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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission file number :0-11770 FDP CORP.
(Exact name of registrant as specified in its charter)
Florida 59-138243
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
2140 South Dixie Highway 33133
Miami, Florida (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (305) 858-8200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of class)
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting Common Stock held by non- affiliates (based
upon the closing price as reported by the National Association of Securities
Dealers) on January 31, 1997 was approximately $16,094,000.
As of January 31, 1997, there were 5,534,832 shares of Common Stock, par value
$.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its 1997 Annual Meeting of
Shareholders, scheduled to be held on April 15, 1997, are incorporated by
reference in Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
FDP Corp., a Florida corporation ("FDP" or the "Company"), has been engaged in
the development, marketing and support of computer applications software to meet
the needs of the life insurance and employee benefit industry since 1968. The
Company is owned 55.8% by an individual shareholder who has voting control. The
software is available for operation on standalone mainframe, mini-and/or
microcomputers and/or may be accessed on a timeshare basis. In the Pension
Partner division, software products are developed for use by actuaries, life
insurance agents, life insurance companies, third party administrators, employee
benefit plan consultants, lawyers, bankers, accountants and others to promote
sales of, and assist in the administration of, defined benefit, defined
contribution and cafeteria plans by providing clients with an analysis of tax
benefits and funding assumptions. Products in the Company's Agency Partner
division are used by life insurance agents in demonstrating to their clients
interest-sensitive and other life insurance policies and to market and manage
their prospects and clients. In the Home Office Systems division, software
systems are developed for use by life insurance company home offices and other
financial institutions in handling the unique administration and processing
requirements of life insurance, pension and annuity products.
Life insurance products are based on intricate mathematical calculations and are
sensitive to a wide variety of constantly changing factors, including
fluctuations in interest rates, the availability and desirability of other
investment vehicles and changes in governmental regulations and tax laws. The
Company's software systems, which are enhanced and updated to reflect changes in
the economic and regulatory environment, facilitate the efforts by insurance
companies to keep existing products current and to develop new products in
response to these changes.
Because the design, marketing and administration of life insurance products and
pension and other employee benefit plans is complex, customer support personnel
for such software systems must possess actuarial skills, computer programming
ability and familiarity with the product. The Company has developed a customer
support organization by hiring actuaries and mathematicians and providing them
with training in computer programming, employee benefits and life insurance
products. The Company services its client base by maintaining a "hot-line" to
provide technical support and consultation.
The Company provides limited consulting services with respect to the application
of its products to technically enhance systems. In addition to generating
revenue and satisfying customer needs, these consulting services have, in the
past, contributed to decisions by the Company to enhance existing products and
develop entirely new products. The Company expects to continue its policy of
providing such consulting services.
The revenues from sales of software systems in the Home Office Systems division
are usually derived from large contracts. Due to normal delays and factors
associated with the size of these contracts, the effect of these revenues on a
fiscal quarter or fiscal year can be variable due to changes in estimates. (See
Item 7 -Management's Discussion and Analysis of Financial Condition and Results
of Operations.)
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ACQUISITION
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a System
Innovations). The purchase price consisted of 75,000 shares of the Company's
common stock $.01 par value ("Common stock") valued at $5.25 per share. 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 $313,000 was recorded as a result of the
transaction. 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. An additional 75,000 shares of the Company's common
stock will be issuable in the event that System Innovations achieves certain
earnings for fiscal years ending November 30, 1998 and 1999. These shares would
be paid in two equal installments of 37,500 shares on the third and fourth
anniversary dates of the acquisition.
In connection with the acquisition, the Company entered into a five-year
employment agreement with Michael Bain, the sole shareholder of System
Innovations, providing for an annual base salary of $210,000.
STRATEGY
FDP/VISION represents the Company's strategy to offer a total solution for the
marketing and administration needs of the life insurance, financial institution
and employee benefits industries. The total solution will completely integrate
the respective product lines of Agency Partner and Pension Partner. It will also
incorporate the Company's Home Office Systems, providing a common interface
under a Windows(R) environment.
Over the years, insurance agents, employee benefit professionals and insurance
company home offices have been buying various application packages to support
their marketing and administration needs. Each application has its own data
storage and user interface, causing data to be entered and stored independently.
This nonintegrated environment of multiple applications and multiple databases
results in added expense through duplication of training, duplication of
resources and lost productivity.
FDP/VISION addresses these issues. At the core of FDP/VISION solution lies a
relational database which enables all systems used within FDP/VISION to access
and share the same information. Using the knowledge gained from 28 years of
experience, the Company has created a database model that addresses all the data
storage needs of life insurance agents, home offices and employee benefits
professionals. The ability to share data eliminates repetitive data entry,
reduces the risk of error, and provides easy access to data. Another part of the
FDP/VISION solution is a common user interface. FDP not only coordinates the
look and feel of all its applications but also follows the standard interface
elements of Microsoft Windows. The consistency with these familiar elements
reduces the learning curve required for the user learning the systems developed
under FDP/VISION. The FDP/VISION design is also based upon object modeling
allowing the various systems to make use of reusable business objects. These
objects have been designed to comply with emerging standards such as OLE for
Life Insurance and Microsoft OLE. The use of Microsoft tools in the development
of the products under FDP/VISION will allow FDP to leverage the wide acceptance
of Microsoft Windows as a standard in the life insurance and employee benefits
industries.
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FDP/VISION products work in conjunction with other popular Windows-based
applications such as spreadsheet programs and report generators.
The flexibility and functionality of the system design is making FDP/VISION a
standard in the industry. The Company's commitment to this system design and
development strategy has been validated by the insurance industry as evidenced
by the increasing sales of the products released under FDP/VISION, multiple
sales of VISION products to the same customers and the growing list of customers
interested in purchasing the additional applications as soon as they are
released. The Company continues to dedicate resources to advancement of
FDP/VISION in an effort to gain market share over competitors. FDP's success is
also built upon the existing satisfied customer base, innovation, company
stability, strong tradition of quality products and high levels of customer
service.
PRODUCTS
The Company's software systems have been designed to permit ease of use and
adaptability to individual customer requirements. Most of the systems have a
modular structure that facilitates the application of updates and enhancements
and are based on a parameter-driven design so that key variables are not
embedded in the individual programs. Rather, these variables or parameters are
stored in central files which permit easy access without modifying the basic
program modules.
PENSION PARTNER
The Company's Pension Partner systems are designed to compute and illustrate
interactively various pension and employee benefit plans based upon assumed
financial and tax parameters governed by considerable Federal tax regulation,
economic conditions, actuarial concepts, and certain standard business factors
in the industry. These systems are used to assist self-employed people and
owners of small businesses to maximize the use of existing tax law to shelter
income and provide significant tax free death benefits to their survivors
through pension and employee benefit plans.
At the core of Pension Partner is the FDP/PEN Proposal and Administration
software for PCs. Patterned after its predecessor FDP/2000, which was available
on a timesharing basis or on standalone minicomputers, FDP/PEN was originally
developed in a DOS environment for IBM-compatible PCs. Resources have now
shifted to reengineer FDP/PEN for the Windows environment, and the first
production release of the FDP/PEN proposal and Administration system will be
offered in 1997. The gradual migration from the FDP/2000 system to FDP/PEN
continues, with all new sales attributable to the current PC DOS version and the
anticipated PC Windows version. The Pension Partner systems are utilized by
thousands of companies and agents throughout the nation, as well as consultants
and other users. These systems include:
- FDP/PEN Complete proposal and administration system for
all types of qualified plans, including Defined
Benefit, Target Benefit, Money Purchase, Profit
Sharing, 401(K), ESOP and Keogh Plans.
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- Easy Laser 5500 microcomputer software that automates the
for Windows completion of laser-printed IRS 5500 forms and
related schedules. Also available in a DOS version.
- Easy Laser 5300 microcomputer software that automates the
for Windows completion of laser-printed IRS 5300 forms and
related schedules. Also available in a DOS version.
- Easy Forms 1099 microcomputer software that automates the
for Windows preparation of 1099R's and related forms. Also
available in a DOS version.
- PDQ/PRO IRS-approved automated pension document
for Windows generation systems for Master or Regional Prototype
and PDQ/VIP plans and Volume Submitter Individualized Plans.
- Pension Manager a product designed to control and coordinate
pension office work flow.
- FDP/PTA a pension trust accounting database and asset
reconciliation system.
- FDP/Distpack mini-, microcomputer or timeshare accessed
software that illustrates the amount of excise
taxes payable on excess distributions and excess
accumulations.
- FDP/125 enrollment and administration software for
Section 125 cafeteria plans.
- FDP/A4 nondiscrimination testing system for 401(k) plans.
