<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1996
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 0-17920
BRITE VOICE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KANSAS 48-0986248
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7309 E. 21ST STREET NORTH
WICHITA, KANSAS 67206
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(316) 652-6500
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 [ ]
As of November 5, 1996, 11,786,355 shares of the registrant's common stock were
outstanding.
TOTAL NUMBER OF PAGES: 16
<PAGE>
BRITE VOICE SYSTEMS, INC.
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income - Three and Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1996 and 1995 . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
September 30, December 31,
1996 1995
------------- -----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . $ 4,163 $ 3,405
Accounts receivable, less allowance for doubtful
accounts: 1996-$668, 1995-$481 . . . . . . . . . 35,149 28,690
Inventories. . . . . . . . . . . . . . . . . . . . 11,692 10,510
Prepaid expenses and other . . . . . . . . . . . . 3,352 2,715
---------- ---------
Total Current Assets . . . . . . . . . . . . . 54,356 45,320
---------- ---------
PROPERTY AND EQUIPMENT
Land and building. . . . . . . . . . . . . . . . . 3,074 3,074
Furniture and equipment. . . . . . . . . . . . . . 20,798 19,978
---------- ---------
23,872 23,052
Less accumulated depreciation. . . . . . . . . . . (11,068) (11,476)
---------- ---------
Total Property and Equipment . . . . . . . . . 12,804 11,576
---------- ---------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . 1,845 1,936
---------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $ 69,005 $ 58,832
---------- ---------
---------- ---------
See Notes to Financial Statements
-3-
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
CURRENT LIABILITIES
Advances from affiliates . . . . . . . . . . . . . $ -- $ 551
Accounts payable . . . . . . . . . . . . . . . . . 8,102 9,503
Accrued salaries and wages . . . . . . . . . . . . 2,855 1,726
Other accrued expenses . . . . . . . . . . . . . . 1,802 1,785
Deferred revenue . . . . . . . . . . . . . . . . . 2,488 1,364
Customer deposits. . . . . . . . . . . . . . . . . 2,061 1,565
Income taxes payable . . . . . . . . . . . . . . . 1,174 1,892
------- -------
Total Current Liabilities. . . . . . . . . . . 18,482 18,386
------- -------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized
10,000,000 shares; none issued and
outstanding. . . . . . . . . . . . . . . . . . -- --
Common stock, no par value; authorized
30,000,000 shares; issued 11,784,668
shares - 1996; 11,489,325 shares - 1995. . . . 37,851 34,377
Retained earnings. . . . . . . . . . . . . . . . . 12,912 6,383
Foreign currency translation adjustment. . . . . . (240) (314)
------- -------
Total Stockholders' Equity . . . . . . . . . . 50,523 40,446
------- -------
$69,005 $58,832
------- -------
------- -------
See Notes to Financial Statements
-4-
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
--------- -------- --------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
System sales . . . . . . . . . . . . . . . . . . . $ 14,553 $ 12,659 $ 44,357 $ 36,400
Services revenues. . . . . . . . . . . . . . . . . 10,803 11,474 35,514 32,767
--------- --------- --------- ---------
25,356 24,133 79,871 69,167
--------- --------- --------- ---------
COSTS AND EXPENSES
Cost of Sales:
System . . . . . . . . . . . . . . . . . . . . 6,093 5,864 19,210 15,344
Services . . . . . . . . . . . . . . . . . . . 5,746 5,771 17,660 16,718
Research and engineering . . . . . . . . . . . . . 2,947 2,284 8,271 5,917
Selling, general and
administrative . . . . . . . . . . . . . . . . 9,262 6,945 25,834 20,657
S-Corporation distributions. . . . . . . . . . . . -- 1,040 -- 4,303
Merger costs & other . . . . . . . . . . . . . . . -- 4,327 -- 4,327
--------- --------- --------- ---------
24,048 26,231 70,975 67,266
--------- --------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS . . . . . . . . . . . . . . . . . . . . 1,308 (2,098) 8,896 1,901
OTHER INCOME (EXPENSE), NET. . . . . . . . . . . . . (44) 49 136 334
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES . . . . . . . . . . . . . 1,264 (2,049) 9,032 2,235
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . 320 191 2,496 1,331
--------- --------- --------- ---------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . $ 944 $ (2,240) $ 6,536 $ 904
--------- --------- --------- ---------
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE. . . . . . . . . . . . . . $ .08 $ (.19) $ .54 $ .08
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE SHARES
OUTSTANDING. . . . . . . . . . . . . . . . . . . . 12,166 12,005 12,125 11,940
</TABLE>
See Notes to Financial Statements
-5-
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
-------- -------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,536 $ 904
Items not requiring cash:
Depreciation and amortization. . . . . . . . . . . . . . . . . 2,375 2,463
