UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
TO
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-22604
WHITE RIVER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 93-1011071
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TWO GANNETT DRIVE, SUITE 200, 10604
WHITE PLAINS, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
----------------
(914) 251-0237
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
As of May 13, 1998, 4,874,756 shares of White River Corporation common stock, par value $0.01 per share, were outstanding.
WHITE RIVER CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION..................................... 3
ITEM 1. FINANCIAL STATEMENTS...................................... 3
Consolidated Interim Statements of Financial Condition,
March 31, 1998 (Unaudited), and December 31, 1997........ 3
Consolidated Interim Statements of Operations (Unaudited),
Quarter Ended March 31, 1998, and 1997................... 4
Consolidated Interim Statements of Cash Flows (Unaudited),
Quarter Ended March 31, 1998, and 1997................... 5
Notes to Consolidated Interim Financial Statements
(Unaudited)............................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 7
PART II. OTHER INFORMATION......................................... 12
ITEM 1. LEGAL PROCEEDINGS......................................... 12
ITEM 2. CHANGES IN SECURITIES..................................... 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....... 12
ITEM 5. OTHER INFORMATION......................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......................... 12
SIGNATURES.......................................................... 15
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WHITE RIVER CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1998 DEC. 31, 1997
-------------- -------------
IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS
ASSETS (UNAUDITED)
Cash and cash equivalents......................... $ 196,465 $190,515
Investment securities, at market value (adjusted
cost: $40,944 and $63,940)....................... 118,783 122,688
Accounts receivable, less allowances of $2,769 and
$2,661........................................... 20,843 19,617
Other current assets.............................. 8,112 7,091
----------- --------
Total current assets.......................... 344,203 339,911
Investment securities, at market value (adjusted
cost: $14,855)................................... 52,338 41,434
Long term investment.............................. 20,000 --
Goodwill, less accumulated amortization of $21,418
and $20,051...................................... 17,492 18,754
Purchased software and equipment, less accumulated
amortization and depreciation of $51,458 and
$46,895.......................................... 21,299 18,431
Deferred income tax asset......................... 7,162 7,264
Other assets...................................... 1,363 1,339
----------- --------
Total assets.................................. $ 463,857 $427,133
=========== ========
LIABILITIES
Accounts payable and accrued expenses............. $ 25,851 $ 24,134
Deferred revenues................................. 5,810 5,824
Current portion of notes payable and other debt... 80 111
Redeemable preferred stock........................ 7,000 7,000
----------- --------
Total current liabilities..................... 38,741 37,069
Deferred income tax liability..................... 54,894 44,676
Other liabilities................................. 11,595 10,765
----------- --------
Total liabilities............................. 105,230 92,510
----------- --------
Redeemable preferred stock........................ 192 189
----------- --------
Minority interest................................. 38,203 33,687
----------- --------
Stockholders' equity
Series B, Participating Cumulative Preferred
Stock--par value $1.00 per share; 50,000 shares
designated; none issued........................ -- --
Common stock--par value $0.01 per share;
62,500,000 shares authorized; 6,370,000 shares
issued......................................... 64 64
Common paid-in surplus.......................... 251,760 250,942
Retained earnings................................. 42,336 43,166
Accumulated other comprehensive income, net of
tax.............................................. 74,946 55,449
Common stock in treasury, at cost (1,495,244
shares).......................................... (48,874) (48,874)
----------- --------
Total stockholders' equity.................... 320,232 300,747
----------- --------
Total liabilities, redeemable preferred stock,
minority interest and stockholders' equity... $ 463,857 $427,133
=========== ========
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The accompanying notes are an integral part of these consolidated interim financial statements.
WHITE RIVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDED
MARCH 31,
--------------------------
1998 1997
------------ ------------
IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS
Revenues
Insurance-related services...................... $ 44,692 $ 36,777
Investment income............................... 2,868 2,562
Other revenues.................................... 3,341 1,559
------------ ------------
Total revenues................................ 50,901 40,898
------------ ------------
Operating expenses
Compensation and benefits....................... 20,248 19,103
Other operating expenses........................ 25,291 21,572
------------ ------------
Total operating expenses...................... 45,539 40,675
------------ ------------
Operating income.................................. 5,362 223
------------ ------------
Net investment gains.............................. -- 669
------------ ------------
Other expense
Interest expense................................ 65 37
Minority interest............................... 2,807 2,111
------------ ------------
Total other expenses.......................... 2,872 2,148
------------ ------------
Pretax income (loss).............................. 2,490 (1,256)
Income tax expense................................ 3,202 1,248
------------ ------------
Net (loss)........................................ (712) (2,504)
Dividends and accretion on redeemable preferred
stock............................................ 118 118
------------ ------------
Net loss applicable to Common Shares.............. $ (830) $ (2,622)
============ ============
Basic and diluted loss per Common Share........... $ (0.17) $ (0.54)
Weighted average shares used in computing basic
and diluted loss per Common Share................ 4,874,756 4,874,756
============ ============
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The accompanying notes are an integral part of these consolidated interim financial statements.
