<PAGE>
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________to____________
COMMISSION FILE NUMBER 0-5589
PAYCO AMERICAN CORPORATION
(Exact name of registrant as specified in its charter)
39-1133219
(I.R.S Employer Identification No.)
WISCONSIN
(State or other jurisdiction of incorporation or organization)
180 NORTH EXECUTIVE DRIVE, BROOKFIELD, WISCONSIN 53005
(Address of principal executive offices) (Zip Code)
(414)784-9035
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
-------------------- ------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
----------------------------
(Title of Class)
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 periods 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
----
(Cover page 1 of 2 pages)
<PAGE>
The aggregate market value of voting stock of the Registrant held by
nonaffiliates was $58,874,599 as of February 28, 1995
The number of shares outstanding of each of the Registrant's classes of common
stock as of February 28, 1995 was 10,128,503 shares of $.10 par value common
stock.
=================================================================
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Into Which Portions
of Documents are
Document Incorporated
- -------------------------------------------- -------------------
Payco American Corporation Annual Report to
Shareholders for the Fiscal Year Ended
December 31, 1994 Part II
Definitive Proxy Statement for the 1994
Annual Meeting of Shareholders to be Filed
with Securities and Exchange Commission
within 120 days of December 31, 1994 Part III
Registration Statement on Form S-1
Reg. No. 2-34767 Part IV
Form 10-K filed for fiscal year ended
December 31, 1979 Part IV
Form 10-K filed for fiscal year ended
December 31, 1983 Part IV
Form 10-K filed for fiscal year ended
December 31, 1985 Part IV
Form 10-K filed for fiscal year ended
December 31, 1986 Part IV
Definitive Proxy Statement for the
1989 Annual Meeting of Stockholders Part IV
Definitive Proxy Statement for the
1992 Annual Meeting of Stockholders Part IV
Definitive Proxy Statement for the
1993 Annual Meeting of Stockholders Part IV
PAYCO AMERICAN CORPORATION
1994 FORM 10-K TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to avote of Security Holders
PART II
Item 5. Market For the Registrant's Common Equity and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on
Accounting and Fianncial Disclosure
PART III
Item 10. Directors and Executive officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Reltionships and Related Transactions
Item 14. Exhibits, Fiancial Statement Schedules and Reprots on
Form 8-K
Signatures
<PAGE>
PART I
ITEM 1 DESCRIPTION OF BUSINESS
The Registrant, Payco American Corporation, was incorporated August 7, 1969 as
a Delaware Corporation and was reincorporated in Wisconsin on June 28, 1993.
The Registrant and its subsidiaries (hereafter referred to as the "Company")
are engaged in the accounts receivable management and collection business.
The Company is regulated by the Fair Debt Collection Practice Act and the
Telephone Consumer Protection Act which are enforced by the Federal Trade
Commission, and by various state regulatory commissions. Through its network
of more than 40 offices across the United States, and Puerto Rico, the Company
provides a full range of account receivable management services which includes
the following: third-party debt collection services for clients in the credit
card, education, energy, health care, retail and telecommunications industries
as well as local state and federal government agencies and departments,
commercial (business to business) debt collection, pre-collection programs,
current-account billing programs for health care and student loan clients,
contract management services in which Company personnel work on-site at a
client's location to render expertise in various accounts receivable areas,
from billing to collection, worldwide training and consulting, and
telemarketing services. In addition, as part of its acquisition program, the
Company has purchased, at a discount, a total of 54 portfolios of accounts
receivable of which 11 portfolios were purchased in 1994. The Company is also
majority owner of joint ventures in Mexico City, Mexico and Tokyo, Japan that
provide receivable management services.
The Company does business under several trade names or product trade styles
which are as follows:
Payco American Corporation, PAYCO
National Account Systems, NAS
Payco-General American Credits
University Accounting Service, UAS
Retail Merchants Collection Service
National Collex
National Business Division
Creditors Protective Association
IMC Credit Services
IMPACT
FM Services Corporation
FM Services of Arizona
Missouri Medical Collection Inc.
Hospital & Physician Services
Herring Financial Services, Inc.
Central Patient Billing Inc.
Asset Recovery and Management Corp.
Jennifer Loomis & Associates Inc., JLA
AdvantagePlus, CircPlus, PayPlus
Medical Accounting Services, MAS
CheckBack
Select, CVS
Pay Tech, Inc.
Paystar
Federal Collection Bureau, S.A. DE C.V.
Professional Recoveries Inc.
Furst and Furst (F&F)
Continental Credit Adjustors (CCA)
The Company maintains offices in the following metropolitan
areas:
Phoenix and Tucson, Arizona
Los Angeles and Pleasanton, California
Denver, Colorado
Miami, Orlando, Fort Myers, Jacksonville
and Lakeland, Florida
Atlanta, Georgia
Chicago, Illinois
Indianapolis, Indiana
<PAGE>
Newport, Kentucky
Augusta, Maine
Baltimore, Maryland
Boston, Massachusetts
Detroit, Michigan
Minneapolis, Minnesota
Springfield, Missouri
Las Vegas, Nevada
Edison an Rochelle New Jersey
Yonkers, New York
Middleburg Heights, Dublin and Springfield, Ohio
Oklahoma City, Oklahoma
Portland, Oregon
Philadelphia and Pittsburgh, Pennsylvania
Dallas and Houston, Texas
Herndon and Richmond, Virginia
Seattle, Washington
Brookfield, Wisconsin
Mexico City, Mexico
San Juan, Puerto Rico
The volume of accounts received by the Company for collection during the year
ended December 31, 1994 was approximately $3.2 billion. Accounts received for
collection in 1993 totalled approximately $3.5 billion.
The Company receives accounts from a wide range of clients including the
federal government, student loan guarantors, hospitals, universities,
utilities, oil companies and retail and bank credit card providers. American
Express Co., contributed approximately 9% of the Company's operating revenue
in 1994, 10% in 1993 and 9% in 1992.
Collections on the accounts received are made through solicitation of payment
through the mail and more importantly through direct telephone contact with
consumers. All accounts received for collection are assigned a work standard,
which is based on various criteria, including, contractual agreement to work
accounts in a certain manner, dollar balances of the account, age of the
account, etc. To aid the Company in monitoring these work standards as well
as to increase collector productivity and client service, the Company
developed the Payco Automated Collection System (PACS[registered trademark]).
PACS[registered trademark] is a computer-based collection system that
substantially automates the collection process. The Company began in 1994 the
purchase and customization of its "World-class Integrated Network" (WIN).
This new technologically advanced accounts receivable management system is
expected to completely replace PACS[registered trademark] in all
existing location by the end of 1996. During the fourth quarter of 1994 WIN
was installed at the Company's Lakeland, Florida office. The Company
estimates that the investment in software purchases and customization and
computer hardware will be approximately $15 million for the WIN project. The
Company also expects to invest approximately $4.0 million over the next two
years, in order to upgrade its automated student loan billing system.
The Company devotes significant and continuous efforts, through training of
personnel and monitoring of compliance with the Fair Debt Collection Practices
Act in order to provide ethical, innovative, high quality accounts receivable
management services which meet client needs and comply with the law. In
addition to traditional collection services, the Company provides service in
the area of student loan billing, letter program, hospital billing, including
interstate Medicaid billing, telemarketing, management and training seminars
and in-house projects and also provides temporary employees to the health care
market. The Company also engages in the purchase of discounted accounts
receivable portfolios through its subsidiary Asset Recovery & Management Corp.
As of December 31, 1994 the Company had purchased 54 portfolios at a total
cost of approximately $ 51.6 million. The primary source of purchased
accounts receivables through 1994 was the Federal Deposit Insurance
Corporation and the Resolution Trust Corporation. The availability of these
portfolios in the future, is uncertain. The Company has continued to purse new
markets for purchasing accounts receivable portfolios.
<PAGE>
The Company and its subsidiaries employed 2,751 full-time employees and 572
part-time employees as of December 31, 1994. Of such employees, 232 were
engaged in administration and management, 2,247 in sales and collection, and
the remainder in clerical activities.
The Company is among the largest firms in the accounts receivable management
industry. Intense competition is provided by numerous local, regional and
several national agencies and it is the policy of most large businesses to
utilize the services of several agencies as well as to make their own
collection efforts.
ITEM 2 PROPERTIES
All of the offices listed in Item 1 above are in leased space totaling
approximately 416,000 square feet as of December 31, 1994. The leases for
such offices expire between February 28, 1995 and September 30, 2007 and
provide for aggregate annual rentals for 1994 of approximately $5.4 million.
The Company leases its headquarters facility of approximately 66,000 square
feet for a term of 20 years ending March 31, 2000. Annual rentals under this
lease for 1994 were $710,000 which may escalate at a rate not to exceed 5%
annually. In addition, the Company leases a modern data processing facility
of approximately 37,000 square feet which houses the Company's computer
operations. Annual rentals under this lease for 1994 were $273,000, which may
escalate at a rate not to exceed 5% annually. The Company considers the
office space and other facilities leased by it to be modern and adequate for
the conduct of its business. The Company also owns furniture, computer
equipment, telephone equipment,office equipment and leases various types of
office equipment which are considered adequate for the conduct of its
business.
