<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
[ * ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 [ * ] No [ ]
As of May 10, 1996, 11,721,046 shares of the registrant's common stock were
outstanding.
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BRITE VOICE SYSTEMS, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995................................ 3
Consolidated Statements of Income - Three Months
Ended March 31, 1996 and 1995........................ 5
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 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......................................... 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
________
March 31, December 31,
1996 1995
_________ ____________
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................. $ 3,839 $ 3,405
Temporary investments (at cost which
approximates market)................................ 1,987 --
Accounts receivable, less allowance for doubtful
accounts: 1996-$555, 1995-$481...................... 26,230 28,690
Inventories........................................... 11,581 10,510
Prepaid expenses and other............................ 4,395 2,715
_________ ____________
Total Current Assets............................. 48,032 45,320
_________ ____________
PROPERTY AND EQUIPMENT
Land and building..................................... 3,074 3,074
Furniture and equipment............................... 21,470 19,978
_________ ____________
24,544 23,052
Less accumulated depreciation......................... (12,260) (11,476)
_________ ____________
Total Property and Equipment..................... 12,284 11,576
_________ ____________
OTHER ASSETS............................................... 1,973 1,936
_________ ____________
TOTAL ASSETS..................................... $ 62,289 $ 58,832
_________ ____________
_________ ____________
</TABLE>
See Notes to Financial Statements
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<PAGE>
<TABLE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
______________________________________
March 31, December 31,
1996 1995
_________ ____________
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable...................................... $ 8,394 $ 9,503
Accrued salaries and wages............................ 1,906 1,726
Other accrued expenses................................ 1,628 1,785
Deferred revenue...................................... 1,504 1,364
Customer deposits..................................... 1,083 1,565
Advances from affiliates.............................. -- 551
Income taxes payable.................................. 1,965 1,892
_________ ____________
Total Current Liabilities........................ 16,480 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 11,712,321
shares - 1996; 11,489,325 shares - 1995.......... 37,210 34,377
Retained earnings..................................... 9,080 6,383
Foreign currency translation adjustment............... (481) (314)
_________ ____________
Total Stockholders' Equity....................... 45,809 40,446
_________ ____________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........................... $ 62,289 $ 58,832
_________ ____________
_________ ____________
</TABLE>
See Notes to Financial Statements
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<PAGE>
<TABLE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
1996 1995
_________ ____________
(Unaudited)
<S> <C> <C>
REVENUES
System sales.......................................... $ 14,116 $ 12,143
Service revenues...................................... 11,732 10,671
_________ ____________
25,848 22,814
_________ ____________
COSTS AND EXPENSES
Cost of Sales:
System........................................... 6,010 5,040
Service.......................................... 5,621 5,396
Research and engineering.............................. 2,586 1,731
Selling, general and administrative................... 7,927 6,721
S corporation distributions........................... -- 1,461
_________ ____________
22,144 20,349
_________ ____________
INCOME FROM OPERATIONS..................................... 3,704 2,465
OTHER INCOME, NET.......................................... 57 153
_________ ____________
INCOME BEFORE TAXES........................................ 3,761 2,618
PROVISION FOR INCOME TAXES................................. 1,058 625
_________ ____________
NET INCOME................................................. $ 2,703 $ 1,993
_________ ____________
_________ ____________
EARNINGS PER SHARE......................................... $ 0.23 $ 0.17
_________ ____________
_________ ____________
WEIGHTED AVERAGE SHARES OUTSTANDING........................ 11,921 11,904
</TABLE>
See Notes to Financial Statements
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<PAGE>
BRITE VOICE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
Three Months Ended
March 31,
1996 1995
_________ ____________
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................ $ 2,703 $ 1,993
Items not requiring cash:
Depreciation and amortization.................... 838 861
Changes in:
Accounts receivable.............................. 2,460 (3,887)
Inventories...................................... (1,071) (902)
Accounts payable and accrued expenses............ (1,018) 357
Other current assets and liabilities............. (1,949) 1,349
_________ ____________
Net cash provided by (used in)
operating activities........................ 1,963 (229)
_________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net............... (1,491) (1,422)
Proceeds from maturity of temporary