WHITE RIVER CORPORATION AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
QUARTER ENDED MARCH 31,
------------------------
1998 1997
----------- -----------
IN THOUSANDS
Net (loss).......................................... $ (712) $ (2,504)
Adjustments to reconcile net (loss) to net cash and
cash equivalents provided from (used for)
operations:
Net investment gains.............................. -- (669)
Amortization and depreciation of purchased
software and equipment........................... 4,653 2,811
Amortization of goodwill.......................... 1,367 1,317
Minority interest................................. 2,807 2,111
Contract funding revenue amortization............. -- (96)
Deferred income tax expense (benefit)............. (293) (2,115)
Changes in:
Other current assets and accounts receivable.... (2,247) (2,090)
Other liabilities............................... 2,539 4,898
Deferred revenues............................... (14) 3,337
Accounts payable and accrued expenses........... 1,717 893
Other, net...................................... 274 (221)
----------- -----------
Net cash and cash equivalents provided from
operations......................................... 10,091 7,672
----------- -----------
Cash flows provided from (used for) investing
activities:
Proceeds from sales of investment securities...... 31,080 1,207
Purchase of long term investment.................. (20,000) --
Purchases of software and equipment............... (7,557) (1,825)
Purchases of investment securities................ (8,333) (950)
----------- -----------
Net cash and cash equivalents used for investment
activities......................................... (4,810) (1,568)
----------- -----------
Cash flows provided from (used for) financing
activities:
Proceeds from issuance of subsidiary stock........ 818 786
Principal payments on notes payable and other
debt............................................. (31) (29)
Dividends paid on redeemable preferred stock...... (118) (118)
Other, net........................................ -- 5
----------- -----------
Net cash and cash equivalents provided from
financing activities............................... 669 644
----------- -----------
Net increase in cash and cash equivalents during
period............................................. 5,950 6,748
Cash and cash equivalents balance at beginning of
period............................................. 190,515 188,365
----------- -----------
Cash and cash equivalents balance at end of period.. $ 196,465 $ 195,113
=========== ===========
Supplemental information:
Income taxes paid................................. $ 773 $ 1,101
Interest paid..................................... $ 34 $ 17
=========== ===========
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The accompanying notes are an integral part of these consolidated interim financial statements.
WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated interim financial statements include the accounts of White River Corporation (together with its wholly-owned subsidiaries, unless the context requires otherwise, "White River" or, together with all of its subsidiaries, the "Company") and its subsidiaries, including those of CCC Information Services Group, Inc. ("CCC"). The consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S- X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant intercompany balances have been eliminated in consolidation. The consolidated interim financial statements include all adjustments (consisting solely of normal recurring adjustments) considered necessary by management to fairly present the financial condition, results of operations and cash flows of the Company. Notwithstanding the foregoing, these consolidated interim financial statements may not be indicative of financial results for the full year or for any other future period. The balance sheet at December 31, 1997 has been derived from the audited financial statements at that date. Such consolidated interim financial statements should be read in conjunction with White River's 1997 Annual Report to Stockholders on Form 10-K as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as well as the disclosure of contingent assets and liabilities as of the date of the financial statements. Such estimates also have a pervasive effect upon the reported amounts of revenues and expenses reflected in the consolidated interim statements of operations. Actual results could differ from these estimates.
Certain accounts in prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.
NOTE 2. ADOPTION OF ACCOUNTING STANDARDS
As of January 1, 1998, the Company is required to adopt SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or stockholders' equity. SFAS No. 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption were reported separately in stockholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130.
During the first quarter of 1998, total comprehensive income amounted to $18.7 million. In the first quarter of 1997, total comprehensive income amounted to a loss of $3.1 million.
