SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K(A)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 15, 1997
-------------------------------------------
(Date of the earliest event reported)
AMERICAN BUSINESS INFORMATION, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-19598 47-0751545
- ---------------------- ----------- ---------------------
(State or other juris- (Commission I.R.S. Employer
diction of incorporation) File Number) Identification Number)
5711 South 86/th/ Circle, Omaha, Nebraska 68127
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(Address of principal executive offices) (Zip Code)
402/593-4500
--------------------- ----------------------------
Registrant's telephone number, including area code
American Business Information, Inc. (the "Company") hereby amends Item 7 of its
Form 8-K filed to report an event occurring on February 15, 1997 to include the
following:
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired.
The following consolidated financial statements of DBA Holdings, Inc.
and Subsidiaries (operating as Database America Companies) are filed
with this report:
Page
----
Report of Independent Certified Public Accountants 1
Balance Sheets as of January 31, 1996
and January 31, 1997 2
Statements of Operations and Retained
Earnings for the years ended
January 31, 1995, January 31, 1996
and January 31, 1997 3
Statements of Cash Flows for the years
ended January 31, 1995, January 31, 1996 4
and January 31, 1997
Notes to Financial Statements 5 - 12
(b) Pro forma financial information. 13
Pro Forma Consolidated Balance Sheet
as of December 31, 1996 14
Pro Forma Consolidated Statement of
Operations for the year ended December 15
31, 1996
Notes to Pro Forma Consolidated Financial Statements 16
- -------------------------------------------------------------------------------
SIGNATURES
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 hereunto duly authorized.
Date: September 4, 1997 /s/ Jon H. Wellman
----------------- --------------------------------------------
Jon H. Wellman, President and Chief Operating
Officer
/s/ Steven Purcell
-------------------------------------------
Steven Purcell, Chief Financial Officer
- -------------------------------------------------------------------------------
Report of Independent Certified Public Accountants
To the Stockholders
DBA Holdings, Inc.
(operating as Database America Companies)
Montvale, New Jersey
We have audited the accompanying consolidated balance sheets of DBA Holdings,
Inc. and Subsidiaries (operating as Database America Companies) as of January
31, 1997 and 1996 and the related consolidated statements of operations and
retained earnings, and cash flows for each of the three years in the period
ended January 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of DBA Holdings, Inc.
and Subsidiaries as of January 31, 1997 and 1996 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended January 31, 1997, in conformity with generally accepted accounting
principles.
/s/ BDO SEIDMAN, LLP
- -----------------------
BDO SEIDMAN, LLP
Woodbridge, New Jersey
April 10, 1997
1
DBA Holdings, Inc. and subsidiaries
(operating as Database America Companies)
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
January 31, 1997 1996
- -------------------------------------------------------------------------------
Assets
Current:
Cash and cash equivalents $ 5,916,174 $ 4,315,175
Accounts receivable, less allowance
for doubtful accounts of $161,000
and $106,000 (Note 11) 14,339,851 11,266,394
Officers Life Insurance (Note 10) 864,938 -
Due from shareholder 536,125 -
Deferred income taxes (Note 9) 188,000 -
Income taxes receivable (Note 9) 7,232,413 -
Due from ESOP (Note 4) 476,286 -
Prepaid expenses and other current
assets 708,839 656,695
- -------------------------------------------------------------------------------
Total current assets 30,262,626 16,238,264
Property and equipment, less 621,289 932,329
accumulated depreciation and
amortization (Note 3)
Due from ESOP (Note 4) - 696,286
Intangible assets, net of accumulated
amortization (Note 13) 317,850 342,944
Officers life insurance (Note 10) - 1,151,262
Deferred income taxes (Note 9) 404,000 1,394,000
Other assets 178,437 754,956
- -------------------------------------------------------------------------------
$31,784,202 $21,510,041
- -------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current:
Notes payable to banks (Note 7) $ 1,380,450 $ 560,004
Note payable ESOP - current portion
(Note 4) - 128,852
Accounts payable and accrued expenses
(Note 14) 6,802,578 2,995,332
Accounts payable - affiliate 64,610 90,110
Deferred income taxes (Note 9) - 20,000
Deferred compensation (Note 8) 17,385,000 -
- -------------------------------------------------------------------------------
Total current liabilities 25,632,638 3,794,298
- -------------------------------------------------------------------------------
Long-term notes payable to banks (Note 7) - 1,417,071
Note payable ESOP (Note 4) - 375,820
Deferred compensation (Note 8) - 3,686,000
Commitments and contingencies (Notes 5 and 8)
Stockholders' equity (Note 8):
Common stock:
Class A, voting, no par value;
authorized 1,000 shares; issued 1,000
shares 1,400 1,400
Class B, non-voting, no par value;
authorized 10,000 shares; issued 9,000
shares 12,600 12,600
Paid-in-capital 25,000 25,000
Retained earnings 6,112,564 12,702,524
ESOP Guaranty (Note 4) - (504,672)
