As filed with the Securities and Exchange Commission on May 15, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 or |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 | |
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: 001-16451
Genesys S.A.
(Exact name of Registrant as specified in its charter)
N/A | l’Acropole, 954-980 Avenue Jean Mermoz 34000 Montpellier France | Republic of France |
(Translation of Registrant’s name into English) | (Jurisdiction of incorporation) or organization | |
(Address of principal executive offices) |
Title of each class: | Name of each exchange on which registered: |
Ordinary shares, nominal value €5 per share* | Nasdaq National Market |
American Depositary Shares, each representing one half of one ordinary share, nominal value €5 per share | Nasdaq National Market |
Ordinary shares, nominal value €5 per share: 15,471,204
Item 17 Item 18
* | Listed, not for trading or quotation purposes, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission. |
TABLE OF CONTENTS
Page | ||
PART I | ||
Item 1. | Identity of Directors, Senior Management and Advisers | |
Item 2. | Offer Statistics and Expected Timetable | |
Item 3. | Key Information | |
A. Selected Financial Data | ||
B. Capitalization and Indebtedness | ||
C. Reasons for Offer and Use of Proceeds | ||
D. Risk Factors | ||
Item 4. | Information on the Company | |
A. History and Development of the Company | ||
B. Business Overview | ||
C. Organizational Structure | ||
D. Property, Plants and Equipment | ||
Item 5. | Operating and Financial Review and Prospects | |
Item 6. | Directors, Senior Management and Employees | |
A. Directors and Senior Management | ||
B. Compensation | ||
C. Board Practices | ||
D. Employees | ||
E. Share Ownership | ||
Item 7. | Major Shareholders and Related Party Transactions | |
A. Major Shareholders | ||
B. Related Party Transactions | ||
C. Interests of Experts and Counsel | ||
Item 8. | Financial Information | |
Item 9. | The Offer and Listing | |
A. Offer and Listing Details | ||
B. Plan of Distribution | ||
C. Markets | ||
D. Selling Shareholders | ||
E. Dilution | ||
F. Expenses of the Issue | ||
Item 10. | Additional Information | |
A. Share Capital | ||
B. Memorandum and Articles of Association | ||
C. Material Contracts | ||
D. Exchange Controls | ||
E. Taxation | ||
F. Dividends and Paying Agents | ||
G. Statement by Experts | ||
H. Documents on Display | ||
I. Subsidiary Information | ||
Item 11. | Quantitative and Qualitative Disclosures about Market Risk | |
Item 12. | Description of Securities other than Equity Securities | |
PART II | ||
Item 13. | Defaults, Dividend Arrearages and Delinquencies | |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | |
Item 15. | Controls and Procedures | |
Item 16. | [Reserved] | |
PART III | ||
Item 17. | Financial Statements | |
Item 18. | Financial Statements | |
Item 19. | Exhibits |
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PRESENTATION OF FINANCIAL INFORMATION
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PART I |
Item 1. Identity of Directors, Senior Management and Advisers |
Item 2. Offer Statistics and Expected Timetable |
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Item 3. Key Information |
A. | Selected Financial Data |
As of and for the year ended December 31, | |||||||||||||||||||
1998 | 1999 | 2000 | 2001 | 2002 | 2002 | ||||||||||||||
(in thousands, except share data) | |||||||||||||||||||
Consolidated statement of operations data: | |||||||||||||||||||
Revenue: | |||||||||||||||||||
Services | € | 18,311 | € | 47,159 | € | 89,336 | € | 177,120 | € | 199,068 | $ | 228,919 | |||||||
Products | 910 | 836 | 3,083 | 1,831 | 1,595 | 1,834 | |||||||||||||
Total revenues | 19,221 | 47,995 | 92,419 | 178,951 | 200,663 | 230,753 | |||||||||||||
Cost of revenue: | |||||||||||||||||||
Services | 7,517 | 19,959 | 38,173 | 74,774 | 86,193 | 99,118 | |||||||||||||
Products | 656 | 596 | 2,548 | 1,402 | 1,250 | 1,437 | |||||||||||||
Total cost of revenues | 8,173 | 20,555 | 40,721 | 76,176 | 87,443 | 100,555 | |||||||||||||
Gross profit | 11,048 | 27,440 | 51,698 | 102,775 | 113,220 | 130,198 | |||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 910 | 1,629 | 2,613 | 5,366 | 4,734 | 5,444 | |||||||||||||
Selling and marketing | 5,747 | 10,130 | 17,867 | 42,718 | 49,976 | 57,470 | |||||||||||||
General and administrative | 4,004 | 12,952 | 27,165 | 53,920 | 56,487 | 64,957 | |||||||||||||
Restructuring charge | — | — | — | — | 4,336 | 4,986 | |||||||||||||
Amortization and impairment of goodwill and other intangibles | 1,396 | 3,216 | 7,015 | 92,037 | (1) | 107,501 | (2) | 123,621 | |||||||||||
Total operating expenses | 12,057 | 27,927 | 54,660 | 194,041 | 223,034 | 256,478 | |||||||||||||
Operating loss | (1,009 | ) | (487 | ) | (2,962 | ) | (91,266 | ) | (109,814 | ) | (126,280 | ) | |||||||
Financial income (expense), net | (335 | ) | (2,083 | ) | 655 | (6,722 | ) | (8,987 | ) | (10,335 | ) | ||||||||
Equity in loss of affiliated company | — | (15 | ) | (76 | ) | (55 | ) | (8 | ) | (9 | ) | ||||||||
Loss before income taxes and minority interest | (1,344 | ) | (2,585 | ) | (2,383 | ) | (98,043 | ) | (118,809 | ) | (136,624 | ) | |||||||
Income tax (expense) credit | (293 | ) | (1,253 | ) | (3,589 | ) | (484 | ) | 5,043 | 5,799 | |||||||||
Net loss | € | (1,637 | ) | € | (3,838 | ) | € | (5,972 | ) | € | (98,527 | ) | € | (113,766 | ) | $ | (130,825 | ) | |
