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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------------

FORM 10-K

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

/ / 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: 0-28268

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USCS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 94-1727009
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification)

2969 PROSPECT PARK DRIVE, RANCHO CORDOVA
CALIFORNIA 95670-6148
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (916) 636-4500

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------- --------------------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK PAR VALUE
$.05 PER SHARE
---------------------------------------------
(Title of Class)

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______

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10K. __X__

The aggregate market value of the Registrant's Common Stock held by
non-affiliates as of March 10, 1997 was $194,786,012.

Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 10, 1997: 23,117,761 shares of $.05 par
value Common Stock.

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DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT DESCRIPTION 10-K PART
- ---------------------------------------- --------------------------------------
Proxy Statement For Annual Meeting Of Part I--Item 4
Stockholders
dated April 17, 1997

Pages 1 through 10 Part III--Item 10, 11, 12, 13

TABLE OF CONTENTS
PART I

ITEM PAGE
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1. Business............................................................................................ 2
2. Properties.......................................................................................... 8
3. Legal Proceedings................................................................................... 9
4. Submission of Matters to a Vote of Security Holders................................................. 9

PART II

5. Market for the Registrant's Common Equity and Related Stockholder Matters........................... 9
6. Selected Financial Data............................................................................. 10
7. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 11
8. Financial Statements and Supplementary Data......................................................... 19
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................ 37

PART III

10. Directors and Executive Officers of the Registrant.................................................. 37
11. Executive Compensation.............................................................................. 39
12. Security Ownership of Certain Beneficial Owners and Management...................................... 39
13. Certain Relationships and Related Transactions...................................................... 39

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8K..................................... 40
Signatures.......................................................................................... 44

PART I

ITEM 1. BUSINESS

The statements that are not historical fact or that are not statements of
current status are forward-looking statements. The Company's future results may
differ significantly from the results and forward-looking statements discussed
in this report. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--FACTORS THAT MAY AFFECT FUTURE RESULTS."

THE COMPANY

USCS International, Inc. (USCS) is a leading provider of customer management
software and services to the global communications industry. The Company's
clients include cable television, wireless and wire-line telephony, Direct
Broadcast Satellite (DBS) and multi-service providers in the U.S. and 19 other
countries. The Company's software and services enable its clients to manage
mission-critical customer relationship functions, including new account set-up,
order processing, customer support, management reporting and marketing analysis.
The Company also provides bill processing services, which include generation of
high-quality customized billing statements that are produced in automated
facilities designed to minimize turnaround time and mailing costs. USCS also
offers a variety of complementary professional services, including consulting,
application development and client training, as well as statement design
services that allow clients to use the billing statement as a communication and
marketing tool.

USCS has been providing comprehensive customer management software and
services to the cable television industry for more than 25 years. The Company's
software currently supports approximately 54% of U.S. cable television
subscribers and is used by a majority of the largest cable television service
providers in the U.S. The Company provides bill processing services to clients
serving 54% of U.S. cable television subscribers, 36% of U.S. cellular users and
10% of U.S. wire-line telephony customers and to a variety of other service
providers. The Company's bill processing clients include substantially all of
its domestic customer management software clients and other service providers
such as Ameritech, AT&T and Frontier Communications. At year-end the Company's
monthly statement production had risen to over 65 million bills. The Company is
the largest centralized first class mailer in the U.S., responsible for
generating approximately 1.6% of the total volume of all U.S. first class mail,
including customer remittance volume. Bill processing services are generally
provided to software clients in bundled contracts and are also sold separately.

In 1993, the Company deployed Intelecable-TM-, which the Company believes is
the first customer management software product designed for multi-service
providers. The Company also believes that Intelecable is the only integrated
multi-service customer management software system currently operational and
commercially available. At year-end there were over 60 Intelecable installations
worldwide, including combined cable/telephony service providers in the U.K., a
combined cable/wireless cable/DBS provider in Australia and two interactive
video providers in the U.S., including BellSouth Entertainment. The Company has
also expanded its bill presentment services by offering technology licensing and
consolidated billing statements that combine data from multiple services, such
as wireless and wire-line telephony, into a single integrated billing statement.

U.S. Computer Services, the predecessor to USCS International, Inc., was
incorporated under California law on November 18, 1969. USCS International,
Inc., incorporated under Delaware law on April 10, 1996, succeeded to the
business of the California corporation pursuant to a reincorporation effective
May 31, 1996. Unless the context otherwise requires, all references in this
annual report to "USCS" or the "Company" refer to USCS International, Inc., a
Delaware corporation, its predecessor, U.S. Computer Services, a California
corporation, and their consolidated subsidiaries.

PRODUCTS AND SERVICES

CUSTOMER MANAGEMENT SOFTWARE

The Company's primary customer management software products are DDP/SQL and
Intelecable. The Company markets DDP/SQL to the traditional U.S. cable
television provider market. Intelecable is targeted to single and multi-service
providers in the U.S. and internationally. The Company also offers CableWorks, a
PC-based system for smaller operators. Additionally, certain clients continue to
use earlier generations of the Company's software that are no longer marketed to
new clients. Both DDP/SQL and Intelecable are scaleable, including the Company's
new internet-based customer support product, CyberCSR-TM-, and are available in
basic systems with optional modules, allowing the service provider to design a
customized system which can effectively manage a growing customer base.

The Company licenses its software products to its clients under multi-year
license agreements. License fees are generally paid monthly based on the number
of subscribers or end-users served by the client. These agreements are typically
subject to periodic renewals and inflation-based license fee adjustments.

DDP/SQL: DDP/SQL is the Company's primary software system for cable
television companies in North America. Currently, a majority of the largest
cable television service providers in the U.S. use the DDP/SQL system. DDP/SQL
offers a basic system with optional modules for expanded functionality. DDP/SQL
uses a relational database which allows the user to query logical relationships
without the need to predefine or describe a specific access path to the data.
Information generated by DDP/SQL can be used with the client's internal
information systems and off-the-shelf software programs. This interoperability
allows users, for example, to easily create financial spreadsheets based on
information generated by DDP/SQL.

The Company offers DDP/SQL on either a stand-alone or a service bureau
basis. Stand-alone systems currently support approximately 80% of the Company's
client subscriber base while 20% are supported on a service bureau basis. For
stand-alone clients, the Company installs a complete DDP/SQL system at the
provider's facility, including necessary hardware and peripherals. Clients using
a service bureau arrangement access the Company's on-line processors via wide
area networks. The Company's Technical Response Center monitors traffic and
network availability to identify and respond to outages in the system. DDP/ SQL
runs on massively parallel processing hardware manufactured by Tandem. The
Company is a value-added reseller of Tandem equipment. The Company also sells to
its clients peripheral hardware made by manufacturers other than Tandem, and
generally enters into hardware maintenance agreements with its clients. The
Company also provides lease financing and maintenance services primarily for
companies operating systems on a stand-alone basis. See "PRODUCTS AND
SERVICES--Hardware Leasing and Sales" and " PRODUCT AND SERVICES--Client Support
and Care".

INTELECABLE: The Company believes that Intelecable is the world's first
customer management software system designed for multi-service providers in the
converging communications marketplace. The Company also believes that
Intelecable is the only integrated multi-service, multi-language enabled
software system currently operational and commercially available. First
installed in 1993, Intelecable supports a diverse array of communications
services, including cable television, telephony, combined cable/ telephony,
interactive video and DBS. At year end there were over 60 installations of
Intelecable worldwide. Intelecable is enabled with National Language Support
double-byte capability, which allows operation in a variety of foreign
languages, including Japanese and Chinese. The Company believes that Intelecable
is the only customer management software system currently operational that has
multi-platform capabilities. Initially offered on IBM's AIX (UNIX) operating
system, Intelecable has been ported to Tandem's Integrity NR, Silicon Graphics
Challenge, Group Bull Escala and the Hewlett-Packard 9000. It is also expected
to be available on Tandem's OSS platform. The Tandem OSS port is expected to
provide a migration path to Intelecable for DDP/SQL users requiring
multi-service customer management software capabilities.

Intelecable is based on an open systems architecture, which facilitates
customization and interoperability with other information systems. The
Intelecable system has been developed using standard design methodologies and
transaction processing monitor architecture. Intelecable also uses an embedded
standard query language (SQL), which facilitates access to the database by
user-created applications. The design of Intelecable delivers a high-level
programming interface, which allows extensive customization without complex code
changes. Intelecable uses an Oracle relational database, which allows clients to
maintain an integrated database for each service offered by the client.

CABLEWORKS: The Company markets its CableWorks PC-based customer management
software product to domestic and international cable operators that have lower
transaction volume requirements than operators supported by DDP/SQL or
Intelecable. CableWorks is designed to introduce smaller cable operators to the
Company's products, with the expectation that such operators will migrate to
Intelecable or DDP/SQL as their business grows.

PROFESSIONAL SERVICES, TRAINING AND SUPPORT: The Company maintains various
professional services groups to provide global consulting services to its
software customers, including assistance with database definition and
initialization, system operations, network consolidation, and performance and
decision support services. These groups also provide clients with assistance in
developing custom-tailored applications and interfaces that are operable with
the Company's customer management software to enhance client operations. The
Company provides complete product documentation and training services to users
of its software products, including CD-ROM-based product documentation and
training. The Company's ClassROM-Registered Trademark- software provides
interactive instruction and product training on CD-ROM. The Company maintains
training facilities in California and the U.K.

BILL PROCESSING SERVICES

The Company provides bill processing services and solutions in a fully
integrated and automated production environment that rapidly and
cost-effectively transforms electronic data received from the client into
informative, accurate and customized billing statements. In addition, the
Company's statement-based marketing services allow clients to use the billing
statement as a marketing tool to reinforce a corporate image, advertise special
offers and features and otherwise market its services to its customers. To
address the needs of multi-service providers, the Company offers billing
statements that combine data from multiple services, such as wireless and
wire-line telephony, into a consolidated billing statement. In addition, the
Company also licenses its advanced technology. The company believes it was the
first major mailer to fully meet the requirements of the 1996 Postal
Reclassification regulations, thereby further maximizing postal savings for its
clients.

STATEMENT PRODUCTION: The Company operates two statement production
facilities in the Northern California area. These facilities receive a data
stream from the client's customer management software (whether a client's legacy
or third party system, a competitor's system or the Company's software),
manipulate the data into a usable format, create cost-effective, informative,
easy-to-read and accurate customized billing statements and mail the statements
to the end-users.

Using patented processes and technologies, the Company provides a
fully-integrated, computerized and automated production environment that (i)
processes, logs, verifies and authenticates all customer data, (ii) creates
automated production controls for every statement, including form bar codes,
weight and thickness parameters, unique statement tracking numbers, "due out"
dates, address correction, carrier route/delivery point bar codes and postal
processing parameters, (iii) models every production run on-line before printing
and (iv) enables postal processing, sorting and discounting to be performed
on-line.

Full real-time automation enables the Company to monitor quality, control
remakes, predict and schedule production loading, verify customer data, forecast
production volumes and maintain production system history on-line. The system is
controlled by an on-line production control system that is based on

advanced client/server architecture and has high-speed data transmission
capabilities. A local area network links the production equipment to the
production control system. To provide clients with real-time information
regarding the progress of the billing statement production process, the Company
has developed its Direct Access-TM- client information system, which provides a
customized view into the facility to allow clients to monitor the status of
their jobs. Direct Access, which is currently installed in a number of client
sites, includes a client/server architecture and a PC-based graphical user
interface that provides traceability of an individual statement from the
beginning of statement production until some period after distribution.

The Company also offers consolidated billing statements for multi-service
providers, which combine data from multiple services, such as wireless and
wire-line telephony, into a single integrated statement. Consolidated statements
can offer clients significant savings both in paper and mailing costs.
Consolidated statements can also be a powerful marketing tool for companies
seeking to establish brand name recognition and sell combined services.

The Company offers a full range of technical support for the Company's bill
processing clients. Customized programming tools have been developed that allow
it to receive electronic information streams from a variety of client systems
without the need to make changes to the customer's system. These tools allow for
rapid and smooth transitions when clients outsource bill processing functions to
the Company.

TECHNOLOGY LICENSING: In 1996, the Company licensed its statement
processing software to enable a client to take advantage of the Company's
advanced processing and functions in the client's own facilities. AT&T is the
first customer to license the Company's statement processing software.

