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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28536
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BILLING INFORMATION CONCEPTS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2781950
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
7411 JOHN SMITH DRIVE, SUITE 200 78229
SAN ANTONIO, TEXAS (Zip code)
(Address of principal executive offices)
(210) 949-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. |X| Yes |_| No
Indicated below is the number of shares outstanding of the registrant's
only class of common stock at February 4, 1997:
TITLE OF CLASS NUMBER OF SHARES
-------------- OUTSTANDING
----------------
Common Stock, $.01 par value 15,254,198
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BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1996 and September 30, 1996.............................. 3
Condensed Consolidated Statements of Income - For the Three-Month Periods Ended
December 31, 1996 and 1995................................................................................ 4
Condensed Consolidated Statements of Cash Flows - For the Three-Month Periods Ended
December 31, 1996 and 1995................................................................................ 5
Notes to Interim Condensed Consolidated Financial Statements.................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................................................................. 13
Item 2. Changes in Securities......................................................................................... 13
Item 3. Defaults Upon Senior Securities............................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders........................................................... 13
Item 5. Other Information............................................................................................. 13
Item 6. Exhibits and Reports on Form 8-K.............................................................................. 14
SIGNATURES .............................................................................................................. 15
2
3
PART I FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
Current assets:
Cash and cash equivalents...................................................................... $ 30,456 $ 34,135
Accounts receivable............................................................................ 16,666 17,707
Purchased receivables.......................................................................... 61,532 70,920
Prepaids and other............................................................................. 996 883
---------- ----------
Total current assets......................................................................... 109,650 123,645
Property and equipment, net...................................................................... 14,607 9,380
Equipment held under capital leases, net......................................................... 3,452 3,519
Other assets, net................................................................................ 1,920 1,238
---------- ----------
Total assets................................................................................. $ 129,629 $ 137,782
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade......................................................................................... $ 11,791 $ 12,743
Billing customers............................................................................. 50,577 50,974
Accrued liabilities.............................................................................. 30,656 25,889
Revolving line of credit for purchased receivables............................................... 211 19,010
Current portion of long-term debt................................................................ 795 603
Current portion of obligations under capital leases.............................................. 893 896
---------- ----------
Total current liabilities................................................................... 94,923 110,115
Long-term debt, less current portion............................................................. 3,095 2,370
Obligations under capital leases, less current portion........................................... 2,430 2,666
---------- ----------
Total liabilities........................................................................... 100,448 115,151
Commitments and contingencies (Note 3)
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; no shares issued or
outstanding at December 31 or September 30.................................................... 0 0
Common stock, $0.01 par value, 60,000,000 shares authorized; 15,157,361 shares
issued and outstanding at December 31; 15,045,709 shares issued and outstanding
at September 30............................................................................... 152 151
Additional paid-in capital....................................................................... 21,428 19,790
Retained earnings................................................................................ 7,601 2,690
---------- ----------
Total stockholders' equity.................................................................. 29,181 22,631
---------- ----------
Total liabilities and stockholders' equity.................................................. $ 129,629 $ 137,782
========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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4
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------
1996 1995
------------- -----------
Operating revenues............................................................................... $ 27,818 $ 23,354
Cost of services................................................................................. 17,958 15,306
--------- ---------
Gross profit..................................................................................... 9,860 8,048
Selling, general and administrative expenses..................................................... 2,903 2,392
Advance funding program income................................................................... (1,749) (1,324)
Advance funding program expense.................................................................. 324 278
Depreciation and amortization expense............................................................ 521 439
--------- ---------
Income from operations........................................................................... 7,861 6,263
Other income (expense):
Interest income................................................................................ 242 231
Interest expense............................................................................... (119) (80)
Other, net..................................................................................... (62) (47)
--------- ---------
Total other income (expense).................................................................. 61 104
--------- ---------
Income before income taxes....................................................................... 7,922 6,367
Income tax expense............................................................................... (3,011) (2,419)
