<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 September 30, 2000
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
November 9, 2000: 12,787,797 shares.
<PAGE>
DAVOX CORPORATION & SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No.
-------
Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income
for the Three Months and Nine Months Ended
September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 13
Item 3. Quantitative and Qualitative Disclosures About Market Risks 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42,091 $34,433
Marketable securities 25,517 30,770
Accounts receivable, net of reserves of $2,301 and
$1,631 in 2000 and 1999, respectively 18,910 20,320
Deferred tax assets 4,811 4,811
Prepaid expenses and other current assets 1,938 2,280
-------- -------
Total current assets 93,267 92,614
Property and equipment, net 5,251 5,050
Other assets 2,005 1,379
-------- -------
$100,523 $99,043
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,323 $ 5,733
Accrued expenses 7,378 11,815
Customer deposits 4,604 3,515
Deferred revenue 8,468 5,466
-------- -------
Total current liabilities 24,773 26,529
Stockholders' equity:
Common stock, $.10 par value -
Authorized - 30,000 shares
Issued - 14,556 shares 1,456 1,456
Additional paid-in capital 81,024 74,691
Accumulated foreign currency translation adjustments (270) (17)
Retained earnings 10,575 6,355
-------- -------
92,785 82,485
Treasury stock, 1,683 and 1,298 shares, at cost,
in 2000 and 1999, respectively (17,035) (9,971)
-------- -------
Total stockholders' equity 75,750 72,514
-------- -------
$100,523 $99,043
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM I. FINANCIAL STATEMENTS
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product revenue $11,081 $14,035 $35,609 $37,856
Service revenue 11,398 10,011 34,826 28,447
------- ------- ------- -------
Total revenue 22,479 24,046 70,435 66,303
------- ------- ------- -------
Cost of product revenue 2,058 2,670 6,086 7,075
Cost of service revenue 6,461 5,171 17,977 15,745
------- ------- ------- -------
Total cost of revenue 8,519 7,841 24,063 22,820
------- ------- ------- -------
Gross profit 13,960 16,205 46,372 43,483
------- ------- ------- -------
Operating expenses:
Research, development and engineering 3,913 3,356 11,722 9,615
Selling, general and administrative 10,738 9,507 31,267 26,959
------- ------- ------- -------
Total operating expenses 14,651 12,863 42,989 36,574
------- ------- ------- -------
Income (loss) from operations (691) 3,342 3,383 6,909
Interest and other income, net 1,041 748 3,013 2,012
------- ------- ------- -------
Income before provision for income taxes 350 4,090 6,396 8,921
Provision for income taxes 119 614 2,175 1,338
------- ------- ------- -------
Net income $ 231 $ 3,476 $ 4,221 $ 7,583
======= ======= ======= =======
Earnings per share:
Basic $ 0.02 $ 0.26 $ 0.31 $ 0.56
======= ======= ======= =======
Diluted $ 0.02 $ 0.25 $ 0.30 $ 0.53
======= ======= ======= =======
Weighted average shares outstanding:
Basic 13,247 13,126 13,407 13,636
======= ======= ======= =======
Diluted 13,631 13,841 14,158 14,207
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM I. FINANCIAL STATEMENTS
DAVOX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
<S> <C> <C>
2000 1999
------------- -------------
Cash Flows from Operating Activities:
Net income $ 4,221 $ 7,583
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,968 2,615
Changes in current assets and liabilities -
Accounts receivable 1,438 (4,188)
Prepaid expenses and other current assets 314 599
Accounts payable (1,410) 969
Accrued expenses (4,387) 371
Customer deposits 1,089 236
Deferred revenue 3,000 1,902
--------- --------
Net cash provided by operating activities 7,233 10,087
--------- --------
Cash Flows From Investing Activities:
Purchases of property and equipment (3,153) (2,557)
(Increase) decrease in other assets (626) 231
Purchases of marketable securities (68,121) (70,452)
Maturities of marketable securities 73,375 64,855
--------- --------
Net cash provided by (used in) investing activities 1,475 (7,923)
--------- --------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options 5,524 321
Proceeds from employee stock purchase plan 214 278
Purchases of treasury stock (6,470) (10,217)
--------- --------
Net cash used in financing activities (732) (9,618)
--------- --------
Effect of exchange rate differences on cash (318) 21
--------- --------
Net increase (decrease) in cash and cash equivalents 7,658 (7,433)
Cash and cash equivalents, beginning of period 34,433 31,759
--------- --------
Cash and cash equivalents, end of period $ 42,091 $ 24,326
========= ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for income taxes $ 2,495 $ 826
========= ========
</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 7, 2000. In the opinion of management, the
accompanying consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position and results of operations. The results of
operations for the three month and nine month periods ended September 30, 2000
may not be indicative of the results that may be expected for the full fiscal
year.