Basic and diluted net (loss) per share | € | (0.39 | ) | € | (0.60 | ) | € | (0.76 | ) | € | (7.65 | ) | € | (7.32 | ) | $ | (8.42 | ) | |
Weighted average number of ordinary shares outstanding | 4,209,669 | 6,374,278 | 7,831,257 | 12,878,594 | 15,541,898 | 15,541,898 | |||||||||||||
(1) | In 2001, €61.3 million represents impairment of goodwill and other intangible assets in accordance with SFAS No. 121. |
(2) | In 2002, €93.6 million represents impairment charges, which consists of impairment of goodwill in accordance with SFAS No. 142 (81.7 million) and impairment of identifiable intangible assets in accordance with SFAS No. 144 (€11.9 millions). |
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As of and for the year ended December 31, | |||||||||||||||||||
1998 | 1999 | 2000 | 2001 | 2002 | 2002 | ||||||||||||||
(in thousands ) | |||||||||||||||||||
Consolidated balance sheet data: | |||||||||||||||||||
Total current assets | € 25,408 | € 32,194 | € 77,338 | € 80,465 | € 53,113 | $ 61,078 | |||||||||||||
Total assets | 51,620 | 122,890 | 207,169 | 410,404 | 249,733 | 287,181 | |||||||||||||
Total current liabilities | 8,172 | 19,500 | 34,633 | 72,704 | 49,318 | 56,713 | |||||||||||||
Total long-term liabilities | 7,382 | 62,056 | 44,423 | 174,832 | 147,624 | 169,761 | |||||||||||||
Total shareholders’ equity | 36,066 | 41,334 | 128,113 | 162,868 | 52,791 | 60,707 | |||||||||||||
Cash flow statement data: | |||||||||||||||||||
Cash flows provided by (used in) operating activities | (28 | ) | 3,945 | 9,302 | (18,299 | ) | 7,209 | 8,290 | |||||||||||
Cash flows used in investing activities | (5,932 | ) | (60,571 | ) | (28,235 | ) | (36,057 | ) | (10,104 | ) | (11,619 | ) | |||||||
Cash flows provided by financing activities | €18,468 | €50,517 | €53,561 | €20,701 | €(3,310 | ) | $(3,806 | ) |
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EXCHANGE RATE INFORMATION
AND THE EUROPEAN MONETARY SYSTEM
The European Monetary System |
Exchange Rates |
Period-end Rate | Average Rate(1) | High | Low | ||||||||||
French francs per U.S. dollar | |||||||||||||
1998 | 5.59 | 5.90 | 6.21 | 5.39 |
(1) | The average of the Noon Buying Rates on the last business day of each month (or portion thereof) during the relevant period. |
Period-end Rate | Average Rate(1) | High | Low | ||||||||||
U.S. dollar per euro | |||||||||||||
1999 | 1.01 | 1.06 | 1.18 | 1.00 | |||||||||
2000 | 0.94 | 0.92 | 1.03 | 0.83 | |||||||||
2001 | 0.89 | 0.89 | 0.95 | 0.84 | |||||||||
2002 | 1.05 | 0.95 | 1.05 | 0.86 | |||||||||
2003 (through May 14, 2003) | 1.15 | 1.09 | 1.16 | 1.04 | |||||||||
2002 | |||||||||||||
November | 1.01 | 1.00 | 1.01 | 0.99 | |||||||||
December | 1.05 | 1.02 | 1.05 | 0.95 | |||||||||
2003 | |||||||||||||
January | 1.07 | 1.06 | 1.09 | 1.04 | |||||||||
February | 1.08 | 1.08 | 1.09 | 1.07 | |||||||||
March | 1.09 | 1.08 | 1.10 | 1.05 | |||||||||
April | 1.12 | 1.09 | 1.12 | 1.06 | |||||||||
May (through May 14, 2003) | 1.15 | 1.14 | 1.16 | 1.12 |
(1) | The average of the Noon Buying Rates on the last business day of each month (or portion thereof) during the relevant period for year average; on each business day of the month (or portion thereof) for monthly average. On May 14, 2003 the Noon Buying Rate was $1 = €0.87 ($1.15 per €1). |
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B. | Capitalization and Indebtedness |
C. | Reasons for the Offer and Use of Proceeds |
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D. | Risk Factors |
Risks Relating to Our Company |
Our high level of debt may limit our operating flexibility. |
• | limiting our ability to make capital investments in order to expand our business; |
• | limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements or other purposes; |
• | limiting our ability to invest operating cash flow in our business, because we use a substantial portion of these funds to pay debt service and because our covenants restrict the amount of our investments; |
• | limiting our ability to withstand business and economic downturns, because of the high percentage of our operating cash flow that is dedicated to servicing our debt; and |
• | limiting our ability to pay dividends. |
We may not grow as quickly as we hope because the markets for data conferencing and Web conferencing, which we target for a substantial part of our future growth, are in very early stages of development and may not develop as expected. |
Web conferencing services will compete with our traditional audio and video services, which may cause us to lose market share and to experience lower margins. |
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If we are unable to keep up with rapid changes in technology, our products and services could become obsolete. |
Our services may be interrupted by technological problems or affected by human error, which may cause us to lose customers. |
We depend on the continued services of a few key executives, and only a limited number of those key executives have service contracts. |
Because we have made several significant acquisitions in recent years, our consolidated financial statements are not comparable from period to period, which may make it more difficult for you to evaluate our business. |
Merger and acquisition related accounting charges may delay and reduce our profitability. |
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We have historically incurred and may continue to incur net losses, which may adversely affect the trading price of our ordinary shares and ADSs. |
