-----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, E4XaS1A5446f+S1/U4Ehx/z3LZqPpp2tAhtXFpA1dBgjr2CXaaaTnu6YwTfUQ5ar 74p9m/tf1CnUH5jsL7H/Hg== 0000950153-97-000752.txt : 19970815 0000950153-97-000752.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950153-97-000752 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNTELLECT INC CENTRAL INDEX KEY: 0000758830 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 860486871 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18323 FILM NUMBER: 97660009 BUSINESS ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 BUSINESS PHONE: 6027892800 MAIL ADDRESS: STREET 1: 1000 HOLCOMB WOODS PARKWAY STREET 2: SUITE 410A CITY: ROSWELL STATE: GA ZIP: 30076 10-Q 1 FORM 10-Q FOR QUARTER ENDED 6/30/97 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 June 30, 1997 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 - 18323 SYNTELLECT INC. (Exact name of registrant as specified in its charter) Delaware 86-0486871 (State or other jurisdiction of (IRS employer identification number) incorporation) 1000 Holcomb Woods Parkway, Suite 410A, Roswell, Georgia 30076 (Address of principal executive office) (Zip Code) (770) 587-0700 (Registrant's telephone number, including area code) 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. 13,520,907 shares of common stock, $.01 par value per share, were outstanding on July 31, 1997 2 SYNTELLECT INC. AND SUBSIDIARIES INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets- June 30, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Operations- Three Months and Six Months Ended June 30, 1997 and June 30, 1996 4 Condensed Consolidated Statements of Cash Flows- Six Months Ended June 30, 1997 and June 30, 1996 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion & Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBITS Exhibit 11 - Schedule of Computation of Net Income (Loss) Per Share 12 Exhibit 27 - Financial Data Schedule 14 2 3 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except shares and per share amounts)
June 30, December 31, 1997 1996 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,354 $ 4,928 Marketable securities 3,222 1,275 Receivables, net 11,767 13,744 Inventories 2,975 4,085 Prepaid expenses 1,200 1,197 Deferred contract costs 230 1,006 -------- -------- Total current assets 21,748 26,235 Property and equipment, net 8,387 7,676 Other assets 835 897 -------- -------- $ 30,970 $ 34,808 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,945 $ 1,302 Accrued liabilities 4,831 6,329 Customer deposits 898 699 Deferred revenue 3,223 3,940 Current portion of long-term debt 177 288 -------- -------- Total current liabilities 11,074 12,558 Long-term debt, less current portion 623 229 Shareholders' equity: Preferred stock, $.01 par value per share. Authorized -- -- 2,500,000 shares; no shares issued or outstanding Common stock, $.01 par value per share. Authorized 135 135 25,000,000 shares; issued and outstanding, 13,515,617 and 13,478,127, respectively Additional paid-in capital 60,617 60,545 Deferred compensation (33) (52) Accumulated deficit (40,287) (37,595) Foreign currency translation adjustment (14) 136 Unrealized holding gain (loss) on marketable securities (4) (7) -------- -------- 20,414 23,162 Treasury stock, at cost, 175,732 shares (1,141) (1,141) -------- -------- 19,273 22,021 -------- -------- $ 30,970 $ 34,808 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ 1997 1996 1997 1996 ---- ---- ---- ---- (unaudited) (unaudited) Net revenues: System sales $ 5,047 $ 8,088 $ 13,773 $ 15,627 Service bureau 2,446 2,342 5,010 4,507 Maintenance and other services 3,532 3,574 7,113 6,816 -------- -------- -------- -------- Total net revenues 11,025 14,004 25,896 26,950 Cost of revenues: System sales 3,999 4,774 8,530 9,331 Service bureau 1,561 1,272 3,244 2,474 Maintenance and other services 909 1,008 1,920 1,851 -------- -------- -------- -------- Total cost of revenues 6,469 7,054 13,694 13,656 -------- -------- -------- -------- Gross margin 4,556 6,950 12,202 13,294 Operating expenses: Selling, marketing and administrative 4,906 5,181 10,089 10,343 Research and development 1,479 1,472 2,937 3,000 Depreciation and amortization 1,021 774 1,971 1,567 -------- -------- -------- -------- Total operating expenses 7,406 7,427 14,997 14,910 -------- -------- -------- -------- Operating loss (2,850) (477) (2,795) (1,616) Other income (expense) Interest income 76 97 149 202 Other (24) (13) (46) (62) -------- -------- -------- -------- Total other income 52 84 103 140 -------- -------- -------- -------- Loss before income taxes (2,798) (393) (2,692) (1,476) Income taxes -- -- -- -- -------- -------- -------- -------- Net loss $ (2,798) $ (393) $ (2,692) $ (1,476) ======== ======== ======== ======== Net loss per common share $ (.21) $ (.03) $ (.20) $ (.11) ======== ======== ======== ======== Shares used in per share calculations 13,487 13,412 13,486 13,400 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 4 5 SYNTELLECT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended June 30, 1997 1996 ---- ---- (unaudited) Cash flows from operating activities: Net loss $ (2,692) $ (1,476) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,971 1,567 Provision for doubtful accounts 160 180 Provision for inventory obsolescence 20 9 Stock