The components of comprehensive income (loss), net of related tax, for the three-month periods ended March 31, 1998 and 1997 are as follows:
QUARTER ENDED MARCH 31,
------------------------
1998 1997
----------- -----------
Net loss......................................... $ (830) $ (2,622)
Unrealized gains on available for sale
securities...................................... 19,497 (436)
----------- -----------
Comprehensive income (loss)...................... $ 18,667 $ (3,058)
=========== ===========
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WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
Accumulated other comprehensive income, net of related tax, at March 31, 1998 and December 31, 1997 is comprised solely of unrealized gains on available for sale securities.
As of January 1, 1998, the Company is required to adopt SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. Under the provisions of SFAS No. 131, the Company has elected to disclose segment information for its interim periods commencing with the filing of its 1998 Annual Report on Form 10-K.
NOTE 3. INCOME TAXES
Income tax expense is based on income recognized for financial statement purposes and includes the effects of temporary differences between such income and that recognized for tax return purposes. For the quarter ended March 31, 1998, the Company recorded income tax expense of $3.2 million on pretax income of $2.5 million. For the quarter ended March 31, 1997, the Company recorded income tax expense of $1.2 million on a pretax loss of $1.3 million. The major components that caused the Company's effective tax rate to exceed the Federal statutory rate of 35% in both years are the amortization of goodwill, which is not deductible for tax purposes, and the undistributed earnings of CCC, for which the Company provides deferred taxes.
NOTE 4. SUBSEQUENT EVENT
White River has entered into an Amended and Restated Agreement and Plan of Merger, dated as of December 11, 1997, as amended by Amendment Number 1 to the Amended and Restated Agreement and Plan of Merger, dated as of April 6, 1998, by and among certain affiliates of Harvard Private Group, Inc. ("Harvard Private Capital"), White River and White River Ventures, Inc., a wholly owned subsidiary of White River (as amended, the "Merger Agreement") pursuant to which, among other things, (i) an affiliate of Harvard Private Capital will merge with and into White River, with White River remaining as the surviving corporation (the "Merger"), (ii) each share of White River common stock, $.01 par value per share (other than treasury shares and shares with respect to which appraisal rights are perfected under the Delaware General Corporation Law), outstanding at the time of the Merger will be converted into the right to receive approximately $90.67 in cash, without interest and subject to adjustment under certain circumstances as described in the Merger Agreement and (iii) each share of Series A Non-Participating Cumulative Preferred Stock, par value $1.00 per share, will be converted into the right to receive the stated value of $1,000 per share plus any accrued and unpaid dividends until the effective time of the Merger. In addition, White River has agreed to pay Harvard Private Capital a termination fee of $15 million, plus up to $1.5 million in reimbursable expenses, in the event that the Merger Agreement is terminated under certain circumstances.
Consummation of the Merger is subject to customary conditions, including the approval of White River's stockholders and the absence of any material adverse change. The Merger Agreement may be terminated by any of the parties in the event that the Board of Directors of White River withdraws its recommendation of the transaction to stockholders or recommends an alternative transaction. The parties expect the merger to occur during the second quarter of 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION--AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
Book value per common equivalent share, as defined below, increased $4.12, or 6.7%, to $66.00 at March 31, 1998, from $61.88 at December 31, 1997. Such change reflects an increase of $4.00 per share related to the after tax increase in net unrealized investment gains, which were recorded directly to stockholders' equity as part of Accumulated Other Comprehensive Income.
WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
The calculation of book value per common and common equivalent share reflects the potentially dilutive effects of White River's outstanding incentive and directors' compensation awards. In the calculation of book value per common and common equivalent share: (i) the numerator is the sum of stockholders' equity and the tax benefit which would result from the settlement of outstanding performance units, directors' compensation awards and balances within White River's retirement plans with shares of Common Stock, based upon the current market price of the Common Stock and assuming a statutory tax rate of 35%, and (ii) the denominator is the sum of the shares of Common Stock outstanding and shares deemed issued in settlement of outstanding performance units, directors' compensation awards and balances within such retirement plans.
As of March 31, 1998, the Company had consolidated cash and cash equivalents of $196.5 million, (which included $7.8 million related to the operations of CCC, Hanover, and JKRE), as compared to $190.5 million as of December 31, 1997. Substantially all of the cash and cash equivalent balances of $188.7 million held by White River as of March 31, 1998, other than those of CCC, Hanover and JKRE, were deposited with several major banking institutions in interest-bearing accounts with maturities of six days or less. As of March 31, 1998, such deposits earned a weighted average interest rate of 5.4% per annum.
