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, 1995 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
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
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(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.
13,842,251 shares of common stock at July 28, 1995
AMERICAN BUSINESS INFORMATION, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION 2
Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1994 3
Consolidated Statements of Operations for the three
months and six months ended June 30, 1995 and 1994 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1995 and 1994 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
JUNE 30, 1995
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, 1995 and December 31, 1994
(In thousands, except share amounts)
ASSETS
------
June 30, 1995 December 31, 1994
------------- -----------------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $11,021 $13,491
Marketable securities . . . . . . . . . . . . . . . . . 22,560 14,684
Trade accounts receivable, net . . . . . . . . . . . . 15,470 15,112
Recoverable income taxes . . . . . . . . . . . . . . . 662 -
Prepaid expenses . . . . . . . . . . . . . . . . . . . 1,285 1,882
------- -------
Total current assets . . . . . . . . . . . . . . . 50,998 45,169
------- -------
Property and equipment, net . . . . . . . . . . . . . . . . 11,566 11,106
Net assets of business transferred under contractual
arrangement . . . . . . . . . . . . . . . . . . . . . . . 3,000 -
Intangible assets, net of accumulated amortization . . . . 14,787 19,567
Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,629 1,941
------- -------
$82,980 $77,783
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . $ 300 $ 815
Accounts payable . . . . . . . . . . . . . . . . . . . 2,580 2,416
Income taxes payable . . . . . . . . . . . . . . . . . - 430
Accrued payroll expenses . . . . . . . . . . . . . . . 1,527 1,496
Accrued expenses . . . . . . . . . . . . . . . . . . . 4,808 4,374
Deferred income taxes . . . . . . . . . . . . . . . . . 135 227
------- -------
Total current liabilities . . . . . . . . . . . . . 9,350 9,758
------- -------
Long-term debt, net of current portion . . . . . . . . . . 1,828 3,006
Deferred income taxes . . . . . . . . . . . . . . . . . . . 1,077 990
Minority interest . . . . . . . . . . . . . . . . . . . . . - 703
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 20,761,876 shares
at June 30, 1995 and 20,682,751 at
December 31, 1994 . . . . . . . . . . . . . . . . . 51 34
Paid-in capital . . . . . . . . . . . . . . . . . . . . 27,202 26,573
Net unrealized holding gain (loss), net of tax . . . . 340 (217)
Retained earnings . . . . . . . . . . . . . . . . . . . 43,132 36,936
------- -------
Total shareholders' equity . . . . . . . . . . . . 70,725 63,326
------- -------
$82,980 $77,783
======= =======
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, 1995 and 1994
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
Net sales . . . . . . . . . . . . . . . . $22,479 $18,795 $44,836 $36,238
Costs and expenses:
Database and production costs . . . . 6,310 5,271 11,955 9,595
Selling, general and administrative . 9,309 8,029 18,914 16,213
Impairment of net assets of business
transferred under contractual
arrangement . . . . . . . . . . . 2,640 - 2,640 -
Depreciation and amortization . . . . 807 823 1,639 1,583
------- ------- ------- -------
19,066 14,123 35,148 27,391
------- ------- ------- -------
Operating income . . . . . . . . . . . . 3,413 4,672 9,688 8,847
Other income (expense):
Investment income . . . . . . . . . . 462 293 493 558
Interest expense . . . . . . . . . . (32) (71) (88) (142)
Other . . . . . . . . . . . . . . . . - 5 (162) 54
------- ------- ------- -------
Income before income taxes . . . . . . . 3,843 4,899 9,931 9,317
Income taxes . . . . . . . . . . . . . . 1,461 1,740 3,736 3,290
------- ------- ------- -------
Net Income . . . . . . . . . . . . . . . $ 2,382 $ 3,159 $ 6,195 $ 6,027
======= ======= ======= =======
Earnings per share:
Net income . . . . . . . . . . . . . . $ 0.11 $ 0.15 $ 0.30 $ 0.29
======= ======= ======= =======
Weighted average shares outstanding . . . 20,719 20,676 20,704 20,676
======= ======= ======= =======
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, 1995 and 1994
Six Months Ended
June 30
--------------------
1995 1994
---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 6,195 $ 6,027
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation and amortization . . . . . . . . . 1,639 1,583
Deferred income taxes . . . . . . . . . . . . . (1,081) 430
Loss on sale of investments . . . . . . . . . . 258 1
Impairment of net assets of business transferred 2,640 -
