<PAGE>p-i
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
Form 10-Q/A
/X/QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1996
OR
/ /Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From ___________ To ___________
Commission File Number 0-8615
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 September 30, 1996
Common Stock 6,933,891
$.10 Par Value
<PAGE>p-ii
BRC HOLDINGS, INC.
INDEX
PAGE
Part I. Financial Information
Consolidated Condensed Balance
Sheets - September 30, 1996 and
December 31, 1995 1
Consolidated Condensed Statements of
Income - Three Months Ended September 30,
1996 and 1995 2
Consolidated Condensed Statements of
Income - Nine Months Ended September 30,
1996 and 1995 3
Consolidated Condensed Statements of
Cash Flows - Nine Months Ended September 30,
1996 and 1995 4
Notes to Consolidated Condensed Financial
Statements 5
Management's Discussion and Analysis 8
Part II. Other Information 12
Background Information
The Company's Form 10-Q for the period ended September 30, 1996 is amended and
restated in its entirety to reflect the merger of The Pace Group, Inc. ("The
Pace Group") with a wholly-owned subsidiary of BRC Holdings, Inc. ("BRC") as a
purchase for accounting purposes. For accounting purposes, the merger was
previously recorded by BRC and reported in Form 10-Q for the period ended
September 30, 1996 using the pooling of interests method of accounting for the
combination. However, due to the Company's execution of a definitive purchase
and subscription agreement with American Information Systems, Inc. on November
21, 1996, pertaining to the divestiture of the Company's Election business,
the Company has chosen to amend and restate its financial statements for this
period pursuant to Accounting Principles Board Opinion No. 16, "Business
Combinations". Please also refer to the Company's filing on Form 8-K dated
December 15, 1996 for further information concerning the above mentioned
transaction.
<PAGE>p-1
PART I. FINANCIAL INFORMATION
BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, Restated)
September 30, December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . $ 7,275,000 $ 10,059,000
Short-term marketable securities . . . . 31,384,000 28,299,000
Accounts receivable, net . . . . . . . . 27,677,000 23,698,000
Current portion of installments
and notes receivable. . . . . . . . . . 8,587,000 5,884,000
Inventories (Note 3) . . . . . . . . . . 8,661,000 11,750,000
Deferred tax asset . . . . . . . . . . . 4,475,000 4,980,000
Other current assets . . . . . . . . . . 3,546,000 3,195,000
Total current assets. . . . . . . . . . 91,605,000 87,865,000
Property, plant and equipment. . . . . . 59,410,000 59,022,000
Less accumulated depreciation . . . . . (43,337,000) (42,141,000)
16,073,000 16,881,000
Long-term marketable securities. . . . . 17,763,000 7,891,000
Long-term installments and notes
receivable, net. . . . . . . . . . . . 13,212,000 10,194,000
Purchased software and
databases, net. . . . . . . . . . . . . 4,113,000 4,049,000
Goodwill and intangibles, net. . . . . . 27,922,000 33,414,000
Other assets . . . . . . . . . . . . . . 2,164,000 1,685,000
Total assets . . . . . . . . . . . . . . $172,852,000 $161,979,000
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 2,569,000 $ 3,326,000
Accrued liabilities. . . . . . . . . . . 22,876,000 19,543,000
Current portion of
notes and capital leases. . . . . . . . 618,000 793,000
Total current liabilities . . . . . . . 26,063,000 23,662,000
Long-term notes and capital leases . . . 37,000 579,000
Deferred tax payable . . . . . . . . . . 2,655,000 3,920,000
Shareholders' equity:
Common stock . . . . . . . . . . . . . . 693,000 645,000
Additional paid-in capital . . . . . . . 71,949,000 57,702,000
Retained earnings. . . . . . . . . . . . 71,455,000 75,471,000
Total shareholders' equity. . . . . . . 144,097,000 133,818,000
Total liabilities and
shareholders' equity. . . . . . . . . . $172,852,000 $161,979,000
See accompanying notes to the consolidated condensed financial statements.
