1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
UNITED STATES
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended May 31, 1997.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-11770
FDP CORP.
(Exact name of registrant as specified in its charter)
Florida 59-2138243
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2140 South Dixie Highway, Miami, Florida 33133
(Address of principal executive offices) (Zip Code)
(305) 858-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value per share,
5,634,837 shares outstanding as of June 30, 1997.
2
FDP CORP.
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
May 31, 1997 and November 30, 1996 3
Consolidated Condensed Statements of Earnings
Three and Six Months Ended May 31, 1997 and 1996 4
Consolidated Condensed Statements of Cash Flows
Three and Six Months Ended May 31, 1997 and 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
PART II. OTHER INFORMATION
Item 1. Legal 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Page 2
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FDP CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS) May 31, November 30,
1997 1996
(Unaudited)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,535 $ 6,300
Marketable securities 4,995 5,365
Accounts receivable, less allowance for uncollectible
accounts of $442 in 1997 and $444 in 1996 5,502 5,649
Notes receivable - current 425 403
Prepaid expenses 251 91
Deferred income taxes 317 327
Costs and earnings in excess of billings on
uncompleted contracts 776 562
Other 167 79
------- -------
Total current assets 15,968 18,776
Property and equipment at cost, less accumulated depreciation
of $3,886 in 1997 and $3,629 in 1996 2,740 2,719
Other assets:
Marketable securities 10,653 7,114
Notes receivable - non-current 148 185
Goodwill, net 202 241
Other 83 77
------- -------
Total assets $29,794 $29,112
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,171 $ 2,900
Income taxes payable 205 239
Billings in excess of costs on earnings on
uncompleted contracts 817 1,914
------- -------
Total current liabilities 4,193 5,053
Deferred income taxes 512 497
------- -------
Total liabilities 4,705 5,550
------- -------
Stockholder's 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
5,622 in 1997 and 5,518 in 1996 56 55
Paid-in capital 9,712 9,282
Retained earnings 15,321 14,225
------- -------
Total stockholders' equity 25,089 23,562
------- -------
Total liabilities and stockholders' equity $29,794 $29,112
======= =======
See accompanying notes to consolidated condensed financial statements.
Page 3
4
FDP CORP
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(AMOUNTS IN THOUSANDS) Three Months Ended Six Months Ended
May 31, May 31,
----------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Revenues:
Software $ 7,335 $ 5,572 $ 13,973 $ 10,689
Information services 557 806 1,181 1,589
-------- -------- -------- --------
Total Revenue 7,892 6,378 15,154 12,278
-------- -------- -------- --------
Cost of sales and services:
Product development, maintenance and enhancements:
Software 5,581 4,439 10,783 8,448
Information services 266 296 595 642
Telecommunications 104 117 229 227
Selling, general and administrative
expenses 1,163 992 2,279 2,000
-------- -------- -------- --------
Total cost of sales and services 7,114 5,844 13,886 11,317
-------- -------- -------- --------
Operating profit 778 534 1,268 961
Interest income 321 259 611 510
Foreign currency loss and other (14) (5) 20 (6)
-------- -------- -------- --------
Earnings before income taxes 1,085 788 1,899 1,465
Provision for income taxes 380 250 665 465
-------- -------- -------- --------
Net earnings $ 705 $ 538 $ 1,234 $ 1,000
======== ======== ======== ========
Earnings per common and
common equivalent share: $ .12 $ .09 $ .21 $ .18
======== ======== ======== ========
Weighted average number of shares
used in per share calculations 5,850 5,731 5,858 5,675
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
Page 4
5
FDP CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
May 31,
---------------------
1997 1996
------- -------
Cash flows from operating activities:
Net earnings $ 1,234 $ 1,000
------- -------
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization of property,
equipment and intangibles 471 395
Changes in assets and liabilities, net of affects
from acquisition of business:
Decrease (Increase) in accounts receivable, net 147 (505)
Increase in prepaid expenses (160) (134)
Increase in costs and earnings in excess
of billings on uncompleted contracts (214) (123)
Increase in other current assets (88) (51)
Increase (Decrease) in accounts payable
and accrued liabilities 271 (954)
(Decrease) Increase in billing in excess of costs
and earnings on uncompleted contracts (1,097) 229
(Decrease) Increase in income taxes payable (34) 17
Increase (Decrease) in deferred income taxes 25 (119)
(Increase) Decrease in other assets (6) 32
------- -------
Net adjustments (685) (1,213)
------- -------
Net cash provided by (used in)
operating activities 549 (213)
------- -------
Cash flows from investing activities:
Proceeds from sale of marketable securities 2,871 2,477
Purchase of marketable securities (6,040) (4,629)
Acquisition of business, net of cash acquired -- 185
Proceeds from note receivable 368 472
