EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. National Data Corporation ("NDC" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All forward-
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of NDC. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, NDC undertakes no obligation to update
or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
NDC provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward-looking statements for
the safe harbor protection of the Reform Act and any other similar safe harbor
provisions. Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements
include the disclosures contained in the Annual Report on Form 10-K to which
this statement is appended as an exhibit and also include the following:
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of the potential for computer programs to
improperly interpret dates in the year 2000 and beyond. Certain of the
Company's computer systems used for product or internal use that have time/date-
sensitive software and hardware may misinterpret dates resulting in a system
failure or miscalculation.
The Year 2000 issue creates risk for the Company from unforeseen problems in its
own computer systems and from third parties upon which the Company relies.
Accordingly, the Company is requesting assurances from certain software vendors
from which it has acquired, or from which it may acquire software, that the
software will correctly process all date information at all times. In addition,
the Company is querying certain of its customers and suppliers as to their
progress in identifying and addressing problems that their computer systems will
face in correctly processing date information as the Year 2000 approaches and is
reached. The Company is heavily reliant upon customers and other third parties
in the health care, banking and credit card industries, in terms of electronic
interfaces. Failure to appropriately address the Year 2000 issue by major
customers or suppliers or a material percentage of the smaller customers could
have a material adverse effect on the financial condition and results of
operations of the Company. Testing is being performed as required and is
dependent on third parties. The Company continues to actively pursue these
dependencies to schedule required testing.
At this time, the Company does not expect any material research and development
activities to be delayed due to the Year 2000 compliance efforts. However, if
certain initiatives are delayed, the result could have an adverse effect to the
Company.
In order for the testing phase of the Year 2000 plan to be completed, the
Company is reliant upon its customers and other third party connection points to
prepare their systems for testing. The Company could be affected if a
significant number of customers delay testing or conversions until the end of
1999. The Company has been active in advising customers and business partners of
their obligation and the Company continues to evaluate the impact of those
customers who have not yet coordinated with the Company for upgrades,
certification/verification and testing.
The customers with the greatest revenue impact have been identified and their
testing/certification process is being analyzed. Testing has been completed
and/or scheduled for substantially all key systems. If coordination of a preset
testing time is not possible, the revenue impact for the accommodation of last
minute testing is being evaluated. The goal is to ensure that products with
significant revenues are fully ready, tested and implemented before October 31,
1999, so that the Company's overall revenue is not materially impacted.
The Company's business is also heavily reliant upon external suppliers to
provide certain operating elements of its business. Some of these providers
include telecommunication services, computer systems, banks and utility
companies. Due diligence continues to be performed on suppliers to the Company
as described in Phases III, IV and V. Inquiries are made regarding suppliers'
Year 2000 efforts and contingency plans are developed as necessary. However,
the Company exerts no control over the efforts of these companies to become Year
2000 compliant. The services provided by these parties are critical to the
operations of the Company and the Company is heavily reliant upon these parties
to successfully address the Year 2000 issue. Therefore, if any of these parties
fail to provide the Company with services, the Company's ability to conduct
business could be materially impacted. The result of such impact may have a
material adverse effect on the financial condition and results of operations of
the Company.
COMPETITION AND CONSOLIDATION
The markets for the applications systems and services offered by NDC are
highly competitive. Competition in the health care information services and
electronic commerce markets affects NDC's ability to gain new customers and the
prices it can charge. The key competitive factors for NDC are functionality of
products and services, quality and price. Some of NDC's competitors have access
to significant capital and management, marketing and technological resources
that are equal to or greater than those of NDC, and there can be no assurance
that NDC will continue to be able to compete successfully with them. In
addition, NDC competes with businesses that internally perform data processing
or other services offered by NDC.
In addition, there has been and continues to be significant consolidation
in the banking and health care industries. The Company markets its credit,
charge and debit card transaction services through several marketing channels,
including banks. As a result of consolidation, banks that market the Company's
financial services may be acquired by banks that compete with the Company or by
banks that have a relationship with one or more of the Company's competitors,
thereby potentially depriving the Company of a distribution channel. The
consolidation of health care providers and other parts of the industry may
reduce the number of potential customers for the Company's health care related
services and the increased purchasing power of these larger consolidated
organizations could lead to reductions in the amounts paid for such services.
The overall impact of such consolidation in the electronic commerce and health
care industries is difficult to predict and could have a material adverse effect
on the Company's business, financial condition and results of operations.
MARKETS AND APPLICATIONS
NDC's future growth and profitability will depend, in part, upon the
further expansion of the health care information services and electronic
commerce markets, the emergence of other markets for electronic transaction
processing services and NDC's ability to penetrate such markets. Further
expansion of these markets is dependent upon the continued growth in demand, the
continued automation of traditional paper-based processing systems and demand
for new decision support applications. NDC's ability to penetrate such markets
will depend, in turn, upon its ability to apply its existing technology, or to
develop new technology, to meet the particular service needs of each new market.
There can be no assurance that markets for NDC's services will continue to
expand and develop or that NDC will be successful in its efforts, or have
adequate financial, marketing and technological resources to penetrate new
markets.
HEALTH INFORMATION SERVICES
Federal and state governments have recently focused significant attention
on health care reform. It is not possible to predict which, if any, proposal
that has been or will be considered will be adopted. There can be no assurance
that the health care regulatory environment will not change so as to restrict
the existing operations of, impose additional requirements on or limit the
expansion of NDC. Costs of compliance with changes in government regulations may
not be subject to recovery by NDC through price increases.