- -------------------------------------------------------------------------------
Total stockholders' equity 6,151,564 12,236,852
- -------------------------------------------------------------------------------
$31,784,202 $21,510,041
- -------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
2
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Consolidated Statements of Operations and Retained Earnings
==================================================================================================
Year ended January 31, 1997 1996 1995
- --------------------------------------------------------------------------------------------------
Sales (Note 11) $ 52,512,709 $48,786,855 $39,505,275
Direct costs 23,486,848 22,516,278 19,004,280
- --------------------------------------------------------------------------------------------------
Gross profit 29,025,861 26,270,577 20,500,995
- --------------------------------------------------------------------------------------------------
Operating expenses:
Selling 11,959,610 9,603,502 6,684,827
General and administrative 10,705,720 8,000,355 6,945,651
Deferred compensation (Note 8) 13,699,000 1,674,000 844,000
Special incentive bonus (Note 1) 2,500,000 - -
- --------------------------------------------------------------------------------------------------
Total operating expenses 38,864,330 19,277,857 14,474,478
- --------------------------------------------------------------------------------------------------
Income (loss) from operations (9,838,469) 6,992,720 6,026,517
- --------------------------------------------------------------------------------------------------
Other expense (income):
Impairment of officers life insurance (Note 10) 567,790 - -
Interest expense 158,920 195,594 209,967
Interest income (223,219) (181,819) (105,443)
Loss on disposal and abandonment of fixed
assets 144,000 64,132 -
Other, net (12,000) - -
- --------------------------------------------------------------------------------------------------
Total other expense, net 635,491 77,907 104,524
- --------------------------------------------------------------------------------------------------
Income (loss) before provision (benefit) for (10,473,960) 6,914,813 5,921,993
income taxes
Provision (benefit) for income taxes (Note 9) (3,884,000) 2,815,000 2,416,000
- --------------------------------------------------------------------------------------------------
Net income (loss) (6,589,960) 4,099,813 3,505,993
Retained earnings, beginning of year 12,702,524 8,602,711 5,096,718
- --------------------------------------------------------------------------------------------------
Retained earnings, end of year $ 6,112,564 $12,702,524 $ 8,602,711
==================================================================================================
See accompanying notes to consolidated financial statements.
3
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Consolidated Statements of Cash Flow
====================================================================================================
Year ended January 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $(6,589,960) $ 4,099,813 $ 3,505,993
- ----------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 502,077 451,717 427,323
Writedown of officers life insurance 567,790 - -
Amortization of goodwill 25,094 25,093 8,364
Provision for losses on accounts receivable 403,676 107,472 10,000
Loss on disposal and abandonment of fixed assets 144,000 64,132 -
Deferred taxes 782,000 (697,000) (211,000)
Deferred compensation 13,699,000 1,674,000 844,000
(Increase) decrease in:
Accounts receivable (3,477,133) (2,084,403) (2,807,256)
Income taxes receivable (7,232,413) - -
Prepaid expenses and other current assets (296,620) 280,920 (164,448)
Other assets 3,404 (844,504) (303,745)
Increase (decrease) in:
Accounts payable and accrued expenses 3,807,246 161,241 (99,756)
Accounts payable - affiliate (25,500) (176,013) (65,562)
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,312,661 3,062,468 1,143,913
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (335,037) (462,789) (791,891)
Acquisition of intangible assets - - (376,401)
Repayments of ESOP note receivable 220,000 30,000 50,000
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (115,037) (432,789) (1,118,292)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings (repayments) of lines of credit - (400,000) 400,000
Net repayment of bank debt (596,625) (482,925) (149,007)
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (596,625) (882,925) 250,993
- ----------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,600,999 1,746,754 276,614
Cash and cash equivalents, beginning of year 4,315,175 2,568,421 2,291,807
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 5,916,174 $ 4,315,175 $ 2,568,421
====================================================================================================
Supplemental Cash Flow Information:
Interest paid $ 158,920 $ 198,640 $ 208,993
Income taxes paid 2,693,220 3,375,000 2,495,371
====================================================================================================
Non-cash financing and investing activities:
ESOP repayment of its bank debt (see Note 4) $ 151,360 $ 128,852 $ 101,476
ESOP obligation offset against stockholders' equity 504,672 - -
====================================================================================================
See accompanying notes to consolidated financial statements.