investments......................................... -- 4,229
Purchase of temporary investments..................... (1,987) (2,732)
Increase in other assets.............................. (89) 2
Net cash received from business acquisitions.......... -- 44
_________ ____________
Net cash provided by (used in)
investing activities........................ (3,567) 121
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.............................. 2,832 99
Principal payment on debts............................ (621) (758)
_________ ____________
Net cash provided by financing activities... 2,211 659
_________ ____________
EFFECT OF EXCHANGE RATE CHANGES
ON CASH .............................................. (173) 200
_________ ____________
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................................... 434 (567)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD............................................. 3,405 5,776
_________ ____________
CASH AND CASH EQUIVALENTS, END OF
PERIOD................................................ $ 3,839 $ 5,209
_________ ____________
_________ ____________
</TABLE>
See Notes to Financial Statements
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<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. 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):
March 31, December 31,
1996 1995
_________ ____________
Purchased parts........................ $ 3,762 $ 3,044
Work in progress....................... 4,194 4,146
Finished goods......................... 3,624 3,320
_________ ____________
$ 11,580 $ 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"). 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):
Three Months Ended
March 31, 1995
__________________________
Net
Revenues Income
Brite Voice Systems, Inc............... $ 19,040 $ 1,691
The TSL Companies...................... 3,774 302
_________ ____________
$ 22,814 $ 1,993
_________ ____________
_________ ____________
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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 (refunds received) during the three months ended March
31, 1996 and 1995 were $1,214,000 and $ (301,000), respectively.
Interest paid during the three months ended March 31, 1996 and 1995 was
$10,000 and $0, respectively.
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<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 period ended March 31, 1995.
RESULTS OF OPERATIONS
Total revenues for the three months ended March 31, 1996 increased
$3,034,000 to $25,848,000, or 13.3%, compared to the same period in 1995,
primarily as a result of continuing penetration of international markets,
including sales of systems to new customers, and equipment and software upgrades
and system expansions by 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, decreased to $6,683,000 from $8,067,000, or 17.2%.
General purpose voice response system sales decreased $936,000 to
$5,458,000, or 14.6%, principally due to the presence during the first quarter
of 1995 of several large orders placed by value-added resellers of the Company's
products that did not recur during the first quarter of 1996. The Company
believes that this decrease is the result of the timing of certain orders and
does not indicate a decrease in demand for the Company's voice response
products.
Electronic publishing system sales decreased $448,000 to $1,225,000, or
26.8%. The Company attributes this decrease to continued saturation of the
market for this type of system. The Company believes it holds a significant
majority of the market share for audiotex systems sold to newspapers and Yellow
Pages publishers. Many of the Company's customers have slowed their deployment
of audiotex systems in the last year, as interest in on-line systems and
services has decreased demand for audiotex 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 $3,357,000 to $7,433,000, or 82.4%,
primarily due to sales of the Voice Services Director ("VSD"), a voice messaging
product sold to cellular network providers around the world. The Company
believes the international markets are behind the United 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.
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<PAGE>
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 or to sustain recent growth rates.
Service revenues increased $1,061,000 to $11,732,000, or 9.9%. Managed
service revenues, consisting of telecommunications management services, Consumer
Tips and 900 Voice Personals, increased 10.5%, from $6,731,000 to $7,440,000,
due primarily to an increase in revenues from telecommunications management
services. Service contract and repair revenues increased 7.2%, from $2,739,000
to $2,937,000, due to the Company's continuing emphasis on expanding its base of
customers who subscribe to quarterly or annual maintenance contracts.
Information services revenues increased 12.8% from $1,201,000 to $1,355,000, due
primarily to the introduction of new audio products.
Cost of system sales increased $970,000 to $6,010,000, or 19.2%, and
increased as a percentage of system sales from 41.5% to 42.6%. The increase in
actual costs was due to an increase in the number of systems shipped by the
Company's foreign subsidiaries to international customers. The increase as a
percentage of system sales is 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 sales of service revenues increased $225,000 to $5,621,000, or
4.2%, while decreasing as a percentage of service revenues from 50.6% to 47.9%.