ITEM 3 LEGAL PROCEEDINGS
The Company is a defendant in various legal proceedings involving claims for
damages which constitute ordinary routine litigation incidental to its
business. The Company has provided for the estimated defense costs and
liability associated with pending litigation through charges to operations.
On March 8, 1995 the Company reached a settlement in its litigation with the
Federal Trade Commission (FTC), which had been pending in federal court in
Wisconsin. In a complaint filed in August, 1993, the FTC alleged that the
Company had violated the Federal Fair Debt Collection Practices Act. The
Company vigorously defended the case, and asserted that any violations of the
Act were contrary to the policy and practice of the Company. The case was
resolved with a Consent Decree, in which the Company did not admit any
liability. The Consent Decree further provides that the Company shall take
additional steps to ensure compliance with the Act, and pay a penalty of
$500,000. The Company had previously established a reserve adequate to cover
the cost of the Consent Decree. The Company further believes that compliance
with provisions of the Consent Decree will not materially effect its financial
condition or ongoing operations.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1994.
<PAGE>
<PAGE>
PART II
-------
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The information about the market for the Company's stock and stock quotations
as required by Item 5 of Form 10-K is included in the SELECTED FINANCIAL DATA
and MARKET FOR COMPANY'S STOCK AND RELATED SECURITY MATTERS sections
of the accompanying Annual Report to Shareholders for 1994 which appears as
Exhibit 13 in this filing, and is incorporated by reference in this
Form 10-K Annual Report.
The Company has no cash dividend paying history.
ITEM 6 SELECTED FINANCIAL DATA
The selected financial data required by Item 6 of Form 10-K is included in
SELECTED FINANCIAL DATA section of the accompanying Annual Report to
Shareholders for 1994, which appears as Exhibit 13 in this filing and is
incorporated by reference in this Form 10-K Annual Report.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
The discussion and analysis required by Item 7 of Form 10-K is included in
MANAGEMENT DISCUSSION AND ANALYSIS of the accompanying Annual Report to
Shareholders for 1994, which appears as Exhibit 13 in this filing and is
incorporated by reference in this Form 10-K Annual Report.
ITEM 8 FINANCIAL STATEMENTS
The following financial statements, related notes thereto, and auditor's
report required by Item 8 of Form 10-K, are included in the accompanying
Annual Report to Shareholders for the years ended December 31, 1994, which
appears as Exhibit 13 in this filing and are hereby incorporated by reference
in this Form 10-K Annual Report:
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements for the Three Years Ended
December 31, 1994:
Income
Shareholders' Investment
Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
--------
ITEM 10
Except for the table of Executive officers below, all other information called
for by Item 10 is hereby incorporated by reference from the Registrant's
definitive Proxy Statement for its Annual Meeting to be held on May 2, 1995
which Proxy Statement will be filed within 120 days after December 31, 1994.
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
---------------------------------
OFFICER HAS SERVED
IN CAPACITY
OFFICER POSITIONS AGE INDICATED SINCE
- ------ ---------- --- -------------
Dennis G. Punches Chairman of the Board 59 January 1990
Neal R. Sparby President, Principal 58 October 1991
Executive Officer
David S. Patterson Executive Vice- 54 October 1991
President
Principal Operating
Officer
William W. Kagel Senior Vice President- 58 August 1969
Production
Alvin W. Keeley Senior Vice President- 57 May 1979
Marketing
James R. Bohmann Treasurer and Senior 48 May 1985
Vice President-Corporate
Development(effective
January 1, 1993)
Patrick E. Carroll Senior Vice President- 52 August 1987
Sales
Susan Mathison Vice President- 46 August 1987
Administration and
Secretary (effective
October, 1991)
Philip C. Colin Vice President- 58 January 1989
Information Systems
John P. Stetzenbach Controller and 39 January 1987
Vice President- Finance
& Principal Financial
Officer, (effective
January 1, 1993)
ITEM 11, 12 and 13.
The information called for by Items 11, 12 and 13 is hereby incorporated by
reference from the Registrant's definitive Proxy statement for its Annual
Meeting to be held on May 2, 1995 which Proxy Statement will be filed within
120 days after December 31, 1994.
<PAGE>
PART IV
-------
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements--The financial statements filed as
part of this Annual Report are listed under Item 8.
(a)(2) Financial Statement Schedules:
All schedules have been omitted because they are not
applicable, not required or information is included in the
Financial Statements or the Notes thereto.
Separate financial statements of the Registrant have been omitted since it is
primarily an operating company and all subsidiaries included in the
Consolidated Financial Statements are majority owned.
(a)(3) Exhibits required to be filed by Item 601 of
Regulation S-K:
EXHIBIT PAGE
REFERENCE NUMBER
- --------- ------
3(a) Articles of Incorporation of New Payco, N/A
Inc. and Agreement and Plan of Merger of
New Payco, Inc. and Payco American Corporation
dated March 26, 1993, which are Exhibits A and B,
respectively, to Registrant's definitive Proxy
Statement for the 1993 Annual Meeting of
Shareholders, are hereby incorporated by reference
to such Proxy Statement.
3(b) By-Laws of New Payco, Inc. which is Exhibit C to N/A
Registrant's definitive Proxy Statement for the
1993 Annual Meeting of Shareholders, is hereby
incorporated by reference to such Proxy Statement.
10(a) Lease agreement between Payco American Corporation N/A
and the Brookfield Investment Company dated
July 12, 1979--Exhibit 1 of Registrant's Form 10-K
for the fiscal year ended December 31, 1979
is hereby incorporated by reference.
<PAGE>
10(b) Lease agreement between Payco American Corporation N/A
and the Percom Investment Company dated August
5, 1983--Exhibit 10(c) of Registrant's Form 10-K
for the fiscal year ended December 31, 1983
is hereby incorporated by reference.
10(c) Purchase Order #92136 of Registrant dated N/A
June 8, 1982, pertaining to the purchase of
software and hardware related to the Payco
Automated Collection System--Exhibit 10(d)
of Registrant's Form 10-K for fiscal year ended
December 31, 1983 is hereby incorporated by
reference.
10(d) Lease agreement between Payco American Corporation N/A
and the Westlake Investment Company dated
March 1, 1985--Exhibit 10(e) of Registrant's
Form 10-K for the fiscal year ended
December 31, 1985 is hereby incorporated
by reference.
10(e) Lease agreement between Payco American Corporation N/A
and the Dublin Investment Company dated July
14, 1986--Exhibit 10(f) of Registrant's Form 10-K
for the fiscal year ended December 31, 1986
is hereby incorporated by reference.
10(f) Lease agreement between Payco American Corporation N/A
and the Hacienda Investment Company dated
October 14, 1986--Exhibit 10(g) of Registrant's
Form 10-K for the fiscal year ended
December 31, 1986 is hereby incorporated
by reference.
10(g) Modification, dated February 17, 1987, of the N/A
lease agreement filed as Exhibit 10(b) between
Payco American Corporation and Percom Investment
Company.--Exhibit 10(h) of Registrant's Form 10-K
for fiscal year ended December 31, 1986 is
hereby incorporated by reference.
10(h) Modification, dated December 30, 1986, of the N/A
lease agreement filed as Exhibit 10(a) between
Payco American Corporation and Brookfield Investment
Company.--Exhibit 10(i) of Registrant; Form 10-K
for fiscal year ended December 31, 1986 is
hereby incorporated by reference.
10(i) 1988 Stock Option Plan of Payco American N/A
Corporation--Incorporated by reference
Exhibit A of Registrant's definitive Proxy
Statement for the 1989 Annual Meeting of
Shareholders.
10(j) 1992 Stock Option Plan of Payco American N/A
Corporation--Incorporated by reference
Exhibit A of Registrant's definitive Proxy
Statement for the 1992 Annual Meeting of
Shareholders.
10(k) Amendment to 1992 Payco American Stock N/A
Option Plan, Incorporated by reference to
Registrant's definitive Proxy Statement
for the 1993 Annual Meeting of Shareholders.
10(l) Modification, dated December 30, 1992 to the N/A
lease agreement filed as Exhibit 10(d)
between Payco American Corporation and Westlake
Investment Company Exhibit 10(l) of Registrant's
Form 10-K for fiscal year ended December 31, 1992
is hereby incorporated by reference.
13 Annual Report to security holders Herewith Attached
21 List of subsidiaries as of December 31, 1994. Herewith Attached
23 Consent of Indenpendent Public Accountants Herewith Attached
27 Financial Data Schedule Herewith Attached
(b)(3) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fourth quarter of the fiscal year ended December 31,
1994.
