1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
UNITED STATES
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended May 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-11770
FDP CORP.
(Exact name of registrant as specified in its charter)
Florida 59-2138243
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2140 South Dixie Highway, Miami, Florida 33133
(Address of principal executive offices) (Zip Code)
(305) 858-8200
(Registrant's telephone number, including area code)
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 the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value per share,
3,628,551 shares outstanding as of June 30, 1996
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FDP CORP.
TABLE OF CONTENTS
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
May 31, 1996 and November 30, 1995 3
Consolidated Condensed Statements of Earnings
Three and Six Months Ended May 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
Six Months Ended May 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II. OTHER INFORMATION
Item 1. Legal 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FDP CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
May 31, November 30,
1996 1995
(Unaudited)
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,201,162 $ 3,301,112
Marketable securities 5,342,716 4,953,370
Accounts receivable, less allowance for
uncollectible accounts of $303,810 in
1996 and $317,174 in 1995 4,706,603 3,747,309
Notes receivable - current 498,024 675,436
Prepaid expenses 251,867 113,426
Deferred income taxes 128,968 230,351
Costs and earnings in excess of billings on
uncompleted contracts 247,758 124,364
Other 115,806 64,428
------------ -------------
Total current assets 12,492,904 13,209,796
Property and equipment at cost, less
accumulated depreciation of $3,580,830 in
1996 and $3,755,975 in 1995. 2,609,491 2,193,194
Other assets:
Marketable securities 9,619,018 7,856,804
Notes receivable - non-current 255,159 367,859
Goodwill 283,598 -
Other 53,067 32,479
------------ -------------
Total assets $ 25,313,237 $ 23,660,132
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,525,772 $ 2,781,700
Income taxes payable 271,694 223,465
Billings in excess of costs and earnings on
uncompleted contracts 279,017 49,550
------------ -------------
Total current liabilities 3,076,483 3,054,715
Deferred income taxes 343,779 543,612
------------ -------------
Total liabilities 3,420,262 3,598,327
------------ -------------
Stockholders' equity:
Preferred stock; $.01 par value. Authorized
10,000,000 shares; none issued
Common stock; $.01 par value. Authorized
30,000,000 shares; shares issued and outstanding
3,621,051 in 1996 and 3,467,701 in 1995 36,211 34,677
Paid-in capital 8,856,549 7,811,270
Retained earnings 13,000,215 12,215,858
------------ -------------
Total stockholders' equity 21,892,975 20,061,805
------------ -------------
Total liabilities and stockholders' equity $ 25,313,237 $ 23,660,132
============ =============
See accompanying notes to consolidated condensed financial statements.
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FDP CORP
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
May 31, May 31,
------------------------ ---------------------------
1996 1995 1996 1995
--------- ---------- --------- ------------
Revenues:
Software $5,571,788 $4,122,725 $10,689,337 $8,298,810
Information services 806,035 751,506 1,588,777 1,542,436
---------- ---------- ----------- ----------
Total Revenues 6,377,823 4,874,231 12,278,114 9,841,246
---------- ---------- ----------- ----------
Cost of sales and services:
Product development, maintenance
and enhancements:
Software 4,438,769 3,152,961 8,448,419 6,201,554
Information services 296,140 487,069 641,423 989,893
Telecommunications 117,078 133,435 226,936 263,916
Selling, general and administrative
expenses 992,209 895,670 2,000,373 1,761,535
---------- ---------- ----------- ----------
Total cost of sales and services 5,844,196 4,669,135 11,317,151 9,216,898
---------- ---------- ----------- ----------
Operating profit 533,627 205,096 960,963 624,348
Interest income 259,438 244,382 510,368 469,405
Foreign currency loss and other (4,832) (4,077) (6,785) (9,449)
---------- ---------- ----------- ----------
Earnings before income taxes 788,233 445,401 1,464,546 1,084,304
Provision for income taxes 250,061 99,200 464,666 342,000
---------- ---------- ----------- ----------
Net earnings $ 538,172 $ 346,201 $ 999,880 $ 742,304
========== ========== ========== ==========
Earnings per common and
common equivalent share: $ 0.14 $ 0.10 $ 0.26 $ 0.21
========== ========== ========== ==========
Weighted average number of
shares used in per share
calculations 3,820,920 3,547,233 3,783,198 3,569,222
========== ========== ========== ==========
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
May 31,
-----------------------------
1996 1995
----------- -----------
Cash flows from operating activities:
Net earnings $ 999,880 $ 742,304
----------- -----------
Adjustments to reconcile net earnings to net
cash (used in) provided by operating activities:
Depreciation and amortization of property,
equipment and intangibles 394,905 241,537
Changes in assets and liabilities, net of effects
