<PAGE>
THE PURPOSE OF THIS DOCUMENT IS TO
INCLUDE THE FINANCIAL DATA SCHEDULE
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
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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
----- -----
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
April 14, 1995 is 6,687,882.
<PAGE>
BI INCORPORATED
Index
PART I - FINANCIAL INFORMATION: Page No.
Item 1 - Financial Statements
Consolidated Balance Sheet
at March 31, 1995 and June 30, 1994 2
Consolidated Statement of Operations
for the three and nine months ended
March 31, 1995 and 1994 3
Consolidated Statement of Cash Flows
for the three and nine months ended
March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 6
Signatures 8
PART II - OTHER INFORMATION:
Item 1 - Legal Proceedings
On February 1, 1995, Digital Products Corporation and Monitoring
Services, Inc. filed a complaint naming BI Incorporated and
Michael Fox, a BI employee, as defendants in the United States
Court for the District of New Jersey, alleging intentional, malicious and
tortious interference with present and prospective contractual
relations. They are seeking damages in excess of $50,000. The
action is in early stages of discovery.
Item 5 - Other
The Board of Directors of the Company accepted a resignation
letter from board member Dean R. Pickerell effective
March 20, 1995.
Item 6 - Exhibits and Reports on Form 8-K: None
<PAGE>
Item 1 - Financial Statements
BI INCORPORATED
BALANCE SHEET
(in thousands)
(unaudited)
March 31, June 30,
1995 1994
------------ ---------
ASSETS
Current assets
Cash and cash equivalents $1,203 $3,045
Short-term investments 287 282
Receivables, net 5,768 5,259
Investment in sales-type leases, net 3,438 3,076
Inventories
Raw materials 1,319 1,065
Work in process 1,171 960
Finished goods 798 791
Prepaids and other current assets 1,008 1,059
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Total current assets 14,992 15,537
Investment in sales-type leases, net 3,064 2,377
Rental and monitoring equipment, net 4,189 4,031
Property and equipment, net 2,068 1,729
Software, net 2,092 2,580
Intangibles, net 8,451 9,124
Other assets 1,001 1,493
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$35,857 $36,871
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $733 $551
Accrued compensation and benefits 1,018 940
Accrued acquisition liabilities 78 705
Accrued product warranty 412 353
Current income taxes payable 162
Deferred revenue 931 760
Other liabilities 413 357
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Total current liabilities 3,585 3,828
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Deferred revenue and long-term debt 931 857
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Stockholders' equity
Common stock, no par value, 75,000 shares
authorized; 7,404 shares
issued March 31, 1995 and 7,369 shares
issued June 30, 1994 31,335 31,159
Retained earnings 2,622 1,142
Less treasury shares at cost; 718 shares at
March 31, 1995 and 183 shares
at June 30, 1994 (2,616) (115)
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31,341 32,186
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$35,857 $36,871
======== =======
The accompanying notes are an integral
part of the financial statements.
2
<PAGE>
BI INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts, unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the three months For the nine months
ended March 31, ended March 31,
----------------------------- ------------------------------
1995 1994 1995 1994
------------ ------------ ---------- ----------
Revenues
Net sales $3,083 $2,283 $8,607 $6,378
Service and monitoring income 4,214 3,307 11,978 9,113
Rental income 207 230 627 539
Interest income 21 31 108 126
Other income 38 119 98 174
------------ ----------- ---------- ----------
7,563 5,970 21,418 16,330
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Costs and expenses
Cost of net sales 1,599 1,304 4,257 3,442
Cost of service and monitoring income 1,944 1,453 5,370 4,141
Cost of rental income 84 104 297 242
Selling, general and administrative
expenses 2,308 2,163 6,625 6,529
Amortization and depreciation 317 346 906 881
Research and development expenses 474 326 1,482 1,142
----------- ---------- ---------- ----------
6,726 5,696 18,937 16,377
----------- ---------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of accounting change 837 274 2,481 (47)
Income tax provision (320) (118) (1,001) (46)
----------- ---------- ---------- ----------
Income (loss) before cumulative effect of
accounting change 517 156 1,480 (93)
Cumulative effect on prior years of change
in method of accounting for income taxes 75
------------ ---------- --------- -----------
Net income (loss) $517 $156 $1,480 ($18)
============ ========== ========= ============
Income (loss) per common and common
equivalent share:
Income (loss) before cumulative effect
of accounting change $0.08 $0.02 $0.22 ($0.01)
Cumulative effect of accounting change 0.00 0.00 0.00 0.01
----------- ----------- --------- ------------
Net income (loss) $0.08 $0.02 $0.22 $0.00
=========== =========== ========= ============
Weighted average number of common and common
equivalent shares outstanding 6,785 7,202 6,869 7,139
=========== =========== ========= ============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
3
<PAGE>
BI INCORPORATED
STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For the nine months
ended March 31,
-----------------------------
1995 1994
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Cash flows from operating activities:
Net income (loss) $1,480 ($18)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 3,205 2,593
