1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File Number: 0-24132 ABR INFORMATION SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) Florida 59-3228107 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 34125 U.S. Highway 19 North, Palm Harbor, Florida 34684-2116 - ------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including area code: (813) 785-2819 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 Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Class: Voting Common Stock, $.01 Par Value Outstanding at March 10, 1997: 27,374,454 Class: Nonvoting Common Stock, $.01 Par Value Outstanding at March 10, 1997: None 1 2 ABR INFORMATION SERVICES, INC. INDEX TO FORM 10-Q Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three and six months ended January 31, 1996 and 1997 3 Consolidated Balance Sheets as of July 31, 1996 and January 31, 1997 4 Consolidated Statements of Cash Flows for the six months ended January 31, 1996 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 2 3 PART I. FINANCIAL INFORMATION Item 1. ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Six months ended January 31, January 31, ------------------------------ ------------------------------ 1996 1997 1996 1997 ----------- ----------- ----------- ----------- Revenue $ 6,851,136 $11,714,389 $12,465,439 $22,103,582 Operating expenses: Cost of services 3,780,042 6,469,631 6,824,505 12,384,210 Selling, general and administrative 1,420,482 2,368,084 2,801,474 4,515,024 Other operating 53,308 79,967 103,177 140,633 ----------- ----------- ----------- ----------- Total operating expenses 5,253,832 8,917,682 9,729,156 17,039,867 ----------- ----------- ----------- ----------- Operating income 1,597,304 2,796,707 2,736,283 5,063,715 Interest income 106,054 1,909,046 266,093 3,869,108 ----------- ----------- ----------- ----------- Income before income taxes 1,703,358 4,705,753 3,002,376 8,932,823 Income taxes 655,726 1,769,288 1,171,308 3,384,995 ----------- ----------- ----------- ----------- Net income $ 1,047,632 $ 2,936,465 $ 1,831,068 $ 5,547,828 =========== =========== =========== =========== Net income per common share $ .05 $ .11 $ .09 $ .20 =========== =========== =========== =========== Weighted average shares outstanding 20,516,742 27,938,898 20,418,111 27,399,889 The accompanying notes are an integral part of these statements. 3 4 ABR INFORMATION SERVICES, INC. CONSOLIDATED BALANCE SHEETS ASSETS July 31, 1996 January 31, 1997 (Unaudited) ------------- ---------------- CURRENT ASSETS Cash and cash equivalents $ 14,088,396 $ 29,451,276 Investments 147,111,102 131,112,933 Accounts receivable, net 3,870,539 5,146,748 Prepaid expenses and other 1,282,952 2,109,712 -------------- ------------- Total current assets 166,352,989 167,820,669 PROPERTY AND EQUIPMENT, net 14,539,898 18,742,841 SOFTWARE DEVELOPMENT COSTS, net 6,181,973 8,177,056 GOODWILL, INTANGIBLES AND OTHER ASSETS, net 15,498,745 15,934,276 -------------- ------------- TOTAL ASSETS $ 202,573,605 $ 210,674,842 ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 615,663 $ 573,112 Accrued expenses 762,442 1,062,501 Customer account deposits 18,019,405 18,901,678 Unearned revenue 647,093 599,102 Income taxes payable 483,663 406,455 -------------- -------------- Total current liabilities 20,528,266 21,542,848 ------------- ------------- DEFERRED INCOME TAXES 895,555 1,772,795 -------------- ------------- SHAREHOLDERS' EQUITY Preferred Stock - authorized 2,000,000 shares of $.01 par value; no shares issued - - Common Stock - authorized, 100,250,000 shares of $.01 par value; issued and outstanding, 13,588,194 and 27,370,706 shares, respectively 135,882 273,708 Additional paid in capital 169,879,717 170,403,478 Retained earnings 11,134,185 16,682,013 -------------- ------------- TOTAL SHAREHOLDERS' EQUITY 181,149,784 187,359,199 -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 202,573,605 $ 210,674,842 ============== ============= The accompanying notes are an integral part of these statements. 4 5 ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months ended January 31, ----------- 1996 1997 ---- ---- Cash flows from operating activities: Net income $ 1,831,068 $ 5,547,828 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization 468,030 1,259,182 Amortization of software 33,809 231,042 Deferred income taxes 403,705 877,240 Increase in allowance for doubtful accounts 8,000 10,808 Tax benefit related to exercise of certain stock options -- 56,606 Change in operating assets and liabilities: Accounts receivable 181,955 (1,287,018) Prepaid expenses and other (367,077) (826,760) Other assets 1,190 3,737 Accounts payable (362,819) (42,551) Accrued expenses (120,856) 300,059 Unearned revenue 26,888 (47,991) Customer account deposits 1,236,586 882,274 Income taxes payable 118,522 (77,208) ------------ ------------- Net cash provided by operating activities 3,459,001 6,887,248 ------------ ------------- Cash flows from investing activities: Additions to investments (24,550,752) (265,579,923) Maturity of investments 29,524,787 281,578,092 Additions to property and equipment (4,604,362) (5,040,946) Additions to software