STATEMENT-BASED MARKETING SERVICES: The Company provides statement-based
marketing services that allow its clients to transform regular customer billing
statements into communication tools. The billing statement is often the only
form of regular communication between a service provider and its customers. Many
clients have the opportunity, through the Company's statement-based marketing
and creative design services, to use the billing statement to reinforce a
corporate image, advertise special offers and features, deliver
customer-specific messages and otherwise market their services to their
customers.

FUTURE ELECTRONIC DELIVERY ALTERNATIVES: The Company's automated
information and technology infrastructure, which electronically prepares and
monitors the statement until final printing, provides the basis for the
Company's development of electronic bill presentment. The proliferation of
on-line services and the Internet provides an opportunity for communications
service providers to bill customers electronically through a PC or other device.
The Company believes that as electronic billing and payment solutions become
more accepted, communications service providers, utilities, financial services
and other industries will require electronic statement presentment capabilities.
USCS has developed an electronic statement processing prototype and has
announced a marketing alliance with CyberCash, Inc. to begin integrating
electronic presentment technologies into the Company's systems.

HARDWARE LEASING AND SALES

The Company sells computer equipment and provides leasing and maintenance
services to selected software clients which purchase stand-alone systems
primarily in the U.S. Maintenance is typically billed in advance of providing
the service. Revenue from sales of computer hardware and providing associated
maintenance and leasing services has been declining in absolute dollars and as a
percentage of total revenue. The Company will continue to offer hardware and
related services to current and future clients, but expects the decline to
continue.

CLIENTS

The Company provides customer management software and services to clients in
the U.S. and 19 other countries. In addition to communications service
providers, the Company provides bill processing services to companies in other
industries, including utilities and financial services. The Company intends to
seek additional non-communications clients for its bill processing services.

Aggregate revenue from the Company's ten largest clients accounted for
approximately two-thirds of total revenue in 1996, 1995 and 1994. Three clients
accounted for 47%, 46% and 41% in 1996, 1995 and 1994, respectively.

Tele-Communications,Inc. ("TCI"), after giving effect to the purchase of the
cable operations of Viacom in 1996, which was a USCS client, accounted for $55.7
million or 21%, $47.3 million or 21%, and $42.8 million or 23% of total revenue
in 1996, 1995, and 1994, respectively. In June 1996, the Company entered into a
new three-and-one-half year contract to continue to provide customer management
software and bill processing services for TCI. Under the contract, TCI may
remove subscribers from the agreement during its term, subject to price
increases based on the number of subscribers remaining under contract. TCI has
announced a plan to replace the Company's customer management software with an
in-house system. The Company cannot estimate when, or if, TCI would be
successful in converting its subscriber base to the TCI system. Another client,
which accounted for 4% of total revenue in 1996, has orally advised the Company
that it may move to an alternative system for its customer management software
requirements.

The Company's largest bill processing client, Ameritech, accounted for $41.1
million or 16%, $38.8 million or 17%, and $24.6 million or 13% of total revenue
in 1996, 1995, and 1994, respectively. Ameritech became a client early in 1994,
and has long-term contracts with the Company expiring in 2000 and 2001. Another
bill processing client, Cincinnati Bell Information Systems ("CBIS"), a client
since 1990, accounted for $25.0 million or 10%, $17.9 million or 8%, and $10.3
million or 5% of total revenue in 1996, 1995 and 1994, respectively. In early
1997, the Company entered into a new contract with CBIS expiring in 2002, which
replaced the contract due to expire late in 1997. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-- FACTORS THAT MAY
AFFECT FUTURE RESULTS" regarding dependence on certain marketplaces,
concentration of client base, and other factors that may impact the Company's
relationship with its clients and on the Company's future revenue and net
income.

CLIENT SUPPORT AND CARE

USCS provides worldwide training and support to its clients. In the U.S.,
client care is divided into product specific teams, with one team focusing on
customer management software and the other team focusing on bill processing
services. Both teams provide broad-based, 24-hour, 7-day support and technical
assistance. The Company has developed a full range of training products and
documentation including ClassROM, which the Company believes to be the first
CD-ROM based training product, for its software clients. Supplementing the front
line software support groups for service bureau software customers is the
Company's Technical Response Center, which monitors traffic and network
availability to identify and respond to outages in the system. Internationally,
Intelecable is supported by teams located in the U.S. and the U.K. as well as by
alliance partners.

SALES AND MARKETING

The Company markets its products and services in the U.S. with a direct
sales force, including account management and technical support teams, and
internationally through alliance partners. The Company's sales and marketing
teams are coordinated by the Company's Strategic Accounts Council to promote a
unified marketing and sales effort to its clients.

Software and services are sold primarily to cable, DBS and multi-service
providers through direct sales channels and in conjunction with international
alliance partners. In North America the Company operates a software and services
sales and marketing team, including account management and technical support
teams.

The Company's international sales staff is coordinated by geographic area,
including dedicated account and technical support personnel located in the U.K.
office. In addition to direct sales, the Company has contracted with 16 alliance
partners throughout the world who are responsible for sales, marketing, support
and local customization.

The Company believes that sales of separate bill processing services to
telecommunications service providers such as Regional Bell Operating Companies
("RBOCs") and cellular providers offer both increased revenue opportunities as
well as increased visibility for the Company. The Company maintains a sales
staff, including account management and technical support teams and significant
design resources, to target this market. The Company has begun a bill processing
international marketing effort that seeks to exploit what the Company believes
is significant growth potential in that market. The Company has also entered
into alliances with partners such as Xerox, Mellon Bank and CyberCash to jointly
market its bill processing capabilities.

COMPETITION

The market for the Company's products and services is highly competitive,
and competition is increasing as additional market opportunities arise. The
Company competes with both independent providers and developers of in-house
systems. The Company believes its most significant competitors for software
systems are Information Systems Development (owned by Cincinnati Bell), CSG
Systems International, Inc., and its own clients to the extent such clients
develop in-house systems. The most significant competitors for bill processing
services are in-house service providers. Other competitors include Moore
Corporation Ltd. and Output Technologies, Inc.

The Company believes that the principal competitive factors in the market
for customer management software include functionality and features of software,
quality of client care and support, type of hardware platform used and quality
of research and development. The principal competitive factors for bill
processing services include statement production accuracy, ability to meet
statement production deadlines, product quality and price. The Company believes
that it competes favorably with respect to these factors. However, the Company
believes that to remain competitive, it will require significant financial
resources in order to market its existing products and services, to maintain
customer service and support and to invest in research and development. Many of
the Company's existing and potential competitors may have greater resources than
the Company. The Company expects its competitors to continue to improve the
design and performance of their current systems and processes and to introduce
new systems and processes with improved price/performance characteristics. No
assurance can be given that the Company will be able to compete successfully in
the U.S. or internationally.

RESEARCH AND DEVELOPMENT

The Company's research and development efforts are focused on introducing
new products and services as well as ongoing enhancement of its existing
products and services. The Company believes that its investment in research and
development is critical to maintaining its leadership position. The Company
works closely with development partners such as Tandem, IBM and Hewlett-Packard
to enhance its products. The Company's research and development partnerships
typically provide for funding by development partners and include joint
marketing and other arrangements. In software product development, significant
emphasis is placed on compliance with worldwide development standards and
quality benchmarks. The Company's processes used at its research and development
center in El Dorado Hills, California, have received ISO 9001 certification, the
globally recognized quality standard. The Company

also continually enhances its bill processing services by developing software
and processes that increase production efficiency and aid clients in accessing
bill processing information.

INTELLECTUAL PROPERTY

The Company holds thirteen U.S. patents covering various aspects of its bill
processing services. In addition, the Company has applied for fourteen
additional U.S. patents. The Company has no foreign patents. The Company
believes that although the patents it holds are valuable, they will not
determine the Company's success, which depends principally upon its product
quality, marketing and service skills. However, despite patent protection, the
Company may be vulnerable to competitors who attempt to imitate the Company's
systems or processes and manufacturing techniques and processes. In addition,
other companies and inventors may receive patents that contain claims applicable
to the Company's system and processes. The sale of the Company's systems covered
by such patents could require licenses that may not be available on acceptable
terms, if at all. In addition, there can be no assurance that patent
applications will result in issued patents.

Although the Company attempts to protect its intellectual property rights
through patents, copyrights, trade secrets and other measures, there can be no
assurance that the Company will be able to protect its technology adequately or
that competitors will not be able to develop similar technology independently.
There can be no assurance that any patent applications that the Company may file
will be issued or that foreign intellectual property laws will protect the
Company's intellectual property rights. There can also be no assurance that
others will not independently develop similar systems, duplicate the Company's
systems or design around the patents licensed by or issued to the Company.

EMPLOYEES

As of December 31, 1996, the Company had 2,038 employees, of which 1,969
were full-time employees and 69 were part-time employees. None of the Company's
employees are represented by a labor union or covered by a collective bargaining
agreement. The Company considers its employee relations to be good.

ITEM 2. PROPERTIES

The Company owns two buildings in El Dorado Hills, California on
approximately 29 acres. One building of approximately 247,167 square feet is
utilized for statement processing operations and supporting activities and the
other of approximately 48,200 square feet is the Company's system and software
research and development center. In addition, the Company owns approximately 278
acres of undeveloped land adjacent to its buildings. The Company leases a total
of approximately 476,000 square feet in Rancho Cordova and El Dorado Hills,
California of which approximately 287,000 square feet is utilized primarily for
statement processing operations and warehousing. The other 189,000 square feet
is utilized primarily for corporate headquarters, sales and marketing, customer
support, and research and development.

The Company leases approximately 14,891 square feet in Norcross, Georgia for
its Eastern Regional Data Center and approximately 2,000 square feet in
Harrison, Arkansas for use by its subsidiary, CUO, Inc. The Company also leases
approximately 9,420 square feet in the U.K. The leases for these facilities
expire in the years 1997 through 2019.

The Company believes that its facilities are adequate for its proposed needs
through 1997 and that additional suitable space will be available or can be
constructed as required.

ITEM 3. LEGAL PROCEEDINGS

The Company has legal proceedings incidental to its normal business
activities. In the opinion of the Company, the outcome of the proceedings will
not have a material adverse effect on the Company's consolidated financial
position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Information regarding Submission Of Matters To A Vote Of Security Holders is
set forth under "ACTIONS TAKEN SINCE 1996 STOCKHOLDER MEETING" on page 3 of the
Company's Proxy Statement For Annual Meeting Of Stockholders, dated April 17,
1997, which pages are incorporated herein by reference.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The common stock of USCS International, Inc. is listed and traded on the
Nasdaq National Market under the trading symbol "USCS".

As of March 10, 1997, the number of record holders of USCS International,
Inc. was 186. The table below shows the high and low prices of the Company's
common stock as reported by the Nasdaq National Market for each quarter from the
date of the Company's initial public offering on June 20, 1996. The Company has
not paid any cash dividends on its common stock to date. The Company currently
intends to retain any future earnings for its business and does not anticipate
paying any cash dividends on its common stock in the foreseeable future.

HIGH LOW
----- -----

CALENDAR QUARTER
(2ND QUARTER 1996 TO 1ST QUARTER 1997)
2nd (beginning June 21, 1996)................................................... 19 3/4 17
3rd............................................................................. 19 7/8 13 1/8
4th............................................................................. 18 1/2 14 3/4
1st (through March 10, 1997).................................................... 21 16 1/8

ITEM 6. SELECTED FINANCIAL DATA

The consolidated statements of operations data presented below for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992 and the consolidated balance
sheet data as of December 31, 1996, 1995, 1994, 1993 and 1992 are derived from
the consolidated financial statements of the Company, which have been audited.
The data set forth below should be read in conjunction with, and are qualified
by reference to, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
Notes thereto included elsewhere herein.

YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Consolidated Statements of Operations Data:
Revenue:
Software and services....................................... $ 240,848 $ 197,282 $ 155,247 $ 116,563 $ 106,348
Equipment sales and services................................ 22,366 31,981 33,558 49,501 39,739
--------- --------- --------- --------- ---------
Total....................................................... 263,214 229,263 188,805 166,064 146,087

Cost of revenue:
Software and services....................................... 147,743 127,702 103,046 72,758 65,904
Equipment sales and services................................ 13,180 19,538 19,476 31,561 27,097
--------- --------- --------- --------- ---------
Total....................................................... 160,923 147,240 122,522 104,319 93,001
Gross profit.................................................. 102,291 82,023 66,283 61,745 53,086

Operating expenses:
Research and development.................................... 25,140 17,815 16,700 16,007 12,170
Selling, general and administrative......................... 49,631 42,102 34,160 28,148 24,617
Consolidation and relocation................................ -- -- (364) 4,096 --
--------- --------- --------- --------- ---------
Total....................................................... 74,771 59,917 50,496 48,251 36,787
--------- --------- --------- --------- ---------
Operating income.............................................. 27,520 22,106 15,787 13,494 16,299
Interest expense.............................................. 3,185 4,966 4,284 4,609 5,049
--------- --------- --------- --------- ---------
Income before income taxes and cumulative effect of accounting
change...................................................... 24,335 17,140 11,503 8,885 11,250
Income tax provision.......................................... 9,826 6,770 5,334 4,330 4,355
--------- --------- --------- --------- ---------
Income before cumulative effect of accounting change (1)...... 14,509 10,370 6,169 4,555 6,895
Cumulative effect of accounting change (1).................... -- -- -- 2,408 --
--------- --------- --------- --------- ---------
Net income.................................................... $ 14,509 $ 10,370 $ 6,169 $ 6,963 $ 6,895
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income before cumulative effect of accounting change per share
(2)......................................................... $ 0.64 $ 0.49 $ 0.28 $ 0.20 $ 0.30
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share (2)...................................... $ 0.64 $ 0.49 $ 0.28 $ 0.31 $ 0.30
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in per share computation.......................... 22,555 21,138 21,882 22,129 22,675
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------

Consolidated Balance Sheets Data:
Cash.......................................................... $ 8,452 $ 6,627 $ 1,966 $ 8,158 $ 9,053
Working capital............................................... 37,041 23,440 11,454 20,029 23,757
Total assets.................................................. 205,559 180,450 157,331 140,922 125,997
Long-term debt less current portion (3)....................... 5,647 51,155 37,647 40,167 42,734
Stockholders' equity.......................................... 115,333 46,590 39,861 35,633 29,445

- ------------------------------
(1) In 1993, the Company adopted SFAS 109, resulting in an accumulated credit to
income for an adjustment in the calculation of income tax expense.

(2) Net income per share is based on the weighted average number of shares of
Common Stock and dilutive common equivalent shares from stock options and
warrants outstanding during the period using the treasury stock method.
Pursuant to certain Securities and Exchange Commission Staff Accounting
Bulletins, common and common equivalent shares issued during the 12-month
period prior to the date of the initial filing of the Registration Statement
have been included in the calculation as if they were outstanding for all
periods prior to their issuance. See Note 2 of Notes to Consolidated
Financial Statements.

(3) See Note 5 of Notes to Consolidated Financial Statements

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The statements that are not historical fact or that are not statements of
current status are forward-looking statements. The Company's future results may
differ significantly from the results and forward-looking statements discussed
in this Report. See "FACTORS THAT MAY AFFECT FUTURE RESULTS."

OVERVIEW

Founded in 1969, USCS is a leading provider of customer management software
and services to the global communications industry. USCS operates in one segment
with revenue derived primarily from providing software and bill processing
services to cable television and multi-service providers and bill processing
services to telecommunications companies. Software and bill processing services
to cable television and multi-service providers are generally provided under
bundled service arrangements. Most of the Company's revenue is derived based on
the number of subscribers or end-users of the Company's clients, the number of
billing statements mailed and/or the number of images, generally one-page-side,
produced. Most of the Company's revenue is derived under long-term contracts
with terms ranging from three to seven years. Clients are billed monthly,
generally based on the number of end-users they serve. As a result, a
significant portion of the Company's revenue is recurring and increases as the
service provider's customer base grows. In 1996, the Company's revenue totaled
$263.2 million, of which approximately 80% was generated from companies which
have been clients of USCS for three or more years.

Over the three years ended December 31, 1996, the Company's revenue from
software and services has increased at an average rate of 27% and has grown from
82% of revenue in 1994 to over 91% in 1996. Revenue from selling computer
hardware and providing associated maintenance and leasing services has been
declining in absolute dollars and as a percentage of total revenue. Revenue from
these activities represented 18% of total revenues in 1994 and had declined to
less than 9% of total revenue in 1996.

The Company provides software and services to North America and U.K. cable
television and multi-service providers primarily through a direct sales force.
Outside of North America and the U.K., the Company markets its software services
primarily through strategic alliances with companies specializing in system
integration or computer hardware manufacturing which are capable of providing
local sales and support. Building and maintaining relationships with its clients
is an important part of the Company's strategy because selling cycles can extend
a year or longer. The Company has committed increased resources to the
international, multi-service and telecommunications markets because it believes
these represent opportunities to grow at rates greater than in the U.S. cable
television marketplace alone.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the Company's
consolidated statements of operations and the percentage of revenue represented
by each line item:

YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994
--------------------- --------------------- ---------------------
(IN THOUSANDS)

Revenue:
Software and services................. $ 240,848 91.5% $ 197,282 86.1% $ 155,247 82.2%
Equipment sales and services.......... 22,366 8.5 31,981 13.9 33,558 17.8
--------- --------- --------- --------- --------- ---------
Total............................... 263,214 100.0 229,263 100.0 188,805 100.0

Cost of revenue:
Software and services................. 147,743 56.1 127,702 55.7 103,046 54.6
Equipment sales and services.......... 13,180 5.0 19,538 8.5 19,476 10.3
--------- --------- --------- --------- --------- ---------
Total............................... 160,923 61.1 147,240 64.2 122,522 64.9
--------- --------- --------- --------- --------- ---------
Gross profit............................ 102,291 38.9 82,023 35.8 66,283 35.1
--------- --------- --------- --------- --------- ---------

Operating expenses:
Research and development.............. 25,140 9.5 17,815 7.8 16,700 8.8
Selling, general and administrative... 49,631 18.9 42,102 18.3 34,160 18.1
Consolidation and relocation.......... -- -- -- -- (364) (0.2)
--------- --------- --------- --------- --------- ---------
Total............................... 74,771 28.4 59,917 26.1 50,496 26.7
--------- --------- --------- --------- --------- ---------
Operating income...................... 27,520 10.5 22,106 9.7 15,787 8.4
Interest expense...................... 3,185 1.3 4,966 2.2 4,284 2.3
--------- --------- --------- --------- --------- ---------
Income before income taxes.............. 24,335 9.2 17,140 7.5 11,503 6.1
Income tax provision.................... 9,826 3.7 6,770 3.0 5,334 2.8
--------- --------- --------- --------- --------- ---------
Net income.............................. $ 14,509 5.5% $ 10,370 4.5% $ 6,169 3.3%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------

THREE MONTHS ENDED
DECEMBER 31,
---------------------------------------------
1996 1995
--------------------- ---------------------

Revenue:
Software and services................. $ 64,498 92.1% $ 54,451 85.9%
Equipment sales and services.......... 5,532 7.9 8,972 14.1
--------- --------- --------- ---------
Total............................... 70,030 100.0 63,423 100.0
Cost of revenue:
Software and services................. 38,262 54.6 34,278 54.1
Equipment sales and services.......... 3,085 4.4 5,717 9.0
--------- --------- --------- ---------
Total............................... 41,347 59.0 39,995 63.1
--------- --------- --------- ---------
Gross profit............................ 28,683 41.0 23,428 36.9
--------- --------- --------- ---------
Operating expenses:
Research and development.............. 6,839 9.8 5,099 8.0
Selling, general and administrative... 13,520 19.3 12,141 19.1
Consolidation and relocation.......... -- -- -- --
--------- --------- --------- ---------
Total............................... 20,359 29.1 17,240 27.1
--------- --------- --------- ---------
Operating income...................... 8,324 11.9 6,188 9.8
Interest expense...................... 79 0.1 1,216 2.0
--------- --------- --------- ---------
Income before income taxes.............. 8,245 11.8 4,972 7.8
Income tax provision.................... 3,470 5.0 1,964 3.1
--------- --------- --------- ---------
Net income.............................. $ 4,775 6.8% $ 3,008 4.7%
--------- --------- --------- ---------
--------- --------- --------- ---------

REVENUE

Revenue is derived primarily from providing customer management software and
services to cable television and multi-service providers in the U.S. and 19
other countries and from providing bill processing services primarily to
telecommunications companies in the U.S. Software and bill processing services
to cable television and multi-service providers are generally provided under
bundled service arrangements. In addition, the Company sells computer hardware
and associated maintenance and leasing services to cable television service
providers in connection with providing the Company's software and provides
design, printing and graphics services in connection with its bill processing
services. Most of the software and services revenue is derived based on the
number of end-users of the services of the Company's clients, the number of
bills mailed and/or the number of images produced under long-term contracts,
which usually have terms ranging from three to seven years. The Company
generally recognizes software and bill processing services revenue (collectively
referred to as "software and services revenue") as services are performed.
Certain of the Company's software licenses provide for fixed or minimum fees.
Fixed fees and the present value of minimum fees under software licenses are
recognized as revenue upon installation. Such amounts have not been material.
Most contracts include provisions for inflation-based adjustments, including
changes in paper costs.

Total revenue increased by 10% to $70.0 million in the fourth quarter of
1996 from $63.4 million in the comparable quarter in 1995. The 1995 fourth
quarter revenue increased by 21% over 1994 fourth quarter revenue of $52.6
million. The increase was attributable to growth in revenue from software and
services of

18% in the fourth quarter of 1996 over the comparable 1995 quarter, partially
offset by a decline of $3.4 million in equipment sales and services revenue.

Customer management software and services revenue increased by 14% to $34.8
million in the fourth quarter of 1996 from $30.6 million in the comparable 1995
quarter. Bill processing revenue provided primarily to telecommunications
companies as a stand-alone service increased by 25% to $29.7 million in the
fourth quarter of 1996 from $23.8 million in the comparable quarter of the prior
year.

Total revenue for the year increased by 15% to $263.2 million in 1996 from
$229.3 million in 1995. Revenue in 1995 increased by 21% over 1994 revenue of
$188.8 million. The increase in 1996 was attributable to growth in revenue from
software and services of 22%, partially offset by a decline in equipment sales
and services revenue of $9.6 million.

Customer management software and services revenue increased by 18% to $138.2
million in 1996 from $116.9 million in 1995, and increased in 1995 by 15% from
1994 revenue of $101.4 million. Bill processing services revenue increased by
28% to $102.6 million in 1996 from $80.4 million in 1995, and by 49% in 1995
from $53.8 million in 1994.

Growth in customer management software and services revenue came primarily
from sales of additional services, increases in the number of subscribers of
existing and new clients in the U.S. and international markets, increases in
prices allowed by existing contracts, and migration of clients to higher priced
services. Growth in bill processing revenue was primarily derived from an
increase in the volume of statements and images produced because of the internal
growth of customers, the acquisition of new customers, and increases in prices
allowed by existing contracts. The expected decline in equipment sales and
services revenue was due to lower equipment sales as a result of market
condition changes.

Three clients accounted for $121.7 million, $104 million and $77.7 million
or 47%, 46% and 41% of total revenue in 1996, 1995 and 1994, respectively. See
"PRODUCTS AND SERVICES--Clients" and "FACTORS THAT MAY AFFECT FUTURE RESULTS"
regarding these clients and other factors that may impact future revenue.

COST OF REVENUE AND GROSS PROFIT

Cost of software and services revenue consists primarily of direct labor,
equipment-related expenses, and cost of materials such as paper and facilities
expense. Cost of equipment sales and services revenue consists primarily of
computer hardware purchased for resale or lease and third party maintenance.

The Company's gross profit margin of approximately 41% in the fourth quarter
of 1996 significantly improved from 37% in the fourth quarter of 1995. Software
and services gross profit margin increased to 41% in the fourth quarter of 1996
from 37% in the comparable quarter of 1995. Customer management software and
services gross profit margin increased to 48% in the fourth quarter of 1996 from
43% in the comparable quarter of 1995. Bill processing services gross profit
margin increased to 32% in the fourth quarter of 1996 from 30% in the comparable
1995 quarter. The gross profit margin on equipment related revenue increased to
44% in the fourth quarter of 1996 from 36% in the 1995 comparable quarter.

For the year, the Company's gross profit margin in 1996 increased to
approximately 39% from approximately 36% in 1995. The gross profit margin in
1994 was 35%. Software and services gross profit margin increased to 39% in 1996
from 35% in 1995 and 34% in 1994. Customer management software and services
gross profit margin increased to 47% in 1996 from 43% in 1995 and 40% in 1994.
Bill processing services gross profit margin increased to approximately 28% in
1996 from 24% in 1995 and 21% in 1994. The gross profit margin on equipment
sales and service revenue was 41% in 1996 versus 39% in 1995 and 42% in 1994.