Fluctuations in currency exchange rates could adversely affect our revenues and results of operations. |
Challenges to our intellectual property rights could cause us to incur costly litigation and, if we are not successful, could result in the loss of a valuable asset and market share. |
If third parties using or claiming prior rights to the name “Genesys” were to successfully prevent us from using the name “Genesys” or “Genesys Conferencing” in some markets, we might be required to establish new or alternative brand names in those markets. |
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We use third-party technology in providing our products and services, and our business would be harmed if we were not able to continue using this third-party technology. |
Risks Relating to Our Industry |
We may not be able to compete effectively with our competitors, which include some of the largest telecommunications companies in each country in which we operate. |
The telecommunications and Internet sectors are experiencing low valuations compared to recent years, and raising capital in these sectors has become difficult. |
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Risks Relating to Our ADSs and Our Ordinary Shares |
The market prices of our ordinary shares and ADSs have been volatile, and may continue to be volatile in the future. |
• | quarterly variations in operating results or growth rates; |
• | the announcement of technological innovations; |
• | the introduction of new products by us and our competitors; |
• | changes in estimates by securities analysts; |
• | market conditions in the industry; |
• | announcements and actions by competitors; |
• | regulatory and judicial actions; and |
• | general economic conditions. |
Our stock option plan includes provisions that could have anti-takeover effects. |
Exchange rate fluctuations may adversely affect the U.S. dollar value of our ADSs and our dividends (if any). |
We have not yet distributed any dividends to our shareholders, and do not anticipate doing so in the near future. |
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FORWARD-LOOKING STATEMENTS
• | projections of operating revenues, net income, net earnings per share, capital expenditures, dividends, capital structure or other financial items or ratios; |
• | statements about the future performance of the conferencing industry; |
• | statements about our future economic performance or that of France, the United States or any other countries in which we operate; and |
• | statements of assumptions underlying such statements. |
• | uncertainties regarding the market for data conferencing and Web conferencing, and the pricing for these services; |
• | the effects of technological change; |
• | fluctuations in the value of our ordinary shares and ADSs and in the value of the Internet and telecommunications sectors; and |
• | competition from telecommunications providers. |
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Item 4. Information on the Company |
A. | History and Development of the Company |
Our agent in the United States is:
Margie Medalle, Chief Executive Officer and Managing Director of Genesys North America,
9139 South Ridgeline Blvd,
Highlands Ranch, CO 80129
Development of Our Business |
Acquisitions |
Our Shares |
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B. | Business Overview |
INTRODUCTION |
• | Genesys Meeting Center: our fully integrated audio, video and Web conferencing platform accessible on demand through the Web and over the phone. The Genesys Meeting Center platform allows users to conduct a conference by telephone while exchanging information and monitoring the call over the Internet, providing our customers complete access to a virtual conference room 24 hours per day, seven days per week. This service is highly collaborative. |
• | Genesys Events and Managed Services: for higher-profile corporate announcements, training sessions, and large-audience presentations. Our Genesys Events and Managed Services team offers our customers professional assistance in managing all aspects of their conference calls and other audio presentations. We believe that our hands-on assistance and global network help our customers achieve their conferencing goals. These services are specific to events. We group our fully operator-assisted Web-based audio and video streaming applications, TeleEvent, EventStream and PowerStream, under our Events and Managed Services category. |
• | Video services: to complement our audio and Web conferencing services. Video conferencing is similar to audio conferencing except that generally one or more participants are viewing the video broadcast from select video-point locations. Genesys has a full staff of professionally trained operators available at all times to help schedule, arrange and manage the video session. |
STRATEGY
We aim to be the world’s leading provider of interactive group communications and applications in terms of market share, service innovation and operating profitability. In pursuing this goal, we intend to:
• | Leverage global presence and infrastructure to meet needs of multinational customers. We use our locally based, knowledgeable sales force to market and service customers in one or more markets. The physical presence of our capabilities in major North American, European and Asian Pacific markets has created a unique geographical coverage and recognized quality of service that is attractive to major multinational organizations seeking global coverage of their interactive group communications needs delivered by a local means. We leverage these differentiation elements in actively pursuing major new international contracts offered in global requests for proposals. | |