<PAGE>
SIGNATURES
==========
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Payco American Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATE MARCH 20, 1995 BY NEAL R. SPARBY
------------------ ---------------
Neal R. Sparby, President &
Principal Executive Officer
PAYCO AMERICAN CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By JAMES R. BOHMANN DATE MARCH 20, 1995
------------------------- --------------
James R. Bohmann, Director
By PATRICK E. CARROLL DATE MARCH 20, 1995
------------------------ --------------
Patrick E. Carroll, Director
By WILLIAM W. KAGEL DATE MARCH 20, 1995
------------------------ --------------
William W. Kagel, Director
By ALVIN W. KEELEY DATE MARCH 20, 1995
------------------------ --------------
Alvin W. Keeley, Director
By DAVID S. PATTERSON DATE MARCH 20, 1995
------------------------ --------------
David S. Patterson, Director &
Principal Operating Officer
By DENNIS G. PUNCHES DATE MARCH 20, 1995
------------------------ --------------
Dennis G. Punches
Chairman of the Board
By NEAL R. SPARBY DATE MARCH 20, 1995
------------------------ --------------
Neal R. Sparby, Director &
Principal Executive Officer
By JOHN P. STETZENBACH DATE MARCH 20, 1995
------------------------ --------------
John P. Stetzenbach, Principal
Financial & Accounting Officer
By WILLIAM A. INGLEHART DATE MARCH 20, 1995
------------------------ --------------
William A. Inglehart
Director
By (1) DATE
------------------------ --------------
Raymond J. Larkin
Director
By (1) DATE
------------------------ --------------
Richard G. Miles
Director
By (1) DATE
------------------------ --------------
Bo S. Goranson
Director
By (1) DATE
------------------------ --------------
Dennis Shea
Director
(1) Not available for signature
<PAGE>
Annual Report Cover Description
- -------------------------------
The Annual Report Cover for Payco American Corporation is
herewith described in order to comply with Securities and
Exchange Commission electronic filing requirements.
Black glossy cover with a picture of the world
(approximately 5.5 inches in diameter off center to the right),
revealing primarily the North and South American continents.
The following wording also appears on the front cover of the
Annual Report in yellow or white print.
(top left corner) 1994 ANNUAL REPORT
(bottom left corner) PAYCO (registered trademark)
AMERICAN
C O R P O R A T I O N
The Receivable Management Company
<PAGE>
Annual Report Inside Cover Wording and Description
- --------------------------------------------------
The inside cover of the Annual Report provides the following
statements.
PAYCO AMERICAN CORPORATION
V I S I O N
We will deliver best-in-class receivable management
solutions to markets worldwide while increasing
shareholder worth.
V A L U E S
We will achieve our VISION by upholding these VALUES:
- Exceed customer expectations and build enduring
relationships.
- Practice honesty, openness and respect in our
relationships with fellow employees, customers,
consumers, regulatory bodies and suppliers.
- Provide employees equal opportunity and treatment,
ongoing training, career opportunities, competitive and
performance-based compensation and a modern, safe
work environment.
- Preserve Human Dignity (PHD) in our collection
activities.
- Adhere to all collection and other applicable laws and
regulations--embracing their intent and spirit.
- Evaluate and improve work processes on a continuous basis.
<PAGE>
ABOUT PAYCO AMERICAN CORPORATION
- -----------------------------------------------------------------
Founded in 1959 and headquartered in Brookfield, Wisconsin,
Payco American Corporation, through various subsidiaries,
provides a full range of accounts receivable management services
to credit-granting clients. Payco provides nationwide account
coverage through its network of more than 40 offices across the
United states, and Puerto Rico, and employs more than 3,300
people. Payco also is majority owner of joint ventures in Mexico
City, Mexico and Tokyo, Japan that provide receivable management
services.
Payco's services include: - third-party debt collection
services for clients in the credit card, education, energy,
health care, retail and telecommunications industries as well as
local, state and federal government agencies and departments -
commercial (business to business) debt collection - pre-
collection programs - current-account billing programs for health
care and student loan clients - contract management services in
which Payco personnel work on-site at a client's location to
render expertise in various accounts receivable areas, from
billing to collection - worldwide training and consulting -
telemarketing. In addition, Payco purchases and manages
portfolios of accounts receivable.
The following table is presented in lieu of a bar graph
illustration which appears in the paper copy of the 1994 Annual
Report. This information is presented in this format in
compliance with the Securities and Exchange Commission electronic
filing requirements.
<TABLE>
<CAPTION>
Comparison of Five Year History of Accounts Received for
Collection, Operating Revenue and net Income Per Share
- --------------------------------------------------------------
ACCOUNTS RECEIVED OPERATING
FOR COLLECTION REVENUE NET INCOME
(in Billions of (in Millions PER SHARE
YEAR Dollars) of Dollars) (in Dollars)
- ---- ---------------- ------------ -------------
<S> <C> <C> <C>
1990 2.7 106.3 0.54
1991 3.1 112.5 0.49
1992 3.4 123.6 0.33
1993 3.5 150.8 0.40
1994 3.2 150.7 0.45
</TABLE>
1
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
The following amounts are
presented in thousands of
dollars except per share data. 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31:
Accounts Received for Collection $3,246,000 $3,538,000 $3,378,000 $3,097,000 $2,659,000
Operating Revenue 150,696 150,795 123,585 112,452 106,253
Net Income 4,559 4,001 3,288 4,932 5,421
Net Income Per Share 0.45 0.40 0.33 0.49 0.54
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31:
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets 87,498 79,081 73,232 63,590 58,883
Long-Term Debt 395 447 255 95 180
<FN>
The Company has no cash dividend paying history.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET FOR COMPANY'S STOCK
AND RELATED SECURITY MATTERS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
The Company's stock is traded
principally in the over-the-counter QUARTER ENDED HIGH LOW
market. The number of sharehold- ______________________________________
ers of record on December 31, 1994 March 31,1993 $11.00 $8.13
was 675. June 30,1993 9.25 7.25
September 30, 1993 8.25 6.25
The following table shows the high December 31, 1993 11.50 7.00
and low closing sale prices reported March 31, 1994 12.00 9.00
in the NASDAQ National Market June, 30, 1994 10.00 8.50
System. September 30, 1994 9.50 8.25
December 31,1994 9.50 6.50
</TABLE>
2
<PAGE>
TO OUR SHAREHOLDERS
- -----------------------------------------------------------------
DEAR FELLOW SHAREHOLDER:
Revenue for the year was $150.7 million, compared to $150.8
million in 1993. Due to effective cost controls, earnings per
share increased to $0.45 for 1994, up 12.5% from $0.40 for 1993.
FTC MATTER RESOLVED
On March 8, 1995, the Company reached a settlement in its
litigation with the Federal Trade Commission that had been
pending in federal court in Wisconsin. In a complaint filed in
August 1993, the Federal Trade Commission alleged that the
Company had violated the Federal Fair Debt Collection Practices
Act. The Company vigorously defended the case and asserted that
any violations of the Act were contrary to the policy and
practice of the Company. The case was resolved with a consent
decree in which the Company did not admit any liability. The
consent decree further provides that the Company pay a civil
penalty of $500,000 and take additional steps to ensure
compliance with the Act. The Company had previously established a
reserve adequate to cover the cost of the consent decree. The
Company further believes that compliance with the provisions of
the consent decree will not materially affect its financial
condition or ongoing operations.
STRATEGIES
The Company's Vision is to deliver best-in-class receivable
management solutions to markets worldwide while increasing
shareholder worth. We believe we can and will achieve that Vision
by continuing to pursue four primary strategies. They are:
1. Be #1 with our clients.
2. Improve customer service.
3. Control costs.
4. Pursue acquisitions and new business opportunities.
The Company advanced these strategies in a number of ways in
1994, as outlined below.
WIN
In 1994, Payco signed an agreement with Ontario Systems
Corporation for a new accounts receivable management system
called WIN (World-class Integrated Network).
This agreement represents a major strategic investment for
the Company. We will invest approximately $15 million to
purchase, customize and install WIN in all of our offices. WIN
<PAGE>
<PAGE>
will improve productivity, allow greater flexibility and be easy
to use. It will integrate all receivable management functions and
provide excellent custom reporting capabilities.
In addition, WIN will integrate our services for the health
care industry, thus positioning us for growth in this market.
ADDITIONAL STRATEGIC INITIATIVES
In 1994, Payco:
- initiated a formal, ongoing plan to create a complaint-
free collection environment. As part of this plan, we hired a
Compliance Officer, implemented a new collection process auditing
program, new collector training programs and an internal
awareness campaign.
- initiated a $4 million upgrade of the University
Accounting Service (UAS) student loan billing system. The
upgraded system will dramatically enhance our internal
productivity and allow us to provide a more competitive service.
- converted to a new accounting system, Oracle Financials,
that provides more efficient information processing and greater
capacity.
- invested in new telephone systems at several of our
largest offices. The new systems reduced costs while providing
better communication.
- expanded Total Quality Management (TQM) training. TQM
assists in understanding our clients' needs and in improving our
work processes. These activities will lead to better service to
our clients and lower costs to us. We plan to continue expanding
TQM in 1995.
