<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
AUGUST 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-13616
InterVoice, Inc.
(Exact name of registrant as specified in its charter)
TEXAS 75-1927578
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17811 WATERVIEW PARKWAY DALLAS, TX 75252
(Address of principal executive offices)
214-454-8000
(Registrant's telephone number, including area code)
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
--- ---
The Registrant had 15,746,608 shares of common stock, no par value per
share, outstanding as of the close of the period covered by this report.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
InterVoice, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
August 31, February 28,
ASSETS 1995 1995
- ------------------------------------ ----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $14,227,394 $10,276,952
Accounts and notes receivable, net 22,738,866 18,222,080
Inventory 10,920,826 9,803,534
Prepaid expenses 611,191 516,091
Deferred taxes 1,168,076 1,168,076
----------- -----------
49,666,353 39,986,733
PROPERTY AND EQUIPMENT
Building 15,036,173 14,545,054
Computer equipment 6,860,761 5,379,320
Furniture, fixtures and other 4,753,080 4,300,907
Service equipment 2,065,221 1,903,632
----------- -----------
28,715,235 26,128,913
Less allowance for depreciation 8,008,390 6,465,385
----------- -----------
20,706,845 19,663,528
OTHER ASSETS
Other assets, net 3,047,231 3,068,304
----------- -----------
$73,420,429 $62,718,565
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 9,697,178 $ 9,538,117
Customer deposits 1,728,798 1,131,764
Deferred income 2,825,807 3,364,848
Income taxes payable 2,064,908 1,836,738
----------- -----------
16,316,691 15,871,467
STOCKHOLDERS' EQUITY
Preferred Stock, $100 par value--2,000,000
shares authorized: none issued
Common Stock, no par value, at nominal
assigned value--62,000,000 shares
authorized: 18,746,608 issued,
15,746,608 outstanding in 1996
and 18,381,503 issued,
15,381,503 outstanding in 1995 9,341 9,167
Additional paid-in capital 35,240,345 33,212,063
Treasury stock - at cost (24,003,245) (24,003,245)
Retained earnings 45,857,297 37,629,113
----------- -----------
57,103,738 46,847,098
----------- -----------
$73,420,429 $62,718,565
=========== ===========
</TABLE>
<PAGE> 3
InterVoice, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ---------------------------
August 31, August 31, August 31, August 31,
1995 1994 1995 1994
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $23,683,721 $18,005,943 $45,700,418 $34,610,680
Cost of goods sold 8,301,778 6,495,842 15,962,059 12,752,909
------------ ------------ ------------ ------------
Gross Margin 15,381,943 11,510,101 29,738,359 21,857,771
------------ ------------ ------------ ------------
Research and development expenses 2,319,179 1,714,115 4,549,300 3,419,462
Selling, general and administrative
expenses 6,741,678 5,380,286 12,878,816 9,888,541
Purchased research and development - - 10,541,918 - - 10,541,918
------------ ------------ ------------ ------------
Income (loss) from operations 6,321,086 (6,126,218) 12,310,243 (1,992,150)
Other income 147,798 23,229 251,870 249,752
------------ ------------ ------------ ------------
Income (loss) before income taxes 6,468,884 (6,102,989) 12,562,113 (1,742,398)
Income taxes 2,230,960 1,500,503 4,333,929 2,991,837
------------ ------------ ------------ ------------
Net income (loss) $4,237,924 ($7,603,492) $8,228,184 ($4,734,235)
============ ============ ============ ============
Earnings (loss) per common and
common equivalent share $. 26 ($.47) $.50 ($.28)
============ ============ ============ ============
Weighted average number of common
and common equivalent shares 16,441,611 16,138,004 16,321,278 16,961,333
============ ============ ============ ============
</TABLE>
<PAGE> 4
InterVoice, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------------- Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1995 15,381,503 9,167 $33,212,063 $37,629,113 ($24,003,245) $46,847,098
Exercise of stock options 365,105 174 2,028,282 - - - - $ 2,028,456
Net Income - - - - - - 8,228,184 - - $ 8,228,184
-----------------------------------------------------------------------------------------
Balance at August 31, 1995 15,746,608 9,341 $35,240,345 $45,857,297 ($24,003,245) $57,103,738
=========================================================================================
</TABLE>
<PAGE> 5
InterVoice, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- -------------------------------