4
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
1. Organization and Nature of Business
The consolidated financial statements include the accounts of DBA Holdings,
Inc. (the "Company") and its wholly-owned subsidiaries, Database America
Companies, Inc., DBA FL, Inc., Magi Direct, Inc., Database Holdings, Inc.
and Ed Burnett Consultants, Inc. All material intercompany transactions and
accounts have been eliminated in consolidation.
The Company is a compiler of various business and consumer data and a
provider of computer processing services for the direct marketing industry.
On February 11, 1997, an Agreement and Plan of Reorganization ("Agreement")
was entered into between the Company and American Business Information,
Inc. ("ABI"), whereby ABI acquired 100% of the Company's outstanding common
stock. The Agreement is effective February 1, 1997 and the Company will
continue its operations as a wholly owned subsidiary of ABI.
The final purchase price, which is based on the Company's defined net
tangible assets and defined revenues as of and for the year ended January
31, 1997, is approximately $104,000,000. Since the Agreement was entered
into after January 31, 1997, the 1997 financial statements do not reflect a
remeasurement of the carrying values ascribed to the Company's assets and
liabilities to fair values.
As required by the Agreement, the liability for employment agreements
discussed in Note 8(b) are to be fully paid out by the Company as will
$2,500,000 in special incentive bonuses. Additionally, certain real estate
assets leased by the Company will not be retained in the merger by ABI and,
accordingly, a loss related to the abandonment of $144,000 in fixed assets
was recorded as of January 31, 1997.
2. Significant Accounting Policies
Revenue Recognition
Sales of products are generally recorded when products are shipped to
customers. For data processing and list services, revenue is recognized for
the actual and work-in-process billing of services rendered during the
year.
Cash Equivalents
The Company considers all highly liquid debt investments purchased with an
original maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed primarily using the straight-line method over the estimated
useful lives of the related assets.
Income Taxes
The Company accounts for deferred taxes using the liability method.
Deferred taxes are provided on differences between the financial reporting
and income tax basis of assets and liabilities based upon statutory rates
enacted for future periods.
5
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
Intangible Assets
Costs in excess of the fair value of net assets of businesses acquired are being
amortized on a straight-line basis over 15 years.
Fair Value of Financial Instruments
Due to the short-term maturity of cash equivalents, the estimated fair values
approximate carrying values at January 31, 1997 and 1996. The interest rates on
the Company's notes payable to banks are indexed to short-term market
conditions. As a result, fair values approximate carrying values at January 31,
1997 and 1996.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification
Certain balances in the prior periods' financial statements were reclassified to
conform with the 1997 presentation.
3. Property and Equipment
Property and equipment are summarized as follows:
January 31, 1997 1996
- -------------------------------------------------------------------------------
Furniture and fixtures $ 94,202 $ 114,761
Leasehold improvements 282,527 403,204
Tradeshow booth 67,110 -
Autos and trucks 31,090 31,090
Computer equipment and software 1,019,628 1,518,470
Telephone equipment 121,018 121,018
- -------------------------------------------------------------------------------
1,615,575 2,188,543
Less: Accumulated depreciation and
amortization 994,286 1,256,214
Net property and equipment $ 621,289 $ 932,329
- ------------------------------------------------------------------------------
6
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
4. Employee Stock Ownership Plan
The Company guaranteed a loan obligation of an employee stock ownership plan
("ESOP"). Through January 31, 1997, the contingent obligation was recorded by
the Company as a liability with a corresponding reduction of stockholders'
equity. Repayment of principal was reflected as a decrease in the Company's
contingent obligation and a corresponding increase in stockholders' equity. The
amount of the contingent obligation at January 31, 1997 was not material.
