<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 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: 0-28268
USCS INTERNATIONAL, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-1727009
- ------------------------------- ----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification)
2969 PROSPECT PARK DRIVE, RANCHO CORDOVA 95670-6148
CALIFORNIA
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (916) 636-4500
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
----------------------------- ----------------------------
Common Stock, $.05 par value 22,283,827 shares
1
<PAGE>
USCS INTERNATIONAL, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PAGE NO.
--------
Part I. Financial Information
Item 1. Financial Statements 3
Consolidated Condensed Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995 4
Consolidated Condensed Statements of Operations (Unaudited)
Three months and six months ended June 30, 1996 and 1995 5
Consolidated Condensed Statements of Cash Flows (Unaudited)
Six months ended June 30, 1996 and 1995 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition, Results of Operations, and Certain
Factors That May Affect Future Results. 8-12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
2
<PAGE>
USCS INTERNATIONAL, INC.
PART I- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following consolidated condensed financial statements, except for the
balance sheet as of December 31, 1995, have been prepared by the Company
without audit by independent public accountants, but in accordance with the
rules and regulations of the Securities and Exchange Commission (SEC), and in
the opinion of the Company, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair statement of results for
each period shown. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such SEC rules and regulations. The Company believes that the disclosures
made are adequate to make the information presented not misleading. These
financial statments should be read in conjunction with the financial
statements and notes thereto included in the Company's Registration Statement
on Form S-1 (Registration No. 333-3842) declared effective by the SEC on
June 20, 1996. The results of operations for the three months and six months
ended June 30, 1996 are not necessarily indicative of the results to be
expected for the entire year ending December 31, 1996.
3
<PAGE>
USCS INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 6,725 $ 6,627
Accounts receivable 67,061 59,907
Current portion of net investment in leases 4,963 6,868
Paper products and other inventory 4,761 5,608
Other 5,935 4,904
------------ ------------
Total current assets 89,445 83,914
Property and equipment 89,505 85,385
Net investment in leases, net of current portion 5,893 7,320
Other 4,528 3,831
------------ ------------
Total assets $ 189,371 $ 180,450
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 40,649 $ 44,974
Current portion of long-term debt 8,442 11,679
Deferred revenue 5,116 3,821
------------ ------------
Total current liabilities 54,207 60,474
Long-term debt, net of current portion 18,956 51,155
Customer deposits 13,403 13,497
Other liabilities 8,008 8,734
------------ ------------
Total liabilities 94,574 133,860
------------ ------------
Stockholders' Equity:
Preferred Stock, $.05 par value, 10,000,000 shares
authorized; no shares issued and outstanding - -
Common Stock, $.05 par value
Voting: Authorized 40,000,000 shares; Issued and
outstanding: 22,283,827 shares at June 30, 1996
(unaudited) and 12,813,313 shares at December 31, 1995 1,114 641
Non-Voting: Authorized 12,000,000 shares; Issued and
outstanding: 6,228,702 shares at December 31, 1995 - 311
Additional paid-in capital 42,645 -
Retained earnings 51,364 45,966
Foreign currency translation adjustment (326) (328)
------------ ------------
Total stockholders' equity 94,797 46,590
------------ ------------
Total liabilities and stockholders' equity $ 189,371 $ 180,450
------------ ------------
------------ ------------
</TABLE>
4
<PAGE>
USCS INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ------------------------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Software and services $ 57,789 $ 46,129 $ 113,210 $ 92,613
Equipment sales and services 5,783 10,022 10,617 16,550
------------ ----------- ---------- ----------
Total revenue 63,572 56,151 123,827 109,163
------------ ----------- ---------- ----------
Cost of revenue:
Software and services 36,358 31,102 71,586 60,915
Equipment sales and services 3,413 5,996 6,346 9,697
------------ ----------- ---------- ----------
Total cost of revenue 39,771 37,098 77,932 70,612
------------ ----------- ---------- ----------
Gross profit 23,801 19,053 45,895 38,551
