SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
Amendment No. 1
on
Form 10-K/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 [No Fee Required]
For the transition period from to
Commission File No. 0-21519
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
----------------------------
Delaware
(State or other jurisdiction of 06-1295986
incorporation or organization) (I.R.S. Employer Identification No.)
225 High Ridge Road,
Stamford, Connecticut 06905
(Address of principal executive offices) (Zip Code)
(203) 329-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of Class)
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 (Section 229.405 of this Chapter) is not contained herein,
and will not be contained, to the best of 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. |X|
The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant as of February 24, 1998:
Common Stock, $.01 par value -- $270,387,356.25
The number of shares outstanding of the issuer's common stock as of
February 24, 1998 (adjusted to reflect three-for-two stock split to be effected
on March 9, 1998):
Common Stock, $.01 par value -- 13,418,257 shares
--------------------
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the Annual Meeting of Stockholders
to be held April 13, 1998 are incorporated by reference into Part III of this
Report.
================================================================================
<PAGE>
This Amendment No. 1 on Form 10-K/A to Annual Report on Form 10-K
originally filed with the Securities and Exchange Commission (the "Commission")
on March 10, 1998 (the "Form 10-K"), is being filed for the purposes of revising
footnote 11 to the Company's Consolidated Financial Statements contained in the
Form 10-K, revising the exhibit index and filing certain restated financial data
schedules as exhibits to the Form 10-K.
<PAGE>
Item 8--Financial Statements and Supplementary Data
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Auditors ................................................. 23
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1997 ................... 24
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997 .............................................. 26
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended
December 31, 1995, 1996 and 1997 .............................................. 27
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 .............................................. 29
Notes to Consolidated Financial Statements ..................................... 30
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
International Telecommunication Data Systems, Inc.
We have audited the accompanying consolidated balance sheets of International
Telecommunication Data Systems, Inc. as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Telecommunication Data Systems, Inc. at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 10, 1998,
except for information describing
the three-for-two stock split in Note 1
and Note 3 as to which the
date is February 23, 1998.
23
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 4,138,575 $28,967,173
Accounts receivable, net of allowance for doubtful
accounts of $52,370 and $486,422, respectively ............ 3,232,967 5,007,581
Securities available for sale, at market value .............. 25,023,454 --
Prepaid expenses and other current assets ................... 1,503,209 741,297
Deferred income taxes ....................................... 44,000 220,000
----------- -----------
Total current assets ................................... 33,942,205 34,936,051
Property and equipment:
Computers, including leased property under capital
leases of $1,863,103 and $1,104,507, respectively ......... 2,986,056 4,843,816
Furniture and fixtures, including leased property under
capital leases of $33,119 in 1996 and 1997 ................ 446,535 446,535
Equipment, including leased property under capital
leases of $53,508 in 1996 and 1997 ........................ 251,850 373,093
Leasehold improvements ...................................... 589,479 589,479
----------- -----------
4,273,920 6,252,923
Less: accumulated depreciation and amortization .............. 1,328,228 2,318,936
----------- -----------
2,945,692 3,933,987
Other assets:
Product development costs-at cost, net of accumulated
amortization of $586,215 and $1,104,613, respectively 1,343,727 3,697,726
Other ....................................................... 165,913 1,884,688
----------- -----------
1,509,640 5,582,414
----------- -----------
Total assets ........................................... $38,397,537 $44,452,452
=========== ===========
</TABLE>
See accompanying notes.
24
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--Continued
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 685,739 $ 1,191,825
Accrued expenses ......................................... 806,772 560,861
Accrued compensation ..................................... 272,059 332,700
Current maturities of capital lease obligations .......... 538,238 278,634
----------- -----------
Total current liabilities ........................... 2,302,808 2,364,020
Capital lease obligations ................................. 878,432 73,532
Deferred income taxes ..................................... 407,000 1,667,000
Other ..................................................... 91,879 29,580
Commitments and contingencies (Note 7) .................... -- --
Stockholders' equity
Common Stock, $.01 par value; 40,000,000 shares
authorized, 12,654,756 shares issued and outstanding
as of December 31, 1996, 12,786,740 shares issued
and outstanding as of December 31, 1997 ................ 126,548 127,868
Additional paid-in capital ............................... 43,790,517 44,447,507
Retained deficit ......................................... (8,826,674) (4,026,055)
Unearned compensation .................................... (336,000) (231,000)
Unrealized loss on securities available for sale ......... (36,973) --
----------- -----------
Total stockholders' equity ................................ 34,717,418 40,318,320
----------- -----------
Total liabilities and stockholders' equity ................ $38,397,537 $44,452,452
=========== ===========
</TABLE>
See accompanying notes.
25
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue .................................................. $10,820,815 $16,689,401 $23,428,810
Costs and expenses:
Operating expenses ...................................... 2,787,687 4,283,364 5,617,245
General, administrative and selling expenses ............ 4,601,242 6,522,900 6,760,053
Depreciation and amortization ........................... 640,917 1,053,472 1,595,706
Systems development and programming costs ............... 1,183,141 2,115,305 2,910,331
------------ ------------ ------------
Total costs and expenses ................................. 9,212,987 13,975,041 16,883,335
------------ ------------ ------------
Operating income ......................................... 1,607,828 2,714,360 6,545,475
Other income ............................................. 49,477 315,914 1,701,881
Interest expense ......................................... (452,925) (416,148) (120,355)
------------ ------------ ------------
Income before income tax expense and
extraordinary item ...................................... 1,204,380 2,614,126 8,127,001
Income tax expense ....................................... 378,786 1,111,788 3,326,382
------------ ------------ ------------
Income before extraordinary item ......................... 825,594 1,502,338 4,800,619
Extraordinary loss (net of $158,038 tax benefit) ......... (223,696) -- --
------------ ------------ ------------
Net income ............................................... $ 601,898 $ 1,502,338 $ 4,800,619
============ ============ ============
Income per common share--basic:
Income before extraordinary item ........................ $ .09 $ .15 $ .38
Extraordinary loss ...................................... (.03) -- --
------------ ------------ ------------
Net income ............................................... $ .06 $ .15 $ .38
============ ============ ============
Shares used in computing basic income per
common share ............................................ 9,291,257 9,889,809 12,728,214
============ ============ ============
Income per common share--diluted:
Income before extraordinary item ........................ $ .09 $ .15 $ .36
Extraordinary loss ...................................... (.03) -- --
------------ ------------ ------------
Net income ............................................... $ .06 $ .15 $ .36
============ ============ ============
Shares used in computing diluted income per
common share ............................................ 9,291,257 10,109,121 13,192,830
============ ============ ============
</TABLE>
See accompanying notes.