- reorganized our Sales Department, effective January 1,
1995, along "national" and "local" lines to improve sales
effectiveness and customer service.
- created a national bank card collection center at our
Pleasanton, California office to serve the bank credit card
market. Centralizing our bank card collection operations allows
us to concentrate the resources and expertise required to provide
superior service and results, leading to increased market share.
- won the opportunity to sell Health Care Cost Recovery
(HCCR) services to medical treatment facilities operated by the
United States Department of Veterans Affairs, Department of
Defense, Public Health Service and Indian Health Services.
ACQUISITIONS
Effective January 1, 1995 and February 1, 1995,
respectively, the Company acquired the assets that comprise the
collection businesses of Furst and Furst (F&F) and Continental
Credit Adjustors (CCA). F&F is a leading provider of collection
services to commercial credit grantors throughout the country.
CCA is located in Houston, Texas and serves medical and
3
<PAGE>
retail markets throughout Texas. On a combined basis, these
companies generated more than $8 million in revenue in 1994. We
look forward to the contributions these acquisitions will make to
our Company.
NEW DIRECTOR
In 1994, Bo Goranson, Chairman of Intrum Justitia, the
leading debt collection firm in Europe, joined our Company's
Board of Directors as an outside director. In turn, Payco's
Chairman, Dennis Punches, has joined the Supervisory Board of
Intrum Justitia.
The exchange of board members provides each company with an
opportunity to take advantage of senior management experience in
the receivable management industry. Goranson brings valuable
international experience to Payco's Board at a time when the
Company is expanding into international markets.
STUDENT LOAN AND HEALTH CARE MARKETS
Implementation of the Federal Direct Student Loan Program is
being questioned by Congress. Any delay in the implementation
would benefit the level of student loan account placements. We
continue to monitor both the direct student loan and guaranteed
student loan programs in pursuit of opportunities.
We also continue to closely watch proposed changes in the
health care industry. It is unclear at this time what changes
might be implemented, when they would be implemented, and what
impact, if any, they would have on the Company's business.
CHALLENGES AND OPPORTUNITIES
The environment in which we operate is changing. The market
is increasingly choosing vendors based upon price, thereby
creating downward pressure on fees. At the same time, clients are
demanding more in both quantity and quality of service.
We believe we can effectively deal with these challenges by
continuing to focus on the strategies of being #1 with our
clients, improving customer service and controlling costs.
The Company in 1995 will focus on further improving the
productivity and performance of our collectors by identifying and
sharing "best practices" Companywide.
We estimate our share of accounts placed for collection with
third-party collection agencies in the U.S. to be less than 10
percent. We see ample opportunity to increase market share by
performing at a #1 level for our clients and by selectively
pursuing acquisitions of collection-related businesses. We will
continue to pursue improved productivity and cost reductions.
The bank card and health care industries, as well as our
commercial receivable management services, should provide
excellent near-term growth possibilities. We will continue to
evaluate the accounts receivable management industry seeking
additions to our non-collection businesses.
<PAGE>
We again sincerely thank our clients for their business. We
are grateful to our employees, many of whom are shareholders, for
their efforts in 1994. We thank our Directors for their guidance
and support, and you, our shareholders, for your continued
confidence in the Company.
Very truly yours,
[Photograph of Dennis G. Punches]
/S/DENNIS G. PUNCHES
Dennis G. Punches
Chairman of the Board
[Photograph of Neal R. Sparby]
/S/NEAL R. SPARBY
Neal R. Sparby
President
Chief Executive Officer
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS(in thousands of dollars except share and per share data)
- -----------------------------------------------------------------------------------------------
December 31, 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------
ASSETS LIABILITIES & SHAREHOLDERS'
INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <S> <C> <C>
Cash and Cash Equivalents $10,867 $14,014 Collections Due to Clients $17,794 $18,373
Cash and Cash Equivalents Accounts Payable 5,459 4,620
Held for Clients 17,794 18,373
Notes Payable 6,200 2,000
Obligations under Capital
Accounts Receivable-Trade Leases 77 119
Net of Allowances 15,541 13,279 Accrued Liabilities-
Salaries and Benefits 5,597 5,432
Accounts Receivable- Taxes, Other Than Income 1,101 1,007
Purchased 13,826 8,587 Other 1,698 1,181
Prepaid Expenses 1,054 920 Deferred Revenue 192 238
Accrued Income Taxes 23 -
Deferred Income Taxes 743 818 Accrued Income Taxes - 944
-------- -------- -------- --------
Total Current Assets 59,848 55,991 Total Current Liabilities 38,118 33,914
PROPERTY AND EQUIPMENT: OTHER LONG-TERM LIABILITIES 942 883
Data Processing Equipment 33,105 30,688 DEFERRED INCOME TAXES - 253
Furniture and Equipment 11,334 10,500
Leasehold Improvements 2,998 2,844 LONG-TERM DEBT 334 309
Property Held under
Capital Leases 634 671 OBLIGATIONS UNDER CAPITAL
-------- -------- LEASES 61 138
48,071 44,703
Less-Accumulated COMMITMENTS AND
Depreciation and CONTINGENCIES (Note 10)
Amortization 34,463 31,237
-------- -------- SHAREHOLDERS' INVESTMENT:
Net Property and Equipment 13,608 13,466 Preferred Stock,
<PAGE>
No Par Value-
ACCOUNTS RECEIVABLE- Authorized 500,000 Shares,
PURCHASED 4,164 2,413 None Issued - -
Common Stock,
OTHER LONG-TERM $0.10 Par Value-Authorized
RECEIVABLES 839 485 50,000,000 Shares, Issued
& Outstanding, 10,128,503
NON-COMPETE COVENANTS, NET 2,691 2,833 and 10,075,886 Shares, 1,013 1,008
Respectively
GOODWILL, NET 5,939 3,746 Additional Paid-In Capital 1,586 1,084
DEFERRED INCOME TAXES 287 - Stock Options Issuable 704 1,311
OTHER ASSETS 122 147 Retained Earnings 44,740 40,181
-------- --------
Total Shareholders' Investment 48,043 43,584
-------- -------- -------- --------
$87,498 $79,081 $87,498 $79,081
======== ======== ======== ========
<FN>
=================================================================================================
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars except share and per share data)
- -------------------------------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUE $150,696 $150,795 $123,585
OPERATING EXPENSES:
Salaries and Benefits 82,786 82,007 66,715
Telephone 10,846 10,160 8,163
Postage and Supplies 8,962 9,206 8,123
Occupancy Costs 8,381 8,741 7,609
Data Processing Equipment 7,353 7,938 6,014
Amortization of Acquisition Costs 12,543 13,874 10,947
Other Operating Costs 11,360 11,362 10,203
------- ------- -------
Total Operating Expenses 142,231 143,288 117,774
------- ------- -------
Income from Operations 8,465 7,507 5,811
------- ------- -------
OTHER INCOME, Primarily from
Short-Term Investments 68 28 65
INTEREST EXPENSE 148 268 94
------- ------- -------
Income before Income Taxes 8,385 7,267 5,782
PROVISION FOR INCOME TAXES 3,826 3,266 2,494
------- ------- -------
NET INCOME $ 4,559 $ 4,001 $ 3,288
======= ======= =======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 10,080,889 10,075,886 10,075,886
NET INCOME PER SHARE $0.45 $0.40 $0.33
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(In thousands of dollars except share data)
_______________________________________________________________________________________________________
For the three years ended December 31,1994
_______________________________________________________________________________________________________
Additional ESOP Stock
Common Stock Paid-In Deferred Options Retained
Shares Amount Capital Compensation Issuable Earnings
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
BALANCE
December 31, 1991 10,075,886 $1,008 $1,084 $(95) $1,311 $32,892
Net Income - - - - - 3,288
ESOP
Deferred Compensation - - - 95 - -
____________________________________________________________________________________
BALANCE
December 31, 1992 10,075,886 1,008 1,084 - 1,311 36,180
Net Income - - - - - 4,001
____________________________________________________________________________________
BALANCE
December 31, 1993 10,075,886 1,008 1,084 - 1,311 40,181
Net Income - - - - - 4,559
Exercise
of Stock Options 52,617 5 502 - (607) -
____________________________________________________________________________________
BALANCE
December 31, 1994 10,128,503 $1,013 $1,586 $ - $704 $44,740
<FN>
====================================================================================
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)
- --------------------------------------------------------------------------------
For the years ended December 31, 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income $ 4,559 $ 4,001 $ 3,288
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Amortization of Acquisition Costs 12,543 13,874 10,947
Depreciation and Amortization 4,681 4,777 4,306
Benefit of Deferred Income Taxes (465) (363) (452)
Changes in Assets and Liabilities:
Accounts Receivable (2,262) (761) (1,598)
Prepaid Expenses (119) 444 (388)
Accounts Payable 839 (838) 1,636
Accrued Liabilities 835 1,442 1,193
Deferred Revenue (46) 34 89
Accrued Income Taxes (967) 302 (295)
-------- -------- --------
Net Cash Provided by Operations 19,598 22,912 18,726
-------- -------- --------
CASH FLOWS (USED IN) INVESTING ACTIVITIES:
Capital Expenditures, Net of Retirements (4,755) (2,598) (4,762)
Purchase of Accounts Receivable (17,309) (15,152) (10,671)
Purchase of Other Businesses (4,333) - (6,215)
Long-Term Notes Receivable (354) (485) -
-------- -------- --------
Net Cash Used In Investing Activities (26,751) (18,235) (21,648)
-------- -------- --------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net Proceeds (Payments) Under Line of Credit 4,200 (1,600) 3,600
Payments Under Capital Lease Obligations (119) (245) (74)
Other Long-Term Debt 25 309 -
Proceeds from Exercise of Stock Options (100) - -
-------- -------- --------
Net Cash Provided by (Used In) Financing Activities 4,006 (1,536) 3,526
-------- -------- --------
<PAGE>
Net Increase (Decrease) in Cash and
Cash Equivalents (3,147) 3,141 604
Cash and Cash Equivalents at
Beginning of Year 14,014 10,873 10,269
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 10,867 $ 14,014 $ 10,873
=================================================== ======== ======== ========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash Paid For:
Income Taxes, Net of Refunds $ 5,374 $ 3,327 $ 3,242
Interest 216 266 83
<FN>
================================================================================
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Payco American Corporation and its subsidiaries (the Company) are
engaged in the accounts receivable management business. The
Company's primary business is the collection of current and past
due accounts receivable through its national network of
collection offices. The Company also provides telemarketing and
billing services, in addition to specialized accounts receivable
management consulting services. The Company also purchases and
manages discounted receivable portfolios.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
Payco American Corporation and its majority-owned subsidiaries.
