<PAGE>
UNITED STATES
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 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: 0-22604
WHITE RIVER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 93-1011071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Westchester Avenue, Suite 201, 10604
White Plains, New York (Zip Code)
(Address of principal executive offices)
(914) 251-0237
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
As of May 3, 1996, 4,880,189 shares of White River Corporation common stock, par
value $0.01 per share, were outstanding.
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WHITE RIVER CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Interim Statements of Financial Condition,
March 31, 1996 (Unaudited), and December 31, 1995 3
Consolidated Interim Statements of Operations (Unaudited),
Quarters Ended March 31, 1996, and 1995 4
Consolidated Interim Statements of Cash Flows (Unaudited),
Quarters Ended March 31, 1996, and 1995 5
Notes to Consolidated Interim Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
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WHITE RIVER CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
Dollars in thousands, except per share amounts March 31, 1996 Dec. 31, 1995
- - ------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 143,762 $ 139,245
Accounts receivable, net (reserves: $1,381 12,622 9,899
and $1,472)
Investment securities, at market value 47,374 48,154
(adjusted cost: $35,356)
Other current assets 4,254 4,583
----------- ---------
Total current assets 208,012 201,881
Other investments, at adjusted cost (fair 28,103 28,103
value: $35,580 and $34,495)
Goodwill, net (accumulated amortization: 32,002 34,806
$11,033 and $9,489)
Purchased software and equipment, net
(accumulated amortization and
depreciation: $35,188 and $32,085) 23,814 25,791
Other assets 5,982 6,174
----------- ---------
Total assets $ 297,913 $ 296,755
==============================================================================
Liabilities
Accounts payable and accrued expenses $ 23,352 $ 21,197
Current portion of notes payable and other 7,899 7,660
debt
Deferred revenues 6,597 5,063
Current portion of contract funding 2,141 3,328
----------- ---------
Total current liabilities 39,989 37,248
Notes payable and other debt 26,201 27,220
Deferred income tax liability 17,798 17,961
Other liabilities 15,025 12,790
----------- ---------
Total liabilities 99,013 95,219
----------- ---------
Redeemable preferred stock 8,305 8,275
----------- ---------
Stockholders' equity
Series B, Participating Cumulative Preferred
Stock - par value $1.00
per share; 50,000 shares designated; none -- --
issued
Common stock - par value $0.01 per share;
62,500,000 shares authorized; 6,370,000 64 64
shares issued
Common paid-in surplus 199,936 199,936
Retained earnings 31,036 32,693
Net unrealized investment gains, net of tax 7,812 8,319
Common stock in treasury, at cost (1,480,730 (48,253) (47,751)
and 1,467,079 shares)
----------- ---------
Total stockholders' equity 190,595 193,261
----------- ---------
Total liabilities, redeemable preferred $ 297,913 $ 296,755
stock and stockholders' equity
==============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
3
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WHITE RIVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
In thousands, Quarter Ended March 31,
--------------------------
except per share amounts 1996 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Insurance-related services $ 31,369 $ 28,010
Investment income 1,969 1,899
---------- ----------
Total revenues 33,338 29,909
---------- ----------
Operating expenses
Compensation and benefits 14,205 13,054
Other operating expenses 16,865 16,794
---------- ----------
Total operating expenses 31,070 29,848
---------- ----------
Operating income 2,268 61
---------- ----------
Net investment gains
Net realized investment gains -- 367
Change in net unrealized investment gains and -- 8,798
losses
---------- ----------
Net investment gains -- 9,165
---------- ----------
Interest expense 1,032 2,457
---------- ----------
Pretax income 1,236 6,769
Income tax expense 2,744 3,111
---------- ----------
Net income (loss) (1,508) 3,658
Dividends and accretion on redeemable preferred 149 144
stock
---------- ----------
Net income (loss) applicable to common stock $ (1,657) $ 3,514
========== ==========
Primary income (loss) per common share $ (0.34) $ 0.64
Fully-diluted income (loss) per common share $ (0.34) $ 0.62
================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
4
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WHITE RIVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
Quarter Ended March 31,
--------------------------
In thousands 1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (1,508) $ 3,658
Adjustments to reconcile net income (loss) to
net cash and cash equivalents provided from
operations:
Amortization and depreciation of purchased 3,511 3,600
software and equipment
Amortization of goodwill 1,544 1,451
Change in deferred revenues 1,534 3,532
Deferred income tax expense 1,529 5,051
Repayment of contract funding balances (1,294) (3,469)
Net investment gains -- (9,165)
Other, net 2,144 43
----------- ----------
Net cash and cash equivalents provided from 7,460 4,701
operations
----------- ----------
Cash flows provided from (used for) investing
activities:
Purchases of software and equipment (1,018) (709)
Proceeds from sales of investment -- 8,413
securities and other investments
Other, net 18 555
----------- ----------
Net cash and cash equivalents provided from (1,000) 8,259
(used for) investing activities