option compensation expense 19 20 (Increase) decrease in receivables 1,817 2,155 (Increase) decrease in inventories 1,090 (117) Increase (decrease) in accounts payable 643 (1,559) Increase (decrease) in accrued liabilities (1,498) (1,158) Change in other assets and liabilities 282 1,467 -------- -------- Total adjustments 4,504 2,564 -------- -------- Net cash provided by operating activities 1,812 1,088 -------- -------- Cash flows from investing activities: Purchase of marketable securities (11,223) (4,806) Maturities of marketable securities 9,276 5,741 Proceeds from disposition of SNS product line -- 30 Purchase of property and equipment (2,085) (2,576) -------- -------- Net cash used in investing activities (4,032) (1,611) -------- -------- Cash flows from financing activities: Proceeds from issuance of common stock 72 110 Principal payments on long-term debt (276) (578) -------- -------- Net cash used in financing activities (204) (468) -------- -------- Effect of exchange rates on cash (150) 7 -------- -------- Net decrease in cash and cash equivalents (2,574) (984) Cash and cash equivalents at beginning of period 4,928 5,125 -------- -------- Cash and cash equivalents at end of period $ 2,354 $ 4,141 ======== ======== Supplemental disclosure of cash flow information: Cash paid for interest $ 54 $ 27 ======== ======== Cash paid for income taxes $ 21 $ 155 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 SYNTELLECT INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except shares and per share amounts) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of Syntellect Inc. ("Syntellect" or the "Company") and its wholly-owned subsidiaries, Telecorp Systems, Inc., Syntellect Canada Inc., Syntellect Europe Ltd., Syntellect Deutschland GmbH, Syntellect Technology Corp. and Syntellect Interactive Services, Inc. ("SIS"). All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements have been prepared in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the financial statements include all adjustments of a normal recurring nature which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations. Although the Company believes that the disclosures are adequate to make information presented not misleading, it is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1996 annual report on Form 10-K. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. (2) INVENTORIES Inventories consist of the following:
June 30, December 31, 1997 1996 ---- ---- Finished goods $ 1,792 $ 3,085 Purchased components 2,514 2,797 Repair, warranty and maintenance inventory 1,934 2,348 ------- ------- Less allowances for obsolescence 6,240 8,230 (3,265) (4,145) ------- ------- $ 2,975 $ 4,085 ======= =======
6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET REVENUES Net revenues for the quarter ended June 30, 1997 were $11.0 million, a decrease of 21% from the $14.0 million reported for the second quarter of 1996. For the six month period ended June 30, 1997, net revenues were $25.9 million, a decrease of 4.0% from $27.0 million for the corresponding period in 1996. Net revenues consist of SYSTEM SALES, SERVICE BUREAU REVENUES and MAINTENANCE AND OTHER SERVICES REVENUES, which represented 46%, 22% and 32% of net revenues, respectively, for the quarter ended June 30, 1997, and 53%, 19%, and 28% of net revenues, respectively, in the six month period ended June 30, 1997. Revenues from SYSTEM SALES decreased $3.0 million, or 38%, between the comparable quarters and decreased $1.9 million, or 11.9% , between the corresponding six month periods. This decrease was mostly attributable to the decline in revenues from the Company's non-core product lines that are reaching the end of their marketing lifecycle. System sales consist of the Company's primary inbound product lines, VocalPoint Interactive Voice Response (IVR), an open architecture IVR platform; the Premier and Premier 030 proprietary IVR systems; the VocalPoint ARU (Audio Response Unit) for the cable television industry; and an outbound system, the VocalPoint Predictive Dialer. During 1996, the Company introduced several new system product lines, including the VocalPoint IWR providing Interactive Web Response for transactions processed over the Internet, and the VocalPoint Interaction Server which provides CTI (Computer Telephony Integration) functionality. The Company made initial deliveries of these new product offerings during the fourth quarter of 1996 and first quarter of 1997, but they have not, as yet, produced significant revenues. These new system products, combined with the VocalPoint IVR and VocalPoint Predictive Dialer make up the Company's core product line for future system revenues. The Company expects revenues from its non-core products, Premier and Premier 030 IVR systems and the VocalPoint ARU, to continue to decline over time as the Company migrates its customer base to the core product offerings. System sales revenues from the Company's core products, as described above, decreased $658,000, or 15%, to $3.7 million in the quarter ended June 30, 1997, from $4.4 million in the comparable prior year period, and represented 74% and 54% of total system sales in the respective quarters. Core product revenues in the second quarter ended June 30, 1997 were negatively impacted by a reduction in new system