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 June 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------ Exchange Act of 1934
For the transition period from to
-------- --------
Commission File Number 0-19598
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AMERICAN BUSINESS INFORMATION, INC.
---------------------------------------------------
(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
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 593-4500
--------------------------
(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
----------- -----------
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.
20,810,935 shares of common stock at August 2, 1996
AMERICAN BUSINESS INFORMATION, INC.
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION 2
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the three
months and six months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
PART II - OTHER INFORMATION 12
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 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 June 30, 1996 and December 31, 1995
(In thousands, except share amounts)
ASSETS
------ June 30, 1996 December 31, 1995
------------- -----------------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,361 $11,999
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,433 23,350
Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . 19,548 19,215
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,899 1,733
Deferred marketing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,301 996
------- -------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,542 57,293
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,773 13,885
Net assets of business transferred under contractual arrangement . . . . . . . . . 2,874 2,972
Intangible assets, net of accumulated amortization . . . . . . . . . . . . . . . . 14,993 14,642
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,999 1,999
------- -------
$96,181 $90,791
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ 469 $ 969
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,342 4,254
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 143
Accrued payroll expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,854 2,205
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,411 1,891
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 123
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 8,511 9,585
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . 672 1,070
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,483 1,707
Stockholders' equity:
Preferred stock, $.0025 par value. Authorized 5,000,000 shares;
none issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock, $.0025 par value. Authorized 75,000,000 shares;
issued and outstanding 20,810,935 shares at June 30, 1996
and 20,776,860 at December 31, 1995 . . . . . . . . . . . . . . . . . . . . 52 51
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,574 27,342
Net unrealized holding loss, net of tax . . . . . . . . . . . . . . . . . . . . (478) (246)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,367 51,282
------- -------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 84,515 78,429
------- -------
$96,181 $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 and six months ended June 30, 1996 and 1995
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales . . . . . . . . . . . . . . . . . . . . . . $24,325 $22,479 $49,110 $44,836
Costs and expenses:
Database and production costs . . . . . . . . . . 6,916 6,310 13,452 11,955
Selling, general and administrative . . . . . . . 10,113 9,309 20,265 18,914
Impairment of net assets of business transferred
under contractual arrangement . . . . . . . . - 2,640 - 2,640
Depreciation and amortization . . . . . . . . . . 903 807 1,805 1,639
------- ------- ------- -------
17,932 19,066 35,522 35,148
------- ------- ------- -------
Operating income . . . . . . . . . . . . . . . . . . 6,393 3,413 13,588 9,688
Other income (expense):
Investment income . . . . . . . . . . . . . . . . 635 462 1,045 493
Interest expense . . . . . . . . . . . . . . . . (22) (32) (33) (88)
Other . . . . . . . . . . . . . . . . . . . . . . - - - (162)
------- ------- ------- -------
Income before income taxes . . . . . . . . . . . . . 7,006 3,843 14,600 9,931
Income taxes . . . . . . . . . . . . . . . . . . . . 2,630 1,461 5,515 3,736
------- ------- ------- -------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 4,376 $ 2,382 $ 9,085 $ 6,195
======= ======= ======= =======
Earnings per share:
Net income . . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.12 $ 0.44 $ 0.30
======= ======= ======= =======
Weighted average shares outstanding . . . . . . . . . 20,801 20,719 20,792 20,704
======= ======= ======= =======
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 six months ended June 30, 1996 and 1995
(In thousands)
Six Months Ended
June 30
--------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,085 $ 6,195
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 1,805 1,639
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 1,538 (1,081)
Impairment of other assets . . . . . . . . . . . . . . . . . . . . . . - (630)
Impairment of net assets of business transferred under contractual
arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,640
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93) 200
Changes in assets and liabilities
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (333) (1,025)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,166) (347)
Deferred marketing costs . . . . . . . . . . . . . . . . . . . . . . . . (1,305) -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (912) 806
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 407 (668)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (831) 865