----------- ----------
Cash flows used for financing activities:
Principal payments on notes payable and (5,824) (1,707)
other debt
Proceeds from notes payable and other debt 4,500 40,000
Purchases of treasury stock (501) (5,580)
Dividends paid on redeemable preferred stock (118) (118)
Pledge of collateral relating to proceeds -- (44,000)
from notes payable and other debt
----------- ----------
Net cash and cash equivalents used for financing (1,943) (11,405)
activities
----------- ----------
Net increase in cash and cash equivalents during 4,517 1,555
period
Cash and cash equivalents balance at beginning 139,245 94,985
of period
----------- ----------
Cash and cash equivalents balance at end of $ 143,762 $ 96,540
period
==============================================================================
Supplemental information:
Income taxes refunded $ 2,371 $ 324
Interest paid $ 1,028 $ 1,921
Non-cash equipment financing $ 544 $ --
==============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
5
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WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION
White River Corporation (together with its wholly-owned subsidiaries, unless the
context requires otherwise, "White River" or, together with all of its
subsidiaries, the "Company") commenced operations in its present form on
September 24, 1993, concurrent with the purchase and other transfer of selected
assets and the assumption of certain liabilities (collectively, the
"Capitalization") from its former parent company, Fund American Enterprises
Holdings, Inc., and certain of its subsidiaries (together, "Fund American"). On
December 22, 1993, Fund American distributed (the "Distribution") approximately
75% of the outstanding shares of White River common stock, par value $0.01 per
share (the "Common Stock"), to all holders of Fund American common stock.
Based upon the composition of its assets at the time of the Capitalization,
White River met the definition of an investment company (an "Investment
Company") under the Investment Company Act of 1940 (the "Investment Company
Act"). In anticipation of the Distribution, White River submitted an
application to the Securities and Exchange Commission (the "Commission") seeking
exemptive relief from various provisions of the Investment Company Act. During
December 1993, White River received from the Commission a temporary exemption
from registering as an Investment Company for a period of up to two years.
During October 1995, White River filed a report with the Commission which
concluded that, based upon the composition of its assets, White River no longer
met the definition of an Investment Company. Since the filing of such report,
White River has conducted and intends to continue to conduct its business
operations so as to avoid having to register as an Investment Company under the
Investment Company Act.
During June 1994, White River completed its acquisition of a majority of the
total outstanding common stock, par value $0.10 per share (the "InfoVest Common
Stock"), of InfoVest Corporation (together with its subsidiaries, unless the
context requires otherwise, "InfoVest"). InfoVest, through CCC Information
Services Inc. and certain other subsidiaries, primarily provides: (i) vehicle
valuation and collision estimating services and software for use by the
insurance and automobile repair industries, and (ii) services which improve the
handling and settling of automobile damage claims. As of March 31, 1996, White
River held: (i) approximately 52% of the total outstanding InfoVest Common
Stock and (ii) InfoVest preferred stock (the "InfoVest Preferred Stock") with a
liquidation value of $33.6 million including accrued dividends.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the accounts
of White River and its subsidiaries, including those of InfoVest. The
consolidated interim financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"). All significant intercompany
balances have been eliminated in consolidation. The consolidated interim
financial statements include all adjustments (consisting solely of normal
recurring adjustments) considered necessary by management to fairly present the
financial condition, results of operations and cash flows of the Company.
Certain prior period balances have been reclassified to conform to current
financial statement presentation. Notwithstanding the foregoing, these
consolidated interim financial statements may not be indicative of financial
results for the full year.
6
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WHITE RIVER CORPORATION SUBSIDIARIES
Such consolidated interim financial statements should be read in conjunction
with White River's 1995 Annual Report to Stockholders and Form 10-K.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities as well as the disclosure of contingent assets and
liabilities as of the date of the financial statements. Such estimates also
have a pervasive affect upon the reported amounts of revenues and expenses
reflected in the consolidated interim statements of operations. Actual results
could differ from these estimates.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121
establishes standards of financial accounting and reporting for the impairment
of long-lived assets, certain identifiable intangibles and related goodwill.
Under the provisions of SFAS No. 121, companies are required to review such
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. White River adopted
SFAS No. 121 effective January 1, 1996; such adoption had no effect upon the
financial condition or operating results of the Company for the quarter ended
March 31, 1996.
