- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------------

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1998

---------------------

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
(Address of registrant's principal executive offices)

34684-2141
(Zip Code)

(727) 785-2819
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS
Voting Common Stock, $.0l par value
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 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. [ ]

As of October 23, 1998, there were outstanding 28,701,594 shares of Voting
Common Stock. The aggregate market value of the Voting Common Stock held by
non-affiliates of the registrant based on the last sale price reported on the
Nasdaq National Market as of October 23, 1998 was $426,838,217.

DOCUMENTS INCORPORATED BY REFERENCE:

DOCUMENTS FORM 10-K REFERENCE
- --------- --------------------

Proxy Statement dated on or about November 16, 1998......... Part III Items 10-12

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2

ABR INFORMATION SERVICES, INC.

FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PAGE NO.
--------

PART I
Item 1 Business.................................................... 1
Item 2 Properties.................................................. 12
Item 3 Legal Proceedings........................................... 13
Item 4 Submission of Matters to a Vote of Security Holders......... 13

PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 14
Item 6 Selected Financial Data..................................... 14
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15
Item 7A Quantitative and Qualitative Disclosures About Market
Risk...................................................... 19
Item 8 Financial Statements and Supplementary Data................. 20
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 20

PART III
Item 10 Directors and Executive Officers of the Registrant.......... 20
Item 11 Executive Compensation...................................... 20
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................ 20
Item 13 Certain Relationships and Related Transactions.............. 20

PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 20

The statements contained in this report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes, beliefs,
intentions, or strategies regarding the future. Forward-looking statements
include statements regarding, among other things: (i) the potential loss of
material customers; (ii) the failure to properly manage growth and successfully
integrate acquired businesses; (iii) the Company's financing plans; (iv) trends
affecting the Company's financial condition or results of operations; (v) the
Company's growth and operating strategies; (vi) the ability to attract and
retain qualified sales, information services and management personnel; (vii) the
impact of competition from new and existing competitors; (viii) the financial
condition of the Company's clients; (ix) potential increases in the Company's
costs; (x) the declaration and payment of dividends; (xi) the potential for
unfavorable interpretation of existing government regulations or new government
legislation; (xii) the development of a comprehensive and fully integrated suite
of benefits administrative services; (xiii) the sufficiency of the Company's
back-up facilities and disaster recovery procedures; (xiv) the ability of the
Company and its significant suppliers and large customers to address the Year
2000 Issue; (xv) the Company's ability to minimize the impact of interest rate
fluctuations; and (xvi) the outcome of certain litigation involving the Company.
Prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the forward
looking statements as a result of various factors. All forward-looking
statements included in this document are based on information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statement. Among the factors that could cause actual
results to differ materially are the factors detailed in Items 1 through 3 and 7
of this report and the risks discussed under the caption "Risk Factors" included
in the Company's filings under the Securities Act of 1933. Prospective investors
should also consult the risks described from time to time in the Company's
Reports on Form 10-Q, 8-K, 10-K and Annual Reports to Shareholders.

ii
3

PART I

ITEM 1. BUSINESS

ABR Information Services, Inc. (collectively with its subsidiaries, the
"Company"), through its wholly-owned subsidiaries, ABR Benefits Services, Inc.,
Charing Company, Inc., Matthews, Malone & Associates, Ltd., Business Computer
Services, Inc., MidAtlantic 401(k) Services, Inc., Chowning, Ltd., Western
Pension Service Corporation and BMC Consultants, Inc., is a leading provider of
comprehensive benefits administration, payroll and human resource services to
employers seeking to outsource these functions. The Company's operating revenues
currently are generated from three sources: employee health and welfare
administration services, qualified plan administration services, and payroll and
human resource administration services. All 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.
Additionally, the Company generates non-operating revenue from the short-term
lease of its St. Petersburg, Florida facility through its wholly-owned
subsidiary, ABR Properties, Inc.

The third source of the Company's revenue is providing payroll and human
resource administration services, including tax deposit services and integrated
human resource solutions.

The Company provides portability (primarily COBRA and HIPAA) services
through the trade name CobraServ(R) and payroll and tax deposit services through
the trade name PayAmerica(R). The Company is headquartered in Palm Harbor,
Florida, and employs approximately 1,400 people in marketing/operations centers
in Florida, New Jersey, Virginia, Maryland, California, Wisconsin, Pennsylvania,
Arizona, South Carolina and Colorado.

TREND TOWARD OUTSOURCING

Many U.S. companies, in order to focus on core competencies and
revenue-producing activities, have sought to outsource to specialized vendors
certain functions or services that were historically performed in-house. In
addition, the trend in recent legislation and healthcare reform proposals has
been to provide employees with the ability to continue their healthcare coverage
after a change in employment status and to take certain benefits with them to
new employers, a concept known as "portability". Based on the following factors,
the Company believes that benefits administration and compliance is often too
complicated, costly and administratively burdensome to be performed in-house:

- Extensive staff training and associated costs required to monitor complex
and frequently changing government regulations.

- Substantial exposure to liability for noncompliance with federal laws
concerning benefits, such as COBRA and HIPAA.

1
4

- Employer awareness of benefit plans, including the concern for adverse
effects on employee relations and potential litigation due to inadequate
benefits administration.

- Cost of investment in specialized data processing systems requiring
periodic maintenance, updates and reinvestment.

- Disproportionate expenditures of management time and attention to a
function that is not directly related to the generation of revenues.

The Company believes that its market position, proprietary software and
compliance systems and experience in benefits administration should enable the
Company to capitalize on trends favoring outsourcing. The Company believes it is
strategically positioned to capitalize on the benefits administration
outsourcing trend because of its (i) proven ability to deliver economies of
location by performing administrative functions in relatively low-cost areas,
(ii) financial leverage of economies of scale by spreading fixed costs over a
large number of customers, (iii) economies of technology in utilizing its
sophisticated information systems and proprietary databases, (iv) synergistic
product offerings, and (v) strong financial position.

STRATEGY

The Company's objective is to strengthen its market position by becoming
the leading provider of benefits administration services to employers seeking to
outsource these functions. To achieve this objective, the Company has developed
a strategy that includes the following key components:

Cross-Selling. Approximately 90% of the Company's customers utilize only
one of its product offerings. The Company plans to actively market and
cross-sell its additional product lines to its existing customers to expand the
number of products used by individual customers. The Company's various product
offerings are designed to be complementary, in terms of (a) being sold by a
cross-trained ABR sales person (rather than a team or multiple sales persons),
and (b) being sold to essentially the same point of contact within an employer's
organization.

Seek Marketing Agreements With Other Service Providers. The Company
intends to investigate distribution or marketing arrangements with other
entities who provide similar or complementary services. These agreements could
be in the form of marketing alliances, technological alliances, institutional
resale agreements, or joint ventures.

Integrate The Company's Services Through Its MAX Version II Software. The
Company has undertaken writing Version II of its Enrollment and Eligibility
software platform, which management believes will be the focal point of the
Company's services for the foreseeable future. When completed, Version II is
expected to supersede the Company's existing Version I software and add greater
synergy and scalability to the Company's existing product lines. No assurances
can be given, however, that Version II will perform as anticipated or will be
adequate to meet the Company's and its customers' future needs.

Version II is intended to support all health and welfare benefit types,
qualified plans and payroll services through web-based technology and
object-oriented database configuration. Due to Version II's extensive use of
middleware, management believes new customer programming/modification will be
simplified and diminished in comparison to Version I. The Company further
believes that the efficiency of Version II's data model will be manifested in
lower operating, support and maintenance costs, although no assurances can be
given in this regard.

From a marketing perspective, Version II is expected to allow users to
select from ABR's multiple service offerings in an integrated "point and click"
manner. The Company believes that this merged sales and operating presentation
will (a) enhance its ability to cross-sell additional services to its existing
customers, (b) continue to leverage technology among its large client base and
(c) reduce its reliance on programmer operational support of certain of the
Company's information systems.

Certain elements of Version II were placed on-line in October 1998 and
further programming is expected to continue through calendar 1999. Nevertheless,
there can be no assurances that the development and

2
5

implementation of Version II will be completed on a timely and cost-effective
basis, and the failure to do so could have a material adverse effect on the
Company's business, financial condition and results of operations.

Generate Recurring Revenue. The Company's services are structured to
generate revenue based on events which occur in the normal course of a
customer's business and in a relatively frequent manner. Furthermore, the
Company has developed extensive systems and databases that are not easily
duplicated, resulting in favorable customer retention. Due to the frequency of
events that generate revenue, the Company's high rate of customer retention, and
its monthly billing arrangements with capitation customers, the Company
generates a high level of recurring revenue.

Increase Portability Compliance Market Share. The portability compliance
market consists of approximately 650,000 employers that are required to comply
with COBRA and 5.5 million employers required to comply with HIPAA. The Company
believes that, based on the number of current and former employees covered by
its customers' healthcare benefit plans, it is the largest independent COBRA
compliance service provider in the United States. The Company provides
portability compliance services for more than 25,000 employers, which represents
approximately 4% of the potential COBRA compliance market. The Company intends
to increase its market share by expanding its telemarketing efforts and by
marketing its services directly through its sales force and indirectly through
the Company's agreements with insurance companies and other distribution
channels obtained through acquisition.

Create A National Independent Qualified Plan Administration
Presence. Historically, qualified plans administrators have affiliated
themselves with proprietary investments or services. The Company believes that
recent adverse publicity in the qualified plans industry will motivate plan
administrators to seek service providers who are independent of mutual fund
products and services. Through its acquisitions in the qualified plans segment
in the past nine months, the Company has obtained enhanced technical resources,
new products and additional sales distribution channels. The Company plans to
consolidate its various products and services into a singular product which will
be marketed nationally through its existing distribution network.

Nationalize the PayAmerica(R) Payroll Presence. Through its acquisition of
Business Computer Services, Inc. d.b.a. PayAmerica ("PayAmerica"), the Company
has significantly increased its payroll capacity and product offerings.
Historically, PayAmerica has targeted regional companies located in the
MidAtlantic states, its geographic location. The Company intends to expand
nationally the PayAmerica(R) product by, among other things, placing PayAmerica
sales personnel in existing ABR locations, opening new locations, including the
PayAmerica product in its national marketing campaigns, and directly targeting
ABR customers for PayAmerica(R) selling efforts.

Acquire Complementary Businesses. The Company intends to continue to
acquire complementary businesses in order to increase its market share, expand
its services and expand its geographic presence. Management believes such
acquisitions will permit the Company to cross-sell additional services to its
existing customer base and gain new customers and geographic bases to increase
market share. The Company believes that additional acquisition opportunities
exist in the benefits administration sector, although no assurances can be given
that any material acquisitions will be consummated in the future.

ACQUISITIONS

Since December 1995, the Company has made ten acquisitions of benefits
administration companies, one of which was completed by a pooling of interests.
These acquisitions are discussed below:

New Jersey Acquisition. 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. ("Bullock"), for $12.5 million in cash, with
an additional $2.0 million payable upon the attainment of certain revenue
requirements during 1996 and 1997. During fiscal 1997 and 1998, $863,053 and
$1,136,947, respectively, of this additional amount was paid for the attainment
of these revenue requirements. Bullock, now part of ABR Benefits Services, Inc.,
is located in Princeton, New Jersey, and when acquired provided COBRA
administration, retiree insurance administration, insurance continuation billing
and collection, pension benefits administration services, QDRO administration
and educational benefit administration services as well as

3
6

administration for other employee benefits programs such as employee discount
plans, adoption programs, program rebates and emergency loans.

TCS Acquisition. Effective February 1, 1996, in an acquisition accounted
for as a purchase, the Company acquired all of the outstanding capital stock of
Total Cobra Services ("TCS") for 265,424 shares of the Company's Common Stock.
TCS is located in Irvine, California and provides COBRA administration and
retiree billing services. For its fiscal year ended December 31, 1995, TCS had
revenues of less than $2.0 million. The California Acquisition has increased the
Company's market share in the COBRA compliance market and enhanced its ability
to market its services to clients on the west coast of the United States. In
1998, certain of TCS' back office functions were moved to the Company's existing
Florida operations.

Virginia Acquisition. On June 28, 1996, the Company acquired, in an
acquisition accounted for as a pooling of interests, all of the outstanding
stock of the L.P. Baier Company ("LPB") in exchange for 286,020 shares of the
Company's Common Stock. LPB, now part of ABR Benefits Services, Inc., is located
in Fairfax, Virginia and provides FSA administration and COBRA administration.
LPB had revenues of approximately $2.4 million in calendar year 1995. In 1998,
the COBRA administration operations of LPB were moved to the Company's Florida
operations.

Wisconsin Acquisition. Effective February 1, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of Charing Company, Inc. ("Charing") for $7.5 million in cash and an
additional amount to be paid contingent upon future earnings. Charing is located
in Wisconsin and provides qualified plan administration, Section 125
administration, consulting services and comprehensive employee benefits
statement reporting. For the year ended July 31, 1998, Charing generated
revenues of approximately $3.0 million.

Arizona Acquisition. Effective February 1, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of Matthews, Malone & Associates, Ltd. ("Matthews/ Malone") for $2.9
million in cash and an additional amount to be paid contingent upon future
earnings. Matthews/Malone is located in Arizona and provides defined benefit and
defined contribution plan administration services, as well as Section 125
administration and non-qualified plan administration services. For the year
ended July 31, 1998, Matthews/Malone generated revenues of approximately $3.0
million.

PayAmerica(R) Acquisition. Effective April 30, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of Business Computer Services, Inc. d.b.a. PayAmerica(R) ("PayAmerica") in
exchange for 1,198,008 shares of the Company's Common Stock. PayAmerica is
located in McLean, Virginia and has offices in Maryland and New Jersey.
PayAmerica provides payroll and tax deposit services, along with human resource
administration services. For the year ended December 31, 1997, PayAmerica had
revenues of approximately $8.6 million.

MidAtlantic Acquisition. Effective August 1, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the capital stock of
MidAtlantic 401(k) Services, Inc. ("MidAtlantic") for $10.9 million in cash and
an additional amount to be paid contingent upon future earnings. Located in
Midlothian, Virginia, MidAtlantic was a pioneer in the daily valuation 401(k)
field and is expected to generate approximately $4.0 million in Qualified Plans
revenue in fiscal 1999.

