<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1997
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
----- ----
--------------
COMMISSION FILE NUMBER: 0-13616
INTERVOICE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-1927578
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
17811 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(972) 454-8000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
-------------------
COMMON STOCK, NO PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NONAFFILIATES AS OF MAY
19,1997: $180,140,027
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MAY 19, 1997:
16,192,362
DOCUMENTS INCORPORATED BY REFERENCE
LISTED BELOW ARE DOCUMENTS PARTS OF WHICH ARE INCORPORATED HEREIN BY
REFERENCE AND THE PART OF THIS REPORT INTO WHICH THE DOCUMENT IS INCORPORATED:
(1) PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS - PART III.
===============================================================================
<PAGE> 2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors Report of Ernst & Young LLP and the Consolidated
Financial Statements of the Company as of February 28, 1997 and February 29,
1996, and for each of the three years in the period ended February 28, 1997
follow:
16
<PAGE> 3
REPORT OF ERNST AND YOUNG LLP, INDEPENDENT AUDITORS
The Stockholders and Board of Directors of
InterVoice, Inc.
We have audited the accompanying consolidated balance sheets of InterVoice,
Inc. and subsidiaries as of February 28, 1997 and February 29, 1996, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended February 28, 1997.
Our audits also included the financial statement schedule listed in the index
at item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
InterVoice, Inc. and subsidiaries at February 28, 1997 and February 29, 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended February 28, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
Ernst & Young LLP
Dallas, Texas
April 2, 1997,
except for
Note F, for
which the date
is April 9, 1997.
17
<PAGE> 4
InterVoice, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
February 28, February 29,
ASSETS 1997 1996
- ---------------------------------------------------------- -------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 24,162,024 $ 23,573,976
Accounts and notes receivable, net of allowance
for doubtful accounts of $250,950 in 1997 and
$746,027 in 1996 33,506,747 24,704,425
Inventory 12,107,738 12,586,640
Prepaid expenses and other assets 3,833,248 804,428
Deferred taxes 1,419,495 1,714,246
-------------- --------------
75,029,252 63,383,715
PROPERTY AND EQUIPMENT
Building 16,140,989 15,865,605
Computer equipment and software 20,663,578 10,117,852
Furniture, fixtures and other 5,322,288 4,737,625
Service equipment 1,975,825 2,025,558
-------------- --------------
44,102,680 32,746,640
Less allowance for depreciation 13,676,956 9,540,886
-------------- --------------
30,425,724 23,205,754
OTHER ASSETS
Intangible assets, net of amortization
of $1,802,708 in 1997 and
$1,893,619 in 1996 3,723,533 2,788,205
Other assets -- 349,132
-------------- --------------
$ 109,178,509 $ 89,726,806
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 12,893,725 $ 11,796,125
Customer deposits 3,403,739 2,527,514
Deferred income 4,995,231 4,075,099
Income taxes payable -- 1,053,519
-------------- --------------
21,292,695 19,452,257
DEFERRED TAXES 1,695,294 713,074
CONTINGENCIES
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: 19,353,973 issued,
16,353,973 outstanding in 1997
and 18,984,206 issued, 15,984,206
outstanding in 1996 9,667 9,460
Additional paid-in capital 43,028,780 39,103,070
Unearned compensation (493,634) (436,281)
Treasury stock - at cost (24,003,245) (24,003,245)
Retained earnings 67,648,952 54,888,471
-------------- --------------
86,190,520 69,561,475
-------------- --------------
$ 109,178,509 $ 89,726,806
============== ==============
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 5
InterVoice, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended February 29/28
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
SALES $104,845,697 $ 97,103,054 $ 76,265,228
COST OF GOODS SOLD 40,131,308 34,468,112 27,882,870
------------ ------------ ------------
GROSS MARGIN 64,714,389 62,634,942 48,382,358
Research and development expenses 11,652,934 9,757,972 7,313,780
Selling, general and
administrative expenses 33,712,840 27,822,228 21,222,547
Purchased research and development -- -- 10,541,918
Litigation settlement 1,800,000 -- --
------------ ------------ ------------
INCOME FROM OPERATIONS 17,548,615 25,054,742 9,304,113
Other income - net 680,644 532,065 438,586
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 18,229,259 25,586,807 9,742,699
INCOME TAXES
Current 4,191,807 8,371,856 7,328,307
Deferred 1,276,971 (44,407) (119,188)
------------ ------------ ------------
INCOME TAXES 5,468,778 8,327,449 7,209,119
------------ ------------ ------------
NET INCOME $ 12,760,481 $ 17,259,358 $ 2,533,580
============ ============ ============
Net income per common and
common equivalent share $ .77 $ 1.05 $ .15
============ ============ ============
Weighted average number of common
and common equivalent shares 16,618,937 16,397,924 16,755,289
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 6
InterVoice, Inc.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