Acquisition of note receivable (353) (182)
Equipment acquired (453) (648)
------- -------
Net cash used in investing activities (3,607) (2,325)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options 274 406
Stock option income tax benefit 157 247
Dividend payment (138) (215)
------- -------
Net cash provided by financing activities 293 438
------- -------
Net decrease in cash and cash equivalents (2,765) (2,100)
Cash and cash equivalents at beginning of year 6,300 3,301
------- -------
Cash and cash equivalents at end of period $ 3,535 $ 1,201
======= =======
See accompanying notes to consolidated condensed financial statements
Page 5
6
FDP CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 1997
(Unaudited)
NOTE A
In the opinion of management of FDP Corp. (the "Company"), the accompanying
unaudited consolidated condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position, the results of operations and the
statement of cash flows in conformity with generally accepted accounting
principles.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these consolidated
condensed financial statements be read in conjunction with the consolidated
financial statements and the notes included in the Company's latest annual
report on Form 10K.
The results of operations for the six months ended May 31, 1997, are not
necessarily indicative of the results for the full year.
NOTE B
The Board of Directors approved a quarterly cash dividend of $.0125 per share,
payable March 13, 1997 and June 13, 1997 to shareholders of record on February
26, 1997 and May 26, 1997, respectively.
NOTE C
On November 11, 1996 the Board of Directors approved a three-for-two common
split distributable on December 10, 1996 to shareholders of record at the close
of business on November 26, 1996. All share and per share amounts have been
restated to retroactively reflect the stock split.
NOTE D
Net primary earnings per common share for the periods presented has been
computed using the weighted average number of common and common equivalent
shares (stock options) outstanding except in the periods where the effect is
anti-dilutive. Fully-dilutive earnings per share is not materially different
from primary earnings per share in the periods presented.
NOTE E
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a System
Innovations). The purchase price consisted of 50,000 shares of FDP Corp. common
stock valued at $7.875 per share and an additional 50,000 shares will be
issuable in the event that System Innovations achieves certain earnings
Page 6
7
levels. The transaction was accounted for as a purchase, and the results of
operations for System Innovations are included in the statement of earnings from
the acquisition date. Goodwill of $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.
NOTE F
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock - Based
Compensation" ("SFAS No. 123"). SFAS No. 123 is effective for fiscal years
beginning after December 15, 1995. SFAS No. 123 defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees". Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at grant date, or other measurement date, over
the amount an employee must pay to acquire the stock. Management has elected to
continue to measure compensation cost using the APB Opinion No. 25 prescribed
method and therefore believes that SFAS No. 123 will not have a material effect
on the Company's consolidated financial statements.
NOTE G
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.
Page 7
8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
RESULTS OF OPERATIONS
---------------------
Revenues reflect the Company's ability to develop new computer software
products, or enhance existing ones, then successfully market its software and
related services. Several factors influence the Company's results of operations
including advances in computer technology and changes in governmental
regulations. The Company's business is not seasonal even though quarterly
revenues and net earnings may vary. The variation is primarily due to uncertain
timing of customers' decisions, over which the Company has little control,
regarding the purchase of software systems and computer hardware.
On December 28, 1995 the Company acquired Existential Systems Inc. (d/b/a System
Innovations). The purchase price consisted of 50,000 shares of FDP Corp. common
stock and an additional 50,000 shares issuable in the event that Systems
Innovations achieves certain earnings levels over the next few years. System
Innovations, a privately held company based in Littleton, Colorado, has been in
business since 1984 and develops software applications for the life insurance
industry. System Innovations employs 28 people and generates approximately $3
million in annual revenue and is currently developing an advanced technology
life insurance proposal system in partnership with six major insurance
companies. The Company believes that the acquisition will provide the ability to
leverage its technical and insurance industry expertise and the joint
partnership with the six insurance companies provides opportunities for the
cross-selling of the Company's products. Included in the financial statements is
the activity related to the acquisition subsequent to December 28, 1995.