------- -------
Net cash provided by operating activities . . . . . . . . . . . . . 8,195 8,594
Cash flows from investing activities:
Proceeds from sale of marketable securities . . . . . . . . . . . . . . . . . 3,230 8,935
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . (4,755) (16,275)
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . (2,787) (1,526)
Acquisition of businesses, including minority interest . . . . . . . . . . . - (1,150)
Capitalization of software development costs . . . . . . . . . . . . . . . . (980) -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 -
------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . (5,168) (10,016)
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (897) (1,983)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . - 289
Repurchase and retirement of common stock . . . . . . . . . . . . . . . . . . (5,589) -
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 2,821 646
------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . (3,665) (1,048)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . (638) (2,470)
Cash and cash equivalents, beginning . . . . . . . . . . . . . . . . . . . . . . . 11,999 13,491
------- -------
Cash and cash equivalents, ending . . . . . . . . . . . . . . . . . . . . . . . . . $11,361 $11,021
======= =======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 $ 89
======= =======
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,894 $ 5,737
======= =======
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):
June 30, 1996 December 31, 1995
------------- -----------------
Property and equipment:
Land and improvements $ 1,457 $ 1,032
Building and improvements 7,608 7,157
Furniture and equipment 17,630 15,439
Capitalized equipment leases 1,437 1,437
------- -------
28,132 25,065
Less accumulated depreciation
and amortization 12,359 11,180
------- -------
$15,773 $13,885
======= =======
June 30, 1996 December 31, 1995
------------- -----------------
Intangible assets:
Goodwill $ 5,012 $ 5,012
Distribution networks 11,871 11,871
Noncompete agreements 150 150
Acquisition costs 1,369 1,319
Software development costs 1,336 431
------- -------
19,738 18,783
Less accumulated amortization 4,745 4,141
------- -------
$14,993 $14,642
======= =======
6
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. NET ASSETS OF BUSINESS TRANSFORMED UNDER CONTRACTUAL ARRANGEMENT
On June 1, 1995, the Company transferred substantially all of the assets
and liabilities of its wholly-owned subsidiary, American Business
Communications, Inc. ("ABC"), to a wholly-owned subsidiary of Baker
University. ABC provides continuing education programs and products to
small and medium-sized businesses. 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 from April 1, 1995 through the date of sale were $1,269 and were
$2,929 from January 1, 1995 through the date of sale.
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 and six month periods
indicated, certain items from the Company's statement of operations data
expressed as a percentage of net sales:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
Statement of Operations Data:
Net Sales 100% 100% 100% 100%
Costs and expenses:
Database and production costs 28 28 27 26
Selling, general and administrative 42 42 41 42
Impairment of net assets of
business transferred - 12 - 6
Depreciation and amortization 4 4 4 4
--- --- --- ---
Operating income 26 14 28 22
Investment income, net 3 2 2 1
--- --- --- ---
Income before income taxes and
discontinued operation 29 16 30 23
Income taxes 11 5 11 9
--- --- --- ---
Income from continuing operations 18% 11% 19% 14%
=== === === ===
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Net Sales
- ---------
Net sales increased 8% to $24.3 million for the three months ended June
30, 1996 from $22.5 million in the second quarter of 1995. For the six
month period ended June 30, 1996, net sales were $49.1 million, a 10%
increase from $44.8 million in the comparable period in 1995.
Lead generation product net sales increased 15% to $18.6 million for the
three months ended June 30, 1996, from $16.1 million in the second
quarter of 1995. For the six month period ended June 30, 1996, lead
generation products were $36.9 million, a 13% increase from $32.6
million in the comparable period in 1995. The increases for the
comparable three and six month periods are largely the result of
increased marketing efforts which began late in 1995.
CD-ROM product net sales increased 13% to $3.2 for the three months
ended June 30, 1996 from $2.8 million in the second quarter of 1995. For
the six month period ended June 30, 1996, CD-ROM products were $7.5
million, a 57% increase from $4.8 million in the comparable period in
1995. The increase is a result of increased demand in consumer retail
channels and the introduction of additional CD-ROM titles in the third
quarter of 1995.
Directory product net sales for the three months and six months ended
June 30, 1996, posted modest increases to $2.2 million and $3.9 million,
respectively, or an increase of 13% and 3%, respectively, compared to
the same period in 1995. Voice and on-line service net sales accounted
for $380 thousand in the second quarter of 1996 compared to $350
thousand in the second quarter of 1995. For the six months ended June
30, 1996, net sales were $765 thousand compared to $695 thousand in the
same period of 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 second quarter of 1996 were $6.9
million, or 28% of net sales, compared to $6.3 million, or 28% of net
sales, in the prior year quarter. For the six months ended June 30,
1996, these costs were $13.4 million, or 27% of net sales, compared to
$12.0 million, or 26% of net sales in the comparable prior year period.