---------------------- Paid-in Unearned Treasury Retained
Shares Amount Capital Compensation Stock Earnings Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1994 17,760,805 $8,857 $28,047,450 $ -- $ -- $35,095,533 $ 63,151,840
Exercise of stock
options 365,690 183 1,606,960 -- -- -- 1,607,143
Acquisition of
business 255,008 127 2,980,279 -- -- -- 2,980,406
Purchase of
treasury stock (3,000,000) -- -- -- (24,003,245) -- (24,003,245)
Tax benefit from
exercise of
stock options -- -- 577,374 -- -- -- 577,374
Net Income -- -- -- -- -- 2,533,580 2,533,580
--------------------------------------------------------------------------------------------
Balance at February 28, 1995 15,381,503 9,167 33,212,063 -- (24,003,245) 37,629,113 46,847,098
--------------------------------------------------------------------------------------------
Exercise of stock
options 571,942 278 3,763,469 -- -- -- 3,763,747
Tax benefit from
exercise of
stock options -- -- 1,545,825 -- -- -- 1,545,825
Issuance of
restricted stock 30,761 15 581,713 (436,281) -- -- 145,447
Net Income -- -- -- -- -- 17,259,358 17,259,358
--------------------------------------------------------------------------------------------
Balance at February 29, 1996 15,984,206 $9,460 $39,103,070 ($436,281) ($24,003,245) $54,888,471 $ 69,561,475
Exercise of stock
options 344,083 194 2,710,623 -- -- -- 2,710,817
Tax benefit from
exercise of
stock options -- -- 562,340 -- -- -- 562,340
Issuance of
restricted stock,
net of forfeitures 25,684 13 652,747 (57,353) -- -- 595,407
Net Income -- -- -- -- -- 12,760,481 12,760,481
--------------------------------------------------------------------------------------------
Balance at February 28, 1997 16,353,973 $9,667 $43,028,780 ($493,634) ($24,003,245) $67,648,952 $ 86,190,520
============================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 7
InterVoice, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended February 29/28
--------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 12,760,481 $ 17,259,358 $ 2,533,580
Adjustments to reconcile net income
to net cash provided by
operating activities:
Purchased research and
development -- -- 10,541,918
Depreciation and amortization 4,946,376 4,393,988 3,522,925
Compensation expense
related to restricted stock issuances 595,407 145,447 --
Deferred income taxes (benefit) 1,276,971 (44,407) (119,188)
Provision for doubtful accounts 397,739 173,928 481,938
Provision for slow moving inventories 1,200,000 752,090 660,000
Disposal of equipment 89,447 11,669 37,014
Changes in operating assets and
liabilities net of effects of acquisition:
Increase in accounts receivable (9,200,060) (7,279,317) (3,396,102)
Increase in inventories (671,365) (3,657,122) (3,499,289)
(Increase) decrease in prepaid expenses (3,520,298) (288,339) 124,669
Increase in accounts payable
and accrued expenses 1,097,596 2,258,010 2,273,304
Increase (decrease) in customer deposits 876,225 1,395,750 (84,607)
Increase in deferred income 920,132 710,251 1,088,334
Increase (decrease) in income taxes payable -- (459,505) 1,027,768
------------ ------------ ------------
10,768,651 15,371,801 15,192,264
INVESTING ACTIVITIES
Acquisition of business, net of
cash acquired -- -- (9,130,574)
Purchases of property and equipment (11,483,435) (6,525,578) (9,197,365)
Increase in other assets (1,407,985) (1,020,279) (819,401)
(Increase) decrease in notes receivable -- 161,508 (151,462)
------------ ------------ ------------
(12,891,420) (7,384,349) (19,298,802)
FINANCING ACTIVITIES
Purchase of treasury stock -- -- (24,003,245)
Exercise of stock options 2,710,817 5,309,572 2,184,517
------------ ------------ ------------
2,710,817 5,309,572 (21,818,728)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 588,048 13,297,024 (25,925,266)
Cash and cash equivalents, beginning of year 23,573,976 10,276,952 36,202,218
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 24,162,024 $ 23,573,976 $ 10,276,952
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS
The Company develops, sells and services call automation systems with an
emphasis on interactive voice response allowing individuals to interact with
computer data bases using their telephones, personal computers, credit card
terminals or voice. The Company's systems are sold under the trade names
"OneVoice" and "InterDial" and are used by a variety of enterprises to
disseminate and receive information efficiently, allowing multiple callers
simultaneous access to computer data bases without the expense of maintaining a
manned workstation for each telephone line, or by automatically dialing phone
numbers and only transferring a call to an operator if the call is answered and
the called party remains on the phone. The Company's products include software
designed to simplify system customization while permitting a number of diverse
product applications. The Company sells its products directly to end-users and
through more than 130 domestic and international distributors.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of InterVoice and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INVENTORIES: Inventories, primarily system components, are valued at the lower
of cost or net realizable value with cost determined on a first-in, first-out
basis. Amounts presented are net of inventory valuation allowances totaling
$166,000 and $1,350,000 at February 28, 1997 and February 29, 1996,
respectively.
