NATIONAL DATA CORPORATION
Condensed Consolidated Statement of Income
(In Thousands Except Per Share Data)
Quarter Ended November 30,
1995 1994
---- ----
Revenue $65,510 $59,812
Operating expenses:
Cost of service 34,125 32,847
Sales, general and administrative 23,273 21,110
------- -------
57,398 53,957
Operating income 8,112 5,855
Other income (expense):
Interest and other income 1,177 348
Interest and other expense (601) (708)
-------- -------
576 (360)
Income before income taxes 8,688 5,495
Provision for income taxes 2,954 1,978
------- -------
Net income 5,734 3,517
------- -------
Earnings per common and
common equivalent share (Note 2) $0.24 $0.17
------- -------
Earnings per common and common equivalent
share, assuming full dilution (Note 2) $0.24 $0.17
------- -------
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NATIONAL DATA CORPORATION
Condensed Consolidated Statement of Income
(In Thousands Except Per Share Data)
Six Months Ended November 30,
1995 1994
---- ----
Revenue $131,135 $115,781
Operating expenses:
Cost of service 68,053 63,505
Sales, general and administrative 47,616 41,481
------- -------
115,669 104,986
Operating income 15,466 10,795
Other income (expense):
Interest and other income 2,304 803
Interest and other expense (1,310) (1,295)
-------- -------
994 (492)
Income before income taxes 16,460 10,303
Provision for income taxes 5,752 3,709
------- -------
Net income $10,708 $6,594
------- -------
Earnings per common and
common equivalent share (Note 2) $0.44 $0.33
------- -------
Earnings per common and common equivalent
share, assuming full dilution (Note 2) $0.44 $0.33
------- -------
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NATIONAL DATA CORPORATION P. 1 of 2
Condensed Consolidated Balance Sheet
(In Thousands)
NOVEMBER 30, MAY 31,
1995 1995
ASSETS ------------ -----------
Current assets:
Cash and cash equivalents $100,887 $30,740
Short-term investments 25 25
Accounts receivable (less allowances
of $1,170 and $1,409) 39,545 39,239
Deferred income taxes 601 601
Inventory 2,898 2,900
Prepaid expenses and other current assets 4,295 4,345
------- -------
Total current assets 148,251 77,850
Property and equipment, at cost 130,994 140,141
Less-Accumulated depreciation
and amortization (103,067) (111,307)
------- -------
27,927 28,834
Property acquired under capital leases,
net of accumulated amortization 7,789 9,033
------- -------
35,716 37,867
Deposits 166 439
Other assets:
Acquired intangibles and goodwill,
net of accumulated amortization
of $42,112 and $38,132 74,602 78,094
Other 2,223 2,320
------- -------
76,825 80,414
Total Assets $260,958 $196,570
========== ==========
See Notes to Unaudited Condensed Consolidated Financial Statements
NATIONAL DATA CORPORATION P. 2 of 2
Condensed Consolidated Balance Sheet
(In Thousands)
NOVEMBER 31, MAY 31,
1995 1995
LIABILITIES AND STOCKHOLDERS' EQUITY ------------ -----------
Current liabilities:
Accounts payable $6,386 $9,042
Notes payable on acquired
business, current portion 1,942 1,958
Earn-out payable on acquired
businesses, current portion 539 1,180
Accrued compensation and benefits 5,326 6,199
Net merchant processing payable 159 2,172
Income tax payable 6,698 7,989
Obligations under capital leases,
current portion 2,685 2,785
Mortgage payable, current portion 172 164
Deferred income 3,982 4,766
Other accrued liabilities 10,736 11,149
------- -------
Total current liabilities 38,625 47,404
Mortgage payable 10,848 10,936
Notes payable on acquired business 1,318 2,580
Deferred income taxes 3,193 3,193
Obligations under capital leases 5,207 6,140
Other long-term liabilities 3,488 3,402
------- -------
Total liabilities 62,679 73,655
Minority interest in equity of subsidiary 586 392
Stockholders' Equity:
Preferred stock, par value $1.00 per share,
1,000,000 shares authorized; none issued - -
Common stock, par value $.125 per share,
30,000,000 shares authorized; 22,968,977
and 19,306,733 shares issued 2,870 2,413
Capital in excess of par value 100,427 33,145
Retained earnings 95,079 87,789
Cumulative translation adjustment (519) (550)
------- -------
197,857 122,797
Less:
Deferred compensation (164) (274)
