<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K/A
AMENDMENT NO. 1
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1995 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 48-0986258
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
7309 E. 21ST STREET NORTH
WICHITA, KANSAS 67206-1083
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (316) 652-6500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
----------------
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table contains certain selected financial data which should be
read in conjunction with the Company's financial statements and notes thereto
and with Management's Discussion and Analysis of Financial Condition and Results
of Operations. The selected financial data as of and for the years ended
December 31, 1995, 1994 and 1993 have been derived from the financial statements
of the Company audited by Arthur Andersen LLP, independent public accountants,
except for the balance sheet data as of December 31, 1993. The balance sheet
data as of December 31, 1993 has been restated by the Company to reflect the TSL
merger, and are derived from the financial statements of the Company audited by
Arthur Andersen LLP and the financial statements of the TSL Companies as of and
for the years ended December 31, 1994 and 1993, audited by Ernst & Young LLP,
independent accountants. The selected financial data as of and for the years
ended December 31, 1992 and 1991 have been restated by the Company to reflect
the TSL Merger, and are derived from the financial statements of the Company
audited by Baird, Kurtz & Dobson, independent certified public accountants, and
the financial statements of the TSL Companies. The balance sheets as of December
31, 1992 and 1991 and the income statement for the year ended December 31, 1991
of the TSL Companies from which the selected financial data is derived are
unaudited.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 97,078 $ 79,940 $ 56,412 $ 42,265 $ 41,846
Operating income (loss).............................. 5,708 6,005 (1,606) (3,951) 2,017
Net income (loss).................................... 3,950 4,425 (1,303) (2,423) 2,339
Net income (loss) per share.......................... .33 .38 (.12) (.22) .21
Weighted average shares used in computation.......... 11,922 11,526 11,068 10,865 11,031
BALANCE SHEET DATA:
Working capital...................................... $ 26,934 $ 23,772 $ 20,918 $ 22,522 $ 25,483
Total assets......................................... 58,832 51,888 41,328 39,745 43,043
Long term debt....................................... -- -- 1,040 1,055 1,255
Stockholders' equity................................. 40,446 35,547 29,655 30,669 33,551
</TABLE>
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... 22
Consolidated Balance Sheets as of December 31, 1995 and 1994............................................... 23
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993................. 25
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1995, 1994 and
1993...................................................................................................... 26
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993................. 27
Notes to Consolidated Financial Statements................................................................. 28
Supplemental Schedules:
Schedule II -- Valuation and Qualifying Accounts........................................................... 37
</TABLE>
Note: Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is included in
the Financial Statements or notes thereto.
21
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Brite Voice Systems, Inc.
Wichita, Kansas
We have audited the accompanying consolidated balance sheets of Brite Voice
Systems, Inc., (a Kansas corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. 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 did not audit the financial statements of the
TSL Companies, companies acquired during 1995 in a transaction accounted for as
a pooling of interests, as discussed in Note 2. Such statements are included in
the consolidated financial statements of the Company and reflect total assets
and total revenues of 7 percent and 17 percent in 1994, respectively, and 20
percent of total revenues in 1993, of the consolidated totals. These statements
were audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to amounts included for the TSL Companies, is
based solely upon the report of the other auditors.
