to fund the
development and growth of its business and, therefore, does not anticipate
paying cash dividends within the foreseeable future. Any future payment of
dividends will be determined by the Company's Board of Directors and will depend
on the Company's financial condition, results of operations and other factors
deemed relevant by its Board of Directors.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
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The selected consolidated financial data below have been derived from the
Company's Consolidated Financial Statements and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Consolidated Financial Statements and related notes appearing
elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
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1995 1994 1993 1992 1991
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(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... $89,695 $76,302 $58,926 $48,517 $41,533
Costs and expenses:
Database and production costs.................... 24,827 20,289 15,042 11,774 10,891
Selling, general and administrative.............. 36,714 33,540 25,469 20,051 17,243
Depreciation and amortization.................... 3,511 3,125 2,737 2,410 2,409
Impairment of net assets of business............
transferred under contractual arrangement (1).. 2,910 - - - -
Unusual charges: purchased database,
cancellation of noncompete agreements
and stock sale compensation(2)................ - - - - 5,254
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Total costs and expenses.......................... 67,962 56,954 43,428 34,235 35,797
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Operating income.................................. 21,733 19,348 15,678 14,282 5,736
Other income (expense):
Investment income................................ 1,322 1,112 1,172 607 224
Interest expense................................. (165) (255) (298) (605) (1,578)
Other............................................ - 94 48 58 (424)
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Income before income taxes........................ 22,890 20,299 16,600 14,342 3,958
Income taxes...................................... 8,544 7,475 5,825 4,435 -
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Net income........................................ $14,346 $12,824 $10,775 $ 9,907 $ 3,958
======= ======= ======= ======= =======
Historical and pro forma information(3)
Net income....................................... $14,346 $12,824 $10,775 $ 9,162 $ 2,263
======= ======= ======= ======= =======
Earnings per share(4):
Net income........................................ $0.69 $0.62 $0.52 $0.45 $0.13
======= ======= ======= ======= =======
Weighted average shares outstanding (4)........... 20,738 20,678 20,658 20,165 17,621
======= ======= ======= ======= =======
December 31,
-----------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(in thousands)
BALANCE SHEET DATA:
Working capital.................................. $48,139 $35,411 $30,765 $23,465 $ 1,493
Total assets..................................... 90,791 77,783 61,027 47,807 28,471
Long-term debt, including current portion........ 2,039 3,821 4,587 5,306 15,725
Shareholders' equity............................. 78,429 63,326 50,665 39,508 9,666
</TABLE>
____________________
(1) Represents charge related to the impairment of net assets of American
Business Communications, Inc. transferred to Baker University in June 1995,
which has been accounted for in accordance with Securities and Exchange
Commission's Staff Accounting Bulletins 5-E and 5-Z.
(2) Reflects charges of $2.5 million related to a database purchased in the
acquisition of certain assets of Trinet effective January 1991, $2.4
million resulting from the cancellation of noncompete agreements with
former shareholders of CPI, and $373,000 in compensation related to
issuance of Common Stock to an employee.
(3) Prior to February 1992, the Company was taxed as an S corporation.
Accordingly, net income prior to February 1992 contained no provision for
federal and state income taxes. Pro forma net income reflects a pro forma
tax provision at a combined federal and state income tax rate of 36% in
1992 and 43% in 1991. The pro forma tax provision for 1991 reflects non-
cash compensation for which no tax deduction was taken. The Company ceased
being taxed as an S corporation February 1992.
(4) Restated for 3 for 2 stock split in August, 1995.
-14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
-------------
OVERVIEW
The Company is a leading provider of business-to-business marketing
information which it supplies from its proprietary database containing
information on approximately 10 million businesses in the United States and 1
million businesses in Canada.
The Company generally recognizes revenues from sales of its products and
services at the time the product is delivered or the service is performed. The
pricing of the products and services varies according to the number of names
supplied, the type of information purchased, the medium through which the
information is delivered, and the channel of distribution. In 1995, over
100,000 customers purchased the Company's products and services.
The Company's primary expenses relate to maintaining, updating, and
telephone verifying its database and the direct marketing costs associated with
selling its products and services. The Company has been profitable on an
operating basis in each year since its inception in 1972. The Company believes
inflation has not had a significant impact on its operations.
The Company's net sales on a quarterly basis can be affected by seasonal
characteristics, the timing of acquisitions, and certain other factors including
the timing and extent of the Company's own direct marketing activity.
This discussion and analysis contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933, which are subject to the "safe harbor" created by
that section. The Company's actual future results could differ materially from
those projected in the forward-looking statements. Some factors which could
cause future actual results to differ materially from the company's recent
results or those projected in the forward-looking statements are described in
"Factors Affecting Operating Results" below. The Company assumes no obligation
to update the forward-looking statements or such factors.
-15-
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain items
from the Company's statement of operations data expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
Year Ended December 31
- - ---------------------------------------------------
<S> <C> <C> <C>
1995............................................... 1994 1993
- - --------------------------------------------------- ---- ----
Net sales.......................................... 100% 100% 100%
Costs and expenses:
Database and production costs..................... 28 27 25
Selling, general and administrative............... 41 44 43
Depreciation and amortization..................... 4 4 5
Impairment of net assets of business transferred.. 3 - -
---- --- ----
Total costs and expenses........................... 76 75 73
---- --- ----
Operating income................................... 24 25 27
Other income (expense)............................. 1 2 1
---- --- ----
Income before income taxes......................... 25 27 28
Income taxes....................................... 9 10 10
---- --- ----
Net income......................................... 16% 17% 18%
---- --- ----
</TABLE>
- - ---------------
1995 Compared to 1994
Net sales increased 18% to $89.7 million in 1995 from $76.3 million in
1994. The Company's sales lead and directory products accounted for $9.6 million
of this increase with a $7.6 million increase coming from CD-ROM products,
offset by a decrease in revenue from American Business Communications, Inc.