The gross margin increases in customer management and software and bill
processing services are attributed to economies of scale associated with higher
volume and increased revenue combined with

productivity improvements. Gross margins on equipment sales and services varied
based on the mix of equipment sales and services and underlying demand.

RESEARCH AND DEVELOPMENT

Research and development costs relate primarily to on-going product
development and consist of personnel costs, consulting, testing, supplies,
facilities and depreciation expenses. Once the product under development reaches
technological feasibility, the development expenditures are capitalized and
amortized. See Note 2 of Notes to Consolidated Financial Statements.

Under certain development agreements, a portion of software development
expense is shared by development partners. The Company retains the rights to any
development and third-party funds may be subject to certain performance
milestones, which, if not met, may require the Company to repay the partner or
to expend its own capital for the development without reimbursement from the
partner.

The Company is currently in discussions with a development partner to revise
the milestone schedule for the completion of the porting and the enhancement of
Intelecable on that partner's computer platform. In the event it is unable to
reach an understanding for a revised milestone schedule, the Company's
capitalized development cost would not be reduced by the remaining unreimbursed
portion under this agreement, of up to $3.2 million, and will be expensed over
the life of the product. The Company has evaluated the estimated net realizable
value of capitalized development costs related to the development agreement and
has determined that such costs are not in excess of estimated future net revenue
to be earned from the product under development.

The Company spent $7.1 million in the fourth quarter of 1996, inclusive of
amounts reimbursable by development partners on research and development versus
$6.2 million in the comparable quarter of 1995, an increase of approximately
15%. The Company spent $26.1 million, $19.8 million, and $18.0 million,
inclusive of amounts reimbursable by development partners, in 1996, 1995, and
1994, respectively, for an increase of 32% in 1996 over 1995 and an increase of
10% in 1995 over 1994. The increased spending is attributable to the Company's
continuing commitment to the development of new products and enhancements to
existing products.

SELLING, GENERAL AND ADMINISTRATIVE

Selling expenses consist of compensation for sales and marketing personnel
including commissions and related bonuses, travel, trade shows and promotional
expenses. General and administrative expenses consist of compensation for
administration, finance and general management personnel, as well as legal and
accounting fees.

Total selling, general and administrative expenses increased by 11% in the
fourth quarter of 1996 in comparison to the fourth quarter of 1995 and 18% for
the 1996 year compared to 1995. Selling and marketing expenditures increased by
22% in the fourth quarter of 1996 compared to the fourth quarter of 1995 and 29%
for the 1996 year compared to 1995. As a percentage of revenue, selling and
marketing expenditures increased by approximately 1% in 1996 compared to 1995.
In 1995, total sales and marketing expenditures increased by 29% in comparison
to 1994 but remained constant as a percentage of revenue. The increase in sales
and marketing expenditures was primarily because of the addition of sales and
marketing personnel and additional resources to support increased sales and
marketing activities in the international, multi-service and telecommunications
markets.

General and administrative expenses for the fourth quarter increased 4% in
1996 compared to 1995. General and administrative expenses in 1996 increased by
11% compared to 1995. As a percentage of revenue, there was no significant
change in general and administrative expenses for the fourth quarter and 1996
year compared to the same periods in 1995. The increase in general and
administrative expenses is attributable to support for the increased selling and
marketing efforts, expansion into international

markets as well as costs related to general company expansion and being a
publicly held entity. General and administrative expenses increased by 20% in
1995 compared to 1994 to support higher levels of sales, but remained constant
as a percentage of revenue.

INTEREST EXPENSE

Interest expense consists of interest on borrowings under revolving credit
agreements, revenue bonds pertaining to certain of the Company's facilities and
notes and credit agreements related to the Company's leasing subsidiary.

Interest expense in the fourth quarter and for the 1996 year decreased by
$1.1 million, or 94% and $1.8 million, or 36%, respectively, compared to the
same periods in 1995. Proceeds of the initial public offering (IPO) were
utilized to pay down existing debt and resulted in decreased interest expense on
a comparative basis.

INCOME TAXES

The Company's provision for income taxes represents estimated federal, state
and foreign income taxes.

The income tax rate for the fourth quarter was 42%, approximately two
percentage points higher than the 1995 comparable quarter. This is attributable
to the mix of U.S. and international profits and state and local taxes. The
income tax rate was approximately 40% in 1996 and 1995. The income tax rate was
46% in 1994 because of losses in a foreign subsidiary which were incurred and
not tax effected.

NET INCOME

Net income increased by $1.8 million or 59% in the fourth quarter of 1996
compared to the fourth quarter of 1995. For the 1996 year, net income increased
to $14.5 million or 40% over 1995 net income of $10.4 million. Earnings per
share for the year was $0.64 per share in 1996 compared to $0.49 per share in
1995. This represents a 31% increase despite a 7% increase in the number of
shares outstanding in 1996 over 1995. The increase in net income for the fourth
quarter and 1996 year compared to 1995 is attributable to the factors cited
above. Net income and earnings per share increased by 68% and 75%, respectively,
in 1995 compared to 1994 due to higher earnings and the Company's redemption of
shares which reduced the number of shares outstanding by approximately 1
million.

FINANCIAL CONDITION AND LIQUIDITY

The Company strengthened its financial condition and liquidity in 1996
primarily as a result of its IPO. The net proceeds of the IPO of approximately
$52 million and cash generated from operations enabled the Company to pay down
existing debt. Total long-term debt, including the current portion, was $10.4
million as of December 31, 1996 compared to $62.8 million at December 31, 1995.
Of the debt outstanding at December 31, 1996, $8 million pertains to the
Company's leasing subsidiary and is collateralized, without recourse, by rents
receivable. As of December 31, 1996, the Company had an available and unused $50
million line of credit. Capital expenditures in 1996 and 1995 remained level at
approximately $30 million.

The Company collects from its clients and remits to the U.S. Postal Service
a significant amount of postage. Substantially all contracts allow the Company
to pre-bill and/or require deposits from its clients to mitigate the effect on
cash flow. As of December 31, 1996 and 1995, accounts receivable were $73.5
million and $59.9 million, respectively, including $21.5 million and $18.3
million in amounts due from clients for postage.

The Company continues to make significant investments in capital equipment,
research and development as well as to expand into new domestic and
international markets. The Company believes that net

cash from operations and the Company's borrowing availability will be sufficient
to support operations through the next twelve months.

FACTORS THAT MAY AFFECT FUTURE RESULTS

A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, changes in the cable
television market, the Company's ability to retain existing customers and
attract new customers, the Company's continuing ability to develop products that
are responsive to the evolving needs of its customers, increased competition,
changes in operating expenses, changes in government regulation of the Company's
clients and general economic factors.

DEPENDENCE ON THE CABLE TELEVISION MARKET

The Company is highly dependent on the cable television market. During 1996,
approximately 63% of the Company's revenue was derived from sales to cable
television service providers compared to 67% in 1995. The number of providers of
cable television service in the U.S. has been declining, resulting in a
reduction of the number of potential cable television clients in the U.S. As the
number of companies serving the available subscriber base decreases, the loss of
a single client could have a greater adverse impact on the Company than in the
past. Even if the number of clients remains the same, a decrease in the number
of subscribers served by the Company's cable television clients would result in
lower revenue for the Company. Furthermore, a decrease in the number of cable
subscribers or any adverse development in the cable television market could have
a material adverse effect on the financial condition and results of operations
of the Company.

CHANGING COMMUNICATIONS MARKET

The communications market is characterized by rapid technological
developments, changes in client requirements, evolving industry standards and
frequent new product introductions. The Company's future success will depend, in
part, upon its ability to enhance its existing applications, develop and
introduce new products that take advantage of technological advances and respond
promptly to new client requirements and evolving industry standards. The Company
has expended considerable funds to develop products to serve the changing
communications market. If the communications market grows or converges more
slowly than anticipated or the Company's products and services fail to achieve
market acceptance, there could be a material adverse effect on the financial
condition and results of operations of the Company. Further, the Company's
development projects are subject to all of the risks associated with the
development of new software and other products based on innovative technologies.
The failure of such development projects could have a material adverse effect on
the financial condition and results of operations of the Company.

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company's quarterly and annual operating results may fluctuate from
quarter to quarter and year to year depending on various factors, including the
impact of significant start-up costs associated with initiating the delivery of
contracted services to new clients, the hiring of additional staff, new product
development and other expenses, introduction of new products by competitors,
pricing pressures, the evolving and unpredictable nature of the markets in which
the Company's products and services are sold and general economic conditions.

NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGES

The market for the Company's products and services is highly competitive,
and competition is increasing as additional market opportunities arise. The
Company believes its most significant competitors for customer management
software and services are independent providers of such software and services
and in-house systems. TCI, which represented approximately 21% of the Company's
revenue for 1996 and

1995, respectively, has announced that it is developing and testing an in-house
system and that such in-house system will replace the Company's customer
management software system. Another client, which accounted for 4% of total
revenue in 1996 and recently extended its contract with the Company to early
1997, has orally advised the Company that it may move to an alternative solution
for its customer management software requirements.

COMPETITION

In addition, competitive factors could influence or alter the Company's
overall revenue mix between customer management software, services, including
bill processing services, and equipment sales and leasing. Any of these events
could have a material adverse effect on the financial condition and results of
operations, including gross profit margins, of the Company.

CONCENTRATION OF CLIENT BASE

Aggregate revenue from the Company's ten largest clients accounted for
approximately two-thirds of total revenue. Loss of all or a significant part of
the business of any of these clients or a decrease in their respective customer
bases would have a material adverse effect on the financial condition and
results of operations of the Company. Three of the Company's clients represented
approximately 47% and 46% of total revenue in 1996 and 1995, respectively. See
"BUSINESS--CLIENTS" regarding these clients and other factors that may impact
future revenue.

MANAGEMENT OF GROWTH

Management of the Company's growth may place a considerable strain on the
Company's management, operations and systems. The Company's ability to execute
its business strategy will depend in part upon its ability to manage the demands
of a growing business. Any failure of the Company's management team to
effectively manage growth could have a material adverse effect on the Company's
business, financial condition or results of operations.

CLIENT FAILURE TO RENEW OR UTILIZE CONTRACTS

Substantially all of the Company's revenue is derived from the sale of
services or products under long-term contracts with its clients. The Company
typically does not have the unilateral option to extend the terms of such
contracts upon their expiration. In addition, certain of the Company's contracts
do not require clients to make any minimum purchase. Others require minimum
purchases that are substantially below the current level of business under such
contracts and all such contracts are cancelable by clients under certain
conditions. The failure of clients to renew contracts, a reduction in usage by
clients under any contracts or the cancellation of contracts could have a
material adverse effect on the Company's financial condition and results of
operations.

INTERNATIONAL BUSINESS ACTIVITIES

The Company markets its products in a variety of international markets. To
date, the Company's primary customer management software has been installed in
20 countries. While approximately 5% of the Company's customer management
software and services revenue came from international sources, the Company is
expanding its international presence, primarily through third party marketing
and distribution alliances. The Company's current and proposed international
business activities are subject to certain inherent risks. There can be no
assurance that such risks will not have a material adverse effect on the
Company's future international sales and, consequently, the Company's business,
operating results and financial condition.

ATTRACTION AND RETENTION OF KEY PERSONNEL

The Company's future success depends in large part on the continued service
of its key management, sales, product development and operational personnel. The
Company believes that its future success also depends on its ability to attract
and retain skilled technical, managerial and marketing personnel, including, in
particular, additional personnel in the areas of research and development and
technical support. Competition for qualified personnel is intense. The Company
has from time to time experienced difficulties in recruiting qualified skilled
technical personnel. Failure by the Company to attract and retain the personnel
it requires could have a material adverse effect on the financial condition and
results of operations of the Company.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company relies on a combination of patent, trade secret and copyright
laws, nondisclosure agreements, and other contractual and technical measures to
protect its proprietary technology. There can be no assurance that these
provisions will be adequate to protect its proprietary rights. Although the
Company believes that its products and services do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company or the Company's
clients.

