ABR Information Services, Inc. Announces Record Fourth Quarter Results.

PALM HARBOR, Fla.--(BUSINESS WIRE)--Sept. 23, 1998--ABR Information Services, Inc. (NASDAQ:ABRX) Wednesday announced record revenues and net income for the company's fourth quarter and fiscal year ended July 31, 1998.

For the quarter ended July 31, 1998, revenues increased 42.9% to $24.0 million, as compared to revenues of $16.8 million for the same quarter of the prior fiscal year. Net income increased 62.9% to $5.7 million for the fourth quarter, as compared to $3.5 million for the same quarter of the prior fiscal year. Net income per share for the quarter was $.20 (diluted), as compared to $.12 (diluted) for the same period last year.

For the year ended July 31, 1998, revenues increased 41.8% to $81.8 million, as compared to revenues of $57.7 million for the prior fiscal year. Net income increased 48.0% to $18.2 million for fiscal year 1998, as compared to $12.3 million for the prior fiscal year. For fiscal year 1998, net income per share was $.62 (diluted), as compared to $.42 (diluted) for the prior fiscal year.

James E. MacDougald, ABR's president and chief executive officer, stated: "Last quarter was ABR's eighteenth consecutive quarter of revenue growth in excess of 30%. During the quarter, ABR also benefited from non-recurring Qualified Plans revenue of approximately $2 million, continued net lease revenue of approximately $800,000, and a lower-than-expected effective tax rate as a result of certain tax credits. The combination of these factors led to our fourth quarter results far surpassing the previous quarter. Our track record of success was recognized this month by Fortune magazine, which named ABR as one of `America's 100 Fastest-Growing Companies.'"

In August, the company completed the acquisition of MidAtlantic 401(K) Services, Inc., located in Midlothian, Virginia. The acquisition was accounted for using the purchase method of accounting and was effective Aug. 1, 1998. 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. MidAtlantic adds to ABR's significant presence in the mid-Atlantic/Washington, DC area, with existing operations in Fairfax and McLean, Virginia.

In September, the company's board of directors elected to discontinue use of Version I of the ABR Enrollment and Eligibility system during fiscal 1999, which will result in a one-time charge against earnings of approximately $13.8 million (pre-tax) during the first quarter of fiscal 1999. In connection with this decision, ABR has negotiated mutually acceptable discontinuation of service agreements with two current Version I Enrollment and Eligibility customers, as of the end of fiscal 1999. The company does not expect this change to have an adverse impact on any other customer. The company expects that the renegotiation of these agreements and the change in its strategic software design will be neutral to the company's earnings per share in fiscal 1999 and 2000, with the exception of the approximately $13.8 million pre-tax charge against earnings in the first quarter of fiscal 1999.

Version II of ABR's Enrollment and Eligibility software uses more advanced Web-enabled technology and database structure. ABR anticipates that its newest Enrollment and Eligibility account will go on-line with Version II in late October 1998. The new software also has widespread utility in other lines of ABR business. In mid-October, ABR will introduce COBRA elections via the Internet. Additional development of Version II will continue through calendar 1999 and will feature Internet (Web) enablement that will be utilized in virtually all ABR service lines.

MacDougald added: "These are exciting times for ABR. Our recent acquisitions, including three Qualified Plans administrators and a major payroll company, have positioned ABR for a very successful fiscal 1999. Our acquisition efforts have gained momentum in fiscal 1998 and constitute a major portion of our growth strategy for the years ahead. In addition, we believe the board's decision to focus our resources on the newest Web-enabled technology as a platform for all of our services will continue to strengthen ABR's leadership position in the field of integrated human resource, payroll and benefits administration."

ABR Information Services, Inc. provides comprehensive benefits administration, payroll and human resource services to employers seeking to outsource functions such as COBRA, HIPAA, payroll and tax deposit, Flexible Spending Account, Qualified Plans and other services. ABR provides services to more than 30,000 employers, ranging in size from 20 to over 200,000 employees. ABR provides portability (COBRA and HIPAA) services through the trade name CobraServ(sm) and payroll and tax deposit services through the trade name PayAmerica(sm). The company employs approximately 1,400 persons in marketing/service centers located in Florida, New Jersey, Virginia, Maryland, California, Wisconsin and Arizona.

THE `SAFE HARBOR' STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This press release contains forward-looking statements that involve risks and uncertainties including, but not limited to, risks such as: (i) potential for unfavorable interpretation of government regulations or new government legislation; (ii) the ability to attract and retain qualified sales, information services and management personnel; (iii) potential increases in the company's costs; (iv) the level of acquisition opportunities available to the company and the company's ability to efficiently price and negotiate such acquisitions on a favorable basis; (v) the financial condition of the company's clients; (vi) the impact of competition from existing and new organizations; (vii) the failure to properly manage growth and successfully integrate acquired companies and operations, and to achieve synergies and other cost savings in the operation of acquired companies; and (viii) other factors which are described in further detail in the company's filings with the Securities and Exchange Commission. Such forward-looking statements are based on information available to the company on the date hereof, and the company assumes no obligation to update any such forward-looking statements.

Summary statements of income for the three months and years ended July 31, 1998 and 1997 and balance sheet highlights as of July 31, 1998 and 1997 are attached. -0-

                    ABR INFORMATION SERVICES, INC.
             CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                             (Unaudited)
                        Three Months Ended             Year Ended
                            July 31,                       July 31,
                       1998            1997(a)         1998(a)      1997(a)
Revenue             $24,027,808  $16,791,433  $81,824,176  $57,745,842
Cost of services     13,471,192    9,843,267   46,609,711   33,983,925
Selling, general
 and administrative   4,321,065    3,186,273   15,534,462   11,526,500
Acquisition costs             --           --          440,022            --
   Operating income   6,235,551    3,761,893   19,239,981   12,235,417
Interest income       1,321,665    1,567,995        5,363,957    7,072,238
Lease revenue, net        812,064           --        2,817,004            --
Income taxes              2,654,206    1,861,749        9,268,506    7,020,003
   Net income            $ 5,715,074  $ 3,468,139  $18,152,436  $12,287,652
Net income per share:
   Basic                   $.20         $.12             $.63          $.43
   Diluted                   $.20         $.12             $.62          $.42
Weighted average common
 shares outstanding:
   Basic             28,694,383   28,573,935   28,624,816   28,518,159
   Diluted             29,084,623   29,060,182   29,086,885   29,089,932
(a) Restated for the effect of the pooling of Business Computer
Services, Inc. d.b.a. PayAmerica

                       BALANCE SHEET HIGHLIGHTS
                       (in thousands, unaudited)
                                            July 31,           July 31,
                                              1998             1997(a)
Cash and investments, net (b)                    $117,215            $135,481
Working capital                             $121,868            $128,989
Total assets                                    $257,502            $225,206
Shareholders' equity                            $214,625            $195,480
(b) Net of customer account deposits.