-----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, AaoIwwm9DOktbK7slgfPFF09ahvWPCxheQ/8Jk+YQXj7sFQGIW+UJo2AVL/ywKuE vbom5fPaI0kK9xkyZ30WlQ== 0000950144-97-012065.txt : 19971113 0000950144-97-012065.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950144-97-012065 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MELITA INTERNATIONAL CORP CENTRAL INDEX KEY: 0001034956 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 581378534 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22317 FILM NUMBER: 97715963 BUSINESS ADDRESS: STREET 1: 5051 PEACHTREE CORNERS CITY: NORCROSS STATE: GA ZIP: 30092-2500 BUSINESS PHONE: 7702394000 MAIL ADDRESS: STREET 1: 5051 PEACHTREE CORNERS CIRCLE CITY: NORCROSS STATE: GA ZIP: 30092-2500 10-Q 1 MELITA INTERNATIONAL CORP. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 [ ] 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 0-22317 ------- MELITA INTERNATIONAL CORPORATION (Exact Name of Registrant as Specified in its Charter) GEORGIA 58-1378534 (State or other Jurisdiction of Incorporation (I.R.S. Employer Identification or Organization) Number)
5051 PEACHTREE CORNERS CIRCLE NORCROSS, GEORGIA 30092-2500 (770) 239-4330 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 No X ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, no par value, outstanding as of November 10, 1997: 15,168,395 shares. 2
PART 1 - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1997 (Unaudited) 3 and December 31, 1996. Unaudited Consolidated Statements of Operations for the three months ended 4 September 30, 1997 and 1996 and for the nine months ended September 30, 1997 and 1996. Unaudited Consolidated Statements of Cash Flows for the nine months ended 5 September 30, 1997 and 1996 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and 7 Results of Operations. PART II - OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10
- 2 - 3 MELITA INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
September 30, December 31, 1997 1996 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,807 $ 9,849 Marketable securities 23,735 -- Accounts receivable, net of allowance for doubtful 13,205 11,860 accounts of $6,651 at September 30, 1997 and $487 at December 31, 1996 Inventories 1,556 2,442 Deferred taxes 1,473 -- Prepaid expenses and other 883 170 -------- ------- Total current assets 46,659 24,321 Property and equipment, net of accumulated depreciation 4,537 2,724 Other assets 38 24 -------- ------- $ 51,234 $27,069 ======== ======= Current liabilities: Accounts payable $ 3,661 $ 2,429 Accrued liabilities 7,071 4,210 Deferred revenue 4,218 3,065 Customer deposits 1,481 3,849 Current maturities of notes payable to stockholder -- 2,625 Current maturities of capital lease obligations -- 19 -------- ------- Total current liabilities 16,431 16,197 Commitments and contingencies LIABILITIES AND STOCKHOLDERS' EQUITY Stockholders' equity Preferred Stock: Melita International Corporation, no par value; 20,000,000 shares authorized, no shares issued and outstanding at December 31, 1996 and September 30, 1997 -- -- Common Stock: Melita International Corporation, no par value; 100,000,000 shares authorized, 8,000,000 shares issued and outstanding December 31, 1996 and 15,168,395 shares issued and outstanding September 30, 1997 69 2 Melita Europe Limited, L.1 par value; 50,000 shares authorized, 31,328 shares issued and outstanding December 31, 1996 and no shares issued and outstanding at September 30, 1997 -- 46 Inventions, Inc., $5 par value; 100 shares authorized, 100 shares issued and outstanding December 31, 1996 and no shares issued and outstanding at September 30, 1997 -- 1 Additional paid-in capital 36,046 20 Cumulative foreign currency translation adjustment 9 -- Net change in unrealized gains/(losses) or marketable securities (67) 35 Retained earnings (deficit) (1,254) 10,768 -------- ------- Total stockholders' equity (deficit) 34,803 10,872 -------- ------- $ 51,234 $27,069 ======== =======
The accompanying notes are an integral part of these consolidated balance sheets. 3 4 MELITA INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) (UNAUDITED)