Chowning Acquisition. Effective October 22, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of Chowning, Ltd., including its sole operating subsidiary, The Barrington
Group, Ltd., for $15.9 million in cash. Chowning is headquartered in Milwaukee,
Wisconsin, and has additional offices in Maryland, Pennsylvania and California.
The Barrington Group is one of the nation's largest independent administrators
of IRS Section 125 benefit plans (full cafeteria plans, flexible spending
accounts and pre-tax premium plans). For calendar 1998, The Barrington Group
expects revenues of approximately $10.0 million.

Western Pension Acquisition. Effective October 1, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of Western Pension Service Corporation ("Western Pension") for $7.0
million in cash and an additional amount to be paid contingent upon future
earnings. Western Pension is headquartered in San Rafael, California, and
presently administers over 370 qualified
4
7

retirement plans. Western Pension is expected to generate revenues of
approximately $2.5 million for calendar year 1998.

Colorado Acquisition. Effective November 1, 1998, the Company, in an
acquisition accounted for as a purchase, acquired all of the outstanding capital
stock of BMC Consultants, Inc. ("BMC") for $3.0 million in cash and an
additional amount to be paid contingent upon future earnings. BMC is
headquartered in Englewood, Colorado, and presently provides services to over
1,700 defined contribution and defined benefit plans in the Rocky Mountain
region. BMC is expected to generate revenues of approximately $3.3 million for
calendar year 1998.

BENEFITS ADMINISTRATION SERVICES

The Company provides the following comprehensive benefits administration,
payroll and human resource administration services to its customers, as
described below:

Health and Welfare Services

Portability Compliance Services. The Company provides comprehensive COBRA
compliance services to a diverse customer base throughout the United States.
Once the Company's customer or the qualified beneficiary notifies the Company of
a qualifying event, the Company assumes responsibility for COBRA compliance and
administration.

Under COBRA, premiums paid by continuants are generally limited to 102% of
the applicable insurance premium. Eligible participants have in most cases at
least 105 days after the occurrence of a qualifying event to elect to continue,
and pay for, insurance coverage retroactively. As a result, COBRA claims and
administration costs generally exceed premiums due primarily to adverse
selection (i.e., those who are eligible for continued insurance coverage under
COBRA, and have pending claims, are more likely to select coverage retroactively
when the cost of claims exceeds the cost of healthcare coverage, and those who
have no need for healthcare coverage typically do not elect coverage and
consequently do not pay premiums). The Company believes that uniform
determination of coverage eligibility and administration of COBRA claims in
accordance with applicable requirements can in most cases reduce COBRA claim
costs and, as a result, reduce healthcare costs for employers.

The COBRA compliance process begins when the Company or the employer sends
each employee and his or her dependents a notification of COBRA rights letter
when they become eligible to participate in the employer's group healthcare
plan. Thereafter, it is the employer's or the participant's responsibility to
send the Company a qualifying event notice following any qualifying event. After
processing the qualifying event, the Company communicates with any qualified
beneficiary who elects COBRA coverage throughout the period of coverage, which
typically extends for 18 to 36 months after the qualifying event. During this
period, the Company: (i) processes and archives all election forms and
correspondence; (ii) determines whether coverage elections have been made on a
timely basis; (iii) sends premium notices to, and collects payments from,
continuants; (iv) generates daily and monthly reports for customers; and (v)
maintains automated and customer representative telephone services for
continuant and customer inquiries.

As a provider of COBRA compliance and administration services, the Company
is subject to excise taxes for noncompliance with certain provisions of COBRA.
Under current federal laws, the maximum amount of such taxes that may be imposed
on the Company in any year for unintentional violations of COBRA is $2.0
million. In addition to the excise tax liability that may be imposed on the
Company, substantial excise taxes may be imposed under COBRA on the Company's
customers. Under the Company's service agreements with its customers, the
Company assumes financial responsibility for the payment of such taxes assessed
against its customers arising out of the Company's failure to comply with COBRA,
unless such taxes are attributable to the customer's failure to comply with
COBRA or with the terms of its agreement with the Company. In addition to
liability for excise taxes for noncompliance with COBRA, the Company accepts
financial responsibility for certain liabilities incurred by its customers that
are attributable to the Company's failure to comply with COBRA or to fulfill its
obligations to its customers under its agreements. These liabilities could, in
certain cases, be substantial. Although there can be no assurance that the
Company will not incur any

5
8

material liability for noncompliance with COBRA or for its failure to comply
with its agreement with any customer, as of July 31, 1998, the Company has not
incurred any such material liability. The imposition of such liability on the
Company in excess of any available insurance coverage could have a material
adverse effect on the Company. See "Regulatory Environment."

The Company also provides comprehensive HIPAA compliance services to a
diverse customer base throughout the United States. Once the Company's customer
or the qualified beneficiary notifies the Company of a qualifying event, the
Company assumes responsibility for HIPAA compliance and administration.

HIPAA (also known as the Kennedy-Kassebaum bill when it was passed in 1996)
requires employers with two or more employees and a group health plan to issue
"Certificates of Creditable Coverage" to all persons who were covered by their
group health plan but lost coverage for any reason since October 1, 1996. The
requirement also applies to anyone losing coverage after June 1, 1997. The
certificate will serve as proof of coverage which the individual can use to
obtain waivers of pre-existing condition limitations when seeking coverage under
another employer's plan.

HIPAA requires employers to capture information reflecting types of
coverage and coverage periods for individuals (employees and dependents) on
their plan. Data must be captured as far back as July 1, 1996. They then must
issue certificates to these individuals documenting the coverage periods for
future insurers. Employees, covered dependents, employers and carriers may
request certificates at any time up to 24 months after the loss-of-coverage
event. The HIPAA compliance process begins when the Company sends each employee
and his or her dependents a HIPAA certificate following any qualifying event.

As a provider of HIPAA compliance and administration services, the Company
is subject to ERISA penalties for noncompliance with certain provisions of
HIPAA. Under the Company's service agreements with its customers, the Company
assumes financial responsibility for the payment of such penalties assessed
against its customers arising out of the Company's failure to comply with HIPAA,
unless such penalties are attributable to the customer's failure to comply with
HIPAA or with the terms of its agreement with the Company. Under ERISA,
employers that are subject to HIPAA are liable for penalties at the rate of $110
per "qualified beneficiary" for each day during which the group healthcare is in
noncompliance. These liabilities could, in certain cases, be substantial.
Although there can be no assurance that the Company will not incur any material
liability for noncompliance with HIPAA or for its failure to comply with its
agreement with any customer, as of July 31, 1998, the Company has not incurred
any such material liability. The imposition of such liability on the Company in
excess of any available insurance coverage could have a material adverse effect
on the Company. See "Regulatory Environment."

The Company also provides COBRA-like services to employers in certain
states as required by state laws therein.

Enrollment and Eligibility Services. The Company provides various
enrollment and eligibility services for employers such as disseminating
enrollment materials, processing responses, providing telephone assistance to
enrollees and determining eligibility for coverage and reporting. These services
are provided in conjunction with central employee data base administration of
the employers.

Flexible Spending Account (FSA) Administration Services. The Company
designs and supports all types of IRS Section 125 flexible benefit formats (full
cafeteria plans, flexible spending accounts and pre-tax premium plans),
including plan design, legal documents, employee education, enrollment support,
compliance testing, claims administration and the preparation of required IRS
forms.

Educational Benefits Administration Services. The Company administers
various educational benefit programs such as educational loans, reimbursements
and scholarships. Also, the Company verifies eligibility, processes payments and
loan forms, and monitors for compliance against the customer's benefit plan.

New Hire Processing Services. The Company processes benefits
administration forms and information relating to the provision of benefits to
newly hired employees.

6
9

Retiree/Inactive Employee Benefits Administration. The Company's
experience with benefits administration and compliance services, and the
extensive databases maintained to provide these services, have enabled the
Company to expand its operations to provide for the administration of various
employer-sponsored benefits that are not mandated by law. The Company provides
notification, billing, collection, record-keeping and reporting services to
larger employers where a periodic benefit plan contribution is required to be
made by retirees or their dependents. The Company also administers benefits
provided for inactive employees, such as healthcare benefits.

Other. The Company also administers employee discount plans, adoption
programs, employee emergency loan programs, and product rebate programs;
provides employee help desk and Qualified Medical Child Support Order ("QMCSO")
administration, eligibility verification; and administers tuition refund and
Family Medical Leave Act ("FMLA") insurance programs.

Qualified Plan Services

Pension/Profit Sharing Services. The Company provides employers with
administration services for IRS qualified plans, including defined contribution,
defined benefit, and 401(k) plans.

Vestee Services. The Company provides active and retired employees who are
vested in a company's pension plan with benefit information and process
retirement election forms and other materials to begin the retirement payment
process. The Company maintains Retiree and Vestee Answer Centers that provide
access to benefit analysts who are proficient in client-specific plans and
procedures.

Qualified Domestic Relations Order ("QDRO") Services. The Company develops
packages to assist QDRO participants in the process of properly and accurately
dividing pension plan assets. The Company verifies "qualification" of a domestic
relations order, and responds to telephone and written inquires regarding QDRO
benefits.

Payroll and Human Resource Administration Services

Payroll Services. The Company offers payroll services through its
PayAmerica(R) proprietary operating system. The Company offers the following
payroll services: preparation and payment of pay checks and direct deposits,
along with supporting journals, summaries and management reports.

Tax Filing Services. The Company processes federal, state and local
payroll taxes on behalf of clients and remits such taxes to the appropriate
taxing authorities when due.

Human Resources (HR) Services. The Company offers various HR services
including comprehensive human resources recordkeeping services, such as employee
job history, applicant tracking, training position management and benefits
tracking capabilities.

Summary of Functions

In connection with the performance of various benefits administration
services, the Company generally provides one or more of the following functions:

Notification. Provide timely notifications of eligibility for coverage and
healthcare benefit plan requirements to participants, employers and insurance
companies.

Billing and Premium Collections. Send detailed monthly premium notice,
return envelope for payment and request for ongoing certification of eligibility
to participants. Remit collected premiums to employers on a monthly basis in
accordance with employers' instructions.

Automated Response System. Maintain 24 hour-a-day, 365 day-a-year
toll-free automated voice and facsimile response systems for certain status
information available to customers and participants.

Customer Service Hotline. Respond during normal business hours to
inquiries from participants or employers requiring individual attention from
trained customer service representatives.

7
10

Compliance Monitoring and Determination of Eligibility. Monitor government
compliance guidelines regarding availability of healthcare coverage. Determine
whether applications and premium payments comply with applicable regulations and
established eligibility criteria.

Reporting and Auditing. Generate daily reports for employers to monitor
elections and terminations of coverage by participants. Generate monthly reports
for employers providing current status of all participants or employees.

Archive and Record-Keeping Systems. Archive in an off-site facility all
electronic storage media, correspondence, postmarked envelopes and copies of
premium notices and checks evidencing payment.

SEASONALITY

Certain of the Company's business is characterized by significant
seasonality. As a result, the Company's revenue will be subject to seasonal
fluctuations, with the largest increases in annual revenue occurring in the
Company's second and third fiscal quarters. During these quarters, new customers
beginning flexible spending accounts, qualified plans and payroll services are
likely to start services with the Company to coincide with the start of the tax
(calendar) year. Also, qualified plans and payroll services customers generally
require additional compliance related work after the end of the tax year. Open
enrollment services similarly occur annually, prior to the start of the new
benefits (calendar) year.

SALES, MARKETING AND CUSTOMER SERVICE

Approximately 39.7%, 33.5% and 36.1% of the Company's revenues in fiscal
1996, 1997, and 1998, respectively, were derived solely from agreements with the
Company's ten largest customers. Approximately 15.0%, 14.5% and 10.5% of the
Company's revenues in fiscal 1996, 1997 and 1998, respectively, were derived
from General Electric Company. Assuming the acquisition of Bullock had occurred
on August 1, 1995, approximately 44.9% of the Company's revenues in fiscal 1996
would have been attributable to the Company's ten largest customers, with
approximately 20.8% of such revenues being derived from General Electric
Company. As part of the Bullock acquisition, the Company entered into a
four-year contract with this customer, which contract was renewed in fiscal 1998
for an additional three-year period. The Company's loss of any of these large
customers, including General Electric Company, could have a material adverse
effect on the Company.

The Company markets its services across the United States through a sales,
marketing and support staff consisting of approximately 80 employees as of July
31, 1998. The Company identifies prospective customers through a combination of
direct mail, telemarketing, advertising and referrals.

Generally, the Company markets its services in one of two ways, depending
upon whether a potential customer is (i) a large employer or an institutional
resale customer, or (ii) a small employer. When a large employer or
institutional resale customer has been identified as a potential customer, the
Company's sales strategy is to focus its sales and marketing efforts on
developing relationships with key decision makers, such as the potential
customer's Chief Executive Officer, Chief Financial Officer or Director of Human
Resources or Benefits. The Company's sales executives make presentations that
are designed to acquaint the potential customer with the Company's services and
the benefits associated with outsourcing functions to the Company. A formal
presentation is usually followed by a visit to the Company's facility where the
prospective customer evaluates the Company's internal procedures, data
processing capabilities and customer support team.

With respect to potential customers who are small employers, the Company
markets its services directly to the employer via telemarketing. The Company's
telemarketing staff sells the Company's services by educating the potential
customer about the benefits of the Company's outsourcing services without the
need for face-to-face presentations. The Company also markets its services to
small employers through independent insurance agents, insurance companies, as
well as banks or other product providers. The agents typically receive a
one-time commission and renewal fees for 3-5 years for each client who utilizes
the Company's services.

8
11

The Company emphasizes account development to strengthen its relationship
with existing customers. The Company disseminates information about its services
through newsletters and various periodic reports. These activities are designed
to increase existing customer awareness and understanding of the scope of
benefits administration services offered by the Company.

COMPUTER OPERATIONS, SOFTWARE DEVELOPMENT AND PROPRIETARY PRODUCT PROTECTION

The Company's central data processing and information system consists of
high-performance micro and mid-range processors linked in multiple local-area
networks through high-speed routers and intelligent hubs. Installed in the data
center located at the Company's new service center in Palm Harbor, Florida, the
network utilizes client-server and web technology in a DOS and Windows
environment, on a UNIX platform and Oracle database environment.

The Company meets the changing information needs of its customers by
developing, maintaining and enhancing its software. The Company provides the
majority of its services to customers using proprietary software that is owned
by the Company and not licensed to others. The Company utilizes certain
third-party software to service a portion of its qualified plans operations. The
Company's major programming initiatives include MAX Version II (see "Strategy")
and Freedom, an enhanced integrated Payroll/HR platform which will be linked
with MAX Version II. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" (Item
7).