from acquistion of business:
(Increase) decrease in accounts receivable, net (504,740) 119,741
Increase in prepaid expenses (133,894) (59,987)
Increase in costs and earnings in excess
of billings on uncompleted contracts (123,394) (482,315)
(Increase) decrease in other current assets (51,378) 71,156
(Decrease) increase in accounts payable
and accrued liabilities (954,160) 83,040
Increase in billings in excess of
costs and earnings on uncompleted contracts 229,467 59,852
Increase in income taxes payable 16,512 65,700
Decrease in deferred income taxes (118,450) (48,338)
Decrease in other assets 32,487 21,650
----------- -----------
Net adjustments (1,212,645) 72,036
----------- -----------
Net cash (used in) provided by
operating activities (212,765) 814,340
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Cash flows from investing activities:
Proceeds from sale of marketable securities 2,476,959 4,155,032
Purchase of marketable securities (4,628,519) (5,222,076)
Proceeds from sale of equipment - 12,523
Acquisition of business. net of cash acquired 184,829 -
Proceeds from note receivable 471,991 309,026
Acquistion of note receivable (181,879) (307,213)
Equipment acquired (648,111) (389,157)
----------- -----------
Net cash used in investing activities (2,324,730) (1,441,866)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 405,863 208,125
Stock option income tax benefit 247,205 48,338
Dividend payment (215,523) -
----------- -----------
Net cash provided by financing activities 437,545 256,463
----------- -----------
Net decrease in cash and cash equivalents (2,099,950) (371,063)
Cash and cash equivalents at beginning of year 3,301,112 1,989,902
----------- -----------
Cash and cash equivalents at end of period $ 1,201,162 $ 1,618,839
=========== ===========
See accompanying notes to consolidated condensed financial statements.
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FDP CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MAY 31, 1996
(Unaudited)
Note A
In the opinion of management of FDP Corp. (the "Company"), the accompanying
unaudited consolidated condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position, the results of operations and the
statement of cash flows in conformity with generally accepted accounting
principles.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these consolidated
condensed financial statements be read in conjunction with the consolidated
financial statements and the notes included in the Company's latest annual
report on Form 10K.
The results of operations for the six months ended May 31, 1996, are not
necessarily indicative of the results for the full year.
Note B
The Board of Directors approved a annual cash dividend of $.06 per share,
payable May 25, 1996 to shareholders of record on May 10,1996.
Note C
Net primary earnings per common share for the periods presented has been
computed using the weighted average number of common and common equivalent
shares (stock options) outstanding except in the periods where the effect is
anti-dilutive. Fully-dilutive earnings per share is not materially different
from primary earnings per share in the periods presented.
Note D
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 50,000 shares of FDP Corp.
common stock valued at $7.875 per share and an additional 50,000 shares will be
issuable in the event that System Innovations achieves certain earnings levels.
The transaction was accounted for as a purchase, and the results of operations
for System Innovations are included in the statement of earnings from the
acquisition date. Goodwill of $316,574 was recorded as a result of the
transaction. System Innovations, a privately held company
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based in Littleton, Colorado, has been in business since 1984 and develops
software applications for the life insurance industry.
Note E
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock - Based
Compensation" ("SFAS No. 123"). SFAS No. 123 is effective for fiscal years
beginning after December 15, 1995.
SFAS No. 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees".
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the
stock at grant date, or other measurement date, over the amount an employee
must pay to acquire the stock.
Management has elected to continue to measure compensation cost using the APB
Opinion No. 25 prescribed method and therefore believes that SFAS No. 123 will
not have a material effect on the Company's consolidated financial statements.
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Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
Revenues reflect the Company's ability to develop new computer software
products, or enhance existing ones, then successfully market its software and
related services. Several factors influence the Company's results of
operations including advances in computer technology and changes in
governmental regulations. The Company's business is not seasonal even though
quarterly revenues and net earnings may vary. The variation is primarily due to
uncertain timing of customers' decisions, over which the Company has little
control, regarding the purchase of software systems and computer hardware.
