<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[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 000-21771
WEST TELESERVICES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0777362
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
9910 Maple Street, Omaha, Nebraska 68134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 571-7700
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 __
At August 12, 1997, 63,330,000 shares of Common Stock, par value $.01 per share,
of the registrant were outstanding.
<PAGE>
INDEX
Page No.
PART I. FINANCIAL INFORMATION...................................... 3
Item 1.Financial Statements
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996.................................. 3
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1997 and 1996.. 4
Consolidated Statements of Stockholders' Equity...... 5
Consolidated Statement of Cash Flows - Six Months
Ended June 30, 1997 and 1996....................... 6
Notes to Consolidated Condensed Financial Statements. 7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 8
Item 3.Quantitative and Qualitative Disclosure About Market
Risk .............................................. 11
PART II. OTHER INFORMATION......................................... 12
Item 1.Legal Proceedings.................................... 12
Item 4.Submission of Matters to a Vote of Securities
Holders............................................ 12
Item 6.Exhibits and Reports on Form 8-K..................... 13
Signatures.................................................. 14
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------------ -------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $17,882 $55,065
Accounts receivable, net of allowance for doubtful accounts of
$302 and $244 78,873 45,982
Notes receivable 1,160 360
Accounts receivable - financing 11,535 11,805
Federal income tax receivable 799 -
Deferred income tax receivable - current 90 88
Other 5,256 3,961
------------------ -------------------
Total current assets 115,595 117,261
PROPERTY AND EQUIPMENT
Land and improvements 1,132 1,132
Buildings 8,126 8,043
Telephone and computer equipment 77,986 68,483
Office furniture and equipment 15,184 14,383
Leasehold improvements 17,245 18,130
Construction in process 10,647 749
------------------ -------------------
130,320 110,920
Accumulated depreciation and amortization (46,989) (41,895)
------------------ -------------------
83,331 69,025
GOODWILL, NET OF AMORTIZATION OF $1,011 AND $168 49,522 50,365
LAND HELD FOR DEVELOPMENT 1,583 1,583
OTHER ASSETS 145 51
------------------ -------------------
$250,176 $238,285
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 31,867 23,271
Customer deposits and holdbacks 6,405 12,662
Accrued wages and benefits 7,413 5,748
Accrued phone expense 9,100 8,404
Other current liabilities 3,815 2,501
Current obligations under capital leases 3,707 10,915
Current maturities of long-term debt 808 5,894
Income tax payable - current 308 1,697
------------------ -------------------
Total current liabilities 63,423 71,092
OBLIGATIONS UNDER CAPITAL LEASES, less current obligations 3,645 5,714
LONG TERM DEBT, less current obligations 1,517 -
DEFERRED INCOME TAXES 2,759 2,600
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock $0.01 par value, 10,000 shares authorized,
no shares issued and outstanding - -
Common stock $0.01 par value, 200,000 shares authorized,
63,330 shares issued and outstanding 633 633
Additional paid-in capital 157,681 157,719
Retained earnings 20,518 527
------------------ -------------------
Total stockholders' equity 178,832 158,879
------------------ -------------------
$250,176 $238,285
================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUE $98,380 $74,980 $194,026 $154,468
COST OF SERVICES 55,153 43,199 106,501 87,340
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 29,384 20,210 55,529 40,299
----------- ---------- ----------- ------------
NET OPERATING INCOME 13,843 11,571 31,996 26,829
OTHER INCOME (EXPENSE):
Interest income 312 85 701 171
Interest income - financing, net of interest expense of $85, $300,
$178 and $621 390 168 770 279
Interest expense (178) (612) (409) (1,240)
Minority interest in net income of consolidated subsidiaries - (348) - (814)
Other income (expense) (145) (140) (314) (170)
----------- ---------- ----------- ------------
Net other income (expense) 379 (847) 748 (1,774)
----------- ---------- ----------- ------------
NET INCOME BEFORE INCOME TAX EXPENSE: 14,222 10,724 32,744 25,055
ACTUAL INCOME TAX EXPENSE:
Current income tax expense 5,458 166 12,596 379
Deferred income tax expense 85 - 157 -
----------- ---------- ----------- ------------
Actual income tax expense 5,543 166 12,753 379
----------- ---------- ----------- ------------
NET INCOME AND NET INCOME BEFORE PROFORMA
INCOME TAX EXPENSE 8,679 10,558 19,991 24,676
PROFORMA INFORMATION:
Income tax expense - 3,862 - 9,026
----------- ---------- ----------- ------------
Net income $8,679 $6,696 $19,991 $15,650
=========== ========== =========== ============
Primary and fully diluted earnings per common and common equivalent share $0.14 $0.12 $0.32 $0.29
=========== ========== =========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 63,330 53,968 63,363 53,968
=========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $568 $4,743 $32,918 $38,229
Distributions to stockholders - - (18,546) (18,546)
Net income - - 24,676 24,676
------------ ------------ ------------- --------------
BALANCE, June 30, 1996 $568 $4,743 $39,048 $44,359
============ ============ ============= ==============
BALANCE, December 31, 1996 $633 $157,719 $527 $158,879
Payments for stock registration
costs - (38) - (38)
Net income - - 19,991 19,991
------------ ------------ ------------- --------------
BALANCE, June 30, 1997 $633 $157,681 $20,518 $178,832
============ ============ ============= ==============
</TABLE>
5