The Company's main computer system works with on-line, real-time
information, thus allowing its service representatives to give accurate,
up-to-date information to continuants and customers. In addition, the Company
believes that its ability to upload and download information to customers and
insurance carriers with minimal development time provides the Company with a
competitive advantage. The Company's software and systems have supported the
customer base without interruption for over eleven years. As of October 23,
1998, the Company had approximately 200 full-time equivalent employees in
programming, software development, modifications and maintenance. In addition,
the Company periodically utilizes contractors for various information systems
services.

The Company's primary data center is located in Florida and protected by a
fire extinguishing system. The data center is supported by two centralized UPS
(uninterruptible power supply) systems that provide short-term battery backup in
the event of a power outage, reduced voltage or power surge, and dual phone and
electric feeds from adjacent, but separate, power grids. Further back-up power
is supplied for the primary data center by a diesel powered generator, which
could continuously power the data center for 5-7 days. In addition, the facility
which houses the data center is built to withstand 130+ mile per hour wind and
is approximately 35 feet above sea level. Multiple layers of password and access
authorization are imposed to prevent unauthorized access, use or distribution of
information. The Company maintains log-in records of all users, restricts
certain key record fields and maintains audit trail records of all changes.
Software and related data files are backed up three times a day and stored
off-site at multiple locations.

The Company believes that the quality of its systems and the ability to
adapt to the changing business requirements of its customers have proven to be
key factors in maintaining its current customers and obtaining new customers.
The Company ensures the accuracy of data, customers' deposits and continuant
records by independent double-entry of premium payments and verification and
reconciliation of continuant records.

The Company also has purchased certain software and license agreements from
outside vendors. In conjunction with these agreements, the Company has purchased
maintenance and support agreements or provided trained in-house expertise to
support these applications. The Company believes that all such technology is
readily replaceable through other vendors should any of its current suppliers
experience any degree of business interruption.

Interruption or loss of the Company's information processing capabilities
through loss of stored data, breakdown or malfunctioning of computer equipment
and software systems, telecommunications failure or damage to the Company's
headquarters and systems caused by fire, hurricane, lightning, electrical power
outage or other disruption could have a material adverse effect on the Company.
Although the Company

9
12

maintains business interruption insurance providing for three months of
operations with an aggregate limit of $2.0 million per occurrence, there can be
no assurance that such insurance will: (i)continue to be available; (ii)
continue to be available at reasonable prices; (iii) cover all such losses; or
(iv) be sufficient to compensate the Company for losses due to the Company's
inability to provide services to its customers. See "Insurance."

The Company relies upon a combination of contract provisions and trade
secret laws to protect its proprietary technology. The Company attempts to
protect its trade secrets and other proprietary information through agreements
with employees and consultants. The Company does not hold any patents and does
not have any patent applications pending. There can be no assurance that the
steps taken by the Company to protect its proprietary technology will be
adequate to deter misappropriation of its proprietary rights or third party
development of similar proprietary software.

REGULATORY ENVIRONMENT

The benefit plans administered by the Company generally are subject to
various laws and regulations, including the Consolidated Omnibus Budget
Reconciliation Act ("COBRA"), the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), proposed regulations of the Internal Revenue Service
and the Public Health Service Act. These laws and regulations are administered
by numerous agencies, such as the Internal Revenue Service, the Department of
Labor and the Department of Health and Human Services. The Company's internal
compliance department regularly reviews the Company's operations to ensure
compliance with applicable federal laws and regulations.

Enacted in 1986, COBRA has been amended significantly by Congress and is
the subject of proposed regulations of the Internal Revenue Service. COBRA,
which amended the Internal Revenue Code, ERISA, and the Public Health Service
Act, is subject to interpretation by the federal courts and is administered
jointly by several federal agencies, including the Internal Revenue Service, the
Department of Labor and the Department of Health and Human Services. In
addition, COBRA is affected by certain other federal legislation and entitlement
programs, such as Medicare, FMLA and, most recently, the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"). COBRA applies to virtually
all employers with 20 or more employees that maintain group health insurance
plans, including fully-insured, self-insured or partially-insured plans, and
union or non-union plans. Church groups and the District of Columbia government
are exempt from compliance with COBRA.

To comply with COBRA, an employer must provide written notice to all
employees, including newly hired employees and their dependents, of their rights
under COBRA when they become covered under a group health plan. Employees and
their dependents become eligible for COBRA coverage upon the occurrence of a
qualifying event. The occurrence of a qualifying event triggers a series of
notifications and related response and payment deadlines, including grace
periods, that result in an employee's or qualified beneficiary's ability to
elect continued group healthcare plan coverage retroactively, and often after
the occurrence of an event leading to claims under the related coverage.

The penalties for noncompliance with COBRA are substantial. As a provider
of COBRA compliance and administration services, the Company's exposure under
the Internal Revenue Code for excise taxes imposed for unintentional violations
of certain provisions of COBRA is limited to an aggregate of $2.0 million per
year. Under the Internal Revenue Code, employers that are subject to COBRA are
liable for excise taxes at the rate of $100 per "qualified beneficiary" ($200 if
the qualified beneficiary has covered dependents) for each day during which the
group healthcare plan is in noncompliance, subject to an annual maximum for
unintentional violations. When such noncompliance is not corrected before an
audit by the Internal Revenue Service, the employer is subject to certain
minimum excise tax obligations, depending on whether or not the violations are
"de minimis." ERISA also imposes personal liability on the plan administrator
for the benefit of plan participants for COBRA violations in the form of a
penalty of up to $110 for each day the violation continues. In addition to
liability for COBRA violations under the Internal Revenue Code and ERISA,
improper denial of coverage under COBRA or failure to comply with COBRA's
notification requirements may result in an employer's liability for damages and
equitable remedies, including, but not limited to, healthcare coverage for

10
13

a former employee or dependent retroactive to the date of the qualifying event
which triggered the notification requirement. Depending on the terms of the
employer's group healthcare plan, such an employer may be required to provide
this type of retroactive coverage without reimbursement from its insurance
carrier.

The Company is not subject to federal or state regulations specifically
applicable to financial and insurance institutions such as banks, thrifts,
credit unions, insurance companies and third-party administrators. As a provider
of COBRA compliance services to its customers, the Company is required to comply
with various federal laws and regulations as noted above. The Company follows
changes in federal laws and regulations related to COBRA and judicial
interpretations of COBRA and promptly implements required changes to its data
processing operations.

HIPAA (also known as the Kennedy-Kassebaum bill when it was passed in 1996)
requires employers with two or more employees and a group health plan to issue
"Certificates of Creditable Coverage" to all persons who were covered by their
group health plan but lost coverage for any reason since October 1, 1996. The
certificate will serve as proof of coverage which the individual can use to
obtain waivers of pre-existing condition limitations when seeking coverage under
another employer's group health plan.

HIPAA requires employers to capture information reflecting type of coverage
and coverage periods for individuals (employees and dependents) on their plan.
Data must be captured as far back as July 1, 1996. The employers then must issue
certificates to these individuals documenting the coverage periods for future
insurers. Employees, covered dependents, employers and carriers may request
certificates at any time up to 24 months after the loss-of-coverage event. The
HIPAA compliance process begins when the Company sends each employee and his or
her dependents a HIPAA certificate following any loss of coverage from the group
health plan.

COMPETITION

The market for the Company's services is highly competitive, subject to
rapid change and significantly affected by new service introductions and other
market activities of industry participants. With respect to benefits
administration services, the Company's existing competitors include insurance
companies, third-party administrators and other outsourcing service companies.
Certain of the Company's existing competitors, as well as a number of potential
competitors, have longer operating histories, greater financial, technical,
marketing and other resources, greater name recognition and a larger number of
clients than the Company. In addition to the Company's competitors, services
offered by the Company are often provided in-house. Consequently, outsourcing of
benefits administration and payroll services may require the Company's potential
customers to reduce, reassign or eliminate in-house benefits administration or
human resources personnel, who often have an interest in maintaining these
responsibilities in-house. The Company has experienced, and expects to continue
to experience, competition from new entrants into its markets. Increased
competition, the failure of the Company to compete successfully, pricing
pressures, loss of market share and loss of clients could have a material
adverse effect on the Company's business, financial condition and results of
operations.

The Company believes that the most significant competitive factors in the
sale of its services include quality, reliability of services and integrity of
data provided, flexibility in tailoring services to client needs,

11
14

assumption of certain responsibilities for compliance with complex laws and
regulations, experience, reputation, comprehensive services, integrated services
and price.

EMPLOYEES

As of October 28, 1998, the Company had approximately 1,400 full-time
equivalent employees. The service nature of the Company's business makes its
employees an important corporate asset. While the market for qualified personnel
is competitive, the Company has been able to hire and retain its personnel and
believes its relations with its employees are good. The Company's employees are
not represented by any union.

SERVICEMARKS

CobraServ(R) and PayAmerica(R) are registered servicemarks of the Company.
Other than CobraServ(R) and PayAmerica(R), the Company does not believe that any
other servicemark is material to its business.

INSURANCE

As a provider of portability compliance and administration services, the
Company is subject to excise taxes and penalties for noncompliance with certain
provisions of COBRA and HIPAA. In addition, the Company accepts financial
responsibility for certain liabilities incurred by its customers that are
attributable to the Company's failure to fulfill its obligations to its
customers under its agreements. The Company maintains a professional liability
policy, with a deductible of $25,000 per occurrence, and an annual per aggregate
limit on coverage of $5.0 million.

In addition to professional liability coverage, the Company maintains the
following policies: (i) a general commercial liability policy which has an
aggregate coverage of $2.0 million, with a $1.0 million limit per occurrence;
(ii) an automobile liability policy with a combined single coverage limit of
$1.0 million; (iii) an excess liability policy, which covers liabilities that
exceed the limits of the above policies, with an aggregate and a per occurrence
limit of $4.0 million; and (iv) a business interruption policy, which covers
three months of operations, with an aggregate limit of $2.0 million.

ITEM 2. PROPERTIES

The Company leases the following facilities:

SQUARE EXPIRATION
LOCATION FOOTAGE OF LEASE
- -------- ------- --------------

Clearwater, Florida......................................... 11,000 June 1999
Princeton, New Jersey....................................... 22,300 December 1999
Irvine, California.......................................... 2,150 December 2000
Fairfax, Virginia........................................... 13,000 May 2005
Phoenix, Arizona............................................ 10,000 February 2001
LaCrosse, Wisconsin......................................... 6,200 March 2000
Madison, Wisconsin.......................................... 900 May 2000
Milwaukee, Wisconsin........................................ 500 May 1999
McLean, Virginia............................................ 19,000 June 2001
Baltimore, Maryland......................................... 2,600 June 1999
Cherry Hill, New Jersey..................................... 3,000 April 2003
Milwaukee, Wisconsin........................................ 19,460 June 2005
San Rafael, California...................................... 6,450 November 2002
Englewood, Colorado......................................... 10,700 July 2002
Midlothian, Virginia........................................ 8,400 March 2000
Columbia, South Carolina.................................... 10,700 September 2002
Silver Spring, Maryland..................................... 1,800 May 2002

12
15

The Company maintains its 65,000 square foot headquarters in Palm Harbor,
Florida. The Company purchased this facility in June 1996 for $3.5 million
(including land). In May 1997, the Company also moved into its 118,000 square
foot facility in Palm Harbor, Florida. The total cost for this facility was
approximately $10.7 million (including the land). In addition, the Company owns
real estate in Tarpon Springs, Florida, acquired at a price of $2.5 million. In
October 1997, the Company acquired a 383,000 square foot campus in St.
Petersburg, Florida for $13.5 million. The Company expects to spend
approximately $23.0 million to expand and renovate the facility over the next
three years. Upon completion in fiscal 2000, this facility is expected to become
the Company headquarters. The Company believes that its facilities are adequate
for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

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 10, 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. On November 22, 1996, Mr.
Addonisio filed a lawsuit against the Company in Florida state court, 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
will have a material adverse effect on the Company's financial position but no
assurances can be given in this regard.

The Company is engaged in various other litigation arising from the
ordinary course of its business. In the opinion of management, the ultimate
outcome of such litigation is not expected to be material to the Company's
financial position, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

As of July 31, 1998 there was one executive officer who was not also a
director of the Company. James P. O'Drobinak, age 37, has been Senior Vice
President and Chief Financial Officer since January 30, 1997. Prior to joining
the Company, Mr. O'Drobinak served as Chief Financial Officer -- North America
for Danka Industries, Inc. from 1995 to 1997. From 1983 to 1995, Mr. O'Drobinak
held various positions with Deloitte & Touche, LLP, most recently as a Senior
Manager of the Tampa, Florida Office. Executive officers are elected annually by
the Board of Directors.

13
16

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following table sets forth the high and low sale price of the Company's
Common Stock since its initial public offering on May 26, 1994 as reported by
Nasdaq and restated for the three-for-two stock splits completed on July 13,
1995 and February 19, 1996, and the two-for-one stock split completed on
February 19, 1997:

1998 1997 1996
-------------------- ------------------- ----------------------
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---

First Quarter................... $29 5/8 $22 $37 3/4 $25 1/2 $9 59/64 $6 1/2
Second Quarter.................. 26 5/16 21 11/32 33 1/2 19 11/16 16 27/64 9 43/64
Third Quarter................... 31 5/8 24 1/4 24 3/8 16 11/16 31 1/2 16 3/32
Fourth Quarter.................. 27 3/4 17 1/2 32 3/4 20 5/8 32 1/2 19
Year............................ 31 5/8 17 1/2 37 3/4 16 11/16 32 1/2 6 1/2

1995 1994
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---

First Quarter................... $3 19/32 $2 29/64 $-- $--
Second Quarter.................. 4 49/64 3 1/16 -- --
Third Quarter................... 5 5/8 4 43/64 -- --
Fourth Quarter.................. 7 27/32 5 13/64 2 59/64 2 9/32
Year............................ 7 27/32 2 29/64 2 59/64 2 9/32

The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that all of its earnings will be
retained for development and expansion of the Company's business and does not
anticipate paying any cash dividends in the foreseeable future. Any payment of
future dividends and the amounts thereof will be dependent upon the Company's
earnings, financial requirements and other factors deemed relevant by the Board
of Directors.

The total number of holders of record of the Company's Common Stock as of
October 23, 1998 was approximately 6,429.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data are derived from the consolidated
financial statements of the Company for each of the five years ended July 31,
1998, 1997, 1996, 1995 and 1994. These consolidated financial statements have
been audited and reported on by Grant Thornton LLP, independent certified public
accountants.