Subsequent to January 31, 1997, the ESOP obligation is to be credited against
stockholders' equity to reflect the settlement of the debt.
At January 31, 1997 and 1996 the Company had advanced $476,286 and $696,286,
respectively, to the ESOP.
Contributions to the plan are at the discretion of Executive Management.
Participants are fully vested in the plan upon completion of 5 years of
employment with the Company. The Company contributed approximately $823,000,
$411,000 and $345,000 to the ESOP for the years ended January 31, 1997, 1996 and
1995, respectively.
5. Defined Contribution Plan
The Company has a defined contribution pension plan qualified under Section
401(k) of the Internal Revenue Code. Under the terms of the plan, an employee is
eligible to participate after completing one year of service with the Company.
The Company is obligated to contribute 1 1/2% of eligible compensation and to
match employee contributions up to 33 1/3% of the first 4 1/2% of eligible
compensation contributed to the plan. The employer matching contribution is 100%
vested at the time the contribution is made. The Company contributed
approximately $193,000, $407,000 and $204,000 to the plan for the years ended
January 31, 1997, 1996 and 1995, respectively.
6. Revolving Lines of Credit
Through January 31, 1997, the Company maintained two credit facilities with
maximum aggregate borrowings of $15,000,000. Borrowings under the lines bear
interest at the bank's prime rate and are collateralized by substantially all
of the assets of the Company. There were no borrowings against the
lines at January 31, 1997 and 1996.
In February 1997, pursuant to the sale of the Company, all revolving lines of
credit were terminated (see Note 1).
7
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
7. Notes Payable to Banks
Notes payable to banks consist of the following:
January 31, 1997 1996
- -------------------------------------------------------------------------------
Five year term loan (a) $ 900,000 $1,290,000
Five year term loan (b) 480,450 687,075
- -------------------------------------------------------------------------------
1,380,450 1,977,075
Less: Current portion 1,380,450 560,004
- -------------------------------------------------------------------------------
Long-term portion $ - $1,417,071
- ------------------------------------------------------------------------------
(a) Interest at various rates based on LIBOR, payable in monthly installments
through September 1999.
(b) Interest at the bank's prime rate, payable in monthly installments through
July 1999.
The loan agreements contained various covenants relating to, among other
matters, maintenance of certain financial ratios, net worth levels, and
restrictions on capital expenditures. These loans were also collateralized
by the Company's assets. However, the Company has not complied with certain
financial and operational covenants of these agreements. The Company has not
sought a waiver to remedy these events of default. Subsequent to January 31,
1997, such indebtedness was paid off and the agreements terminated.
Accordingly, notes payable are classified as short-term at January 31, 1997.
8. Commitments and Contingencies
(a) Leases
The Company leases facilities under noncancellable operating leases expiring
at various dates through February 1999. The Company is generally obligated
to pay additional amounts based on real estate taxes, insurance and common
area maintenance charges. The Company leases its primary office and a
storage facility from a stockholder and affiliated entity. Lease payments to
these related parties were approximately $1,170,000 for each of the years
ended January 31, 1997, 1996 and 1995.
Future minimum rental payments required for all non-cancelable leases are as
follows:
January 31,
- ------------------------------------------------------------------------------
1998 $1,199,000
1999 1,170,000
2000 97,000
- ------------------------------------------------------------------------------
$2,466,000
- ------------------------------------------------------------------------------
8
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
Rent expense, including common area maintenance charges and rent expense
for other month to month leases, was approximately $1,903,000, $1,632,000
and $1,417,000 for the years ended January 31, 1997, 1996 and 1995,
respectively.
(b) Employment Agreements
Under agreements with certain employees in previous years, the Company had
granted options to purchase from the treasury for nominal amounts, 180
common shares in the event of certain changes in ownership of the Company.
Certain of the agreements also provided for deferred compensation for the
employees.
Prior to the sale of the business discussed in Note 1, the Company provided
for the deferred compensation arrangements based upon the present value of
the payments beginning in 1999, adjusted annually for changes in the
estimated value of the Company, as determined with respect to the Employee
Stock Ownership Plan discussed in Note 4. Upon the sale of the business,
the actual liability became known and, accordingly, the difference between
that amount and the amounts previously provided for was accrued by a charge
to operations for the year ended January 31, 1997. Such amounts are to be
paid by the Company during the 1998 fiscal year. This liability is being
reviewed and the final determination may change. The amount in question is
less than $600,000 (after tax) and the effect, if any, would change the
purchase price (see Note 1).