All significant intercompany transactions and balances have been
eliminated in consolidation.
REVENUE RECOGNITION
Collection revenue is recognized at a commission rate when a
collection payment is received. Revenue is recognized on
purchased accounts receivable portfolios when payments are
collected. Revenue on all other services provided by the Company
is recognized as the service is performed.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance and
repairs are expensed as incurred. When assets are retired or
otherwise disposed of in the normal course of business, the cost
and related accumulated depreciation are removed from the
accounts, and resulting gains or losses are included in the
Consolidated Statements of Income. The Company provides for
depreciation and amortization by the straight-line method over
the estimated useful lives as follows:
Data Processing Equipment 3-8 years
Telephone Equipment 3-7 years
Office Furniture & Other 3-10 years
Leasehold improvements are amortized over the term of the related
leases.
<PAGE>
GOODWILL AND ACQUISITION COSTS
Goodwill represents the excess of purchase price over the fair
market value of net assets of acquired businesses. Goodwill is
amortized on a straight-line basis principally over 20 years.
Accumulated amortization at December 31, 1994 and 1993 totalled
$1.2 million and $861,000, respectively.
Non-compete covenants are recorded at cost and are amortized on a
straight-line basis over the term of the covenant, typically
three to seven years. Accumulated amortization at December 31,
1994 and 1993 totalled $5.5 million and $4.8 million,
respectively.
ACCOUNTS RECEIVABLE-PURCHASED
Purchased accounts receivable portfolios are recorded at cost and
amortized, based upon a percentage of expected collections, over
the life of the individual portfolios. The amortization rates
are reviewed periodically and adjusted, based on the projected
overall collection performance of each portfolio. Although the
contractual lives of certain purchased receivables is 20 years,
management expects to recover its portfolio costs over four
years.
CASH AND CASH EQUIVALENTS
Short-term investments, which consist of certificates of deposit,
government instruments and commercial paper, are included in Cash
and Cash Equivalents on the Consolidated Balance Sheets. Short-
term investments at December 31, 1994 and 1993 were $1.8 million.
The Company considers all highly liquid investments with an
original maturity of less than 90 days to be cash equivalents for
cash flow purposes.
INCOME TAXES
During the first quarter of 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under the provisions of the new Statement,
deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. The
impact of adopting this new standard was not material.
Prior to 1993, the Company followed the liability method of
accounting for income taxes in accordance with SFAS No. 96.
RECLASSIFICATION
Certain 1993 and 1992 amounts have been reclassified to conform
to presentation for 1994.
9
<PAGE>
<TABLE>
<CAPTION>
2. INCOME TAXES
_________________________________________________________________
The provision for income taxes for the three years ended December
31, 1994 consists of the following:
- -----------------------------------------------------------------
(Dollars in thousands) 1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $3,336 $2,795 $2,297
State and foreign 955 834 649
------ ------ ------
Total current 4,291 3,629 2,946
Total deferred ( 465) ( 363) ( 452)
------ ------ ------
Total provision $3,826 $3,266 $2,494
</TABLE>
=================================================================
<TABLE>
<CAPTION>
The following is a reconciliation of the statutory Federal rate
to the effective tax rate applicable to the Company's
consolidated income before taxes:
- ----------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State and foreign taxes
Net of federal benefit 7.6 6.9 5.9
Other 4.1 4.0 3.2
----- ----- -----
Effective tax rate 45.7% 44.9% 43.1%
====== ===== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The components of the net deferred tax asset (liability) as of
December 31, 1994 and 1993 were as follows:
- -----------------------------------------------------------------
(Dollars in thousands) 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Related to intangible assets $ 847 $ 473
Deferred compensation 914 1,195
Accruals and reserves not currently
deductible for tax purposes 743 763
------- -------
Total deferred tax assets 2,504 2,431
Deferred tax liabilities:
Related to fixed assets (1,407) ( 1,632)
Other ( 67) ( 234)
------ ------
Total deferred tax liabilities (1,474) ( 1,866)
-------- -------
Net deferred tax asset $ 1,030 $ 565
</TABLE>
=================================================================
<TABLE>
<CAPTION>
The net deferred tax asset is classified in the December 31, 1994
and 1993 Consolidated Balance Sheets as follows:
- -----------------------------------------------------------------
(Dollars in thousands) 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Non-current deferred income tax
asset (liability) $ 287 $( 253)
Current deferred income tax asset 743 818
------ ------
Net deferred tax asset $1,030 $ 565
</TABLE>
=================================================================
3. EMPLOYEE BENEFIT PLANS
The Company maintained a separate profit sharing/401(k) savings
plan and an Employee Stock Ownership Plan (ESOP) during 1993 and
1992. The discretionary contributions to the profit sharing
plan/401(k) savings plan that were charged to operations for the
years ended December 31, 1993 and 1992 were $200,000 and $50,000,
respectively. Effective January 1, 1994, the Company amended the
profit sharing/401(k) plan to add a provision to allow for
partial matching of employee contributions by the Company. All
<PAGE>
employees who participate in the savings feature are eligible to
participate in the employer matching contributions. For each
dollar an employee contributes up to 4% of compensation, the
Company contributes 20%. During 1994 the charge to operations for
matching contributions was $163,000. No discretionary
contribution was made to the ESOP during 1993 or 1994. The
discretionary contribution to the ESOP that was charged to
operations in 1992 was $99,000. All ESOP shares have been
allocated to participant accounts.
Effective January 1, 1995, the ESOP was merged into the profit
sharing/401(k) savings plan. In conjunction with the merger of
the plans, the new combined plan, the PAYCO AMERICAN RETIREMENT
PLAN, was amended to provide the employee with the ability to
continue to purchase the Company's common stock through the
401(k) savings feature of the plan.
The Company does not provide post-retirement health or life
insurance benefits or significant post-employment benefits to
employees.
4. ACCOUNTS RECEIVABLE PURCHASED
In November, 1990, the Company began purchasing discounted
accounts receivable portfolios. Revenue recognized on cash
collected from these portfolios totalled $13.1 million, $14.3
million and $11.6 million during 1994, 1993 and 1992,
respectively. Amortization costs associated with these revenues
totalled $10.3 million, $11.8 million and $8.9 million during
1994, 1993, and 1992, respectively.
5. OPERATING REVENUE
The Company has one client that contributed approximately 9% of
its total operating revenue in 1994, 10% in 1993 and 9% in 1992.
6. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are reported net of an allowance for
doubtful accounts. The allowance at December 31, 1994 and 1993
was $555,000 and $416,000, respectively.
10
Trade accounts receivable consist of amounts due from clients
which can be summarized into "Group Concentrations of Credit
Risk" as defined in the SFAS No. 105. As of December 31, 1994,
35% and 17% of the Company's accounts receivable were from
clients in the health care and education industries,
respectively, as compared to 34% and 29% as of December 31, 1993.
<PAGE>
7. PURCHASE OF OTHER BUSINESSES
During 1992 the Company purchased certain assets of three
companies at a total cost of $6.2 million.
On February 1, 1994 the Company purchased certain assets of
Indiana Mutual Credit Association, Inc. (IMC) at a cost of $3
million, plus certain payments contingent on performance. IMC
provides accounts receivable management services primarily to the
medical marketplace through its office in Indianapolis, Indiana.