YEARS ENDED JULY 31,
--------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)

STATEMENT OF INCOME DATA:
Revenue............................................... $ 74,592 $ 50,079 $ 31,162 $18,835 $13,465
Cost of services...................................... 42,387 28,179 17,864 10,410 7,689
Selling, general and administrative expenses.......... 13,849 9,765 6,575 4,448 3,250
Acquisition costs..................................... -- -- 361 -- --
Acquired research and development..................... 11,010 -- -- -- --
-------- -------- -------- ------- -------
Operating income...................................... 7,346 12,135 6,362 3,977 2,526
Interest income....................................... 5,364 7,081 2,872 572 65
Lease revenue, net.................................... 2,817 -- -- -- --
-------- -------- -------- ------- -------
Income before provision for income taxes.............. 15,527 19,216 9,234 4,549 2,591
Income tax provision.................................. 8,800 6,987 3,560 1,755 981
-------- -------- -------- ------- -------
Net income............................................ $ 6,727 $ 12,229 $ 5,674 $ 2,794 $ 1,610
======== ======== ======== ======= =======
Per share data (diluted):
Net income per share.................................. $ .24 $ .44 $ .25 $ .14 $ .11
======== ======== ======== ======= =======
Weighted average shares outstanding (diluted)......... 28,194 27,892 23,031 20,001 14,965

JULY 31,
--------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- -------
(IN THOUSANDS)

BALANCE SHEET DATA:
Working capital....................................... $122,170 $127,839 $145,825 $14,192 $13,676
Total assets................................... 273,191 222,017 202,574 33,191 27,186
Total long-term debt........................... -- -- -- -- --
Total shareholders' equity..................... 230,615 194,096 181,150 19,213 16,113

14
17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The Company's operating revenues currently are generated from three
sources: employee health and welfare administration services, qualified plan
administration services, and payroll and human resource administration services.
Additionally, starting in fiscal 1998 the Company generates non-operating
revenue from the short-term lease of its St. Petersburg, Florida operations
center through its wholly-owned subsidiary, ABR Properties, Inc.

The first source of the Company's revenue is providing employee health and
welfare administration outsourcing services. In particular, the Company provides
portability (i.e., COBRA (the "Consolidated Omnibus Budget Reconciliation Act"),
HIPAA (the "Health Insurance Portability and Accountability Act of 1996") or
state-mandated continuation coverage) law compliance services primarily through
its qualifying event agreements with employers and 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 or change of coverage under a group healthcare plan. The amount of the
fixed fee varies depending on the type of portability qualifying event and 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 compliance for their group insurance clients
that are subject to health portability laws. 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 COBRA continuant, as well as interest earned on the premiums
received from continuants prior to remittance to the employer. In addition, the
Company generates health and welfare administration services revenues by
providing administration services for benefits provided to active employees,
including open enrollment, employee enrollment and eligibility, and flexible
spending account administration, along with providing administration services
for benefits provided to retired and inactive employees, including retiree
healthcare, disability, surviving dependent, family leave and severance
benefits. Most services are provided both on a one-time and continuous basis.
During fiscal 1998 and 1997, 85.4% and 97.5%, respectively, of the Company's
revenues were attributable to employee health and welfare administration
services.

The second source of the Company's revenue is providing employee qualified
plan administration services, including 401(k) plan administration, profit
sharing administration, defined benefit plan administration, ESOP administration
and Qualified Domestic Relations Order ("QDRO") administration. During fiscal
1998 and 1997, 10.7% and 1.7%, respectively, of the Company's revenues were
attributable to employee qualified retirement plans administration.

The third source of the Company's revenue is providing payroll and human
resource administration services, including tax deposit services and integrated
human resource solutions. During fiscal 1998 and 1997, 3.9% and .8%,
respectively, of the Company's revenues were attributable to payroll and human
resource administration services.

15
18

Costs of services include direct personnel, occupancy and other costs
associated with providing services to customers, such as mailing and printing
costs. Selling, general and administrative expenses include administrative,
marketing and certain other indirect costs.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenue represented by
certain items reflected in the Company's statements of income.

PERCENTAGE OF REVENUES
-----------------------
YEARS ENDED JULY 31,
-----------------------
1998 1997 1996
----- ----- -----

Revenue..................................................... 100.0% 100.0% 100.0%
Cost of services............................................ 56.8 56.3 57.3
Selling, general and administrative expenses................ 18.6 19.5 21.1
Acquisition costs........................................... -- -- 1.2
Acquired Research and Development........................... 14.8 -- --
----- ----- -----
Operating income............................................ 9.8 24.2 20.4
Interest income............................................. 7.2 14.2 9.2
Lease revenue, net.......................................... 3.8 -- --
Income taxes................................................ 11.8 14.0 11.4
----- ----- -----
Net income.................................................. 9.0% 24.4% 18.2%
===== ===== =====

YEAR ENDED JULY 31, 1998 COMPARED TO YEAR ENDED JULY 31, 1997

Revenues increased $24.5 million, or 48.9%, to $74.6 million during the
year ended July 31, 1998 from $50.1 million during the year ended July 31, 1997.
Of the $24.5 million increase in revenues, $14.9 million was attributable to
increased employee health and welfare administration revenues, $7.1 million was
attributable to increased employee qualified plan administration revenues and
$2.5 million was due to increased revenues from payroll and human resource
administration services. For the year ended July 31, 1998, health and welfare
administration revenue was $63.7 million, qualified plan administration revenue
was $8.0 million, and payroll and human resource administration was $2.9
million.

The increase in employee health and welfare administration revenues was
primarily attributable to the addition of new customers and new service product
offerings related to the federally-mandated HIPAA requirements. The increase in
employee qualified retirement plan administration revenues was primarily
attributable to the two new subsidiaries acquired by the Company effective
February 1, 1998. The increase in payroll and human resource administration was
primarily attributable to the acquisition of PayAmerica effective April 30,
1998.

Cost of services increased $14.2 million, or 50.4%, to $42.4 million during
the year ended July 31, 1998 from $28.2 million during the year ended July 31,
1997. The increase in cost of services was attributable to the addition of data
processing, information systems and customer service personnel to support
revenue growth, the amortization of software placed in service as completed, the
transition and consolidation of certain operational duties into the Florida
operations center and the addition of three subsidiaries during the year ended
July 31, 1998. As a percentage of revenues, 1998 cost of services increased to
56.8% from 56.3% in the previous year.

Selling, general and administrative expenses increased $4.0 million, or
40.8%, to $13.8 million during the year ended July 31, 1998 from $9.8 million
during the year ended July 31, 1997. The increase in selling, general and
administrative expenses was primarily attributable to additional advertising,
the addition of marketing, management and administrative personnel and equipment
necessary to support the Company's growth and the acquisition of three
subsidiaries during the year ended July 31, 1998. As a percentage of revenues,
selling, general and administrative expenses decreased to 18.6% from 19.5% in
the previous year.

16
19

Acquired research and development increased to $11.0 million for the year
ended July 31, 1998 as compared to $0 for the year ended July 31, 1997. The
acquired in-process research and development was, as a result of the purchase of
PayAmerica in 1998 which, in accordance with applicable accounting rules, was
expensed. The value assigned to acquired in-process research and development was
based on a third-party valuation.

Interest income decreased $1.7 million to $5.4 million during the year
ended July 31, 1998 from $7.1 million during the year ended July 31, 1997. This
decrease was the result of less cash available for investing due to capital
purchases, cash payments for acquisitions of two new subsidiaries, increased
utilization of tax-free investment instruments which yield a lower stated
interest rate, and an overall decline in short-term interest rates.

Lease revenue increased to $2.8 million for the year ended July 31, 1998 as
compared to $0 for the corresponding period in 1997 due to the purchase of an
office campus (with an existing tenant) in St. Petersburg, Florida. Lease
revenue is presented net of direct costs associated with operating the campus.
This net revenue will decrease as the Company begins to occupy the campus in
phases beginning in calendar 1999 and will decrease to $0 by April 1999, at the
latest. Final occupancy by the Company is expected in 2000.

Income taxes increased 25.7% to $8.8 million during the year ended July 31,
1998 from $7.0 million during the year ended July 31, 1997. The Company's
effective tax rate increased to 56.7% for the year ended July 31, 1998 from
36.4% for the corresponding period in the previous year. This increase was
primarily due to the non-deductibility (for income tax purposes) of acquired
in-process research and developments costs associated with the PayAmerica
acquisition.

As a result of the foregoing, the Company's net income decreased $5.5
million, or 45.1%, to $6.7 million during the year ended July 31, 1998 from
$12.2 million during the year ended July 31, 1997. Net income per share was $.24
(diluted) for the year ended July 31, 1998 as compared to $.44 (diluted) for the
prior year.

YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996

Revenues increased $18.9 million, or 60.6%, to $50.1 million during the
year ended July 31, 1997 from $31.2 million during the year ended July 31, 1996.
Of the $18.9 million increase in revenues, $18.3 million was attributable to
increased employee health and welfare administration revenues, $.5 million was
attributable to increased employee qualified plan administration revenues and
$.1 million was due to increased revenues from payroll and human resource
administration services. For the year ended July 31, 1997, health and welfare
administration revenue was $48.8 million, qualified plan administration revenue
was $.9 million, and payroll and human resource administration was $.4 million.

The increase in employee health and welfare administration revenues was
primarily attributable to the addition of new customers and new service product
offerings related to state-mandated continuation coverage health portability
laws, enrollment and eligibility and the federally-mandated HIPAA requirements.
The increase in payroll and human resource administration was primarily
attributable to the addition of new customers.

Cost of services increased $10.3 million, or 57.5%, to $28.2 million during
the year ended July 31, 1997 from $17.9 million during the year ended July 31,
1996. The increase in cost of services was attributable to the addition of data
processing, information systems and customer service personnel to support
revenue growth, and the amortization of software placed in service as completed.
As a percentage of revenues, the 1997 cost of services decreased to 56.3% from
57.3% in the previous year. The decrease as a percent of revenues resulted
primarily from operating efficiencies from the allocation of these expenses over
an increasingly larger revenue base.

Selling, general and administrative expenses increased $3.2 million, or
48.5%, to $9.8 million during the year ended July 31, 1997 from $6.6 million
during the year ended July 31, 1996. The increase in selling, general and
administrative expenses was primarily attributable to the addition of marketing,
management and administrative personnel and equipment necessary to support the
Company's growth and additional advertising costs. As a percentage of revenues,
selling, general and administrative expenses decreased to 19.5% from
17
20

21.1% in the previous year, primarily as a result of operating efficiencies from
the allocation of these expenses over an increasingly larger revenue base.

Acquisition costs decreased to $0 during fiscal 1997 from $361,000 for
fiscal 1996. The 1996 expenses relate to costs associated with the acquisition
of the L.P. Baier Company, which was accounted for using the pooling of
interests method of accounting.

Interest income increased $4.2 million to $7.1 million during the year
ended July 31, 1997 from $2.9 million during the year ended July 31, 1996. This
increase was the result of the proceeds from the secondary stock offering
completed in March 1996 being invested for a full year in fiscal 1997.

Income taxes increased 96.3% to $7.0 million during the year ended July 31,
1997 from $3.6 million during the year ended July 31, 1996. The Company's
effective tax rate decreased to 36.4% for the year ended July 31, 1997 from
38.6% for the corresponding period in the previous year. This decrease reflected
the Company's move to more tax-free investments in fiscal 1997.

As a result of the foregoing, the Company's net income increased $6.5
million, or 115.5%, to $12.2 million during the year ended July 31, 1997 from
$5.7 million during the year ended July 31, 1996. Net income per share (diluted)
was $.44 for the year ended July 31, 1997 as compared to $.25 (diluted) for the
prior year.

YEAR 2000 MATTERS

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. In 1996, the Company
initiated the process of modifying existing software programs to become Year
2000 compliant. Management has determined that the Year 2000 issue will not pose
a significant operational problem for its computer systems.

The Company is utilizing both internal and external resources to test and
reprogram, or replace, the software for Year 2000 compliance. The Company is
also in the process of identifying non-IT systems in which Year 2000 problems
could be embedded, testing those systems for Year 2000 compliance and correcting
or replacing those systems having Year 2000 problems. The Company anticipates
completing the Year 2000 project for both IT and non-IT systems no later than
March 1999, which is prior to any anticipated impact on its operating systems.
The total cost of the Year 2000 project is estimated at approximately $250,000.
Approximately $100,000 in costs has been incurred to date. These costs are being
funded through operating cash flows and are not expected to have a material
adverse effect on the Company's business, financial condition or results of
operations. All costs associated with addressing the Year 2000 Issue are being
expensed as incurred.

The cost of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third-party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.

The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. While some suppliers and customers have responded
affirmatively, a majority have not as yet provided the necessary feedback. There
can be no guarantee that the systems of other companies on which the Company's
systems rely will be timely converted and will not have a material adverse
effect on the Company's systems and in turn, the Company's business, financial
condition and results of operations.

18
21

LIQUIDITY AND CAPITAL RESOURCES

For the year ended July 31, 1998, net cash provided by operating activities
was $32.6 million as compared to $16.4 million for fiscal 1997. As of July 31,
1998 and 1997, the Company's working capital and current ratio were $122.1
million and 4.6:1 and $127.8 million and 6.1:1, 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 year ended July 31, 1998, the Company's capital expenditures
were $33.7 million.

On October 2, 1997, the Company acquired a 383,000 square foot office
campus in St. Petersburg, Florida for $13.5 million. The Company expects to
spend approximately $23 million to expand and renovate the facility over the
next three years. Management estimates that as of July 31, 1998, approximately
$13 million will be required in order for the Company to purchase additional
equipment, furniture and hardware, and to complete its currently defined
software projects.

In September 1998, the Company announced plans to repurchase up to 3.0
million shares of its outstanding common stock.

The Company believes that its cash, investments, cash flows from operations
and potential additional borrowing capacity will be adequate to meet the
Company's expected capital requirements for the foreseeable future.

The Company has a three-year, $25.0 million unsecured credit facility. The
Company has agreed to maintain all of its assets free and clear of all liens,
encumbrances and pledges, except to purchase money security interests in
specific equipment in an aggregate amount of less than $1,500,000 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 30-day London Interbank
Offering Rate (LIBOR), plus an applicable interest rate margin between 62.5 and
150 basis points 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 2.5-to-1, a debt service coverage
ratio of not less than 1.35-to-1, as well as the maintenance of a certain funded
debt to tangible net worth ratio. As of July 31, 1998, the Company was in
compliance with all such covenants and there were no amounts outstanding under
the credit facility.

