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, 1998.
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,
5,975,712 shares outstanding as of June 30, 1998.
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FDP CORP.
TABLE OF CONTENTS
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
May 31, 1998 and November 30, 1997 3
Consolidated Statements of Earnings
Three and Six Months Ended May 31, 1998 and 1997 4
Consolidated Statements of Cash Flows
Six Months Ended May 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II. OTHER INFORMATION
Item 1. Legal 11
Item 4 Submission of Matters to Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FDP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands) May 31, November 30,
1998 1997
(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents $ 3,551 $ 4,109
Marketable securities 4,607 4,825
Accounts receivable, less allowance for uncollectible
accounts of $335 in 1998 and $384 in 1997 7,794 6,967
Notes receivable - current 346 671
Prepaid expenses 320 145
Deferred income taxes 225 246
Costs and earnings in excess of billings on
uncompleted contracts 1,411 774
Other 305 69
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Total current assets 18,559 17,806
Property and equipment at cost, less accumulated
depreciation of $4,195 in 1998 and
$4,306 in 1997 5,073 3,848
Other assets:
Marketable securities 11,101 10,897
Notes receivable - non-current 95 109
Goodwill, net 104 137
Other 290 291
======= =======
Total assets $35,222 $33,088
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 3,375 $ 4,095
Income taxes payable 644 399
Billings in excess of costs and earnings
on uncompleted contracts 313 513
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Total current liabilities 4,332 5,007
Deferred income taxes 635 610
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Total liabilities 4,967 5,617
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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 5,963 in 1998 and 5,777 in 1997 60 58
Paid-in capital 11,777 10,500
Retained earnings 18,418 16,913
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Total stockholders' equity 30,255 27,471
======= =======
Total liabilities and stockholders' equity $35,222 $33,088
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See accompanying notes to consolidated financial statements.
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FDP CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands) Three Months Ended Six Months Ended
May 31, May 31,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
Revenues:
Software $ 9,170 $ 7,335 $ 17,874 $ 13,973
Information services 504 557 990 1,181
-------- -------- -------- --------
Total Revenue 9,674 7,892 18,864 15,154
-------- -------- -------- --------
Cost of sales and services:
Product development, maintenance
and enhancements:
Software 6,947 5,581 13,686 10,783
Information services 258 266 501 595
Telecommunications 67 104 140 229
Selling, general and administrative expenses 1,266 1,163 2,564 2,279
-------- -------- -------- --------
Total cost of sales and services 8,538 7,114 16,891 13,886
-------- -------- -------- --------
Operating profit 1,136 778 1,973 1,268
Interest income 292 321 583 611
Foreign currency (loss) gain and other (12) (14) (19) 20
-------- -------- -------- --------
Earnings before income taxes 1,416 1,085 2,537 1,899
Provision for income taxes 497 380 889 665
-------- -------- -------- --------
Net earnings $ 919 $ 705 $ 1,648 $ 1,234
======== ======== ======== ========
BASIC EPS COMPUTATION
Numerator 919 705 1,648 1,234
Denominator:
Weighted average shares 5,942 5,558 5,891 5,542
Basic EPS $ .15 $ .13 $ .28 $ .22
======== ======== ======== ========
DILUTED EPS COMPUTATION
Numerator 919 705 1,648 1,234
Denominator:
Weighted average shares 5,942 5,558 5,891 5,542
Incremental shares from assumed
conversions stock options 309 292 303 316
-------- -------- -------- --------
6,251 5,850 6,194 5,858
Diluted EPS $ .15 $ .12 .27 $ .21
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
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FDP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
May 31,
-------------------
1998 1997
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Cash flows from operating activities:
Net earnings $ 1,648 $ 1,234
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Adjustments to reconcile net earnings to net
cash (used in) provided by
operating activities:
Depreciation and amortization of property,
equipment and intangibles 651 471
Deferred income taxes 45 25
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net (827) 147
Increase in prepaid expenses (175) (160)
Increase in costs and earnings in excess
of billings on uncompleted contracts (637) (214)
Increase in other current assets (236) (88)
(Decrease) increase in accounts payable
and accrued expenses (721) 271
Decrease in billings in excess of costs
and earnings on uncompleted contracts (200) (1,097)
Increase (decrease) in income taxes payable 245 (34)
Decrease (increase) in other assets 1 (6)
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Net adjustments (1,854) (685)
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Net cash (used in) provided by
operating activities (206) 549
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Cash flows from investing activities:
Proceeds from sale of marketable investment securities 2,514 2,871
Purchase of marketable securities (2,500) (6,040)
Proceeds from note receivable 749 368
Acquisition of note receivable (410) (353)
Equipment acquired and leasehold improvements (1,844) (453)
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Net cash used in investing activities (1,491) (3,607)
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Cash flows from financing activities:
Proceeds from exercise of stock options 818 274
Stock option income tax benefit 461 157
Cummulative transfer adjustment 6 --
Dividend payment (146) (138)
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Net cash provided by financing activities 1,139 293
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Net decrease in cash and cash equivalents (558) (2,765)
Cash and cash equivalents at beginning of year 4,109 6,300
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Cash and cash equivalents at end of period $ 3,551 $ 3,535
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See accompanying notes to consolidated financial statements
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FDP Corp. and Subsidiaries
Notes to Consolidated Financial Statements
May 31, 1998
(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, 1998, 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 June 15, 1998, to shareholders of record on May 28, 1998.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Revenues reflect the Company's ability to develop new computer software
products, or enhance existing ones, then successfully market its software and
related services. Several factors influence the Company's results of operations
including advances in computer technology and changes in governmental
regulations. The Company's business is not seasonal even though quarterly
revenues and net earnings may vary. The variation is primarily due to uncertain
timing of customers' decisions, over which the Company has little control,
regarding the purchase of software systems and computer hardware.
