<PAGE>P-i
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
Form 10-Q
/X/QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1997
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 0-8615
BRC HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1533071
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1111 West Mockingbird Lane, Suite 1400, Dallas, Texas 75247
(Address of principal executive including zip code)
Registrant's telephone number, including area code (214) 688-1800
None
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 X No
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, 1997
Common Stock 6,894,621
$.10 Par Value
<PAGE>P-ii
BRC HOLDINGS, INC.
INDEX
PAGE
Part I. Financial Information (Unaudited)
Consolidated Condensed Balance
Sheets - June 30, 1997 and
December 31, 1996 1
Consolidated Condensed Statements
of Income - Three Months Ended
June 30, 1997 and 1996 2
Consolidated Condensed Statements of
Income - Six Months Ended June 30,
1997 and 1996 3
Consolidated Condensed Statements of
Cash Flows - Six Months Ended June 30,
1997 and 1996 4
Notes to Consolidated Condensed Financial
Statements 5
Management's Discussion and Analysis 8
Part II. Other Information 13
<PAGE>P-1 PART I. FINANCIAL INFORMATION
BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . $ 8,420,000 $ 7,089,000
Short-term investments . . . . . . . . . . 27,498,000 33,440,000
Accounts receivable, net . . . . . . . . . 22,087,000 21,417,000
Current portion of installment and
notes receivable. . . . . . . . . . . . . 5,316,000 7,950,000
Inventories (Note 4) . . . . . . . . . . . 1,363,000 1,462,000
Deferred tax asset . . . . . . . . . . . . 2,791,000 3,099,000
Other current assets . . . . . . . . . . . 3,025,000 5,573,000
Total current assets . . . . . . . . . . 70,500,000 80,030,000
Property, plant and equipment. . . . . . . 41,591,000 40,033,000
Less accumulated depreciation . . . . . . (31,492,000) (29,017,000)
10,099,000 11,016,000
Long-term investments. . . . . . . . . . . 34,570,000 24,211,000
Long-term installment and notes
receivable . . . . . . . . . . . . . . . 12,036,000 13,958,000
Purchased software and databases, net. . . 1,710,000 2,238,000
Goodwill and intangibles, net. . . . . . . 26,898,000 26,833,000
Other assets . . . . . . . . . . . . . . . 1,593,000 1,817,000
Net assets of discontinued operations
(Note 5). . . . . . . . . . . . . . . . . 14,880,000 18,141,000
Total assets . . . . . . . . . . . . . . . $172,286,000 $178,244,000
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . . $ 2,157,000 $ 2,522,000
Accrued liabilities . . . . . . . . . . . 18,923,000 18,987,000
Current portion of capital lease
obligations. . . . . . . . . . . . . . . 138,000 525,000
Total current liabilities. . . . . . . . 21,218,000 22,034,000
Long-term capital lease obligations. . . . --- 14,000
Deferred tax liability . . . . . . . . . . 1,861,000 2,000,000
Shareholders' Equity:
Common stock . . . . . . . . . . . . . . . 719,000 716,000
Additional paid-in capital . . . . . . . . 80,414,000 79,375,000
Retained earnings (Note 7) . . . . . . . . 77,896,000 74,105,000
Treasury stock (Note 7). . . . . . . . . . (9,822,000) ---
Total shareholders' equity . . . . . . . 149,207,000 154,196,000
Total liabilities and shareholders'
equity . . . . . . . . . . . . . . . . . $172,286,000 $178,244,000
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE>P-2 BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30,
1997 1996
Revenues . . . . . . . . . . . . . . . . . . $ 27,755,000 $ 24,596,000
Cost of products and services. . . . . . . . 18,618,000 17,882,000
Selling, general and administrative. . . . . 5,572,000 4,386,000
24,190,000 22,268,000
Operating profit . . . . . . . . . . . . . . 3,565,000 2,328,000
Interest income, net . . . . . . . . . . . . 1,042,000 781,000
Income from continuing operations
before income taxes . . . . . . . . . . . . 4,607,000 3,109,000
Income taxes . . . . . . . . . . . . . . . . 1,841,000 1,224,000
Income from continuing operations. . . . . . 2,766,000 1,885,000
Income from discontinued operations
(Note 5) (net of income taxes of $4,000 in
1997 and $1,405,000 in 1996). . . . . . . . 6,000 2,108,000
Net income . . . . . . . . . . . . . . . . . $ 2,772,000 $ 3,993,000
Earnings per share (Note 6):
Common and common equivalent share:
Income from continuing operations. . . . . $ .39 $ .29
Income from discontinued operations. . . . .00 .31
$ .39 $ .60