Non-qualified stock option compensation. . . . . . . . . . . . -- 4
Changes in:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . (6,459) (7,244)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . (1,184) (3,392)
Accounts payable and accrued expenses. . . . . . . . . . . . . 388 2,014
Other current assets and liabilities . . . . . . . . . . . . . (376) 2,216
------- -------
Net cash provided by (used in) operating activities. . . . . . 1,280 (3,035)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment . . . . . . . . . . . . . . . . (4,085) (3,909)
Proceeds from sales of property and equipment. . . . . . . . . . . 323 44
Proceeds from maturity of temporary investments. . . . . . . . . . -- 8,580
Purchase of temporary investments. . . . . . . . . . . . . . . . . -- (3,379)
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . 251 766
Net cash received from business acquisitions . . . . . . . . . . . -- 44
------- -------
Net cash provided by (used in) investing activities. . . . . . (3,511) 2,146
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . 3,473 498
Principal payments on debt . . . . . . . . . . . . . . . . . . . . (551) (556)
------- -------
Net cash provided by (used in) financing activities. . . . . . 2,922 (58)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . . . . 67 37
------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . 758 (910)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,405 5,776
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . $ 4,163 $ 4,866
------- -------
------- -------
</TABLE>
See Notes to Financial Statements
-6-
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The 1996 and 1995 financial statements (except for the December 31, 1995
Balance Sheet) included herein have been prepared by the Company, without audit,
and reflect all adjustments (consisting only of those of a normal recurring
nature) which are, in the opinion of management, necessary to fairly present the
financial position, results of operations and cash flows for the interim
periods. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures are adequate to make the information presented not misleading.
The financial statements include various estimates, including estimated
reserves for obsolete inventory, uncollectible accounts, warranty reserves and
costs to complete certain projects. These estimates have been established by
management using historical operations data. There can be no assurance that
these estimates will not change as additional information becomes available. It
is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto for the year ended December
31, 1995, contained in the Company's Annual Report to Stockholders and Form 10-K
filed with the Securities and Exchange Commission.
2. Inventories consist of the following (in thousands):
September 30, December 31,
1996 1995
------------- ------------
Purchased parts. . . . $ 4,200 $ 3,044
Work in progress . . . 4,344 4,146
Finished goods . . . . 3,148 3,320
---------- ----------
$ 11,692 $ 10,510
---------- ----------
---------- ----------
3. Effective August 9, 1995, the Company consummated its mergers (the
"Mergers") with each of Telecom Services Limited (U.S.), Inc., Telecom Services
Limited (West), Inc., TSL Software Services, Inc., and TSL Management Group,
Inc. (collectively the "TSL Companies" or "TSL"). Pursuant to the Agreement and
Plan of Reorganization and Merger dated May 24, 1995 (the "Merger Agreement"),
the TSL Companies were merged into the Company in a transaction involving the
issuance of 3,331,000 shares of the Company's common stock in conversion of all
outstanding shares of common stock of the TSL Companies.
The Mergers have been accounted for as a pooling of interests.
Accordingly, the consolidated financial statements have been retroactively
restated to include the results of operations, financial positions and cash
flows of the TSL Companies for all periods prior to consummation of the Mergers.
Revenues and net income prior to the combination are as follows (in thousands):
-7-
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
--------------------------- ------------------------
Net Net
Income Income
Revenues (Loss) Revenues (Loss)
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Brite Voice Systems, Inc. . . . $ 20,156 $ (3,081) $ 57,883 $ 148
TSL Companies . . . . . . . . . 3,977 841 11,284 756
----------- ----------- ----------- ---------
$ 24,133 $ (2,240) $ 69,167 $ 904
----------- ----------- ----------- ---------
----------- ----------- ----------- ---------
</TABLE>
4. On March 4, 1996, the Company completed a public stock offering whereby
1,377,401 shares were sold by certain stockholders. The Company granted the
Underwriter an option to purchase up to 206,610 shares, solely to cover over-
allotments. The underwriter's option was exercised, resulting in proceeds to
the Company of $2,761,176, net of expenses.
5. Income taxes paid during the nine months ended September 30, 1996 and 1995
were $3,651,000 and $772,000, respectively.
