-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RPwpXim9c5tDIbpwM1AaFBbpjrW/a52iUchjeeFbzLlpZuCpT3GlbQfFNKKO3wlX KDlY3lw3NgfTLqVehpFV9g== 0000950131-97-005394.txt : 19970912 0000950131-97-005394.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950131-97-005394 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19970904 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BUSINESS INFORMATION INC /DE CENTRAL INDEX KEY: 0000879437 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DIRECT MAIL ADVERTISING SERVICES [7331] IRS NUMBER: 470751545 STATE OF INCORPORATION: NE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-19598 FILM NUMBER: 97675222 BUSINESS ADDRESS: STREET 1: 5711 S 86TH CIRCLE CITY: OMAHA STATE: NE ZIP: 68127 BUSINESS PHONE: 4025934500 MAIL ADDRESS: STREET 1: 5711 SOUTH 86TH CIRCLE CITY: OMAHA STATE: NE ZIP: 68127 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Act of 1934 [Fee Required] For the fiscal year ended December 31, 1995 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from to --------------- --------------- Commission file number: 0-19598 AMERICAN BUSINESS INFORMATION, INC. (Exact name of registrant as specified in its charter) Delaware 47-0751545 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5711 South 86th Circle, Omaha, Nebraska 68127 (Address of principal executive offices) Registrant's telephone number, including area code: (402) 593-4500 -------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0025 par value -------------------------------------------------- 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. [_] 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 ----- ----- The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on March 15, 1996 as reported on the NASDAQ National Market System, was approximately $138,090,425. Shares of Common Stock held by each officer and director and by each person who owns 5% of more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 15, 1996 registrant had outstanding 20,791,735 shares of Common Stock. PART I American Business Information, Inc. (the "Company") hereby amends Items 6, 7, 8 and 14, Schedule II, and, Exhibits 11, 23 and 27 of its Form 10-K filed for the fiscal year ended December 31, 1995 for purposes described in Note (1) "General" in the Notes to Consolidated Financial Statements on page F-7. -2- ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA. The selected consolidated financial data below have been derived from the Company's Consolidated Financial Statements and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Consolidated Financial Statements and related notes appearing elsewhere herein.
Year Ended December 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (in thousands, except per share data) Statement of Operations Data: Net sales......................................... $89,695 $76,302 $58,926 $48,517 $41,533 Costs and expenses: Database and production costs.................... 24,827 20,289 15,042 11,774 10,891 Selling, general and administrative.............. 40,438 33,540 25,469 20,051 17,243 Depreciation and amortization.................... 3,511 3,125 2,737 2,410 2,409 Impairment of net assets of business transferred under contractual arrangement(1).... 2,910 - - - - Unusual charges: purchased database, cancellation of noncompete agreements and stock sale compensation(2).................. - - - - 5,254 ------- ------- ------- ------- ------- Total costs and expenses.......................... 71,686 56,954 43,428 34,235 35,797 ------- ------- ------- ------- ------- Operating income.................................. 18,009 19,348 15,678 14,282 5,736 Other income (expense): Investment income................................ 1,322 1,112 1,172 607 224 Interest expense................................. (165) (255) (298) (605) (1,578) Other............................................ - 94 48 58 (424) ------- ------- ------- ------- ------- Income before income taxes........................ 19,166 20,299 16,600 14,342 3,958 Income taxes...................................... 7,165 7,475 5,825 4,435 - ------- ------- ------- ------- ------- Net income........................................ $12,001 $12,824 $10,775 $ 9,907 $ 3,958 ======= ======= ======= ======= ======= Historical and pro forma information(3) Net income....................................... $12,001 $12,824 $10,775 $ 9,162 $ 2,263 ======= ======= ======= ======= ======= Earnings per share(4): Net income........................................ $ 0.58 $ 0.62 $ 0.52 $ 0.45 $ 0.13 ======= ======= ======= ======= ======= Weighted average shares outstanding (4)........... 20,738 20,678 20,658 20,165 17,621 ======= ======= ======= ======= ======= December 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- (in thousands) Balance Sheet Data: Working capital.................................. $45,794 $35,411 $30,765 $23,465 $ 1,493 Total assets..................................... 91,241 77,783 61,027 47,807 28,471 Long-term debt, including current portion........ 2,039 3,821 4,587 5,306 15,725 Shareholders' equity............................. 76,084 63,326 50,665 39,508 9,666
- ----------------- (1) Represents charge related to the impairment of net assets of American Business Communications, Inc. transferred to Baker University in June 1995, which has been accounted for in accordance with Securities and Exchange Commission's Staff Accounting Bulletins 5-E and 5-Z. (2) Reflects charges of $2.5 million related to a database purchased in the acquisition of certain assets of Trinet effective January 1991, $2.4 million resulting from the cancellation of noncompete agreements with former shareholders of CPI, and $373,000 in compensation related to issuance of Common Stock to an employee. (3) Prior to February 1992, the Company was taxed as an S corporation. Accordingly, net income prior to February 1992 contained no provision for federal and state income taxes. Pro forma net income reflects a pro forma tax provision at a combined federal and state income tax rate of 36% in 1992 and 43% in 1991. The pro forma tax provision for 1991 reflects non- cash compensation for which no tax deduction was taken. The Company ceased being taxed as an S corporation February 1992. (4) Restated for 3 for 2 stock split in August, 1995. -3- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview The Company is a leading provider of business-to-business marketing information which it supplies from its proprietary database containing information on approximately 10 million businesses in the United States and 1 million businesses in Canada. The Company generally recognizes revenues from sales of its products and services at the time the product is delivered or the service is performed. The pricing of the products and services varies according to the number of names supplied, the type of information purchased, the medium through which the information is delivered, and the channel of distribution. In 1995, over 100,000 customers purchased the Company's products and services. The Company's primary expenses relate to maintaining, updating, and telephone verifying its database and the direct marketing costs associated with selling its products and services. The Company has been profitable on an operating basis in each year since its inception in 1972. The Company believes inflation has not had a significant impact on its operations. The Company's net sales on a quarterly basis can be affected by seasonal characteristics, the timing of acquisitions, and certain other factors including the timing and extent of the Company's own direct marketing activity. This discussion and analysis contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, which are subject to the "safe harbor" created by that section. The Company's actual future results could differ materially from those projected in the forward-looking statements. Some factors which could cause future actual results to differ materially from the company's recent results or those projected in the forward-looking statements are described in "Factors Affecting Operating Results" below. The Company assumes no obligation to update the forward-looking statements or such factors. -4- Results of Operations The following table sets forth, for the periods indicated, certain items from the Company's statement of operations data expressed as a percentage of net sales:
Year Ended December 31 ---------------------- 1995 1994 1993 ---- ---- ---- Net sales.......................................... 100% 100% 100% Costs and expenses: Database and production costs..................... 28 27 25 Selling, general and administrative............... 45 44 43 Depreciation and amortization..................... 4 4 5 Impairment of net assets of business transferred.. 3 - - ---- --- ---- Total costs and expenses........................... 80 75 73 ---- --- ---- Operating income................................... 20 25 27 Other income (expense)............................. 1 2 1 ---- --- ---- Income before income taxes......................... 21 27 28 Income taxes....................................... 8 10 10 ---- --- ---- Net income......................................... 13% 17% 18% ==== === ====
1995 Compared to 1994 Net sales increased 18% to $89.7 million in 1995 from $76.3 million in 1994. The Company's sales lead and directory products accounted for $9.6 million of this increase with a $7.6 million increase coming from CD-ROM products, offset by a decrease in revenue from American Business Communications, Inc. (ABC) of $3.8 million due to the transfer of net assets to an unrelated party. Revenue increases for all products were the result of an increase in both the number and average size of orders placed by customers. There were no significant price increases for the Company's products and services during the year. Database and production costs for 1995 increased to $24.8 million, or 28% of net sales, from $20.3 million, or 27% of net sales, in 1994. These amounts primarily represent the costs of compiling and telephone verifying information in the database and fulfilling customer orders. The increase in database and production costs as a percentage of net sales was primarily attributable to investments in database programming and CD-ROM software development activities as well as increased sales of CD-ROM products which bear a slightly higher level of costs then the Company's traditional lead generation products. Selling, general and administrative expenses increased in 1995 to $40.4 million from $33.5 million in 1994. The increased spending was primarily attributable to an overall increase in direct marketing activities for all of the Company's products and services, continued investment in a field sales organization and promotional marketing of CD-ROM products. Additionally, the increase includes a charge of $3.1 million related to the Company's acquisition, at fair market value, of 291,875 shares of common stock from a former officer of the Company. Excluding this charge recorded as compensation expense, overall spending levels were in-line with revenue recognition and decreased in 1995 to 42% of net sales as compared to 44% of net sales in 1994. -5- Depreciation and amortization expense increased to $3.5 million in 1995 from $3.1 million in 1994, primarily due to the increased amortization related to acquisitions. Operating income in 1995 was $18 million, or 20% of net sales, compared to $19.3 million, or 25% of net sales, in 1994. Investment income during 1995 increased to $1.3 million compared to $1.1 in 1994 due to the increase in cash and cash equivalents and investments. Interest expense decreased to $165,000 in 1995 from $255,000 in 1994 due to lower outstanding debt balances during 1995. 1994 Compared to 1993 Net sales increased 29% to $76.3 million in 1994 from $58.9 million in 1993. Revenues from the Company's existing products and services represented 17% of this increase (or $10.1 million), and 12% (or $7.1 million) was attributable to revenues from ABC, which was acquired in June 1993, BMI Medical Information, Inc. (BMI) which was acquired by the Company in March, 1994 and Zeller and Letica (Z&L) which was acquired in August, 1994. There have been no significant price increases for the majority of the Company's existing products and services during the year. Database and production costs for 1994 to $20.3 million, or 27% of net sales, from $15.0 million, or 25% of net sales, in 1993. These amounts primarily represent the costs of compiling and telephone verifying information in the database, fulfilling customer orders, the direct costs of ABC associated with presenting education training programs, and royalty costs paid by BMI. Approximately $2.8 million of the increase was attributable to the direct costs of ABC and BMI, and $2.5 million was attributable to increased order fulfillment and database compilation costs. Selling, general and administrative expenses increased in 1994 to $33.5 million, or 44% of net sales, from $25.5 million, or 43% of net sales in 1993. The increase in absolute amount is due primarily to the acquisitions of ABC, BMI and Z&L. ABC historically has higher marketing expenses when expressed as a percentage of net sales. ABC added approximately $2.5 million in selling and administrative costs over the prior year. BMI and Z&L contributed $1.8 million to selling and administrative costs. The Company's market expansion efforts and marketing expenses related to new products also contributed to the increase, which included the strengthening of the National Accounts sales force. Depreciation and amortization expense increased to $3.1 million in 1994 from $2.7 million in 1993, primarily due to the increased amortization related to the acquisition of ABC and BMI. Operating income in 1994 was $19.3 million, or 25% or net sales, compared to $15.7 million, or 27% of net sales, in 1993. Investment income during 1994 was $1.1 million compared to $1.2 in 1993. Interest expense decreased to $255,000 in 1994 from $298,000 in 1993 due to lower outstanding debt balances during 1994. -6- Liquidity and Capital Resources As of December 31, 1995, the Company's principal sources of liquidity included cash and cash equivalents of $12.0 million and marketable securities of $23.3 million. The Company also has a revolving line of credit totaling $5.0 million, all of which was available for borrowing at year-end. Net cash provided by operating activities totaled $15.3 million in 1995 as compared to $18.1 million in 1994. The decrease was attributable primarily to higher levels of receivables from sales of consumer CD-ROM products. The Company added approximately $9.0 million of marketable securities during 1995 and spent approximately $1.2 million on equipment, primarily data processing equipment and system upgrades, and approximately $2.3 million related to expansion of its Omaha facility. A total of $3.2 million of debt, most of which was incurred in connection with a 1994 facility expansion, was repaid during 1995. The Company anticipates spending up to $2.5 million for equipment additions in 1996 and an additional $4.0 million for facility expansion. The Company believes that cash flows from operations and its cash and short term investments will be sufficient to fund its foreseeable operating and capital expenditure needs in 1996. Additional financing may be required in the event that other capital investment, business expansion or acquisition opportunities arise. Factors Affecting Operating Results Fluctuations in Operating Results. The Company believes that future operating results may be subject to quarterly and annual fluctuations based on numerous factors. The Company's net sales on a quarterly basis can be affected by seasonal characteristics and certain other factors including the timing and extent of the Company's own direct marketing activity. In addition, the expenses associated with acquiring data, direct marketing campaigns and the timing of acquisitions and the costs and expenses