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 of 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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion based on our audit and the report of other auditors, the
financial statements referred to above present fairly in all material respects,
the financial position of Brite Voice Systems, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 2, 1996
22
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................................................ $ 3,405 $ 5,776
Temporary investments (at cost which approximates market) (Note 1)....................... -- 5,201
Accounts receivable, less allowance for doubtful accounts: 1995 -- $481; 1994 -- $844.... 28,690 18,846
Inventories (Note 4)..................................................................... 10,510 8,263
Prepaid expenses and other............................................................... 2,715 1,889
--------- ---------
Total Current Assets................................................................... 45,320 39,975
--------- ---------
PROPERTY AND EQUIPMENT
Land and building........................................................................ 3,074 3,074
Furniture and equipment.................................................................. 19,978 15,161
--------- ---------
23,052 18,235
Less accumulated depreciation............................................................ (11,476) (8,906)
--------- ---------
11,576 9,329
--------- ---------
OTHER ASSETS (Note 3)...................................................................... 1,936 2,584
--------- ---------
TOTAL ASSETS........................................................................... $ 58,832 $ 51,888
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements
23
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable......................................................................... $ 9,503 $ 6,492
Accrued salaries and wages............................................................... 1,726 1,941
Other accrued expenses................................................................... 1,785 2,926
Deferred revenue......................................................................... 1,364 1,287
Customer deposits........................................................................ 1,565 775
Advances from affiliates (Note 7)........................................................ 551 2,782
Income taxes payable..................................................................... 1,892 --
--------- ---------
Total Current Liabilities.............................................................. 18,386 16,203
--------- ---------
DEFERRED INCOME TAXES (Note 6)............................................................. -- 138
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)............................................. -- --
STOCKHOLDERS' EQUITY (Note 8)
Preferred stock, no par value; authorized 10,000,000 shares; none outstanding............ -- --
Common stock, no par value; authorized 30,000,000 shares; outstanding 1995 -11,489,325
shares; 1994 - 11,254,798 shares 34,377 33,404
Retained earnings........................................................................ 6,383 2,358
Foreign currency translation adjustment.................................................. (314) (215)
--------- ---------
Total Stockholders' Equity............................................................... 40,446 35,547
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................. $ 58,832 $ 51,888
--------- ---------
--------- ---------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
System sales................................................................. $ 52,697 $ 43,126 $ 32,119
Service revenues............................................................. 44,381 36,814 24,293
--------- --------- ---------
97,078 79,940 56,412
--------- --------- ---------
COSTS AND EXPENSES
Cost of sales:
System..................................................................... 22,809 19,158 14,677
Service.................................................................... 22,249 19,343 11,987
Research and engineering..................................................... 8,520 6,436 5,863
Selling, general and administrative.......................................... 29,162 22,009 18,599
S corporation distributions (Note 2)......................................... 4,303 6,989 2,292
Merger and other costs (Notes 2 and 3)....................................... 4,327 -- 4,600
--------- --------- ---------
91,370 73,935 58,018
--------- --------- ---------
INCOME (LOSS) FROM OPERATIONS.................................................. 5,708 6,005 (1,606)
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income.............................................................. 265 556 463
Interest expense............................................................. (18) (121) (124)
Other........................................................................ 205 152 72
--------- --------- ---------
452 587 411
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.............................................. 6,160 6,592 (1,195)
INCOME TAX PROVISION (NOTE 6).................................................. 2,210 2,167 108
--------- --------- ---------
NET INCOME (LOSS).............................................................. $ 3,950 $ 4,425 $ (1,303)
--------- --------- ---------
--------- --------- ---------
EARNINGS (LOSS) PER SHARE...................................................... $ 0.33 $ 0.38 $ (0.12)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Financial Statements
25
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED FOREIGN
EARNINGS CURRENCY
COMMON TREASURY (ACCUMULATED TRANSLATION
STOCK STOCK DEFICIT) ADJUSTMENT TOTAL
--------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992......................... 34,509 (2,810) (672) (357) 30,670
Net loss......................................... -- -- (1,303) -- (1,303)
Retirement of treasury stock..................... (2,810) 2,810 -- -- -0-
Adjustments to conform fiscal year of acquired
corporation..................................... 21 -- (92) -- (71)
Sale of common stock............................. 442 -- -- -- 442
Non-qualified stock option compensation.......... 4 -- -- -- 4
Foreign currency translation adjustment.......... -- -- -- (87) (87)
--------- --------- ------------ ----------- ---------
Balance, December 31, 1993......................... 32,166 -0- (2,067) (444) 29,655
Net income....................................... -- -- 4,425 -- 4,425
Sale of common stock............................. 847 -- -- -- 847
Non-qualified stock option compensation.......... 6 -- -- -- 6
Tax benefit of stock option transactions......... 385 -- -- -- 385
Foreign currency translation adjustment.......... -- -- -- 229 229