PROPERTY AND EQUIPMENT: Property and Equipment is stated on the basis of cost.
Depreciation is provided by the straight-line method over each asset's
estimated useful life. Depreciation expense totaled $4,124,289, $2,834,613 and
$2,305,263 in fiscal 1997, 1996 and 1995, respectively.
INTANGIBLE ASSETS: Intangible assets, which include patent licenses, purchased
software and license fees for technologies such as text to speech and speech
recognition, are being amortized by the straight-line method based on the
Company's assessment of each asset's useful life. Useful lives range from five
to twelve years. Amortization expense for these items totaled $822,087,
$647,261 and $912,996 in fiscal 1997, 1996 and 1995, respectively.
CASH AND CASH EQUIVALENTS: Cash equivalents include investments in highly
liquid securities with a maturity of three months or less at the time of
acquisition. The carrying amount of these securities approximate fair market
value.
REVENUE RECOGNITION: The Company recognizes revenue from sales of systems and
services at the time a contract is signed, custom system specifications, where
applicable, are defined and agreed upon, and the system has been shipped or
services rendered. In the event the Company anticipates more than a normal time
period between shipment and completion of other obligations (installation and
system testing), revenue recognition is deferred until all remaining
obligations are insignificant. Revenues from system maintenance agreements are
deferred and recognized over the term of the agreement.
DEFERRED INCOME TAXES: Deferred income taxes are recognized using the liability
method and reflect the tax impact of temporary differences between the amounts
of assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws and regulations.
NET INCOME PER SHARE: Net income per share is based on the average common and
common equivalent shares outstanding during each fiscal year. Common equivalent
shares assume the exercise of all dilutive stock options, including restricted
stock, using the treasury stock method. Primary and fully diluted earnings per
share are not materially different for the years presented.
STOCK-BASED COMPENSATION: The Company has elected to follow Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees"
("APB 25") in the primary financial statements and to provide supplementary
disclosures required by Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("FAS 123"). See Note F.
RECLASSIFICATIONS: Certain prior year balances have been reclassified to
conform to current year presentation.
22
<PAGE> 9
NOTE C - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accounts payable $10,094,466 $ 7,923,169
Accrued compensation 1,572,875 2,356,379
Other 1,226,384 1,516,577
----------- -----------
$12,893,725 $11,796,125
=========== ===========
</TABLE>
NOTE D - INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for slow moving inventories $ 62,956 $ 511,988
Deferred revenue 738,667 942,181
Accrued expenses 146,022 267,615
Allowance for doubtful accounts 69,782 102,777
Book over tax depreciation/amortization 453,706 --
Other 311,093 44,795
----------- ----------
Total deferred tax assets 1,782,226 1,869,356
----------- ----------
Deferred tax liabilities:
Capitalized Software 1,814,368 639,835
Tax over book depreciation -- 110,884
Prepaid assets 240,826 107,049
Other 2,831 10,416
----------- ----------
Total deferred tax liabilities 2,058,025 868,184
----------- ----------
Net deferred tax assets (liabilities) $ (275,799) $1,001,172
=========== ==========
</TABLE>
23
<PAGE> 10
Domestic and foreign income before taxes, and details of the income tax
provision are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income (loss) before taxes:
Domestic $ 18,610,597 $ 26,671,904 $ 10,969,945
Foreign (381,338) (1,085,097) (1,227,246)
------------ ------------ ------------
$ 18,229,259 $ 25,586,807 $ 9,742,699
============ ============ ============
Income tax provision (benefit):
Current:
Federal $ 4,137,807 $ 8,050,856 $ 6,349,864
Foreign -- -- 146,147
State 54,000 321,000 832,296
------------ ------------ ------------
Total current 4,191,807 8,371,856 7,328,307
Deferred:
Federal 1,156,811 (40,982) (109,996)
State 120,160 (3,425) (9,192)
------------ ------------ ------------