(ABC) if $3.8 million due to the transfer of net assets to an unrelated party.
Revenue increases for all products were the result of an increase in both the
number and average size of orders placed by customers. There were no significant
price increases for the Company's products and services during the year.
Database and production costs for 1995 increased to $24.8 million, or 28%
of net sales, from $20.3 million, or 27% of net sales, in 1994. These amounts
primarily represent the costs of compiling and telephone verifying information
in the database and fulfilling customer orders. The increase in database and
production costs as a percentage of net sales was primarily attributable to
investments in database programming and CD-ROM software development activities
as well as increased sales of CD-ROM products which bear a slightly higher level
of costs then the Company's traditional lead generation products.
Selling, general and administrative expenses increased in 1995 to $36.7
million from $33.5 million in 1994. The increased spending was primarily
attributable to an overall increase in direct marketing activities for all of
the Company's products and services, continued investment in a field sales
organization and promotional marketing of CD-ROM products. Overall spending
levels were in line with revenue generation as selling, general and
administrative expenses decreased in 1995 to 41% of net sales as compared to 44%
of net sales in 1994.
Depreciation and amortization expense increased to $3.5 million in 1995
from $3.1 million in 1994, primarily due to the increased amortization related
to acquisitions.
Operating income in 1995 was $21.7 million, or 24% of net sales, compared
to $19.3 million, or 25% of net sales, in 1994.
-16-
<PAGE>
Investment income during 1995 increased to $1.3 million compared to $1.1 in
1994 due to the increase in cash and cash equivalents and investments. Interest
expense decreased to $165,000 in 1995 from $255,000 in 1994 due to lower
outstanding debt balances during 1995.
1994 Compared to 1993
Net sales increased 29% to $76.3 million in 1994 from $58.9 million in
1993. Revenues from the Company's existing products and services represented 17%
of this increase (or $10.1 million), and 12% (or $7.1 million) was attributable
to revenues from ABC, which was acquired in June 1993, BMI Medical Information,
Inc. (BMI) which was acquired by the Company in March, 1994 and Zeller and
Letica (Z&L) which was acquired in August, 1994. There have been no significant
price increases for the majority of the Company's existing products and services
during the year.
Database and production costs for 1994 to $20.3 million, or 27% of net
sales, from $15.0 million, or 25% of net sales, in 1993. These amounts primarily
represent the costs of compiling and telephone verifying information in the
database, fulfilling customer orders, the direct costs of ABC associated with
presenting education training programs, and royalty costs paid by BMI.
Approximately $2.8 million of the increase was attributable to the direct costs
of ABC and BMI, and $2.5 million was attributable to increased order fulfillment
and database compilation costs.
Selling, general and administrative expenses increased in 1994 to $33.5
million, or 44% of net sales, from $25.5 million, or 43% of net sales in 1993.
The increase in absolute amount is due primarily to the acquisitions of ABC, BMI
and Z&L. ABC historically has higher marketing expenses, when expressed as
a percentage of net sales. ABC added approximately $2.5 million in selling and
administrative costs over the prior year. BMI and Z&L which contributed $1.8
million to selling and administrative costs. The Company's market expansion
efforts and marketing expenses related to new products also contributed to the
increase, which included the strengthening of the National Accounts sales force.
Depreciation and amortization expense increased to $3.1 million in 1994
from $2.7 million in 1993, primarily due to the increased amortization related
to the acquisition of ABC and BMI.
Operating income in 1994 was $19.3 million, or 25% or net sales, compared
to $15.7 million, or 27% of net sales, in 1993.
Investment income during 1994 was $1.1 million compared to $1.2 in 1993.
Interest expense decreased to $255,000 in 1994 from $298,000 in 1993 due to
lower outstanding debt balances during 1994.
Liquidity and Capital Resources
As of December 31, 1995, the Company's principal sources of liquidity
included cash and cash equivalents of $12.0 million and marketable
securities of $23.3 million. The Company also has a revolving line of
credit totaling $5.0 million, all of which was available for borrowing at
year-end.
Net cash provided by operating activities totaled $15.3 million in 1995
as compared to $18.1 million in 1994. The decrease was attributable
primarily to higher levels of receivables from sales of consumer CD-ROM
products. The Company added approximately $9.0 million of marketable
-17-
<PAGE>
securities during 1995 and spent approximately $1.2 million on equipment,
primarily data processing equipment and system upgrades, and approximately $2.3
million related to expansion of its Omaha facility. A total of $3.2 million of
debt, most of which was incurred in connection with a 1994 facility expansion,
was repaid during 1995. The Company anticipates spending up to $2.5 million for
equipment additions in 1996 and an additional $4.0 million for facility
expansion.
The Company believes that cash flows from operations and its cash and short
term investments will be sufficient to fund its foreseeable operating and
capital expenditure needs in 1996. Additional financing may be required in the
event that other capital investment, business expansion or acquisition
opportunities arise.
FACTORS AFFECTING OPERATING RESULTS.
Fluctuations in Operating Results. The Company believes that future
operating results may be subject to quarterly and annual fluctuations based on
numerous factors. The Company's net sales on a quarterly basis can be affected
by seasonal characteristics and certain other factors including the timing and
extent of the Company's own direct marketing activity. In addition, the
expenses associated with acquiring data, direct marketing campaigns and the
timing of acquisitions and the costs and expenses associated therewith may also
affect operating results.