--------- --------- ------------ ----------- ---------
Balance, December 31, 1994......................... 33,404 -0- 2,358 (215) 35,547
Issuance of shares for pooling transaction (Note
2).............................................. 1 -- 75 -- 76
Net income....................................... -- -- 3,950 -- 3,950
Sale of common stock............................. 733 -- -- -- 733
Non-qualified stock option compensation.......... 5 -- -- -- 5
Tax benefit of stock option transactions......... 234 -- -- -- 234
Foreign currency translation adjustment.......... -- -- -- (99) (99)
--------- --------- ------------ ----------- ---------
Balance, December 31, 1995......................... $ 34,377 $ -0- $ 6,383 $ (314) $ 40,446
--------- --------- ------------ ----------- ---------
--------- --------- ------------ ----------- ---------
</TABLE>
See Notes to Financial Statements
26
<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................................... $ 3,951 $ 4,425 $ (1,303)
Adjustment to conform fiscal year of acquired corporation................... -- -- (209)
Items not requiring (providing) cash:
Depreciation and amortization............................................. 3,677 2,705 1,974
(Gain) loss on disposition of assets...................................... -- (109) 263
Non-qualified stock option compensation................................... 5 6 4
Changes in:
Accounts receivable....................................................... (9,006) (4,640) (4,680)
Inventories............................................................... (2,231) (1,693) (923)
Accounts payable and accrued expenses..................................... 1,955 3,087 2,898
Other current assets and liabilities...................................... 1,131 756 1,066
--------- ---------- ---------
Net cash provided by (used in) operating activities..................... (518) 4,537 (910)
--------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net..................................... (5,600) (3,886) (2,219)
Proceeds from maturity of temporary investments............................. 8,580 15,067 11,205
Purchase of temporary investments........................................... (3,379) (14,651) (7,051)
Proceeds from sale of property.............................................. -- 228 --
Increase (decrease) in other assets......................................... 29 (458) (899)
Net cash received from business acquisitions................................ 44 -- --
--------- ---------- ---------
Net cash provided by (used in) investing activities..................... (326) (3,700) 1,036
--------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.................................................... 436 147 21
Exercise of stock options................................................... 297 700 422
Proceeds from shareholder loans............................................. 2,267 2,712 1,621
Principal payments on debt.................................................. (4,428) (2,473) (1,559)
--------- ---------- ---------
Net cash provided by (used in) financing activities..................... (1,428) 1,086 505
--------- ---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH....................................... (99) 229 --
--------- ---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. (2,371) 2,152 631
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................. 5,776 3,624 2,993
--------- ---------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR........................................ $ 3,405 $ 5,776 $ 3,624
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
See Notes to Financial Statements
27
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION
The Company designs, integrates, assembles, markets and supports voice
processing systems and services which incorporate audiotex, voice response,
voice recognition, voice/facsimile messaging and interactive computer
applications into customized market solutions. The Company also offers a broad
array of telecommunications consulting services. These markets are characterized
by rapid technological change, and the Company is subject to many risks
associated with this rapid change, including obsolescence of its products and
services, warranty charges and estimates of costs required to complete certain
projects after shipment of a system. In addition, the Company has elected to
purchase certain components from sole suppliers. Although there are a limited
number of manufacturers of these particular components, management believes that
the other suppliers could provide similar products on comparable terms. A change
in suppliers, however, could cause a delay in manufacturing and a possible loss
of sales, which would affect operating results adversely.
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.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant inter-company accounts and transactions
have been eliminated in consolidation.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method and includes the cost of materials, direct
labor and manufacturing overhead. Provision is made for obsolete or slow moving
items where appropriate.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets which
range from three to 10 years for furniture and equipment to 35 years for
buildings and improvements.
RESEARCH AND ENGINEERING
Costs associated with internal development of new products or enhancements
of existing products are expensed as incurred because the marketability of such
products is not determinable until substantially all the costs are incurred.
REVENUE RECOGNITION
Revenues from the sale of systems generally are recognized upon shipment.
Software revenue is recognized in accordance with the American Institute of
Certified Public Accountants Statement 91-1, Software Revenue Recognition.
Revenues from maintenance and consulting services, and audio information
contracts for installed systems are recognized ratably over the service period.
Revenues from service bureau operations and consulting services are recognized
when the services are provided. Revenues from billing verification services are
recognized when claim proceeds are received from the telephone company.
CREDIT RISK
The Company extends unsecured credit to customers throughout the United
States and in certain foreign countries.
28
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Deferred tax liabilities and assets are recognized for the future tax
consequences of events that have been recognized in the financial statements or
tax returns. (See Note 6)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Financial statements of the Company's foreign subsidiaries have been
translated into U.S. dollars at current and average exchange rates. Resulting
translation adjustments are recorded as a separate component of stockholders'
equity. Any transaction gains or losses are included in the Consolidated
Statements of Operations.
