-----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, Vvm2HApKCFm2Iq9LPKyEPC0wLdPUr79gUZCevwnwenirweq9k8tpB+IJ7tXKbQmq 2uk6m9ONkCWree/bFZJ1Ew== 0000927016-97-002193.txt : 19970805 0000927016-97-002193.hdr.sgml : 19970805 ACCESSION NUMBER: 0000927016-97-002193 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970804 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: 97651096 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 FORM 10-Q 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 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 0-15578 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 July 30, 1997: 11,575,589 shares. DAVOX CORPORATION & SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No. -------- Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 (Unaudited) 3 Consolidated Statements of Income for the three months and six months ended June 30, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996 (Unaudited) 5 Notes to Consolidated Financial Statements 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 4. Submission of Matters to a Vote of Security Holders 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 (Unaudited)
June 30, December 31, 1997 1996 ---------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 28,373,774 $ 21,333,300 Marketable securities 9,504,134 9,780,273 Accounts receivable, net of reserves of approximately $533,000 and $699,000 in 1997 and 1996, respectively 8,556,782 3,184,814 Inventories 722,459 1,204,058 Prepaid expenses and other current assets 178,527 101,802 ---------------- -------------- Total current assets 47,335,676 35,604,247 Property and equipment, net 4,362,404 4,050,850 Other assets 113,398 74,207 ---------------- -------------- $ 51,811,478 $ 39,729,304 ================ ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,660,169 $ 4,811,190 Accrued expenses 7,884,936 6,174,935 Customer deposits 2,956,166 3,413,726 Deferred revenue 4,469,798 2,494,390 ---------------- -------------- Total current liabilities 19,971,069 16,894,241 ---------------- -------------- Commitments and Contingencies Stockholders' equity: Common stock, $.10 par value - Authorized - 30,000,000 shares Issued - 11,560,750 and 11,080,749 shares in 1997 and 1996, respectively 1,156,075 1,108,075 Capital in excess of par value 45,891,234 44,894,273 Accumulated deficit (15,182,754) (23,143,139) ---------------- -------------- 31,864,555 22,859,209 Less - Treasury Stock, 3,294 shares at cost (24,146) (24,146) ---------------- -------------- Total stockholders' equity 31,840,409 22,835,063 ---------------- -------------- $ 51,811,478 $ 39,729,304 ================ ==============
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 six months ended June 30, ended June 30, ------------------------------- ------------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Product revenue $12,536,562 $8,702,957 $24,328,331 $16,304,591 Service revenue 5,633,617 3,962,392 11,110,579 7,771,025 ------------ ------------- ------------- ------------- Total revenue 18,170,179 12,665,349 35,438,910 24,075,616 ------------ ------------- ------------- ------------- Cost of product revenue 3,083,943 2,563,644 5,890,387 4,768,079 Cost of service revenue 3,588,227 2,574,654 7,090,705 5,048,867 ------------ ------------- ------------- ------------- Total cost of revenue 6,672,170 5,138,298 12,981,092 9,816,946 ------------ ------------- ------------- ------------- Gross profit 11,498,009 7,527,051 22,457,818 14,258,670 ------------ ------------- ------------- ------------- Research, development and engineering expenses 2,013,128 1,415,696 3,895,038 2,683,566 Selling, general and administrative expenses 5,314,580 4,054,250 10,386,606 7,727,592 ------------- ------------- ------------- ------------- Total operating expenses 7,327,708 5,469,946 14,281,644 10,411,158 ------------- ------------- ------------- ------------- Income from operations 4,170,301 2,057,105 8,176,174 3,847,512 Interest income, net 460,529 218,305 869,721 381,556 ------------- ------------- ------------- ------------- Income before provision for income taxes 4,630,830 2,275,410 9,045,895 4,229,068 Provision for income taxes 555,702 227,549 1,085,510 422,908 ------------- ------------- ------------- ------------- Net income $ 4,075,128 $ 2,047,861 $ 7,960,385 $ 3,806,160 ============ ============= ============= ============= Net income per common and common equivalent share $0.32 $0.17 $0.63 $0.31 ============ ============= ============= ============= Weighted average number of common and common equivalent shares outstanding 12,620,612 12,290,256 12,540,657 12,151,901 ============ ============= ============= =============
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 six months ended June 30, ---------------------------------------------------- Cash flows from operating activities: 1997 1996 ------------------ ------------------ Net income $ 7,960,385 $ 3,806,160 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,790,353 1,224,634 Provision for losses on accounts receivable 30,000 34,000 Changes in current assets and liabilities - Accounts receivable (5,401,968) (467,856) Inventories 481,599 (603,850) Prepaid expenses and other current assets (76,725) (78,061) Accounts payable (151,021) 703,008 Accrued expenses 1,710,001 147,780 Customer deposits (457,560) 4,185,352 Deferred revenue 1,975,408 1,625,021 --------------- --------------- Net cash provided by operating activities 7,860,472 10,576,188 --------------- --------------- Cash flows from investing activities: Purchase of property and equipment, net (2,101,907) (2,039,978) Increase in other assets (39,191) (118,726) Purchases of marketable securities (10,626,204) ----- Sales of marketable securities 10,902,343 ----- --------------- --------------- Net cash used in investing activities (1,864,959) (2,158,704) --------------- --------------- Cash flows from financing activities: Proceeds from exercise of stock options 961,293 1,199,545 Proceeds from employee stock purchase plan 83,668 39,269 --------------- --------------- Net cash provided by financing activities 1,044,961 1,238,814 --------------- --------------- Net increase in cash and cash equivalents 7,040,474 9,656,298 Cash and cash equivalents at beginning of period 21,333,300 12,935,907 --------------- --------------- Cash and cash equivalents at end of period $ 28,373,774 $ 22,592,205 =============== =============== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 1,839 $ 6,536 =============== =============== Cash paid during the period for income taxes $ 107,428 $ 114,306 =============== ===============
