1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 1, 1996
NATIONAL DATA CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-3966 58-0977458
- ------------------------------- --------------------- -------------------
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
National Data Plaza, Atlanta, Georgia 30329-2010
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 404-728-2000
------------
NONE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
2
Item 1. Not Applicable
Item 2. Acquisition or Disposition of Assets
On April 1, 1996, National Data Corporation and certain of its subsidiaries
(collectively, the "Registrant") organized a new Georgia limited liability
company, Global Payment Systems LLC, ("GPS"), to which it transferred its
Payment Services business unit, its Information Systems and Services business
unit and certain back office support functions from the Registrant's Payment
Systems business unit. In addition, the Registrant contributed to GPS
$60,000,000 and loaned $50,000,000. The total cash from the Registrant,
$110,000,000, transferred to GPS was paid by using cash on-hand of
approximately $104,000,000 with the remaining $6,000,000 borrowed under an
existing acquisition line of credit. The Registrant also agreed to lend
working capital to GPS not to exceed $15,000,000. GPS then acquired a business
unit from MasterCard International Incorporated ("MasterCard"). The business
unit acquired, the MasterCard Automated Point-of-Sale Program ("MAPP"),
consisted of tangible personal property, leased personal and real property,
customer contracts, assembled work force and the goodwill of the business.
The establishment of GPS and the acquisition of the MAPP business unit was
consummated pursuant to an Asset Purchase and Contribution Agreement by and
among MasterCard, the Registrant and GPS dated as of February 22, 1996, as
amended (the "Contribution Agreement"). Pursuant to the Contribution Agreement
the purchase price paid for the assets of the MAPP business unit by GPS was
$110,000,000 in cash plus the granting of a 7.5% membership interest in GPS to
MasterCard.
Pursuant to the Contribution Agreement, MasterCard and the Registrant entered
into an Operating Agreement dated as of March 31, 1996, which sets forth
certain rights and obligations of the parties thereto regarding GPS, including
rights regarding the earnings of GPS. Subject to earlier termination upon
conversion of GPS into a corporation at the Registrant's election, the
Registrant will be entitled to receive a special allocation of 99% of the
earnings from GPS through May 31, 1998, 97% of the earnings from GPS from June
1, 1998 through May 31, 1999, and 95% of the earnings from GPS from June 1,
1999 through May 31, 2000. Thereafter, 92.5% of the earnings from GPS will be
distributed to the Registrant, with the balance of the 7.5% of the earnings
being distributed to MasterCard. Upon the conversion of GPS into a
corporation, the earnings will be distributed in accordance with MasterCard's
and the Registrant's respective ownership interests.
In the Contribution Agreement, the parties entered into various indemnification
agreements and agreements relating to the employment of the former MAPP
employees. Pursuant to the Contribution Agreement, the Registrant and GPS,
and MasterCard and GPS entered into service agreements and subleases.
Additionally, GPS and Mastercard entered into a registration rights agreement
providing for, among other things, certain "demand" and "piggy-back"
registration rights upon any future public offering of securities of GPS.
These agreements also provide that MasterCard shall be entitled to one
3
GPS board seat until the earlier of (1) MasterCard's disposition of more than
50% of its initial membership interest in GPS or (2) GPS's completion of an
initial public offering.
The purchase price for the MAPP business was $128,750,000, which consists of
the $110,000,000 in cash and the 7.5% minority interest with an estimated value
of $18,750,000.
The acquisition of MAPP will be accounted for using the purchase method of
accounting. The net value of the tangible assets acquired was approximately
$8,391,000 creating an excess cost over tangible assets of $120,359,000. The
Registrant is in the process of receiving an independent appraisal of the value
of the assets acquired. It is estimated that the intangible assets will have
useful lives as follows:
Customer Contracts 25 years
Assembled Work Force 10 years
Trade Name 40 years
Goodwill 40 years
MAPP used the tangible fixed assets, principally mainframe computer hardware
and communications equipment, to provide transaction processing services to
financial institutions, including the authorization and capture of transactions
involving credit cards. The Registrant intends to continue the same or similar
use of all assets acquired.
