<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, 1998
------------------
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
----------------------------------------------
(Exact name of issuer as specified in charter)
Colorado 84-0769926
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6400 Lookout Road, Boulder, Colorado
-------------------------------------
80301
--------------------
(Address of principal executive offices)
(Zip Code)
(303) 530-2911
--------------------------------------------------
(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 October 19, 1998 was 7,647,185.
<PAGE>
BI INCORPORATED
INDEX
-----
PART I - FINANCIAL INFORMATION: Page No.
Item 1 - Financial Statements
Balance Sheet
at September 30, 1998 and June 30, 1998 2
Statement of Operations
for the three months ended September 30, 1998 and 1997 3
Statement of Cash Flows
for the three months ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations 6 through 10
Signatures 11
PART II - OTHER INFORMATION:
Item 1 - Legal Proceedings: Incorporated by reference to Note 4 to Consolidated
Financial Statements in Part I.
<PAGE>
BI INCORPORATED
CONSOLIDATED BALANCE SHEET
(in thousands, unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
----------------------- ----------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $10 $1,146
Receivables, net 13,438 12,188
Investment in sales-type leases, net 4,133 4,337
Inventories ,net 3,032 3,393
Deferred income taxes 751 751
Prepaid expenses 766 866
----------------------- ----------------------
Total current assets 22,130 22,681
Investment in sales-type leases, net 3,350 3,529
Rental and monitoring equipment, net 5,128 4,872
Property and equipment, net 13,214 13,250
Software, net 2,223 2,282
Intangibles, net 12,073 12,047
Other assets 3,343 3,328
----------------------- ----------------------
$61,461 $61,989
======================= ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $1,666 $3,163
Accrued compensation and benefits 2,467 1,940
Deferred revenue 2,021 1,647
Income taxes payable 77 347
Other liabilities 694 759
----------------------- ----------------------
Total current liabilities 6,925 7,856
----------------------- ----------------------
Capital lease obligation 6,859 6,897
Deferred revenue 2,230 2,329
Stockholders' equity
Common stock, no par value, 75,000 shares authorized;
7,641 shares issued and outstanding September 30, 1998 and
7,640 shares issued and outstanding June 30, 1998 34,087 34,076
Retained earnings 11,360 10,831
----------------------- ----------------------
Total stockholders' equity 45,447 44,907
----------------------- ----------------------
$61,461 $61,989
======================= ======================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
2
<PAGE>
BI INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts, unaudited)
<TABLE>
<CAPTION>
For the three months
ended September 30,
----------------------------------------------------------
1998 1997
------------------------- --------------------------
<S> <C> <C>
Revenues
Service and monitoring income $12,782 $10,037
Rental income 108 260
Net sales 3,615 4,519
Other income 30 51
------------------------- --------------------------
Total revenues 16,535 14,867
------------------------- --------------------------
Costs and expenses
Cost of service and monitoring income 6,540 5,205
Cost of rental income 80 57
Cost of net sales 1,738 2,200
Selling, general and administrative expenses 4,989 4,509
Provision for doubtful accounts 410 595
Amortization and depreciation 840 801
Research and development expenses 1,001 755
------------------------- --------------------------
Total costs and expenses 15,598 14,122
------------------------- --------------------------
Income before income taxes 937 745
Income tax provision (408) (317)
------------------------- --------------------------
Net income $529 $428
========================= ==========================
Basic earnings per share $0.07 $0.06
========================= ==========================
Weighted average number of common shares outstanding 7,640 7,420
========================= ==========================
Diluted earnings per share $0.07 $0.06
========================= ==========================
Weighted average number of common and common equivalent
shares outstanding 7,909 7,613
========================= ==========================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
3
<PAGE>
BI INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
For the three months
ended September 30,
----------------------------------------------------------------
1998 1997
----------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $529 $428
Adjustments to reconcile net income
to net cash from operating activities:
Amortization and depreciation 1,817 1,609
Provision for doubtful accounts 410 595
Changes in assets and liabilities:
Receivables (1,660) (886)
Investment in STLs 383 (1,620)
Inventories, net 361 312
Accounts payable (1,497) (604)
Accrued expenses 462 704
Deferred revenue 275 337
Income taxes payable (270) (27)
Prepaids and other assets 85 (340)
---------------------------------------------------------------
Net cash from operating activities 895 508
---------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (629) (1,102)
Increase in rental and monitoring equipment (988) (467)
Increase in capitalized software (90) (329)
Investment in intangibles (297) 0
Change in short-term investments 0 450
---------------------------------------------------------------
Net cash used in investing activities (2,004) (1,448)
---------------------------------------------------------------
Cash flows from financing activities:
Payments on capital lease obligation (38) (11)
Proceeds from issuance of common stock 11 24
---------------------------------------------------------------
Net cash from (used in) financing activities (27) 13
---------------------------------------------------------------
Net change in cash and cash equivalents (1,136) (927)
Cash and cash equivalents at beginning of period 1,146 1,694
---------------------------------------------------------------
Cash and cash equivalents at end of period $10 $767
====================== ================
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
4
<PAGE>
BI INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
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 presentation of the
results for the interim periods.