• | Optimize sales and marketing capabilities in order to capture new accounts and foster usage. We have reorganized our sales teams into a direct sales «field» force and an indirect sales «sedentary» force in order to create a more focused effort for pursuing new major customer opportunities and for increasing the utilization of and penetration of existing accounts. Our direct sales force is comprised of high-level representatives who are responsible for establishing long-term relationships with the key communications services decision makers at major customers. Our indirect sales force works on a day to day basis to identify, register and train new individual users throughout a customer’s organization and then to increase the utilization of each existing user. We believe that these efforts will further result in our ability to develop a highly consistent and growing base of corporate users. | |
• | Continue to provide a comprehensive suite of integrated communication services. We offer a full array of integrated real-time group communications services, from traditional audio and video conferencing services to the latest in multimedia collaboration over the Internet and Web streaming technology. We believe that offering a comprehensive suite of conferencing services and collaboration applications is essential to winning the business of our target multinational and multi-site national corporations, who are increasingly seeking to rationalize and centralize their communication needs. | |
• | Expand contribution margins and stimulate usage by migrating customers to automated conferencing and newer collaboration services. We continually migrate customers from operator-assisted services to fully automated conferencing and newer collaboration services. Utilizing the strong customer education capabilities of our indirect sales team, we are broadening customers’ understanding of the cost effectiveness, ease-of-use and expanded feature functionality of automated conferencing and newer collaborative services. As revenues are more significantly comprised of these less labor intensive automated conferencing and newer collaboration services, we expect our gross margins to strengthen. Additionally, as a benefit of our increasing long distance purchasing power and our exploration of new digital transport technology, contribution margins are expected to further strengthen as our underlying telecommunication long distance costs continue to decline as a percent of total cost of services. | |
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• | Utilize proprietary research and development capabilities to create innovative applications for a global customer base. We develop and acquire innovative services and systems designed to ensure that our offerings respond to the expanding needs of customers’ interactive group communications requirements. Additionally, we seek to effectively utilize our proprietary knowledge and capabilities in a manner that responds to changes in the global marketplace. As we move forward in developing and marketing innovative services that can accommodate the needs of a global customer base, we intend to focus on systems based on universal standards and open systems, in order to facilitate ease of use by a broad customer base. | ||
• | Increase usage by delivering customers greater service value. We deliver service offerings that provide customers improved features and functionality in a cost effective solution. We intend to continue introducing innovative applications as well as innovative price methodologies that respond to customers’ desire for value based service offerings. We expect to implement pricing methodologies that promote greater customer usage, penetration and adoption of new services including, the bundling of our full suite of integrated multimedia group communications services and flat-rate pricing models. | ||
• | Improve operating effectiveness and cost efficiency. We implemented a call center integration and overhead rationalization program designed to eliminate redundant infrastructure and administrative costs and to provide higher levels of customer service and management responsiveness. A major component of our plan included the closure and consolidation of six call centers throughout North America and Europe and the centralization of certain marketing, finance and administrative functions. We intend to further centralize and automate additional finance, administrative and customer marketing, service and billing functions by leveraging our recent development of a more unified management information system. | ||
Our Communication and Collaboration Services |
Genesys Meeting Center |
• | Real-time interactive meetings with rich visual content. Genesys Meeting Center allows presenters to deliver dynamic multimedia presentations, collaborate and share any application running on their computers, conduct “follow-me” Web tours (which can be either pre-scripted or conducted ad hoc) and alternate between applications at any time during the meeting. |
• | Scheduling, invitation and calendaring. Scheduling and invitation features enable authorized users to quickly and easily schedule Web conferences and generate meeting-specific invitations and reminders to send to audience members. |