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED ENDED JUNE 30,
1997 1996
----------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $19,991 $24,676
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 9,372 5,979
(Gain) Loss on sale of equipment 113 (140)
Deferred income tax expense 157 -
Minority Interest - 814
Changes in operating assets and liabilities:
Accounts receivable (34,005) (1,807)
Other assets and vendor receivables (1,389) (3,949)
Accounts payable 8,596 (4,032)
Other current liabilities and accrued expenses 3,675 200
Income tax payable (2,188) (325)
----------------- ----------------
Net cash flows from operating activities 4,322 21,416
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (23,294) (6,765)
Proceeds from disposal of property and equipment 346 621
Issuance of notes receivable (287) (900)
Proceeds from payments of notes receivable 601 363
----------------- ----------------
Net cash flows from investing activities (22,634) (6,681)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 2,499 1,817
Payments of debt (6,068) (962)
Payments of capital lease obligations (9,277) (2,929)
Net change in line of credit agreement - 2,550
Distribution to stockholders - (23,878)
Net change in accounts receivable financing and notes payable financing 270 44
Payments for stock registration costs (38) -
Increase (decrease) in customer deposits and holdbacks (6,257) 1,941
----------------- ----------------
Net cash flows from financing activities (18,871) (21,417)
----------------- ----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (37,183) (6,682)
CASH AND CASH EQUIVALENTS, Beginning of period 55,065 21,861
----------------- ----------------
CASH AND CASH EQUIVALENTS, End of period 17,882 15,179
================= ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest 659 1,795
================= ================
Cash paid during the period for income taxes 14,446 666
================= ================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of equipment through assumption of capital lease - 2,809
obligations ================= ================
Reduction of accounts receivable through issuance of notes receivable 1,114 61
receivable ================= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
WEST TELESERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(AMOUNTS IN THOUSANDS)
1. GENERAL
The accompanying unaudited consolidated condensed financial statements reflect
all normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results,
and cash flows for the interim periods. The consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and analysis
of financial condition and results of operations, contained in the Company's
Form 10-K for the year ended December 31, 1996, which has previously been filed
with the Securities and Exchange Commission.
Where appropriate, items within the consolidated condensed financial statements
have been reclassified from the previous periods to conform to the current
year's presentation.
2. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits and claims which arise out of the normal
course of its business. In the opinion of management, the disposition of such
claims will not have a material adverse effect on the Company's financial
position or results of operations.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share which specifies the computation, presentation and disclosure
requirements for earnings per share. The objective of the statement is to
simplify the computation of earnings per share. The impact on the Company's
earnings per share is not materially different than earnings per share
determined in accordance with current guidance. SFAS No. 128 is applicable for
fiscal years ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information which
established presentation of financial data based on the "management approach".
SFAS No. 131 is applicable for fiscal years beginning after December 15, 1997.
The Company is currently in the process of reviewing this presentation
requirement.
4. STOCK INCENTIVE PLAN
During September 1996, the Company and its stockholders adopted the 1996 Stock
Incentive Plan. The Plan authorized granting to officers and directors the right
to purchase common shares at the fair market value determined on the date of
grant. Options to a maximum of 9,499.5 common shares may be granted under the
1996 Plan. There were options for 3,601 shares issued during November 1996 and
were outstanding at December 31, 1996 and March 31, 1997. During May of 1997,
the Company and its stockholders amended the options granted during November
1996. The 3,601 shares were surrendered by option holders in June of 1997 and
new options were issued. At June 30, 1997, 4,601 shares were issued and
outstanding relating to the new options granted. Ten percent of the options vest
on the first anniversary of the grant date, an additional ten percent of the
options vest on the second anniversary of the grant date, an additional fifteen
percent of the options vest on each of the third, fourth, fifth and sixth
anniversaries of the grant date and the final twenty percent of the options vest
on the seventh anniversary of the grant date. No options were exercisable at
June 30, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto. Certain statements
under this caption constitute forward-looking statements which involve risks and
uncertainties. The Company's actual results in the future could differ
significantly from the results discussed or implied in such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, the effect on financial performance of increased
competition in the teleservices industry, potential future competition,
competitive pricing for services, potential future competing technologies and
trends, dependence on technology and phone service, dependence on the Company's
labor force, reliance on major clients, the success of new product innovations,
legal proceedings and government regulation.