- FDP/Daily daily processing of participants records and
plan administration for 401(k) plans.
- FDP/VOICE voice response system that works in conjunction
with FDP/Daily.
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AGENCY PARTNER
FDP's Agency Partner division is responsible for developing integrated software
applications to support the needs of today's life insurance companies. These
Windows(R)-based systems assist in increasing sales, enhancing marketing,
servicing clients and managing day-to-day business functions for life insurance
professionals. The products in the Agency Partner division performing these
integrated operations are Contact Partner(TM), FDP/XL and FINPACK.
Contact Partner is a complete sales, marketing and client management database
incorporated into one system. Contact Partner includes all of the functions
required for an agent to perform automatic client/prospect tracking, in-force
policy servicing, investment tracking, time management, report management,
targeted marketing, report generation and letter writing. The system also
includes an exclusive Custom Screen Generator and a data conversion feature,
making it one of the most flexible and comprehensive systems on the market.
FDP/XL, a sales illustration system, provides a broad range of capabilities to
present the benefits of life insurance policies, while implementing all National
Association of Insurance Commissioner requirements. The product also illustrates
a diverse range of plan strategies including Ledgers, Executive Bonus, Group
Carve-Out, Split Dollar and Deferred Compensation. FDP/XL provides full
customization, enabling users to create columns and formats which can be saved
for use in any illustration. With open-ended architecture, FDP/XL can quickly
accommodate changes in the life insurance industry.
FINPACK, a comprehensive financial planning system, allows agents to analyze a
client's financial profile through family needs analysis, estate tax planning
and other financial tools. The system permits users to output comprehensive
reports, graphs, presentations and charts with superior graphics. This
easy-to-use system provides additional features, such as new a Tips Wizard &
On-line Help and a Conceptual Support Library, all designed to assist the user
in providing the right answers, while conveying them in a clear and professional
manner.
All of FDP's Agency Partner products are being continuously enhanced and
developed utilizing the latest technology available in the market. While FDP
continues to focus on enhancing its new Windows-based Agency Partner products,
the Company remains committed to maintaining and supporting its original
DOS-based versions of these products.
HOME OFFICE
The Home Office Systems division is responsible for the development of large
systems for use by life insurance home offices and financial institutions in
handling the unique administration and processing requirements of life, pension
and annuity products.
The systems provided by the FDP Home Office division are:
- FDP/CLAS, Comprehensive Life Administration System, supports universal
life and universal variable life as well as traditional life products in
the individual, group, COLI (Corporately Owned Life Insurance) and
annuity marketplaces.
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- FDP/COMPASS, COMPrehensive Annuity Support System, provides for
administration of group and individual pension/annuity products (both
qualified and non-qualified), including participant record-keeping and
plan administration for corporate defined contribution arrangements such
as 401(k) plans.
FDP/CLAS and FDP/COMPASS support administration requirements for various
insurance company products with a full range of automated financial functions
These include complete accounting for all transactions and comprehensive
management information and report generation facilities. The functionality
contained within these systems allows FDP to provide the administration and
service capabilities required to operate an entire home office.
Utilizing a relational database design along with a Graphical User Interface
(GUI) front-end, FDP/CLAS and FDP/COMPASS now operate in a client/server
environment and provide a state-of-the-art technical architecture, allowing for
flexibility and ease of use. Capable of running on hardware ranging from
inexpensive workstations to minicomputers with the power of a mainframe, the
UNIX-based FDP/CLAS and FDP/COMPASS systems can be quickly installed and easily
maintained on a standalone basis at the client's site. FDP/CLAS is also
available for those companies that prefer to handle their administrative needs
by outsourcing.
SOFTWARE DEVELOPMENT AGREEMENT (ISP ILLUSTRATION SYSTEM)
With the acquisition of System Innovations the Company became party to the ISP
Illustration System Software Development Agreement. This agreement represents a
joint development effort between the Company, System Innovations and six
insurance companies to develop an "advanced marketing illustration system". Upon
completion of the joint development effort, the Company will have title to the
"advanced marketing illustration system" with full rights to reproduce, publish,
sell or distribute. In exchange for these rights, the Company has agreed to pay
a royalty to the six insurance companies on license fees earned for new sales of
the "advanced marketing illustration system".
COMPUTER INFORMATION SYSTEMS
The Company provides timesharing services on its in-house Hewlett- Packard 3000
computer systems. The demand for the Company's timesharing services in the
Pension Partner and Agency Partner divisions continues to decline as their
various software programs are now more frequently requested for standalone
personal computers. By contrast, revenue related to timeshare access for
FDP/CLAS system has increased over the last few years due to higher usage of the
system. In fiscal 1997 the Company expects timesharing revenues related to
FDP/CLAS to decrease as two major customers of the system plan to take their
systems in-house. The data processing center of the Company operates multiple
computers, approximately two-thirds of which are for in-house software
development. The Company believes its computers and communication lines are
sufficient for its processing needs.
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OTHER
The Company is a Microsoft Solutions Provider Partner, Value Added Reseller for
Hewlett-Packard and Oracle and an Authorized Applications Specialist in the IBM
Business Partner Program.
CUSTOMERS
The clients of the Company include thousands of life insurance agents, numerous
insurance companies, many consulting firms specializing in pension and employee
benefits, and several nationally recognized accounting firms, law firms and
banks.
The Company's major customers include The Prudential, Metropolitan Life, New
York Life, John Hancock Mutual Life, Massachusetts Mutual, American
International Group, New England Mutual, Mutual Life Insurance Company of New
York (MONY), Connecticut Mutual, Continental Assurance (CNA), General American
Life, Guardian Life, National Life of Vermont, Minnesota Mutual, Home Life,
American United Life, Union Central, U.S. Life, Indianapolis Life, Great-West
Life, Safeco Life, American Life, ITT/Hartford Life, National Mutual Life
Association of Australia Ltd., VVAA, Principal Mutual Life Insurance Company,
The Travelers Insurance Company, London & Manchester Assurance Company Ltd.,
Liberty Life, Alexander Forbes, Investec Management Services, Empire Life
Insurance Company, Fidelity Investments Life Insurance Company, and
Dejardins-Laurentian Life Group.
REVENUE RECOGNITION AND RELATED MATTERS
The Company's business has not historically been of the nature that results in a
backlog of unfilled firm customer orders although some contracts may take
several years for completion. Large contracts for the sale and installation of
software are billed as phases of the contracts are substantially complete. Sales
of software licenses are billed upon shipment of the products to the customer.
The Company bills its customers for timesharing services on a monthly basis.
Timesharing agreements continue for indefinite terms and are terminable by the
customer at any time. Equipment sales are billed upon shipment. The backlog of
software sales was insignificant at November 30, 1996.
On sales where significant enhancements are required, the Company recognizes
revenue on the percentage of completion method based upon the labor hours
incurred to date to total estimated labor hours. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Amounts
received or billed in excess of revenues recognized to date are classified as
"billings in excess of costs and earnings on uncompleted contracts", whereas,
revenues recognized in excess of amounts billed are classified as "costs and
earnings in excess of billings on uncompleted contracts". Revenue from
separately priced extended software maintenance arrangements is deferred and
recognized in income on a straight line basis over the contract period.
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International revenues provided by export sales were $6,307,000 or 24%,
$3,403,000 or 18% and $2,599,000 or 14% of consolidated revenues for the years
ended November 30, 1996, 1995 and 1994, respectively, and were primarily from
customers in South Africa, United Kingdom, Australia, Netherlands and Canada.
MARKETING AND CUSTOMER SUPPORT
The Company's marketing philosophy is to provide potential and existing
customers with solutions to specific needs or problems. This approach requires a
high level of customer support and assistance and is one of the most important
factors in maintaining existing clients and increasing its client base. The
Company attributes much of its present client base to referrals from existing
clients. The Company also participates at industry trade shows and is active in
industry organizations.
A joint marketing effort was initiated in 1989 between the Company and Pension
Publications of Denver (PPD), a firm specializing in the preparation of employee
benefit documents. Using PPD documents, FDP developed two automated pension
document operation systems, Plan Documents Quickly (PDQ/PRO) and Volume
Submitter Individualized Plan (PDQ/VIP). The Company and PPD have agreed to
compensate one another for sales of their respective products. In addition, in
1994, the Company added voice response capabilities to its Daily Valuation
401(k) system. This feature has allowed data links to many fund vendors. These
joint relationships allow FDP to enhance its service available to the 401K
market. FDP's acceptance as a Microsoft Solutions Provider Partner provides the
Company with the technical knowledge and marketing support to build upon the
wide acceptance of Microsoft Windows in the life insurance and employee benefit
industries.
