-----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, RDb1Wh1+OCv7X4vFc3mwQYxppt3Y9HNAu0RXZendPfYVfTFp+r5IyNSvqGrwEed6 5a2IDRTc3D4nuuogc9EdSg== 0000927356-98-001670.txt : 19981022 0000927356-98-001670.hdr.sgml : 19981022 ACCESSION NUMBER: 0000927356-98-001670 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981021 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: SEC FILE NUMBER: 000-12410 FILM NUMBER: 98728550 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 BI, INC. FORM 10-Q 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, 1998 ------------------ 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 19, 1998 was 7,647,185. BI INCORPORATED INDEX ----- PART I - FINANCIAL INFORMATION: Page No. Item 1 - Financial Statements Balance Sheet at September 30, 1998 and June 30, 1998 2 Statement of Operations for the three months ended September 30, 1998 and 1997 3 Statement of Cash Flows for the three months ended September 30, 1998 and 1997 4 Notes to Consolidated Financial Statements 5 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 6 through 10 Signatures 11 PART II - OTHER INFORMATION: Item 1 - Legal Proceedings: Incorporated by reference to Note 4 to Consolidated Financial Statements in Part I. BI INCORPORATED CONSOLIDATED BALANCE SHEET (in thousands, unaudited)
September 30, June 30, 1998 1998 ----------------------- ---------------------- ASSETS Current assets Cash and cash equivalents $10 $1,146 Receivables, net 13,438 12,188 Investment in sales-type leases, net 4,133 4,337 Inventories ,net 3,032 3,393 Deferred income taxes 751 751 Prepaid expenses 766 866 ----------------------- ---------------------- Total current assets 22,130 22,681 Investment in sales-type leases, net 3,350 3,529 Rental and monitoring equipment, net 5,128 4,872 Property and equipment, net 13,214 13,250 Software, net 2,223 2,282 Intangibles, net 12,073 12,047 Other assets 3,343 3,328 ----------------------- ---------------------- $61,461 $61,989 ======================= ====================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $1,666 $3,163 Accrued compensation and benefits 2,467 1,940 Deferred revenue 2,021 1,647 Income taxes payable 77 347 Other liabilities 694 759 ----------------------- ---------------------- Total current liabilities 6,925 7,856 ----------------------- ---------------------- Capital lease obligation 6,859 6,897 Deferred revenue 2,230 2,329 Stockholders' equity Common stock, no par value, 75,000 shares authorized; 7,641 shares issued and outstanding September 30, 1998 and 7,640 shares issued and outstanding June 30, 1998 34,087 34,076 Retained earnings 11,360 10,831 ----------------------- ---------------------- Total stockholders' equity 45,447 44,907 ----------------------- ---------------------- $61,461 $61,989 ======================= ======================
The accompanying notes are an integral part of these consolidated financial statements. 2 BI INCORPORATED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands except per share amounts, unaudited)
For the three months ended September 30, ---------------------------------------------------------- 1998 1997 ------------------------- -------------------------- Revenues Service and monitoring income $12,782 $10,037 Rental income 108 260 Net sales 3,615 4,519 Other income 30 51 ------------------------- -------------------------- Total revenues 16,535 14,867 ------------------------- -------------------------- Costs and expenses Cost of service and monitoring income 6,540 5,205 Cost of rental income 80 57 Cost of net sales 1,738 2,200 Selling, general and administrative expenses 4,989 4,509 Provision for doubtful accounts 410 595 Amortization and depreciation 840 801 Research and development expenses 1,001 755 ------------------------- -------------------------- Total costs and expenses 15,598 14,122 ------------------------- -------------------------- Income before income taxes 937 745 Income tax provision (408) (317) ------------------------- -------------------------- Net income $529 $428 ========================= ========================== Basic earnings per share $0.07 $0.06 ========================= ========================== Weighted average number of common shares outstanding 7,640 7,420 ========================= ========================== Diluted earnings per share $0.07 $0.06 ========================= ========================== Weighted average number of common and common equivalent shares outstanding 7,909 7,613 ========================= ==========================
The accompanying notes are an integral part of these consolidated financial statements. 3 BI INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands, unaudited)
For the three months ended September 30, ---------------------------------------------------------------- 1998 1997 ---------------------------------------------------------------- Cash flows from operating activities: Net income $529 $428 Adjustments to reconcile net income to net cash from operating activities: Amortization and depreciation 1,817 1,609 Provision for doubtful accounts 410 595 Changes in assets and liabilities: Receivables (1,660) (886) Investment in STLs 383 (1,620) Inventories, net 361 312 Accounts payable (1,497) (604) Accrued expenses 462 704 Deferred revenue 275 337 Income taxes payable (270) (27) Prepaids and other assets 85 (340) --------------------------------------------------------------- Net cash from operating activities 895 508 --------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (629) (1,102) Increase in rental