--------- ---------
Net income....................................................................................... $ 4,911 $ 3,948
========= =========
Net income per common share...................................................................... $ 0.30 $ -
Pro forma net income per common share (See Note 1)............................................... $ - $ 0.27
Weighted average common shares and common share equivalents outstanding.......................... 16,195 -
Pro forma weighted average common shares and common share equivalents
outstanding (See Note 1)....................................................................... - 14,853
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------
1996 1995
------------- -----------
Cash flows from operating activities:
Net income..................................................................................... $ 4,911 $ 3,948
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization................................................................ 521 439
Deferred compensation........................................................................ 0 3
Changes in operating assets and liabilities:
Decrease in accounts receivable............................................................. 1,041 2,478
Increase in prepaids and other.............................................................. (114) (150)
Increase (decrease) in accounts payable..................................................... (952) 5,630
Increase (decrease) in accrued liabilities.................................................. 1,307 (13,361)
Increase in other liabilities............................................................... 0 35
--------- ---------
Net cash provided by (used in) operating activities.............................................. 6,714 (978)
Cash flows from investing activities:
Purchase of property and equipment............................................................. (5,628) (233)
Collections of purchased receivables from billing customers, net............................... 9,388 5,711
Collections of proceeds due (payments made) to billing customers, net.......................... (397) 6,370
Collections of sales taxes due on behalf of billing customers, net............................. 4,311 4,521
Other investing activities..................................................................... (734) 59
--------- ---------
Net cash provided by investing activities........................................................ 6,940 16,428
Cash flows from financing activities:
Payments on revolving line of credit for purchased receivables, net............................ (18,799) (1,128)
Proceeds from issuance of long-term debt....................................................... 1,063 0
Payments on long-term debt..................................................................... (146) (64)
Payments on capital leases..................................................................... (238) (108)
Proceeds from issuance of common stock......................................................... 787 0
Transfers to affiliates........................................................................ 0 (2,339)
--------- ---------
Net cash used in financing activities............................................................ (17,333) (3,639)
--------- ---------
Net increase (decrease) in cash and cash equivalents............................................. (3,679) 11,811
Cash and cash equivalents, beginning of period................................................... 34,135 26,770
--------- ---------
Cash and cash equivalents, end of period......................................................... $ 30,456 $ 38,581
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein
have been prepared by Billing Information Concepts Corp. ("Billing") and
subsidiaries (collectively referred to as the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company's management, the accompanying
interim condensed consolidated financial statements reflect all adjustments
that are necessary for a fair presentation of the Company's financial position,
results of operations and cash flows for such periods. All such adjustments are
of a normal recurring nature. It is recommended that these interim condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1996. Results of
operations for interim periods are not necessarily indicative of results that
may be expected for any other interim periods or the full fiscal year. Certain
prior period amounts have been reclassified for comparative purposes.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
On August 2, 1996, U.S. Long Distance Corp. ("USLD") distributed to its
stockholders all of the outstanding shares of common stock of Billing (the
"Distribution") with the result being that Billing became an independent,
publicly held company that owns and operates the billing clearinghouse and
information management services business previously owned by USLD. Since
Billing had no publicly held common shares outstanding prior to the
Distribution, net income per common share and weighted average common shares
outstanding for the quarter ended December 31, 1995 are presented on a pro
forma basis. The pro forma weighted average shares outstanding during the
quarter ended December 31, 1995 gives effect to the number of shares assumed to
be issued had the Distribution occurred at the beginning of the period and
differs from the number of shares assumed to be outstanding at the end of the
period due to the assumed conversions of options and warrants that were assumed
to be outstanding during the period. The unaudited pro forma per share data is
presented for informational purposes only and should not be considered
indicative of the operating results which the Company will achieve in the
future because, among other things, this data is based on historical rather
than prospective information and includes certain assumptions which are subject
to change.
NOTE 2. STATEMENT OF CASH FLOWS
Cash payments and non-cash activities during the periods indicated
were as follows:
THREE MONTHS ENDED
DECEMBER 31,
------------------
1996 1995
---- -----
(IN THOUSANDS)
Cash payments for income taxes...................................................... $1,612 $ 0
Cash payments for interest.......................................................... 632 366
Tax benefit recognized in connection with stock option exercises.................... 852 0
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BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party will have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
As of December 31, 1996, the Company is obligated to pay a company
approximately $10.0 million for license and service fees under a non-exclusive,
perpetual software license and related services agreements.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company and USLD share a common individual on their respective boards
of directors. Therefore, USLD is considered a related party for purposes of
financial disclosure. The Company provides billing and information management
services for USLD and purchases telecommunications services from USLD.
