<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 June 30, 1999
[ ] 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)
<TABLE>
<S> <C>
GEORGIA 58-1378534
(State or other Jurisdiction of Incorporation (I.R.S. Employer Identification
or Organization) Number)
</TABLE>
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 Aug 9, 1999: 15,684,055 shares.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
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<CAPTION>
Page
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Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998. 3
Unaudited Consolidated Statements of Operations for the three months and six months 4
ended June 30, 1999 and 1998.
Unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 5
1999 and 1998.
Notes to Consolidated Financial Statements (Unaudited). 6
Item 2. Management's Discussion and Analysis of Financial Condition and 9
Results of Operations.
Item 3. Quantitative and Qualitative Disclaimers About Market Risk. 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits 13
Signatures 14
</TABLE>
2
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MELITA INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $26,676 $30,440
Accounts receivable, net of allowance for doubtful
accounts of $3,103 at June 30, 1999 and $2,450 at December 31, 1998 40,233 32,287
Inventories 926 1,260
Deferred taxes 3,731 3,731
Prepaid expenses and other 350 403
------- -------
Total current assets 71,916 68,121
Property and equipment, net of accumulated depreciation 8,130 7,008
Other assets 159 179
Intangible Assets, Net 4,232 --
------- -------
$84,437 $75,308
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,355 $ 6,624
Accrued liabilities 13,136 11,835
Deferred revenue 7,397 5,965
Customer deposits 827 815
------- -------
Total current liabilities 26,715 25,239
Stockholders' Equity Common Stock, no par value, 100,000,000
shares authorized 15,670,429 outstanding at June 30, 1999
and 15,270,738 issued and
outstanding at December 31, 1998 69 69
Additional paid-in capital
38,692 37,075
Accumulated other comprehensive income
72 96
Retained earnings
18,889 12,829
------- -------
Total stockholders' equity 57,722 50,069
------- -------
Total liabilities and stockholders' equity $84,437 $75,308
======= =======
</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 six months ended
June 30, June 30,
1999 1998 1999 1998
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net revenues:
Product $16,876 $16,012 $36,704 $30,832
Service 8,141 6,192 15,857 11,744
------- ------- ------- -------
Total revenues 25,017 22,204 52,561 42,576
Cost of revenues:
Product 5,259 5,164 11,398 9,924
Service 4,149 3,125 8,161 5,912
------- ------- ------- -------
Total cost of revenues 9,408 8,289 19,559 15,836
------- ------- ------- -------
Gross margin 15,609 13,915 33,002 26,740
Operating expenses:
Research and development 2,917 2,515 5,967 4,810
Selling, general and
administrative 9,006 7,407 18,118 14,229
------- ------- ------- -------
Total operating expenses 11,923 9,922 24,085 19,039
------- ------- ------- -------
Income from operations 3,686 3,993 8,917 7,701
Other income (expense), net 261 277 551 550
------- ------- ------- -------
Income before income taxes 3,947 4,270 9,468 8,251
Income tax provision 1,421 1,537 3,408 2,970
------- ------- ------- -------
Net income after income tax $ 2,526 $ 2,733 $ 6,060 $ 5,281
======= ======= ======= =======
Earnings per share
Basic $ 0.16 $ 0.18 $ 0.39 $ 0.35
======= ======= ======= =======
Diluted $ 0.16 $ 0.17 $ 0.38 $ 0.33
======= ======= ======= =======
Weighted average common and common
equivalent shares
Basic 15,653 15,170 15,577 15,169
Diluted 16,088 16,085 16,145 16,040
</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 six months ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,060 $ 5,281
Adjustments to reconcile net income to net cash provided
by(used in) operating activities:
Depreciation and amortization 1,214 839
Changes in assets and liabilities:
Accounts receivable, net (7,740) (8,031)
Inventories 446 49
Prepaid expenses and other assets 53 (398)
Accounts payable (1,269) (805)
Accrued liabilities 1,301 2,773
Deferred revenue 1,432 737
Customer deposits 12 (148)
Deferred Taxes -- (1,787)
Other, net (4) (51)
--------- ---------
Total adjustments (4,555) (6,823)
--------- ---------
Net cash provided by operating activities 1,505 (1,542)
Cash flows from investing activities:
Purchased business, net of cash (4,605)
Purchases of property and equipment (2,281) (2,012)
Purchase of marketable securities 5,640 2,747
--------- ---------