GOVERNMENT REGULATION

The Company's existing and potential clients are subject to extensive
regulation, and certain of the Company's revenue opportunities may depend on
continued deregulation in the worldwide communications industry. In addition,
the Company's clients are subject to certain regulations governing the privacy
and use of the customer information that is collected and managed by the
Company's products and services. Regulatory changes that adversely affect the
Company's existing and potential clients could have a material adverse effect on
the financial condition and results of operations of the Company.

POSSIBLE VOLATILITY OF STOCK PRICE

Although the Company believes that it has the product offerings and
resources needed for continuing success, future revenue and margin trends cannot
be reliably predicted and may cause the Company to adjust its operations. The
Company's stock price, like that of other technology companies, is subject to
significant volatility. The announcement of new products, services or
technologies by the Company or its competitors, quarterly variations in the
Company's results of operations, changes in revenue or earnings estimates by the
investment community and speculation in the press or investment community are
among the factors affecting the Company's stock price. In addition, the stock
price may be affected by general market conditions and domestic and
international macroeconomic factors unrelated to the Company's performance.
Because of the foregoing reasons, recent trends should not be considered
reliable indicators of future stock prices or financial results.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements and Financial Statement Schedules

PAGE
-----

Report of Independent Accountants.......................................................................... 21

Consolidated Balance Sheets as of December 31, 1996 and 1995............................................... 22

Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994................. 23

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994....... 24

Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994................. 25

Notes to Consolidated Financial Statements................................................................. 26

Quarterly Financial Information (Unaudited)................................................................ 36

REPORT OF MANAGEMENT

Stockholders of
USCS International, Inc.

The Company's management is responsible for the preparation, integrity, and
objectivity of the consolidated financial statements and other financial
information presented in this report. The accompanying financial statements have
been prepared in conformity with generally accepted accounting principles and
reflect the effects of certain estimates and judgments made by management.

Management maintains an effective system of internal control that is
designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by direct management review
and by internal audit. The Company selects and trains qualified people who are
provided with and expected to adhere to the Company's standards of business
conduct. These standards, which set forth the highest principles of business
ethics and conduct, are a key element of the Company's control system. It is
management's responsibility to proactively foster an environment conducive to
these principles.

The Company's consolidated financial statements have been audited by Price
Waterhouse LLP, independent accountants. Their audits were conducted in
accordance with generally accepted auditing standards, and included a review of
financial controls and test of accounting records and procedures as they
considered necessary in the circumstances. Management made available to them all
of the Company's financial records and data. Management believes that all
representations made to Price Waterhouse LLP were valid.

The Audit Committee of the Board of Directors meets regularly with
management, the internal auditors and the independent accountants to review
accounting, reporting, auditing and internal control matters. The committee has
direct and private access to both internal and external auditors.

By: /s/ JAMES C. CASTLE By: /s/ DOUGLAS L. SHURTLEFF
---------------------------------- ----------------------------------
James C. Castle Douglas L. Shurtleff,
CHIEF EXECUTIVE OFFICER AND SENIOR VICE PRESIDENT OF FINANCE
CHAIRMAN OF THE BOARD OF DIRECTORS AND
(PRINCIPAL EXECUTIVE OFFICER) CHIEF FINANCIAL OFFICER

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of USCS International, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of USCS
International, Inc. and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PRICE WATERHOUSE LLP
- ---------------------------------------
Price Waterhouse LLP

Sacramento, California
February 14, 1997

USCS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

DECEMBER 31,
----------------------
1996 1995
---------- ----------

ASSETS
Current Assets:
Cash.................................................................................... $ 8,452 $ 6,627
Accounts receivable..................................................................... 73,458 59,907
Current portion of net investment in leases (note 11)................................... 4,922 6,868
Paper products and other inventory...................................................... 4,418 5,608
Other................................................................................... 8,972 4,904
---------- ----------
Total current assets................................................................ 100,222 83,914
Property and equipment, net (note 3)...................................................... 94,350 85,385
Net investment in leases, net of current portion (note 11)................................ 6,252 7,320
Other..................................................................................... 4,735 3,831
---------- ----------
Total assets.............................................................................. $ 205,559 $ 180,450
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses (note 3).......................................... $ 48,975 $ 44,974
Current portion of long-term debt (note 5).............................................. 4,772 11,679
Deferred revenue........................................................................ 9,434 3,821
---------- ----------
Total current liabilities........................................................... 63,181 60,474
Long-term debt, net of current portion (note 5)........................................... 5,647 51,155
Customer deposits......................................................................... 12,752 13,497
Other liabilities......................................................................... 8,646 8,734
---------- ----------
Total liabilities................................................................... 90,226 133,860
---------- ----------

Commitments and Contingencies (note 6)

Stockholders' Equity (note 7 and 9):
Preferred Stock, $.05 par value, 10,000,000 shares authorized; no shares issued and
outstanding
Common Stocks, $.05 par value
Authorized 40,000,000 shares; Issued and outstanding: 23,068,826 and 19,042,015 shares
at December 31, 1996 and 1995....................................................... 1,153 952
Additional paid-in capital................................................................ 53,902 --
Retained earnings......................................................................... 60,437 45,966
Foreign currency translation adjustment................................................... (159) (328)
---------- ----------
Total stockholders' equity.......................................................... 115,333 46,590
---------- ----------
Total liabilities and stockholders' equity................................................ $ 205,559 $ 180,450
---------- ----------
---------- ----------

The accompanying notes are an integral part of the financial statements.

USCS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------

Revenue:
Software and services................................................. $ 240,848 $ 197,282 $ 155,247
Equipment sales and services.......................................... 22,366 31,981 33,558
------------ ------------ ------------
Total revenue........................................................... 263,214 229,263 188,805

Cost of Revenue:
Software and services................................................. 147,743 127,702 103,046
Equipment sales and services.......................................... 13,180 19,538 19,476
------------ ------------ ------------
Total cost of revenue................................................... 160,923 147,240 122,522
------------ ------------ ------------
Gross profit............................................................ 102,291 82,023 66,283
------------ ------------ ------------

Operating Expenses
Research and development.............................................. 25,140 17,815 16,700
Selling, general and administrative................................... 49,631 42,102 33,796
------------ ------------ ------------
Total operating expenses................................................ 74,771 59,917 50,496
------------ ------------ ------------
Operating income........................................................ 27,520 22,106 15,787
Interest expense........................................................ 3,185 4,966 4,284
------------ ------------ ------------
Income before income taxes.............................................. 24,335 17,140 11,503
Income tax provision (note 8)........................................... 9,826 6,770 5,334
------------ ------------ ------------
Net income.............................................................. $ 14,509 $ 10,370 $ 6,169
------------ ------------ ------------
------------ ------------ ------------
Earnings per share (note 7)............................................. $ 0.64 $ 0.49 $ 0.28
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares and equivalents.......................... 22,555,412 21,137,863 21,881,516
------------ ------------ ------------
------------ ------------ ------------

The accompanying notes are an integral part of the financial statements.

USCS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS EXCEPT SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

COMMON STOCK FOREIGN
----------------------- ADDITIONAL CURRENCY
NUMBER PAR PAID-IN RETAINED TRANSLATION
OF SHARES VALUE CAPITAL EARNINGS ADJUSTMENT
------------ --------- ----------- --------- -------------

Balance, January 1, 1994.............................. 19,776,804 $ 989 -- $ 35,162 $ (518)
Issuance of common stock.............................. 161,406 8 $ 332 -- --
Repurchase of common stock............................ (560,067) (28) (332) (2,146) --
Translation adjustment................................ -- -- -- -- 225
Net income............................................ -- -- -- 6,169 --
------------ --------- ----------- --------- -----
Balance, December 31, 1994............................ 19,378,143 969 -- 39,185 (293)
Issuance of common stock.............................. 708,393 35 1,608 -- --
Repurchase of common stock............................ (1,044,521) (52) (1,608) (3,589) --
Translation adjustment................................ -- -- -- -- (35)
Net income............................................ -- -- -- 10,370 --
------------ --------- ----------- --------- -----
Balance, December 31, 1995............................ 19,042,015 952 -- 45,966 (328)
Issuance of common stock.............................. 4,034,240 201 53,902 -- --
Repurchase of common stock............................ (7,429) -- -- (38) --
Translation adjustment................................ -- -- -- -- 169
Net income............................................ -- -- -- 14,509 --
------------ --------- ----------- --------- -----
Balance, December 31, 1996............................ 23,068,826 $ 1,153 $ 53,902 $ 60,437 $ (159)
------------ --------- ----------- --------- -----
------------ --------- ----------- --------- -----

The accompanying notes are an integral part of the financial statements.

USCS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------

Cash flows from operating activities:
Net income.................................................................. $ 14,509 $ 10,370 $ 6,169
Adjustments to net income:
Depreciation and amortization............................................. 20,311 16,000 13,734
Loss on sale of assets.................................................... 583 102 148
Changes in operating assets and liabilities:
Accounts receivable..................................................... (13,551) (8,388) (2,955)
Net investment in leases................................................ (7,440) (7,230) (8,904)
Collections on leases................................................... 10,454 13,745 11,201
Paper products and other inventory...................................... 1,190 (898) (1,961)
Other assets............................................................ (4,972) (558) (372)
Customer deposits....................................................... (745) 1,857 4,820
Other liabilities....................................................... 9,526 4,022 5,712
---------- ---------- ----------
Net cash provided by operating activities................................... 29,865 29,022 27,592
---------- ---------- ----------

Cash flows from investing activities:
Capital expenditures, net................................................... (29,397) (29,231) (33,412)
Capitalized software expenditures, net...................................... (293) (2,000) --
---------- ---------- ----------
Net cash used in investing activities....................................... (29,690) (31,231) (33,412)
---------- ---------- ----------

Cash flows from financing activities:
Net (paydown) borrowings under revolving credit agreements.................. (30,000) 22,000 8,000
Proceeds from issuance of long-term debt.................................... 2,765 4,096 4,678
Payments on long-term debt.................................................. (25,180) (15,620) (10,884)
Proceeds from issuance of common stock less expenses........................ 54,103 1,643 340
Repurchase of common stock.................................................. (38) (5,249) (2,506)
---------- ---------- ----------
Net cash provided by (used in) financing activities......................... 1,650 6,870 (372)
---------- ---------- ----------
Net increase (decrease) in cash............................................... 1,825 4,661 (6,192)
Cash at beginning of year..................................................... 6,627 1,966 8,158
---------- ---------- ----------
Cash at end of year........................................................... $ 8,452 $ 6,627 $ 1,966
---------- ---------- ----------
---------- ---------- ----------

Supplemental Cash Flow Information:
Cash paid during the year for:
Interest.................................................................. $ 4,595 $ 5,145 $ 4,277
Income taxes.............................................................. 9,748 4,210 7,228

The accompanying notes are an integral part of the financial statements.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

USCS International, Inc. (the Company), a Delaware Corporation, formerly
U.S. Computer Services, a California Corporation, operates in one segment
providing transaction based comprehensive customer management software and
services and bill processing services to the global communications industry, and
sells, maintains and leases computer systems primarily in North America. The
Company generally provides software and bill processing services to cable
television and multi-service providers under long-term bundled service
contracts. The Company also provides bill processing services on a stand-alone
basis primarily to clients in the telecommunications market.

In June 1996, the Company completed an initial public offering (IPO) of its
common stock. Upon the close of the IPO, the Company effected certain stock
splits and conversions of its Voting and Non-Voting Common Stock. See Note 9.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation--The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries after elimination of intercompany
accounts and transactions.

Financial Statement Preparation--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Revenue Recognition--The Company recognizes services revenue monthly as the
services are performed. Fixed fees and the present value of minimum fees under
software licenses are recognized as revenue upon installation. Variable software
license fees are a component of fees billed under bundled service contracts and
are recognized as revenue over the life of the license based on usage. Revenue
from equipment sales is recognized as equipment is shipped. Income from
sales-type leases is recognized as revenue at a constant periodic rate of return
on the net investment in the lease. Billing for services in advance of
performance is recorded as deferred revenue.

Concentration of Credit Risk--Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
trade accounts receivable. A majority of the Company's trade receivables are
derived from sales to the cable television and telecommunications industries.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral. The Company maintains an
allowance for doubtful accounts on its receivables based upon expected
collectibility of all accounts receivable. Uncollectible amounts have not been
significant.

Paper Products and Other Inventory--Paper products and other inventory is
stated at the lower of standard cost, which approximates actual cost (determined
on a first-in, first-out basis), or market.

Property and Equipment--Property and equipment is recorded at cost.
Depreciation and amortization expense is recognized on the declining balance and
straight-line methods over useful lives ranging from two to seven years on
equipment and thirty-one to forty years on buildings.

