<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 June 30, 1997
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 August 7, 1997, 4,874,756 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
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C> <C>
Consolidated Interim Statements of Financial Condition,
June 30, 1997 (Unaudited), and December 31, 1996 3
Consolidated Interim Statements of Operations (Unaudited),
Quarters and Six Months Ended June 30, 1997, and 1996 4
Consolidated Interim Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 1997, and 1996 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 15
SIGNATURES 17
</TABLE>
2
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WHITE RIVER CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL CONDITION
- -------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except per share amounts June 30, 1997 Dec. 31, 1996
- -------------------------------------------------------------------------------------------------------------------
Assets (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 192,086 $ 188,365
Investment securities, at market value (adjusted cost: $52,261 and $42,892) 97,358 72,699
Accounts receivable, less allowances of $2,283 and $1,946 12,439 10,661
Other current assets 5,364 4,545
---------- ----------
Total current assets 307,247 276,270
Other investments, at adjusted cost (fair value: $37,628 and $39,813) 22,124 26,420
Goodwill, less accumulated amortization of $17,317 and $14,675 21,334 23,730
Purchased software and equipment, less accumulated amortization and depreciation
of $40,798 and $35,081 18,645 20,478
Deferred Income tax asset 6,838 6,410
Other assets 1,041 1,204
---------- ----------
Total assets $ 377,229 $ 354,512
===================================================================================================================
Liabilities
Accounts payable and accrued expenses $ 19,730 $ 21,334
Deferred revenues 7,028 5,709
Current portion of contract funding -- 123
Current portion of notes payable and other debt 122 120
---------- ----------
Total current liabilities 26,880 27,286
Deferred income tax liability 24,749 21,867
Non-controlling interest in net assets of subsidiary 25,062 18,950
Notes payable and other debt 50 111
Other liabilities 29,292 22,591
---------- ----------
Total liabilities 106,033 90,805
---------- ----------
Redeemable preferred stock 7,182 7,175
---------- ----------
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 250,124 249,546
Retained earnings 33,402 36,438
Net unrealized investment gains, net of tax 29,298 19,358
Common stock in treasury, at cost (1,495,244 shares) (48,874) (48,874)
---------- ----------
Total stockholders' equity 264,014 256,532
---------- ----------
Total liabilities, redeemable preferred stock and stockholders' equity $ 377,229 $ 354,512
===================================================================================================================
</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 Six Months Ended
June 30 June 30,
In thousands, --------------------- ----------------------
except per share amounts 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Insurance-related services $ 38,289 $ 31,956 $ 75,066 $ 63,325
Investment income 2,736 1,936 5,298 3,905
Other revenues 1,774 -- 3,333 --
--------- --------- --------- ----------
Total revenues 42,799 33,892 83,697 67,230
--------- --------- --------- ----------
Operating expenses
Compensation and benefits 17,651 16,079 36,754 30,284
Other operating expenses 23,561 17,686 47,244 34,551
--------- --------- --------- ----------
Total operating expenses 41,212 33,765 83,998 64,835
--------- --------- --------- ----------
Operating income (loss) 1,587 127 (301) 2,395
--------- --------- --------- ----------
Net realized investment gains 505 996 1,174 996
--------- --------- --------- ----------
Interest expense 35 950 72 1,982
--------- --------- --------- ----------
Pretax income 2,057 173 801 1,409
Income tax expense 2,353 2,869 3,601 5,613
--------- --------- --------- ----------
Net loss (296) (2,696) (2,800) (4,204)
Dividends and accretion on redeemable preferred stock 118 147 236 296
--------- --------- --------- ----------
Net loss applicable to common stock $ (414) $ (2,843) $ (3,036) $ (4,500)
========= ========= ========= ==========
Primary loss per common share $ (0.08) $ (0.58) $ (0.62) $ (0.92)
Fully-diluted loss per common share $ (0.08) $ (0.58) $ (0.62) $ (0.92)
===================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
4
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WHITE RIVER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30,
------------------------------
In thousands 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (2,800) $ (4,204)
Adjustments to reconcile net income (loss) to net cash and cash equivalents
provided from operations:
Net investment gains (1,174) (996)
Amortization and depreciation of purchased software and equipment 5,725 6,939
Amortization of goodwill 2,640 2,936
Minority interest 4,554 --
Contract funding revenue amortization (123) (2,258)
Deferred income tax expense (benefit) (2,470) 2,174
Changes in:
Other current assets and accounts receivable (2,597) (403)
Other liabilities 6,701 1,354
Deferred revenues 1,319 (581)
Accounts payable and accrued expenses (1,604) 5,288
Other, net (588) (900)
--------- ----------
Net cash and cash equivalents provided from operations 9,583 9,349
--------- ----------
Cash flows provided from (used for) investing activities:
Proceeds from sales of investment securities 2,170 2,318
Purchases of software and equipment (3,892) (1,827)
Purchases of investment securities (5,986) --
Other, net -- 24
--------- ----------
Net cash and cash equivalents provided from (used for) investment activities (7,708) 515
--------- ----------
Cash flows provided from (used for) financing activities:
Proceeds from issuance of subsidiary stock 2,136 --
Principal payments on notes payable and other debt (59) (16,181)
Proceeds from notes payable and other debt -- 9,750
Purchases of treasury stock -- (1,165)
Dividends paid on redeemable preferred stock (236) (236)
Other, net 5 283
--------- ----------
Net cash and cash equivalents provided from (used for) financing activities 1,846 (7,549)
--------- ----------
Net increase in cash and cash equivalents during period 3,721 2,315
Cash and cash equivalents balance at beginning of period 188,365 139,245
--------- ----------
Cash and cash equivalents balance at end of period $ 192,086 $ 141,560
===================================================================================================================
Supplemental information:
Income taxes paid (refunded) $ 7,162 $ (766)
Interest paid $ 41 $ 1,745
Non-cash equipment financing $ -- $ 1,088
Minority interest in CCC other investment distribution -- 254
===================================================================================================================
</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 with a face value of
$37.5 million. CCC is a supplier of automobile claims information and
processing, claims management software and communications services. 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. 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 which White River held. As of June 30,
1997, White River held approximately 36% of the total outstanding shares of CCC
Common Stock, as well as CCC Preferred Stock with an aggregate stated value of
$4.7 million. Certain of the shares of the CCC Preferred Stock held by White
River provide White River with 51% of the voting power associated with CCC's
total outstanding voting stock, when combined with the shares of CCC Common
Stock held by White River.
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,
6
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WHITE RIVER CORPORATION AND SUBSIDIARIES
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 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 1996 Annual Report to Stockholders and Form 10-K
as filed with the Securities and Exchange Commission.
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.
Certain accounts in prior year financial statements have been reclassified for
comparative purposes to conform with the presentation in the current year
financial statements.
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 and six
month periods ended June 30, 1997, and 1996, by the weighted average number of
outstanding shares of Common Stock for such periods, which was 4.9 million for
both the 1997 and 1996 periods. 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 six month periods ended June 30, 1997, and 1996, by
the sum of the weighted average number of outstanding shares of Common Stock and
potentially dilutive securities, if any, for such periods. No dividends were
declared on shares of Common Stock during such periods.
7
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WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," in February 1997.
This statement establishes standards for computing and presenting earnings per
share ("EPS"). This statement is effective for financial statements issued for
periods ending after December 15, 1997; earlier adoption is not permitted. The
adoption of the SFAS No. 128 would not have had a material effect on the EPS
information presented for the quarters and six month period ended June 30, 1997
and 1996.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive Income," in June
1997. In addition to net income, comprehensive income includes items recorded
directly to stockholders' equity, such as unrealized gains and losses on certain
investments in equity, preferred stock accretion, preferred stock dividends and
the income tax benefit related to the exercise of certain stock options. This
statement establishes new standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements.
This statement is effective for fiscal years beginning after December 15, 1997.
Adoption of this standard will only require an additional financial statement
disclosure detailing the Company's comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes new standards
for reporting information about operating segments in interim and annual
financial statements. This statement is also effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
impact this statement will have on the consolidated financial statements.
NOTE 5. INCOME TAXES
Income tax expense is based on income recognized for financial statement
purposes and includes the effects of temporary differences between such income
and that recognized for tax return purposes. For the six month period ended June
30,1997, the Company recorded income tax expense of $3.6 million on pretax
income of $0.8 million. For the six month period ended June 30, 1996, the
Company recorded income tax expense of $5.6 million on pretax income of $1.4
million. The major components that caused the Company's effective tax rate to
exceed the Federal statutory rate of 35% in both years are the amortization of
goodwill and the undistributed earnings of CCC.
