SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
- ------ Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------ Exchange Act of 1934
For the transition period from to
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Commission File Number 0-19598
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AMERICAN BUSINESS INFORMATION, INC.
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(exact name of registrant specified in its charter)
Delaware 47-0751545
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
5711 South 86th Circle, Omaha, Nebraska 68127
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 593-4500
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(Former name, former address and former fiscal year, if changed since
last report)
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 at least the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
20,791,735 shares of common stock at April 26, 1996
AMERICAN BUSINESS INFORMATION, INC.
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION 2
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II - OTHER INFORMATION 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of March 31, 1996 and December 31, 1995
(In thousands, except share amounts)
ASSETS
------ March 31, 1996 December 31, 1995
-------------- -----------------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,974 $11,999
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,004 23,350
Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . 20,051 19,215
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,001 1,733
Deferred marketing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,972 996
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,002 57,293
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,375 13,885
Net assets of business transferred under contractual arrangement . . . . . . . . . 2,960 2,972
Intangible assets, net of accumulated amortization . . . . . . . . . . . . . . . . 14,960 14,642
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,999 1,999
------- -------
$93,296 $90,791
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ 463 $ 969
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,124 4,254
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,529 143
Accrued payroll expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,990 2,205
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,466 1,891
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334 123
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10,906 9,585
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . 792 1,070
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,471 1,707
Shareholders' 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 20,791,735 shares at March 31, 1996
and 20,776,860 at December 31, 1995 . . . . . . . . . . . . . . . . . . . . 51 51
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,416 27,342
Net unrealized holding gain (loss), net of tax . . . . . . . . . . . . . . . . (331) (246)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,991 51,282
------- -------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 80,127 78,429
------- -------
$93,296 $90,791
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
3
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1996 and 1995
(In thousands, except per share amounts)
Three Months Ended
March 31
-------------------
1996 1995
---- ----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,785 $22,357
Costs and expenses:
Database and production costs . . . . . . . . . . . . . . . . . . . . . . 6,536 5,645
Selling, general and administrative . . . . . . . . . . . . . . . . . . . 10,152 9,605
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 902 832
------- -------
17,590 16,082
------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,195 6,275
Other income (expense):
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 31
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) (56)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (162)
------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 7,594 6,088
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,885) (2,275)
------- -------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,709 $ 3,813
======= =======
Earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.23 $ 0.19
======= =======
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . 20,783 20,685
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
4
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
(In thousands)
Three Months Ended
March 31
-----------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,709 $ 3,813
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 902 832
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 975 487
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 287
Changes in assets and liabilities:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (836) (731)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,268) (1,097)
Deferred marketing costs . . . . . . . . . . . . . . . . . . . . . . . . (976) -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130) 1,451
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,386 1,588
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (763) 1,170
------- -------
Net cash provided by operating activities . . . . . . . . . . . . . 4,038 7,800
Cash flows from investing activities:
Proceeds from sale of marketable securities . . . . . . . . . . . . . . . . . 1,483 5,108
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . (2,337) (9,490)
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . (1,972) (1,175)
Purchase of minority interest . . . . . . . . . . . . . . . . . . . . . . . . - (900)
Capitalization of software development costs . . . . . . . . . . . . . . . . (620) -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 (149)
------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . (3,358) (6,606)
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (779) (210)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . - 289
Repurchase and retirement of common stock . . . . . . . . . . . . . . . . . . (5,589) -
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 2,663 89
------- -------
Net cash provided by (used in) financing activities . . . . . . . . (3,705) 168
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . (3,025) 1,362
Cash and cash equivalents, beginning . . . . . . . . . . . . . . . . . . . . . . . 11,999 13,491
------- -------
Cash and cash equivalents, ending . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,974 $14,853
======= =======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11 $ 24
======= =======
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,236 $ 200
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
5
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited financial statements have been prepared on
the same basis as the audited consolidated financial statements and, in
the opinion of management, contain all adjustments, consisting of normal
recurring adjustments, necessary to fairly present the financial
information included therein. The December 31, 1995 Consolidated
Balance Sheet was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles.
The Company suggests that this financial data be read in conjunction
with the audited consolidated financial statements and notes thereto for
the year ended December 31, 1995 included in the Company's 1995 Annual
Report to the Securities and Exchange Commission on Form 10-K. Results
for the interim period presented are not necessarily indicative of
results to be expected for the entire year.
"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. CONSOLIDATED BALANCE SHEET DETAIL (IN THOUSANDS):
March 31, 1996 December 31, 1995
-------------- -----------------
Property and equipment:
Land and improvements $ 1,287 $ 1,032
Building and improvements 6,922 7,157
Furniture and equipment 17,509 15,439
Capitalized equipment leases 1,437 1,437
------- -------
27,155 25,065
Less accumulated depreciation
and amortization 11,780 11,180
------- -------
$15,375 $13,885
======= =======
March 31, 1996 December 31, 1995
-------------- -----------------
Intangible assets:
Goodwill $ 5,012 $ 5,012
Distribution networks 11,871 11,871
Noncompete agreements 150 150
Acquisition costs 1,319 1,319
Software development costs 1,051 431
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19,403 18,783
Less accumulated amortization 4,443 4,141
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$14,960 $14,642
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6
3. NET ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL AGREEMENT
On February 28, 1995, the Company agreed to acquire the minority
interest of American Business Communications, Inc. ("ABC") for $900,000.
On June 1, 1995, the Company transferred substantially all of the assets
and liabilities of its wholly-owned subsidiary ABC, to a wholly-owned
subsidiary of Baker University. The Company received $3.0 million in
the form of a 7.52% non-recourse promissory note, due in equal monthly
installments through 2005.
