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FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13, 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
BI Incorporated
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(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
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The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of its current report dated October 24,
1996 on Form 8K as set forth in the pages attached hereto:
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(List all such items, financial statements, exhibits, or other portions amended)
Item 7a. and b.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
BI Incorporated
--------------------------------
(Registrant)
Date: 11/12/96 By /s/ Jackie A. Chamberlin
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Jackie A. Chamberlin
Chief Financial Officer
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Item 7. Financial Statements and Proforma Financial Information Page No.
- ---------------------------------------------------------------- --------
a. Financial Statements of Businesses Acquired:
Report of Independent Accountants..................................... 2
Combined Balance Sheet at March 31, 1996.............................. 3
Combined Statement of Operations and Retained Earnings for the year
ended March 31, 1996............................................... 4
Combined Statement of Cash Flows for the year ended March 31, 1996.... 5
Notes to the Financial Statements..................................... 6
b. Proforma financial information (unaudited):............................ 12
Condensed Combined Balance Sheet at June 30, 1996.................... 13
Condensed Combined Statement of Operations for the twelve months
ended June 30, 1996............................................... 14
Explanatory Notes.................................................... 15
1
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[LETTERHEAD OF PRICE WATERHOUSE APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
September 9, 1996
To the Board of Directors and Stockholders of Community Corrections Corporation,
Tennessee Probation Services, Inc., Lifeline Therapeutics, Inc. and Justice
Alternatives, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and retained earnings, and of cash flows present
fairly, in all material respects, the financial position of Community
Corrections Corporation, Tennessee Probation Services, Inc., Lifeline
Therapeutics, Inc. and Justice Alternatives, Inc. (combined, the Company) at
March 31, 1996 and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
As discussed in Note 8, on July 5, 1996, the Company signed a letter of intent
to merge with BI Incorporated.
/s/ Price Waterhouse LLP
2
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
COMBINED BALANCE SHEET
- -----------------------------------------------------------------------------
March 31,
1996
(in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 110
Accounts receivable, net of allowance for doubtful
accounts of $1,475 329
Other assets 65
Deferred income taxes 26
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Total current assets 530
Property and equipment, net 284
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$ 814
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 39
Accounts payable 202
Deferred revenue 223
Accrued compensation and benefits 131
Income taxes payable 11
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Total current liabilities 606
Long-term debt 13
Deferred income taxes 28
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647
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Stockholders' equity
Common stock 2
Retained earnings 165
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167
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$ 814
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The accompanying notes are an integral part
of these combined financial statements.
3
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
- -----------------------------------------------------------------------------
Year ended
March 31,
1996
(in thousands)
Revenues
Service income $ 8,407
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Costs and expenses
Cost of service income 3,725
Selling, general and administrative expenses 1,995
Provision for uncollectible accounts 2,656
Depreciation and amortization 73
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8,449
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Other income (expense) - net 9
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Loss before income tax benefit (33)
Income tax benefit (21)
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Net loss (12)
Retained earnings, beginning of year 177
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Retained earnings, end of year $ 165
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The accompanying notes are an integral part
of these combined financial statements.
4
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
COMBINED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended
March 31,
1996
(in thousands)
<S> <C>
Cash flows from operating activities
Net loss $ (12)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 73
Provision for uncollectible accounts 93
Deferred income taxes (34)
Changes in assets and liabilities
Accounts receivable (92)
Other assets 39
Accounts payable 61
Accrued compensation and benefits 8
Deferred revenue 12
Income taxes payable 11
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Net cash provided by operating activities 159
Cash flows from investing activities
Purchase of property and equipment (111)
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Net cash used for investing activities (111)
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Cash flows from financing activities
Proceeds from issuances of debt 77
Payment of debt and capital lease obligations (109)
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Net cash used for financing activities (32)
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Net increase in cash and cash equivalents 16
Cash and cash equivalents at beginning of year 94
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Cash and cash equivalents at end of year $ 110
Supplemental disclosure of cash flow information:
Interest paid $ 11
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Income taxes paid $ 7
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Assets acquired by incurring directly related
liabilities $ 27
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</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
5
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC. LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying financial statements include the combined financial
information of Community Corrections Corporation (CCC), Tennessee Probation
Services, Inc. (TPS), Lifeline Therapeutics, Inc. (LTI), and Justice
Alternatives, Inc. (JAI) (combined, the "Company"), which are commonly
controlled through family ownership. All significant intercompany accounts
and transactions have been eliminated in the combination. The revenues and
expenses of TPS, LTI, and JAI are not material to the combined financial
statements.