26
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock
-------------------------------------------------------
Class A Class B Common Stock
--------------------------- --------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994 as
previously reported 18 $400,400 1,500 $327,600 4,875,200 $51,248
Three-for-two stock
split effected in
the form of a
50% stock
dividend ................ 2,437,600 24,376
-- --------- ----- -------- --------- -------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Balance at
December 31, 1995 18 400,400 1,500 327,600 7,312,800 75,624
Net income ...............
Preferred stock
dividends
declared ................
Retirement of
treasury stock .......... (2,496)
Recapitalization of
Class A & B
preferred stock ......... (18) (400,400) (1,500) (327,600) 1,279,218 12,792
Compensation paid
in common stock 106,152 1,062
Conversion of Class
C convertible
preferred stock ......... 154,800 1,548
Exercise of warrants 501,786 5,018
<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1994 as
previously reported $ 28,112 $(400,030) $ (593,600) $ -- $-- $(186,270)
Three-for-two stock
split effected in
the form of a
50% stock
dividend ................ (24,376) --
---------- --------- ----------- ---------- --- ---------
Balance at
December 31,
1994 as restated
for the three-for-
two stock split ......... 28,112 (400,030) (617,976) (186,270)
Net income ............... 601,898 601,898
Preferred stock
dividends
declared ................ (28,112) (8,482) (36,594)
----------- -------- ----------- ----------- --- ---------
Balance at
December 31, 1995 -- (400,030) (24,560) -- 379,034
Net income ............... 1,502,338 1,502,338
Preferred stock
dividends
declared ................ (79,236) (79,236)
Retirement of
treasury stock .......... (397,534) 400,030 --
Recapitalization of
Class A & B
preferred stock ......... 10,115,424 (10,225,216) (825,000)
Compensation paid
in common stock 969,487 (336,000) 634,549
Conversion of Class
C convertible
preferred stock ......... 638,452 640,000
Exercise of warrants 817,941 822,959
</TABLE>
See accompanying notes.
27
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--Continued
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------------------------
Class A Class B Common Stock
------------------------- ------------------------- -------------------------
Number Number Number
of Shares $25,000 of Shares $250 of Shares
Outstanding Par Value Outstanding Par Value Outstanding Par Value
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses .............. 3,300,000 33,000
Net unrealized loss
on securities
available for sale
-- --- -- --- ---------- --------
Balance at
December 31, 1996 -- -- -- -- 12,654,756 126,548
Net income .............
Secondary sale of
common stock .......... 75,000 750
Employee stock
purchase plan ......... 9,078 91
Exercise of stock
options ............... 47,906 479
Amortization of
unearned
compensation ..........
Net unrealized gain
on securities
available for sale
-- --- -- --- ---------- --------
Balance at
December 31, 1997 -- $-- -- $-- 12,786,740 $127,868
== === == === ========== ========
<CAPTION>
Unearned Net Unrealized
Additional Treasury Retained Compensation Gain (Loss)
Paid-in Stock at Earnings Restricted on Securities
Capital Cost (Deficit) Stock Awards Held for Sale Total
-------------- ---------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sale of common
stock, net of
expenses .............. 31,646,747 31,679,747
Net unrealized loss
on securities
available for sale (36,973) (36,973)
---------- -- ---------- -------- ------- ----------
Balance at
December 31, 1996 43,790,517 -- (8,826,674) (336,000) (36,973) 34,717,418
Net income ............. 4,800,619 4,800,619
Secondary sale of
common stock .......... 172,126 172,876
Employee stock
purchase plan ......... 113,113 113,204
Exercise of stock
options ............... 371,751 372,230
Amortization of
unearned
compensation .......... 105,000 105,000
Net unrealized gain
on securities
available for sale 36,973 36,973
----------- -- ------------ ---------- ------- ----------
Balance at
December 31, 1997 $44,447,507 -- $ (4,026,055) $ (231,000) -- $40,318,320
=========== == ============ ========== ======= ===========
</TABLE>
See accompanying notes.
28
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1995 1996 1997
------------- --------------- ---------------
<S> <C> <C> <C>
Operating activities
Income before extraordinary loss ........................ $ 825,594 $ 1,502,338 $ 4,800,619
Adjustments to reconcile income before extraordinary
loss to net cash provided by operating activities:
Depreciation and amortization .......................... 640,917 1,053,472 1,595,706
Amortization of unearned compensation .................. -- -- 105,000
Compensation paid in Common Stock ...................... -- 634,549 --
Loss (gain) on disposal of equipment ................... --
Deferred income taxes .................................. (93,960) 612,079 1,084,000
Change in operating assets and liabilities:
Accounts receivable .................................. (457,609) (1,884,180) (1,774,614)
Prepaid expenses and other current assets ............ (236,378) (875,072) 413,717
Accounts payable and accrued expenses ................ 781,049 390,831 320,816
Other assets and liabilities, net .................... (157,659) 11,775 (1,788,785)
---------- ----------- -------------
Net cash provided by operating activities ............... 1,301,954 1,445,792 4,756,459
Investing activities
Capital expenditures .................................... (17,358) (1,852,701) (2,737,598)
Proceeds from sale of equipment ......................... 13,500 -- --
Purchase of securities available for sale ............... (245,069) (25,060,427) (25,328,551)
Purchase of investments held to maturity ................ -- (353,126) (3,062,361)
Proceeds from maturities of investments ................. 99,286 300,000 3,410,556
Proceeds from maturities of securities available
for sale ............................................... -- -- 50,388,977
Product development costs ............................... (479,316) (858,827) (2,872,397)
---------- ----------- -------------
Net cash (used for) provided by investing activities..... (628,957) (27,825,081) 19,798,626
Financing activities
Principal payments on long-term debt .................... (276,507) (1,811,273) --
Payment to retire Preferred Stock ....................... -- (825,000) --
Principal payments on notes payable ..................... (76,001) (76,958) --
Principal payments on capital lease obligations ......... (166,297) (362,223) (384,558)
Proceeds from sale of Common Stock ...................... -- 32,502,706 658,071
Proceeds from sale of Preferred Stock ................... 640,000 -- --
Dividends paid .......................................... (33,750) (82,080) --
---------- ----------- -------------
Net cash provided by (used for) financing
activities ............................................. 87,445 29,345,172 273,513
Net increase in cash and cash equivalents ............... 760,442 2,965,883 24,828,598
Cash and cash equivalents at beginning of year .......... 412,250 1,172,692 4,138,575
---------- ----------- -------------
Cash and cash equivalents at end of year ................ $1,172,692 $ 4,138,575 $ 28,967,173
========== =========== =============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest .................. $ 447,241 $ 434,092 $ 120,355
Cash paid during the year for taxes ..................... $ 419,700 $ 819,897 $ 2,342,081
</TABLE>
Supplemental disclosure of noncash financing activities:
Capital lease obligations totaling $960,059 and $685,604 in the years ended
December 31, 1995 and 1996, respectively, were incurred for the acquisition of
new equipment. No leases were entered into in 1997.