Provision for losses on accounts receivable and STL's 139 235
Changes in assets and liabilities:
Receivables (632) (242)
Investment in STLs* (1,049) 865
Inventories (472) (286)
Accounts payable 182 139
Accrued expenses 665 (218)
Income taxes payable (162) (267)
Deferred revenue 308 757
Rental equipment-net, converted to STL 122
Other (214) (186)
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Net cash from operating activities 3,572 3,372
Cash flows from investing activities:
Capital expenditures (1,069) (1,165)
Increase in rental and monitoring equipment (1,817) (2,526)
Increase in capitalized software (172) (403)
Purchased software (1,004)
Other (5) (263)
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Net cash from investing activities (3,063) (5,361)
Cash flows from financing activities:
Reduction of obligations under non-recourse
and recourse borrowings* (4)
Purchase of treasury stock (2,501)
Proceeds from issuance of common stock 150 389
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Net cash from financing activities (2,351) 385
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Net change in cash and cash equivalents (1,842) (1,604)
Cash and cash equivalents at June 30 3,045 4,352
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Cash and cash equivalents at March 31 before short-term
investments of $287 and $282 in 1995 and 1994, respectively $1,203 $2,748
========== ===========
<FN>
*Recourse and non-recourse borrowings are used by the Company to finance its investment in sales-type
leases (STLs). The reduction of the obligation is presented as if the cash is received by the Company from
the customer and then disbursed to the lender.
</TABLE>
The accompanying notes are an integral
part of the financial statements.
4
<PAGE>
BI INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Note 1 - Preparation of Financial Statements
These financial statements should be read in conjunction with the
consolidated 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. Common equivalent shares were excluded from the
nine months ended March 31, 1994 since the effect would have been
to reduce the loss per share.
Note 3 - Uncertainty
During fiscal 1992 and 1994 the Company invested a total of
$217,000 in JurisMonitor, Inc. (Juris) for a 16% ownership in
this Company. Juris was researching and marketing products for
the domestic violence industry. BI developed an initial product
for Juris and is currently monitoring domestic violence offenders
for approximately 16 agencies. In December 1994, Juris notified
its shareholders that it was unable to continue operations and
was pursuing the opportunities to sell, recapitalize or
restructure Juris. At March 31, 1995, it is possible that the
Company's investment in Juris may be impaired. Juris has
received a letter of intent to be acquired, subject to due
diligence. The Company is unable to determine if its investment
will be fully recovered under this agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The three-month period ended March 31, 1995 (fiscal 1995),
compared to the three-month period ended March 31, 1994 (fiscal
1994):
Total revenue for the three months ended March 31, 1995,
increased 26.7% to $7,563,000 compared to $5,970,000 in the
corresponding period a year ago as a result of increased sales
and monitoring of home arrest systems. Even though net sales of
the Company's home arrest equipment increased 35.0% in fiscal
1995 over fiscal 1994 there has been a transition by government
agencies to contract monitoring services. Service, monitoring
and rental income increased 25.0% to $4,421,000 in fiscal 1995
from $3,537,000 in fiscal 1994. This revenue base gives the
Company more cash flow stability and opportunity to generate
future recurring income.
Gross profit on net sales, service, monitoring and rental income
increased to 51.7% in fiscal 1995 from 50.8% in fiscal 1994.
This increase relates largely to improved net sales margins from
42.9% in 1994 to 48.1% in 1995. In both quarters the Company
offered a program to certain net sales customers to upgrade their
home arrest equipment to the newest version. Lower profit
margins were recognized on this upgrade program. Gross profit on
service and monitoring decreased to 53.9% in 1995 compared to
56.1% in 1994 as a result of an increase in the average cost per
day on a unit being monitored. This increased cost is largely
related to additional labor required for specialized monitoring
contracts. The Company is working on additional automation of
the monitoring software to improve labor efficiencies.
Selling, general and administrative (S,G&A) expenses decreased as
a percentage of total revenue to 30.5% or $2,308,000 in fiscal
1995 compared to 36.2% or $2,163,000 in fiscal 1994 primarily as
a result of increased revenue. The $145,000 increase in 1995
compared to 1994 is largely related to increased sales, marketing
and account management expenses on increased revenue. The
Company believes its G&A expenses will not materially increase as
a percentage of revenue in its next fiscal quarter.
Research and development (R&D) expenses increased to $474,000, or
6.3% of total revenue, in fiscal 1995 from $326,000, or 5.5% of
total revenue, in fiscal 1994. R&D expenses were largely related
to new product development and software enhancements to the
Company's monitoring center operations in both periods. In
January 1995, the Company introduced its alcohol monitoring
product. As a result of the complexity in the use of this
product, the Company's revenues from the introduction of this
product will be limited in fiscal 1995.