Competition. The business information industry is highly competitive. In
particular, the rapid expansion of the Internet creates a substantial new
channel for distributing business information to the market, and a new avenue
for future entrants to the business information industry. There is no guarantee
that the Company will be successful in this new market. Many of the Company's
principal competitors have substantially greater resources than the Company. In
addition, the Company has no control over the possible future entry into the
marketplace of other potential competitors, some of which may be much larger
than the Company and may have much larger capital bases form which to develop
and compete with the Company.
Direct Marketing Regulation and Postal Rates. The Company and many of its
customers engage in direct marketing. Any negative impact on direct marketing,
including changes to existing laws or regulations or future laws and
regulations, may adversely affect the Company's operating results. The direct
mail industry depends and will continue to depend upon the services of the
United States Postal Service and other private mail carriers. Any modification
by the Postal Service of its rate structure or any increase in public or private
postal rates generally could have a negative impact on the demand for business
information, direct mail activities and the cost of the Company's direct mail
activities. In addition to the risk of rate increases, the direct mail
industry, and thus the Company's operating results, could be adversely affected
by postal strikes.
Loss of Data Centers. The Company's business depends on computer systems
contained in the Company's two data centers. The Company's disaster recovery
program is based upon maintaining redundant computer equipment at each of its
data centers. The data centers are protected by Halon fire suppression systems,
designed to extinguish a fire without damaging the computer equipment. The
centers are further protected by uninterrupted power supply backup systems.
There can be no guarantee that a fire or other disaster affecting one or both of
its data centers would not disable the
-18-
<PAGE>
Company's computer systems. Any significant damage to either or both of the data
centers could have a material adverse affect on the Company.
-19-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item (other than selected quarterly
financial data which is set forth below) is incorporated by reference to
the Consolidated Financial Statements set forth on pages F-1 through F-16
hereof.
The following table sets forth selected financial information for each
of the eight quarters in the two-year period ended December 31, 1995. This
information has been prepared by the Company on the same basis as the
consolidated financial statements and includes all normal recurring
adjustments necessary to present fairly this information when read in
conjunction with the Company's audited consolidated financial statements
and the notes thereto.
<TABLE>
<CAPTION>
1995 Quarter Ended 1994 Quarter Ended
------------------------------------------ ------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
--------- --------- ---------- --------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $22,357 $22,479 $21,501 $23,358 $17,443 $18,795 $19,473 $20,591
Costs and expenses:
Database and production costs. 5,645 6,310 6,149 6,723 4,324 5,271 5,383 5,311
Selling, general and
administrative............... 9,605 9,309 8,366 9,434 8,184 8,029 8,314 9,013
Depreciation and amortization. 832 807 796 1,076 760 823 819 723
Impairment of net assets of
business transferred under
contractual arrangement..... - 2,640 - 270 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Total costs and expenses........ 16,082 19,066 15,311 17,503 13,268 14,123 14,516 15,047
------- ------- ------- ------- ------- ------- ------- -------
Operating income................ 6,275 3,413 6,190 5,855 4,175 4,672 4,957 5,544
Other income (expense), net..... (187) 430 334 580 243 227 238 243
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes...... 6,088 3,843 6,524 6,435 4,418 4,899 5,195 5,787
Income taxes 2,275 1,461 2,420 2,388 1,550 1,740 1,865 2,320
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 3,813 $ 2,382 $ 4,104 $ 4,047 $ 2,868 $ 3,159 $ 3,330 $ 3,467
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share:
Net income $ 0.19 $ 0.11 $ 0.20 $ 0.19 $ 0.14 $ 0.16 $ 0.16 $ 0.16
======= ======= ======= ======= ======= ======= ======= =======
Weighted average shares
outstanding 20,685 20,719 20,768 20,775 20,676 20,676 20,678 20,678
======= ======= ======= ======= ======= ======= ======= =======
1995 Quarter Ended 1994 Quarter Ended
----------------------------------------- ------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a Percentage of Net Sales:
Net sales....................... 100% 100% 100% 100% 100% 100% 100% 100%
Costs and expenses:
Database and production costs. 25 28 28 29 25 28 28 26
Selling, general and
administrative............... 43 41 39 40 47 43 43 44
Depreciation and amortization. 4 4 4 5 4 4 4 3
Impairment of net assets of
business transferred......... - 12 - 1 - - - -
Operating income................ 28 15 29 25 24 25 25 27
</TABLE>
- - -------------------
-20-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
The required information regarding Directors of the registrant is
incorporated by reference from the information under the caption "Nominees for
Election at the Annual Meeting" and "Incumbent Directors whose Terms of Office
Continue After the Annual Meeting" in the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held on May 24, 1996.
The required information regarding Executive Officers of the registrant is
contained in Part I of this Form 10-K.
The required information regarding compliance with Section 16(a) of the
Securities Exchange Act is incorporated by reference from the information under
the caption "Compliance with Section 16(a) of the Exchange Act" in the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held on
May 24, 1996.