Research and Development--Research and development costs are expensed as
incurred and consist primarily of software development costs incurred prior to
the achievement of technological feasibility. The Company capitalizes software
development costs after the products reach technological feasibility. These

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
costs are amortized on a product-by-product basis using the greater of the
amount computed by taking the ratio of current year net revenue to estimated
future net revenue or the amount computed by the straight-line method over the
estimated useful life of the product. No amortization has been recorded to date.
The Company evaluates the net realizable value of capitalized software
development costs on a product-by-product basis in accordance with SFAS 86. The
cost of custom development that is required by a specific client is charged to
cost of revenue.

The Company has entered into strategic alliances with vendors which
underwrite a portion of the enhancements to the Company's software. The Company
retains the rights to the enhancements and the vendors may be entitled to
repayment if certain milestones are not achieved. Funding subject to repayment
is deferred until the related repayment obligations lapse. Funding not subject
to repayment is offset against related software development costs.

Customer Deposits--The Company requires postage deposits of its clients
based on long-term contractual arrangements. The Company does not anticipate
repaying in the next year amounts classified as non-current.

Foreign Currency Translation--The functional currency of the Company's
foreign subsidiary is the foreign currency. Adjustments arising from the
translation of balance sheets to U.S. dollars at the year-end exchange rates are
included in stockholders' equity. Income and expenses are translated at the
average prevailing rate during the year.

Income Tax--Income taxes are recorded using the liability method under which
current or deferred taxes are recognized for the expected future tax
consequences of temporary differences between tax bases and financial reporting
bases of assets and liabilities.

Earnings Per Share--Earnings per share are based on the weighted average
number of shares outstanding and common stock equivalents during the respective
periods, including the assumed net shares issuable upon exercise of stock
options when dilutive. Common and common equivalent shares issued during the
twelve month period prior to the IPO are included in the calculations as if they
were outstanding for all periods presented (using the treasury stock method at
the public offering price).

Stock Options--The Company accounts for its stock option plans in accordance
with APB 25, under which no compensation expense is recognized in the financial
statements except where the grants have been issued at less than fair market
value on the determination date. The Company has presented the pro forma
disclosure of compensation expense under the fair value provisions of the
recently issued SFAS 123 "Accounting for Stock Based Compensation" in Note 7.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. BALANCE SHEET COMPONENTS AT DECEMBER 31 (IN THOUSANDS)

Property and equipment, net, consists of the following:

1996 1995
---------- ----------

Computer and production equipment........................... $ 122,105 $ 102,381
Plant and property.......................................... 32,545 31,375
Leasehold improvements...................................... 12,715 10,532
Office equipment............................................ 8,674 7,271
Capital projects-in-progress................................ 5,723 6,795
---------- ----------
181,762 158,354
Less accumulated depreciation and amortization.............. 87,412 72,969
---------- ----------
$ 94,350 $ 85,385
---------- ----------
---------- ----------

Accounts payable and accrued expenses consists of the following:

Trade accounts payable...................................... $ 20,791 $ 19,981
Book overdraft.............................................. -- 2,720
Accrued payroll and related expenses........................ 13,915 11,752
Accrued retirement plan contributions....................... 5,218 4,419
Income taxes payable........................................ 5,553 1,727
Other accrued expenses...................................... 3,498 4,375
--------- ---------
$ 48,975 $ 44,974
--------- ---------
--------- ---------

4. BENEFITS PLANS

The Company has an employee savings and pension benefit plan (known as the
401(k) Retirement Plan). This plan covers substantially all employees. The
Company matches employee contributions of up to six percent of compensation at a
rate of fifty percent. The Company is required to make a contribution of 3% of
each eligible employee's annual compensation. Commencing in 1996, under the
plan's profit-sharing element, the Company also contributes 10% of pretax
profits. Prior to 1996, under the plan's profit-sharing element, the Company
could contribute up to 3% of each eligible employee's compensation determined at
the discretion of the Board of Directors. The Company's contribution expense was
$5,179,000, $4,204,000 and $3,763,000 in 1996, 1995 and 1994, respectively.

The Company also has two defined contribution stock ownership plans covering
substantially all employees who were employed by the Company as of February 18,
1993. There were no contributions to the plans in 1996, 1995 and 1994. Under the
plans, the Company was obligated, at the employee's option, to repurchase vested
shares at the current fair market value upon termination or retirement.
Substantially all share repurchases in 1996 and prior years resulted from the
repurchase of shares from former employees. The Company's repurchase obligations
under the plans lapsed effective with the IPO.

The Company has non-qualified deferred compensation plans for senior
management and certain highly compensated employees. The plans permit
participants to defer a portion of their compensation until termination of their
employment at which time payment of amounts deferred is made in a lump sum or
annual installments. Deferred amounts accrue interest at a rate determined by
the Board of Directors

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BENEFITS PLANS (CONTINUED)
or the underlying investments. At December 31, 1996, amounts deferred under the
plans and the related accrued interest were not material.

5. LONG-TERM DEBT

Long-term debt consists of the following at December 31 (in thousands):

MATURITIES 1996 1995
-------------- --------- ---------

Credit agreement with a finance company, collateralized, without recourse,
by minimum rentals receivable of $10,401. Principal and interest payable
monthly at fixed interest rates resulting in a weighted average interest
rate of 8.78% at December 31, 1996....................................... 1997 to 2000 $ 8,027 $ 9,486

Bonds payable, with interest (rates at 5.75% and 6.83% at December 31,
1996) and principal repayable in approximately equal monthly
installments, collateralized by first deeds of trust on buildings with a
net book value of $12,476................................................ 1998 to 1999 2,392 3,695

Notes payable to a bank, paid in August, 1996.............................. -- -- 1,653

Credit line with two banks refinanced in September, 1996................... 2001 -- 30,000

Notes payable to insurance companies, prepaid in September, 1996........... -- -- 18,000
--------- ---------
10,419 62,834
Less current portion....................................................... 4,772 11,679
--------- ---------
Total long-term debt....................................................... $ 5,647 $ 51,155
--------- ---------
--------- ---------

In September 1996, the Company renegotiated its existing revolving credit
agreements into a new five-year unsecured revolving credit line with two banks
in the amount of $50 million. Borrowings under the agreement bear interest at
the Company's choice of LIBOR (plus a margin ranging from .55% to 1.25%), the
bank's base rate or a quoted rate.

Under the borrowing agreements, the Company is required to maintain certain
financial ratios and meet a net worth test. In addition, the Company has two
outstanding standby letters of credit totaling $4,661,000 at December 31, 1996.
Based on the borrowing rates currently available to the Company for credit
facilities and bonds with similar terms and average maturities, the carrying
value of long-term debt at December 31, 1996, is considered to approximate fair
value.

Maturities of long-term debt at December 31, 1996 are as follows (in
thousands):

1997............................................... $ 4,772
1998............................................... 4,194
1999............................................... 1,395
2000............................................... 58
---------
$ 10,419
---------
---------

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under operating leases
with terms ranging from one to fifteen years. Rental expense was $9,594,000 in
1996, $ 8,798,000 in 1995 and $7,317,000 in 1994.

Future minimum rental commitments under operating leases are (in thousands):

1997................................................ $ 6,550
1998................................................ 4,637
1999................................................ 3,626
2000................................................ 2,550
2001................................................ 964
Thereafter.......................................... 565

7. STOCK OPTION PLANS

The Company has five stock option plans under which shares of the Company's
common stock have been reserved for issuance to directors, officers and key
employees.

Under the 1988, 1990, 1993 and 1996 Stock Option Plans, options may be
granted at prices and with terms and conditions established by the Company's
Board of Directors at the date of grant. Options vest over periods of up to
sixty months and expire ten years after the date of grant.

Under the Director's Stock Option Plan, options may be granted at fair
market value. Options vest annually over three years and expire five years after
the date of grant.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCK OPTION PLANS (CONTINUED)
Information regarding the Company's stock option plans is summarized below:

WEIGHTED
NUMBER AVERAGE
OF SHARES EXERCISE PRICE
---------- ---------------

Shares under option:
Outstanding at January 1, 1994.................................. 2,295,783 $ 1.87
Granted....................................................... 305,550 4.35
Exercised..................................................... (161,406) 1.00
Canceled...................................................... (257,040) 2.10
---------- -----
Outstanding at December 31, 1994................................ 2,182,887 2.25
Granted....................................................... 551,775 5.05
Exercised..................................................... (708,393) 1.44
Canceled...................................................... (243,663) 3.00
---------- -----
Outstanding at December 31, 1995................................ 1,782,606 3.34
Granted....................................................... 1,229,074 13.20
Exercised..................................................... (538,412) 2.10
Canceled...................................................... (259,807) 4.30
---------- -----
Outstanding at December 31, 1996................................ 2,213,461 $ 9.00
---------- -----
---------- -----

At December 31, 1996, 2,651,025 shares were available for future grants
under the stock option plans.

For purposes of the following pro forma disclosures required by SFAS 123,
the estimated fair value of options is amortized to expense over the options'
vesting period. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option valuation model. The Black-Scholes option
model was developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable. In addition, option
valuation models, such as the Black-Scholes model, require the input of highly
subjective assumptions, including the expected stock price volatility, which are
subject to change from time to time. For this reason, and because the SFAS 123
fair-value based method of accounting has not been applied to options granted
prior to January 1, 1995, the resulting pro forma compensation costs are not
necessarily indicative of costs to be expected in future years.

The following pro forma information has been prepared as if the Company had
accounted for its employee stock options using the fair value based method of
accounting established by SFAS 123(Net income in thousands):

1996 1995
--------- ---------

Net income As reported...................................... $ 14,509 $ 10,370
Pro forma........................................ 14,036 10,265

Earnings per share As reported...................................... $ 0.64 $ 0.49
Pro forma........................................ 0.63 0.49

SFAS 123 pro forma calculations are based on the following assumptions for
grants in 1996 and 1995, respectively: risk-free weighted-average interest rates
of 5.7% and 5.9%; volatility factors of the expected

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCK OPTION PLANS (CONTINUED)
market price of the Company's common stock of 43.3%; and weighted average
expected option lives of 7.3 years and 6.9 years.

Summary information concerning outstanding and exercisable employee option
as of December 31, 1996 is as follows:

WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ----------------------------------------- ----------- --------------- ----------- ----------- -----------

$ 1.39-$ 2.05............................ 38,682 2.90 $ 1.71 38,682 $ 1.71
2.44- 2.80............................ 170,075 5.96 2.63 115,625 2.65
3.73- 4.35............................ 342,453 7.07 3.99 273,342 3.90
5.05- 5.05............................ 481,687 8.45 5.05 94,150 5.05
7.38- 7.38............................ 6,300 9.17 7.38 -- --
12.50- 16.50............................ 1,093,764 9.35 12.91 -- --
17.50- 18.63............................ 80,500 7.15 18.09 -- --
----------- --- ----------- ----------- -----
$ 1.39-$18.63............................ 2,213,461 8.35 $ 9.00 521,799 $ 3.67
----------- --- ----------- ----------- -----
----------- --- ----------- ----------- -----

Exercise prices of some options differ from the market price of the stock on
the grant date. The following table summarizes options by those that have
exercise prices equal to the market price on the grant date. There were no
grants in 1996, 1995, or 1994 with exercise prices less than the market price on
the grant date. The weighted average fair values below have been determined
using the Black-Scholes model.

EXERCISE
PRICE
EQUAL TO
MARKET PRICE
-------------

1996:
Options granted................................................................ 1,229,074
Weighted average exercise price................................................ 13.20
Weighted average fair value.................................................... 13.20

1995:
Options granted................................................................ 551,775
Weighted average exercise price................................................ 5.05
Weighted average fair value.................................................... 5.05

1994:
Options Granted................................................................ 305,550
Weighted average exercise price................................................ 4.35

Total compensation recognized under APB 25 was $77,000, $296,000, and
$140,000 in 1996, 1995 and 1994, respectively.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCK OPTION PLANS (CONTINUED)

In April of 1996, the Company adopted an Employee Stock Purchase Plan (the
"Plan") which was implemented after 1996. The Plan provides a method for
employees of the Company to purchase shares of the Company's Common Stock
through payroll deductions. Under the Plan, shares are purchased on a quarterly
basis at the lower of 95% of the fair market value of the Company's Common Stock
on the first or last business day of each calendar quarter. Shares purchased
under the Plan may not be sold or otherwise transferred for six months after
issuance.