See accompanying notes.
29
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
ITDS is a leading provider of comprehensive transactional billing and
management information solutions to providers of wireless and satellite
telecommunications services. The Company uses its proprietary software
technology to develop billing solutions which address customer requirements as
they evolve, regardless of the market segment, geographic area or mix of
network features and billing options. Typically, the Company provides its
services under contracts with terms ranging from two to five years, and bills
customers monthly, on a per-subscriber basis. As a result, substantially all of
the Company's revenue is recurring in nature, and increases as a provider's
subscriber base grows.
Basis of Presentation
Stock Split
The Company effected a three-for-two stock split in the form of a 50%
stock dividend, to be distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives of the
assets.
The Company capitalizes software development costs incurred in the
development of software used in its product and service line only after
establishing commercial and technical viability and ceases when the product is
available for general release. The capitalized costs include salaries and
related payroll costs incurred in the development activities. Software
development costs are carried at cost less accumulated amortization.
Amortization is computed by using the greater of the amount that results from
applying the ratio that current revenue for the product bears to total revenue
for the product or the straight-line method over the remaining useful life of
the product. Generally, such deferred costs are amortized over five years.
During the years ended December 31, 1995, 1996 and 1997, $166,292, $300,105 and
$518,398, respectively, of capitalized software development costs were
amortized.
Revenue Recognition
Revenues and costs associated with the recurring process of providing
billing and other service/ software solutions are recognized at the time
services are performed. License fees and related costs are recognized upon
execution of the licensing agreement and delivery of the software to the
customer, provided that the Company has no significant related obligations or
collection uncertainties remaining. Where there are significant obligations
related to the development and enhancement of the software, license fees are
recorded over the expected installation period or the term of the respective
contract. As of December 31, 1997, other assets includes approximately $865,000
for installation and related services that are being recorded over the
installation period. In addition, accounts receivable at December 31, 1996 and
1997 include $1,278,412 and $2,296,451, respectively, for services rendered
prior to December 31 which were billed in January of the following year when the
billing cycles were complete.
In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("FAS 121"). FAS 121, which was adopted in 1996, requires companies to
investigate potential impairments of long-lived assets on an exception basis,
when there is evidence that events or changes in circumstances have made
recovery of an asset's carrying value unlikely. The adoption of FAS 121 has not
had a material effect on the Company's financial position or results of
operations.
30
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Consolidation
The financial statements include the accounts of ITDS and consolidated
subsidiaries after elimination of intercompany accounts and transactions.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses
for the years ended December 31, 1995, 1996, and 1997 were $115,835, $194,097,
and $233,673, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts and disclosures reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications:
Certain reclassifications were made to conform prior years' data to the
current year's presentation.
Major Customers
Revenues generated from two customers accounted for approximately 15.2%
and 12.7% of 1995 revenues, 19.1% and 12.5% of 1996 revenues and 18.4% and
11.7% of 1997 revenues.
New Accounting Pronouncements
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("FAS 130") and SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 130 and FAS 131 are effective for
financial statements for fiscal years beginning after December 15, 1997. In
addition, in October 1997 AcSEC issued Statement of Position 97-2 "Software
Revenue Recognition" which is effective for transactions entered in fiscal
years beginning after December 15, 1997. The Company is studying the
application of the new standards to evaluate the effect on the Company's
financial statements.
2. INVESTMENTS
Prepaid expenses and other current assets includes short-term investments
of $348,195 as of December 31, 1996. These investments are recorded at cost
plus accrued interest (approximates market) and consist of United States
Treasury Bills, maturing on or before April 3, 1997. These short-term
investments are classified as held to maturity.
Securities available for sale at December 31, 1996 consisted of United
Stated Treasury Notes with a 6% coupon rate maturing on August 15, 1999. These
securities are recorded at fair value. The unrealized gains or loss, net of tax
are reported in a separate component of stockholder equity. During 1997, these
investments were disposed of and invested in cash equivalents.
Other income for the years ended December 31, 1995, 1996 and 1997 includes
$20,269, $313,132 and $1,646,630, respectively, of investment income.
31
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. CAPITAL STOCK
Stock Split
The Company effected a three-for-two stock split, in the form of a 50%
stock dividend, distributed on March 9, 1998 to stockholders of record on
February 23, 1998. Accordingly, all share and per share amounts have been
adjusted to reflect this split.
Public Offerings
The Company completed its Initial Public Offering ("IPO") in October 1996.
The Company sold 3 million shares at $10.67 per share, resulting in proceeds to
the Company of approximately $28.7 million, after deducting expenses. In
addition, on November 18, 1996 the Company received approximately $3.0 million,
net of expenses, upon the exercise of the underwriters' over-allotment option
to purchase 300,000 shares of Common Stock from the Company in connection with
the IPO.
In connection with the IPO, the Company's Certificate of Incorporation was
amended to authorize the issuance of up to 40,000,000 shares of Common Stock,
$.01 par value per share and the issuance of up to 2,000,000 shares of
Preferred Stock, $.01 par value per share.