Total deferred 1,276,971 (44,407) (119,188)
------------ ------------ ------------
Total $ 5,468,778 $ 8,327,449 $ 7,209,119
============ ============ ============
</TABLE>
A reconciliation of the United States Federal statutory rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
$ % $ % $ %
- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes at statutory rates 6,380,240 35 8,955,382 35 3,409,945 35
Tax exempt interest (175,588) (1.0) -- -- (151,139) (1.6)
Purchased research & development -- -- -- -- 3,689,671 37.9
State taxes, net of federal benefit 113,204 .6 259,000 1.0 540,992 5.6
Effect of foreign losses (659,833) (3.6) 380,576 1.5 383,777 3.9
Foreign sales corp. benefit (544,036) (3.0) (521,208) (2.0) (284,327) (2.9)
Other 354,791 1.9 (746,301) (2.9) (379,800) (3.9)
----------- ---- ----------- ---- ----------- ----
$ 5,468,778 30.0 $ 8,327,449 32.5 $ 7,209,119 74.0
=========== ==== =========== ==== =========== ====
</TABLE>
Income taxes, net of refunds, of $6,587,097, $7,240,945 and $5,818,651 were
paid in fiscal 1997, 1996 and 1995, respectively.
NOTE E - CONTINGENCIES
Lucent Technologies ("Lucent") has suggested in correspondence to the
Company that it should consider licensing certain Lucent patents for a
substantial payment. The Company has an opinion from its outside legal counsel
that the Company does not infringe the Lucent patents by reason of
non-infringement and/or invalidity. The Company has suggested to Lucent that
Lucent should consider licensing certain patents of the Company, and that a
mutual cross-license might be in the best interests of both parties. The
parties are currently attempting to negotiate a mutually satisfactory
cross-license agreement which would resolve the matter. There is no assurance
that the Company will be able to negotiate a cross-license agreement based on
mutually satisfactory terms. Lucent has not threatened litigation against the
Company. In the event that litigation is instituted against the Company
concerning the Lucent patents, the Company intends to vigorously contest the
claims and to assert defenses of non-infringement and/or invalidity of the
patents, together with any other meritorious defenses and counterclaims,
including any counterclaim for infringement of its patents, the Company might
have. As with any legal proceeding, there is no guarantee that the Company will
prevail in any litigation asserted against the Company in connection with the
Lucent patents.
24
<PAGE> 11
NOTE F - STOCKHOLDERS' EQUITY
Stock option plans are in effect under which shares of common stock may be
authorized for issuance by the Compensation Committee of the Board of Directors
as incentive stock options to key employees. Option prices per share are the
fair market value per share of stock, based on the closing per share price on
the date of grant. Generally, the options become exercisable at the rate of 33%
per year and are exercisable for six years from the date of grant.
<TABLE>
<CAPTION>
Weighted Average
Exercise Price Per Share
------------------------
<S> <C> <C> <C>
Balance at February 28, 1994 1,537,094
Granted 676,050 $7.63 to $14.50
Exercised (325,640) $1.06 to $12.63
Forfeited (64,841) $4.13 to $18.75
Balance at February 28, 1995 1,822,663
Granted 510,750 $14.75 to $22.00
Exercised (514.177) $2.06 to $18.75
Forfeited (164,912) $4.31 to $21.38
Balance at February 29, 1996 1,654,324 $13.52
Granted 603,300 $11.88 to $27.25 $21.57
Exercised (285,736) $2.06 to $19.25 $ 7.36
Forfeited (185,788) $7.63 to $26.25 $18.21
Balance at February 28, 1997 1,786,100 $16.74
</TABLE>
At February 28, 1997, a total of 792,328 employee options were exercisable at
an average price of $13.02.
On April 9, 1997, the Board of Directors approved a plan to offer to the
holders of certain outstanding stock options, excluding the five most highly
compensated executive officers, the opportunity to cancel their existing
options and receive new options for the same number of shares but with an
exercise price per share at the then current fair market value and with new
vesting requirements. As a result, approximately 620,000 options with exercise
prices ranging from $11.88 to $27.25 per share were exchanged for new options
with an exercise price of $10.00 per share.