------------ ----------- ---------- ----------
Operating expenses:
Research and development 5,890 3,917 11,533 8,421
Selling, general and administrative 12,070 10,120 23,078 20,177
------------ ----------- ---------- ----------
Total operating expenses 17,960 14,037 34,611 28,598
------------ ----------- ---------- ----------
Operating income 5,841 5,016 11,284 9,953
Interest expense 1,143 1,236 2,349 2,404
------------ ----------- ---------- ----------
Income before income taxes 4,698 3,780 8,935 7,549
Income tax provision 1,855 1,493 3,529 2,981
------------ ----------- ---------- ----------
Net income $ 2,843 $ 2,287 $ 5,406 $ 4,568
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
Earnings per share $ 0.13 $ 0.11 $ 0.26 $ 0.22
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
Weighted average common
shares and equivalents 21,304 21,186 20,982 21,340
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
</TABLE>
5
<PAGE>
USCS INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six months ended
June 30,
-----------------------
1996 1995
---------- ---------
Cash flows from operating activities:
Net cash provided by operating activities $ 6,575 $ 12,027
---------- ---------
Cash flows from investing activities:
Capital expenditures, net (13,501) (13,938)
Other (339) (1,997)
---------- ---------
Net cash used in investing activities (13,840) (15,935)
---------- ---------
Cash flows from financing activities:
Net (paydown) borrowing of revolving
credit agreement (26,000) 15,000
Payments on long-term debt (9,436) (9,792)
Proceeds from issuance of common stock
less commission 45,338 318
Initial public offering costs (2,500) -
Repurchase of common stock (39) (558)
---------- ---------
Net cash provided by financing activties 7,363 4,968
---------- ---------
Net increase in cash 98 1,060
Cash at January 1 6,627 1,966
---------- ---------
Cash at June 30 $ 6,725 $ 3,026
---------- ---------
---------- ---------
6
<PAGE>
USCS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Stockholders' Equity
The Company completed an initial public offering (IPO) of its common
stock in June 1996. The Company sold 2,766,375 shares at an initial
public offering price of $17 per share, resulting in proceeds to the
Company of approximately $41.2 million, after deducting underwriting
discounts and offering expenses.
As of the closing of the IPO, the Company's Common Voting Stock split
on a 2.1 to 1 basis, the Company's Common Non-Voting Stock split on a 2
to 1 basis, and all of the Common Non-Voting Stock converted to Common
Voting Stock on a one-for-one basis. The effect of these transactions
has been retroactively reflected in the financial statements.
2. Income Tax
Income tax provisions for interim periods are based on estimated
effective annual income tax rates. The Company recognizes deferred
tax assets and liabilities for the expected future tax consequences of
temporary differences between tax bases and financial reporting bases
of assets and liabilities.
3. Earnings per Share
Earnings per share are based on the weighted average number of shares
outstanding and common stock equivalents during the respective
periods, including the assumed net shares issuable upon exercise of
stock options when dilutive. Common and common equivalent shares
issued during the twelve month period prior to the IPO are included in
the calculations as if they were outstanding for all periods presented
(using the treasury stock method at the fair market value of the stock
on June 30, 1996.)
4. Subsequent Event
On July 9, 1996, the Company received approximately $11.4 million,
after deducting underwriting discounts and offering expenses, upon the
exercise of the Underwriters' overallotment option to purchase
720,000 shares of common stock in connection with the IPO.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition, Results
of Operations, and Certain Factors that May Affect Future Results
Founded in 1969, USCS is a leading provider of customer management software
and services to the global communications industry. Revenue is derived
primarily from providing software and bill presentment services to cable
television and multi-service providers in the U.S. and 13 other countries and
bill presentment services to telecommunication companies in the U.S. Software
and bill presentment services to cable television and multi-service providers
are generally provided under bundled service arrangements. Most of the
Company's revenue is derived based on the number of subscribers or end-users
of the Company's clients, the number of billing statements mailed and/or the
number of images, generally one page side, produced. Most of the Company's
revenue is derived under long-term contracts with terms ranging from three to
seven years.