A portion of the proceeds from the Company's IPO were used to retire
substantially all of the Company's outstanding debt. In addition, the Company's
Class A and B Preferred Stock was retired and the holders of such shares were
issued an aggregate of 1,279,218 shares of the Company's Common Stock and were
paid an aggregate amount of $825,000. The distribution of the 1,279,218 shares
of the Company's Common Stock, valued at $8 per share, for an aggregate of
$10.2 million, resulted in a one-time, noncash charge to retained earnings and
a corresponding increase to additional paid-in-capital. Further, immediately
prior to the IPO, Connecticut Innovations Incorporated ("CII") exercised
outstanding warrants to purchase 501,786 shares of the Company's Common Stock
at an aggregate purchase price of $822,959. In addition, upon the closing of
the IPO all of the outstanding shares of Series C Preferred Stock of the
Company (all of which were held by CII) converted into an aggregate of 154,800
shares of Common Stock.
During April 1997, the Company received net proceeds of $172,876 from the
sale of 75,000 shares of its Common Stock in a follow-on offering.
Earnings Per Share
In February 1997, the FASB issued Statement of Financial Accounting
Standards SFAS No. 128, "Earnings Per Share" FAS 128, which revises the
methodology of calculating earnings per share. The Company adopted FAS 128 in
the fourth quarter of 1997. All earnings per share amounts for all periods have
been presented in accordance with and where appropriate, restated to conform to
the FAS No. 128 requirements.
32
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. CAPITAL STOCK (Continued)
The following table set forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings
per share--earnings before extraordinary
item ................................... $ 825,594 $ 1,502,338 $ 4,800,619
=========== =========== ===========
Denominator:
Denominator for basic earnings per
share--weighted-average shares ......... 9,291,257 9,889,809 12,728,214
Effect of dilutive securities:
Employee stock options ................ -- 219,312 464,616
----------- ----------- -----------
Denominator for diluted earnings per
share--adjusted weighted-average shares
and assumed conversions ................ 9,291,257 10,109,121 13,192,830
=========== =========== ===========
Basic income per common share before
extraordinary item ....................... $ .09 $ .15 $ .38
=========== =========== ===========
Diluted income per common share before
extraordinary item ....................... $ .09 $ .15 $ .36
=========== =========== ===========
</TABLE>
Income per common share for the years ended December 31, 1995 and 1996 is
calculated using the weighted average number of shares of common stock
outstanding after giving effect to the retirement of the Company's Class A and
B Preferred Stock and the conversion of the Series C Preferred Stock in
conjunction with the Company's IPO.
Supplemental earnings per share, assuming, at the beginning of the
respective periods, the exercise of the warrants, the redemption and conversion
of all outstanding preferred stock, and the sale of Common Stock, the proceeds
of which were used for debt retirement, are as follows:
Year ended December 31,
1995 1996
--------- ---------
Basic:
Income before extraordinary item ......... $ .11 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .09 $ .16
====== =====
Diluted:
Income before extraordinary item ......... $ .09 $ .16
Extraordinary item ....................... (.02) --
------ -----
Net income ............................... $ .07 $ .16
====== =====
33
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. STOCK PLANS
The Company's 1996 and 1997 Stock Incentive Plans authorize the grant of
options to employees, directors and consultants for up to 1,500,000 shares and
1,125,000 shares, respectively, of the Company's Common Stock. All options
granted have 10 year terms and vest and become fully exercisable at the end of
4 years of continued employment. In addition, a total of 300,000 shares of
Common Stock have been authorized for issuance under the Company's 1996
Employee Stock Purchase Plan.
Under the employee stock purchase plan, shares of the Company's Common
Stock may be purchased at six-month intervals at 85% of the lower of the fair
market value on the first or the last business day of each six-month period.
Employees may purchase shares having a value not exceeding 10% of their gross
compensation, up to $25,000 of the fair market value of such Common Stock,
during an offering period.
A summary of the Company's activity in the stock options plans, and
related information for the years ended December 31, 1995, 1996, and 1997
follows:
<TABLE>
<CAPTION>
Weighted-Average
Options Exercise Price
------------ -----------------
<S> <C> <C>
Outstanding at December 31, 1995 ................. -- --
Granted .......................................... 590,550 $ 9.29
Forfeited ........................................ 2,250 $ 9.33
------- -------
Outstanding at December 31, 1996 ................. 588,300 $ 9.29
Granted .......................................... 2,607,643 $ 12.33
Exercised ........................................ 47,910 $ 7.77
Cancelled ........................................ 534,750 $ 7.78
Forfeited ........................................ 124,184 $ 7.88
--------- -------
Outstanding at December 31, 1997 ................. 2,489,099 $ 12.33
========= =======
Options exercisable at December 31, 1997 ......... 111,583 $ 9.19
Options exercisable at December 31, 1996 ......... 24,093 $ 12.24
</TABLE>
In May 1997, 534,750 options previously issued were exchanged for new
options covering an equal number of shares and an exercise price equal to the
then current market price. The previously issued options were included in the
number of shares granted for 1997.
Options Outstanding
- --------------------------------------------------------------------------------
Weighted-Average
Range of Outstanding Remaining Weighted-Average
Exercise Prices as of 12/31/97 Contractual Life Exercise Price
- -------------------------- ---------------- ------------------ -----------------
$7.50--$10.00.......... 844,651 8.9 $ 7.75
$10.00--$12.50......... 198,750 9.4 11.50
$12.50--$15.00......... 0 0 0
$15.00--$17.50......... 1,445,698 9.9 15.48
--------- --- -------
2,489,099 9.5 $ 12.54
========= === =======
Exercise prices for options outstanding as of December 31, 1997 ranged
from $7.75 to $16 per share. The weighted average remaining contractual life of
those options is 9.5 years.
