-----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, OinLGZwkAmjewatF2C3Kg+OPZJp9LrM6psRWiGvJTfUEJrkbIQD49Ke5qw46N3yZ qfQy+kZ0s1SkdnWUQD5Rnw== 0000927016-97-002861.txt : 19971105 0000927016-97-002861.hdr.sgml : 19971105 ACCESSION NUMBER: 0000927016-97-002861 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971104 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: SEC FILE NUMBER: 000-15578 FILM NUMBER: 97707628 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 September 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: (978) 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 29, 1997: 11,773,313 shares. DAVOX CORPORATION & SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No. -------- Consolidated Balance Sheets as of September 30, 1997 (Unaudited) and December 31, 1996 3 Consolidated Statements of Income for the three months and nine months ended September 30, 1997 and 1996 (Unaudited) 4 Consolidated Statements of Cash Flows for the nine months ended September 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 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, 1997 December 31, (Unaudited) 1996 -------------------- -------------------- ASSETS Current assets: Cash and cash equivalents $ 27,386,208 $ 21,333,300 Marketable securities 15,598,546 9,780,273 Accounts receivable, net of reserves of approximately $685,000 and $699,000 in 1997 and 1996, respectively 8,976,026 3,184,814 Inventories 470,118 1,204,058 Prepaid expenses and other current assets 148,531 101,802 -------------------- -------------------- Total current assets 52,579,429 35,604,247 Property and equipment, net 4,866,876 4,050,850 Other assets 65,725 74,207 -------------------- -------------------- $ 57,512,030 $ 39,729,304 ==================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,849,249 $ 4,811,190 Accrued expenses 8,515,358 6,174,935 Customer deposits 2,772,890 3,413,726 Deferred revenue 4,329,357 2,494,390 -------------------- -------------------- Total current liabilities 20,466,854 16,894,241 -------------------- -------------------- Commitments and Contingencies Stockholders' equity: Common stock, $.10 par value - Authorized - 30,000,000 shares Issued - 11,633,067 and 11,080,749 shares in 1997 and 1996, respectively 1,163,307 1,108,075 Capital in excess of par value 46,135,891 44,894,273 Accumulated deficit (10,229,876) (23,143,139) -------------------- -------------------- 37,069,322 22,859,209 Less - Treasury Stock, 3,294 shares at cost (24,146) (24,146) -------------------- -------------------- Total stockholders' equity 37,045,176 22,835,063 -------------------- -------------------- $ 57,512,030 $ 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 nine months ended September 30, ended September 30, --------------------------------------- --------------------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Product revenue $13,711,932 $9,864,379 $38,040,263 $26,168,970 Service revenue 6,093,761 4,214,845 17,204,340 11,985,870 ------------------- ----------------- ------------------- ----------------- Total revenue 19,805,693 14,079,224 55,244,603 38,154,840 ------------------- ----------------- ------------------- ----------------- Cost of product revenue 2,939,391 2,894,865 8,829,778 7,662,944 Cost of service revenue 3,704,047 2,733,710 10,794,752 7,782,577 ------------------- ----------------- ------------------- ----------------- Total cost of revenue 6,643,438 5,628,575 19,624,530 15,445,521 ------------------- ----------------- ------------------- ----------------- Gross profit 13,162,255 8,450,649 35,620,073 22,709,319 ------------------- ----------------- ------------------- ----------------- Research, development and engineering expenses 2,242,101 1,549,027 6,137,139 4,232,593 Selling, general and administrative expenses 5,774,327 4,511,770 16,160,933 12,239,362 ------------------- ----------------- ------------------- ----------------- Total operating expenses 8,016,428 6,060,797 22,298,072 16,471,955 ------------------- ----------------- ------------------- ----------------- Income from operations 5,145,827 2,389,852 13,322,001 6,237,364 Interest income, net 482,445 362,870 1,352,166 744,426 ------------------- ----------------- ------------------- ----------------- Income before provision for income taxes 5,628,272 2,752,722 14,674,167 6,981,790 Provision for income taxes 675,393 275,672 1,760,903 698,580 ------------------- ----------------- ------------------- ----------------- Net income $ 4,952,879 $ 2,477,050 $ 12,913,264 $ 6,283,210 =================== ================= =================== ================= Net income per common and common equivalent share $0.39 $0.20 $1.02 $0.51 =================== ================= =================== ================= Weighted average number of common and common equivalent shares outstanding 12,784,279 12,374,201 12,601,076 12,226,989 =================== ================= =================== =================
