<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 September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 0-22604
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 November 11, 1996, 4,874,756 shares of White River Corporation common
stock, par value $0.01 per share, were outstanding.
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Interim Statements of Financial Condition,
September 30, 1996 (Unaudited), and December 31, 1995 3
Consolidated Interim Statements of Operations (Unaudited),
Quarters and Nine Months Ended September 30, 1996, and 1995 4
Consolidated Interim Statements of Cash Flows (Unaudited),
Nine Months Ended September 30, 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 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
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 Sept. 30, 1996 Dec. 31, 1995
- ------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 196,721 $ 139,245
Accounts receivable, net (reserves: $1,948
and $1,472) 12,292 9,899
Investment securities, at market value
(adjusted cost: $33,908 and $35,356) 60,968 48,154
Other current assets 4,709 4,583
--------- ---------
Total current assets 274,690 201,881
Other investments, at adjusted cost (fair
value: $32,761 and $34,495) 26,419 28,103
Goodwill, net (accumulated amortization:
$13,737 and $9,489) 25,401 34,806
Purchased software and equipment, net
(accumulated amortization and
depreciation: $34,974 and $32,085) 20,849 25,791
Other assets 6,749 6,174
--------- ---------
Total assets $ 354,108 $ 296,755
==============================================================================
Liabilities
Accounts payable and accrued expenses $ 22,991 $ 21,197
Current portion of notes payable, other debt 647 10,988
and contract funding
Current portion of deferred revenues 8,162 5,063
--------- ---------
Total current liabilities 31,800 37,248
Non-controlling interest in net assets of
subsidiary 27,000 --
Deferred income tax liability 18,620 17,961
Notes payable and other debt 141 27,220
Other liabilities 23,687 12,790
--------- ---------
Total liabilities 101,248 95,219
--------- ---------
Redeemable preferred stock 7,172 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
shares issued 64 64
Common paid-in surplus 244,834 199,936
Retained earnings 32,075 32,693
Net unrealized investment gains, net of tax 17,589 8,319
Common stock in treasury, at cost (1,495,244
and 1,467,079 shares) (48,874) (47,751)
--------- ---------
Total stockholders' equity 245,688 193,261
--------- ---------
Total liabilities, redeemable preferred
stock and stockholders' equity $ 354,108 $ 296,755
==============================================================================
</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>
Quarter Ended Nine Months Ended
Sept. 30, Sept. 30,
In thousands, -------------------- ---------------------
except per share amounts 1996 1995 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Insurance-related services $ 32,602 $ 28,818 $ 95,927 $ 85,440
Investment income 2,429 1,947 6,334 6,198
Other revenues 3,084 -- 3,084 --
-------- -------- -------- --------
Total revenues 38,115 30,765 105,345 91,638
-------- -------- -------- --------
Operating expenses
Compensation and benefits 20,047 13,449 50,331 38,289
Provision for litigation -- -- -- 4,500
Other operating expenses 19,955 17,537 54,506 52,920
-------- -------- -------- --------
Total operating expenses 40,002 30,986 104,837 95,709
-------- -------- -------- --------
Operating income (loss) (1,887) (221) 508 (4,071)
-------- -------- -------- --------
Net investment gains 15,148 10,859 16,144 36,339
-------- -------- -------- --------
Interest expense 526 1,878 2,508 7,660
-------- -------- -------- --------
Pretax income 12,735 8,760 14,144 24,608
Income tax expense 7,866 3,824 13,479 9,686
-------- -------- -------- --------
Net income before extraordinary
item and dividends and
accretion on redeemable
preferred stock 4,869 4,936 665 14,922
Extraordinary loss on early
retirement of debt, net of tax 678 -- 678 --
-------- -------- -------- --------
Net income (loss) 4,191 4,936 (13) 14,922
Dividends and accretion on
redeemable preferred stock 309 149 605 437
-------- -------- -------- --------
Net income (loss) applicable
to common stock $ 3,882 $ 4,787 $ (618) $ 14,485
======== ======== ======== ========
Net income before extraordinary
item and dividends and
accretion on preferred stock
per common share:
Primary $ 1.00 $ 0.98 $ 0.14 $ 2.79
Fully-diluted $ 0.94 $ 0.95 $ 0.13 $ 2.71
Net income (loss) applicable to
common stock per common share:
Primary $ 0.80 $ 0.95 $ (0.13) $ 2.71
Fully-diluted $ 0.75 $ 0.92 $ (0.13) $ 2.63
==============================================================================
</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>
- ------------------------------------------------------------------------------
Nine Months Ended Sept. 30,
---------------------------
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (13) $ 14,922
Adjustments to reconcile net income (loss)
to net cash and cash equivalents provided from
operations:
Net investment gains (16,144) (36,339)
Amortization and depreciation of
purchased software and equipment 9,534 10,613
Amortization of goodwill 4,248 4,613
Repayment of contract funding balances (2,935) (8,716)
Deferred income tax expense (benefit) (671) 10,082
Provision for litigation -- 4,500
Changes in:
Other liabilities 9,615 (1,079)
Deferred revenues 4,515 1,863
Accounts payable and accrued expenses 1,859 3,093
Other, net (1,007) 1,446
--------- ---------
Net cash and cash equivalents provided from
operations 9,001 4,998
--------- ---------
Cash flows provided from investing
activities:
Proceeds from sales of investment
securities and other investments 21,052 28,350
Purchases of software and equipment (3,193) (1,983)
Purchases of investment securities (2,031) --
Other, net (231) 698
--------- ---------
Net cash and cash equivalents provided from
investing activities 15,597 27,065
--------- ---------
Cash flows provided from financing
activities:
Proceeds from issuance of subsidiary
stock 72,124 --
Principal payments on notes payable and
other debt (46,711) (7,274)
Proceeds from notes payable and other
debt 10,750 44,000
Purchases of treasury stock (1,188) (25,571)
Dividends paid on redeemable preferred
stock (354) (354)
Redemption of subsidiary redeemable
preferred stock, including accrued
dividends (1,354) --
Other, net (389) --
--------- ---------
Net cash and cash equivalents provided from
financing activities 32,878 10,801
--------- ---------
Net increase in cash and cash equivalents
during period 57,476 42,864
Cash and cash equivalents balance at
beginning of period 139,245 94,985
--------- ---------
Cash and cash equivalents balance at end of
period $196,721 $ 137,849
==============================================================================
Supplemental information:
Income taxes refunded (paid) $ (8,264) $ 605
Interest paid $ 2,560 $ 6,379
Non-cash equipment financing $ 1,341 $ 734
Minority interest in CCC non-monetary
dividend distribution $ 254 $ --
Exchange of other investments in
settlement of notes payable and other
debt $ -- $ 90,000
==============================================================================
</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 (the "CCC Acquisition")
of a majority of the total outstanding common stock, par value $0.10 per share
(the "CCC Common Stock"), of CCC Information Services Group Inc. (together with
its subsidiaries, unless the context requires otherwise, "CCC", formerly
InfoVest Corporation). In addition, at the time of the CCC Acquisition, White
River acquired redeemable preferred stock issued by CCC (the "CCC Preferred
Stock") with a face value of $37.5 million. CCC, through CCC Information
Services Inc. and certain other subsidiaries, primarily provides automobile
claims information and processing, claims management software and communication
services. See Note 3 "Issuance of CCC Common Stock" for further discussion.
During April 1996, White River, through its wholly-owned subsidiary Hanover
Accessories, Inc. ("Hanover"), became engaged in the design, distribution, sale
and retail servicing of popular-priced fashion accessories, primarily for the
children's market. Hanover currently markets over 3,500 different styles of
products, many of which are exclusive designs available only to Hanover. All
of Hanover's products are supplied through contract manufacturers.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the accounts
of White River and its subsidiaries, including those of CCC. The consolidated
interim financial statements have been prepared in
6
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WHITE RIVER CORPORATION AND SUBSIDIARIES
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. Notwithstanding the foregoing, these consolidated interim
financial statements may not be indicative of financial results for the full
year or for any other future period. 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
Company's financial condition as of September 30, 1996, or the Company's
operating results for the nine months then ended.