The foregoing is qualified in its entirety by reference to the Contribution
Agreement, as amended, and the exhibits thereto filed as Exhibits 2.1 and 2.2
hereto and incorporated herein by reference.
4
Items 3-6. Not Applicable
Item 7. Financial Statements and Exhibits
The following financial statements, pro forma financial information and
exhibits are filed as part of this report.
(a) Financial Statements of the Business Acquired:
(1) MAPP Balance Sheets for the years ended December 31, 1994 and 1995.
(2) MAPP Income Statements for the years ended December 31, 1993, 1994 and
1995.
(3) MAPP Statements of Cash Flows for the years ended December 31, 1993,
1994 and 1995.
(4) Notes to Financial Statements.
(5) Independent Auditors Report.
(b) Pro Forma Financial Information.
(1) Unaudited Pro Forma Condensed Combined Balance Sheet as of February
29, 1996.
(2) Unaudited Pro Forma Condensed Combined Income Statement for the fiscal
year ended May 31, 1995.
(3) Unaudited Pro Forma Condensed Combined Income Statement for the nine
months ended February 29, 1996.
(4) Notes to Unaudited Pro Forma Condensed Combined Statements.
(c) Exhibits.
Exhibit No. Description
----------- --------------------------------
2.1 Asset Purchase and Contribution Agreement
2.2 Amendment No. 1 to Asset Purchase and Contribution
Agreement
23 Consent of Price Waterhouse LLP
Item 8. Not Applicable
5
Signature
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.
NATIONAL DATA CORPORATION
By: /s/ Jerry W. Braxton
---------------------
Jerry W. Braxton
Chief Financial Officer
Dated: April 15, 1996
6
MasterCard Automated
Point-of-Sale Program
(An organizational unit of
MasterCard International Incorporated)
Financial Statements
December 31, 1995
7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of MasterCard International Incorporated
In our opinion, the accompanying balance sheet and the related statements of
income and of cash flows present fairly, in all material respects, the
financial position of MasterCard Automated Point-of-Sale Program Business Unit
("MAPP"), an organizational unit of MasterCard International Incorporated
("MasterCard"), at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of MasterCard's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance that 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
MAPP is a business unit of MasterCard and, as disclosed in Note 2 to the
accompanying financial statements, has engaged in various transactions with
MasterCard.
PRICE WATERHOUSE
New York, New York
March 28, 1996
8
MasterCard Automated Point-of-Sale Program
(An organizational unit of MasterCard International Incorporated)
Balance Sheet (In thousands)
- ------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
ASSETS
Current assets
Accounts receivable $ 4,894 $ 4,187
Prepaid expenses 567 113
----------- -----------
5,461 4,300
Fixed assets, net 9,000 9,437
TOTAL ASSETS $ 14,461 $ 13,737
=========== ===========
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,785 $ 1,308
----------- -----------
1,785 1,308
Deferred tax liability 273 462
----------- -----------
TOTAL LIABILITIES 2,058 1,770
----------- -----------
Commitments and contingencies (Note 6) - -
Parent Company investment 12,403 11,967
TOTAL LIABILITIES AND EQUITY $ 14,461 $ 13,737
=========== ===========
The accompanying notes are an integral part of these financial statements.