Interest paid during the nine months ended September 30, 1996 and 1995 was
$62,000 and $21,000, respectively.
-8-
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BASIS OF PRESENTATION
Effective August 9, 1995, the TSL Companies were merged into the Company in
a transaction accounted for as a pooling of interests. TSL provides a broad
array of services and products which assist clients in managing various aspects
of their telecommunications requirements. The acquisition resulted in the
issuance of 3,331,000 shares of Brite's common stock in exchange for all of the
outstanding common stock of the TSL Companies. The financial information
presented herein has been restated to include the accounts and operations of the
TSL Companies for the quarter and nine months ended September 30, 1995.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Total revenues for the three months ended September 30, 1996 increased
$1,223,000 to $25,356,000, or 5.1%, compared to the same period in 1995,
primarily as a result of sales of general purpose voice response systems to new
customers, and equipment and software upgrades and system expansions to existing
customers.
Domestic system sales, consisting of general purpose voice response systems
and electronic publishing systems delivered to customers in the United States
and Canada, increased $1,630,000 to $7,931,000, or 25.9%.
General purpose voice response system sales increased $1,108,000 to
$6,868,000, or 19.2%, principally due to expansion of business from existing
customers and several large system sales in the banking and health care
industries.
Electronic publishing system sales increased $522,000 to $1,063,000, or
96.5%. The Company attributes this increase to new system sales to a
distributor in the health care industry. Previous sales have been to newspapers
and Yellow Pages publishers. The Company believes it holds a significant
majority of the market share in these segments and that this market is
saturated. Many of the Company's customers have slowed their deployment of
electronic publishing systems in the last year, as interest in on-line systems
and services has decreased demand for such systems. The Company believes that
sales of these systems in future periods will become increasingly more difficult
to obtain in the domestic market.
International system sales increased $263,000 to $6,621,000, or 4.1%.
System sales by the Company's foreign subsidiaries increased $551,000 to
$5,857,000, or 10.4%. System sales by the Company's United States-based sales
force decreased $288,000 to $764,000, or 27.4%. International system sales sold
by the United States-based sales force usually include several large orders.
During the quarter ended September 30, 1996, the system sales were generally
smaller than in prior periods. The Company believes the international markets
are behind the United
-9-
<PAGE>
States markets in terms of acceptance of voice response technology, and that
prospects for growth in these markets will exceed those in the United States
during the next several years.
The Company's system sales are dependent upon continued orders by existing
customers, orders from new customers and development of new products. There can
be no assurance that the Company will be able to increase or maintain its market
share in the future.
Services revenues decreased $671,000 to $10,803,000, or 5.8%. Managed
services revenues, consisting of telecommunications management services,
Consumer Tips and 900 Voice Personals, decreased $1,228,000 to $6,131,000, or
16.7%, due primarily to the absence of voice personals product revenues and the
decline of billing verification revenues. The Company discontinued the Person-
to-Person product at the end of the third quarter in 1995 and sold the 900 Voice
Personals product in July 1996. Billing verification revenues have usually
included very large claims. Billing verification claims were generally smaller
in the quarter ended September 30, 1996. With voice personals product revenues
excluded from both 1995 and 1996 results, service revenues would have increased
11.4% for the three months ended September 30, 1996. Service contract and repair
revenues increased $298,000 to $3,142,000, or 10.5%, due primarily to the
Company's emphasis on expanding its base of customers who subscribe to quarterly
or annual maintenance contracts. Information services revenues increased
$259,000 to $1,530,000, or 20.4%, due primarily to the introduction of new audio
products and the expansion of the customer base.
Cost of system sales increased $230,000 to $6,093,000, or 3.9%, and
decreased as a percentage of system sales from 46.3% to 41.9%. The increase in
actual costs was due to an increase in the volume of systems shipped during the
quarter. The decrease as a percentage of system sales is principally due to the
change in the mix of hardware and software sales in the three months ended
September 30, 1996. Software upgrades typically have much higher margins than
system sales.
Cost of services revenues decreased $26,000 to $5,746,000, or 0.5%, while
increasing as a percentage of services revenues from 50.3% to 53.2%. The
decrease in actual costs was due to the absence of voice personals product
revenues as discussed above. The increase as a percentage of revenues was
primarily due to the decline in billing verification revenues, which typically
have much higher margins than other services revenues.