NOTE 6. LEGAL PROCEEDINGS
The Company is a party to various claims and routine litigation arising in the
normal course of business. Such claims and litigation are not expected to have a
material adverse effect on the financial condition or results of operations of
the Company.
NOTE 7. SUBSEQUENT EVENT
On July 25, 1997, White River sold its entire common stock investment in
McFarland Energy due to the purchase of McFarland by Monterey Acquisition
Corporation. As a result of this transaction, the Company realized an after tax
gain on the sale of $4.5 million in its Statement of Operations during the
quarter ending September 30, 1997.
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 June 30, 1997 and December 31, 1996
Book value per common and common equivalent share increased 6.3% to $55.28 per
share at June 30, 1997, as compared to $51.98 at December 31, 1996. The increase
was primarily due to unrealized gains from White River's investments in Cross
Timbers Oil Company common stock and in McFarland Energy common stock. The
increase in McFarland's value reflects the impending sale of all of our holdings
of said common shares on July 25, 1997 as a result of the purchase of McFarland
by Monterey Acquisition Corporation. The combined impact on book value of
increases in net unrealized investment gains versus year-end 1996 was $2.04 per
share.
Cash and cash equivalents as of June 30, 1997, totalled $192.1 million, as
compared to $188.4 million as of December 31, 1996. Substantially all of the
cash and cash equivalent balances were deposited with several major banking
institutions in interest-bearing accounts with maturities of six days or less.
At June 30, 1997, such deposits earned a weighted average interest rate of 5.6%
per annum, as compared to 5.4% per annum at December 31, 1996.
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 a 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 Six Months Ended June 30, 1997, and 1996
The Company reported a net loss applicable to common stock of $0.4 million, or
$0.08 per fully-diluted common share, for the quarter ended June 30, 1997, as
compared to a net loss applicable to common stock of $2.8 million, or $0.58 per
fully-diluted common share, for the quarter ended June 30, 1996. The 1997 second
quarter results reflect pretax operating income of $1.6 million, as compared to
pretax operating income of $0.1 million for the same period in 1996.
For the six months ended June 30, 1997, White River reported a net loss
applicable to common stock of $3.0 million, or $0.62 per fully-diluted common
share, as compared to a net loss of $4.5 million, or $0.92 per fully-diluted
common share for the same period in 1996. The 1997 year-to-date results reflect
a pretax operating loss of $0.3 million, as compared to pretax operating income
of $2.4 million for the same period in 1996.
Investment Operations
White River's pretax investment income totalled $2.7 million for the quarter
ended June 30, 1997, and $5.3 million for the six months then ended, as compared
to $1.9 million and $3.9 million for the quarter and six months ended June 30,
1996, respectively. These increases reflect the increased balances in cash and
cash equivalents during the first six months of 1997, as compared the same
period in 1996.
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WHITE RIVER CORPORATION AND SUBSIDIARIES
Pretax net realized investment gains totalled $0.5 million for the quarter ended
June 30, 1997, and $1.2 million for the six months then ended, as compared to
$1.0 million for the quarter and six months ended June 30, 1996.
Insurance-Related Services
CCC's revenues from insurance-related services increased $6.3 million, or 19.8%,
to $38.3 million for the quarter ended June 30, 1997, from $32.0 million for the
same period in 1996. For the six months ended June 30, 1997, CCC's revenues from
insurance-related services increased 18.5%, to $75.1 million, from $63.3 million
for the same period in 1996. This improvement was primarily due to higher
revenues from workflow/collision estimating software and from CCC's outsourced
claims and vehicle valuation services. Collision estimating software licensing
revenues increased primarily due to growth in the number of software licenses,
particularly in the Autobody and insurance markets. Outsourced claims services
revenues increased during 1997 primarily as a result of higher transaction
volume, and vehicle valuation services increased as a result of improvements to
the product which assist customers in settling totalled vehicle claims.
