<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] 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 0-22317
-------
MELITA INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
GEORGIA 58-1378534
(State or other Jurisdiction of Incorporation (I.R.S. Employer Identification
or Organization) Number)
5051 PEACHTREE CORNERS CIRCLE
NORCROSS, GEORGIA 30092-2500
(770) 239-4330
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, as of the latest practicable date. Common stock, no par value,
outstanding as of November 1, 1998: 15,223,664 shares.
<PAGE> 2
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997. 3
Unaudited Consolidated Statements of Operations for the three months ended September 30, 4
1998 and 1997 and for the nine months ended September 30, 1998 and 1997.
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 5
1998 and 1997
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
MELITA INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,025 $ 6,845
Marketable securities 21,479 23,969
Accounts receivable, net of allowance for doubtful
accounts of $1,781 at September 30, 1998 and $876 at December 31, 1997 23,293 15,796
Inventories 2,166 2,461
Deferred taxes 3,822 2,035
Prepaid expenses and other 628 251
------- -------
Total current assets 62,413 51,357
Property and equipment, net of accumulated depreciation 6,548 4,939
Other assets 161 99
------- -------
$69,122 $56,395
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,254 $ 5,326
Accrued liabilities 12,090 7,763
Deferred revenue 5,375 4,029
Customer deposits 458 1,988
------- -------
Total current liabilities 23,177 19,106
Stockholders' Equity
Common Stock, no par value, 100,000,000 shares authorized
15,216,314 issued and outstanding at September 30, 1998 and 15,168,395 issued
and outstanding at December 31, 1997 69 69
Additional paid-in capital 36,306 36,046
Accumulated other comprehensive income 78 30
Retained earnings 9,492 1,144
------- -------
Total stockholders' equity 45,945 37,289
------- -------
Total liabilities and stockholders' equity $69,122 $56,395
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 4
MELITA INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Product $ 17,639 $ 11,728 $ 48,471 $ 32,707
Service 6,613 5,200 18,357 14,420
-------- -------- -------- --------
Total revenues 24,252 16,928 66,828 47,127
Cost of revenues:
Product 5,557 3,812 15,480 11,213
Service 3,460 2,628 9,373 6,992
-------- -------- -------- --------
Total cost of revenues 9,017 6,440 24,853 18,205
-------- -------- -------- --------
Gross margin 15,235 10,488 41,975 28,922
Operating expenses:
Research and development 2,612 1,793 7,422 4,818
Selling, general and administrative 8,213 5,732 22,442 16,097
-------- -------- -------- --------
Total operating expenses 10,825 7,525 29,864 20,915
-------- -------- -------- --------
Income from operations 4,410 2,963 12,111 8,007
Other income (expense), net 386 396 936 336
-------- -------- -------- --------
Income before income taxes 4,796 3,359 13,047 8,343
Income tax provision 1,725 1,276 4,696 1,685
Deferred tax adjustment 0 0 0 (1,473)
-------- -------- -------- --------
Net income after income tax $ 3,071 $ 2,083 $ 8,351 $ 8,131
======== ======== ======== ========
Income before income taxes 8,343
Pro forma income tax provision (Note 6) 3,170
--------
Pro forma net income $ 5,173
========
Earnings per share
Basic $ 0.20 $ 0.14 $ 0.55 $ 0.61
======== ======== ======== ========
Diluted $ 0.19 $ 0.13 $ 0.52 $ 0.59
======== ======== ======== ========
Weighted average common and common
equivalent shares
Basic 15,198 15,281 15,179 13,346
Diluted 15,957 16,016 16,022 13,856
Pro forma earnings per share
Basic $ 0.39
========
Diluted $ 0.37
========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
MELITA INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,351 $ 8,131
Adjustments to reconcile net income to net cash provided
by(used in) operating activities:
Depreciation and amortization 1,413 964
Changes in assets and liabilities:
Accounts receivable, net (7,498) (1,345)
Inventories 295 886
Prepaid expenses and other assets (377) (713)
Accounts payable (72) 1,232
Accrued liabilities 4,325 2,860
Deferred revenue 1,346 1,154
Customer deposits (1,530) (2,368)
Deferred taxes (1,787) (1,473)
Other, net (60) (116)
-------- --------
Total adjustments (3,945) 1,081
-------- --------
Net cash provided by operating activities 4,406 9,212
Cash flows from investing activities:
Purchases of property and equipment (3,022) (2,777)
Purchase of marketable securities 2,536 (23,726)
-------- --------
Net cash (used in) investing activities (486) (26,503)
Cash flows from financing activities:
Repayment of capital lease obligations -- (19)