------- -------
Total Stockholders' Equity 197,693 122,523
Total Liabilities and Stockholders' Equity $260,958 $196,570
========== ==========
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NATIONAL DATA CORPORATION
Condensed Consolidated Statement of Cash Flows
(In Thousands)
Six Months
Ended November 30,
1995 1994
Cash flows from operating activities: ----- -----
Net income $10,708 $ 6,594
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,598 6,748
Amortization of acquired intangibles and goodwill 3,973 3,363
Provision for bad debts 722 201
Loss on disposal of fixed assets 6 34
Changes in assets and liabilities, net
of the effects of acquisitions:
Increase in accounts receivable, net (1,024) (5,926)
Decrease in inventory 3 313
Decrease in prepaid expenses and other assets 127 3,280
Decrease in accounts payable
and accrued liabilities (4,430) (992)
Increase (decrease) in net merchant
processing payable (2,014) 1,042
Increase (decrease) in income taxes payable and
deferred income taxes payable (1,291) 323
--------- --------
Net cash provided by operating activities 14,378 14,980
Cash flows from investing activities:
Capital expenditures (5,125) (4,358)
Business acquisitions, net of cash acquired - (32,340)
Decrease in investments and other
non-current assets 274 2,204
Proceeds from the sale of equipment 75 -
-------- --------
Net cash used in investing activities (4,776) (34,494)
Cash flows from financing activities:
Payments on notes payable (1,277) -
Principal payments under mortgage, capital lease
arrangements and other long-term debt (1,512) (1,188)
Principal payments on earn-out payable (1,016) (1,627)
Net proceeds from secondary public offering 63,652 -
Net proceeds from the issuance of stock
under employee stock plans 4,087 1,611
Effect of exchange rates on cash 29 16
Dividends paid (3,418) (2,796)
-------- --------
Net cash provided by (used in) financing activities 60,545 (3,984)
Increase (decrease) in cash and cash equivalents 70,147 (23,498)
Cash, beginning of period 30,740 38,012
-------- --------
Cash, end of period $ 100,887 $ 14,514
======== ========
Supplemental schedule of noncash investing
and financing activities:
Promissory notes entered into in exchange
for capital stock - $ 3,006
Capital leases entered into in exchange
for property and equipment 332 6
======== ========
See Notes to Unaudited Condensed Consolidated Financial Statements
==============================================================================
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with Generally Accepted Accounting Principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures are adequate to make the
information presented not misleading. In addition, certain
reclassifications have been made to the fiscal 1995 consolidated
financial statements to conform to the fiscal 1996 presentation. It is
suggested that these financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
latest annual report on Form 10-K for the fiscal year ended May 31,
1995.
In the opinion of management, the information furnished reflects all
adjustments necessary to present fairly the results for such interim
periods.
NOTE 2 - EARNINGS PER SHARE:
Primary earnings per common share and common equivalent share are
computed by dividing net income by the weighted average number of
common shares and common equivalent shares outstanding during the
period. Common equivalent shares represent stock options that, if
exercised, would have a dilutive effect on earnings per share. All
options with an exercise price less than the average market share
price for the period are assumed to have a dilutive effect on earnings
per share.
Fully diluted earnings per common and common equivalent share are
computed by the same method as described for primary earnings per
share except that the higher of (1) the ending market share price for
the period or (2) the average market share price for the period is
used to compute the fully diluted earnings per share, as compared to
the average market share price for primary earnings per share.
Earnings per share calculations are presented in the accompanying
financial statements.