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• | Web-based audio management controls. This Web interface enables the moderator to fully manage the audio portion of the meeting via the Web from start to finish. One can view all the participants’ names as well as monitor their status, including mute, un-mute, and ejection from a meeting. In addition, there is the capability to manage larger-sized audiences with waiting rooms and sub-conference sessions. |
• | Integration with Microsoft. Genesys Meeting Center features a comprehensive invitation wizard with Microsoft Outlook® integration to leverage Microsoft contacts and to facilitate the management of invitations, personal scheduling and calendaring. In addition, Genesys Meeting Center is integrated with MSN Instant Messenger to directly start meetings with active members on the contact list. |
• | Recording and archives. The audio and visuals of any meeting can be recorded for later on-demand playback by those who could not attend the original live session. In addition, live conferences can be economically streamed to reach broader audiences throughout the Web. |
• | Detailed meeting reports. Users can obtain online meeting reports, including reports for individual meetings and summary level reports on meetings scheduled, users, attendance, capacity utilization and future reservations. In addition, reports can be generated to track the responses to audience surveys, polls and quizzes. |
• | Desktop video support. We offer multi-point, Web cam-video conferencing capability, enabling a video connection between two or more sites. The moderator can choose the composition of the images shown on each screen: all sites, the site speaking or any combination of screens. These screen formats can be changed at any time during the meeting. |
• | No plug-ins required. Genesys Meeting Center is a Java-based application that functions with both Microsoft Explorer and Netscape browsers. There are no special plug-ins or downloads required for meeting guests and participants, making it convenient to invite audience members from behind most firewalls. |
Genesys Events and Managed Services |
• | TeleEvent. TeleEvent is a fully operator-managed audio conference service designed specifically for large event-style conference calls, which can include several thousand participants. Participants may dial in from any location, or the operator may dial out to them. An operator takes full control of the conference. TeleEvent is frequently used for investor relations calls, new product launches or other announcements by top management of our customers. |
Due to the complex and highly specific nature of TeleEvent, we assign a dedicated cross-functional team to each TeleEvent client. Our service begins with guidance in the initial planning of the event to maximize the event’s impact. During the event, specialized operators manage all aspects of the conference, including branded greetings, recording of participant information and question and answer sessions, which helps to control speaking time and maintain focus. This allows the presenter to focus on conveying the desired message to the audience. |
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• | We also offer our customers a wide range of enhanced services for an additional fee. These services include transcripts of calls, real-time translation services, broadcast fax transmission of documents to conference participants, recording and rebroadcast of conferences and participant polling. Our operators can also assist customers in integrating our other services, including data collaboration and Webcasting, into their events. |
• | EventStream and PowerStream. EventStream and PowerStream are services designed to augment traditional audio conference calls by adding high-impact visual presentations and live video streams. Both services are based on our rich media technology, a powerful interface that enables the synchronization of video and/or audio with texts, images, slides, graphic animation and interactive modules. All elements can be packaged in an interface that reflects the corporate identity of our clients, including the customer’s logo, corporate graphics and colors. |
Participants can easily join an audio call via telephone and/or click onto a Web presentation with audio or video over any standard Internet connection. The client chooses how to broadcast the event but can allow participants to choose how they would prefer to view it. For example, participants may choose to listen in via telephone or through an audio stream over the Internet. For the convenience of participants who are unable to attend the original, live session, these events are recorded and archived for later, on-demand viewing. |
Video Conferencing |
• | Direct: Our direct video service is our basic automated service, which we believe offers our clients a low-touch, no-frills service at a competitive price. |
• | Classic Service: Our classic service provides for basic remote operator support. Our classic service allows for certification of sites prior to a call, meeting set-up through an operator and off-site monitoring by our operators during a live meeting. |
• | Premium Service: This package provides a complete suite of personalized support by our operators, including certification of sites prior to a call, meeting set-up through an operator and status screen display, as well as on-site monitoring by our operators during a live meeting. |