The Company has developed a customer support organization by hiring actuaries
and mathematicians and providing them with training in computer programming,
employee benefits and life insurance products. Most of the Company's officers
function as software consultants providing technical advice with regard to the
Company's software systems.
Users of the software are trained by the Company's staff concerning the use of a
system and are provided with documentation including reference manuals. The
Company maintains a staff which is available over a toll-free WATS telephone
line to support its clients. In addition, the Company sponsors periodic training
sessions and seminars to update and train users on new features of a system.
WARRANTIES AND RETURNS
The Company generally does not offer express warranties and limits implied
warranties in its timesharing and software licensing agreements. The standard
agreement for licensing the Company's systems under base fee arrangements
contains provisions purporting to limit warranty liability to the correction of
any deviation of a system from its specifications. The Company has not incurred
any significant warranty expense to date. The amount of sales returns of
hardware and software has been immaterial in the fiscal years ended November 30,
1996, 1995 and 1994.
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PRODUCT DEVELOPMENT AND ENHANCEMENT
The computer software industry is characterized by continual technological
change, requiring a high level of expenditures for the development and
improvement of computer software products. To date, the Company has adapted to
such changes by developing substantial functional enhancements to its products
that are provided to users of the system without additional charge. The Company
anticipates that it will continue to provide such enhancements for timesharing
users. A substantial amount of the Company's cost of services is associated with
the maintenance, enhancement and development of existing and new products, as
well as customer service. Research and development expenses charged to cost of
sales and services were approximately $5.8 million, $3.8 million, and $3.2
million during fiscal years 1996, 1995 and 1994, respectively.
In 1996, the Company's development efforts centered around the development of
the suite of products under FDP/VISION. In Pension Partner the Company's
successfully delivered the Windows version of PDQ/PRO. The delivery of PDQ/PRO
in Windows underscored the Company's commitment to Microsoft, as the Windows
version of PDQ/PRO incorporates Microsoft's Word for Windows software. The
Company responded rapidly to the recent Pension Simplification legislation,
providing timely updates to the FDP/PEN DOS software, as well as incorporating
the new legislation into the development of FDP/PEN for Windows. In addition,
the Company successfully released an Alpha version of the FDP/PEN Proposal
System for Windows, which was previewed by existing customers and prospects and
received positive ratings.
The Agency Partner division continued to expand its user base as Contact Partner
and FINPACK both released 2.0 versions of their systems providing significant
upgrades and new features. In addition, FDP/XL implemented enhancements to its
system, including NAIC Compliant Reports. All three products within the division
are opening new doors for FDP as they are developed in foreign languages. The
division also experienced successful implementation and integration with the
Company's Home Offices System products, becoming one of the first companies
in the industry to have a field release utilizing OLE for Life Insurance, an
industry- specific software development standard. In addition, for Contact
Partner, the Company added an Investment Tracking Module and now provides the
capabilities to download mutual fund information through DST .
In the Home Office System division, the Company expanded its customer base
internationally and domestically as significant functionality and product
capabilities were added to the systems including a new graphical user interface
for the FDP/COMPASS international system. In addition, the Company's new US
version of FDP/COMPASS went into production for a major domestic insurance
company.
System Innovations continued development of a life insurance proposal 32 bit
system that will take full advantage of the capabilities of Windows (TM) 95 and
Windows NT.
The Company believes that its future success will depend on its ability to
improve existing software products and develop or acquire additional software
products. There can be no assurance that such developments will occur or that
such acquisitions will be made.
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COMPETITION
The Company believes that its major competition is the in-house data processing
capability of life insurance companies. In addition, other independent software
producers compete in certain market segments served by the Company. The Company
believes that its products compete favorably with the competition, although it
may be at a competitive disadvantage against companies with greater financial,
technological, marketing, service and support resources.
The Company believes that the most important considerations for potential
purchasers of systems software packages are product capability, customer support
and service, integration of the product line, continuity of product enhancement,
ease of installation and use, documentation and training, the experience and
financial stability of the vendor and to a lesser extent, price. By virtue of
its 28 years of experience in developing software for use by the life insurance
industry, the Company believes that it has the ability to compete successfully
with the data processing systems of life insurance companies and other
independent software producers. The Company considers that its competitive
position is in part dependent upon its ability to continue to develop software
applications in response to the changing conditions of the employee benefit,
life insurance and financial planning markets.
PRODUCT PROTECTION
The Company does not sell or transfer title to its products to customers. The
products are licensed on a "right to use" basis pursuant to license agreements.
Each license is nontransferable and restricts use of the products to the
customer's internal purposes at one or more designated computer sites.
The Company regards its software as proprietary and relies for protection upon
trade secret laws and internal nondisclosure safeguards as well as restrictions
on disclosure and transferability incorporated in its software license
agreements. Despite these restrictions, it may be possible for competitors or
users to copy aspects of the Company's products or to obtain information which
the Company regards as its trade secrets. Computer software generally cannot be
patented, and existing copyright laws afford only limited protection. The
Company believes that the rapid pace of technological change in the computer
industry makes patent or copyright protection of less significance than such
factors as the knowledge and experience of management and other personnel and
the Company's ability to develop, enhance, market and acquire new systems and
services.
EMPLOYEES
The Company seeks to employ and retain highly skilled personnel who possess
actuarial, marketing and computer programming skills. The Company employs
approximately 290 employees, most of whom are employed at the Company's home
office and none of whom are members of a union. The Company has experienced a
low turn-over rate and believes that its relations with its employees are
excellent.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of February 26, 1997, the names and ages of
the Company's Executive Officers, together with all positions and offices held
with the Company by such Executive Officers. Officers are appointed annually by
the Board of Directors and serve at the discretion of the Board.
NAME AGE TITLE
Michael C. Goldberg 59 Chairman of the Board, President and
Chief Executive Officer
Douglas Kennedy 50 Executive Vice President
Cindy Goldberg 49 Secretary and Treasurer
Richard B. Fleischman 45 Vice President
Christine Stroud 42 Vice President
Edward Pick 46 Vice President
Beverly Price 45 Vice President
Kathleen Muro 45 Vice President
Michael C. Goldberg, founder of the Company, has been the Chairman, Chief
Executive Officer and President of the Company since its formation in 1968. He
is an Associate of the Society of Actuaries and a member of the American Academy
of Actuaries.
Douglas Kennedy became the Executive Vice President and a director of the
Company in January 1986. Mr. Kennedy joined the Company in 1977, and prior to
January 1986 served as a Vice President. He is responsible for the electronic
data processing systems of the Company and the development of various present
and proposed products. He is a member of the American Academy of Actuaries, an
Enrolled Actuary and an Associate of the Society of Actuaries.
Cindy Goldberg has been a director and the Secretary and Treasurer of the
Company since 1968 and served as its Vice President- Administration from its
formation until 1982. Cindy Goldberg is the wife of Michael C. Goldberg.
Richard B. Fleischman originally joined the Company in May 1981 as a consulting
actuary, heading the group pension area. In 1985, Mr. Fleischman became a
corporate Vice President. He is a member of the American Academy of Actuaries,
an Enrolled Actuary, and a Fellow of the Society of Actuaries.
Chris Stroud joined the Company in June 1978 as an actuarial trainee and in 1983
moved to the marketing area. Ms. Stroud became a corporate Vice President in
1990. She is a member of the American Academy of Actuaries and the American
Society of Pension Actuaries and is an Enrolled Actuary.
Edward Pick joined the Company in April 1978 as a programmer in the Pension
Partner Systems department and became a corporate Vice President in January
1992. He is responsible for the development of employee benefit related software
products for the Company.
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Beverly Price joined the Company in December 1979 as a programmer in the Agency
Partner Systems department. She became head of this department in January 1986
and became a corporate Vice President in January 1992.
Kathleen Muro joined the Company in June 1981 as a programmer in the life
administration area. Ms. Muro became head of the FDP/CLAS department in 1988 and
a corporate Vice President in January 1992.
ITEM 2. PROPERTIES
The Company currently rents approximately 36,000 square feet of office space,
which constitutes the Company's headquarters, in Miami, Florida, from a
partnership, of which its principal shareholder is the general partner (the
"Partnership"). This location is rented pursuant to a 5-year lease effective
December 1, 1994 which provides for annual base rental of approximately $770,000
with annual increases based on the consumer price index plus taxes, insurance
and certain operating expenses. On July 1, 1995, the Company executed a rider to
the current lease for an additional 9,200 square feet of office space located in
Miami, Florida, in close proximity to the Company's headquarters. The additional
office space is rented for an annual base rental of approximately $200,000. The
Company has the option to renew this lease for another 5 years under the same
terms and conditions.
