SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 2001
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Commission File No. 001-12392
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NATIONAL DATA CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 58-0977458
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(State or other jurisdiction of (IRS Employer
incorporation) Identification Number)
National Data Plaza, Atlanta, Georgia 30329-2010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 728-2000
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N/A
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(Former name, former address and former fiscal year, if
changed since last year)
Item 7. Financial Statements and Exhibits
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Exhibit 99.1
(a) Press Release dated July 19, 2001
(b) Schedules:
1) National Data Corporation (unaudited) Consolidated Statements
of Income (normalized) for the fourth quarter ended May 31,
2001 and May 31, 2000,
2) National Data Corporation (unaudited) Consolidated Statements
of Income (Loss) (GAAP) for the fourth quarter ended May 31,
2001 and May 31, 2000,
3) National Data Corporation (unaudited) Consolidated Statements
of Income (normalized) for the fiscal year ended May 31, 2001
and May 31, 2000,
4) National Data Corporation (unaudited) Consolidated Statements
of Income (Loss) (GAAP) for the fiscal year ended May 31, 2001
and May 31, 2000,
5) National Data Corporation (unaudited) Consolidated Balance
Sheets for May 31, 2001 and May 31, 2000,
6) National Data Corporation (unaudited) Consolidated Statements
of Cash Flows for the fiscal years ended May 31, 2001 and May
31, 2000,
7) National Data Corporation (unaudited) Consolidated Statements
of Income (normalized) for fiscal 1999, 2000 (by quarter) and
2001 (by quarter). (Normalized for certain items discussed
below), and
8) National Data Corporation (unaudited) Consolidated Statements
of Income or (Loss) (GAAP) for fiscal 1999, 2000 (by quarter)
and 2001 (by quarter).
Item 9. Regulation FD Disclosure
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On July 19, 2001, National Data Corporation issued a press release
which is filed herewith as Exhibit 99.1 (a) and (b) 1, 2, 3, 4, 5 and 6 and
incorporated in this Item 9 by this reference.
General
On January 31, 2001, National Data Corporation completed the spin-off of
our Global Payments Inc. subsidiary.
As an indication of the historical performance of the continuing
NDCHealth business, in Exhibit 99.1 (b) 7 to this report, we have provided
certain financial information regarding NDCHealth, the stand-alone healthcare
information business segment that remains after the spin-off of Global Payments
Inc. These stand alone NDCHealth consolidated income statements for fiscal 1999,
2000 and 2001 have been "normalized" by adjusting for the following:
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a) Discontinued operations, net of tax, for all periods (discussed
below),
b) Restructuring and impairment charges in the amount of $34.4 million
and $2.2 million previously recorded in the second quarter of
fiscal 2000 and the second quarter of fiscal 2001, respectively
(discussed below),
c) Unusual expenses in the amount of $11.1 million also previously
recorded in the second quarter of fiscal 2000 (discussed below),
d) Other income related to the gain from sale of marketable securities
in the amount of $1.6 million previously recorded in the first
quarter of fiscal 2000,
e) Other income related to the gain on the divestiture of a business
in the amount of $2.3 million previously recorded in the second
quarter of fiscal 2000,
f) Other expense related to the non-cash loss recorded to mark to
market the Medscape, Inc. investment in the amounts of $9.7 million
and $7.0 million previously recorded in the fourth quarter of
fiscal 2000 and the fourth quarter of fiscal 2001, respectively,
and
g) Revenue and operating expenses related to divested businesses, as
follows:
1) Fiscal 1999: Revenue $68.2 million; and Operating Expenses
$58.9 million.
2) Fiscal 2000: Revenue $56.4 million; Operating Expenses $57.2
million; and Other Income $0.7 million.
3) Quarter ended August 31, 2000: Revenue $5.6 million; and
Operating expenses $5.3 million.
4) Quarter ended November 30, 2000: Revenue $0.2 million; and
Operating expenses $0.2 million.
5) Quarter ended February 28, 2001: No adjustments were made.
6) Quarter ended May 31, 2001: No adjustments were made.
h) Incremental Sales, General and Administrative expenses associated
with being a separate public company of approximately $2.3 million
have been added to fiscal 1999 and 2000. These expenses are
estimates for the additional functionality needed for corporate
activities such as legal, financial, human resources, communication
and similar functions.