9
MasterCard Automated Point-of-Sale Program
(An organizational unit of MasterCard International Incorporated)
Statement of Income (In thousands)
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
Revenue
Electronic Draft Capture $ 30,874 $ 26,053 $ 20,663
Other 17,742 14,092 12,021
----------- ----------- -----------
TOTAL REVENUE 48,616 40,145 32,684
----------- ----------- -----------
Expenses
Telecommunications 15,260 13,692 11,200
Personnel 14,302 12,926 11,031
Data Processing 2,399 2,135 1,889
Occupancy 1,746 1,302 1,164
Depreciation and amortization 3,975 3,433 2,708
General operating and administrative 2,217 2,366 1,818
Allocated corporate expenses 1,794 1,226 1,427
----------- ----------- -----------
TOTAL EXPENSES 41,693 37,080 31,237
----------- ----------- -----------
Income before income taxes 6,923 3,065 1,447
Provision for income taxes 2,885 1,319 603
----------- ----------- -----------
NET INCOME $ 4,038 $ 1,746 $ 844
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
10
MasterCard Automated Point-of-Sale Program
(An organizational unit of MasterCard International Incorporated)
Statement of Cash Flows (In thousands)
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
Cash flows from operating activities
Net income $ 4,038 $ 1,746 $ 844
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 3,975 3,433 2,708
Deferred income tax (benefit) provision (189) (147) 23
Changes in operating assets and liabilities
Increase in accounts receivable (707) (737) (344)
Increase in prepaid expenses, net (454) (113) -
Increase in accounts payable 477 889 76
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,140 5,071 3,307
Cash flows from investing activities
Purchase of fixed assets (3,688) (3,818) (4,530)
NET CASH USED IN INVESTING ACTIVITIES (3,688) (3,818) (4,530)
----------- ----------- -----------
Cash flows from financing activities
Net (payments to) receipts from Parent (3,452) (1,253) 1,223
----------- ----------- -----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (3,452) (1,253) 1,223
----------- ----------- -----------
Net change in cash and cash equivalents - - -
Cash and cash equivalents at beginning of year - - -
----------- ----------- -----------
Cash and cash equivalents at end of year - - -
----------- ----------- -----------
The accompanying notes are integral part of these financial statements.
11
MasterCard Automated Point-of-Sale Program
(An organizational unit of MasterCard International Incorporated)
Notes to Financial Statements (In thousands)
December 31, 1995, 1994 and 1993
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
MasterCard Automated Point-of-Sale Program ("MAPP") is a business unit
established and operated by MasterCard International Incorporated
("MasterCard") that provides transaction processing services to acquiring
members, including the authorization and capture of transactions involving
credit, debit and similar cards, through utilization of an electronic
telecommunications and computer network. MAPP is not a distinct legal
entity.
On February 22, 1996, MasterCard entered into an agreement with National
Data Corporation ("NDC") to form a new payment processing company called
Global Payment Systems ("GPS") that will consist of MAPP and NDC's payment
services business, point-of-sale and back-office services. MasterCard will
contribute to GPS certain assets of MAPP and GPS will assume certain
liabilities of MAPP as of April 1, 1996. In return, MasterCard will
receive $110 million in cash and a 7.5% equity ownership in GPS. The
transaction is expected to close in the second quarter of 1996.
The Securities and Exchange Commission, in Staff Accounting Bulletin No. 55
("SAB 55"), requires that historical financial statements of a subsidiary,
division, or lesser business component of another entity include certain
expenses incurred by the parent on its behalf. These expenses generally
include, but are not limited to, officer and employee salaries, rent,
depreciation, accounting and legal services, other selling, general and
administrative expenses, and other such expenses. These financial
statements, as described in Note 2, include the estimated costs of such
expenses and services.
These financial statements include the historical financial position,
results of operations and cash flows of MAPP previously included in the
MasterCard consolidated financial statements. These financial statements
have been prepared by MasterCard management in conformity with generally
accepted accounting principles and include such estimates and adjustments
as considered necessary to present fairly the financial position of MAPP at
December 31, 1995 and 1994 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995.
BASIS OF PRESENTATION
MAPP follows generally accepted accounting principles. Assets and
liabilities are carried principally at historical cost and the accrual
method of accounting is followed. 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates.
12
MasterCard Automated Point-of-Sale Program 2
(An organizational unit of MasterCard International Incorporated)
Notes to Financial Statements (In thousands)
December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
REVENUE RECOGNITION
Revenue represents fees for services provided to members of MasterCard and
is recognized as services are provided.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation on computer equipment and
furniture and fixtures is computed under the straight-line method over the
estimated useful lives of the related assets, which do not exceed five
years. The costs of purchased and internally developed software are
capitalized and amortized on a straight-line basis over their estimated
useful lives, which do not exceed five years.