8. INCOME TAXES

The deferred tax assets and liabilities are comprised of the following at
December 31 (in thousands):

1996 1995
--------- ---------

Deferred tax assets:
Compensation and employee benefits related items.................................. $ 4,714 $ 3,527
Differences in revenue recognition for book and tax purposes...................... 2,840 1,097
Accruals and other non-deductible reserves........................................ 3,542 2,700
--------- ---------
Total deferred tax assets....................................................... 11,096 7,324
--------- ---------

Deferred tax liabilities:
Tax in excess of book depreciation................................................ 6,163 5,259
Capital leases recorded as operating leases for tax purposes...................... 1,762 2,619
Other............................................................................. 674 584
--------- ---------
Total deferred tax liabilities.................................................. 8,599 8,462
--------- ---------
Net deferred tax (asset) liability.................................................. $ (2,497) $ 1,138
--------- ---------
--------- ---------

The income tax provision is comprised of the following for the years ended
December 31 (in thousands):

1996 1995 1994
--------- --------- ---------

Current
Federal....................................................... $ 11,675 $ 4,883 $ 4,644
State......................................................... 1,786 838 1,033
--------- --------- ---------
13,461 5,721 5,677
--------- --------- ---------

Deferred
Federal....................................................... (3,311) 924 72
State......................................................... (324) 125 (415)
--------- --------- ---------
(3,635) 1,049 (343)
--------- --------- ---------
$ 9,826 $ 6,770 $ 5,334
--------- --------- ---------
--------- --------- ---------

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES (CONTINUED)
The income tax rate varies from amounts computed by applying the U.S.
statutory rate to income before provision for income taxes. The tax rates for
the years ended December 31 are as follows:

1996 1995 1994
--------- --------- ---------

Income tax computed using U.S. statutory rate......................... 34.4% 34.7% 34.1%
State income taxes, net of federal benefits........................... 4.4 6.1 6.1
Effect of loss of foreign subsidiary.................................. -- -- 6.6
Other................................................................. 1.6 (1.3) (0.4)
--- --- ---
Income tax provision................................................ 40.4% 39.5% 46.4%
--- --- ---
--- --- ---

9. STOCK SPLITS

On March 31, 1995, the Board of Directors authorized a thirty for one stock
split to be distributed to stockholders of record on May 1, 1995, and increased
the authorized voting and non-voting shares from 2,000,000 shares to 6,000,000
shares, respectively. On May 3, 1995, authorized voting shares were increased to
7,500,000.

On May 16, 1996, the Board and a majority of the Company's stockholders
authorized a 2.1 for 1 stock split of the Company's Common Voting Stock and a 2
for 1 stock split of the Common Non-Voting Stock effective upon the close of the
IPO. The Board also increased the authorized amount of Common Voting Stock and
Common Non-Voting Stock to 40,000,000 and 12,000,000, respectively and
authorized 10,000,000 shares of Preferred Stock, par value $.05. Also, upon the
closing of the IPO, the Common Non-Voting Stock converted to Common Voting Stock
on a one-for-one basis and the Common Non-Voting Class was eliminated. The
effect of these transactions has been retroactively reflected in the financial
statements.

10. SIGNIFICANT CUSTOMERS AND RELATED PARTY TRANSACTIONS

The Company has three significant customers. Revenue from the largest
customer was $55,651,000, $47,287,000 and $42,842,000 or 21%, 21% and 23% of
total revenue in 1996, 1995 and 1994, respectively. Revenue and percentage of
total revenue, respectively,from the other significant customers totaled
$41,066,000 or 16% and $25,013,000 or 10% in 1996, $38,849,000 or 17% and
$17,858,000 or 8% in 1995, and $24,569,000 or 13% and $10,323,000 or 5% in 1994.

Advisory services were provided to the Company in the amount of $430,500 in
1996 and 1995 and $400,000 in 1994, by Westar Capital, a stockholder.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. LEASING ACTIVITIES

LEASES

The net investment in leases held by the Company and its leasing subsidiary
reflects the gross lease receivable and the estimated residual value of the
leased equipment less unearned income. The net investment in sales-type leases
consists of the following at December 31 (in thousands):

1996 1995
--------- ---------

Total minimum lease payments receivable................................. $ 15,516 $ 16,100
Estimated unguaranteed residual value of leased property................ 8 203
--------- ---------
Gross investment in leases.............................................. 15,524 16,303
Less unearned income.................................................... 4,350 2,115
--------- ---------
Net investment in leases................................................ 11,174 14,188
Less current portion.................................................... 4,922 6,868
--------- ---------
Non-current portion..................................................... $ 6,252 $ 7,320
--------- ---------
--------- ---------

Future payments to be received under sales-type leases are (in thousands):

1997............................................... $ 7,898
1998............................................... 5,661
1999............................................... 1,566
2000............................................... 391
---------
$ 15,516
---------
---------

The Company performs ongoing credit evaluations of its clients and generally
maintains a perfected security interest on all equipment leased under sales-type
and operating leases as collateral for lease payments receivable. Substantially
all lease contracts have been pledged and the related receipts have been
assigned to various lenders as collateral for nonrecourse borrowings. The
borrowing agreements provide that the debt is to be satisfied solely from
amounts due under the terms of the lease contracts and the value of the leased
equipment. The lenders' collateral interest in both the lease agreement and the
equipment terminates upon repayment of the debt.

SUBSIDIARY

At December 31, 1996 and 1995, the Company's wholly-owned leasing subsidiary
had total assets of $16,197,000 and $18,256,000 and long-term debt of $8,027,000
and $11,139,000, respectively. Net income was $1,147,000, $1,352,000 and
$1,403,000 in 1996, 1995 and 1994, respectively.

USCS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31, 1996
Total revenue......................................................... $ 60,255 $ 63,572 $ 69,357 $ 70,030
Gross profit.......................................................... 22,094 23,801 27,713 28,683
Operating income...................................................... 5,443 5,841 7,912 8,324
Net income............................................................ 2,563 2,843 4,328 4,775
Net income per share.................................................. 0.12 0.13 0.18 0.20

YEAR ENDED DECEMBER 31, 1995
Total revenue......................................................... $ 53,012 $ 56,151 $ 56,677 $ 63,423
Gross profit.......................................................... 19,498 19,053 20,044 23,428
Operating income...................................................... 4,937 5,016 5,965 6,188
Net income............................................................ 2,281 2,287 2,794 3,008
Net income per share.................................................. 0.11 0.11 0.13 0.14

YEAR ENDED DECEMBER 31, 1994
Total revenue......................................................... $ 40,692 $ 49,917 $ 45,586 $ 52,610
Gross profit.......................................................... 13,637 18,385 16,301 17,960
Operating income...................................................... 2,028 5,906 4,201 3,652
Net income............................................................ 531 2,638 1,654 1,346
Net income per share.................................................. 0.02 0.12 0.08 0.06

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company who are standing for
reelection is set forth under "Election of Directors" on pages 1 and 2 of the
Company's Proxy Statement For Annual Meeting Of Stockholders, dated April 17,
1997, which pages are incorporated herein by reference.

The executive officers and directors of the Company and their ages as of
March 10, 1997 are as follows:

NAME AGE POSITION
- --------------------------------- --- ------------------------------------------------------------

James C. Castle, Ph.D. 60 Chairman of the Board and Chief Executive Officer

Michael F. McGrail 49 President of CableData, Inc. and Director

C. Randles Lintecum 52 President of International Billing Services, Inc.

Douglas L. Shurtleff 50 Senior Vice President, Finance and Chief Financial Officer

Claudia D. Coleman 45 Vice President, Corporate Development

George L. Argyros, Sr. (1)(2) 60 Director

George M. Crandell, Jr. (1) 51 Director

Charles D. Martin (2) 60 Director

Larry W. Wangberg (1)(2) 54 Director

- ------------------------

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

JAMES C. CASTLE, PH.D. joined the Company as Chairman of the Board and Chief
Executive Officer in August 1992. Prior to joining USCS, Dr. Castle served as
Chief Executive Officer and Director of Teradata Corporation, a manufacturer of
high capacity, high performance parallel processing database systems, from
August 1991 until April 1992. Dr. Castle served as President and Chief Executive
Officer of Infotron Systems Corporation, a manufacturer of data and voice
transmission equipment, from October 1987 until August 1991 and was named
Chairman of the Board in May 1989. Prior to October 1987, Dr. Castle held
various senior management positions with TBG Information Systems, Inc., Memorex
Corporation, Honeywell, Inc. and General Electric. Dr. Castle is also a Director
of PAR Technology Corp., Leasing Solutions, Inc. and ADC Telecommunications,
Inc. Dr. Castle received his B.S. from the U.S. Military Academy at West Point
and a M.S.E.E. and Ph.D. in Computer and Information Sciences from the
University of Pennsylvania.

MICHAEL F. MCGRAIL has been President of CableData, Inc., the Company's
wholly owned subsidiary, and a Director of the Company since April 1995. Since
December 1993, Mr. McGrail has been President and Managing Director of CableData
International, Ltd., a wholly-owned subsidiary of CableData, Inc. Prior to his
joining CableData, Mr. McGrail served as President of Gandalf International,
Ltd. ("Gandalf"), a wide and local area network communications products company.
He was also Managing Director of Infotron Systems International Ltd., which was
acquired by Gandalf in 1991. Mr. McGrail

received a B.Sc. with honors from the University of Sussex and a M.Sc. in
Management from Trinity College, Dublin.

C. RANDLES LINTECUM has been the President of International Billing
Services, Inc. ("IBS"), a wholly-owned subsidiary of the Company, since July
1995. From February 1995 to July 1995, Mr. Lintecum was Senior Vice President,
Marketing and Business Development of USCS, and from May 1993 to February 1995
Mr. Lintecum was Vice President, Corporate Development of USCS. From 1989 to May
1993, Mr. Lintecum was Executive Vice President of Corporate Marketing for
Infonet Services Corporation ("Infonet"), an international data network services
company. From 1988 to 1989, Mr. Lintecum was division Vice President of
Marketing for Computer Science Corporation, a computer services company. From
1985 to 1987, Mr. Lintecum was division Vice President of New Business
Development for Computer Science Corporation. Mr. Lintecum received a B.S. in
Business Administration from the University of Kansas and a M.B.A. from the
University of Missouri.

DOUGLAS L. SHURTLEFF has been Senior Vice President, Finance, and Chief
Financial Officer of the Company since May 1995. From September 1988 to May
1995, Mr. Shurtleff was Vice President, Finance and Administration, and
Treasurer of Infonet. From October 1984 to September 1988, Mr. Shurtleff was
Group Vice President, Finance and Administration, of Computer Sciences
Corporation. Previously, Mr. Shurtleff held various senior management positions
at Pacesetter Systems, Inc., and Deloitte & Touche. Mr. Shurtleff received a
B.S. in Accounting and his M.B.A. from the University of Southern California and
is a certified public accountant.

CLAUDIA D. COLEMAN has been Vice President, Corporate Development of the
Company since December 1995. From March 1988 to December 1995, Ms. Coleman held
various positions, including Principal, in the investment division of Alex.
Brown & Sons ("Alex. Brown"). Prior to joining Alex. Brown, Ms. Coleman was a
Vice President in the investment banking division of Drexel Burnham Lambert from
1984 to 1988. From 1979 to 1984, Ms. Coleman held various positions, including
Vice President, Corporate Planning, at Bank of America. Ms. Coleman received a
B.A. and a M.B.A. from the University of California.

GEORGE L. ARGYROS, SR. has been a Director of the Company since November
1990. Mr. Argyros is Chairman and Chief Executive Officer of Arnel & Affiliates,
a West Coast diversified investment company. Mr. Argyros is sole shareholder of
GLA Financial Corp. ("GLA Financial"), a general partner of Westar Capital
Associates, which is the sole general partner of Westar Capital ("Westar"), a
private equity investment firm and a principal shareholder of the Company. Mr.
Argyros is also a limited partner of Westar. Mr. Argyros is a Director of First
American Financial Corporation, The Newhall Land and Farming Company, Tecstar
Corporation, All Post, Inc., and Dogloo, Inc. Mr. Argyros is President and Chief
Executive Officer of the Horatio Alger Association of Distinguished Americans,
is Chairman of the Board of Trustees of Chapman University, a Trustee of the
California Institute of Technology, director of Independent Colleges of Southern
California, Chairman of the Board of Directors of The Beckman Foundation,
director of the Beckman Laser Institute and Medical Clinic, Vice Chairman of the
Estele Doheny Eye Foundation, and Chairman of the Orange County Business
Committee for the Arts.