Average shares. . . . . . . . . . . . . . . 7,043,000 6,755,000
Assuming full dilution:
Income from continuing operations. . . . . $ .39 $ .29
Income from discontinued operations. . . . .00 .31
$ .39 $ .60
Average shares. . . . . . . . . . . . . . . 7,108,000 6,755,000
Cash dividends per share . . . . . . . . . . $ --- $ ---
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE>P-3 BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended June 30,
1997 1996
Revenues . . . . . . . . . . . . . . . . $ 53,134,000 $ 48,981,000
Cost of products and services. . . . . . 36,637,000 35,804,000
Selling, general and administrative. . . 10,790,000 7,879,000
47,427,000 43,683,000
Operating profit . . . . . . . . . . . . 5,707,000 5,298,000
Interest income, net . . . . . . . . . . 1,999,000 1,511,000
Income from continuing operations
before income taxes . . . . . . . . . . 7,706,000 6,809,000
Income taxes . . . . . . . . . . . . . . 3,074,000 2,724,000
Income from continuing operations. . . . 4,632,000 4,085,000
Income (loss) from discontinued
operations (Note 5) (net of income tax
(benefit) expense of $(520,000) in
1997 and $2,011,000 in 1996). . . . . . (781,000) 3,016,000
Net income . . . . . . . . . . . . . . . $ 3,851,000 $ 7,101,000
Earnings per share (Note 6):
Common and common equivalent share:
Income from continuing operations. . . $ .64 $ .62
Income (loss) from discontinued
operations. . . . . . . . . . . . . . (.11) .45
$ .53 $ 1.07
Average shares. . . . . . . . . . . . . 7,198,000 6,744,000
Assuming full dilution:
Income from continuing operations. . . $ .64 $ .62
Income (loss) from discontinued
operations. . . . . . . . . . . . . . (.11) .45
$ .53 $ 1.07
Average shares. . . . . . . . . . . . . 7,214,000 6,744,000
Cash dividends per share . . . . . . . . $ --- $ ---
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE>P-4 BRC HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
1997 1996
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . $ 3,851,000 $ 7,101,000
Adjustments to reconcile net income to
net cash provided by continuing operations:
Loss (income) from discontinued
operations . . . . . . . . . . . . . . . . 781,000 (3,016,000)
Depreciation and amortization. . . . . . . . 5,731,000 4,506,000
Loss (gain) on sale of assets. . . . . . . . 145,000 (36,000)
Deferred income tax. . . . . . . . . . . . . . 330,000 ---
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . (25,000) (437,000)
Inventories. . . . . . . . . . . . . . . . . 99,000 489,000
Other assets . . . . . . . . . . . . . . . . 2,252,000 1,152,000
Accounts payable . . . . . . . . . . . . . . (450,000) 39,000
Other liabilities. . . . . . . . . . . . . . (320,000) 414,000
Net cash provided by continuing operations . 12,394,000 10,212,000
Net cash provided by discontinued operations . . 3,209,000 2,267,000
Net cash provided by operating activities. . . . 15,603,000 12,479,000
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . (1,899,000) (2,053,000)
Capital expenditures of discontinued
operations . . . . . . . . . . . . . . . . . (28,000) (1,465,000)
Purchase of investments. . . . . . . . . . . . (30,651,000) (31,291,000)
Redemption of investments. . . . . . . . . . . 25,612,000 21,975,000
Proceeds from sale of assets . . . . . . . . . 47,000 49,000
Acquired businesses. . . . . . . . . . . . . . (1,543,000) ---
Additions to installment receivables . . . . . (1,186,000) (6,756,000)
Proceeds from installment receivables. . . . . 4,845,000 1,727,000
Net cash used in investing activities. . . . . . (4,803,000) (17,814,000)
Cash flows from financing activities:
Principal payments on capital leases . . . . . (411,000) (608,000)
Principal payments on notes of discontinued
operations . . . . . . . . . . . . . . . . . 10,000 ---
Issuance of common stock . . . . . . . . . . . 1,157,000 1,120,000
Purchases of treasury stock. . . . . . . . . . (10,225,000) ---
Net cash (used in) provided by financing
activities . . . . . . . . . . . . . . . . . . (9,469,000) 512,000
Increase (decrease) in cash and cash equivalents 1,331,000 (4,823,000)
Cash and cash equivalents at beginning of period 7,089,000 10,059,000
Cash and cash equivalents at end of period . . . $ 8,420,000 $ 5,236,000
Supplemental disclosures -- Cash (receipts) payments during the first six
months of 1997 for income taxes and interest were ($110,000) and $16,000,
respectively. Cash payments during the first six months of 1996 for income
taxes and interest were $3,337,000 and $59,000, respectively.
