-----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, Nl0Z3mYHGinzk5TpnvYMIpr/cwZjXJhBC5P9mlHHoLMSjnWSDx8bRCn9VFIoGABZ s+cPitPETzgnGn05fjm2eQ== 0000950109-96-004809.txt : 19960805 0000950109-96-004809.hdr.sgml : 19960805 ACCESSION NUMBER: 0000950109-96-004809 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960802 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: 96603010 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 June 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 July 26, 1996: 7,204,819 shares. DAVOX CORPORATION & SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No. ------- Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 3 Consolidated Statements of Operations for the three months and six months ended June 30, 1996 and 1995 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security-Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS DAVOX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, 1996 December 31, (unaudited) 1995 ------------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 22,592,205 $ 12,935,907 Accounts receivable, net of reserves of $517,629 in 1996 and $665,030 in 1995 4,893,453 4,459,597 Inventories 1,612,879 1,009,029 Prepaid expenses and other current assets 130,418 52,357 ------------------- ------------------ Total current assets 29,228,955 18,456,890 Property and equipment, net 2,995,299 1,865,398 Capitalized software development costs, net 83,693 380,287 Other assets, net 222,750 121,987 ------------------- ------------------ $ 32,530,697 $ 20,824,562 =================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 66,848 $ 92,896 Accounts payable 3,690,851 2,927,172 Accrued expenses 4,073,834 3,926,054 Customer deposits 5,477,979 1,292,627 Deferred revenue 3,254,102 1,629,081 ------------------- ------------------ Total current liabilities 16,563,614 9,867,830 ------------------- ------------------ Long-term debt, net of current maturities 10,268 44,891 ------------------- ------------------ Stockholders' equity: Common stock, $.10 par value - Authorized - 10,000,000 shares Issued - 7,201,056 shares in 1996 and 6,845,789 shares in 1995 720,106 684,579 Capital in excess of par value 43,712,441 42,509,154 Accumulated deficit (28,451,586) (32,257,746) ------------------- ------------------ 15,980,961 10,935,987 Less - treasury stock, 2,807 shares at cost (24,146) (24,146) ------------------- ------------------ Total stockholders' equity 15,956,815 10,911,841 ------------------- ------------------ $ 32,530,697 $ 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 OPERATIONS (unaudited)
For the three months For the six months ended June 30, ended June 30, ------------------------------- ------------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Product revenue $8,702,957 $5,424,073 $16,304,591 $10,567,500 Service revenue 3,962,392 3,592,011 7,771,025 6,989,685 --------------- -------------- -------------- -------------- Total revenue 12,665,349 9,016,084 24,075,616 17,557,185 Cost of product revenue 2,563,644 1,617,464 4,768,079 3,336,901 Cost of service revenue 2,574,654 2,380,160 5,048,867 4,587,385 --------------- -------------- -------------- -------------- Total cost of revenue 5,138,298 3,997,624 9,816,946 7,924,286 Gross profit 7,527,051 5,018,460 14,258,670 9,632,899 Research, development and engineering expenses 1,415,696 1,027,974 2,683,566 1,963,710 Selling, general and administrative expenses 4,054,250 2,894,686 7,727,592 5,625,077 --------------- -------------- -------------- -------------- Total operating expenses 5,469,946 3,922,660 10,411,158 7,588,787 Income from operations 2,057,105 1,095,800 3,847,512 2,044,112 Interest income 221,609 110,395 388,092 181,832 Interest expense 3,304 5,109 6,536 10,901 --------------- -------------- -------------- -------------- Income before provision for income taxes 2,275,410 1,201,086 4,229,068 2,215,043 Provision for income taxes 227,549 120,185 422,908 221,581 --------------- -------------- -------------- -------------- Net income $ 2,047,861 $ 1,080,901 $ 3,806,160 $ 1,993,462 =============== ============== ============== ============== Net income per common and $0.25 $0.14 $0.47 $0.26 common equivalent share =============== ============== ============== ============== Weighted average number of common and common equivalent shares outstanding 8,193,504 7,659,518 8,101,267 7,554,671 =============== ============== ============== ============== 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: 1996 1995 ------------ ------------ Net income $ 3,806,160 $ 1,993,462 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,224,634 1,259,232 Provision for losses on accounts receivable 34,000 151,744 Changes in current assets and liabilities - Accounts receivable (467,856) 249,642 Inventories (603,850) 76,183 Prepaid expenses and other current assets (78,061) 100,402 Accounts payable 763,679 (431,630) Accrued expenses 147,780 (359,098) Customer deposits 4,185,352 823,332 Deferred revenue 1,625,021 1,312,785 ------------ ------------ Net cash provided by operating activities 10,636,859 5,176,054 ------------ ------------ Cash flows from investing activities: Purchase of property and equipment, net (2,039,978) (635,349) Increase in other assets (118,726) (1,576) ------------ ------------ Net cash used in investing activities (2,158,704) (636,925) ------------ ------------ Cash flows from financing activities: Principal payments of long-term debt (60,671) (54,738) Proceeds from exercise of stock options 1,199,545 252,990 Proceeds from exercise of employee stock purchase plan 39,269 11,700 ------------ ------------ Net cash provided by financing activities 1,178,143 209,952 ------------ ------------ Net increase in cash and cash equivalents 9,656,298 4,749,081 Cash and cash equivalents at beginning of period 12,935,907 5,277,780 ------------ ------------ Cash and cash equivalents at end of period $ 22,592,205 $ 10,026,861 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 6,536 $ 10,901 ============ ============ Cash paid during the period for income taxes $ 114,306 $ 18,755 ============ ============ 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 summarize fairly the Company's financial position and results of operations. The results of operations for the six month period ended June 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 June 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. Inventories Inventories are stated at the lower of the first-in, first-out (FIFO) cost or market and consist of the following:
June 30, December 31, 1996 1995 ----------- ------------ Raw materials and subassemblies..... $ 84,726 $ 52,032 Work-in-process.... 796,926 641,430 Finished goods..... 731,227 315,567 ---------- ---------- $1,612,879 $1,009,029 ========== ==========
6 PART I. FINANCIAL INFORMATION (continued) DAVOX CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (unaudited) 3. Inventories (continued) 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. 4. 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 six months ended June 30, 1996, there were no software development costs capitalized. Approximately $148,000 and $297,000 of capitalized software development costs were amortized to expense during the three months and six months ended June 30, 1996, respectively. 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, 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. 6. Net Income Per Share Net income per share was computed based on the weighted average number of common and common equivalent shares (stock options and warrants) outstanding during the period. 7 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, 1996 and 1995 Total revenue for the second quarter of 1996 increased approximately $3.6 million, or 40.5% compared to the same period in 1995, while total revenue for the first six months of 1996 increased approximately $6.5 million, or 37.1% compared to the same period in 1995. Product revenue increased approximately $3.3 million, or 60.5% to $8.7 million in the second quarter of 1996 as compared to the same period in 1995. Product revenue for the first six months of 1996 increased approximately $5.7 million, or 54.3% to $16.3 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 $946,000, or 58.5% to $2.6 million for the second quarter of 1996, but as a percentage of product revenue decreased 0.4% as compared to the second quarter of 1995. Cost of product revenue for the first six months of 1996 increased approximately $1.4 million, or 42.9% to $4.8 million, but as a percentage of product revenue, decreased 2.3% 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 $370,000, or 10.3% to $4.0 million for the second quarter of 1996 as compared to the second quarter of 1995, while service revenue for the first six months of 1996 increased approximately $781,000, or 11.2% to $7.8 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 $194,000, or 8.2% to $2.6 million for the second quarter of 1996, but as a percentage of service revenue decreased by 1.3% as compared to the second quarter of 1995. Cost of service revenue for the first six months of 1996 increased approximately $461,000, or 10.1% to $5.0 million, but as a percentage of service revenue decreased by 0.7% as compared to the same period in 1995. Research, development and engineering expenses increased approximately $388,000, or 37.7% to $1.4 million for the second quarter of 1996 as compared to the same period in 1995. Research, development and engineering expenses for the first six months of 1996 increased approximately $720,000, or 36.7% to $2.7 million as compared to the same period in 1995. 