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
Incorporated by reference from the information under the captions "Executive
Compensation" and "Certain Transactions" in the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on May 24, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
Incorporated by reference from the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 24, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Incorporated by reference from the information under the captions "Certain
Transactions" in the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 24, 1996.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------
The following documents are filed as a part of this Report:
Financial Statements. The following Consolidated Financial Statements
--------------------
of American Business Information, Inc. and Report of Independent Accountants are
included at pages F-1 through F-15 of this Form 10-K:
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
------------------------ --------
<S> <C>
Report of Independent Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1995
and 1994.......................................................... F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1995, 1994, and 1993........................... F-4
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1995, 1994, and 1993................. F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994, and 1993........................... F-6
Notes to Consolidated Financial Statements........................ F-7
</TABLE>
Financial Statement Schedule. The following consolidated financial
----------------------------
statement schedule of American Business Information, Inc. and Subsidiaries for
the years ended December 31, 1995, 1994 and 1993 are filed as part of this
Report and should be read in conjunction with the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
----------------------------- --------
<S> <C>
Schedule II Valuation and Qualifying Accounts....................... S-1
</TABLE>
Schedules not listed above have been omitted because they are not applicable
or are not required or the information required to be set forth therein is
included in the consolidated financial statements or notes thereto.
-22-
<PAGE>
Exhibits. The following Exhibits are filed as part of, or incorporated by
--------
reference into, this report:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------------------------------------
<S> <C>
3.1 (1) Certificate of Incorporation
3.2 (1) By-laws
4.1 (1) Specimen Certificate representing the Common Stock
10.1 (2) 1992 Stock Option Plan
10.2 (2) Form of Indemnification Agreement with Officers and Directors
10.4 (3) Loan Agreement between Registrant and FirsTier Bank
11 Statement re: computation of per share earnings
23 Consent of Independent Accountants
24 Power of Attorney (included on signature page)
</TABLE>
____________________
(1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-42887) which became effective February 18,
1992.
(2) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-51352) which became effective September 16,
1992.
(3) Incorporated by reference to exhibits filed with Registrant's year end
report on Form 10-K for the year ended December 31, 1993.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December 31,
1995.
-23-
<PAGE>
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.
AMERICAN BUSINESS INFORMATION, INC.
By: /s/ Vinod Gupta
---------------------------------
Vinod Gupta
Chairman of the Board and
Chief Executive Officer
Dated: March 28, 1996
-24-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vinod Gupta and Jon Hoffmaster, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-K,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Vinod Gupta Chairman of the Board, March 27, 1996
- - ----------------------------
Chief Vinod Gupta Executive Officer (principal
executive officer)
/s/ Jon H. Wellman Chief Financial Officer March 28, 1996
- - ----------------------------
Jon H. Wellman
/s/ Jon D. Hoffmaster Director March 23, 1996
- - ----------------------------
Jon D. Hoffmaster
/s/ Gautam Gupta Director March 18, 1996
- - ----------------------------
Gautam Gupta
/s/ Elliot S. Kaplan Director March 20, 1996
- - ----------------------------
Elliot S. Kaplan
/s/ Donald R. Dixon Director March 22, 1996
- - ----------------------------
Donald R. Dixon
/s/ Harold Andersen Director March 17, 1996
- - ----------------------------
Harold Andersen
/s/ George F. Haddix Director March 18, 1996
- - ----------------------------
George F. Haddix
/s/ George J. Kubat Director March 17, 1996
- - ----------------------------
George J. Kubat -
</TABLE>
-25-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
American Business Information, Inc.:
We have audited the accompanying consolidated balance sheets of American
Business Information, Inc. and subsidiaries as of December 31, 1995 and 1994 and
related consolidated statements of operations, stockholders equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Business
Information, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P
---------------------------
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
January 23, 1996
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
__________________________________________
AS OF DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......................................... $11,999 $13,491
Marketable securities.............................................. 23,350 14,684
Trade accounts receivable, net of allowances of $361 and
$404, respectively............................................... 19,215 15,112
Prepaid expenses................................................... 3,160 1,882
------- -------
Total current assets................................................ 57,724 45,169
------- -------
Property and equipment, net......................................... 13,885 11,106
Net assets of business transferred under contractual arrangement.... 2,972 -
Intangible assets, net of accumulated amortization.................. 14,211 19,567
Other assets........................................................ 1,999 1,941
------- -------
$90,791 $77,783
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt.................................. $ 969 $ 815
Accounts payable................................................... 4,254 2,416
Accrued payroll expenses........................................... 2,205 1,496
Accrued expenses................................................... 1,891 4,374
Income taxes payable............................................... 143 430
Deferred income taxes.............................................. 123 227
------- -------
Total current liabilities........................................... 9,585 9,758
------- -------
Long-term debt, net of current portion.............................. 1,070 3,006
Deferred income taxes............................................... 1,707 990
Minority interest................................................... - 703
Commitments and contingencies
Stockholders' 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 20,776,860 shares at December 31, 1995,
and 20,682,735 shares at December 31, 1994...................... 51 34
Paid-in capital.................................................... 27,342 26,573
Retained earnings.................................................. 51,282 36,936
Net unrealized holding loss, net of tax............................ (246) (217)
------- -------
Total stockholders' equity........................................ 78,429 63,326
------- -------
$90,791 $77,783
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
__________________________________________
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................... $89,695 $76,302 $58,926
Costs and expenses:
Database and production costs..................... 24,827 20,289 15,042
Selling, general and administrative............... 36,714 33,540 25,469
Depreciation and amortization..................... 3,511 3,125 2,737
Impairment of net assets of business transferred
under contractual arrangement.................. 2,910 - -