Effective January 1, 1995 the Company purchased certain assets of
Furst and Furst (F&F). F&F provides accounts receivable
management services to commercial clients through offices in
Illinois, New Jersey and California. Effective February 1, 1995
the Company purchased the collection business of Continental
Credit Adjustors (CCA). CCA is located in Houston, Texas and
provides primarily medical and retail collection services to
Texas clients. A total of $4.9 million was paid for these
companies via cash and a note payable. In addition, the purchase
contracts require certain future payments contingent on
performance.
The pro forma impact on the results of operations of the Company,
had the acquisitions been made as of the beginning of the year
purchased, would not have been material. All activity subsequent
to the acquisitions has been reported in the consolidated
financial statements of the Company.
8. STOCK PLANS
The Board of Directors has approved various stock option plans
for certain employees and officers. The stock options have been
granted at market prices. Under a stock option plan established
in 1988, the Board of Directors granted options to purchase up to
500,000 shares of common stock. The award of such options was
dependent upon meeting certain performance goals over the three
year period ended December 31, 1991. Under the 1988 plan,
options to purchase 306,367 shares of common stock have been
awarded to management, and 193,633 options have been forfeited.
Under a 1992 stock option plan, 443,500 options have been granted
of which 11,500 options have been forfeited.
The Company also maintains a common stock equivalent plan. Under
this plan certain management employees were granted, at the
discretion of the Board of Directors, units that are valued at
the market price of the Company's common stock. Employees vest
in these units over the sixth to tenth year of service subsequent
to the award. The units are to be paid out at the Board's
discretion in common stock or cash. Participants can make an
<PAGE>
election to defer receipt of the value of the units until
termination of their employment. In the absence of such
election, participants are paid 20% of the value on the 6th
through 10th anniversary dates of the grant. As of December 31,
1994 there were 158,332 outstanding units awarded under the plan.
The Board has no plans to award any additional units under this
plan. On May 19, 1992 participants representing 160,831 units in
the common stock equivalent plan agreed to cap the value of units
awarded to a maximum value of $12.63 per unit. In exchange for
this agreement the Board of Directors granted each participant an
equivalent number of options to purchase shares of the Company's
common stock at the then current market price of $12.63. This
agreement was amended on May 20, 1993, to cap the value of units
awarded to a maximum value of $7.50 per unit in exchange for a
reduction of their option price to $7.50. Of the 160,831 options
granted under this agreement, 10,046 and 3,213 were forfeited in
1993 and 1994, respectively.
The Company realized compensation expense related to the common
stock equivalent plan of $53,000, $(209,000), and $18,000 for the
years ended 1994, 1993 and 1992 respectively. The related
accrual is included in Other Long-Term Liabilities.
<TABLE>
<CAPTION>
The following table summarizes stock option activity for each of
the three years in the period ended December 31, 1994 and options
outstanding as of December 31, 1994.
=================================================================
Stock option activity for the three years ended December 31, 1994
was as follows:
Options Exercised
Options Awarded Option Price or Forfeited
--------------- ------------ ---------------
<S> <C> <C> <C>
1992 604,331 $7.50-12.25 -
1993 - - 17,046
1994 - - 96,477
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1994, options outstanding were as follows:
Options Outstanding Exercise Price Expiration
------------------- -------------- ----------
<S> <C> <C>
82,219 $ 4.38 1995-1996
139,500 $12.25 1999
292,500 $ 7.81 1999
147,572 $ 7.50 2002
<FN>
The impact of these options on earnings per share is immaterial.
=================================================================
</TABLE>
11
<PAGE>
9. LINE OF CREDIT
On December 14, 1994 the Company and its bank agreed to increase
the Company's line of credit from $15 million to $25 million.
All loans made to the Company by the bank under the line of
credit are payable upon demand and are evidenced by a single
promissory note. The Company is not required to maintain
compensating balances, and there are no restrictive covenants
under the agreement. As of December 31, 1994, the Company had
$18.8 million available under the line of credit. Funds borrowed
were used primarily to finance the purchase of accounts
receivable portfolios during the fourth quarter. The weighted
average interest rate at December 31, 1994 was 6.98%. The maximum
interest rate at December 31, 1994 was 7.40%.
The Company borrows funds under its line of credit as needed and
repays the notes as funds become available from operations. The
following table provides supplemental information for the three
years ended December 31, 1994.
<TABLE>
<CAPTION>
=================================================================
Weighted
Weighted Average
Average Interest
Interest Amounts Rate
Year Ended Ending Rate at Outstanding During
the
December 31, Balance Year End Maximum Average(1) Year(2)
- ------------ ------- ----------- ------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
1992 $3,600 4.75% $5,400 $1,405 4.89%
1993 $2,000 4.31% $8,000 $4,557 4.46%
1994 $6,200 6.98% $6,200 $2,176 5.80%
<FN>
(1) Average amounts outstanding during the year were
computed on daily outstanding balances.
(2) Weighted average interest rates during the year were
computed by dividing actual interest expense by the
average amounts outstanding.
=================================================================
</TABLE>
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
LEASES- The Company is obligated under operating leases for
certain office space and equipment for various periods through
2007. The Company is also obligated under capital leases for
certain furniture, telephone and computer equipment.
Certain of the leases for office space require the Company to
pay, as additional rent, any allocable increases in real estate
taxes and other expenses over a specified base rent. Total
rental expense was $5.4 million, $5.7 million, and $4.8 million
for the three years ended December 31, 1994, 1993, and 1992.
These operating and capital leases are due in approximate amounts
as follows:
<TABLE>
<CAPTION>
=================================================================
Year ended (Dollars in thousands)
December 31, Operating Capital
- --------------- --------- -------
<S> <C> <C>
1995 $6,416 $ 89
1996 5,169 48
1997 2,981 16
1998 1,991 -
1999 1,967 -
2000 and subsequent 7,127 -
_____
Total Capital Lease Payments 153
Less Interest ( 15)
Present Value -------
of Capital Lease Payments $ 138
=======
</TABLE>
=================================================================
The Company leases its corporate headquarters, data processing
center and the office space for three of its collection
operations from partnerships in which certain officers and
directors of the Company are the principal partners. The terms
of the leases provided for aggregate annual payments of
approximately $2.2 million, $2.1 million and $2.1 million for the
three years ended December 31, 1994, 1993 and 1992. Such lease
amounts are subject to an escalation adjustment, not to exceed 5%
annually. All operating and maintenance costs associated with
these buildings are paid by the Company. In the opinion of
management, the terms of the leases are at least as favorable as
could have been obtained in arm's-length negotiations with an
unaffiliated lessor.
<PAGE>
OTHER CONTINGENCIES - At December 31, 1994, the Company was
involved in a number of legal proceedings and claims that were
routine to the nature of the collection business. The Company
has provided for the estimated uninsured amounts and costs of
defense against these pending suits through charges to operations
and believes that reserves it has established for ultimate
settlement are adequate at December 31, 1994.
On August 2, 1993 a complaint was filed by the Department of
Justice on behalf of the Federal Trade Commission against the
Company based on alleged violations of the Federal Fair Debt
Collection Practices Act. The Company has established a reserve
which it believes is adequate to cover the costs associated with
this pending litigation.
Reliance National Insurance Co. Ltd. (RNIC), a wholly owned
subsidiary in Bermuda, provides professional liability insurance
coverage for the Company. As of December 31, 1994, RNIC has
recorded reserves totaling $1.3 million for future reported and
unreported claims.
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS OF PAYCO AMERICAN CORPORATION:
We have audited the accompanying consolidated balance sheets of
Payco American Corporation (a Wisconsin corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' investment, and
cash flows for each of the three years in the period ended
December 31, 1994. 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Payco American Corporation and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
-------------------
Milwaukee, Wisconsin, ARTHUR ANDERSEN LLP
February 10, 1995.
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS
- -----------------------------------------------------------------
RESULTS OF OPERATIONS
Accounts received for collection for the year ended December 31,
1994 were $3.2 billion, or an 8% decrease when compared to the
year ended December 31, 1993. Included in the 1993 total
accounts received for collection were approximately $190 million
<PAGE>
from certain government programs, compared to $164 million in
1994. Also, accounts received for collection for 1993 included
approximately $73 million from a student loan client that ceased
operations in late 1993.
<TABLE>
<CAPTION>
Operating revenue for the three years ended December 31, 1994 is
summarized below.
===============================================================
Revenue (in thousands) 1994 1993 1992
- ---------------------- -------- ------ --------
<S> <C> <C> <C>
Collection $114,399 $115,062 $ 92,837
Accounts Receivable-Purchased 13,128 14,272 11,551
Student Loan Billing 6,876 6,717 6,629
Medicaid Billing 5,717 6,348 4,787
Telemarketing 6,665 5,551 5,066
Other 3,911 2,845 2,715
-------- -------- ---------
Total Operating Revenue $150,696 $150,795 $123,585
</TABLE>
===============================================================
1994 vs. 1993
Collection revenue decreased to $114.4 million during 1994
compared to $115.1 million in 1993. The overall decline in
collection revenue was primarily due to declining contingency
rates brought on by competition and a decrease in collection
revenue from a student loan client which ceased operations in
1993. However, collection revenue benefited as a result of the
IMC acquisition, the foreign operations and expanded services to
new and existing clients.