associated therewith may also affect operating results. Competition. The business information industry is highly competitive. In particular, the rapid expansion of the Internet creates a substantial new channel for distributing business information to the market, and a new avenue for future entrants to the business information industry. There is no guarantee that the Company will be successful in this new market. Many of the Company's principal competitors have substantially greater resources than the Company. In addition, the Company has no control over the possible future entry into the marketplace of other potential competitors, some of which may be much larger than the Company and may have much larger capital bases form which to develop and compete with the Company. Direct Marketing Regulation and Postal Rates. The Company and many of its customers engage in direct marketing. Any negative impact on direct marketing, including changes to existing laws or regulations or future laws and regulations, may adversely affect the Company's operating results. The direct mail industry depends and will continue to depend upon the services of the United States Postal Service and other private mail carriers. Any modification by the Postal Service of its rate structure or any increase in public or private postal rates generally could have a negative impact on the demand for business information, direct mail activities and the cost of the Company's direct mail activities. In -7- addition to the risk of rate increases, the direct mail industry, and thus the Company's operating results, could be adversely affected by postal strikes. Loss of Data Centers. The Company's business depends on computer systems contained in the Company's two data centers. The Company's disaster recovery program is based upon maintaining redundant computer equipment at each of its data centers. The data centers are protected by Halon fire suppression systems, designed to extinguish a fire without damaging the computer equipment. The centers are further protected by uninterrupted power supply backup systems. There can be no guarantee that a fire or other disaster affecting one or both of its data centers would not disable the Company's computer systems. Any significant damage to either or both of the data centers could have a material adverse affect on the Company. -8- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item (other than selected quarterly financial data which is set forth below) is incorporated by reference to the Consolidated Financial Statements set forth on pages F-1 through F-16 hereof. The following table sets forth selected financial information for each of the eight quarters in the two-year period ended December 31, 1995. This information has been prepared by the Company on the same basis as the consolidated financial statements and includes all normal recurring adjustments necessary to present fairly this information when read in conjunction with the Company's audited consolidated financial statements and the notes thereto.
1995 Quarter Ended ---------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- -------- (in thousands, except per share data) Net sales........................................ $22,357 $22,479 $21,501 $23,358 Costs and expenses: Database and production costs.................. 5,645 6,310 6,149 6,723 Selling, general and administrative............ 9,605 9,309 8,366 13,158 Depreciation and amortization.................. 832 807 796 1,076 Impairment of net assets of business transferred under contractual arrangement.... - 2,640 - 270 ------- ------- ------- ------- Total costs and expenses......................... 16,082 19,066 15,311 21,227 ------- ------- ------- ------- Operating income................................. 6,275 3,413 6,190 2,131 Other income (expense), net...................... (187) 430 334 580 ------- ------- ------- ------- Income before income taxes....................... 6,088 3,843 6,524 2,711 Income taxes..................................... 2,275 1,461 2,420 1,009 ------- ------- ------- ------- Net income....................................... $ 3,813 $ 2,382 $ 4,104 $ 1,702 ======= ======= ======= ======= Earnings per share: Net income....................................... $ 0.19 $ 0.11 $ 0.20 $ 0.08 ======= ======= ======= ======= Weighted average shares outstanding..................................... 20,685 20,719 20,768 20,775 ======= ======= ======= =======
1994 Quarter Ended --------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- ------- Net sales........................................ $17,443 $18,795 $19,473 $20,591 Costs and expenses: Database and production costs.................. 4,324 5,271 5,383 5,311 Selling, general and administrative............ 8,184 8,029 8,314 9,013 Depreciation and amortization.................. 760 823 819 723 Impairment of net assets of business transferred under contractual arrangement..... - - - - ------- ------- ------- ------- Total costs and expenses.................... 13,268 14,123 14,516 15,047 ------- ------- ------- ------- Operating income................................. 4,175 4,672 4,957 5,544 Other income (expense), net...................... 243 227 238 243 ------- ------- ------- ------- Income before income taxes....................... 4,418 4,899 5,195 5,787 Income taxes..................................... 1,550 1,740 1,865 2,320 ------- ------- ------- ------- Net income....................................... $ 2,868 $ 3,159 $ 3,330 $ 3,467 ======= ======= ======= ======= Earnings per share: Net income....................................... $ 0.14 $ 0.16 $ 0.16 $ 0.16 ======= ======= ======= ======= Weighted average shares outstanding.............. 20,676 20,676 20,678 20,678 ======= ======= ======= =======
1995 Quarter Ended ---------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- ------- As a Percentage of Net Sales: Net sales........................................ 100% 100% 100% 100% Costs and expenses: Database and production costs.................. 25 28 28 29 Selling, general and administrative............ 43 41 39 56 Depreciation and amortization.................. 4 4 4 5 Impairment of net assets of business transferred.................................. - 12 - 1 Operating income................................. 28 15 29 9
1994 Quarter Ended --------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- ------- As a Percentage of Net Sales: Net sales........................................ 100% 100% 100% 100% Costs and expenses: Database and production costs.................. 25 28 28 26 Selling, general and administrative............ 47 43 43 44 Depreciation and amortization.................. 4 4 4 3 Impairment of net assets of business transferred.................................. - - - - Operating income................................. 24 25 25 27
-9- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. The following documents are filed as a part of this Report: Financial Statements. The following Consolidated Financial Statements of American Business Information, Inc. and Report of Independent Accountants are included at pages F-1 through F-15 of this Form 10-K:
DESCRIPTION PAGE NO. ------------------------------------ -------- Report of Independent Accountants.............................. F-2 Consolidated Balance Sheets as of December 31, 1995 and 1994....................................................... F-3 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994, and 1993........................ F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994, and 1993.............. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993........................ F-6 Notes to Consolidated Financial Statements..................... F-7
Financial Statement Schedule. The following consolidated financial statement schedule of American Business Information, Inc. and Subsidiaries for the years ended December 31, 1995, 1994 and 1993 are filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements.