and monitoring equipment (988) (467) Increase in capitalized software (90) (329) Investment in intangibles (297) 0 Change in short-term investments 0 450 --------------------------------------------------------------- Net cash used in investing activities (2,004) (1,448) --------------------------------------------------------------- Cash flows from financing activities: Payments on capital lease obligation (38) (11) Proceeds from issuance of common stock 11 24 --------------------------------------------------------------- Net cash from (used in) financing activities (27) 13 --------------------------------------------------------------- Net change in cash and cash equivalents (1,136) (927) Cash and cash equivalents at beginning of period 1,146 1,694 --------------------------------------------------------------- Cash and cash equivalents at end of period $10 $767 ====================== ================
The accompanying notes are an integral part of these consolidated financial statements. 4 BI INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 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 presentation of the results for the interim periods. NOTE 2 - RECLASSIFICATION - ------------------------- Certain fiscal 1998 amounts have been reclassified to be comparable with the fiscal 1999 presentation. NOTE 3 - NET INCOME PER COMMON AND EQUIVALENT SHARE - --------------------------------------------------- The Company adopted SFAS No. 128, "Earnings per Share" during the three month period ended December 31, 1997. This pronouncement establishes new standards for computing and presenting EPS on a basis that is more comparable to international standards and provides for the presentation of basic and diluted EPS, replacing the previously reported primary and fully-diluted EPS. The basic EPS has been computed by dividing net income by the weighted average number of shares outstanding during each period. Diluted EPS has been computed by dividing net income by the weighted average common and common equivalent shares outstanding during each period using the treasury stock method. The difference between the Basic and Diluted weighted average shares is due to common stock equivalent shares resulting from outstanding stock options. Prior periods' EPS have been restated to conform with the new statement. NOTE 4 - LEGAL PROCEEDINGS - -------------------------- On August 27, 1997, the Company received notice of a class action complaint filed against it and certain of its officers and directors. The complaint includes various claims under securities law as well as for common law fraud. The complaint alleges, among other things, that various public filings and press releases made by the Company during 1996 contained material misstatements and omissions, including inflated Company revenues and earnings. The complaint further claims that these misstatements and omissions occurred as a result of shipping products to customers with the understanding that the customers had no obligation to pay for the products and could return them at any time. In addition, the complaint alleges that the Company failed to disclose (a) the nature of competition in its monitoring services line of business and (b) that one of the Company's products related to in-home alcohol testing did not work properly. The complaint seeks rescission, unspecified damages and attorney's fees on behalf of all persons who purchased the Company's common stock between April 24, 1996 and September 12, 1996. The Company believes the complaint is without merit but is currently unable to (a) determine the ultimate outcome of resolution of the complaint, (b) determine whether resolution of this matter will have a material adverse impact on the Company's financial position or results of operations, or (c) estimate reasonably the amount of loss, if any, which may result from resolution of this matter. The Company is involved in five additional legal proceedings; one alleging negligence in manufacturing and general negligence, one alleging malfunction in equipment, another alleging negligence and misrepresentation resulting in a wrongful death, the fourth alleging negligence under product liability, and the last suit alleges wrongful death from general negligence. One of the claimants seeks damages in excess of $150,000, another seeks damages of $3,000,000, a third seeks damages of $3,977,500, the fourth seeks $250 million in damages, and the last seeks damages in excess of $100,000. Management believes the Company has adequate legal defenses and/or insurance coverage against all claims and intends to defend itself vigorously against them. There can be no assurances 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 adverse effect on the Company's reported results of operations in a particular quarter. 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; new product introductions by competitors or unexpected delays of new product introductions by the Company; raw material availability; changes in telecommunications regulations or technologies; the inability of the Company or others upon which it depends to adequately address and correct problems resulting from "Year 2000" issue; or the loss of a material contract through lack of appropriation or otherwise. RESULTS OF OPERATIONS - --------------------- The following table provides a breakdown of selected results by Business Unit. The Company's Business Units consist of Electronic Monitoring (EM), Community Correctional Services (CCS) and Corrections Information Systems (CIS).