NOTE 3. INCOME (LOSS) PER COMMON SHARE
The calculation of primary income (loss) per common share is computed by
dividing net income (loss) applicable to common stock for the quarters ended
March 31, 1996, and 1995, by the weighted average number of outstanding shares
of Common Stock for such periods, which was 4.9 million and 5.5 million shares,
respectively. The calculation of fully-diluted income (loss) per common share is
computed by dividing net income (loss) applicable to common stock for the
quarters ended March 31, 1996, and 1995, by the sum of the weighted average
number of outstanding shares of Common Stock and potentially dilutive securities
for such periods, which was 4.9 million and 5.7 million shares, respectively. No
dividends were declared on shares of Common Stock during such periods.
NOTE 4. INCOME TAXES
The Company's effective tax rate of 222.0% and 46.0% for the quarters ended
March 31, 1996, and 1995, respectively, exceed the Federal statutory tax rate of
35.0% due primarily to the effects of the amortization of goodwill and the
undistributed earnings and accretion of preferred stock relating to InfoVest.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition - As of March 31, 1996, and December 31, 1995
Book value per common and common equivalent share decreased $0.39, or 1.0%, to
$38.62 at March 31, 1996, from $39.01 at December 31, 1995.
Cash and cash equivalents as of March 31, 1996, totalled $143.8 million, as
compared to $139.2 million as of December 31, 1995. Substantially all of the
cash and cash equivalent balances as of March 31, 1996, and
7
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WHITE RIVER CORPORATION AND SUBSIDIARIES
December 31, 1995, were deposited with several major banking institutions in
interest-bearing accounts with maturities of six days or less. As of March 31,
1996, such deposits earned a weighted average interest rate of 5.1% per annum,
as compared to 5.4% per annum as of December 31, 1995. The White River board of
directors (the "White River Board") continues to consider the level of capital
available to White River in light of its current operating needs and the
prospects for the acquisition of additional operating businesses. If, as the
result of such analysis, it is determined that stockholder value would best be
enhanced through the return of capital to stockholders, White River may
distribute to stockholders, through share repurchases or other means approved by
the White River Board, funds which the White River Board concludes are in excess
of the current and projected capital needs of White River.
Results of Operations -- Quarters Ended March 31, 1996, and 1995
The Company reported a net loss applicable to common stock of $1.7 million, or
$0.34 per fully-diluted common share, for the quarter ended March 31, 1996, as
compared to net income of $3.5 million, or $0.62 per fully-diluted common share,
for the quarter ended March 31, 1995. The 1996 results reflect pretax operating
income of $2.3 million as compared to $0.1 million for the same period in 1995.
Due to the adoption of SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," during the third quarter of 1995, pretax unrealized net
investment losses of $0.8 million which arose during the first quarter of 1996
were recorded net of tax as a separate component of stockholders' equity.
Additionally, pretax unrealized net investment gains of $1.1 million relating to
changes in the value of White River's portfolio of other investments during the
quarter ended March 31, 1996, were not recognized. The 1995 results include
pretax net investment gains of $9.2 million relating primarily to unrealized
gains recorded in White River's other investment portfolio.
White River's investment income totalled $2.0 million for the quarter ended
March 31, 1996, as compared to $1.9 million for the quarter ended March 31,
1995.
Insurance-Related Services
InfoVest's revenues from insurance-related services increased $3.4 million, or
12.0%, to $31.4 million for the quarter ended March 31, 1996, from $28.0 million
for the same period last year. This improvement was due primarily to new
customers for InfoVest's collision estimating software and network
communications products, as well as increased transaction volume with existing
network customers.
On a stand-alone basis, InfoVest reported net income of $2.6 million for the
quarter ended March 31, 1996, as compared to $0.9 million for the same period in
1995. White River's adjustment of goodwill and purchased software reduced
InfoVest's reported net income by approximately $3.5 million and $2.1 million
during the quarters ended March 31, 1996, and 1995, respectively. The 1996
adjustment includes income tax benefits of $1.2 million which were recorded by
InfoVest and which were reflected in consolidation by White River as a reduction
of goodwill.
As previously disclosed, InfoVest was involved in litigation with MacLean Hunter
Market Reports, Inc. ("MacLean Hunter") and certain licensees of the MacLean
Hunter data concerning certain claims including
8
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WHITE RIVER CORPORATION AND SUBSIDIARIES
alleged copyright infringement. During December 1995, InfoVest had
conditionally agreed to a settlement structure that would resolve all
outstanding disputes between these parties. During April 1996, all conditions
precedent to the settlement agreement were satisfied, accordingly, all issues
arising out of the litigation between the parties have been fully and finally
settled and each civil action has been dismissed with prejudice. The final
settlement amounts, including related expenses, approximated the $4.5 million
pretax charge taken during 1995 in connection with this litigation.