For the three months ended For the nine months ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Net revenues: Product $ 11,728 $ 7,428 $ 32,707 $ 23,277 Service 5,200 4,161 14,420 11,269 -------- -------- -------- -------- Total revenues 16,928 11,589 47,127 34,496 Cost of revenues: Product 3,812 2,660 11,213 8,099 Service 2,628 1,902 6,992 5,074 -------- -------- -------- -------- Total cost of revenues 6,440 4,562 18,205 13,173 -------- -------- -------- -------- Gross margin 10,488 7,027 28,922 21,323 Operating expenses: Research and development 1,793 1,409 4,818 3,505 Selling, general and administrative 5,732 4,212 16,097 12,341 -------- -------- -------- -------- Total operating expenses 7,525 5,621 20,915 15,846 -------- -------- -------- -------- Income from operations 2,963 1,406 8,007 5,477 Other income (expense), net 396 20 336 63 -------- -------- -------- -------- Income before income taxes 3,359 1,426 8,343 5,540 Income tax provision (benefit): Tax provision as 'C' Corporation 1,276 -- 1,685 -- Deferred tax adjustment -- -- (1,473) -- -------- -------- -------- -------- Net income after income tax $ 2,083 $ 1,426 $ 8,131 $ 5,540 ======== ======== ======== ======== Income before income taxes 3,359 1,426 8,343 5,540 Pro forma income tax provision (Note 6) 1,276 517 3,170 2,054 -------- -------- -------- -------- Pro forma net income $ 2,083 $ 909 $ 5,173 $ 3,486 ======== ======== ======== ======== Earnings per share $ 0.13 $ 0.12 $ 0.59 $ 0.45 ======== ======== ======== ======== Weighted average common and common equivalent shares 16,016 12,360 13,856 12,360 Pro forma earnings per share $ 0.13 $ 0.07 $ 0.37 $ 0.28 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. 4 5 MELITA INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Nine months ended September 30, 1997 1996 ---- ---- Cash flows from operating activities: Net income $ 8,131 $ 5,540 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 964 757 Deferred taxes (1,473) -- Changes in assets and liabilities: Accounts receivable (1,345) (2,039) Inventories 886 (803) Prepaid expenses and other assets (713) 96 Accounts payable 1,232 (282) Accrued liabilities 2,860 945 Deferred revenue 1,154 2,002 Customer deposits (2,368) 2 Other, net (116) 19 -------- ------- Total adjustments 1,081 697 -------- ------- Net cash provided by operating activities 9,212 6,237 Cash flows from investing activities: Purchases of property and equipment (2,777) (1,020) Purchases of marketable securities (23,726) -- -------- ------- Net cash used in investing activities (26,503) (1,020) Cash flows from financing activities: Repayment of capital lease obligations (19) (36) Net proceeds from issuance of common stock 36,046 -- Repayment of note payable to stockholder (15,525) (187) Distributions to stockholders (7,253) (3,242) -------- ------- Net cash provided by (used in) financing activities 13,249 (3,465) -------- ------- Net change in cash and cash equivalents (4,042) 1,752 Cash and cash equivalents, beginning of period 9,849 5,959 -------- ------- Cash and cash equivalents, end of period 5,807 7,711 Marketable securities 23,735 -- -------- ------- Cash, cash equivalents and marketable securities $ 29,542 $ 7,711 ======== ======= Cash paid for interest during the period $ 360 $ 208 ======== ======= Income taxes paid $ 1,819 $ -- ======== =======
5 6 MELITA INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED) 1. Basis of Presentation The unaudited consolidated financial statements presented herein have been prepared in accordance with generally accepted accounting principles applicable to interim financial statements. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company's management, these consolidated financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary to present fairly the financial position as of September 30, 1997, the results of operations and changes in cash flows for the nine months ended September 30, 1997 and 1996. The interim results for the three months and nine months ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company's combined financial statements for the year ended December 31, 1996, as filed in its Prospectus dated June 4, 1997. 2. Principles of Consolidation The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. 3. Completion of Initial Public Offering and Combination On June 4, 1997, the Company completed its initial public offering ("IPO") of common stock. The Company sold 4,025 shares of common stock, including the underwriters' over-allotment of 525 shares, for $40,250 less issuance costs of $4,148. Concurrently with the IPO, the Company issued 3,143 shares in connection with the combination of Melita International, Melita Europe Limited and Inventions, Inc. 4. Inventories Inventories are stated at the lower of first-in, first-out (FIFO) cost or market and consist of the following at:
September 30, 1997 December 31, 1996 ------------------ ----------------- Raw Materials $ 827 $1,059 Work in process 278 337 Finished goods 451 1,046 ------ ------ Total inventories $1,556 $2,442 ======= ======
5. Earnings Per Share Earnings per share are computed using the weighted-average number of common stock and dilutive common stock equivalents ("CSE") shares from stock options and warrants (using the treasury stock method) outstanding during each period. Also included are (1) common stock and CSE's issued at a price below the initial public offering price during the 12 month period prior to June 4, 1997, and (2) CSE's in an amount necessary to pay the stockholder distributions. 6. Income Taxes In connection with the IPO the Company converted from an "S" corporation to a "C" corporation and, accordingly, is subject to federal and state income taxes. Upon the conversion, the Company recognized a one-time benefit by recording the asset related to the future reduction of income tax payments due to timing differences between the recognition of income for financial statements and 6 7 income tax regulations. Pro forma income tax provisions reflect the Company's anticipated effective annual tax rate of 38.0% for 1997 and 37.2% in 1996. 7. Accounting Pronouncements During the first quarter of 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). This standard is effective for fiscal years ending after December 15, 1997 and early adoption is not permitted. The Company will adopt this statement for its year ended December 31, 1997. Pro forma calculations of basic and diluted earnings per share, in conformance with SFA's No. 128, are as follows:
For the three months For the nine months ended ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Basic EPS $.14 $.12 $.61 $.45 Basic pro forma EPS .14 .07 .39 .28 Diluted EPS .13 .12 .59 .45 Diluted pro forma EPS .13 .07 .37 .28
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months and Nine Months Ended September 30, 1997 and 1996 Total revenues of $16.9 million in the third quarter of 1997 increased 46.1% as compared to the same period in 1996. Total revenues increased to $47.1 million in the first nine months of 1997 as compared to $34.5 million in the corresponding period of 1996, representing growth of 36.6%. Product revenue increased $4.3 million or 57.9% to $11.7 million for the third quarter of 1997 as compared to the third quarter of 1996. Product revenue increased $9.4 million or 40.8% to $32.7 million for the nine months of 1997 as compared to the same period in 1996. Service revenue increased $1.0 million or 25.0% to $5.2 million in the third quarter as compared to the same quarter in 1996. Service revenue increased $3.2 million or 28.0% to $14.4 million for the nine months ended 1997 as compared to the first nine months of 1996. The growth in product revenues was due to continued increasing demand for the Company's products, increased marketing and sales efforts, and the further penetration into the telemarketing arena. Service revenues increased during the quarter and nine month period due to the continued expansion of the Company's installed customer base and the increased volume of installations during the period. Cost of product revenue, as a percentage of product revenue, decreased 3.3 percentage points for the third quarter of 1997 as compared to 1996. For the first nine months of 1997 the cost of product revenue as a percentage of product revenue decreased .6 percentage points as compared to 1996. Product cost as a percentage of product revenue decreased during the third quarter principally due to the continuing engineering product cost reduction efforts, changes in the product mix, and an increase in the volume of shipments as compared to fixed costs. Cost of service revenue increased 3.5 percentage points for the nine months ended September 30, 1997 due to an increase in support service personnel and increases in compensation. Research and development cost was $1.8 million in the third quarter of fiscal 1997, a $384,000 increase over the third quarter of 1996. For the first nine months of 1997, research and development cost increased to $4.8 million, an increase of $1.3 million over the comparable 1996 period. The overall cost increase during the third quarter resulted primarily from the addition of