August 31, August 31, August 31, August 31,
1995 1994 1995 1994
--------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $4,237,924 ($7,603,492) $8,228,184 ($4,734,235)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Purchased research and
development - - 10,541,918 - - 10,541,918
Depreciation and
amortization 1,160,251 755,533 2,159,238 1,377,339
Changes in operating assets
and liabilities: (5,852,422) (2,392,986) (5,523,065) 1,123,712
----------- ----------- ----------- -----------
NET CASH FROM OPERATIONS (454,247) 1,300,973 4,864,357 8,308,734
INVESTING ACTIVITIES
Acquisition of business, net
of cash acquired - - (7,042,191) - - (7,042,191)
Purchase of property
and equipment (911,988) (2,293,819) (2,431,022) (6,301,624)
Purchased software (523,396) - - (592,103) (12,833)
(Increase) decrease in notes
receivable 40,377 84,770 80,754 (80,754)
----------- ----------- ----------- -----------
(1,395,007) (9,251,240) (2,942,371) (13,437,402)
FINANCING ACTIVITIES
Purchase of Treasury Stock - - (24,003,245) - - (24,003,245)
Exercise of stock options 1,520,948 152,508 2,028,456 611,281
----------- ----------- ----------- -----------
1,520,948 (23,850,737) 2,028,456 (23,391,964)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (328,306) (31,801,004) 3,950,442 (28,520,632)
Cash and cash equivalents,
beginning of period 14,555,700 39,482,590 10,276,952 36,202,218
CASH AND CASH EQUIVALENTS,
END OF PERIOD $14,227,394 $ 7,681,586 $14,227,394 $ 7,681,586
=========== =========== =========== ===========
</TABLE>
<PAGE> 6
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Six months ended August 31, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information. The
Balance Sheet at February 28, 1995 has been derived from audited financial
statements at that date. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the unaudited August 31, 1995 and 1994 financial statements
have been included. Operating results for the six month period ended August 31,
1995 are not necessarily indicative of the results that may be expected for the
year ending February 29, 1996 as they may be affected by a number of factors,
including the timing and ultimate receipt of orders from significant customers
which continue to constitute a large portion of the Company's sales, the sales
channel mix of products sold, and changes in general economic conditions, any
of which could have an adverse effect on operations.
NOTE B -- EARNINGS PER SHARE
Earnings per share are computed based on the sum of the average outstanding
common shares and common equivalent shares. Common equivalent shares assume the
exercise of all dilutive stock options using the treasury stock method.
Primary and fully diluted earnings per share are not materially different for
the periods presented.
NOTE C -- CONTINGENCIES
The Company is subject to certain legal proceedings and claims that arise in
the ordinary course of its business. In the opinion of management, based on
discussions with and advice of legal counsel, the amount of ultimate liability
with respect to these actions will not materially affect the consolidated
results of operations or financial condition of the Company.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SALES. Sales in the second quarter and first six months of fiscal 1996
increased approximately $5.7 million and $11.1 million, respectively, or 32%
when compared to the same periods of fiscal 1995. International sales grew 122%
and 185%, respectively, and were 16% of the Company's total sales in the second
quarter of fiscal 1996 versus 10% in the same period of the previous fiscal
year. These increases are the result of the Company's continued focus on
diversifying its international sales outside of the audiotex market in Europe
and expansion of its international sales channels through strengthening
existing distributor relationships and adding new distributors. Domestic sales
in the second quarter and first six months of fiscal 1996 grew 22% and 16%,
respectively, primarily due to direct sales to domestic end users which grew to
64% of the Company's domestic sales in the second quarter of fiscal 1996 from
57% in the same period in the previous fiscal year. Sales to a leading domestic
telecommunication company in the second quarter and first six months of fiscal
1996 were approximately $4.7 million and $7.7 million, respectively, or 20% and
17%, respectively, of the Company's total sales. Sales to a major west coast
financial institution during the second quarter of fiscal 1996 were
approximately $2.5 million, or 11% of the Company's total sales.
