<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number: 0-24132
ABR INFORMATION SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Florida 59-3228107
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34125 U.S. Highway 19 North, Palm Harbor, Florida 34684-2116
------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (813) 785-2819
</TABLE>
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 Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
<TABLE>
<S> <C> <C> <C>
Class: Voting Common Stock, $.01 Par Value Outstanding at May 31, 1996: 13,433,675
Class: Nonvoting Common Stock, $.01 Par Value Outstanding at May 31, 1996: None
</TABLE>
1
<PAGE> 2
ABR INFORMATION SERVICES, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the three
and nine months ended April 30, 1995 and 1996 3
Consolidated Balance Sheets as of July 31, 1995 and
April 30, 1996 4
Consolidated Statements of Cash Flows for the nine months
ended April 30, 1995 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1.
ABR INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
--------------------------- -----------------------------
1995 1996 1995 1996
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue $4,199,073 $8,278,494 $11,943,507 $19,389,195
Operating expenses:
Cost of services 2,184,910 4,764,970 6,289,572 10,542,081
Selling, general and administrative 1,024,014 1,697,975 2,872,821 4,148,584
Other operating 63,856 60,129 184,651 163,307
----------- ----------- ----------- -----------
Total operating expenses 3,272,780 6,523,074 9,347,044 14,853,972
----------- ----------- ----------- -----------
Operating income 926,293 1,755,420 2,596,463 4,535,223
Interest income (expense):
Interest income 133,274 728,799 416,193 1,021,226
Interest expense - (97,491) (4) (125,559)
----------- ----------- ----------- -----------
133,274 631,308 416,189 895,667
----------- ----------- ------------- ------------
Income before income taxes 1,059,567 2,386,728 3,012,652 5,430,890
Income taxes 401,405 918,591 1,141,730 2,089,899
----------- ----------- ------------- ------------
Net income $ 658,162 $ 1,468,137 $ 1,870,922 $ 3,340,991
=========== =========== ============= ============
Net income per share $.07 $.13 $.19 $.32
Weighted average number of common and
common equivalent shares outstanding 9,893,372 11,518,754 9,893,372 10,632,659
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
ABR INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, 1995 April 30, 1996
(Unaudited)
------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 19,184,372 $ 68,726,343
Investments 4,974,035 94,816,187
Accounts receivable, net of allowance
for doubtful accounts of $26,202
and $41,702, respectively 2,361,545 2,980,751
Prepaid expenses and other 658,200 1,300,359
------------ -------------
Total current assets 27,178,152 167,823,640
PROPERTY AND EQUIPMENT, net 2,300,964 8,118,544
GOODWILL AND OTHER INTANGIBLES, net - 15,528,020
SOFTWARE DEVELOPMENT COSTS, net of accumulated
amortization of $128,388 and $170,383, respectively 2,984,737 4,883,422
OTHER ASSETS 141,853 155,011
------------ -------------
TOTAL ASSETS $ 32,605,706 $ 196,508,637
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 214,158 $ 772,957
Accrued expenses 762,389 608,890
Customer accounts deposits 11,783,187 16,151,632
Unearned revenue 271,375 650,050
Income taxes payable 53,448 36,702
------------ -------------
Total current liabilities 13,084,557 18,220,231
DEFERRED INCOME TAXES 550,450 1,202,501
SHAREHOLDERS' EQUITY
Preferred Stock - authorized 2,000,000 shares of
$.01 par value; no shares issued
Common Stock - authorized, 20,250,000
shares of $.01 par value; issued and outstanding,
6,497,804 and 13,417,072 shares, respectively 64,978 134,171
Additional paid in capital 13,665,092 168,370,118
Retained earnings 5,240,629 8,581,616
------------ -------------
TOTAL SHAREHOLDERS' EQUITY 18,970,699 177,085,905
------------ -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 32,605,706 $ 196,508,637
============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
ABR INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
April 30,
-----------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,870,922 $ 3,340,991
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 421,812 1,260,420
Deferred income taxes 170,501 652,051
Change in operating assets and liabilities:
Accounts receivable (631,158) 63,461
Prepaid expenses and other (48,833) (587,131)
Income taxes recoverable 176,165 -
Other assets (49,779) 262,771
Accounts payable (92,761) 260,829
Accrued expenses 294,622 (176,534)
Unearned revenue 247,875 378,675
Customer accounts deposits 281,578 2,360,754
Income taxes payable 57,699 (21,540)
------------- -------------
Net cash provided by operating activities 2,698,643 7,794,747
------------- -------------