The Company provides software and services to North American cable television
and multi-service providers primarily through a direct sales force. Outside
of North America, the Company markets its software services primarily through
strategic partners, such as system integrators and computer hardware
manufacturers, which provide local sales and support. Building and
maintaining relationships with its clients is an important part of the
Company's strategy because selling cycles can extend a year or longer. The
Company has committed increased resources to the international, multi-service
and telecommunications markets because it believes these represent
opportunities to grow at rates greater than in the U.S. cable television
marketplace alone. In addition, the Company sells computer hardware and
provides associated maintenance. Leasing is provided as an alternative to
equipment purchase for clients.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the Company's
consolidated condensed statements of operations and the percentage of revenue
represented by each line item:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------------------- -------------------------------------------
1996 1995 1996 1995
--------------------- ------------------ --------------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software and services $57,789 90.9% $46,129 82.2% $113,210 91.4% $ 92,613 84.8%
Equipment sales and services 5,783 9.1 10,022 17.8 10,617 8.6 16,550 15.2
--------- -------- -------- -------- --------- -------- -------- --------
Total revenue 63,572 100.0 56,151 100.0 123,827 100.0 109,163 100.0
--------- -------- -------- -------- --------- -------- -------- --------
Cost of revenue:
Software and services 36,358 57.2 31,102 55.4 71,586 57.8 60,915 55.8
Equipment sales and services 3,413 5.4 5,996 10.7 6,346 5.1 9,697 8.9
--------- -------- -------- -------- --------- -------- -------- --------
Total cost of revenue 39,771 62.6 37,098 66.1 77,932 62.9 70,612 64.7
--------- -------- -------- -------- --------- -------- -------- --------
Gross profit 23,801 37.4 19,053 33.9 45,895 37.1 38,551 35.3
--------- -------- -------- -------- --------- -------- -------- --------
Operating expenses:
Research and development 5,890 9.2 3,917 7.0 11,533 9.3 8,421 7.7
Selling, general and administrative 12,070 19.0 10,120 18.0 23,078 18.7 20,177 18.5
--------- -------- -------- -------- --------- -------- -------- --------
Total operating expenses 17,960 28.2 14,037 25.0 34,611 28.0 28,598 26.2
--------- -------- -------- -------- --------- -------- -------- --------
Operating income 5,841 9.2 5,016 8.9 11,284 9.1 9,953 9.1
Interest expense 1,143 1.8 1,236 2.2 2,349 1.9 2,404 2.2
--------- -------- -------- -------- --------- -------- -------- --------
Income before income taxes 4,698 7.4 3,780 6.7 8,935 7.2 7,549 6.9
Income tax provision 1,855 2.9 1,493 2.6 3,529 2.8 2,981 2.7
--------- -------- -------- -------- --------- -------- -------- --------
Net income $2,843 4.5% $ 2,287 4.1% $ 5,406 4.4% $ 4,568 4.2%
--------- -------- -------- -------- --------- -------- -------- --------
--------- -------- -------- -------- --------- -------- -------- --------
</TABLE>
8
<PAGE>
Revenue. Total revenue increased by 13% to $63.6 million in the second
quarter of 1996 from $56.1 million in the comparable quarter in 1995.
Software and services, which was 91% of total revenue in the second quarter
of 1996 versus 82% in the comparable quarter in 1995, increased in the second
quarter of 1996 by 25% over the comparable quarter in 1995. Customer
management software and services revenue increased by 20% to $33.8 million in
the second quarter of 1996 from $28.1 million in the comparable 1995 quarter.
Bill presentment revenue provided primarily to telecommunications companies
as a standalone service increased by 33% to $24.0 million in the second
quarter of 1996 from $18.0 million in the comparable quarter of the prior
year. Equipment sales and services declined in the second quarter of 1996 by
$4.2 million or 42% from the comparable quarter in 1995.
Total revenue increased by 13% to $123.8 million for the six months ended
June 30, 1996 from $109.2 million for the six months ended June 30, 1995.
Software and services was 91% of total revenue in the six months ended June
30, 1996 versus 85% in the comparable 1995 six month period. Customer
management software and services revenue increased by 17% to $66.3 million in
the six months ended June 30, 1996 from $56.9 million in the comparable 1995
six month period. Bill presentment revenue provided primarily to
telecommunications companies as a standalone service increased by 31% to
$46.9 million in the six months ended June 30, 1996 from $35.7 million in the
comparable period of the prior year.
Growth in revenues for the second quarter and the first half of 1996 came
primarily from higher prices allowed by existing contracts, migration by
clients to higher priced services, increases in the number of subscribers in
existing and new clients in the U.S. and international markets, and increased
volume in bill presentment services.
Cost of Revenue and Gross Profit. The Company's gross profit margin increased
to 37% in the second quarter of 1996 from 34% in the comparable quarter in 1995.