DESCRIPTION PAGE NO. ----------------------------------- -------- Schedule II Valuation and Qualifying Accounts................. S-1
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or notes thereto. -10- Exhibits. The following Exhibits are filed as part of, or incorporated by reference into, this report: Exhibit No. Description ------- ----------- 3.1(1) Certificate of Incorporation 3.2(1) By-laws 4.1(1) Specimen Certificate representing the Common Stock 10.1(2) 1992 Stock Option Plan 10.2(2) Form of Indemnification Agreement with Officers and Directors 10.4(3) Loan Agreement between Registrant and FirsTier Bank 11 Statement re: computation of per share earnings 23 Consent of Independent Accountants 24 Power of Attorney (included on signature page) - -------------------- (1) Incorporated by reference to exhibits filed with Registrant's Registration Statement on Form S-1 (No. 33-42887) which became effective February 18, 1992. (2) Incorporated by reference to exhibits filed with Registrant's Registration Statement on Form S-1 (No. 33-51352) which became effective September 16, 1992. (3) Incorporated by reference to exhibits filed with Registrant's year end report on Form 10-K for the year ended December 31, 1993. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 1995. -11- 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. AMERICAN BUSINESS INFORMATION, INC. By: /s/ Vinod Gupta ---------------------------------------- Vinod Gupta Chairman of the Board, Chief Executive Officer (principal executive officer) /s/ Jon H. Wellman ---------------------------------------- Jon H. Wellman President and Chief Operating Officer /s/ Steven Purcell ---------------------------------------- Steven Purcell Chief Financial Officer (principal financial officer) Dated: August 13, 1997 -12- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Vinod Gupta and Jon Hoffmaster, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------------------------- --------------------------------- ------------- /s/ Vinod Gupta Chairman of the Board, Chief July 21, 1997 - ------------------------------------------- Executive Officer (principal Vinod Gupta executive officer) /s/ Jon H. Wellman President and Chief Operating July 21, 1997 - ----------------------------------------- Officer Jon H. Wellman /s/ Steven Purcell Chief Financial Officer July 21, 1997 - -------------------------------------------- (principal financial officer) Steven Purcell /s/ Jon D. Hoffmaster Director July 21, 1997 - ---------------------------------------- Jon D. Hoffmaster /s/ Gautam Gupta Director July 21, 1997 - ----------------------------------------- Gautam Gupta /s/ Elliot S. Kaplan Director July 21, 1997 - ------------------------------------------- Elliot S. Kaplan /s/ Harold Andersen Director July 21, 1997 - --------------------------- Harold Andersen /s/ George F. Haddix Director July 21, 1997 - --------------------------- George F. Haddix /s/ Paul A. Goldner Director July 21, 1997 - --------------------------- Paul A. Goldner /s/ George J. Kubat Director July 21, 1997 - --------------------------- George J. Kubat
-13- REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of American Business Information, Inc.: We have audited the accompanying consolidated balance sheets of American Business Information, Inc. and subsidiaries as of December 31, 1995 and 1994 and related consolidated statements of operations, stockholders equity and cash flows for each of the three years in the period ended December 31, 1995. 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 that 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 American Business Information, Inc. and subsidiaries as of December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 17, the accompanying financial statements have been restated. /s/ COOPERS & LYBRAND L.L.P --------------------------- COOPERS & LYBRAND L.L.P. Omaha, Nebraska January 23, 1996, except for Note 17, for which the date is July 31, 1997 F-2 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS __________________________________________ as of December 31, 1995 and 1994 (In thousands, except share amounts)
ASSETS 1995 1994 - ------------------------------------------------------------ -------- ------- Restated Current assets: Cash and cash equivalents................................. $11,999 $13,491 Marketable securities..................................... 23,350 14,684 Trade accounts receivable, net of allowances of $1,024 and $404, respectively...................................... 18,552 15,112 Income tax receivable.................................... 984 -- Prepaid expenses.......................................... 3,160 1,882 Deferred income taxes..................................... 129 -- ------- ------- Total current assets........................................ 58,174 45,169 ------- ------- Property and equipment, net............................... 13,885 11,106 Net assets of business transferred under contractual arrangement............................................. 2,972 -- Intangible assets, net of accumulated amortization........ 14,211 19,567 Other assets.............................................. 1,999 1,941 ------- ------- $91,241 $77,783 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------- Current liabilities: Current portion of long-term debt......................... $ 969 $ 815 Accounts payable.......................................... 4,255 2,416 Accrued payroll expenses.................................. 5,267 1,496 Accrued expenses.......................................... 1,889 4,374 Income taxes payable...................................... -- 430 Deferred income taxes..................................... -- 227 ------- ------- Total current liabilities................................... 12,380 9,758 ------- ------- Long-term debt, net of current portion...................... 1,070 3,006 Deferred income taxes....................................... 1,707 990 Minority interest........................................... -- 703 Commitments and contingencies Stockholders' equity: Preferred stock, $.0025 par value. Authorized 5,000,000 shares; none issued or outstanding............ -- -- Common stock, $.0025 par value. Authorized 25,000,000 shares; issued and outstanding 20,776,860 shares at December 31, 1995, and 20,682,735 shares at December 31, 1994....................................... 51 34 Paid-in capital........................................... 27,342 26,573 Retained earnings......................................... 48,937 36,936 Net unrealized holding loss, net of tax................... (246) (217) ------- ------- Total stockholders' equity.............................. 76,084 63,326 ------- ------- $91,241 $77,783 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-3 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS __________________________________________ for the years ended December 31, 1995, 1994 and 1993 (In thousands, except per share amounts)
1995 1994 1993 ------- ------- ------- Restated Net sales....................................... $89,695 $76,302 $58,926 Costs and expenses: Database and production costs................. 24,827 20,289 15,042 Selling, general and administrative........... 40,438 33,540 25,469 Depreciation and amortization................. 3,511 3,125 2,737 Impairment of net assets of business transferred under contractual arrangement... 2,910 -- -- ------- ------- ------- 71,686 56,954 43,428 ------- ------- ------- Operating income................................ 18,009 19,348 15,678 Other income (expense): Investment income............................. 1,322 1,112 1,172 Interest expense.............................. (165) (255) (298) Other expense................................. -- 94 48 ------- ------- ------- Income before income taxes...................... 19,166 20,299 16,600 Income taxes.................................. 7,165 7,475 5,825 ------- ------- ------- Net income...................................... $12,001 $12,824 $10,775 ======= ======= ======= Earnings per share: Net income...................................... $ 0.58 $ 0.62 $ 0.52 ======= ======= ======= Weighted average shares outstanding............. 20,738 20,678 20,658 ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. F-4 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY __________________________________________ for the years ended December 31, 1995, 1994 and 1993 (In thousands, except share amounts)