Cash flows from investing activities:
Maturity of (additions to) investments 9,305,282 (89,842,152)
Additions to property and equipment (523,512) (6,391,924)
Additions to software development costs (1,530,261) (1,956,073)
Cash paid for acquisitions, net - (11,062,985)
Disposal of fixed assets 4,600 (13,986)
------------- -------------
Net cash provided by (used in) investing activities 7,256,109 (109,267,120)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term bank borrowings - 6,000,000
Payments on bank borrowings - (6,710,581)
Proceeds from stock offering, net of cost - 151,137,080
Proceeds from exercise of common stock options 162,276 587,845
------------- -------------
Net cash provided by financing activities 162,276 151,014,344
------------- -------------
Net increase in cash and
cash equivalents 10,117,028 49,541,971
Cash and cash equivalents at beginning
of year 5,123,565 19,184,372
------------- -------------
Cash and cash equivalents at end
of period $ 15,240,593 $ 68,726,343
============ =============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
ABR INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1996
NOTE A - DESCRIPTION OF ORGANIZATION AND BUSINESS
ABR Information Services, Inc. is a leading provider of comprehensive
benefits administration, compliance and information services to employers
seeking to outsource their benefits administration functions. The Company
believes it is the largest provider of COBRA compliance services. COBRA is a
federally mandated law related to the portability of employee group health
insurance. The Company also provides benefits administration services with
respect to benefits provided to retirees and inactive employees, including
retiree healthcare, disability, surviving dependent, family leave and severance
benefits. Additionally, the Company provides benefits administration services
with respect to benefits provided to active employees, including enrollment,
eligibility verification, qualified domestic relations order ("QDRO")
administration, HMO consolidation and pension services. These services are
offered on either an "a la carte" or a total outsourcing basis, allowing
customers to outsource certain benefits administration tasks which they find
too costly or burdensome to perform in-house, or to outsource the entire
benefits administration function.
The Company is headquartered in Palm Harbor, Florida and provides
information and support services to more than 20,000 employers including
Fortune 500 companies, insurance companies and other employers. The Company's
operations are in a single business segment, the information services business.
NOTE B - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
the instructions to Form 10-Q and do not include all the information and
footnote disclosure required by generally accepted accounting principles for
complete financial statements. The financial statements as of April 30, 1996
and for the three and nine months ended April 30, 1995 and April 30, 1996 are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the interim
periods. The results of operations for the three and nine months ended April
30, 1996 are not necessarily indicative of results that may be expected for the
year ending July 31, 1996. These financial statements should be read in
conjunction with the audited financial statements of the Company as of July 31,
1994 and 1995, and for each of the three years in the period ended July 31,
1995, included in the Company's 1995 Annual Report to Shareholders.
NOTE C - NET INCOME PER SHARE
Net income per common share has been computed using the weighted average
of the outstanding Common Stock plus the dilutive Common Stock equivalents
(stock options and warrants), using the treasury or the modified treasury stock
method. On July 13, 1995 and February 19, 1996, the Company completed
three-for-two stock splits. All share and per share data included in this
report have been restated to reflect the splits. Primary and fully dilutive
calculations result in the same net income per common share.
6
<PAGE> 7
ABR INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE D - CASH AND CASH EQUIVALENTS
The Company invests excess cash balances in short-term investment grade
securities, such as money market investments, obligations of the U.S.
government and its agencies, and obligations of state and local government
agencies.
NOTE E - LINES OF CREDIT AND COMMITMENTS
The Company has a five year, $15.0 million unsecured credit facility. The
Company has agreed to maintain all of its assets free and clear of all liens,
encumbrances and pledges, except purchase money security interests in specific
equipment in an aggregate amount of less than $500,000 as long as the credit
facility remains outstanding or any indebtedness thereunder remains unpaid.