FINANCIAL RESULTS
For the quarter ended May 31, 1998, revenues increased 23% to $9,674,000 as
compared to $7,892,000 for the same period last year. Operating profit for the
second quarter was up 46% to $1,136,000 as compared to $778,000 for the prior
year. Net earnings for the second quarter increased 30% to $919,000 or $.15 per
diluted share ($.15 per share basic) versus $705,000 or $.12 per diluted share
($.13 per basic share) a year ago.
For the six month period ended May 31, 1998, revenues increased 24% to
$18,864,000 as compared to $15,154,000 for the same period last year. Operating
profit for the six month period was up 56% to $1,973,000 as compared to
$1,268,000 for same period last year. Net earnings for the six month period
increased 34% to $1,648,000 or $.27 per diluted share ($.28 per share basic)
versus $1,234,000 or $.21 per diluted share ($.22 per basic share) for the same
period last year.
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,
1998 1997 1998 1997
(000) (000) (000) (000)
PENSION PARTNER $ 1,086 $ 999 $ 2,448 $ 2,050
AGENCY PARTNER 1,973 1,713 3,702 3,515
SYSTEM INNOVATIONS 1,038 802 1,815 1,654
HOME OFFICE SYSTEMS 5,073 3,821 9,909 6,754
TOTAL SOFTWARE $ 9,170 $ 7,335 $17,874 $13,973
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SOFTWARE REVENUE:
Total software related revenue which includes software licenses, maintenance,
service revenue (time and materials) and other for the quarter and six months
ended May 31, 1998 increased by 25% and 28%, respectively, as compared to last
year. The increase in revenues for the quarter and six month periods was
principally driven by higher revenues in Home Office Systems.
Revenues for HOME OFFICE SYSTEMS, which includes FDP/COMPASS and FDP/CLAS, for
the quarter and six months ended May 31, 1998, were up 33% and 47%,
respectively. Driving the overall increase were revenues relating to
FDP/COMPASS, the Company's group pension administration system. Revenues for
FDP/COMPASS for the quarter and six month periods rose 42% and 53%,
respectively. The increase in revenues was primarily due to ongoing
implementations of the system worldwide and a new multi-million dollar contract
executed in the quarter with a major life insurance company in the United
Kingdom. Revenues for FDP/CLAS, the Company's life insurance administration
system, for the quarter and six month periods rose 18% and 36%, respectively.
Revenues in AGENCY PARTNER, which includes the products Contact Partner(TM),
FDP/XL and FINPACK, for the quarter and six month periods ended May 31, 1998,
were up 15% and 5%, respectively. Higher revenues relating to Contact
Partner(TM), the Company's contact management program for the financial services
professional, were offset by lower revenues of FDP/XL the Company's sales
illustration system.
PENSION PARTNER revenues for the quarter and six month periods were up 9% and
19%, respectively. Revenues increased due to sales of the FDP/PEN for
Windows(TM) system, the Company's qualified plan proposal and administration
software.
Revenues for System Innovations for the quarter and six months ended May 31,
1998 were up 29% and 10%, respectively.