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 28, 1997. 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 month and six month periods ended June 30, 1997 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 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 purchase. 4. Marketable Securities 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. The marketable securities held at June 30, 1997 consist principally of commercial paper with original maturities of less than one year, and they are recorded at amortized cost on the balance sheet. The fair value of marketable securities at June 30, 1997 was approximately equal to amortized cost. Gross unrealized holding losses at June 30, 1997 were approximately $487. 6 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 5. Provision for Income Taxes The Company has available significant net operating loss carryforwards. However, for the three months and six months ended June 30, 1997, 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. 6. Net Income Per Common and Common Equivalent Share Net income per common and common equivalent 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 do not differ significantly from primary earnings per share. 7. Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. This statement is effective for the fiscal years ending after December 15, 1997 and early adoption is not permitted. When adopted, the statement will require restatement of prior years' earnings per share. The Company will adopt this statement for its fiscal year ended December 31, 1997. 7 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 7. Recently Issued Accounting Standards (continued) Pro forma calculations of basic and diluted earnings per share as required by SFAS No. 128 are as follows:
Three Months ended June 30, Six Months ended June 30, 1997 1996 1997 1996 ---- ---- ---- ---- Basic EPS Net Income $ 4,075,128 $ 2,047,861 $ 7,960,385 $ 3,806,160 Weighted average common shares outstanding 11,459,836 10,636,644 11,343,304 10,492,606 Basic EPS: $ 0.36 $ 0.19 $ 0.70 $ 0.36 =========== =========== =========== =========== Diluted EPS Net Income $ 4,075,128 $ 2,047,861 $ 7,960,385 $ 3,806,160 Weighted average common and common equivalent shares outstanding 12,620,612 12,290,256 12,540,657 12,151,901 Diluted EPS: $ 0.32 $ 0.17 $ 0.63 $ 0.31 =========== =========== =========== ===========
8. Stock Split On April 24, 1997, the Company's Board of Directors approved an increase in the authorized number of common shares of the Company's stock from 10,000,000 to 30,000,000 and authorized a three-for-two stock split of the Company's common stock which was effected in the form of a 50% stock dividend paid on May 28, 1997 to shareholders of record on May 13, 1997. All share and per share amounts have been retroactively restated for all periods presented to reflect the stock split. Accordingly, approximately $ 385,000 was transferred from capital in excess of par to common stock. 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 Six Months Ended June 30, 1997 and 1996 Total revenue for the second quarter of 1997 increased approximately $5.5 million, or 43.5% compared to the same period in 1996, while total revenue for the first six months of 1997 increased approximately $11.4 million, or 47.2% compared to the same period in 1996. Product revenue increased approximately $3.8 million, or 44.0% to $12.5 million in the second quarter of 1997 as compared to the same period in 1996. Product revenue for the first six months of 1997 increased approximately $8.0 million, or 49.2% to $24.3 million as compared to the same period in 1996. These increases are caused by continued increasing demand for the Unison call center management system, especially the telemarketing, collections, and inbound/outbound call blending capabilities. Cost of product revenue increased approximately $.5 million, or 20.3% to $3.1 million for the second quarter of 1997, but as a percentage of product revenue decreased 4.9% as compared to the second quarter of 1996. Cost of product revenue for the first six months of 1997 increased $1.1 million, or 23.5% to $5.9 million, but as a percentage of product revenue decreased 5.0% as compared to the same period in 1996. The decreases as a percentage of product revenue are mainly attributable to the increased volume of product shipments relative to fixed costs, and a higher margin product mix. Service revenue increased approximately $1.7 million, or 42.2% to $5.6 million for the second quarter of 1997 as compared to the second quarter of 1996. Service revenue for the first six months of 1997 increased $3.3 million, or 43.0% to $11.1 million as compared to the same period in 1996. These increases are due to an increase in maintenance revenue related to the growth in the number of the Company's customers, increased installation revenue related to the increased volume of product sales, and professional services revenue in the first quarter of 1997 generated in Europe. Cost of service revenue increased approximately $1.0 million, or 39.4% to $3.6 million for the second quarter of 1997. Cost of service revenue for the first six months of 1997 increased approximately $2.0 million, or 40.4% to $7.1 million. These increases are attributable to higher payroll and related expenses in 1997 resulting from headcount increases, increased third party maintenance and installation charges in 1997, and accelerated depreciation on certain service assets. As a percentage of service revenue, cost of service revenue decreased by 1.3% and 1.2% for the second quarter and first six months respectively, as compared to the same periods in 1996. These decreases are primarily attributable to the higher service revenue relative to fixed costs. 