34
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. STOCK PLANS (Continued)
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, if the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of the
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Risk-free interest rate ................................ 5.0% 5.0%
Dividend yield ......................................... 0 0
Expected volatility of market price of company's
common stock .......................................... .71 .63
Expected option life ................................... 5 years 5 years
Weighted average fair value per share of options granted
during year ........................................... $4.86 $7.31
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Pro forma net income .......................... $ 1,189,597 $ 3,441,094
=========== ===========
Pro forma earnings per share:
Pro forma basic earnings per share ............ $ .12 $ .27
Pro forma diluted earnings per share .......... $ .12 $ .26
</TABLE>
5. DEFERRED COMPENSATION
In accordance with the terms of his employment agreement, as amended on
September 30, 1996, an employee became entitled to receive a payment of
$275,000 on or before December 31, 1996 and, as a result of the public offering
of the Company's Common Stock, the right to purchase 27,500 shares of the
Company's Common Stock for $.01 per share. In addition, during 1996 an employee
was given the right to purchase 42,652 shares of the Company's Common Stock for
$.01 per share. During 1996, these employees acquired the shares and the
difference between the exercise price and the fair value on the date of grant
was charged to compensation expense. In connection with an employment
35
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. DEFERRED COMPENSATION (Continued)
agreement entered into during 1996, an employee was awarded 36,000 shares of
the Company's Common Stock with a fair value of $336,000 when awarded. The
shares vest 25% on April 1, 1997, 25% on October 31, 1998, 25% on October 31,
1999, and 25% on October 31, 2000. The fair value of the shares on the date of
award is being amortized as compensation expense over the vesting period.
6. CAPITALIZED LEASE OBLIGATIONS
The Company leases computer equipment and office furniture under capital
leases expiring in various years through 1999. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. Depreciation of assets under
capital leases is included in depreciation expense.
Maturities of capital lease obligations are as follows as of December 31,
1997:
1998 ............................................ $322,030
1999 ............................................ 71,935
--------
Total lease obligations ......................... 393,965
Less: amount representing interest .............. 41,799
--------
Present value of minimum lease payments ......... $352,166
========
7. COMMITMENTS AND CONTINGENCIES
On June 11, 1996, the Company entered into a noncancelable lease expiring
on August 31, 2000 for 48,222 square feet of office space in Stamford,
Connecticut. In connection therewith, the Company obtained a letter of credit
in the initial amount of $362,000 as security for the lease. Minimum future
rental payments due under such lease are $723,330 per year.
The Company also leases Connecticut office facilities under a
noncancelable operating lease expiring in April 1999. The Company recognizes
rental expense on a straight line basis over the term of the lease. Rent
expense was $330,914, $591,729 and $738,582 for the years ended December 31,
1995, 1996 and 1997, respectively.
Minimum future rental payments due under such leases as of December 31,
1997 are as follows:
1998 .......................... $ 929,521
1999 .......................... 773,237
2000 .......................... 482,220
----------
2,184,978
Less: sublease income ......... (266,850)
----------
$1,918,128
==========
The Company is also obligated to pay utilities and property taxes above
the landlords' base year costs.
The Company has entered into employment contracts with various officers
and other employees. The contracts expire in one to four years and require the
Company to pay base compensation of approximately $2.1 million per year plus
benefits. The contracts provide for discretionary bonuses if
36
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. COMMITMENTS AND CONTINGENCIES (Continued)
approved by the Board of Directors. In addition, as of December 31, 1997, the
Company has loans to officers aggregating $264,653.
The Company maintains an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than $9,500 and $10,000 for 1996 and 1997 calendar
years. The Company does not contribute to the plan.
8. EXTRAORDINARY ITEM
On June 30, 1995 the Company refinanced existing debt with CII. In doing
so, the Company recorded an extraordinary loss of $223,696 which is net of a
$158,038 tax benefit. Such extraordinary loss was due to a negotiated
acceleration of payments due to early termination of the debt agreement.
9. INCOME TAXES
Significant components of income tax expense (benefit) before
extraordinary item are as follows:
Year ended December 31,
-------------------------------------------
1995 1996 1997
----------- ------------- -------------
Current:
Federal .................. $344,360 $ 381,376 $1,667,132
State .................... 128,386 118,333 575,250
-------- ---------- ----------
472,746 499,709 2,242,382
-------- ---------- ----------
Deferred:
Federal .................. (62,640) 436,659 805,916
State .................... (31,320) 175,390 278,084
-------- ---------- ----------
(93,960) 612,079 1,084,000
-------- ---------- ----------
Total tax expense ......... $378,786 $1,111,788 $3,326,382
======== ========== ==========
A reconciliation of the applicable federal statutory rate to the Company's
effective tax (benefit) rate from income before income tax expense and
extraordinary item follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Statutory rate .............................. 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit .................................... 5.3 7.4 6.9
Debt consolidation expenses ................. (10.1) -- --
Other, net .................................. 2.3 1.1 --
----- ---- ----
31.5% 42.5% 40.9%
===== ==== ====
</TABLE>
37
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. INCOME TAXES (Continued)
Significant components of the Company's deferred tax assets and
liabilities are as follows:
December 31,
----------------------------
1996 1997
------------ -------------
Deferred tax liabilities:
Software development costs ............ $ 798,862 $1,965,598
Capitalized leases .................... 382,521 537,081
--------- ----------
Total deferred tax liabilities ......... 1,181,383 2,502,679
--------- ----------
Deferred tax assets:
Deferred charges ...................... 46,092 28,786
Depreciation and amortization ......... 719,748 819,855
Accrued compensation .................. 26,937 4,319
Reserve for doubtful accounts ......... 21,521 199,093
Interest .............................. 4,085 3,626
--------- ----------
Total deferred tax assets .............. 818,383 1,055,679
--------- ----------
Net deferred tax liability ............. $ 363,000 $1,447,000
========= ==========
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of
operations for the two years ended December 31, 1997 (in thousands, except
per-share data):
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue .............................. $5,270 $5,362 $6,039 $6,758
Gross profit ......................... 1,439 1,421 1,659 2,027
Net income ........................... 1,062 1,078 1,240 1,420
Basic net income per share ........... .08 .08 .10 .11
Diluted net income per share ......... .08 .08 .09 .11
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue ..................... $3,934 $3,931 $4,139 $4,685
Operating income ............ 1,054 877 (273) 1,056
Net income (loss) ........... 549 445 (240) 748
Basic net income (loss) per
share ...................... .06 .05 (.03) .07
Diluted net income (loss) per
share ...................... .06 .05 (.03) .07
</TABLE>
The sum of the quarters' net income per share may not equal the full year
per-share amounts due to rounding differences resulting from changes in the
number of shares of Common Stock outstanding.