INFORMATION SERVICES Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1998 1997 1998 1997
(000) (000) (000) (000)
PENSION PARTNER $ 119 $ 138 $ 222 $ 291
AGENCY PARTNER 30 36 59 71
FDP/CLAS 355 383 709 819
TOTAL INFORMATION SERVICES $ 504 $ 557 $ 990 $1,181
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INFORMATION SERVICES REVENUE:
Total information services revenue for the quarter and six month periods ended
May 31, 1998 decreased by 10% and 16%, respectively, as compared to the same
period last year. 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 also decreased for
the quarter and six months ended May 31, 1998 as compared to the same period
last year. Information service revenue as a percentage of total revenues
continues to decline as software revenues have increased.
COSTS AND EXPENSES:
The Company's total cost of sales and services for the quarter and six months
ended May 31, 1998 were $8,538,000 and $16,891,000 as compared to $7,114,000 and
$13,886,000 for the same periods last year, representing an increases of 20% and
22%, respectively. The increase for both periods was primarily related to higher
personnel related costs for the Company mainly concentrated in the FDP/COMPASS
division.
For the quarter and six months ended May 31, 1998, costs related to product
development, maintenance and enhancements for software have increased whereas
costs for information services have decreased. This change reflects the
continuing trend of the shifting of the Company resources 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 months
ended May 31, 1998 were $1,266,000 and $2,564,000 as compared to $1,163,000 and
$2,279,000 for the same periods last year, respectively, representing increases
of 9% and 13%. Most of the increase for both periods was 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 ended May 31, 1998 was $292,000 as compared to $321,000
for the same period last year. The average interest-earning rate for the second
quarter of 1998 was 6.02% as compared to 6.23% for the same period last year.
(See Financial Condition)
PROVISION FOR INCOME TAXES:
The Company's effective income tax rate was 35% for the quarters ended May 31,
1998 and 1997. The Company's effective tax rate has benefited from the use of
foreign sale corporations credits (FSC).
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FINANCIAL CONDITION
The Company continues to maintain a highly liquid and virtually debt free
balance sheet. As of May 31, 1998 and November 30, 1997 cash and marketable
securities were $19,259,000 and $19,831,000, representing 55% and 60% of total
assets for the respective periods. The decrease in cash flow from operating
activities for May 31, 1998 as compared to the same period last year was mainly
the result of increases in accounts receivable and costs and earnings in excess
of billings on uncompleted contracts and a decrease in accounts payable and
accrued expenses. The decrease in cash flows from investing activities mainly
related to leasehold improvements and furniture purchases on additional office
space. Cash flows from financing activities increased as a result of stock
options that were exercised.
Other than planned purchases of equipment, no other significant capital
expenditures are anticipated for the remainder of fiscal 1998. 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.
STATEMENT OF POSITION (SOP) 97-2
In October 1997, the AICPA issued Statement of Position (SOP) 97-2, Software
Revenue Recognition, which supersedes SOP 91-1. The Company will be required to
adopt SOP 97-2 for software transactions entered into beginning December 1,
1998, and retroactive application to years prior to adoption is prohibited. SOP
97-2 generally requires revenue earned on software arrangements involving
multiple elements (i.e., software products, upgrades/enhancements, post contract
customer support, installation, training, etc.) to be allocated to each element
based on the relative fair values of the elements. The fair value of an element
must be based on evidence which is specific to the vendor. The revenue allocated
to software products (including specified upgrades/enhancements) generally is
recognized upon delivery of the products. The revenue allocated to post contract
customer support generally is recognized ratably over the term of the support
and revenue allocated to service elements (such as training and installation)
generally is recognized as the services are performed. If a vendor does not have
evidence of fair value for all elements in a multiple-element arrangement, all
revenue from the arrangement is deferred until such evidence exists or until all
elements are delivered. The Company does not believe that adoption of (SOP) 97-2
will have a significant impact on its financial reporting.
FORWARD LOOKING STATEMENTS
This quarterly report contains certain "forward-looking statements" 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 the 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 forward looking
statements, including, without limitation, the decline in demand for the
Company's software products, the effect of general economic conditions and
factors affecting the life insurance, employee benefits and financial services
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.
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PART II. OTHER INFORMATION
Item 1. Legal
The Company is from time to time involved in routine litigation arising in the
ordinary course of business. No litigation in which the Company is presently
involved is material to its financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant held its Annual Meeting of Stockholders on April 21, 1998. At
this meeting the following matters were approved: (1) election of nominees Cesar
L. Alvarez, Michael C. Goldberg, Cindy Goldberg, 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, 1998.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - There were no reports on Form 8-K
filed for the three months ended May 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 10, 1998 FDP CORP.
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By: /s/ Michael C. Goldberg
-------------------------------------
Michael C. Goldberg
Chairman of Board of Directors
Chief Executive Officer and President
(principal executive and financial
officer)
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