9 PART I. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Research, development and engineering expenses increased approximately $.6 million, or 42.2% to $2.0 million for the second quarter of 1997 as compared to the second quarter of 1996. Research, development and engineering expenses increased approximately $1.2 million, or 45.1% to $3.9 million for the first six months of 1997 as compared to the same period in 1996. These increases are primarily attributable to higher payroll and related expenses in 1997 resulting from headcount increases and higher outside consulting fees in 1997. As a percentage of total revenue, research, development and engineering expenses decreased from 11.2% for the second quarter of 1996 to 11.1% for the second quarter of 1997 and from 11.1% for the first six months of 1996 to 11.0% for the first six months of 1997. Selling, general and administrative (SG&A) expenses increased by approximately $1.3 million or 31.1% to $5.3 million for the second quarter of 1997 as compared to the second quarter of 1996. SG&A expenses for the first six months of 1997 increased approximately $2.7 million, or 34.4% to $10.4 million as compared to the same period in 1996. These increases are primarily attributable to increased payroll and related expenses in 1997 resulting from headcount increases and indirect and direct selling expenses related to the increased revenue. As a percentage of total revenue, SG&A expenses decreased from 32.0% for the second quarter of 1996 to 29.2% for the second quarter of 1997 and from 32.1% for the first six months of 1996 to 29.3% for the first six months of 1997. These decreases are due primarily to the increase in revenue. Interest income in 1997 was derived primarily from money market instruments and investments in commercial paper and government securities. Interest income increased 108.2% and 124.6% for the second quarter and first six months of 1997 respectively, compared to the same periods in 1996. This increase reflects the higher average cash and cash equivalents and marketable securities balances in 1997 compared to 1996, as well as the higher investment returns received as a result of the Company's new investment strategy of investing in commercial paper and government securities. The Company provided for income taxes at its anticipated effective annual rate, which is 12%. This rate differs from the federal statutory rate due to utilization of net operating loss carryforwards and tax credits. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1997, the Company's principal sources of liquidity were its cash and cash equivalent balances of approximately $28.4 million, its marketable securities of approximately $9.5 million, and its accounts receivable of approximately $8.6 million. As of the end of fiscal year 1996, the Company's cash and cash equivalent balances were approximately $21.3 million, its marketable securities were approximately $9.8 million, and its 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) accounts receivable were approximately $3.2 million. The overall increase in cash and cash equivalents and marketable securities was due primarily to the favorable operating results, collection of deferred annual maintenance contracts, and proceeds from exercises of stock options. The increase in accounts receivable over year end was primarily due to a large number of product sales in the fourth quarter of 1996 being paid in full at the time of revenue recognition. In addition, the Company has an agreement for a working capital line of credit with a bank for up to $2.0 million based on eligible receivables, as defined. There were no outstanding balances under the line of credit as of June 30, 1997. At June 30, 1997, the working capital of the Company increased to approximately $27.4 million from approximately $18.7 million as of December 31, 1996. The increase was primarily attributable to the net income of approximately $8.0 million for the first six months of 1997. Management believes, based on its current operating plan, that the Company's existing cash and cash equivalents, marketable securities, cash generated from operations, and amounts available under its working capital line of credit will be sufficient to meet the Company's cash requirements for the next twelve months. 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, 1996. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of security-holders of the Company was held on April 24, The number of directors was fixed at four and the following persons were elected as directors:
Total Votes Total Votes Nominee for Nominee Withheld for Nominee ------- ----------- -------------------- Alphonse M. Lucchese 6,547,051 210,203 Michael D. Kaufman 6,547,051 210,203 Walter J. Levison 6,547,051 210,203 R. Scott Asen 6,547,051 210,203
An amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock, $.10 par value, from 10,000,000 to 30,000,000 shares, was adopted and approved, with 5,228,360 shares voting in favor, 1,450,666 shares voting against and 6,956 shares abstaining. The Company's 1996 Stock Plan was adopted and approved, with 5,211,474 shares voting in favor, 413,801 shares voting against and 87,504 shares abstaining. The selection of the firm of Arthur Andersen LLP as auditors for the fiscal year ending December 31, 1997 was ratified, with 6,738,968 shares voting in favor, 14,440 shares voting against and 3,846 shares abstaining. 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 June 30, 1997. 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: August 1, 1997 By: /s/ Alphonse M. Lucchese ------------------------ Alphonse M. Lucchese President, Chief Executive Officer and Chairman (Principal Executive Officer) Date: August 1, 1997 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 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 28,373,774 9,504,134 9,089,493 532,711 722,459 47,335,676 4,362,404 0 51,811,478 19,971,069 0 0 0 1,156,075 30,708,480 51,811,478 24,328,331 35,438,910 5,890,387 12,981,092 3,895,038 0 869,721 9,045,895 1,085,510 7,960,385 0 0 0 7,960,385 0.63 0.63
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