Three Months Ended Three Months Ended September 30, 1998 September 30, 1997 ---------------------------- ---------------------------- EM CCS CIS Total EM CCS CIS Total ---------------------------- ---------------------------- Revenue (unaudited, in thousands) (unaudited, in thousands) Recurring Revenue Service & Monitoring 7,653 5,066 63 12,782 6,453 3,539 45 10,037 Rental 108 108 260 260 Direct Sales 2,864 751 3,615 3,992 527 4,519 Other Income 30 30 51 51 ---------------------------- ---------------------------- Total Revenue 10,655 5,066 814 16,535 10,756 3,539 572 14,867 Gross Profit 6,261 2,076 (160) 8,177 6,003 1,303 99 7,405 Gross Profit % 58.8% 41.0% (19.7%) 49.5% 55.8% 36.8% 17.3% 49.8%
THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998 (FISCAL 1999), COMPARED TO THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 (FISCAL 1998): Revenue Total revenue for the three months ended September 30, 1998 increased 11.2% to $16,535,000 compared to $14,867,000 in the corresponding period a year ago. The Company is continuing to expand recurring revenue which 6 includes service,, monitoring and rental income although there can be no assurances that the Company will be successful in continuing this expansion. These revenue sources, which are generated within all three business units increased 25.2% in fiscal 1999 compared to fiscal 1998. Recurring revenue increased to $12,890,000 or 78.0% of total revenue in fiscal 1999 from $10,297,000 or 69.3% of total revenue in fiscal 1998. All three business units reported recurring revenue increases for fiscal 1999 as compared to fiscal 1998. The EM business unit revenue decreased slightly to $10,655,000 for the three months ended September 30, 1998 compared to $10,756,000 in the corresponding period a year ago. Some government agencies purchase equipment and run their own monitoring programs, others elect to utilize both monitoring equipment and services offered by the Company, while other agencies purchase equipment from the Company and then contract with the Company for the service portion of the monitoring. Recurring revenue which is comprised of electronic monitoring and rental income increased 15.6% to $7,761,000 in fiscal 1999 from $6,713,000 in fiscal 1998. This increase in recurring revenue relates to the continuing trend of government agencies to contract for electronic monitoring rather than purchasing equipment. Direct sales revenue decreased to $2,864,000 in fiscal 1999 from $3,992,000 in fiscal 1998. This decrease was partially do to a decline in direct sales to service providers as a result of the Company's change in market strategy emphasizing recurring revenue. In addition, direct sales revenue in the first quarter of fiscal year 1998 was unusually high as a result of increased backlog at June 30, 1997. Direct sales revenue for fiscal 1999 was consistent with comparable periods prior to fiscal 1998. The CCS business unit recurring revenue increased $1,527,000 or 43.1% to $5,066,000 in fiscal 1999 compared to $3,539,000 in fiscal 1998. CCS provides community correctional supervision and services in 11 states through its 81 community correctional service centers. During the past twelve months CCS set up 15 new centers or programs within existing centers and increased the number of offenders receiving services from approximately 35,000 to approximately 40,000. The Company intends to continue to broaden the services provided to the offender and anticipates continued revenue growth in this business unit for fiscal year 1999. The CIS business unit increased revenue by 42.3% to $814,000 in fiscal 1999 compared to $572,000 in fiscal 1998. Direct sales revenue associated with the Institutional Management System (IMS) applications software product increased to $751,000 in fiscal 1999 from $527,000 in fiscal 1998. The CIS business unit has contracts lasting from one month to approximately twenty four months in duration. This increase in revenue is a direct result of the increase in new contracts awarded which is reflected in the $5,650,000 of backlog as of the end of current period. On August 25, 1998, the Company announced that it has engaged an investment banker to attempt to sell the CIS business unit. Gross Profit Total gross profit as a percentage of total revenue for the three months ended September 30, 1998 and September 30, 1997 was consistent at approximately 50%. Gross profit for fiscal 1998 was $8,177,000 compared to $7,405,000 in the corresponding period a year ago. The EM business unit increased its total gross profit to 58.8% or $6,261,000 in fiscal 1999 compared to 55.8% or $6,003,000 in fiscal 1998. This percentage increase was due to an improvement in gross profits on direct sales revenue. Direct sales gross profit increased as a result of favorable sales pricing, manufacturing cost improvements and favorable production variances during fiscal 1999. EM recurring revenue gross profit was approximately 54% in fiscal 1999 compared to approximately 55% in fiscal 1998. The CCS business unit increased its gross profit to 41.0% for fiscal 1999 compared to 36.8% in fiscal 1998. The 1999 increase was due to cost reductions and operating efficiency improvements throughout the 81 community correctional service centers. Probation and day reporting services require relatively high direct labor costs which are recognized as direct costs of sales which reduce gross profit. 