In addition to the stand alone NDCHealth (unaudited) consolidated income
statements (normalized) described above, Exhibit 99.1 (b) 8 presents the
National Data Corporation (unaudited) consolidated income statements (GAAP) for
fiscal 1999, 2000 and 2001. The Global Payments data, along with data from other
businesses discontinued by NDCHealth as described below, is recorded as
discontinued operations in Exhibits 99.1 (b) 2, 4, 5, 6 and 8.
Operating costs and expenses in these income statements reflect direct charges
of the business together with certain allocations by NDC for corporate services
and other shared services that have been charged to the NDCHealth business on a
reasonable and consistent basis. Except for the adjustments (estimated
incremental Sales, General and Administrative expenses associated with being a
separate public company) described above, these allocations approximate all
material incremental costs management believes would have been incurred had we
been operating on a stand-alone basis.
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NDC corporate interest expense has been allocated to NDCHealth based on the
corporate debt allocations to NDCHealth and Global Payments at the spin-off
date. This treatment recorded an appropriate debt allocation and interest
expense percentage for all historical periods presented. The total convertible
debt remained with NDCHealth. The allocated debt amount was less than this total
convertible debt; therefore, Global Payments Inc. had a liability to NDCHealth
for its net portion of the outstanding debt. As of January 31, 2001, this net
amount due from Global Payments Inc. to NDCHealth was $77.6 million. At the date
of the spin-off and shortly thereafter, Global Payments Inc. made net cash
payments to NDCHealth equal to $77.6 million.
Financial Results
During the last 24 months, NDCHealth completed a significant strategy review and
implemented a plan to focus on its core products and services. As a result, the
last two years represented a major transition period for NDCHealth. As a part
of that plan, NDCHealth determined to divest its PHSS (Physician and Hospital
Support Services) businesses in the third quarter of fiscal 2000. The sale of
these PHSS units as well as our related health management services businesses
was completed in the first quarter of fiscal 2001. The PHSS portion of these
businesses is accounted for as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations" and prior periods have been restated to reflect this treatment.
During the last year NDCHealth has also divested other non-core products and
services. The financial results for fiscal 2001 include $5.5 million of
corporate and division overhead previously allocated to these divested
businesses.
In addition to these divestitures, other actions were initiated by management as
a part of the strategic review, including acceleration of clearing house
integration, consolidation of locations, associated staff and expense
reductions, and elimination of obsolete and redundant product and service
offerings. Total charges related to restructuring and asset impairment were
$34.4 million during fiscal 2000.
During the second quarter of fiscal 2000, management also evaluated certain
significant business risks related to recent acquisitions and those locations
that were closed as part of the strategic review, including bankrupt accounts
and customer disputes. As a result of this review, unusual expenses were
recorded in the second quarter of fiscal 2000 as follows: accounts receivable
write-off of $8.0 million; bad debt allowance increases of $2.0 million;
litigation settlement expenses of $1.3 million; and write-off of $0.8 million of
prepaid expenses and recording of $1.2 million of accrued expenses.
Approximately $2.2 million of these unusual expenses were related to the PHSS
operation and are reflected in the results of the discontinued operations.
Accordingly, the results of fiscal 2000 include approximately $45.5 million of
charges related to restructuring and asset impairment ($34.4 million) and other
unusual expenses ($11.1 million).
At the end of the second quarter of fiscal 2000, we disclosed that we would have
additional restructuring and other unusual charges of up to $10 million in the
next twelve months. In the second quarter of fiscal 2001, our Salt Lake City
and a Cleveland
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operation were closed. We also wrote down and divested a managed care operation.
Therefore, in the second quarter of fiscal 2001, $2.2 million of restructuring
and impairment charges are reflected. These actions essentially complete all of
the programs identified in our strategic review. The financial results for the
first half of fiscal 2001 also include $0.9 million of transition expenses
related to the spin-off.
We believe that NDCHealth is well positioned to provide processing products and
services to the healthcare industry in the future. For fiscal year 2002, our
expectation is that revenue for the full year will be $375-385 million resulting
in diluted earnings per share of $1.10 to $1.14 excluding the impact of the
accounting change described below.