orders in the first quarter of 1997. Management believes this decline was primarily attributable to a lengthening of the sales cycle associated with the introduction of the Company's core product line. For the six month period ended June 30, 1997, core product revenues increased $2.8 million, or 42%, to $9.8 million from $6.9 million in the comparable year ago period. System sales from the Company's non-core products decreased $2.4 million, or 65%, to $1.3 million in the quarter ended June 30, 1997, from $3.7 million in the comparable prior quarter, and represented 26% and 46% of total system sales in the respective quarters. For the six months ended June 30, 1997, non-core products revenues decreased $4.7 million, or 54%, to $4.0 million from $8.7 million. SERVICE BUREAU REVENUES increased by $104,000, or 4%, quarter-over-quarter and $503,000, or 11.2%, between the comparable six month periods. MAINTENANCE AND OTHER SERVICES REVENUES decreased by $42,000 between the comparable quarters and increased by $297,000 as compared to the prior six month periods. INTERNATIONAL REVENUES for the second quarter of 1997 were $2.1 million, or 19% of total revenues, compared to $3.0 million, or 21%, for the second quarter of 1996. International revenues typically consist of a small number of larger orders and are subject to quarter-to-quarter fluctuations. For the six month period ended June 30, 1997, international revenues were $6.1 million, or 24% of total revenues, as compared to $7.3 million, or 27%, for the prior comparable period. GROSS MARGIN The gross margin percentage for the quarter ended June 30, 1997 was 41% of net revenues as compared with 50% in the comparable prior year quarter. Gross margins for system sales decreased to 21% from 41% between comparable quarters as a result of decreased revenues and the proportion of fixed costs in cost of sales. 7 8 Gross margins for the service bureau decreased from 46% to 36% between the comparable quarters as a result of the Company's decision to increase spending on infrastructure that is expected to facilitate continued growth of the Home Ticket pay-per-view service and other service bureau applications. Gross margins on maintenance and other services increased to 74% from 72% between the comparable quarters. The Company includes those costs directly associated with the generation of revenue in its computation of gross margin, including direct labor, application development, travel, maintenance, customer support, supplies and hardware. Gross margins will fluctuate on a quarterly basis due to changes in competitive pressures, sales volume, product mix, variations in the ratio of domestic versus international sales, or changes in the mix of direct and indirect sales activity. Accordingly, the gross margins reported for the second quarter and the first six months of 1997 are not necessarily indicative of the results to be expected for the full year. The gross margin percentage for the six months ended June 30, 1997 was 47% of net revenues as compared to 49% in the comparable year ago period. Gross margins on system sales decreased to 38% from 40%, service bureau decreased to 35% from 45%, and maintenance and other services remained at 73% for the comparable six month periods. Gross Margins for the six months ended June 30, 1997 were negatively impacted primarily by the 1997 second quarter results as described above. OPERATING EXPENSES Operating expenses for the second quarter of 1997 were $7.4 million, a decrease of $21,000 from the prior year quarter. For the six month period ended June 30, 1997, operating expenses were $15.0 million, an increase of $87,000, or 1%, over the prior year period. Selling, marketing and administrative expenses decreased $275,000, or 5%, between the comparable quarters and $254,000, or 2%, between the corresponding six month periods. The decrease is primarily the result of lower selling expense associated with the reduced volume of system revenues. Research and development expenses for the second quarter of 1997 increased $7,000 over the prior year quarter, and decreased by $63,000 over the comparable six month period. The Company has re-allocated its development resources during 1997 for the development of market-driven features and upgrades for the Company's core product lines and away from efforts on its non-core products. Depreciation and amortization expense increased $247,000, or 32%, and $404,000, or 26%, between comparable quarters and six month periods as a result of capital expenditures made in 1996 and 1997. NET INCOME (LOSS) Syntellect reported a net loss of $2.8 million, or $(.21) per share for the second quarter of 1997, compared to a net loss of $393,000, or $(.03) per share for the prior year quarter. For the six month period ended June 30, 1997, the Company reported a net loss of $2.7 million, or $(.20) per share, compared to a net loss of $1.5 million, or $(.11) per share for the comparable prior year period. LIQUIDITY AND CAPITAL RESOURCES Syntellect had working capital of $10.7 million at June 30, 1997, as compared with $13.7 million at December 31, 1996. The current ratio was 2.0:1 and 2.1:1, respectively. Cash, cash equivalents and marketable securities at the end of the second quarter totaled $5.6 million as compared with $6.2 million at year end. Syntellect