A stock option plan is in effect under which shares of common stock may be
issued by the Board of Directors as nonqualified stock options to
non-employees. Options are issued to non-employee directors in accordance with
a formula prescribed by the plan. Option prices per share are the fair market
value per share, based on the closing per share price on the date of grant.
Each option becomes exercisable within the period specified in the optionee's
agreement and are exercisable for 10 years from the date of grant.
<TABLE>
<CAPTION>
Weighted Average
1990 Non-Employee Option Plan Shares Option Price Exercise Price Per Share
- ----------------------------- ------ ------------ ------------------------
<S> <C> <C> <C>
Balance at February 28, 1994 24,600
Granted 26,000 $8.50
Exercised (6,600) $3.00 to $6.13
Forfeited (4,000) $15.13
------
Balance at February 28, 1995 40,000
Granted 12,000 $22.13
Exercised (2,000) $3.09
-------
Balance at February 29, 1996 50,000 $12.82
Granted 26,000 $13.94 $13.94
Exercised (22,000) $8.50 $ 8.50
Forfeited (4,000) $22.13 $22.13
-------
Balance at February 28, 1997 50,000 $22.13 $15.10
=======
</TABLE>
At February 28, 1997, a total of 24,000 non-employee options were exercisable
at an average price of $14.85.
For all option plans at February 28, 1997, options for 632,133 shares of common
stock were available for future grant.
The Company has adopted an Employee Stock Purchase Plan under which an
aggregate of 200,000 shares of common stock may be issued. Options are issued
to eligible employees in accordance with a formula prescribed by the plan and
are exercised automatically at the end of a one year payroll deduction period.
Option prices are determined as 85% of the lower of the closing price per share
of the Company's common stock on the option
25
<PAGE> 12
grant date or the option exercise date. At February 28, 1997, options for
70,637 shares of common stock were outstanding under the plan.
<TABLE>
<CAPTION> Weighted Average
Employee Stock Purchase Plan Shares Exercise Price Per Share
- ---------------------------- ------ ------------------------
<S> <C> <C>
Balance at February 28, 1994 58,916
Granted 68,763
Exercised (33,436)
Forfeited (25,480)
-------
Balance at February 28, 1995 68,763
Granted 48,061
Exercised (55,765)
Forfeited (12,998)
-------
Balance at February 29, 1996 48,061 $ 17.33
Granted 70,637 $ 14.39
Exercised (36,347) $ 11.43
Forfeited (11,714) $ 20.26
-------
Balance at February 28, 1997 70,637 $ 12.23
=======
Grant price per option outstanding $10.84 to $18.06
</TABLE>
During fiscal 1996, the Company adopted a Restricted Stock Plan under which an
aggregate of 500,000 shares may be issued. Approximately 154,000 shares have
been allocated to five senior executives to be earned based on the achievement
of certain targeted share prices and the continued service of each executive for
a two year period after each target is met. The remaining shares are available
for annual grants to other key executives as a component of their annual bonuses
based on the achievement of targeted annual earnings per share objectives and
the completion of an additional two years of service after the grant. Activity
related to restricted stock during fiscal 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Senior Executive Key Executive
Plan Plan
---------------- -------------
<S> <C> <C>
Balance at February 28, 1995 -- --
Granted 30,761 --
------ ------
Balance at February 29, 1996 30,761 --
Granted 30,761 4,787
Forfeited (9,228) (636)
------ ------
Balance at February 28, 1997 52,294 4,151
====== ======
</TABLE>
The weighted average share price on the date of grant in fiscal 1997 was $21.27
for the Senior Executive Plan and $29.44 for the Key Executive Plan. Shares
forfeited in fiscal 1997 had been granted at a weighted average share price of
$21.80. At February 28, 1997, approximately 440,000 shares are reserved for
future restricted stock grants.
