<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: JUNE 30, 1998
Commission File Number 0-21333
RMH TELESERVICES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2250564
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
40 MORRIS AVENUE, BRYN MAWR, PA 19010
(Address of principal executive offices)
(610) 520-5300
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all report(s) 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
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,120,000 shares of Common
Stock outstanding as of August 5, 1998.
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of
June 30, 1998 and September 30, 1997 ........................................... 3
Consolidated Statements of Operations for the
three and nine months ended June 30, 1998 and 1997 ............................. 4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1998 and 1997 ....................................... 6
Notes to Consolidated Financial Statements ..................................... 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .................................. 10
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...................... 14
PART II. OTHER INFORMATION ............................................................. 15
</TABLE>
2
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1998 1997
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,127,000 $ 6,882,000
Marketable securities 7,668,000 5,135,000
Accounts receivable, net of allowance
for doubtful accounts of $69,000
and $37,000 8,648,000 7,926,000
Refundable deposits 1,582,000 ---
Prepaid expenses and other current assets 716,000 755,000
----------- -----------
Total current assets 20,741,000 20,698,000
----------- -----------
PROPERTY AND EQUIPMENT 10,448,000 9,354,000
Less - accumulated depreciation and
amortization (6,071,000) (4,878,000)
----------- -----------
Net property and equipment 4,377,000 4,476,000
----------- -----------
OTHER ASSETS 126,000 112,000
----------- -----------
$25,244,000 $25,286,000
=========== ===========
<CAPTION>
LIABILITIES AND June 30, September 30,
SHAREHOLDERS' EQUITY 1998 1997
-------------------- ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of capitalized $ -- $ 8,000
lease obligations
Accounts payable 668,000 583,000
Accrued expenses 1,950,000 2,379,000
Deferred income taxes 344,000 344,000
----------- -----------
Total current liabilities 2,962,000 3,314,000
------------ ------------
DEFERRED INCOME TAXES 259,000 289,000
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock 48,638,000 48,638,000
Common stock warrant outstanding 450,000 450,000
Accumulated deficit (27,065,000) (27,405,000)
------------ ------------
Total shareholders' equity 22,023,000 21,683,000
------------ ------------
$ 25,244,000 $ 25,286,000
============ ============
</TABLE>
The accompanying notes and the notes to the consolidated financial statements
included in the Registrant's Annual Report on Form 10-K are an integral part of
these consolidated financial statements.
3
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES $13,212,000 $12,698,000
----------- -----------
OPERATING EXPENSES:
Cost of services 10,155,000 8,858,000
Selling, general and administrative 3,052,000 2,553,000
----------- -----------
Total operating expenses 13,207,000 11,411,000
----------- -----------
Operating income 5,000 1,287,000
INTEREST INCOME 145,000 133,000
----------- -----------
Income before income taxes 150,000 1,420,000
INCOME TAXES 54,000 477,000
----------- -----------
NET INCOME $ 96,000 $ 943,000
=========== ===========
BASIC EARNINGS PER SHARE $ .01 $ .12
=========== ===========
DILUTED EARNINGS PER SHARE $ .01 $ .11
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN BASIC
EARNINGS PER SHARE COMPUTATION 8,120,000 8,120,000
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN DILUTED
EARNINGS PER SHARE COMPUTATION 8,264,000 8,262,000
=========== ===========
</TABLE>
The accompanying notes and the notes to the consolidated financial statements
included in the Registrant's Annual Report on Form 10-K are an integral part of
these consolidated financial statements.
4
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended June 30,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
REVENUES $37,796,000 $33,770,000
----------- -----------
OPERATING EXPENSES:
Cost of services 28,451,000 23,060,000
Selling, general and administrative 9,228,000 7,023,000
----------- -----------
Total operating expenses 37,679,000 30,083,000
----------- -----------
Operating income 117,000 3,687,000
INTEREST INCOME 414,000 346,000
----------- -----------
Income before income taxes 531,000 4,033,000
INCOME TAXES 191,000 1,418,000
----------- -----------
NET INCOME $ 340,000 $ 2,615,000
=========== ===========
BASIC EARNINGS PER SHARE $ .04 $ .32
=========== ===========
DILUTED EARNINGS PER SHARE $ .04 $ .32
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN BASIC
EARNINGS PER SHARE COMPUTATION 8,120,000 8,120,000
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN DILUTED
EARNINGS PER SHARE COMPUTATION 8,318,000 8,262,000
=========== ===========
</TABLE>
The accompanying notes and the notes to the consolidated financial statements
included in the Registrant's Annual Report on Form 10-K are an integral part of
these consolidated financial statements.