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 50,000 shares of FDP Corp.
common stock and an additional 50,000 shares issuable in the event that Systems
Innovations achieves certain earnings levels over the next few years. System
Innovations, a privately held company based in Littleton, Colorado, has been in
business since 1984 and develops software applications for the life insurance
industry. System Innovations employs 28 people and generates approximately $3
million in annual revenue and is currently developing an advanced technology
life insurance proposal system in partnership with six major insurance
companies. The Company believes that the acquisition will provide the ability
to leverage its technical and insurance industry expertise and the joint
partnership with the six insurance companies provides opportunities for the
cross-selling of the Company's products. Included in the financial statements
is the activity related to the acquisition subsequent to December 28, 1995.
FINANCIAL RESULTS
For the quarter ended May 31, 1996, total revenue was $6,377,823 as compared to
$4,874,231 for the same period for last year representing an increase of 31%.
The Company reported net earnings for the second quarter of $538,172 or $.14
per share compared to net earnings of $346,201 or $.10 per share for the same
period in 1995.
For the six month period ended May 31, 1996, total revenue was $12,278,114 as
compared to $9,841,246 for the same period for last year representing an
increase of 25%. The Company reported net earnings for the six month period of
$999,880 or $.26 per share compared to net earnings of $742,304 or $.21 per
share for the same period in 1995.
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The Company reports its revenues by two categories, Software and Information
Services.
SOFTWARE REVENUE Three Months Ended Six Months Ended
------------------ ----------------
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
(000) (000) (000) (000)
------ ------ ------- ------
PENSION PARTNER $ 876 $ 969 $ 1,920 $1,977
------ ------ ------- ------
AGENCY PARTNER
Advanced Underwriting 1,144 1,185 2,224 2,257
Agency Database 586 450 1,221 850
------ ------ ------- ------
Subtotal 1,730 1,635 3,445 3,107
------ ------ ------- ------
SYSTEM INNOVATIONS 753 ---- 1,358 -----
------ ------ ------- ------
HOME OFFICE SYSTEMS
FDP/CLAS 1,189 1,130 2,268 2,463
FDP/COMPASS 1,024 389 1,698 752
------ ------ ------- ------
Subtotal 2,213 1,519 3,966 3,215
------ ------ ------- ------
TOTAL SOFTWARE $5,572 $4,123 $10,689 $8,299
------ ------ ------- ------
SOFTWARE REVENUE:
Total software related revenue which includes software licenses, maintenance,
service revenue (time and materials) and other for the three months ended May
31, 1996 was $5,571,788 versus $4,122,725 for the same period in 1995
representing a 35% increase. For the six month period, total software related
revenues were $10,689,337 compared to $8,298,810 for the same period last year
representing an increase of 29%.
Software revenues for PENSION PARTNER for the quarter and six month periods
decreased by 10% and 3%, respectively, as compared to last year. Higher
maintenance related revenues were offset by lower product sales as customers
delayed purchasing awaiting the release of the Pension Partner products of
FDP/VISION.
Agency Partner, which consists of Advanced Underwriting and Agency Database,
reported an increase in software revenue for the three and six month periods
ended May 31, 1996 of 6% and 11%, respectively. Advanced Underwriting revenues
were basically unchanged on a year to year comparison whereas revenues in
Agency Database for the quarter and six month periods were up 30% and 44%,
respectively. The increase in revenues in Agency Database related to sales of
Contact Plus! (formerly Agency Database for Windows), the flagship product of
FDP/VISION.
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SYSTEM INNOVATIONS software revenues for the second quarter were $753,000. Most
of the revenues were generated from the development of the advanced technology
life insurance proposal system and enhancements and modifications to existing
products.
Software related sales for FDP/CLAS for the three months ended May 31, 1996
were up 5% as compared to last year. For the six month period, revenues were
down 8% as compared to last year as a result of a one time fee received in the
first quarter of 1995 for the completion of a significant United Kingdom
contract. Excluding this one time fee, FDP/CLAS revenues for the six month
period were basically unchanged on a year to year basis.
Revenues for FDP/COMPASS for the quarter and six months periods ended May 31,
1996 were up 164% and 126%, respectively. The increase in revenues for the
second quarter was the result of three new contracts executed this fiscal year
for the installation of the product. After signing a new contract for the
product in the United Kingdom in the first quarter, the Company signed two
additional agreements in the second quarter to install the product in South
Africa.