On a stand-alone basis, CCC reported net income before accretion and dividends
on preferred stock of $3.9 million and $7.3 million for the quarter and six
months ended June 30, 1997, respectively, as compared to $4.1 million and $6.7
million for the same periods in 1996. Such stand-alone 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 net income as
reported by White River by $1.8 million and $3.6 million for the quarter and six
months ended June 30, 1997, as compared to $4.3 million and $7.8 million for the
respective periods in 1996. In addition, White River recorded an expense of $2.5
million and $4.6 million, respectively, for the quarter and six month period
ended June 30, 1997, which represents the equity in earnings of noncontrolling
interest in CCC. No comparable expense was recognized in the quarter and six
month period ended June 30, 1996, because the minority interest prior to the
August, 1996 CCC IPO represented a recoverable balance which was not reflected
in the consolidated statements of financial condition, as the minority interest
did not guarantee the obligations of CCC nor was it otherwise committed to
provide further financial support. The 1996 adjustment to CCC's stand-alone
results includes income tax benefits of $1.8 million and $3.1 million for the
quarter and six months ended June 30, 1996 which was recorded by CCC but which
were reflected in consolidation by White River as a reduction of goodwill.
Fashion Accessories
Hanover Accessories, which began operations in April 1996, generated $1.8
million in revenue from the sale of fashion accessories during the second
quarter 1997, with a net loss of $0.1 million. For the six months year-to-date,
revenues were $3.3 million, with a year-to-date net loss of $0.3 million. Sales
of Hanover are reported as Other Revenues in the accompanying consolidated
interim statements of operations. As of June 30, 1997, White River's investment
in and advances to Hanover totalled $2.2 million.
Operating Expenses
Compensation and benefits expense increased 9.8%, to $17.7 million for the
quarter ended June 30, 1997, as compared to $16.1 million for the same period in
1996. Hanover's operations, which did not begin until April
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WHITE RIVER CORPORATION AND SUBSIDIARIES
1996, added $0.8 million to this amount during the second quarter of 1997.
Expenses related to stock-based incentive awards decreased by $1.2 million in
the second quarter of 1997 when compared with the second quarter of 1996 due to
accelerated vesting of certain awards during the second quarter of 1996.
Additionally, CCC's compensation and benefits increased by $2.0 million for the
quarter ended June 30, 1997 when compared with the 1996 quarter as a result of
higher staffing required to support revenue growth and product development
activities. For the six months ended June 30, 1997, compensation and benefits
expense totalled $36.8 million, as compared to $30.3 million for the
corresponding period in 1996. The 1997 six month results include a $1.8 million
increase in White River's provision for stock based incentive awards, $1.5
million related to Hanover's operations, and a $3.3 million increase in CCC's
compensation and benefits.
Other operating expenses increased 33.2%, to $23.6 million, for the quarter
ended June 30, 1997, as compared to $17.7 million for the corresponding quarter
in 1996. Such increase was due to (i) an increase in CCC's operating expenses of
$3.6 million, or 21.2%, which was primarily attributable to an increase in
product development and customer support capacity necessary to support increased
revenues, as well as to efforts to build and upgrade internal systems.
Furthermore, during the second quarter 1996, CCC had constraints imposed on
operating expenditures due to principal payment obligations and restrictive
covenants attributable to its previous commercial bank credit facility; (ii) the
recording by the Company of a $2.5 million expense related to equity in earnings
of a noncontrolling interest in CCC for the second quarter 1997. No comparable
expense was recognized in the second quarter 1996, because the minority interest
prior to the August, 1996 CCC IPO represented a recoverable balance which was
not reflected in the consolidated statements of financial condition, as the
minority interest did not guarantee the obligations of CCC nor was it otherwise
committed to provide further financial support. For the six months ended June
30, 1997, other operating expenses totalled $47.2 million, as compared to $34.6
million for the 1996 period, representing an increase of 36.7%.
Interest Expense
Interest expense totalled thirty five thousand dollars and seventy two thousand
dollars for the quarter and six months ended June 30, 1997, respectively, as
compared to $1.0 million and $2.0 million for the corresponding periods in 1996.
The decrease is due primarily to the repayment of CCC's long-term debt and
contract funding amortization following its initial public offering in August
1996.
New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," in February 1997.
This statement establishes standards for computing and presenting earnings per
share ("EPS"). This statement is effective for financial statements issued for
periods ending after December 15,1997; earlier adoption is not permitted. The
adoption of the SFAS No. 128 would not have had a material effect on the EPS
information presented for the quarters and six month periods ended June 30, 1997
and 1996.
