-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HUskqKgmr9VLGXnetdCrO2DNb9vqkOlEBCa+C4g0/8Aa3OLAW+Owg3MDC8FgonOf r+LBZYnNSqNoKAuIM+SqZg== 0000912057-96-003722.txt : 19960304 0000912057-96-003722.hdr.sgml : 19960304 ACCESSION NUMBER: 0000912057-96-003722 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960301 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRITE VOICE SYSTEMS INC CENTRAL INDEX KEY: 0000852637 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 480986248 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17920 FILM NUMBER: 96530123 BUSINESS ADDRESS: STREET 1: 7309 E 21ST ST N CITY: WICHITA STATE: KS ZIP: 67206 BUSINESS PHONE: 3166526500 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K/A AMENDMENT NO. 1 [x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to _________________. Commission File Number 0-17920 BRITE VOICE SYSTEMS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) KANSAS 48-0986258 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 7309 E. 21ST STREET NORTH WICHITA, KANSAS 67206-1083 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (316) 652-6500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, NO PAR VALUE (Title of class) ---------------- ITEM 6. SELECTED FINANCIAL DATA The following table contains certain selected financial data which should be read in conjunction with the Company's financial statements and notes thereto and with Management's Discussion and Analysis of Financial Condition and Results of Operations. The selected financial data as of and for the years ended December 31, 1995, 1994 and 1993 have been derived from the financial statements of the Company audited by Arthur Andersen LLP, independent public accountants, except for the balance sheet data as of December 31, 1993. The balance sheet data as of December 31, 1993 has been restated by the Company to reflect the TSL merger, and are derived from the financial statements of the Company audited by Arthur Andersen LLP and the financial statements of the TSL Companies as of and for the years ended December 31, 1994 and 1993, audited by Ernst & Young LLP, independent accountants. The selected financial data as of and for the years ended December 31, 1992 and 1991 have been restated by the Company to reflect the TSL Merger, and are derived from the financial statements of the Company audited by Baird, Kurtz & Dobson, independent certified public accountants, and the financial statements of the TSL Companies. The balance sheets as of December 31, 1992 and 1991 and the income statement for the year ended December 31, 1991 of the TSL Companies from which the selected financial data is derived are unaudited.
YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues............................................. $ 97,078 $ 79,940 $ 56,412 $ 42,265 $ 41,846 Operating income (loss).............................. 5,708 6,005 (1,606) (3,951) 2,017 Net income (loss).................................... 3,950 4,425 (1,303) (2,423) 2,339 Net income (loss) per share.......................... .33 .38 (.12) (.22) .21 Weighted average shares used in computation.......... 11,922 11,526 11,068 10,865 11,031 BALANCE SHEET DATA: Working capital...................................... $ 26,934 $ 23,772 $ 20,918 $ 22,522 $ 25,483 Total assets......................................... 58,832 51,888 41,328 39,745 43,043 Long term debt....................................... -- -- 1,040 1,055 1,255 Stockholders' equity................................. 40,446 35,547 29,655 30,669 33,551
15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE ----- Report of Independent Public Accountants................................................................... 22 Consolidated Balance Sheets as of December 31, 1995 and 1994............................................... 23 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993................. 25 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993...................................................................................................... 26 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993................. 27 Notes to Consolidated Financial Statements................................................................. 28 Supplemental Schedules: Schedule II -- Valuation and Qualifying Accounts........................................................... 37
Note: Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is included in the Financial Statements or notes thereto. 21 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS Board of Directors Brite Voice Systems, Inc. Wichita, Kansas We have audited the accompanying consolidated balance sheets of Brite Voice Systems, Inc., (a Kansas corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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 did not audit the financial statements of the TSL Companies, companies acquired during 1995 in a transaction accounted for as a pooling of interests, as discussed in Note 2. Such statements are included in the consolidated financial statements of the Company and reflect total assets and total revenues of 7 percent and 17 percent in 1994, respectively, and 20 percent of total revenues in 1993, of the consolidated totals. These statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for the TSL Companies, is based solely upon the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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 of the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion based on our audit and the report of other auditors, the financial statements referred to above present fairly in all material respects, the financial position of Brite Voice Systems, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Kansas City, Missouri, February 2, 1996 22 BRITE VOICE SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 ASSETS (IN THOUSANDS)