developers to support the Company's new product development efforts and the subcontracting of certain feature development efforts during 1997. The decrease in research and development as a percentage of sales is due to sales growth outpacing the increased spending in research and development. Selling, general and administrative expenses were $5.7 million for the third quarter of 1997 as compared to $4.2 million in the comparable 1996 period. Selling, general and administrative expenses for the first nine months of fiscal 1997 were $16.1 million, an 7 8 increase of $3.8 million (30.4%) over the comparable 1996 period. This increase was the result of an increase in sales commissions corresponding to the increase in revenues, the additional staff required to support the larger sales levels in 1997, and an increase in advertising and trade show activities. Selling, general and administrative expenses decreased as a percentage of revenue to 33.9% from 36.3% for the third quarter of fiscal 1997, and decreased as a percentage of revenue to 34.2% from 35.8% for the first nine months of fiscal 1997. Income from operations was $3.0 million in the third quarter of 1997, representing a 110.8% increase over income from operations of $1.4 million in the third quarter of 1996. Income from operations was $8.0 million in the first nine months of 1997, representing a 46.2% increase over income from operations of $5.5 million in the corresponding period in 1996. These increases were the result of the foregoing factors. Other income (expense), net was a net income of $396,000 in the third quarter of 1997 compared to net income of $20,000 in the third quarter of 1996. Other income (expense), net was a net income of $336,000 for the first nine months of 1997 compared to net income of $63,000 in the first nine months of 1996. The increase in other income reflects the earnings from the higher average cash and short term investment balances in 1997 as compared to 1996. Income tax provisions have been recorded for the period subsequent to the IPO. The Company prior to the IPO was not subject to federal or state income taxes. As a result of its election to be treated as an "S" Corporation for income tax purposes prior to the IPO, pro forma net income amounts include additional provisions for income taxes determined by applying the Company's anticipated statutory tax rate to income before income taxes, adjusted for permanent tax differences. The Company's "S" Corporation status was terminated in conjunction with the completion of its initial public offering in June 1997. Upon the termination of its "S" Corporation election, the Company recorded certain deferred tax assets in the amount of $1.5 million. Pro forma net income increased to $2.1 million in the third quarter of 1997 from $909,000 in the third quarter of 1996. Pro forma net income rose to $5.2 million in the first nine months of 1997 compared to $3.5 million in the first nine months of 1996. LIQUIDITY AND CAPITAL RESOURCES In June 1997, the Company completed its IPO, in which the Company received net proceeds of approximately $36.1 million after deducting underwriting discounts and offering expenses. The Company applied a portion of the net proceeds to (1) repay outstanding stockholder notes of $15.2 million, (2) payment of $245,000 in accrued interest on the stockholder notes, and (3) pay undistributed "S" Corporation earnings of $ 2.4 million. Prior to the IPO date, the Company made payments of $375,000 to repay stockholder notes, and $3.6 million in distributions to stockholders. The balance of the net proceeds of the offering (approximately $18.3 million) will be utilized for general corporate purposes. Such purposes may also include possible acquisitions of, or investments in, businesses and technologies that are complementary to those of the Company. The Company has no specific agreements, commitments or understandings with respect to any such acquisitions or investments. As of September 30, 1997, the Company had $29.5 million in cash, cash equivalents, and marketable securities, compared to $9.8 million as of December 31, 1996. The Company's working capital was $30.2 million for the period ending September 30, 1997 as compared to $8.1 million for period ending December 31, 1996. Operating activities provided $9.2 million during the first nine months of fiscal 1997. Cash used in investing activities totaled $26.5 million during the first nine months