<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-12410
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BI Incorporated
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(Exact name of issuer as specified in charter)
Colorado 84-0769926
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 Lookout Road, Boulder, Colorado
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80301
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(Address of principal executive offices)
(Zip Code)
(303) 530-2911
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of no par
value common stock outstanding at October 26, 1995 is 6,659,957.
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BI INCORPORATED
INDEX
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PART I - FINANCIAL INFORMATION: Page No.
Item 1 - Financial Statements
Balance Sheet
at September 30, 1995 and June 30, 1995 2
Statement of Operations
for the three months ended September 30, 1995 and 1994 3
Statement of Cash Flows
for the three months ended September 30, 1995 and 1994 4
Notes to Financial Statements 5
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 5
Signatures 7
PART II - OTHER INFORMATION:
Item 1 - Legal Proceedings: Incorporated by reference to Notes to Financial
Statements in Part I.
Item 6 - Exhibits and Reports on Form 8-K: None
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BI INCORPORATED
BALANCE SHEET
(in thousands, unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
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<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,369 $ 2,358
Short-term investments 377 376
Receivables, net 6,204 6,245
Investment in sales-type leases, net 3,268 3,204
Inventories
Raw materials 942 1,333
Work in process 1,030 1,049
Finished goods 737 896
Deferred income taxes 605 519
Prepaid expenses 822 683
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Total current assets 18,354 16,663
Investment in sales-type leases, net 2,592 2,792
Rental and monitoring equipment, net 4,399 4,197
Property and equipment, net 2,021 2,027
Software, net 1,912 2,004
Intangibles, net 7,915 8,162
Deferred income taxes 529 568
Other assets 448 468
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$38,170 $36,881
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 530 $ 407
Accrued compensation and benefits 992 1,060
Accrued product warranty 331 326
Current income taxes payable 392 130
Deferred revenue 1,537 1,232
Other liabilities 514 570
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Total current liabilities 4,296 3,725
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Deferred revenue and long-term debt 647 824
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Stockholders' equity
Common stock, no par value, 75,000 shares
authorized; 6,907 shares issued
September 30, 1995 and 6,865 shares issued
June 30, 1995 29,175 28,883
Retained earnings 4,065 3,464
Loss treasury shares at cost; 143 shares at
September 30, 1995 and 154 shares at
June 30, 1995 (13) (15)
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33,227 32,332
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$38,170 $36,881
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</TABLE>
The accompanying notes are an integral
part of these financial statements.
2
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BI INCORPORATED
STATEMENT OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended September 30,
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1995 1994
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<S> <C> <C>
Revenues
Net sales $3,034 $2,723
Service and monitoring income 5,066 3,754
Rental income 219 222
Interest and other income 68 74
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8,387 6,773
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Cost and expenses
Cost of net sales 1,494 1,309
Cost of service and monitoring income 2,328 1,655
Cost of rental income 71 113
Selling, general and administrative
expenses 2,529 2,180
Amortization and depreciation 327 291
Research and development expenses 615 519
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7,364 6,067
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Income before income taxes 1,023 706
Income tax provision (422) (293)
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Net income $ 601 $ 413
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Net income per common and common
equivalent share $ 0.09 $ 0.06
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Weighted average number of common and
common equivalent shares outstanding 6,999 7,061
============= ============
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE>
BI INCORPORATED
STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended September 30,
-----------------------------
1995 1994
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<S> <C> <C>
Cash flows operating activites:
Net income $ 601 $ 413
Adjustments to reconcile net income
to net cash from operating activities:
Cumulative effect of change in accounting
method
Amortization and depreciation 1,375 1,007
Provision for losses on accounts receivable
and STLs 55 46
Changes in assets and liabilities:
Receivables (138) 844
Investment in STLs 136 (369)
Inventories, net 569 234
Accounts payable 123 153
Accrued expenses (148) (270)
Deferred revenue 274 35
Income taxes payable 262 118
Rental equipment-net, converted to STL 122
Other (141) (67)
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Net cash from operating activities 2,968 2,266
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Cash flows from investing activities:
Capital expenditures (277) (187)
Increase in rental and monitoring equipment (832) (769)
Increase in capitalized software (123) (32)
Other (1) (2)
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Net cash from investing activites (1,233) (990)
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Cash flows from financing activities:
Purchase of treasury stock (1,879)
Proceeds from issuance of common stock 276 62
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Net cash from financing activities 276 (1,817)
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Net increase in cash and cash equivalents 2,011 (541)
Cash and cash equivalents at June 30 2,358 3,045
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Cash and cash equivalents at September 30 $4,369 $2,504
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</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During the quarter ended Septmeber 30, 1995, $250,000 of debt forgiveness was
exchanged for certain outstanding intangibel assets.
The accompanying notes are an integral
part of the financial statements
4
<PAGE>
BI INCORPORATED
NOTES TO FINANCIAL STATEMENTS
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(unaudited)
Note 1 - Preparation of Financial Statements
- --------------------------------------------
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual report.