During the third quarter of 1996, the Company incurred a one-time charge
for compensation related to two newly hired employees of $909,548 or $.07 per
share ($.07 per share--diluted). The fourth quarter of 1996 includes a one-time
charge associated with the IPO of $200,000 or $.02 per share ($.01 per
share--diluted).
38
<PAGE>
INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. SUBSEQUENT EVENTS
On January 2, 1998, the Company acquired TRIS, a provider of billing and
care software and services, from Computer Sciences Corporation, in a
transaction accounted for in accordance with the purchase method of accounting,
by acquiring all of the outstanding Capital Stock of CSC Intelicom Inc. (now
known as ITDS Intelicom Services, Inc.). The purchases price consisted of
606,674 shares of Common Stock of the Company valued at $10,000,000 and
$75,826,777 in cash. A portion of the cash purchase price for TRIS was obtained
by the Company under a Credit Agreement dated January 2, 1998, with certain
lenders and Lehman Commercial Paper, Inc., as Administrative Agent and Arranger
(the "Credit Agreement"), that provides for a $70 million term loan and a $30
million line of credit.
The credit agreement contains normal covenants which include meeting
certain financial ratios, requires the Company to pay interest at LIBOR plus
two and one quarter percent and requires payments of interest only through
March 30, 2000. At which time periodic principal, payments will become due.
The purchase price in excess of the fair market value of the assets
acquired of approximately $57 million will be amortized over 15 years. In
addition, purchased research and development costs of approximately $21 million
before income tax benefit and other indirect transaction related costs of
approximately $5 million before income tax benefit will be expensed in the
first quarter of 1998. The fair value of the purchased research and development
costs was determined based on an independent valuation. The $21 million and $5
million discussed above have been excluded from the pro forma calculation for
the year ended December 31, 1997.
Pro Forma Financial Information (Unaudited)
For the year ended March 28, 1997 and the nine months ended December 31,
1997, TRIS had revenues and net income (loss) of $42.2 million and $3.0 million
and $39.8 million and $(1.9) million, respectively. Assuming the acquisition
had occurred as of January 1, 1997, pro forma revenues, net income and basic
net income per share and diluted net income per share would have been $80.4
million, $5.2 million, $.39 per share and $.37 per share, respectively.
Two customers accounted for 36% and 11% of TRIS' total revenues for the
nine months ended December 31, 1997. For the year ended March 28, 1997, these
two customers accounted for 17% and 13% of TRIS' total revenues.
Legal Proceedings
Neither ITDS nor any of its subsidiaries is currently party to any
material legal proceedings. However, ITDS Intelicom Services, Inc., a
wholly-owned subsidiary of the Company acquired in January 1998 from Computer
Sciences Corporation ("CSC"), is party to litigation and has been threatened
with litigation in connection with the operation of its business prior to its
acquisition by the Company. Pursuant to the terms of the acquisition, CSC and
certain of its affiliates are obligated to defend and indemnify the Company
against any obligations arising out of such litigation or threatened
litigation.
39
<PAGE>
PART IV
Item 14--Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of this Report on Form 10-K:
3. Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are as
follows:
EXHIBIT
NUMBER DESCRIPTION
*2 Stock Purchase Agreement, dated as of December 29, 1997 by and
among the Registrant, CSC Intelicom, Inc. and CSC Domestic
Enterprises, Inc.
**3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 By-Laws of the Registrant.
**+ 10.1 Form of 1996 Equity Incentive Plan.
**+ 10.2 1996 Employee Stock Purchase Plan.
***+10.3 1997 Stock Incentive Plan, as amended.
***+10.4 1998 Stock Incentive Plan.
***+10.5 Amended and Restated Employment Agreement between the
Registrant and Barry K. Lewis, dated as of April 1997.
***+10.6 Employment Agreement between the Registrant and Peter P.
Bassermann, dated as of September 3, 1997, and amendment
thereto, dated as of January 1, 1998.
***+10.7 Employment Agreement between the Registrant and Lewis D. Bakes,
dated as of January 1, 1998.
***+10.8 Employment Agreement between the Registrant and Peter L.
Masanotti, dated as of January 1, 1998.
***+10.9 Employment Agreement between the Company and Paul K. Kothari,
dated as of December 29. 1997.
***+10.10 Employment Agreement between the Company and Susan Yezzi, dated
as of December 23, 1997.
**10.11 Stock Purchase Agreement dated December 11, 1995, as amended,
between the Registrant and Connecticut Innovations,
Incorporated relating to Class C Convertible Preferred Stock.
**10.12 Form of Lease between the Company and 969 Associates, dated
December 1990.
**10.13 Sublease dated June 11, 1996 between the Registrant and
Learning International, relating to 225 High Ridge Road,
Stamford, Connecticut.
***10.14 Lease dated January 1996 between Par 3 Development, L.L.C. and
CSC Intelicom, Inc. (now known as ITDS Intelicom Services, Inc.).
***10.15 Lease dated September 19, 1996 between Par 3 Development,
L.L.C. and CSC Intelicom, Inc. (now known as ITDS Intelicom
Services, Inc.).
***10.16 Credit Agreement dated as of January 2, 1998 among the
Registrant, the Subsidiary Guarantors Party thereto and Lehman
Commercial Paper Inc.
***10.17 Security Agreement, dated as of January 2, 1998 among the
Registrant, each of the subsidiaries of the Registrant, and
Lehman Commercial Paper Inc.
***10.18 Guarantee Assumption Agreement, dated as of January 2, 1998 by
ITDS Intelicom Services, Inc. in favor of Lehman Commercial
Paper Inc.
***21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
-4-
<PAGE>
27.1 Restated Financial Data Schedule, relating to Form 10-K for the
period ended December 31, 1997, as originally filed with the
Commission on March 10, 1998.
27.2 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended September 30, 1997, as originally filed with the
Commission on November 3, 1997.
27.3 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended June 30, 1997, as originally filed with the
Commission on August 7, 1997.
27.4 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended March 31, 1997, as originally filed with the
Commission on May 13, 1997.
27.5 Restated Financial Data Schedule, relating to Form 10-K for
the period ended December 31, 1996, as originally filed with
the Commission on February 28, 1997.