Working capital (current assets less current liabilities) increased by $2.7 million to $305.5 million at March 31, 1998 from $302.8 million at December 31, 1997 primarily due to an increase in the Company's balances of cash and cash equivalents of $6.0 million, which was offset by a reduction in the Company's investment securities as a result of the sale of certain of CCC's short-term investments in U.S. Treasury Bills and, as discussed below, the purchase by CCC of a long term investment.
On February 10, 1998, CCC signed an agreement with InsurQuote Systems, Inc. ("InsurQuote"), a provider of insurance rating information and the software used to manage that information, and invested $20 million to acquire 19.9% of the InsurQuote common stock, a subordinated note from InsurQuote, warrants, and shares of InsurQuote preferred stock. The warrants provide the right to acquire additional shares of InsurQuote common stock and are exercisable by CCC through February 10, 2008, subject to potential early termination provisions. The Series C stock is redeemable in full at the end of five years, or earlier under certain conditions, if not converted prior to that time. Each share of Series C and D preferred stock is initially convertible into one common share at the option of CCC. CCC is accounting for its investment in InsurQuote using the cost method.
Capital expenditures were $7.6 million for the quarter ended March 31, 1998 compared to $1.8 million during the quarter ended March 31, 1997 primarily due to expansion of CCC's office space as well as expenditures related to CCC's new products.
RESULTS OF OPERATIONS--QUARTERS ENDED MARCH 31, 1998 AND 1997
The consolidated net loss applicable to common stock totalled $0.8 million for the quarter ended March 31, 1998, or $0.17 per diluted common share, as compared to a net loss of $2.6 million, or $0.54 per diluted common share for the quarter ended March 31, 1997.
Investment Operations
Under SFAS No. 115, changes in net unrealized investment gains and losses relating to White River's marketable equity securities and debt which are classified as available for sale are reported net of tax as a separate component of stockholders' equity (Accumulated Other Comprehensive Income) and, except for declines in value which are deemed to be other than temporary in nature, changes in net unrealized investment gains and losses relating to White River's other investments are not recognized until realized. Pretax net unrealized gains of $30.0 million were recorded directly to stockholders' equity as part of Accumulated Other Comprehensive Income during the quarter ended March 31, 1998, and pretax net investment losses of $0.7 million were recorded directly to stockholders' equity as part of Accumulated Other Comprehensive Income during the quarter ended March 31, 1997.
WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
For the quarter ended March 31, 1998, pretax investment income totalled $2.9 million, including $2.6 million of interest income generated from the cash and cash equivalents balances held during the first quarter 1998. Pretax investment income totalled $2.6 million for the quarter ended March 31,1997, including $2.3 million of interest income generated from the cash and cash equivalent balances held during the first quarter 1997.
Proceeds from dispositions of investments during the quarters ended March 31, 1998 and March 31, 1997 were $31.1 million and $1.2 million, respectively. The increase in 1998 relates to CCC's dispositions of short-term investments in U.S. Treasury bills.
Insurance-Related Services
Revenues for the quarter ended March 31, 1998 of $44.7 million were $7.9 million, or 21.5%, higher than the same period in 1997. The increase in revenues was due primarily to higher revenues from workflow/collision estimating software licensing and valuation services. Workflow/collision estimating software revenue increased due to an increase in the number of units sold in both the autobody and insurance markets. Valuation services revenue increased due to higher transaction volume.
On a stand-alone basis, CCC reported net income before accretion and dividends on preferred stock of $4.4 million and $3.4 million for the quarters ended March 31, 1998 and March 31, 1997, respectively. White River's adjustment for the amortization of goodwill and purchased software related to the CCC acquisition, as well as the minority shareholders' interest in the earnings of CCC during these periods, reduced net income by $4.6 million and $4.0 million for the quarters ended March 31, 1998, and March 31, 1997, respectively.
Other Revenues--Consolidated
Other revenue of $3.3 million for the quarter ended March 31, 1998 consisted of Hanover Accessories, Inc. ("Hanover") sales of $2.8 million, and Just Kiddie Rides Enterprises, Inc. ("JKRE") sales of $0.5 million. The corresponding sales amount of $1.6 million for the same period in 1997 includes only the operations of Hanover, since JKRE was not established until November 1997.