INCOME TAXES
MasterCard utilizes the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Historically, the results of MAPP's operations have been included in the
consolidated U.S. federal income tax return of MasterCard. The income tax
expense and other tax related information in these financial statements is
presented as if MAPP had not been eligible to be included in the
consolidated tax returns of MasterCard (i.e., MAPP on a stand-alone basis).
The recognition and measurement of income tax expense and deferred income
taxes requires certain assumptions, allocations, and significant estimates
which management believes are reasonable to measure the tax consequences as
if MAPP were a stand-alone taxpayer.
2. RELATED PARTY TRANSACTIONS
MAPP processes transactions with MasterCard's members in the normal course
of business. In addition, MAPP enters into transactions with MasterCard
which are discussed in further detail below:
CASH AND CASH EQUIVALENTS
MAPP accounts receivable are collected by MasterCard and cash is invested
centrally by MasterCard. Additionally, disbursements are funded centrally.
As a result, MAPP maintains a zero cash balance on its books and receives
charges and credits against Parent Company Investment for cash collected
and used.
ALLOCATED CORPORATE EXPENSES
MasterCard allocates a certain portion of its corporate expenses to its
business units. These costs include human resources, legal, accounting,
audit, occupancy, data processing and network operations, but do not
include allocations of MasterCard executive management costs. Allocations
of rentals for office space of $1,395, $997 and $935 for the years ended
December 31, 1995, 1994 and 1993,
13
MasterCard Automated Point-of-Sale Program 3
(An organizational unit of MasterCard International Incorporated)
Notes to Financial Statements (In thousands)
December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
respectively, are included in occupancy expense. All other allocated
corporate expenses of $1,794, $1,226 and $1,427 for the years ended
December 31, 1995, 1994 and 1993, respectively, are presented as a separate
line item in the Statement of Income.
Corporate expenses are allocated based on a variety of factors (e.g.,
square footage, head count, transaction volumes, etc.) which management
believes to be reasonable. These costs could have been different had MAPP
operated on its own during the periods presented.
MasterCard does not charge its business units for the carrying costs
related to its investment in such units (parent company investment).
Therefore, MAPP's results of operations for each of the periods presented
do not include any allocated interest charges from MasterCard.
3. FIXED ASSETS
Fixed assets are comprised of the following at December 31:
1995 1994
Computer equipment $ 24,205 $ 20,927
Capitalized software 2,793 2,793
----------- -----------
26,998 23,720
Less - Accumulated depreciation and amortization (17,998) (14,283)
----------- -----------
$ 9,000 $ 9,437
=========== ===========
Depreciation expense aggregated $3,416, $2,929 and $2,708 for the years
ended December 31, 1995, 1994 and 1993, respectively. Amortization expense
related to capitalized software aggregated $559, $504 and $0 for the years
ended December 31, 1995, 1994 and 1993, respectively.
4. EMPLOYEE BENEFIT PLANS
MAPP participates in the MasterCard noncontributory defined benefit pension
plan. For the years ended December 31, 1995, 1994 and 1993, $358, $366 and
$250, respectively, of pension expense was allocated to MAPP. MAPP also
participates in MasterCard's defined benefit/defined contribution plan for
providing postretirement medical and life insurance benefits. For the
years ended December 31, 1995, 1994 and 1993, $227, $305 and $243,
respectively, of postretirement expense was allocated to MAPP. As a
multiemployer plan, separate information regarding the components of cost,
plan assets, accumulated and projected benefit obligations, and related
liabilities or prepaid asset amounts for these plans are not available for
MAPP.