Significant media and public attention has recently been focused on the
health care industry due to ongoing federal and state investigations purportedly
related to certain referral and billing practices. The Office of the Inspector
General and the Department of Justice have initiated hospital laboratory billing
review projects in certain states and are expected to extend such projects to
additional states, including states in which NDC operates. These projects
increase the likelihood of governmental investigations of hospitals,
laboratories and other institutions for which NDC perform services. Although NDC
currently monitors billing practices and arrangements to ensure compliance with
prevailing industry practices under applicable laws, such laws are complex and
constantly evolving and there can be no assurance that governmental
investigators will not take positions that are inconsistent with industry
practices, including NDC's practices.
MEDICAL RECORD INFORMATION
The Department of Health and Human Services ("DHHS") has proposed
regulations under Health Insurance Portability and Accountability Act of 1996
("HIPAA") regarding the maintenance and transmission of health information.
These regulations establish certain standards for electronic record-keeping. The
Company cannot tell whether these regulations will be adopted in their present
or a different form, or at all. However, if these regulations are adopted, they
may require modifications to the Company's current computer software and record-
keeping practices. These changes may involve substantial capital investment,
and could have a significant effect on the Company's operations, financial
condition, or business.
ELECTRONIC COMMERCE BUSINESS
NDC's direct merchant customers have liability for charges disputed by
cardholders. However, in the case of merchant fraud, or insolvency or
bankruptcy of the merchant, NDC may be liable for any of such charges disputed
by cardholders. NDC requires cash deposits and other types of collateral by
certain merchants to minimize any such contingent liability. Based on its
historical loss experience, NDC has established reserves, which management
believes are adequate, for estimated losses on transactions processed. There can
be no assurance, however, that such reserves for losses will be adequate. Any
such losses in excess of reserves could have a material adverse effect on the
financial condition and results of operations of NDC.
ACQUISITION RISKS
NDC completed six acquisitions in fiscal 1998 and one in fiscal 1999 and
intends to seek additional acquisition opportunities and alliance relationships
with other businesses that will allow it to increase its market penetration,
technological capabilities, product offerings and distribution capabilities.
There can be no assurance that NDC will be able successfully to identify
suitable acquisition candidates, complete acquisitions or expand into new
markets. As a result of the acquisitions of each of Source Informatics Inc.
("Source"), PMSI Database Holdings Inc. ("PMSI Database") and Physician Support
Systems, Inc. ("PHSS"), NDC is currently devoting significant management and
other resources toward the assimilation of these businesses with NDC,
particularly PHSS. There can be no assurance that NDC will be able to
successfully integrate the operations of acquired businesses into NDC's
operations. In addition, there can also be no assurance that future
acquisitions will not have an adverse effect upon NDC's operating results,
particularly in the fiscal quarters immediately following the completion of such
acquisitions while the operations of the acquired business are being integrated
into NDC's operations. Once integrated, acquired operations may not achieve
levels of revenue growth, profitability or productivity comparable with those
achieved by NDC's existing operations, or otherwise perform as expected.
Specifically, with regard to the acquisition of Source, certain products
currently under development may never reach technological feasibility, which
could have a material adverse effect upon NDC's operating results. NDC may
incur indebtedness in the future, including through borrowings under a credit
facility, if a credit facility is available, to finance acquisitions. As a
result, NDC expects to be subject to risks associated with debt financing,
including the risk that interest rates may increase, the risk that NDC's cash
flow will be insufficient to meet required payments on its debt and the risk
that NDC may be unable to refinance or repay the debt as it comes due. In
addition, NDC competes for acquisition and expansion opportunities with
companies that have substantially greater resources.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW, CERTAIN CHARTER AND BY-LAW
PROVISIONS AND STOCKHOLDER RIGHTS PLAN
Certain provisions of NDC's Certificate of Incorporation and By-laws could
delay, defer or prevent a takeover attempt that a stockholder might consider in
its best interest. These provisions may adversely affect prevailing market
prices for NDC Common Stock. These provisions, among other things, classify
NDC's Board of Directors into three classes as nearly equal in number as the
total number of directors permits, each of which serve for different three-year
terms, and authorize the Board of Directors to issue preferred stock in one or
more classes or series and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any action on the part of the stockholders. The rights of the holders of NDC
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of NDC. NDC has no current plans to issue shares of
preferred stock. NDC also maintains a stockholder rights plan which entitles the
stockholders of NDC, upon the happening of certain events, to purchase preferred
stock of NDC. These NDC Rights (hereinafter defined) may have certain anti-
takeover effects because the rights will cause substantial dilution to a person
or group that attempts to acquire NDC on terms not approved by the Board of
Directors of NDC unless the offer is conditioned on a substantial number of NDC
Rights being acquired. In addition, Section 203 of the Delaware General
Corporation Law (the "DGCL") prohibits certain persons from engaging in business
combinations with NDC, which may also have the effect of delaying, deterring or
preventing a change of control of NDC.
NEW PRODUCT INTRODUCTIONS
The market for NDC's products and services is characterized by rapid
technological change, frequent new product introductions, evolving industry
standards and changing customer needs. There can be no assurance that NDC will
be successful in developing and marketing these new products and services or
that NDC's current or new products and services will adequately meet the quickly
changing demands of their customers. In addition, in order to meet its
customers' demands, NDC is continually involved in a number of development
projects, including NDC Health Information Services' efforts to update its core
mainframe-based products. Because it is generally not possible to predict the
time required and costs involved in reaching certain research, development and
engineering objectives, estimated product development schedules could require
extensions. NDC believes that the future success of its NDC Health Information
Services will depend in large part on its ability to maintain and enhance its
current product and service offerings and to continually develop and introduce
new products and services that will keep pace with technological advances and
satisfy evolving customer requirements. Further, there can be no assurance that
NDC will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products and services. If NDC
is unable to develop and introduce new products and services in a timely manner,
or if a new or updated product does not achieve market acceptance, NDC's
financial condition and results of operations could be materially adversely
affected.