Hanover generated $2.8 million in revenue from the sale of fashion accessories for the quarter ended March 31, 1998, with a net loss of $0.1 million. As of March 31, 1998, White River's investment in and advances to Hanover totalled $3.7 million. Hanover generated revenues of $1.6 million for the quarter ended March 31,1997, with a net loss of $0.2 million.
JKRE generated $0.5 million in revenue for the quarter ended March 31, 1998, with a net loss of $0.2 million. As of March 31, 1998, White Rivers investment in and advances to JKRE totalled $2.1 million.
Operating Expenses
For the quarter ended March 31, 1998, compensation and benefits expense totaled $20.2 million, as compared to $19.1 million for the same period in 1997. The first quarter 1998 increase is entirely the result of an increase in CCC's compensation and benefits to recruit and retain key employees. For the quarter ended March 31, 1998, other operating expenses totalled $25.3 million, as compared to $21.6 million for the same period in 1997, representing an increase of 17.2%. Such increase was due to an increase in CCC's operating expenses of $3.1 million, which was primarily attributable to product development and customer service expenses necessary to support increased revenues, as well as to efforts to build and upgrade internal systems.
Income Taxes
The Company's effective tax rate is higher than the statutory rate of 35% due to the fact that the Company provides for deferred taxes on its equity interest in the net income of CCC, as well as due to the effect of the amortization of goodwill.
WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
The Company provides for deferred income taxes which reflect the effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Furthermore, deferred tax assets are recorded net of a valuation allowance if management believes that it is more likely than not that some portion or all of the deferred tax assets will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
Total Company (consolidated basis)
During the quarter ended March 31, 1998, the Company's cash and cash equivalent balances increased by $6.0 million (see "Consolidated Interim Statements of Cash Flows (unaudited)" on page 5). The major sources of cash provided were $31.1 million from sales of investments, and net cash provided from operations of $10.1 million. The Company used $20.0 million for the purchase of a long-term investment (see below under "CCC"), $8.3 million for the purchase of investment securities and $7.6 million for the purchase of software and equipment.
Management believes that cash flows from operations, sales of investment securities and available borrowings as discussed separately below under "CCC" will be sufficient to satisfy the Company's capital expenditure and working capital requirements for the foreseeable future.
White River
As of March 31, 1998, the Company had consolidated cash and cash equivalents of $196.5 million, of which $188.7 million relates to balances held by White River, with the remaining $7.8 million related to the operation of CCC, Hanover and JKRE. White River's primary sources of additional cash include sales of investments, interest earned on cash equivalents and dividends earned on investments. There were no cash proceeds generated from the sale of investments during the quarter ended March 31, 1998, as compared to $1.2 million cash generated from the sale of investments during the quarter ended March 31, 1997.
Management believes that available cash and funds generated from sales of investments will be sufficient for White River to satisfy its working capital requirements for the foreseeable future.
CCC
CCC's primary source of cash includes receipts of customer billings, which are generally invoiced monthly in advance for EZEst units and Pathways subscriptions and monthly in arrears for Total Loss and EZNet transactions. During each of the quarters ended March 31, 1998 and March 31, 1997, CCC generated net cash from operating activities of $8.0 million. CCC used $6.1 million and $1.8 million, during the quarters ended March 31, 1998 and March 31, 1997, respectively, excluding noncash capital expenditures, to purchase equipment and software and invested the remaining cash in marketable securities. In addition, CCC invested $20 million in InsurQuote during the quarter ended March 31, 1998, using cash provided from sales of investments.
Management believes that cash flows from operations and the current credit facility will be sufficient to meet CCC's liquidity needs over the next 12 months. There can be no assurance, however, that CCC will be able to satisfy its liquidity needs in the future without engaging in financing activities beyond those described above.
YEAR 2000 ISSUE
The year 2000 issue relates to computer system programs which may not properly recognize the change in date years from 1999 to 2000. As a result of this time sensitivity of existing software, any business entity is at risk for possible system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business
WHITE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
activities. In addition, entities that provide software solutions to their customers must monitor the year 2000 concerns in the applications their software supports.
Based on risk assessment, CCC is currently modifying or replacing significant portions of its software so that its computer systems will function properly with respect to the year 2000 date recognition. White River is currently in the process of replacing significant portions of its software and expects to have such upgrades completed by December 31, 1998. CCC presently believes that with modifications to existing software and conversions to new software, the year 2000 issue will not pose a significant operational problem. However, if such modifications and conversions are not made, or not completed timely, the year 2000 issue could have a material adverse effect on CCC's business, financial condition and results of operations.