of fiscal 1997. Such investing activities consisted of purchases of property and equipment and an increase in short term interest bearing investments. Cash provided by financing activities totaled $13.2 million during the first nine months of fiscal 1997, due to the issuance of common stock in the IPO offset by repayment of the Company's outstanding indebtedness noted above. The Company anticipates that existing cash and cash equivalents will be adequate to meet its cash requirements for the next twelve months. FORWARD LOOKING STATEMENTS Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements related to plans for future business development activities, anticipated costs of revenues, product mix and service revenues, research and development and selling, general and administrative activities, and liquidity and capital needs and resources. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Investors are cautioned that any forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward looking statements. 8 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings. None 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 and Reports on Form 8-K. (a) Exhibit 11 Statement re Computation of per share earnings. Exhibit 27 Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K. No Report on Form 8-K was filed during the quarter ended September 30, 1997. 9 10 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 hereunto duly authorized. MELITA INTERNATIONAL CORPORATION Date: November 14, 1997 By: /s/ Aleksander Szlam ------------------------------- Aleksander Szlam Chairman and Chief Executive Officer Date: November 14, 1997 By: /s/ Mark B. Adams ------------------------------- Mark B. Adams Vice President, Finance and Chief Financial Officer 10 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 MELITA INTERNATIONAL CORPORATION COMPUTATION OF PRO FORMA EARNINGS PER SHARE (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
Three Months Nine Months Ended September 30 Ended September 30 1997 1996 1997 1996 ---- ---- ---- ---- PRIMARY (1) Weighted average common stock outstanding 8,000 8,000 8,000 8,000 Effect of the combination (2) 3,143 3,143 3,143 3,143 Effect of issuance of shares in IPO 4,025 - 1,709 - Dilutive effect of common stock equivalents 735 139 510 139 Cheap stock adjustment (3) 113 133 100 133 Effect of shareholder distribution (4) -- 945 394 945 - -- -- -- -- -- Weighted average common and common equivalent shares 16,016 12,360 13,856 12,360 ====== ====== ====== ====== Net income after income tax 2,083 1,426 8,131 5,540 Earnings per share .13 .12 .59 .45 ====== ====== ====== ====== Pro forma net income 2,083 909 5,173 3,486 Pro forma earnings per share .13 .07 .37 .28 ====== ====== ====== ======
(1) Fully diluted earnings per share would change only the dilutive effect of common stock equivalents noted above. If the dilutive effect of common stock equivalents was computed on a fully dilutive basis, the weighted average common and common equivalent shares would be 16,081, 12,478, 13,971, and 12,468, for the three months ended September 30, 1997 and 1996, and the nine months ended September 30, 1997 and 1996, respectively. (2) Reflects pro forma issuance of 3,143 shares of Common Stock in connection with the combination of Melita International Corporation, Melita Europe Limited and Inventions, Inc. (3) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, common stock and common stock equivalents issued at prices below the assumed initial public offering price per share ("cheap stock") during the twelve months immediately preceding the initial filing date of the Company's Registration Statement for its public offering have been included as outstanding for all periods presented. (4) Pursuant to Staff Accounting Bulletin 1B.3, pro forma earnings per share gives effect to the issuance by the Company of the numbers of shares that, of the assumed public offering price, would yield proceeds in the amount necessary to pay the shareholder distribution that is not covered by the earnings during the period. 11 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF MELITA INTERNATIONAL FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 JUL-01-1997 SEP-30-1997 1 5,807 23,735 19,856 (6,651) 1,556 46,659 4,537 0 51,234 16,431 0 0 0 69 34,734 51,234 47,127 47,127 18,205 18,205 20,915 0 (336) 8,343 212 8,131 0 0 0 8,131 .59 .59
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