(c) Legal Matters
The Company has been named as a defendant in several pending legal matters
and has also been notified of other possible claims and assessments against
them. In the opinion of the management of the Company, the final resolution
of these matters will not have a material adverse effect on the Company's
financial position or results of operations.
9. Income Taxes
The provision (benefit) for income taxes in the statements of operations consist
of the following components:
January 31, 1997 1996 1995
- ------------------------------------------------------------------------------
Current:
Federal $(4,630,000) $2,900,000 $2,048,000
State (36,000) 612,000 579,000
- ------------------------------------------------------------------------------
(4,666,000) 3,512,000 2,627,000
Deferred 782,000 (697,000) (211,000)
- ------------------------------------------------------------------------------
$(3,884,000) $2,815,000 $2,416,000
- ------------------------------------------------------------------------------
9
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
Deferred tax assets and liabilities are comprised of the following temporary
differences and carryforwards at January 31:
January 31, 1997 1996
- ------------------------------------------------------------------------------
Current deferred tax assets (liabilities):
Accounts receivable $ 64,000 $ 42,000
State operating losses carryforwards 257,000 -
Prepaid assets (133,000) (62,000)
- ------------------------------------------------------------------------------
Total current $ 188,000 $ (20,000)
==============================================================================
Noncurrent deferred tax assets (liabilities):
Deferred compensation $ - $1,474,000
State operating losses carryforwards 507,000 -
Depreciation (103,000) (80,000)
- ------------------------------------------------------------------------------
Total noncurrent $ 404,000 $1,394,000
==============================================================================
The Company's income tax provision (benefit) differed from the amount determined
by applying the applicable statutory U.S. Federal tax rate to pretax income
(loss) as a result of the following:
January 31, 1997 1996 1995
- -------------------------------------------------------------------------------
Income taxes (benefit) computed
at statutory rates $(3,561,000) $2,351,000 $2,013,000
State taxes (benefit), net of
Federal taxes (588,000) 388,000 332,000
Nondeductible expenses 265,000 76,000 71,000
- -------------------------------------------------------------------------------
Provision (benefit) for
income taxes $(3,884,000) $2,815,000 $2,416,000
===============================================================================
As a result of its operating loss for the year ended January 31, 1997, the
Company elected, for Federal purposes, to carryback such losses to offset
taxable income generated in previous periods. Accordingly, the January 31, 1997
financial statements reflect the anticipated refund of taxes paid in the year
ended January 31, 1997 and in earlier years.
10
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
Based on an assessment of all available evidence and identified tax
strategies, management has concluded that realization of the Company's
deferred tax assets of $592,000 at January 31, 1997 is considered to be
more likely than not. Accordingly, a valuation allowance is not necessary
at this date.
10. Officers Life Insurance
Officers life insurance at January 31, 1997 and 1996, represents gross
reimbursable insurance premiums totaling $1,432,728 and $1,151,263,
respectively, paid by the Company on behalf of a shareholder. The Company
will be reimbursed for premiums paid upon the earlier of the maturity of
the policy from cash surrender value or from proceeds upon the death of the
shareholder. With the sale of the Company and the transfer of this asset to
the Company's principal shareholder, the officers life insurance was
written down to cash surrender value at January 31, 1997, resulting in an
impairment loss of $567,790.
11. Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consists principally of cash deposits and
trade accounts receivable.
The Company maintains cash balances at several banks located in the state
of New Jersey. As part of its cash management process, the Company
periodically reviews the relative credit standing of these banks.
The Company invests substantially all of its available cash in overnight
repurchase agreements, typically consisting of government treasury
certificates, at two banks. These amounts are included in cash and cash
equivalents.
Credit risk with respect to trade accounts receivable is concentrated with
the Company's ten largest customers. These customers accounted for
approximately 36% and 38% of the Company's outstanding trade accounts
receivable at January 31, 1997 and 1996, respectively.
For the years ended January 31, 1997, 1996 and 1995, one customer accounted
for approximately 12%, 19% and 10%, respectively, of the Company's sales.
This customer comprised approximately 16% of accounts receivable at January
31, 1997 and 1996.