development costs (1,010,037) (2,226,125) Cash paid for acquisition, net (12,476,476) (863,053) Disposal of fixed assets -- 2,607 ------------ ------------- Net cash provided by (used in) investing activities (13,116,840) 7,870,652 ------------ ------------- Cash flows from financing activities: Proceeds from long-term bank borrowings 6,104,641 -- Payments on bank borrowings (365,997) -- Exercise of common stock options 289,266 604,980 ------------ ------------- Net cash provided by financing activities 6,027,910 604,980 ------------ ------------- Net increase (decrease) in cash and cash equivalents (3,629,929) 15,362,880 Cash and cash equivalents at beginning of year 19,403,090 14,088,396 ------------ ------------- Cash and cash equivalents at end of period $ 15,773,161 $ 29,451,276 ============ ============= The accompanying notes are an integral part of these statements. 5 6 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 NOTE A - DESCRIPTION OF ORGANIZATION AND BUSINESS ABR Information Services, Inc. (the "Company") is a leading provider of comprehensive benefits administration, compliance and information services to employers seeking to outsource their benefits administration functions. The Company believes it is the largest provider of COBRA (the "Consolidated Omnibus Reconciliation Act") compliance services. COBRA is a federally mandated law related to the portability of employee group health insurance. The Company also provides benefits administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. Additionally, the Company provides benefits administration services with respect to benefits provided to active employees, including enrollment, eligibility verification, qualified domestic relations order ("QDRO") administration, HMO consolidation, 401(k) administration services, Flexible Spending Account ("FSA") administration and pension services. These services are offered on either an "a la carte" or a total outsourcing basis, allowing customers to outsource certain benefits administration tasks which they find too costly or burdensome to perform in-house, or to outsource the entire benefits administration function. The Company is headquartered in Palm Harbor, Florida and provides information and support services to more than 21,000 employers, including Fortune 500 companies, insurance companies and other employers. The Company's operations are in a single business segment, the information services business. The accompanying financial statements have been restated to reflect a two-for-one stock split completed February 1997 and an acquisition by a pooling of interest completed June 1996. Additionally, certain amounts in previous periods' financial statements have been adjusted or reclassified, for comparability purposes. NOTE B - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosure required by generally accepted accounting principles for complete financial statements. The financial statements as of January 31, 1997 and for the three and six months ended January 31, 1996 and January 31, 1997 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The results of operations for the three and six months ended January 31, 1997 are not necessarily indicative of results that may be expected for the year ending July 31, 1997. These financial statements should be read in conjunction with the audited financial statements of the Company as of July 31, 1995 and 1996, and for each of the three years in the period ended July 31, 1996, included in the Company's 1996 Annual Report to Shareholders. Effective August 1, 1996 management elected to continue using the method under Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued for Employees" to account for stock option awards granted to employees. As a result, the pro forma disclosures required by Statement of Financial Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based Compensations" will be in the Company's 1997 annual financial statements. The adoption of SFAS No. 123's accounting and reporting provisions had an immaterial effect on the Company's financial statements. NOTE C - NET INCOME PER COMMON SHARE Net income per common share has been computed using the weighted average of the outstanding Common Stock plus the dilutive Common Stock equivalents (stock options), using the treasury or the modified treasury stock method. Primary and fully dilutive calculations result in the same net income per common share. 