Net cash (used in) investing activities (1,246) 735
Cash flows from financing activities:
Repayment of capital lease obligations -- --
Net proceeds from issuance of common stock 1,617 15
Repayment of note payable to stockholder -- --
Distributions to stockholders -- --
--------- ---------
Net cash provided by financing activities 1,617 15
Net change in cash and cash equivalents 1,876 (792)
Cash and cash equivalents, beginning of period 7,684 6,845
--------- ---------
Cash and cash equivalents, end of period 9,560 6,053
Marketable securities 17,116 21,249
--------- ---------
Cash, cash equivalents and marketable securities $ 26,676 $ 27,302
========= =========
Supplemental Disclosures of Cash Flow Information:
Income taxes paid $ 1,542 $ 2,990
========= =========
</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 June 30, 1999 and 1998. The interim results for the three months
and six months ended June 30, 1999 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, 1998, 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. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following at:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------ -----------------
<S> <C> <C>
Raw Materials $ 502 $ 143
Work in process 44 37
Finished goods 380 1,080
------ ------
Total inventories $ 926 $1,260
====== ======
</TABLE>
6
<PAGE> 7
4. 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.
The following table presents the components of diluted weighted average shares
outstanding.
<TABLE>
<CAPTION>
For the six months For the three months For the six months
ended June 30, 1999 ended June 30, 1999 ended June 30, 1998
------------------- ------------------- -------------------
<S> <C> <C> <C>
Weighted average shares outstanding
Basic weighted average shares outstanding 15,578 15,653 15,169
Weighted average common equivalent shares 567 435 871
-------- -------- ------
Diluted weighted average shares outstanding 16,145 16,088 16,040
======== ======== ======
</TABLE>
5. Revenue Recognition
The Company generates product revenues primarily from its principal product, an
integrated system comprised of both hardware and software. The Company's service
revenues are generated from maintenance contracts which include support, parts
and labor, and software update rights. Service revenues also include fee-based
installation, training, and consulting services.
The Company recognizes product revenues when a contract has been executed, the
product has been shipped and the Company has no significant obligations yet to
be satisfied. The Company's sales contracts provide for certain payment terms
normally based upon signing the contract, customer receipt of the product, and
commencement of operation of the customer's system.
Revenues from maintenance contracts are recognized ratably over the term of the
contractual support period which ranges up to 5 years. If maintenance is
included in the original integrated product contract, such amounts are unbundled
from the license fee based on the value established by independent sale of such
maintenance to customers. Consulting revenues are primarily related to
implementation services performed under separate service arrangements related to
the installation of the Company's hardware and software products. Revenues from
consulting, installation, and training services are recognized as the services
are performed.
Deferred revenues primarily relate to products that have not yet been delivered
and maintenance services which have been paid by the customers prior to the
performance of those services.
7
<PAGE> 8
6. Other Comprehensive Income
In June, 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 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 six months ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ----- ----
<S> <C> <C> <C> <C>
Net income as reported $ 2,526 $ 2,733 $ 6,060 $5,281
======= ======= ======= ======
Other comprehensive income:
Foreign currency translation $ (1) $ (1) $ (25) $ 20
Unrealized gains on securities, net 2 13 (48) 42
------- ------- ------- ------
Other comprehensive income $ 1 $ 12 $ (73) $ 62
======= ======= ======= ======
</TABLE>
7. Recently Issued Accounting Standards
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 does not believe that the adoption of this
standard will have a material impact on its financial position or results of
operations.
8. Acquisitions
On June 15, 1999, the Company purchased smallwonder! softworks, Inc. of
Leesburg, Virginia for $4.1 million in cash and a prospective earnout of up to
an additional $3 million, based on achievement of certain defined criteria.