27.6 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended September 30, 1996, as originally filed with the
Commission on December 6, 1996.
- ----------
* Incorporated by reference to the Registrant's Report on Form 8-K
originally filed with the Commission on January 13, 1998.
** Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333-11045), as amended, originally filed with the
Commission on August 29, 1996.
*** Incorporated by reference to the Registrant's Report on Form 10-K,
originally filed with the Commission on March 10, 1998.
+ Management Contract or Compensatory Plan.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL TELECOMMUNICATION
DATA SYSTEMS, INC.
/s/ Peter P. Bassermann
------------------------------------
Peter P. Bassermann
President
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.
Signature Title Date
/s/ Peter P. Bassermann
- --------------------------- President, Chief Executive
Peter P. Bassermann Officer and Director March 27, 1998
(Principal Executive
Officer)
/s/ Paul K. Kothari
- --------------------------- Chief Financial Officer
Paul K. Kothari (Principal Financial and March 27, 1998
Accounting Officer)
/s/ Lewis D. Bakes
- --------------------------- Director March 30, 1998
Lewis D. Bakes
/s/ Stuart L. Bell
- --------------------------- Director March 30, 1998
Stuart L. Bell
/s/ Stephen J. Saft
- --------------------------- Director March 26, 1998
Stephen J. Saft
/s/ Peter L. Masanotti
- ---------------------------
Peter L. Masanotti Director March 27, 1998
-6-
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
*2 Stock Purchase Agreement, dated as of December 29, 1997 by and
among the Registrant, CSC Intelicom, Inc. and CSC Domestic
Enterprises, Inc.
**3.1 Certificate of Incorporation of the Registrant, as amended.
**3.2 By-Laws of the Registrant.
**+ 10.1 Form of 1996 Equity Incentive Plan.
**+ 10.2 1996 Employee Stock Purchase Plan.
***+10.3 1997 Stock Incentive Plan, as amended.
***+10.4 1998 Stock Incentive Plan.
***+10.5 Amended and Restated Employment Agreement between the
Registrant and Barry K. Lewis, dated as of April 1997.
***+10.6 Employment Agreement between the Registrant and Peter P.
Bassermann, dated as of September 3, 1997, and amendment
thereto, dated as of January 1, 1998.
***+10.7 Employment Agreement between the Registrant and Lewis D. Bakes,
dated as of January 1, 1998.
***+10.8 Employment Agreement between the Registrant and Peter L.
Masanotti, dated as of January 1, 1998.
***+10.9 Employment Agreement between the Company and Paul K. Kothari,
dated as of December 29. 1997.
***+10.10 Employment Agreement between the Company and Susan Yezzi, dated
as of December 23, 1997.
**10.11 Stock Purchase Agreement dated December 11, 1995, as amended,
between the Registrant and Connecticut Innovations,
Incorporated relating to Class C Convertible Preferred Stock.
**10.12 Form of Lease between the Company and 969 Associates, dated
December 1990.
**10.13 Sublease dated June 11, 1996 between the Registrant and
Learning International, relating to 225 High Ridge Road,
Stamford, Connecticut.
***10.14 Lease dated January 1996 between Par 3 Development, L.L.C. and
CSC Intelicom, Inc. (now known as ITDS Intelicom Services, Inc.).
***10.15 Lease dated September 19, 1996 between Par 3 Development,
L.L.C. and CSC Intelicom, Inc. (now known as ITDS Intelicom
Services, Inc.).
***10.16 Credit Agreement dated as of January 2, 1998 among the
Registrant, the Subsidiary Guarantors Party thereto and Lehman
Commercial Paper Inc.
***10.17 Security Agreement, dated as of January 2, 1998 among the
Registrant, each of the subsidiaries of the Registrant, and
Lehman Commercial Paper Inc.
***10.18 Guarantee Assumption Agreement, dated as of January 2, 1998 by
ITDS Intelicom Services, Inc. in favor of Lehman Commercial
Paper Inc.
***21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27.1 Restated Financial Data Schedule, relating to Form 10-K for the
period ended December 31, 1997, as originally filed with the
Commission on March 10, 1998.
27.2 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended September 30, 1997, as originally filed with the
Commission on November 3, 1997.
27.3 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended June 30, 1997, as originally filed with the
Commission on August 7, 1997.
27.4 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended March 31, 1997, as originally filed with the
Commission on May 13, 1997.
27.5 Restated Financial Data Schedule, relating to Form 10-K for
the period ended December 31, 1996, as originally filed with
the Commission on February 28, 1997.
-7-
<PAGE>
27.6 Restated Financial Data Schedule, relating to Form 10-Q for the
period ended September 30, 1996, as originally filed with the
Commission on December 6, 1996.
- ----------
* Incorporated by reference to the Registrant's Report on Form 8-K
originally filed with the Commission on January 13, 1998.
** Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 333-11045), as amended, originally filed with the
Commission on August 29, 1996.
*** Incorporated by reference to the Registrant's Report on Form 10-K,
originally filed with the Commission on March 10, 1998.