Net Total Common Paid-In Retained Unrealized Stockholders' Stock Capital Earnings Holding Loss Equity ----- ------- -------- ------------ ------ Balances, December 31, 1992................ $34 $26,137 $13,337 $ - $39,508 Issuance of 45,000 shares of common stock.. - 382 - - 382 Net income................................. - - 10,775 - 10,775 --- ------- ------- ----- ------- Balances, December 31, 1993................ 34 26,519 24,112 - 50,665 Issuance of 6,750 shares of common stock... - 54 - - 54 Net unrealized holding loss, net of tax.... - - - (217) (217) Net income................................. - - 12,824 - 12,824 --- ------- ------- ----- ------- Balances, December 31, 1994................ 34 26,573 36,936 (217) 63,326 Issuance of 94,125 shares of common stock.. - 786 - - 786 Net unrealized holding loss, net of tax.... - - - (29) (29) 3 for 2 stock split (Note 14).............. 17 (17) - - - Net income................................. - - 12,001 - 12,001 --- ------- ------- ----- ------- Balances, December 31, 1995 - Restated $51 $27,342 $48,937 $(246) $76,084 === ======= ======= ===== =======
The accompanying notes are an integral part of the consolidated financial statements. F-5 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS __________________________________________ for the years ended December 31, 1995, 1994 and 1993 (In thousands)
1995 1994 1993 --------- --------- --------- Restated Cash flows from operating activities: Net income....................................................................... $ 12,001 $ 12,824 $ 10,775 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................................. 3,511 3,125 2,737 Deferred income taxes.......................................................... (373) 574 945 Impairment of other assets..................................................... 630 - - Impairment of net assets of business transferred............................... 2,910 - - Other.......................................................................... 258 1 (268) Changes in assets and liabilities, net of effect of acquisitions and transfers: Trade accounts receivable...................................................... (4,108) (2,167) (3,325) Prepaid expenses............................................................... (2,223) 211 (1,654) Accounts payable............................................................... 2,480 615 513 Income taxes payable and receivable............................................ (1,414) 573 (425) Accrued expenses............................................................... 1,635 2,330 893 -------- -------- -------- Net cash provided by operating activities............................ 15,307 18,086 10,191 Cash flows from investing activities: Proceeds from sales of marketable securities................................... 15,787 15,248 15,892 Purchases of marketable securities............................................. (24,792) (15,316) (17,714) Purchases of property and equipment............................................ (3,554) (3,580) (1,749) Acquisitions of businesses, including minority interest........................ (1,174) (8,246) (4,446) Other assets................................................................... (660) (500) - -------- -------- -------- Net cash used in investing activities................................ (14,393) (12,394) (8,017) Cash flows from financing activities: Repayment of long-term debt.................................................... (3,192) (5,566) (1,416) Proceeds from long-term debt................................................... - 4,800 650 Issuance of common stock....................................................... 786 54 - -------- -------- -------- Net cash used in financing activities................................ (2,406) (712) (766) -------- -------- -------- Net increase (decrease) in cash and cash equivalents................................ (1,492) 4,980 1,408 Cash and cash equivalents, beginning................................................ 13,491 8,511 7,103 -------- -------- -------- Cash and cash equivalents, ending................................................... $ 11,999 $ 13,491 $ 8,511 ======== ======== ======== Supplemental cash flow information: Interest paid.................................................................. $ 165 $ 259 $ 328 ======== ======== ======== Income taxes paid.............................................................. $ 8,226 $ 6,328 $ 5,305 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-6 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) GENERAL American Business Information, Inc. ("ABI") and its subsidiaries, ("the Company"), provide business information to organizations engaged in business-to- business marketing through products and services derived from the Company's database. These products include customized business lists, business directories and other information services. An amendment had been previously filed to reflect the presentation of American Business Communications, Inc. as a continuing operation until the third quarter of 1996, at which time the investment in this subsidiary was abandoned. This amendment is being filed to reflect the presentation of a charge to compensation expense in 1995 related to the Company's acquisition of 291,875 shares of common stock from a former officer of the Company, and to adjust asset valuation reserves by approximately $660,000. The transaction had been previously reported as a charge to paid-in-capital during the first quarter of 1996. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates and Assumptions: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation: The consolidated financial statements include the accounts of ABI and its subsidiaries. Intercompany accounts and transactions have been eliminated. Revenue Recognition: The Company recognizes revenue from product sales at the time of delivery and service revenues at the time the service is provided. Licensing fees are recognized upon initial delivery of the information and when updated information is provided in accordance with the terms of individual license agreements. Allowance is made currently for estimated sales returns. The Company maintains an allowance for potential bad debts based on a percentage of historical charge-off percentages and such uncollectable amounts have been within management's expectations. Database Costs: Costs to maintain and enhance the Company's database are expensed as incurred. Advertising Costs: Certain direct-response advertising costs are capitalized and amortized over periods that correspond to the estimated revenue stream of the individual advertising activity. All other advertising costs are expensed as the advertising takes place. Total unamortized advertising costs included in prepaid expenses at December 31, 1995 and 1994, was $1,132,000 and zero, respectively. Total advertising expense included in net income for the years ending December 31, 1995, 1994, and 1993 was $8,947,000, $8,553,000 and $7,558,000, respectively. F-7 Software Capitalization: Until technological feasibility is established, software development costs are expensed as