5
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For The Nine Months Ended June 30,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 340,000 $ 2,615,000
Adjustments to reconcile net income to net cash
used in operating activities
Depreciation and amortization 1,193,000 1,001,000
Deferred income taxes (30,000) ---
Changes in operating assets and liabilities -
Accounts receivable (722,000) (4,431,000)
Refundable deposits (1,582,000) ---
Prepaid expenses and other assets 39,000 (99,000)
Other assets (14,000) (54,000)
Accounts payable and accrued expenses (344,000) 185,000
----------- -----------
Net cash used in operating activities (1,120,000) (783,000)
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (1,113,000) (1,067,000)
Purchases of marketable securities (9,970,000) (4,450,000)
Maturities of marketable securities 7,437,000 ---
----------- -----------
Net cash used in investing activities (3,646,000) (5,517,000)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from refinanced assets 19,000 714,000
Repayments on capitalized lease obligations (8,000) (36,000)
----------- -----------
Net cash provided by financing activities 11,000 678,000
----------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (4,755,000) (5,622,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,882,000 10,047,000
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 2,127,000 $ 4,425,000
=========== ===========
</TABLE>
The accompanying notes and the notes to the consolidated financial statements
included in the Registrant's Annual Report Form 10-K are an integral part of
these consolidated financial statements.
6
<PAGE>
RMH TELESERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The consolidated financial statements have been prepared by the Registrant
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position and results of operations. Operating results for the three and nine
month periods ended June 30, 1998, are not necessarily indicative of the results
that may be expected for the complete fiscal year. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules and regulations. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Registrant's Annual Report on Form 10-K for the
year ended September 30, 1997.
RMH Teleservices, Inc. (the "Company") provides outbound and inbound
teleservices to major corporations, such as those in the insurance, financial
services, telecommunications and utility industries.
NOTE 2 - EARNINGS PER SHARE
- ---------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share," ("SFAS No. 128").
SFAS No. 128 requires dual presentation of basic and diluted earnings per share.
According to SFAS No. 128, basic earnings per share, which replaces primary
earnings per share, is calculated by dividing net income by the weighted average
number of common shares outstanding for the period. Diluted earnings per share,
which replaces fully diluted earnings per share, reflects the potential dilution
from the exercise or conversion of securities into Common stock, such as stock
options and warrants. The Company was required to and did adopt SFAS No. 128
during the period ended December 31, 1997, as earlier application was not
permitted. As required by SFAS No. 128, all prior-period earnings per share
data have been restated to conform with the provisions of this statement.
7
<PAGE>
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations.
<TABLE>
<CAPTION>
For The Three Months Ended June 30,
-------------------------------------------------------------------------------------
1998 1997
---------------------------------------- ------------------------------------------
Per
Income Shares Per Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share:
Net income $96,000 8,120,000 $.01 $943,000 8,120,000 $.12
==== ====
Effect of dilutive
securities
Stock warrants --- 142,000 --- 142,000
Stock options --- 2,000 --- ---
------- --------- -------- ---------
Diluted earnings
per share:
Net income and
assumed conversion of
dilutive securities $96,000 8,264,000 $.01 $943,000 8,262,000 $.11
======= ========= ==== ======== ========= ====
</TABLE>
<TABLE>
<CAPTION>
For The Nine Months Ended June 30,
-------------------------------------------------------------------------------------
1998 1997
---------------------------------------- ------------------------------------------
Per
Income Shares Per Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share:
Net income $340,000 8,120,000 $.04 $2,615,000 8,120,000 $.32
==== ====
Effect of dilutive
securities:
Stock warrants --- 142,000 --- 142,000
Stock options --- 56,000 --- ---
-------- --------- ---------- ---------
Diluted earnings per
share:
Net income and
assumed conversion
of dilutive securities $340,000 8,318,000 $.04 $2,615,000 8,262,000 $.32
======== ========= ==== ========== ========= ====
</TABLE>
Options to purchase 268,000 and 255,000 shares of Common stock were outstanding
during the three and nine month periods ended June 30, 1997, respectively, but
were not included in the respective computations of diluted earnings per share
because the option exercise prices were greater than the average market price of
the Common shares during the respective periods. For the three and nine month
periods ended June 30, 1998, 2,000 and 56,000 stock options were included in the
diluted earnings per share calculation as the average market price of Common
stock, exceeded the exercise price during the respective periods, using the
treasury stock method. Options to purchase 555,900 shares of Common stock were
outstanding at June 30, 1998.