1995 1994 --------- --------- CURRENT ASSETS Cash and cash equivalents................................................................ $ 3,405 $ 5,776 Temporary investments (at cost which approximates market) (Note 1)....................... -- 5,201 Accounts receivable, less allowance for doubtful accounts: 1995 -- $481; 1994 -- $844.... 28,690 18,846 Inventories (Note 4)..................................................................... 10,510 8,263 Prepaid expenses and other............................................................... 2,715 1,889 --------- --------- Total Current Assets................................................................... 45,320 39,975 --------- --------- PROPERTY AND EQUIPMENT Land and building........................................................................ 3,074 3,074 Furniture and equipment.................................................................. 19,978 15,161 --------- --------- 23,052 18,235 Less accumulated depreciation............................................................ (11,476) (8,906) --------- --------- 11,576 9,329 --------- --------- OTHER ASSETS (Note 3)...................................................................... 1,936 2,584 --------- --------- TOTAL ASSETS........................................................................... $ 58,832 $ 51,888 --------- --------- --------- ---------
See Notes to Financial Statements 23 BRITE VOICE SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 LIABILITIES AND STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
1995 1994 --------- --------- CURRENT LIABILITIES Accounts payable......................................................................... $ 9,503 $ 6,492 Accrued salaries and wages............................................................... 1,726 1,941 Other accrued expenses................................................................... 1,785 2,926 Deferred revenue......................................................................... 1,364 1,287 Customer deposits........................................................................ 1,565 775 Advances from affiliates (Note 7)........................................................ 551 2,782 Income taxes payable..................................................................... 1,892 -- --------- --------- Total Current Liabilities.............................................................. 18,386 16,203 --------- --------- DEFERRED INCOME TAXES (Note 6)............................................................. -- 138 --------- --------- COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)............................................. -- -- STOCKHOLDERS' EQUITY (Note 8) Preferred stock, no par value; authorized 10,000,000 shares; none outstanding............ -- -- Common stock, no par value; authorized 30,000,000 shares; outstanding 1995 -11,489,325 shares; 1994 - 11,254,798 shares 34,377 33,404 Retained earnings........................................................................ 6,383 2,358 Foreign currency translation adjustment.................................................. (314) (215) --------- --------- Total Stockholders' Equity............................................................... 40,446 35,547 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................. $ 58,832 $ 51,888 --------- --------- --------- ---------
See Notes to Financial Statements 24 BRITE VOICE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS, EXCEPT SHARE DATA)
1995 1994 1993 --------- --------- --------- REVENUES System sales................................................................. $ 52,697 $ 43,126 $ 32,119 Service revenues............................................................. 44,381 36,814 24,293 --------- --------- --------- 97,078 79,940 56,412 --------- --------- --------- COSTS AND EXPENSES Cost of sales: System..................................................................... 22,809 19,158 14,677 Service.................................................................... 22,249 19,343 11,987 Research and engineering..................................................... 8,520 6,436 5,863 Selling, general and administrative.......................................... 29,162 22,009 18,599 S corporation distributions (Note 2)......................................... 4,303 6,989 2,292 Merger and other costs (Notes 2 and 3)....................................... 4,327 -- 4,600 --------- --------- --------- 91,370 73,935 58,018 --------- --------- --------- INCOME (LOSS) FROM OPERATIONS.................................................. 5,708 6,005 (1,606) --------- --------- --------- OTHER INCOME (EXPENSE) Interest income.............................................................. 265 556 463 Interest expense............................................................. (18) (121) (124) Other........................................................................ 205 152 72 --------- --------- --------- 452 587 411 --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES.............................................. 6,160 6,592 (1,195) INCOME TAX PROVISION (NOTE 6).................................................. 2,210 2,167 108 --------- --------- --------- NET INCOME (LOSS).............................................................. $ 3,950 $ 4,425 $ (1,303) --------- --------- --------- --------- --------- --------- EARNINGS (LOSS) PER SHARE...................................................... $ 0.33 $ 0.38 $ (0.12) --------- --------- --------- --------- --------- ---------