The primary and fully diluted number of common and common equivalent
shares outstanding is as follows (in thousands):
Quarter Ended November 30, Six Months Ended November 30,
1995 1994 1995 1994
Primary 24,328 20,157 24,226 19,946
Fully Diluted 24,346 20,178 24,260 20,115
NOTE 3 - COMMON STOCK OFFERING:
In June, 1995, the Company completed a secondary public offering of
3,162,500 shares of its Common Stock. The stock was sold at a price of
$21.25 per share. This transaction, net of underwriting discount and
expenses associated with this offering, added approximately
$63,652,000 in cash to the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The second quarter of fiscal 1996, ended November 30, 1995 compared to the
same quarter last year is reflected as follows:
($ Millions)
FY 1996 FY 1995 Inc.(Dec.)
$ % $ % %
--- --- --- --- -----------
Revenue:
Payment Systems 36.2 55% 33.5 56% 8%
Health Care 23.6 36% 20.0 33% 18%
Information Systems & Services 5.7 9% 6.3 11% (9%)
------ ----- ------ ----- -------
Total Revenue 65.5 100% 59.8 100% 10%
Cost of Service:
Operations 25.9 39% 25.6 43% 1%
Depreciation & Amortization 5.0 8% 4.2 7% 19%
Hardware Sales 3.2 5% 3.0 5% 7%
------ ----- ------ ----- -------
Total Cost of Service 34.1 52% 32.8 55% 4%
Gross Margin 31.4 48% 27.0 45% 16%
Sales, General &
Administrative 23.3 36% 21.1 35% 10%
------ ----- ------ ----- -------
Operating Margin 8.1 12% 5.9 10% 37%
Interest and Other Income 1.2 2% 0.3 - 300%
Interest and Other Expense (0.6) (1%) (0.7) (1%) (14%)
------ ----- ------ ----- -------
Income Before Income Taxes 8.7 13% 5.5 9% 58%
Provision for Income Taxes 3.0 4% 2.0 3% 50%
------ ----- ------ ----- -------
Net Income 5.7 9% 3.5 6% 63%
------ ----- ------ ----- -------
Results of Operations
The first six months of fiscal 1996, ended November 30, 1995 compared to the
same period last year is reflected as follows:
($ Millions)
FY 1996 FY 1995 Inc.(Dec.)
$ % $ % %
--- --- --- --- -----------
Revenue:
Payment Systems 73.3 56% 65.8 57% 11%
Health Care 46.5 35% 36.8 32% 26%
Information Systems & Services 11.3 9% 13.0 11% (13%)
Other - - .2 - -
------ ----- ------ ----- -------
Total Revenue 131.1 100% 115.8 100% 13%
Cost of Service:
Operations 52.1 40% 50.0 43% 4%
Depreciation & Amortization 10.0 8% 8.2 7% 22%
Hardware Sales 5.9 4% 5.3 5% 11%
------ ----- ------ ----- -------
Total Cost of Service 68.0 52% 63.5 55% 7%
Gross Margin 63.1 48% 52.3 45% 21%
Sales, General &
Administrative 47.6 36% 41.5 36% 15%
------ ----- ------ ----- -------
Operating Margin 15.5 12% 10.8 9% 44%
Interest and Other Income 2.3 2% 0.8 1% 188%
Interest and Other Expense (1.3) (1%) (1.3) (1%) -
------ ----- ------ ----- -------
Income Before Income Taxes 16.5 13% 10.3 9% 60%
Provision for Income Taxes 5.8 5% 3.7 3% 57%
------ ----- ------ ----- -------
Net Income 10.7 8% 6.6 6% 62%
------ ----- ------ ----- -------
Revenue
Total revenue for the second quarter of fiscal 1996 was $65,510,000, an
increase of $5,698,000 (10%) from the same period of the prior year. The
revenue increase in the second quarter was the result of increased revenue in
Health Care, $3,532,000 (18 %), and Payment Systems, $2,728,000 (8%),
partially offset by a decrease in Information Systems and Services revenue of
$547,000 (9%).
Total revenue for the six months ended November 30, 1995 was $131,135,000, an
increase of $15,354,000 (13%) from the same period of the prior year. The
revenue increase was the result of increased revenue in Health Care,
$9,682,000 (26%) and Payment Systems, $7,497,000 (11%), partially offset by a
decrease in Information Systems and Services revenue of $1,650,000 (13%).
