-----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, BrOb0bEYB2QoFVYHaFZDO1vE8j+9C2OiGya7pX5fCsU7dCHpw7fu3waM6W5Yl6Np +gRcJGOe3wx+RfRLlCt+Mg== 0000927356-96-000985.txt : 19961107 0000927356-96-000985.hdr.sgml : 19961107 ACCESSION NUMBER: 0000927356-96-000985 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BI INC CENTRAL INDEX KEY: 0000716629 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 840769926 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12410 FILM NUMBER: 96654950 BUSINESS ADDRESS: STREET 1: 6400 LOOKOUT RD CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3035302911 MAIL ADDRESS: STREET 1: 6400 LOOKOUT RD CITY: BOULDER STATE: CO ZIP: 80301 10-Q 1 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------ OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-12410 ------- BI Incorporated --------------------------- (Exact name of issuer as specified in charter) Colorado 84-0769926 - ----------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification NO.) 6400 Lookout Road, Boulder, Colorado ------------------------------------- 80301 -------------------- (Address of principal executive offices) (Zip Code) (303) 530-2911 --------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The number of shares of no par value common stock outstanding at October 21, 1996 is 7,357,737. BI INCORPORATED Index ----- Part I - Financial Information: Page No. Item 1 - Financial Statements Balance Sheet at September 30, 1996 and June 30, 1996 2 Statement of Operations for the three months ended September 30, 1996 and 1995 3 Statement of Cash Flows for the three months ended September 30, 1996 and 1995 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Signatures 8 Part II - Other Information: Item 1 - Legal Proceedings: Incorporated by reference to Notes to Financial Statements in Part I. Item 6 - Exhibits and Reports on Form 8-K: Filed with the Securities and Exchange Commission on July 17, 1996, and incorporated by reference. The Company reported the signing of a letter of intent to merge with Community Corrections Corporation under Item 5 - Other Events. See Notes to Financial Statements in Part I. Part I - Financial Statements BI INCORPORATED BALANCE SHEET (in thousands, unaudited)
September 30, June 30, 1996 1996 --------------- ---------------- ASSETS Current assets Cash and cash equivalents $4,736 $4,263 Short-term investments 1,185 1,099 Receivables, net 7,760 9,043 Investment in sales-type leases, net 4,400 4,345 Inventories Raw materials 1,045 923 Work in process 1,322 1,033 Finished goods 1,054 1,064 Deferred income taxes 603 302 Prepaid expenses 671 893 --------------- ---------------- Total current assets 22,776 22,965 Investment in sales-type leases, net 3,172 3,446 Rental and monitoring equipment, net 3,905 4,088 Property and equipment, net 2,487 2,564 Software, net 1,943 1,906 Intangibles, net 7,006 7,232 Deferred income taxes 680 370 Other assets 288 249 --------------- ---------------- $42,257 $42,820 =============== ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $906 $1,486 Accrued compensation and benefits 1,231 1,581 Accrued product warranty 177 193 Deferred revenue 997 1,086 Other liabilities 383 447 --------------- ---------------- Total current liabilities 3,694 4,793 --------------- ---------------- Deferred revenue 787 821 --------------- ---------------- Stockholders' equity Common stock, no par value, 75,000 shares authorized; 7,048 shares issued September 30, 1996 and 7,004 shares issued June 30, 1996 31,292 30,879 Retained earnings 6,484 6,327 --------------- ---------------- 37,776 37,206 --------------- ---------------- $42,257 $42,820 =============== ================
The accompanying notes are an integral part of these financial statements. 2 BI INCORPORATED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands except per share amounts, unaudited)
For the three months ended September 30, --------------------------- 1996 1995 -------- -------- Revenues Net sales $2,801 $3,034 Service and monitoring income 5,616 5,066 Rental income 215 219 Interest and other income 91 68 -------- -------- Total Revenues 8,723 8,387 -------- -------- Costs and expenses Cost of net sales 1,533 1,494 Cost of service and monitoring income 2,778 2,328 Cost of rental income 83 71 Selling, general and administrative expenses 2,950 2,529 Amortization and depreciation 401 327 Research and development expenses 712 615 -------- -------- Total costs and expenses 8,457 7,364 -------- -------- Income before income taxes 266 1,023 Income tax provision (109) (422) -------- -------- Net income $157 $601 ======== ======== Income per common and common equivalent share: Net income $0.02 $0.09 ======== ======== Weighted average number of common and common equivalent shares outstanding 7,402 6,999 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 BI INCORPORATED STATEMENT OF CASH FLOWS (in thousands, unaudited)