• | Additional Options: A number of service offerings are available to add to the above options to enhance the service delivery the client may require. These include but are not limited to: helpdesk support, outside broadcast support, off-call diagnostics, and recording. |
Group Communications Technologies |
• | Audio conferencing. Audio conferencing connects multiple parties on a single telephone call through specialized telephone equipment known as a “bridge.” Each bridge has multiple ports, which allow conference participants to connect to a conference call. We offer two types of audio conferencing: fully automated, which is part of our Genesys Meeting Center, and our operator-assisted services. |
• | Video conferencing. Video conferencing is similar to audio conferencing except that one or more callers may be viewed on a video monitor by the other participants. |
• | Web-based conferencing. Web-based conferencing is conferencing using the Internet as the media for communication. We offer two types of Web-based conferencing services: data collaboration applications and Web streaming. Data collaboration applications help customers to enhance their audio conferences by allowing graphics, animation and audience participation through a simple Internet connection. Genesys Meeting Center allows conference participants to share and jointly edit or view documents in real time, or to access conference archives or learning sessions at their own pace. Web-based applications enable multiple users to conference and collaborate using both visuals and voice over the Internet. |
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Genesys Meeting Center enables customers to monitor and manage their virtual conference room over the Internet. Our EventStream and PowerStream Web streaming applications described above are two of our other Web-based conferencing services. |
Suppliers |
• | Infrastructure/networks services. A significant portion of our direct costs are attributable to the purchase of local and long distance telephone services. We purchase telecommunications services from multiple suppliers in most of our markets and believe that multiple suppliers will continue to compete for our business. Direct costs also include the cost of hosting some of our infrastructure in co-location facilities. For example, the Genesys Meeting Center Web conferencing infrastructure is co-located in several Internet Data Centers, also known as IDCs, located around the world. The advantages of using an IDC are that it provides high availability facilities for operating Internet based services, including redundant power, air conditioning, fire containment systems and connectivity to the Internet, as well as physical security and other services. |
• | Tele- and Videoconferencing Bridges and Technology. We purchase our bridges and related technology from a limited number of suppliers in each market in which we operate. We believe that there are a sufficient number of suppliers in this market so that we should be able to find alternative sources if the need were to arise. |
• | Data Collaboration and Web Streaming. We buy hardware, software and development tools to develop and deploy proprietary and innovative Web-based collaboration and streaming services. We have multiple suppliers, or the potential to have multiple suppliers, for these products. |
Sales and Marketing |
Sales |
Direct Sales |
• | Large Accounts. In each market, we focus our sales and marketing efforts primarily on large multinational companies and domestic companies with multiple sites, because these are the heaviest users of group communications services. To target these accounts, our direct sales staff focuses on the home country, city or headquarters of these multinationals as a base for developing global business relationships. In approaching large accounts, we seek to establish strong relationships and to position our company as a long-term partner and solution provider. We have made a concerted effort to win global contracts by emphasizing our global presence, and in 2002, won global contracts with companies such as Alfa Laval, Frost & Sullivan and Lufthansa. |
• | Small Accounts. We also actively target small and medium size businesses using our inside sales force. Our inside sales team targets small and mid-size businesses through advertising in specialized magazines, telemarketing calls and direct mail. |
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Indirect Sales and Distribution Arrangements |
Marketing |
General |
Service Quality and Customer Care |
Billing and Management Information Systems |
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Customers |
Global Presence |
Australia | France | Norway | Taiwan |
Belgium | Germany | Portugal | The Netherlands |
Canada | Hong Kong | Singapore | United Kingdom |
Denmark | Italy | Spain | United States |
Finland | Malaysia | Sweden |
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Year ended December 31, | |||||||||||||
2001 | 2002 | ||||||||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | ||||||||||
Genesys Meeting Center | 72,656 | 40.5 | % | 109,857 | 54.7 | % | |||||||
Genesys Events and Managed Services | 93,520 | 52.3 | % | 80,238 | 40.0 | % | |||||||
Video conferencing | 10,944 | 6.1 | % | 8,973 | 4.5 | % | |||||||
Products | 1,831 | 1.1 | % | 1,595 | 0.8 | % | |||||||
Total revenues | 178,951 | 100.0 | % | 200,663 | 100.0 | % | |||||||
Year ended December 31, | |||||||||||||||||||