Health Care. Revenue increased 18% in the second quarter and 26% for the six
months ended November 30, 1995. Revenue growth was related to (i) increases
in electronic claim processing and (ii) increases in revenue for the Company's
practice management systems for the pharmacy, dental, physician and
institutional sectors, including the impact of acquisitions completed after
the first quarter of fiscal 1995.
Payment Systems. Payment Systems revenues increased 8% in the second quarter
and 11% for the six months ended November 30, 1995 compared to the same
periods last year. Direct Payment Systems revenue increased due to higher
volume of merchant sales processed and equipment sales as well as increased
volume in the check verification/guarantee business. Offsetting this increase,
revenue in the Indirect Payment Services (distribution through banks) business
decreased for the second quarter and for the first six months of fiscal 1996,
as a result of price adjustments generally made in return for increased volume
and term commitments.
Information Systems and Services. Revenue decreased 9% for the second quarter
and 13% for the first six months of fiscal 1996 primarily as a result of a
decline in revenue associated with software licenses for electronic data
interchange (EDI) applications.
Other. As a result of the Company's decision to exit the communication
services market in 1991, there is no longer any residual revenue from these
activities. The customer contracts associated with this business expired in
the first quarter of fiscal 1995.
Costs and Expenses
Total cost of service for the second quarter of fiscal 1996 was $34,125,000,
an increase of $1,278,000 (4%) from the same period last year. While the cost
of operations increased $253,000 (1%), the cost of operations as a percentage
of revenue decreased from 43% last year to 39% this year. Depreciation and
amortization as a percentage of revenue increased 19%, primarily as a result
of acquisitions made during fiscal 1995. Cost of hardware sold was 5% for
both periods.
Cost of service for the six month period ended November 30, 1995 was
$68,053,000, an increase of $4,548,000 (7%) from the same period last year.
Total cost of service as a percentage of revenue decreased to 52% this year
from 55% last year. Cost of operations increased $2,263,000 (4%). Cost of
operations as a percentage of revenue decreased to 40% for the first six
months of this fiscal year as compared to 43% for the same period last year.
Depreciation and amortization as a percentage of revenue increased 22%,
primarily as a result of acquisitions made during 1995. Cost of hardware
decreased to 4% of revenue as compared to 5% last year.
Gross margin increased to 48% from 45% in both the second quarter and the six
months ended November 30, 1995.
Sales, general and administrative expenses were $23,273,000 in the quarter.
This is an increase of $2,163,000 (10%) from the prior year. Sales, general
and administrative expense increased $6,135,000 (15%) for the six month
period. These increases are primarily due to increased product development and
sales expansion programs in the Payment Systems and Health Care areas as well
as increased sales, general, administrative and product development expenses
associated with acquired businesses.
Interest and Other Income
Interest and other income for the second quarter of fiscal 1996 was
$1,177,000, an increase of $829,000 (238%) from last year. Interest and other
income for the first six months of fiscal year 1996 was $2,304,000 an increase
of $1,501,000 (187%). These increases are principally the result of increased
cash balances associated with the secondary stock offering completed in the
first quarter of fiscal 1996.
Interest and Other Expense
Interest and other expense for the second quarter of fiscal 1996 decreased
$107,000 (15%) as a result of lower interest expense due to fewer capital
leases. Interest and other expense for the six months ended November 30, 1995
was essentially flat.
Income Taxes
The provision for income taxes, as a percentage of taxable income, was 34% and
36% for the quarters ended November 30, 1995 and 1994, respectively and 35%
and 36% for the six month periods ended November 30, 1995 and 1994,
respectively. These decreased tax rates are a result of research and
development tax credits and tax exempt interest income.
Net Income
Net income for the second quarter of fiscal 1996 was $5,734,000, an increase
of $2,217,000 (63%), as compared to the same period of the prior year.