NOTE 3. ISSUANCE OF CCC COMMON STOCK
During August 1996, CCC completed an initial public offering (the "CCC IPO")
which raised net proceeds of $72.1 million in exchange for 6.9 million newly
issued shares of CCC Common Stock. CCC used the proceeds from the CCC IPO to
redeem a substantial portion of the outstanding CCC Preferred Stock and to
retire certain of its outstanding commercial bank debt. After the closing of
the CCC IPO, White River held 36.6% of the total outstanding shares of CCC
Common Stock. As a result of the CCC IPO, White River recorded approximately
$44 million as a direct increase to consolidated paid-in-surplus representing
the increase in equity that White River recognized upon the CCC IPO.
As a result of the CCC IPO, White River received $34.8 million, including
accrued but unpaid dividends, as a partial redemption of the CCC Preferred
Stock that White River held. As of September 30, 1996, White River continues to
hold CCC Preferred Stock with a redemption value of $5.0 million, including
accrued but unpaid dividends. In accordance with the terms of the CCC Preferred
Stock, the dividend accrual rate on the remaining shares of CCC Preferred Stock
has been eliminated from the day following the CCC IPO through June 16, 1998.
Certain of the shares of the CCC Preferred Stock held by White River provides
White River with a maximum of 51% of the total voting power associated with
CCC's total outstanding voting stock when combined with the shares of CCC Common
Stock held by White River.
7
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WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTE 4. 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 and nine
months ended September 30, 1996, and 1995, by the weighted average number of
outstanding shares of Common Stock for such periods, which was 4.9 million
shares for each of the 1996 periods and 5.0 million and 5.3 million for the
quarter and nine months ended September 30, 1995, 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 and nine months ended
September 30, 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 5.2 million for each of the 1996 periods, and 5.2 million and
5.5 million for the quarter and nine months ended September 30, 1995,
respectively. No dividends were declared on shares of Common Stock during such
periods.
NOTE 5. INCOME TAXES
The Company's effective tax rate of 95.3% and 39.4% for the nine months ended
September 30, 1996, and 1995, respectively, exceeds the Federal statutory tax
rate of 35.0% due primarily to the effects of amortization of goodwill and the
undistributed earnings of CCC. In addition, the Company's effective tax rate is
higher than expected due to the partial redemption of the CCC Preferred Stock
held by White River, the effects of which are eliminated in consolidation for
GAAP reporting purposes, however, income taxes will be due on the corresponding
taxable gain to White River.
NOTE 6. NOTES PAYABLE AND OTHER DEBT
Primarily with a portion of the proceeds from the CCC IPO, CCC repaid all
outstanding balances under an existing term loan and revolving credit facility
(the "Former Credit Facility"). During August 1996, CCC executed a new
revolving line of credit (the "Revolving Credit Facility") with a new commercial
bank and terminated the Former Credit Facility. As a result, the balance of
deferred financing fees associated with the Former Credit Facility have been
written-off as an extraordinary loss, net of income taxes, in the accompanying
consolidated interim statements of operations for the quarter and nine months
ended September 30, 1996.
The Revolving Credit Facility expires on August 21, 2001 and provides CCC with
the ability to borrow, for general corporate purposes, up to $20.0 million under
a revolving line of credit . The interest rate under the Revolving Credit
Facility is the prime rate (as defined) or the London Inter-Bank Offering Rate
(the "LIBOR Rate") plus 1.5% per annum, as selected by CCC. In addition, CCC
pays a commitment fee of 0.25% per annum on any unused portion of the Revolving
Credit Facility.