Revenue from purchased accounts receivable portfolios decreased
8.0% to $13.1 million in 1994, compared to $14.3 million in 1993.
During 1994 the Company purchased eleven accounts receivable
portfolios at a cost of $17.3 million, of which $6.1 million were
purchased during the fourth quarter of 1994.
Billing revenue, including Student Loan, Medicaid and Other
billing revenue, increased 3.7% from $15.9 million in 1993 to
$16.5 million in 1994. Included in Other billing revenue are
customized billing services for the health care industry and
letter programs for retail and health care clients.
Telemarketing revenue increased 20.1%, from $5.6 million in 1993
to $6.7 million in 1994, primarily as a result of sales to new
clients and increased business volume from existing clients.
<PAGE>
The Federal Government has approved a direct student loan
program, the four year implementation of which began in July,
1994. The initial phase-in of this program had little impact on
the Company. The Company will continue to
13
actively monitor the change and seek opportunities in the
industry.
The debate over the nation's health care system continues to be
monitored by the Company. It remains unclear at this time what
changes will be implemented, when they will be implemented and
what their eventual impact will be, if any, on the Company's
business.
Operating expenses decreased $1.1 million, to $142.2 million in
1994, compared to $143.3 million in 1993. Factors which have
impacted the overall decrease in operating expense are the
following.
Salaries and benefits, the Company's largest expense, increased
by 0.9% between years to $82.8 million. During 1994 compensation
expense included $2.3 million due to the acquisition of IMC and
foreign operations. Exclusive of the effect of the IMC
acquisition and foreign operations, salaries and benefits
decreased 1.8%, primarily as a result of staff reductions which
occurred during the second half of 1993. The Company does not
provide post-retirement health or life insurance benefits or
significant post-employment benefits to employees.
Telephone expense increased 6.8% to $10.8 million in 1994.
Telephone expense includes expense associated with dedicated
communication datalines, local and long distance service and
maintenance on telephone equipment. Local and long distance
service expense increased by $832,000, primarily because of
acquisitions, increased telemarketing business, and a change in
the long distance calling patterns. During the first half of 1994
the Company upgraded its telephone systems in certain locations
through the purchase of technologically advanced equipment at a
cost of approximately $1.2 million. During the third quarter of
1994 the Company renegotiated its contracts for long distance
service and benefited from lower long distance rates beginning in
the fourth quarter.
Postage and supplies expense decreased 2.7% between years to $9.0
million. Postage and supplies expense historically fluctuates
with the number of accounts received for collection and with the
U.S. postal rate. Effective January 1, 1995 the Company's cost
per letter will increase approximately 10% due to the U.S. postal
rate increase.
<PAGE>
Occupancy costs, which includes expense for leased office space,
depreciation of furniture and fixtures, amortization of leasehold
improvements and rental and repair of office equipment, decreased
4.1% between 1994 and 1993 to $8.4 million. Expense related to
leased office space declined $496,000 between years as a result
of planned office space reduction and renegotiated leases at
certain locations. Increased space rental due to the acquisition
of IMC, to foreign operations and to expansion in other locations
resulted in additional rental costs of $215,000 during 1994.
Data processing equipment costs decreased 7.4% to $7.4 million in
1994. The decrease in data processing equipment costs is
attributable primarily to savings realized under the renegotiated
maintenance contract with the Company's major computer vendor
which took effect in January 1994. Depreciation expense on
computer equipment decreased $270,000 during 1994 when compared
to 1993. During the last half of 1994 the Company began
investment in hardware and software to support the Company's
"World-class Integrated Network" (WIN). WIN is the Company's new
receivable management system which will replace PACS (Payco
Automated Collection System). During the third quarter of 1994
the Company installed WIN in its Lakeland, Florida location. The
Company will invest approximately $15 million for the purchase
and customization of WIN in all offices. The conversion of
additional offices is scheduled to begin in mid-1995 and will
continue through 1996. The Company also plans to invest
approximately $4.0 million over the next two years in order to
upgrade its automated student loan billing system.
Amortization of acquisition costs was $12.5 million in 1994,
compared to $13.9 million in 1993. This expense category
includes the amortization of non-compete agreements, debtor
account inventory, goodwill and purchased accounts receivable
portfolios. Amortization expense associated with purchased
accounts receivable portfolios decreased by $1.5 million between
years to $10.3 million. This decrease is due to the decreased
collection activity on the portfolios.
Other operating costs were level between years at $11.4 million.
Other operating costs includes, among other categories, business
insurance, legal expenses, skip tracing costs and travel and
entertainment costs.
In August 1993 the Company invested in joint ventures with
operations in Mexico and Japan. In July of 1994 the Company
initiated operations in Puerto Rico. The investment in these
entities provides the Company with the opportunities to extend
accounts receivable management services and technology to these
countries. The Consolidated Statements of Income include the
<PAGE>
Company's interest in the operating results of these new
entities. While there is significant opportunity in these
countries, these investments did not have a significant impact on
overall earnings in 1994.
Effective January 1, 1995 the Company purchased certain assets of
Furst and Furst, one of the nations' leading commercial debt
collection firms. On February 1, 1995 the Company bought the
collection business of Continental Credit Adjustors (CCA). CCA
is located in Houston, Texas and serves medical and retail
markets in the state of Texas. On a combined basis, these
companies generated over $8.0 million in revenue in 1994. Key
management and sales personnel remain with the Company.
Other income increased by $40,000, while interest expense
14
decreased by $120,000 when compared to the year ended December
31, 1993. Other income consists primarily of interest income.
The decrease in interest expense is due primarily to the decrease
in average borrowings under the Company's line of credit, which
were used primarily to finance accounts receivable purchases.
The effective tax rate increased between years from 44.9% to
45.7%. The effective tax rate fluctuates as a result of levels
of pre-tax income, nondeductible expense and changes in the mix
of state income tax rates.
Earnings per share in 1994 was $0.45 compared to $0.40 in 1993.
The increase in earnings per share is primarily attributable to
improved operating margin in 1994 as a result of cost control
measures taken by the Company.
1993 vs. 1992
Collection revenue for the year ended December 31, 1993 increased
23.9% over the same periods of the prior year. Collection
revenue attributable to the 1992 acquisition of businesses was
$20.1 million during 1993, compared to $6.7 million in 1992, of
which $15.5 million in 1993 and $3.5 million in 1992 was
attributable to FM Services Corporation (FMSC). FMSC was acquired
October 1, 1992. Excluding the effect of acquisitions,
collection revenue increased by $8.8 million, or 10.3%.
Collection revenue was favorably impacted by increased
collections in the student loan and utility industries and
increased collection-related project revenue.
<PAGE>
Revenue from purchased accounts receivable portfolios increased
23.6% The increase in revenue in this category was primarily a
result of an increase in purchasing activity and the collection
on the accounts purchased. In 1993 the Company purchased nine
portfolios at a total cost of $15.1 million.
Billing revenue, including student loan, Medicaid and other
billing revenue increased in 1993 to $15.9 million compared to
1992. The Medicaid billing operations of the Company alone
experienced a 32.6% increase in revenue between 1992 and 1993 to
$6.3 million. The increased revenue in the billing categories
was due primarily to expansion of the Company's client base
through increased sales.
Telemarketing revenue increased 9.6% between 1992 and 1993 to
$5.6 million, primarily as a result of the acquisition of FMSC.
Exclusive of the effect of FMSC, telemarketing revenue declined
by $2.2 million. The decline in political campaign business
negatively impacted telemarketing revenue in 1993 compared to
1992.
Salaries and benefits increased by 22.9% between years to $82.0
million. Employment increases associated with acquired
businesses accounted for $9.9 million of the increase in salaries
and benefits. Certain line and staff positions were eliminated
during 1993, having a favorable impact on the Company's operating
margin during the second half of 1993.
Telephone expense increased 24.5% to $10.2 million in 1993.
Local and long distance service expense increased by $2.1
million, primarily because of acquisitions and the more intense
utilization of predictive dialing equipment.
Postage and supplies expense increased 13.3% between years to
$9.2 million. Exclusive of 1992 acquisitions of businesses,
postage and supplies expense increased 7%. Postage and supplies
expense historically fluctuate with the level of accounts
received for collection.
Occupancy costs increased 14.9% between 1993 and 1992 to $8.7
million. Excluding the acquisition activity, occupancy costs
increased by 4.7%. During 1993 the Company consolidated certain
offices into other existing locations and renegotiated certain
other leases to reduce square footage and future monthly rent
expense.
<PAGE>
Data processing equipment costs increased by $1.9 million to $7.9
million or 32%, in 1993 compared to 1992. Acquisitions in 1992
accounted for $1.5 million of this increase. Exclusive of the
effect of businesses purchased in 1992, data processing equipment
costs increased 7%. Also contributing to the increase was
depreciation expense associated with purchases of predictive
dialing equipment.