------- ------- -------
67,962 56,954 43,428
------- ------- -------
Operating income.................................... 21,733 19,348 15,678
Other income (expense):
Investment income................................. 1,322 1,112 1,172
Interest expense.................................. (165) (255) (298)
Other expense..................................... - 94 48
------- ------- -------
Income before income taxes.......................... 22,890 20,299 16,600
Income taxes...................................... 8,544 7,475 5,825
------- ------- -------
Net income.......................................... $14,346 $12,824 $10,775
======= ======= =======
Earnings per share:
Net income.......................................... $0.69 $0.62 $0.52
======= ======= =======
Weighted average shares outstanding................. 20,738 20,678 20,658
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
__________________________________________
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Net Total
Common Paid-In Retained Unrealized Stockholders'
Stock Capital Earnings Holding Loss Equity
----- ------- -------- ------------ ------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1992................ $34 $26,137 $13,337 $ $39,508
Issuance of 45,000 shares of common stock.. - 382 - - 382
Net income................................. - - 10,775 - 10,775
--- ------- ------- ----- -------
Balances, December 31, 1993................ 34 26,519 24,112 - 50,665
Issuance of 6,750 shares of common stock... - 54 - - 54
Net unrealized holding loss, net of tax.... - - - (217) (217)
Net income................................. - - 12,824 - 12,824
--- ------- ------- ----- -------
Balances, December 31, 1994................ 34 26,573 36,936 (217) 63,326
Issuance of 94,125 shares of common stock.. - 786 - - 786
Net unrealized holding loss, net of tax.... - - - (29) (29)
3 for 2 stock split (Note 14).............. 17 (17) - - -
Net income................................. - - 14,346 - 14,346
--- ------- ------- ------ -------
Balances, December 31, 1995 $51 $27,342 $51,282 $(246) $78,429
=== ======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------
for the years ended December 31, 1995, 1994 and 1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................................... $ 14,346 $ 12,824 $ 10,775
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................................. 3,511 3,125 2,737
Deferred income taxes......................................................... (121) 574 945
Impairment of other assets.................................................... 630 - -
Impairment of net assets of business transferred.............................. 2,910 - -
Other......................................................................... 258 1 (268)
Changes in assets and liabilities, net of effect of acquisitions and transfers:
Trade accounts receivable..................................................... (4,771) (2,167) (3,325)
Prepaid expenses.............................................................. (2,223) 211 (1,654)
Accounts payable.............................................................. 2,480 615 513
Income taxes payable.......................................................... (287) 573 (425)
Accrued expenses.............................................................. (1,426) 2,330 893
-------- -------- --------
Net cash provided by operating activities............................ 15,307 18,086 10,191
Cash flows from investing activities:
Proceeds from sales of marketable securities................................... 15,787 15,248 15,892
Purchases of marketable securities............................................. (24,792) (15,316) (17,714)
Purchases of property and equipment............................................ (3,554) (3,580) (1,749)
Acquisitions of businesses, including minority interest........................ (1,174) (8,246) (4,446)
Other assets................................................................... (660) (500) -
-------- -------- --------
Net cash used in investing activities................................ (14,393) (12,394) (8,017)
Cash flows from financing activities:
Repayment of long-term debt.................................................... (3,192) (5,566) (1,416)
Proceeds from long-term debt................................................... - 4,800 650
Issuance of common stock....................................................... 786 54 -
-------- -------- --------
Net cash used in financing activities................................ (2,406) (712) (766)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents................................ (1,492) 4,980 1,408
Cash and cash equivalents, beginning................................................ 13,491 8,511 7,103
-------- -------- --------
Cash and cash equivalents, ending................................................... $ 11,999 $ 13,491 $ 8,511
======== ======== ========
Supplemental cash flow information:
Interest paid.................................................................. $ 165 $ 259 $ 328
======== ======== ========
Income taxes paid.............................................................. $ 8,226 $ 6,328 $ 5,305
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
<PAGE>
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
American Business Information, Inc. ("ABI") and its subsidiaries, ("the
Company"), provide business information to organizations engaged in business-to-
business marketing through products and services derived from the Company's
database. These products include customized business lists, business directories
and other information services.
"This amendment is being filed to reflect the presentation of American
Business Communications, Inc. as a continuing operation until the Third Quarter
of 1996, at which time the investment in this subsidiary was abandoned."
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates and Assumptions: 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.
Principles of Consolidation: The consolidated financial statements include
the accounts of ABI and its subsidiaries. Intercompany accounts and transactions
have been eliminated.
Revenue Recognition: The Company recognizes revenue from product sales at
the time of delivery and service revenues at the time the service is provided.
Licensing fees are recognized upon initial delivery of the information and when
updated information is provided in accordance with the terms of individual
license agreements. Allowance is made currently for estimated sales returns.
The Company maintains an allowance for potential bad debts based on a
percentage of historical charge-off percentages and such uncollectable amounts
have been within management's expectations.
Database Costs: Costs to maintain and enhance the Company's database are
expensed as incurred.
Advertising Costs: Certain direct-response advertising costs are
capitalized and amortized over periods that correspond to the estimated revenue
stream of the individual advertising activity. All other advertising costs are
expensed as the advertising takes place. Total unamortized advertising costs
included in prepaid expenses at December 31, 1995 and 1994, was $1,132,000 and
zero, respectively. Total advertising expense included in net income for the
years ending December 31, 1995, 1994, and 1993 was $8,947,000, $8,553,000 and
$7,558,000, respectively.
Software Capitalization: Until technological feasibility is established,
software development costs are expensed as incurred. After that time, direct
costs are capitalized and amortized using the straight-line method over the
estimated economic life of the product, generally one to three years.
Unamortized software costs included in prepaid expenses at December 31, 1995
totaled $494,000. Amortization of capitalized costs during 1995 totaled
approximately $81,000.
F-7
<PAGE>
Income taxes: The Company recognizes income taxes using the liability
method, under which deferred tax assets and liabilities are determined based on
the difference between financial and tax basis of assets and liabilities using
enacted tax rates.