Net proceeds from issuance of common stock 260 36,046
Repayment of note payable to stockholder -- (15,525)
Distributions to stockholders (7,253)
-------- --------
Net cash provided by financing activities 260 13,249
Net change in cash and cash equivalents 4,180 (4,042)
Cash and cash equivalents, beginning of period 6,845 9,849
-------- --------
Cash and cash equivalents, end of period 11,025 5,807
Marketable securities 21,479 23,735
-------- --------
Cash, cash equivalents and marketable securities $ 32,504 $ 29,542
======== ========
Supplemental Disclosures of Cash Flow Information:
Income taxes paid $ 2,990 $ 1,819
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
MELITA INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
1. Basis of Presentation
The unaudited consolidated financial statements presented herein have been
prepared in accordance with generally accepted accounting principles applicable
to interim financial statements. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company's management, these
consolidated financial statements contain all adjustments (which comprise only
normal and recurring accruals) necessary to present fairly the financial
position as of September 30, 1998, the results of operations and changes in cash
flows for the nine months ended September 30, 1998 and 1997. The interim results
for the three months and nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year. These
statements should be read in conjunction with the Company's combined financial
statements for the fiscal year ended December 31, 1997, as filed in its annual
report on form 10-K.
2. Principles of Consolidation
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.
3. Completion of Initial Public Offering and Combination
On June 4, 1997, the Company completed its initial public offering ("IPO") of
common stock. The Company sold 4,025 shares of common stock, including the
underwriters' over-allotment of 525 shares, for $40,250 less issuance costs of
$4,148. Concurrently with the IPO, the Company issued 3,143 shares in connection
with the combination of Melita International, Melita Europe Limited and
Inventions, Inc.
4. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or market
and consist of the following at:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Raw Materials $1,405 $1,251
Work in process 124 457
Finished goods 637 753
------ ------
Total inventories $2,166 $2,461
====== ======
</TABLE>
5. Earnings Per Share
Earnings per share are computed using the weighted-average number of common
stock and diluted common stock equivalents ("CSE") shares from stock options
(using the treasury stock method) outstanding during each period. Also included
for the three months and nine months ended September 30, 1997 are (1) common
stock and CSE's issued at a price below the initial public offering price during
the 12 month period prior to June 4, 1997, and (2) CSE's in an amount necessary
to pay the stockholder distributions.
6
<PAGE> 7
6. Income Taxes
In connection with the IPO the Company converted from an "S" corporation to a
"C" corporation and, accordingly, is subject to federal and state income taxes.
Upon the conversion, the Company recognized a one-time benefit by recording the
asset related to the future reduction of income tax payments due to timing
differences between the recognition of income for financial statements and
income tax regulations. Pro forma income tax provisions reflect the Company's
anticipated effective annual tax rate of 38.0% for 1997.
7. Earnings Per Share
During the first quarter of 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS No. 128"). This standard is effective for fiscal years ending
after December 15, 1997. The prior years' earnings per share have been
retroactively restated in accordance with this statement.
<TABLE>
<CAPTION>
For the nine months
ended
September 30,
1997
----
<S> <C>
Net income after income tax $ 8,131
=======
Pro forma net income $ 5,173
=======
Weighted average shares outstanding
Basic weighted average shares outstanding 13,346
Weighted average common equivalent shares 510
-------
Diluted weighted average shares outstanding 13,856
=======
Earnings Per Share
Basic earnings per share $ 0.61
Diluted earnings per share $ 0.59
Pro forma basic earnings per share $ 0.39
Pro forma diluted earnings per share $ 0.37
</TABLE>
8. Revenue Recognition
In October, 1997 the American Institute of Certified Public Accountants issued
Statement Of Position 97-2, Software Revenue Recognition ("SOP 97-2"). The
Company adopted SOP 97-2 in the first quarter of 1998. The Company believes that
its revenue recognition practices are consistent with those required by SOP
97-2.