The FASB has also issued SFAS No. 130, "Reporting Comprehensive Income," in June
1997. In addition to net income, comprehensive income includes items recorded
directly to stockholders' equity, such as unrealized gains and losses on certain
investments in equity, preferred stock accretion, preferred stock dividends and
the
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WHITE RIVER CORPORATION AND SUBSIDIARIES
income tax benefit related to the exercise of certain stock options. This
statement establishes new standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements.
This statement is effective for fiscal years beginning after December 15, 1997.
Adoption of this standard will only require an additional financial statement
disclosure detailing the Company's comprehensive income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes new standards
for reporting information about operating segments in interim and annual
financial statements. This statement is also effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
impact this statement will have on the consolidated financial statements.
Liquidity and Capital Resources
White River
As of June 30, 1997, the Company had consolidated cash and cash equivalents of
$192.1 million, of which $178.5 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. As of June 30, 1997, 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 June 30, 1997, totalled approximately 1.5 million shares at
an aggregate cost of $48.9 million. As of June 30, 1997, 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.
12
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
CCC
Since the retirement of its 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 six months ended June 30, 1997, net cash provided by CCC's
operating activities was $11.2 million. CCC applied $3.8 million of cash to
purchase equipment and software and invested $6.0 million in marketable
securities, net of proceeds from the sale of such securities.
Management believes that cash flows from CCC's operations and an available $20.0
million under its 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
On May 8, 1997, White River held its regular annual meeting (the
"Annual Meeting") of stockholders for purposes of (i) electing a Class
I Director with term ending in 2000, (ii) approving the appointment of
Ernst & Young LLP ("Ernst & Young") as White River's independent
auditors for 1997, and (iii) transacting such other business as may be
properly brought before the Annual Meeting or any adjournment thereof.
At the Annual Meeting, Andrew Delaney was elected as a Class I
Director with a term ending in 1999 with a total of 4,251,639 votes
cast for, zero votes cast against, and 3,465 votes withheld. After the
Annual Meeting, Gordon S. Macklin continued to serve as a Class II
Director with a term ending in 1998 and Robert T. Marto and Patrick M.
Byrne continue to serve as Class III Directors with terms ending in
1999.
In addition, at the Annual Meeting, Ernst & Young was approved as
White River's independent auditors for 1997 with a total of 4,253,171
votes cast for, 1,157 votes cast against, and 776 votes withheld.
Item 5. Other Information
None.
14
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1* Purchase Agreement, dated as of April 15, 1994, among White
River Ventures, Inc. and Teachers Insurance and Annuity
Association of America, The Mutual Life Insurance Company of
New York, TCW Special Placements Fund II, TCW Capital and
BankAmerica Capital Investments (Current Report on Form 8-K
dated April 15, 1994, File No. 0-22604 -- Exhibit 2.1).
2.1 (a) Index of Omitted Schedules; Agreement to Furnish Upon Request
(Current Report on Form 8-K dated April 15, 1994, File No. 0-
22604 -- Exhibit 2.1(a)).
2.2* Reorganization Agreement, dated as of June 16, 1994, between
InfoVest Corporation and White River Ventures, Inc. (Current
Report on Form 8-K dated June 16, 1994, File No. 0- 22604 --
Exhibit 2.1).
2.2 (a) Index of Omitted Schedules; Agreement to Furnish Upon Request
(Current Report on Form 8-K dated June 16, 1994, File No. 0-
22604-- Exhibit 2.1(a)).
2.3* Stock and Asset Purchase Agreement, dated as of August 25,
1994, by and among InfoVest Corporation and Credit Card
Service Corporation and Faneuil, Inc., New Service, Inc. and
Faneuil ISG, Inc. (Current Report on Form 8-K dated August
25, 1994, File No. 0-22604 -- Exhibit 2.1).
2.3 (a) Index of Omitted Exhibits and Schedules; Agreement to Furnish
Upon Request (Current Report on Form 8-K dated August 25,
1994, File No. 0-22604 -- Exhibit 2.1(a)).
3.1* Restated Certificate of Incorporation of the Registrant as
filed with the Secretary of State of the State of Delaware
(Form 10, File No. 0-22604 -- Exhibit 3.1).
3.2* By-Laws of the Registrant (Form 10, File No. 0-22604 --
Exhibit 3.2).
4.1* Rights Agreement between the Registrant and First Chicago
Trust Company of New York, as Rights Agent (Form 8-A, File
No. 0-22604 -- Exhibit 1).