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.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Selling, General, and Administrative
- ------------------------------------
Selling, general and administrative expenses in the second quarter of
1996 were $10.1 million, or 42% of net sales, compared to $9.3 million,
or 42% of net sales, in the prior year quarter. For the six month
period, these costs were $20.3 million, or 41% of net sales, compared to
$18.9 million, or 42% in the comparable 1995 period. The increase is
primarily the result of higher levels of CD-ROM promotions and other
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 June
30, 1996 increased to $903,000 from $807,000 in the comparable 1995
period. These costs during the six month period of 1996 were $1.8
million, up from $1.6 million in the comparable 1995 period. The
increases were due primarily to the addition of property and upgrades to
data processing equipment of $2.8 million during the six month period of
1996.
Operating Income
- ----------------
Operating income for the second quarter of 1996 was $6.4 million, or 26%
of net sales, compared to $3.4 million, or 14% of net sales in the
second quarter of 1995. For the six month period of 1996, operating
income increased to $13.6 million, or 28% of net sales, from $9.7
million, or 22% of net sales in 1995. The increase in percentage of net sales
is primarily the result of the 1995 impairment on the net assets transferred
under contractual arrangement offset by the above explained increases in costs.
Other Income
- ------------
Net investment income for the 1996 second quarter was $613,000 compared
to $430,000 in the same quarter of 1995. For the six months ended June
30, 1996, net investment income was $1,012,000 compared to $405,000 in
the prior year period. The increase is attributable to increased cash
and cash equivalents as well as the realized losses in the amount of
$287,000 due to investment restructuring of the Company's portfolio in
the prior year quarter.
Provision for Income Taxes
- --------------------------
A provision for income taxes has been recorded on the Company's 1996
earnings at a combined effective federal and state tax rate of 38%,
compared to the 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 June 30, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $11.4 million and short term
investments of $24.4 million. The Company has a revolving line of credit
totaling $5.0 million, which had no outstanding balance at June 30,
1996.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Net cash provided by operating activities for the six months ended June
30, 1996 totaled $8.2 million compared to $8.6 million in the same
period of 1995. The decrease is due to higher levels of prepaid and
deferred marketing costs associated with the increased direct marketing
programs and from the payment of accrued expenses. The Company spent
$1.9 million on upgrades to data processing equipment and $900 thousand
for land and building improvements to its Omaha, Nebraska and Carter
Lake, Iowa facilities. The Company anticipates spending an additional
$2.0 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.
11
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1996
PART II
OTHER INFORMATION
12
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1996
PART II
ITEM 2. CHANGES IN SECURITIES
---------------------
At the 1996 Annual Meeting of Stockholders held on May 24, 1996, the
stockholders of the Company approved an amendment to increase the
authorized number of shares of common stock from 25,000,000 to
75,000,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At the 1996 Annual Meeting of Stockholders of the Company held on May
24, 1996, the stockholders voted and approved the following items:
1. Re-elected Gautam Gupta and George J. Kubat to the Board of
Directors for a term of three years. Incumbent Directors whose
terms of office continue after the annual meeting are Vinod
Gupta, Jon D. Hoffmaster, George F. Haddix, Harold W. Andersen,
Donald R. Dixon and Elliot S. Kaplan.
2. Approved an amendment to the Company's Certificate of
Incorporation by a vote of 17,087,271 for, 1,416,565 against,
and 46,815 withheld, to increase the authorized number of
shares of common stock from 25,000,000 to 75,000,000.
3. The stockholders voted to increase the number of shares of
common stock reserved for issuance under the Company's 1992
Stock Option Plan from 1,950,000 to 4,000,000 shares. The vote
was 16,198,919 for, 1,690,389 against, and 661,343 withheld.
4. The stockholders also ratified the re-appointment of Coopers &
Lybrand as the Company's independent public accountants for the
fiscal year ending December 31, 1996.
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
13
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: August 13, 1996 /s/ Jon H. Wellman
---------------------- ----------------------------
Jon H. Wellman
Executive Vice President and
Chief Financial Officer
14
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
11 Statement regarding computation of
per share earnings
15