See accompanying Notes to the Consolidated Condensed Financial Statements.
<PAGE>P-5 BRC HOLDINGS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The interim consolidated condensed financial statements included herein
have been prepared by BRC Holdings, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements have been condensed or omitted pursuant
to such rules and regulations. These consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and related notes contained in the Company's 1996 annual report
on Form 10-K. In the opinion of management, the consolidated condensed
financial statements contain all adjustments necessary to present fairly
the financial position as of June 30, 1997 and the results of operations
and cash flows for the six months ended June 30, 1997 and 1996. These
adjustments include recurring accruals and a pro rata portion of certain
estimated expenses. Management believes that the procedures followed in
preparing these consolidated condensed financial statements are reasonable
under the circumstances, but the accuracy of the amounts in the financial
statements are in some respects dependent upon facts that will exist and
procedures that will be performed by the Company later in the fiscal year.
2. The provision for income tax is based on the estimated annual rate.
Certain reclassifications between current income tax and deferred income
tax may be necessary at December 31, 1997 to reflect the annual
computation of differences between book and tax income.
3. The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
4. Inventories consist of the following:
June 30, December 31,
1997 1996
Finished goods. . . . . . . . . . $ 119,000 $ 243,000
Raw materials and supplies. . . . 1,244,000 1,219,000
Net inventories . . . . . . . . . $ 1,363,000 $ 1,462,000
5. On November 21, 1996, the Company entered into a definitive agreement to
sell the assets of its election business to American Information Systems,
Inc., ("AIS") a privately-held information systems company headquartered
in Omaha, Nebraska. Accordingly, this business is reported as a
discontinued operation for accounting purposes and has been presented in
the Consolidated Condensed Balance Sheets as "net assets of discontinued
operations" and as "discontinued operations" in the Consolidated Condensed
Statements of Income.
Closing of the transaction is subject to the satisfactory conclusion of a
review currently being conducted by the United States Department of
Justice, Antitrust Division ("DOJ") pursuant to its authority under the
Hart Scott Rodino Antitrust Improvement Act. While the outcome of this
review cannot be determined at this time, the Company currently believes
the ultimate result will not preclude consummation of the planned
transaction.
<PAGE>P-6
Subject to changes in the net book value of the election business through
the date of closing, the agreement provides for the payment by AIS of
consideration consisting of $35 million in cash, $17.5 million in a
subordinated note and 19.9% of the resulting equity of AIS. The Company
anticipates recording a pre-tax gain associated with this transaction.
The net assets of discontinued operations are summarized as follows
(000's):
June 30, December 31,
1997 1996
Current assets. . . . . . . . . . . $ 12,467 $ 17,029
Plant and equipment, net. . . . . . 4,543 4,538
Other assets. . . . . . . . . . . . 2,054 2,187
Current liabilities . . . . . . . . (3,561) (4,983)
Other liabilities . . . . . . . . . (623) ( 630)
Net assets of discontinued
operations . . . . . . . . . . . $ 14,880 $ 18,141
6. In February, 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" was issued. This statement cannot be adopted prior
to the Company's financial statements as of and for the year ending
December 31, 1997. However, pro forma earnings per share information
computed using this new standard is presented below for the periods ended
June 30.
