-----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, OjOWNLCORcBHXQJR3AxsxoaVvT8RYie5Z3s8tRiS7OWnH+EtMcVJkShACtrxm+Eo h9TjgILFEKwR3Q+rVXYu8g== 0000927016-96-001509.txt : 19961106 0000927016-96-001509.hdr.sgml : 19961106 ACCESSION NUMBER: 0000927016-96-001509 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAVOX CORP CENTRAL INDEX KEY: 0000811640 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 020364368 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15578 FILM NUMBER: 96654402 BUSINESS ADDRESS: STREET 1: 6 TECHNOLOGY PARK DR CITY: WESTFORD STATE: MA ZIP: 01886 BUSINESS PHONE: 5089520200 MAIL ADDRESS: STREET 2: 6 TECHNOLOGY PARK DRIVE CITY: WESTFORD STATE: MA ZIP: 01886 10-Q 1 QUARTERLY REPORT FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (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, 1996 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 0-15578 DAVOX CORPORATION (Exact name of registrant as specified in its charter) Delaware No. 02-0364368 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification Number) 6 Technology Park Drive Westford, Massachusetts 01886 (Address of principal executive offices) (Zip Code) Telephone: (508) 952-0200 (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: Common Stock, par value $.10 per share, outstanding as of October 30, 1996: 7,338,570 shares. DAVOX CORPORATION & SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No. ------- Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 3 Consolidated Statements of Income for the three months and nine months ended September 30, 1996 and 1995 (unaudited) 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS DAVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, (unaudited) 1995 ------------------- -------------------- ASSETS Current assets: Cash and cash equivalents $ 24,331,333 $ 12,935,907 Short-term investments 3,297,403 ------- Accounts receivable, net of reserves of $530,350 in 1996 and $665,030 in 1995 3,568,694 4,459,597 Inventories 1,460,273 1,009,029 Prepaid expenses and other current assets 77,856 52,357 ------------------- ------------------ Total current assets 32,735,559 18,456,890 Property and equipment, net 3,585,548 1,865,398 Capitalized software development costs, net ------ 380,287 Other assets, net 94,761 121,987 ================== ================== $ 36,415,868 $ 20,824,562 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 58,786 $ 92,896 Accounts payable 4,033,084 2,927,172 Accrued expenses 4,940,209 3,926,054 Customer deposits 5,430,432 1,292,627 Deferred revenue 3,075,786 1,629,081 ------------------ ------------------ Total current liabilities 17,538,297 9,867,830 ------------------ -------------------- Long-term debt, net of current maturities ------ 44,891 ------------------- ------------------- Stockholders' equity: Common stock, $.10 par value - Authorized - 10,000,000 shares Issued - 7,325,606 shares in 1996 and 6,845,789 shares in 1995 732,561 684,579 Capital in excess of par value 44,143,692 42,509,154 Accumulated deficit (25,974,536) (32,257,746) ------------------ ------------------- 18,901,717 10,935,987 Less - treasury stock, 2,807 shares at cost (24,146) (24,146) ------------------ ------------------- Total stockholders' equity 18,877,571 10,911,841 ------------------ -------------------- $ 36,415,868 $ 20,824,562 ================== ====================
The accompanying notes are an integral part of these consolidated financial statements. 3 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the three months For the nine months ended September 30, ended September 30, --------------------------------------- ------------------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Product revenue $9,864,379 $6,019,485 $26,168,970 $16,586,985 Service revenue 4,214,845 3,549,134 11,985,870 10,538,819 ------------------- ----------------- ----------------- ----------------- Total revenue 14,079,224 9,568,619 38,154,840 27,125,804 Cost of product revenue 2,894,865 1,799,463 7,662,944 5,136,364 Cost of service revenue 2,733,710 2,316,628 7,782,577 6,904,013 ------------------- ----------------- ----------------- ----------------- Total cost of revenue 5,628,575 4,116,091 15,445,521 12,040,377 Gross profit 8,450,649 5,452,528 22,709,319 15,085,427 Research, development and engineering expenses 1,549,027 1,084,154 4,232,593 3,047,864 Selling, general and administrative expenses 4,511,770 3,052,595 12,239,362 8,677,672 ------------------- ----------------- ----------------- ----------------- Total operating expenses 6,060,797 4,136,749 16,471,955 11,725,536 Income from operations 2,389,852 1,315,779 6,237,364 3,359,891 Interest income 364,537 121,103 752,629 302,935 Interest expense 1,667 4,501 8,203 15,402 ------------------- ----------------- ----------------- ----------------- Income before provision for income taxes 2,752,722 1,432,381 6,981,790 3,647,424 Provision for income taxes 275,672 143,296 698,580 364,877 ------------------- ----------------- ----------------- ----------------- Net income $ 2,477,050 $ 1,289,085 $ 6,283,210 $ 3,282,547 =================== ================= ================= ================= Net income per common and common equivalent share $0.30 $0.16 $0.77 $0.43 =================== ================= ================= ================= Weighted average number of common and common equivalent shares outstanding 8,249,467 7,848,116 8,151,326 7,652,995 =================== ================= ================= =================