NEW ACCOUNTING PRONOUNCEMENTS

The Company has not adopted SFAS No. 130 "Reporting Comprehensive Income,"
which requires reporting "comprehensive income" for transactions that bypass the
income statement and are reported directly in the equity section of the balance
sheet. This statement is effective for the Company's 1999 fiscal year. Currently
the Company does not expect adoption of this standard to have a material effect
on its financial statements.

The Company has not adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which requires reporting business segments
and information, including how the segments are determined, products and
services are provided and changes in the measurement of segment accounts from
period to period. This statement is effective for the Company's 1999 fiscal
year. The Company has not yet determined the effect that the adoption of this
standard will have on its financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Registrant's investment portfolio consists primarily of high grade
fixed income investments, such as AA or better rated fixed income municipal
instruments, and consequently the Company believes such portfolio does not
subject it to material market risk exposures.

19
22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements of the Company and its independent
certified public accountant's Report are set forth on pages 23 through 40 of
this report:

Report of Independent Certified Public Accountants.
Consolidated Balance Sheets as of July 31, 1998 and 1997.
Consolidated Statements of Income for the Years Ended July 31, 1998,
1997, and 1996.
Consolidated Statements of Shareholders' Equity for the Years Ended
July 31, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows for the Years Ended July 31,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information to be set forth under the caption "Item 1: Election of
Directors" in the Company's Proxy Statement dated on or about November 16, 1998,
for the Annual Meeting of Shareholders to be held December 22, 1998 (the "Proxy
Statement"), and the information to be set forth under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement are
incorporated herein by reference. The information set forth under "Executive
Officers of the Registrant" in Part I hereof is also incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

The information to be set forth under the caption "Executive Compensation"
in the Proxy Statement is incorporated herein by reference; provided, however
that the Company specifically excludes from such incorporation by reference any
information set forth under the captions "Compensation Committee Report on
Executive Compensation" and "Stock Price Performance Graph" in the Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security ownership of certain beneficial owners and management to be set
forth under the caption "Principal Shareholders" in the Proxy Statement is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) List of documents filed as part of this report:

(1) Financial Statements.

Report of Independent Certified Public Accountants.

Consolidated Balance Sheets as of July 31, 1998 and 1997.

Consolidated Statements of Income for the Years Ended July 31,
1998, 1997, and 1996.

20
23

Consolidated Statements of Shareholders' Equity for the Years Ended
July 31, 1998, 1997, and 1996.

Consolidated Statements of Cash Flows for the Years Ended July 31,
1998, 1997, and 1996.

Notes to Consolidated Financial Statements.

(2) Financial Statement Schedule.

Report of Independent Certified Public Accountants on The Schedule.

SCHEDULE
NUMBER DESCRIPTION
- -------- -----------

II -- Valuation and Qualifying Accounts

(3) Exhibits.

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 -- Articles of Incorporation of ABR Information Services,
Inc.(1)
3.2 -- Bylaws of ABR Information Services, Inc.(1)
10.1 -- Form of Employment Agreement between ABR Information
Services, Inc. and each of James E. MacDougald and Suzanne
M. MacDougald.(1)
10.2 -- ABR Information Services, Inc. 1995 Non-Employee Director
Stock Option Plan.(2)
10.3 -- ABR Information Services, Inc. 1996 Non-Employee Director
Stock Option Plan, as amended.
10.4 -- ABR Information Services, Inc. Amended and Restated 1987
Stock Option Plan.(4)
10.5 -- ABR Information Services, Inc. Amended and Restated 1993
Stock Option Plan (as amended).(2)
10.6 -- ABR Information Services, Inc. Incentive Bonus Plan.(1)
10.7 -- Revolving Line of Credit Note/Loan Agreement dated June 19,
1998 by and between Barnett Bank, N.A. and ABR Information
Services, Inc.
10.8 -- Services Agreement between Corporate Benefits Delivery of
General Electric Company and ABR Benefits Services, Inc. (as
successor to Bullock Associates, Inc.), as amended on
December 15, 1995.(5)
10.9 -- Agreement and Plan of Reorganization dated as of February 1,
1996 by and among ABR Information Services, Inc., Total
Cobra Services and John M. Hermann.(3)
10.10 -- Agreement and Plan of Reorganization dated as of June 28,
1996 by and among ABR Information Services, Inc., The L.P.
Baier Company and L.P. Baier's shareholders.(3)
10.11 -- Stock Purchase Agreement by and among ABR Information
Services, Inc., Bullock Associates, Inc., W. Carl Bullock,
Barbara A. Biasotti and Nancy L. Clark dated as of December
15, 1995.(6)
10.12 -- Agreement for Sale and Purchase of Property, dated October
2, 1997, by and between Florida Power Corporation (Seller)
and ABR Properties, Inc. (Buyer), including commercial lease
as of the same date.(7)
10.13 -- Stock Purchase Agreement dated February 26, 1998 and
effective February 1, 1998, by and among ABR Information
Services, Inc., Charing Company, Inc. and the shareholders
of Charing Company, Inc.(8)
10.14 -- Stock Purchase Agreement dated February 27, 1998 and
effective February 1, 1998, by and among ABR Information
Services, Inc., Matthews, Malone & Associates, Ltd. and the
shareholders of Matthews, Malone & Associates, Ltd.(8)

21
24

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10.15 -- Agreement and Plan of Reorganization, dated April 30, 1998,
by and among ABR Information Services, Inc., Business
Computer Services, Inc. ("BCSI"), Joseph M. Speroni, Paul J.
Speroni, Robert S. Speroni, Stephen J. Speroni, Joseph F.
Speroni, David M. Speroni, Richard B. Speroni, Rex Haverty,
E. Hale Waller, Nikky Losapio and Christopher Mantua, as the
Shareholders of BCSI, and Samuel N. Klewans, as
Shareholders' Agent.(9)
10.16 -- Stock Purchase Agreement, dated August 12, 1998, and
effective as of August 1, 1998, by and among ABR Information
Services, Inc., MidAtlantic 401(k) Services, Inc., the
Shareholders of MidAtlantic 401(k) Services, Inc., and E.
Franklin De Pew, as Shareholders' Agent.
10.17 -- Stock Purchase Agreement, dated October 22, 1998, by and
among ABR Information Services, Inc., Chowning, Ltd., The
Barrington Group, Ltd., Mark G. FitzGerald, Timothy D. Dyer
and Laura J. LaPinske, as shareholders of Chowning, Ltd.,
and Mark G. FitzGerald, as Shareholders' Agent.(10)
10.18 -- ABR Information Services, Inc. 1997 Stock Option Plan.
10.19 -- Stock Purchase Agreement, dated October 30, 1998, and
effective as of October 1, 1998, by and among ABR
Information Services, Inc., Western Pension Service
Corporation, and Robert A. Jocelyn.
10.20 -- Stock Purchase Agreement, dated November 10, 1998, and
effective as of November 1, 1998, by and among ABR
Information Services, Inc., BMC Consultants, Inc., Jeffrey
J. Berends, D'Nelle L. Macaluso, Frank J. Dobis, Scott A.
Hittner, Carol L. Carlson, Thomas W. Nielsen, Jr., Walter L.
Malles, Jr. and Gene R. Etzig, as Shareholders of BMC
Consultants, Inc., and Jeffrey J. Berends, as Shareholders'
Agent.
10.21 -- Form of Key Executive Employment and Severance Agreement
between ABR Information Services, Inc. and each of James E.
MacDougald and James P. O'Drobinak, executive officers.
21.1 -- List of subsidiaries of ABR Information Services, Inc.
23.1 -- Consent of Grant Thornton LLP.
24.1 -- Powers of Attorney (included on signature page hereto).
27.1 -- Financial Data Schedule (for SEC use only)

- ---------------

(1) Previously filed as part of the Company's Form S-1 Registration Statement
(No. 33-76922) dated May 26, 1994 and incorporated herein by reference.
(2) Previously filed as part of the Company's Form 10-K for the fiscal year
ended July 31, 1995.
(3) Previously filed as part of the Company's Form 10-K for the fiscal year
ended July 31, 1996.
(4) Previously filed as part of the Company's Form 10-K for the fiscal year
ended July 31, 1994.
(5) Previously filed as part of the Company's Form 10-Q for the quarter ended
January 31, 1996.
(6) Previously filed as part of the Company's Form 8-K dated as of December 26,
1995.
(7) Previously filed as part of the Company's Form 10-K for the fiscal year
ended July 31, 1997.
(8) Previously filed as part of the Company's Form 10-Q for the quarter ended
January 31, 1998.
(9) Previously filed as part of the Company's Form 8-K/A dated as of November
13, 1998.
(10) Previously filed as part of the Company's Form 8-K dated as of November 5,
1998.

Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.18, and 10.21 represent
management contracts and compensatory plans.

(b) Reports on Form 8-K.

The Company filed a Report on Form 8-K on May 15, 1998 reporting the
acquisition of Business Computer Services, Inc. (d.b.a. Pay America(R)) on April
30, 1998. This report was amended and restated in its entirety pursuant to a
Report on Form 8-K/A filed on November 13, 1998. Included as an exhibit to such
filing is the Agreement and Plan of Reorganization by and among ABR Information
Services, Inc., Business Computer Services, Inc., the Shareholders of Business
Computer Services, Inc., and Samuel N. Klewans, as Shareholders' Agent. No
financial statements were required to be filed as part of either the Form 8-K or
Form 8-K/A.

22
25

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
ABR Information Services, Inc.

We have audited the accompanying consolidated balance sheets of ABR
Information Services, Inc. as of July 31, 1998 and 1997 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended July 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ABR Information
Services, Inc. as of July 31, 1998 and 1997, and the consolidated results of its
operations and its consolidated cash flows for each of the three years in the
period ended July 31, 1998, in conformity with generally accepted accounting
principles.

GRANT THORNTON LLP

Tampa, Florida
November 11, 1998

23
26

CONSOLIDATED BALANCE SHEETS

JULY 31,
---------------------------
1998 1997
------------ ------------

ASSETS
Current Assets:
Cash and cash equivalents................................. $ 54,427,446 $ 33,322,734
Investments............................................... 85,912,690 109,486,166
Accounts receivable, net.................................. 13,102,473 7,308,914
Prepaid expenses and other................................ 2,582,277 2,595,306
------------ ------------
Total current assets.............................. 156,024,886 152,713,120
Long-Term Investments....................................... 6,021,873 14,128,644
Property and Equipment, net................................. 47,713,155 27,790,354
Software Development Costs, net............................. 21,276,073 11,767,211
Goodwill, Intangibles and Other Assets, net................. 42,154,560 15,617,519
------------ ------------
Total Assets...................................... $273,190,547 $222,016,848
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 1,336,504 $ 613,138
Accrued expenses.......................................... 2,882,668 512,035
Customer accounts deposits................................ 29,147,418 23,133,381
Unearned revenue.......................................... 361,782 594,524
Income taxes payable...................................... 126,508 20,770
------------ ------------
Total current liabilities......................... 33,854,880 24,873,848
------------ ------------
Deferred Income Taxes....................................... 8,720,312 3,047,243
------------ ------------
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, 28,695,592 and
27,376,356 shares, respectively........................ 286,956 273,763
Additional paid-in capital................................ 200,238,804 170,459,157
Retained earnings......................................... 30,089,595 23,362,837
------------ ------------
Total Shareholders' Equity........................ 230,615,355 194,095,757
------------ ------------
Total Liabilities and Shareholders' Equity........ $273,190,547 $222,016,848
============ ============

The accompanying notes are an integral part of these statements.

24
27

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED JULY 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------

Revenue................................................. $74,592,273 $50,078,842 $31,162,181
Operating expenses:
Cost of services...................................... 42,386,859 28,178,925 17,863,588
Selling, general and administrative................... 13,849,617 9,765,500 6,575,390
Acquisition costs..................................... -- -- 361,198
Acquired research and development..................... 11,010,000 -- --
----------- ----------- -----------
Operating income........................................ 7,345,797 12,134,417 6,362,005
Interest income......................................... 5,363,957 7,081,238 2,872,145
Lease revenue, net...................................... 2,817,004 -- --
----------- ----------- -----------
Income before provision for income taxes................ 15,526,758 19,215,655 9,234,150
Income tax provision.................................... 8,800,000 6,987,003 3,560,366
----------- ----------- -----------
Net income.................................... $ 6,726,758 $12,228,652 $ 5,673,784
=========== =========== ===========
Net income per share (basic)............................ $ .24 $ .45 $ .25
=========== =========== ===========
Net income per share (diluted).......................... $ .24 $ .44 $ .25
=========== =========== ===========

The accompanying notes are an integral part of these statements.

25
28

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ---------- ------------ ----------- ------------

Balance at July 31, 1995........ 6,640,814 $ 66,408 $ 13,686,162 $ 5,460,401 $ 19,212,971
Common stock split.............. 3,248,882 32,489 (33,917) -- (1,428)
Exercise of stock options....... 145,911 1,459 666,890 -- 668,349
Tax benefit related to exercise
of certain stock options...... -- -- 1,426,563 -- 1,426,563
Shares issued in conjunction
with acquisition.............. 132,712 1,327 3,048,848 -- 3,050,175
Secondary stock offering, net of
offering costs of $381,092.... 3,419,875 34,199 151,085,171 -- 151,119,370
Net income...................... -- -- -- 5,673,784 5,673,784
---------- ---------- ------------ ----------- ------------
Balance at July 31, 1996........ 13,588,194 135,882 169,879,717 11,134,185 181,149,784
Common stock split.............. 13,685,918 136,859 (136,859) -- --
Exercise of stock options....... 102,244 1,022 659,693 -- 660,715
Tax benefit related to exercise
of certain stock options...... -- -- 56,606 -- 56,606
Net income...................... -- -- -- 12,228,652 12,228,652
---------- ---------- ------------ ----------- ------------
Balance at July 31, 1997........ 27,376,356 273,763 170,459,157 23,362,837 194,095,757
Exercise of stock options....... 121,228 1,212 991,516 -- 992,728
Shares issued in conjunction
with acquisition.............. 1,198,008 11,981 28,788,131 -- 28,800,112
Net income...................... -- -- -- 6,726,758 6,726,758
---------- ---------- ------------ ----------- ------------
Balance at July 31, 1998........ 28,695,592 $ 286,956 $200,238,804 $30,089,595 $230,615,355
========== ========== ============ =========== ============

The accompanying notes are an integral part of these statements.