incurred. After that time, direct costs are capitalized and amortized using the straight-line method over the estimated economic life of the product, generally one to three years. Unamortized software costs included in prepaid expenses at December 31, 1995 totaled $494,000. Amortization of capitalized costs during 1995 totaled approximately $81,000. Income taxes: The Company recognizes income taxes using the liability method, under which deferred tax assets and liabilities are determined based on the difference between financial and tax basis of assets and liabilities using enacted tax rates. Earnings Per Share: Earnings per share are based on the weighted average number of common shares outstanding and common equivalent shares assumed outstanding during the year. Common equivalent shares arise as a result of stock options which are assumed to have been exercised solely for the purpose of this calculation. Invested Cash: Cash equivalents consist of highly liquid debt instruments purchased with an original maturity of three months or less and are carried at cost which approximates fair value. Marketable securities have been classified as available-for-sale and therefore net unrealized gains and losses are reported as a separate component of stockholders' equity. Unrealized and realized gains and losses are determined by specific identification and fair values are estimated based on quoted market prices. Long-Lived Assets: Property and equipment are stated at cost. Depreciation and amortization are computed using primarily the straight-line method, based on the following estimated useful lives: buildings and improvements - 30 years; office furniture and equipment - 5 to 7 years; and capitalized equipment leases- 5 years. Intangible assets are stated at cost and are amortized over the periods benefited on a straight-line basis. Goodwill, distribution networks, and noncompete agreements and acquisition costs are being amortized over 30 years, 15 years, and 3 to 6 years, respectively. All of the Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, a loss is recognized. Reclassifications: Certain reclassifications were made to the 1993 and 1994 financial statements to conform to the 1995 presentation. Accounting Pronouncements: On October 23, 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation." As allowed by the statement, the Company plans to retain its current method of accounting for stock compensation when it adopts this Statement in 1997 and thus adoption is not expected to have an impact on financial position or results of operations. (3) ACQUISITIONS Effective August 1994, the Company acquired certain assets of Zeller & Letica ("Z&L") and Nationwide Mail Marketing ("NMM") for total consideration of $2.4 million which was accounted for under the purchase method. The Company has allocated substantially all of the purchase price to a distribution network which is being amortized over its estimated useful life of 15 years. F-8 Effective March 1994, the Company acquired certain assets from Business Mailers, Inc. ("BMI") for total consideration of $5.75 million which was accounted for under the purchase method. The Company has allocated substantially all of the purchase price to a distribution network which is being amortized over its estimated useful life of 15 years. Effective March, 1993, the Company acquired certain assets from Alvin B. Zeller, Inc. ("ABZ") for total consideration of $1.2 million which was accounted for under the purchase method. The Company has allocated substantially all of the purchase price to a distribution network which is being amortized over its estimated useful life of 15 years. Operating results for each of these acquisitions are included in the accompanying consolidated statements of operations from the respective acquisition dates. Assuming the above described companies had been acquired on January 1, 1993, unaudited pro forma consolidated revenues, net income and net income per share would have been as follows:
Years Ended December 31, 1994 1993 ---- ---- (In thousands except per share amounts) Net sales............. $72,749 $64,758 Net income............ $13,316 $10,884 Net income per share.. $ 0.64 $ 0.53
The pro forma information provided above does not purport to be indicative of the results of operations that would actually have resulted if the acquisitions were made as of those dates or of results which may occur in the future. Effective June 1993, American Business Communications, Inc. ("ABC"), which was 80% owned by the Company and 20% owned by a minority stockholder, acquired certain assets of Business Communications & Information, Inc. ("BCI") for total consideration of $4.4 million which was accounted for under the purchase method. On February 28, 1995, the Company agreed to acquire the minority interest for $900,000. The Company transferred ABC in 1995 (See Note 13). The Company also paid $148,000, $280,000, and $179,000 in 1995, 1994 and 1993, respectively, to Annapurna Corporation for consulting services and related expenses in connection with acquisition activity conducted by the Company. Annapurna Corporation is 100% owned by a significant stockholder. F-9 (4) MARKETABLE SECURITIES
Amortized Unrealized Unrealized Fair Cost Gross Gain Gross Loss Value --------- ---------- ---------- --------- At December 31, 1995 (In thousands) Municipal Bonds $12,027 $ 68 $ (55) $12,040 U.S. Government and Agency 1,513 46 - 1,559 Corporate Bonds 7,189 114 (5) 7,298 Common Stock 1,148 11 (248) 911 Preferred Stock 1,804 4 (266) 1,542 ------- ---- ----- ------- $23,681 $243 $(574) $23,350 ======= ==== ===== =======
Gross Gross Amortized Unrealized Unrealized Fair Cost Holding Gain Holding Loss Value --------- ------------ ------------ --------- At December 31, 1994 (In thousands) Municipal Bonds $ 2,445 $ - $ (16) $ 2,429 U.S. Government and Agency 609 - (1) 608 Corporate Bonds 312 - (24) 288 Common Stock 1,776 690 (84) 2,381 Preferred Stock 9,886 26 (934) 8,978 ------- ---- ------- ------- $15,028 $716 $(1,060) $14,684 ======= ==== ======= =======
Scheduled maturities of marketable debt securities at December 31, 1995, are as follows:
Less Than One to Five to Greater than One Year Five Years Ten Years Ten Years Total --------- ---------- --------- ------------ --------- (In thousands) Municipal Bonds $1,579 $ 6,819 $1,756 $1,886 $12,040 U.S. Government and Agency - 1,246 313 - 1,559 Corporate Bonds 862 6,436 - - 7,298 ------ ------- ------- ------ ------- $2,441 $14,501 $2,069 $1,886 $20,897 ====== ======= ======= ====== =======
During 1995, proceeds from sales of available-for-sale securities approximated $15.8 million with realized gains of $747 thousand and realized losses of $1.1 million. In 1994, proceeds approximated $15.2 million with realized gains of $681 thousand and realized losses of $776 thousand. F-10 (5) PROPERTY AND EQUIPMENT
December 31, 1995 1994 ---- ---- (In thousands) Land and improvements.............. $ 1,032 $ 931 Buildings and improvements......... 7,157 6,563 Furniture and equipment............ 15,439 12,654 Capitalized equipment leases....... 1,437 344 ------- ------- 25,065 20,492 Less accumulated depreciation and amortization: Owned property................... 11,036 9,128 Capitalized equipment leases..... 144 258 ------- ------- Property and equipment, net.... $13,885 $11,106 ======= =======
Under the terms of its capital lease agreements, the Company is required to pay ownership costs, including taxes, licenses and maintenance. The Company also leases office space under operating leases expiring at various dates through November, 2000. Certain of these leases contain renewal options. Rent expense was $593,000 in 1995, $603,000 in 1994, and $514,000 in 1993. Following is a schedule of the future minimum lease payments under these leases as of December 31, 1995.