See Notes to Financial Statements 25 BRITE VOICE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
RETAINED FOREIGN EARNINGS CURRENCY COMMON TREASURY (ACCUMULATED TRANSLATION STOCK STOCK DEFICIT) ADJUSTMENT TOTAL --------- --------- ------------ ----------- --------- Balance, December 31, 1992......................... 34,509 (2,810) (672) (357) 30,670 Net loss......................................... -- -- (1,303) -- (1,303) Retirement of treasury stock..................... (2,810) 2,810 -- -- -0- Adjustments to conform fiscal year of acquired corporation..................................... 21 -- (92) -- (71) Sale of common stock............................. 442 -- -- -- 442 Non-qualified stock option compensation.......... 4 -- -- -- 4 Foreign currency translation adjustment.......... -- -- -- (87) (87) --------- --------- ------------ ----------- --------- Balance, December 31, 1993......................... 32,166 -0- (2,067) (444) 29,655 Net income....................................... -- -- 4,425 -- 4,425 Sale of common stock............................. 847 -- -- -- 847 Non-qualified stock option compensation.......... 6 -- -- -- 6 Tax benefit of stock option transactions......... 385 -- -- -- 385 Foreign currency translation adjustment.......... -- -- -- 229 229 --------- --------- ------------ ----------- --------- Balance, December 31, 1994......................... 33,404 -0- 2,358 (215) 35,547 Issuance of shares for pooling transaction (Note 2).............................................. 1 -- 75 -- 76 Net income....................................... -- -- 3,950 -- 3,950 Sale of common stock............................. 733 -- -- -- 733 Non-qualified stock option compensation.......... 5 -- -- -- 5 Tax benefit of stock option transactions......... 234 -- -- -- 234 Foreign currency translation adjustment.......... -- -- -- (99) (99) --------- --------- ------------ ----------- --------- Balance, December 31, 1995......................... $ 34,377 $ -0- $ 6,383 $ (314) $ 40,446 --------- --------- ------------ ----------- --------- --------- --------- ------------ ----------- ---------
See Notes to Financial Statements 26 BRITE VOICE SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
1995 1994 1993 --------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)........................................................... $ 3,951 $ 4,425 $ (1,303) Adjustment to conform fiscal year of acquired corporation................... -- -- (209) Items not requiring (providing) cash: Depreciation and amortization............................................. 3,677 2,705 1,974 (Gain) loss on disposition of assets...................................... -- (109) 263 Non-qualified stock option compensation................................... 5 6 4 Changes in: Accounts receivable....................................................... (9,006) (4,640) (4,680) Inventories............................................................... (2,231) (1,693) (923) Accounts payable and accrued expenses..................................... 1,955 3,087 2,898 Other current assets and liabilities...................................... 1,131 756 1,066 --------- ---------- --------- Net cash provided by (used in) operating activities..................... (518) 4,537 (910) --------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment, net..................................... (5,600) (3,886) (2,219) Proceeds from maturity of temporary investments............................. 8,580 15,067 11,205 Purchase of temporary investments........................................... (3,379) (14,651) (7,051) Proceeds from sale of property.............................................. -- 228 -- Increase (decrease) in other assets......................................... 29 (458) (899) Net cash received from business acquisitions................................ 44 -- -- --------- ---------- --------- Net cash provided by (used in) investing activities..................... (326) (3,700) 1,036 --------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock.................................................... 436 147 21 Exercise of stock options................................................... 297 700 422 Proceeds from shareholder loans............................................. 2,267 2,712 1,621 Principal payments on debt.................................................. (4,428) (2,473) (1,559) --------- ---------- --------- Net cash provided by (used in) financing activities..................... (1,428) 1,086 505 --------- ---------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH....................................... (99) 229 -- --------- ---------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. (2,371) 2,152 631 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.................................. 5,776 3,624 2,993 --------- ---------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR........................................ $ 3,405 $ 5,776 $ 3,624 --------- ---------- --------- --------- ---------- ---------