26
29

CONSOLIDATED STATEMENTS OF CASH FLOW

YEARS ENDED JULY 31,
---------------------------------------------
1998 1997 1996
------------- ------------- -------------

Cash flows from operating activities:
Net income...................................... $ 6,726,758 $ 12,228,652 $ 5,673,784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 6,864,895 3,498,034 1,642,754
Deferred income taxes........................ 5,031,147 2,151,688 328,514
Tax benefit related to exercise of certain
stock options.............................. -- 56,606 1,426,563
Provision for losses on accounts
receivable................................. 339,033 91,281 12,692
Acquired research and development............ 11,010,000 -- --
Change in operating assets and liabilities net
of effects from purchases:
Accounts receivable.......................... (3,908,507) (4,516,626) (771,537)
Prepaid expenses and other................... 91,240 (1,312,354) (528,798)
Other assets................................. 26,358 (112,693) (8,953)
Accounts payable............................. 686,329 (2,525) (674,980)
Accrued expenses............................. (42,320) (250,407) (130,668)
Customer accounts deposits................... 5,983,594 5,113,976 4,228,527
Unearned revenue............................. (253,277) (52,569) 23,931
Income taxes payable......................... 17,898 (462,893) 298,695
------------- ------------- -------------
Net cash provided by operating
activities............................ 32,573,148 16,430,170 11,520,524
------------- ------------- -------------
Cash flows from investing activities:
Additions to investments........................ (576,404,831) (394,805,395) (314,607,394)
Maturities of investments....................... 608,085,078 419,288,657 172,470,327
Additions to property and equipment............. (22,432,419) (15,192,338) (12,537,101)
Additions to software development costs......... (11,295,633) (6,275,787) (3,292,648)
Acquisitions, net of cash acquired.............. (10,413,359) (871,684) (10,656,020)
------------- ------------- -------------
Net cash provided by (used in) investing
activities............................ (12,461,164) 2,143,453 (168,622,836)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from bank borrowings................... 7,198,574 -- 6,000,000
Principal payments under bank borrowings........ (7,198,574) -- (6,000,000)
Exercise of stock options....................... 992,728 660,715 668,248
Public offerings, net of cost................... -- -- 151,119,370
------------- ------------- -------------
Net cash provided by financing
activities............................ 992,728 660,715 151,787,618
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents..................................... 21,104,712 19,234,338 (5,314,694)
Cash and cash equivalents at beginning of year.... 33,322,734 14,088,396 19,403,090
------------- ------------- -------------
Cash and cash equivalents at end of year.......... $ 54,427,446 $ 33,322,734 $ 14,088,396
============= ============= =============

The accompanying notes are an integral part of these statements.

27
30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998, 1997 AND 1996

NOTE A -- DESCRIPTION OF ORGANIZATION AND BUSINESS

ABR Information Services, Inc. (the "Company") through its wholly-owned
subsidiaries, ABR Benefits Services, Inc., Charing Company, Inc., Matthews,
Malone & Associates, Ltd., Business Computer Services, Inc., MidAtlantic 401(k)
Services, Inc., Chowning, Ltd., Western Pension Service Corporation and BMC
Consultants, Inc., is a leading provider of comprehensive benefits
administration, payroll, and human resource services to employers seeking to
outsource these functions. The Company's operating revenues currently are
generated from three sources: employee health and welfare administration
services, qualified plan administration services, and payroll and human resource
administration services. All 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.
Additionally, the Company generates non-operating revenue from the short-term
lease (expiring in April 1999) of its St. Petersburg, Florida operations center
through its wholly-owned subsidiary, ABR Properties, Inc.

The Company provides outsourced benefits administration, payroll, and human
resource services to employers ranging in size from 20 to 200,000 employees. ABR
provides portability (primarily COBRA and HIPAA) services through the trade name
CobraServ(R) and payroll and tax deposit services through the trade name
PayAmerica.(R) The Company is headquartered in Palm Harbor, Florida, and employs
approximately 1,400 people in marketing/operations centers in Florida, New
Jersey, Virginia, Maryland, California, Wisconsin and Arizona.

The financial statements have been restated to reflect the three-for-two
stock split completed February 1996 and a two-for-one stock split completed
February 1997.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of ABR Information Services, Inc.
and all of its subsidiaries. All material intercompany balances and transactions
have been eliminated.

2. REVENUE RECOGNITION

Revenues are recognized when the related services have been provided. Advance
payments received from customers for services not provided are included in
unearned revenue.

3. COST OF SERVICES

Cost of services includes personnel, occupancy and other costs associated with
providing services to customers, such as mailing and printing costs.

4. CUSTOMER ACCOUNTS DEPOSITS

As part of the services provided to customers, the Company bills and collects
for its customers and maintains the funds in segregated accounts until the funds
are remitted. For financial statement purposes, the segregated funds are
included in cash and investments (as the funds are not restricted) with the
corresponding liability presented as customer accounts deposits.

5. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments, with a maturity of 30 days
or less when purchased, as cash equivalents.

28
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company presents Cash and Cash Equivalents exclusive of PayAmerica tax
deposits held for future payment on behalf of its payroll customers due to their
restricted and short-term nature. The amount of such tax deposits and related
liability was approximately $65.9 million at July 31, 1998.

As of July 31, 1998 and 1997, substantially all of the Company's cash is
invested in overnight repurchase agreements of mortgage-backed or government
securities. The Company has a security interest in the specific investment
underlying the repurchase agreements.

6. INVESTMENTS

The Company's investments are classified as either "Held-to-Maturity" or
"Available-for-Sale" investment securities in accordance with SFAS No. 115.
"Held-to-Maturity" investments are securities which the Company has the ability
and positive intent to hold to maturity and are stated at cost, adjusted for
amortization of premiums and accretion of discounts which are computed by the
interest method. Declines in fair value that are other than temporary are
recorded as incurred. "Available-for-Sale" securities are measured at fair
value.

7. CONTRACT SET-UP COSTS

Under contractual arrangements with certain customers, the Company incurs
set-up costs. These costs are capitalized and amortized over the contract
period, but no longer than twelve months, using the straight-line method. As of
July 31, 1998 and 1997, unamortized set-up costs of $835,103 and $1,013,789,
respectively, are included in prepaid expenses. During 1998, 1997 and 1996,
amortization of set-up costs totaled $2,453,139, $989,612 and $569,755,
respectively. AICPA Statement of Position 98-5 "Reporting on the Costs of
Start-up Activities" will not impact contract set-up costs.

8. PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter. Accelerated methods
are used for income tax purposes.

9. SOFTWARE DEVELOPMENT COSTS

Effective in fiscal 1998, the Company adopted AICPA Statement of Position
98-1 "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This standard states that costs to develop internal-use computer
software during the application development stage as defined in SOP 98-1 should
be capitalized. The adoption of this standard had no material effect on the
Company's financial statements. For fiscal 1997 and 1996, software development
costs consist primarily of purchased software, consulting services, salaries and
certain other expenses related to the development and modification of software
capitalized in accordance with the provisions of SFAS No. 86 "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed."
Capitalization of such cost begins only upon the establishment of technological
feasibility as defined in SFAS No. 86. Such capitalized costs are amortized when
the software is available to service customers using the straight-line method
over an estimated life of four to five years or based on the ratio of current
gross revenue to the anticipated gross revenue, whichever is greater.
Amortization expense for the years ended 1998, 1997 and 1996 was $1,966,771,
$690,549 and $95,411, respectively. Accumulated amortization of software
development costs totaled $2,790,629 and $911,084 at July 31, 1998 and 1997,
respectively.

Software development costs that were expensed and not capitalized totaled
$5,191,579, $3,113,157 and $1,312,653 for the years ended 1998, 1997 and 1996,
respectively.

29
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Subsequent to year end, the Company's Board of Directors redefined the
strategic design of a number of its completed and in-process software projects.
In conjunction with this strategic change, software projects in the amount of
$14,300,000 will be superceded by new product design or outright eliminated.
Therefore, in the first quarter of fiscal 1999, the Company will take a non-cash
charge of approximately $13,800,000 (pre-tax) for these software projects.

10. INCOME TAXES

Deferred income taxes principally result from expensing certain software
development costs for income tax return purposes while capitalizing and
amortizing certain of these costs for financial statement purposes.

11. NET INCOME PER SHARE

During fiscal 1998, the Company adopted Statement of Financial Accounting
Standard No. 128 "Earnings Per Share" (FAS 128). This Standard became effective
for financial statements issued after December 15, 1997 and eliminates primary
and fully diluted income per share and replaces them with basic and diluted
income per share. Accordingly, all income per share amounts for the prior
periods presented have been restated to conform to the new Standard (see Note
H).

12. RECLASSIFICATIONS

Certain amounts in prior years' financials statements have been
reclassified to conform with the July 31, 1998 presentation.

13. NEW ACCOUNTING PRONOUNCEMENTS

The Company has not adopted SFAS No. 130 "Reporting Comprehensive Income"
which requires reporting "comprehensive income" for transactions that bypass the
income statement and are reported directly in the equity section of the balance
sheet. This statement is effective for the Company's 1999 fiscal year. Currently
the Company does not expect adoption of this standard to have a material effect
on its financial statements.

The Company has not adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" which requires reporting business segments
and information, including how the segments are determined, products and
services are provided and changes in the measurement of segment accounts from
period to period. This statement is effective for the Company's 1999 fiscal
year. The Company has not yet determined the effect that the adoption of this
standard will have on its financial statements.

14. GOODWILL AND OTHER INTANGIBLES

Amortization is based upon the allocation of the total purchase price (see
Note N) and amortization periods, using the straight-line method, as follows:

ESTIMATED
USEFUL
ALLOCATION LIVES
----------- ---------

Non-competition Agreements.................................. $ 1,104,000 2-5 years
Contracts................................................... $ 2,000,000 10 years
Trademarks.................................................. $ 1,590,000 --
Customer Accounts........................................... $ 1,050,000 10 years
Workforce................................................... $ 1,850,000 10 years
Goodwill.................................................... $37,268,018 25 years

30
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense totaled $1,337,105, $865,603 and $482,708 for the
years ended July 31, 1998, 1997 and 1996, respectively. The accumulated
amortization totaled $2,707,458 and $1,348,310 at July 31, 1998 and 1997,
respectively of which $1,755,050 and $843,311 respectively relate to goodwill.

The Company evaluates the recoverability of goodwill and reviews the
amortization period on an annual basis. Several factors are used to evaluate
goodwill, including management's plans for future operations, recent operating
results and projected undiscounted cash flows. No adjustments to goodwill have
been necessary.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

At July 31, 1998 and 1997, the carrying amount of cash, accounts
receivable, accounts payable, accrued expenses and customer accounts deposits
approximate fair value because of the short-term maturities of these items.

16. USE OF ESTIMATES

The financial statements are prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts that are based on
management's best estimates and judgements. Actual results could differ from
these estimates.

NOTE C -- INVESTMENTS

The Company classifies debt and equity securities in two categories:
Available-for-Sale securities and Held-to-Maturity securities.
Available-for-Sale securities are measured at fair value, with net unrealized
gains and losses reported in equity. Held-to-Maturity securities are carried at
amortized cost.

The amortized cost, unrealized gains and losses, and fair values of the
Company's Available-for-Sale and Held-to-Maturity investment securities at July
31, 1998 and 1997 are summarized as follows:

ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------

AT JULY 31, 1998:
Available-for-Sale Securities
Obligations of local, state and
federal governmental agencies........ $ 53,627,784 $ -- $ -- $ 53,627,784
Held-to-Maturity Securities Obligations
of local, state and federal
governmental agencies................ 38,306,779 65,200 41,633 38,330,346
------------ ------- -------- ------------
Total........................ $ 91,934,563 $65,200 $ 41,633 $ 91,958,130
============ ======= ======== ============
AT JULY 31, 1997:
Available-for-Sale Securities
Obligations of local, state and
federal governmental agencies........ $ 68,311,065 $ -- $ -- $ 68,311,065
Held-to-Maturity Securities Obligations
of local, state and federal
governmental agencies................ 55,303,745 65,363 107,178 55,261,930
------------ ------- -------- ------------
Total........................ $123,614,810 $65,363 $107,178 $123,572,995
============ ======= ======== ============

31
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table lists the maturities of debt securities held at July
31, 1998 and 1997 classified as Available-for-Sale and Held-to-Maturity:

AVAILABLE-FOR-SALE HELD-TO-MATURITY
------------------------- -------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- ----------- ----------- -----------

AT JULY 31, 1998:
Due in one year or less............. $53,627,784 $53,627,784 $32,284,906 $32,247,092
Due after one year through five
years............................. -- -- 6,021,873 6,083,254
----------- ----------- ----------- -----------
Total..................... $53,627,784 $53,627,784 $38,306,779 $38,330,346
=========== =========== =========== ===========
AT JULY 31, 1997:
Due in one year or less............. $68,311,065 $68,311,065 $41,175,101 $41,136,201
Due after one year through five
years............................. -- -- 14,128,644 14,125,729
----------- ----------- ----------- -----------
Total..................... $68,311,065 $68,311,065 $55,303,745 $55,261,930
=========== =========== =========== ===========

There were no sales of securities classified as Available-for-Sale in 1998
and 1997. The Company uses the specific identification method to determine the
cost of securities sold.

Interest earned on investment securities and cash and cash equivalents was
$7,483,894, $8,252,011 and $3,846,102 for the years ended July 31, 1998, 1997
and 1996, respectively. A portion of these amounts is included in Revenues and
the remainder is reported separately as Interest Income in the Consolidated
Statements of Income.

NOTE D -- PROPERTY AND EQUIPMENT

JULY 31,
------------------------- ESTIMATED
1998 1997 LIFE
----------- ----------- -------------

Land and buildings............................ $34,680,594 $17,007,404 39 Years
Equipment..................................... 17,494,203 12,908,421 5 Years
Furniture and fixtures........................ 2,968,469 1,930,115 10 Years
Leasehold improvements........................ 332,166 439,085 Life of Lease
----------- -----------
55,475,432 32,285,025
Accumulated depreciation...................... (7,762,277) (4,494,671)
----------- -----------
Total property and equipment, net... $47,713,155 $27,790,354
=========== ===========

Depreciation expense for the years ended 1998, 1997 and 1996 was
$3,561,018, $1,941,882 and $1,064,635, respectively.

NOTE E -- LINES OF CREDIT

On June 19, 1998, the Company entered into a three-year, $25.0 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
$1,500,000 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 30-day London Interbank Offering Rate (LIBOR), plus an applicable
interest rate margin between 62.5 and 150 basis points 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 2.5-to-1, a debt service coverage ratio of not less than 1.35-to-1,
as well as the maintenance of a certain funded debt to tangible net worth ratio.
As of July 31,

32
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1998, the Company was in compliance with all such covenants, and there were no
amounts outstanding under the credit facility.