7
<PAGE> 8
9. Other Comprehensive Income
In June, 1997 the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for the disclosure of all components of
comprehensive income. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. The Company adopted SFAS No. 130 in 1998.
The changes in the components of other comprehensive income are reported as
follows (in thousands):
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income as reported $3,071 $2,083 $8,351 $8,131
====== ====== ====== ======
Pro forma net income as reported $5,173
Other comprehensive income:
Foreign currency translation $ (3) $ (75) $ 17 $ (67)
Unrealized gains on securities, net 19 -- 61 --
------ ------ ------ ------
Other comprehensive income $ 16 $ (75) $ 78 $ (67)
====== ====== ====== ======
</TABLE>
10. Recently Issued Accounting Standards
In June, 1997 the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 requires certain financial and
supplementary information to be disclosed on an annual and interim basis for
each reportable segment of an enterprise. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997 and is not required in interim financial
statements in the initial year of application. The impact of adoption upon the
financial statements is expected to be immaterial.
In June, 1998 the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 requires that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is required for fiscal years beginning
after June 15, 1999. The Company has not determined the method or timing of its
adoption of SFAS No. 133, but at this time the impact of adoption on the
financial statements would be immaterial.
8
<PAGE> 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months and Nine Months Ended September 30, 1998 and 1997
Total revenues of $24.3 million in the third quarter of 1998 increased 43.3% as
compared to the corresponding period in 1997. Total revenues increased to $66.8
million in the first nine months of 1998, representing growth of 41.8%, as
compared to $47.1 million in the corresponding period of 1997. Product revenue
increased $5.9 million or 50.4% to $17.6 million for the third quarter of 1998
and increased $15.8 million or 48.2% for the first nine months of 1998, as
compared to the corresponding periods in 1997. Service revenue increased $1.4
million or 27.2% to $6.6 million in the third quarter and increased $3.9 million
or 27.3% to $18.4 million for the first nine months of 1998, as compared to the
corresponding periods in 1997. The increase in product revenues during the third
quarter of 1998 was due to increased demand for the Company's products and
increased marketing and sales efforts. The growth in service revenues during the
third quarter of 1998 was due to the continued expansion of the Company's
installed customer base and the increased volume of installations during the
period.
Cost of product revenue, as a percentage of product revenue, decreased to 31.5%
of revenue or $5.6 million, for the third quarter of 1998 and to 31.9% of
revenue or $15.5 million, for the first nine months of 1998, as compared to
32.5% of revenue or $3.8 million, and 34.3% of revenue or $11.2 million, for the
corresponding periods in 1997. Cost of product as a percentage of product
revenue decreased during the third quarter of 1998 and the first nine months of
1998, principally due to continuing cost reduction efforts through product
engineering and an increase in the volume of shipments as compared to fixed
costs. Cost of service revenue as a percentage of service revenue increased to
52.3% or $3.5 million, for the third quarter and increased to 51.1%, or $9.4
million for the first nine months of 1998, as compared to 50.5%, or $2.6
million, and 48.5%, or $7.0 million, for the corresponding periods in 1997. The
increase in service costs as a percentage of revenue was due to an increase in
total support service personnel and increases in compensation.
Research and development cost was $2.6 million in the third quarter of fiscal
1998 and $7.4 million in the first nine months of 1998, an $819,000 and $2.6
million increase over the respective periods of 1997. The overall cost increase
during these periods resulted primarily from the addition of developers to
support the Company's new product development efforts and the subcontracting of
certain development efforts during 1998.
Selling, general and administrative expenses were $8.2 million for the third
quarter of 1998 and $22.4 million for the first nine months of 1998, a $2.5
million and $6.3 million increase over the comparable 1997 periods. These
increases were the result of an increase in sales commissions corresponding to
the increase in revenues, the additional staff required to support the larger
sales levels in 1998, and an increase in marketing activities. Selling, general
and administrative expenses remained constant as a percentage of revenue at
33.9% for the third quarter of fiscal 1998 and decreased to 33.6% for the first
nine months of 1998 as compared to 33.9% and 34.2% for the corresponding periods
in 1997.
Income from operations was $4.4 million in the third quarter of 1998,
representing a 48.8% increase over income from operations of $3.0 million in the
third quarter of 1997. Income from operations was $12.1 million in the first
nine months of 1998, representing a 51.3% increase over income from operations
of $8.0 million in the corresponding period of 1997. These increases were the
result of the foregoing factors.