Research and engineering expenses increased $663,000 to $2,947,000, or
29.0%, due to the addition of research engineers and related expenses to support
the Company's continued commitment to product development. As a percentage of
revenues, these expenses increased to 11.6% of total revenues in the three
months ended September 30, 1996, compared to 9.5% in 1995. The Company believes
that it must continue to increase spending on research and engineering
activities in absolute terms in order to continue to remain competitive in the
voice response market. Such expenses could continue to increase as a percentage
of revenues as well.
Selling, general and administrative expenses increased $2,317,000 to
$9,262,000, or 33.4%, primarily due to the expansion of the Company's
international sales and marketing efforts. Significant staff were added during
the latter part of 1995 and during the nine months ended September 30, 1996 to
support new sales
-10-
<PAGE>
opportunities in both the domestic and international markets. As a percentage
of total revenues, selling, general and administrative expenses increased to
36.5% from 28.8% in 1995.
S corporation distributions represent payments made to the former TSL
Companies' stockholders. Under the terms of the Merger Agreement, the TSL
Companies were allowed to distribute estimated tax basis income through the
closing date of the Mergers. The distributions totaled $1,040,000 in the three
months ended September 30, 1995. These payments were not made in 1996 and will
not recur in future periods.
Other income (expense) decreased by $93,000 to $(44,000), principally due
to the $119,000 loss recognized on the sale of the 900 Voice Personals product.
The provision for income taxes was 25.3% for the three months ended
September 30, 1996. The variance from the United States statutory rate was due
primarily to the utilization of net operating loss and credit carryforwards
acquired through the Company's 1993 merger with Perception Technology
Corporation, and a reduction in the Company's deferred tax valuation allowance.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Total revenues increased $10,704,000 to $79,871,000, or 15.5%, compared to
the same period in 1995. This improvement was due to increases in international
system sales and domestic and international services revenues.
General purpose voice response system sales increased $883,000 to
$18,619,000, or 5.0%, principally due to the expansion of business from existing
customers and several large system sales in the banking, health care and utility
industries. Electronic publishing system sales increased $474,000 to
$3,258,000, or 17.0%, due primarily to new system sales to a distributor in the
health care industry.
International system sales increased $6,599,000 to $22,479,000, or 41.6%.
System sales by the Company's foreign subsidiaries increased $6,480,000 to
$18,520,000, or 53.8%, primarily due to system expansion by the Company's two
largest customers located in the United Kingdom and Spain. System sales by the
Company's United States-based sales force increased $119,000 to $3,959,000, or
3.1%. The revenue growth in this area was impacted by the decline in large
orders received in the third quarter of 1996.
Services revenues increased $2,747,000 to $35,514,000, or 8.4%. Service
contract and repair revenues increased $1,486,000 to $9,759,000, or 18.0%, due
primarily to the Company's emphasis on expanding its base of customers who
subscribe to quarterly or annual maintenance contracts. Managed services
revenues increased $748,000 to $21,472,000, or 3.6%. The rate of increase
declined due to the absence of voice personals product revenues. The Company
discontinued the Person-to-Person product at the end of the third quarter in
1995 and sold the 900 Voice Personals product in July 1996. With voice
personals product revenues excluded from both 1995 and 1996 results, service
revenues would have increased 22.1% for the nine months ended September 30,
1996. Information services and other service revenues increased $513,000 to
$4,283,000, or 13.6%, due to the introduction of new audio products and the
expansion of the customer base.
-11-
<PAGE>
Cost of system sales increased $3,867,000 to $19,210,000, or 25.2%, and
increased as a percentage of system sales from 42.2% to 43.3%. The increase in
actual costs was due to an increase in the volume of systems shipped by the
Company. The increase as a percentage of system sales is principally due to a
change in the mix between international sales and domestic sales. International
sales are dominated by sales of voice messaging equipment, which typically have
a lower margin than the Company's voice response products; therefore, as
international sales increase as a percentage of total equipment sales, the
Company expects overall margins to decrease.
Cost of services revenues increased $941,000 to $17,660,000, or 5.6%, while
decreasing as a percentage of services revenues from 51.0% to 49.7%. The
increase in actual costs was due primarily to the increase in variable costs,
such as telephone transmission costs and revenue sharing payments to customers.
The decrease as a percentage of revenues was primarily due to the inclusion of
costs during the nine months ended September 30, 1995 associated with the voice
personals service, Person-to-Person, canceled during the last half of 1995.
These services had a much lower margin than other services provided.