Nature of business
The Company provides probationary services such as monitoring, counseling,
and training services to individuals under contracts with various court
systems located throughout the State of Georgia and Tennessee, respectively.
These contracts generally have terms of one year. In addition, CCC and TPS
agree to collect fines and restitutions from probationers on behalf of the
various courts. The Company remits these monies to the courts monthly.
Revenue recognition
Service income is recognized upon completion of the service provided to the
probationer.
The provision for uncollectible accounts arises as a result of (a) the Court
suspending amounts due to the Company because of the inability of the
probationer to pay; (b) the probationer being incarcerated for committing a
different offense while under the supervision of the Company or; (c) the
probationer absconding while under the supervision of the Company.
CCC and TPS record an allowance for doubtful accounts for estimated
probationer accounts deemed uncollectible. However, if probationers fail to
meet the terms of their probation and a warrant is issued for their arrest,
the related account receivable is written off. Any amounts subsequently
recovered are recorded as revenue when received.
Approximately $1,180,000 or 14% of the Company's service income for fiscal
year 1996 was earned by providing services under a contract with one court
located in Georgia.
Use of estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
6
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid monetary instruments purchased with an original maturity of
three months or less to be cash equivalents.
Property and equipment
Property and equipment is recorded at cost and depreciated using the
straight line method over the estimated useful lives of five years. Repair
and maintenance expenses which do not extend the useful lives of the related
assets are expensed as incurred.
Deferred revenue
A significant portion of the Company's accounts receivable are due from
individuals who have been sentenced to probation by a court of law. The
probationer may elect to pay a portion or all of their court-ordered fees in
advance. The Company records payments made in advance as deferred revenue
until earned. Deferred revenue at March 31, 1996 totaled $223,000.
Fair value of financial instruments
Recorded balances of financial instruments at March 31, 1996 approximate
estimated fair market values.
2. AMOUNTS HELD IN ESCROW
The Company collects certain court-ordered fines and restitution fees from
probationers which are held in escrow for the respective courts to which the
monies are due. These funds are remitted (usually monthly) to the courts in
accordance with the contract terms. The Company's policy is to maintain
these funds in separate bank accounts and not to record the cash and related
liability on the balance sheet. At March 31, 1996 the Company had $665,000
in escrow to be remitted to certain courts.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 1996 (in
thousands):
<TABLE>
<S> <C>
Computer equipment and software $ 195
Office furniture 134
Land 48
Vehicles 65
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442
Less: accumulated depreciation (158)
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$ 284
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</TABLE>
7
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At March 31, 1996, property and equipment includes $26,000 of equipment
leased under capital lease obligations.
4. LONG-TERM DEBT AND LEASE OBLIGATIONS
Long term debt consists of the following (in thousands):
<TABLE>
<S> <C>
Revolving line of credit with bank due July 5, 1996,
interest at prime plus 1% due monthly $ 30
Capital lease obligations for an automobile and
telephone systems, interest rates from
10.25% to 14.0%, payments due monthly maturing
at various dates through 1999 22
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52
Less - current portion (39)
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$ 13
======
</TABLE>
Scheduled maturities of long-term debt outstanding as of March 31, 1996 are
as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1997 $ 39
1998 10
1999 3
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$ 52
======
</TABLE>
In July 1995, the Company entered into a $50,000 revolving line of credit
agreement and a $100,000 Officer Guidance Loan, (term facility) with a bank.
Borrowings from the term facility are to be used to open additional
probation offices. Interest is payable under both facilities monthly at the
prime rate plus 1%. This credit is secured by a blanket lien against all of
CCC's assets, expires on July 5, 1996, and is jointly and severally
guaranteed by CCC's stockholders.