<PAGE>p-2
BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited, Restated)
Three Months Ended September 30,
1996 1995
Revenues . . . . . . . . . . . . . . . $ 35,053,000 $34,728,000
Cost of products and services. . . . . 24,999,000 24,927,000
Selling, general and administrative. . 7,079,000 5,987,000
Unusual charges (Note 4) . . . . . . . 15,266,000 ---
47,344,000 30,914,000
Operating profit (loss) . . . . . . . (12,291,000) 3,814,000
Interest income, net . . . . . . . . . 1,063,000 750,000
Income (loss) before income tax. . . . (11,228,000) 4,564,000
Income tax provision (Note 5). . . . . ( 111,000) 1,816,000
Net income (loss). . . . . . . . . . . $(11,117,000) $ 2,748,000
Earnings per common and
common equivalent share:
Net income (loss) . . . . . . . . . $ (1.68) $ .41
Average shares. . . . . . . . . . . 6,606,000 6,631,000
Earnings per share
assuming full dilution:
Net income (loss) . . . . . . . . . $ (1.68) $ .41
Average shares (Note 7) . . . . . . 6,606,000 6,652,000
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, Restated)
Nine Months Ended September 30,
1996 1995
Revenues. . . . . . . . . . . . . . . . $110,474,000 $100,173,000
Cost of products and services . . . . . 76,831,000 73,038,000
Selling, general and administrative . . 20,344,000 17,175,000
Unusual charges (Note 4). . . . . . . . 15,266,000 ---
112,441,000 90,213,000
Operating profit (loss) . . . . . . . . (1,967,000) 9,960,000
Other income. . . . . . . . . . . . . . --- 823,000
Interest income, net. . . . . . . . . . 2,575,000 2,200,000
Income before income tax. . . . . . . . 608,000 12,983,000
Income tax provision (Note 5) . . . . . 4,624,000 5,184,000
Net income (loss) . . . . . . . . . . . $ (4,016,000) $ 7,799,000
Earnings per common and
common equivalent share:
Net income (loss). . . . . . . . . . $ (.62) $ 1.20
Average shares . . . . . . . . . . . 6,513,000 6,505,000
Earnings per share
assuming full dilution:
Net income (loss). . . . . . . . . . $ (.62) $ 1.18
Average shares (Note 7). . . . . . . 6,513,000 6,625,000
Cash dividends per share. . . . . . . . $ --- $ ---
See accompanying notes to the consolidated condensed financial statements.
<PAGE>p-4
<TABLE> BRC HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, Restated)
<S> <C> <C>
Nine Months Ended September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . $(4,016,000) $ 7,799,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . 8,333,000 8,180,000
Gain on sale of assets. . . . . . . . . . . . . (44,000) (282,000)
Deferred income taxes . . . . . . . . . . . . . (1,349,000) ---
Unusual charges . . . . . . . . . . . . . . . . 15,266,000 ---
Changes in assets and liabilities:
(Increase) decrease in accounts receivable. . (1,754,000) (4,480,000)
(Increase) decrease in inventories. . . . . . 3,089,000 (5,754,000)
(Increase) decrease in other assets . . . . . (1,272,000) (26,000)
Increase (decrease) in accounts payable . . . (1,142,000) 1,499,000
Increase (decrease) in other liabilities. . . 219,000 (551,000)
Increase (decrease) in accrued liabilities. . 1,913,000 (2,731,000)
Net cash provided by operating activities . . . . . 19,243,000 3,654,000
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . (5,262,000) (5,302,000)
Marketable securities purchased . . . . . . . . . (39,736,000) (34,214,000)
Marketable securities matured . . . . . . . . . . 26,976,000 12,094,000
Proceeds from sale of assets. . . . . . . . . . . 98,000 ---
Additions to installment receivables. . . . . . . (8,117,000) (4,099,000)
Proceeds from installment receivables . . . . . . 2,691,000 2,518,000
Cash acquired in business acquisition . . . . . . 774,000 ---
Net cash used in investing activities . . . . . . . (22,576,000) (29,003,000)
Cash flows from financing activities:
Principal payments on notes and capital leases. . (717,000) (1,206,000)
Issuance of common stock. . . . . . . . . . . . . 1,266,000 5,634,000
Repurchases of stock and other. . . . . . . . . . --- (978,000)
Net cash provided by financing activities . . . . . 549,000 3,450,000