For the three months ended September 30, ------------------------ 1996 1995 ----------- ----------- Cashflows from operating activities: Net income $157 $601 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 1,498 1,375 Provision for losses on accounts receivable and STLs 58 55 Changes in assets and liabilities: Receivables 1,217 (138) Investment in STLs 219 136 Inventories (403) 569 Accounts payable (580) 123 Accrued expenses (430) (148) Income taxes (501) 262 Deferred revenue (123) 274 Other 201 (141) ----------- ----------- Net cash from operating activities 1,313 2,968 ----------- ----------- Cash flows from investing activities: Capital expenditures (261) (278) Increase in rental and monitoring equipment (520) (832) Increase in capitalized software (277) (123) Change in investments (86) ----------- ----------- Net cash from investing activities (1,144) (1,233) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock 304 276 ----------- ----------- Net cash from financing activities 304 276 ----------- ----------- Net change in cash and cash equivalents 473 2,011 Cash and cash equivalents at June 30 4,263 2,358 ----------- ----------- Cash and cash equivalents at September 30 $4,736 $4,369 =========== ===========
The accompanying notes are an integral part of the financial statements. 4 BI INCORPORATED Notes to Financial Statements ----------------------------- (unaudited) Note 1 - Preparation of Financial Statements - -------------------------------------------- These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report. The interim financial data are unaudited; however, in the opinion of the management of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Note 2 - Net Income per Common and Equivalent Share - --------------------------------------------------- Net income per common and common equivalent share is computed on the basis of the weighted average number of shares of common and common equivalent shares outstanding during the period. Common equivalent shares are determined using the treasury stock method, which assumes that proceeds from exercise of certain outstanding stock options and warrants are utilized to repurchase outstanding shares of the Company at the average fair market value during such period. Note 3 - Legal Proceedings - -------------------------- The Company is involved in three legal proceedings; one alleging wrongful termination of a distributor contract; and two alleging negligence in monitoring and detention. One of the claimants seeks damages up to $3,000,000. Management believes the Company has adequate legal defenses and/or insurance coverage against all claims and intends to defend them. There can be no assurance however, that any individual case will result in an outcome favorable to the Company. In the event of any adverse outcome, neither the amount nor the likelihood of any potential liability which might result is reasonably estimable. The Company currently believes that the amount of the ultimate potential loss would not be material to the Company's financial position or results of operations. However, an adverse future outcome in any individual case, including legal defense costs, could have a material effect on the Company's reported results of operations in a particular quarter. Note 4 - Subsequent Event - ------------------------- On October 10, 1996, the Company effected a purchase of 100% of the outstanding stock of Community Corrections Corporation, Justice Alternatives, Inc. and Tennessee Probation Services, Inc. The purchase price was 400,000 shares of restricted common stock of the Company and $3,000,000. On October 10, 1996, the Company signed a letter of intent to enter into a new leasing arrangement for the building it currently occupies. The present value of Aggregate future minimum lease payments related to the new lease are approximately $7,500,000 over a 15 year term, retroactive to October 1995. Note 5 - Purchase of Treasury Stock - ----------------------------------- On September 24, 1996, the Company announced its intention to purchase up to $2,500,000 of its common stock in the open market. As of October 25, 1996, the Company had repurchased 135,000 shares at a weighted average price of $7.28. 