Interest on the principal balance outstanding under this line of credit accrues
at a floating interest rate equal to the prime rate or, at the Company's
option, to the 30 day London Interbank Offering Rate (LIBOR), plus an
applicable interest rate margin between 1% and 2% based on certain financial
ratios. The credit facility contains certain financial covenants requiring the
maintenance of cash and cash equivalents and investments equal to or greater
than customer account deposits, a funded debt to EBITDA ratio of a maximum of
2.25 to 1, a debt service coverage ratio of not less than 1.35 to 1, as well as
the maintenance of certain funded debt to tangible net worth ratio. As of April
30, 1996, the Company was in compliance with all such covenants. As of April
30, 1996, there were no outstanding amounts under the credit facility.
The Company recently purchased a 110,000 square foot facility situated on
12.7 acres of land in Palm Harbor, Florida. The cost of improvements to be made
by the Company to such facility has been estimated to be $5.5 million.
Management estimates that as of the end of April 30, 1996, approximately $5.0
million will be required in order for the Company to purchase equipment for and
to upgrade the Company's information processing systems.
Subsequent to the end of the quarter, the Company purchased 72 acres of
land for $2.1 million in Tarpon Springs, Florida to hold for future expansion
of operating facilities.
NOTE F - BUSINESS ACQUISITIONS
New Jersey Acquisition: On December 15, 1995, the Company acquired all of
the outstanding capital stock of Bullock Associates, Inc. ("BAI") for $12.5
million, with an additional $2.0 million payable upon the attainment of certain
revenue requirements during 1996 and 1997. BAI, which was renamed ABR Benefits
Services, Inc. ("BSI"), is located in Princeton, New Jersey, and provides COBRA
administration, retiree insurance administration, insurance continuation
billing and collection, pension benefits administration, QDRO administration
and educational benefit administration, as well as administration of other
employee benefits programs such as employee discount plans, adoption programs,
program rebates and emergency loans.
The following unaudited pro forma summary combines the results of
operations of the Company with the operations of BSI as if the acquisitions had
occurred at the beginning of the respective periods. This pro forma summary
does not necessarily reflect the results of operations as they would have been
if the Company and the operations of BSI operated as a single entity during
such periods.
7
<PAGE> 8
ABR INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
NOTE F - BUSINESS ACQUISITIONS - Continued
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
(in thousands, except per share data) (in thousands, except per share data)
------------------------------------- -------------------------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 6,400 $ 8,278 $ 18,508 $ 22,967
Operating income 1,417 1,755 3,911 5,418
Net income 836 1,468 2,314 3,682
Net income per share $ .08 $ .13 $ .23 $ .35
</TABLE>
California Acquisition. Effective February 1, 1996, the Company acquired all
of the outstanding capital stock of Total COBRA Services ("TCS") for 132,712
shares of Common Stock. TCS is located in Irvine, California and provides COBRA
administration and retiree billing services. For the fiscal year ended December
31, 1995, TCS had revenues of less than $2 million. The Company has not
provided pro forma financial information with respect to TCS as it is not a
significant acquisition.
Amortization of goodwill and other intangibles is based upon the allocation
of the total purchase price and amortization periods, using the straight-line
method, as follows:
<TABLE>
<CAPTION>
Estimated
Allocation Useful Lives
------------ ------------
<S> <C> <C>
Non-competition agreements $ 600,000 5 years
Contracts 2,000,000 10 years
Goodwill 13,198,756 25 years
</TABLE>
Amortization expense totaled $270,736 for the nine months ended April 30,
1996.
8
<PAGE> 9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere in this Form
10-Q.
OVERVIEW
The Company's revenues currently are generated from three sources. First,
the Company generates revenues through its COBRA compliance services. Second,
the Company generates revenue from providing administration services with
respect to benefits provided to retirees and inactive employees. Third, the
Company generates revenue from providing administration services with respect
to benefits provided to active employees.