Under the Revolving Credit Facility, CCC is, among other restrictions and with
certain exceptions, prohibited from making certain sales or transfers of assets,
incurring nonpermitted indebtedness or encumbrances, and redeeming or
repurchasing its capital stock. In addition, the Revolving Credit Facility
requires CCC to maintain certain levels of operating cash flow and interest
expense coverage, and limits CCC's ability to make capital expenditures and
investments and declare dividends.
8
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WHITE RIVER CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition - As of September 30, 1996, and December 31, 1995
Book value per common and common equivalent share increased 29.0% to $50.34 at
September 30, 1996, from $39.01 at December 31, 1995. Such change reflects an
increase of approximately $8.50 per share relating to the effects of the CCC
IPO, as well as approximately $1.75 per share relating to the after tax increase
in net unrealized investment gains. Such items were recorded directly to
stockholders' equity.
Consolidated cash and cash equivalents as of September 30, 1996, totalled $196.7
million, as compared to $139.2 million as of December 31, 1995. Such increase
is attributed primarily to the CCC IPO and the sale or redemption of certain of
White River's investments. Substantially all of the cash balances of $179.1
million which were held by White River were deposited with several major banking
institutions in interest-bearing accounts with maturities of six days or less.
As of September 30, 1996, such deposits earned a weighted average interest rate
of 5.2% 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 its 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 and Nine Months Ended September 30, 1996, and
1995
The Company reported net income applicable to common stock of $3.9 million, or
$0.75 per fully-diluted common share, for the quarter ended September 30, 1996,
as compared to net income of $4.8 million, or $0.92 per fully-diluted common
share, for the quarter ended September 30, 1995. The 1996 results reflect a
pretax operating loss of $1.9 million, as compared to a pretax operating loss of
$0.2 million for the same period in 1995.
For the nine months ended September 30, 1996, the Company reported a net loss
applicable to common stock of $0.6 million, or $0.13 per fully-diluted common
share, as compared to net income of $14.5 million, or $2.63 per fully-diluted
common share, for the nine months ended September 30, 1995. The 1996 year-to-
date results reflect pretax operating income of $0.5 million, as compared to a
pretax operating loss of $4.1 million for the same period in 1995. The 1995
year-to-date results include a $4.5 million pretax provision for litigation
which was ultimately settled during April 1996.
Investment Operations
White River's pretax investment income totalled $2.4 million for the quarter
ended September 30, 1996, and $6.3 million for the nine months then ended, as
compared to $1.9 million and $6.2 million for the quarter and nine months ended
September 30, 1995, respectively. The 1996 quarterly and year-to-date results
include dividend income of $0.4 million representing dividends received upon the
third quarter redemption of White
9
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WHITE RIVER CORPORATION AND SUBSIDIARIES
River's investment in NEWFLO Corporation ("NEWFLO") common and preferred stock.
Pretax net investment gains totalled $15.1 million for the quarter ended
September 30, 1996, and $16.1 million for the nine months then ended, as
compared to $10.9 million and $36.3 million for the quarter and nine months
ended September 30, 1995, respectively. The 1996 results include pretax
realized gains of $13.0 million relating to the redemption of White River's
investment in NEWFLO. Pretax net investment gains for the third quarter of 1995
include $6.1 million relating to the transfer of certain investments to Fund
American in settlement of the balances outstanding under a credit agreement with
Fund American.
Due to the adoption of SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," during the third quarter of 1995, after tax unrealized
net investment losses of $2.5 million and after tax unrealized net investment
gains of $9.3 million, which arose during the third quarter, and year-to-date
period ended September 30, 1996, respectively, were recorded as a separate
component of stockholders' equity.
