-----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, AKXwNHrfkby6TKc6x6LBY0mrZTl/u1YvUQB2djL5l2P8m9Q5alyhFtk7pLGPTkI/ XEUlNmeC4gNC03RgeO86dA== 0000950144-98-006475.txt : 19980518 0000950144-98-006475.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950144-98-006475 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98624923 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 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 March 31, 1998 [ ] 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 (I.R.S. Employer Identification Incorporation 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 X No ___ 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 May 1, 1998: 15,169,645 shares. 1 2
Page ---- PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997. 3 Unaudited Consolidated Statements of Operations for the three months ended 4 March 31, 1998 and 1997. Unaudited Consolidated Statements of Cash Flows for the three months ended 5 March 31, 1998 and 1997 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and 8 Results of Operations. PART II - OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
2 3 MELITA INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
March 31, December 31, 1998 1997 --------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,917 $ 6,845 Marketable securities 23,030 23,969 Accounts receivable, net of allowance for doubtful accounts of $1,145 at March 31, 1998 and $876 at December 31, 1997 20,080 15,796 Inventories 2,619 2,461 Deferred taxes 2,035 2,035 Prepaid expenses and other 381 251 ------- ------- Total current assets 54,062 51,357 Property and equipment, net of accumulated depreciation 5,720 4,939 Other assets 152 99 ------- ------- $59,934 $56,395 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,295 $ 5,326 Accrued liabilities 8,973 7,763 Deferred revenue 5,072 4,029 Customer deposits 730 1,988 ------- ------- Total current liabilities 20,070 19,106 Stockholders' Equity Common Stock, no par value, 100,000,000 shares authorized 15,169,645 issued and outstanding at March 31, 1998 and 15,168,395 issued and outstanding at December 31, 1997 69 69 Additional paid-in capital 36,054 36,046 Accumulated other comprehensive income 50 30 Retained earnings 3,691 1,144 ------- ------- Total stockholders' equity 39,864 37,289 ------- ------- Total liabilities and stockholders' equity $59,934 $56,395 ======= =======
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 March 31, 1998 1997 ---- ---- Net revenues: Product $ 14,820 $ 10,265 Service 5,552 4,404 -------- -------- Total revenues 20,372 14,669 Cost of revenues: Product 4,760 3,836 Service 2,787 1,931 -------- -------- Total cost of revenues 7,547 5,767 -------- -------- Gross margin 12,825 8,902 Operating expenses: Research and development 2,295 1,381 Selling, general and administrative 6,822 5,134 -------- -------- Total operating expenses 9,117 6,515 -------- -------- Income from operations 3,708 2,387 Other income (expense), net 273 (51) -------- -------- Income before income taxes 3,981 2,336 Income tax provision (benefit): 1,433 16 -------- -------- Net income after income tax $ 2,548 $ 2,320 ======== ======== Income before income taxes 3,981 2,336 Pro forma income tax provision 1,433 911 (Note 6) -------- -------- Pro forma net income $ 2,548 $ 1,425 ======== ======== Earnings per share Basic $ 0.17 $ 0.19 ======== ======== Diluted $ 0.16 $ 0.18 ======== ======== Weighted average common and common equivalent shares Basic 15,168 12,453 Diluted 15,992 12,647 Pro forma earnings per share Basic $ 0.11 ======== Diluted $ 0.11 ========
The accompanying notes are an integral part of these consolidated statements. 4 5 MELITA INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
For the three months ended March 31, 1998 1997 ---- ---- Cash flows from operating activities: Pro forma net income $ 2,548 $ 1,425 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Pro forma income taxes -- 895 Depreciation and amortization 386 392 Changes in assets and liabilities: Accounts receivable, net (4,284) 673 Inventories (158) 524 Prepaid expenses and other assets (130) (303) Accounts payable (31) 570 Accrued liabilities 1,210 (180) Deferred revenue 1,043 785 Customer deposits (1,258) (638) Other, net (47) (19) -------- -------- Total adjustments (3,269) 2,699 -------- -------- Net cash (used in)provided by operating activities (721) 4,124 Cash flows from investing activities: Purchases of property and equipment (1,166) (486) Purchases of marketable securities 953 -- -------- -------- Net cash used in investing activities (213) (486) Cash flows from financing activities: Repayment of capital lease obligations -- (4) Net proceeds from issuance of common stock 6 -- Repayment of note payable to stockholder -- (188) Distributions to stockholders -- (1,608) -------- -------- Net cash provided by (used in) financing activities 6 (1,800) Net change in cash and cash equivalents (928) 1,838 Cash and cash equivalents, beginning of period 6,845 9,849 -------- -------- Cash and cash equivalents, end of period 5,917 11,687 Marketable securities 23,030 -- -------- -------- Cash, cash equivalents and marketable securities $ 28,947 $ 11,687 ======== ======== Supplemental Disclosures of Cash Flow Information: Income Taxes paid $ 203 $ 16 ======== ========
The accompanying notes are an integral part of these consolidated statements. 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 March 31, 1998, the results of operations and changes in cash flows for the three months ended March 31, 1998 and 1997. The interim results for the three months ended March 31, 1998 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 fiscal year ended December 31, 1997, as filed in its annual report on form 10-K. 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:
March 31, 1998 December 31, 1997 -------------- ----------------- Raw Materials $2,075 $1,251 Work in process 184 457 Finished goods 360 753 ------ ------ Total inventories $2,619 $2,461 ====== ======
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 (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 7 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 income tax regulations. Pro forma income tax provisions reflect the Company's anticipated effective annual tax rate of 38.0% for 1997. 7. Earnings Per Share During the first quarter of 1997, the Financial Accounting Standards Board ("FASB") 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. The prior years' earnings per share have been retroactively restated in accordance with this statement.