2. 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.
3. Revenue Recognition
The Company generates software revenue from licensing the rights to use its
software products. The Company also generates service revenues from the sale of
product maintenance contracts, installation services and consulting services.
The Company recognizes revenue in accordance with the provisions of the American
Institute of Certified Public Accountants Statement of Position (SOP) No. 97-2,
Software Revenue Recognition. Revenue from software license fees are generally
recognized upon shipment, net of estimated returns, provided that there are no
significant post shipment obligations, payment is due within one year and
collection is probable. If acceptance is required beyond the Company's standard
published specifications, software license revenue is recognized upon customer
acceptance.
SOP No. 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair values of the elements. The fair value of an element must be
based on evidence that is specific to the vendor. If a vendor does not have
evidence of the fair value for all the elements in a multiple-element
arrangement, all revenue from the arrangement is deferred until such evidence
exists or until all elements are delivered.
6
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Revenue Recognition (continued)
Revenues for consulting services are recognized over the period in which
services are provided and the revenue is fixed and determinable and collection
is probable. Maintenance revenue is deferred at the time of software license
shipment and is recognized ratably over the term of the support period, which is
typically one year.
On December 3, 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 was initially to become effective for calendar year end
companies for the quarter ending March 31, 2000. However, the SEC in late June
2000 announced that they were delaying the effective date for SAB 101 until no
later than the quarter ending December 31, 2000. On October 12, 2000 the SEC
issued their final guidance regarding the implementation of SAB 101. The Company
is currently in the process of evaluating the potential impact that SAB 101 may
have on its revenue recognition policies and its results of operations. At this
time, the Company is not able to reasonably determine the potential impact of
the application of SAB 101 on its financial condition or results of operations.
4. 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 2000 at
an effective tax rate of 34%, which is lower than the combined federal and state
statutory tax rates due primarily to net operating loss carryforwards,
utilization of tax credits and benefits derived from the Company's foreign sales
corporation.
5. Earnings Per Share
Basic earnings per share is calculated using the weighted average number of
common shares outstanding. Diluted earnings per share is computed on the basis
of the weighted average number of common shares outstanding and the effect of
dilutive stock options using the treasury stock method. A reconciliation of
basic and diluted weighted average shares outstanding is as follows (in
thousands):
7
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
5. Earnings Per Share (continued)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 13,247 13,126 13,407 13,636
Effect of dilutive stock options 384 715 751 571
------ ------ ------ ------
Diluted weighted average shares outstanding 13,631 13,841 14,158 14,207
====== ====== ====== ======
</TABLE>
For the three month periods ended September 30, 2000 and 1999,
1,953,013 and 1,598,573 common equivalent shares, respectively, were not
included in the diluted weighted average shares outstanding, as their effect
would be antidilutive. For the nine month periods ended September 30, 2000 and
1999, 1,276,724 and 1,607,478 common equivalent shares, respectively, were not
included in the diluted weighted average shares outstanding, as their effect
would be antidilutive.
6. Comprehensive Income
The components of comprehensive income are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
2000 1999 2000 1999
----- ------ ------ ------
<S> <C> <C> <C> <C>
Net income $ 231 $3,476 $4,221 $7,583
Foreign currency translation adjustments (24) 36 (253) 21
----- ------ ------ ------
Comprehensive income $ 207 $3,512 $3,968 $7,604
===== ====== ====== ======
</TABLE>
8
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
DAVOX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
7. Segment and Geographic Information
Product revenue from international sources totaled approximately $1.9
million and $3.9 million for the third quarter of 2000 and 1999, respectively,
and totaled approximately $6.7 million and $8.7 million for the nine month
periods ended September 30, 2000 and 1999 respectively. The Company's revenue
from international sources was primarily generated from customers located in
Europe and Asia/Pacific. Substantially all of the Company's product revenue for
the periods presented was shipped from its headquarters located in the United
States.
The following table represents the Company's percentage of product revenue
by geographic region from customers for the three month and nine month periods
ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
U.S. 83.2% 72.2% 81.3% 77.1%
Europe 9.6 23.0 13.4 19.8
Asia/Pacific 6.6 2.1 3.0 1.9
Other 0.6 2.7 2.3 1.2
----- ----- ----- -----
Total 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
</TABLE>
Substantially all of the company's assets are located in the United States.
CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. Statements set forth herein may
contain "forward-looking" information that involves risks and uncertainties.