The first source of revenues for the Company is COBRA compliance services
and is generated primarily from its qualifying event agreements with employers
and through capitation agreements with insurance companies. Through qualifying
event agreements, the Company receives a fixed, per occurrence fee from its
customers for each qualifying event. A qualifying event occurs when an employee
or his or her dependents experience a loss of coverage under a group healthcare
plan. The amount of the fixed fee varies depending on the method of the
qualifying event notification mailing, which is selected by the customer.
Through capitation agreements, insurance companies designate the Company as the
administrator of COBRA compliance for their group insurance clients that are
subject to COBRA. The Company is paid a monthly fee for each employee covered
by the group plan. The revenue generated under a capitation agreement is not
dependent on the triggering of a qualifying event, but is determined based on
the number of employees covered by the group plan at the beginning of each
month. The Company also receives an administrative fee typically equal to 2% of
the monthly health insurance premium that is paid by or on behalf of each
continuant. In addition, the Company generates revenues from customers for
additional COBRA compliance and healthcare administration services, both on a
one-time and continuous basis. These additional revenues include new account
fees paid to the Company when it is retained by a new customer. During the
first nine months of fiscal 1995 and the first nine months of fiscal 1996,
91.4% and 77.8%, respectively, of the Company's revenues were attributable to
the Company's COBRA compliance services.
The second source of the Company's revenues is administration services with
respect to benefits provided to retirees and inactive employees, including
retiree healthcare, disability, surviving dependent, family leave and severance
benefits. During the first nine months of fiscal 1995 and the first nine months
of fiscal 1996, 7.1% and 15.3%, respectively, of the Company's revenues were
attributable to the Company's administration services for retirees and inactive
employees.
The third source of the Company's revenues is administration services with
respect to benefits provided to active employees. Through this service, the
Company provides benefits administration services for active employees, such as
enrollment, eligibility verification, QDRO administration, HMO consolidation
and pension services. During the first nine months of fiscal 1995 and the first
nine months of fiscal 1996, 0.5% and 6.9%, respectively, of the Company's
revenues were attributable to benefits administration services for active
employees.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues, certain
financial data for the Company for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30,
-------------------- -------------------
1995 1996 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of services 52.0 57.6 52.7 54.4
Selling, general and administrative expenses 24.4 20.5 24.1 21.4
Other operating expenses 1.5 .7 1.5 .8
----- ----- ----- -----
Operating income 22.1 21.2 21.7 23.4
Interest expense (income) (3.2) (7.6) (3.5) (4.6)
Income taxes 9.6 11.1 9.5 10.8
----- ----- ----- -----
Net income 15.7% 17.7% 15.7% 17.2%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 30, 1995
Revenues increased $4.1 million, or 97.2%, to $8.3 million during the three
months ended April 30, 1996 from $4.2 million in the three months ended April
30, 1995. Of the $4.1 million increase in revenues, $2.1 million was
attributable to increased revenues from COBRA compliance services, $1.4 million
was attributable to increased revenues from retiree/inactive employee benefits
administration, and approximately $588,000 was due to increased revenues from
active employee benefits administration.
The increase in COBRA compliance revenues increased as a result of the
addition of new customers and as a result of the New Jersey and California
acquisitions. These revenues also increased due to an increase in revenues from
the 2% administration fee on the monthly health insurance premiums during the
three months ended April 30, 1996 compared to the three months ended April 30,
1995.
The increase in revenues from retiree/inactive employee benefits
administration was primarily attributable to the addition of new customers
obtained by the Company and as a result of the New Jersey and California
acquisitions during the three months ended April 30, 1996 who were not
customers of the Company during the three months ended April 30, 1995.
The increase in revenues from active employee benefits administration was
primarily attributable to the addition of new customers obtained by the Company
and as a result of the New Jersey Acquisition during the three months ended
April 30, 1996 who were not customers of the Company during the same period of
1995.