Other income (expense), net was a net income of $386,000 in the third quarter of
1998 compared to net income of $396,000 in the third quarter of 1997. Other
income (expense), net was a net income of $936,000 in the first nine months of
1998 compared to net income of $336,000 in the first nine months of 1997. The
decrease in other income for the third quarter is a result of lower average
short term investment balances during the quarter, while the increase for the
nine month period reflects the earnings from the higher average cash and short
term investment balances in 1998 as compared to the corresponding periods in
1997.
Income tax provisions have been recorded for the period subsequent to the IPO.
The Company prior to the IPO was not subject to federal or state income taxes.
As a result of its election to be treated as an "S" Corporation for income tax
purposes prior to the IPO, pro forma net income amounts include additional
provisions for income taxes determined by applying the Company's anticipated
statutory tax rate to income before income taxes, adjusted for permanent tax
differences. The Company's "S" Corporation status was terminated in conjunction
with the completion of its initial public offering in June 1997. Upon the
termination of its "S" Corporation election, the Company recorded certain
deferred tax assets in the amount of $1.5 million.
9
<PAGE> 10
The Company's effective income tax rate was 36.0% in the third quarter
and the first nine months of 1998 compared to 38.0% in the corresponding periods
of 1997, primarily due to the impact on operations of tax planning activities.
Net income increased to $3.1 million in the third quarter and $8.4 million for
the first nine months of 1998 from $2.1 million in the third quarter and $5.2
million pro forma net income for the first nine months of 1997, as a result of
the operational, other income and tax factors described above.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had $32.5 million in cash, cash
equivalents and marketable securities, compared to $30.8 million as of December
31, 1997. The Company's working capital was $39.2 million for the period ending
September 30, 1998 as compared to $32.3 million for period ending December 31,
1997. Operating activities provided $4.4 million during the first nine months of
fiscal 1998. Cash used in investing activities totaled $486,000 million during
the first nine months of fiscal 1998. Such investing activities consisted of
purchases of property and equipment and an increase in short term interest
bearing investments. The Company anticipates that existing cash and cash
equivalents will be adequate to meet its cash requirements for the next twelve
months.
IMPACT OF THE YEAR 2000 ISSUE
Introduction
Many currently installed computer systems and software products are
coded to accept only two digit entries in date code fields. Beginning in the
year 2000, many of these systems will need to be modified to accept four digit
entries or otherwise distinguish twenty-first century dates from twentieth
century dates. As a result, over the next year, computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements.
The Company's State of Readiness
The management of the Company has chartered a Year 2000 Committee (the
"Year 2000 Committee") and charged it with the task of evaluating the Company's
Year 2000 issue and recommending action that the Company should take to minimize
disruption from the Year 2000 issue. The Year 2000 Committee has developed a
comprehensive checklist (the "Plan") to address the Company's Year 2000
readiness with respect to both information technology ("IT") and non-IT systems.
The Plan covers all major and minor IT and non-IT systems potentially impacted
by the Year 2000.
Beginning in the second quarter of 1998, the Company initiated a
quarterly review of the status of resolution of any items in the Plan. By
December 31, 1998 the Committee will recommend any actions to the Company's
management necessary to ensure that the Year 2000 event does not materially
impact business operations.
The latest versions of the Company's products are designed to be Year
2000 compliant. The Company is in the process of determining the extent to which
its earlier software products as implemented in the Company's installed customer
base are Year 2000 compliant, as well as the impact of any non-compliance on the
Company and its customers.
To operate its business, the Company relies upon relationships with
third parties over which it can assert little control. The Year 2000 Committee
is in the process of assessing the risks associated with the failure of such
third parties to adequately address the Year 2000 issue. The Year 2000 Committee
is also assessing the risks associated with non-information technology systems
on which the Company's operations rely which may contain microcontrollers or
embedded systems technologies which are not Year 2000 compliant.
The Costs to Address the Company's Year 2000 Issues
The Company estimates that the cost to address the Company's Year 2000
issues will not have a material impact on operations.