Three Months Ended June 30,
1997 1996
Basic earnings per share:
Income from continuing
operations. . . . . . . . . . . . $ .40 $ .29
Income from discontinued
operations. . . . . . . . . . . . .00 .33
$ .40 $ .62
Average shares. . . . . . . . . . . 6,950,000 6,477,000
Diluted earnings per share:
Income from continuing
operations. . . . . . . . . . . . $ .39 $ .29
Income from discontinued
operations. . . . . . . . . . . . .00 .31
$ .39 $ .60
Average shares. . . . . . . . . . . 7,108,000 6,755,000
<PAGE>P-7
Six Months Ended June 30,
1997 1996
Basic earnings per share:
Income from continuing
operations. . . . . . . . . . . . $ .66 $ .63
Income (loss) from discontinued
operations. . . . . . . . . . . . (.11) .47
$ .55 $ 1.10
Average shares. . . . . . . . . . . 7,053,000 6,467,000
Diluted earnings per share:
Income from continuing
operations. . . . . . . . . . . . $ .64 $ .62
Income (loss) from discontinued
operations. . . . . . . . . . . . (.11) .45
$ .53 $ 1.07
Average shares. . . . . . . . . . . 7,214,000 6,744,000
7. During the first six months of 1997, the Company repurchased 255,000
shares of its common stock, in open market transactions, at an average
price of $33.53 per share, and 50,000 shares of its common stock in a
privately negotiated purchase at $33.50 per share. In the second quarter
of 1997, common stock was issued from treasury upon exercise of 12,500
employee stock options. In connection with these exercise transactions,
the difference between the aggregate option exercise proceeds and the
Company's basis in the treasury stock of $61,000 was charged to retained
earnings. At June 30, 1997, the Company reflects treasury stock of
$9,822,000.
8. On May 28, 1997, the Company purchased the assets and operations of Code
Rite, Inc., a Fort Worth, Texas provider of health care coding and
transcription services, for $1.5 million. In connection with the purchase,
the Company recorded $1.0 million of goodwill which will be amortized over
15 years. Code Rite had annual revenues of approximately $2.7 million.
9. On July 31, 1997, the Company acquired the assets and operations of
Management Consulting Solutions, Inc. ("MCSI"), a Pittsburgh,
Pennsylvania-based provider of systems consulting and integration
services, for $3.2 million. The purchase price will be adjusted based
on the final determination of changes in working capital subsequent to
April 30, 1997 through the closing date. This business unit had revenues
of approximately $5.6 million for the twelve months ended June 30, 1997.
MCSI was a subsidiary of North Pittsburgh Systems, Inc., a publicly-traded
telecommunications company.
In addition, effective July 31, 1997, the Company divested of its title
services business unit for a purchase price of $6.0 million, and other
consideration, to Title Records Corporation ("TRC"), a subsidiary of
Government Records Services, Inc., a privately-owned Dallas-based Company.
TRC issued to the Company a $6.0 million promissory note bearing interest
at 9% per annum. Based upon the Company's historical accounting treatment
for sales of title plants and the repayment of the note being dependent on
future successful operations of the buyers, BRC will recognize the gain on
the divestiture on the installment basis of accounting. This business
unit had revenues of $5.1 million for the twelve months ended
December 31, 1996, and $2.4 million for the first six months of 1997.
<PAGE>P-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain information contained herein may include forward-looking statements
that involve risks and uncertainties. The Company's actual results may differ
materially from those discussed in the forward-looking statements. Potential
risks and uncertainties include market responses to pricing pressures, changes
in product and service mix, results of litigation, the timely development and
acceptance of new products and services, the outcome of regulatory reviews of
the Company's planned divestiture of its election business, changes in customer
preferences and inventory risks due to shifts in market demand. Consequently,
the actual results realized by the Company could differ materially from the
statements made herein. Readers of this report are cautioned not to place
undue reliance on the forward-looking statements made herein.
Three Months Ended June 30, 1997 and 1996
Revenues from continuing operations for the second quarter of 1997 were
approximately $3.2 million, or 12.8%, higher than those reported during the
same period in the prior year. This increase can be attributed to revenues
associated with government technology outsourcing activities which grew $1.8
million, or 33%, and consulting services revenues of $4.0 million related to
the Company's acquisition of a managed-care consulting firm in the second half
of 1996. These increases were offset somewhat by a $2.4 million decrease on
revenues from health care technology services.