Operating Expenses
Compensation and benefits increased 8.8%, to $14.2 million for the quarter ended
March 31, 1996, as compared to $13.1 million for the same period in 1995. The
1996 results reflect a $0.4 million reduction in White River's provision for
stock-based incentive awards, which was primarily due to changes in the market
value of Common Stock during such periods.
Other operating expenses increased 0.4%, to $16.9 million for the quarter ended
March 31, 1996, as compared to $16.8 million for the same period in 1995. The
nominal growth in operating expenses during the first quarter of 1996 is
attributable to effective cost containment initiatives which, among other
things, have resulted in reduced personnel procurement expenses.
Interest Expense
Interest expense totalled $1.0 million for the quarter ended March 31, 1996, as
compared to $2.5 million for the same period in 1995. Such decrease is due
primarily to the repayment of balances due under the credit agreement between
White River and Fund American and lower outstanding contract funding balances.
Liquidity and Capital Resources
White River
As of March 31, 1996, the Company had consolidated cash and cash equivalents of
$143.8 million, of which $136.1 million relates to balances held by White River
primarily in accounts with banks with maturities of six days or less. White
River's primary sources of additional cash include sales of investments as well
as interest earned on cash equivalents and dividends earned from the investment
portfolio. For the foreseeable future, White River does not expect to receive
cash dividends on its holdings of InfoVest Common Stock and, based upon the
terms of the InfoVest Preferred Stock, White River will not receive dividends
thereon until the earlier of: (i) an initial public offering of InfoVest Common
Stock, (ii) a private sale of InfoVest or all of its assets, or (iii) June 16,
1998. Additionally, White River has not made any formal or informal commitment
to make additional investments in or advances to InfoVest and is not a direct or
indirect guarantor of any InfoVest indebtedness.
During the quarter ended March 31, 1996, the Company repurchased approximately
14,000 shares of Common Stock for an aggregate cost of $0.5 million. Cumulative
repurchases of shares of Common Stock during the period from the Distribution
through March 31, 1996, totalled approximately 1,481,000 shares at
9
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WHITE RIVER CORPORATION AND SUBSIDIARIES
an aggregate cost of $48.3 million. As of March 31, 1996, White River may
repurchase approximately 537,000 additional shares of Common Stock under its
existing share repurchase authorization.
Although no assurances can be given, management believes that available cash
will be sufficient for White River to satisfy its working capital requirements
for the foreseeable future. The White River Board continues to consider the
level of capital available to White River in light of its current operating
needs and prospects for the acquisition of additional operating interests. If,
as the result of such analysis, it is determined that stockholder value would
best be enhanced through the return of capital to stockholders, White River may
distribute to stockholders, through share repurchases or other means approved by
the White River Board, funds which the White River Board concludes are in excess
of the capital needs of White River.
InfoVest
InfoVest's primary source of cash includes receipts from customer billings,
which are generally invoiced monthly. During the quarter ended March 31, 1996,
InfoVest generated net cash from operating activities of $6.1 million. InfoVest
has discounted (generally at an annual rate of 14%) and sold the right to
receive revenues generated from certain contracts ("Contracts") to various
investors ("Contract Funding"). Cash receipts from customers relating to sold
Contracts will satisfy outstanding Contract Funding balances. During the
quarter ending March 31, 1996, InfoVest's net cash generated from operating
activities was reduced by $1.3 million due to the amortization of outstanding
Contract Funding balances. As of March 31, 1996, Contract Funding balances
totalled $2.2 million, essentially all of which is due to be repaid within one
year.
InfoVest's ability to satisfy its obligations, reduce debt and increase equity
will depend upon its future operating performance, which will be subject to
prevailing economic conditions and financial, operating and other factors, some
of which are beyond the control of management. Although no assurances can be
given, management believes that cash flows generated from InfoVest's operations,
coupled with existing cash reserves and borrowing capacity under its revolving
credit facility, will provide sufficient liquidity for InfoVest to satisfy its
working capital and debt service requirements for the foreseeable future. In
addition, management believes that InfoVest will continue to meet the financial
covenants contained in its commercial bank lending arrangement.
10
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WHITE RIVER CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
White River and InfoVest are parties to various claims and routine
litigation arising in the normal course of their businesses. Such
claims and litigation are not expected to have a material impact upon
the Company.
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) Exhibits
None.
(b) Reports on Form 8-K
None.
11
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WHITE RIVER CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 9, 1996 White River Corporation
By: /s/ Robert T. Marto
--------------------------
Name: Robert T. Marto
Title: President and
Chief Executive Officer
By: /s/ Brian P. Zwarych
--------------------------
Name: Brian P. Zwarych
Title: Vice President and
Chief Financial Officer
12