6 7 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE D - COMMITMENTS Management estimates that as of January 31, 1997, approximately $4.4 million will be required in order for the Company to complete the currently defined software projects. Additionally, management estimates that as of January 31, 1997, approximately $3.8 million will be required to complete the cost of improvements to be made to a 110,000 square foot facility purchased in 1996. NOTE E - BUSINESS ACQUISITIONS On December 15, 1995, the Company, in an acquisition accounted for as a purchase, acquired all of the outstanding capital stock of Bullock Associates, Inc., which was subsequently renamed ABR Benefits Services, Inc. ("BSI"), for $12.5 million, with an additional $2.0 million payable upon the attainment of certain revenue requirements during 1996 and 1997. As of January 31, 1997, $863,053 of this additional amount was paid for the attainment of these revenue requirements leaving a balance of $1,136,947 that could be paid in 1997 upon the attainment of certain revenue requirements. BSI is located in Princeton, New Jersey, and provides COBRA administration, retiree insurance administration, insurance continuation billing and collection, pension benefits administration, QDRO administration and educational benefit administration services as well as administration for other employee benefits programs such as employee discount plans, adoption programs, program rebates and emergency loans. The following unaudited pro forma information have been derived from the historical financial statements of the Company and BSI and adjusts such information to give effect to the acquisition of BSI. The balances for the three and six months ended January 31, 1996 assume that the acquisition of BSI occurred on August 1, 1995. The unaudited pro forma financial information is not necessarily indicative of the results which would actually have occurred had the transaction been in effect on the dates and for the periods indicated or which may result in the future. Pro Forma Financials Three months ended Six months ended (in thousands, except per share data) January 31, January 31, 1996 1996 ------ ----- Revenue $8,030 $16,044 Operating income $1,826 $ 3,621 Net income $1,120 $ 2,172 Net income per share $.05 $.11 ==== ==== NOTE F - LITIGATION The Company is involved in various litigation arising from the normal course of its operations. The outcome of the pending litigation is not expected to be material to the Company's financial condition but no assurances can be given in this regard. 7 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Form 10-Q. OVERVIEW The Company's revenues currently are generated from three sources: COBRA compliance services, administration services with respect to benefits provided to retirees and inactive employees, and administration services with respect to benefits provided to active employees. The first source of revenue for the Company, COBRA compliance services, is generated primarily from its qualifying event agreements with employers and through capitation agreements with insurance companies. Through qualifying event agreements, the Company receives a fixed, per occurrence fee from its customers for each qualifying event. A qualifying event occurs when an employee or his or her dependents experience a loss of coverage under a group healthcare plan. The amount of the fixed fee varies depending on the method of the qualifying event notification mailing, which is selected by the customer. Through capitation agreements, insurance companies designate the Company as the administrator of COBRA compliance for their group insurance clients that are subject to COBRA. The Company is paid a monthly fee for each employee covered by the group plan. The revenue generated under a capitation agreement is not dependent on the triggering of a qualifying event, but is determined based on the number of employees covered by the group plan at the beginning of each month. The Company also receives an administrative fee typically equal to 2% of the monthly health insurance premium that is paid by or on behalf of each continuant. In addition, the Company generates revenues from customers for additional COBRA compliance and healthcare administration services, both on a one-time and continuous basis. These additional revenues include new account fees paid to the Company when it is retained by a new customer. During the first six months of fiscal 1996 and 1997, 76.2% and 62.2%, respectively, of the Company's revenues were attributable to the Company's COBRA compliance services. The second source of the Company's revenue is providing administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. During the first six months of fiscal 1996 and 1997, 10.1% and 16.0%, respectively, of the Company's revenues were attributable to the Company's administration services for retirees and inactive employees. The third source of the Company's revenues is providing administration services with respect to benefits provided to active employees. Through this service, the Company provides benefits administration services for active employees, such as enrollment, eligibility verification, QDRO administration, Flexible Spending Account administration, 401(k) plan administration and pension services. During the first six months of fiscal 1996 and the first six months of fiscal 1997, 13.7% and 21.8%, respectively, of the Company's revenues were attributable to benefits administration services for active employees. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) RESULTS OF OPERATIONS The following table sets forth the percentage of revenue represented by certain items reflected in the Company's statements of income, as restated to reflect the acquisition by a pooling of interest in 1996. Three months ended Six months ended January 31, January 31, 1996 1997 1996 1997 ---- ---- ---- ---- Revenue 100.0% 100.0% 100.0% 100.0% Cost of services 55.2 55.2 54.7 56.0 Selling, general and administrative expenses 20.7 20.2 22.5 20.4 Other operating expenses .8 .7 .8 .7 ---- --- ----- ---- Operating income 23.3 23.9 22.0 22.9 Interest income 1.6 16.3 2.1 17.5 Income taxes 9.6 15.1 9.4 15.3 ----- ----- ----- ----- Net income 15.3% 25.1% 14.7% 25.1% ===== ====== ===== ===== THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1996 Revenues increased $4.9 million, or 71%, to $11.7 million during the three months ended January 31, 1997 from $6.8 million in the three months ended January 31, 1996. Of the $4.9 million increase in revenues, $2.3 million was attributable to increased revenues from COBRA compliance services, $.8 million was attributable to increased revenues from retiree/inactive employee benefits administration and $1.8 million was due to increased revenues from active employee benefits administration. The increase in COBRA compliance revenues increased primarily as a result of the addition of new customers, the addition of a new product to service clients having to comply with newly passed state mandated continuation coverage health portability laws and as a result of the acquisitions. The increase in revenues from retiree/inactive employee benefits administration was primarily attributable to the addition of new customers, obtained by the Company and through acquisitions, who were not customers of the Company during the three months ended January 31, 1996. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers obtained by the Company, the addition of new service product offerings and as a result of the acquisitions. Cost of services increased $2.7 million, or 71.2%, to $6.5 million during the three months ended January 31, 1997 from $3.8 million during the three months ended Janaury 31, 1996. The increase in cost of services was attributable to the addition of data processing, information systems and customer service personnel to support growth, the result of the acquisitions and the amortization of software placed in service as completed. As a percentage of revenues, cost of services remained the same at 55.2% for both periods. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased $948,000, or 66.7%, to $2.4 million during the three months ended January 31, 1997 from $1.4 million in the three months ended January 31, 1996. The increase in selling, general and administrative expenses was primarily attributable to the addition of marketing, management and administrative personnel to support the Company's growth and additional marketing costs. As a percentage of revenues, selling, general and administrative expenses decreased to 20.2% from 20.7% for the same periods. The decrease as a percentage of revenues resulted primarily from the acquisitions which had lower selling, general and administrative expenses as a percent of revenue, and from operating efficiencies from allocating expenses over a larger revenue base. Other operating expenses increased 50% to $80,000 during the three months ended January 31, 1997 from $53,000 in the three months ended January 31, 1996. Interest income increased $1.8 million to $1.9 million during the three months ended January 31, 1997 from $106,000 in the three months ended January 31, 1996. This increase is a result of the investment of the proceeds from the Company's secondary stock offering completed in March 1996. Income taxes increased 169.8% to $1.8 million during the three months ended January 31, 1997 from $656,000 during the three months ended January 31, 1996. The Company's effective tax rate decreased to 37.6% from 38.5% for the same period in the previous year. As a result of the foregoing, the Company's net income increased $1.9 million, or 180.3%, to $2.9 million during the three months ended January 31, 1997 from $1.0 million in the three months ended January 31, 1996. Net income per share was $.11 for the quarter ended January 31, 1997 compared to $.05 for the corresponding prior year period, after adjustment for the February 1997 stock split. SIX MONTHS ENDED JANUARY 31, 1997 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1996 Revenues increased $9.6 million, or 77.3%, to $22.1 million in the six months ended January 31, 1997 from $12.5 million in the same period of 1996. Of the $9.6 million increase in revenues, $4.2 million was attributable to increased revenues from COBRA compliance services, $2.3 million was attributable to increased revenues from retiree/inactive employee benefits administration and $3.1 million was due to increased revenues from active employee benefits administration. COBRA compliance revenues increased as a result of new customers, a new product to service clients mandated by the new state insurance portability laws and an increase in the number of COBRA compliance events over the prior period. The increase in retiree/inactive employee benefits administration revenues was primarily attributable to the addition of new customers during the first six months of fiscal 1997 who were not customers of the Company during the same period of 1996. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers and new product offerings in total benefits outsourcing administration. Cost of services increased $5.6 million or 81.5% to $12.4 million in the six months ended January 31, 1997 from $6.8 million in the six months ended January 31, 1996. As a percentage of revenues, however, cost of services increased to 56.0% from 54.7% for the same period of 1996. The increase in the amount and percentage of cost of services was attributable to the addition of data processing, information systems and customer service personnel to support revenue growth and an increase in operating expenses to service the additional revenues. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased $1.7 million, or 61.2% to $4.5 million in the six months ended January 31, 1997 from $2.8 million in the six months ended January 31, 1996. As a percentage of revenues, selling, general and administrative expense decreased to 20.4% in the six months ended January 31, 1997 from 22.5% in the six months ended January 31, 1996. The decrease as a percent of revenues results primarily from the acquisitions which had lower selling, general and administration expenses as a percent of revenue and from allocating expenses over a larger revenue base. Other operating expenses increased 36.3% to $141,000 in the six months ended January 31, 1997 from $103,000 in the six months ended January 31, 1996. Interest income increased $3.6 million to $3.9 million during the six months ended January 31, 1997 from $266,000 in the six months ended January 31, 1996. This increase is a result of the investment of the proceeds from the Company's secondary stock offering completed in March 1996. Income taxes increased 189% to $3.4 million in the six months ended January 31, 1997 from $1.2 million in the six months ended January 31, 1996. The Company's effective tax rate decreased to 37.9% from 39.0% for the same period. As a result of the foregoing, the Company's net income increased $3.7 million or 203% to $5.5 million in the six months ended January 31, 1997 from $1.8 million in the six months ended January 31, 1996. Net income per share was $.20 for the six months ended January 31, 1997 compared to $.09 for the corresponding prior year period after adjustment for the February 1997 stock split. LIQUIDITY AND CAPITAL RESOURCES In March 1996, the Company completed a secondary stock offering which provided, net cash after offering expenses, $151 million to its operations. Net cash provided by operating activities was $6.9 million for the six months ended January 31, 1997 compared to $3.5 million for the same period of 1996. As of January 31, 1997 and July 31, 1996, the Company's working capital and current ratio were $146.3 million and 7.8-to-1 and $145.8 million and 8.1-to-1, respectively. The Company invests excess cash balances in short-term investment grade securities, such as money market investments, obligations of the U.S. government and its agencies, and obligations of state and local government agencies. During the six months ended January 31, 1997, the Company's capital expenditures were $7.3 million. In December 1995, the Company purchased a 110,000 square foot facility situated on 12.7 acres of land in Palm Harbor, Florida. As of January 31, 1997, the cost of improvements to be made by the Company to such facility has been estimated to be $3.8 million. Management estimates that this operating facility will be ready for occupancy by May of 1997. Management estimates that as of January 31, 1997, approximately $9 million will be required in order for the Company to complete its currently defined software projects and to purchase equipment, furniture and hardware. The Company has a five-year, $15.0 million unsecured credit facility. The Company has agreed to maintain all of its assets free and clear of all liens, encumbrances and pledges, except purchase money security interests in specific equipment in an aggregate amount of less than $500,000 as long as the credit facility remains outstanding or any indebtedness thereunder remains unpaid. Interest on the principal balance outstanding under this line of credit accrues at a floating interest rate equal to the prime rate or, at the Company's option, to the 30-day London Interbank Offering Rate (LIBOR), plus an applicable interest rate margin between 1% and 2% based on certain financial ratios. The credit facility contains certain financial covenants requiring the maintenance of cash and cash equivalents and investments equal to or greater than customer account deposits, a funded debt to EBITDA ratio of a maximum of 2.25-to-1, a debt service coverage ratio of not less than 1.35-to-1, as well as the maintenance of certain funded debt to tangible net worth ratio. As of January 31, 1997, the Company was in compliance with all such covenants and there were no amounts outstanding under the credit facility. The Company believes that its cash, investments, its cash flow from operations and the funds available from its credit facility will be adequate to meet the Company's expected capital requirements for the foreseeable future. 