<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1998
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 0-15578
DAVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware No. 02-0364368
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
6 Technology Park Drive
Westford, Massachusetts 01886
(Address of principal executive offices) (Zip Code)
Telephone: (978) 952-0200
(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
-- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock: Common Stock, par value $.10 per share, outstanding as of
August 6, 1998: 14,226,879 shares.
<PAGE>
DAVOX CORPORATION & SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page No.
-------
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997............................ 3
Consolidated Statements of Income
for the three months and six months ended June 30, 1998
and 1997....................................................... 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997................ 5
Notes to Consolidated Financial Statements..................... 6 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 10 - 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................ 14
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Item 5. Other Information........................................ 15
Item 6. Exhibits and Reports on Form 8-K......................... 15
Signatures............................................... 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
ASSETS -------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $20,680 $ 28,639
Marketable securities 34,682 23,802
Accounts receivable, net of reserves of
approximately $968 and $1,134
in 1998 and 1997, respectively 19,997 12,599
Interest receivable 1,073 ----
Deferred tax assets 9,319 9,319
Prepaid expenses and other current assets 1,295 1,123
------- --------
Total current assets 87,046 75,482
------- --------
Property and equipment, net 5,488 5,248
Long-term deferred tax assets 669 669
Other assets 149 161
------- --------
$93,352 $ 81,560
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,011 $ 5,247
Accrued expenses 14,535 10,837
Customer deposits 1,222 2,018
Deferred revenue - current 5,969 4,355
Current portion of long-term obligations ---- 178
------- --------
Total current liabilities 27,737 22,635
------- --------
Deferred revenue - noncurrent 195 253
Long-term obligations, less current portion ---- 297
------- --------
Total long term liabilities 195 550
------- --------
Stockholders' equity:
Common stock $.10 par value -
Authorized - 30,000,000 shares
Issued - 14,203,091 and 13,868,097
shares in 1998 and 1997, respectively 1,420 1,387
Capital in excess of par value 72,646 71,598
Cumulative translation adjustments (42) 7
Accumulated deficit (8,580) (14,593)
------- --------
65,444 58,399
Less - Treasury stock, 3,294 shares at cost (24) (24)
------- --------
Total stockholders' equity 65,420 58,375
------- --------
$93,352 $ 81,560
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
PART 1 FINANCIAL INFORMATION (Continued)
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product revenue $ 15,072 $ 13,833 $ 31,426 $ 27,055
Service revenue 9,118 6,124 17,184 11,897
---------- ---------- ---------- ----------
Total revenue 24,190 19,957 48,610 38,952
---------- ---------- ---------- ----------
Cost of product revenue 2,804 3,125 5,951 5,992
Cost of service revenue 4,789 3,967 9,561 7,761
---------- ---------- ---------- ----------
Total cost of revenue 7,593 7,092 15,512 13,753
---------- ---------- ---------- ----------
Gross profit 16,597 12,865 33,098 25,199
---------- ---------- ---------- ----------
Operating expenses:
Research, development and engineering expenses 2,918 2,500 6,022 4,766
Selling, general and administrative expenses 8,930 6,677 18,137 13,154
Non-recurring merger transaction costs 1,329 -- 1,329 --
Non-recurring merger-related integration costs 597 -- 597 --
---------- ---------- ---------- ----------
Total operating expenses 13,774 9,177 26,085 17,920
---------- ---------- ---------- ----------
Income from operations 2,823 3,688 7,013 7,279
Other income (primarily interest income) 724 468 1,472 899
---------- ---------- ---------- ----------
Income before provision for income taxes 3,547 4,156 8,485 8,178
Provision for income taxes 1,206 556 2,885 1,086
---------- ---------- ---------- ----------
Net income $ 2,341 $ 3,600 $ 5,600 $ 7,092
========== ========== ========== ==========
Earnings per share:
Basic $ 0.17 $ 0.28 $ 0.40 $ 0.56
========== ========== ========== ==========
Diluted $ 0.16 $ 0.26 $ 0.37 $ 0.51
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 14,076,843 12,731,749 13,991,185 12,606,288
========== ========== ========== ==========