NOTE 2 - RECLASSIFICATION
- -------------------------
Certain fiscal 1998 amounts have been reclassified to be comparable with
the fiscal 1999 presentation.
NOTE 3 - NET INCOME PER COMMON AND EQUIVALENT SHARE
- ---------------------------------------------------
The Company adopted SFAS No. 128, "Earnings per Share" during the three
month period ended December 31, 1997. This pronouncement establishes new
standards for computing and presenting EPS on a basis that is more comparable to
international standards and provides for the presentation of basic and diluted
EPS, replacing the previously reported primary and fully-diluted EPS. The basic
EPS has been computed by dividing net income by the weighted average number of
shares outstanding during each period. Diluted EPS has been computed by dividing
net income by the weighted average common and common equivalent shares
outstanding during each period using the treasury stock method. The difference
between the Basic and Diluted weighted average shares is due to common stock
equivalent shares resulting from outstanding stock options. Prior periods' EPS
have been restated to conform with the new statement.
NOTE 4 - LEGAL PROCEEDINGS
- --------------------------
On August 27, 1997, the Company received notice of a class action complaint
filed against it and certain of its officers and directors. The complaint
includes various claims under securities law as well as for common law fraud.
The complaint alleges, among other things, that various public filings and press
releases made by the Company during 1996 contained material misstatements and
omissions, including inflated Company revenues and earnings. The complaint
further claims that these misstatements and omissions occurred as a result of
shipping products to customers with the understanding that the customers had no
obligation to pay for the products and could return them at any time. In
addition, the complaint alleges that the Company failed to disclose (a) the
nature of competition in its monitoring services line of business and (b) that
one of the Company's products related to in-home alcohol testing did not work
properly. The complaint seeks rescission, unspecified damages and attorney's
fees on behalf of all persons who purchased the Company's common stock between
April 24, 1996 and September 12, 1996. The Company believes the complaint is
without merit but is currently unable to (a) determine the ultimate outcome of
resolution of the complaint, (b) determine whether resolution of this matter
will have a material adverse impact on the Company's financial position or
results of operations, or (c) estimate reasonably the amount of loss, if any,
which may result from resolution of this matter.
The Company is involved in five additional legal proceedings; one alleging
negligence in manufacturing and general negligence, one alleging malfunction in
equipment, another alleging negligence and misrepresentation resulting in a
wrongful death, the fourth alleging negligence under product liability, and the
last suit alleges wrongful death from general negligence. One of the claimants
seeks damages in excess of $150,000, another seeks damages of $3,000,000, a
third seeks damages of $3,977,500, the fourth seeks $250 million in damages, and
the last seeks damages in excess of $100,000.
Management believes the Company has adequate legal defenses and/or
insurance coverage against all claims and intends to defend itself vigorously
against 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
adverse effect on the Company's reported results of operations in a particular
quarter.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain information in "Management's Discussion and Analysis" and other
statements periodically reported by the Company contain forward-looking
statements that involve risks and uncertainties. Management believes that its
expectations are based on reasonable assumptions. However, no assurances can be
given that its goals will be achieved. It should be noted that the earnings
history of the Company has not been consistent year to year. Factors that could
cause actual results to differ materially include, but are not limited to:
fluctuations due to timing of award of government contracts; pricing pressures;
liability in excess of insurance coverage; changes in federal, state and local
regulations; new product introductions by competitors or unexpected delays of
new product introductions by the Company; raw material availability; changes in
telecommunications regulations or technologies; the inability of the Company or
others upon which it depends to adequately address and correct problems
resulting from "Year 2000" issue; or the loss of a material contract through
lack of appropriation or otherwise.
RESULTS OF OPERATIONS
- ---------------------
The following table provides a breakdown of selected results by Business Unit.
The Company's Business Units consist of Electronic Monitoring (EM), Community
Correctional Services (CCS) and Corrections Information Systems (CIS).