See Notes to Financial Statements 27 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS AND PRINCIPLES OF CONSOLIDATION The Company designs, integrates, assembles, markets and supports voice processing systems and services which incorporate audiotex, voice response, voice recognition, voice/facsimile messaging and interactive computer applications into customized market solutions. The Company also offers a broad array of telecommunications consulting services. These markets are characterized by rapid technological change, and the Company is subject to many risks associated with this rapid change, including obsolescence of its products and services, warranty charges and estimates of costs required to complete certain projects after shipment of a system. In addition, the Company has elected to purchase certain components from sole suppliers. Although there are a limited number of manufacturers of these particular components, management believes that the other suppliers could provide similar products on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely. The financial statements include various estimates, including estimated reserves for obsolete inventory, uncollectible accounts, warranty reserves and costs to complete certain projects. These estimates have been established by management using historical operations data. There can be no assurance that these estimates will not change as additional information becomes available. The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method and includes the cost of materials, direct labor and manufacturing overhead. Provision is made for obsolete or slow moving items where appropriate. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from three to 10 years for furniture and equipment to 35 years for buildings and improvements. RESEARCH AND ENGINEERING Costs associated with internal development of new products or enhancements of existing products are expensed as incurred because the marketability of such products is not determinable until substantially all the costs are incurred. REVENUE RECOGNITION Revenues from the sale of systems generally are recognized upon shipment. Software revenue is recognized in accordance with the American Institute of Certified Public Accountants Statement 91-1, Software Revenue Recognition. Revenues from maintenance and consulting services, and audio information contracts for installed systems are recognized ratably over the service period. Revenues from service bureau operations and consulting services are recognized when the services are provided. Revenues from billing verification services are recognized when claim proceeds are received from the telephone company. CREDIT RISK The Company extends unsecured credit to customers throughout the United States and in certain foreign countries. 28 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAXES Deferred tax liabilities and assets are recognized for the future tax consequences of events that have been recognized in the financial statements or tax returns. (See Note 6) FOREIGN CURRENCY TRANSLATION ADJUSTMENT Financial statements of the Company's foreign subsidiaries have been translated into U.S. dollars at current and average exchange rates. Resulting translation adjustments are recorded as a separate component of stockholders' equity. Any transaction gains or losses are included in the Consolidated Statements of Operations. EARNINGS PER SHARE Earnings per share amounts are computed using the weighted average number of shares outstanding of 11,922,000, 11,526,000 and 11,068,000, for the years ended December 31, 1995, 1994 and 1993, respectively. All options are considered to be common stock equivalents but are only included in the weighted average to the extent that they are dilutive. NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of". This standard provides a framework for evaluating the realizability of the Company's investments in long-lived assets. At this time, the Company does not anticipate that adoption of the standard, which is required in 1996, will have a material impact on its results of operations or financial position. The Financial Accounting Standards Board also issued SFAS No. 123, "Accounting for Stock Based Compensation". Adoption of this standard is required in 1996. Under the new standard, the Company must either change its method of computing the compensation expense associated with the issuance of stock options or make pro forma disclosures based on the new computation method. At this time, the Company anticipates adopting the standard by making the pro forma disclosures. TEMPORARY INVESTMENTS The Company is required to classify debt and equity securities into specific categories and present them in the financial statements under the guidelines established for each category. At December 31, 1994, all investments in debt securities were classified as held-to-maturity because the Company had the positive intent and