One Preferred Share Purchase Right is attached to each outstanding share of the
Company's common stock. If a person or group acquires beneficial ownership of
20 percent or more, or announces a tender offer that would result in beneficial
ownership of 20 percent or more of the Company's outstanding common stock, the
rights become exercisable and each right will entitle its holder to purchase
one four-hundredth of a share of Series A Preferred Stock for $75, subject to
adjustment. If the Company is acquired in a business combination transaction
while the rights are outstanding, each right will entitle its holder to
purchase, for $75, common shares of the acquiring company having a market value
of $150. In addition, if a person or group acquires beneficial ownership of 20
percent or more of the Company's outstanding common stock, each right will
entitle its holder (other than such person or members of such group) to
purchase, for $75, a number of shares of the Company's common stock having a
market value of $150. Furthermore, at any time after a person or group acquires
beneficial ownership of 20 percent or more (but less than 50 percent) of the
Company's outstanding common stock, the Board of Directors may, at its option,
exchange part or all of the rights (other than rights held by the acquiring
person or group) for shares of the Company's common stock on a one-for-one
basis. At any time prior to the acquisition of such a 20 percent position, the
Company can redeem each right for .25 cents. The Board of Directors is also
authorized to reduce the 20 percent thresholds referred to above to not less
than 10 percent. The rights expire in the year 2001.
Because the Company has elected to continue to apply the provisions of APB 25
for expense recognition purposes in the primary financial statements, Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", ("FAS 123") requires disclosure of pro forma information which
provides the effects on Net income and Income per share as if the Company had
accounted for its employee stock awards under fair value methods prescribed by
FAS 123. The fair value of the Company's employee stock awards was estimated
using a Black-Scholes option pricing model with the following weighted-average
assumptions for fiscal 1997 and 1996, respectively: risk-free interest rates of
6.39% and 6.02%; stock price volatility factors of .66 and .74; and expected
option lives of 4.06 years and 3.2 years. The Company does not have a history of
paying dividends, and none have been assumed in estimating the fair value of the
options. The weighted-average fair value per share of options granted in fiscal
1997 was $11.82.
26
<PAGE> 13
Pro Forma Required Disclosures:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net income ..... $ 10,795,850 $ 16,242,620
Income per share $ .67 $ 1.00
</TABLE>
As required by FAS 123, only awards granted in fiscal 1996 and 1997 have been
included in determining the amount of additional compensation expense for those
years. As such, the effects of applying FAS 123 on fiscal 1997 and 1996 results
are not necessarily representative of the additional compensation expense which
will be included in future years' pro forma disclosures as more than two years
of awards will be considered.
The following table provides information related to all option plans at
February 28, 1997, excluding the impact of the exchange of options on April 9,
1997, as previously described.
<TABLE>
<CAPTION>
Options Outstanding Weighted Average
- ------------------- Weighted Average Remaining Contractual
Exercise Prices Shares Exercise Price Life In Years
- ------------------- ------ ---------------- ---------------------
<S> <C> <C> <C>
$ 2.06 - $10.84 363,474 $ 7.38 2.36
$11.63 - $15.13 536,078 $ 12.85 4.41
$17.38 - $27.25 1,007,185 $ 21.79 6.47
---------
1,906,737
=========
Options Exercisable
- -------------------
$ 2.06 - $10.84 236,652 $ 6.17 2.26
$11.63 - $15.13 330,360 $ 12.69 2.70
$17.38 - $27.25 249,316 $ 20.20 3.61
---------
816,328
=========
</TABLE>
Pursuant to an authorization by the Company's Board of Directors during fiscal
1995, in July, 1994, the Company repurchased 3,000,000 shares of its common
stock at an average price of $8.00 per share.
NOTE G - GEOGRAPHIC OPERATIONS AND MAJOR CUSTOMERS
The Company's operations involve a single industry segment: the development,
sale and service of call automation systems.
Export sales, summarized by geographic area, are as follows:
<TABLE>
<CAPTION>
(In Thousands) 1997 1996 1995
- -------------- ---- ---- ----
<S> <C> <C> <C>
The Americas (Excluding
the United States) $11,622 $11,126 $ 6,606
Pacific Rim 4,769 3,507 2,461
Europe, The Middle East
and Africa 8,372 3,620 1,978
------- ------- -------
TOTAL $24,763 $18,253 $11,045
======= ======= =======
</TABLE>
One customer, Siemens AG, an InterVoice distributor, accounted for 10.2% of
the Company's sales during fiscal 1997. During fiscal 1996 and 1995, MCI
Telecommunications accounted for 11.2% and 11.7% of the Company's total sales,
respectively.
27
<PAGE> 14
NOTE H - CONCENTRATIONS OF CREDIT RISK
The Company sells systems directly to end-users and distributors primarily in
the banking and financial, telecommunications, human resource, heathcare and
call center vertical markets. Credit is extended based on an evaluation of a
customer's financial condition and a deposit is generally required. The Company
has made a provision for credit losses in these financial statements, which
have been less than 1% of sales in the periods reported.