Actual future financial or operating results may differ materially from such
forward-looking statements. Statements indicating that the Company "expects,"
"estimates," "believes," "is planning," or "plans to" are forward looking, as
are other statements concerning future financial or operating results, product
offerings or other events that have not yet occurred. There are several
important factors that could cause actual results or events to differ materially
from those anticipated by the forward-looking statements. Such factors are
described in greater detail under Management's Discussion and Analysis of
Financial Condition and Results of Operations--Certain Factors That May Affect
Future Results. Although the Company has sought to identify the most significant
risks to its business, the Company cannot predict whether, or to what extent,
any of such risks may be realized nor can there be any assurance that the
Company has identified all possible issues that the Company may face.
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 Nine Months Ended September 30, 2000 and 1999
Total revenue for the third quarter of 2000 decreased approximately $1.6
million, or 6.5%, to $22.5 million compared to the same period in 1999, while
total revenue for the first nine months of 2000 increased approximately $4.1
million, or 6.2%, to $70.4 million compared to the same period in 1999.
Product revenue for the third quarter of 2000 decreased approximately $2.9
million, or 21.0%, to $11.1 million compared to the same period in 1999, while
product revenue for the first nine months of 2000 decreased approximately $2.2
million, or 5.9%, to $35.6 million compared to the same period in 1999. The
decreases in the third quarter and nine months of 2000 were due to decreased
product shipments in the third quarter of 2000 compared to the same period in
1999 resulting from a slowdown in Unison(R) system sales and a longer than
expected sales cycle associated with the Company's new Ensemble(TM) software
suite.
Cost of product revenue for the third quarter of 2000 decreased
approximately $612,000, or 22.9%, to $2.1 million compared to the same period in
1999. Cost of product revenue for the first nine months of 2000 decreased
approximately $989,000 or 13.9%, to $6.1 million compared to the same period in
1999. The decreases were due to lower product shipments in the third quarter and
first nine months of 2000 compared to the same periods in 1999.
Service revenue for the third quarter of 2000 increased approximately $1.4
million, or 13.8%, to $11.4 million compared to the same period in 1999.
Service revenue for the first nine months of 2000 increased approximately $6.4
million, or 22.4%, to $34.8 million compared to the same period in 1999. The
increases in service revenue were primarily due to the growth in the Company's
installed customer base, resulting in increased new and renewed contract
maintenance and professional services revenue as well as increased
implementation revenue for the first nine months of 2000 compared to the same
period in 1999.
Cost of service revenue for the third quarter of 2000 increased
approximately $1.3 million, or 24.9%, to $6.5 million compared to the same
period in 1999. Cost of service revenue for the first nine months of 2000
increased approximately $2.2 million, or 14.2%, to $18.0 million compared to the
same period in 1999. The increases during the third quarter and first nine
months of 2000 were due primarily to increased headcount and payroll and related
expenses compared to the same periods in 1999.
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
$557,000, or 16.6%, to $3.9 million for the third quarter of 2000 as compared to
the same period in 1999. Research, development and engineering expenses
increased approximately $2.1 million, or 21.9%, to $11.7 million for the first
nine months of 2000 compared to the same period in 1999. These increases were
primarily due to increased headcount and payroll and related expenses, including
additional recruiting, training and equipment needed for the increased headcount
in the first nine months of 2000 compared to the same period in 1999.
Selling, general and administrative (SG&A) expenses increased by
approximately $1.2 million, or 12.9%, to $10.7 million for the third quarter of
2000 compared to the same period in 1999. SG&A expenses increased by
approximately $4.3 million, or 15.9%, to $31.3 million for the first nine months
of 2000 compared to the same period in 1999. The increase for the third quarter
of 2000 was attributable to increases in headcount and payroll and related
expenses compared to the same period in 1999. The increase for the first nine
months of 2000 is due primarily to increases in headcount and payroll and
related expenses, increased expenses associated with new international
subsidiaries and increased marketing program expenses for advertising and
promotion of the Company's Ensemble(TM) product compared to the same period in
1999.
Other income in 2000 was derived primarily from interest income from
investments in commercial paper, corporate bonds, Eurodollar bonds, and similar
financial instruments, net of investment fees. Other income increased 39.2% for
the third quarter of 2000 compared to the same period in 1999, and increased
49.8% for the first nine months of 2000 compared to the same period in 1999.
The increase for the third quarter and first nine months of 2000 is primarily
due to the higher average cash, cash equivalents and marketable securities
balances and higher average yields compared to the same periods in 1999.
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 2000 at
an effective tax rate of 34%, which is lower than the combined federal and state
statutory tax rates due primarily to net operating loss carryforwards,
utilization of tax credits and benefits derived from the Company's foreign sales
corporation.