Diluted 14,870,098 14,059,931 14,956,245 13,942,552
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 5,600 $ 7,092
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,580 1,923
Provision for losses on accounts receivable 92 30
Changes in current assets and liabilities -
Accounts receivable (7,490) (5,479)
Interest receivable (1,073) ----
Prepaid expenses and other current assets (172) 415
Accounts payable 764 (222)
Accrued expenses 3,649 1,993
Customer deposits (796) (458)
Deferred revenue 1,556 1,155
-------- --------
Net cash provided by operating activities 3,710 6,449
-------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment (1,820) (2,261)
Decrease in other assets 12 78
Purchases of marketable securities (42,506) (10,626)
Sales of marketable securities 31,626 10,902
-------- --------
Net cash used in investing activities (12,688) (1,907)
-------- --------
Cash Flows From Financing Activities:
Borrowings (payments) of long-term debt (475) 437
Payment of note receivable from officers 414 ----
Proceeds from exercise of stock options 875 1,087
Proceeds from employee stock purchase plan 205 84
-------- --------
Net cash provided by financing activities 1,019 1,608
-------- --------
Net (decrease) increase in cash and cash equivalents (7,959) 6,150
Cash and cash equivalents, beginning of period 28,639 24,275
-------- --------
Cash and cash equivalents, end of period $ 20,680 $ 30,425
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for income taxes $ 804 $ 107
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
PART 1. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Preparation
The unaudited consolidated financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and note disclosures required by generally accepted
accounting principles. The statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10-K, Commission File No. 0-15578 that was filed with the Securities and
Exchange Commission on March 6, 1998. In the opinion of management, the
accompanying consolidated financial statements include all adjustments necessary
to present fairly the Company's financial position and results of operations.
The results of operations for the three month and six month periods ended June
30, 1998 may not be indicative of the results that may be expected for the full
fiscal year.
2. Acquisition of AnswerSoft, Inc.
In May 1998, the Company acquired AnswerSoft, Inc., (ASI), a Richardson,
Texas developer of inbound call center software solutions, in exchange for the
issuance of an aggregate of 2,384,452 shares of Davox common stock, including
shares which were subject to outstanding AnswerSoft, Inc. stock options and
warrants. In connection with the merger with AnswerSoft, Inc., the Company
incurred non-recurring merger transaction costs (primarily professional fees) of
$1,329. In addition, the Company incurred non-recurring costs (primarily
severance and lease termination costs) of $597 related to the integration of the
two businesses. The acquisition was accounted for as a pooling of interests
under Accounting Principles Board Opinion No. 16. Accordingly, the historical
information for 1998 and 1997 has been retroactively restated to reflect the
merger. Revenues and net income (loss) for the separate entities prior to the
acquisition and as restated for the combined Company are as follows:
<TABLE>
<CAPTION>
For the three months For the six months
ended March 31, ended June 30,
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
Davox
-----
Total revenue $23,160 $17,269 $35,439
Net income $ 4,433 $ 3,885 $ 7,960
AnswerSoft
----------
Total revenue $ 1,260 $ 1,726 $ 3,513
Net income $(1,173) $ (393) $ (868)
Combined
--------
Total revenue $24,420 $18,995 $38,952
Net income $ 3,260 $ 3,492 $ 7,092
</TABLE>
6
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
4. Marketable Securities
The Company's investment portfolio of debt securities consists of
marketable securities classified as held-to-maturity under the provisions of
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The marketable securities held at
June 30, 1998 consist principally of Eurodollar bonds and commercial paper with
original maturities of less than one year, and they are recorded at amortized
cost.
5. Provision for Income Taxes
In accordance with generally accepted accounting principles, the
Company provides for income taxes on an interim basis using its estimated annual
effective income tax rate. The Company is providing for income taxes in 1998 at
an effective tax rate of 34%, which is lower than the combined federal and state
statutory tax rates due primarily to utilization of tax credits and benefits
derived from the Company's foreign sales corporation.
