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 September 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 ________
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
- -----------------------------------------------------------------------------
(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.
20,774,610 shares of common stock at October 23, 1995
AMERICAN BUSINESS INFORMATION, INC.
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION 2
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 3
Consolidated Statements of Operations for the three
months and nine months ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows for the nine
months ended September 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
SEPTEMBER 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 September 30, 1995 and December 31, 1994
(In thousands, except share amounts)
ASSETS
------
Sept. 30, 1995 Dec. 31, 1994
-------------- -------------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $10,474 $13,491
Marketable securities . . . . . . . . . . . . . . . . . 24,146 14,684
Trade accounts receivable, net . . . . . . . . . . . . 17,327 15,112
Prepaid expenses . . . . . . . . . . . . . . . . . . . 2,366 1,882
------- -------
Total current assets . . . . . . . . . . . . . . . 54,313 45,169
------- -------
Property and equipment, net . . . . . . . . . . . . . . . . 12,363 11,106
Net assets of business transferred under
contractual arrangement . . . . . . . . . . . . . . . . . 3,000 -
Intangible assets, net of accumulated amortization . . . . 14,510 19,567
Other assets . . . . . . . . . . . . . . . . . . . . . . . 1,998 1,941
------- -------
$86,184 $77,783
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . $ 300 $ 815
Accounts payable . . . . . . . . . . . . . . . . . . . 3,311 2,416
Accrued payroll expenses . . . . . . . . . . . . . . . 1,566 1,496
Accrued expenses . . . . . . . . . . . . . . . . . . . 4,215 4,374
Income taxes payable . . . . . . . . . . . . . . . . . 463 430
Deferred income taxes . . . . . . . . . . . . . . . . . 135 227
------- -------
Total current liabilities . . . . . . . . . . . . . 9,990 9,758
------- -------
Long-term debt, net of current portion . . . . . . . . . . 743 3,006
Deferred income taxes . . . . . . . . . . . . . . . . . . . 961 990
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 20,770,860 shares at
September 30, 1995 and 20,682,751 at
December 31, 1994 . . . . . . . . . . . . . . . . . 51 34
Paid-in capital . . . . . . . . . . . . . . . . . . . . 27,322 26,573
Net unrealized holding loss, net of tax . . . . . . . . (120) (217)
Retained earnings . . . . . . . . . . . . . . . . . . . 47,237 36,936
------- -------
Total shareholders' equity . . . . . . . . . . . . 74,490 63,326
------- -------
$86,184 $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 nine months ended September 30, 1995 and 1994
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
Net sales . . . . . . . . . . . . . . . . $21,501 $19,473 $66,337 $55,711
Costs and expenses:
Database and production costs . . . . 6,149 5,383 18,104 14,978
Selling, general and administrative . 8,366 8,314 27,280 24,527
Impairment of net assets of business
transferred under contractual
arrangement . . . . . . . . . . . . - - 2,640 -
Depreciation and amortization . . . . 796 819 2,435 2,402
------- ------- ------- -------
15,311 14,516 50,459 41,907
------- ------- ------- -------
Operating income . . . . . . . . . . . . 6,190 4,957 15,878 13,804
Other income (expense):
Investment income . . . . . . . . . . 394 288 887 846
Interest expense . . . . . . . . . . (60) (66) (148) (208)
Other . . . . . . . . . . . . . . . . - 16 (162) 70
------- ------- ------- -------
Income before income taxes . . . . . . . 6,524 5,195 16,455 14,512
Income taxes . . . . . . . . . . . . . . 2,420 1,865 6,154 5,155
------- ------- ------- -------
Net Income . . . . . . . . . . . . . . . $ 4,104 $ 3,330 $10,301 $ 9,357
======= ======= ======= =======
Earnings per share:
Net income . . . . . . . . . . . . . . $ 0.20 $ 0.16 $ 0.50 $ 0.45
======= ======= ======= =======
Weighted average shares outstanding . . . 20,768 20,678 20,725 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 nine months ended September 30, 1995 and 1994
(In thousands)
Nine Months Ended
September 30
--------------------
1995 1994
---- ----
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . $10,301 $ 9,357
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation and amortization . . . . . . . . . 2,446 2,402
Deferred income taxes . . . . . . . . . . . . . (977) 621
Loss on sale of investments . . . . . . . . . . 270 41
Impairment of net assets of
business transferred 2,640 -
Minority interest . . . . . . . . . . . . . . . - (70)
Changes in assets and liabilities, net of effect of
acquisitions and transfers
Trade accounts receivable . . . . . . . . . . . (2,882) (1,043)
Prepaid expenses . . . . . . . . . . . . . . . . (1,429) (270)
Other assets . . . . . . . . . . . . . . . . . . (688) -
Accounts payable . . . . . . . . . . . . . . . . 1,560 1,305
Income taxes payable . . . . . . . . . . . . . . 460 360
Accrued expenses . . . . . . . . . . . . . . . . 258 1,361
------- -------
Net cash provided by operating activities . 11,959 14,064
Cash flows from investing activities:
Proceeds from sale of marketable securities . . . . . 9,035 10,497
Purchases of marketable securities . . . . . . . . . (18,018) (11,311)
Purchases of property and equipment . . . . . . . . . (2,834) (2,463)
Purchase of minority interest . . . . . . . . . . . . (900) -
Acquisitions of businesses . . . . . . . . . . . . . - (8,150)
Increase in intangible assets . . . . . . . . . . . . (274) (412)
------- -------
Net cash used in investing activities . . . (12,991) (11,839)
Cash flows from financing activities:
Repayment of long-term debt . . . . . . . . . . . . . (3,040) (5,360)
Proceeds from long-term debt . . . . . . . . . . . . 289 4,800
Proceeds from issuance of common stock under
