How Does the FCC and the SEC ALLOW private companies to take advantage of systems the government requires by law? Evercom is the second largest scam in the country, I bet, second only to the rotten to the core "Criminal Justice" system that now runs entiredly out of the executive branch of government for the sole purpose of stripping every dime possible from every "citizen" for everything from traffic tickets to such "commercial crimes" as murder...
There isn't a part of the system that is not driven by the almighty buck and no one gives a *** if you are innocent or guilty because there IS NO INNOCENT PLEA allowed in these Courts of Commerce. The closest you can get is "Not Guilty" but there is a world of difference between the 2 if you know anything about law.
Here's Evercom's SEC FILING. Check out how they brag about how they steal from the general public. Nice. Really nice.
What a country. John Adams, just roll over in your grave and stay dead, cuz there aint no America left.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements (including notes) appearing elsewhere in this Prospectus. Except as otherwise stated or unless the context otherwise requires, information in this Prospectus assumes no exercise of the U.S. Underwriters' over-allotment option and all references to "Evercom" and the "Company" are to Evercom, Inc. (formerly Talton Holdings, Inc.) and its consolidated subsidiaries and predecessors. Unless otherwise specifically stated, information in this Prospectus gives effect to a to stock split that will be effected immediately prior to the Offering.
THE COMPANY
The Company is the largest independent provider of collect, prepaid, and debit calling services to local, county, state, and private correctional facilities in the United States. As of June 30, 1998, the Company served 2,145 correctional facilities in 43 states, of which 50 were private facilities. The Company has a high level of market penetration in many states, providing inmate telecommunications services to over 75% of the county correctional facilities in seven states and to over 50% of the county correctional facilities in an additional 12 states. The Company believes that this high level of market penetration contributes to operating efficiencies through economies of scale and enables the Company to compete more effectively for new contracts in these geographic areas. The Company has increased the total number of facilities served through internal growth and acquisitions from 1,112 at December 1, 1996 to 2,145 at June 30, 1998. The Company's historical revenues were $91.8 million for the year ended December 31, 1997 and $103.6 million for the six months ended June 30, 1998.
The Company's inmate telecommunications business consists of owning, operating, servicing, and maintaining a system of automated operator switches and telephones located in correctional facilities. Generally, inmates may make only collect, prepaid, and debit calls from correctional facilities, which generates revenue per phone line in excess of industry averages for a business phone line. The Company generally enters into multi-year agreements with correctional facilities pursuant to which the Company serves as exclusive provider of telecommunications services to inmates within the facility. In exchange for the exclusive service rights, the Company pays a percentage of its revenue from each correctional facility to that facility as a commission. Typically, the Company installs and retains ownership of the telephones and related equipment.
Significant costs typically associated with providing telecommunication services to correctional facilities include uncollectible accounts, network expenses, and billing expenses. The Company has developed an integrated call management and billing system to help control these expenses. This system limits inmates to collect, prepaid, or debit calls; validates and verifies the payment history and account status of each number dialed; confirms that the destination number has not been blocked; and processes call records for billing through a third party. To faciliate billing, the Company has entered into 29 separate direct billing agreements with regional bell operating companies ("RBOCs") and local exchange carriers ("LECs"), allowing the Company to bill directly through the RBOCs and LECs rather than utilizing third party billing services. Management believes that direct billing arrangements expedite the billing and collections process and increase collectibility. The Company direct billed approximately 80% of its operating revenues in June 1998.
The Company uses its experience in billing, collection, and control of uncollectible accounts to offer specialized billing and collection services to other inmate telecommunications service providers. The Company recently entered into a contract with a major RBOC, under which the Company performs validation, billing, and collection services for the RBOC's inmate calls. Under the terms of the contract, the Company expects to receive call traffic from 428 local and county facilities. The Company began processing call traffic under the contract in May 1998. In addition, the Company provides call processing services for a major interexchange carrier ("IXC"). The Company continues to pursue additional opportunities to offer these services to RBOCs, LECs, IXCs, and other inmate telecommunications providers.
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INDUSTRY OVERVIEW
The inmate telecommunications industry places unique demands on telecommunications systems and service providers. Security and public safety concerns associated with inmate telephone use require that correctional facilities use call processor technology, which allows the facilities to control inmate access to certain telephone numbers and to monitor inmate telephone activity. In addition, concerns regarding fraud and called parties' failure to pay for inmate collect calls require systems and procedures unique to this industry.