RESULTS OF OPERATIONS
COMPARISON OF THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
REVENUE: For the three months ended June 30, 1997, revenues increased
$23.4 million, or 31.2%, to $98.4 million up from $75.0 million for the three
months ended June 30, 1996. For the six months ended June 30, 1997, revenues
increased $39.5 million, or 25.6%, to $194.0 million up from $154.5 million for
the six months ended June 30, 1996. For the six months ending June 30, 1997,
inbound operator teleservices accounts for $55.4 million of revenue, interactive
teleservices accounts for $74.3 million, and outbound direct teleservices
accounts for $64.3 million. Revenue from inbound operator teleservices increased
approximately $6.7 million to $55.4 million primarily due to entry into customer
operator services (or dedicated live operator). Customer operator services began
in the second quarter of 1996 and during the entire year of 1996 accounted for
$7.0 million. In the first two quarters of 1997, customer operator services
accounted for approximately $7.5 million of revenue compared to $2.6 million in
the first two quarters of 1996. Revenue from interactive teleservices increased
approximately $11.2 million to $74.3 million. Revenue from outbound direct
teleservices increased approximately $21.6 million to $64.3. The increases are
primarily the result of servicing the growing needs of the Company's clients.
COST OF SERVICES: Cost of services represents direct labor, telephone
expense and other costs directly related to teleservices activities. Costs of
services increased $12.0 million, or 27.8%, in the second quarter of 1997 to
$55.2 million up from $43.2 million for the comparable period of 1996. Cost of
services increased $19.2 million, or 22.0%, to $106.5 million for the six months
ended June 30, 1997, up from $87.3 million for the comparable period of 1996. As
a percentage of revenue, cost of services decreased to 56.1% for the second
quarter of 1997 and 54.9% for the six months ended June 30, 1997 compared to
approximately 57.6% and 56.5%, respectively, for the comparable periods in 1996.
The decrease is partially due to the addition of new call centers in new markets
which had available, cost-effective quality labor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"): SG&A expenses
increased by $9.2 million, or 45.5%, to $29.4 million for the second quarter of
1997 up from $20.2 million
8
<PAGE>
for the comparable period of 1996. For the six months ended June 30, 1997, SG&A
expenses increased by $15.2 million, or 37.7%, to $55.5 million, up from $40.3
million for the comparable period of 1996. As a percentage of revenue, SG&A
expenses increased to approximately 29.9% for the second quarter of 1997 and
28.6% for the six months ended June 30, 1997 compared to approximately 26.9% and
26.1%, respectively, for the comparable periods of 1996. The increase is
primarily due to the increase in depreciation expense and other costs associated
with call center expansion. The increase is also the result of the amortization
of goodwill recorded to account for the exchange of stock of minority
shareholders in connection with the initial public offering.
NET OPERATING INCOME: Net operating income increased by $2.2 million, or
19.0%, to $13.8 million in the second quarter of 1997 up from $11.6 million in
the second quarter of 1996. For the six months ended June 30, 1997, net
operating income increased by $5.1 million, or 19.0%, to $32.0 million up from
$26.9 million for the comparable period of 1996. As a percentage of revenue, net
operating income decreased to approximately 14.0% for the second quarter of 1997
and 16.5% of the six months ended June 30, 1997, compared to 15.5% and 17.4%,
respectively, for the corresponding periods of 1996 due to the factors discussed
above.
NET OTHER INCOME (EXPENSE): Net other income (expense) includes interest
income from short-term investments, interest income from an accounts receivable
financing program (net of the related interest expense to fund the program),
interest expense from short-term and long-term borrowings under credit
facilities and capital leases, and minority interest in net income. Other income
(expense) for the second quarter of 1997 totaled $0.4 million compared to ($0.8)
million for the second quarter of 1996. Other income (expense) for the six
months ended June 30, 1997, totaled $0.8 million compared to ($1.8) million for
the comparable period of 1996. The reduction in interest expense is primarily
due to the repayment of outstanding long term debt in December 1996 and January
1997.
NET INCOME AND PROFORMA NET INCOME: Net income increased by $2.0
million, or 29.9%, for the second quarter of 1997, to $8.7 million from proforma
net income of $6.7 million for the second quarter of 1996. Net income increased
by $4.3 million, or 27.4%, for the six months ended June 30, 1997, to $20.0
million up from $15.7 million for the comparable period of 1996. Net income and
proforma net income include a provision for actual income tax expense and
proforma income tax expense, respectively, at a combined effective rate of
approximately 39.0% for 1997 and approximately 36.3% for 1996. The 1996 rate
reflects the combined federal and state income tax rate of the Company as if it
had been treated as a C Corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity has been cash flow from
operations, supplemented by borrowings under its revolving bank lines of credit.
The Company's credit facilities consisted of $8.0 million and $4.5 million
revolving credit facilities, with no amounts outstanding at June 30, 1997.