Minority interest . . . . . . . . . . . . . . . - (53)
Changes in assets and liabilities, net of effect of
acquisitions and transfers
Trade accounts receivable . . . . . . . . . . . (1,025) 444
Prepaid expenses . . . . . . . . . . . . . . . . (347) 123
Other assets . . . . . . . . . . . . . . . . . . (688) -
Accounts payable . . . . . . . . . . . . . . . . 806 529
Income taxes payable . . . . . . . . . . . . . . (668) 13
Accrued expenses . . . . . . . . . . . . . . . . 865 616
------- -------
Net cash provided by operating activities . 8,594 9,713
Cash flows from investing activities:
Proceeds from sale of marketable securities . . . . . 8,935 7,642
Purchases of marketable securities . . . . . . . . . (16,275) (7,401)
Purchases of property and equipment . . . . . . . . . (1,526) (1,453)
Purchase of minority interest . . . . . . . . . . . . (900) -
Acquisitions of businesses . . . . . . . . . . . . . - (5,750)
Increase in intangible assets . . . . . . . . . . . . (250) (335)
------- -------
Net cash used in investing activities . . . (10,016) (7,297)
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . (1,983) (356)
Proceeds from long-term debt . . . . . . . . . . . . 289 -
Proceeds from issuance of common stock under
stock option plan . . . . . . . . . . . . . . . . . 646 -
------- -------
Net cash used in investing activities . . . (1,048) (356)
Net increase (decrease) in cash and cash equivalents . . . (2,470) 2,060
Cash and cash equivalents, beginning . . . . . . . . . . . 13,491 8,511
------- -------
Cash and cash equivalents, ending . . . . . . . . . . . . . $11,021 $10,571
======= =======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . $ 88 $ 142
======= =======
Income taxes paid . . . . . . . . . . . . . . . . . . $ 5,737 $ 2,243
======= =======
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, 1994 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, 1994 included in the Company's 1994 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, 1995 December 31, 1994
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Property and equipment:
Land and improvements $ 955 $ 931
Building and improvements 6,699 6,563
Transportation equipment 95 103
Computer equipment 10,659 9,876
Furniture and fixtures 2,863 2,675
Capitalized leases 633 344
------- -------
21,904 20,492
Less accumulated depreciation
and amortization 10,338 9,386
------- -------
$11,566 $11,106
======= =======
June 30, 1995 December 31, 1994
------------- -----------------
Intangible assets:
Goodwill $ 5,012 $ 9,353
Distribution networks 11,870 11,952
Noncompete agreements 125 125
Acquisition costs 1,317 1,294
------- -------
18,324 22,724
Less accumulated amortization 3,537 3,157
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$14,787 $19,567
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6
AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. NET ASSETS OF BUSINESS TRANSFERRED 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. Revenues of ABC
for the three and six months ended June 30, 1994 were $1,695 and $3,025,
respectively.
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
shareholders 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. and Subsidiaries (the "Company")
provide business-to-business marketing information compiled from yellow
page directories throughout the U.S. and Canada and other public
sources. The Company's database is continuously updated to provide
customers with the most accurate information available, including the
business name, address, number of employees, and name of owner or
manager.
The Company's BMI Medical Information, Inc. ("BMI") subsidiary offers
in-depth marketing information to the healthcare industry. This
information is obtained from a variety of sources, including over
500,000 surveys received from medical professionals.
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
1995 1994 1995 1994
---- ---- ---- ----
Statement of Operations Data:
Net Sales 100% 100% 100% 100%
Costs and expenses:
Database and production costs 28 28 26 27
Selling, general and administrative 41 43 42 45
Impairment of net assets of
business transferred 12 - 6 -
Depreciation and amortization 4 4 4 4
--- --- --- ---
Operating income 15 25 22 24
Other income (expense) 2 1 1 1
--- --- --- ---
Income before income taxes 17 26 23 25
Income taxes 6 10 9 9
--- --- --- ---
Net Income 11% 16% 14% 16%
=== === === ===
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Net Sales
- ---------
Net sales increased 20% to $22.5 million for the three months ended June
30, 1995 from $18.8 million in the second quarter of 1994. For the six
month period ended June 30, 1995, net sales were $44.8 million, a 24%
increase from $36.2 million in the comparable period in 1994.