8
<PAGE> 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Revenues
Product. Product revenues increased by 5.6% from $16.0 million in the
second quarter 1998 to $16.9 million in the same period 1999. The increase in
product revenues was due to continued strong demand for our PhoneFrame Explorer
product line, increased marketing and sales efforts, increased international
sales through the direct channel and increased sales through distribution
channels. Product revenues decreased 14.9% from $19.8 million in the first
quarter 1999 to $16.9 million in the second quarter 1999. This decrease is
primarily due to a combination of certain contracts that had been forecasted
for second quarter that did not close and a change in the product mix that
reflected a higher percentage of software-only sales.
Service. Service revenues increased by 30.6% from $6.2 million in the
second quarter 1998 to $8.1 million in the same quarter 1999. Service revenues
increased primarily due to an increase in the number of maintenance and support
agreements and, to a lesser degree, from revenues generated by the installation
of new systems, upgrades to existing systems, and consulting services. Revenues
generated from maintenance and support agreements increased 23.4% from $3.9
million in the second quarter 1998 to $4.9 million in the second quarter 1999.
Revenues generated from consulting services increased 65.1% from $.3 million in
the second quarter 1998 to $.5 million in the same period 1999.
Cost of Revenues
Product. The cost of product revenues includes the cost of material, the
cost of sublicensing third-party software, personnel-related costs for internal
product assembly and fees paid to third parties for outsourced product
assembly. Cost of product revenues increased from $5.2 million, or 32.5% of
related product revenues, in the second quarter 1998, to $5.3 million, or 31.4%
of related product revenues in the second quarter of 1999. The increase in
absolute dollars in the cost of product revenues was due to the increase in the
volume of shipments of our products. The decrease, as a percentage of product
revenues, was primarily due to product design improvements, reduced material
purchase costs, and an increase in software-only solutions that increased from
historic percentages resulting in a lower overall percentage of the hardware
content of systems shipped.
Service. The cost of service revenues primarily consists of
employee-related costs for customer support, consulting and field service
personnel and fees paid to third parties for installation services and post-
installation hardware maintenance services. Cost of service revenues increased
from $3.1 million, or 50.0% of related service revenues, in the second quarter
1998, to $4.1 million, or 50.6% of related services revenues, in the second
quarter of 1999. The increase in absolute dollars in the cost of service
revenues was primarily due to the increase in service personnel to support the
larger installed customer base and higher volume of installations. The increase
as a percentage of service revenues, was primarily due to increased
infrastructure spending for international operations and to support expansion
of domestic indirect distribution channels.
Operating Expenses
Engineering, research and development. Engineering, research and development
expenses primarily consist of employee-related costs for engineering personnel
involved with software, voice processing and CTI technology development and for
expendable equipment purchases. Also included are outside contractor costs for
future development projects. Engineering, research and development costs
increased from $2.5 million, or 11.3% of total revenues, in the second quarter
of 1998, to $2.9 million, or 11.6% of total revenues, in the second quarter of
1999. The increase in absolute dollars and percentage of total revenue resulted
primarily from the addition of developers and outside contractors to support our
new product development efforts, which were focused on continued enhancements to
PhoneFrame Explorer and ongoing development of future products. We intend to
continue to invest heavily in product development activities. As a result, we
expect that engineering, research and development costs will increase in
absolute dollars and may increase as a percentage of revenues in the future.
Selling, general and administrative. Selling, general and administrative
expenses consist primarily of employee-related costs for sales, marketing,
administrative, finance and human resources personnel. Also included are
marketing expenditures for trade shows, advertising and other promotional
expenditures. Selling, general and administrative costs increased from $7.4
million, or 33.3% of total revenues, in the second quarter of 1998, to $9
million, or 36.0% of total revenues, in the same period 1999. This increase in
9
<PAGE> 10
absolute dollars was primarily related to the expansion of our sales and
marketing resources and increased levels of marketing activities. General and
administrative expenses declined in absolute dollars and percentage from $2.3
million, or 10.5% of total revenues, in second quarter 1998, to $2.1 million,
or 8.2% of total revenues, for the same period 1999. We intend to continue to
expand our sales, marketing and sales support operations in 1999 while
encouraging continued operating efficiencies. As a result, we expect selling,
general and administrative costs will increase in absolute dollars and may
increase as a percentage of revenue in the future.