NOTE F -- SHAREHOLDERS' EQUITY

COMMON STOCK

The authorized Common Stock of the Company consists of 100,000,000 shares
of voting Common Stock, and 250,000 shares of nonvoting Common Stock. The shares
of nonvoting Common Stock have the same rights as the shares of voting Common
Stock, except that the holders of nonvoting Common Stock are not entitled to
vote on matters submitted to shareholders, except as required by applicable law.
As of July 31, 1998, there were no shares of nonvoting Common Stock issued and
outstanding. On July 13, 1995 and February 19, 1996 the Company completed
three-for-two stock splits, on February 19, 1997 the Company completed a
two-for-one stock split, and on June 28, 1996 the Company completed an
acquisition utilizing the pooling of interests method of accounting. The
weighted average shares outstanding, earnings per share and stock options have
been restated to reflect the stock splits and the acquisition by a pooling of
interest.

PREFERRED STOCK

The Board of Directors of the Company has the authority to issue up to
2,000,000 shares of Preferred Stock (par value of $.01 per share) in one or more
series and to fix the number of shares constituting any such series and the
rights and preferences thereof, including dividend rates, terms of redemption
(including sinking fund provision), redemption price or prices, voting rights,
conversion rights and liquidation preferences of the shares constituting such
series. As of July 31, 1998, there were no shares of Preferred Stock issued and
outstanding.

NOTE G -- STOCK OPTIONS

The Company has established the 1987, 1993 and 1997 Stock Option Plans and
the 1996 Non-Employee Director Stock Option Plan. Under the 1987, 1993 and 1997
Plans, 774,000; 1,800,000 and 1,400,000 shares of Common Stock, respectively,
have been authorized for issuance. Under the 1996 Plan (which replaces the
Company's previous 1995 Non-Employee Director Stock Option Plan), 400,000 shares
of Common Stock have been authorized for issuance. During the years ended 1998,
1997 and 1996, all option prices at date of grant equaled or exceeded the
estimated fair value of the Company's Common Stock as determined by the terms of
the stock option plans.

A summary of the status of the Company's fixed stock option plans as of
July 31, 1998, 1997 and 1996, and changes during the years ending on those dates
is present below:

1998 1997 1996
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------

Outstanding at beginning of
year...................... 1,373,444 $16.27 1,167,708 $ 8.93 933,602 $ 3.95
Granted................... 551,157 25.82 642,300 25.75 570,376 13.37
Exercised................. (121,228) 8.19 (199,968) 3.31 (291,822) 2.29
Cancelled................. (74,519) 26.37 (236,596) 16.73 (44,448) 5.05
--------- --------- ---------
Outstanding at end of
year................... 1,728,854 19.54 1,373,444 16.27 1,167,708 8.93
========= ========= =========
Exercisable at end of
year................... 589,211 13.37 337,844 7.64 304,921 7.52
========= ========= =========

33
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information concerning currently outstanding
and exercisable stock options:

WEIGHTED AVERAGE
REMAINING WEIGHTED
RANGE OF CONTRACTUAL LIFE AVERAGE
EXERCISE PRICES NUMBER OUTSTANDING (YEARS) EXERCISE PRICE
- --------------- ------------------ ---------------- --------------

Outstanding Shares
$ 2.07 -- 4.09........................ 67,894 .9 $3.07
$ 6.49 -- 6.77........................ 313,927 7.0 6.60
$13.24 -- 16.63........................ 305,000 7.5 15.80
$20.14 -- 34.33........................ 1,042,033 8.8 25.60
---------
Total.......................... 1,728,854
=========
Exercisable Shares
$ 2.07 -- 4.09........................ 67,894 N/A 3.07
$ 6.49 -- 6.77........................ 219,589 N/A 6.59
$13.24 -- 16.63........................ 152,500 N/A 15.80
$20.14 -- 34.33........................ 149,228 N/A 25.55
---------
Total.......................... 589,211
=========

The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation," as it
relates to employment awards. It applies APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
plans and does not recognize compensation expense for its stock-based
compensation plans. If the Company had elected to recognize compensation expense
based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed by SFAS No. 123, the Company's net
income and earnings per share would be reduced to the pro forma amounts
indicated below:

1998 1997 1996
---------- ----------- ----------

Net Income:
As reported..................................... $6,726,758 $12,228,652 $5,673,784
Pro forma (unaudited)........................... $3,383,543 $ 9,874,324 $4,674,893
Net Income per share:
As reported -- Basic............................ $ .24 $ .45 $ .25
As reported -- Diluted.......................... $ .24 $ .44 $ .25
Pro forma (unaudited) -- Basic.................. $ .12 $ .36 $ .20
Pro forma (unaudited) -- Diluted................ $ .12 $ .36 $ .20

The fair value of each option grant is estimated on the date of grant using
the Binomial options-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively, no dividend
yield for all years, expected volatility of 50% for 1998 and 45% for 1997 and
1996; risk-free interest rates of 5.8%, 6.2% and 5.6% percent, and expected
option holding periods of 3.7, 2.6 and 3.5 years.

The weighted average fair value stock of options granted for the years
ended July 31, 1998, 1997 and 1996 was $10.97, $8.58 and $5.21 per share
respectively.

34
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE H -- NET INCOME PER COMMON SHARE

The following table reconciles the numerators and denominators of the basic
and diluted income per share computations, as computed in accordance with FAS
128:

YEARS ENDED JULY 31,
-------------------------------------
1998 1997 1996
---------- ----------- ----------

Basic:
Net income available to common shareholders..... $6,726,758 $12,228,652 $5,673,784
========== =========== ==========
Weighted average shares......................... 27,732,054 27,320,151 22,353,986
========== =========== ==========
Basic income per share.......................... $ .24 $ .45 $ .25
========== =========== ==========
Diluted:
Net income available to common shareholders..... $6,726,758 $12,228,652 $5,673,784
========== =========== ==========
Weighted average shares........................... 27,732,054 27,320,151 22,353,986
Effect of dilutive stock options.................. 462,024 571,773 677,214
---------- ----------- ----------
Adjusted weighted average shares................ 28,194,078 27,891,924 23,031,200
========== =========== ==========
Diluted income per share.......................... $ .24 $ .44 $ .25
========== =========== ==========
Options not included in diluted income per share
because exercise price was greater than average
market price: First Quarter..................... 815,834 N/A N/A
Second Quarter.................................. 921,418 2,000 N/A
Third Quarter................................... 62,000 512,771 N/A
Fourth Quarter.................................. 896,433 427,203 N/A
Price Range....................................... $ 23.65 to $ 22.37 to N/A
$ 34.33 $ 34.33

NOTE I -- INCOME TAXES

The following tables summarize the Company's income tax position:

YEARS ENDED JULY 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------

Currently payable
Federal....................................... $ 2,880,813 $ 3,957,785 $ 1,492,683
State......................................... 888,040 820,924 312,606
----------- ----------- -----------
3,768,853 4,778,709 1,805,289
Deferred........................................ 5,031,147 2,151,688 328,514
Tax benefit from the exercise of certain stock
options....................................... -- 56,606 1,426,563
----------- ----------- -----------
Total income tax provision............ $ 8,800,000 $ 6,987,003 $ 3,560,366
=========== =========== ===========

35
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reconciliation of the federal statutory income tax rate to the Company's
effective income tax rates are as follows:

YEARS ENDED JULY 31,
---------------------
1998 1997 1996
----- ----- -----

Federal statutory income tax rate........................... 35.0% 35.0% 34.0%
State income taxes, net of federal income tax benefit....... 6.5 4.3 3.6
Tax-exempt interest......................................... (6.4) (2.6) (0.4)
Acquisition costs........................................... -- -- 3.4
Acquired research and development........................... 24.8 -- --
Research and experimentation tax credit..................... (3.4) -- --
Other....................................................... (0.2) (0.3) (2.0)
---- ---- ----
Effective income tax rate................................... 56.7% 36.4% 38.6%
==== ==== ====

Deferred tax asset and liability components are as follows:

JULY 31,
-----------------------
1998 1997
---------- ----------

Deferred tax assets:
Acquired net operating loss carryforward.................. $ -- $ 265,000
Reserve for doubtful accounts............................. 187,553 60,000
Other..................................................... 38,325 113,757
---------- ----------
225,878 438,757
---------- ----------
Deferred tax liabilities:
Depreciation and asset basis differences.................. 1,571,020 220,000
Software development costs................................ 7,375,170 3,266,000
---------- ----------
8,946,190 3,486,000
---------- ----------
Net deferred tax liability........................ $8,720,312 $3,047,243
========== ==========

NOTE J -- COMMITMENTS AND CONTINGENCIES

The Company leases office space under noncancellable leases which are
accounted for as operating leases. The leases are subject to an escalation
clause using a CPI index. The leases expire between June 1999 and May 2005.

Future minimum lease payments under noncancellable operating leases are as
follows as of July 31, 1998:

JULY 31,
- --------

1999...................................... $1,713,464
2000...................................... 1,104,752
2001...................................... 888,660
2002...................................... 274,143
2003...................................... 254,601
Thereafter................................ 415,941

Rent expense for all operating leases for the years ending July 31, 1998,
1997 and 1996 was $1,117,991, $1,083,000 and $1,129,738, respectively.

In October 1997, the Company acquired a 383,000 square foot office campus
in St. Petersburg, Florida for $13.5 million. The Company expects to spend
approximately $23 million to expand and renovate the facility over the next
three years.

36
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Management estimates that as of July 31, 1998, approximately $13.0 million
will be required in order for the Company to purchase additional equipment,
furniture and hardware and to complete its currently defined software projects.

The Company is engaged in various litigation arising from the ordinary
course of its business. In the opinion of management, the ultimate outcome of
such litigation is not expected to be material to the Company's financial
position, results of operations or liquidity.

As a provider for portability compliance and administration services, the
Company is subject to excise taxes for noncompliance with certain provisions of
COBRA and HIPAA. In addition, the Company accepts financial responsibility for
certain liabilities incurred by its customers that are attributable to the
Company's failure to fulfill its obligations to its customers under its
agreements. The Company maintains a professional liability policy, with a
deductible of $25,000 per occurrence, and an annual per aggregate limit on
coverage of $5.0 million. Although there can be no assurance that the Company
will not incur any material liability for noncompliance with COBRA or HIPAA for
its failure to comply its agreement with any customer, from the Company's
inception through July 31, 1998, the Company has not incurred any material
liability as a provider.

NOTE K -- INCENTIVE BONUS PLAN AND SAVINGS PLAN

Effective January 1, 1992, the Company established a defined contribution
savings plan (the "Savings Plan") covering substantially all employees. The
Savings Plan consists of an employee elective contribution and a Company
matching contribution for each eligible participant. The Company's matching
contribution is determined by the Board of Directors on a discretionary basis.
The Company's contributions under the Savings Plan in fiscal 1998, 1997 and 1996
were approximately $357,054, $261,944 and $167,969, respectively.

Effective August 1, 1993, the Company adopted an incentive bonus plan (the
"Incentive Bonus Plan"), which provides for the discretionary payment of annual
incentive awards to key employees from a pool equal to 10% of the Company's
pre-tax profits (income before income taxes), adjusted upward or downward based
on the attainment of pre-established goals related to the Company's pre-tax
margin (income before income taxes divided by revenues) and its revenue growth
(based on annual increases in revenues). Payments under the Incentive Bonus Plan
are discretionary, based on the determination of the Board of Directors of the
Company and are subject to certain limitations as provided in the Incentive
Bonus Plan. In fiscal 1998, 1997 and 1996, $1,048,496, $1,112,809 and $790,000,
respectively, of incentive bonus was expensed.

NOTE L -- MAJOR CUSTOMER

During fiscal 1998, 1997 and 1996, one of the Company's customers accounted
for approximately 10.5%, 14.5% and 15.0%, respectively, of revenues. This
customer became a client of the Company as a result of the New Jersey
acquisition and signed a three year renewal in fiscal 1998.

37
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE M -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the
quarterly periods of fiscal 1998, 1997 and 1996:

FIRST SECOND THIRD FOURTH TOTAL
----------- ----------- ----------- ----------- -----------

1998
Revenue................. $15,234,938 $16,711,144 $18,618,383 $24,027,808 $74,592,273
Operating income
(loss)................ 3,735,474 4,044,759 (6,472,706) 6,038,270 7,345,797
Net income (loss)....... 3,500,960 4,150,975 (6,442,970) 5,517,793 6,726,758
Net income (loss) per
share (diluted)....... $ .13 $ .15 $ (.23) $ .19 $ .24
1997
Revenue................. $10,389,193 $11,714,389 $13,188,827 $14,786,433 $50,078,842
Operating income........ 2,267,008 2,796,707 3,275,809 3,794,893 12,134,417
Net income.............. 2,611,363 2,936,465 3,184,585 3,496,239 12,228,652.
Net income per share
(diluted)............. $ .09 $ .11 $ .12 $ .13 $ .44
1996
Revenue................. $ 5,614,304 $ 6,851,136 $ 9,067,901 $ 9,628,840 $31,162,181
Operating income........ 1,138,977 1,597,305 1,768,907 1,856,816 6,362,005
Net income.............. 783,436 1,047,632 1,645,273 2,197,443 5,673,784
Net income per share
(diluted)............. $ .04 $ .05 $ .07 $ .08 $ .25

NOTE N -- 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. ("Bullock), for $12.5 million, with an additional $2.0 million payable upon
the attainment of certain revenue requirements during 1996 and 1997. During
fiscal 1997 and 1998, $863,053 and $1,136,947, respectively, of this additional
amount was paid for the attainment of these revenue requirements. Bullock, now
part of ABR Benefits Services, Inc., is located in Princeton, New Jersey and,
when acquired, provided COBRA administration, retiree insurance administration,
insurance continuation billing and collection, pension benefits administration
services, 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.

Effective February 1, 1996, the Company acquired all of the outstanding
capital stock of Total Cobra Services, Inc. ("TCS" for 265,424 (adjusted for
stock splits) shares of restricted Common Stock. This acquisition was accounted
for as a purchase. TCS is located in Irvine, California and provides COBRA
administration and retiree billing services. Pro forma financial information is
not provided for TCS due to its immateriality.

