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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): October 2, 1998 (September
18, 1998)
XETA Corporation
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 0-16231 73-1130045
--------------------------- ---------- ------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
4500 S. Garnett, Suite 1000, Tulsa, Oklahoma 74146
-------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918-664-8200
Not Applicable
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(Former name or address, if changed since last report.)
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This Current Report on Form 8-K/A1 amends the Current Report on Form 8-K filed
by XETA Corporation on October 2, 1998 solely to add the pro forma financial
information required by Item 7(b).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information.
The following pro forma financial information is set forth in the
pages that follow:
<TABLE>
<S> <C>
Description of Pro Forma Information 3
Pro Forma Condensed Balance Sheet at July 31, 1998 4
Note to Pro Forma Condensed Balance Sheet 5
Pro Forma Condensed Statement of Operations for the Year Ending
October 31, 1997 6
Pro Forma Condensed Statement of Operations for the Nine Months
Ending July 31, 1998 7
Note to Pro Forma Condensed Statement of Operations 8
</TABLE>
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XETA CORPORATION
DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed balance sheet at July 31, 1998, and
the unaudited pro forma condensed statements of operations for the nine months
ending July 31, 1998, and for the fiscal year ending October 31, 1997, reflect
the pro forma financial position and results of operations, respectively of XETA
Corporation (the "Company") after giving effect to the acquisition of certain
contract rights and inventory from Williams Communications Solutions, LLC
("WCS"). The acquisition included substantially all of the service rights and
spare parts inventory related to WCS' service base of Hitachi(R) HCX and DX
switches and Centigram voice mail systems connected to those switches.
The unaudited pro forma condensed statements of operations are not necessarily
indicative either of the results of operations that would have occurred had the
transaction been effected at the beginning of the periods being presented or of
future results of operations.
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XETA CORPORATION
CONSOLIDATED BALANCE SHEETS
JULY 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Pro Forma
--------------------------------
Historical Adjustments Total
---------- ----------- -----
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,214,986 $ (2,161,712)(a) $ 3,053,274
Current portion of net investment in
sales-type leases 1,741,056 -- 1,741,056
Other receivables, net 2,644,185 -- 2,644,185
Inventories, net 2,338,329 580,500 (a) 2,918,829
Deferred tax asset, net 467,483 -- 467,483
Prepaid expenses and other assets 84,496 -- 84,496
------------ ------------ ------------
Total current assets 12,490,535 (1,581,212) 10,909,323
------------ ------------ ------------
Noncurrent Assets:
Net investment in sales-type leases,
less current portion above 1,185,991 -- 1,185,991
Purchased long distance contracts, net 785,310 -- 785,310
Purchased service contracts, net 1,694,500 (a) 1,694,500
Property, plant & equipment, net 1,921,518 -- 1,921,518
Capitalized software production costs, net of
accumulated amortization of $423,066 at July 31,
1998 and $333,066 at October 31, 1997 626,586 -- 626,586
Other assets 78,174 -- 78,174
------------ ------------ ------------
Total noncurrent assets 4,597,579 1,694,500 6,292,079
------------ ------------ ------------
Total assets $ 17,088,114 $ 113,288 $ 17,201,402
============ ============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,171,379 $ -- $ 1,171,379
Unearned revenue 3,170,267 113,288 (a) 3,283,555
Accrued liabilities 768,240 -- 768,240
Accrued federal and state income taxes 132,522 -- 132,522
------------ ------------ ------------
Total current liabilities 5,242,408 113,288 5,355,696
------------ ------------ ------------
Unearned service revenue 662,714 -- 662,714
------------ ------------ ------------
Noncurrent deferred tax liability, net 504,060 -- 504,060
------------ ------------ ------------
Commitments
Shareholders' equity:
Common stock; $.10 par value; 10,000,000
shares authorized, 2,286,284 and 2,207,285
issued at July 31, 1998 and October
31, 1997, respectively 228,628 -- 228,628
Paid-in capital 5,135,818 -- 5,135,818
Retained earnings 6,796,039 -- 6,796,039
------------ ------------ ------------
12,160,485 12,160,485
Less treasury stock, at cost (1,481,553) -- (1,481,553)
------------ ------------ ------------
Total shareholders' equity 10,678,932 -- 10,678,932
------------ ------------ ------------
Total liabilities & shareholders' equity $ 17,088,114 $ 113,288 $ 17,201,402
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
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XETA CORPORATION
NOTE TO PRO FORMA CONDENSED BALANCE SHEET
JULY 31, 1998
The historical consolidated statements reflect the unaudited balances of XETA
Corporation and its dormant subsidiary at July 31, 1998.
The pro forma condensed balance sheet assumes the disposition occurred at the
end of the period. The pro forma adjustments are as follows:
(a) To record the cash used for the acquisition of the service
contracts and spare parts inventory. Netted from the cash paid and
recorded as deferred revenue was $113,288 representing customer
service fees that were prepaid to WCS for services to be provided
by the Company.