8
<PAGE>
NOTE 3 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
- ---------------------------------------------------------
The Company is dependent on several large customers within the insurance
industry for a significant portion of its revenues. Three of the Company's
largest customers are engaged in transactions with each other and represent a
single credit risk to the Company. These three customers accounted for 62.1% and
68.5% and 69.9% and 74.1% of revenues for the three and nine month periods
ended june 30, 1998 and 1997, respectively. The loss of one or more of these
customers could have a materially adverse effect on the Company's business.
Concentration of credit risk is limited to accounts receivable and is subject to
the financial conditions of the Company's customers. The Company does not
require collateral or other securities to support customer receivables. At June
30, 1998, the accounts receivable from the customers that represent a single
credit risk were $5,600,000.
For the nine month period ended june 30, 1998 and the three and nine month
periods ended June 30, 1997, the Company generated 6.4%, 9.5% and 7.8%,
respectively, of its revenues from a customer who had an equity ownership
interest through an affiliate. Effective February 20, 1998, this customer
transferred this line of business to a new independent entity. While the Company
continues to do business with this new entity, it no longer relies upon this
related party relationship for such revenues.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor for Forward-Looking Statements
- ------------------------------------------
From time-to-time, the Company may publish statements which are not historical
facts but are forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. The Private
Securities Litigation Reform Act of 1995 provided a safe harbor for forward-
looking statements. In order to comply with the terms of the safe harbor, the
Company notes that a variety of factors could cause the Company's actual results
and experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The risks
and uncertainties that may affect the operations, performance, development and
results of the Company's business include, but are not limited to: (i) reliance
on principal client relationships in the insurance and financial services
industries; (ii) fluctuations in quarterly results of operations due to the
timing of clients' telemarketing campaigns, the timing of opening new call
centers and expansion of existing call centers and changes in competitive
conditions affecting the telemarketing industry; (iii) difficulties of managing
growth profitably; (iv) pressure on gross margins as a result of large volume
opportunities that may warrant appropriate pricing discounts; (v) dependence on
the services of the Company's executive officers and other key operations and
technical personnel; (vi) changes in the availability of qualified employees;
(vii) performance of automated call-processing systems and other technological
factors; (viii) reliance on independent long-distance companies; (ix) changes in
government regulations affecting the teleservices and telecommunications
industries; (x) competition from other outside providers of teleservices and in-
house telemarketing operations of existing and potential clients; and (xi)
competition from providers of other marketing formats, such as direct mail and
emerging strategies such as interactive shopping and marketing over the
internet.
Overview
- --------
The Company is a leading provider of outbound and inbound teleservices to major
corporations, such as those in the insurance, financial services and
telecommunications industries. Founded in 1983, the Company opened its first
call center in 1985 to support the marketing efforts of its consulting
customers. At the present time, outbound business-to-consumer teleservices is
the predominant business of the Company.
The Company's results of operations in any single interim period should not be
viewed as an indication of future results of operations. The Company may
experience quarterly variations in net revenue and operating income as a result
of the timing of clients' telemarketing campaigns, the commencement and
expiration of contracts, the amount of new business generated by the Company,
the timing of additional selling, general and administrative expenses to acquire
and support such new business and changes in the Company's revenue mix among its
various customers.
10
<PAGE>
Risks Associated With The Year 2000
- -----------------------------------
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words, date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among others, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities.
The Company does not believe that it has material exposure to the Year 2000
issue. New internal systems are written that correctly define the Year 2000.
Older systems are being modified to support the century format. The Company is
currently unable to predict the extent to which the Year 2000 issue will effect
its suppliers or the extent to which it would be a vulnerable to its suppliers'
failure to remediate any Year 2000 issues on a timely basis. The Company's
predictive dialing vendor is releasing its Year 2000 compliant software upgrade
in August 1998. the Company's plan is to aggressively upgrade to the new
software in calendar 1998 to afford reasonable time to modify and test the
revised software. The Company does not believe it will incur significant costs
in order to comply with Year 2000 requirements.
Results of Operations
- ---------------------
Revenues - Revenues increased to $13,212,000 and $37,796,000 for the three and
nine month periods ended June 30, 1998, from $12,698,000 and $33,770,000 for the
comparable periods in 1997. This represents revenue increases of 4.0% and 11.9%
for the three and nine month periods ended June 30, 1998, respectively, as
compared to the comparable periods in 1997. Of such increase in revenues,
approximately $378,000 and $2,469,000 were attributable to increased calling
volumes from existing clients, and $136,000 and $1,557,000 to new clients, for
the three and nine month periods, respectively.