The Company also rents office space at two other locations: 1) 10,000 square
feet of office space in Natick, Massachusetts for an annual rent of
approximately $185,000 under a sublease expiring on April 30, 1999 and 2) 9,200
square feet of office space in Littleton, Colorado for an annual rent of
approximately $110,000 under a lease expiring on August 31, 2002.
ITEM 3. LEGAL PROCEEDINGS
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
No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders.
Subsequent to the end of such fiscal year, Mr. Michael C. Goldberg, the record
and beneficial owner of approximately 55.8% of the outstanding shares of Common
Stock, voted all such shares pursuant to a written consent in favor of the
increase in the number of shares of Common Stock reserved for issuance pursuant
to the 1994 Employee Stock Option Plan, which vote was sufficient to approve the
increase. For further information, see the Company's Information Statement filed
with the Securities Exchange Commission on December 12, 1996.
13
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock trades on The Nasdaq National Market under the
symbol FDPC. The following table sets forth for the periods indicated, the high
and low sales prices of the Common Stock as reported on the Nasdaq Market.
- ---------------------------------------------------------------------------
FISCAL 1996: High Low
- ---------------------------------------------------------------------------
First Quarter 6 1/2 5
Second Quarter 8 7/8 5 3/8
Third Quarter 9 1/8 7 1/2
Fourth Quarter 10 7/8 7 5/8
- ---------------------------------------------------------------------------
FISCAL 1995: High Low
- ---------------------------------------------------------------------------
First Quarter 5 1/2 4 1/8
Second Quarter 5 1/8 4
Third Quarter 5 3/8 3 3/4
Fourth Quarter 6 4 3/8
The Company had 100 record holders as of November 30, 1996 not
including security position listings. (the Company would have approximately 981
record holders if security positions listings were included)
On April 24, 1996, the Company's Board of Directors approved an annual cash
dividend of $.04 per share, adjusted to reflect the three-for two stock split
discussed below, and paid to shareholders of record on May 10, 1996.
On November 12, 1996, the Company's Board of Directors approved a
three-for-two stock split in which each two shares of outstanding common stock
were converted into three shares of common stock by way of a 50% stock dividend.
The stock dividend was payable to the Company shareholders of record as of the
close of business on November 26, 1996. The stock prices in the above table have
been adjusted retroactively to reflect the split.
On February 13, 1997, the Company's Board of Directors approved a quarterly
cash dividend of $.0125 per share, payable March 13, 1997 to shareholders of
record on February 26, 1997.
14
15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands, except per share data) The selected consolidated
financial data set forth below has been derived from the consolidated financial
statements of the Company. The consolidated financial statements as of November
30, 1996 and 1995 and for the three years ended November 30, 1996 have been
audited by KPMG Peat Marwick LLP, independent auditors, and such consolidated
financial statements and the report thereon are included elsewhere herein. The
consolidated financial statements as of November 30, 1994, 1993 and 1992 and for
the two years ended November 30, 1993 have also been audited by KPMG Peat
Marwick LLP and are not included herein.
Historical summary 1996 1995 1994 1993 1992
------------------------------------------------------------------
Results of Operations
Revenues $26,445(a) $19,389 $18,371 $16,977 $17,291
Operating profit (loss) 2,191 1,069 427 (316) 523
Interest income 1,073 968 725 632 859
Foreign exchange (loss) gain and other (3) (7) 9 (73) (306)
Earnings before income taxes 3,261 2,030 1,161 243 1,076
Net earnings 2,225 1,468 652 151 708
Net earnings per share (b) .39 .27 .13 .03 .14
Weighted average shares outstanding (b) 5,751 5,385 5,164 5,114 5,188
Financial Condition
Working capital 13,723 $10,155 $ 9,694 $16,656 $13,381
Total assets 29,112 23,660 21,520 20,298 20,617
Stockholders' equity 23,562 20,062 18,240 17,480 17,319
First Second Third Fourth
quarterly results (Unaudited) Quarter Quarter Quarter Quarter
------------------------------------------------------------------
Fiscal 1996:
Revenues 5,900 $6,378 $6,694 $7,473
Operating profit 427 534 573 657
Net earnings 462 538 581 644
Earnings per share .08 .09 .10 .11
Weighted average shares outstanding 5,524 5,731 5,809 5,850
Fiscal 1995:
Revenues 4,967 $4,874 $4,717 $4,831
Operating profit 419 205 221 224
Net earnings 396 346 364 362
Earnings per share .07 .07 .07 .07
Weighted average shares outstanding 5,314 5,321 5,367 5,399
(A) Fiscal year 1996 revenues include revenues of $3,186 related to System
Innovations, an acquisition accounted for as a purchase. See Note 1 to
the Consolidated Financial Statements.
(B) In fiscal year 1996, the Company declared a three-for-two stock split.
Prior year share and per share amounts have been restated to reflect
the split.
15
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FDP Corp. and its wholly-owned subsidiaries ("FDP" or the "Company") develop
and sell a variety of applications software systems that facilitate the
marketing and administrative functions for the life insurance and employee
benefit industries. Support services such as design, installation,
customization, maintenance, consulting and training are routinely performed.
Information services are provided to clients for calculating certain values
within life insurance policies, pension contracts and sales illustrations. The
Company is a Microsoft(R) Solutions Provider Partner, Value Added Reseller for
Hewlett-Packard and Oracle, and an Authorized Applications Specialist in the IBM
Business Partner Program.
ACQUISITION
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a System
Innovations). The purchase price consisted of 75,000 shares of the Company's
common stock $.01 par value ("Common stock") valued at $5.25 per share. 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 $313,000 was recorded as a result of the
transaction. 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. An additional 75,000 shares of the Company's common
stock will be issuable in the event that System Innovations achieves certain
earnings for fiscal years ending November 30, 1998 and 1999. These shares would
be paid in two equal installments of 37,500 shares on the third and fourth
anniversary dates of the acquisition.
The following unaudited pro forma information combines the consolidated
results of operations of the Company and System Innovations for the year ended
November 30, 1995. The proforma results, which contain a proforma adjustment for
goodwill amortization, do not purport to be indicative of what would have
occurred had the acquisition been consummated as of the beginning of the
respective period or of future operations of the combined company. Proforma
results for the period ended November 30, 1996 have not been presented as the
acquisition occurred near the beginning of the period.
(in thousands) Year Ended
November 30,
1995
- ----------------------------------------------------------------------------
Revenues $22,490
Net earnings $ 1,682
Net earnings per share $ .31
16
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Annual 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.
The Company's total revenue, exclusive of interest earnings, was $26,445,000,
$19,389,000, and $18,371,000 for the fiscal years ended November 30, 1996, 1995
and 1994, respectively. Total revenues in 1996 and 1995 increased by 36% and 6%,
respectively. The Company reports its revenues by two major types: software and
information services.
SOFTWARE REVENUES
(in thousands) 1996 Change 1995 Change 1994
---------------------------------------------------
AGENCY PARTNER $ 6,900 10% $ 6,245 30% $ 4,801
PENSION PARTNER 3,844 -1% 3,901 -2% 3,962
HOME OFFICE SYSTEMS 9,357 49% 6,291 -1% 6,334
SYSTEM INNOVATIONS 3,186 - - - -
---------------------------------------------------
Total software $23,287 42% $16,437 9% $15,097
% of total revenue 88% 85% 82%
Total software-related revenues, which includes software sales, maintenance,
service revenue (time and materials), net equipment sales and other, for fiscal
1996 was $23,287,000, an increase of $6,850,000 or 42% as compared to the prior
year. For fiscal 1995, software-related revenues increased by $1,340,000 or 9%
as compared to 1994. The increase in software related revenues for 1996 was
driven by an 85% increase in international revenues and the first quarter
acquisition of System Innovations. International revenues in fiscal 1996 were
$6,307,000 as compared to $3,403,000 for 1995 and System Innovations added
additional revenues of $3,186,000 for the fiscal year.
The increase in revenues in Agency Partner, which includes Advanced
Underwriting and Agency Database, was mainly related to revenue derived from the
Windows(R)-based products released under FDP/VISION which continue to gain
market acceptance. Advanced Underwriting revenues relating to FDP/XL and FINPACK
in 1996 increased 44% to $3,176,000 from $2,209,000 in 1995. In 1994 revenue
related to these products was $465,000. Agency Database revenues relating to
Contact PartnerTM rose 29% to $2,191,000 from $1,696,000 in 1995. In 1994
revenues for Contact PartnerTM were $181,000. Revenues relating to the DOS
counterparts of these products were lower as customers upgraded to the new
Windows systems.
17
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Pension Partner software related revenues in 1996 and 1995 were basically
unchanged. Higher maintenance related revenue has been offset by lower software
sales. Software sales have decreased as customers delayed purchasing, awaiting
the availability of the Pension Partner products under FDP/VISION. In 1997
software sales are expected to improve as the Company plans to release the
Pension Partner Windows(R)-based products under FDP/VISION.