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
---------------------------- ----------------------------
EM CCS CIS Total EM CCS CIS Total
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue (unaudited, in thousands) (unaudited, in thousands)
Recurring Revenue
Service & Monitoring 7,653 5,066 63 12,782 6,453 3,539 45 10,037
Rental 108 108 260 260
Direct Sales 2,864 751 3,615 3,992 527 4,519
Other Income 30 30 51 51
---------------------------- ----------------------------
Total Revenue 10,655 5,066 814 16,535 10,756 3,539 572 14,867
Gross Profit 6,261 2,076 (160) 8,177 6,003 1,303 99 7,405
Gross Profit % 58.8% 41.0% (19.7%) 49.5% 55.8% 36.8% 17.3% 49.8%
</TABLE>
THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1998 (FISCAL 1999), COMPARED TO THE
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 (FISCAL 1998):
Revenue
Total revenue for the three months ended September 30, 1998 increased 11.2%
to $16,535,000 compared to $14,867,000 in the corresponding period a year ago.
The Company is continuing to expand recurring revenue which
6
<PAGE>
includes service,, monitoring and rental income although there can be no
assurances that the Company will be successful in continuing this expansion.
These revenue sources, which are generated within all three business units
increased 25.2% in fiscal 1999 compared to fiscal 1998. Recurring revenue
increased to $12,890,000 or 78.0% of total revenue in fiscal 1999 from
$10,297,000 or 69.3% of total revenue in fiscal 1998. All three business units
reported recurring revenue increases for fiscal 1999 as compared to fiscal 1998.
The EM business unit revenue decreased slightly to $10,655,000 for the
three months ended September 30, 1998 compared to $10,756,000 in the
corresponding period a year ago. Some government agencies purchase equipment and
run their own monitoring programs, others elect to utilize both monitoring
equipment and services offered by the Company, while other agencies purchase
equipment from the Company and then contract with the Company for the service
portion of the monitoring. Recurring revenue which is comprised of electronic
monitoring and rental income increased 15.6% to $7,761,000 in fiscal 1999 from
$6,713,000 in fiscal 1998. This increase in recurring revenue relates to the
continuing trend of government agencies to contract for electronic monitoring
rather than purchasing equipment. Direct sales revenue decreased to $2,864,000
in fiscal 1999 from $3,992,000 in fiscal 1998. This decrease was partially do to
a decline in direct sales to service providers as a result of the Company's
change in market strategy emphasizing recurring revenue. In addition, direct
sales revenue in the first quarter of fiscal year 1998 was unusually high as a
result of increased backlog at June 30, 1997. Direct sales revenue for fiscal
1999 was consistent with comparable periods prior to fiscal 1998.
The CCS business unit recurring revenue increased $1,527,000 or 43.1% to
$5,066,000 in fiscal 1999 compared to $3,539,000 in fiscal 1998. CCS provides
community correctional supervision and services in 11 states through its 81
community correctional service centers. During the past twelve months CCS set
up 15 new centers or programs within existing centers and increased the number
of offenders receiving services from approximately 35,000 to approximately
40,000. The Company intends to continue to broaden the services provided to the
offender and anticipates continued revenue growth in this business unit for
fiscal year 1999.
The CIS business unit increased revenue by 42.3% to $814,000 in fiscal 1999
compared to $572,000 in fiscal 1998. Direct sales revenue associated with the
Institutional Management System (IMS) applications software product increased to
$751,000 in fiscal 1999 from $527,000 in fiscal 1998. The CIS business unit has
contracts lasting from one month to approximately twenty four months in
duration. This increase in revenue is a direct result of the increase in new
contracts awarded which is reflected in the $5,650,000 of backlog as of the end
of current period. On August 25, 1998, the Company announced that it has engaged
an investment banker to attempt to sell the CIS business unit.
Gross Profit
Total gross profit as a percentage of total revenue for the three months
ended September 30, 1998 and September 30, 1997 was consistent at approximately
50%. Gross profit for fiscal 1998 was $8,177,000 compared to $7,405,000 in the
corresponding period a year ago.
The EM business unit increased its total gross profit to 58.8% or
$6,261,000 in fiscal 1999 compared to 55.8% or $6,003,000 in fiscal 1998. This
percentage increase was due to an improvement in gross profits on direct sales
revenue. Direct sales gross profit increased as a result of favorable sales
pricing, manufacturing cost improvements and favorable production variances
during fiscal 1999. EM recurring revenue gross profit was approximately 54% in
fiscal 1999 compared to approximately 55% in fiscal 1998.