Decrease in cash and cash equivalents . . . . . . . (2,784,000) (21,899,000)
Cash and cash equivalents at beginning of period. . 10,059,000 21,946,000
Cash and cash equivalents at end of period. . . . . $ 7,275,000 $ 47,000
</TABLE>
Supplemental disclosure -- Cash payments during the first nine months of 1996
for income taxes and interest were $6,242,000 and $70,000, respectively. Cash
payments during the first nine months of 1995 for income taxes and interest
were $5,913,000 and $338,000, respectively. See additional noncash activities
disclosed in Note 6.
See accompanying notes to the consolidated condensed financial statements.
<PAGE>p-5
BRC HOLDINGS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The Company's Form 10-Q for the period ended September 30, 1996 is amended
and restated in its entirety to reflect the merger of The Pace Group, Inc.
("The Pace Group") with a wholly-owned subsidiary of BRC Holdings, Inc.
("BRC") as a purchase for accounting purposes. For accounting purposes,
the merger was previously recorded by BRC and reported in Form 10-Q for
the period ended September 30, 1996 using the pooling of interests method
of accounting for the combination. However, due to the Company's
execution of a definitive purchase and subscription agreement with
American Information Systems, Inc. on November 21, 1996, pertaining to the
divestiture of the Company's Election business, the Company has chosen to
amend and restate its financial statements for this period pursuant to
Accounting Principles Board Opinion No. 16 "Business Combinations".
Please also refer to the Company's filing on Form 8-K dated December 15,
1996 for further information concerning the above mentioned transaction.
The interim consolidated condensed financial statements included herein
have been prepared by BRC Holdings, Inc. (the "Company" or "BRC"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financ ial 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 1995
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 of the Company as of
September 30, 1996, and the results of operations and cash flows for the
three and nine months ended September 30, 1996 and 1995. These
adjustments include recurring accruals and a pro rata portion of certain
estimated expenses. Management believes 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 results of operations for the three months and nine months ended
September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
<PAGE>p-6
3. Inventories consisted of the following:
September 30, December 31,
1996 1995
Finished goods. . . . . . . . $ 3,827,000 $ 4,187,000
Work in progress. . . . . . . 1,866,000 3,023,000
Raw materials and supplies. . 2,968,000 4,540,000
Inventories . . . . . . . . . $ 8,661,000 $11,750,000
4. Results of operations for the quarter ended September 30, 1996 include a
$15,266,000 pre-tax charge to earnings, primarily associated with the
write-off of goodwill and other intangible assets of the Company's
"HealthSource" technology outsourcing business unit within its Health Care
division. The charge was determined in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for Long-lived Assets"
("SFAS No. 121"). The charge was a result of the cancellation of certain
customer contracts with the Sisters of Providence Health System. Total
revenues derived from these contracts were approximately $2.9 and $12.4
million for the three and twelve month periods ended September 30, 1996,
respectively. In determining the amount of the impairment charge, the
Company compared expected undiscounted future cash flows of the
"HealthSource" business unit with the carrying value of the related
goodwill and other identifiable intangible assets. Expected undiscounted
future cash flows are not sufficient to recover the carrying value of such
assets, and as such, the Company recognized an impairment loss equal to
the difference between the carrying amount and their estimated fair value.