-8-
Exhibit 23
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-21287) pertaining to the 1996 Stock Incentive Plan of
International Telecommunication Data Systems, Inc., in the Registration
Statement (Form S-8 No. 333-21283) pertaining to the 1996 Employee Stock
Purchase Plan of International Telecommunication Data Systems, Inc. and in the
Registration Statement (Form S-8 No. 333-47865) pertaining to the 1997 Stock
Incentive Plan of International Telecommunication Data Systems, Inc. of our
report dated February 10, 1998, except for information describing the
three-for-two stock split in Note 1 and Note 3 as to which the date is February
23, 1998, with respect to the financial statements of International
Telecommunication Data Systems, Inc. included in the Annual Report (Form
10-K/A) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Stamford, Connecticut
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
This schedule contains summary financial information extracted from the audited
balance sheets for the year ended December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000867889
<NAME> INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 28,967,173
<SECURITIES> 0
<RECEIVABLES> 5,007,581
<ALLOWANCES> 486,422
<INVENTORY> 0
<CURRENT-ASSETS> 34,936,051
<PP&E> 6,252,923
<DEPRECIATION> 2,318,936
<TOTAL-ASSETS> 44,452,452
<CURRENT-LIABILITIES> 2,364,020
<BONDS> 0
0
0
<COMMON> 127,868
<OTHER-SE> 40,190,452
<TOTAL-LIABILITY-AND-EQUITY> 44,452,452
<SALES> 23,428,810
<TOTAL-REVENUES> 23,428,810
<CGS> 0
<TOTAL-COSTS> 5,617,245
<OTHER-EXPENSES> 11,266,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120,355
<INCOME-PRETAX> 8,127,001
<INCOME-TAX> 3,326,382
<INCOME-CONTINUING> 4,800,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,800,619
<EPS-PRIMARY> .38
<EPS-DILUTED> .36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 3,715,309 3,715,309
<SECURITIES> 25,499,540 25,499,540
<RECEIVABLES> 5,389,401 5,389,401
<ALLOWANCES> 136,422 136,422
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,241,929 35,241,929
<PP&E> 6,053,198 6,053,198
<DEPRECIATION> 2,089,003 2,089,003
<TOTAL-ASSETS> 41,965,880 41,965,880
<CURRENT-LIABILITIES> 2,153,108 2,153,108
<BONDS> 0 0
0 0
0 0
<COMMON> 85,048 85,048
<OTHER-SE> 38,561,512 38,561,512
<TOTAL-LIABILITY-AND-EQUITY> 41,965,880 41,965,880
<SALES> 0 0
<TOTAL-REVENUES> 6,038,577 16,670,950
<CGS> 0 0
<TOTAL-COSTS> 1,309,159 3,993,543
<OTHER-EXPENSES> 3,070,020 8,158,756
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 23,873 101,100
<INCOME-PRETAX> 2,099,907 5,723,196
<INCOME-TAX> 859,492 2,342,504
<INCOME-CONTINUING> 1,240,415 3,380,692
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,240,415 3,380,692
<EPS-PRIMARY> .10 .26
<EPS-DILUTED> .09 .26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 2,290,884 2,290,884
<SECURITIES> 25,706,039 25,706,039
<RECEIVABLES> 4,140,606 4,140,606
<ALLOWANCES> 133,291 133,291
<INVENTORY> 0 0
<CURRENT-ASSETS> 33,443,507 33,443,507
<PP&E> 5,611,357 5,611,357
<DEPRECIATION> 1,823,737 1,823,737
<TOTAL-ASSETS> 39,478,353 39,478,353
<CURRENT-LIABILITIES> 1,438,317 1,438,317
<BONDS> 0 0
0 0
0 0
<COMMON> 84,869 84,869
<OTHER-SE> 37,009,921 37,009,921
<TOTAL-LIABILITY-AND-EQUITY> 39,478,353 39,478,353
<SALES> 0 0
<TOTAL-REVENUES> 5,362,006 10,632,373
<CGS> 0 0
<TOTAL-COSTS> 1,363,854 2,684,384
<OTHER-EXPENSES> 2,577,501 5,088,736
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 28,370 77,227
<INCOME-PRETAX> 1,819,881 3,623,289
<INCOME-TAX> 741,811 1,483,012
<INCOME-CONTINUING> 1,078,070 2,140,277
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,078,070 2,140,277
<EPS-PRIMARY> .08 .17
<EPS-DILUTED> .08 .16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,771,582
<SECURITIES> 27,900,105
<RECEIVABLES> 3,534,711
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 34,076,571
<PP&E> 5,179,801
<DEPRECIATION> 1,563,155
<TOTAL-ASSETS> 39,536,178
<CURRENT-LIABILITIES> 3,023,269
<BONDS> 0
0
0
<COMMON> 84,369
<OTHER-SE> 35,582,791
<TOTAL-LIABILITY-AND-EQUITY> 39,536,178
<SALES> 0
<TOTAL-REVENUES> 5,270,367
<CGS> 0
<TOTAL-COSTS> 1,320,530
<OTHER-EXPENSES> 2,511,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,857
<INCOME-PRETAX> 1,803,408
<INCOME-TAX> 741,201
<INCOME-CONTINUING> 1,062,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,062,207
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED BALANCE SHEETS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000867889
<NAME> INTERNATIONAL TELECOMMUNICATION DATA SYSTEMS
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,138,575
<SECURITIES> 25,023,454
<RECEIVABLES> 3,232,967
<ALLOWANCES> 52,370
<INVENTORY> 0
<CURRENT-ASSETS> 33,942,205
<PP&E> 4,273,920
<DEPRECIATION> 1,328,228
<TOTAL-ASSETS> 38,397,537
<CURRENT-LIABILITIES> 2,302,808
<BONDS> 0
0
0
<COMMON> 84,365
<OTHER-SE> 34,633,053
<TOTAL-LIABILITY-AND-EQUITY> 38,397,537
<SALES> 16,689,401
<TOTAL-REVENUES> 16,689,401
<CGS> 0
<TOTAL-COSTS> 4,283,364
<OTHER-EXPENSES> 9,691,677
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416,148
<INCOME-PRETAX> 2,614,126
<INCOME-TAX> 1,111,788
<INCOME-CONTINUING> 1,502,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,502,338
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 625,670 625,670
<SECURITIES> 344,415 344,415
<RECEIVABLES> 2,704,650 2,704,650
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,411,277 4,411,277
<PP&E> 3,201,416 3,201,416
<DEPRECIATION> 1,207,839 1,207,839
<TOTAL-ASSETS> 7,904,001 7,904,001
<CURRENT-LIABILITIES> 2,163,824 2,163,824
<BONDS> 0 0
0 0
640,000 640,000
<COMMON> 57,564 57,564
<OTHER-SE> 517,716 517,716
<TOTAL-LIABILITY-AND-EQUITY> 7,904,001 7,904,001
<SALES> 0 0
<TOTAL-REVENUES> 4,139,061 12,003,702
<CGS> 0 0
<TOTAL-COSTS> 1,227,419 3,075,137
<OTHER-EXPENSES> 3,184,250 7,269,367
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 118,169 336,585
<INCOME-PRETAX> (381,617) 1,344,588
<INCOME-TAX> (141,838) 590,162
<INCOME-CONTINUING> (239,779) 754,426
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (239,779) 754,426
<EPS-PRIMARY> (.03) .08
<EPS-DILUTED> (.03) .08
</TABLE>