Including revenues associated with the Company's discontinued operations of its
election business, revenues for the second quarter of 1997 would have decreased
$3.6 million, or 9.6% compared to the second quarter of 1996. A significant
portion of the Company's historical revenues has been derived from election
products and services which are subject to a two year business cycle. Revenues
from these products and services are typically higher in even-numbered
"election" years as opposed to odd-numbered "non-election" years. The Company
believes the divestiture of its election business will result in a less
cyclical revenue and earnings trend for the Company. (See Note 5 to the
unaudited financial statements). In addition to a discussion of the results
from the Company's continuing operations, the financial results of the election
business are discussed below.
Revenues from government technology outsourcing services for the second quarter
of 1997 increased $1.8 million, or 33%, when compared to the second quarter of
1996. Increased revenues relate primarily to the initiation of outsourcing
services to the City of Riverside, California pursuant to a contract signed in
December of 1996, and to increased sales of computer hardware to existing
customers upgrading their systems to newer technologies.
Revenues from health care technology services for the second quarter of 1997
decreased by $2.4 million, or 22%, as compared to the second quarter of 1996.
This decrease relates primarily to the loss of certain health care technology
outsourcing contracts in the fourth quarter of 1996. These contracts produced
$3.6 million of revenue during the second quarter of 1996. The Company
anticipates, from time to time, that existing customers will not renew their
contracts upon the expiration thereof. This loss of revenue was partially
offset for the second quarter of 1997 by increased sales of the Company's
automated emergency department systems and information services to its health
care customers.
<PAGE>P-9
On May 28, 1997, the Company purchased the assets and operations of Code Rite,
Inc., a Fort Worth, Texas provider of health care coding and transcription
services for $1.5 million. The Company believes this purchase will compliment
our emergency department software product and information services currently
provided to health care customers. Code Rite had annual revenues of
approximately $2.7 million at the time of its acquisition.
The Company's second quarter revenues associated with government records
management decreased $0.3 million, or 5%, when compared to the second quarter
of 1996. Revenues from indexing services were up 44% while packaged services
and other government service revenues were down 24%.
Consulting services revenues were $4.0 million for the second quarter of 1997
representing 14.5% of revenues from continuing operations. Prior to the fourth
quarter of 1996, consulting services did not constitute a significant portion
of the Company's business. Increased consulting services revenues can
primarily be attributed to the Company's September 1996 acquisition of The Pace
Group, Inc., a managed-care consulting firm.
The Company's millennium services group, established in the fourth quarter of
1996 to address the Year 2000 conversion consulting needs of customers, was in
the start-up phase during the first half of 1997, and, thus did not contribute
revenues to the Company.
Second quarter 1997 revenues from election products and services decreased $6.8
million, or 51%, when compared to the second quarter of 1996. This decrease
can be partially attributed to fewer customer purchase decisions due to the
pending sale of the elections business to American Information Systems, Inc.
pursuant to the definitive agreement entered into in November, 1996 (See Note 5
to the unaudited financial statements) and to the normal two year sales cycle
of these products. Specifically, full service election revenues and ballots
sales have decreased $3.8 million, or 91%, and $1.5 million, or 63%,
respectively, when compared to the second quarter of 1996. The divestiture
of the elections business is currently under review by the Anti-trust Division
of the United States Department of Justice ("DOJ").
Revenues from other products and services during the second quarter of 1997
were consistent at $3.1 million when compared to the second quarter of 1996.
The Company's gross margins for the second quarters of 1997 and 1996 were 33%
and 27%, respectively. The increase in 1997 gross margin over 1996 can
primarily be attributed to cost reductions in the Company's health care
technology services and government records management divisions. Additionally,
margins in the Company's health care technology services division increased due
to additional sales of packaged software which typically provide higher
gross margins than the traditional outsourcing services provided by the
division. Selling, general and administrative expenses increased from 18% of
revenues in the second quarter of 1996 to 20% of revenues during the second
quarter of 1997. This increase primarily relates to additional administrative
costs associated with the DOJ's review of the pending sale of the election
business, as well as start up costs associated with the Company's millennium
services group.
<PAGE>P-10
Six Months Ended June 30, 1997 and 1996
Revenues from continuing operations for the first half of 1997 were
approximately $4.2 million, or 8.5%, higher than those reported during the same
period last year. Including revenues associated with the Company's
discontinued operations of its election business, revenues for the first half
of 1997 would have decreased $11.6 million, or 15.4%, compared to the first six
months of 1996. A significant portion of the Company's historical revenues has
been derived from election products and services which are subject to a two
year business cycle. Revenues from these products and services are typically
higher in even-numbered "election" years as opposed to odd-numbered "non-
election" years. The Company believes the divestiture of its election business
will result in a less cyclical revenue and earnings trend for the Company.