Cost of Services - Cost of Services increased to $10,155,000 and $28,451,000 for
the three and nine month periods ended June 30, 1998, from $8,858,000 and
$23,060,000 for the comparable periods in 1997. As a percentage of revenues,
cost of services increased to 76.9% and 75.3% for the three and nine month
periods ended June 30, 1998, as compared to 69.8% and 68.3% for the comparable
periods in 1997. The Company believes that the increase in costs of services, as
a percentage of revenues, during both periods, is attributable to pricing
pressures coupled with the costs of supporting several call centers that opened
in fiscal 1997 that remain less than fully utilized. The Company anticipates
that cost of services, as a percentage of revenue, may increase during the
remainder of the year to the degree that new business and/or volume
opportunities warrant pricing discounts to be offered by the Company, the
Company requires a longer period of time to generate acceptable levels of
utilization at its call centers, and/or the Company experiences upward pressures
on hourly wages as a result of tighter or more competitive labor markets.
11
<PAGE>
Selling, General and Administrative - Selling, general and administrative
expenses increased to $3,052,000 and $9,228,000 for the three and nine month
periods ended June 30, 1998, from $2,553,000 and $7,023,000 for the comparable
periods in 1997. As a percentage of revenues, selling, general and
administrative expenses increased to 23.1% and 24.4% during the three and nine
months ended June 30, 1998, as compared to 20.1% and 20.8% for the comparable
periods in 1997. During the nine month period ended June 30, 1998, $335,000 of
the increase was a result of the Company's decision to settle certain litigation
with an existing customer and legal costs incurred relating to such settlement.
The balance of the increase was primarily the result of increased staffing and
operating costs required to support the growth in the Company's revenues.
Interest Income - Interest income for the three and nine month periods ended
June 30, 1998 and 1997, amounted to $145,000 and $414,000 and $133,000 and
$346,000, respectively, and was earned by investing the remaining proceeds of
the Company's initial public offering in short term investments and cash
equivalents.
Income Tax Expense - Income tax expense for the three and nine month periods
ended June 30, 1998, was $54,000 and $191,000 and represents income taxes based
on an effective tax rate of 36%. This tax rate is reflective of both the federal
tax rate in effect and those state tax rates in effect where the Company does
business coupled with certain tax planning strategies implemented in fiscal
1996.
Liquidity and Capital Resources
- -------------------------------
Historically, the Company's primary sources of liquidity have been cash flow
from operations and borrowings under its credit facilities. On September 24,
1996, the Company completed an initial public offering and raised net proceeds
of approximately $36.3 million. The Company used approximately $27.9 million of
these proceeds to repay all bank indebtedness, redeem its series B Preferred
Stock and pay certain one-time special bonuses to the founders. The remaining
$8.4 million in proceeds was invested in short term financial instruments
pending use for working capital and general corporate purposes. The balance of
such short term instruments was approximately $8.2 million on August 5, 1998.
On March 21, 1997, the Company entered into a new $4 million line of credit
facility (the "Credit Line") with PNC Bank (the "Bank"). The Credit Line
replaces the Company's former term loan and credit facility originated in
conjunction with the 1996 recapitalization. The Credit Line expires on April 1,
1999, or such later date, if extended by the Bank, and outstanding balances bear
interest at the Company's option of the LIBOR rate plus 95 basis points or at
the prime rate minus one-half percent. The Credit Line is secured by all of the
assets of the Company and contains financial covenants and certain restrictions
on the Company's ability to incur additional debt or dispose of its assets. As
of June 30, 1998, the Company had no borrowings outstanding on the Credit Line.
12
<PAGE>
Under a separate agreement dated February 22, 1997, with PNC Leasing
Corporation, the company had up to $6 million available for purposes of leasing
call center equipment. The original $6 million commitment expired on April 1,
1998, and was subsequently renewed with a maturity date of April 1, 1999, in
order for this facility to mature simultaneously with the Company's Credit Line,
and requires that such leases meet the accounting definition of an operating
lease with rent to be paid over a period not to exceed sixty months. As of June
30, 1998, the Company had financed $5,800,000 of equipment purchases under the
original facility and $6.0 million remains available under the renewed leasing
facility. At the end of each respective lease term, and at the Company's
option, the Company may acquire the specific equipment at the current fair
market value. In the future, the Company will continue to evaluate the benefits
and costs of leasing such equipment and may decide to finance future capital
expenditures by utilizing this lease line from PNC Leasing Corporation or using
its available cash.
Net cash used in operating activities was $1,120,000 and $783,000 during the
nine month periods ended June 30, 1998 and 1997, respectively. The cash used in
operations in the 1998 period was a result of deposits paid on assets to be
leased amounting to $1,582,000 and a decrease in the Company's accounts
receivable, less the Company's net income after adding back certain non-cash
depreciation and amortization charges. Subsequent to June 30, 1998 the Company
received a full refund of the $1,582,000 deposit from PNC Leasing Corporation
under the aforementioned agreement.