8
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company leases office space and certain equipment under operating
leases. Future minimum lease payments due under capital leases and
noncancelable operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1997 $ 357
1998 273
1999 120
2000 2
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$ 752
</TABLE>
Rent expense was approximately $268,000 for the year ended March 31, 1996.
5. INCOME TAXES
The Company elects to file its federal income tax returns under the cash
method. Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the financial
reporting and income tax bases of property and equipment and the difference
between accounting for transactions under the accrual method for financial
reporting purposes and the cash method for income tax purposes. The deferred
taxes represent the future tax return consequences of those differences,
which will be taxable when the assets and liabilities are settled.
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<S> <C>
Current:
Federal $ 9
State 4
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13
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Deferred:
Federal (29)
State (5)
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(34)
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$ (21)
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</TABLE>
9
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Significant components of the Company's deferred tax (liabilities) and
assets at March 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
Current
Accounts payable and accrued expenses $ 176
Accounts receivable (150)
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Net current deferred tax asset 26
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Non-current
Property and equipment (28)
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Net deferred tax liability $ (2)
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</TABLE>
The difference between the Company's effective income tax rate and
multiplying the Company's loss before income taxes by the federal statutory
income tax rate is due primarily to the surtax exemption.
6. EMPLOYEE BENEFITS
Effective April 1, 1995, the Company adopted a 401(k) savings plan. The plan
is offered on a voluntary basis to full-time employees who have completed
one year of service. With certain limitations, each participant may elect to
contribute up to 15% of their salary. The Company matches $.25 for each
$1.00 of employee contributions up to 4% of the employees' gross pay.
Company contributions for the year ended March 31, 1996 were $19,000.
Participants become fully vested in their share of the Company's
contributions after six years of service.
The Company also makes a discretionary bonus to all employees based upon the
operating results of the Company, as well as a performance bonus to
probation officers. Total disbursements made by the Company during the year
ended March 31, 1996 for these amounts were approximately $350,000.
7. RELATED PARTY TRANSACTIONS
In March 1995, the Company obtained loans from two of its shareholders
totaling $64,000, which bore interest at 9%. During the year ended March 31,
1996, the Company repaid the entire principal amount of the loans plus
interest of $6,000.
10
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COMMUNITY CORRECTIONS CORPORATION, TENNESSEE
PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND
JUSTICE ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. SUBSEQUENT EVENT
On July 5, 1996, the Company and BI Incorporated (BI) of Boulder, Colorado
signed a letter of intent to merge. The transaction, if consummated in
accordance with the letter of intent, would result in the Company receiving
a certain number of shares of BI common stock to be determined and
approximately $3,000,000 in cash. The merger is expected to be completed by
October 10, 1996, after the completion of due diligence and approvals of the
respective board of directors.
11
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Item 7.b. PROFORMA FINANCIAL INFORMATION
The following unaudited proforma combined balance sheet and statements of
operations are derived from the individual financial statements of BI
Incorporated (BI) as shown in its annual report on Form 10K for the year ended
June 30, 1996, and the financial statements of Community Corrections Corporation
(CCC), Justice Alternatives, Inc. (JAI), Tennessee Probation Services (TPS) and
Lifeline Therapeutics, Inc. (LTI) (together the New Businesses) as of and for
the fiscal year ended March 31, 1996. The 100% acquisition of CCC, JAI and TPS
by BI was accounted for as a purchase and the unaudited proforma combined
financial information gives effect to the proforma adjustments described in Note
2.
This unaudited proforma combined financial information should be read in
conjunction with the other financial statements and notes thereto of CCC, JAI,
LTI and TPS included elsewhere in this amendment to Form 8K and the financial
statements and notes thereto of BI included in its annual report on Form 10K for
the period indicated above.
In the opinion of BI all adjustments neccessary to present fairly such unaudited
proforma combined financial information have been made. The unaudited proforma
combined financial statements are not necessarily indicative of what results of
operations would have been if the entities had been combined during the periods
presented and are not necessarily indicative of future operations.