(See Note 5 to the unaudited financial statements). In addition to a
discussion of the results from the Company's continuing operations, the
financial results of the election business are discussed below.
Revenues from government technology outsourcing services for the first six
months of 1997 increased $2.5 million, or 21%, when compared to the first
half of 1996. As previously discussed, additional revenues can be attributed
to the newly acquired outsourcing services contract with the City of Riverside,
California signed in December,1996, and to increased sales of computer
hardware to existing customers upgrading their systems to new technologies.
Revenues from health care technology services for the first six months of 1997
decreased by $5.6 million, or 26%, as compared to the first half of 1996. This
decrease relates primarily to the loss of certain health care technology
outsourcing contracts in the fourth quarter of 1996. These contracts produced
$6.9 million of revenue in the first six months of 1996. The Company
anticipates, from time to time, that existing customers will not renew their
contracts upon the expiration thereof. This loss of revenue has been partially
offset by a $1.7 million increase in sales of the Company's automated emergency
department systems and information services to its health care customers.
The Company's revenues associated with government records management for the
first six months of 1997 decreased $0.3 million, or 4%, when compared to the
first half of 1996. As stated in the previous discussion, indexing services
revenues for the first six months of 1997 increased while packaged services
and other government records management revenues decreased when compared to
the first half of 1996.
Consulting services revenues were $7.5 million for the first six months of 1997
representing 14.1% of revenues from continuing operations. Prior to the fourth
quarter of 1996, consulting services did not constitute a significant portion
of the Company's business. Increased consulting services revenues can
primarily be attributed to the Company's September 1996 acquisition of The Pace
Group, Inc.
The Company's millennium services group, established in the fourth quarter of
1996 to address the Year 2000 conversion consulting needs of customers, was in
the start up phase during the first half of 1997, and, thus did not contribute
revenues to the Company.
<PAGE>P-11
In the first six months of 1997, revenues from election products and services
decreased $15.7 million, or 60%, when compared to the first six months of 1996.
This decrease can be partially attributed to fewer customer purchase decisions
due to the pending sale of the elections business to American Information
Systems, Inc. pursuant to the definitive agreement entered into in November,
1996 (See Note 5 to the unaudited financial statements) and to the normal two
year sales cycle of these products. During the first six months of 1997,
computerized elections systems reflected a $6.2 million, or 77%, decrease in
sales when compared to the first half of 1996. Likewise, elections supplies
sales, including ballots, and full service election revenues decreased $4.9
million, or 64%, and $3.9 million, or 84%, respectively.
During the first half of 1997, revenues from other products and services
increased $0.1 million, or 1%, when compared to the first six months of 1996.
The Company's Enduro Binders business unit increased revenues by $0.5 million
when compared to the first half of 1996, while title services reflected a
$0.3 million decrease.
The Company's gross margins for the first six months of 1997 and 1996 were 31%
and 27%, respectively. The increase in 1997 gross margin over 1996 can be
attributed to cost reductions in the Company's health care technology services
and government records management divisions. Additionally, the health care
technology services division experienced a $1.7 million increase in sales
associated primarily with its higher margin emergency room software when
compared to 1996. Selling, general and administrative expenses increased from
16% of revenues in the second quarter of 1996 to 20% of revenues during the
second quarter of 1997. This increase primarily relates to additional
administrative costs associated with the DOJ's review of the pending sale of
the election business, as well as start up costs associated with the Company's
millennium services group.
Subsequent Events
On July 31, 1997, the Company acquired the assets and operations of Management
Consulting Solutions, Inc. ("MCSI"), a Pittsburgh, Pennsylvania-based provider
of systems consulting and integration services, for $3.2 million. MCSI had
revenues of approximately $5.6 million for the twelve months ended June 30,
1997. MCSI was a subsidiary of North Pittsburgh Systems, Inc., a publicly-
traded telecommunications company.