The Company recorded income tax expense of $320,000 for the
three months ended March 31, 1995, which differs from the statutory
rate largely as a result of non-deductable goodwill amortization
expense.
The nine-month period ended March 31, 1995 (fiscal 1995), compared to
the nine-month period ended March 31, 1994 (fiscal 1994):
Total revenue increased 31.1% from $16,330,000 in fiscal 1994 to
$21,418,000 in fiscal 1995. Service, monitoring and rental
income increased 30.6% to $12,605,000 in fiscal 1995 from
$9,652,000 in fiscal 1994 and remains at 59% of the Company's
total revenue. The Company has refocused its sales efforts and
believes this revenue source will continue to increase during
the remainder of its fiscal year. Net sales income for the
nine months ended March 31, 1995 did not include revenue from the
Company's jail management system (JMS) software product.
Currently the Company has a backlog of approximately
6
<PAGE>
$900,000 for delivery of two JMS software installations. The
Company will begin recognizing revenue from this backlog beginning
in its fiscal 1996 first quarter.
Gross profit on net sales, service, monitoring and rental
income increased to 53.2% in fiscal 1995 from 51.2% in
fiscal 1994 largely as a result of efficiencies gained on
increased units being manufactured and monitored.
Selling, general and administrative expenses increased
$96,000 for fiscal 1995 compared to fiscal 1994 but decreased
as a percentage of total revenue to 30.9% from the nine
months ended March 31, 1995 compared to 40.0% for the
same period a year ago. The increase was largely related
to additional commissions on the 31% increase in total
revenue during fiscal 1995 compared to 1994. In
December 1993 (fiscal 1994) the Company instituted
certain cost reductions to restructure and redirect
its SG&A expenses to reflect the transition of the
Company's revenues toward service and monitoring.
Research and development expenses increased to $1,482,000 from
$1,142,000 for the nine months ended March 31, 1995 and
1994, respectively. This increase is primarily a result
of lower levels of capitalized software resulting from
differences in the stage of developing software products
which were recorded as an asset on the balance sheet,
therefore reducing total R&D expenses. The Company
believes its R&D expenses will continue to be 7% to 8% of
total revenue during fiscal 1995. Development efforts
associated with the development of a new jail management
software platform will be capitalized in the fourth
quarter of 1995 and in the first half of fiscal 1996.
Certain development expenses directly related to a JMS customer
contract will be charged to cost of sales as revenue is
recognized beginning fiscal 1996. Continued R&D
expenditures are required to mainitain a leadership
position in this industry.
The Company's income tax expense for fiscal 1995 was above the statutory
rate as discussed above. A $75,000 benefit was recorded in fiscal 1994
from the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
LIQUIDITY AND CAPITAL RESOURCES
The Company has significant net accounts reveivable and net
sales-type leases available to borrow against which could
be used as collateral for future borrowing arrangements.
During the nine months ended March 31, 1995, the Company
generated $3,572,000 from operating activities; expended
$3,058,000 for capital equipment, rental and monitoring
equipment and internally developed software; and
purchased $2,501,000 of its common stock on the open
market. Together, these activities resulted in a decrease
of cash and cash equivalents of $1,842,000.
Working capital decreased $302,000 to $11,407,000 at
March 31, 1995. The decrease was primarily the result
of a decrease in cash, offset by increases in receivables
and inventories. The accrued acquisition liabilities
decreased as the Company commenced to fulfill its
obligation assumed under an acquisition agreement.
The Compay believes its existing sources of liquidity and funds
expected to be generated from operations will provide
adequate cash to fund the Company's anticipated
working capital needs through fiscal 1995.
7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934 THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
BI Incorporated
Date August 25, 1995 By /s/David J. Hunter
------------------------ ------------------------------
David J. Hunter
President and Chief Executive Officer
/s/Jacqueline A. Chamberlin
------------------------------
Jacqueline A.Chamberlin
Chief Financial Officer
<TABLE> <S> <C>
<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 CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,203
<SECURITIES> 287
<RECEIVABLES> 9,206
<ALLOWANCES> 0
<INVENTORY> 3,288
<CURRENT-ASSETS> 14,992
<PP&E> 2,068
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,857
<CURRENT-LIABILITIES> 3,585
<BONDS> 0
<COMMON> 31,335
0
0
<OTHER-SE> (2,616)
<TOTAL-LIABILITY-AND-EQUITY> 35,857
<SALES> 21,212
<TOTAL-REVENUES> 21,418
<CGS> 9,924
<TOTAL-COSTS> 18,937
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,481
<INCOME-TAX> 1,001
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,480
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