In the Home Office Systems division, which includes FDP/COMPASS and
FDP/CLAS, revenues increased by 49% in fiscal 1996. The increase in revenues was
mainly related to sales of the FDP/COMPASS system. In fiscal 1996, revenues for
the product more than tripled to $4,858,000 from $1,533,000 for the prior year
due to the success of the Company's international marketing efforts. During the
year, five new contracts for the product were executed spanning South Africa,
the United Kingdom and Australia and representing almost $8 million in new
software revenues continuing through 1997. In 1995, the lack of new sales
resulted in a 28% decrease in revenues for FDP/COMPASS as compared to 1994.
Software related revenues for FDP/CLAS in fiscal 1996 were down slightly as
compared to 1995. In 1995 revenue relating to the FDP/CLAS product increased by
13% as a result of higher international revenues. Looking forward, the Company
expects continued growth in the Home Office Systems division as a result of its
successful international sales efforts.
INFORMATION SERVICES REVENUE
(in thousands) 1996 Change 1995 Change 1994
---------------------------------------------------------------
AGENCY PARTNER $ 249 -24% $ 328 -40 $ 543
PENSION PARTNER 733 -16% 868 -23% 1,132
HOME OFFICE SYSTEMS:
FDP/CLAS 2,176 24% 1,756 10% 1,599
---------------------------------------------------------------
Total information services $ 3,158 7% $ 2,952 -10% $ 3,274
% of total revenue 12% 15% 18%
Total information services revenue, consisting primarily of timesharing
charges, for fiscal 1996, increased by 7% after decreasing by 10% in 1995. The
1996 increase was the result of a 24% increase in revenue for FDP/CLAS due to
higher usage of the system. Information services revenue for Agency Partner and
Pension Partner decreased in 1996 and has been on a downward trend as customers
that access the various software programs on a timesharing basis are purchasing
the products for use on personal computers. In fiscal 1997, the Company expects
an overall decrease in revenue from information services as two major customers
of the FDP/CLAS system intend to take their systems in-house.
18
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
COSTS AND EXPENSES
(in thousands) 1996 Change 1995 Change 1994
-----------------------------------------------------
Product development, main-
tenance and enhancements:
Software $18,240 47% $12,383 4% $11,921
Information services 1,211 -36% 1,906 -4% 1,991
Selling, general and admin. 4,329 23% 3,529 1% 3,484
Telecommunications 474 -6% 502 -8% 548
-----------------------------------------------------
Total costs & and expenses $24,254 32% $18,320 2% $17,944
% of total revenue 92% 94% 98%
The Company's costs and expenses for 1996, increased by $5,934,000 or 32%
after increasing $376,000 or 2%, in 1995. Approximately 50% of the 1996 increase
in costs and expenses related to the acquisition of System Innovations. The
remainder of the increase in costs and expenses for 1996 related primarily to
higher personnel related expenses for FDP/COMPASS and development efforts
related to FDP/VISION. In 1995 most of the increase in costs and expenses was
the result of higher personnel related costs.
For 1996 and 1995, costs and expenses related to software have increased,
whereas the costs and expenses related to information services have decreased.
This trend reflects the shifting of Company resources in the Agency Partner and
Pension Partner divisions away from information services, a decreasing revenue
base, to software product development, a growing revenue base. Total selling,
general and administrative expenses for 1996 increased by $800,000 or 23% after
remaining basically unchanged in 1995. In 1996 the increase in selling, general
and administrative expenses was mainly related to the acquisition of System
Innovations and higher selling related expenses.
OTHER INFORMATION
(in thousands) 1996 Change 1995 Change 1994
------------------------------------------------------
Personnel costs $ 16,273 28% $ 12,714 5% $ 12,152
% of total revenue 62% 66% 66%
Research and development
expenditures $ 5,778 52% $ 3,794 20% $ 3,157
% of total revenue 22% 20% 17%
In 1996 and 1995 personnel costs, which include employee compensation,
payroll taxes and employee benefits increased by $3,559,000 or 28% and $562,000
or 5%, respectively. The increases in research and development ("R&D")
expenditures for 1996 were mainly related to the development of products under
FDP/VISION and the acquisition of System Innovations. In 1995, the increase
mainly related to FDP/VISION.
FDP supports a variety of research and development programs in an effort to
continuously provide leading edge products to the life insurance and pension
industries. Capitalizable software development costs relating to new products
have not been significant and have been charged to research and development
expense as incurred. Many of the Company's research and development expenditures
especially those related to product enhancements and modifications, are billed
to the customer.
19
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
(in thousands) 1996 Change 1995 Change 1994
----------------------------------------------
Interest income $ 1,073 11% $ 968 34% $ 725
Average interest-earning rate 5.90% 5.77% 4.43%
The Company's investment income principally relates to the marketable
securities portfolio which consists of U.S. Treasury Securities. The amount of
interest income earned is primarily the result of the average interest rates on
the instruments in the securities portfolio.
INCOME TAXES
(in thousands) 1996 Change 1995 Change 1994
---------------------------------------------
Provision for income taxes $ 1,036 84% $ 562 10% $ 509
Effective income tax rate 32% 28% 44%
The Company provides for federal and state income taxes on sources of income
effectively connected with trade or business within the United States and within
each applicable state. In 1996 the effective income tax rate increased due to a
reduction in benefits provided by research and development credits. In 1995, the
effective tax rate decreased due to the use of research and development credits
and an additional provision for taxes in 1994 that was not necessary in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a highly liquid and virtually debt-free
balance sheet. Expenditures for property and equipment used for software
development, information services and other operations were $1,200,000,
$1,387,000 and $518,000 for fiscal years 1996, 1995 and 1994, respectively.
Management believes 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. At November 30, 1996, there
were no long-term commitments for the Company's working capital other than for
leases of premises.
(in thousands) 1996 Change 1995 Change 1994
----------------------------------------------------
Cash, cash equivalents and
marketable securities-
end of year $ 18,779 17% $ 16,111 -1% $ 16,206
Working capital $ 13,723 35% $ 10,155 5% $ 9,694
In 1996, cash, cash equivalents and marketable securities grew $2,668,000 as
compared to 1995 due to cash flow from operating activities and cash received
upon the exercise of stock options. In 1995, cash, cash equivalents and
marketable securities was basically unchanged as compared to 1994.
20
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
FOREIGN CURRENCY EXCHANGE
International sales are sometimes invoiced and paid for in foreign
currencies. Therefore, revenues, from these sales will be affected by
fluctuations of foreign currencies versus the U.S. dollar. The Company attempts
to minimize its foreign currency exposure by executing its contracts in U.S.
currency. The foreign exchange gain (loss) was minimal for fiscal years ending
1996, 1995 and 1994.
EFFECTS OF INFLATION
Although the effects of inflation upon the Company's costs and expenses
cannot be precisely measured, inflation has caused increases in personnel and
other operating costs. Within the limits imposed by the respective marketplace,
the Company attempts to control its expenditures through a variety of
management-supervised policies.
SFAS NO. 123
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.
While SFAS No. 123 would be applicable to the Company's current fiscal year
beginning December 1, 1996, management has elected to continue to measure
compensation cost using the APB Opinion No. 25 prescribed method and
accordingly, plans to disclose proforma net earnings and proforma net earnings
per share for the fiscal year ending November 30, 1997 as if SFAS No. 123 had
been adopted.
SFAS NO. 121
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
21
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Adoption of this
Statement will not have a material impact on the Company's financial position,
results of operations, or liquidity.
SUBSEQUENT EVENT
Effective January 2, 1997, Mr. Michael C. Goldberg, the record and
beneficial owner of approximately 55.8% of the outstanding shares of Common
Stock, voted all such shares in favor of the increase in the number of shares of
Common Stock reserved for issuance pursuant to the Company's 1994 Plan to
920,868 shares. For further information, see the Company's Information Statement
filed on December 12, 1996 with the Securities and Exchange Commission.
CAUTIONARY STATEMENTS RELATING TO FORWARD-LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which represent the
Company's expectations and beliefs concerning future events, including, but not
limited to, statements regarding growth in sales of the Company's products,
profit margins and sufficiency of the Company's cash flow for the Company's
future liquidity and capital resource needs. The Company cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in forward-looking statements,
including, without limitation, the following: technological changes, decline in
the demand for the Company's software products; and the effect of general
economic conditions generally and factors affecting the insurance and employee
benefits industries. These statements by their nature involve substantial risks
and uncertainties and actual events or results may differ as a result of these
and other factors.