The CCS business unit increased its gross profit to 41.0% for fiscal 1999
compared to 36.8% in fiscal 1998. The 1999 increase was due to cost reductions
and operating efficiency improvements throughout the 81 community correctional
service centers. Probation and day reporting services require relatively high
direct labor costs which are recognized as direct costs of sales which reduce
gross profit.
7
<PAGE>
The CIS business unit decreased its gross profit to (19.7)% in fiscal 1999
compared to 17.3% in fiscal 1998. This decrease in fiscal 1999 is primarily a
result of additional amortization expense associated with the recent general
release of phase two of the Company's IMS product and revisions in estimated
recoverability of certain contract costs and in estimated future contract costs
that were identified in the current period.
Selling, General and Administrative (S,G&A)
S,G&A expenses for the three months ended September 30, 1998 increased
$480,000 to $4,989,000 compared to $4,509,000 in the corresponding period a year
ago. S,G&A expense as a percentage of total revenue remained constant at
approximately 30%.
The EM business unit increased its S,G&A expenses $315,000 in fiscal 1999
resulting in expenses of 31.1% of EM revenue in fiscal 1999 compared to 27.9% in
fiscal 1998. This increase is related to additional marketing expenses
associated with continuing market expansion activities throughout fiscal year
1999. As well as increases in account management and technical services related
to increasing customer satisfaction and growth of existing customer sites.
The CCS business unit increased its S,G&A expenses $136,000 to $1,319,000
in fiscal 1999 compared to $1,183,000 in fiscal 1998, although it decreased its
S,G&A expenses as a percentage of CCS revenue to 26.0% in fiscal 1999 from 33.4%
in fiscal 1998. The increase in expenses is related to investments in
infrastructure and staffing to support the growth of the business unit.
The CIS business unit increased its S,G&A expenses $29,000 to $354,000 in
fiscal 1999 but as a result of a significant increase in revenue decreased
expenses to 43.5% of CIS revenue in fiscal 1999 compared to 56.8% in fiscal
1998. These expenses associated with infrastructure costs necessary to manage
deployment and implementation of existing contracts.
Provision for Doubtful Accounts
The provision for doubtful accounts was $410,000 or 2.5% of total revenue
in fiscal 1999 compared to $595,000 or 4.0% of total revenue in fiscal 1998. The
provision relates largely to the Company's CCS business unit. Probation service
revenue is 100% paid by the offender and carries an increased risk of default.
Day reporting revenue for fiscal 1999 was 24.0% paid by the offender and the
remaining paid by government agencies. The Company has initiated collection
activities that have improved its collection results. The Company accrued
approximately 7% of CCS revenue to allowance for doubtful accounts during 1999
compared to approximately 14% in fiscal 1998. The Company is implementing
additional collection procedures to reduce payment defaults within the CCS
business unit. The Company believes the industry average payment default
associated with similar for-profit companies is approximately 20%. The EM
business unit accrued approximately 1% of EM revenue to allowance for doubtful
accounts in both fiscal 1999 and 1998.
8
<PAGE>
Amortization and Depreciation (A&D)
A&D expenses increased $39,000 to $840,000 or 5.1% of revenue in fiscal
1999 from $801,000 or 5.4% of revenue in fiscal 1998. The increase was due to
additions to property, plant and equipment.
Research and Development Expenses (R&D)
R&D expenses increased $246,000 to $1,001,000 in fiscal 1999 from $755,000
in fiscal 1998. The Company's R&D expenditures were largely related to EM
business unit expenses associated with internal software development efforts for
improved automation to the Company's electronic monitoring centers, and the
evaluation and enhancement of existing electronic monitoring products. The
Company expects to continue expenditures for improvements to the monitoring
operations and development of future home arrest products throughout fiscal year
1999. As a percentage of EM revenue EM business unit R&D expense was 7.3% in
fiscal 1999 compared to 6.1% in fiscal 1998.
Net Income and Income Taxes
The Company recorded income tax expense of $408,000 and $317,000 for fiscal
1999 and fiscal 1998 respectively, which differs from the statutory rate largely
as a result of state income taxes and non-deductible goodwill amortization
expense.
For fiscal 1999, the Company had net income of $529,000 or $.07 diluted
earnings per share compared to fiscal 1998 net income of $428,000 or $.06
diluted earnings per share. The changes in net income relate primarily to the
items discussed above.
Impact of Year 2000 Issues
The Year 2000 issue is related to computer software utilizing two digits
rather than four to define the appropriate year. As a result, any of the
Company's computer programs or any of the Company's suppliers or vendors that
have date sensitive software may incur system failures or generate incorrect
data if "00" is recognized as 1900 rather than 2000.