Advances under the revolving credit facilities bore interest at the prime rate
less 0.25% and 0.50%, respectively. Aggregate borrowings under the revolving
credit facility were limited to 80% of eligible accounts receivable. The
revolving credit facilities terminated on June 30, 1997 and July 1, 1997,
respectively. The Company is in the process of replacing these facilities with a
$10 million unsecured revolving credit facility with similar terms and
conditions as the expired facilities. At
9
<PAGE>
June 30, 1997, the Company had no term loans with banks. Repayment of all bank
debt is secured by the Company's accounts receivable, equipment, real estate,
and other assets. In addition, the Company's loan agreements contain certain
financial covenants and restrictions.
The Company also had a $30.0 million revolving bank line used to fund an
accounts receivable financing program offered to certain customers in the pay
per call industry. Borrowings under the facility were limited to a borrowing
base of pledged accounts receivable from certain of the Company's qualified
customers which were assigned by the Company to the bank. There were no
outstanding borrowings under this facility at June 30, 1997. This credit
facility expired on June 30, 1997. This credit facility was renewed on July 22,
1997 for $20 million under substantially the same terms and conditions. The
renewed credit facility expires on June 30, 1998.
Net cash flow from operating activities decreased $17.1 million, or 80%, to
$4.3 million for the six months ended June 30, 1997, compared to an increase of
$21.4 million for the six months ended June 30, 1996. The decrease was due
principally to cash used for accounts receivable resulting from growth in
revenue and income taxes paid, partially offset by higher net income and
depreciation and amortization.
Net cash flow used in investing activities was $22.6 million for the six
months ended June 30, 1997, compared to $6.7 million, for the comparable period
of 1996. The increase was primarily due to investments in call centers to
support the growth of the business.
Net cash flow used in financing activities was $18.9 million for the six
months ended June 30, 1997 compared to $21.4 million, for the comparable period
of 1996. The net cash flow used in financing activities for the six months ended
June 30, 1997, was used primarily to refund $3.2 million in customer deposits
and holdbacks and the payment of $1.0 million on the line of credit. The cash
used was offset by $2.5 million of proceeds from a vendor loan. In the six
months ended June 30, 1996, net cash flow from financing activities was used
primarily for distributions made to the existing stockholders to cover their tax
liabilities as S Corporation stockholders and to provide a return of capital,
offsetting borrowings under the Company's credit facilities, net of repayments.
CAPITAL EXPENDITURES
The Company's operations will continue to require significant capital
expenditures for capacity expansion and upgrades. Capital expenditures, which
include the acquisition of equipment, were $11.2 million in the second quarter
of 1997 and $23.3 million for the six months ended June 30, 1997. The Company
projects its capital expenditures for the balance of 1997 to be approximately
$17 million, primarily for capacity expansion and upgrades at existing
facilities and the addition of four new call centers.
The Company believes that the cash flow from operations, together with
existing cash and cash equivalents and available borrowings under its credit
facilities will be adequate to meet its capital requirements for the foreseeable
future. The Company may pledge additional property or assets of the Company or
any of its subsidiaries, which are not already pledged as collateral securing
the new and existing credit facilities. The Company or its affiliates may be
required to
10
<PAGE>
guarantee any existing or additional credit facilities.
INFLATION
The Company does not believe that inflation has had a material effect on its
results of operations. However, there can be no assurance that the Company's
business will not be affected by inflation in the future.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
West Interactive Corporation ("Interactive") is a defendant in a case
brought in the United States District Court for the Southern District of
Georgia, Augusta Division, on September 12, 1991, captioned Lamar Andrews,
Individually and as Representative of a Class of All Other Persons Similarly
Situated, Plaintiff v. American Telephone & Telegraph Company, et al.,
Defendants, No. CV 191-175. The District Court certified a master class of all
persons who paid for one or more 900 number calls pertaining to programs
offering sweepstakes, games of chance, awards, cash or other prizes, gifts or
information on unclaimed funds. These calls were billed and collected by AT&T
Corp. ("AT&T") and U.S. Sprint Communications Company Limited Partnership
("Sprint"). The District Court also certified a sub-class of those persons who
paid, in the State of Georgia, for one or more such calls billed and collected
by AT&T or Sprint. The complaint alleged that the programs at issue involved,
among other things, acts of unlawful gambling, mail fraud and wire fraud in
violation of the Racketeering Influenced and Corrupt Organizations Act ("RICO"),
the Communications Act of 1934, the federal common law of communications and
other state and federal laws. Interactive provided interactive voice processing
and billing services to a customer which conducted some of the programs at issue
in the litigation. The billing services were provided through AT&T. The action
sought recovery of treble damages, punitive damages, costs and attorneys' fees.