22
23
ITEM 8. REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
Report of Independent Auditors Page 24
Consolidated Balance Sheets as of November 30, 1996 and 1995 Page 25
Consolidated Statements of Income for the years ended Page 26
November 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended Page 27
November 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years Page 28
ended November 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements Page 29-38
23
24
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FDP Corp.:
We have audited the accompanying consolidated balance sheets of FDP Corp. and
subsidiaries as of November 30, 1996 and 1995, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended November 30, 1996. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule, schedule II - Valuation and Qualifying Accounts.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule 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 consolidated financial statements referred to above present
fairly in all material respects, the financial position of FDP Corp. and
subsidiaries at November 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year period ended
November 30, 1996, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Miami, Florida
January 17, 1997
24
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FDP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
November 30,
Assets 1996 1995
-------------------------------
Current assets:
Cash and cash equivalents $ 6,300 $ 3,301
Marketable securities 5,365 4,953
Accounts receivable, less allowance for uncollectible
accounts of $444 in 1996 and $317 in 1995 5,649 3,747
Notes receivable - current 403 676
Prepaid expenses 91 114
Deferred income taxes 327 230
Costs and earnings in excess of billings on uncompleted contracts 562 124
Other 79 65
--------------------------------
Total current assets 18,776 13,210
Property and equipment, net 2,719 2,193
Other assets:
Marketable securities 7,114 7,857
Notes receivable - non-current 185 368
Goodwill, net 241 --
Other 77 32
--------------------------------
TOTAL ASSETS $ 29,112 $ 23,660
================================
Liabilities and stockholders' equity Current liabilities:
Accounts payable and accrued liabilities $ 2,900 $ 2,782
Income taxes payable 239 223
Billings in excess of costs and earnings on uncompleted contracts 1,914 50
--------------------------------
Total current liabilities 5,053 3,055
--------------------------------
Deferred income taxes 497 543
---------------------------------
Total liabilities 5,550 3,598
Stockholders' equity:
Preferred stock $.01 par value. Authorized 10,000 shares; none issued. -- --
Common stock $.01 par value. Authorized 30,000 shares; shares issued
and outstanding 5,518 in 1996 and 5,202 in 1995 55 52
Paid-in capital 9,282 7,794
Retained earnings 14,225 12,216
--------------------------------
Total stockholders' equity 23,562 20,062
--------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,112 $ 23,660
================================
See accompanying notes to consolidated financial statements.
25
26
FDP Corp. and Subsidiaries
Consolidated Statements of Earnings
(In thousands, except per share data)
Year Ended November 30,
1996 1995 1994
----------------------------------
Revenues:
Software $23,287 $16,437 $15,097
Information services 3,158 2,952 3,274
----------------------------------
26,445 19,389 18,371
Costs of sales and services:
Product development, maintenance and enhancements:
Software 18,240 12,383 11,921
Information services 1,211 1,906 1,991
Selling, general and administrative expenses 4,329 3,529 3,484
Telecommunications 474 502 548
----------------------------------
24,254 18,320 17,944
----------------------------------
OPERATING PROFIT 2,191 1,069 427
Other:
Interest income 1,073 968 725
Foreign exchange (loss) gain and other (3) (7) 9
----------------------------------
Net other income 1,070 961 734
----------------------------------
EARNINGS BEFORE INCOME TAXES 3,261 2,030 1,161
Provision for income taxes 1,036 562 509
----------------------------------
NET EARNINGS $ 2,225 $ 1,468 $ 652
==================================
NET EARNINGS PER SHARE $ .39 $ .27 $ .13
==================================
WEIGHTED AVERAGE NUMBER OF SHARES USED
IN PER SHARE CALCULATIONS 5,751 5,385 5,164
See accompanying notes to consolidated financial statements.
26
27
FDP Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, except per sheet data)
Year Ended November 30,
1996 1995 1994
------------------------------------
Cash flows from operating activities:
Net earnings $ 2,225 $ 1,468 $ 652
------------------------------------
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization of property,
equipment and intangibles 866 554 515
Changes in assets and liabilities, net of effects
from acquisition of business:
Increase in accounts receivable, net (1,447) (1,105) (301)
Decrease (Increase) in prepaid expenses 27 (89) 106
Decrease in income taxes receivable -- -- 2
(Increase) Decrease in costs and earnings in
excess of billings on uncompleted contracts (438) 395 (189)
(Increase) Decrease in other assets (3) 110 (46)
(Decrease) Increase in accounts payable
and accrued expenses (580) 289 659
Increase (Decrease) in billings in excess of
costs and earnings on uncompleted contracts 1,865 (45) (273)
(Decrease) Increase in income taxes payable (16) (32) 255
(Decrease) Increase in deferred taxes (163) 6 129
------------------------------------
Total adjustments 111 83 857
------------------------------------
Net cash provided by operating activities 2,336 1,551 1,509
Cash flows from investing activities:
Proceeds from redemption of marketable securities 4,960 7,168 14,758
Purchase of marketable securities (4,629) (5,762) (15,056)
Proceeds from the sale of equipment 10 15 14
Proceeds from note receivable 882 265 200
Acquisition of note receivable (426) (893) (306)
Acquisition of business, net of cash acquired 185 -- --
Equipment acquired (1,200) (1,387) (518)
-------------------------------------
Net cash used in investing activities (218) (594) (908)
Cash flows from financing activities:
Proceeds from exercise of stock options 629 278 84
Stock option income tax benefit 468 76 24
Dividend payment (216) -- --
------------------------------------
Net cash provided by financing activities 881 354 108
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,999 1,311 709
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,301 1,990 1,281
------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,300 $ 3,301 $ 1,990
====================================
See accompanying notes to consolidated financial statements.
27
28
FDP Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands, except per share data)
Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------------------------------------------------------------------
Balance at November 30, 1993 5,055 $ 51 $ 7,333 $10,096 $17,480
Exercise of stock options 37 84 84
Stock option income tax benefit 24 24
Net earnings 652 652
------------------------------------------------------------------
Balance at November 30, 1994 5,092 $ 51 $ 7,441 $10,748 $18,240
Exercise of stock options 110 1 277 278
Stock option income tax benefit 76 76
Net earnings 1,468 1,468
------------------------------------------------------------------
Balance at November 30, 1995 5,202 $ 52 $ 7,794 $12,216 $20,062
EXERCISE OF STOCK OPTIONS 241 2 627 629
STOCK OPTION INCOME TAX BENEFIT 468 468
STOCK ISSUED FOR ACQUISITION 75 1 393 394
DIVIDEND PAYMENT (216) (216)
NET EARNINGS 2,225 2,225
------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1996 5,518 $ 55 $ 9,282 $14,225 $23,562
==================================================================
See accompanying notes to consolidated financial statements.
28
29
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FDP Corp. and its subsidiaries (the "Company") develop, market and support a
wide variety of applications and software systems for mainframe, mini- and
microcomputers and for access on timesharing basis. The systems are used by life
insurance agents, insurance company home offices, employee benefit consultants
and others to market and administer life insurance products and employee benefit
plans.
ACQUISITION
On December 28, 1995, the Company acquired Existential Systems Inc. (d/b/a
System Innovations). The purchase price consisted of 75,000 shares of FDP Corp.
common stock valued at $5.25 per share. 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 $313,000 was
recorded as a result of the transaction. 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. An additional
75,000 shares of the Company's common stock will be issuable in the event that
System Innovations achieves certain earnings for fiscal years ending November
30, 1998 and 1999. These shares would be paid in two equal installments of
37,500 shares each on, respectively, the third and fourth anniversary dates of
the acquisition.
The following unaudited pro forma information combines the consolidated
results of operations of the Company and System Innovations for the year ended
November 30, 1995. The proforma results, which contain a proforma adjustment for
goodwill amortization, do not purport to be indicative of what would have
occurred had the acquisition been consummated as of the beginning of the
respective period or of future operations of the combined company. Proforma
results for the period ended November 30, 1996 have not been presented as the
acquisition occurred near the beginning of the period.
Year Ended
(in thousands) November 30,
1995
- -----------------------------------------------------------------------------
Revenues $22,490
Net earnings $ 1,682
Net earnings per share $ .31
The accounting and reporting policies of the Company conform to generally
accepted accounting principles. The following summarizes the more significant of
these policies:
29
30
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of FDP Corp. and its
wholly-owned subsidiaries, Financial Data Planning Corp., Actuarial Research &
Development Corp., FDP Leasing Corp. and System Innovations. All inter-company
accounts and transactions have been eliminated.
CASH EQUIVALENTS
For financial statement purposes, cash equivalents include interest bearing
accounts. The Company considers all highly liquid debt instruments with original
maturities of less than three months to be cash equivalents.