Transactions under the agreements for these services have been reflected in the
accompanying consolidated financial statements at market prices. Transactions
between the Company and USLD are summarized as follows:
THREE MONTHS ENDED
DECEMBER 31,
------------------
1996 1995
---- -----
(IN THOUSANDS)
Sales to USLD...................................................................... $1,198 $1,362
Purchases from USLD................................................................ 901 595
In addition, at December 31 and September 30, 1996, the Company's accounts
receivable balance includes $779,000 and $998,000, respectively, and the
billing customers accounts payable balance includes $1,083,000 and $1,337,000,
respectively, related to billing services performed for USLD. The Company also
had $774,000 and $1,288,000 payable to USLD included in accrued liabilities at
December 31 and September 30, 1996, respectively, and $971,000 and $1,034,000
payable to USLD included in long-term debt at December 31 and September 30,
1996, respectively.
NOTE 5. REVOLVING LINE OF CREDIT
The Company obtained a $50.0 million revolving line of credit facility
with certain commercial lending institutions effective December 23, 1996 to
finance the purchase of accounts receivable under the Company's Advance Funding
Program and for general corporate purposes. The credit facility terminates on
December 20, 1999 and bears interest at a variable rate based on the prime rate
or federal funds rate as determined by a formula defined in the credit
agreement. The facility is secured by the related accounts receivable, the
stock of Billing's subsidiaries and various other assets of the Company. Under
the most restrictive terms of the credit agreement, the Company is prohibited
from paying dividends on its common stock, is required to comply with certain
financial covenants and is subject to certain limitations on the issuance of
additional secured debt. The Company was in compliance with all such covenants
at December 31, 1996. The amount borrowed by the Company and the amount
available for borrowing under this credit facility was $211,000 and $47.4
million, respectively, at December 31, 1996.
7
8
ITEM 2.
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to the Company and its subsidiaries that
are based on the beliefs of the Company's management as well as assumptions
made by and information currently available to the Company's management. When
used in this report, the words "anticipate," "believe," "estimate," "expect"
and "intend" and words or phrases of similar import, as they relate to the
Company or its subsidiaries or Company management, are intended to identify
forward-looking statements. Such statements reflect the current risks,
uncertainties and assumptions related to certain factors including, without
limitations, competitive factors, general economic conditions, customer
relations, relationships with vendors, the interest rate environment,
governmental regulation and supervision, seasonality, distribution networks,
product introductions and acceptance, technological change, changes in industry
practices, onetime events and other factors described herein and in other
filings made by the Company with the Securities and Exchange Commission. Based
upon changing conditions, should any one or more of these risks or
uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three-month periods ended December
31, 1996 and 1995. It should be read in conjunction with the Interim Condensed
Consolidated Financial Statements of the Company, the notes thereto and other
financial information included elsewhere in this report. For purposes of the
following discussion, references to year periods refer to the Company's fiscal
year ended September 30 and references to quarterly periods refer to the
Company's fiscal quarter ended December 31.
GENERAL
On August 2, 1996, USLD distributed to its stockholders all of the
outstanding shares of common stock of the Company (the "Distribution") which,
prior to the Distribution, was a wholly-owned subsidiary of USLD. Upon the
completion of the Distribution, Billing became an independent, publicly held
company that owns and operates the billing clearinghouse and information
management services business ("Billing Group Business") previously owned by
USLD (see "Effects of Spinoff of Billing Group Business" below).