6. Earnings Per Share
In March 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings Per Share. This statement established standards for
computing and presenting earnings per share and applies to entities with
publicly traded common stock or potential common stock. This statement is
effective for fiscal years ending after December 15, 1997. The prior years'
earnings per share have been retroactively restated in accordance with this
statement. Basic earnings per share was determined by dividing net income by the
weighted average shares of common stock outstanding during the year. Diluted
earnings per share reflects the dilution of the potentially dilutive securities,
primarily stock options based on the treasury stock method.
7
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
6. Earnings Per Share (continued)
The calculation of basic and diluted shares outstanding is as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 14,077 12,732 13,991 12,606
Weighted average common equivalent shares 793 1,328 965 1,337
------ ------ ------ ------
Diluted weighted average shares outstanding 14,870 14,060 14,956 13,943
====== ====== ====== ======
</TABLE>
For the three month period ended June 30, 1998, 1,230,585 weighted
average common equivalent shares were not included in the diluted weighted
average shares outstanding as they were antidilutive. For the three month
period ended June 30, 1997, there were no antidilutive shares. For the six
month periods ended June 30, 1998 and 1997, 605,576 and 210,349 weighted average
common equivalent shares, respectively, were not included in the diluted
weighted average shares outstanding as they were antidilutive.
7. Revenue Recognition
In October 1997, the American Institute of Certified Public Accountants
issued SOP 97-2, Software Revenue Recognition. The Company believes that its
revenue recognition practices are consistent with those required by SOP 97-2.
8. Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 requires disclosure of all components of comprehensive income on an
annual and interim basis. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The Company adopted SFAS No.
130 in 1998.
8
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
8. Comprehensive Income (continued)
The changes in the components of comprehensive income are as follows (in
thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, 1998 Ended June 30, 1998
-------------------- --------------------
<S> <C> <C>
Net income 2,341 5,600
===== =====
Foreign currency translation
adjustments (6) (49)
----- -----
Comprehensive income 2,335 5,551
===== =====
</TABLE>
9. Recently Issued Accounting Standards
In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
Enterprise and Related Information. SFAS No. 131 requires certain financial and
supplementary information to be disclosed on an annual and interim basis for
each reportable segment of an enterprise. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997, and interim period reporting is not
required until interim periods beginning after December 15, 1998. Unless
impracticable, companies would be required to restate prior period information
upon adoption. Management does not expect the adoption of this standard to have
a material impact on the Company and its operations.
9
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months and Six Months Ended June 30, 1998 and 1997
Total revenue for the second quarter of 1998 increased approximately $4.2
million, or 21.2% to $24.2 million compared to the same period in 1997, while
total revenue for the first six months of 1998 increased approximately $9.7
million, or 24.8% to $48.6 million compared to the same period in 1997.
Product revenue for the second quarter of 1998 increased approximately $1.2
million, or 9.0% to $15.1 million compared to the same period in 1997, while
product revenue for the first six months of 1998 increased approximately $4.4
million, or 16.2% to $31.4 million compared to the same period in 1997. These
increases were caused by higher demand for the Unison(R) suite of call center
management systems with collections applications, which more than offset
slightly lower demand for telemarketing applications.
Cost of product revenue for the second quarter of 1998 decreased
approximately $321,000, or 10.3% to $2.8 million compared to the same period in
1997. Cost of product revenue for the first six months of 1998 decreased
approximately $41,000, or 0.7% to $6.0 million compared to the same period in
1997. These decreases were mainly attributable to a higher margin product mix.
Service revenue for the second quarter of 1998 increased approximately $3.0
million, or 48.9% to $9.1 million compared to the same period in 1997. Service
revenue for the first six months of 1998 increased approximately $5.3 million,
or 44.4% to $17.2 million compared to the same period in 1997. These increases
were due to an increase in maintenance revenue related to the growth in the
number of the Company's customers, increased installation revenue related to the
increased volume of product shipments, and increased professional services
revenue in 1998, as compared to 1997.