NOTE I - EMPLOYEE BENEFIT PLAN
The Company sponsors an employee savings plan which qualifies under section
401(k) of the Internal Revenue Code. All full time employees who have completed
three months of service are eligible to participate in the plan. The Company
matches 50% of employee contributions up to 6% of the employee's eligible
compensation. Company contributions totaled $759,000, $524,000 and $405,000 in
fiscal 1997, 1996 and 1995, respectively.
NOTE J - ACQUISITION
The Company acquired VoicePlex Corporation on August 31, 1994. The acquisition
was accounted for by the purchase method of accounting. This purchase price of
$12,277,992 was comprised of $7,954,749 in cash, Company common stock valued at
$2,980,406 and other direct acquisition costs totaling $1,342,837. The
allocation of the purchase price among the identifiable tangible and intangible
assets was based on the fair market value of those assets using a risk adjusted
income approach.
Based on appraised value, a portion of the purchase price was allocated to
purchased research and development which had not reached technological
feasibility and had no alternative future use. This allocation resulted in a
$10,541,918 charge, net of taxes, to the Company's operations in fiscal year
1995. The remaining purchase price was allocated, based on appraisals, to
software ($746,121), net tangible assets ($470,619), deferred taxes ($351,457),
and assembled workforce ($167,877).
28
<PAGE> 15
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
INTERVOICE, INC.
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------- ----------- ----------------------------- ------------ ----------
Additions
-----------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Cost and Other Accounts Deductions - End of
Description of Period Expenses - Describe Describe Period
----------- ---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended February 28,1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 746,027 $ 397,740 $ (892,817)(A) $ 250,950
Allowance for slow moving inventories 1,350,000 1,200,000 (2,384,000)(C) 166,000
---------- ----------- ----------- ----------
Total $2,096,027 $ 1,597,740 $(3,276,817) $ 416,950
========== =========== =========== ==========
Year ended February 29,1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 585,439 $ 173,930 $ (13,342)(A) $ 746,027
Allowance for slow moving inventories 1,110,267 752,090 (512,357)(B) 1,350,000
---------- ----------- ----------- ----------
Total $1,695,706 $ 926,020 $ (525,699) $2,096,027
========== =========== =========== ==========
Year ended February 28,1995
Deducted from asset accounts:
Allowance for doubtful accounts $ 192,000 $ 481,938 $ (88,499)(A) $ 585,439
Allowance for slow moving inventories 677,256 660,000 (226,989)(B) 1,110,267
---------- ----------- ----------- ----------
Total $ 869,256 $ 1,141,938 $ (315,488) $1,695,706
========== =========== =========== ==========
</TABLE>
- --------------------------------
(A) Accounts written off. Includes approximately $520,000 associated with
shut down of foreign subsidiary in fiscal 1997.
(B) Scrapped material.
(C) Includes approximately $1,700,000 reclassified to accumulated depreciation
associated with reclassification of inventory into fixed assets. Also
includes approximately $700,000 of scrapped material.
29
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERVOICE, INC.
By: /s/ DANIEL D. HAMMOND
----------------------------------
Daniel D. Hammond
Chairman of the Board of Directors
and Chief Executive Officer
Dated: June 11, 1997
33
<PAGE> 17
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DANIEL D. HAMMOND Chairman of the Board of June 11, 1997
-------------------------- Directors and Chief
Daniel D. Hammond Executive Officer
/s/ MICHAEL W. BARKER President and Chief June 11, 1997
-------------------------- Operating Officer
Michael W. Barker
/s/ ROB-ROY J.GRAHAM Chief Financial Officer, June 11, 1997
-------------------------- Chief Accounting Officer
Rob-Roy J. Graham and Controller
(Principal Accounting Officer)
/s/ JOSEPH J. PIETROPAOLO Director June 11, 1997
--------------------------
Joseph J. Pietropaolo
/s/ GEORGE C. PLATT Director June 11, 1997
--------------------------
George C. Platt
/s/ GRANT A. DOVE Director June 11, 1997
--------------------------
Grant A. Dove
</TABLE>
34
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
<S> <C>
3.1 -- Articles of Incorporation, as amended, of Registrant (3)