Other Income (Expense), Net
Other income (expense), net decreased from $277,000 in the second quarter
of 1998 to $261,000 in the second quarter of 1999. This income was primarily
due to interest income earned on our investments in marketable securities. This
income varies over time based on cash position and prevailing market rates.
FINANCIAL CONDITION
Total assets as of June 30, 1999, were $84.4 million, an increase of $9.1
million from December 31, 1998. The increase was primarily due to increases in
accounts receivable, other assets, and net property and equipment. Accounts
receivable increased $7.9 million primarily due to an increased proportion of
sales through distribution and international channels as well as a large
percentage of sales activity occurring late in the quarter. Historically, bad
debt write-offs have been less than 1% of total revenue. Intangible assets
increased by $4.2 million primarily due to purchase of smallwonder! softworks,
Inc. on June 15, 1999. The company also purchased equipment and software to
support the increased number of employees and purchases of equipment used for
development purposes.
Current liabilities as of June 30, 1999 were $26.7 million, an increase of
$1.5 million from December 31, 1998. The increase was primarily due to an
increase in accrued income taxes, employee related compensation, and deferred
revenue.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Company had $26.7 million in cash, cash equivalents
and marketable securities, compared to $30.4 million as of December 31, 1998.
The decrease in cash is primarily due to the cash purchase of smallwonder!
softworks, Inc. and the increase in accounts receivable. The Company's working
capital was $45.2 million for the period ending June 30, 1999 as compared to
$42.9 million for period ending December 31, 1998. 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
YEAR 2000 READINESS
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 may not operate properly unless they are modified
to accept four digit entries or otherwise distinguish twenty-first century
dates from twentieth century dates. As a result, over the remainder of the
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
Our management has chartered a Year 2000 Committee and charged it with the
task of evaluating our Year 2000 readiness and recommending action that we
should take to minimize disruption from the Year 2000 issue. The Year 2000
Committee has developed a comprehensive checklist, or Year 2000 Plan, to
address our Year 2000 readiness with respect to both IT and non-IT systems. The
Year 2000 Plan covers all major and minor IT and non-IT systems potentially
impacted by the Year 2000. Beginning in the second quarter of 1998, we
initiated a quarterly review of the status of resolution of any items in the
Year 2000 Plan.
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The latest versions of our products are designed to be Year 2000 compliant.
As we continue to evaluate system components, including elements of the system
furnished by third parties, we will keep our customers advised of any system
changes which need to be made and will make available such modifications to
these customers. We have determined the extent to which our earlier software
products as implemented in our installed customer base are Year 2000 compliant,
as well as the impact of any non-compliance on us and our customers, and have
developed a program for addressing this with these customers.
To operate our business, we rely upon relationships with third parties over
which we can assert little control. The Year 2000 Committee has determined
which third party components require upgrade and is working to distribute those
changes to customers who require it. The Year 2000 Committee is also assessing
the risks associated with non-IT systems on which our operations rely that may
contain microcontrollers or embedded systems technologies that are not Year
2000 compliant.
The Costs to Address Our Year 2000 Issues
We estimate that the cost to address our Year 2000 issues will not have a
material impact on operations.
The Risks of Our Year 2000 Issues
We do not currently believe that the effects of any Year 2000
non-compliance in our installed base of software will materially adversely
affect our business, financial condition and results of operations. However, no
assurance can be given that we will not be exposed to potential claims
resulting from system problems associated with the century change. There can
also be no assurance that our software products that are designed to be Year
2000 compliant contain all necessary date code changes. In addition, Year 2000
non-compliance in our internal IT systems and certain non-IT systems on which
our operations rely or non-compliance by our business partners could adversely
affect our business, financial condition and results of operations.