Cost of service revenue for the second quarter of 1998 increased
approximately $822,000, or 20.7% to $4.8 million compared to the same period in
1997. Cost of service revenue for the first six months of 1998 increased $1.8
million, or 23.2% to $9.6 million compared to the same period in 1997. These
increases were attributable to higher payroll and related expenses in 1998
resulting from customer service headcount increases, and to higher facilities
related costs. As a percentage of service revenue, cost of service revenue
decreased by 12.3% in the second quarter of 1998 as compared to the same period
in 1997. As a percentage of service revenue, cost of service revenue decreased
by 9.6% for the first six months of 1998 as compared to the same period in 1997.
These decreases as a percentage of service revenue were primarily attributable
to the higher service revenue relative to fixed costs.
10
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Research, development and engineering expenses increased approximately
$418,000, or 16.7% to $2.9 million for the second quarter of 1998 as compared to
the same period in 1997. Research, development and engineering expenses
increased approximately $1.3 million, or 26.4% to $6.0 million for the first six
months of 1998 compared to the same period in 1997. These increases were
primarily attributable to higher payroll and related expenses due to headcount
increases in 1998, and to higher consulting, documentation, and depreciation
expenses incurred in 1998. As a percentage of total revenue, research,
development and engineering expenses decreased 0.4% to 12.1% for the second
quarter of 1998 from 12.5% for the same period in 1997. As a percentage of
total revenue, research, development and engineering expenses increased 0.2% to
12.4% for the first six months of 1998 from 12.2% for the same period in 1997.
Selling, general and administrative (SG&A) expenses increased by
approximately $2.3 million, or 33.7% to $8.9 million for the second quarter of
1998 compared to the same period in 1997. SG&A expenses increased by
approximately $5.0 million, or 37.9% to $18.1 million for the first six months
of 1998 compared to the same period in 1997. These increases were attributable
to increased payroll and related expenses in 1998 resulting from headcount
increases, and direct and indirect selling expenses related to the increased
product and service revenue.
In connection with the merger with AnswerSoft, Inc., the Company
incurred non-recurring merger transaction costs (primarily professional fees) of
$1,329. In addition, the Company incurred non-recurring costs (primarily
severance and lease termination costs) of $597 related to the integration of the
two businesses.
Interest income in 1998 was derived primarily from investments in
Eurodollar bonds, commercial paper, and money market instruments. Interest
income increased 61.4% for the second quarter of 1998 compared to the same
period in 1997. Interest income increased 69.2% for the first six months of
1998 compared to the same period in 1997. These increases reflect the higher
average cash and marketable securities balances in 1998 compared to 1997.
In accordance with generally accepted accounting principles, the
Company provides for income taxes on an interim basis using its estimated annual
effective income tax rate. The Company is providing for income taxes in 1998 at
an effective tax rate of 34%, which is lower than the combined federal and state
statutory tax rates due primarily to utilization of tax credits and net income
benefits derived from the Company's foreign sales corporation. For the first
six months of 1997, the Company had available significant net operating loss
carryforwards, and provided for federal alternative minimum tax and for state
income taxes in those states, which do not allow for net operating loss
carryforwards.
11
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company's principal sources of liquidity were
its cash and cash equivalent balances of approximately $20.7 million as well as
its marketable securities of approximately $34.7 million. As of the end of
fiscal year 1997, the Company's cash and cash equivalent balances were
approximately $28.6 million and its marketable securities were approximately
$23.8 million. The increase was due primarily to favorable operating results,
and proceeds from exercises of stock options. In addition, the Company has an
agreement for a working capital line of credit with a bank for up to $2.0
million based on eligible receivables, as defined. There were no outstanding
balances under the line of credit as of June 30, 1998.