2000 | 2001 | 2002 | |||||||||||||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | in thousands of € | % of revenues | ||||||||||||||
North America | 40,357 | 43.7 | % | 108,035 | 60.1 | % | 126,977 | –63.3 | % | ||||||||||
Europe | 35,781 | 38.7 | % | 53,762 | 30.3 | % | 58,233 | 29.0 | % | ||||||||||
Asia-Pacific | 4,044 | 4.4 | % | 6,210 | 3.5 | % | 6,480 | 3.2 | % | ||||||||||
Video(1) | 12,237 | 13.2 | % | 10,944 | 6.1 | % | 8,973 | 4.5 | % | ||||||||||
Total revenues | 92,419 | 100.0 | % | 178,951 | 100.0 | % | 200,663 | 100.0 | % | ||||||||||
(1) Our Global Video Division was created in 2002. For 2000 and 2001, we have reallocated revenues from our geographic areas to our global video division for purposes of comparison with 2002. Absent such reallocation, in 2001, North America represented €113,481 thousand (63.4%), Europe represented €59,125 thousand (33.0%) and Asia-Pacific €6,345 thousand (3.6%). |
Technology |
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Research and Development |
• | Call center automated bridge provisioning, one-call event reservation tools; |
• | Simple event interface customization tools for non-technical users; and |
• | Web registration tools to decrease operator assistance for participants joining events. |
• | Total quality initiative to provide broader compatibility with a wide range of proxy servers, increased stability of the application, performance improvements to application sharing, and user interface modifications designed to provide simplified customization for every level of customer expertise; |
• | Integration with Microsoft applications, including tighter link with Outlook Calendar scheduling, launch from Windows Messenger, instant meeting initialization from all Office applications; |
• | New client technologies to eliminate reliance on Java, open up new performance and interface capabilities; and |
• | Implementation of enhanced meeting security options, enabling security-conscious clients to more effectively enforce and monitor individual users. |
• | Enabling the ability to provide rapid feature development and deployment; |
• | Centralization of production; |
• | Establish online provisioning through debit/credit card transactions for account subscriptions, pay-per-view; |
• | Web front-office capabilities for large customers and third party service providers, to offload account creation and configuration; and |
• | Enablement of individual users to edit account privileges and services, and for us to bill for services used on an individual account basis. |
• | Wireless clients enable users to manage resources and moderate or participate using connected personal digital assistants or mobile phones. |
• | HTML clients for go-anywhere capabilities, meaning that the client can receive service using an ordinary Web browser and therefore does not need to install anything on his or her computer to run the service. |
Intellectual Property |
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Competition |
• | quality, reliability and security of service offerings; | |
• | innovation; | |
• | brand awareness; |
• | responsivness and quality of customer service; |
• | ease of use of services; |
• | geographic scope; |
• | compatibility with new and existing communication formats and everyday tools; |
• | price. |
Our failure to adequately address any of the above factors could harm our business.
Our Principal Competitors |
• | Companies with conferencing revenues of approximately U.S. $200 million or more per annum: AT&T and MCI Conferencing, part of MCI; |
• | Companies with conferencing revenues of over U.S. $100 million to U.S. $199 million per annum: Intercall, Global Crossing, Webex, Premiere; and |
• | Companies with conferencing revenues of below U.S. $100 million per annum: ACT, Raindance, British Telecom, France Telecom, Deutsche Telekom and Sprint. |
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Regulation |
C. | Organizational Structure |
Significant Subsidiary or Affiliate | Country of Incorporation | Ownership Interest | |||||
Genesys Conferencing, Inc | United States | 100 | % | ||||
Genesys Conferencing Ltd | United Kingdom | 100 | % |
D. | Property, Plants and Equipment |
North America | Size (m2) | Europe | Size (m2) | Asia/Pacific | Size (m2) | |||||||||||
Headquarters: | Headquarters: | Headquarters: | ||||||||||||||
Denver, Colorado | 4,117 | Montpellier, France | 3,750 | Singapore | 282 | |||||||||||
Call Centers: | Call Center | Call Center | ||||||||||||||
Reston, Virginia | 4,141 | Croydon, England | 1,693 | Melbourne, Australia | 400 | |||||||||||
Chanhassen, Minnesota | 3,288 |
In February 2002, we announced plans to consolidate our North American and European call centers to provide higher levels of customer service and improve operating efficiencies. In March 2002, we announced the execution of the first phase of this consolidation, with the closure of our Bedford, Massachusetts call center on March 20, 2002. We next closed our Denver, Colorado call center in June, 2002. In October 2002 we closed our Montgomery, Alabama call center, and in December 2002 we finalized our U.S. call center consolidation with the closure of our Honolulu, Hawaii call center. All traffic generated through the closed sites has been successfully re-routed to our remaining North American call centers in Reston, Virginia and Chanhassen, Minnesota. In October 2002, we closed our Roedermark, Germany (near Frankfurt) call center. Traffic generated through that site has been re-routed to our Croydon, England call center.