RESULTS OF OPERATIONS
The following table presents certain items in the Company's Condensed
Consolidated Statements of Income as a percentage of total revenues:
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1996 1995
--------- --------
Operating revenues........................................................................... 100.0% 100.0%
Cost of services............................................................................. 64.6 65.5
----- -----
Gross profit................................................................................. 35.4 34.5
Selling, general and administrative expenses................................................. 10.4 10.2
Advance funding program income............................................................... (6.3) (5.7)
Advance funding program expense.............................................................. 1.2 1.2
Depreciation and amortization expense........................................................ 1.9 1.9
----- -----
Income from operations....................................................................... 28.3 26.8
Other income, net............................................................................ 0.2 0.4
----- -----
Income before income taxes................................................................... 28.5 27.3
Income tax expense........................................................................... (10.8) (10.4)
----- -----
Net income................................................................................... 17.7% 16.9%
===== =====
8
9
Operating Revenues
The Company's revenues are primarily derived from providing billing
clearinghouse and information management services to direct dial long distance
carriers and operator services providers. Revenues are also derived from
enhanced billing services provided to companies that offer 900 services or
other non-regulated telecommunications equipment and services. Fees charged by
the Company include processing and customer service inquiry fees. Processing
fees are assessed to customers either as a fee charged for each telephone call
record or other transaction processed or as a percentage of the customer's
revenue that is submitted by the Company to local telephone companies for
billing and collection. Processing fees also include any charges assessed to
the Company by local telephone companies for billing and collection services
that are passed through to the customer. Customer service inquiry fees are
assessed to customers either as a fee charged for each record processed by the
Company or as a fee charged for each billing inquiry made by end-users.
Billing services revenues increased 19.1% to $27.8 million in the first
quarter of 1997 compared to $23.4 million in the first quarter of 1996. The
revenue increase is primarily attributable to an increase in the number of
telephone call records processed and billed on behalf of direct dial long
distance customers. Revenues derived from operator services customers in the
first quarter of 1997 were virtually unchanged from the comparable prior year
quarter. This lack of operator services revenue growth is attributable to
several factors, including an awareness on the part of the consumer of the
ability of the telephone user to select a carrier of choice by dialing access
codes of carriers other than the carrier contracted by the telephone owner,
resulting in a lower number of billable telephone calls generated by the
Company's customers. Telephone call record volumes (exclusive of records
processed for billing management customers) were as follows:
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1996 1995
------ ------
(IN MILLIONS)
Direct dial long distance services.................................................. 119.2 88.6
Operator services................................................................... 30.0 31.5
Enhanced billing services........................................................... 1.8 2.1
Revenue per record for billing management customers, who have their own
billing and collection agreements with the local telephone companies, is
significantly less than revenue per record for the Company's other customers,
and thus, the volume of records processed for billing management customers is
not presented in the table above.
Cost of Services
Cost of services includes billing and collection fees charged to the
Company by local telephone companies and related transmission costs, as well as
all costs associated with the customer service organization, including staffing
expenses and costs associated with telecommunications services. Billing and
collection fees charged by the local telephone companies include fees that are
assessed for each record submitted and for each bill rendered to its end-user
customers. The Company achieves discounted billing costs due to its aggregated
volumes and can pass these discounts on to its customers.
The gross profit margin of 35.4% reported for the quarter ended December
31, 1996 increased from 34.5% achieved in the comparable prior year quarter.
This increase was primarily attributable to lower billing and collection fees
which were partially offset by higher customer service costs. The lower billing
and collection fees as a percentage of revenues were the result of growth of
the Company's higher gross margin business.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses are comprised of all
selling, marketing and administrative costs incurred in direct support of the
business operations of the Company. Additionally, a portion of the expense of
certain USLD corporate functions, such as treasury, financial reporting,
investor relations, legal, payroll and management information systems has been
allocated to the Company and is reflected in its historical operating results
for the quarter ended December 31, 1995.
9
10
SG&A expenses for the first quarter of 1997 were $2.9 million,
representing 10.4% of revenues, compared to $2.4 million in the first quarter
of 1996, or 10.2% of revenues. SG&A expenses as a percentage of revenues may
increase in subsequent periods due to costs incurred in connection with the
Company taking occupancy of new facilities.
Advance Funding Program Income and Expense
Advance funding program income increased 32.1% to $1.7 million for the
first quarter of 1997 from $1.3 million for the first quarter of 1996. The
increase was primarily the result of financing a higher level of customer
receivables under the Company's advance funding program. The monthly average
balance of purchased receivables was $69.2 million and $50.7 million for the
quarter ended December 31, 1996 and comparable prior year quarter,
respectively.