ability to hold the securities to maturity. The securities had short-term maturities, were presented at amortized cost, and had an aggregate fair value which approximated cost. NOTE 2 -- ACQUISITIONS Effective August 9, 1995, the Company issued 3,331,000 shares of its common stock for all of the outstanding common stock of Telecom Services Limited (U.S.), Inc., Telecom Services Limited (West), Inc., TSL Software Services, Inc., and TSL Management Group, Inc. (collectively the "TSL Companies" or "TSL") and the TSL Companies were merged into the Company (the "TSL Merger"). The TSL Merger has been accounted for as a pooling of interests and, accordingly, the Company's 29 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 2 -- ACQUISITIONS (CONTINUED) consolidated financial statements have been restated for all periods prior to the acquisition to include the results of operations, financial position and cash flows of the TSL Companies. Revenues and net income (loss) prior to the combination are as follows:
PERIOD ENDED AUGUST YEAR ENDED DECEMBER YEAR ENDED DECEMBER 8, 1995 (UNAUDITED) 31, 1994 31, 1993 -------------------- -------------------- -------------------- NET NET NET INCOME INCOME INCOME REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS) --------- --------- --------- --------- --------- --------- (IN THOUSANDS) Brite Voice Systems, Inc...................... $ 41,041 $ 2,104 $ 66,304 $ 5,569 $ 46,857 $ (1,963) TSL........................................... 9,242 (91) 13,636 (1,144) 9,555 660 --------- --------- --------- --------- --------- --------- $ 50,283 $ 2,013 $ 79,940 $ 4,425 $ 56,412 $ (1,303) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Prior to the TSL Merger, the TSL Companies elected to be taxed as S corporations under the Internal Revenue Code. This election eliminates federal income taxes at the corporate level, as a result of which the TSL Companies' profits were included in the income tax returns of their stockholders for all periods through the date of the TSL Merger. Accordingly, the TSL Companies distributed the majority of their taxable earnings in the form of additional compensation to officers and shareholders. Distributions in excess of the salary and bonus amounts contracted for in the employment agreements entered into between the Company and certain of the TSL Stockholders, were $4,303,000, $6,989,000 and $2,292,000 for the period ended August 8, 1995 and the years ended December 31, 1994 and 1993, respectively. No adjustments have been made to the provision for income taxes, to reflect the impact had the TSL Companies been subject to federal income taxes as the adjustment is immaterial. Merger expenses of $3,509,000 were charged to expense during 1995. These expenses represent brokerage, legal and other professional fees associated with the consummation of the TSL Merger. On March 31, 1995, the Company issued 150,000 shares of its common stock for all of the outstanding common stock of Touch-Talk, Inc. (the "Touch-Talk Merger"), and Touch-Talk was merged into the Company. The Touch-Talk Merger has been accounted for as a pooling of interests. The net assets of Touch-Talk, Inc. were $560,000 at March 31, 1995. The effect of this pooling is immaterial to the operations of the Company and, accordingly, prior years' financial statements have not been restated. NOTE 3 -- OTHER ASSETS Other Assets consist of the following:
1995 1994 --------- --------- (IN THOUSANDS) Prepaid royalties........................................................ $ -- $ 1,250 Goodwill and other....................................................... 2,472 1,966 --------- --------- 2,472 3,216 Accumulated amortization................................................. (536) (632) --------- --------- $ 1,936 $ 2,584 --------- --------- --------- ---------
In September 1992, the Company licensed certain patented technology for the provision of electronic classified services, and advanced $1,250,000 in nonrefundable royalties. The royalties were 30 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 -- OTHER ASSETS (CONTINUED) being amortized over a five year period. In September 1995, due to continued unprofitability of the product, the Company wrote off $818,000, representing the balance of the prepaid royalties and the net book value of certain equipment related to the project. This charge is included in Merger and other costs in the accompanying Statements of Operations. Goodwill and other intangible assets are being amortized using the straight-line method over the estimated useful lives of the assets or the specific contract term, which range from three to 10 years. Amortization expense, including the amortization of prepaid royalties, was $619,000 in 1995 and $434,000 in 1994. NOTE 4 -- INVENTORIES Inventories consist of the following (in thousands):
1995 1994 --------- --------- Purchased parts........................................................ $ 3,044 $ 2,677 Work in progress....................................................... 4,146 2,383 Finished goods......................................................... 3,320 3,203 --------- --------- $ 10,510 $ 8,263 --------- --------- --------- ---------