EARNINGS PER SHARE
Earnings per share amounts are computed using the weighted average number of
shares outstanding of 11,922,000, 11,526,000 and 11,068,000, for the years ended
December 31, 1995, 1994 and 1993, respectively. All options are considered to be
common stock equivalents but are only included in the weighted average to the
extent that they are dilutive.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of". This standard provides a framework for evaluating the
realizability of the Company's investments in long-lived assets. At this time,
the Company does not anticipate that adoption of the standard, which is required
in 1996, will have a material impact on its results of operations or financial
position. The Financial Accounting Standards Board also issued SFAS No. 123,
"Accounting for Stock Based Compensation". Adoption of this standard is required
in 1996. Under the new standard, the Company must either change its method of
computing the compensation expense associated with the issuance of stock options
or make pro forma disclosures based on the new computation method. At this time,
the Company anticipates adopting the standard by making the pro forma
disclosures.
TEMPORARY INVESTMENTS
The Company is required to classify debt and equity securities into specific
categories and present them in the financial statements under the guidelines
established for each category. At December 31, 1994, all investments in debt
securities were classified as held-to-maturity because the Company had the
positive intent and ability to hold the securities to maturity. The securities
had short-term maturities, were presented at amortized cost, and had an
aggregate fair value which approximated cost.
NOTE 2 -- ACQUISITIONS
Effective August 9, 1995, the Company issued 3,331,000 shares of its common
stock for all of the outstanding common stock 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")
and the TSL Companies were merged into the Company (the "TSL Merger"). The TSL
Merger has been accounted for as a pooling of interests and, accordingly, the
Company's
29
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2 -- ACQUISITIONS (CONTINUED)
consolidated financial statements have been restated for all periods prior to
the acquisition to include the results of operations, financial position and
cash flows of the TSL Companies. Revenues and net income (loss) prior to the
combination are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED AUGUST
YEAR ENDED DECEMBER YEAR ENDED DECEMBER
8, 1995
(UNAUDITED) 31, 1994 31, 1993
-------------------- -------------------- --------------------
NET NET NET
INCOME INCOME INCOME
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Brite Voice Systems, Inc...................... $ 41,041 $ 2,104 $ 66,304 $ 5,569 $ 46,857 $ (1,963)
TSL........................................... 9,242 (91) 13,636 (1,144) 9,555 660
--------- --------- --------- --------- --------- ---------
$ 50,283 $ 2,013 $ 79,940 $ 4,425 $ 56,412 $ (1,303)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Prior to the TSL Merger, the TSL Companies elected to be taxed as S
corporations under the Internal Revenue Code. This election eliminates federal
income taxes at the corporate level, as a result of which the TSL Companies'
profits were included in the income tax returns of their stockholders for all
periods through the date of the TSL Merger. Accordingly, the TSL Companies
distributed the majority of their taxable earnings in the form of additional
compensation to officers and shareholders. Distributions in excess of the salary
and bonus amounts contracted for in the employment agreements entered into
between the Company and certain of the TSL Stockholders, were $4,303,000,
$6,989,000 and $2,292,000 for the period ended August 8, 1995 and the years
ended December 31, 1994 and 1993, respectively. No adjustments have been made to
the provision for income taxes, to reflect the impact had the TSL Companies been
subject to federal income taxes as the adjustment is immaterial.
Merger expenses of $3,509,000 were charged to expense during 1995. These
expenses represent brokerage, legal and other professional fees associated with
the consummation of the TSL Merger.
On March 31, 1995, the Company issued 150,000 shares of its common stock for
all of the outstanding common stock of Touch-Talk, Inc. (the "Touch-Talk
Merger"), and Touch-Talk was merged into the Company. The Touch-Talk Merger has
been accounted for as a pooling of interests. The net assets of Touch-Talk, Inc.
were $560,000 at March 31, 1995. The effect of this pooling is immaterial to the
operations of the Company and, accordingly, prior years' financial statements
have not been restated.
NOTE 3 -- OTHER ASSETS
Other Assets consist of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
(IN THOUSANDS)
Prepaid royalties........................................................ $ -- $ 1,250
Goodwill and other....................................................... 2,472 1,966
--------- ---------
2,472 3,216
Accumulated amortization................................................. (536) (632)
--------- ---------
$ 1,936 $ 2,584
--------- ---------
--------- ---------
</TABLE>
In September 1992, the Company licensed certain patented technology for the
provision of electronic classified services, and advanced $1,250,000 in
nonrefundable royalties. The royalties were
30
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 -- OTHER ASSETS (CONTINUED)
being amortized over a five year period. In September 1995, due to continued
unprofitability of the product, the Company wrote off $818,000, representing the
balance of the prepaid royalties and the net book value of certain equipment
related to the project. This charge is included in Merger and other costs in the
accompanying Statements of Operations.