Advance funding program expense increased 16.5% to $324,000 for the first
quarter of 1997 from $278,000 for the first quarter of 1996. Although
increasing from quarter to quarter, advance funding program expense declined
relative to advance funding program income due to the Company financing a
higher percentage of purchased receivables with internally generated funds. The
Company anticipates making certain capital expenditures over the next two years
(see "Liquidity and Capital Resources") and remitting certain sales taxes
during the next several quarters. Consequently, advance funding program expense
may increase in subsequent periods due to increased borrowings under the
Company's credit facility.
Income from Operations
Income from operations in the first quarter of 1997 increased to $7.9
million, or 28.3% of revenues, from $6.3 million, or 26.8% of revenues, in the
first quarter of 1996. The increase in income from operations as a percentage
of revenues is primarily attributable to a higher gross profit margin and
higher net advance funding program income, as discussed above.
EFFECTS OF SPINOFF OF BILLING GROUP BUSINESS
The unaudited Condensed Consolidated Statements of Income included in this
report reflect the operations of the Company for the quarters ended December
31, 1996 and 1995. Included below is supplemental unaudited consolidated pro
forma financial information that management believes is important to provide an
understanding of the results of operations of the Company on a stand-alone
basis. Pro Forma Condensed Consolidated Statements of Income are presented
below on a quarterly and annual basis for 1996. These Pro Forma Condensed
Consolidated Statements of Income are based on the historical statements of the
periods presented adjusted to reflect the items discussed in the accompanying
notes to the pro forma financial statements. The Pro Forma Condensed
Consolidated Statements of Income give effect to the Distribution as if it had
occurred at the beginning of 1996. The number of weighted average shares
outstanding used in the calculation of the pro forma per share data gives
effect to the shares assumed to be issued had the Distribution occurred at the
beginning of each period presented.
The unaudited consolidated pro forma financial information is presented
for informational purposes only and should be read in conjunction with the
accompanying notes to the pro forma financial statements and with the Company's
historical financial statements and notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" set forth herein
and in the Post Effective Amendment No. 2 to the Company's Registration
Statement on Form 10/A dated August 1, 1996 and the Company's Annual Report on
Form 10-K for the year ended September 30, 1996. The pro forma financial
statements should not be considered indicative of the operating results which
the Company will achieve in the future because, among other things, these
statements are based on historical rather than prospective information and
include certain assumptions which are subject to change.
The unaudited Pro Forma Condensed Consolidated Statements of Income
reflect, in management's opinion, all adjustments necessary to fairly state the
pro forma results of operations for the periods presented to make the unaudited
pro forma statements not misleading.
10
11
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------------------------- YEAR ENDED
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, SEPT. 30,
--------- --------- --------- --------- -----------
1995 1996 1996 1996 1996
---- ---- ---- ---- ----
Operating revenues............................................... $ 23,354 $ 26,947 $ 25,729 $ 27,854 $ 103,884
Cost of services................................................. 15,306 16,839 16,640 18,083 66,868
--------- --------- --------- --------- -----------
Gross profit.................................................... 8,048 10,108 9,089 9,771 37,016
Selling, general and administrative expenses..................... 2,392 2,964 3,239 2,850 11,445
Advance funding program income................................... (1,324) (1,644) (1,805) (1,791) (6,564)
Advance funding program expense (A).............................. 696 738 640 686 2,760
Depreciation and amortization expense............................ 439 501 567 620 2,127
--------- --------- --------- --------- -----------
Income from operations.......................................... 5,845 7,549 6,448 7,406 27,248
Other income (expense), net...................................... 104 132 96 (180) 152
--------- --------- --------- ---------- -----------
Income before income taxes....................................... 5,949 7,681 6,544 7,226 27,400
Income tax expense (B)........................................... (2,260) (2,919) (2,486) (2,746) (10,411)
--------- --------- --------- --------- -----------
Net income....................................................... $ 3,689 $ 4,762 $ 4,058 $ 4,480 $ 16,989
========= ========= ========= ========= ===========
Net income per common share...................................... $0.25 $0.31 $0.26 $0.28 $1.10
Weighted average common shares outstanding....................... 14,853 15,189 15,715 15,783 15,385
Notes to unaudited pro forma condensed consolidated statements of income:
(A) Reflects an adjustment to increase interest expense for the assumed
borrowings for the cash transfer made to USLD of $11,713,000 in accordance
with the terms of the Distribution Agreement and cash payments for direct
costs incurred in connection with the Distribution of approximately
$9,200,000. Interest expense was calculated at a rate of 8.0% per annum.