7 The CIS business unit decreased its gross profit to (19.7)% in fiscal 1999 compared to 17.3% in fiscal 1998. This decrease in fiscal 1999 is primarily a result of additional amortization expense associated with the recent general release of phase two of the Company's IMS product and revisions in estimated recoverability of certain contract costs and in estimated future contract costs that were identified in the current period. Selling, General and Administrative (S,G&A) S,G&A expenses for the three months ended September 30, 1998 increased $480,000 to $4,989,000 compared to $4,509,000 in the corresponding period a year ago. S,G&A expense as a percentage of total revenue remained constant at approximately 30%. The EM business unit increased its S,G&A expenses $315,000 in fiscal 1999 resulting in expenses of 31.1% of EM revenue in fiscal 1999 compared to 27.9% in fiscal 1998. This increase is related to additional marketing expenses associated with continuing market expansion activities throughout fiscal year 1999. As well as increases in account management and technical services related to increasing customer satisfaction and growth of existing customer sites. The CCS business unit increased its S,G&A expenses $136,000 to $1,319,000 in fiscal 1999 compared to $1,183,000 in fiscal 1998, although it decreased its S,G&A expenses as a percentage of CCS revenue to 26.0% in fiscal 1999 from 33.4% in fiscal 1998. The increase in expenses is related to investments in infrastructure and staffing to support the growth of the business unit. The CIS business unit increased its S,G&A expenses $29,000 to $354,000 in fiscal 1999 but as a result of a significant increase in revenue decreased expenses to 43.5% of CIS revenue in fiscal 1999 compared to 56.8% in fiscal 1998. These expenses associated with infrastructure costs necessary to manage deployment and implementation of existing contracts. Provision for Doubtful Accounts The provision for doubtful accounts was $410,000 or 2.5% of total revenue in fiscal 1999 compared to $595,000 or 4.0% of total revenue in fiscal 1998. The provision relates largely to the Company's CCS business unit. Probation service revenue is 100% paid by the offender and carries an increased risk of default. Day reporting revenue for fiscal 1999 was 24.0% paid by the offender and the remaining paid by government agencies. The Company has initiated collection activities that have improved its collection results. The Company accrued approximately 7% of CCS revenue to allowance for doubtful accounts during 1999 compared to approximately 14% in fiscal 1998. The Company is implementing additional collection procedures to reduce payment defaults within the CCS business unit. The Company believes the industry average payment default associated with similar for-profit companies is approximately 20%. The EM business unit accrued approximately 1% of EM revenue to allowance for doubtful accounts in both fiscal 1999 and 1998. 8 Amortization and Depreciation (A&D) A&D expenses increased $39,000 to $840,000 or 5.1% of revenue in fiscal 1999 from $801,000 or 5.4% of revenue in fiscal 1998. The increase was due to additions to property, plant and equipment. Research and Development Expenses (R&D) R&D expenses increased $246,000 to $1,001,000 in fiscal 1999 from $755,000 in fiscal 1998. The Company's R&D expenditures were largely related to EM business unit expenses associated with internal software development efforts for improved automation to the Company's electronic monitoring centers, and the evaluation and enhancement of existing electronic monitoring products. The Company expects to continue expenditures for improvements to the monitoring operations and development of future home arrest products throughout fiscal year 1999. As a percentage of EM revenue EM business unit R&D expense was 7.3% in fiscal 1999 compared to 6.1% in fiscal 1998. Net Income and Income Taxes The Company recorded income tax expense of $408,000 and $317,000 for fiscal 1999 and fiscal 1998 respectively, which differs from the statutory rate largely as a result of state income taxes and non-deductible goodwill amortization expense. For fiscal 1999, the Company had net income of $529,000 or $.07 diluted earnings per share compared to fiscal 1998 net income of $428,000 or $.06 diluted earnings per share. The changes in net income relate primarily to the items discussed above. Impact of Year 2000 Issues The Year 2000 issue is related to computer software utilizing two digits rather than four to define the appropriate year. As a result, any of the Company's computer programs or any of the Company's suppliers or vendors that have date sensitive software may incur system failures or generate incorrect data if "00" is recognized as 1900 rather than 2000. The Company has been addressing Year 2000 issues throughout fiscal year 1998 and the first quarter of fiscal 1999 and has modified or is in the process of modifying any products or services that are affected by Year 2000 issues. The Company has