The Company relied upon a discounted cash flow analysis to determine the
fair value of such assets. The charge also includes certain other
contract re-negotiation and termination costs.
5. During the third quarter of 1996, the Company incurred a significant
unusual charge to earnings associated with the write-off of goodwill and
certain identifiable intangible assets (See Note 4). The Company will
realize a limited tax benefit associated with this unusual charge, and as
such, has reflected the full effect of the Company's underlying tax
liability as of September 30, 1996, inclusive of the charge.
Due to the reliance on an estimated annual effective rate pursuant to the
requirements of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", certain reclassifications between current
income tax and deferred income tax may be necessary at December 31, 1996
to reflect the annual computation of differences between book and tax
income.
6. On September 5, 1996, the Company consummated the merger of The Pace
Group, Inc. ("The Pace Group"), with a wholly-owned subsidiary of the
Company. Under the terms of the agreement, the Company issued 432,835
shares of its common stock in a tax-free exchange for all of the record
and beneficial interests held by The Pace Group security holders. In
connection with this noncash transaction, which was accounted for as a
purchase, assets acquired, liabilities assumed and purchase price were
approximately $4,100,000, $1,153,000 and $12,769,000, respectively. As a
result, the Company recorded goodwill of $9,822,000 equal to the excess of
the purchase price over the net assets of The Pace Group. The goodwill
will be amortized over a period of 15 years. The Pace Group,
headquartered in Dallas, Texas, provides consulting, development and
management services to purchasers and providers of health care services.
<PAGE>p-7
The following summarized unaudited pro forma consolidated results of
operations for the nine month periods ended September 30, 1996 and 1995,
assuming the acquisition occurred as of the beginning of the period are
presented. These pro forma results have been prepared for comparative
purposes only and do not propose to be indicative of the results of
operations which actually would have resulted had the acquisition been in
effect at the dates indicated, or which may occur in the future.
Nine Months Ended September 30,
1996 1995
(Pro Forma)
Revenues $116,830,000 $ 104,984,000
Net Income (loss): $ (3,719,000) $ 8,062,000
Income (loss) per common share $ ( .54) $ 1.16
The combined financial results presented above include adjustments and
reclassifications made to conform the accounting policies of the two
companies. There were no material income adjustments or intercompany
transactions between the two companies for the periods presented.
7. Earnings per share, assuming full dilution, for the three and nine month
periods ended September 30, 1996 and the three months ended September 30,
1995, were computed based on the weighted average number of common and
common equivalent shares outstanding for a total of 6,606,000, 6,513,000
and 6,652,000 shares, respectively. Earnings per share, assuming full
dilution, for the nine months ended September 30, 1995, was computed based
on shares issued upon the conversion of a note to an officer/director and
the weighted average number of common and common equivalent shares
outstanding for a total of 6,625,000 shares. In addition, for purposes of
computing earnings per share for the nine months ended September 30, 1995,
interest expense on the convertible note was added back to income, net of
tax, in the amount of $20,000.
8. On October 23, 1996, the Company executed a consulting agreement and stock
purchase agreement with MatriDigm Corporation ("MatriDigm"), a privately-
held corporation headquartered in Fremont, California. MatriDigm is
researching, developing and testing an automated technology solution to
the Year 2000 computer date problem affecting computer systems. Under the
consulting agreement with MatriDigm, the Company will provide the
assistance of its Chairman and Chief Executive Officer, and certain other
management services, to assist MatriDigm in the development and growth of
its business operations. In consideration for these efforts, the Company
will receive a percentage of the pre-tax operating income of MatriDigm.
Additionally, the Company purchased $1,500,000 of MatriDigm common stock,
constituting approximately seven percent (7%) of the current outstanding
equity of MatriDigm. The consulting agreement terminates in December
1999, and may be terminated earlier based on a number of events, including
the lack of achievement of performance goals subsequent to September 30,
1997. In the event of a termination of the consulting contract, MatriDigm
has certain share repurchase rights with respect to a portion of the
shares purchased by the Company. The Company has previously entered into
a sales and marketing agreement with MatriDigm which provides for
commissions to be paid to the Company based on the sale of MatriDigm
products and services.