Cost of services increased 118.1% to $4.8 million during the three months
ended April 30, 1996 from $2.2 million during the three months ended April 30,
1995. The increase in cost of services was attributable to the addition of data
processing, information systems and customer service personnel to support
growth as well as the result of the New Jersey and California acquisitions. As
a percentage of revenues, cost of services increased to 57.6% from 52.0% for
the same periods. This increase as a percentage of revenues resulted from
increasing the operating infrastructure to support the Company's growth.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Selling, general and administrative expenses increased 65.8% to $1.7
million during the three months ended April 30, 1996 from $1.0 million in the
three months ended April 30, 1995. The increase in selling, general and
administrative expenses was primarily attributable to the addition of
marketing, management and administrative personnel to support the Company's
growth. As a percentage of revenues, selling, general and administrative
expenses decreased to 20.5% from 24.4% for the same periods. The decrease as a
percentage of revenues resulted primarily from the acquisitions which had lower
selling, general and administrative expenses as a percent of revenue, and from
allocating expenses over a larger revenue base.
Other operating expenses decreased 5.8% to $60,000 during the three months
ended April 30, 1996 from $64,000 in the three months ended April 30, 1995. The
reduction in other operating expenses as a percentage of revenues resulted from
operating efficiencies associated with the allocation of these expenses over a
larger revenue base.
Income taxes increased 128.8% to $919,000 during the three months ended
April 30, 1996 from $401,000 during the three months ended April 30, 1995. The
Company's effective tax rate increased to 38.5% from 37.9% for the same period.
As a result of the foregoing, the Company's net income increased 123.1% to
$1.5 million during the three months ended April 30, 1996 from $658,000 in the
three months ended April 30, 1995. Net income per share was $.13 for the
quarter ended April 30, 1996 compared to $.07 for the prior year period.
NINE MONTHS ENDED APRIL 30, 1996 COMPARED TO NINE MONTHS ENDED APRIL 30, 1995
Revenues increased $7.4 million, or 62.3%, to $19.4 million during the nine
months ended April 30, 1996 from $12.0 million in the same period of 1995. Of
the $7.4 million increase in revenues, $4.2 million was attributable to
increased revenues from COBRA compliance services, $2.1 million was
attributable to increased revenues from retiree/inactive employee benefits
administration and $1.1 million was due to increased revenues from active
employee benefits administration.
COBRA compliance revenues increased as a result of the addition of new
customers and as a result of the New Jersey and California acquisitions. These
revenues also increased due to an increase in revenues from the 2%
administrative fee on monthly health insurance premiums during the nine months
ended April 30, 1996 compared to the same period of 1995.
The increase in revenues from retiree/inactive employee benefits
administration was primarily attributable to the addition of new customers
obtained by the Company and as a result of the New Jersey and California
acquisitions during the nine months of fiscal 1996 who were not customers of
the Company during the same period of 1995.
The increase in revenues from active employee benefits administration was
primarily attributable to the addition of new customers obtained by the Company
and as a result of the New Jersey Acquisition during the nine months ended
April 30, 1996 who were not customers of the Company during the same period of
1995.
Cost of services increased 67.6% to $10.5 million during the nine months
ended April 30, 1996 from $6.3 million in the same period of 1995. As a
percentage of revenues, cost of services increased to 54.4% from 52.7% for the
same periods. The increase in cost of services was attributable to the addition
of data processing, information systems and customer service personnel to
support growth and an increase in operating expenses to service the additional
revenues. This increase as a percentage of revenues resulted from increasing
the operating infrastructure to support the Company's growth.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Selling, general and administrative expenses increased 44.4% to $4.1
million during the nine months ended April 30, 1996 from $2.9 million in the
same period of 1995. The increase in selling, general and administrative
expenses was primarily attributable to the addition of management, marketing
and administrative personnel to support the Company's growth. As a percentage
of revenues, selling, general and administrative expenses decreased to 21.4%
from 24.1% for the same periods. The decrease as a percentage of revenues
resulted primarily from the acquisitions which had lower selling, general and
administrative expenses as a percent of revenue and from allocating expenses
over a larger revenue base.
Other operating expenses remained fairly constant during the nine months
ended April 30, 1996 as compared to the same period of 1995 and, as a
percentage of revenues, decreased to 0.8% from 1.5% for the same periods. The
reduction in other operating expenses as a percentage of revenues resulted from
operating efficiencies associated with the allocation of these expenses over a
larger revenue base.