Capital Operating ------- --------- (In thousands) 1996............................... $ 482 $ 569 1997............................... 516 518 1998............................... 429 342 1999............................... 35 114 2000............................... - 52 ------ ------ Total future minimum lease payments $1,462 $1,595 ====== Less amounts representing interest 110 ------ Present value of net minimum lease payments $1,352 ======
(6) OTHER INVESTMENTS Included in other assets at December 31, 1995 and 1994, are investments, carried at cost, of $1.3 million and $1.9 million, respectively, in two companies that are partially owned by certain members of the Board of Directors of the Company. The investments include $500,000 in Trident Capital, L.P. and $811,000 in IDE Corporation. The Company owns less than 10% of either company. No dividends have been received from these investments. F-11 (7) INTANGIBLE ASSETS
December 31, 1995 1994 ---- ---- (In thousands) Goodwill....................... $ 5,012 $ 9,353 Distribution networks.......... 11,871 11,952 Noncompete agreements.......... 150 125 Acquisition costs.............. 1,319 1,294 ------- ------- 18,352 22,724 Less accumulated amortization.. 4,141 3,157 ------- ------- $14,211 $19,567 ======= =======
(8) FINANCING ARRANGEMENTS The Company has a revolving line of credit totaling $5.0 million, none of which was outstanding at December 31, 1995. The line of credit expires in May 1996. Any borrowings would accrue interest at the bank's base rate and would be payable upon demand. Long-term debt consisted of the following:
December 31, 1995 1994 ---- ---- (In thousands) Bank note payable monthly including interest through 1997. Interest at 6.5%, collateralized by certain equipment......................... $ 687 $1,193 Bank note, repaid in June 1995............................... - 1,617 Bank note, repaid in June 1995............................... - 966 Computer lease obligations, discounted at 4.9% (See Note 5).. 1,352 45 ------ ------ 2,039 3,821 Less current portion......................................... 969 815 ------ ------ Long-term debt............................................ $1,070 $3,006 ====== ======
The maturities of long-term debt are as follows: 1996................................... $ 969 1997................................... 625 1998................................... 426 1999................................... 19 ------ $2,039 ======
F-12 (9) INCOME TAXES The provision for income taxes on continuing operations consists of the following:
Years ended December 31, 1995 1994 1993 ------ ------ ------ (in thousands): Current: Federal $6,218 $6,324 $4,609 State 586 577 271 ------ ------ ------ 6,804 6,901 4,880 ------ ------ ------ Deferred: Federal 335 443 892 State 26 131 53 ------ ------ ------ 361 574 945 ------ ------ ------ $7,165 $7,475 $5,825 ====== ====== ======
The effective income tax rate varied from the federal statutory rate as follows:
Years ended December 31, 1995 1994 1993 ------ ------ ------ (in thousands) Tax provision computed at statutory rate of 35%..... $6,708 $7,104 $5,810 State taxes, net.................................... 396 418 229 Nondeductible expenses and other.................... 61 (47) (214) ------ ------ ------ $7,165 $7,475 $5,825 ====== ====== ======
The components of the net deferred tax liability were as follows:
Years ended December 31, 1995 1994 ---- ---- (in thousands) Deferred tax assets: Marketable securities.............................. 85 127 Accrued vacation................................... 185 230 Accrued expenses................................... 409 - Accounts receivable................................ 389 159 Other assets....................................... 239 - Other.............................................. 208 2 ------- ------ 1,515 518 ------- ------ Deferred tax liabilities: Intangible assets.................................. (1,439) - Depreciation....................................... (801) (976) Prepaid expenses and other......................... (853) (759) ------- ------ (3,093) (1,735) ------- ------ Net deferred tax liability.......................... $(1,578) $(1,217) ======= =======
F-13 (10) STOCK INCENTIVES The Company has a stock option plan under which a total of 1,950,000 shares of the Company's common stock have been reserved for issuance to officers, key employees and non-employee directors. Options are granted at their fair market value on the date of grant, vest generally over a four year period and expire five years from date of grant. Options exercisable at December 31, 1995 and 1994 totaled 378,750 and 189,000, respectively. Option plan activity is as follows:
Number of Shares 1995 1994 1993 ---------------- ---------- ---------- -------- Balance at January 1 1,094,250 694,500 93,000 Options Granted 498,000 436,500 676,500 Options Exercised (94,125) (6,750) - Options Canceled (41,250) (30,000) (75,000) ---------- ---------- -------- Balance at December 31 1,456,875 1,094,250 694,500 ========== ========== ======== Average Price: Options Outstanding $ 10.97 $ 8.66 $ 8.28 Options Granted 10.55 8.56 8.21 Options Exercised 8.36 7.94 -
(11) SAVINGS PLAN Employees who meet certain eligibility requirements can participate in the Company's 401(k) Savings and Investment Plan. Under the plan, the Company may, at its discretion, match a percentage of the employee contributions. The Company recorded expenses related to its matching contributions of $80,000, $71,000 and $52,000 in 1995, 1994 and 1993, respectively. (12) SUPPLEMENTAL CASH FLOW INFORMATION The Company made certain acquisitions in 1994 and 1993 (See Note 3) and assumed liabilities as follows:
1994 1993 ------- ------- (In thousands) Fair value of assets $ 9,333 $ 6,918 Cash paid (8,200) (4,421) Common stock issued - (381) ------- ------- Liabilities assumed $ 1,133 $ 2,116 ======= =======