The accompanying notes are an integral part of these consolidated financial statements. 4 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the nine months ended September 30, -------------------------------------------------- Cash flows from operating activities: 1996 1995 -------------------- -------------------- Net income $ 6,283,210 $ 3,282,547 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,860,198 1,960,070 Provision for losses on accounts receivable 46,000 241,061 Changes in current assets and liabilities - Accounts receivable 844,903 120,894 Inventories (451,244) 91,505 Prepaid expenses and other current assets (25,499) 121,643 Accounts payable 1,105,912 (114,878) Accrued expenses 1,014,155 57,240 Customer deposits 4,137,805 571,564 Deferred revenue 1,446,705 499,126 -------------------- -------------------- Net cash provided by operating activities 16,262,145 6,830,772 -------------------- -------------------- Cash flows from investing activities: Purchase of property and equipment, net (3,166,060) (1,042,969) (Increase) decrease in other assets (6,775) 20,277 Purchase of marketable securities (3,297,403) ------- -------------------- -------------------- Net cash used in investing activities (6,470,238) (1,022,692) -------------------- -------------------- Cash flows from financing activities: Principal payments of long-term debt (79,001) (80,541) Proceeds from exercise of stock options 1,591,601 378,973 Proceeds from exercise of employee stock purchase plan 90,919 36,095 -------------------- -------------------- Net cash provided by financing activities 1,603,519 334,527 -------------------- -------------------- Net increase in cash and cash equivalents 11,395,426 6,142,607 Cash and cash equivalents at beginning of period 12,935,907 5,277,780 -------------------- -------------------- Cash and cash equivalents at end of period $ 24,331,333 $ 11,420,387 ==================== ==================== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 8,203 $ 15,402 ==================== ==================== Cash paid during the period for income taxes $ 151,891 $ 23,755 ==================== ====================
The accompanying notes are an integral part of these consolidated financial statements. 5 PART 1. FINANCIAL INFORMATION (CONTINUED) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Preparation The unaudited consolidated financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K, Commission File No. 0-15578 which was filed with the Securities and Exchange Commission on February 26, 1996. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position and results of operations. The results of operations for the three and nine month periods ended September 30, 1996 may not be indicative of the results that may be expected for the full fiscal year. 2. Principles of Consolidation The accompanying consolidated financial statements at September 30, 1996 include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 3. Cash and Cash Equivalents Cash equivalents are highly liquid investments consisting mainly of commercial paper with original maturities of less than three months at the date of acquisition . 4. Short Term Investments The Company's investment portfolio of debt securities consists of marketable securities classified as held-to-maturity under the provisions of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, (SFAS No. 115). The marketable securities held at September 30, 1996 consist principally of commercial paper with original maturities of less than one year, and they are recorded at amortized cost on the balance sheet. 6 PART I. FINANCIAL INFORMATION (CONTINUED) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 4. Short Term Investments (continued) The fair value of marketable securities at September 30, 1996 was approximately equal to amortized cost. Gross unrealized holding gains at September 30, 1996 were approximately $88. 5. Inventories Inventories are stated at the lower of cost (first in, first out), or market and consist of the following:
September 30, December 31, 1996 1995 ------------- ------------ Raw materials and subassemblies..... $ 79,062 $ 52,032 Work-in-process.... 610,466 641,430 Finished goods..... 770,745 315,567 ---------- ---------- $1,460,273 $1,009,029 ========== ==========