NOTE 5 -- LEASES The Company leases office space under noncancelable agreements expiring at various times through 2002. Future minimum rental payments under these operating leases are as follows (in thousands): 1996....................................................... $ 1,306 1997....................................................... 927 1998....................................................... 457 1999....................................................... 376 2000....................................................... 282 Thereafter................................................. 320 --------- $ 3,668 --------- ---------
Rent expense under the above agreements was $1,023,000, $807,000 and $700,000 for the years ended December 31, 1995, 1994 and 1993, respectively. NOTE 6 -- INCOME TAXES The income tax provision includes the following (in thousands):
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 --------- --------- --------- Taxes currently payable: Federal.................................................................. $ 1,804 $ 1,918 $ (90) State.................................................................... 355 150 -- Foreign.................................................................. 651 449 198 Deferred taxes........................................................... (600) (350) -- --------- --------- --------- $ 2,210 $ 2,167 $ 108 --------- --------- --------- --------- --------- ---------
31 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 6 -- INCOME TAXES (CONTINUED) United States income taxes have not been provided on the cumulative undistributed earnings of the Company's foreign subsidiaries for $3,076,000 at December 31, 1995. It is intended that these earnings will be permanently invested in operations outside the United States. A reconciliation of income tax expense at the statutory rate to income tax expense at the Company's effective rate, is as follows (in thousands):
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 --------- --------- --------- Tax expense (benefit) at the statutory rate............................... $ 2,095 $ 2,886 $ (583) Effect of foreign tax rates............................................... 8 28 78 Losses providing no current benefit....................................... -- 49 775 Increase (decrease) in taxes resulting from: Disqualifying dispositions.............................................. -- -- (280) Merger costs............................................................ 1,130 -- 104 State income taxes, net of federal benefit.............................. 234 197 -- Foreign sales corporation benefit....................................... (54) (112) (21) Utilization of net operating loss carryforward.......................... (321) (456) -- Utilization of credit carryforwards..................................... (278) (276) -- Reduction of valuation allowance........................................ (600) (350) -- Other permanent differences............................................. (4) 201 35 --------- --------- --------- $ 2,210 $ 2,167 $ 108 --------- --------- --------- --------- --------- ---------
Deferred taxes are determined based on the estimated future tax effect of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. Deferred taxes consist of the following (in thousands):
1995 1994 --------- --------- Current deferred taxes Gross assets.................................................... $ 662 $ 488 Gross liabilities............................................... -- -- --------- --------- $ 662 $ 488 --------- --------- --------- --------- Noncurrent deferred taxes Gross assets.................................................... $ 728 $ 164 Gross liabilities............................................... (403) (302) --------- --------- $ 325 $ (138) --------- --------- --------- ---------
32 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 6 -- INCOME TAXES (CONTINUED) The tax effect of significant temporary differences representing deferred tax assets and liabilities is as follows (in thousands):
1995 1994 --------- --------- Federal regular tax operating loss, research and development credit, investment tax credit and alternative minimum tax credit carryforwards...................... $ 1,293 $ 1,688 Merger costs...................................................................... -- 96 Depreciation...................................................................... (403) (302) Inventory obsolescence reserve.................................................... 362 223 Allowance for doubtful accounts................................................... 154 266 Accrued vacation pay.............................................................. 276 241 Other, net........................................................................ 317 318 --------- --------- $ 1,999 $ 2,530 Valuation allowance............................................................... (1,049) (2,180) --------- --------- Net deferred taxes................................................................ $ 950 $ 350 --------- --------- --------- ---------
A valuation allowance is provided to the extent realization of the deferred tax assets are dependent on taxable income (exclusive of reversing temporary differences) in future years. A net deferred tax asset was recognized in the current year to the extent existing non-deductible temporary differences could be carried back to reduce current-year income tax. At December 31, 1995, the Company has loss and credit carryforwards available for tax purposes as follows (dollars in thousands):