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 8 PART I. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) and engineering expenses decreased from 11.4% for the second quarter of 1995 to 11.2% for the second quarter of 1996, while research, development and engineering expenses as a percentage of total revenues for the first six months of 1996 remained unchanged as compared to the same period in 1995. Selling, general and administrative (SG&A) expenses increased by approximately $1,160,000, or 40.1% to $4.1 million for the second quarter of 1996 as compared to the same period in 1995. SG&A expenses for the first six months of 1996 increased by approximately $2,100,000, or 37.4% to $7.7 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 decreased from 32.1% for the second quarter of 1995 to 32.0% for the second quarter of 1996, while SG&A expenses as a percentage of total revenues increased slightly from 32.0% for the first six months of 1995 to 32.1% for the first six months of 1996 . Interest income in 1996 was derived primarily from money market investments. Interest income increased 100.7% and 113.4% in the second quarter and first six months of 1996, respectively, compared to the same periods in 1995. The increases reflect the higher average cash balances in 1996 compared to 1995. Interest expense in 1996 was attributable to capital lease obligations. Interest expense decreased 35.3% and 40.0% in the second quarter and first six 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. RESTRUCTURING In response to lower revenues, the Company implemented a restructuring program in the second quarter of 1994. In total, the restructuring cost was approximately $3,379,000, of which approximately $40,000 of related costs have yet to be paid as of June 30, 1996. These costs are expected to be completely paid off in the fourth quarter of 1997. There were no non-cash adjustments to the accrual during the quarter ended June 30, 1996. 9 PART I. FINANCIAL INFORMATION (continued) ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1996, the Company's principal sources of liquidity were its cash and cash equivalent balances of approximately $22,592,000. 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 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 June 30, 1996. At June 30, 1996, the working capital of the Company increased to approximately $12,665,000 from approximately $8,589,000 as of December 31, 1995. The increase was primarily attributable to the net income of approximately $3,806,000 for the first six months of 1996. Total assets during the same period increased to approximately $32,531,000 from approximately $20,825,000. The increase was primarily due to the cash provided by operations and increases in inventory and property and equipment. 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. 10 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 4. Submission of Matters to a Vote of Security-Holders The annual meeting of security-holders of the Company was held on April 18, 1996. The following persons were elected as directors:
Total Votes Total Votes Nominee for Nominee Withheld for Nominee - --------------------------- ----------------------------- -------------------- Alphonse M. Lucchese 5,948,011 274,500 Michael D. Kaufman 5,948,011 274,500 Walter J. Levison 5,948,011 274,500 R. Scott Asen 5,948,011 274,500
An amendment to the 1986 Stock Plan of the Company, to increase the number of shares authorized for issuance pursuant to the 1986 plan by 350,000 to 2,464,286 shares, was approved, with 4,109,039 shares voting in favor, 594,954 shares voting against and 16,928 shares abstaining. The election of the firm of Arthur Andersen, LLP as auditors for the fiscal year ending December 31, 1996 was approved, with 6,216,190 voting in favor, 1,865 shares voting against and 4,456 shares abstaining. Item 6. Exhibits and Reports on Form 8-K (a) 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, 1996. 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. DAVOX CORPORATION Date: August 1, 1996 By: /s/ Alphonse M. Lucchese ------------------------ Alphonse M. Lucchese President, Chief Executive Officer and Chairman (Principal Executive Officer) Date: August 1, 1996 By: /s/ John J. Connolly -------------------- John J. Connolly Vice President of Finance and Chief Financial Officer (Principal Financial Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 22,592,205 0 5,411,082 517,629 1,612,879 29,228,955 2,995,299 0 32,530,697 16,563,614 10,268 0 0 720,106 15,260,855 32,530,697 16,304,591 24,075,616 4,768,079 9,816,946 2,683,566 0 381,556 4,229,068 422,908 3,806,160 0 0 0 3,806,160 .47 .47
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