The Company's gross profit margin increased to 37% in the six months ended June
30, 1996 from 35% in the comparable period in 1995. Customer management
software and services gross profit margin increased to 45% in the second quarter
of 1996 from 42% in the comparable quarter in 1995. Customer management software
and services gross profit margin increased to 44% in the six months ended June
30, 1996 from 43% in the comparable period in 1995. Gross profit margins were
increased because of economies of scale associated with higher volume, increased
prices and cost control. Bill presentment services gross profit margin
increased to 27% in the second quarter of 1996 from 17% in the comparable 1995
quarter and to 27% in the six months ended June 30, 1996 from 20% in the
comparable 1995 period due to economies of scale resulting from increased
revenue. The gross profit margin on equipment related revenue increased to 41%
in the second quarter of 1996 from 40% in the comparable quarter in 1995.
Research and Development. Research and development spending in the second
quarter, exclusive of amounts reimbursable by development partners,
represented 9% of total revenue, and increased by $2.0 million over the
comparable quarter in the prior year. Research and development was 9% of
total revenue, or $11.5 million, for the six months ended June 30,
9
<PAGE>
1996 versus 8%, or $8.4 million, in the comparable 1995 six month
period. The added spending was aimed at expanding features and functionality
in both customer management software and bill presentment services.
Selling, General and Administrative. Selling, general and administrative
expenses represented 19% of total revenue for both the three months and the
six months ended June 30, 1996 versus 18% for the comparable 1995 periods.
Selling, general and administrative expenses in the second quarter of 1996
increased by approximately 19% over the comparable quarter in the prior year.
This increase is attributable to a 33% increase in sales and marketing
spending to primarily support our increased sales and marketing efforts in
the U.S. and international markets.
Net Income. Net income in the second quarter of 1996 increased by 24% to $2.8
million from $2.3 million in the comparable 1995 quarter primarily because of
the factors cited above. Net income per share increased 18% in the second
quarter and for the first half of 1996 versus the comparable periods in 1995.
The increases in net income per share resulted primarily from the Company's
higher earnings.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of the Company's growth has been provided by operations
and borrowing from banks and financial institutions for the three months and
six months ended June 30, 1996 until the receipt of the proceeds of the IPO.
In June 1996, the Company utilized the net proceeds from the IPO of $41.2
million to reduce debt under certain revolving credit agreements. Subsequent
to June 30, 1996, the Company received net proceeds of approximately $11.4
million upon the exercise of the Underwriters' overallottment option to
purchase 720,000 shares of common stock.
The Company collects from its clients and remits to the U.S. Postal Service a
substantial amount of postage. All contracts allow the Company to pre-bill
and/or require deposits from its clients to mitigate the effect on cash flow.
As of June 30, 1996, 34% of the Company's accounts receivable represented
amounts due from clients for postage. Postage collections and remittances are
not included in the Company's statements of operations.
At June 30, 1996, the Company had $6.7 million of cash, $67.1 million of
accounts receivable (including postage receivable of $ 23.1 million), $5.0
million of current net investment in leases, and $35.2 million of working
capital. At the end of the second quarter of 1996, the Company and a
subsidiary had combined borrowings of $4.0 million under unsecured bank
credit arrangements with a total borrowing availability of $65.0 million. Of
the $27.4 million of total debt outstanding at June 30, 1996, $8.4 million is
due over the following 12-month period.
The Company continues to make significant investments in capital equipment
and research and development. The Company believes that the proceeds of the
IPO, together with net cash from operations and the borrowing availability,
will be sufficient to support operations through the next twelve months.
The above statements that are not historical facts or statements of current
status are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995 and as such are subject to risks and
uncertainties including, but not limited to, the risks and uncertainties set
forth under the caption "Certain Factors That May Affect Future Results."
Actual results may differ materially.
10
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. A number of
uncertainties exist that could affect the Company's future operating results,
including, without limitation, changes in the cable television market, the
Company's ability to retain existing customers and attract new customers, the
Company's continuing ability to develop products that are responsive to the
evolving needs of its customers, increased competition, changes in operating
expenses, changes in government regulation of the Company's clients and
general economic factors.
The Company is highly dependant on the cable television market. The number of
providers of cable television service in the U.S. is declining, resulting in
a reduction of the number of potential cable television clients in the U.S.
As the number of companies serving the available subscriber base decreases,
the loss of a single client could have a greater adverse impact on the
Company than in the past. Furthermore, a decrease in the number of cable
subscribers or any adverse development in the cable television market could
have a material adverse effect on the financial condition and results of
operations of the Company.
The communications market is characterized by rapid technological
developments, changes in client requirements, evolving industry standards and
frequent new product introductions. The Company's future success will depend,
in part, upon its ability to enhance its existing applications, develop and
introduce new products that take advantage of technological advances and
respond promptly to new client requirements and evolving industry standards.