The Company's teleservices operations will continue to require significant
Capital expenditures. Capital expenditures, during the nine month period ended
June 30, 1998, were $1,113,000. Either by purchasing or leasing, the Company
expects to allocate approximately $0.5 million on capital expenditures during
the remainder of the fiscal year ending September 30, 1998, primarily for
enhancements of technology used throughout its call center operations.
The Company believes that cash generated from operations, when available,
together with its cash and marketable securities, available credit under the
credit facility and leasing agreement will be sufficient to finance its current
operations and planned capital expenditures at least until September 30, 1999.
13
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not applicable.
14
<PAGE>
PART II
OTHER INFORMATION
Item 1: Legal Proceedings
- ------ -----------------
a. None.
Item 2: Changes in Securities
- ------ ---------------------
a. No change.
b. Not applicable.
c. The Company has not sold any securities that were not
registered under the Securities Act
d. The Company's Registration Statement on Form S-1 (File No.
333-07501) (the "Registration Statement") was declared
effective by the Commission on September 18, 1996. Pursuant
to the Registration Statement, the Company registered an
aggregate of 3,220,000 shares of Common Stock, par value
$0.01 per share. All of the shares registers by the
Registration Statement were sold at $12.50 per share,
realizing aggregate proceeds of $40,250,000 and net
aggregate proceeds (after deduction of underwriters'
discounts and commissions and other offering expenses of
$2,801,420 and $900,000, respectively) of $36,548,600. None
of these expenses were paid to directors, officers, general
partners or their associates or to 10% shareholders of the
Company. Of the net proceeds of the offering, $15,300,000
were used to repay indebtedness and $6,000,000 were used to
pay a special bonus to Raymond J. Hansell and Marysue Lucci,
the Company's founders and owners, in excess of 10% of the
common stock. The amount of $6,400,000 was used to fund the
redemption of Series B Preferred Stock by Advanta Partners
LP, an owner of 10% or more of the Common Stock, and the
amount of $281,000 to fund the redemption of Series B
Preferred Stock by Glengar International Investments
Limited. The remainder of the proceeds were invested in
short-term investments pending their withdrawal for general
corporate purposes. At August 5, 1998 the balance of these
investments was approximately $8,214,000 reflecting the use
of approximately $586,000 for general corporate purposes.
15
<PAGE>
Item 3: Defaults upon Senior Securities
- ------ -------------------------------
None.
Item 4: Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
On May 18, 1998, the Company held its Annual Meeting of Shareholders at
which the holders of the Company's Common Stock voted in an election of three
members of the Company's Board of Directors to three year terms expiring at the
Company's 2001 Annual Meeting of Shareholders. The total number of shares of
Common Stock represented at the Annual Meeting were 7,367,798, constituting a
quorum. All three nominees of the Board of Directors were reelected. The
following is a report of the votes cast at the Annual Meeting for each nominee
for director:
- --------------------------------------------------------------------------------
Nominee Name Votes For Withhold Authority
- --------------------------------------------------------------------------------
MarySue Lucci Hansell 7,339,448 28,350
- --------------------------------------------------------------------------------
Herbert Kurtz 7,339,448 28,350
- --------------------------------------------------------------------------------
Gary H. Neems 7,339,448 28,350
- --------------------------------------------------------------------------------
At the Meeting, the shareholders also approved a proposal to ratify the
choice of Authur Andersen LLP as the Company's independent auditors for the
fiscal year ending September 30, 1998. The following is a report of the votes
cast with respect to this proposal:
- --------------------------------------------------------------------------------
Votes For Votes Against Abstain
- --------------------------------------------------------------------------------
7,354,338 6,750 6,750
- --------------------------------------------------------------------------------
Item 5: Other Information
- ------ -----------------
None.
Item 6: Exhibits and Reports on Form 8-K
- ------ --------------------------------
a. Exhibits
27 - Financial Data Schedule, which is submitted
electronically to the Securities and
Exchange Commission for information purposes
only.
b. Reports on Form 8-K - None
16
<PAGE>
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.
RMH Teleservices, Inc.
Date: August 5, 1998 BY: /s/ Raymond J. Hansell
-------------------------------
Raymond J. Hansell
Chief Executive Officer
Date: August 5, 1998 by: /s/ Michael J. Scharff
-------------------------------
Michael J. Scharff
Chief Financial Officer/Executive Vice President
(Principal Financial and Accounting Officer)
17
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