Insurance-Related Services
CCC's revenues from insurance-related services increased $3.8 million, or 13.1%,
to $32.6 million for the quarter ended September 30, 1996, from $28.8 million
for the same period last year. For the nine months ended September 30, 1996,
such revenues increased $10.5 million, or 12.3%, to $95.9 million, as compared
to $85.4 million for the same period last year. These increases were due
primarily to higher revenues from collision estimating software licensing and
from CCC's outsourced claims and vehicle valuation services. The year-to-date
1996 period also benefited from higher communication services revenues due to
higher transaction volumes. Collision estimating software licensing revenues
increased during 1996 primarily due to growth in the number of software
licenses, particularly at collision repair facilities. Outsourced claims
services revenues increased primarily as a result of higher transaction volume
and vehicle valuation services revenues increased as a result of a regulatory
change in three large industrial states that allowed CCC to market its premium
vehicle valuation product in such states.
On a stand-alone basis, CCC reported net income before accretion and dividends
on preferred stock of $4.0 million and $10.7 million for the quarter and nine
months ended September 30, 1996, respectively, as compared to net income of $0.8
million and a net loss of $0.3 million for the same periods in 1995. Such
results exclude the effects of White River's amortization and adjustment of
goodwill and purchased software associated with the CCC Acquisition, which
reduced CCC's stand-alone reported net income by $3.9 million and $11.7 million
during the quarter and nine months ended September 30, 1996, respectively, and
$2.3 million and $6.7 million for the respective periods in 1995. The 1996
adjustments include the reversal of income tax benefits of $2.1 million and $5.2
million for the quarter and nine months ended September 30, 1996, respectively,
which had been recorded by CCC but which were reflected by White River as a
reduction of goodwill relating to the CCC Acquisition.
As previously disclosed, CCC was involved in litigation with MacLean Hunter
Market Reports, Inc. ("MacLean Hunter") and certain licensees of the MacLean
Hunter data concerning certain claims including alleged copyright infringement.
During December 1995, CCC 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
10
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WHITE RIVER CORPORATION AND SUBSIDIARIES
have been fully and completely settled and each civil action has been dismissed
with prejudice. The final settlement amounts, including related expenses,
approximated the $4.5 million pretax provision recorded during the second
quarter of 1995 in connection with this litigation.
Fashion Accessories
Hanover's revenues from the sale of fashion accessories which are reported as
other revenues in the accompanying consolidated interim statements of operation,
totalled $3.1 million during the period from the commencement of Hanover's
operations during April 1996, through September 30, 1996. Hanover reported
break-even operating results during the year-to-date period ending September 30,
1996. As of September 30, 1996, White River's investment in and advances to
Hanover totalled $1.7 million.
Operating Expenses
Compensation and benefits expense increased 49.1%, to $20.0 million for the
quarter ended September 30, 1996, as compared to $13.4 million for the same
period in 1995. The 1996 quarterly result reflects a $4.1 million increase in
White River's provision for stock-based incentive awards, which was due to
increases in the market value of Common Stock during such period as well as
accelerated vesting of certain awards due in part to the effects of the CCC IPO
upon White River's book value per common and common equivalent share. For the
nine months ended September 30, 1996, compensation and benefits expense totalled
$50.3 million, as compared to $38.3 million for the 1995 period. The 1996 year-
to-date result reflects a $5.8 million increase in White River's provision for
stock-based incentive awards.
Other operating expenses increased 13.8%, to $20.0 million for the quarter ended
September 30, 1996, as compared to $17.5 million for the same period in 1995.
For the nine months ended September 30, 1996, other operating expenses totalled
$54.5 million, as compared to $52.9 million for the 1995 period, representing an
increase of 3.0%. The relatively slow growth in other operating expenses during
the nine months ended September 30, 1996, is attributable to effective cost
containment initiatives and the postponement by CCC of certain operating
expenditures that it would have made during the first half of 1996 in the
absence of the covenants under the Former Credit Facility. CCC has plans to
increase operating expenditures over the remainder of 1996 to enhance certain
internal functions and capabilities as well as to implement recently contracted
services for certain new clients. CCC presently expects to incur approximately
$1.0 million of previously postponed expenditures during the fourth quarter of
1996.