Inmate telephones in the U.S. are operated by a large and diverse group of service providers. Large telecommunications companies such as RBOCs, other LECs, and IXCs such as AT&T Corp. ("AT&T"), MCI Communications, Inc. ("MCI"), and Sprint Corporation ("Sprint") provide inmate telecommunications in addition to other services. In addition, independent public pay telephone and inmate telephone companies also focus on this market segment. As of December 31, 1996, the inmate telecommunications market represented approximately $1.4 billion in gross revenues annually. Management estimates that approximately 78% of this market is controlled by RBOCs, other LECs, and IXCs. The remainder of this market is served by independent service providers such as the Company, with the Company accounting for approximately 66% of this market and 14% of the total inmate telecommunications market. Management believes that no other independent provider accounts for more than 5% of the revenues from the total market.
Companies compete for the right to serve as the exclusive provider of inmate calling services within a particular correctional facility. Most local or county correctional facilities (typically fewer than 250 beds) award contracts on a facility-by-facility basis, while most state prison systems award contracts on a system-wide basis. Generally, contracts are awarded pursuant to a competitive bidding process.
Evercom is the only nationwide telecommunications company focused exclusively on providing services to correctional facilities. This focus has enabled the Company to develop industry specific systems and services that give it operating efficiencies and advantages over competitors in this segment of the business. The Company believes that these advantages will enable the Company to more aggressively bid and ultimately win contracts, as well as negotiate favorable billing and network agreements.
. Uncollectible Account Control. The Company has developed an integrated call management and billing system designed to help control expenses associated with uncollectible accounts. Management believes that this system has allowed it to incur lower uncollectible account expenses than its competitors. The Company is currently enhancing its call management and billing system to better identify called parties that pose an uncollectible account risk, which the Company believes will further reduce uncollectible accounts. The Company expects that this enhancement will be implemented in 1999.
. Direct Billing. The Company currently has 29 direct billing agreements, under which LECs include charges for the Company's services on the local telephone bill sent to the recipient of inmate collect calls. Direct billing arrangements with LECs are advantageous because they eliminate the costs associated with third party billing arrangements. Management believes that direct billing arrangements expedite the billing and collections process and increase collectibility. The Company direct billed approximately 80% of its operating revenues in June 1998.
. Network. Management believes that the Company's high call volume and regional concentration have enabled it to obtain low per minute calling rates, particularly in comparison to the rates typically obtained by other independent providers. The Company has recently entered into agreements with alternative long distance providers, such as ICG Communications, Inc. ("ICG"), Unidial Communications ("Unidial"), and VarTec Telecom, Inc. ("Vartec"), which the Company believes will further reduce its cost per minute calling rates. The Company is also establishing fixed cost networks to reduce its operating expenses by obtaining leased lines in areas where it has significant traffic. To date,
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the Company has transmitted its traffic by purchasing minutes of use from other carriers. However, the Company has begun to enter into month-to- month leases for networks connecting major cities where the Company has a high level of market penetration. The Company recently entered into an agreement with BTI Telecommunications, Inc. ("BTI") to deploy a leased network in the state of North Carolina. This agreement is expected to result in a 38% reduction in the Company's telecommunications costs in the state of North Carolina. The Company is also pursuing additional alternative network solutions that management believes will enable the Company to further reduce its operating expenses as a percentage of revenue. See "Business--Business Strategy--Implement Cost Reduction Initiatives."
. Regional Concentration. The Company has a high level of market penetration in many states, providing inmate telecommunications services to over 75% of the county correctional facilities in seven states, and to over 50% of the county correctional facilities in an additional 12 states. This high market penetration has contributed to operating efficiencies in field service, marketing, sales, and telecommunications expense. The Company also believes that it is able to compete more effectively for new contracts in states where it is the dominant service provider.
. Call Processing. The Company has developed call processor technology that provides call activity reporting and controls inmate access to specific telephone numbers through call blocking, both of which are valuable services to correctional facilities. The Company manufactures its call processors using readily available components and internally developed application software tailored to the inmate telecommunications industry. Therefore, the Company does not need to rely on third party call processor manufacturers.
. Value Added Services. The Company offers a number of value added services that are tailored to meet the specialized needs of the corrections industry and the requirements of individual correctional facilities, such as a specialized law enforcement management system ("LEMS"), which includes jail management, victim notification, and prisoner profile software packages. Management believes that the Company's specialized products and services afford the Company a competitive advantage because it is less likely that a correctional facility will be able to economically replace all of the services provided by the Company from alternative sources.
BUSINESS STRATEGY
The Company's primary business objectives are to be a cost-efficient, high- quality provider of telecommunications services to correctional facilities in the U.S. and to leverage its billing and collections system, customer base, and telecommunications network to grow its business. The Company has developed and is implementing the following strategies to meet these objectives:
. Capitalize on Existing Opportunities to Expand Market Share. The Company intends to aggressively pursue revenue growth in its core inmate telecommunications business by winning contracts for which the Company is not the incumbent and by pursuing the renewal of existing contracts. From January 1997 through June 1998, in cases where the Company was not the incumbent, the Company was successful in over 72% of its bids for county and local contracts and 67% of its bids for state contracts. In August 1998, the Company, in a partnership arrangement with Public Communications Services, Inc. ("PCS"), was awarded the federal contract for 11 Immigration and Naturalization Service ("INS") facilities, representing approximately 5,840 beds. Since its inception, the Company, based on revenue, has been successful in obtaining renewals of 95% of its contracts.