(B) Reflects related income tax effect of the interest expense adjustment in
note (A).
11
12
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance decreased to $30.5 million at December 31, 1996
from $34.1 million at September 30, 1996. The Company's working capital
position increased to $14.7 million at December 31, 1996 from $13.5 million at
September 30, 1996 and its current ratio was 1.2:1 and 1.1:1 at December 31 and
September 30, 1996, respectively. Net cash provided by operating activities was
$6.7 million and $3.3 million in the first quarter of 1997 and 1996,
respectively, and reflected the increase in net income from the prior year
quarter.
In December 1996, the Company obtained a new $50 million revolving line of
credit facility with certain lenders to draw upon to advance funds to its
billing customers prior to collection of the funds from the local telephone
companies and for general corporate purposes. This new credit facility
terminates on December 20, 1999 and provides the Company with more favorable
terms than those of the Company's previous credit facility. Management believes
that the capacity under the revolving credit facility will be sufficient to
fund advances to its billing customers for the foreseeable future. The amount
borrowed by the Company under its credit facility to finance the advance
funding program was $211,000 and $19.0 million at December 31 and September 30,
1996, respectively. At December 31, 1996, the amount available under the
Company's receivable financing facility was $47.4 million.
In addition to the revolving line of credit facility described above, the
Company is obligated as a guarantor of USLD's equipment financing agreements
with certain lenders. The aggregate unpaid principal amount of indebtedness
under such agreements at December 31, 1996 was approximately $9.6 million, due
in varying amounts through October 2000. The Company is also obligated under
its own equipment financing agreements. Under certain of the credit agreements,
the Company is prohibited from paying dividends on its common stock, is
required to comply with certain financial covenants and is subject to certain
limitations on the issuance of additional secured debt. Cross-default
provisions of certain of the Company's equipment loans may place the Company in
default of such loans in the event that USLD defaults under the equipment
finance agreements that the Company has guaranteed. The Company was in
compliance with all required covenants at December 31 and September 30, 1996.
Capital expenditures amounted to approximately $5.6 million in the first
quarter of 1997 and related primarily to the purchase of computer equipment and
software. During the first quarter of 1997, the Company financed approximately
$1.1 million of equipment through a term debt agreement with a lender. To
facilitate and support the growth anticipated in its business, the Company
plans to invest a total of approximately $20 million to $25 million in capital
expenditures over the next 12 to 18 months, including approximately $18 million
to develop and create information systems that will enable it to offer "direct
billing" and "invoice ready" services to its customers. These expenditures, if
made, will be focused in the areas of software development, computer hardware
and local telephone company agreements. The Company has entered into a
non-exclusive, perpetual software license and related services agreements with
Saville Systems US, Inc. ("Saville") for the provision of certain of these
items. The Company's agreements with Saville include fees for licensing,
implementation and customization of the software, annual software maintenance
and assistance in utilizing the software products. In relation to this
development effort, the Company is currently discussing additional local
telephone company agreements with the local telephone companies for the
implementation of "invoice ready" billing services. The Company believes that
it will be able to fund expenditures for the new billing services with
internally generated funds and borrowings, but there can be no assurance that
such funds will be available or will be invested in these projects. As of
December 31, 1996, the Company had expended approximately $6.4 million in
support of these projects and a total of approximately $10.5 million in capital
expenditures since becoming a separate public company.
The Company's operating cash requirements consist principally of working
capital requirements, requirements under its advance funding program, scheduled
payments of principal on its outstanding indebtedness and capital expenditures.
The Company believes that it has the ability to continue to secure long-term
equipment financing and that this ability, combined with cash flows generated
from operations and periodic borrowings under its receivable financing
facility, will be sufficient to fund capital expenditures, advance funding
requirements, working capital needs and debt repayment requirements for the
foreseeable future.