Subassemblies, work-in-process and finished goods inventories include material and subcontract labor. Internal labor and overhead are not significant and are charged to operations in the period incurred. 6. Capitalization of Software Development Costs A change occurred in the Company's development cycle, such that the period between the attainment of technological feasibility and the first commercial shipment of a software enhancement has shortened, and the level of capitalizable costs incurred are no longer material. Accordingly, during the three months and nine months ended September 30, 1996, there were no software development costs capitalized. Approximately $84,000 and $380,000 of capitalized software development costs were amortized to expense during the three months and nine months ended September 30, 1996, respectively. 7 PART I. FINANCIAL INFORMATION (CONTINUED) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 7. Provision for Income Taxes The Company has available significant net operating loss carryforwards. However, for the three months and nine months ended September 30, 1996, the Company provided for federal alternative minimum tax and for certain state income taxes in those states which do not allow for net operating loss carryforwards. 8. Net Income Per Common Share Net income per common share is computed based on the weighted average number of common and common equivalent shares (stock options and warrants) outstanding during the period when diluted. Fully diluted earnings per share have not been presented as their amounts would not differ significantly from primary earnings per share. 8 PART I. FINANCIAL INFORMATION (CONTINUED) 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, 1996 and 1995 Total revenue for the third quarter of 1996 increased approximately $4.5 million, or 47.1% compared to the same period in 1995, while total revenue for the first nine months of 1996 increased approximately $11.0 million, or 40.7% compared to the same period in 1995. Product revenue increased approximately $3.8 million, or 63.9% to $9.9 million in the third quarter of 1996 as compared to the same period in 1995. Product revenue for the first nine months of 1996 increased approximately $9.6 million, or 57.8% to $26.2 million as compared to the same period in 1995. The increase was caused by continued increasing demand for the Unison call center management system, especially the telemarketing and collections outbound capabilities. Cost of product revenue increased approximately $1.1 million, or 60.9% to $2.9 million for the third quarter of 1996, but as a percentage of product revenue decreased 0.5% as compared to the third quarter of 1995. Cost of product revenue for the first nine months of 1996 increased approximately $2.5 million, or 49.2% to $7.7 million, but as a percentage of product revenue, decreased 1.7% as compared to the same period in 1995. This decrease as a percentage of product revenue was mainly attributable to the increased volume of product shipments relative to fixed costs, and a higher margin product mix. Service revenue increased approximately $666,000, or 18.8% to $4.2 million for the third quarter of 1996 as compared to the third quarter of 1995, while service revenue for the first nine months of 1996 increased approximately $1.4 million, or 13.7% to $12.0 million as compared to the same period in 1995. These increases are due to increased installation revenue related to the increased volume of product shipments and an increase in maintenance revenues related to the growth in the number of the Company's customers. Cost of service revenue increased approximately $417,000, or 18.0% to $2.7 million for the third quarter of 1996, but as a percentage of service revenue decreased by 0.4% as compared to the third quarter of 1995. Cost of service revenue for the first nine months of 1996 increased approximately $879,000, or 12.7% to $7.8 million, but as a percentage of service revenue decreased by 0.6% as compared to the same period in 1995. This decrease was primarily attributable to the higher service revenues relative to fixed costs. Research, development and engineering expenses increased approximately $465,000, or 42.9% to $1.5 million for the third quarter of 1996 as compared to the same period in 1995. Research, development and engineering expenses for the first nine months of 1996 increased approximately $1.2 million, or 38.9% to $4.2 million as compared to the same period in 1995. 9 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) These increases were primarily attributable to higher payroll and related expenses in 1996 resulting from headcount increases. As a percentage of total revenues, research, development and engineering expenses decreased from 11.3% for the third quarter of 1995 to 11.0% for the third quarter of 1996, while research, development and engineering expenses as a percentage of total revenues for the first nine months decreased from 11.2% for the first nine months of 1995 to 11.1% for the first nine months of 1996. Selling, general and administrative (SG&A) expenses increased by approximately $1.5 million or 47.8% to $4.5 million for the third quarter of 1996 as compared to the same period in 1995. SG&A expenses for the first nine months of 1996 increased by approximately $3.6 million, or 41.0% to $12.2 million as compared to the same period in 1995. These increases were primarily attributable to direct