Goodwill and other intangible assets are being amortized using the
straight-line method over the estimated useful lives of the assets or the
specific contract term, which range from three to 10 years. Amortization
expense, including the amortization of prepaid royalties, was $619,000 in 1995
and $434,000 in 1994.
NOTE 4 -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Purchased parts........................................................ $ 3,044 $ 2,677
Work in progress....................................................... 4,146 2,383
Finished goods......................................................... 3,320 3,203
--------- ---------
$ 10,510 $ 8,263
--------- ---------
--------- ---------
</TABLE>
NOTE 5 -- LEASES
The Company leases office space under noncancelable agreements expiring at
various times through 2002. Future minimum rental payments under these operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
1996....................................................... $ 1,306
1997....................................................... 927
1998....................................................... 457
1999....................................................... 376
2000....................................................... 282
Thereafter................................................. 320
---------
$ 3,668
---------
---------
</TABLE>
Rent expense under the above agreements was $1,023,000, $807,000 and
$700,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 6 -- INCOME TAXES
The income tax provision includes the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Taxes currently payable:
Federal.................................................................. $ 1,804 $ 1,918 $ (90)
State.................................................................... 355 150 --
Foreign.................................................................. 651 449 198
Deferred taxes........................................................... (600) (350) --
--------- --------- ---------
$ 2,210 $ 2,167 $ 108
--------- --------- ---------
--------- --------- ---------
</TABLE>
31
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 6 -- INCOME TAXES (CONTINUED)
United States income taxes have not been provided on the cumulative
undistributed earnings of the Company's foreign subsidiaries for $3,076,000 at
December 31, 1995. It is intended that these earnings will be permanently
invested in operations outside the United States.
A reconciliation of income tax expense at the statutory rate to income tax
expense at the Company's effective rate, is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Tax expense (benefit) at the statutory rate............................... $ 2,095 $ 2,886 $ (583)
Effect of foreign tax rates............................................... 8 28 78
Losses providing no current benefit....................................... -- 49 775
Increase (decrease) in taxes resulting from:
Disqualifying dispositions.............................................. -- -- (280)
Merger costs............................................................ 1,130 -- 104
State income taxes, net of federal benefit.............................. 234 197 --
Foreign sales corporation benefit....................................... (54) (112) (21)
Utilization of net operating loss carryforward.......................... (321) (456) --
Utilization of credit carryforwards..................................... (278) (276) --
Reduction of valuation allowance........................................ (600) (350) --
Other permanent differences............................................. (4) 201 35
--------- --------- ---------
$ 2,210 $ 2,167 $ 108
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred taxes are determined based on the estimated future tax effect of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of the enacted tax laws. Deferred taxes consist
of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Current deferred taxes
Gross assets.................................................... $ 662 $ 488
Gross liabilities............................................... -- --
--------- ---------
$ 662 $ 488
--------- ---------
--------- ---------
Noncurrent deferred taxes
Gross assets.................................................... $ 728 $ 164
Gross liabilities............................................... (403) (302)
--------- ---------
$ 325 $ (138)
--------- ---------
--------- ---------
</TABLE>
32
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 6 -- INCOME TAXES (CONTINUED)
The tax effect of significant temporary differences representing deferred
tax assets and liabilities is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Federal regular tax operating loss, research and development credit, investment
tax credit and alternative minimum tax credit carryforwards...................... $ 1,293 $ 1,688
Merger costs...................................................................... -- 96
Depreciation...................................................................... (403) (302)
Inventory obsolescence reserve.................................................... 362 223
Allowance for doubtful accounts................................................... 154 266
Accrued vacation pay.............................................................. 276 241
Other, net........................................................................ 317 318
--------- ---------
$ 1,999 $ 2,530
Valuation allowance............................................................... (1,049) (2,180)
--------- ---------
Net deferred taxes................................................................ $ 950 $ 350
--------- ---------
--------- ---------
</TABLE>
A valuation allowance is provided to the extent realization of the deferred
tax assets are dependent on taxable income (exclusive of reversing temporary
differences) in future years. A net deferred tax asset was recognized in the
current year to the extent existing non-deductible temporary differences could
be carried back to reduce current-year income tax.