On June 28, 1996, the Company completed a merger of The L.P. Baier Company
("LPB") where 286,020 shares of the Company's stock was exchanged for all of the
outstanding stock of LPB. LPB is located in Fairfax, Virginia and provides
primarily FSA (Flexible Spending Account) administration services and COBRA
administration. The merger was accounted for as a pooling of interests, and
accordingly, the accompanying financial statements have been restated to include
the accounts and operations of LPB for all periods prior to the merger,
including restating the retained earnings at July 31, 1994 to reflect the
difference between the par value of the Company stock issued and the total
shareholders' equity of LPB. In connection with this merger, $361,198 of
acquisition costs were incurred and have been charged to expense in the fourth
quarter of 1996.

38
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective February 1, 1998, the Company, in an acquisition accounted for as
a purchase, acquired all of the outstanding capital stock of Charing Company,
Inc. ("Charing") for $7.5 million in cash and an additional amount to be paid
contingent upon future earnings. The contingent payment, if any will be charged
to goodwill. Charing is located in Wisconsin and provides qualified plan
administration, Section 125 administration, consulting services and
comprehensive employee benefits statement reporting. Goodwill of approximately
$7.5 million resulting from the acquisition is being amortized over a period of
25 years on a straight-line method. Pro forma financial information is not
provided for Charing due to its immateriality.

Effective February 1, 1998, the Company, in an acquisition accounted for as
a purchase, acquired all of the outstanding capital stock of Matthews, Malone &
Associates, Ltd. ("Matthews/Malone") for $2.9 million in cash and an additional
amount to be paid contingent upon future earnings. Potential contingent payments
could range between $0 and $500,000 and would be charged to goodwill if paid.
Matthews/Malone is located in Arizona and provides defined benefit and defined
contribution plan administration services as well as Section 125 administration
and non-qualified plan administration services. Goodwill of approximately $2.5
million resulting from the acquisition is being amortized over a period of 25
years on a straight-line method. Pro forma financial information is not provided
for Matthews/Malone due to its immateriality.

On April 30, 1998, the Company, in an acquisition accounted for as a
purchase, acquired all of the outstanding capital stock of Business Computer
Services, Inc. ("BCSI") d/b/a PayAmerica ("PayAmerica"(R)) in exchange for
1,198,008 shares of the Company's voting common stock valued at $28.8 million,
reflecting a 20% discount for the large block of common stock and restricted
status thereof. The purchase price was allocated to the net assets acquired and
to purchased in-process research and development ("R&D"). Purchased R&D includes
the value of products in the development stage and not considered to have
reached technological feasibility. In accordance with applicable accounting
rules, purchased in-process R&D is required to be expensed. Accordingly
$11,010,000 (which amount was determined by a third-party valuation) of the
acquisition cost was expensed in the third quarter of fiscal 1998. BCSI is
located in McLean, Virginia and has offices in Maryland and New Jersey. BCSI
provides payroll and tax deposit services, along with human resource
administration services. Goodwill of approximately $11.8 million resulting from
the acquisition is being amortized over a period of 25 years on a straight-line
method. Pro forma financial information is not provided for BCSI due to its
immateriality.

The following pro forma balances have been derived from the historical
financial statements of the Company, Charing, Matthews/Malone and BCSI and
adjusts such information to give effect to the acquisitions of Charing,
Matthews/Malone and BCSI. The balances for the years ended July 31, 1998 and
1997 assume that these acquisitions occurred on August 1, 1996. The unaudited
pro forma financial information is not necessarily indicative of the results
which would actually have occurred had the transactions been in effect on the
dates and for the periods indicated or which may result in the future.

YEARS ENDED JULY 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS EXCEPT
PER SHARE DATA)

Revenue.................................. $84,350 $62,725
Operating income......................... 19,582 2,673
Net income............................... 18,274 1,947
Net income per share (diluted)........... $ 0.63 $ 0.07

Effective August 1, 1998, the Company, in an acquisition accounted for as a
purchase, acquired all of the capital stock of MidAtlantic 401(k) Services, Inc.
("MidAtlantic") for $10.9 million in cash and an additional amount to be paid
contingent upon future earnings. Potential contingent payments could range
between $0 and $2.0 million and would be charged to goodwill if paid. The
majority of the purchase price is allocated to goodwill and amortized over 25
years.

39
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective October 22, 1998, the Company, in an acquisition accounted for as
a purchase, acquired all of the outstanding capital stock of Chowning, Ltd.,
d/b/a The Barrington Group, for $15.9 million in cash and an additional amount
to be paid contingent upon future earnings. Potential contingent payments could
range between $0 and $800,000 and would be charged to goodwill if paid. Chowning
is headquartered in Milwaukee, Wisconsin, and has additional offices in
Maryland, Pennsylvania and California. The Barrington Group administers Section
125 benefit plans (full cafeteria plans, flexible spending accounts and pre-tax
premium plans). The majority of the purchase price is allocated to goodwill and
amortized over 25 years.

Effective October 1, 1998, the Company, in an acquisition accounted for as
a purchase, acquired all of the outstanding capital stock of Western Pension
Service Corporation ("Western Pension") for $7.0 million in cash and an
additional amount to be paid contingent upon future earnings. The potential
contingent payment could be $1.0 million and would be charged to goodwill if
paid. Western Pension is headquartered in San Rafael, California and administers
qualified retirement plans. The majority of the purchase price is allocated to
goodwill and amortized over 25 years.

Effective November 1, 1998, the Company, in an acquisition accounted for as
a purchase, acquired all of the outstanding capital stock of BMC Consultants,
Inc. ("BMC") for $3.0 million in cash and an additional amount to be paid
contingent upon future earnings. Potential contingent payments could range
between $0 and $800,000 and would be charged to goodwill if paid. BMC is
headquartered in Englewood, Colorado and provides defined contribution and
defined benefit plan administration services. The majority of the purchase price
is allocated to goodwill and amortized over 25 years.

NOTE O -- CASH FLOW INFORMATION

Non-cash investing and financing activities:

During the years presented, the Company has completed certain acquisitions
(see Note N). In connection with these acquisitions liabilities were assumed as
follows:

YEARS ENDED JULY 31,
----------------------------------------
1998 1997 1996
------------ ---------- ------------

Fair Value of Assets Acquired.................. $ 33,065,835 $ 871,684 $ 12,896,190
Cash Paid for Capital Stock.................... (11,608,599) (871,684) (11,288,020)
------------ ---------- ------------
Stock Exchanged for Capital Stock.............. (28,800,112) -- --
Acquired Research and Development.............. 11,010,000 -- --
------------
Liabilities assumed............................ $ 3,667,124 $ -- $ 1,608,170
============ ========== ============
Stock Issued in Connection with Acquisition.... $ -- $ -- $ 3,050,176
============ ========== ============

Cash Paid during the Year for Income Taxes..... $ 3,253,574 $5,241,601 $ 1,663,102
============ ========== ============

40
43

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON THE SCHEDULE

Board of Directors
ABR Information Services, Inc.

In connection with our audit of the consolidated financial statements of
ABR Information Services, Inc. referred to in our report dated November 11,
1998, which is included on page 23 of this Form 10-K for the year ended July 31,
1998, we have also audited Schedule II for each of the three years in the period
ended July 31, 1998. In our opinion, the schedule presents fairly, in all
material respects, the information required to be set forth therein.

GRANT THORNTON LLP

Tampa, Florida
November 11, 1998

41
44

SCHEDULE II
ABR INFORMATION SERVICES, INC.

VALUATION AND QUALIFYING ACCOUNTS

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------- ---------- ----------------------------- ---------- ----------
ADDITIONS
-----------------------------
BALANCE AT CHARGED CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING TO COSTS OTHER ACCOUNTS DESCRIBE END OF
DESCRIPTION OF PERIOD AND EXPENSES -- DESCRIBE (1) PERIOD
- ----------- ---------- ------------ -------------- ---------- ----------

Year Ended July 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts... 26,202 20,000 -- 7,308 38,894
Year Ended July 31, 1997
Deducted from asset accounts:
Allowance for doubtful accounts... 38,894 91,500 -- 219 130,175
Year Ended July 31, 1998
Deducted from asset accounts:
Allowance for doubtful accounts...... 130,175 339,033 -- 41,894 427,314

42
45

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.

ABR INFORMATION SERVICES, INC.

By: /s/ JAMES P. O'DROBINAK
------------------------------------
James P. O'Drobinak
Senior Vice President and Chief
Financial Officer

November 13, 1998

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James E. MacDougald and James P. O'Drobinak, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments to
this report, and to file the same, with all exhibits thereto, and any other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON NOVEMBER 13, 1998.

/s/ JAMES E. MACDOUGALD /s/ SUZANNE M. MACDOUGALD
- ----------------------------------------------------- -----------------------------------------------------
James E. MacDougald Suzanne M. MacDougald
Chairman of the Board, Senior Vice President, Secretary and Director
President and Chief Executive Officer and
Director (Principal Executive Officer)

/s/ JAMES P. O'DROBINAK /s/ THOMAS F. COSTELLO
- ----------------------------------------------------- -----------------------------------------------------
James P. O'Drobinak Thomas F. Costello
Senior Vice President and Director
Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ MARK M. GOLDMAN /s/ PETER A. SULLIVAN
- ----------------------------------------------------- -----------------------------------------------------
Mark M. Goldman Peter A. Sullivan
Director Director

43
46

EXHIBITS TO FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 31, 1998

ABR INFORMATION SERVICES, INC.
FILE NO. 0-24132
47

ABR INFORMATION SERVICES, INC.

EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JULY 31, 1998

EXHIBIT FILED
NUMBER DESCRIPTION HEREWITH
- ------- ----------- --------

3.1 -- Articles of Incorporation of ABR Information Services, Inc.*
3.2 -- Bylaws of ABR Information Services, Inc.*
10.1 -- Form of Employment Agreement between ABR Information
Services, Inc. and each of James E. MacDougald and Suzanne
M. MacDougald, executive officers.*
10.2 -- ABR Information Services, Inc. 1995 Non-Employee Director
Stock Option Plan.*
10.3 -- ABR Information Services, Inc. 1996 Non-Employee Director
Stock Option Plan, as amended. X
10.4 -- ABR Information Services, Inc. Amended and Restated 1987
Stock Option Plan.*
10.5 -- ABR Information Services, Inc. Amended and Restated 1993
Stock Option Plan (as amended).*
10.6 -- ABR Information Services, Inc. Incentive Bonus Plan.*
10.7 -- Revolving Line of Credit Note/Loan Agreement dated June 19,
1998 by and between Barnett Bank, N.A. and ABR Information
Services, Inc. X
10.8 -- Services Agreement between Corporate Benefits Delivery of
General Electric Company and ABR Benefits Services, Inc. (as
successor to Bullock Associates, Inc.), as amended on
December 15, 1995.*
10.9 -- Agreement and Plan of Reorganization dated as of February 1,
1996 by and among ABR Information Services, Inc., Total
Cobra Services and John M. Hermann.*
10.10 -- Agreement and Plan of Reorganization dated as of June 28,
1996 by and among ABR Information Services, Inc., The L.P.
Baier Company and L.P. Baier's shareholders.*
10.11 -- Stock Purchase Agreement by and among ABR Information
Services, Inc., Bullock Associates, Inc., W. Carl Bullock,
Barbara A. Biasotti and Nancy L. Clark dated as of December
15, 1995.*
10.12 -- Agreement for Sale and Purchase of Property, dated October
2, 1997, by and between Florida Power Corporation (Seller)
and ABR Properties, Inc. (Buyer) including commercial lease
as of the same date.*
10.13 -- Stock Purchase Agreement dated February 26, 1998 and
effective February 1, 1998, by and among ABR Information
Services, Inc., Charing Company, Inc. and the shareholders
of Charing Company, Inc.*
10.14 -- Stock Purchase Agreement dated February 27, 1998 and
effective February 1, 1998, by and among ABR Information
Services, Inc., Matthews, Malone & Associates, Ltd. and the
shareholders of Matthews, Malone & Associates, Ltd.*
10.15 -- Agreement and Plan of Reorganization, dated April 30, 1998,
by and among ABR Information Services, Inc., Business
Computer Services, Inc. ("BCSI"), Joseph M. Speroni, Paul J.
Speroni, Robert S. Speroni, Stephen J. Speroni, Joseph F.
Speroni, David M. Speroni, Richard B. Speroni, Rex Haverty,
E. Hale Waller, Nikky Losapio and Christopher Mantua, as the
Shareholders of BCSI, and Samuel N. Klewans, as
Shareholders' Agent.*
10.16 -- Stock Purchase Agreement, dated August 12, 1998, and
effective as of August 1, 1998, by and among ABR Information
Services, Inc., MidAtlantic 401(k) Services, Inc., the
Shareholders of MidAtlantic 401(k) Services, Inc., and E.
Franklin DePew, as Shareholders' Agent. X

EXHIBIT FILED
NUMBER DESCRIPTION HEREWITH
- ------- ----------- --------

10.17 -- Stock Purchase Agreement, dated October 22, 1998, by and
among ABR Information Services, Inc., Chowning, Ltd., The
Barrington Group, Ltd., Mark G. FitzGerald, Timothy D. Dyer
and Laura J. LaPinske, as shareholders of Chowning, Ltd.,
and Mark G. Fitzgerald, as Shareholders' Agent.*
10.18 -- ABR Information Services, Inc. 1997 Stock Option Plan. X
10.19 -- Stock Purchase Agreement, dated October 30, 1998, and
effective as of October 1, 1998, by and among ABR
Information Services, Inc., Western Pension Service
Corporation, and Robert A. Jocelyn. X
10.20 -- Stock Purchase Agreement, dated November 10, 1998, and
effective as of November 1, 1998, by and among ABR
Information Services, Inc., BMC Consultants, Inc., Jeffrey
J. Berends, D'Nelle L. Macaluso, Frank J. Dobis, Scott A.
Hittner, Carol L. Carlson, Thomas W. Neilsen, Jr., Walter L.
Malles, Jr. and Gene R. Etzig, as Shareholders of BMC
Consultants, Inc., and Jeffrey J. Berends, as Shareholders'
Agent. X
10.21 -- Form of Key Executive Employment and Severance Agreement
between ABR Information Services, Inc. and each of James E.
MacDougald and James P. O'Drobinak, executive officers. X
21.1 -- List of subsidiaries of ABR Information Services, Inc. X
23.1 -- Consent of Grant Thornton LLP. X
24.1 -- Powers of Attorney (included on signature page hereto).
27.1 -- Financial Data Schedule (for SEC use only).

- ---------------

* Incorporated by reference.