12. Related Parties
Revenue related to transactions between the Company and affiliates of ABI
were approximately $1,033,000, $1,335,000 and $0 for the years ended
January 31, 1997, 1996 and 1995, respectively. Accounts receivable with ABI
were $774,000 and $631,000 at January 31, 1997 and 1996, respectively (see
also Notes 8(a) and 10).
13. Acquisition
In October 1994, the Company purchased the stock of a Company engaged in
similar operations for $400,000. This transaction was accounted for under
the purchase method of accounting. The amount paid in excess of the fair
value of the net assets acquired is being amortized over 15 years and is
included in intangible assets. Accumulated amortization as of January 31,
1997 and 1996 was $58,551 and $33,457.
11
DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies)
Notes to Consolidated Financial Statements
14. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at January 31, 1997 and 1996 are
composed of the following:
January 31, 1997 1996
- -------------------------------------------------------------------------------
Accrued bonuses $2,570,000 $ 24,500
Trade accounts payable 1,644,702 1,149,402
Accrued commissions 307,500 294,580
Accrued income taxes - 126,808
Accrued group insurance 401,495 150,000
Customer advances 487,027 457,688
Accrued expenses 1,391,854 792,354
- ------------------------------------------------------------------------------
$6,802,578 $2,995,332
==============================================================================
12
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements give effect
to the purchase transaction pursuant to the Agreement and Plan of Merger dated
February 11, 1997 between the Company and DBA Holdings, Inc. and Subsidiaries
(operating as Database America Companies, or DBA).
The pro forma consolidated balance sheet assumes that the purchase occurred on
December 31, 1996.
The pro forma consolidated statement of operations assume that the purchase
occurred on January 1, 1996.
The merger will be accounted for using the purchase method of accounting. The
pro forma consolidated financial statements presented herein are shown for
illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of the Company, or of the
financial position or results of operations of the Company that would have
actually occurred had the transaction been in effect as of the date or for the
period presented.
The unaudited pro forma consolidated financial statements and related notes
should be read in conjunction with the historical financial statements and
related notes of the Company and DBA.
This amendment is being filed to reflect the completion of the valuation of the
tangible and intangible assets acquired in the acquisition of DBA. The
previously filed Form 8-K/A had been based on estimates available at the time
this filing was required to be submitted. This amendment also reflects the
presentation of a charge of $3.1 million to compensation expense in 1995 related
to the Company's acquisition of approximately 292,000 shares of common stock
from a former officer of the Company. The transaction had been previously
reported as a charge to paid-in capital during the first quarter of 1996.
13
AMERICAN BUSINESS INFORMATION, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
(in thousands)
Historical Historical
American DBA Holdings,
Business Inc. and Pro Forma Pro Forma
Information, Inc. Subsidiaries Adjustments Combined
----------------- ------------- ----------- ---------
ASSETS
Current assets: Restated Restated Restated
Cash and cash equivalents $ 7,497 $ 5,916 $ - $ 13,413
Marketable securities 22,810 - - 22,810
Trade accounts receivable, net 29,630 14,340 (1,274) (f) 42,696
Income taxes receivable, net 1,105 7,232 - 8,337
Officers life insurance - 865 - 865
Prepaid expenses 3,761 709 - 4,470
Deferred marketing costs 1,263 - - 1,263
------------------------------------------- --------
Total current assets 66,066 29,062 (1,274) 93,854
------------------------------------------- --------
Property and equipment, net 18,886 621 - 19,507
Intangible assets, net of accumulated amortization 16,916 318 47,970 (a) 65,204
Deferred income taxes 5,388 592 - 5,980
Other assets 621 1,191 1,812
------------------------------------------- --------
$107,877 $31,784 $ 46,696 $186,357
=========================================== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 708 $ 1,380 $ - $ 2,088
Note payable to shareholders 7,925 - - 7,925
Accounts payable 5,520 1,709 - 7,229
Accrued payroll expenses 2,352 3,279 - 5,631
Accrued expenses 711 1,879 2,000 (e) 4,590
Deferred revenue 2,117 - - 2,117
Deferred compensation - 17,385 - 17,385
Deferred income taxes 512 - - 572
------------------------------------------- --------
Total current liabilities 19,845 25,632 2,000 47,477