In addition, effective July 31, 1997, the Company sold its title services
business unit for a purchase price of $6.0 million, and other consideration, to
Title Records Corporation, a subsidiary of Government Records Services, Inc.,
a privately-owned Dallas-based Company. This business unit, which provides
certain title companies in North Central Texas with title plant update
services, had revenues of $5.1 million for the twelve months ended December 31,
1996, and $2.4 million for the first six months of 1997 (See Note 9 to the
unaudited financial statements).
<PAGE>P-12
Liquidity and Capital Resources
At June 30, 1997, the Company had net working capital (total current assets
minus total current liabilities) of $49.3 million. This represents a decrease
of $8.7 million in the Company's working capital since December 31, 1996. This
decrease relates to a $4.6 million reduction in cash equivalents and short-term
investments which were invested in long-term instruments. In addition, the
current portion of notes receivable decreased by $2.6 million. Of this amount,
$1.1 million is attributable to receivables collected in the first half of 1997
on notes receivable, and $0.6 million is attributable to write offs of notes
receivable. The Company's total current assets were 3.3 times total current
liabilities.
Net cash provided by operating activities from continuing operations during the
first half of 1997 increased by $2.2 million when compared to the first half
of 1996. This increase can be primarily attributed to the strong operational
results of the Company during the first six months of 1997 after adding back
non-cash expenses into net income.
Cash flows expended for investing activities of continuing operations
(excluding capital expenditures of discontinued operations) reflect a net
decrease of $11.6 million when compared to the second quarter of 1996. This
change is a result of a $3.6 million increase in investment redemptions in 1997
as compared to 1996, and a net decrease in installment receivables of $8.7
million as compared to the same period last year. Additions to installment
receivables in the first half of 1996 exceeded additions in 1997 by $5.6
million due to a large equipment financing transaction in the second quarter
of 1996.
Cash flows from financing activities of continuing operations reflect a net
decrease of $10.0 million as compared to the first six months of 1996. This
change is primarily a result of treasury stock purchases by the Company in the
second quarter of 1997 of $10.2 million offset by a reduction in principal
payments on long-term obligations.
The Company currently anticipates continuing positive cash flows from
operations and additions to capital associated with employee stock option
exercises in the short-term. Long-term cash flow trends may be affected by
acquisitions, changes in industry trends or other factors which cannot be
anticipated at this time. Currently, the Company believes its cash and
investment balances are sufficient to meet currently foreseeable working
capital commitments. The Company does not maintain an active line of credit.
<PAGE>P-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
11. Computation of Earnings per Share
a. For the Three Months Ended June 30, 1997 and 1996.
b. For the Six Months Ended June 30, 1997 and 1996.
27. Financial Data Schedule for the Six Months Ended June 30, 1997.
(Pursuant to Item 601(c)(iv) of Regulation S-X, the Financial
Data Schedule is not deemed to be "filed" for purpose of Section
11 of the Securities Act of 1933, as amended, or Section 18 of
the Securities Exchange Act of 1934, as amended.)
B. Reports on Form 8-K
During the period from April 1, 1997 through June 30, 1997 the
Company did not file a Current Report on Form 8-K.
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.
BRC HOLDINGS, INC.
(Registrant)
By
Date: August 13, 1997 /s/ P. E. Esping
P. E. Esping
Chairman, Chief Executive Officer
and Director (Principal Executive
Officer)
Date: August 13, 1997 /s/ J. L. Morrison
J. L. Morrison
President and Chief Operating Officer
Date: August 13, 1997 /s/ Thomas E. Kiraly
Thomas E. Kiraly
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT 11a
BRC HOLDINGS, INC.