<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 from litigation, the timely development and
acceptance of new products and services, 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 September 30, 1996 and 1995
Revenues of $35.1 million for the third quarter of 1996 were up $0.3 million
compared to those reported during the same period last year. While the
Company's election products and services and technology outsourcing service
revenues increased over the third quarter of last year, revenues from
governmental records management and other products and services decreased. A
significant portion of the Company's revenues from election products and
services is subject to a two year business cycle. Due to a higher number of
public elections being held, revenues from these products and services are
typically higher in even-numbered "election" years as opposed to odd-numbered
"non-election" years.
Due primarily to the aforementioned election cycle, revenues from election
products and services increased by $1.7 million, or 25%, when compared to the
previous year. This increase is primarily related to revenues generated from
the sale of election supplies and ballots of $4.0 million in the third quarter
of 1996 compared to $1.9 million in the third quarter of 1995.
Revenues from technology outsourcing services increased $1.6 million, or 10%,
over the same period last year. The majority of this increase can be
attributed to the sale of specialized software to hospital emergency rooms and
revenues from consulting services provided by The Pace Group. During the
third quarter of 1996, certain technology outsourcing contracts with the
Sisters of Providence Health System were canceled. Total revenues derived
from these contracts were approximately $2.9 million and $12.4 million for the
three and twelve months ended September 30, 1996, respectively. Additionally,
the Company anticipates the potential loss of other health care outsourcing
contracts. As a result of the cancellation of the contracts, and in accordance
with SFAS No. 121, the Company recorded a $15,266,000 pre-tax charge against
earnings for the quarter ended September 30, 1996. The charge relates
primarily to a write-off of goodwill and other intangible assets of the
Company's Health Care Division (See Note 4 to the unaudited financial
statements).
On September 5, 1996, a wholly-owned subsidiary of the Company merged with The
Pace Group, a Dallas-based consulting firm specializing in the managed health
care industry. The merger has been treated as a purchase for accounting
purposes (See Note 6 to the unaudited financial statements).
<PAGE>p-9
The Company's revenues associated with governmental records management for the
third quarter of 1996 were down $0.9 million, or 15%, as compared to the same
period last year. This decrease relates primarily to the discontinuance of
government records management services to the Office of Recorder, Cook County,
Illinois ("Cook County") during the fourth quarter of 1995. Cook County
accounted for $0.6 million in revenues during the third quarter of 1995. Other
decreases in revenues from governmental records management are due to the
disposition of certain of the Company's customer accounts in the Texas region
during the third quarter of 1995.
Revenues from other products and services decreased $1.3 million as compared to
the same period last year. This decrease was due to the discontinuance of a
tape media sale and repair business, as well as the sale of a business unit
involved in the reselling of a variety of public records data to nationwide
credit bureaus and other providers of information retrieval services in
December 1995.
The Company's gross margins reported for the quarters ended September 30, 1996
and 1995, were consistent at 28%. Selling, general and administrative expenses
for the quarter ended September 30, 1996 increased by $1.1 million, or 18%,
when compared to the same period last year. Selling, general and
administrative expenses rose from 17% of revenues during the third quarter of
1995 to 20% of revenues during the third quarter of 1996. The primary causes
of this increase in expense can be attributed to increased commission expense
incurred as a result of additional election-related sales, increases in
expenses associated with the Company's employee benefit plans and increased
contract labor expenses.
Nine Months Ended September 30, 1996 and 1995
Year-to-date revenues for the first nine months of 1996 were $10.3 million, or
10%, higher than those reported during the same period last year. This
increase relates primarily to additional sales of election products and
services. As stated in the foregoing section, a significant portion of the
Company's revenues from election products and services 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.