12
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party would have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits listed below are filed as part of or incorporated by
reference in this report. Where such filing is made by incorporation by
reference to a previously filed document, such document is identified in
parentheses.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation of Billing (incorporated by reference from Exhibit 3.1 to the
Amendment No. 1 to the Company's Registration Statement on Form 10/A dated July 11, 1996)
3.2 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference from
Exhibit 3.2 to the Amendment No. 1 to the Company's Registration Statement on Form 10/A dated July 11, 1996)
3.3 Bylaws of Billing (incorporated by reference from Exhibit 3.3 to the Amendment No. 1 to the Company's Registration
Statement on Form 10/A dated July 11, 1996)
4.1 Form of Stock Certificate of Common Stock (incorporated by reference from Exhibit 4.1 to the Amendment No. 1 to the
Company's Registration Statement on Form 10/A dated July 11, 1996)
10.1+ Credit Agreement dated December 20, 1996, among Billing Information Concepts, Inc., The Frost
National Bank and The Boatmen's National Bank of St. Louis (filed herewith)
10.3 Parent Guaranty dated December 20, 1996, between Billing Information Concepts Corp. and The Frost National Bank
(filed herewith)
10.4 Affiliate Guaranty dated December 20, 1996, between Enhanced Services Billing, Inc. and The Frost National Bank 10.5
Promissory Note dated December 20, 1996, between Billing Information Concepts, Inc. and The Boatmen's National Bank
of St. Louis (filed herewith)
10.6 Promissory Note dated December 20, 1996, between Billing Information Concepts, Inc. and The Frost National Bank
(filed herewith)
10.7 Stock Pledge Agreement dated December 20, 1996, between Billing Information Concepts Corp. and The Frost National
Bank (filed herewith)
10.8 Security Agreement dated December 20, 1996, between Billing Information Concepts, Inc. and The Frost National Bank
(filed herewith)
11.1 Computation of Earnings Per Share (filed herewith)
27.1 Financial Data Schedule (filed herewith)
- ----------
+ Confidential treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
(b) Current Reports on Form 8-K:
None.
14
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BILLING INFORMATION CONCEPTS CORP.
(Registrant)
Date: February 12, 1997 By: /s/ KELLY E. SIMMONS
----------------------------------------
Kelly E. Simmons
Senior Vice President
Chief Financial Officer
(Duly authorized and principal
financial officer)
15
16
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation of Billing (incorporated by reference from
Exhibit 3.1 to the Amendment No. 1 to the Company's Registration Statement on Form 10/A dated
July 11, 1996)
3.2 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by
reference from Exhibit 3.2 to the Amendment No. 1 to the Company's Registration Statement on
Form 10/A dated July 11, 1996)
3.3 Bylaws of Billing (incorporated by reference from Exhibit 3.3 to the Amendment No. 1 to the
Company's Registration Statement on Form 10/A dated July 11, 1996)
4.1 Form of Stock Certificate of Common Stock (incorporated by reference from Exhibit 4.1 to the
Amendment No. 1 to the Company's Registration Statement on Form 10/A dated July 11, 1996)
10.1* Credit Agreement dated December 20, 1996, among Billing Information Concepts, Inc., The Frost
National Bank and The Boatmen's National Bank of St. Louis
10.3 Parent Guaranty dated December 20, 1996, between Billing Information Concepts Corp. and The
Frost National Bank
10.4 Affiliate Guaranty dated December 20, 1996, between Enhanced Services Billing, Inc. and The
Frost National Bank
10.5 Promissory Note dated December 20, 1996, between Billing Information Concepts, Inc. and The
Boatmen's National Bank of St. Louis
10.6 Promissory Note dated December 20, 1996, between Billing Information Concepts, Inc. and The
Frost National Bank
10.7 Stock Pledge Agreement dated December 20, 1996, between Billing Information Concepts Corp. and
The Frost National Bank
10.8 Security Agreement dated December 20, 1996, between Billing Information Concepts, Inc. and The
Frost National Bank
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
*Confidential treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities and
Exchange Commission.