COST OF GOODS SOLD. Cost of goods sold as a percentage of sales
declined to 35% in both the second quarter and the first six months of fiscal
1996 from 36% and 37% in the same periods of the previous fiscal year. This
decrease is primarily due to an increase, versus the same periods of the
previous fiscal year, in the percentage of the Company's total sales
represented by international systems, which have higher gross margins than
domestic systems due to higher software content, and sales of large systems and
systems upgrades which, generally, also have higher gross margins.
RESEARCH AND DEVELOPMENT. Research and development expenses in the
second quarter and first six months of fiscal 1996 increased approximately $0.6
million and approximately $1.1 million, or 35% and 33%, over the same periods of
the previous fiscal year. Such expenses in the second quarter and first six
months of fiscal 1996 constituted 10% of the Company's total sales, comparable
to the same periods of the previous fiscal year. Research and development
expenses in the second quarter and first six months of fiscal 1996 included the
continued development of the multimedia implementation of Interactive Voice
Response (IVR) and enhancement of products obtained in the acquisition of
VoicePlex Corporation. Additionally, expenditures were made for the ongoing
development of the Company's OneVoice multi-application platform including
InterDial (an outbound predictive dialer system), OneLink (a digital interface
for analog switches), the OneVoice System voice response system, InterForm (a
custom application generation tool) and other hardware and software
enhancements.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased approximately $1.4 million and approximately
$3.0 million in the second quarter and first six months of fiscal 1996 as
compared to the same periods of the
<PAGE> 8
previous year. As a percentage of the Company's total sales, selling, general
and administrative expenses in both the second quarter and first six months of
fiscal 1996 decreased slightly, to 28% from 29%, from the same period in the
previous fiscal year. The Company continues to invest in selling, general and
administrative resources as it expands its worldwide sales, service and support
personnel and marketing and advertising programs.
OTHER INCOME. Other income in the second quarter of fiscal 1996,
consisting primarily of interest income on cash and other non-operating
interest income, increased approximately $0.1 million from the same period in
the prior fiscal year. This increase is the result of reduced cash balances,
during the same period of the previous year, resulting from the completion of
the Company's stock repurchase program on July 13, 1994, the Company's
purchase of VoicePlex Corporation on August 31, 1994, and the expansion of the
Company's office and manufacturing facilities during fiscal 1995. Other income
during the first six months of fiscal 1996 was flat with the same period of the
previous fiscal year.
INCOME FROM OPERATIONS. The Company purchased VoicePlex Corporation on
August 31, 1994 for approximately $8 million in cash and approximately 255,000
shares of the Company's common stock. The acquisition was effected through the
merger of a wholly owned subsidiary of the Company into VoicePlex Corporation.
Substantially all the purchase price was attributable to in process research
and development which resulted in a $10.5 million write off, with no related
tax benefit, in the second quarter of fiscal 1995. As a result, the Company
incurred an operating loss and a net loss of $6.1 million and $7.6 million,
respectively, in the second quarter of fiscal 1995. Excluding this write off,
the Company generated operating income of approximately $4.4 million and $8.6
million and net income of approximately $2.9 million and $5.8 million in the
second quarter and the first six months of fiscal 1995, respectively. Operating
income during the second quarter and first six months of fiscal 1996 increased
43% and 44%, respectively, versus adjusted operating income for the same
periods in the previous fiscal year. Net income during the second quarter and
first six months of fiscal 1996 increased 44% and 41%, respectively, versus
adjusted net income for the same periods in the previous fiscal year. Both
operating and net income increased at a greater rate than the Company's total
sales due to the decreases in cost of goods sold and selling, general and
administrative expenses, as a percentage of the Company's total sales, as
discussed above.