FINANCIAL RESULTS
For the quarter ended May 31, 1997, revenues increased 24% to $7,892,000 as
compared to $6,378,000 for the same period last year. Operating profit for the
second quarter was up 46% to $778,000 as compared to $534,000 for the prior
year. Net earnings for the second quarter increased 31% to $705,000 or $.12 per
share versus $538,000 or $.09 per share a year ago.
For the six month period ending May 31, 1997, revenues increased 23% to
$15,154,000 as compared to $12,278,000 for the same period last year. Operating
profit for the six month period increased 32% to $1,268,000 as compared to
$961,000 for the same period last year. Net earnings for the six month period
increased by 23% to $1,234,000 or $.21 per share, up from $1,000,000 or $.18 per
share for the prior year.
Page 8
9
The Company reports its revenues by two categories, Software and Information
Services.
- --------------------------------------------------------------------------------
SOFTWARE Three Months Ended Six Months Ended
- --------------------------------------------------------------------------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
PENSION PARTNER $ 999 $ 876 $ 2,050 $ 1,920
- --------------------------------------------------------------------------------
AGENCY PARTNER 1,713 1,730 3,515 3,445
- --------------------------------------------------------------------------------
SYSTEM INNOVATIONS 802 753 1,654 1,358
- --------------------------------------------------------------------------------
HOME OFFICE SYSTEMS 3,821 2,213 6,754 3,966
- --------------------------------------------------------------------------------
TOTAL SOFTWARE 7,335 5,572 13,973 10,689
- --------------------------------------------------------------------------------
SOFTWARE REVENUE:
Total software related revenue which includes software licenses, maintenance,
service revenue (time and materials) and other for the three months ended May
31,1997 increased by 32%. For the six month period software revenues were up 31%
as compared to last year. The increase in revenues for the quarter and six month
periods was principally due to higher revenues in Home Office Systems and System
Innovations.
Revenues for Home Office Systems, which includes FDP/COMPASS and FDP/CLAS, for
the quarter and six month periods ended May 31, 1997 were up 73% and 70%,
respectively. Driving the overall increase were revenues related to FDP/COMPASS,
the Company's software for group pension/annuity administration. Revenues for
FDP/COMPASS for the quarter rose 140% to 2.4 million as compared to $1.0 million
for the prior year. For the six month period ending May 31,1997, FDP/COMPASS
revenues increased 153% to $4.3 million as compared to $1.7 million for the
prior year. The increase in revenues related to the six international contracts
executed for the product covering South Africa, the United Kingdom and
Australia.
Revenues for FDP/CLAS, the Company's software for life insurance administration,
for the quarter rose 17% to $1.4 million as compared to $1.2 million for the
prior year. For the six month period, FDP/CLAS revenues were up 9% to $2.5
million as compared to $2.3 million for last year.
Page 9
10
Revenues in AGENCY PARTNER for the quarter and six month periods were basically
unchanged as compared to the prior year. Higher revenues relating to FDP/XL, the
Company's sales illustration system under Windows (TM) , were offset by lower
revenues relating to Contact Partner. Revenues for FDP/XL for the quarter
increased 38% to $1.1 million as compared to $.8 million for the prior year. For
the six month period, revenues for FDP/XL increased 47% to $2.2 million as
compared to $1.5 million for the prior year.
PENSION PARTNER revenues for the quarter and six month periods ending May 31,
1997 were up 14% and 7%, respectively. The increase in revenues for both periods
was related to sales of the new Windows(TM) based products.
Revenues for System Innovations were higher as six full months of revenue were
reported for the six months ended May 31,1997 as compared to only five months of
revenue in 1996.