The FASB recently approved a statement on "Goodwill and other Intangible
Assets" which deals with, among other things, proposed changes in amortization
of goodwill. We expect to implement this accounting change beginning with the
first quarter of fiscal 2002. At the end of the third quarter, we had estimated
that the impact on earnings per share would be approximately $0.06 in the third
quarter based on the goodwill on the balance sheet as of February 28. Since that
time, we have announced our intention to divest the assets associated with our
physician network services business to Medunite. The goodwill amortization
included with those assets equates to one cent per quarter. Assuming that the
Medunite Agreement closes in the first quarter, we estimate that the annual
impact of SFAS 142 will be to add $0.20 per year to diluted earnings per share
in fiscal 2002, resulting in an expected reported range of $1.30 to $1.34 in
diluted earnings per share for fiscal 2002. We estimate that the fiscal 2002 tax
rate will decline to 36.0% due to our application of this new standard.
To provide more specific guidance for the first quarter ending August 31, 2001,
we will be impacted by three factors: a) we expect that revenue will be impacted
by seasonality in the information management business, b) the closing of the
MedUnite transaction will impact results for a partial quarter, and c) we expect
to implement the accounting change described above effective June 1.
Accordingly, we expect revenue to be in the range of $86-89 million, resulting
in diluted earnings per share of $0.25-0.26, prior to the FASB impact, or
$0.30-0.31 after eliminating goodwill. Following the first quarter, we would
expect to see year over year and sequential increases in revenue and earnings in
quarters two, three and four.
Looking ahead to fiscal 2003, we believe we can sustain growth in our
existing markets. Excluding acquisitions, we would expect revenue and earnings
to grow at a mid-teens rate, with earnings growing faster than revenue.
As a result of the adjustments and the other principles and assumptions
discussed above, which are the basis of our presentation of the financial
schedules filed in Exhibit 99.1 (b) 1, 3 and 7, please note that these financial
schedules do not reflect our historical financial statements.
When used in this report, and the exhibits hereto, the words "believes,"
"anticipates," "plans," "expects," "intends" and similar expressions and
statements that are necessarily dependent on future events are intended to
identify forward-looking statements concerning the Company's business
operations, economic performance and financial condition, including in
particular, the Company's business strategy and means to implement the strategy,
the Company's objectives, the amount of future capital
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expenditures, the likelihood of the Company's success in developing and
introducing new products and expanding its business, the timing of the
introduction of new and modified products or services and competition, pricing,
development difficulties, the ability to consummate and integrate acquisitions,
the expected benefits and prospects for the alliance between the Company and
MedUnite. For such statements, the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995 is applicable and invoked. Such statements are based on a number of
assumptions, estimates, projections or plans that are inherently subject to
significant risks, uncertainties and contingencies that are subject to change.
Actual revenues, revenue growth and margins will be dependent upon all such
factors and results subject to risks related to the implementation of changes by
the Company, the failure to implement changes, customer acceptance of such
changes or lack of change. Actual results of events could differ materially from
those anticipated in the Company's forward-looking statements as a result of a
variety of factors, including: (a) those set forth in Exhibit 99.1 to the
Registrant's Annual Report on Form 10-K for the period ended May 31, 2000 which
are incorporated herein by this reference; (b) those set forth elsewhere herein;
(c) those set forth from time to time in the Company's press releases and
reports and other filings made with the Securities and Exchange Commission; and
(d) those set forth from time to time in the Company's analyst calls and
discussions. The Company cautions that such factors are not exclusive.
Consequently, all of the forward-looking statements made herein are qualified by
these cautionary statements and readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to update forward-looking or other
statements or to publicly release the results of any revisions of such forward-
looking statements that may be made to reflect events or circumstances after the
date hereof, or thereof, as the case may be, or to reflect the occurrence of
unanticipated events.
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SIGNATURE
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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 hereunto duly authorized.
NATIONAL DATA CORPORATION
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(Registrant)
By: /s/ David H. Shenk
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David H. Shenk
Vice President & Corporate Controller
(Chief Accounting Officer)
Date: July 19, 2001
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