EXPIRATION AMOUNT DATE --------- ---------- Federal regular tax carryforwards acquired through business combinations: Operating losses.......................................................................... $ 1,568 2008 Research and development credits.......................................................... 380 2008 Investment tax credits.................................................................... 60 2008 Federal regular tax carryforwards: Capital loss.............................................................................. $ 98 2007
NOTE 7 -- ADVANCES FROM AFFILIATES Prior to the TSL Merger, the TSL Companies financed working capital needs through the use of non-interest bearing loans made by the TSL stockholders. Upon consummation of the TSL Merger, the TSL stockholders loaned $2,267,000 to the Company. The loans bear no interest and are to be repaid monthly based upon future cash flow, as required by the Merger Agreement. Any unpaid amounts become due and payable on April 1, 1996. The balance due was $551,000 at December 31, 1995. NOTE 8 -- STOCKHOLDERS' EQUITY STOCK PURCHASE PLAN In March 1994, the Board of Directors approved the Brite Voice Systems 1994 Employee Stock Purchase Plan (the "Plan"). The Plan was approved and adopted at the Annual Meeting of Stockholders held on May 10, 1994. Under the Plan, up to 200,000 shares of common stock of the Company may 33 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 8 -- STOCKHOLDERS' EQUITY (CONTINUED) be sold to employees. Eligible employees may authorize payroll deductions of up to 10 percent of their compensation to purchase shares at the lower of 85 percent of the fair market value of the common stock as of the date of grant (first day of an offering period) or the last day of the six-month offering period. The semi-annual offerings commenced on July 1, 1994 and will terminate on July 1, 1999. No employee may purchase shares under the Plan, in any one year, having a fair market value on the offering date of more than $25,000, nor may an employee purchase more than 500 shares in any offering period. During 1995, 32,890 shares were purchased at prices ranging from $11.79 to $14.98. On December 31, 1995 there were 151,203 shares reserved for issuance under the Plan. STOCK OPTIONS In March 1994, the Board of Directors approved the Brite Voice Systems 1994 Stock Option Plan (the "1994 Option Plan") which was also approved and adopted at the Annual Meeting of Stockholders on May 10, 1994. A maximum of 1,000,000 shares of common stock may be issued under the 1994 Option Plan. Options are granted by the Board of Directors at prices not less than fair market value as of the date of the grant, generally have a four-year vesting period and expire 10 years after the date of grant. At December 31, 1995, a total of 470,150 shares were available for future grants under the 1994 Option Plan. The Company's 1984 Incentive Stock Option Plan terminated on December 31, 1994, except as to unexercised options remaining outstanding. Information regarding outstanding qualified stock options is as follows:
SHARES PRICE ----------- ------------------ Outstanding at December 31, 1992...................................... 802,044 1.25 - 13.75 Granted -- 1993..................................................... 418,000 6.625 - 9.625 Exercised -- 1993................................................... (202,654) 1.25 - 6.375 Cancelled -- 1993................................................... (67,037) 1.25 - 12.50 ----------- Outstanding at December 31, 1993...................................... 950,353 1.25 - 13.75 Granted -- 1994..................................................... 105,500 10.125 - 16.50 Exercised -- 1994................................................... (213,249) 1.25 - 12.50 Cancelled -- 1994................................................... (78,425) 1.25 - 13.75 ----------- Outstanding at December 31, 1994...................................... 764,179 1.25 - 16.50 Granted -- 1995..................................................... 434,350 16.125 - 20.00 Exercised -- 1995................................................... (46,637) 1.25 - 11.00 Cancelled -- 1995................................................... (37,000) 1.25 - 18.625 ----------- Outstanding at December 31, 1995...................................... 1,114,892 1.25 - 20.00 ----------- ----------- Exercisable at December 31, 1995...................................... 368,668 1.25 - 16.50
34 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 8 -- STOCKHOLDERS' EQUITY (CONTINUED) The Company has also granted non-qualified stock options that generally vest over a four-year period. Information regarding these non-qualified options is as follows:
SHARES PRICE ----------- ------------------ Outstanding at December 31, 1992...................................... 30,000 2.25 Granted -- 1993..................................................... 100,000 5.875 Exercised -- 1993................................................... (10,049) 2.25 ----------- Outstanding at December 31, 1993...................................... 119,951 2.25 - 5.875 Granted -- 1994..................................................... 25,000 15.875 Exercised -- 1994................................................... (5,250) 2.25 ----------- Outstanding at December 31, 1994...................................... 139,701 2.25 - 15.875 Exercised -- 1995................................................... (5,000) 2.25 ----------- Outstanding at December 31, 1995...................................... 134,701 2.25 - 15.875 ----------- ----------- Exercisable at December 31, 1995...................................... 59,701 2.25 - 15.875