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XETA CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ending October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
------------------------------
Historical Adjustments Total
---------- ----------- -----
<S> <C> <C> <C>
Installation & service $ 9,355,360 $ 2,294,798 (a) $ 11,650,158
Sales of systems 9,405,120 -- 9,405,120
------------ ------------ ------------
Total service and sales revenues 18,760,480 2,294,798 21,055,278
------------ ------------ ------------
Installation & service costs (5,884,096) (1,440,300)(b) (7,324,396)
Cost of systems (6,074,116) -- (6,074,116)
------------ ------------ ------------
Total cost of service and sales (11,958,212) (1,440,300) (13,398,512)
------------ ------------ ------------
Gross profit 6,802,268 854,498 7,656,766
------------ ------------ ------------
Operating expenses
Selling, general & administrative 3,629,250 138,997 (c) 3,768,247
Engineering, research and development,
and amortization of capitalized
software production costs 509,777 -- 509,777
Amortization of service contracts -- 1,694,500 (d) 1,694,500
------------ ------------ ------------
Total operating expenses 4,139,027 1,833,497 5,972,524
------------ ------------ ------------
Income from operations 2,663,241 (978,999) 1,684,242
------------ ------------ ------------
Interest & other income 667,069 -- 667,069
------------ ------------ ------------
Income/(loss) before taxes 3,330,310 (978,999) 2,351,311
(Provision)/benefit for income taxes (1,190,000) 359,000 (e) (831,000)
------------ ------------ ------------
Net income/(loss) $ 2,140,310 $ (619,999) $ 1,520,311
============ ============ ============
Earnings per share:
Basic $ 1.07 $ 0.76
Diluted $ 0.90 $ 0.64
Weighted average shares outstanding 2,006,255 2,006,255
Weighted average shares-diluted 2,365,244 2,365,244
</TABLE>
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XETA CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ending July 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
-----------------------------
Historical Adjustments Total
---------- ----------- -----
<S> <C> <C> <C>
Installation & service $ 9,564,188 $ 1,798,492 (a) $ 11,362,680
Sales of systems 8,475,713 -- 8,475,713
Long distance services 759,508 -- 759,508
------------ ------------ ------------
Total service and sales revenues 18,799,409 1,798,492 20,597,901
------------ ------------ ------------
Installation & service costs (5,986,941) (1,125,691) (b) (7,112,632)
Cost of systems (5,766,507) -- (5,766,507)
Cost of long distance services (315,024) -- (315,024)
------------ ------------ ------------
Total cost of service and sales (12,068,472) (1,125,691) (13,194,163)
------------ ------------ ------------
Gross profit 6,730,937 672,801 7,403,738
------------ ------------ ------------
Operating expenses
Selling, general & administrative 3,233,424 195,326 (c) 3,428,750
Engineering, research and development,
and amortization of capitalized
software production costs 376,885 -- 376,885
Amortization of service contracts -- -- (d) --
------------ ------------ ------------
Total operating expenses 3,610,309 195,326 3,805,635
------------ ------------ ------------
Income from operations 3,120,628 477,475 3,598,103
------------ ------------ ------------
Interest & other income 505,206 -- 505,206
------------ ------------ ------------
Income before taxes 3,625,834 477,475 4,103,309
Provision for income taxes (1,346,000) (175,000) (e) (1,521,000)
------------ ------------ ------------
Net income $ 2,279,834 $ 302,475 $ 2,582,309
============ ============ ============
Earnings per share:
Basic $ 1.12 $ 1.27
Diluted $ 0.96 $ 1.09
Weighted average shares outstanding 2,030,898 2,030,898
Weighted average shares-diluted 2,369,203 2,369,203
</TABLE>
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XETA CORPORATION
NOTE TO PRO FORMA CONDENSED OPERATING STATEMENTS
The historical consolidated statements reflect the unaudited results of
operations of the Company and its dormant subsidiary for the fiscal year ending
October 31, 1997 and for the nine months ending July 31, 1998.
The pro forma condensed statements of operations assume the acquisition occurred
at the beginning of the periods being presented. The pro forma adjustments are
as follows:
(a) To record the revenues earned by WCS from services provided to its
base of customers with Hitachi(R) switches.
(b) To record cost of goods sold on the additional revenues. These
costs are computed based on the cost structure of the Company for
the periods presented. The Company believes that this presentation
properly reflects the nature of the transaction in that the
purchased contracts will be placed into the Company's existing
service business.
(c) To record additional selling and administrative costs, including
commissions and bonuses, assumed to be incurred to earn the
revenues presented in each period.
(d) To record the amortization of the purchase price of the service
contracts. Of the total purchase price, $1,694,000 was allocated to
the service contracts. This amount is subject to adjustment. The
amortization amounts shown generally reflect the average remaining
contractual life of the underlying contracts, which the Company has
determined to be approximately one year. While some of the
contracts purchased by the Company have expiration dates extending
significantly beyond one year, management believes that the nature
of the industry is such that it must earn each customer's business
within one year of the acquisition or face the probable
cancellation of that service contract.
(e) To record (provision)/benefit for federal and state income taxes.
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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.
XETA Corporation
(Registrant)
Dated: December 3, 1998 By: /s/ ROBERT B. WAGNER
---------------------------------
Robert B. Wagner
Vice President-Finance
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