The Company's primary investing activities were purchases and sales of
marketable securities and purchases of property and equipment. Property and
equipment purchases were approximately $1.8 million during the first six months
of 1998, compared to approximately $2.3 million during the first six months of
1997. Purchases and sales of marketable securities generated a net cash outflow
of approximately $10.9 million during the first six months of 1998, compared to
a net cash inflow of approximately $276,000 during the first six months of 1997.
Cash provided by financing activities is generated primarily from
proceeds from exercises of stock options, and from purchases of stock through
the Company's employee stock purchase plan. Proceeds from exercises of stock
options and purchases through the employee stock purchase plan totaled
approximately $1.1 million during the first six months of 1998, compared to
approximately $1.2 million during the first six months of 1997.
At June 30, 1998, the working capital of the Company increased to
approximately $59.3 million from approximately $52.8 million as of December 31,
1997. This increase was primarily attributable to the higher cash balance due
to favorable operating results, and also to the higher receivable balance due to
increased sales.
Management believes, based on its current operating plan, that the
Company's existing cash and marketable securities, cash generated from
operations, and amounts available under its working capital line of credit will
be sufficient to meet the Company's cash requirements for the next twelve
months.
ACQUISITION OF ANSWERSOFT, INC.
In May 1998, the Company acquired AnswerSoft, Inc., (ASI), a Richardson, Texas
developer of inbound call center software solutions, in exchange for the
issuance of an aggregate of 2,384,452 shares of Davox common stock, including
shares which were subject to outstanding AnswerSoft, Inc. stock options and
warrants. In connection with the merger with AnswerSoft, Inc., the Company
incurred non-recurring merger transaction costs (primarily professional fees) of
$1,329. In addition, the Company incurred non-recurring costs (primarily
severance and lease termination costs) of $597 related to the integration of the
two businesses.
12
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
ACQUISITION OF ANSWERSOFT, INC. (continued)
The acquisition was accounted for as a pooling of interests under
Accounting Principles Board Opinion No. 16. Accordingly, the historical
information for 1998 and 1997 has been retroactively restated to reflect the
merger.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to historical information contained herein, this report
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended, and the statements are subject to the safe harbors
created thereby. The Company's future actual results could differ materially
from the forward-looking statements discussed or implied in this report because
of risks or uncertainties including, but not limited to, risks associated with
the acquisition of AnswerSoft, Inc., competition and competitive pricing
pressures, technological change, new product introduction and market acceptance,
the ability of Davox to attract and retain key personnel, general economic
conditions in the United States and worldwide markets served by Davox, and those
other factors discussed from time to time in Davox's public reports filed with
the Securities and Exchange Commission, such as those discussed under "Certain
Factors That May Affect Future Results" in Davox's quarterly reports on Form
10-Q and annual report on Form 10-K, and the section entitled "Risk Factors"
in the Company's recently filed Registration Statement on Form S-4, file no.
333-49479.
Year 2000 Systems Modifications--The Company expects to be continually in
the process of updating its products, information and network systems and, as
part of that process, the Company is evaluating the costs associated with
modifying and testing our systems for the Year 2000. The Company expects to
make some of the necessary modifications through its ongoing investment in
systems upgrades. The Company is not yet able to estimate the incremental cost
of the Year 2000 conversion effort but such costs will be expensed as incurred.
The costs incurred to date have not been material. There can be no assurance,
however, that there will not be a delay in, or increased costs associated with,
the implementation of such changes, and the Company's inability to implement
such changes could have an adverse effect on future results of operations.
Note: Davox and Unison are registered trademarks and LYRICall and ComposeIt are
trademarks of Davox Corporation. All other marks are the properties of their
respective holders.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There were no material changes since the Company's Annual Report on
Form 10-K for the period ended December 31, 1997.