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended June 30,
1997 1996
Primary:
Income from continuing operations. . . . . . $ 2,766,000 $ 1,885,000
Add net interest income earnings on
investments, net of tax. . . . . . . . . --- 53,000
Adjusted net income from continuing
operations . . . . . . . . . . . . . . . . 2,766,000 1,938,000
Income from discontinued operations. . . . . 6,000 2,108,000
Net income . . . . . . . . . . . . . . . . . $ 2,772,000 $ 4,046,000
Weighted-average number of shares
outstanding. . . . . . . . . . . . . . . . 6,950,000 6,477,000
Additional weighted-average shares from
assumed exercise of dilutive stock
options, net of shares assumed to be
repurchased with proceeds at average
market price during the period . . . . . . 93,000 278,000
7,043,000 6,755,000
Earnings per common and common equivalent
share:
Continuing operations. . . . . . . . . . . $ .39 $ .29
Discontinued operations. . . . . . . . . . .00 .31
$ .39 $ .60
Assuming full dilution:
Income from continuing operations. . . . . . $ 2,766,000 $ 1,855,000
Add net interest income earnings on
investments, net of tax. . . . . . . . . --- 53,000
Adjusted net income from continuing
operations . . . . . . . . . . . . . . . . 2,766,000 1,938,000
Income from discontinued operations. . . . . 6,000 2,108,000
Net income . . . . . . . . . . . . . . . . . $ 2,772,000 $ 4,046,000
Weighted-average number of shares
outstanding. . . . . . . . . . . . . . . . 6,950,000 6,477,000
Additional weighted-average shares from
assumed exercise of dilutive stock
options, net of shares assumed to be
repurchased with proceeds at average
market price during the period . . . . . . 158,000 278,000
7,108,000 6,755,000
Earnings per share assuming full dilution:
Continuing operations. . . . . . . . . . . $ .39 $ .29
Discontinued operations. . . . . . . . . . .00 .31
$ .39 $ .60
<PAGE>
EXHIBIT 11b
BRC HOLDINGS, INC.
COMPUTATION OF EARNINGS PER SHARE
Six Months Ended June 30,
1997 1996
Primary:
Income from continuing operations. . . . . . $ 4,632,000 $ 4,085,000
Add net interest income earnings on
investments, net of tax. . . . . . . . . --- 101,000
Adjusted net income from continuing
operations . . . . . . . . . . . . . . . . 4,632,000 4,186,000
Income (loss) from discontinued
operations . . . . . . . . . . . . . . . . (781,000) 3,016,000
Net income . . . . . . . . . . . . . . . . . $ 3,851,000 $ 7,202,000
Weighted-average number of shares
outstanding. . . . . . . . . . . . . . . . 7,053,000 6,466,000
Additional weighted-average shares from
assumed exercise of dilutive stock
options, net of shares assumed to be
repurchased with proceeds at average
market price during the period . . . . . . 145,000 278,000
7,198,000 6,744,000
Earnings (loss) per common and common
equivalent share:
Continuing operations. . . . . . . . . . . $ .64 $ .62
Discontinued operations. . . . . . . . . . (.11) .45
$ .53 $ 1.07
Assuming full dilution:
Income from continuing operations. . . . . . $ 4,632,000 $ 4,085,000
Add net interest income earnings on
investments, net of tax. . . . . . . . . --- 101,000
Adjusted net income from continuing
operations . . . . . . . . . . . . . . . . 4,632,000 4,186,000
Income (loss) from discontinued
operations . . . . . . . . . . . . . . . . (781,000) 3,016,000
Net income . . . . . . . . . . . . . . . . . $ 3,851,000 $ 7,202,000
Weighted-average number of shares
outstanding. . . . . . . . . . . . . . . . 7,053,000 6,466,000
Additional weighted-average shares from
assumed exercise of dilutive stock
options, net of shares assumed to be
repurchased with proceeds at average
market price during the period . . . . . . 161,000 278,000
7,214,000 6,744,000
Earnings (loss) per share assuming full
dilution:
Continuing operations. . . . . . . . . . . $ .64 $ .62
Discontinued operations. . . . . . . . . . (.11) .45
$ .53 $ 1.07
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from Form 10-Q
financial statements filed for the period ending June 30, 1997 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 8420
<SECURITIES> 27498
<RECEIVABLES> 27403
<ALLOWANCES> 0
<INVENTORY> 1363
<CURRENT-ASSETS> 70500
<PP&E> 41591
<DEPRECIATION> 31492
<TOTAL-ASSETS> 172286
<CURRENT-LIABILITIES> 21218
<BONDS> 0
<COMMON> 719
0
0
<OTHER-SE> 148488
<TOTAL-LIABILITY-AND-EQUITY> 172286
<SALES> 0
<TOTAL-REVENUES> 53134
<CGS> 0
<TOTAL-COSTS> 36637
<OTHER-EXPENSES> 10790
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 7706
<INCOME-TAX> 3074
<INCOME-CONTINUING> 4632
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<EPS-PRIMARY> .53
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</TABLE>