The Company's potential liability and expenses in this matter are not covered
by insurance. On September 19, 1996, the United States Court of Appeals for the
Eleventh Circuit reversed the District Court's order certifying the classes on
the ground that the class action would be unmanageable and, on December 4, 1996,
it denied the plaintiffs' subsequent petition for rehearing. On February 19,
1997, a Motion to Amend Class Definition and a Renewed Motion for Class
Certification was filed by the plaintiffs in the District Court. On July 14,
1997, plaintiffs' motions were denied and the plaintiffs were ordered to amend
the pleadings to eliminate all allegations as to class representation. On August
4, 1997, the plaintiffs filed a second amended complaint which deleted all class
allegations. In addition to claims previously asserted, the second amended
complaint includes an express claim based upon the alleged collection of illegal
gambling debts, and a claim under the Georgia RICO statute with a request for
actual and punitive damages under that statute.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The annual meeting of the stockholders of the Company was held on May
14, 1997 (the "Annual Meeting"). The matters submitted to the stockholders for a
vote included (a) the election of two directors with terms expiring at the 2000
annual meeting of stockholders, (b) the ratification and approval of Deloitte &
Touche LLP as the Company's independent auditors and (c) the ratification and
approval of the Company's 1997 Employees Stock Purchase Plan. The following
table sets forth the results of the voting on these matters:
12
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
VOTES NUMBER OF
NUMBER OF AGAINST ABSTENTIONS AND
MATTER VOTES FOR OR WITHHELD BROKER NON-VOTES
<S> <C> <C> <C>
Election of Directors
Thomas B. Barker 60,703,676 166,843 0
William E. Fisher 60,703,132 167,387 0
Approval of Deloitte & Touche LLP as Independent 60,858,995 6,456 5,068
Auditors
Approval of 1997 Employees Stock Purchase Plan 60,622,430 238,122 9,967
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.01 1997 Employees Stock Purchase Plan
27.01 Financial Data schedule
(b) Reports on Form 8-K
None.
13
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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.
Date: August 14, 1997
WEST TELESERVICES CORPORATION
By: /s/ Troy L. Eaden
-----------------------------------
Troy L. Eaden
Chief Executive Officer
By: /s/ Michael A. Micek
-----------------------------------
Michael A. Micek
Chief Financial Officer
Vice President Finance and Treasurer
14
<PAGE>
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE
NUMBER ----------- NUMBER
------ ------
10.01 1997 Employees Stock Purchase Plan
27.01 Financial Data Schedule
15
<PAGE>
EXHIBIT 10.01
1997 EMPLOYEES STOCK PURCHASE PLAN
ARTICLE I. PURPOSE OF PLAN
The purpose of this Plan is to provide employees a continued opportunity to
purchase shares of the Common Stock, par value $.01 per share of West
TeleServices Corporation (the "Common Shares"), through annual offerings to be
made during the five-year period commencing July 1, 1997.
ARTICLE II. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such other
Committee that may be appointed by the Board of Directors from members of senior
management. The Committee shall have authority to make rules and regulations for
the administration of the Plan; its interpretations and decisions with regard
thereto shall be final and conclusive. Unless prohibited by law, the Committee
may, at its discretion, decrease (but not increase) the limitations set forth at
Sections 6.01(a), 6.02 and 8.02 hereof.
ARTICLE III. ELIGIBILITY
Except as provided below, all employees of the Corporation or its
subsidiaries who are eligible to participate in the West Telemarketing
Corporation Employee 401-K Retirement Plan and Trust Agreement, as from time to
time amended, shall be eligible to participate in the Plan but without giving
effect to the restriction on persons under the age of 21 contained therein;
provided, however, that each of such employees must have completed at least
twenty (20) hours of service per week for a one-year period. No employee may be
granted an option if such employee, immediately after the option is granted,
owns 5% or more of the total combined voting power or value of the stock of the
Corporation or any subsidiary. For purposes of the preceding sentence, the rules
of Section 424(d) of the Internal Revenue Code of 1986, as amended (the "Code")
shall apply in determining the stock ownership of an employee, and stock that
the employee may purchase under outstanding options shall be treated as stock
owned by the employee.
ARTICLE IV. OFFERINGS
The Plan shall be implemented by consecutive offering periods until
terminated in accordance with Article XXIV of the Plan. Each offering period
shall be 12 months in duration, during which (or during such portion thereof as
an employee may elect to participate) the amounts received as compensation by an
employee shall constitute the measure of such of the employee's participation in
the offering as is based on compensation; provided, however, the first offering
period shall commence on the first trading day after July 1, 1997 and ending on
or prior to June 30, 1998.
ARTICLE V. PARTICIPATION.
An employee eligible on the effective date of any offering may participate
in such offering at any time by completing and forwarding a payroll deduction
authorization to the employee's appropriate payroll location. The form will
authorize a regular payroll deduction from the employee's compensation, and must
specify the date on which such deduction is to commence, which may not be
retroactive.