We believe 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 resources 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
us. 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 our current customers, to reevaluate their
current software needs and as a result switch to other systems or suppliers.
Any of the foregoing could adversely affect our business, financial condition
and results of operations.
Our Contingency Plans
We are preparing contingency plans for business functions that are
susceptible to a substantive risk of disruption resulting from a Year 2000
related event. However, we have not yet identified any business function that
is materially at risk of Year 2000 related disruption, and thus have not yet
developed detailed contingency plans specific to Year 2000 events for any
business function. We are prepared for the possibility, however, that certain
business functions may be hereafter identified as at risk. We 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLAIMERS ABOUT MARKET RISK.
FOREIGN EXCHANGE
During the three months ended June 30, 1999, total revenues for the
Company's international operations were approximately 37% of the Company's
total revenues for all operations.
The Company's international business is subject to risks typical of an
international business, including, but not limited to: differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility.
Accordingly, the Company's future results could be materially adversely
impacted by changes in these or other factors. The effect of foreign exchange
rate fluctuations on the Company during the second quarter of 1999 was not
material.
INTEREST RATES
The Company invests its cash in a variety of financial instruments,
including taxable and tax-advantaged variable rate and fixed rate obligations
of corporations, municipalities, and local, state and national governmental
entities and agencies. These investments are denominated in U.S. dollars. Cash
balances in foreign currencies overseas are operating balances.
Interest income on the Company's investments is carried in "Other
income, net" on our Consolidated Financial Statements. The Company accounts for
its investment instruments in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). All of the cash equivalents and short-term
investments are treated as available-for-sale under SFAS 115.
Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest
rates, while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, the Company's future
investment income may fall short of expectations due to changes in interest
rates, or the Company may suffer losses in principal if forced to sell
securities which have seen a decline in market value due to changes in interest
rates. The weighted-average interest rate on investment securities at June 30,
1999 was approximately 3.713% based on predominately tax free instruments. The
fair value of securities held at June 30, 1999 was $17.115 million.
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Many of the Company's installations involve products that are critical
to the operations of its clients' businesses. Any failure in a Company
product could result in a claim for substantial damages against the
Company, regardless of the Company's responsibility for such failure.
Although the Company attempts to limit contractually its liability for
damages arising from product failures or negligent acts or omissions, there
can be no assurance the limitations of liability set forth in its contracts
will be enforceable in all instances.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders (the "Annual Meeting") of the
Company was held on May 26, 1999. There were present at the Annual Meeting,
in person or by proxy, holders of 13,492,869 shares (or 89%) of the Common
Stock entitled to vote.
(b) The following directors were elected to hold office for a term as
designated below or until their successors are elected and qualified, with
the vote for each director being reflected below:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Aleksander Szlam 14,834,669 2,700
Donald L. House 14,835,569 1,800
Don W. Hubble 14,835,369 2,000
Andrew J. Filipowski 14,835,533 1,837
</TABLE>
The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock represented at the Annual Meeting was required to
elect each director.
(c) The appointment of Arthur Andersen LLP as independent public
accountants to audit the accounts of the Company and its subsidiaries for
the year ending December 31, 1999, was ratified with 14,833,433 affirmative
votes cast, 3,247 negative votes cast and 690 abstentions. The affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
represented at the annual meeting was required to ratify the appointment of
Arthur Andersen LLP.
Item 5. Other Information.
None
Item 6. Exhibits.
(a) Exhibit 27 Financial Data Schedule (for SEC use only).
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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 hereunto duly authorized.
MELITA INTERNATIONAL CORPORATION
Date: August 16, 1999 By: /s/ Aleksander Szlam
--------------------
Aleksander Szlam
Chairman and Chief Executive Officer
Date: August 16, 1999 By: /s/ Dan K. Lowring
---------------------
Dan K. Lowring
Vice President, Administration and
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 9,560
<SECURITIES> 17,116
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0
0
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</TABLE>