14
MasterCard Automated Point-of-Sale Program 4
(An organizational unit of MasterCard International Incorporated)
Notes to Financial Statements (In thousands)
December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
5. INCOME TAXES
The recognition and measurement of income tax expense and deferred taxes
requires certain assumptions, allocations, and significant estimates to
measure the tax consequences as if MAPP was stand-alone taxpayer.
PROVISION (BENEFIT) FOR INCOME TAXES
YEAR ENDED DECEMBER 31,
1995 1994 1993
($ in thousands)
Current
Federal $ 2,369 $ 1,130 $ 457
State 705 336 123
---------- --------- ----------
TOTAL INCOME TAXES - CURRENT 3,074 1,466 580
---------- --------- ----------
Deferred
Federal (146) (113) 18
State (43) (34) 5
---------- --------- ----------
TOTAL INCOME TAXES - DEFERRED (189) (147) 23
---------- --------- ----------
INCOME TAXES $ 2,885 $ 1,319 $ 603
========== ========= ==========
MAPP's deferred tax liabilities of $273 and $462 at December 31, 1995 and
1994, respectively, result primarily from differences in the amounts
recorded and the amounts recognized for income tax purposes for fixed
assets and employee benefits. The provision for income taxes varies from
the amounts computed by applying the applicable U.S. federal income tax
rate to income before taxes primarily as a result of state income taxes.
6. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under noncancellable operating leases with
initial or remaining terms in excess of one year at December 31, 1995 are
as follows:
1996 $251
1997 169
1998 68
1999 23
Thereafter -
----
TOTAL MINIMUM LEASE PAYMENTS $511
====
15
MasterCard Automated Point-of-Sale Program 5
(An organizational unit of MasterCard International Incorporated)
Notes to Financial Statements (In thousands)
December 31, 1995, 1994 and 1993
- -------------------------------------------------------------------------------
Rental expense, excluding corporate allocations for office space,
aggregated $287, $181 and $125 for the years ended December 31, 1995, 1994
and 1993, respectively.
7. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Due to their short-term nature, the carrying amount of accounts receivable
and accounts payable reported on the balance sheet approximates estimated
fair value.
8. PARENT COMPANY INVESTMENT
Because MAPP is an operating unit and not a distinct legal entity (see Note
1) there are no customary equity and capital accounts recorded on the
balance sheet. Instead, parent company investment is maintained by MAPP
and MasterCard to account for interunit transactions as described in Note
2. Parent company investment consists of net income, advances for capital
expenditures and other transactions as follows:
PARENT COMPANY INVESTMENT
YEAR ENDED DECEMBER 31,
1995 1994 1993
($ in thousands)
Balance, beginning of year $11,967 $11,545 $ 9,784
Net income 4,038 1,746 844
Capital expenditures (3,688) (3,818) (4,530)
Net interunit transactions (Note 2) 86 2,494 5,447
------- ------- -------
BALANCE, END OF YEAR $12,403 $11,967 $11,545
======= ======= =======
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PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma financial information has been prepared as if the
transaction reported had taken place on February 29, 1996 for the pro forma
condensed combined balance sheet and June 1, 1994 for the pro forma condensed
combined income statements. The pro forma results presented are unaudited and
reflect estimates for differences in year end.
This acquisition has been accounted for using the purchase method. Goodwill
and intangibles resulting from the acquisition will be amortized over an
approximate weighted average period of 38 years. The purchase price
allocations are estimated at this time pending completion of an appraisal by a
third party appraisal firm. Any adjustments to the purchase price are not
expected to be material to the pro forma financial information taken as a
whole.
The pro forma financial information is presented for information purposes only
and is not necessarily indicative of the operating results that would have
occurred had the acquisition taken place on the dates indicated, nor are they
necessarily indicative of the results of future operations. Historical income
statements of the acquired company have been adjusted to reflect differing
fiscal years. Non-recurring items were excluded from the pro forma
presentation. The pro forma financial information should be read in
conjunction with the accompanying notes.