4.2* Certificate of Designations of Series A, Non-Participating
Cumulative Preferred Stock (Form 10, File No. 0-22604 --
Exhibit 4.2).
4.3* Certificate of Designations of Series B, Participating
Cumulative Preferred Stock (Form 10- K for the year ended
December 31, 1993, File No. 0-22604 -- Exhibit 4.3).
4.4* White River Common Stock Certificate (Form 10-K for the year
ended December 31, 1993, File No. 0-22604 -- Exhibit 4.4).
10.1* 1993 Incentive Compensation Plan of the Registrant adopted on
September 24, 1993 (Form 10, File No. 0-22604 -- Exhibit
10.1).
10.2* Voluntary Deferred Compensation Plan of the Registrant
adopted on September 24, 1993 (Form 10, File No. 0-22604 --
Exhibit 10.2).
10.3* Deferred Benefit Plan of the Registrant adopted on September
24, 1993 (Form 10, File No. 0-22604 -- Exhibit 10.3).
15
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
10.4* Letter Agreement Evidencing Award of Performance Units
between the Registrant and Andrew Delaney (Form 10-K for the
year ended December 31, 1993, File No. 0-22604 -- Exhibit
10.4).
10.5* Letter Agreement Evidencing Award of Performance Units
between the Registrant and Gordon S. Macklin (Form 10-K for
the year ended December 31, 1993, File No. 0-22604 -- Exhibit
10.5).
10.6* Credit Agreement dated as of December 13, 1993, between the
Registrant and Fund American Enterprises Holdings, Inc. (Form
10-K for the year ended December 31, 1993, File No. 0-22604
-- Exhibit 10.6).
10.7* Intercompany Services and Expense Sharing Agreement dated as
of September 24, 1993, between the Registrant and Fund
American Enterprises Holdings, Inc. (Form 10, File No. 0-
22604 -- Exhibit 10.8).
10.8* First Amendment to the Deferred Benefit Plan of the
Registrant dated as of December 17, 1993 (Form 10-K for the
year ended December 31, 1993, File No. 0-22604 -- Exhibit
10.10).
10.9* Stockholders' Agreement, dated as of June 16, 1994, by and
among CCC, White River Ventures, Inc. and the Inside
Stockholders of CCC identified on Exhibit A thereto (Current
Report on Form 8-K dated June 16, 1994, File No. 0-22604 --
Exhibit 10.1).
10.10* Regulatory Contingency Agreement, dated as of June 16, 1994,
between CCC and White River Ventures, Inc. (Current Report on
Form 8-K dated June 16, 1994, File No. 0-22604 -- Exhibit
10.2).
10.11* Registration Rights Agreement, dated as of May 23, 1995,
between the Registrant and the Selling Stockholders referred
to therein (incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-3 (File No. 33-
93544).
11* Statement re Computation of Per Share Earnings (incorporated
herein by reference to Exhibit 11 of the Company's Annual
Report on Form 10-K, dated December 31, 1996, Commission File
No. 0-22604 -- Exhibit 11).
27 Financial Data Schedule
* Previously filed as indicated and incorporated herein by
reference.
(b) Reports on Form 8-K
None.
16
<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: August 8, 1997 White River Corporation
By: /s/ Robert T. Marto
------------------------------
Name: Robert T. Marto
Title: President and
Chief Executive Officer
By: /s/ Michael E.B. Spicer
------------------------------
Name: Michael E.B. Spicer
Title: Chief Financial Officer and
Treasurer
17
<PAGE>
WHITE RIVER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Exhibit Sequential
Number Exhibit Index Page Number
--------- ------------------------ ------------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1997 FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 192,086
<SECURITIES> 97,358
<RECEIVABLES> 14,722
<ALLOWANCES> 2,283
<INVENTORY> 0
<CURRENT-ASSETS> 307,247
<PP&E> 59,443
<DEPRECIATION> 40,798
<TOTAL-ASSETS> 377,229
<CURRENT-LIABILITIES> 26,880
<BONDS> 50
7,182
0
<COMMON> 64
<OTHER-SE> 263,950
<TOTAL-LIABILITY-AND-EQUITY> 377,229
<SALES> 78,399
<TOTAL-REVENUES> 83,697
<CGS> 0
<TOTAL-COSTS> 83,998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 554
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> 801
<INCOME-TAX> 3,601
<INCOME-CONTINUING> (2,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,800)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