GEORGE M. CRANDELL, JR. has been a Director of the Company since March 1989.
Mr. Crandell is President of George M. Crandell, Jr., A Law Corporation /
Crandell Capital , and is a limited partner of Westar Capital Associates, the
general partner of Westar. Prior to joining Westar in 1988, Mr. Crandell was a
partner of Brentwood Associates, an investment firm. Prior to joining Brentwood,
Mr. Crandell was a Senior Consultant with the international consulting firm of
McKinsey & Company. He also held positions at Planning Research Corporation and
IBM. Mr. Crandell is a board member and past President of the California State
Sacramento Trust Foundation and a board member of the Dean's Advisory Council of
the University of California, Davis Graduate School of Management.

CHARLES D. MARTIN has been a Director of the Company since November 1990.
Mr. Martin has been a general partner of Enterprise Partners, a Southern
California-based venture capital firm, since its formation in 1985. He has also
been a general partner of Westar Capital Associates, which is the sole general
partner of Westar, since its formation in 1987. Mr. Martin also serves on the
Board of Directors of Apria Healthcare, Inc., Tecstar, Inc., All Post, Inc.,
Dogloo, Inc., ObjectAutomation and El Dorado Communications. He is also a
Director and stockholder of Vedax Sciences Corporation, a firm that operates the
TEC Organization, the largest proprietary membership program in the nation for
company Presidents and Chief Executive Officers. Mr. Martin also serves as a
Trustee of Chapman University and is Chairman of the Board of Trustees of the
Orange County Museum of Art.

LARRY W. WANGBERG has been a Director of the Company since April 1996. Mr.
Wangberg has served as Chairman of the Board of Directors and Chief Executive
Officer of StarSight Telecast, Inc. ("StarSight") since April 1996. From
February 1995 to April 1996, Mr. Wangberg served as StarSight's President and
Chief Executive Officer. Mr. Wangberg was elected to the Board of Directors of
StarSight in May 1993. From 1983 to February 1995, Mr. Wangberg served as
President and Chief Executive Officer of Times Mirror Cable Television, Inc. a
provider of broadband-based network and cable broadcast services. Mr. Wangberg
simultaneously served as Senior Vice President of the parent The Times Mirror
Company, a major information provider. Mr. Wangberg is a past chairman of the
National Cable Television Association (NCTA). Mr. Wangberg has also served on
the Board of Directors of Zilog, Inc. since April 1996.

There are no family relationships between any directors or executive
officers of the Company.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding the Company's compensation of its executive officers
is set forth under "INFORMATION REGARDING EXECUTIVE OFFICERS COMPENSATION" on
pages 5 through 8 of the Company's Proxy Statement For Annual Meeting Of
Shareholders, dated April 17, 1997, which pages are incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding security ownership of certain beneficial owners and
management is set forth under "BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND MANAGEMENT" on pages 4 and 5 of the Company's Proxy Statement For
Annual Meeting Of Shareholders, dated April 17, 1997, which pages are
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is set
forth under "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" on page 9 of the
Company's Proxy Statement For Annual Meeting Of Shareholders, dated April 17,
1997, which pages are incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K

(a) The following documents are filed as part of this report:

1. Financial Statements

Financial Statements and Report of Independent Accountants: See Part II,
Item 8 hereof.

2. Financial Statement Schedule

All Schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are omitted because
such schedules are not required under the related instructions, are not
applicable or the required information is given in the financial
statements.

(b) Reports on Form 8-K

No reports on Form 8-K were filed by the Registrant during the quarter ended
December 31, 1996.

1. Not applicable.

2. Plan of acquisition, reorganization, arrangement, liquidation or succession

2.1 Agreement and Plan of Merger dated April 18, 1996 among USCS
International, Inc., a Delaware corporation, and U.S. Computer
Services, a California corporation. (1)

2.2 Reference exhibits 10.37, 10.38, 10.39 & 10.40.

3. Articles of Incorporation

3.1 Second Amended and Restated Certificate of Incorporation of USCS
International, Inc.

3.2 Bylaws of the Registrant. (1)

3.3 Certificate of Designation of Rights, Preferences and Privileges of
Series A Preferred Stock. (1)

4. Instruments defining the rights of security holders, including indentures

4.1 Reference Exhibit 3.1.

4.2 Stockholder Rights Plan. (1)

5-9. Not applicable

10. Material Contracts

10.1 Amended and Restated 1988 Stock Option Plan. (3)

10.2 The Registrant's Employee Stock Ownership Plan ("ESOP") as amended
and restated as of January 1, 1991, and as amended effective January
1, 1991, January 1, 1992, January 1, 1993, February 19, 1993, January
1, 1994, December 31, 1994, January 1, 1995, March 31, 1995, January
1, 1996 and March 21, 1996. (1)(3)

10.3 Amended and Restated 1993 Stock Option Plan. (3)

10.4 1996 Stock Option Plan. (1)(3)

10.5 1996 Directors' Stock Option Plan. (1)(3)

10.6 Employee Stock Purchase Plan. (1)(3)

10.7 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Trust Indenture
dated as of December 1, 1987 between the Registrant and Sun Bank, as
Trustee. (1)

10.8 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Reimbursement
Agreement dated as of December 1, 1987 between the Registrant and
Sanwa Bank of California. (1)

10.9 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Trust Indenture
dated as of June 30, 1989 between the Registrant and Sun Bank, as
Trustee. (1)

10.10 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Reimbursement
Agreement dated as of June 30, 1989 between the Registrant and Sanwa
Bank of California. (1)

10.11 Amended and Restated 1990 Stock Option Plan. (3)

10.12 Credit Agreement dated as of February 15, 1996 among International
Billing Services, Nationsbank of Texas and the Lender Parties named
therein. (1)

10.13 Credit Agreement dated as of February 15, 1996 among the Registrant,
Nationsbank of Texas and the Lender Parties named therein. (1)

10.14 Form of Standard On/Line Operating and License Agreement. (1)

10.15 Form of Standard Equipment Maintenance Agreement. (1)

10.16 Form of Master Lease, Lease Request and Certificate of Acceptance.
(1)

10.17 Form of Standard Agreement for the Sale and Installation of
Equipment. (1)

10.18 Form of Standard Statement Production Services Agreement. (1)

10.19 Strategic Business Agreement dated January 19, 1992 between the
Registrant and International Business Machines Corporation and
Addendum Number One to Strategic Business Agreement dated June 4,
1993 between the Registrant and International Business Machines
Corporation. (1)

10.20 Business Alliance Program Agreement between Oracle Corporation and
CableData. (1)

10.21 Development Agreement dated December 5, 1994 between the Registrant
and Tandem Computers Incorporated. (1)

10.22 Porting Agreement dated January 25, 1996 between CableData and
Hewlett-Packard Company. (1)

10.23 Amended, Consolidated and Restated Credit Agreement dated as of
September 30, 1996 among the Registrant as borrower and NationsBank,
N.A. and Mellon Bank, N.A. as lender. (2)

10.24 On/Line Operating and License Agreement dated June 7, 1996 between
CableData, Inc. and TCI Cable Management Corporation. (1)

10.25 Master Lease Agreement No. DO4347 dated as of April 16, 1993 between
the Registrant and First Equipment Company. (1)

10.26 On/Line Operating and Licensing Agreement dated December 17, 1993
between the Registrant dba CableData and Continental Cablevision. (1)

10.27 Statement Production Services Agreement dated August 20, 1993 between
the Registrant dba International Billing Services and Ameritech
Corporation. (1)

10.28 Software Development Agreement dated December 27, 1995 between
CableData and BellSouth Interactive Media Services. (1)

10.29 CableData's Intelecable Operating and License Agreement dated
December 27, 1995 between CableData and BellSouth Interactive Media
Services, Inc. (1)

10.30 Software License and Service Agreement and Network User License
Addendum dated May 18, 1994 between the Registrant and Oracle
Corporation. (1)

10.31 Strategic Business Alliance Agreement dated February 28, 1997 between
the Registrant and CBIS. (4)

10.32 Tandem Alliance Agreement dated January 1, 1995 between Tandem and
CableData. (1)

10.33 Contract for Computer Software (Postalsoft Software License
Agreement) dated February 13, 1996 between IBS and Postalsoft, Inc.
(1)

10.34 Employment Agreement dated August 10, 1992 between the Registrant and
James C. Castle. (1)(3)

10.35 Employment Agreement dated June 29, 1995 with Michael McGrail. (1)

10.36 Form of Severance Agreement. (1)(3)

10.37 Asset Acquisition Agreement dated March 31, 1995 by and between the
Registrant and CableData. (1)

10.38 Asset Acquisition Agreement dated March 31, 1995 by and between the
Registrant and IBS. (1)

10.39 Asset Acquisition Agreement dated March 15, 1995 by and between U.S.
Computer Systems Leasing and CableLease, Inc. (1)

10.40 Asset Acquisition Agreement dated March 15, 1995 by and between U.S.
Computer Systems Leasing and RPA, Inc. (1)

10.41 Building Lease for property located at 2969 Prospect Park Drive
between the Registrant and F.I.A. Profile Fund I dated January 19,
1994. (1)

10.42 Alternate Mailing System Agreement dated March 28, 1996 between the
United States Postal Service and IBS. (1)

10.43 Alternate Mailing Systems Agreement dated April 18, 1996 between the
United Postal Service and International Billing Services, Inc. (1)

10.44 Form of Directors' Indemnification Agreement. (1)(3)

10.45 Amendment No. 11 to the ESOP. (1)(3)

11. Statement recomputation of earnings per share.

12-20. Not applicable.

21. List of Subsidiaries. (1)

22. Not applicable.

23. Consent of Independent Accountants.

24. Power of Attorney. Contained in page 44 of this Annual Report on Form 10-K and
incorporated herein by reference.

25-26. Not applicable.

27. Financial data schedule.

28. Not applicable.

99. None.

- ------------------------

(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1, Registration No. 333-3842, filed pursuant to Section 5 of the
Securities Act of 1933, as amended.

(2) Incorporated by reference to Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1996.

(3) Represents a management contract or compensatory plan or arrangement.

(4) Portions of Exhibit 10.31 have been redacted pursuant to a confidential
treatment request.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Rancho
Cordova, State of California, on the 21st day of March, 1997.

USCS INTERNATIONAL, INC.

By: /s/ DOUGLAS L. SHURTLEFF
------------------------------------------
Douglas L. Shurtleff,
SENIOR VICE-PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER

POWER OF ATTORNEY

Each of the officers and directors of USCS International, Inc. whose
signature appears below hereby constitutes and appoints James C. Castle and
Douglas L. Shurtleff, and each of them, their true and lawful attorneys-in-fact
and agents, with full power of substitution, each with power to act alone, to
sign and execute on behalf of the undersigned any amendment or amendments to
this report and to file the same, with exhibits thereto, and other documents in
connection therewith, and to perform any acts necessary in order to file such
amendment or amendments, exhibits and documents with the Securities and Exchange
Commission, and each of the undersigned does hereby ratify and confirm all that
said attorneys-in-fact and agents, or their or his substitutes, shall do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Chief Executive Officer and
/s/ JAMES C. CASTLE Chairman of the Board of
------------------------------------ Directors (Principal March 21, 1997
James C. Castle Executive Officer)

/s/ GEORGE L. ARGYROS, SR.
------------------------------------ Director March 21, 1997
George L. Argyros, Sr.

/s/ GEORGE M. CRANDELL, JR.
------------------------------------ Director March 21, 1997
George M. Crandell, Jr.

/s/ CHARLES D. MARTIN
------------------------------------ Director March 21, 1997
Charles D. Martin

/s/ MICHAEL F. MCGRAIL
------------------------------------ Director March 21, 1997
Michael F. McGrail

/s/ LARRY W. WANGBERG
------------------------------------ Director March 21, 1997
Larry W. Wangberg

Senior Vice-President of
/s/ DOUGLAS L. SHURTLEFF Finance and Chief Financial
------------------------------------ Officer (Principal Financial March 21, 1997
Douglas L. Shurtleff Officer)

Controller and Chief
/s/ ZAIDA A. KLEIN Accounting Officer
------------------------------------ (Principal Accounting March 21, 1997
Zaida A. Klein Officer)