In conjunction with the transfer of the net assets of ABC in 1995, approximately $6,870,000 of assets, less liabilities of $1,017,000, were exchanged for a $3,000,000 non-recourse note receivable. As a result, the Company recognized an impairment of $2,900,000. F-14 (13) NET ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL ARRANGEMENT On June 1, 1995, the Company transferred substantially all of the assets and liabilities of its wholly-owned subsidiary, American Business Communications, Inc. ("ABC") to a wholly-owned subsidiary of Baker University. The Company received $3.0 million in the form of a 7.52% promissory note, due in equal monthly installments through 2005. The note is listed as "net assets of business transferred under contractual arrangement" on the accompanying consolidated balance sheet since it is non-recourse to Baker University. ABC recorded net sales of $2,929,000, $6,699,000 and $3,174,000 during 1995, 1994 and 1993, respectively. The company originally reported the transfer as a discontinued operation. However, the accompanying financial statements have been restated to properly account for the transfer of assets, the ongoing activities of ABC and the note receivable in accordance with the Securities and Exchange Commission's Staff Accounting Bulletins 5-E and 5-Z. 14) STOCK SPLIT On July 18, 1995, the Company's Board of Directors declared a three-for-two stock split of the Company's common shares, effected in the form of a stock dividend, to be paid on August 14, 1995 to stockholders of record as of the close of business on July 31, 1995. All presentations of shares outstanding and amounts per share have been restated to reflect the stock split. (15) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of the Company's financial instruments approximates their estimated fair value at December 31, 1995. The fair value of cash and cash equivalents was based on the carrying value of such assets. The estimated fair value of marketable securities were based on quoted market prices. The fair value of notes receivable and long-term debt, including capital lease obligations, were estimated based on discounted cash flows using market rates at the balance sheet date. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. (16) CONTINGENCIES The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. Management believes that any resulting liability should not materially affect the Company's financial position or results of operations. (17) RESTATEMENT During 1995, the Company agreed to repurchase, at fair market value, 291,875 shares of common stock from a former officer of the Company for $3.1 million. The charge of $3.1 million is reflected as selling, general and administrative expense on the accompanying 1995 consolidated statement of operations. The Company originally reported the transaction as a charge to paid-in-capital during the first quarter of 1996. Consequently, the accompanying financial statements have been restated to properly account for the repurchase as compensation expense. F-15 The accompanying financial statements have also been restated to reflect an increase to receivable reserves of $0.6 million. The charge of $0.6 million is reflected as selling, general and administrative expense on the accompanying 1995 consolidated statement of operations. The restatements decreased net income for 1995 by $2.3 million. Additionally, as of December 31, 1995, accounts receivable decreased by $0.6 million and retained earnings and total stockholders' equity decreased by $2.3 million, respectively. Earnings per share decreased by $0.11 for the year ended December 31, 1995 as a result of the restatement. F-16 AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Additions -------------------------- Balance at Charged to Balance at Beginning Costs and Charged to End of Description of Period Expenses Other Accounts Deductions Period ----------- ---------- ---------- -------------- ---------- ---------- Allowance for doubtful accounts receivable: (A) December 31, 1993............................. $250 $ 758 $ - $758 $ 250 December 31, 1994............................. $250 $ 936 $ - $782 $ 404 December 31, 1995............................. $404 $ 1,585 $ - $965 $1,024
(A) Charge-offs during the period indicated S-1 INDEX TO EXHIBITS AMERICAN BUSINESS INFORMATION, INC. ANNUAL REPORT ON FORM 10-K Exhibit Sequentially No. Description Numbered Page ------- ----------- ------------- 3.1(1) Certificate of Incorporation 3.2(1) By-laws 4.1(1) Specimen Certificate representing the Common Stock 10.1(2) 1992 Stock Option Plan 10.2(2) Form of Indemnification Agreement with Officers and Directors 10.4(3) Loan Agreement between Registrant and FirsTier Bank 11 Statement re: computation of per share earnings 23 Consent of Independent Accountants 24 Power of Attorney (included on signature page) - ----------- (1) Incorporated by reference to exhibits filed with Registrant's Registration Statement on Form S-1 (No. 33-42887) which became effective February 18, 1992. (2) Incorporated by reference to exhibits filed with Registrant's Registration Statement on Form S-1 (No. 33-51352) which became effective September 16, 1992. (3) Incorporated by reference to exhibits filed with Registrant's year end report on Form 10-K for the year ended December 31, 1993. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended December 31, 1995. EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 AMERICAN BUSINESS INFORMATION, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS For the years ended December 31, 1995, 1994 and 1993 (In thousands, except per share amounts)
1995 1994 1993 ------- ------- ------- Average shares outstanding...................... 20,738 20,678 20,658 Net additional common equivalent shares (1)..... 632 174 41 ------- ------- ------- Average number of common and common equivalent shares outstanding............................. 21,370 20,852 20,699 ======= ======= ======= Net income for per share computation (1)........ $12,001 $12,824 $10,775 ======= ======= ======= Net income per average common and common equivalent share outstanding................... $ 0.56 $ 0.62 $ 0.52 ======= ======= =======
- ------------------------------ (1) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3 percent. EX-23 3 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 33-59256) of American Business Information, Inc. of our report dated January 23, 1996 and July 31, 1997, on our audits of the consolidated financial statements and financial statement schedule of American Business Information, Inc. as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, which report is included in this Annual Report on Form 10-K. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Omaha, Nebraska September 4, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 DEC-31-1995 11,999 23,350 18,552 0 0 58,174 25,065 11,184 91,241 12,380 1,070 0 0 51 76,033 91,241 0 89,695 0 71,686 0 0 165 19,166 7,165 12,001 0 0 0 12,001 .58 .56
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