The interim financial data are unaudited; however, in the opinion of the
management of the Company, the interim data includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods.
Note 2 - Net Income per Common and Equivalent Share
- ---------------------------------------------------
Net income per common and common equivalent share is computed on the basis of
the weighted average number of shares of common and common equivalent shares
outstanding during the period. Common equivalent shares are determined using the
treasury stock method, which assumes that proceeds from exercise of certain
outstanding stock options and warrants are utilized to repurchase outstanding
shares of the Company at the average fair market value during such period.
Note 3 - Legal Proceedings
- --------------------------
The Company is involved in four legal proceedings; two alleging product
liability; another alleging wrongful termination of a distributor contract; and
the fourth alleging tortious interference with a competitor. One of the
claimants seeks damages up to $2,700,000. Management believes the Company has
adequate legal defenses and/or insurance coverage against all claims and intends
to vigorously defend them. There can be no assurances however, that any
individual case will result in an outcome favorable to the Company. In the event
of any adverse outcome, neither the amount nor the likelihood of any potential
liability which might result is reasonably estimable. The Company currently
believes that the amount of the ultimate potential loss would not be material to
the Company's financial position or results of operations. However, an adverse
future outcome in any individual case, including legal defense costs, could have
a material effect on the Company's reported results of operations in a
particular quarter.
Note 4 - Subsequent Events
- --------------------------
On October 6, 1995, the Company acquired 136,373 shares of its common stock in
the open market at $7.12 per share pursuant to a buyback authorized by the board
of directors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
The three-month period ended September 30, 1995 (fiscal 1996), compared to the
three-month period ended September 30, 1994 (fiscal 1995):
Total revenue for the three months ended September 30, 1995, increased 23.8% to
$8,387,000 compared to $6,773,000 in the corresponding period a year ago. This
increase related largely to service, monitoring and rental income which
increased 32.9% to $5,285,000 in fiscal 1996 from $3,976,000 in fiscal 1995 as a
result of a transition by government agencies to contract service versus
purchasing equipment. This revenue base gives the Company more stability and
opportunity to generate future recurring income.
5
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Gross profit on net sales, service, monitoring and rental income decreased to
53.2% in fiscal 1996 from 54.1% in fiscal 1995. This decrease was largely
related to the write-off of certain obsolete and other inventory to cost of
goods in fiscal 1996.
Selling, general and administrative (S,G&A) expenses decreased as a percentage
of total revenue to 30.2% or $2,529,000 in fiscal 1996 compared to 32.2% or
$2,180,000 in fiscal 1995. The increase of $349,000 is largely related to
increased sales and marketing expenses on increased revenue.
Research and development (R&D) expenses increased $96,000 to $615,000 in fiscal
1996 from $519,000 in fiscal 1995, but remained at approximately 7% of total
revenue for both periods. R&D expenses were related to current product
evaluations and software enhancements to the Company's monitoring center
operations.
The Company recorded income tax expense of $422,000 and $293,000 for the three
months ended September 30, 1995 and 1994, respectively, which differs from the
statutory rate largely as a result of non-deductible goodwill amortization
expense.
Liquidity and Capital Resources
- -------------------------------
In September 1995, the Company renewed for one year its $2,000,000 line of
credit with Bank One, Boulder, Colorado under the same terms and conditions. The
Company had no outstanding amounts against this line of credit at September 30,
1995.
The Company has significant net accounts receivable and net sales-type leases
available to borrow against which could be used as collateral for future
borrowing arrangements.
During the quarter ended September 30, 1995, the Company generated $2,968,000
from operating activities and expended $1,232,000 for investing activities
related to capital equipment, rental and monitoring equipment and internally
developed software. All cash flow activities resulted in an increase of cash of
$2,011,000.
Working capital increased $1,120,000 to $14,058,000 at September 30, 1995. The
increase was primarily the result of an increase in cash, offset by a decrease
in inventories and an increase in deferred revenue.
The Company believes its existing sources of liquidity expected to be generated
from operations will provide adequate cash to fund the Company's anticipated
working capital needs through fiscal 1996.
6
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BI Incorporated
Date 11/9/95 By /s/ David J. Hunter
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David J. Hunter
President and Chief Executive Officer
/s/ Jacqueline A. Chamberlin
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Jacqueline A. Chamberlin
Chief Financial Officer
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND RELATED NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,369
<SECURITIES> 377
<RECEIVABLES> 9,472
<ALLOWANCES> 0
<INVENTORY> 2,709
<CURRENT-ASSETS> 18,354
<PP&E> 2,021
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,170
<CURRENT-LIABILITIES> 4,296
<BONDS> 0
<COMMON> 29,175
0
0
<OTHER-SE> (13)
<TOTAL-LIABILITY-AND-EQUITY> 38,170
<SALES> 8,319
<TOTAL-REVENUES> 8,387
<CGS> 3,893
<TOTAL-COSTS> 7,364
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,023
<INCOME-TAX> 422
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 601
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