Income taxes increased 83.0% to $2.1 million during the nine months ended
April 30, 1996 from $1.1 million during the same period of 1995. The Company's
effective tax rate remained fairly constant, increasing slightly to 38.5% from
37.9% for the same periods.
As a result of the foregoing, the Company's net income increased 78.6% to
$3.3 million during the nine months ended April 30, 1996 from $1.9 million in
the same period of 1995. Net income per share was $.32 compared to $.19 for the
same period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
In March 1996, the Company completed a secondary stock offering which
provided, net cash after offering expenses, $151 million to its operations. Net
cash provided by operating activities was $7.8 million for the nine months
ended April 30, 1996 compared to $2.7 million for the same period of 1995. As
of April 30, 1996 and July 31, 1995, the Company's working capital and current
ratio were $149.6 million and 9.2-to-1 and $14.1 million and 2.1-to-1,
respectively. The Company invests excess cash balances in short-term investment
grade securities, such as money market investments, obligations of the U.S.
government and its agencies, and obligations of state and local government
agencies.
During the nine months ended April 30, 1996, the Company's capital
expenditures were $6.4 million.
The Company recently purchased a 110,000 square foot facility situated on
12.7 acres of land in Palm Harbor, Florida. The cost of improvements to be made
by the Company to such facility has been estimated to be $5.5 million.
Management estimates that as of the end of April 30, 1996, approximately $5.0
million will be required in order for the Company to purchase equipment for and
to upgrade the Company's information processing systems.
Subsequent to the end of the quarter, the Company purchased 72 acres of
land for $2.1 million in Tarpon Springs, Florida to hold for future expansion
of operating facilities.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
The Company has a five-year, $15.0 million unsecured credit facility. The
Company has agreed to maintain all of its assets free and clear of all liens,
encumbrances and pledges, except purchase money security interests in specific
equipment in an aggregate amount of less than $500,000 as long as the credit
facility remains outstanding or any indebtedness thereunder remains unpaid.
Interest on the principal balance outstanding under this line of credit accrues
at a floating interest rate equal to the prime rate or, at the Company's
option, to the 30-day London Interbank Offering Rate (LIBOR), plus an
applicable interest rate margin between 1% and 2% based on certain financial
ratios. The credit facility contains certain financial covenants requiring the
maintenance of cash and cash equivalents and investments equal to or greater
than customer account deposits, a funded debt to EBITDA ratio of a maximum of
2.25-to-1, a debt service coverage ratio of not less than 1.35-to-1, as well as
the maintenance of certain funded debt to tangible net worth ratio. As of April
30, 1996, the Company was in compliance with all such covenants. As of April
30, 1996, there were no amounts outstanding under the credit facility.
The Company believes that its cash flow from operations and the funds
available from its credit facilities will be adequate to meet the Company's
expected capital requirements for the foreseeable future.
13
<PAGE> 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 12, 1996 ABR INFORMATION SERVICES, INC.
/s/ Vincent Addonisio
-------------------------------------
Vincent Addonisio
Senior Vice President,
Chief Financial Officer and
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABR
INFORMATION SERVICES, INC. THIRD QUARTER 10-Q, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 68,726,343
<SECURITIES> 94,816,187
<RECEIVABLES> 3,022,453
<ALLOWANCES> 41,702
<INVENTORY> 0
<CURRENT-ASSETS> 167,823,640
<PP&E> 10,454,633
<DEPRECIATION> 2,336,089
<TOTAL-ASSETS> 196,508,637
<CURRENT-LIABILITIES> 18,220,231
<BONDS> 0
0
0
<COMMON> 134,171
<OTHER-SE> 176,951,734
<TOTAL-LIABILITY-AND-EQUITY> 196,508,637
<SALES> 19,389,195
<TOTAL-REVENUES> 19,389,195
<CGS> 10,542,081
<TOTAL-COSTS> 4,148,584
<OTHER-EXPENSES> 163,307
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (895,667)
<INCOME-PRETAX> 5,430,890
<INCOME-TAX> 2,089,899
<INCOME-CONTINUING> 3,340,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,340,991
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