------------------------------------------- --------
Long-term debt, net of current portion 427 - 60,000 (a) 60,427
Deferred income taxes - - 10,792 (g) 10,792
Stockholders' equity:
Preferred stock - - - -
Common stock 55 14 (8) (a) 61
Paid-in capital 37,268 25 29,147 (a) 66,640
Retained earnings 52,942 6,113 (55,235) (a) 3,820
Treasury stock (2,281) - - (2,281)
Unrealized holding loss, net of tax (379) - - (379)
------------------------------------------- --------
Total stockholders' equity 87,605 6,152 (26,096) 67,661
------------------------------------------- --------
$107,877 $31,784 $ 46,696 $186,357
=========================================== ========
See notes to pro forma consolidated financial statements
14
AMERICAN BUSINESS INFORMATION, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(in thousands, except per share amounts)
Historical
American Historical
Business DBA Holdings,
Information, Inc. and Pro Forma Pro Forma
Inc. Subsidiaries Adjustments Combined
------------ ------------ ----------- ---------
Restated Restated
Net sales $108,298 $52,513 $ - $160,811
Costs and expenses:
Database and production costs 29,272 23,487 - 52,759
Selling, general and administrative 45,766 22,164 - 67,930
Depreciation and amortization 4,855 502 25,062 (c) 30,419
Non-recurring charges 21,500 16,199 (16,199)(b) 21,500
----------------------------------------- --------
101,393 62,352 8,863 172,608
----------------------------------------- --------
Operating income 6,905 (9,839) (8,863) (11,797)
Other income (expense):
Investment income 3,194 223 - 3,417
Interest expense (209) (159) (3,646)(d) (4,014)
Other (943) (699) 568 (b) (1,074)
----------------------------------------- --------
Income before income taxes and
discontinued operation 8,947 (10,474) (11,941) (13,468)
Income taxes 3,400 (3,884) (4,101)(g) (4,585)
----------------------------------------- --------
Income from continuing operations 5,547 (6,590) (7,840) (8,883)
Loss on discontinued operation (355) - - (355)
Loss from abandonment of subsidiary (1,373) - - (1,373)
----------------------------------------- --------
Net income $ 3,819 $(6,590) $(7,840) $(10,611)
========================================= ========
Earnings per share:
Income from continuing operations $ 0.26 $(0.39)
Loss on discontinued operation and
abandonment of subsidiary $(0.08) $(0.07)
-------- --------
Net income $ 0.18 $(0.46)
======== ========
Weighted average shares outstanding 21,033 2,181 (a) 23,214
======== ======= ========
See notes to pro forma consolidated financial statements.
15
AMERICAN BUSINESS INFORMATION, INC.
NOTES TO UNAUDITED FORMA CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Note 1: Historical financial information for American Business Information,
Inc. (ABI) and DBA Holdings, Inc. and Subsidiaries (DBA) included in the pro
forma financial statements are based on the balance sheets of ABI and DBA as of
December 31, 1996, and on the statements of operations of ABI and DBA for the
twelve months ended December 31, 1996.
Note 2: The unaudited pro forma consolidated financial statements reflect the
following adjustments:
(a) Represents the purchase transaction by ABI of DBA through the issuance of
2,181 shares of ABI common stock and payment of $60,000 in cash, funded
using a revolving credit facility. A write-off of certain intangible assets
acquired with the purchase of DBA totaling $49,200 is not reflected on the
pro forma consolidated statement of operations. The remaining balance of
$47,970 was recorded as certain intangibles on the balance sheet.
(b) Certain non-recurring charges associated with the acquisition of DBA
including payments for deferred compensation of $13,699, incentive bonuses
of $2,500 and $568 related to the impairment of officers life insurance
policy are not reflected on the pro-forma consolidated statement of
operations.
(c) Reflects amortization of certain intangibles on a straight-line basis over
1 to 15 years. Total intangibles recorded as part of the transaction are
$47,970. Included in this amount are acquired database costs of $19,000 and
purchased data processing of $9,400, which will be amortized over 1 year
and 2 years, respectively.
(d) Reflects interest on the revolving credit facility issued in the purchase
transaction. The interest is calculated based on three month LIBOR rates
on the total amount borrowed of $60,000 and reflects the assumption that no
principal payments are made during the period.
(e) Represents accrual for fees totaling $2,000 due to investment banking firm
associated with the merger transaction. The accrual of these fees is not
reflected on the pro-forma consolidated statement of operations.
(f) Reflects valuation of DBA asset or liability to market value.
(g) Reflects income tax effect of pro forma adjustments.
16