At December 31, 1995, the Company has loss and credit carryforwards
available for tax purposes as follows (dollars in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATE
--------- ----------
<S> <C> <C>
Federal regular tax carryforwards acquired through business combinations:
Operating losses.......................................................................... $ 1,568 2008
Research and development credits.......................................................... 380 2008
Investment tax credits.................................................................... 60 2008
Federal regular tax carryforwards:
Capital loss.............................................................................. $ 98 2007
</TABLE>
NOTE 7 -- ADVANCES FROM AFFILIATES
Prior to the TSL Merger, the TSL Companies financed working capital needs
through the use of non-interest bearing loans made by the TSL stockholders. Upon
consummation of the TSL Merger, the TSL stockholders loaned $2,267,000 to the
Company. The loans bear no interest and are to be repaid monthly based upon
future cash flow, as required by the Merger Agreement. Any unpaid amounts become
due and payable on April 1, 1996. The balance due was $551,000 at December 31,
1995.
NOTE 8 -- STOCKHOLDERS' EQUITY
STOCK PURCHASE PLAN
In March 1994, the Board of Directors approved the Brite Voice Systems 1994
Employee Stock Purchase Plan (the "Plan"). The Plan was approved and adopted at
the Annual Meeting of Stockholders held on May 10, 1994. Under the Plan, up to
200,000 shares of common stock of the Company may
33
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 8 -- STOCKHOLDERS' EQUITY (CONTINUED)
be sold to employees. Eligible employees may authorize payroll deductions of up
to 10 percent of their compensation to purchase shares at the lower of 85
percent of the fair market value of the common stock as of the date of grant
(first day of an offering period) or the last day of the six-month offering
period. The semi-annual offerings commenced on July 1, 1994 and will terminate
on July 1, 1999. No employee may purchase shares under the Plan, in any one
year, having a fair market value on the offering date of more than $25,000, nor
may an employee purchase more than 500 shares in any offering period. During
1995, 32,890 shares were purchased at prices ranging from $11.79 to $14.98. On
December 31, 1995 there were 151,203 shares reserved for issuance under the
Plan.
STOCK OPTIONS
In March 1994, the Board of Directors approved the Brite Voice Systems 1994
Stock Option Plan (the "1994 Option Plan") which was also approved and adopted
at the Annual Meeting of Stockholders on May 10, 1994. A maximum of 1,000,000
shares of common stock may be issued under the 1994 Option Plan. Options are
granted by the Board of Directors at prices not less than fair market value as
of the date of the grant, generally have a four-year vesting period and expire
10 years after the date of grant. At December 31, 1995, a total of 470,150
shares were available for future grants under the 1994 Option Plan.
The Company's 1984 Incentive Stock Option Plan terminated on December 31,
1994, except as to unexercised options remaining outstanding.
Information regarding outstanding qualified stock options is as follows:
<TABLE>
<CAPTION>
SHARES PRICE
----------- ------------------
<S> <C> <C>
Outstanding at December 31, 1992...................................... 802,044 1.25 - 13.75
Granted -- 1993..................................................... 418,000 6.625 - 9.625
Exercised -- 1993................................................... (202,654) 1.25 - 6.375
Cancelled -- 1993................................................... (67,037) 1.25 - 12.50
-----------
Outstanding at December 31, 1993...................................... 950,353 1.25 - 13.75
Granted -- 1994..................................................... 105,500 10.125 - 16.50
Exercised -- 1994................................................... (213,249) 1.25 - 12.50
Cancelled -- 1994................................................... (78,425) 1.25 - 13.75
-----------
Outstanding at December 31, 1994...................................... 764,179 1.25 - 16.50
Granted -- 1995..................................................... 434,350 16.125 - 20.00
Exercised -- 1995................................................... (46,637) 1.25 - 11.00
Cancelled -- 1995................................................... (37,000) 1.25 - 18.625
-----------
Outstanding at December 31, 1995...................................... 1,114,892 1.25 - 20.00
-----------
-----------
Exercisable at December 31, 1995...................................... 368,668 1.25 - 16.50
</TABLE>
34
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 8 -- STOCKHOLDERS' EQUITY (CONTINUED)
The Company has also granted non-qualified stock options that generally vest
over a four-year period. Information regarding these non-qualified options is as
follows:
<TABLE>
<CAPTION>
SHARES PRICE
----------- ------------------
<S> <C> <C>
Outstanding at December 31, 1992...................................... 30,000 2.25
Granted -- 1993..................................................... 100,000 5.875
Exercised -- 1993................................................... (10,049) 2.25
-----------
Outstanding at December 31, 1993...................................... 119,951 2.25 - 5.875
Granted -- 1994..................................................... 25,000 15.875
Exercised -- 1994................................................... (5,250) 2.25
-----------
Outstanding at December 31, 1994...................................... 139,701 2.25 - 15.875
Exercised -- 1995................................................... (5,000) 2.25
-----------
Outstanding at December 31, 1995...................................... 134,701 2.25 - 15.875
-----------
-----------
Exercisable at December 31, 1995...................................... 59,701 2.25 - 15.875
</TABLE>
The Company has a Non-Employee Director Stock Option Plan which provides for
the granting of options to purchase up to 60,000 shares of common stock. Options
under this plan are to be granted at prices not less than fair market value as
of the date of the grant, and have a four-year vesting period. At December 31,
1995, there were options granted to purchase 40,000 shares of common stock at
prices ranging from $5.00 to $8.75 per share. At December 31, 1995, 20,000
shares were exercisable. Also outstanding are 4,000 shares at $10.125 per share,
assumed from a previously acquired corporation, all of which were exercisable at
December 31, 1995.