<PAGE>
ARTICLE VI. DEDUCTIONS.
SECTION 6.01. PAYROLL DEDUCTION ACCOUNTS
(a) The Corporation shall maintain payroll deduction accounts for all
participating employees. With respect to any offering made under this Plan, an
employee may authorize a payroll deduction of a whole percentage (up to a
maximum of 10%) of the compensation the employee receives on each payday during
the offering period (or during such portion thereof in which the employee may
elect to participate).
(b) All payroll deductions made for a participant shall be credited to his
account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) At the time the option is exercised, in whole or in part, or at the time
some or all of the Common Shares issued under the Plan is disposed of, the
participant must make adequate provisions for the Corporation's federal, state,
or other tax withholding obligations, if any, which arise upon the exercise of
the option or the disposition of the Common Shares. At any time, the Corporation
may, but will not be obligated to, withhold from the participant's compensation
the amount necessary for the Corporation to meet applicable withholding
obligations, including any withholding required to make available to the
Corporation any tax deductions or benefits attributable to sale or early
disposition of Common Shares by the employee
SECTION 6.02 LIMITATION
No employee may be granted an option that permits his or her rights to
purchase stock under this Plan, and any other stock purchase plan of the
Corporation and its subsidiaries, to accrue at a rate that exceeds $25,000 of
the fair market value of such stock (determined at the date such option is
granted) for each calendar year in which the option is outstanding at any time.
ARTICLE VII. DEDUCTION CHANGES.
An employee may increase or decrease the employee's payroll deduction by
filing a new payroll deduction authorization at any time during an offering
period. The change may not become effective sooner than the next pay period
after receipt of the authorization.
ARTICLE VIII. PURCHASE OF SHARES.
SECTION 8.01 GRANT OF OPTION
Each employee participating in any offering under this Plan shall be granted
an option, upon the effective date of such offering, for as many full and
fractional Common Shares as the participating employee may elect to purchase
with up to 10% of the compensation received during the specified offering period
(or during such portion thereof as the employee may elect to participate), to be
paid by payroll deductions during such period.
SECTION 8.02 LIMITATION ON NUMBER OF SHARES
Notwithstanding the foregoing, in no event shall the number of shares
purchased by an employee during an offering period exceed 1,000 shares.
<PAGE>
SECTION 8.03 PURCHASE PRICE
The purchase price for each share purchased shall mean an amount equal to
100% of the Fair Market Value of a share of Common Shares on the date of grant.
As of the last day of the last pay period during any offering, the account of
each participating employee shall be totaled, and, unless the participating
employee has withdrawn as provided in Article XIII hereof, the employee shall be
deemed to have exercised an option to purchase one or more full or fractional
shares at the then-applicable price; the employee's account shall be charged for
the amount of the purchase; and ownership of such share or shares shall be
appropriately evidenced on the books of the Corporation. If at the end of the
offering the fair market value of the Common Shares subject to the option is
less than 100% of the fair market value at the date of grant, then such option
shall not be deemed exercised and the payroll deductions made with respect to
such option shall be applied to the next offering unless the employee elects to
have the payroll deductions withdrawn from the Plan and returned to the employee
pursuant to Article XIII. Additional shares covered by the employee's option
shall be purchased in the same manner, as of the last day of each subsequent pay
period during the offering period. A participating employee may not purchase a
share under any offering period beyond 12 months from the effective date
thereof. Any balance remaining in an employee's payroll deduction account at the
end of an offering period will be carried forward to the next offering period.
ARTICLE IX. EMPLOYEE ACCOUNTS AND CERTIFICATES.
Upon purchase of one or more full or fractional shares by a Plan participant
pursuant to Article VIII hereof, the Corporation shall establish a book entry
account in the name of the employee to reflect the share(s) purchased at that
time. Certificates shall be issued only on request for full shares and also when
necessary to comply with transaction requirements outside the United States. To
request certificates, employees may call the Company's Investment Relations
officer. In the event a participant terminates his or her account, any
fractional share held in the account will be paid to the participant in cash.
ARTICLE X. REGISTRATION OF SHARES.
Shares may be registered only in the name of the employee, or, if the
employee so indicates on the employee's payroll deduction authorization form,
the employee may designate a beneficiary pursuant to Article XVI.
ARTICLE XI. DEFINITIONS
SECTION 11.01. BOARD
The term "Board" means the Board of Directors of the Corporation.
SECTION 11.02 CODE
The term "Code" means the Internal Revenue Code of 1986, as amended.
SECTION 11.03 COMMITTEE
The term "Committee" shall have the meaning set forth at Article II hereof.
<PAGE>
SECTION 11.04 COMMON SHARES
The term "Common Shares" means the common stock of the Corporation.
SECTION 11.05 CORPORATION
The term "Corporation" means West TeleServices Corporation, a Delaware
corporation.