Revenues from election products and services increased $13.8 million, or 64%,
when compared to the same period of the previous year. Due to increased public
election activity, the Company experienced significant increases in ballots,
booths and supplies sales, which grew to $11.7 million during the period, an
increase of $6.7, million or 132%, over the nine months ended September 30,
1995. Sales of election systems were $9.2 million during the first nine months
of 1996, an increase of $1.6 million, or 21%, when compared to the previous
year. Sales of election systems in 1996 included a $4.2 million sale to
Maricopa County, Arizona. As of September 30, 1996, the Company's inventories
decreased by $3.1 million, as compared to December 31, 1995 balances, due
primarily to the sale of election systems and supplies during the first nine
months of 1996.
Revenues from technology outsourcing services increased $2.7 million, or 5%,
when compared to the first nine months of 1995. In addition to increased
service revenues from existing accounts, the Company also experienced growth
in sales of automated emergency department systems, vision-care related
software and health care consulting services as compared to the first nine
months of 1995.
<PAGE>p-10
Governmental records management revenues decreased $2.3 million, or 14%, as
compared to the same period last year. As mentioned in the previous section,
the discontinuance of services to Cook County, Illinois in late 1995 primarily
contributed to this decrease. Cook County accounted for $1.6 million in
revenues during the first nine months of 1995. The Company also sold other
government records management accounts during the third quarter of 1995.
Revenues from other products and services decreased $3.9 million, or 30%, as
compared to the first nine months of 1995. As noted in the previous
discussion, this decrease relates primarily to the sale of a business unit and
the discontinuance of a tape media sale and repair business in 1995.
The Company's gross margin increased to 30% during the first nine months of
1996 as compared to 27% for the same period in 1995. This increase primarily
relates to higher utilization of the Company's fixed and overhead expenses
associated with election products and services revenue, which increased during
1996. Sales, general and administrative expenses increased $3.2 million in
1996 when compared to the same period in 1995. As discussed in the previous
section, the primary causes of this increase in expense relate to increased
commission expenses associated with additional sales of election products and
services, increased employee benefits expense and additional use of contract
labor.
Subsequent Events
Subsequent to September 30, 1996, the Company executed a consulting agreement
and stock purchase agreement with MatriDigm, a privately-held corporation
headquartered in Fremont, California. MatriDigm is researching, developing and
testing an automated technology solution to the Year 2000 computer date
problem. In addition, the Company has purchased $1.5 million of MatriDigm
common stock, constituting approximately 7% of the current outstanding equity
of MatriDigm (See Note 8 to the unaudited financial statements).
Liquidity and Capital Resources
At September 30, 1996, the Company had net working capital (total current
assets minus total current liabilities) of $65.5 million. This represents an
increase of $1.3 million as compared to the Company's working capital as of
December 31, 1995. Of the $4.0 million increase in accounts receivable in the
first nine months of 1996, $2.2 million represents accounts receivable
purchased in the merger with The Pace Group (See Note 6 to the unaudited
financial statements), and $1.8 million is primarily a result of increased
election supply sales. The $2.7 million increase in current installments and
notes receivable since December 31, 1995 can also be attributed to additional
election-related sales. Accordingly, election-related inventories decreased by
$3.1 million during the same period. The Company's total current assets were
3.5 times total current liabilities at September 30, 1996.
Net cash provided by operating activities increased $15.6 million as compared
to the same period last year. This change relates to the use of $5.8 million
for the production of election equipment in the first nine months of 1995, as
compared to a $3.1 million reduction in inventories related to election
products sold during the first nine months of 1996. In addition, $2.7 million
was used to satisfy accrued liabilities in the first nine months of 1995 as
compared to a $1.9 million increase in accrued liabilities for the first nine
months of 1996. Net income decreased $11.8 million compared to the same period
last year as a result of the third quarter 1996 non-cash, unusual charge of
$15.3 million (See Note 4 to the unaudited financial statements).