MARKETABLE SECURITIES
Effective December 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115) "Accounting for Certain Investments in
Debt and Equity Securities." Accordingly, the Company has classified its
marketable securities as held-to-maturity and is recording the marketable
securities at amortized cost, adjusted for the amortization or accretion of
premiums or discounts. Premiums and discounts are amortized or accreted over the
life of the related held-to maturity security as an adjustment to yield using
the effective interest method. Dividend and interest income are recognized
when earned.
A decline in the market value of any held-to-maturity security below cost
that is deemed to be other than temporary results in a reduction in the carrying
amount to fair value. The impairment is charged to earnings and a new cost basis
for the security is established.
Marketable securities consist of U.S. Treasury securities and the market
value of these securities at each year end approximated their amortized cost.
Maturities of marketable securities at November 30, 1996 and 1995 were as
follows (in thousands):
November 30,
Maturity 1996 1995
----------------------------
Less than 1 year $ 5,365 $ 4,953
1 to 2 years 4,806 5,355
2 to 3 years 2,308 2,502
----------------------------
$12,479 $12,810
==============================
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("Statement No. 109"). Statement
No. 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using the enacted tax rates in
effect for the year in which the differences are expected to reverse. The amount
of federal and
30
31
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
state income taxes paid during 1996, 1995 and 1994 were $638,000, $492,000 and
$100,000, respectively.
FOREIGN CURRENCY EXCHANGE
International sales are sometimes invoiced and paid for in foreign currencies.
Therefore, revenues will be affected by fluctuations of foreign currencies
versus the U.S. dollar. The resulting foreign exchange gain or loss for the
period is reflected in the Company's consolidated financial statements.
International revenues provided by export sales were $6,307,000 or 24%,
$3,403,000 or 18% and $2,599,000 or 14% of consolidated revenues for the years
ended November 30, 1996, 1995 and 1994, respectively, and were primarily from
customers in South Africa, United Kingdom, Australia, Netherlands and Canada.
PER SHARE COMPUTATION
Earnings per share is based upon the weighted average number of common shares
and dilutive common equivalent shares from stock options outstanding. Common
equivalent shares from stock options outstanding during the year included in the
weighted average number of shares were 233,000, 183,000 and 72,000 for 1996,
1995 and 1994, respectively.
REVENUE RECOGNITION AND RELATED MATTERS
Revenue from contracts for the sale and installation of software where
significant enhancements are required is recognized on the percentage of
completion method based on the labor hours incurred to date to total labor
hours. Changes in job performance, job conditions, estimated profitability and
final contract settlements which may result in revisions to costs and income are
recognized in the period in which the revisions are determined. Amounts received
or billed in excess of revenues recognized to date are classified as "billings
in excess of costs and earnings on uncompleted contracts", whereas, revenues
recognized in excess of amounts billed are classified as "costs and earnings in
excess of billings on uncompleted contracts". The Company recognizes revenue for
timesharing services as incurred and bills the customers on a monthly basis.
Timesharing agreements continue for indefinite terms and are terminable by the
customer at any time. Revenue from separately priced extended software
maintenance arrangements is deferred and recognized in income on a straight line
basis over the contract period.
Concentrations of credit risk with respect to receivables are limited due to the
large number of customers and their dispersion across geographic areas. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
The Company provides its services primarily to the life insurance and
employee benefit industries. The Company performs ongoing credit evaluations of
its major customers and maintains reserves for potential credit losses, and such
losses have been immaterial and are
31
32
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
within management's expectation. No single customer accounted for 10% or more of
total net revenues for the years ended 1996, 1995 and 1994.
GOODWILL
Goodwill related to the acquisition of System Innovations represents the excess
of the purchase price over fair market value of net assets acquired and is being
amortized over the expected periods to be benefited, four years on a
straight-line basis. The amortization expense recorded in 1996 was $72,000. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
SOFTWARE DEVELOPMENT COSTS
FASB No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased
or Otherwise Marketed," requires software development costs to be capitalized
upon the establishment of technological feasibility. The establishment of
technological feasibility and the ongoing assessment of the recoverability of
these costs requires considerable judgment by management with respect to certain
external factors such as anticipated future revenue, estimated economic life,
and changes in software and hardware technologies. Capitalizable software
development costs relating to new products have not been significant and have
been charged to research and development expense as incurred
Research and development expenses charged to cost of sales and services were
$5,778,000 in 1996, $3,794,000 in 1995 and $3,157,000 in 1994.
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 and would impact future results
of operations.
32
33
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 2
PROPERTY AND EQUIPMENT
Property and equipment which is recorded at cost and depreciated or amortized
using the straight-line method, over the estimated useful lives of the assets,
consists of the following (in thousands):
Estimated useful November 30,
lives in years 1996 1995
------------------------------------
Computer and communication
equipment 5-7 $4,048 $3,917
Furniture and fixtures 7 1,379 1,188
Leasehold improvements 5 865 788
Vehicles 3-5 56 56
------------------------------------
6,348 5,949
Less accumulated depreciation 3,629 3,756
------------------------------------
$2,719 $2,193
===================================
Maintenance expense on all owned and leased computer equipment was $223,000 for
1996, $200,000 for 1995 and $182,000 for 1994.
NOTE 3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
November 30,
1996 1995
----------------------------
Accounts payable $ 133 $ 533
Accrued liabilities:
Salaries 1,449 972
Profit sharing plan 250 242
Deferred revenues 391 597
Other 677 438
------------------------------
$2,900 $2,782
==============================
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, marketable securities,
accounts receivable, notes receivable, prepaid expenses, other assets, accounts
payable and accrued liabilities approximate fair value because of the short
maturity of these instruments.
33
34
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 5
COMMITMENTS
The Company rents its principal office and certain other facilities for
approximately $88,000 per month from a partnership whose general partner is the
principal stockholder of the Company Additional office space is leased from two
other parties for approximately $20,000 per month. Total rent expense was
$1,265,000 for 1996, $1,044,000 for 1995 and $1,150,000 for 1994. Minimum future
rentals on non-cancelable leases with terms greater than one year are as follows
(in thousands):
Year ending
November 30,
- ------------------------------
1997 $1,365
1998 $1,386
1999 $1,280
2000 $ 110
2001 $ 110
NOTE 6
PROFIT SHARING PLAN
The Company has a qualified profit sharing plan. In 1984, the Company amended
its plan to include a cash or deferred profit sharing plan in accordance with
Section 401(k) of the Internal Revenue Code. The plan provides for the Company
to match employee elective contributions in an amount of 50% of such
contributions, to a maximum of 3% of annual employee compensation. Company
contributions were $325,000 in 1996, $242,000 in 1995 and $201,000 in 1994.
Employee vesting in Company contributions increases in increments of 20% per
year starting after one year of service with full vesting of 100% after six
years.
NOTE 7
INCOME TAXES
The provision for income taxes is comprised of the following (in thousands):
Year ended November 30,
1996 1995 1994
- ------------------------------------------------------------------------------
Current:
Federal $996 $495 $193
State 139 61 188
FSC 44 -- --
- -----------------------------------------------------------------------------
$1,179 $556 $381
=============================================================================
34
35
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Deferred:
Federal (138) (67) 125
State (5) 73 3
- ------------------------------------------------------------------------------
(143) 6 128
- ------------------------------------------------------------------------------
$1,036 $562 $509
=================================
A reconciliation of the Federal income tax statutory rate with the effective
tax rate is as follows:
Year ended November 30,
1996 1995 1994
- -----------------------------------------------------------------------------
Federal income tax at
statutory rate 34% 34% 34%
Research and development
credit (4)% (10)% --
Adjustment of prior year
income taxes -- -- 6%
State income tax, net of
Federal tax benefit 4% 4% 4%
FSC Benefit (2)% -- --
- ----------------------------------------------------------------------------
32% 28% 44%
==================================
The tax effects of temporary differences which give rise to significant portions
of deferred tax assets and deferred tax liabilities at November 30, 1996 and
1995 are as follows (in thousands):
1996 1995
- --------------------------------------------------------------------------------
Deferred income tax assets:
Allowance for uncollectable accounts $ 169 $ 119
Accrual for vacation 243 251
Other 65 0
- --------------------------------------------------------------------------------
$ 477 $ 370
- --------------------------------------------------------------------------------
Deferred income tax liabilities:
Property and equipment, principally due
to differences in depreciation $(176) $(135)
Tax credits (332) (341)
Other (139) (207)
- --------------------------------------------------------------------------------
$(647) $(683)
- --------------------------------------------------------------------------------
Net deferred tax liability $(170) $(313)
===========================
Management has determined, based on the Company's history of prior operating
earnings and its expectations for the future, that operating income of the
Company will be sufficient to fully recognize the deferred tax assets therefore
no valuation allowance is necessary.