The impairment on the transfer of the net assets of ABC has been
accounted for in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin Topics 5-E and 5-Z. Revenues of
ABC were $1,661,000 from January 1, 1995 to March 31, 1995.
4. 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.
7
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
American Business Information, Inc. ("ABI") and its subsidiaries, ("the
Company"), provide business and consumer information to organizations
engaged in business-to-business and consumer marketing through products
and services derived from the Company's database. These products
include customized business lists, business directories, consumer lists
and other information services, such as CD-ROM directories, Online
Access and Internet Access.
In addition, ABI provides business and consumer directories for home
use. These directories are available in a series of CD-ROM titles,
which are distributed through national and local computer software
retail outlets.
RESULTS OF OPERATIONS
The following table sets out for the three month periods indicated,
certain items from the Company's statement of operations data expressed
as a percentage of net sales:
Three Months Ended
March 31
1996 1995
---- ----
Statement of Operations Data:
Net Sales 100% 100%
Costs and expenses:
Database and production costs 26 25
Selling, general and administrative 41 43
Depreciation and amortization 4 4
--- ---
Total costs and expenses 71 72
--- ---
Operating income 29 28
--- ---
Other income (expense) 2 -
--- ---
Income before income taxes 31 28
Income taxes 12 11
--- ---
Net Income 19% 17%
=== ===
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Net Sales
- ---------
Net sales increased 11% to $24.8 million in the first quarter of 1996
from $22.4 million in the same period of 1995. CD-ROM products posted
the largest gain, increasing 119% to $4.4 million from $2.0 million in
the prior year. The increase is a result of increased demand in
consumer retail channels as well as additional titles released in the
third quarter of 1995. Lead generation products increased 11% to $18.3
million from $16.5 million in the prior year. The increase is largely
the result of increased marketing efforts which began late in 1995.
Directory products posted a modest 7% decrease to $1.7 million from $1.9
million in the prior year. Voice and on-line service revenues accounted
for $400 thousand of net sales in 1996 as compared to $300 thousand in
1995.
The Company's net sales on a quarterly basis can be affected by the
timing and extent of the Company s own direct marketing activities and
the release of new products. There have been no significant price
increases for the majority of the Company's existing products and
services during the period.
Database and Production Costs
- -----------------------------
Database and production costs for the first quarter of 1996 were $6.5
million, or 26% of net sales, compared to $5.6 million, or 25% of net
sales, in the prior year quarter. These amounts primarily represent the
costs of compiling and telephone verifying information in the database,
fulfilling customer orders, the direct costs associated with the
production of CD-ROM titles, and royalty costs. The increase is
primarily the result of increased sales of CD-ROM products which bear a
slightly higher level of costs than the Company's traditional lead
generation products as well as production and shipping of free trial
products as part of the Company's increased marketing and promotional
activities.
Selling, General, and Administrative
- ------------------------------------
Selling, general and administrative expenses in the first quarter of
1996 were $10.1 million, or 41% of net sales, compared to $9.6 million,
or 43% of net sales, in the prior year quarter. The dollar increase is
principally the result of higher levels of direct marketing activities,
including catalog and promotional material mailings, as well as an
overall increase in sales personnel.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expense for the three months ended March
31, 1996 increased to $902,000 from $832,000 in the comparable 1995
period, primarily due to increased depreciation on property and
equipment.
9
Operating Income
- ----------------
Operating income for the first quarter of 1996 increased to $7.2
million, or 29% of net sales, compared to $6.3 million, or 28% of net
sales in the first quarter of 1995.
Other Income
- ------------
Investment income for the 1996 first quarter was $399,000 compared to
$(25,000) in the same quarter of 1995. This increase is attributable to
realized losses in the amount of $287,000 due to the investment
restructuring of the Company's investment portfolio in the prior year
quarter.
Provision for Income Taxes
- --------------------------
A provision for income taxes has been recorded on the Company's first
quarter 1996 earnings at a combined effective federal and state tax rate
of 38%, compared to the first quarter 1995 combined effective rate of
37%. The increase in the effective rate is a result of state income
taxes and the mix of states in which the Company conducts its business.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $9.0 million and marketable
securities of $24.0 million. The Company also has a revolving line of
credit totaling $5.0 million, which had no outstanding balance at March
31, 1996.
Net cash provided by operating activities for the first quarter 1996
totaled $4.0 million as compared to $7.8 million in the first quarter
1995. The decrease was attributable primarily from higher levels of
receivables from sales of consumer CD-ROM products, deferred marketing
costs due to an increase in direct marketing programs and from the
payment of accrued expenses. The Company spent approximately $1.5
million on upgrades to data processing equipment and $500,000 related to
building and improvements to its Omaha facility. The Company
anticipates spending an additional $4.5 million in 1996 for equipment
and facility expansion.
The Company believes that cash flows from operations, its cash and short
term investments, and its borrowing facilities will be sufficient to
fund its operations for at least the next twelve months. However, if
the Company acquires additional companies or products, additional
financing may be required.
10
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART II
OTHER INFORMATION
11
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1996
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
11 Statement regarding computation
of per share earnings
(b) Report on Form 8-K
None
12
S I G N A T U R E S
-------------------
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.
AMERICAN BUSINESS INFORMATION, INC.
-----------------------------------
Date: 5/14/96 /s/ Jon H. Wellman
----------------- -----------------------
Jon H. Wellman
Chief Financial Officer
13
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
11 Statement regarding computation of
per share earnings
14