Earnings Per Share: Earnings per share are based on the weighted average
number of common shares outstanding and common equivalent shares assumed
outstanding during the year. Common equivalent shares arise as a result of
stock options which are assumed to have been exercised solely for the purpose of
this calculation.
Invested Cash: Cash equivalents consist of highly liquid debt instruments
purchased with an original maturity of three months or less and are carried at
cost which approximates fair value. Marketable securities have been
classified as available-for-sale and therefore net unrealized gains and losses
are reported as a separate component of stockholders' equity. Unrealized and
realized gains and losses are determined by specific identification and fair
values are estimated based on quoted market prices.
Long-Lived Assets: Property and equipment are stated at cost. Depreciation
and amortization are computed using primarily the straight-line method, based on
the following estimated useful lives: buildings and improvements - 30 years;
office furniture and equipment - 5 to 7 years; and capitalized equipment leases-
5 years. Intangible assets are stated at cost and are amortized over the periods
benefited on a straight-line basis. Goodwill, distribution networks, and
noncompete agreements and acquisition costs are being amortized over 30 years,
15 years, and 3 to 6 years, respectively.
All of the Company's long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future cash flows is less than the
carrying amount of the asset, a loss is recognized.
Reclassifications: Certain reclassifications were made to the 1993 and
1994 financial statements to conform to the 1995 presentation.
Accounting Pronouncements: On October 23, 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation." As allowed by the statement, the Company plans to retain its
current method of accounting for stock compensation when it adopts this
Statement in 1997 and thus adoption is not expected to have an impact on
financial position or results of operations.
(3) ACQUISITIONS
Effective August 1994, the Company acquired certain assets of Zeller &
Letica ("Z&L") and Nationwide Mail Marketing ("NMM") for total consideration of
$2.4 million which was accounted for under the purchase method. The Company has
allocated substantially all of the purchase price to a distribution network
which is being amortized over its estimated useful life of 15 years.
F-8
<PAGE>
Effective March 1994, the Company acquired certain assets from Business
Mailers, Inc. ("BMI") for total consideration of $5.75 million which was
accounted for under the purchase method. The Company has allocated
substantially all of the purchase price to a distribution network which is being
amortized over its estimated useful life of 15 years.
Effective March, 1993, the Company acquired certain assets from Alvin B.
Zeller, Inc. ("ABZ") for total consideration of $1.2 million which was accounted
for under the purchase method. The Company has allocated substantially all of
the purchase price to a distribution network which is being amortized over its
estimated useful life of 15 years.
Operating results for each of these acquisitions are included in the
accompanying consolidated statements of operations from the respective
acquisition dates. Assuming the above described companies had been acquired on
January 1, 1993, unaudited pro forma consolidated revenues, net income and net
income per share would have been as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993
---- ----
(In thousands except per
share amounts)
<S> <C> <C>
Net sales....................... $72,749 $64,758
Net income...................... $13,316 $10,884
Net income per share............ $ 0.64 $ 0.53
</TABLE>
The pro forma information provided above does not purport to be indicative
of the results of operations that would actually have resulted if the
acquisitions were made as of those dates or of results which may occur in the
future.
Effective June 1993, American Business Communications, Inc. ("ABC"), which
was 80% owned by the Company and 20% owned by a minority stockholder, acquired
certain assets of Business Communications & Information, Inc. ("BCI") for total
consideration of $4.4 million which was accounted for under the purchase method.
On February 28, 1995, the Company agreed to acquire the minority interest for
$900,000. The Company disposed of ABC in 1995 (See Note 13).
The Company also paid $148,000, $280,000, and $179,000 in 1995, 1994 and
1993, respectively, to Annapurna Corporation for consulting services and related
expenses in connection with acquisition activity conducted by the Company.
Annapurna Corporation is 100% owned by a significant stockholder.
F-9
<PAGE>
(4) MARKETABLE SECURITIES
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gross Gain Gross Loss Value
--------- ---------- ---------- -------
At December 31, 1995 (In thousands)
<S> <C> <C> <C> <C>
Municipal Bonds $12,027 $ 68 $ (55) $12,040
U.S. Government and Agency 1,513 46 - 1,559
Corporate Bonds 7,189 114 (5) 7,298
Common Stock 1,148 11 (248) 911
Preferred Stock 1,804 4 (266) 1,542
------- ------- ------- -------
$23,681 $ 243 $ (574) $23,350
======= ======= ======= =======
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Holding Gain Holding Loss Value
-------- ------------ ------------ -----
(In thousands)
At December 31, 1994
<S> <C> <C> <C> <C>
Municipal Bonds $ 2,445 $ - $ (16) $ 2,429
U.S. Government and Agency 609 - (1) 608
Corporate Bonds 312 - (24) 288
Common Stock 1,776 690 (84) 2,381
Preferred Stock 9,886 26 (934) 8,978
------- ------- ------- -------
$15,028 $ 716 $(1,060) $14,684
======= ======= ======= =======
</TABLE>
Scheduled maturities of marketable debt securities at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Less Than One to Five to Greater than
One Year Five Years Ten Years Ten Years Total
--------- ---------- --------- ------------- --------
(In thousands)
<S> <C> <C> <C> <C>
Municipal Bonds $ 1,579 $ 6,819 $ 1,756 $ 1,886 $12,040
U.S. Government and Agency - 1,246 313 - 1,559
Corporate Bonds 862 6,436 - - 7,298
------- ------- ------- ------- -------
$ 2,441 $14,501 $ 2,069 $ 1,886 $20,897
======= ======= ======= ======= =======
</TABLE>
During 1995, proceeds from sales of available-for-sale securities
approximated $15.8 million with realized gains of $747 thousand and realized
losses of $1.1 million. In 1994, proceeds approximated 15.2 million with
realized gains of $681 thousand and realized losses of $776 thousand.