17
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FEBRUARY 29, 1996
(in thousands)
NDC MAPP
Historical Assets Pro Forma Pro Forma
@ 2-29-96 Acquired Adjustments Combined
---------- -------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $98,501 $0 ($98,500)i $ 1
Accounts receivable, net 40,293 0 40,293
Other current assets 10,131 0 10,131
-------- ------ -------- --------
Total current assets 148,925 0 (98,500) 50,425
-------- ------ -------- --------
Property and equipment, net of depreciation: 37,509 8,391 45,900
Acquired intangibles and goodwill, net 78,151 0 120,359 b 198,510
Other 2,244 0 2,244
-------- ------ -------- --------
117,904 8,391 120,359 246,654
Total Assets $266,829 $8,391 $ 21,859 $297,079
======== ====== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,232 $0 $ 7,232
Line of credit payable 0 0 11,500 i 11,500
Notes payable 1,475 0 1,475
Mortgage payable 10,978 0 10,978
Other current liabilities 31,139 0 31,139
-------- ------ -------- --------
Total current liabilities 50,824 0 11,500 62,324
-------- ------ -------- --------
Notes payable 1,259 0 1,259
-------- ------ -------- --------
Other long-term liabilities 11,344 0 11,344
-------- ------ -------- --------
Total liabilities 63,427 0 11,500 74,927
-------- ------ -------- --------
Stockholders' Equity:
Common stock 2,881 0 2,881
Capital in excess of par value 101,152 8,391 (8,391)h 101,152
Retained earnings 99,698 0 99,698
Minority interest 689 0 18,750 b 19,439
Equity adjustments (1,018) 0 (1,018)
-------- ------ -------- --------
203,402 8,391 10,359 222,152
Total Liabilities and Stockholders' Equity $266,829 $8,391 $ 21,859 $297,079
======== ====== ======== ========
18
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED MAY 31, 1995
(in thousands except per share data)
NDC
Historical MAPP Pro Forma Pro Forma
@ 5-31-95 @ 5-31-95 Adjustments Combined
--------- --------- ----------- ---------
Revenue $242,031 $43,849 $285,880
Operating Expenses:
Cost of service 130,305 26,100 3,146 b 159,551
Sales, general and administrative 86,870 12,230 99,100
-------- ------- ------ --------
217,175 38,330 3,146 258,651
Operating Income 24,856 5,519 (3,146) 27,229
Other Income (expense):
Interest and other income 1,718 0 (1,289)c 429
Interest and other expense (2,136) 0 (488)d (2,624)
Minority interest (392) 0 (24)e (416)
-------- ------- ------ --------
(810) 0 (1,801) (2,611)
Income before income taxes 24,046 5,519 (4,947) 24,618
Provision for income taxes 8,657 1,987 (1,560)f 9,084
-------- ------- ------ --------
Net Income $ 15,389 $ 3,532 ($3,387) $ 15,534
======== ======= ====== ========
Number of common and common
equivalent shares 20,611 3,163 g 23,774
Earnings per share $0.75 $0.65
======== ========
19
NATIONAL DATA CORPORATION
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED FEBRUARY 29, 1996
(in thousands except per share data)
NDC
Historical MAPP Pro Forma Pro Forma
@ 2-29-96 @ 2-29-96 Adjustments Combined
---------- --------- ----------- ---------
Revenue $198,635 $38,502 $237,137
Operating Expenses:
Cost of service 101,782 23,060 2,360 b 127,202
Sales, general and administrative 72,469 9,028 81,497
-------- ------- ------ --------
174,251 32,088 2,360 208,699
Operating Income 24,384 6,414 (2,360) 28,438
Other Income (expense):
Interest and other income 3,622 0 (3,406)c 216
Interest and other expense (1,637) 0 (366)d (2,003)
Minority interest (295) 0 (41)e (336)
-------- ------- ------ --------
1,690 0 (3,813) (2,123)
Income before income taxes 26,074 6,414 (6,173) 26,315
Provision for income taxes 9,020 2,181 (1,622)f 9,579
-------- ------- ------ --------
Net Income $ 17,054 $ 4,233 ($4,551) $ 16,736
======== ======= ====== ========
Number of common and common
equivalent shares 24,297 24,297
Earnings per share $ 0.70 $ 0.69
======== ========
20
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of presentation
Certain reclassifications have been made to National Data Corporation's
historical condensed consolidated income statement for the year ended May 31,
1995 used in the pro forma presentation to conform to fiscal 1996 presentation.