Revenues in the second quarter from the Company's existing products and
services represented 22% of the increase (or $3.5 million) and 2% (or
$638,000) was attributable to Zeller & Letica (Z&L) which was acquired
August 17, 1994. Revenues for the six month period ended June 30, 1995
from the Company's existing products and services represented 18% of the
increase (or $6.1 million) and 8% (or $2.6 million) was attributable to
Z&L and BMI Medical Information, Inc. (BMI) which was effective August
17, 1994.
The Company's net sales on a quarterly basis can be affected by seasonal
characteristics, the timing of acquisitions, and certain other factors
including the timing and extent of the Company's own direct marketing
activity. 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 1995 were $6.3
million, or 28% of net sales, compared to $5.3 million, or 28% of net
sales, in the prior year quarter. For the six months ended June 30,
1995, these costs were $12.0 million, or 26% of net sales, compared to
$9.6 million, or 27% of net sales in the comparable prior year period.
The Company expects these costs, when expressed as a percentage of net
sales, to approximate its current level for the remainder of the year.
Selling, General, and Administrative
- ------------------------------------
Selling, general and administrative expenses in the second quarter of
1995 were $9.3 million, or 41% of net sales, compared to $8.0 million,
or 43% of net sales, in the prior year quarter. For the six month
period, these costs were $18.9 million, or 42% of net sales, compared to
$16.2 million, or 45% in the comparable 1994 period. In 1994, the
Company incurred costs to expand its markets, incurred marketing
expenses related to new products, and continued development of the field
sales force and introduced the credit predictability code on its
products which resulted in these costs being higher as a percentage of
net sales than the Company has historically incurred.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expense for the three months ended June
30, 1995 decreased to $807,000 from $823,000 in the comparable 1994
period. These costs during the six month period of 1995 were $1.6
million, equal to $1.6 million in the comparable 1994 period.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Operating Income
- ----------------
Operating income for the second quarter of 1995 was $3.4 million, or 15%
of net sales, compared to $4.7 million, or 25% of net sales in the
second quarter of 1994. For the six month period of 1995, operating
income increased to $9.7 million, or 22% of net sales, from $8.8
million, or 24% of net sales in 1994.
Other Income
- ------------
Net investment income for the 1995 second quarter was $430,000 compared
to $222,000 in the same quarter of 1994. For the six months ended June
30, 1995, net investment income was $405,000 compared to $416,000 in the
prior year period. The Company recognized net realized losses of
$258,000 on the sale of marketable securities in the first six months of
1995.
Provision for Income Taxes
- --------------------------
A provision for income taxes has been recorded on the Company's 1995
earnings at a combined effective federal and state tax rate of 37%,
compared to the 1994 combined effective rate of 35%.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, the Company's principal sources of liquidity
included cash and cash equivalents of $11.0 million and short term
investments of $22.6 million. Management intends to repay a $1.0
million real estate loan prior to September 1, 1995. The Company has a
revolving line of credit totaling $5.0 million, which had no outstanding
balance at June 30, 1995.
The Company anticipates spending up to $2.5 million annually in the next
three years on additions to equipment, primarily data processing
equipment, which is expected to be financed either through bank
financing with terms generally from three to four years or cash provided
by operating activities.
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
JUNE 30, 1995
PART II
OTHER INFORMATION
11
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1995
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10.7 Asset Purchase Agreement dated
June 1, 1995 between the Company
and Baker University
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: August 12, 1995 /s/ Jon D. Hoffmaster
------------------- ---------------------------------
Jon D. Hoffmaster
Vice Chairman and Chief Financial
Officer
13
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
10.7 Asset Purchase Agreement dated
June 1, 1995 between the Company
and Baker University
11 Statement regarding computation
of per share earnings
14