F-10
<PAGE>
<TABLE>
<CAPTION>
(5) PROPERTY AND EQUIPMENT
December 31,
1995 1994
------- -------
(In thousands)
<S> <C> <C>
Land and improvements.............. $ 1,032 $ 931
Buildings and improvements......... 7,157 6,563
Furniture and equipment............ 15,439 12,654
Capitalized equipment leases....... 1,437 344
------- -------
25,065 20,492
Less accumulated depreciation and
amortization:
Owned property.................. 11,036 9,128
Capitalized equipment leases.... 144 258
------- -------
Property and equipment, net.. $13,885 $11,106
======= =======
</TABLE>
Under the terms of its capital lease agreements, the Company is required to
pay ownership costs, including taxes, licenses and maintenance. The Company
also leases office space under operating leases expiring at various dates
through November, 2000. Certain of these leases contain renewal options. Rent
expense was $593,000 in 1995, $603,000 in 1994, and $514,000 in 1993.
Following is a schedule of the future minimum lease payments under these
leases as of December 31, 1995.
<TABLE>
<CAPTION>
Capital Operating
------- ---------
(In thousands)
<S> <C> <C>
1996......................................... $ 482 $ 569
1997......................................... 516 518
1998......................................... 429 342
1999......................................... 35 114
2000......................................... - 52
------ ------
Total future minimum lease payments $1,462 $1,595
======
Less amounts representing interest 110
------
Present value of net minimum lease payments.. $1,352
======
</TABLE>
(6) OTHER INVESTMENTS
Included in other assets at December 31, 1995 and 1994, are investments,
carried at cost, of $1.3 million and $1.9 million, respectively, in two
companies that are partially owned by certain members of the Board of Directors
of the Company. The investments include $500,000 in Trident Capital, L.P. and
$811,000 in IDE Corporation. The Company owns less than 10% of eiher company. No
dividends have been received from these investments.
F-11
<PAGE>
(7) INTANGIBLE ASSETS
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(In thousands)
<S> <C> <C>
Goodwill....................... $ 5,012 $ 9,353
Distribution networks.......... 11,871 11,952
Noncompete agreements.......... 150 125
Acquisition costs.............. 1,319 1,294
------- -------
18,352 22,724
Less accumulated amortization.. 4,141 3,157
------- -------
$14,211 $19,567
======= =======
</TABLE>
(8) FINANCING ARRANGEMENTS
The Company has a revolving line of credit totaling $5.0 million, none of
which was outstanding at December 31, 1995. The line of credit expires in May
1996. Any borrowings would accrue interest at the bank's base rate and would be
payable upon demand.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
(In thousands)
<S> <C> <C>
Bank note payable monthly including interest
through 1997. Interest at 6.5%,
collateralized by certain equipment......................... $ 687 $1,193
Bank note, repaid in June 1995............................... - 1,617
Bank note, repaid in June 1995............................... - 966
Computer lease obligations, discounted at 4.9% (See Note 5).. 1,352 45
------ ------
2,039 3,821
Less current portion......................................... 969 815
------ ------
Long-term debt............................................. $1,070 $3,006
====== ======
</TABLE>
The maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996..................... $ 969
1997..................... 625
1998..................... 426
1999..................... 19
------
$2,039
======
</TABLE>
F-12
<PAGE>
(9) INCOME TAXES
The provision for income taxes on continuing operations consists of the
following:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(in thousands):
Current:
Federal $7,367 $6,324 $4,609
State 564 577 271
------ ------ ------
7,931 6,901 4,880
------ ------ ------
Deferred:
Federal 569 443 892
State 44 131 53
------ ------ ------
613 574 945
------ ------ ------
$8,544 $7,475 $5,825
====== ====== ======
</TABLE>
The effective income tax rate varied from the federal statutory rate as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(in thousands)
Tax provision computed at statutory rate of 35%.................... $8,000 $7,104 $5,810
State taxes, net................................................... 471 418 229
Nondeductible expenses and other................................... 67 (47) (214)
------ ------ ------
$8,544 $7,475 $5,825
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
The components of the net deferred tax liability were as follows:
Years ended December 31,
1995 1994
---- ----
<S> <C> <C>
(in thousands)
Deferred tax assets:
Marketable securities............................................. 85 127
Accrued vacation.................................................. 185 230
Accrued expenses.................................................. 409 -
Accounts receivable............................................... 137 159
Other assets...................................................... 239 -
Other............................................................. 208 2
------- -------
1,263 518
------- -------
Deferred tax liabilities:
Intangible assets................................................. (1,439) -
Depreciation...................................................... (801) (976)
Prepaid expenses and other........................................ (853) (759)
------- -------
(3,093) (1,735)
------- -------
Net deferred tax liability......................................... $(1,830) $(1,217)
======= =======
</TABLE>
F-13
<PAGE>
(10) STOCK INCENTIVES
The Company has a stock option plan under which a total of 1,950,000 shares
of the Company's common stock have been reserved for issuance to officers, key
employees and non-employee directors. Options are granted at their fair market
value on the date of grant, vest generally over a four year period and expire
five years from date of grant. Options exercisable at December 31, 1995 and
1994 totaled 378,750 and 189,000, respectively.