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: 1997 1996 ------------ ------------ Net income $ 12,913,264 $ 6,283,210 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 2,564,169 1,860,198 Provision for losses on accounts receivable 45,000 46,000 Changes in current assets and liabilities - Accounts receivable (5,836,212) 844,903 Inventories 733,940 (451,244) Prepaid expenses and other current assets (46,729) (25,499) Accounts payable 38,059 1,026,911 Accrued expenses 2,340,423 1,014,155 Customer deposits (640,836) 4,137,805 Deferred revenue 1,834,967 1,446,705 ------------ ------------ Net cash provided by operating activities 13,946,045 16,183,144 ------------ ------------ Cash flows from investing activities: Purchases of property and equipment, net (3,380,195) (3,166,060) Decrease (increase) in other assets 8,482 (6,775) Purchases of marketable securities (21,404,853) (3,297,403) Sales of marketable securities 15,586,580 -- ------------ ------------ Net cash used in investing activities (9,189,986) (6,470,238) ------------ ------------ Cash flows from financing activities: Proceeds from exercise of stock options 1,052,009 1,591,601 Proceeds from employee stock purchase plan 244,840 90,919 ------------ ------------ Net cash provided by financing activities 1,296,849 1,682,520 ------------ ------------ Net increase in cash and cash equivalents 6,052,908 11,395,426 Cash and cash equivalents at beginning of period 21,333,300 12,935,907 ------------ ------------ Cash and cash equivalents at end of period $ 27,386,208 $ 24,331,333 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 1,517 $ 8,203 ============ ============ Cash paid during the period for income taxes $ 181,307 $ 151,891 ============ ============
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 nine month periods ended September 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 September 30, 1997 consist principally of commercial paper and government securities 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 September 30, 1997 was approximately equal to amortized cost. Gross unrealized holding losses at September 30, 1997 were approximately $2,680. 6 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 5. Provision for Income Taxes The Company provides for income taxes in interim periods based on its estimated effective tax rate for the entire fiscal year. The Company is providing for income tax in 1997 based on an estimated effective tax rate of 12%. Such rate is less than the combined federal statutory and state tax rates due primarily to the utilization of net operating loss carryforwards and recognition of previously unrecognized deferred tax assets. The Company provided 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. 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 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 Nine months ended September 30, September 30, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Basic EPS Net Income $ 4,952,879 $ 2,477,050 $12,913,264 $ 6,283,210 ---------- ---------- ----------- ---------- Weighted average common shares outstanding 11,598,109 10,898,285 11,429,504 10,628,822 ----------- ----------- ----------- ----------- Basic EPS: $ 0.43 $ 0.23 $ 1.13 $ 0.59 =========== =========== =========== =========== Diluted EPS Net Income $ 4,952,879 $ 2,477,050 $12,913,264 $ 6,283,210 ----------- ----------- ----------- ----------- Weighted average common and potential common equivalent shares outstanding 12,784,279 12,374,201 12,601,076 12,226,989 ----------- ----------- ----------- ----------- Diluted EPS: $ 0.39 $ 0.20 $ 1.02 $ 0.51 =========== =========== =========== ===========
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 value 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 Nine Months Ended September 30, 1997 and 1996 Total revenue for the third quarter of 1997 increased approximately $5.7 million, or 40.7% compared to the same period in 1996, while total revenue for the first nine months of 1997 increased approximately $17.1 million, or 44.8% compared to the same period in 1996. Product revenue increased approximately $3.8 million, or 39.0% to $13.7 million in the third quarter of 1997 as compared to the third quarter of 1996. Product revenue for the first nine months of 1997 increased approximately $11.9 million, or 45.4% to $38.0 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 1.5% to $2.9 million for the third quarter of 1997, but as a percentage of product revenue decreased 7.9% as compared to the third quarter of 1996. Cost of product revenue for the first nine months of 1997 increased $1.2 million, or 15.2% to $8.8 million, but as a percentage of product revenue decreased 6.1% 