3.2 -- Second Restated Bylaws of Registrant, as amended (2)
4.1 -- Registration Rights Agreement dated August 31, 1994, among the Company,
Sohail Sattar and Steven E. Polsky and other shareholders of VoicePlex
Corporation. (8)
10.1 -- Registrant's 1984 Incentive Stock Option Plan, as amended (1)
10.2 -- Second Amended and Restated Employment Agreement dated as of June 21,
1996, effective as of March 1, 1996 by and between the Company and Danil
D. Hammond (10)
10.3 -- First Amendment to Amended and Extended Employment Agreement dated as
of June 25, 1996 and effective as of March 1, 1996 by and between the
Company and Daniel D. Hammond (10)
10.4 -- Amended and Restated Rights Agreement dated as of December 12, 1994
between the Registrant and KeyCorp Shareholders Services, Inc. (formerl
Society National Bank), as Rights Agent (5)
10.5 -- The InterVoice, Inc. 1990 Incentive Stock Option Plan, as amended (10)
10.6 -- The InterVoice, Inc. 1990 Nonqualified Stock Option Plan for
Non-Employees, as amended (4)
10.7 -- Amendment to the 1984 Incentive Stock Option Plan (2)
10.8 -- InterVoice, Inc. Employee Stock Purchase Plan (7)
10.9 -- Amended and Restated Employment Agreement dated as of June 21, 1996,
effective as of March 1, 1996 by and between the Company and Michel
W. Barker (10)
10.10 -- First Amendment to Amended and Extended Employment Agreement dated as
of June 25, 1996 and effective as of March 1, 1996 by and between the
Company and Michael W. Barker (10)
10.11 -- InterVoice, Inc. Employee Savings Plan (6)
10.12 -- Merger Agreement dated August 31, 1994 among the Company, InterVoice
Acquisition Corp., VoicePlex Corporation and certain shareholders of
VoicePlex Corporation. (8)
10.13 -- InterVoice, Inc. Restricted Stock Plan (9)
10.14 -- Separation Agreement dated as of December 5, 1996 between the Company
and Richard Herrmann (10)
</TABLE>
35
<PAGE> 19
<TABLE>
<S> <C>
11. -- Computation of Per Share Earnings (10)
23. -- Consent of Independent Auditors (11)
27. -- Financial Data Schedule (10)
</TABLE>
- -------------
(1) Incorporated by reference to exhibits to the Company's Registration
Statement on Form S-2 under the Securities Act of 1933, Registration No.
33-30847.
(2) Incorporated by reference to exhibits to the Company's 1991 Annual
Report on Form 10-K for the fiscal year ended February 28, 1991, filed
with the Securities and Exchange Commission (SEC) on May 29, 1991, as
amended by Amendment No. 1 on Form 8 to Annual Report on Form 10-K,
filed with the SEC on August 1, 1991.
(3) Incorporated by reference to exhibits to the Company's 1995 Annual
Report on form 10-K for the fiscal year ended February 28, 1995, filed
with the SEC on May 30, 1995.
(4) Incorporated by reference to exhibits to the Company's Registration
Statement on form S-8 filed on April 6, 1994, with respect to the
Company's 1990 Nonqualified Stock Option Plan for Non-Employees,
Registration Number 33-77590.
(5) Incorporated by reference to exhibits to Form 8-A/A (Amendment No 1)
filed with the SEC on December 15, 1994.
(6) Incorporated by reference to Exhibits to the Company's 1994 Annual
Report on Form 10-K for the fiscal year ended February 28, 1994, filed
with the SEC on May 31, 1994.
(7) Incorporated by reference to exhibits to Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on December
1, 1993, Registration Number 33-72494.
(8) Incorporated by reference to exhibits to the Company's current report
on Form 8-K dated September 13, 1994, and the Amendment thereto or Form
8K/A dated October 27, 1994.
(9) Incorporated by reference to exhibits to the Company's 1996 Annual
Report on Form 10-K for the fiscal year ended February 29, 1996, filed
with the SEC on May 29, 1996.
(10) Previously filed.
(11) Filed herewith.
Exhibits furnished upon request
36
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under "Item 6. Selected Financial
Data" and to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-17642, Form S-8 No. 33-45131, Form S-8 No. 33-45132, Form S-8
No. 33-62863, Form S-8 No. 33-64860, Form S-8 No. 33-72494, Form S-8 No.
33-77586, Form S-8 No. 33-77590, Form S-3 No. 33-85898 and Form S-8 No.
333-28009) of InterVoice, Inc. subsidiaries of our report dated April 2, 1997,
except for Note F, for which the date is April 9, 1997, with respect to the
consolidated financial statements and schedule of InterVoice, Inc. and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
February 28, 1997, as amended, included in this Form 10-K/A.
ERNST & YOUNG LLP
Dallas, Texas
June 9, 1997