Amortization of acquisition cost was $13.9 million in 1993,
compared to $10.9 million in 1992. Amortization expense
associated with purchased accounts receivable portfolios
increased by $2.9 million between years to $11.8 million. This
increase is due to the increase in the volume of accounts
purchased and corresponding collections.
Other operating costs increased by $1.2 million, or 11.4% over
1992, to $11.4 million. Other operating expenses, exclusive of
1992 acquisitions, increased 4.7%. The Company experienced
increases in business and legal expense of $294,000, due
primarily to ordinary and routine litigation incidental to its
business. Skip tracing costs increased by $232,000, while
certain sales costs, including travel and entertainment and fees
paid for preferred vendor status with various organizations,
increased $581,000 when compared to 1992.
Other income decreased by $37,000, while interest expense
increased by $174,000 when compared to the year ended December
31, 1992. Other income consists primarily of interest income.
The decrease in interest income was due to a decline in interest
rates. The increase in interest expense was due primarily to the
increase in borrowings under the Company's line of credit.
15
The effective tax rate increased between years from 43.1% to
44.9%. The effective tax rate fluctuated as a result of levels
of pre-tax income, nondeductible expenses and changes in the mix
of state income tax rates.
Earnings per share in 1993 was $0.40, compared to $0.33 in 1992.
The increase in earnings per share was primarily attributable to
increased revenues and improved operating margins in the second
half of 1993 as a result of cost control measures taken by the
Company.
<PAGE>
EFFECT OF INFLATION
Compensation and benefits, the Company's largest expense
category, is sensitive to fluctuations in the rate of inflation.
LIQUIDITY AND CAPITAL RESOURCES
On December 14, 1994 the Company and its bank agreed to increase
the Company's line of credit from $15 million to $25 million.
All loans made to the Company by the bank under the line of
credit are payable upon demand and are evidenced by a single
promissory note. The Company is not required to maintain
compensating balances, and there are no restrictive covenants
under the agreement. As of December 31, 1994, the Company had
$18.8 million available under the line of credit. Funds borrowed
during 1994 were used primarily to finance the purchase of
accounts receivable. The weighted average interest rate at
December 31, 1994 was 6.98% The maximum rate of interest at
December 31, 1994 was 7.40%. The Company considers the line of
credit to be its primary liquidity resource.
The Company expects to continue to make investments in property
and equipment in order to support the long-term growth of the
Company. During 1994, the Company began implementation and
installation of WIN, a technologically advanced collection system
which will replace PACS. The total capital expenditure
associated with this project is estimated to be approximately $15
million and will occur over the next two years. The Company also
expects to invest approximately $4.0 million over the next two
years in order to upgrade its automated student loan billing
system. Such expenditures are necessary in order for the Company
to enhance its ability to provide superior collection results,
respond to changing market requirements and to reduce the overall
cost of the data processing operation in future years. In
addition, the Company will continue to actively pursue the
accounts receivable purchase program and the acquisition of
certain collection and related businesses.
While there are a variety of factors that could have an impact on
the actual amount of future capital expenditures, the Company
anticipates that total capital expenditures for 1995 will be
approximately $10 million.
The Company's formal commitments consist primarily of operating
leases for office space and certain capitalized leases. For
additional information refer to Note 10 of the Notes to
Consolidated Financial Statements.
<PAGE>
The Company has reviewed its liquidity in relation to planned
capital expenditures, growth in working capital to support
increased business, and its acquisition program. To the extent
internal funding may not be sufficient to meet its future cash
requirements, the Company plans to utilize its line of credit,
which it considers to be adequate to meet its needs.
16
[Description of Back Cover and Back Inside Cover]
- -----------------------------------------------
Back Cover: Centered at bottom of cover:
PAYCO(registered trademark) AMERICAN
C O R P O R A T I O N
The Receivable Management Company
Corporate Headquarters
180 N. Executive Drive
Brookfield, Wisconsin 53005
Telephone (414) 784-9035
Inside of Back Cover:
- --------------------
Left side of back cover:
- -----------------------
METROPOLITAN LOCATIONS
[Listed down the left side of the back cover are the following
metropolitan locations]: Atlanta, GA, Augusta, ME, Baltimore, MD,
Boston, MA, Brookfield, WI, Chicago, IL, Cincinnati, OH,
Cleveland, OH, Columbus, OH, Dallas, TX, Denver, CO, Detroit, MI,
Edison, NJ, Fort Myers, FL, Herndon, VA, Houston, TX,
Indianapolis, IN, Jacksonville, FL, Lakeland, FL, Las Vegas, NV,
Los Angeles, CA, Miami, FL, Minneapolis, MN, Oklahoma City, OK,
Orlando, FL, Philadelphia, PA, Phoenix, AZ, Pittsburgh, PA,
Pleasanton, CA, Portland, OR, Richmond, VA, Rochelle Park, NJ,
San Juan, PR, Seattle, WA, Springfield, OH, Springfield, MO,
Tucson, AZ, Washington<DC, Yonkers, NY
INTERNATIONAL LOCATIONS
Mexico City, Mexico, Tokyo, Japan
<PAGE>
[Center to right side of inside back cover]:
- ------------------------------------------
OFFICERS AND DIRECTORS
DENNIS G. PUNCHES WILLIAM W. KAGEL
Chairman of the Board Senior Vice President-
Production
NEAL R. SPARBY Director
President
Chief Operating Officer ALVIN W. KEELEY
Director Senior Vice president- Marketing
Director
DAVID S. PATTERSON
Executive Vice President SUSAN MATHISON
Chief Operating Officer Vice President-Administation
Director Secretary
JAMES R BOHMANN BO S. GORANSON
Senior Vice President- Director
Corporate Development
Treasurer WILLIAM A. INGLEHART
Director Director
PATRICK E. CARROLL RAYMOND J. LARKIN
Senior Vice President-Sales Director
Director
RICHARD G. MILES
PHILIP C. COLIN Director
Vice President-Information
Services DENNIS SHEA
Director
- -----------------------------------------
CRAMER, MULTHAUF & HAMMES
Legal Counsel
ARTHUR ANDERSEN LLP
Auditors
FIRST BANK-MILWAUKEE
Transfer Agent
A copy of the Company's 10-K Annual Report, filed with the
Securities and Exchange Commission, is available to stockholders
by written request to:
<PAGE>
SUSAN MATHISON
PAYCO AMERICAN CORPORATION
180 N. EXECUTIVE DRIVE
BROOKFIELD, WISCONSIN 53005
[RECYCLED PAPER SYMBOL] Printed on recycled paper
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated February 10, 1995,
included in this Form 10-K into the previously filed Payco
American Corporation Retirement Plan and Trust Registration
Statement No. 33-88132.
ARTHUR ANDERSEN LLP
-------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Pursuant to Item 601(c)(2)(i) of Regulations S-K, the Registrant hereby
disclaims Exhibit 27.
</LEGEND>
<CIK> 0000076741
<NAME> ART 5 FDS 1994 10-K
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 28,661
<SECURITIES> 0
<RECEIVABLES> 16096
<ALLOWANCES> 555
<INVENTORY> 0
<CURRENT-ASSETS> 59,848
<PP&E> 48,071
<DEPRECIATION> 34,463
<TOTAL-ASSETS> 87,498
<CURRENT-LIABILITIES> 38,118
<BONDS> 0
<COMMON> 1,013
0
0
<OTHER-SE> 47,030
<TOTAL-LIABILITY-AND-EQUITY> 87,498
<SALES> 150,696
<TOTAL-REVENUES> 150,696
<CGS> 0
<TOTAL-COSTS> 142,231
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 8,385
<INCOME-TAX> 3,826
<INCOME-CONTINUING> 4,559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,559
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0
</TABLE>
LIST OF SUBSIDIARIES AS OF DECEMBER 31, 1994
EXHIBIT 21
Payco American Corporation has the following subsidiaries, all of which are
wholly owned and included in the consolidated financial statements of the
Company:
STATE OF
INCORPORATION
-------------
Payco-General American Credits, Inc. Delaware
National Account Systems, Inc. Delaware
University Accounting Service, Inc. Wisconsin
Reliance National Insurance company LTD. Bermuda
Retail Merchants Collection Service, Inc. Oklahoma
FM Services Corporation Arizona
Jennifer Loomis & Associates Inc. Arizona
Asset Recovery & Management Corp. Wisconsin
Payco American International Corporation Wisconsin
Professional Recoveries Inc. Wisconsin
Indiana Mutual Credit Association, Inc. Indiana
Payco Investment, Inc. Wisconsin
Payco Recovery Corporation Wisconsin
Payco American Corporation has a majority interest in the following
subsidiaries, which are included in the consolidated financial statements of
the Company:
Pay Tech, Inc. Wisconsin
Federal Collection Bureau, S.A. DE C.V. Mexico
Telecommunications Group, LLC Wisconsin