Research and engineering expenses increased $2,354,000 to $8,271,000, or
39.8%, due to the addition of research engineers and related expenses to support
the Company's continued commitment to product development. As a percentage of
revenues, these expenses increased to 10.4% of total revenues in the nine months
ended September 30, 1996, compared to 8.6% in 1995. The Company believes that
it must continue to increase spending on research and engineering activities in
absolute terms in order to continue to remain competitive in the voice response
market. Such expenses could increase as a percentage of revenues as well.
Selling, general and administrative expenses increased $5,177,000 to
$25,834,000, or 25.1%, primarily due to the expansion of the Company's
international sales and marketing efforts. Significant staff were added during
the latter part of 1995 and during the nine months ended September 30, 1996 to
support new sales opportunities in both the domestic and international markets.
As a percentage of total revenues, selling, general and administrative expenses
increased to 32.3% in the nine months ended September 30, 1996, compared to
29.9% in 1995.
Other income decreased by $198,000 to $136,000, or 59.3%, primarily due to
lower average cash and cash equivalent balances during the nine month period
versus the same period in 1995, and the $119,000 loss recognized on the sale of
the 900 Voice Personals product in July 1996. The Company also utilized its
line of credit during the nine months ended September 30, 1996, thereby
incurring interest expense that offset a portion of the interest income earned
during the period.
The provision for income taxes was 27.6% for the nine months ended
September 30, 1996. The variance in the effective income tax rate from the
United States statutory rate was due primarily to the utilization of net
operating loss and credit carryforwards acquired through the Company's 1993
merger with Perception Technology Corporation, and a reduction in the Company's
deferred tax valuation allowance.
-12-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had a current ratio of 2.9 to 1, and
working capital of $35,595,000, compared to a current ratio of 2.5 to 1 and
working capital of $26,934,000 at December 31, 1995. Cash and cash equivalents
and temporary investments increased from $3,405,000 at December 31, 1995 to
$4,163,000 at September 30, 1996, primarily due to the issuance of common stock
during the first quarter of 1996 and the generation of net income for the nine
months ended September 30, 1996, partially offset by increases in accounts
receivable and inventories and purchases of property and equipment.
Accounts receivable increased by $6,459,000 and inventory increased by
$1,182,000 during the nine months ended September 30, 1996. The increase in
accounts receivable is principally due to an increase in international sales
during the nine months ended September 30, 1996, which typically have longer
payment cycles and greater difficulty in accounts receivable collection. The
increase in inventory occurred primarily as a result of the anticipation of
sales increases by the Company's foreign subsidiaries. These foreign
subsidiaries require longer lead times for certain components which are included
in customer systems. The increase in inventory was funded by working capital
on hand and operating income generated in the nine months ended September 30,
1996.
Property and equipment purchased during the nine months ended September 30,
1996 was approximately $4,085,000. Although the Company expects capital
expenditures to continue at approximately this level for the remainder of the
year, there are no significant capital commitments. The Company believes that
working capital on hand, the availability of the line of credit, and funds
provided from future operations will be sufficient to fund all of the Company's
known short-term and long-term capital requirements.
The Company regularly invests excess funds in short-term securities, such
as bankers' acceptances, government obligations and variable rate demand notes,
having maturities up to one year. Management believes that restricting
investments to these types of securities maximizes financial flexibility and
minimizes exposure to interest rate and market risks. The Company utilizes
these investments as a source of liquidity, to the extent that cash requirements
exceed short-term cash receipts.
The Company maintains a $5,000,000 line of credit that is used from time to
time to fund short-term cash requirements. There were no borrowings outstanding
under the line as of September 30, 1996.
INFLATION
Inflation has not had a material impact on the Company's results of
operations. Because of the competitive nature of the computer industry, the
costs of parts used in the Company's products have remained relatively stable.
However, should inflation rise to higher levels, the Company believes that such
inflationary costs would be passed on to customers by both the Company and its
competition.
-13-
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements involve
risks and uncertainty, including, without limitation, general economic
conditions in the United States and in foreign markets, competition and product
development. Although the Company believes the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements contained in the report will prove to be
accurate.
-14-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
-15-
<PAGE>
SIGNATURE
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.
Dated: November 11, 1996
BRITE VOICE SYSTEMS, INC.
/s/ Glenn A. Etherington
-----------------------------------------
Glenn A. Etherington
Chief Financial Officer
Duly Authorized Officer on behalf of the Registrant
-16-
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<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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<INVENTORY> 11,692
<CURRENT-ASSETS> 54,356
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<CURRENT-LIABILITIES> 18,482
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0
0
<COMMON> 37,851
<OTHER-SE> 12,672
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