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information in "Management's Discussion and Analysis" and other statements periodically reported by the Company contain forward-looking statements that involve risks and uncertainties. Management believes that its expectations are based on reasonable assumptions. However, no assurances can be given that its goals will be achieved. It should be noted that the earnings history of the Company has not been consistent year to year. Factors that could cause actual results to differ materially include, but are not limited to: fluctuations due to timing of award of government contracts; pricing pressures; liability in excess of insurance coverage; changes in federal, state and local regulations; misrepresented political or media statements; new product introductions by competitors or unexpected delays of new product introductions by the Company; raw material availability; changes in telecommunications regulations or technologies; or the loss of a material contract through lack of appropriation or otherwise. Results of Operations - --------------------- The three-month period ended September 30, 1996 (fiscal 1997), compared to the three-month period ended September 30, 1995 (fiscal 1996): Total revenue for the three months ended September 30, 1996, increased 4% to $8,723,000 compared to $8,387,000 in the corresponding period a year ago. The increase related to an increase in service, monitoring and rental income of $546,000 or 10.3% which was partially offset by a decrease in net sales of $233,000 or 7.7%. The increase in service, monitoring and rental revenue was consistent with the trend of government agencies to contract services rather than owning equipment, while the decrease in net sales revenue resulted from lower equipment purchases. Total gross profit was 49.6% in fiscal 1997 compared to 53.6% in fiscal 1996. Service, monitoring and rental gross profit decreased to 50.9% in the fiscal 1997 period from 54.6% for the same period last fiscal year as a result of lower service usage rates and increased telephone and equipment repair costs related to monitoring. The Company expects monitoring gross margins to improve over time as a result of improved equipment utilization and efficiencies gained from improvements to the monitoring software currently being developed by the Company. Net sales gross profit decreased to 45.3% in fiscal 1997 from 50.8% in fiscal 1996 due to higher costs of software depreciation associated with the Company's Jail Management system (JMS) software and reduced pricing of home arrest products to certain existing customers resulting in lower overall net sales margins. Selling, general and administrative expenses increased $421,000 to $2,950,000 in fiscal 1997 from $2,529,000 in fiscal 1996, and increased as a percentage of total revenue to 33.8% for the three months ended September 30, 1996, versus 30.1% for the three months ended September 30, 1995. The increase largely related to market expansion and sales activities. Research and development expenses increased $97,000 to $712,000, or 8.2% of total revenue, compared to $615,000, or 7.3% in fiscal 1996. This increase largely related to enhancements of current products and evaluating future technologies. 6 The Company recorded income tax expense of $109,000 and $422,000 for the three months ended September 30, 1996 and 1995, respectively, which differs from the statutory rate largely as a result of state income taxes and non-deductible goodwill amortization expense. Liquidity and Capital Resources - ------------------------------- The Company has significant net accounts receivable and net sales-type leases available to borrow against which could be used as collateral for future borrowing arrangements. The Company has a $5,000,000 line of credit with BankOne, Boulder, Colorado which expires in October 1999. No amounts were drawn against this line at September 30, 1996. During the three months ended September 30, 1996, the Company generated $1,313,000 from operating activities and expended $1,144,000 for capital equipment, rental and monitoring equipment, internally developed software and investment changes. The Company has received $304,000 from the exercise of stock options during the period. All cash flow activities resulted in an increase in cash of $473,000. Working capital increased $910,000 to $19,082,000 at September 30, 1996. This increase was primarily the result of an increase in cash and inventories offset by a decrease in net receivables, and a decrease in accounts payable. The Company believes its existing sources of liquidity to be generated from operations will provide adequate cash to fund the Company's anticipated capital needs through fiscal 1997. Use of the Company's line of credit or term debt may be required in connection with certain potential acquisitions during fiscal 1997. 7 Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BI Incorporated Date 11/1/96 By /s/ David J. Hunter ---------- ----------------------------------------- David J. Hunter President and Chief Executive Officer /s/ Jacqueline A. Chamberlin --------------------------------------- Jacqueline A. Chamberlin Chief Financial Officer 8 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Financial Statemenet and related notes thereto and is qualified in its entirety to such financial statements and related notes. 1,000 3-MOS JUN-30-1997 JUL-01-1996 SEP-30-1996 4,736 1,185 12,160 0 3,421 22,776 2,487 0 42,257 3,694 0 0 0 31,292 0 42,257 8,632 8,723 4,394 8,457 0 0 0 266 109 0 0 0 0 157 .02 .02
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