Interest Expense
Interest expense totalled $0.5 million and $2.5 million for the quarter and nine
months ended September 30, 1996, respectively, as compared to $1.9 million and
$7.7 million, respectively, for the same periods in 1995. Such decreases are
due primarily to the repayment of balances due under the credit agreement
between White River and Fund American, reduction of balances due under the
Former Credit Facility and lower outstanding contract funding balances.
11
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WHITE RIVER CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources
White River
As of September 30, 1996, the Company had consolidated cash and cash equivalents
of $196.7 million, of which $179.1 million relate 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 CCC Common Stock. Based upon the
terms of the CCC Preferred Stock, White River received $34.8 million from the
net proceeds from the CCC IPO in partial redemption, including accrued but
unpaid dividends, of the CCC Preferred Stock held by White River. As of
September 30, 1996, White River continues to hold CCC Preferred Stock with a
redemption value of $5.0 million, including accrued but unpaid dividends. The
remaining CCC Preferred Stock held by White River must be redeemed by June 16,
1999, and may be redeemed sooner under certain circumstances including the
occurrence of subsequent offerings of CCC Common Stock. White River has not
made any formal or informal commitment to make additional investments in or
advances to CCC and is not a direct or indirect guarantor of any CCC
indebtedness.
Cumulative repurchases of shares of Common Stock during the period from the
Distribution through September 30, 1996, totalled approximately 1.5 million
shares at an aggregate cost of $48.9 million. As of September 30, 1996, White
River may repurchase approximately 0.5 million 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 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.
CCC
During the quarter ended September 30, 1996, CCC received proceeds, net of
equity issuance costs, of $72.1 million from the CCC IPO. CCC used the net
proceeds of the CCC IPO to retire the Former Credit Facility and to redeem a
substantial portion of the shares of the CCC Preferred Stock, including accrued
but unpaid dividends thereon. During August 1996, CCC secured the Revolving
Credit Facility which provides CCC with the ability to borrow, for general
corporate purposes, up to $20.0 million under a revolving line of credit.
Borrowings under the Revolving Credit Facility will bear interest at the prime
rate (as defined) or the LIBOR Rate plus 1.5% per annum, as selected by CCC.
Through September 30, 1996, there have been no borrowings under the Revolving
Credit Facility.
12
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
Since the retirement of the Former Credit Facility, CCC's principal liquidity
requirements are to provide for operating activities, including product
development, and to fund purchases of equipment for internal and customer
purposes. For the nine months ended September 30, 1996, net cash provided by
CCC's operating activities was $17.0 million, net of $2.9 million which was used
to repay contract funding balances. CCC used $3.2 million of cash to purchase
equipment and software and $8.0 million to reduce debt outstanding under the
Former Credit Facility.
CCC continues to review various financing alternatives. CCC's management
believes that cash flows from operations and funds available under the Revolving
Credit Facility will be sufficient to meet CCC's liquidity needs over the next
12 months. There can be no assurance, however, that CCC will be able to satisfy
its liquidity needs in the future without engaging in financing activities
beyond those described above.
13
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party 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 adverse effect 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
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
14
<PAGE>
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: November 13, 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
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SEPTEMBER 30, 1996 FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 196,721
<SECURITIES> 60,968
<RECEIVABLES> 12,292
<ALLOWANCES> 1,948
<INVENTORY> 0
<CURRENT-ASSETS> 274,690
<PP&E> 20,849
<DEPRECIATION> 34,974
<TOTAL-ASSETS> 354,108
<CURRENT-LIABILITIES> 31,800
<BONDS> 141
7,172
0
<COMMON> 64
<OTHER-SE> 245,624
<TOTAL-LIABILITY-AND-EQUITY> 354,108
<SALES> 99,011
<TOTAL-REVENUES> 105,345
<CGS> 0
<TOTAL-COSTS> 104,837
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 670
<INTEREST-EXPENSE> 2,508
<INCOME-PRETAX> 14,144
<INCOME-TAX> 13,479
<INCOME-CONTINUING> 665
<DISCONTINUED> 0
<EXTRAORDINARY> 678
<CHANGES> 0
<NET-INCOME> (13)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