a formal comprehensive Year 2000 readiness plan in place and under the oversight of to executive management. The Company estimates that approximately $120,000 of costs have been incurred and expensed in fiscal year 1998 and the first quarter of fiscal 1999 related to addressing Year 2000 events. It is estimated that another $200,000 to $300,000 of costs will be incurred prior to calendar year end 1999. Approximately two-thirds of this amount will be related to fixed asset additions for new computer related equipment. The remaining one-third will be expensed as incurred. The Company's greatest risk for a material disruption in services lies in a potential disruption of telecommunication services due to an external telecommunication service provider's failure to be Year 2000 compliant 9 and the resulting impact upon the Company's monitoring services. The Company has contacted and obtained verbal assurances from all of its telecommunications providers that their networks are Year 2000 compliant. The Company is currently seeking written assurances of year 2000 compliance testing from all telecommunication providers and expects to complete this process by mid fiscal year 1999. BI has a redundant monitoring system that would allow the eastern monitoring center to process alerts if for any reason the western monitoring center was to go down, or vice versa. In addition, the Company has backup telecommunication provider connectivity if for any reason the primary carrier has a disruption in service. The Company has been in the process throughout fiscal year 1998 and the first quarter of fiscal 1999 of replacing its internal business and business unit operating computer systems. These replacements were required to meet current and future needs of the business as well as to reduce various administrative and operating functions. These new systems are Year 2000 compliant and are scheduled for deployment in fiscal year 1999. The systems have been independently verified and tested to be Year 2000 compliant. The Company believes that based upon changes and modifications already made and those that are currently planned for implementation throughout fiscal year 1999 the impact of Year 2000 issues will not be material. However, to the extent the Company or third parties on which it relies do not timely achieve Year 2000 readiness, the Company's results of operations may be adversely affected. LIQUIDITY AND CAPITAL RESOURCES For the three months ended September 30, 1998, the Company generated $895,000 of cash from operating activities, expended $629,000 for capital equipment and leasehold improvements, expended $988,000 for equipment associated with rental and monitoring contracts, and expended $297,000 for license fees and other intangibles. The total of all cash flow activities resulted in a decrease in the balance of cash and cash equivalents of $1,136,000 for the three months ended September 30, 1998. The Company's working capital increased $380,000 to $15,205,000 at September 30, 1998. This increase was primarily the result of increases in accounts receivable as a result of increased sales volume in CCS as well as increases in CIS receivables associated with extended term IMS contracts for application software products and investment in sales-type leases. The Company is emphasizing improved collections and procedures across all business units and expects to reduce its past due receivables throughout fiscal year 1999 as compared to fiscal year 1998. Direct sales customers have increasingly requested and obtained financing through the Company in the form of sales-type leases. Such lease financing carries a low risk of default and is at favorable interest rates to the Company. The Company has an available $5,000,000 line of credit with Bank One, Boulder, Colorado which expires in October 1999. No amounts were drawn against this line at September 30, 1998. Subsequent to the quarter end transaction timing has resulted in a temporary need for external financing and the Company has drawn $500,000 on the line of credit to cover short-term operating needs. Working capital may be obtained by financing certain operating and sales- type leases under recourse and non-recourse borrowing arrangements. These borrowings would be collateralized with a security interest in the leased equipment. At September 30, 1998, the Company had unfunded leases in the amount of $7,483,000 which could be used as collateral for future borrowing arrangements. The Company believes it will have adequate sources of cash and available bank line of credit to fund anticipated working capital needs for its existing business through fiscal year 1999. 10 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. BI Incorporated Date October 21, 1998 By /s/ David J. Hunter ----------------------- -------------------------------- David J. Hunter President and Chief Executive Officer /s/ Jacqueline A. Chamberlin ------------------------------------- Jacqueline A. Chamberlin Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 10 0 17,571 0 3,032 22,130 13,214 0 61,461 6,925 0 0 0 34,087 0 61,461 16,505 16,535 8,358 15,598 0 0 0 937 408 0 0 0 0 529 .07 .07
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