The Company has expended considerable funds to develop products to serve the
changing communications market. If the communications market fails to
converge or grows more slowly than anticipated or the Company's products and
services fail to achieve market acceptance, there could be a material adverse
effect on the financial condition and results of operations of the Company.
Further, the Company's development projects are subject to all of the risks
associated with the development of new software and other products based on
innovative technologies. The failure of such development projects could have
a material adverse effect on the financial condition and results of
operations of the Company.
The Company's quarterly operating results may fluctuate from quarter to
quarter depending on various factors, including the impact of significant
start-up costs associated with initiating the delivery of contracted services
to new clients, the hiring of additional staff, new product development and
other expenses, introduction of new products by competitors, pricing
pressures, the evolving and unpredictable nature of the markets in which the
Company's products and services are sold and general economic conditions.
The market for the Company's products and services is highly competitive, and
competition is increasing as additional market opportunities arise. The
Company believes its most significant competitors for customer management
software and services are independent providers of such software and services
and in-house systems. TCI, which represented approximately 17% and 18% of the
11
<PAGE>
Company's revenue for 1995 and 1994, respectively, has announced that it is
developing and testing an in-house system and that such in-house system will
replace the Company's system. Another client, which accounted for 4% of total
revenue in 1995 and recently extended its contract with the Company to early
1997, has orally advised the Company that it may select an alternative
solution for its customer management software requirements. In addition,
competitive factors could influence or alter the Company's overall revenue
mix between customer management software, services, including bill
presentment services, and equipment sales and leasing. Any of these events
could have a material adverse effect on the financial conditions and results
of operations, including gross profit margins, of the Company.
Aggregate revenue from the Company's ten largest clients accounted for
approximately 63% of total revenue in both 1995 and 1994. Loss of all or a
significant part of the business of any of these clients or a decrease in
their respective customer bases would have a material adverse effect on the
financial condition and results of operations of the Company.
Management of the Company's growth may place a considerable strain on the
Company's management, operations and systems. The Company's ability to execute
its business strategy will depend in part upon its ability to manage the
demands of a growing business. Any failure of the Company's management team
to effectively manage growth could have a material adverse effect on the
Company's business, financial condition or results of operations.
Substantially all of the Company's revenue is derived from the sale of
services or products under long-term contracts with its clients. The Company
typically does not have the unilateral option to extend the terms of such
contracts upon their expiration. In addition, certain of the Company's
contracts do not require clients to make any minimum purchase. Others require
minimum purchases that are substantially below the current level of business
under such contracts and all such contracts are cancelable by clients under
certain conditions. The failure of clients to renew contracts, a reduction in
usage by clients under any contracts or the cancellation of contracts, could
have a material adverse effect on the Company's financial condition and
results of operations.
The Company markets its products in a variety of international markets. To
date, the Company's primary customer management software has been installed
in 13 countries. While less than 5% of the Company's customer management
software and services revenue came from international sources, the Company is
expanding its international presence, primarily through third party marketing
and distribution alliances. The Company's current and proposed international
business activities are subject to certain inherent risks. There can be no
assurance that such risks will not have a material adverse effect on the
Company's future international sales and, consequently, the Company's
business, operating results and financial condition.
The Company's existing and potential clients are subject to extensive
regulation, and certain of the Company's revenue opportunities may depend on
continued deregulation in the worldwide communications industry. In addition,
the Company's clients are subject to certain regulations governing the
privacy and use of the customer information that is collected and managed by
the Company's products and services. Regulatory changes that adversely affect
the Company's existing and potential clients could have a material adverse
effect on the financial condition and results of operations of the Company.