and indirect selling expenses related to the increased revenues, and increased payroll and related expenses in 1996 resulting from headcount increases. As a percentage of total revenues, SG&A expenses increased slightly from 31.9% for the third quarter of 1995 to 32.0% for the third quarter of 1996, while SG&A expenses as a percentage of total revenues for the first nine months increased slightly from 32.0% for the first nine months of 1995 to 32.1% for the first nine months of 1996 . Interest income in 1996 was derived primarily from money market instruments and investments in commercial paper. Interest income increased 201.0% and 148.4% in the third quarter and first nine months of 1996, respectively, compared to the same periods in 1995. The increases reflect the higher average cash and investment balances in 1996 compared to 1995, as well as the increased interest percentages received as a result of the Company's new investment strategy of investing in commercial paper and government securities. Interest expense in 1996 was attributable to capital lease obligations. Interest expense decreased 63.0% and 46.7% in the third quarter and first nine months of 1996, respectively, as compared to the same periods in 1995. The decreases reflect an overall decrease in the outstanding balances of the capital lease obligations. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1996, the Company's principal sources of liquidity were its cash and cash equivalent balances of approximately $24,331,000, as well as its short term investments of approximately $3,297,000. As of the end of fiscal year 1995, the Company's cash and cash equivalent balances were approximately $12,936,000. The increase was due primarily to the collection of deferred annual maintenance contracts, an increase in customer deposits, the favorable operating results, and proceeds from exercises of stock options. In addition, the Company has an agreement for a secured working capital line of credit with a 10 PART I. FINANCIAL INFORMATION (CONTINUED) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (Continued) bank for up to $2,000,000 based on eligible receivables, as defined. There were no outstanding balances under the line of credit as of September 30, 1996. At September 30, 1996, the working capital of the Company increased to approximately $15,197,000 from approximately $8,589,000 as of December 31, 1995. The increase was primarily attributable to the net income of approximately $6,283,000 for the first nine months of 1996. Management believes, based on its current operating plan, that the Company's existing cash and cash equivalents, cash generated from operations, and amounts available under its secured working capital line of credit will be sufficient to meet the Company's cash requirements for the foreseeable future. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS From time to time, information provided by the Company, statements made by its employees or information included in its filings with the Securities and Exchange Commission (including this Form 10-Q) may contain statements which are not historical facts, so-called "forward-looking statements," which involve risk and uncertainties. The Company's actual future results may differ significantly from those stated in any forward-looking statements. The Company's quarterly and annual operating results are affected by a wide variety of factors that could have a materially adverse affect on revenues and profitability, including, but not limited to: the timing of customer orders, the ability to introduce new products on a timely basis, introduction of products and technologies by the Company's competitors, and market acceptance of the Company's and its competitors' products. As a result of the foregoing and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect its business, financial condition, operating results and stock price. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings There were no material changes since the Company's Annual Report on Form 10-K for the period ended December 31, 1995 . Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits Exhibit Number Description of Exhibit ------ ----------------------- 27 Article 5 - Summary Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended September 30, 1996. 12 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. DAVOX CORPORATION Date: November 4, 1996 By: /s/ Alphonse M. Lucchese ------------------------ Alphonse M. Lucchese President, Chief Executive Officer and Chairman (Principal Executive Officer) Date: November 4, 1996 By: /s/ John J. Connolly -------------------- John J. Connolly Vice President of Finance and Chief Financial Officer (Principal Financial Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 24,331,333 3,297,403 4,099,044 530,350 1,460,273 32,735,559 3,585,548 0 36,415,868 17,538,297 0 0 0 732,561 18,169,156 36,415,868 26,168,970 38,154,840 7,662,944 15,445,521 4,232,593 0 744,426 6,981,790 698,580 6,283,210 0 0 0 6,283,210 0.77 0.77
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