11 12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's annual meeting of shareholders held on December 6, 1996, three matters were submitted to a vote of shareholders. James E. MacDougald and Thomas F. Costello were elected as directors of the Company for terms expiring in 1999. The following table sets forth certain information with respect to the election of directors at the annual meeting: Shares Withholding Name of Nominee Shares Voted For Authority --------------- ---------------- --------- James E. MacDougald 9,498,934 137,765 Thomas Costello 9,578,572 58,427 The following table sets forth the other directors of the Company whose terms of office continued after the 1996 annual meeting of the shareholders: Name of Director Term Expires ---------------- ------------ Suzanne M. MacDougald 1997 Mark M. Goldman 1998 Second, the Company's shareholders approved a proposal to amend the Company's Articles of Incorporation to increase the number of authorized shares of voting common stock from 20,000,000 to 100,000,000. The following table sets forth certain information with respect to the vote on such matter: Shares Voted Shares Voted For Against Abstentions --- ------- ----------- 6,076,639 3,501,750 40,035 Third, the Company's shareholders approved a proposal to adopt the 1996 Non-Employee Director Stock Option Plan. The following table sets forth certain information with respect to the vote on such matter: Shares Voted Shares Voted For Against Abstentions --- ------- ----------- 9,421,308 151,594 45,522 12 13 OTHER INFORMATION (continued) Item 5. Other Information Effective November 12, 1996, Vincent Addonisio was removed as Executive Vice President, Chief Financial Officer and Treasurer of the Company due to differences with the Board of Directors. On November 20, 1996, Mr. Addonisio resigned as a Director of the Company and withdrew as a nominee for election as a Director at the 1996 Annual Meeting of Shareholders. The Board did not propose for election at the Annual Meeting a successor director or nominee to Mr. Addonisio and has reduced the size of the Board to four directors. Mr. Addonisio has filed a lawsuit against the Company alleging breach of his employment contract and against the Company and James E. MacDougald, Chairman of the Board, President and Chief Executive Officer of the Company, alleging defamation. The Company does not believe that such litigation, or any settlement relating thereto, will have a material adverse effect on the Company's financial position but no assurances can be given in this regard. On January 30, 1997, James P. O'Drobinak joined the Company as Senior Vice President and Chief Financial Officer. From 1995 until joining the Company, Mr. O'Drobinak served as Chief Financial Officer - North America for Danka Industries, Inc., a publicly-held company that is the largest independent retail distributor of office equipment in North America. From 1983 to 1995, Mr. O'Drobinak held various positions with Deloitte & Touche LLP, an international accounting and consulting firm, most recently as a Senior Manager in the Tampa, Florida office. The Company also created two new wholly-owned subsidiaries to expand its benefits outsourcing offerings to include retirement plan administration services to employers and compliance services to insurance carriers. ABR Qualified Plan Services, Inc. ("QPSI"), a Florida corporation, provides employers with a complete menu of retirement plan administrative services, including administration of 401(k), profit sharing and other types of retirement plans. QPSI currently services more than 250 clients through several strategic alliances with financial institutions. These strategic alliances provide QPSI with a source of ongoing new business. The Company's other new subsidiary, ABR Coverage Continuation Services, Inc. ("CCSI"), also a Florida corporation, currently provides services to insurance carriers who are required to comply with the Florida Health Insurance Coverage Continuation Act. The compliance services required by the new Florida law are similar in many respects to those required by federal COBRA law, which are administered by the Company's CobraServ subsidiary. However, while CobraServ assists employers in satisfying the requirements of federal COBRA law, CCSI will focus on providing services to insurance carriers in fulfilling their compliance requirements under state insurance portability laws, such as the Florida Health Insurance Coverage Continuation Act. 13 14 OTHER INFORMATION (continued) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Amendment to the Company's Articles of Incorporation of ABR Information Services, Inc. 3.2 Articles of Incorporation of ABR Information Services, Inc., as amended to date. 10.1 1996 Non-Employee Director Stock Option Plan 27.1 Financial Data Schedule (Edgar Version Only) (b) Reports on Form 8-K The Company filed a Form 8-K dated January 30, 1997 on March 5, 1997. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 13, 1997 ABR INFORMATION SERVICES, INC. (Registrant) /s/ James P. O'Drobinak --------------------------------- James P. O'Drobinak Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 15