The Company has a Non-Employee Director Stock Option Plan which provides for the granting of options to purchase up to 60,000 shares of common stock. Options under this plan are to be granted at prices not less than fair market value as of the date of the grant, and have a four-year vesting period. At December 31, 1995, there were options granted to purchase 40,000 shares of common stock at prices ranging from $5.00 to $8.75 per share. At December 31, 1995, 20,000 shares were exercisable. Also outstanding are 4,000 shares at $10.125 per share, assumed from a previously acquired corporation, all of which were exercisable at December 31, 1995. NOTE 9 -- EMPLOYEE BENEFIT PLANS The Company sponsors defined contribution retirement plans which cover substantially all of its employees in the United States and the United Kingdom. Company contributions to the United Kingdom plan are based on the employee's age, while contributions to the United States plan are a percentage of employee contributions at rates determined by the Board of Directors of the Company. Company contributions to these plans were $493,000, $428,000 and $339,000 for the years ended December 31, 1995, 1994 and 1993, respectively. NOTE 10 -- LEGAL PROCEEDINGS The Company is subject to claims and litigation from time to time arising in the normal operation of its business. Management believes that the ultimate resolution of any pending claim will not result in any material loss to the Company. NOTE 11 -- ADDITIONAL CASH FLOW INFORMATION
1995 1994 1993 --------- --------- --------- (IN THOUSANDS) Interest paid............................................................ $ 316 $ 127 $ 126 Income taxes paid (refunds received)..................................... 1,196 1,276 (435)
35 BRITE VOICE SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 NOTE 12 -- FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Operations for the years ended December 31, 1995, 1994 and 1993 are as follows (in thousands):
1995 1994 1993 --------- --------- --------- Sales to unaffiliated customers: United States...................................................... $ 76,028 $ 67,088 $ 48,527 Europe............................................................. 21,050 12,852 7,885 --------- --------- --------- Total............................................................ $ 97,078 $ 79,940 $ 56,412 --------- --------- --------- --------- --------- --------- Operating profit (loss): United States...................................................... $ 3,465 $ 4,818 $ (2,026) Europe............................................................. 2,243 1,187 420 --------- --------- --------- Total............................................................ $ 5,708 $ 6,005 $ (1,606) --------- --------- --------- --------- --------- --------- Identifiable assets: United States...................................................... $ 50,610 $ 47,541 $ 38,941 Europe............................................................. 14,966 8,862 5,616 Adjustments/eliminations........................................... (6,744) (4,515) (3,229) --------- --------- --------- Total............................................................ $ 58,832 $ 51,888 $ 41,328 --------- --------- --------- --------- --------- --------- Export sales from United States, primarily to the Pacific Rim, Africa and Canada.......................................................... $ 5,071 $ 2,827 $ 2,537 --------- --------- --------- --------- --------- ---------
36 BRITE VOICE SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 1995
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS PERIOD - ---------------------------------------------------------------- ----------- ------------- ------------- ----------- (IN THOUSANDS) Allowance for doubtful accounts: Year ended December 31, 1995.................................. $ 844 $ 317 $ 680 $ 481 Year ended December 31, 1994.................................. $ 453 $ 548 $ 157 $ 844 Year ended December 31, 1993.................................. $ 252 $ 300 $ 99 $ 453
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE DEDUCTIONS PERIOD - ---------------------------------------------------------------- ----------- ------------- ------------- ----------- (IN THOUSANDS) Allowance for obsolete inventory: Year ended December 31, 1995.................................. $ 666 $ 635 $ 232 $ 1,069 Year ended December 31, 1994.................................. $ 639 $ 393 $ 366 $ 666 Year ended December 31, 1993.................................. $ 408 $ 273 $ 42 $ 639
37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BRITE VOICE SYSTEMS, INC. (Registrant) By: /s/ Stanley G. Brannan ----------------------------------- Stanley G. Brannan President and Chief Executive Officer By: /s/ Glenn A. Etherington ----------------------------------- Glenn A. Etherington Chief Financial Officer (Principal Accounting Officer) Dated: February 29, 1996 Wichita, Kansas -----END PRIVACY-ENHANCED MESSAGE-----