12
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BI INCORPORATED AND SUBSIDIARIES
PROFORMA COMBINED BALANCE SHEET
YEAR ENDED JUNE 30, 1996
(in thousands, unaudited)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
--------------------------------- --------------------------------------
NEW Adjustments
BI BUSINESS (note 2) Combined
--------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $4,263 $110 ($3,000) $1,373
Short-term investments 1,099 1,099
Receivables, net 9,043 329 9,372
Investment in sales-type leases, net 4,345 4,345
Inventories, net 3,020 3,020
Deferred income taxes 302 26 328
Prepaid and other assets 893 65 958
--------------- -------------- ----------------- -----------------
Total current assets 22,965 530 (3,000) 20,495
Investment in sales-type leases, net 3,446 3,446
Rental and monitoring equipment, net 4,088 4,088
Property and equipment, net 2,564 284 2,848
Software, net 1,906 1,906
Intangibles, net 7,232 5,358 12,590
Deferred income taxes 370 370
Other assets 249 249
--------------- -------------- ----------------- -----------------
Total assets $42,820 $814 $2,358 $45,992
=============== ============== ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $39 $39
Accounts payable $1,486 202 $275 1,963
Accrued compensation and benefits 1,581 131 1,712
Accrued product warranty 193 193
Deferred revenue 1,086 223 1,309
Other liabilities 447 11 458
--------------- -------------- ----------------- -----------------
Total current liabilities 4,793 606 275 5,674
Deferred revenue and long-term debt 821 41 862
Stockholders' equity
Common stock, no par value 30,879 2 (2) 33,129
2,250
Retained earnings 6,327 165 (165) 6,327
--------------- -------------- ----------------- -----------------
Total stockholders' equity 37,206 167 2,083 39,456
--------------- -------------- ----------------- -----------------
Total liabilities and stockholders'
equity $42,820 $814 $2,358 45,992
=============== ============== ================= =================
</TABLE>
See accompanying notes.
13
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BI INCORPORATED AND SUBSIDIARIES
PROFORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
(in thousands, except per share amounts, unaudited)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
--------------------------------- --------------------------------------
NEW Adjustments
BI BUSINESS (note 2) Combined
--------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUE
Service and monitoring income $21,357 $8,407 $29,764
Net sales 16,616 16,616
Rental income 832 832
Interest income 238 238
Other income 169 9 178
--------------- --------------- -----------------
Total revenue 39,212 8,416 47,628
COSTS AND EXPENSES
Service and monitoring income 10,338 3,725 14,063
Net sales 8,570 8,570
Rental income 292 292
Selling, general and administrative
expenses 11,144 4,651 15,795
Research and development expenses 2,661 2,661
Amortization and depreciation 1,395 73 357 1,825
--------------- --------------- ----------------- -----------------
Total costs and expenses 34,400 8,449 357 43,206
Income before income taxes 4,812 (33) (357) 4,422
Income tax (provision) benefit (1,949) 21 (1,928)
--------------- --------------- ----------------- -----------------
Net income (loss) $2,863 ($12) ($357) $2,494
=============== =============== ================= =================
Net income per common and common
equivalent shares $0.40 $0.33
=============== =================
Weighted average number of common
and common equivalent shares
outstanding 7,160 400 7,561
=============== ================= =================
</TABLE>
See accompanying notes.
14
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BI Incorporated and Subsidiaries
Explanatory Notes to Proforma Combined Financial Statements
(unaudited)
Note 1 - Acquisition of Assets
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On October 10, 1996, the Company effected the purchase of 100% of the
outstanding stock of Community Corrections Corporation (CCC), Justice
Alternatives, Inc. (JAI) and Tennessee Probation Services (TPS). The total
consideration paid was 400,000 shares of restricted common stock of the Company
and $3,000,000 in cash.
Note 2 - Proforma Adjustments
- -----------------------------
The proforma adjustments give effect to recording the issuance of 400,000 shares
of BI common stock; eliminating equity accounts of CCC, JAI and TPS; recording
the related intangibles, including goodwill, and amortization thereof over a
fifteen year period.
Management has estimated and recorded as goodwill additional direct costs of the
acquisition of $275,000 based on the most current information available.
15