. Pursue Opportunities to Perform Third-Party Inmate Telecom Billing. The Company's call management and billing system focuses on the unique needs of the corrections industry. This system has provided the Company with the opportunity to market its inmate billing and collections services to
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third parties. The Company recently entered into a contract with a major RBOC, under which the Company began performing validation, billing, and collection services for the RBOC's inmate calls in May 1998. Under the terms of the contract, the Company expects to receive call traffic from 428 local and county facilities.
. Focus on Needs of Growing Private Prison Industry. Management believes that the dramatic growth of the private corrections industry provides the Company with significant opportunities for further expansion. According to the 1996 Private Adult Correctional Facility Census conducted by the University of Florida, the rated capacity of privately managed adult correctional facilities in the U.S. increased from 63,595 beds to 85,201 beds from December 31, 1995 to December 31, 1996. Management estimates that the private prison industry's capacity will increase by an additional 200,000 beds by 2002. As the largest provider of inmate telecommunication services to the private corrections industry, serving 50 private facilities as of June 30, 1998, the Company believes that it is positioned to continue to benefit from the growth in the private corrections industry.
. Pursue Selective Acquisitions. The Company anticipates continued expansion through an aggressive acquisition strategy. The Company expects to continue to acquire inmate collect business from independents and to pursue opportunities to acquire inmate collect operations from major RBOCs and IXCs. The Company believes that acquisitions will improve its operating results through the integration of acquired entities and implementation of its billing and collections process into such acquired entities. The Company also intends to pursue acquisitions that offer the opportunity to add to the Company's portfolio of value added services targeted at the corrections industry.
. Improve Credit and Collection Through Specialized Technology. The Company believes that its call management and billing system reduces the risk of uncollectible accounts. The Company is currently enhancing this system to better identify called parties that pose an uncollectible account risk, thereby further reducing the number of such accounts. The Company expects that this enhancement will be implemented in 1999.
. Implement Cost Reduction Initiatives. The Company has capitalized upon its geographic concentration and high call volume by pursuing opportunities to obtain lower per minute calling rates in regions in which the Company has high market penetration. The Company recently entered into an agreement with BTI to deploy a private network in North Carolina. This agreement is expected to result in a 38% reduction in the Company's telecommunications costs in the state of North Carolina. The Company intends to further reduce costs by installing a carrier-grade switch in Dallas, Texas, which will give the Company greater flexibility to pursue cost efficient network strategies by allowing it to aggregate traffic and utilize least cost routing. The Company is also pursuing additional alternative network solutions that management believes will enable the Company to further reduce its operating expenses as a percentage of revenue. See "Business--Business Strategy--Implement Cost Reduction Initiatives."
In addition to reducing network costs, the Company intends to pursue additional cost-saving opportunities. For example, management believes that the expansion of the Company's installed base of inmate telephones will allow the Company to enter into additional direct billing agreements. The Company also intends to reduce operating costs by fully integrating its past acquisitions.
The Company was formed in November 1996 by EUF Talton, L.P. ("EUF Talton"), an affiliate of Engles Urso Follmer Capital Corporation ("EUFCC"), a private investment banking and consulting firm, the principals of which are experienced in acquiring and integrating the operations of companies in consolidating industries.
The Company's executive offices are located at 8201 Tristar Drive, Irving, Texas 75063 and its telephone number is (972) 988-3737.
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THE OFFERING
Common Stock offered by the Company.......................... shares Common Stock offered: U.S. Offering................... shares International Offering.......... shares --------- Total......................... shares ========= Common Stock to be outstanding after the Offering............... shares(1) Use of Proceeds................... The net proceeds to be received by the Company from the Offering will be used (i) to repay $10.0 million outstanding under the Senior Credit Facility (the revolving loan facility portion of which may subsequently be reborrowed); (ii) for the acquisition of telecommunications equipment to service new contracts; (iii) for the implementation of alternative network solutions; (iv) for funding of potential acquisitions; and (v) for general corporate purposes, including working capital. Proposed New York Stock Exchange Symbol...........................
(1) Based upon shares of Common Stock outstanding immediately prior to the
Offering and assumes the U.S. Underwriters' overallotment option is not
exercised. Excludes (i) shares of Common Stock subject to options
outstanding as of June 30, 1998 that are exercisable at prices ranging from
$ to $ per share and (ii) shares of Common Stock issuable pursuant
to warrants that are exercisable at a price of $ per share. See
"Management--Compensation, Benefits, and Retirement Plans" and "Description
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