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 September 30, 2000, the Company's principal sources of liquidity were
its cash and cash equivalent balances of approximately $42.1 million, as well as
its marketable securities of approximately $25.5 million. At December 31, 1999,
the Company's cash and cash equivalent balances were approximately $34.4 million
and its marketable securities were approximately $30.8 million. The increase in
the cash and cash equivalent balances and the decrease in marketable securities
balances results from the Company not reinvesting certain investments as they
mature, to allow the Company to have adequate liquidity to fund repurchases of
common stock under the Company's stock repurchase program. During the third
quarter of 2000, the Company used approximately $6.5 million to repurchase
681,500 shares of its common stock.
Net cash provided by operating activities for the first nine months of 2000
was approximately $7.2 million, compared to approximately $10.1 million for the
first nine months of 1999. The decrease in cash provided by operating activities
for the first nine months of 2000 was due primarily to lower net income and a
decrease in accrued expenses of approximately $4.4 million partially offset by a
decrease in accounts receivable of approximately $1.4 million for the period.
The Company's primary investing activities were purchases and maturities of
marketable securities and purchases of property and equipment. Purchases and
maturities of marketable securities generated a net cash inflow of approximately
$5.3 million during the first nine months of 2000, compared to a net cash
outflow of approximately $5.6 million during the same period in 1999. The
reason for the decrease in the marketable securities balances results from the
Company not reinvesting certain investments as they mature, to allow the Company
to have adequate liquidity to fund repurchase of its common stock under the
Company's stock repurchase program. Property and equipment purchases were
approximately $3.2 million during the first nine months of 2000, compared to
approximately $2.6 million during the same period in 1999.
Cash used in financing activities during the first nine months of 2000
totaled approximately $732,000, and was primarily attributable to the repurchase
of 681,500 shares of the Company's common stock, which was partially offset by
cash provided from exercises of stock options and purchases of stock through the
Company's employee stock purchase plan.
At September 30, 2000, the working capital of the Company increased to
approximately $68.5 million from approximately $66.1 million as of December 31,
1999. This increase was primarily attributable to the higher total cash balance
resulting from the cash provided from operations and the proceeds from the
exercise of stock options during the first nine months of 2000.
12
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Management believes, based on its current operating plan, that the
Company's existing cash, cash equivalents and marketable securities balances and
cash generated from operations are sufficient to meet the Company's cash
requirements for the next twelve months.
YEAR 2000 IMPACT
For the first nine months of 2000, the Company has not yet experienced any
material problems with its computer systems relating to distinguishing twenty-
first century dates and twentieth century dates, which generally are referred to
as Year 2000 problems. The Company is also not aware of any material Year 2000
problems with its customers or vendors. Accordingly, the Company does not
anticipate incurring material expenses or experiencing any material operational
disruptions as a result of any Year 2000 problems.
13
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
ITEM 3: QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISKS
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Derivative Financial Instruments, Other Financial Instruments, and Derivative
Commodity Instruments.
As of September 30, 2000, the Company did not participate in any derivative
financial instruments or other financial and commodity instruments for which
fair value disclosure would be required under Statement of Financial Standards
(SFAS) No. 107. All of the Company's investments are short-term; commercial
paper, corporate bonds, Eurodollar bonds, and similar financial instruments that
are carried on the Company's books at amortized cost, which approximates fair
market value. Accordingly, the Company has no quantitative information
concerning the market risk of participating in such investments.
Primary Market Risk Exposures.
The Company's primary market risk exposures are in the areas of interest
rate risk and foreign currency exchange rate risk. The Company's investment
portfolio of cash equivalent and marketable securities is subject to interest
rate fluctuations, but the Company believes this risk is immaterial due to the
short-term nature of these investments.
The Company's exposure to currency exchange rate fluctuations has been and
is expected to continue to be modest due to the fact that the operations of its
international subsidiaries are almost exclusively conducted in their respective
local currencies. International subsidiary operating results are translated
into U.S. dollars and consolidated for reporting purposes. The impact of
currency exchange rate movements on intercompany transactions was immaterial for
the three months and nine months period ended September 30, 2000. The Company
does not currently engage in foreign currency hedging activities.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to historical information contained herein, this report
contains forward-looking statements concerning future expected financial and
operating results. 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, 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, the implementation of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 101; 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.
14
<PAGE>
PART II. OTHER INFORMATION
(Continued)
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, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
10 Transition and Retention Agreement for
Alphonse M. Lucchese, Chairman
27 Article 5 - Summary Financial Data Schedule
(b) No current reports on Form 8-K were filed during the quarter ended
September 30, 2000.
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: November 13, 2000 By: /s/ David M. Sample
-------------------
David M. Sample
President and Chief
Executive Officer (Principal
Executive Officer)
Date: November 13, 2000 By: /s/ Michael J. Provenzano III
-----------------------------
Michael J. Provenzano III
Vice President of Finance
and Chief Financial Officer
(Principal Financial Officer)
16