35
36
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 8
COMMON STOCK SPLIT
On November 11, 1996, the Board of Directors approved a three-for-two common
stock split distributable on December 10, 1996 to shareholders of record at the
close of business on November 26, 1996. In this report, all prior year per share
amounts and numbers of shares have been restated retroactively to reflect the
stock split.
NOTE 9
STOCK OPTIONS
The 1984 Non-Qualified Stock Option Plan (the "Stock Option Plan") was
established for the benefit of key employees on November 7, 1983 when 375,000
shares of Common Stock were reserved for issuance thereunder. Under the
provisions of the Stock Option Plan, employees have the option of paying for
exercised options with cash or Company common stock. On April 18, 1994, the
Board of Directors, adopted the 1994 Employee Stock Option Plan and approved
471,000 newly reserved shares. The exercise price of the options granted under
the stock option plans approximated the market price of the Company's common
stock on the date of the grant.
At November 30, 1996, under the 1984 Non-Qualified Stock Option Plan, there
were options outstanding for the purchase of 264,000 shares of the Company's
stock of which all were vested and exercisable. Under the 1994 Employee Stock
Option Plan, there were options outstanding for the purchase of 419,000 shares
of the Company's stock of which 418,000 were vested and exercisable.
A summary of the transactions in shares under the Stock Option Plans is as
follows (in thousands, except per share data):
1984 Non-Qualified Option Price
Stock Options Per Share
---------------------------------------
Outstanding at November 30, 1993 599 $2.17-$3.08
Transactions during fiscal 1994:
Granted - --
Exercised (31) $2.17-$2.83
Forfeited - --
---------------------------------------
Outstanding at November 30, 1994 568 $2.17-$3.08
Transactions during fiscal 1995:
Granted - --
Exercised (110) $2.50-$2.83
Forfeited (15) $2.50
---------------------------------------
Outstanding at November 30, 1995 443 $2.17-$3.08
36
37
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Transactions during fiscal 1996:
Granted - -
Exercised (179) $2.17-$2.83
Forfeited - -
-------------------------------------------
Outstanding at November 30, 1996 264 $2.50-$3.08
1994 Employee Option Price
Stock Options Per Share
-------------------------------------------
Outstanding at November 30, 1993 -- --
Transactions during fiscal 1994:
Granted 327 $2.83
Exercised (6) $2.83
Forfeited (1) $2.83
-------------------------------------------
Outstanding at November 30, 1994 320 $2.83
Transactions during fiscal 1995:
Granted 94 $3.75
Exercised - --
Forfeited - --
-------------------------------------------
Outstanding at November 30, 1995 414 $2.83-$3.75
Transactions during fiscal 1996:
Granted 67 $5.00-$5.25
Exercised (62) $2.83
Forfeited - --
--------------------------------------------
Outstanding at November 30, 1996 419 $2.83-$5.25
On December 12, 1996, the Company filed with the Securities Exchange
Commission an Information Statement pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended, to increase to 920,868 the number of shares of
Common Stock reserved for issuance pursuant to the Company's 1994 Stock Option
Plan. Mr. Michael C. Goldberg, the record and beneficial owner of approximately
55.8% of the outstanding shares of Common Stock, has voted all such shares in
favor of the increase in the number of shares of Common Stock reserved for
issuance pursuant to the 1994 Plan, which vote was sufficient to approve the
increase.
37
38
FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
NOTE 10
FINANCIAL ACCOUNTING PRONOUNCEMENTS
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.
While SFAS 123 would be applicable to the Company's current fiscal year
beginning December 1, 1996, management has elected to continue to measure
compensation cost using the APB Opinion No. 25 prescribed method and
accordingly, plans to disclose proforma net earnings and proforma net earnings
per share for the fiscal year ending November 30, 1997 as if SFAS No. 123 had
been adopted.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Adoption of this
Statement will not have a material impact on the Company's financial position,
results of operations, or liquidity.
38
39
PART II
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no reported disagreements on any matter of accounting principles
or practice or financial statement disclosure at any time during the preceding
24 months.
39
40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this Item with respect to the Company's directors is
contained in the Registrant's 1997 Proxy Statement which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this Item is contained in the Registrant's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this Item is contained in the Registrant's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in the Registrant's 1997 Proxy
Statement, and is incorporated herein by reference.
40
41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The consolidated financial statements of FDP Corp. are
included in Item 8:
Consolidated Balance Sheets as of November 30, 1996 and 1995
Consolidated Statements of Income for the years ended November
30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
November 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the years
ended November 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedule. Schedule II - Valuation and
Qualifying Accounts
3. Exhibits.
Sequential
page number or
document
incorporated by
Exhibit Description reference
------- ----------- ---------
3.1 Articles of Incorporation of Exhibit 3.1 of the
the Company, as amended Registration
Statement on
Form S-1
(no.2-84919)(the
"Registration
Statement")
3.2 Bylaws of the Company Exhibit 3.2 of the
Registration
Statement
10.1 The Company's 1984 Non-Qualified Registrant's 1984
Stock Option Plan. Proxy Statement
41
42
10.2 The Company's Profit Sharing Plan Exhibit 10.3 of
the Registration
Statement
10.3 IBM Personal Computer Retail Exhibit 10.6 of
Dealer Agreement, between the the Registration
Company and IBM Statement
10.4 Computer Products Purchase Exhibit 10.8 of
Agreement, dated January 19, 1982 the Registration
between Hewlett-Packard Company Statement
and the Company
10.5 Lease agreement, dated December 1, Exhibit 10.9 of
1986 between the Company and 1987 Form 10-K
Key Investment, Ltd.
10.6 Form of Indemnification Agreement Exhibit 10.11 of
with the Company's Directors and 1989 Form 10-K
certain of its Officers
10.7 Lease agreement, dated December 1, Exhibit 10.13 of
1994 between the Company and 1994 Form 10-K
Key Investment, Ltd.
10.8 1994 Employee Stock Option Plan Exhibit 10.15 of
1995 Form 10-K
10.9 Rider to Lease agreement, dated Exhibit 10.17 of
December 1, 1994 between the 1995 Form 10-K
Company and Key Investment, Ltd.
10.10 Acquisition Agreement dated Exhibit 10.19 of
December 21,1995 between the 1995 Form 10-K
Company, Existential Systems,
Inc. (d/b/a) as System Innovations,
SI Acquisition Corp. and Michael R. Bain.
10.11 Employment agreement dated Exhibit 10.21 of
December 21, 1995 between the 1995 Form 10-K
Company and Existential Systems,
Inc. (D/B/A) as System Innovations
and Michael R. Bain.
10.12 The Company's Profit Sharing Plan Exhibit 10.23 of
Amendment of Existing Plan dated 1995 Form 10-K
August 31, 1995
42
43
10.13 Software Development Agreement Exhibit 10.25 of
(ISP Illustration System) dated 1995 Form 10-K
December 21, 1995
22.1 The Company's Subsidiaries Exhibit 22.1 of
1990 Form 10-K
21.1 The Company's Subsidiaries Page 46
24.1 Consent of KPMG Peat Marwick LLP (filed herewith)
27 Financial Data Schedule (for SEC use only) (filed herewith)
(b) No current reports on Form 8-K were filed by the Company during the
fourth quarter of the fiscal year ended November 30, 1996.
43
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: February 26, 1997 FDP CORP.
BY: /s/ Michael C. Goldberg
---------------------------
MICHAEL C. GOLDBERG
Chairman of Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated:
February 26, 1997 /s/ Michael C. Goldberg
------------------------
MICHAEL C. GOLDBERG
Chairman of Board of Directors,
Chief Executive Officer and President
(principal executive and financial officer)
February 26, 1997 /s/ Douglas Kennedy
--------------------
DOUGLAS KENNEDY
Executive Vice President
and Director
February 26, 1997 /s/ Cesar L. Alvarez
--------------------
CESAR L. ALVAREZ
Director
February 26, 1997 /s/ Cindy L. Goldberg
---------------------
CINDY L. GOLDBERG
Director
February 26, 1997 /s/ Albert J. Schiff
--------------------
ALBERT J. SCHIFF
Director
February 26, 1997 /s/ Bruce I. Nierenberg
-----------------------
BRUCE I. NIERENBERG
Director
44
45
ITEM 14 (A) 2 FINANCIAL STATEMENT SCHEDULE
FDP CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
(Amounts in thousands)
For the Three Years Ended November 30, 1996.
A B C D E
Allowance for Balance at Charged to Balance at
Uncollectible Beginning of Costs and End of
Accounts Period Expenses Deductions Period
November 30, 1996: 317 150 23 444
November 30, 1995: 284 80 47 317
November 30, 1994: 314 150 180 284
45