generated $1.8 million in cash flows from operating activities during the first six months of 1997, increased its investment in marketable securities by $1.9 million, received $72,000 in proceeds from the issuance of common stock, and added $588,000 in long-term debt related to a capital lease for furnishings in the Company's new facility for its Phoenix, Arizona operations. Cash used during the six month period consisted of $2.1 million in capital expenditures and $276,000 in principal payments on long-term debt. Receivables, net of reserves, were $11.8 million at June 30, 1997, a decrease of $1.9 million from the $13.7 million reported at December 31, 1996. This decrease was primarily related to the decrease in invoicing associated with lower revenues during the second quarter of 1997 relative to quarter ended December 1996. Inventories decreased $1.1 million since December 31, 1996 as a result of the Company's improved processing controls and stock reduction plan. Syntellect expects that its current cash, cash equivalents and marketable securities, combined with future cash flows from operating activities and existing credit facilities, will be sufficient to support the Company's operations for the remainder of 1997 and 1998. In July 1996, Syntellect negotiated a new $2.0 million revolving credit agreement with a commercial bank to replace its prior credit facilities. The new credit line, which is available to provide working capital financing, is collateralized by accounts receivable and accrues interest at the prime rate. The Company has used $1.1 million of the credit line to fund a letter of credit that is being used as a 8 9 security deposit on the Company's new facility in Phoenix, Arizona. This line of credit is subject to renewal in October 1997. This report on Form 10-Q may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Also see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's report on Form 10-K for the fiscal year ended December 31, 1996 for a discussion of important factors that could affect the validity of any such forward-looking statements. 9 10 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Syntellect held its Annual Meeting of Stockholders on May 20, 1997 to vote on the following proposals: 1. The re-election of Jack R. Kelly, Jr. to serve on the Board of Directors for a three year term. There were 12,031,740 votes cast in favor of Mr. Kelly's re-election and 559,365 votes against. The Company has five additional directors. Steve G. Nussrallah and Daniel D. Ross will serve until 1998 and J. Lawrence Bradner, William P. Conlin and A. LeRoy Ellison will serve until 1999. 2. The increase in the number of shares of common stock authorized for issuance under the Company's Long-Term Incentive Plan from 750,000 to 1,500,000. There were 8,045,791 votes in favor of the increase, 1,312,324 votes against and 25,715 abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Schedule of Computation of Net Income (Loss) Per Share Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K No current reports on Form 8-K were filed during the three months ended June 30, 1997. 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 thereunto duly authorized. SYNTELLECT INC. Date: July 12, 1997 By Neal L. Miller ------------------- Neal L. Miller Vice President, Chief Financial Officer, Secretary and Treasurer By Peter W. Pamplin ------------------- Peter W. Pamplin Chief Accounting Officer 11 EX-11 2 SCHED. OF COMPUTATION OF NET INCOME (LOSS) 1 EXHIBIT 11 SYNTELLECT INC. AND SUBSIDIARIES SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1997 1996 1997 1996 -------- -------- -------- -------- Net loss $ (2,798) $ (393) $ (2,692) $ (1,476) ======== ======== ======== ======== Weighted average shares: Common shares outstanding 13,487 13,412 13,486 13,400 Common equivalent shares representing shares issuable upon exercise of stock options (1) -- -- -- -- -------- -------- -------- -------- Total weighted average shares - primary 13,487 13,412 13,486 13,400 (3) Incremental common equivalent shares (calculated using -- -- -- -- the higher of end of period or average market value) (2) -------- -------- -------- -------- Total weighted average shares - fully diluted 13,487 13,412 13,486 13,400 ======== ======== ======== ======== Primary net loss per common and common equivalent share $ (.21) $ (.03) $ (.20) $ (.11) ======== ======== ======== ======== Fully diluted net loss per common and common equivalent share (2) $ (.21) $ (.03) $ (.20) $ (.11) ======== ======== ======== ========
- ------ Notes: (1) Amount calculated using the treasury stock method and fair market values. (2) This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. (3) The Company has excluded the effect of common stock equivalents from all periods because the impact of such equivalents is antidilutive to the Company's net losses. 12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OT SYNTELLECT, INC. AND SUBSIDIARIES AS OF JUNE 30, 1997, AND THE CONSOLIDATED STATEMENT OF OPERATIONS OF SYNTELLECT, INC. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 2,354 3,222 12,897 1,130 2,975 21,748 27,117 18,730 30,970 11,074 0 0 0 135 20,279 30,970 13,773 25,896 8,530 13,694 14,997 160 54 (2,692) 0 (2,692) 0 0 0 (2,692) (.20) (.20)
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