INFORMATION SERVICES REVENUE Three Months Six Months
------------ ----------
Ended Ended
----- -----
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
(000) (000) (000) (000)
---- ---- ------ ------
PENSION PARTNER $202 $235 $ 390 $ 459
---- ---- ------ ------
AGENCY PARTNER 70 87 152 180
---- ---- ------ ------
FDP/CLAS 534 430 1,047 903
---- ---- ------ ------
TOTAL INFORMATION SERVICES $806 $752 $1,589 $1,542
---- ---- ------ ------
INFORMATION SERVICES REVENUE:
Total information services revenue for the quarter and six month periods ended
May 31, 1996 increased by 7% and 3%, respectively. Higher information service
revenues in FDP/CLAS were offset by decreases in PENSION PARTNER and AGENCY
PARTNER revenues.
Information service revenue for FDP/CLAS for the three and six month periods
was up 24% and 16%, respectively. The increase in FDP/CLAS was due to higher
timesharing usage from the existing customer base. Information services revenue
for PENSION PARTNER and AGENCY PARTNER for the quarter and six months ended May
31, 1996 decreased as customers that access the various
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software programs on a timesharing basis are purchasing the respective products
for use on personal computers.
COSTS AND EXPENSES:
The Company's costs and expenses for the quarter and six month period ended May
31,1996 were $5,844,196 and $11,317,151 versus $4,669,135 and $9,216,898 for
the same periods last year representing increases of 25% and 23%, respectively.
About half of the increase for both periods relates to the acquisition of
System Innovations with the remainder of the increase due to higher payroll
related costs.
For the quarter ended May 31, 1996, costs related to product development,
maintenance and enhancements for software increased by 41%, whereas costs for
information services decreased by 39%. These changes reflect the trend of the
shifting of the Company resources in the PENSION PARTNER and AGENCY PARTNER
groups away from information services, a decreasing revenue base, to software
product development, a growing revenue base. In addition, the increase in
software related expenses was due to the acquisition of System Innovations.
Selling, general and administrative expenses for the quarter and six months
ended May 31, 1996 were $992,209 and $2,000,373 compared to $895,670 and
$1,761,535 for the same periods last year representing an increases of 11% and
14%, respectively. Most of this increase for the two periods relates to System
Innovations and higher selling related expenses.
INTEREST INCOME:
Interest earned primarily on the Company's portfolio of U.S. Treasury Bills and
Notes for the quarter ended May 31, 1996 was $259,438 compared to $244,382 for
the same period in 1995. The average interest earning rate for the second
quarter of 1996 was 6.17% as compared to 5.79% for the same period last year.
(See Financial Condition)
PROVISION FOR INCOME TAXES:
The Company's effective income tax rate was 32% and 22% for the quarters ended
May 31, 1996 and May 31, 1995, respectively. The tax rate in 1995 reflects an
adjustment to prior year income taxes.
- - ----------
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Financial Condition
The Company continues to maintain a highly liquid and virtually debt free
balance sheet. As of May 31, 1996 and November 30, 1995 cash and marketable
securities were $16,162,896 and $16,111,286, representing 64% and 68% of total
assets for the respective periods.
Other than planned purchases of equipment, no other significant capital
expenditures are anticipated for the remainder of fiscal 1996. Management of
the Company continues to believe that existing working capital and funds
generated by operations will be sufficient to meet the Company's anticipated
capital needs in connection with its present and proposed activities.
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PART II. OTHER INFORMATION
Item 1. Legal
The Company is from time to time involved in routine litigation arising in the
ordinary course of business. No litigation in which the Company is presently
involved is material to its financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Stockholders on April 22, 1996. At
this meeting the following matters were approved: (1) election of nominees
Cesar L. Alvarez, Michael C. Goldberg, Cindy Goldberg, Douglas Kennedy, Bruce
I. Nierenberg and Albert J. Schiff to serve on the Company's Board of Directors
until the next annual stockholders' meeting, (2) the number of shares reserved
for issuance under the Company's 1994 Employee Stock Option Plan was increased
to 413,912 and (3) the reappointment of KPMG Peat Marwick LLP, independent
certified public accountants, as auditors for the Company for the year ending
November 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - Exhibit 27 - Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended May 31, 1996.
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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 thereunto duly authorized.
Date: July 10, 1996 FDP CORP.
- - --------------------- ---------
By: /s/ Michael C. Goldberg
-------------------------------------
Michael C. Goldberg
Chairman of Board of Directors
Chief Executive Officer and President
(principal executive and financial
officer)
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