The Company has been addressing Year 2000 issues throughout fiscal year
1998 and the first quarter of fiscal 1999 and has modified or is in the process
of modifying any products or services that are affected by Year 2000 issues.
The Company has a formal comprehensive Year 2000 readiness plan in place and
under the oversight of to executive management. The Company estimates that
approximately $120,000 of costs have been incurred and expensed in fiscal year
1998 and the first quarter of fiscal 1999 related to addressing Year 2000
events. It is estimated that another $200,000 to $300,000 of costs will be
incurred prior to calendar year end 1999. Approximately two-thirds of this
amount will be related to fixed asset additions for new computer related
equipment. The remaining one-third will be expensed as incurred.
The Company's greatest risk for a material disruption in services lies in a
potential disruption of telecommunication services due to an external
telecommunication service provider's failure to be Year 2000 compliant
9
<PAGE>
and the resulting impact upon the Company's monitoring services. The Company has
contacted and obtained verbal assurances from all of its telecommunications
providers that their networks are Year 2000 compliant. The Company is currently
seeking written assurances of year 2000 compliance testing from all
telecommunication providers and expects to complete this process by mid fiscal
year 1999. BI has a redundant monitoring system that would allow the eastern
monitoring center to process alerts if for any reason the western monitoring
center was to go down, or vice versa. In addition, the Company has backup
telecommunication provider connectivity if for any reason the primary carrier
has a disruption in service.
The Company has been in the process throughout fiscal year 1998 and the
first quarter of fiscal 1999 of replacing its internal business and business
unit operating computer systems. These replacements were required to meet
current and future needs of the business as well as to reduce various
administrative and operating functions. These new systems are Year 2000
compliant and are scheduled for deployment in fiscal year 1999. The systems
have been independently verified and tested to be Year 2000 compliant.
The Company believes that based upon changes and modifications already made
and those that are currently planned for implementation throughout fiscal year
1999 the impact of Year 2000 issues will not be material. However, to the
extent the Company or third parties on which it relies do not timely achieve
Year 2000 readiness, the Company's results of operations may be adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended September 30, 1998, the Company generated
$895,000 of cash from operating activities, expended $629,000 for capital
equipment and leasehold improvements, expended $988,000 for equipment associated
with rental and monitoring contracts, and expended $297,000 for license fees and
other intangibles. The total of all cash flow activities resulted in a decrease
in the balance of cash and cash equivalents of $1,136,000 for the three months
ended September 30, 1998.
The Company's working capital increased $380,000 to $15,205,000 at
September 30, 1998. This increase was primarily the result of increases in
accounts receivable as a result of increased sales volume in CCS as well as
increases in CIS receivables associated with extended term IMS contracts for
application software products and investment in sales-type leases. The Company
is emphasizing improved collections and procedures across all business units and
expects to reduce its past due receivables throughout fiscal year 1999 as
compared to fiscal year 1998. Direct sales customers have increasingly requested
and obtained financing through the Company in the form of sales-type leases.
Such lease financing carries a low risk of default and is at favorable interest
rates to the Company.
The Company has an available $5,000,000 line of credit with Bank One,
Boulder, Colorado which expires in October 1999. No amounts were drawn against
this line at September 30, 1998. Subsequent to the quarter end transaction
timing has resulted in a temporary need for external financing and the Company
has drawn $500,000 on the line of credit to cover short-term operating needs.
Working capital may be obtained by financing certain operating and sales-
type leases under recourse and non-recourse borrowing arrangements. These
borrowings would be collateralized with a security interest in the leased
equipment. At September 30, 1998, the Company had unfunded leases in the amount
of $7,483,000 which could be used as collateral for future borrowing
arrangements.
The Company believes it will have adequate sources of cash and available
bank line of credit to fund anticipated working capital needs for its existing
business through fiscal year 1999.
10
<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 October 21, 1998 By /s/ David J. Hunter
----------------------- --------------------------------
David J. Hunter
President and Chief Executive Officer
/s/ Jacqueline A. Chamberlin
-------------------------------------
Jacqueline A. Chamberlin
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 17,571
<ALLOWANCES> 0
<INVENTORY> 3,032
<CURRENT-ASSETS> 22,130
<PP&E> 13,214
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,461
<CURRENT-LIABILITIES> 6,925
<BONDS> 0
0
0
<COMMON> 34,087
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 61,461
<SALES> 16,505
<TOTAL-REVENUES> 16,535
<CGS> 8,358
<TOTAL-COSTS> 15,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 937
<INCOME-TAX> 408
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