NOTE 9 -- EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution retirement plans which cover
substantially all of its employees in the United States and the United Kingdom.
Company contributions to the United Kingdom plan are based on the employee's
age, while contributions to the United States plan are a percentage of employee
contributions at rates determined by the Board of Directors of the Company.
Company contributions to these plans were $493,000, $428,000 and $339,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 10 -- LEGAL PROCEEDINGS
The Company is subject to claims and litigation from time to time arising in
the normal operation of its business. Management believes that the ultimate
resolution of any pending claim will not result in any material loss to the
Company.
NOTE 11 -- ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest paid............................................................ $ 316 $ 127 $ 126
Income taxes paid (refunds received)..................................... 1,196 1,276 (435)
</TABLE>
35
<PAGE>
BRITE VOICE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 12 -- FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES
Operations for the years ended December 31, 1995, 1994 and 1993 are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States...................................................... $ 76,028 $ 67,088 $ 48,527
Europe............................................................. 21,050 12,852 7,885
--------- --------- ---------
Total............................................................ $ 97,078 $ 79,940 $ 56,412
--------- --------- ---------
--------- --------- ---------
Operating profit (loss):
United States...................................................... $ 3,465 $ 4,818 $ (2,026)
Europe............................................................. 2,243 1,187 420
--------- --------- ---------
Total............................................................ $ 5,708 $ 6,005 $ (1,606)
--------- --------- ---------
--------- --------- ---------
Identifiable assets:
United States...................................................... $ 50,610 $ 47,541 $ 38,941
Europe............................................................. 14,966 8,862 5,616
Adjustments/eliminations........................................... (6,744) (4,515) (3,229)
--------- --------- ---------
Total............................................................ $ 58,832 $ 51,888 $ 41,328
--------- --------- ---------
--------- --------- ---------
Export sales from United States, primarily to the Pacific Rim, Africa
and Canada.......................................................... $ 5,071 $ 2,827 $ 2,537
--------- --------- ---------
--------- --------- ---------
</TABLE>
36
<PAGE>
BRITE VOICE SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS PERIOD
- ---------------------------------------------------------------- ----------- ------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1995.................................. $ 844 $ 317 $ 680 $ 481
Year ended December 31, 1994.................................. $ 453 $ 548 $ 157 $ 844
Year ended December 31, 1993.................................. $ 252 $ 300 $ 99 $ 453
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS PERIOD
- ---------------------------------------------------------------- ----------- ------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Allowance for obsolete inventory:
Year ended December 31, 1995.................................. $ 666 $ 635 $ 232 $ 1,069
Year ended December 31, 1994.................................. $ 639 $ 393 $ 366 $ 666
Year ended December 31, 1993.................................. $ 408 $ 273 $ 42 $ 639
</TABLE>
37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRITE VOICE SYSTEMS, INC.
(Registrant)
By: /s/ Stanley G. Brannan
-----------------------------------
Stanley G. Brannan
President and
Chief Executive Officer
By: /s/ Glenn A. Etherington
-----------------------------------
Glenn A. Etherington
Chief Financial Officer
(Principal Accounting Officer)
Dated: February 29, 1996
Wichita, Kansas