The Company is utilizing both internal and external resources to reprogram, or replace, and test software for the year 2000 modifications. The Company anticipates completing the year 2000 project in early 1999. The total cost of the year 2000 project for the Company is not material.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a safe harbor for forward-looking information made on behalf of the Company. All statements, other than statements of historical facts, which address activities or actions that the Company expects or anticipates will or may occur in the future, including such things as expansion and growth of the Company's operations and other such matters are forward-looking statements. To take advantage of the safe harbor provided by the Act, the Company is identifying certain factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by the Company.
Any one, or a combination, of these factors could materially affect the results of the Company's operations. These factors include competitive pressures, changes in customer preferences, acceptance of new product introductions and other marketing and sales initiatives, legal and regulatory initiatives and conditions in the capital markets. Forward-looking statements made by the Company are based on knowledge of its business and the environment in which it operates, but because of the factors listed above, as well as other factors, beyond the control of the Company, actual results may differ from those in the forward-looking statements.
WHITE RIVER CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various claims and routine litigation arising in the normal course of their businesses. Such claims and litigation are not expected to have a material adverse effect upon the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statement Schedules
All financial statement schedules are omitted as they are not applicable or the information required is included in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
On January 7, 1998, White River Corporation issued a press release announcing the election of Gordon S. Macklin to the offices of President and Chief Executive Officer. The information contained in the press release, which is attached as an exhibit to this report, is incorporated herein by reference. (Form 8-K filed January 8, 1998).
White River Corporation announced on April 7, 1998, the signing of Amendment Number 1 to the Amended and Restated Agreement and Plan of Merger ("Amendment"), dated as of April 6, 1998, by and among Demeter Holdings Corporation, WRC Merger Corp., WRV Merger Corp. White River and White River Ventures, Inc. which amended the Amended and Restated Agreement and Plan of Merger, dated as of December 11, 1997, by and among the parties to the Amendment. (Form 8-K filed on April 20, 1998).
As contemplated by Section 19 of Amendment Number 1 to the Amended and Restated Agreement and Plan of Merger, dated as of April 6, 1998 (the "Amendment"), which amended the Amended and Restated Agreement and Plan of Merger, dated as of December 11, 1997 (the "Merger Agreement"), by and among Demeter Holdings Corporation ("Demeter"), WRC Merger Corp., White River Corporation ("White River"), and White River Ventures, Inc., Patrick M. Byrne, Robert T. Marto, Andrew Delaney, Gordon S. Macklin and Bonnie B. Stewart, each an officer or director of White River, and John J. Byrne and an individual who votes certain shares of White River Common Stock (as defined in the Merger Agreement) for the benefit of John J. Byrne, have entered into a voting agreement with Demeter, in substantially the form of Exhibit 1 to the Amendment, pursuant to which such persons have agreed to, among other matters, vote the shares of White River Common Stock that they own and/or vote in favor of the Merger Proposal (as defined in the Merger Agreement).
The foregoing persons own and/or vote, in the aggregate, approximately 20% of the White River Common Stock outstanding. (Form 8-K filed April 30, 1998).
(c) Exhibits
*2.1 Purchase Agreement, dated as of April 15, 1994, among White River
Ventures, Inc. and Teachers Insurance and Annuity Association of
America, The Mutual Life Insurance Company of New York, TCW Special
Placements Fund II, TCW Capital and BankAmerica Capital Investments
(Current Report on Form 8-K dated April 15, 1994, File No. 0-22604--
Exhibit 2.1).
*2.1(a) Index of Omitted Schedules; Agreement to Furnish Upon Request
(Current Report on Form 8-K dated April 15, 1994, File No. 0-22604--
Exhibit 2.1(a)).
*2.2 Reorganization Agreement, dated as of June 16, 1994, between InfoVest
Corporation and White River Ventures, Inc. (Current Report on Form 8-
K dated June 16, 1994, File No. 0-22604--Exhibit 2.1).
*2.2(a) Index of Omitted Schedules; Agreement to Furnish Upon Request
(Current Report on Form 8-K dated June 16, 1994, File No. 0-22604--
Exhibit 2.1(a)).