SECTION 11.06 EXCHANGE ACT
The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
SECTION 11.07 FAIR MARKET VALUE
The term "Fair Market Value" means, as of any date, the value of Common
Shares determined as follows:
(a) If the Common Shares is listed on any established stock exchange or a
national market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ"), its Fair Market Value shall be the average of the high and
low sale price for the Common Shares (or the average of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Shares) or system on the
date of such determination, as reported in The Wall Street Journal or such other
source as the Committee deems reliable; or
(b) If the Common Shares is quoted on NASDAQ (but not on the National Market
System thereof) or is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the average of
the closing bid and asked prices for the Common Shares on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Committee deems reliable; or
(c) In the absence of an established market for the Common Shares, the Fair
Market Value thereof shall be determined in good faith by the Committee.
SECTION 11.08 PLAN
The term "Plan" means this Employees Stock Purchase Plan.
SECTION 11.09 RESERVES
The term "Reserves" means the number of Common Shares covered by each option
under the Plan which have not yet been exercised and the number of Common Shares
which have been authorized for issuance under the Plan but not yet placed under
option.
SECTION 11.10 RULE 16B-3
The term "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor provision.
<PAGE>
SECTION 11.11 SUBSIDIARY
The term "subsidiary" means a subsidiary of the Corporation within the
meaning of Section 424(f) of the Code and the regulations promulgated
thereunder.
SECTION 11.12 TRADING DAY
The term "Trading Day" means a day on which the Common Shares (i) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (ii) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
ARTICLE XII. RIGHTS AS A STOCKHOLDER.
None of the rights or privileges of a stockholder of the Corporation shall
exist with respect to shares purchased under this Plan unless and until such
shares shall have been appropriately evidenced on the books of the Corporation.
ARTICLE XIII. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
A participant may withdraw all but not less than all the payroll deductions
credited to his or her account and not yet used to exercise his or her option
under the Plan at any time prior to the last business day of an offering period
by giving written notice to the Corporation. All of the participant's payroll
deductions credited to his account will be paid to such participant promptly
after receipt of notice of withdrawal and such participant's option for the
offering period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the offering period.
If a participant withdraws from the Plan during an offering period, he may not
resume participation until the next offering period. He may resume participation
for any other offering period by delivering to the Corporation a new
subscription agreement at least ten (10) days prior to such offering period.
Upon a participant's ceasing to be an employee, for any reason, he or she
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the offering period but
not yet used to exercise the option will be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Article XVI hereof, and such participant's option will be automatically
terminated.
A participant's withdrawal from an offering period will not have any effect
upon his eligibility to participate in any similar plan which may hereafter be
adopted by the Corporation.
ARTICLE XIV. INTEREST.
No interest or other increment shall accrue or be payable with respect to
any of the payroll deductions of a participant in the Plan.
<PAGE>
ARTICLE XV. STOCK.
The Common Shares to be sold to participants under the Plan may, at the
election of the Corporation, be either treasury shares or authorized but
previously unissued Common Shares. The maximum number of Common Shares which
shall be made available for sale under the Plan shall be 2,000,000 shares,
subject to adjustment upon changes in capitalization of the Corporation as
provided in Article XXI hereof. If on a given exercise date the number of shares
with respect to which options are to be exercised exceeds the number of shares
then available under the Plan, the Corporation shall make a pro rata allocation
of the shares remaining available for purchase in as uniform a manner as shall
be practicable and as it shall determine to be equitable.
ARTICLE XVI. DESIGNATION OF BENEFICIARY.
A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the date on which
the option is exercised but prior to delivery to such participant of such shares
or cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Corporation shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Corporation), the Corporation, in its discretion, may deliver such shares or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Corporation,
then to such other person as the Corporation may designate.
ARTICLE XVII. USE OF FUNDS.
All payroll deductions received or held by the Corporation under the Plan
may be used by the Corporation for any corporate purpose, and the Corporation
shall not be obligated to segregate such payroll deductions.
ARTICLE XVIII. REPORTS.
Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given to participating employees within such time
as the Committee may reasonably determine, which statements will set forth the
amounts of payroll deductions, the purchase price, the number of shares
purchased and the remaining cash balance, if any.
ARTICLE XIX. RIGHTS NOT TRANSFERABLE.
Rights under this Plan are not transferable by a participating employee
other than by will or the laws of descent and distribution, and are exercisable
during the employee's lifetime only by the employee.
<PAGE>
ARTICLE XX. APPLICATION OF FUNDS AND ADMINISTRATIVE FEES.
All funds received or held by the Corporation under this Plan may be used
for any corporate purpose. The Committee may impose reasonable administrative
fees on participating employees to defray the administrative costs of the Plan,
which shall in no event exceed the actual administrative costs of the Plan.
Initially, the fee shall be $10 per participating employee per offering period.