LIQUIDITY AND CAPITAL RESOURCES. At August 31, 1995, the Company had
cash reserves of approximately $14.2 million. The Company believes its cash
reserves and internally generated cash flow will be sufficient to meet its
operating cash requirements for the foreseeable future. In addition, the
Company has a $15 million unsecured credit line which is available in its
entirety. The Company reviews acquisition opportunities from time to time and
believes it has access to the financial resources necessary to pursue
attractive opportunities as they arise.
<PAGE> 9
PART II, OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to a suit in the United States District Court for
the District of New Jersey, Newark Division, InterVoice, Inc. vs. Next
Generation Information, Inc., Civil Action No. 94-1504 (AJL), described in Part
1, Item 3 of the Company's Annual Report on Form 10-K for the year ended
February 28, 1995. Because the United States Supreme Court recently decided to
review a copyright case upon which the Company relied in a motion for Partial
Summary Judgment, the District Court Judge administratively terminated this
case until such time as the United States Supreme Court renders a decision. In
the meantime, InterVoice is permitted to pursue final phases of discovery. The
case is not expected to be set for trial until the fall of 1996 at the
earliest.
Reference is made to the litigation between the Company and its wholly
owned subsidiary, InterVoice S.A., and Realizzazione Investmenti per lo Sviluppo
delle Communicazioni s.r.l. ("RISC"), an Italian registered limited company,
described in Part 1, Item 3 of the Company's Annual Report on Form 10-K for the
year ended February 28, 1995, and further described in Part II, Item 1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 1995. On
September 8, 1995 the Commercial Court Judge set October 20, 1995 for a trial
on the merits. Also on September 8, 1995, the Company and its European
subsidiary, InterVoice S.A., filed a pleading with the court seeking to have
the expert report overturned for lack of due process. The Company will not
oppose a motion made by RISC to join the Company as a party defendant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the Company was held at 10:00
a.m., local time, on Wednesday, July 26, 1995 in Dallas, Texas.
Proxies were solicited by the Board of Directors of the Company
pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was
no solicitation in opposition to the Board of Directors nominees as listed in
the proxy statement and all such nominees were duly elected. The following
persons are the nominees of the Board of Directors who were re-elected as
directors at the annual meeting: Daniel D. Hammond, Michael W. Barker, Joseph
J. Pietropaolo, George C. Platt and Gerald F. Montry.
The second matter voted on and approved by the shareholders, as fully
described in the proxy statement for the annual meeting, was a proposal to
approve the Company's Restricted Stock Plan. The shareholders and their proxies
cast 11,883,674 votes in favor of the proposal, 2,082,677 votes against the
proposal, and there were 159,324 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this quarterly report and is
incorporated herein by reference.
(b) Reports on Form 8-K
None.
<PAGE> 10
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.
INTERVOICE, INC.
Date: 10/13/95 By: /s/ ROB-ROY J. GRAHAM
-------------------------------
Rob-Roy J. Graham
Chief Financial Officer
(Chief Accounting Officer)
<PAGE> 11
Intervoice, Inc.
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 14,227,394
<SECURITIES> 0
<RECEIVABLES> 22,738,866
<ALLOWANCES> 292,715
<INVENTORY> 10,920,826
<CURRENT-ASSETS> 49,666,353
<PP&E> 28,715,235
<DEPRECIATION> 8,008,390
<TOTAL-ASSETS> 73,420,429
<CURRENT-LIABILITIES> 16,316,691
<BONDS> 0
<COMMON> 9,341
0
0
<OTHER-SE> 57,094,397
<TOTAL-LIABILITY-AND-EQUITY> 73,420,429
<SALES> 45,700,418
<TOTAL-REVENUES> 45,700,418
<CGS> 15,962,059
<TOTAL-COSTS> 15,962,059
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 64,758
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,562,113
<INCOME-TAX> 4,333,929
<INCOME-CONTINUING> 8,228,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,228,184
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