The Risks of the Company's Year 2000 Issues
The Company does not currently believe that the effects of any Year 2000
non-compliance in the Company's installed base of software will result in a
material adverse effect on the Company's business, financial condition or
results of operations. However, the Company's investigation is in its
preliminary stages, and no assurance can be given that the Company will not be
exposed to potential claims resulting from system problems associated with the
century change. There can also be no assurance that the Company's software
products that are designed to be Year 2000 compliant contain all necessary date
code changes. In addition, Year 2000 non-compliance in the Company's internal
information technology systems, certain non-information technology systems on
which its
11
<PAGE> 12
operations rely or by the Company's business partners may have an adverse impact
on the Company's business, financial condition or results of operations.
The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant recourses to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. Potential customers may also choose to defer purchasing Year
2000 compliant products until they believe it is absolutely necessary, thus
potentially resulting in stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current software needs and as a result switch to other systems
or suppliers. Any of the foregoing could result in a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's Contingency Plans
The Company is prepared to develop contingency plans for business
functions that are susceptible to a substantive risk of disruption resulting
from a Year 2000 related event. However, the Company has not yet identified any
business function that is materially at risk of Year 2000 related disruption,
and thus has not yet developed detailed contingency plans specific to Year 2000
events for any business function. The Company is prepared for the possibility,
however, that certain business functions may be hereafter identified as at risk.
The Company will develop contingency plans for such business functions as and if
such determinations are made.
FORWARD LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including but not limited to statements related to plans for future business
development activities, anticipated costs of revenues, product mix and service
revenues, research and development and selling, general and administrative
activities, and liquidity and capital needs and resources. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Investors are cautioned that any
forward looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those contemplated by such forward looking statements.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 Statement re Computation of per share earnings.
Exhibit 27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
Form 8-K filed July 6, 1998
Form 8-K filed July 31, 1998
13
<PAGE> 14
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 hereunto duly authorized.
MELITA INTERNATIONAL CORPORATION
Date: November 13, 1998 By: /s/ Aleksander Szlam
--------------------
Aleksander Szlam
Chairman and Chief Executive Officer
Date: November 13, 1998 By: /s/ Dan K. Lowring
--------------------
Dan K. Lowring
Vice President, Administration and
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 11
MELITA INTERNATIONAL CORPORATION
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1998 1997
---- ----
<S> <C> <C>
DILUTED
Weighted average common stock outstanding 15,179 8,000
Effect of the combination(1) -- 3,143
Effect of issuance of shares in IPO -- 1,709
Dilutive effect of common stock equivalents 843 510
Cheap stock adjustment(2) -- 100
Effect of shareholder distribution(3) -- 394
------ ------
Weighted average common and common equivalent shares 16,022 13,856
====== ======
Net income after income tax 8,351 8,131
Earnings per share .52 .59
====== ======
Pro forma net income 5,173
Pro forma earnings per share .37
======
</TABLE>
(1) Reflects pro forma issuance of 3,143 shares of Common Stock in
connection with the combination of Melita International Corporation,
Melita Europe Limited and Inventions, Inc.
(2) Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and common stock equivalents issued at
prices below the assumed initial public offering price per share
("cheap stock") during the twelve months immediately preceding the
initial filing date of the Company's Registration Statement for its
public offering have been included as outstanding for all periods
presented.
(3) Pursuant to Staff Accounting Bulletin 1B.3, pro forma earnings per
share gives effect to the issuance by the Company of the numbers of
shares that, of the assumed public offering price, would yield proceeds
in the amount necessary to pay the shareholder distribution that is not
covered by the earnings during the period.
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,025
<SECURITIES> 21,479
<RECEIVABLES> 25,074
<ALLOWANCES> 1,781
<INVENTORY> 2,166
<CURRENT-ASSETS> 62,413
<PP&E> 13,696
<DEPRECIATION> 7,148
<TOTAL-ASSETS> 69,122
<CURRENT-LIABILITIES> 23,177
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 45,876
<TOTAL-LIABILITY-AND-EQUITY> 69,122
<SALES> 66,828
<TOTAL-REVENUES> 66,828
<CGS> 24,853
<TOTAL-COSTS> 24,853
<OTHER-EXPENSES> 29,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,047
<INCOME-TAX> 4,696
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,351
<EPS-PRIMARY> .55
<EPS-DILUTED> .52
</TABLE>