Item 4. Submission of Matters to a Vote of Security-Holders
The annual meeting of security-holders of the Company was held on May
6, 1998. The number of directors was fixed at four and the following
persons were elected as directors:
<TABLE>
<CAPTION>
Total Votes Total Votes
Nominee for Nominee Withheld for Nominee
------- ----------- --------------------
<S> <C> <C>
Alphonse M. Lucchese 10,957,204 21,986
Michael D. Kaufman 10,957,204 21,986
Walter J. Levison 10,957,204 21,986
R. Scott Asen 10,957,204 21,986
</TABLE>
The issuance of 2,384,452 shares of the Corporation's Common Stock, $.10
par value, pursuant to the Amended and Restated Agreement and Plan of
Merger dated April 6, 1998 among the Corporation, Duke Acquisition
Corporation, and AnswerSoft, Inc., was approved with 9,275,040 shares
voting in favor, 50,564 shares voting against and 51,165 shares
abstaining.
A proposal to approve an increase in the number of shares of the
Corporation's Common Stock, $.10 par value, available for issuance under
the Corporation's 1996 Stock Plan to 1,950,000 shares, was adopted and
approved, with 5,678,566 shares voting in favor, 3,686,547 shares voting
against and 11,746 shares abstaining.
The selection of the firm Arthur Andersen LLP as auditors for the fiscal
year ending December 31, 1998 was ratified, with 10,951,384 shares voting
in favor, 8,195 shares voting against and 19,611 shares abstaining.
14
<PAGE>
PART II. OTHER INFORMATION (continued)
Item 5. Other Information
Proposals of stockholders intended for inclusion in the proxy statement
to be furnished to all stockholders entitled to vote at the next annual meeting
of stockholders of the Company must be received at the Company's principal
executive offices not later than December 7, 1998. The deadline for providing
timely notice to the Company of matters that stockholders otherwise desire to
introduce at the next annual meeting of stockholders of the Company is February
20, 1999. In order to curtail any controversy as to the date on which a
proposal was received by the Company, it is suggested that proponents submit
their proposals by Certified Mail, Return Receipt Requested.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
Exhibit
Number Description of Exhibit
------ -----------------------
27 Article 5 - Summary Financial Data Schedule
(b) A Current Report on Form 8-K, dated May 6, 1998, was filed on May 8,
1998, reporting, pursuant to Item 2, the Company's acquisition of
AnswerSoft, Inc. pursuant to the Agreement and Plan of Merger among
the Company, Duke Acquisition Corporation and AnswerSoft, Inc.
Unaudited pro-forma combined condensed financial information was
filed as part of the Form 8-K.
(c) An amendment to the Company's Current Report on Form 8-K dated May 6,
1998 was filed on May 11, 1998, amending and restating in its
entirety the Current Report on Form 8-K dated May 6, 1998 (the "Form
8-K") to correct the omission of certain pages from the original
filing which resulted from a transmission error.
15
<PAGE>
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 thereunto duly authorized.
DAVOX CORPORATION
Date: August 12, 1998 By: /s/ Alphonse M. Lucchese
------------------------
Alphonse M. Lucchese
Chief Executive Officer
and Chairman (Principal
Executive Officer)
Date: August 12, 1998 By: /s/ John J. Connolly
--------------------
John J. Connolly
Vice President of Finance
and Chief Financial Officer
(Principal Financial Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 20,680 0
<SECURITIES> 34,682 0
<RECEIVABLES> 20,965 0
<ALLOWANCES> 968 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 87,046 0
<PP&E> 5,488 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 93,352 0
<CURRENT-LIABILITIES> 27,737 0
<BONDS> 0 0
0 0
0 0
<COMMON> 1,420 0
<OTHER-SE> 64,024 0
<TOTAL-LIABILITY-AND-EQUITY> 93,352 0
<SALES> 31,426 27,055
<TOTAL-REVENUES> 48,610 38,952
<CGS> 5,951 5,992
<TOTAL-COSTS> 15,512 13,753
<OTHER-EXPENSES> 6,022 4,766
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,510 899
<INCOME-PRETAX> 8,485 8,178
<INCOME-TAX> 2,885 1,086
<INCOME-CONTINUING> 5,600 7,092
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,600 7,092
<EPS-PRIMARY> 0.40 0.56
<EPS-DILUTED> 0.37 0.51
</TABLE>