stock option plan . . . . . . . . . . . . . . . . . 766 36
------- -------
Net cash used in investing activities . . . (1,985) (524)
Net increase (decrease) in cash and cash equivalents . . . (3,017) 1,701
Cash and cash equivalents, beginning . . . . . . . . . . . 13,491 8,511
------- -------
Cash and cash equivalents, ending . . . . . . . . . . . . . $10,474 $10,212
======= =======
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . $ 148 $ 208
======= =======
Income taxes paid . . . . . . . . . . . . . . . . . . $ 7,422 $ 4,174
======= =======
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):
September 30, 1995 December 31, 1994
------------------ -----------------
Property and equipment:
Land and improvements $ 1,280 $ 931
Building and improvements 6,898 6,563
Transportation equipment 95 103
Computer equipment 11,261 9,876
Furniture and fixtures 3,028 2,675
Capitalized leases 633 344
------- -------
23,195 20,492
Less accumulated depreciation
and amortization 10,832 9,386
------- -------
$12,363 $11,106
======= =======
September 30, 1995 December 31, 1994
------------------ -----------------
Intangible assets:
Goodwill $ 5,012 $ 9,353
Distribution networks 11,870 11,952
Noncompete agreements 150 125
Acquisition costs 1,317 1,294
------- -------
18,349 22,724
Less accumulated amortization 3,839 3,157
------- -------
$14,510 $19,567
======= =======
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 provided 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 were $2,929 from January 1, 1995 through the date of sale.
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, which was 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 nine month periods
indicated, certain items from the Company's statement of operations data
expressed as a percentage of net sales:
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
---- ---- ---- ----
Statement of Operations Data:
Net Sales 100% 100% 100% 100%
Costs and expenses:
Database and production costs 28 28 27 27
Selling, general and administrative 39 43 41 44
Impairment of net assets of
business transferred - - 4 -
Depreciation and amortization 4 4 4 4
--- --- --- ---
Operating income 29 25 24 25
Other income (expense) 1 1 1 1
--- --- --- ---
Income before income taxes 30 26 25 26
Income taxes 11 9 9 9
--- --- --- ---
Net Income 19% 17% 16% 17%
=== === === ===
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Net Sales
- ---------
Net sales increased 10% to $21.5 million for the three months ended
September 30, 1995 from $19.5 million in the third quarter of 1994. For
the nine month period ended September 30, 1995, net sales were $66.3
million, a 19% increase from $55.8 million in the comparable period in
1994.
Revenues in the third quarter from the Company's existing products and
services increased 20% (or $3.5 million) and 2% (or $400,000) was
attributable to Zeller & Letica (Z&L) which was acquired August 17,
1994. Revenues for the nine month period ended September 30, 1995 from
the Company's existing products and services represented 19% of the
increase (or $9.6 million) and 6% (or $2.9 million) was attributable to
Z&L and BMI Medical Information, Inc. (BMI) which was effective March
29, 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 third quarter of 1995 were $6.1
million, or 28% of net sales, compared to $5.4 million, or 28% of net
sales, in the prior year quarter. For the nine months ended September
30, 1995, these costs were $18.1 million, or 27% of net sales, compared
to $15.0 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 third quarter of
1995 were $8.4 million, or 39% of net sales, compared to $8.3 million,
or 43% of net sales, in the prior year quarter. For the nine month
period, these costs were $27.3 million, or 41% of net sales, compared to
$24.5 million, or 44% 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.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, continued
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expense for the three months ended
September 30, 1995 decreased to $796,000 from $819,000 in the comparable
1994 period. These costs during the nine month period of 1995 were $2.4
million, equal to $2.4 million in the comparable 1994 period.
Operating Income
- ----------------
Operating income for the third quarter of 1995 was $6.2 million, or 29%
of net sales, compared to $5.0 million, or 25% of net sales in the third
quarter of 1994. For the nine month period of 1995, operating income
increased to $15.9 million, or 24% of net sales, from $13.8 million, or
25% of net sales in 1994.
Other Income
- ------------
Net investment income for the 1995 third quarter was $334,000 compared
to $222,000 in the same quarter of 1994. For the nine months ended
September 30, 1995, net investment income was $739,000 compared to
$638,000 in the prior year period. The increase in 1995 is attributable
to the increase in cash and cash equivalents and marketable securities.
The Company recognized net realized losses of $270,000 on the sale of
marketable securities in the first nine 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 September 30, 1995, the Company's principal sources of liquidity
included cash and cash equivalents of $10.5 million and short term
investments of $24.1 million. Management repaid a $1.0 million real
estate loan on July 28, 1995. The Company has a revolving line of
credit totaling $5.0 million, which had no outstanding balance at
September 30, 1995.
The Company anticipates spending up to $2.8 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
SEPTEMBER 30, 1995
PART II
OTHER INFORMATION
11
AMERICAN BUSINESS INFORMATION, INC.
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 30, 1995
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) 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: November 9, 1995 /s/ Jon Wellman
---------------- -----------------------
Jon Wellman
Chief Financial Officer
13
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
11 Statement regarding computation of
per share earnings
14