Option plan activity is as follows:
<TABLE>
<CAPTION>
Number of Shares 1995 1994 1993
---------------- ---- ---- ----
<S> <C> <C> <C>
Balance at January 1 1,094,250 694,500 93,000
Options Granted 498,000 436,500 676,500
Options Exercised (94,125) (6,750) -
Options Canceled (41,250) (30,000) (75,000)
---------- ---------- --------
Balance at December 31 1,456,875 1,094,250 694,500
========== ========== ========
Average Price:
Options Outstanding $ 10.97 $ 8.66 $ 8.28
Options Granted 10.55 8.56 8.21
Options Exercised 8.36 7.94 -
</TABLE>
(11) SAVINGS PLAN
Employees who meet certain eligibility requirements can participate in the
Company's 401(k) Savings and Investment Plan. Under the plan, the Company may,
at its discretion, match a percentage of the employee contributions. The
Company recorded expenses related to its matching contributions of $80,000,
$71,000 and $52,000 in 1995, 1994 and 1993, respectively.
(12) SUPPLEMENTAL CASH FLOW INFORMATION
The Company made certain acquisitions in 1994 and 1993 (See Note 3) and
assumed liabilities as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
(In thousands)
Fair value of assets $ 9,333 $ 6,918
Cash paid (8,200) (4,421)
Common stock issued - (381)
------- -------
Liabilities assumed $ 1,133 $ 2,116
======= =======
</TABLE>
In conjunction with the transfer of the net assets of ABC in 1995,
approximately $6,870,000 of assets, less liabilities of $1,017,000, were
exchanged for a $3,000,000 non-recourse note receivable. As a result, the
Company recognized an impairment of $2.9 million, $1,833,000 net of a tax
benefit of $1,020,000.
F-14
<PAGE>
(13) NET ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL ARRANGEMENT
On June 1, 1995, the Company transferred substantially all of the assets
and liabilities of its wholly-owned subsidiary, American Business
Communications, Inc. ("ABC") to a wholly-owned subsidiary of Baker University.
The Company received $3.0 million in the form of a 7.52% promissory note, due in
equal monthly installments through 2005. The note is listed as "net assets of
business transferred under contractual arrangement" on the accompanying
consolidated balance sheet since it is non-recourse to Baker University. ABC
recorded net sales of $2,929,000, $6,699,000 and $3,174,000 during 1995, 1994
and 1993, respectively.
The Company originally reported the transfer as a discontinued operation.
However, the accompanying financial statements have been restated to properly
account for the transfer of assets, the ongoing activities of ABC and the note
receivable in accordance with the Securities and Exchange Commission's Staff
Accounting Bulletins 5-E and 5-Z.
(14) 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.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments approximates
their estimated fair value at December 31, 1995. The fair value of cash and cash
equivalents was based on the carrying value of such assets. The estimated fair
value of marketable securities were based on quoted market prices. The fair
value of notes receivable and long-term debt, including capital lease
obligations, were estimated based on discounted cash flows using market rates at
the balance sheet date. The use of discounted cash flows can be significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. The derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument.
(16) CONTINGENCIES
The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. Management believes
that any resulting liability should not materially affect the Company's
financial position or results of operations.
F-15
<PAGE>
INDEX TO EXHIBITS
AMERICAN BUSINESS INFORMATION, INC.
ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
------- ---------------------------- -------------
<S> <C> <C>
3.1 (1) Certificate of Incorporation
3.2 (1) By-laws
4.1 (1) Specimen Certificate representing the Common Stock
10.1 (2) 1992 Stock Option Plan
10.2 (2) Form of Indemnification Agreement with Officers
and Directors
10.4 (3) Loan Agreement between Registrant and FirsTier Bank
11 Statement re: computation of per share earnings
23 Consent of Independent Accountants
24 Power of Attorney (included on signature page)
</TABLE>
______________
(1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-42887) which became effective February 18,
1992.
(2) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (No. 33-51352) which became effective September 16,
1992.
(3) Incorporated by reference to exhibits filed with Registrant's year end
report on Form 10-K for the year ended December 31, 1993.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended December
31, 1995.
<PAGE>
EXHIBIT 11
AMERICAN BUSINESS INFORMATION, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Average shares outstanding...................... 20,738 20,678 20,658
Net additional common equivalent shares (1)..... 632 174 41
------- ------- -------
Average number of common and common equivalent
shares outstanding............................. 21,370 20,852 20,699
======= ======= =======
Net income for per share computation (1)........ $14,346 $12,824 $10,775
======= ======= =======
Net income per average common and common
equivalent share outstanding................... $ 0.67 $ 0.62 $ 0.52
======= ======= =======
</TABLE>
____________________
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3 percent.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 (File No. 33-59256) of American Business Information, Inc. of our
report dated January 23, 1996, on our audits of the consolidated financial
statements and financial statement schedule of American Business Information,
Inc. as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, which report is included in this Annual Report
on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
March 23, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,999
<SECURITIES> 23,350
<RECEIVABLES> 19,215
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57,724
<PP&E> 25,065
<DEPRECIATION> 11,180
<TOTAL-ASSETS> 90,791
<CURRENT-LIABILITIES> 9,585
<BONDS> 1,070
0
0
<COMMON> 51
<OTHER-SE> 78,378
<TOTAL-LIABILITY-AND-EQUITY> 90,791
<SALES> 0
<TOTAL-REVENUES> 89,695
<CGS> 0
<TOTAL-COSTS> 67,962
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> 22,890
<INCOME-TAX> 8,544
<INCOME-CONTINUING> 14,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,346
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.67
</TABLE>