ARTICLE XXI. ADJUSTMENTS IN CASE OF CHANGES AFFECTING COMMON SHARES.
SECTION 21.01 CHANGES IN CAPITALIZATION
Subject to any required action by the stockholders of the Corporation, the
Reserves as well as the price per share of Common Shares covered by each option
under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued Common Shares
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Shares, or any other increase or decrease in
the number of Common Shares effected without receipt of consideration by the
Corporation; provided, however, that conversion of any convertible securities of
the Corporation shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Corporation of shares of stock of any class,
or securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of Common Shares subject to an option.
SECTION 21.02 DISSOLUTION OR LIQUIDATION.
In the event of the proposed dissolution or liquidation of the Corporation,
the offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board.
SECTION 21.03. MERGER OR ASSET SALE.
In the event of a proposed sale of all or substantially all of the assets of
the Corporation, or the merger of the Corporation with or into another
corporation ("Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion, that in lieu of such assumption or substitution
to terminate all outstanding options in exchange for a cash payment equal to the
excess of the Fair Market Value of the shares subject to options (determined at
the date to the Transaction) over the purchase price thereof. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Shares for each share of Common Shares held on the effective date of the
Transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Common Shares); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Shares in the
sale of assets or merger.
<PAGE>
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Shares covered by each outstanding option, in the event the
Corporation effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Shares, and in the event of the Corporation being consolidated with or merged
into any other corporation.
ARTICLE XXII. DISPOSITION RESTRICTION.
Subject to approval of the Internal Revenue Service, the Committee will
amend the Plan, effective after giving at least one month's written notice to
participating employees, to provide for a holding period of up to one year
following the purchase of each share under the Plan, with the disposition of
such share during the offering period in which it was acquired resulting in
suspension of the participant from further Plan participation for a period not
extending beyond the end of the first offering period that begins after the date
of the disposition; provided that the issuance of a stock certificate may be
treated as a disposition for this purpose; and provided further that a
participant shall not be so suspended if the disposition is required by legal
process.
ARTICLE XXIII. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, or from time to time, amend this
Plan in any respect, except that, to the extent necessary to comply with Section
423 of the Code, the Corporation shall obtain the approval of a majority of the
shares of stock of the Corporation then issued and outstanding and entitled to
vote.
ARTICLE XXIV. TERMINATION OF THE PLAN.
This Plan and all rights of employees under any offering hereunder shall
terminate:
(a) on the day that participating employees become entitled to purchase a
number of shares equal to or greater than the number of shares remaining
available for purchase. If the number of shares so purchasable is greater than
the shares remaining available, the available shares shall be allocated by the
Committee among such participating employees in such manner as it deems fair, or
(b) at any time, at the discretion of the Board of Directors.
No offering hereunder shall be made which shall extend beyond June 30, 2002.
ARTICLE XXV. GOVERNMENTAL REGULATIONS.
The Corporation's obligation to sell and deliver Common Shares under this
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance, or sale of such stock.
ARTICLE XXVI. RULE 16B-3 LIMITATIONS.
The terms and conditions of options granted hereunder to, and the purchase
of shares by, persons subject to Section 16 of the Exchange Act shall comply
with the applicable provisions of Rule 16b-3 thereunder. This Plan shall be
deemed to contain, and such options shall contain, and the shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required by Rule 16b-3 to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
<PAGE>
ARTICLE XXVII. NOTICES.
All notices or other communications by a participant to the Corporation
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Corporation at the location, or by
the person, designated by the Corporation for the receipt thereof.
ARTICLE XXVIII. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Corporation with respect to such
compliance.
As a condition to the exercise of an option, the Corporation may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Corporation, such a representation is required by any of the
aforementioned applicable provisions of law.
ARTICLE XXIX. PLAN SHARES PURCHASES.
Purchases of outstanding shares may be made pursuant to and on behalf of
this Plan, upon such terms as the Corporation may approve, for delivery under
this Plan.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 1997 FORM 10-Q OF WEST TELESERVICES CORPORATIONS, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS CONTAINED THEREIN.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17882
<SECURITIES> 0
<RECEIVABLES> 78873
<ALLOWANCES> 302
<INVENTORY> 0
<CURRENT-ASSETS> 115595
<PP&E> 130320
<DEPRECIATION> 46989
<TOTAL-ASSETS> 250176
<CURRENT-LIABILITIES> 63423
<BONDS> 0
0
0
<COMMON> 633
<OTHER-SE> 178199
<TOTAL-LIABILITY-AND-EQUITY> 250176
<SALES> 98380
<TOTAL-REVENUES> 99082
<CGS> 55153
<TOTAL-COSTS> 84537
<OTHER-EXPENSES> 145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178
<INCOME-PRETAX> 14222
<INCOME-TAX> 5543
<INCOME-CONTINUING> 8679
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<NET-INCOME> 8679
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</TABLE>