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 $1.9 million, or 44.6% to $6.1 million for the third quarter of 1997 as compared to the third quarter of 1996. Service revenue for the first nine months of 1997 increased $5.2 million, or 43.5% to $17.2 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. Cost of service revenue increased approximately $1.0 million, or 35.5% to $3.7 million for the third quarter of 1997. Cost of service revenue for the first nine months of 1997 increased approximately $3.0 million, or 38.7% to $10.8 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 4.1% and 2.2% for the third quarter and first nine 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 $.7 million, or 44.7% to $2.2 million for the third quarter of 1997 as compared to the third quarter of 1996. Research, development and engineering expenses increased approximately $1.9 million, or 45.0% to $6.1 million for the first nine 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 increased from 11.0% for the third quarter of 1996 to 11.3% for the third quarter of 1997. Selling, general and administrative (SG&A) expenses increased approximately $1.3 million or 28.0% to $5.8 million for the third quarter of 1997 as compared to the third quarter of 1996. SG&A expenses for the first nine months of 1997 increased approximately $3.9 million, or 32.0% to $16.2 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 third quarter of 1996 to 29.2% for the third quarter of 1997 and from 32.1% for the first nine months of 1996 to 29.3% for the first nine months of 1997. These decreases are due primarily to the increases in revenue. Interest income in 1997 was derived primarily from money market instruments and investments in commercial paper and government securities. Interest income increased 32.3% and 79.9% for the third quarter and first nine months of 1997 respectively, compared to the same periods in 1996. These increases reflect 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 recognition of deferred tax assets and tax credits. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1997, the Company's principal sources of liquidity were its cash and cash equivalent balances of approximately $27.4 million, its marketable securities of approximately $15.6 million, and its accounts receivable of approximately $9.0 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 an unusually large number of product sales in the fourth quarter of 1996 being paid in full before year end. In addition, the Company has an agreement for a working capital line of credit with a bank for maximum borrowings up to $2.0 million based on eligible receivables, as defined. There were no outstanding balances under the line of credit as of September 30, 1997. At September 30, 1997, the working capital of the Company increased to approximately $32.1 million from approximately $18.7 million as of December 31, 1996. The increase was primarily attributable to increases in cash and cash equivalents, marketable securities, and accounts receivable due to the favorable operating results for the first nine 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 exchange Commission (including this Form 10-Q), may, in addition to historical information, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1993, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. The company's future actual results could differ materially from the forward-looking statements discussed or implied herein because of risks or uncertainties including, but not limited to, risks associated with competition and competitive pricing pressures, technological change, new product introduction and market acceptance, the ability of Davox to attract and retain key personnel, general economic conditions in the United States or worldwide markets served by Davox, and those other factors discussed from time to time in Davox's public reports filed with the Securities and Exchange Commission, such as those discussed under "Factors Which May Affect Future Operating Results" in Davox's report on Form 10-K. 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 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, 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: October 31, 1997 By: /s/ Alphonse M. Lucchese ------------------------ Alphonse M. Lucchese President, Chief Executive Officer and Chairman (Principal Executive Officer) Date: October 31, 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 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 27,386,208 15,598,546 9,661,026 685,000 470,118 52,579,429 4,866,876 0 57,512,030 20,466,854 0 0 0 1,163,307 35,906,015 57,512,030 38,040,263 55,244,603 8,829,778 19,624,530 6,137,139 0 1,352,166 14,674,167 1,760,903 12,913,264 0 0 0 12,913,264 $1.02 $1.02
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