Reference is made to the more detailed discussion of the risks associated
with the Company's business contained under the heading "Risk Factors" in the
Company's Registration Statement on Form S-1 (Registration No. 333-3842)
declared effective by the SEC on June 20, 1996.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
On May 31, 1996, the Company, formerly known as U.S. Computer Services, a
California corporation, reincorporated from California to Delaware via a
merger with and into its wholly owned subsidiary, USCS International, Inc., a
Delaware corporation. The reincorporation effected a change in the Company's
domicile from California to Delaware, thereby modifying the rights,
preferences and privileges of the Company's outstanding securities.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
A. The Company, prior to its reincorporation to Delaware and then named
U.S. Computer Services, held its 1996 Annual meeting of stockholders (the
"Annual Meeting") on May 16, 1996. The following actions were taken at the
Annual Meeting:
I. Reincorporation. The stockholders approved the reincorporation of
the Company from California to Delaware via a merger of the Company
with and into its wholly owned subsidiary (the "Reincorporation") by
a vote of 16,888,073 shares for, 9,755 shares against and 41,982
shares not voting; the Common Voting Stockholders, voting
separately as a class approved the Reincorporation by a vote of
11,544,555 shares for, 1,205 shares against, and 2,014 shares not
voting and the Common Non-Voting Stockholders, voting separately as
a class, approved the Reincorporation by a vote of 5,343,518
shares for, 8,550 shares against and 39,968 shares not voting;
II. 1996 Stock Option Plan. The Common Voting Stockholders approved the
1996 Stock Option Plan by a vote of 11,283,053 shares for 264,721
shares against and 0 shares not voting;
III. 1996 Directors Stock Option Plan. The Common Voting Stockholders
approved the 1996 Directors Stock Option Plan by a vote of
11,363,886 shares for, 183,888 shares against and 0 shares
not voting;
IV. Employee Stock Purchase Plan. The Common Voting Stockholders
approved the 1996 Directors Stock Option Plan by a vote of
11,483,508 shares for, 64,266 shares against and 0 shares
not voting;
V. Appointment of Auditors. The Common Voting Stockholders approved
the appointment of Price Waterhouse LLP as auditors for the Company
for the year 1996 by a vote of 11,382,465 shares for, 145,101 shares
against and 20,208 shares abstaining; and
13
<PAGE>
VI. Directors. The Common Voting Stockholders unanimously elected the
then current board of directors listed below:
George L. Argyros
James C. Castle
George M. Crandell
Charles D. Martin
Michael F. McGrail
Lawrence W. Wangberg
B. On April 18, 1996, the Company's sole stockholder, U.S. Computer
Services, prior to its merger with U.S. Computer Services, approved the First
Amended and Restated Certificate of Incorporation, pursuant to a unanimous
written consent.
C. On May 16, 1996, the Company's sole stockholder, U.S. Computer
Services, prior to its merger with U.S. Computer Services, approved the
Reincorporation, pursuant to a unanimous written consent.
Item 5. Other information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.01 Computation of Per Share Earnings
Exhibit 27.01 Financial Data Schedule
(b) Reports on Form 8-K
None.
14
<PAGE>
USCS INTERNATIONAL, INC.
SIGNATURE
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.
USCS INTERNATIONAL, INC.
(Registrant)
Dated: August 14, 1996 By: /s/ DOUGLAS L. SHURTLEFF
------------------------
Douglas L. Shurtleff
Senior Vice President, Finance
(Chief Financial Officer)
15
<PAGE>
Exhibit 11.01
USCS INTERNATIONAL, INC.
COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------------------------------------
1996 1995 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding
during the period 19,615 19,588 19,326 19,483
Common stock equivalents
considered to be outstanding
for the periods presented 1,689 1,598 1,656 1,857
---------- ---------- ---------- ----------
21,304 21,186 20,982 21,340
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income $ 2,843 $ 2,287 $ 5,406 $ 4,568
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share $ 0.13 $ 0.11 $ 0.26 $ 0.22
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF USCS INTERNATIONAL, INC. AS OF
JUNE 30, 1996 FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6725
<SECURITIES> 0
<RECEIVABLES> 67061
<ALLOWANCES> 0
<INVENTORY> 4761
<CURRENT-ASSETS> 89445
<PP&E> 169801
<DEPRECIATION> 80296
<TOTAL-ASSETS> 189371
<CURRENT-LIABILITIES> 54207
<BONDS> 18956 <F1>
0
0
<COMMON> 1114
<OTHER-SE> 93683 <F2>
<TOTAL-LIABILITY-AND-EQUITY> 189371
<SALES> 0
<TOTAL-REVENUES> 123827
<CGS> 0
<TOTAL-COSTS> 77932
<OTHER-EXPENSES> 34611 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2349
<INCOME-PRETAX> 8935
<INCOME-TAX> 3529
<INCOME-CONTINUING> 5406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5406
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<FN>
<F1> Consists of Notes Payable, Credit Line and Bonds Payable
<F2> Consists of Additional Paid-in Capital, Retained Earnings and Foreign
Currency Translation Adjustments
<F3> Consists of Research and Development and Selling, General Administrative
Expenses
</FN>
</TABLE>