- --------------------------------------------------------------------------------
INFORMATION SERVICES Three Months Ended Six Months Ended
- --------------------------------------------------------------------------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
(000) (000) (000) (000)
- --------------------------------------------------------------------------------
PENSION PARTNER $ 138 $ 202 $ 291 $ 390
- --------------------------------------------------------------------------------
AGENCY PARTNER 36 70 71 152
- --------------------------------------------------------------------------------
FDP/CLAS 383 534 819 1,047
- --------------------------------------------------------------------------------
TOTAL SOFTWARE $ 557 $ 806 $1,181 $1,589
- --------------------------------------------------------------------------------
INFORMATION SERVICES REVENUE:
Total information services revenue for the quarter and six month periods ended
May 31, 1997, as compared to last year, decreased by 31% and 26%, respectively.
Information service revenue for Pension Partner and Agency Partner has been on a
downward trend as customers that access the various software programs on a
time-sharing basis are purchasing the products for use on personal computers.
Information service revenue for FDP/CLAS, which had increased in fiscal 1996,
reported a decrease in revenues for the quarter and six months ended May 31,
1997. This decrease specifically relates to a major customer who purchased a
license to take the system in-house during the last quarter of fiscal 1996.
Page 10
11
COSTS AND EXPENSES:
The Company's total cost of sales and services for the quarter and six month
periods ending May 31,1997 were $7,114,000 and $13,886,000 as compared to
$5,844,000 and $11,317,000 for the same periods last year, representing
increases of 22% and 23%, respectively. Most of the increase for both periods
was related to higher personnel related costs for the Company mainly
concentrated in the FDP/COMPASS division.
For the quarter and six months ending May 31, 1997, costs related to product
development, maintenance and enhancements for software increased by 26% and 28%,
respectively, whereas costs for information services decreased by 10% and 7%,
respectively. These changes reflect the continuing trend of the shifting of the
Company resources in the Pension Partner and Agency Partner groups away from
information services, a decreasing revenue base, to software product
development, a growing revenue base.
Selling, general and administrative expenses for the quarter and six month
periods ended May 31, 1997 were $1,163,000 and $2,279,000 as compared to
$992,000 and $2,000,000, respectively, representing increases of 17% and 14%.
Most of the increase related to higher selling related expenses.
INTEREST INCOME:
Interest earned primarily on the Company's portfolio of U.S. Treasury Bills and
Notes for the quarter ending May 31, 1997 was $321,000 as compared to $259,000
for the same period last year representing an increase of 24%. The average
interest earning rate for the second quarter of 1997 was 6.23% as compared to
6.17% for the same period last year. The increase in interest income in 1997 was
related to a higher portfolio value. (See Financial Condition)
PROVISION FOR INCOME TAXES:
The Company's effective income tax rate was 35% and 32% for the quarters ended
May 31, 1997 and 1996, respectively. The tax rate in 1997 increased due to a
reduction in benefits provided by research and development credits.
FINANCIAL CONDITION
The Company continues to maintain a highly liquid and virtually debt free
balance sheet. As of May 31, 1997 and November 30, 1996 cash and marketable
securities were $19,183,000 and $18,779,000, representing 64% and 65% of total
assets for the respective periods.
Other than planned purchases of equipment, no other significant capital
expenditures are anticipated for the remainder of fiscal 1997. Management of the
Company continues to believe that existing working capital and funds generated
by operations will be sufficient to meet the Company's anticipated capital needs
in connection with its present and proposed activities.
Page 11
12
PART II. OTHER INFORMATION
Item 1. Legal
The Company is from time to time involved in routine litigation arising in the
ordinary course of business. No litigation in which the Company is presently
involved is material to its financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Stockholders on April 15, 1997. At
this meeting the following matters were approved: (1) election of nominees Cesar
L. Alvarez, Michael C. Goldberg, Cindy Goldberg, Douglas Kennedy, Bruce I.
Nierenberg and Albert J. Schiff to serve on the Company's Board of Directors
until the next annual stockholders' meeting, and (2) the reappointment of KPMG
Peat Marwick LLP, independent certified public accountants, as auditors for the
Company for the year ending November 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
27 Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the three months ended May 31, 1997.
Page 12
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: JULY 11, 1997 FDP CORP.
By: /S/ MICHAEL C. GOLDBERG
-------------------------------------
Michael C. Goldberg
Chairman of Board of Directors
Chief Executive Officer and President
(principal executive and financial
officer)
Pgae 13