*2.3 Stock and Asset Purchase Agreement, dated as of August 25, 1994, by
and among InfoVest Corporation and Credit Card Service Corporation
and Faneuil, Inc., New Service, Inc. and Faneuil ISG, Inc. (Current
Report on Form 8-K dated August 25, 1994, File 0-22604--Exhibit 2.1).
*2.3(a) Index of Omitted Exhibits and Schedules; Agreement to Furnish Upon
Request (Current Report on Form 8-K dated August 25, 1994, File No.
0-22604--Exhibit 2.1(a)).
*3.1 Restated Certificate of Incorporation of the Registrant as filed with
the Secretary of State of the State of Delaware (Form 10, File No. 0-
22604--Exhibit 3.1).
*3.2 By-Laws of the Registrant (Form 10, File No. 0-22604--Exhibit 3.2).
*4.1 Rights Agreement between the Registrant and First Chicago Trust
Company of New York, as Rights Agent (Form 8-A, File No. 0-22604--
Exhibit 1).
*4.2 Certificate of Designations of Series A, Non-Participating Cumulative
Preferred Stock (Form 10, File No. 0-22604--Exhibit 4.2).
*4.3 Certificate of Designations of Series B, Participating Cumulative
Preferred Stock (Form 10-K for the year ended December 31, 1993, File
No. 0-22604--Exhibit 4.3).
*4.4 White River Common Stock Certificate (Form 10-K for the year ended
December 31, 1993, File No. 0-22604--Exhibit 4.4).
*10.1 1993 Incentive Compensation Plan of the Registrant adopted on
September 24, 1993 (Form 10, File No. 0-22604--Exhibit 10.1).
*10.2 Voluntary Deferred Compensation Plan of the Registrant adopted on
September 24, 1993 (Form 10, File No. 0-22604--Exhibit 10.2).
*10.3 Deferred Benefit Plan of the Registrant adopted on September 24, 1993
(Form 10, File No. 0-22604--Exhibit 10.3).
*10.4 Letter Agreement Evidencing Award of Performance Units between the
Registrant and Andrew Delaney (Form 10-K for the year ended December
31, 1993, File No. 0-22604--Exhibit 10.4).
*10.5 Letter Agreement Evidencing Award of Performance Units between the
Registrant and Gordon S. Macklin (Form 10-K for the year ended
December 31, 1993, File No. 0-22604--Exhibit 10.5).
*10.6 Credit Agreement dated as of December 13, 1993, between the
Registrant and Fund American Enterprises Holdings, Inc. (Form 10-K
for the year ended December 31, 1993, File No. 0-22604--Exhibit
10.6).
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*10.7 Intercompany Services and Expense Sharing Agreement dated as of
September 24, 1993, between the Registrant and Fund American
Enterprises Holdings, Inc. (Form 10, File No. 0-22604--Exhibit 10.8).
*10.8 First Amendment to the Deferred Benefit Plan of the Registrant dated as
of December 17, 1993 (Form 10-K for the year ended December 31, 1993,
File No. 0-22604--Exhibit 10.10).
*10.9 Stockholders' Agreement, dated as of June 16, 1994, by and among CCC,
White River Ventures, Inc. and the Inside Stockholders of CCC
identified on Exhibit A thereto (Current Report on Form 8-K dated June
16, 1994, File No. 0-22604-- Exhibit 10.1).
*10.10 Regulatory Contingency Agreement, dated as of June 16, 1994, between
CCC and White River Ventures, Inc. (Current Report on Form 8-K dated
June 16, 1994, File No. 0-22604--Exhibit 10.2).
*10.11 Registration Rights Agreement, dated as of May 23, 1995, between the
Registrant and the Selling Stockholders referred to therein
(incorporated by reference to Exhibit 10.1 to the Registrant's
Registration Statement on Form S-3 (File No. 33-93544).
27 Current Financial Data Schedule for quarter ended March 31, 1998.
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WHITE RIVER CORPORATION AND SUBSIDIARIES
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Date: May 22, 1998
White River Corporation
/s/ Gordon S. Macklin
By: _________________________________
Name: Gordon S. Macklin
Title: President and Chief
Executive Officer
/s/ Michael E.B. Spicer
By: _________________________________
Name: Michael E.B. Spicer
Title: Chief Financial Officer
(Principal Accounting Officer),
Treasurer and
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Corporate Secretary
WHITE RIVER CORPORATION AND SUBSIDIARIES
Exhibit Sequential
Number Exhibit Index Page Number
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27 Financial Data Schedule
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