Earnings per share for the quarter ended November 30, 1995 and 1994 were $0.24
and $0.17, respectively . The fully diluted number of common and common
equivalent shares outstanding for the second quarter of fiscal 1996 was
24,346,000, an increase of 4,168,000 (21%) as compared to the same period last
year. This increase is primarily a result of 3,162,500 shares issued in the
supplementary stock offering completed in June, 1995, and shares issued under
Company stock plans.
Net income for the first six months of fiscal 1996 was $10,708,000, an
increase of $4,114,000 (62%), as compared to the same period of the prior
year. Earnings per share for the six months ended November 30, 1995 and 1994
were $0.44 and $0.33, respectively. The fully diluted number of common and
common equivalent shares outstanding for the six month period was 24,260,000,
an increase of 4,145,000 (21%) as compared to the same period last year. This
increase is primarily a result of 3,162,500 shares issued in the supplementary
stock offering completed in June, 1995, and shares issued under Company stock
plans.
Liquidity and Capital Resources
Net cash provided by operating activities was $14,378,000 for the six months
ended November 30, 1995, a decrease of $602,000 (4%). Cash flows from
operations for the first six months of fiscal 1996, consisting of net income
adjusted for depreciation, amortization and provision for bad debts, totaled
$23,001,000, an increase over the same period in the previous fiscal year of
$6,095,000, offset by a reduction of accounts payable and merchant processing
liabilities.
Cash used in investing activities was $4,776,000 compared to the prior year of
$34,494,000. In the first six months of fiscal 1995, four business
acquisitions were made totaling $32,340,000, net of cash acquired.
Net cash provided by financing activities was $60,545,000, an increase of
$64,529,000 over the prior year. The net proceeds from the issuance of stock
under the secondary offering (as discussed in Note 3) were $63,652,000. Net
proceeds from employee stock purchases increased $2,476,000 over the same six
month period last year. Dividends of approximately $3,418,000 and $2,796,000
were paid in the six month periods ending November 30, 1995 and 1994,
respectively.
The Company has entered into a $15,000,000, committed working capital line of
credit expiring in August 1996. In addition, the Company has a $40,000,000
committed acquisition line of credit which expires in August 1996. The
Company believes funds generated from operations along with its committed
lines of credit and the $100,887,000 cash on hand is adequate to meet normal
business operating needs, including possible acquisitions.
Stockholders' Equity
Stockholders' equity increased $75,170,000 (62%), from May 31, 1995 to
$197,693,000 at November 30, 1995, principally the result of the secondary
offering as discussed in Note 3.
Part II
ITEM 1 - PENDING LEGAL PROCEEDINGS
None
ITEM 2 - OTHER INFORMATION
None
ITEM 3 - EXHIBITS AND REPORTS FILED ON FORM 8-K
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on October 26, 1995. At
the annual meeting, the stockholders of the Company approved the following
items:
1. Election of two directors in Class III, Don W. Sands and J. Veronica
Biggins, to serve until the annual meeting of stockholders in 1998 and
thereafter until their successors are duly elected and qualified;
2. Amendment of the Company's 1987 Stock Option Plan to increase the
number of shares that may be issued thereunder from 3,787,500 to
5,287,500, and to limit total grants of options thereunder to any
individual to not more than 1,500,000 shares;
3. Amendment of the Company's 1983 Restricted Stock Plan to increase the
number of shares that may be issued thereunder from 487,500 to
750,000, and to add a performance-based award feature to the plan;
4. Adoption of the Company's 1995 Non-Employee Director Compensation
Plan;
5. Amendment of the Company's 1984 Non-Employee Director Stock Option
Plan to provide for a new series of five additional grants of stock
options to purchase 5,000 shares per grant to non-employee directors,
to extend exercise rights to the expi ration date of the option and to
establish a five year vesting schedule;
6. Adoption of the Company's 1995 Performance-Based Executive Officer
Bonus Plan; and
7. Amendment of the Company's Certificate of Incorporation to increase
the number of shares of Common Stock of the Company authorized for
issuance from 30,000,000 to 60,000,000.
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.
National Data Corporation
(Registrant)
Date: January 15, 1996 By: /s/ Jerry W. Braxton
__________________ _______________________
Jerry W. Braxton
Chief Financial Officer