The increase in actual costs was due to an increase in variable costs, such as
telephone transmission costs and revenue sharing payments to customers,
associated with increased managed service revenues. The decrease as a
percentage of revenues was due to an increase in revenues from
telecommunications management services as a percentage of the total product mix,
which typically have higher margins than other components of service revenues.
Research and engineering expenses increased $855,000 to $2,586,000, or
49.4%, due to the addition of research engineers and related expenses to support
the Company's continued commitment to product development. As a percentage of
revenue, these expenses increased to 10% of total revenue in 1996, compared to
7.6% 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 $1,206,000 to
$7,927,000, or 17.9%, primarily due to the expansion of the Company's
international sales and marketing efforts. During 1995, the Company opened an
office in Cambridge, England, as well as Johannesburg, South Africa and
Singapore. In addition, significant staff was added during the year to support
new sales opportunities in both the domestic and international markets. As a
percentage of total revenues, selling, general and administrative expenses
increased from 29.5% to 30.7%. The Company anticipates that these expenses as a
percentage of revenues will begin to decline as the additional staff begins
generating revenues.
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<PAGE>
S corporation distributions represent payments made to the former TSL
Companies' stockholders, which are approximately equal to the tax basis earnings
of the TSL Companies. Under the terms of the Merger Agreement, the TSL
Companies were allowed to distribute estimated tax basis income through the
closing date of the TSL Merger. The distributions totaled $1,461,000 in the
three months ended March 31, 1995. These payments were not made in 1996 and
will not recur in future periods.
Other income decreased by $96,000 to $57,000, or 62.7%, principally due to
lower average cash and cash equivalents balances during the three months ended
March 31, 1996 versus the same period in 1995. The Company also utilized its
line of credit during the quarter ended March 31, 1996, thereby incurring
interest expense that offset a portion of the interest income earned during the
period.
The provision for income taxes was 28.1% for the three months ended March
31, 1996, compared to 23.8% for the same period during 1995. The variance from
the United States statutory rate in both periods 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.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had a current ratio of 2.9 to 1, and
working capital of $31,552,000, 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
$5,826,000 at March 31, 1996, primarily due to a public offering of common
stock.
Accounts receivable decreased by $2,460,000 and inventory increased by
$1,071,000 during the quarter ended March 31, 1996. 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 the collection of accounts receivable.
Property and equipment increased by $1,452,000 during the three months
ended March 31, 1996. The Company expects capital expenditures to continue at
approximately this level for the remainder of the year.
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 March 31, 1996.
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The Company has no significant capital commitments and believes that
working capital on hand and funds provided from future operations will be
sufficient to fund all of the Company's known short-term and long-term capital
requirements.
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.
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<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 MATTERS
None
ITEM 6. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
(a) None
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
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<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: May 14, 1996
BRITE VOICE SYSTEMS, INC.
/s/ Glenn A. Etherington
______________________________________________
Glenn A. Etherington
Chief Financial Officer
Duly Authorized Officer on behalf of the Registrant
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<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,839
<SECURITIES> 1,987
<RECEIVABLES> 26,230
<ALLOWANCES> 555
<INVENTORY> 11,581
<CURRENT-ASSETS> 48,032
<PP&E> 24,544
<DEPRECIATION> 12,260
<TOTAL-ASSETS> 62,289
<CURRENT-LIABILITIES> 16,480
<BONDS> 0
37,210
0
<COMMON> 0
<OTHER-SE> 8,599
<TOTAL-LIABILITY-AND-EQUITY> 62,289
<SALES> 14,116
<TOTAL-REVENUES> 25,848
<CGS> 6,010
<TOTAL-COSTS> 22,144
<OTHER-EXPENSES> (57)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,761
<INCOME-TAX> 1,058
<INCOME-CONTINUING> 2,703
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,703
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.00
</TABLE>