Note 2. Narrative description of pro forma adjustments.
a. Cash on hand on June 1, 1994 was approximately $38,000,000. It is assumed
that had the transaction been completed on this date, the secondary equity
offering completed in fiscal 1996 would have already occurred. This offering
generated approximately $63,000,000 in cash.
Cash on hand at 6/1/94 $ 38,000,000
Secondary equity offering 63,000,000
Funds borrowed 9,000,000
------------
Total Purchase Price $110,000,000
============
b. Intangibles and goodwill in the amount of $120,359,000 are calculated as
follows:
Purchase price $110,000,000
Less: Tangible fixed assets (8,391,000)
Minority Interest (7.5%) 18,750,000
------------
$120,359,000
============
An approximate weighted average of 38 years is assumed for amortization
purposes. It is estimated that the intangible assets will have useful lives as
follows:
Customer Contracts 25 years
Assembled Work Force 10 years
Trade Name 40 years
Goodwill 40 years
Amortization expense for the periods presented is calculated as follows:
Fiscal Year Ended May 31, 1995 $3,146,000
Nine Months Ended February 29, 1996 2,360,000
21
c. Interest income is reduced by the following amounts to reflect the amount of
interest that would have been forfeited had the transaction occurred on June
1, 1994. The average interest rate earned on investments was approximately
5% in all periods presented.
Fiscal Year Ended May 31, 1995 $1,289,000
Nine Months Ended February 29, 1996 3,406,000
d. Interest expense is increased by the estimated amount of interest that would
have been incurred if $9,000,000 was borrowed on June 1, 1994 and continued
to remain outstanding through February 29, 1996. The interest calculation
is estimated based on the Registrant's current LIBOR borrowing rate of
5.42%.
Fiscal Year Ended May 31, 1995 $488,000
Nine Months Ended February 29, 1996 366,000
e. Minority interest (per the terms of the agreement) for the first two years
is calculated as 1% of operating income (adjusted for amortization of
purchase price), before income taxes.
Fiscal Year Ended May 31, 1995 $24,000
Nine Months Ended February 29, 1996 41,000
f. Income tax rates are adjusted to reflect the reduction of interest income
which was largely comprised of tax exempt or partially tax exempt amounts.
Income tax rates were adjusted to the following amounts:
Fiscal Year Ended May 31, 1995 36.9%
Nine Months Ended February 29, 1996 36.4%
g. Earnings per share is presented using the fully diluted number of shares
outstanding. In fiscal 1995, it is assumed that the secondary equity
offering would have been completed by June 1, 1994 and the number of
outstanding shares would have increased by approximately 3,163,000.
h. Stockholder's equity adjustments represent the elimination of the book
equity of the acquired company, which in this presentation is the value of
the tangible fixed assets.
22
i. Balance sheet as of February 29, 1996
Cash on hand at 2/29/96 $98,500,000
Funds borrowed 11,500,000
------------
Total Purchase Price $110,000,000
============
23
COMMISSION FILE NUMBER 03966
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED ON FORM 8-K
DATED APRIL 1, 1996
NATIONAL DATA CORPORATION
National Data Plaza
Atlanta, Georgia 30329-2010
24
NATIONAL DATA CORPORATION
FORM 8-K
INDEX TO EXHIBITS
------------------------------------------
Exhibit
Numbers Description Page Number
----------------------------------------------------------------- -----------
2.1 Asset Purchase and Contribution Agreement
2.2 Amendment No 1. to Asset Purchase and
Contribution Agreement
23 Consent of Price Waterhouse LLP