<PAGE>p-11
Cash flows used in investing activities decreased $6.4 million as compared to
the same period last year. This change is a result of a $9.4 million net
increase in the amount of marketable securities redeemed over the amount
purchased in 1996 as compared to 1995. A net increase in installment
receivables of $3.8 million as compared to the same period last year primarily
relates to the Company's financing of election equipment sold in 1996.
Cash flows from financing activities reflect a net decrease of $2.9 million as
compared to the previous year. This change primarily relates to fewer
transactions in 1996 relating to the exercise of employee stock options.
The Company currently anticipates continuing positive cash flows from
operations and additions to capital associated with employee stock option
exercises during the short-term. Long-term cash flow trends may be affected by
acquisitions, changes in industry trends or other factors which cannot be
estimated 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-12
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 September 30, 1996 and 1995.
b. For the Nine Months Ended September 30, 1996 and 1995.
27. Financial Data Schedule for the Nine Months Ended September 30,
1996. (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 July 1, 1996 through September 30, 1996, 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: February 24, 1997 /s/ P. E. Esping
P. E. Esping
Chairman, Chief Executive Officer
and Director (Principal Executive
Officer)
Date: February 24, 1997 /s/ J. L. Morrison
J. L. Morrison
President and Chief Operating Officer
Date: February 24, 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 September 30,
1996 1995
Primary:
Net income (loss). . . . . . . . . . . . . . $(11,117,000) $ 2,748,000
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . 6,606,000 6,427,000
Additional weighted average shares
from assumed exercise of dilutive
stock options, net of shares assumed
to be repurchased with proceeds at
average market price. . . . . . . . . . . . --- 204,000
6,606,000 6,631,000
Primary earnings (loss) per share. . . . . . $ (1.68) $ .41
Assuming full dilution:
Net income (loss). . . . . . . . . . . . . . $(11,117,000) $ 2,748,000
Weighted average number of
shares outstanding .. . . . . . . . . . . . 6,606,000 6,427,000
Additional weighted average shares
from assumed exercise of dilutive
stock options, net of shares assumed
to be repurchased with proceeds at
average market price. . . . . . . . . . . . --- 225,000
6,606,000 6,652,000
Fully diluted earnings (loss) per share. . . $ (1.68) $ .41
<PAGE>
EXHIBIT 11b
BRC HOLDINGS, INC.
COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended September 30,
1996 1995
Primary:
Net income (loss). . . . . . . . . . . . . . $(4,016,000) $ 7,799,000
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . . 6,513,000 6,322,000
Additional weighted average shares
from assumed exercise of dilutive
stock options, net of shares assumed
to be repurchased with proceeds at
average market price. . . . . . . . . . . . --- 183,000
6,513,000 6,505,000
Primary earnings (loss) per share. . . . . . $ (.62) $ 1.20
Assuming full dilution:
Net income (loss). . . . . . . . . . . . . . $(4,016,000) $ 7,799,000
Add interest expense on
convertible notes and
debentures, net of tax. . . . . . . . . . . --- 20,000
Adjusted net income (loss). . . . . . . $(4,016,000) $ 7,819,000
Weighted average number of
shares outstanding. . . . . . . . . . . . . 6,513,000 6,322,000
Additional weighted average
shares from assumed exercise of
dilutive stock options, net of
shares assumed to be repurchased
with proceeds at average
market price. . . . . . . . . . . . . . . . --- 208,000
Additional weighted average shares
from assumed conversion of notes
and conversion of debentures. . . . . . . . --- 95,000
6,513,000 6,625,000
Fully diluted earnings (loss) per share. . . $ (.62) $ 1.18
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE
This restated schedule contains summary financial information extracted from
Form 10-Q/A financial statements filed for the period ended September 30, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<PERIOD-END> SEP-30-1996
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