For the three months ended March 31, 1998 1997 ---- ---- Net income after income tax $ 2,548 $ 2,320 ======= ======= Pro forma net income $ 1,425 ======= Weighted average shares outstanding Basic weighted average shares outstanding 15,168 12,453 Weighted average common equivalent shares 824 194 ------- ------- Diluted weighted average shares outstanding 15,992 12,647 ======= ======= Earnings Per Share Basic earnings per share $ 0.17 $ 0.19 Diluted earnings per share $ 0.16 $ 0.18 Pro forma basic earnings per share $ 0.11 Pro forma diluted earnings per share $ 0.11
8. Revenue Recognition In October, 1997 the American Institute of Certified Public Accountants issued SOP 97-2, Software Revenue Recognition. The Company believes that its revenue recognition practices are consistent with those required by SOP 97-2. 9. Other Comprehensive Income In June, 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for the disclosure of all components of comprehensive income. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company adopted SFAS No. 130 in 1998. The changes in the components of other comprehensive income are reported as follows (in thousands):
For the three months ended March 31, 1998 1997 ---- ---- Pro forma net income as reported $2,548 $1,425 Other comprehensive income: Foreign currency translation $ 21 $ 15 Unrealized gains on securities, net 29 15 ------ ------ Comprehensive income $2,598 $1,455 ====== ======
7 8 10. Recently Issued Accounting Standards In June, 1997 the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information". SFAS No. 131 requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and is not required in interim financial statements in the initial year of application. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Three Months Ended March 31, 1998 and 1997 Total revenues of $20.4 million in the first quarter of 1998 increased 38.9% as compared to the same period in 1997. Product revenue increased $4.5 million or 44.4% to $14.8 million for the first quarter of 1998 as compared to the first quarter of 1997. Service revenue increased $1.2 million or 26.1% to $5.6 million in the first quarter as compared to the same quarter in 1997. 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 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 5.3 percentage points for the first quarter of 1998 as compared to 1997. Product cost as a percentage of product revenue decreased during the first quarter principally due to the continuing engineering product cost reduction efforts and an increase in the volume of shipments as compared to fixed costs. Cost of service revenue increased 6.4 percentage points for the three months ended March 31, 1998 due to an increase in support service personnel and increases in compensation. Research and development cost was $2.3 million in the first quarter of fiscal 1998, a $914,000 increase over the first quarter of 1997. The overall cost increase during the first 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 1998. Selling, general and administrative expenses were $6.8 million for the first quarter of 1998 as compared to $5.1 million in the comparable 1997 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 1998, and an increase in advertising and trade show activities. Selling, general and administrative expenses decreased as a percentage of revenue to 33.5% from 35.0% for the first quarter of fiscal 1998. Income from operations was $3.7 million in the first quarter of 1998, representing a 55.3% increase over income from operations of $2.4 million in the first quarter of 1997. These increases were the result of the foregoing factors. Other income (expense), net was a net income of $273,000 in the first quarter of 1998 compared to net expense of $51,000 in the first quarter of 1997. The increase in other income reflects the earnings from the higher average cash and short term investment balances in 1998 as compared to 1997. 8 9 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. The Company's pro forma income tax rate was 36.0% in the first quarter of 1998 compared to 38.6% in the first quarter of 1997, primarily due to the impact on operations of a foreign sales corporation. Pro forma net income increased to $2.5 million in the first quarter of 1998 from $1.4 million in the first quarter of 1997, as a result of the operational, other income and tax factors described above. 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 March 31, 1998, the Company had $28.9 million in cash, cash equivalents and marketable securities, compared to $30.8 million as of December 31, 1997. The Company's working capital was $34.0 million for the period ending March 31, 1998 as compared to $32.3 million for period ending December 31, 1997. Operating activities used $715,000 during the first three months of fiscal 1998. Cash used in investing activities totaled $213,000 million during the first three months of fiscal 1998. Such investing activities consisted of purchases of property and equipment and a decrease in short term interest bearing investments. 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. 9 10 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 March 31, 1998. 10 11 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: May 14, 1998 By: /s/ Aleksander Szlam -------------------- Aleksander Szlam Chairman and Chief Executive Officer Date: May 14, 1998 By: /s/ Mark B. Adams ----------------- Mark B. Adams Vice President, Finance and Chief Financial Officer 11 EX-11 2 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 Ended March 31 1998 1997 ---- ---- DILUTED Weighted average common stock outstanding 8,000 8,000 Effect of the combination (1) 3,143 3,143 Effect of issuance of shares in IPO 4,025 -- Dilutive effect of common stock equivalents 824 194 Cheap stock adjustment (2) -- 116 Effect of shareholder distribution (3) -- 1,194 -- ----- Weighted average common and common equivalent shares 15,992 12,647 ====== ====== Net income after income tax 2,548 2,320 Earnings per share .16 .18 ====== ====== Pro forma net income 2,548 1,425 Pro forma earnings per share .16 .11 ====== ======
(1) 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. (2) 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. (3) 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. 12 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 5,917 23,030 21,225 1,145 2,619 54,062 5,720 0 59,934 20,070 0 0 0 69 39,795 59,934 20,372 20,372 7,547 7,547 9,117 0 0 3,981 1,433 0 0 0 0 2,548 .17 .16
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