Throughout 2002, we also undertook some internal restructuring of our business operations. In January 2002, we merged our former U.S. operating subsidiary Genesys Conferencing Inc., into Genesys Conferencing of Massachussets, Inc. (formerly Vialog). We then merged the combined company into a newly formed Delaware corporation, Genesys Conferencing Inc., in order to reincorporate our consolidated U.S. operations in Delaware. In June 2002, following the approval of our shareholders, we contributed all of the conferencing activities we conducted in France to our subsidiary, Genesys Conferencing France S.A., in order to become a holding company. The French restructuring was retroactive to January 2002.
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Item 5. Operating and Financial Review and Prospects |
Overview |
General |
We were founded in Montpellier, France in 1986 to develop automated audio conferencing services. Since then, we have expanded through internal growth and acquisitions to become the world's leading specialist provider of interactive group communications services and applications, based on annual revenues. We have significantly expanded our global presence and the scope of our service offering over the last several years. We have evolved from a regional audio conferencing provider generating 94.9% of our revenues within Europe in 1998 to become a global company earning 68.6% of our revenues outside Europe in 2002. We have also diversified the scope of our products and services.
In 2001, we completed two major acquisitions. In March 2001, we acquired Astound Incorporated, a leading provider of Web conferencing and data collaboration software. In April 2001, we acquired Vialog Corporation, a leading independent provider of conferencing services in the United States. Our income statements for 2001 include the results of Astound for nine months and the results of Vialog for eight months. The results of both companies are included for the full year in 2002.
In 2002, we undertook a major consolidation of our operations, integrating the activities of Vialog and responding to the significant increase of automated services as a percentage of our activities. The shift to automated services has reduced our revenue growth, but should increase our gross margin percentage following the implementation of our consolidation process, as automated services are priced lower than operator-assisted services but carry higher gross margin percentages. The consolidation resulted in the closure of five call centers, including the closing of our Germany call center, and was the main driver in the reduction in the number of our employees from 1,530 as of December 31, 2001 to 1,119 as of December 31, 2002. We have also streamlined and reorganized our senior management as a result of our more simplified operational structure. We expect to realize the full benefits of the consolidation beginning in 2003.
Impact of Acquisitions
Our recent results of operations have been significantly affected by a number of acquisitions that we undertook in 2000 and 2001 to expand our global presence and service offering. Although we did not acquire any company in 2002, the effect of Vialog and Astound acquisitions are significant because our financial statements for 2002 include the results of Astound and Vialog for the full year, whereas our financial statements for 2001 include the results of Astound and Vialog for only nine months and eight months, respectively.
Among the most significant effects of our acquisitions have been:
• | Increased revenues. During the three year period ended December 31, 2002, our revenues grew from €92.4 million in 2000 to €200.7 million in 2002. Companies we acquired during 2001 accounted for €65.7 million in revenues, or approximately 76.0% of our total annual revenue growth, in 2001. An additional €3.8 million, or 4.4% of total annual revenue growth in 2001, was due to the impact of including a full year of revenues in 2001 from companies that were consolidated for less than the full year in 2000. Our 2002 revenue growth was significantly impacted by including a full year of revenue for companies that were acquired during 2001. Although we have integrated the revenues of the companies acquired in 2001 within the applicable reporting business segments, these companies generated €31.5 million of revenue in 2001 prior to date of acquisition, which was not included in our 2001 revenues. | |
• | Change in composition of revenue. Most of the companies that we have acquired, such as Vialog, historically generated a significant proportion of their revenues from operator-assisted services. These services entail higher labor costs than automated conferencing services. We position operator assisted services as a complement to our core automated service, and have been migrating existing customers of our acquired companies from operator assisted services to automated services. | |
• | Global presence. Our acquisitions have enabled us to expand our geographic coverage from 5 European countries at the beginning of 1998 to 19 countries in North America, Europe and the Asia Pacific region at the end of 2002. Our April 2001 acquisition of Vialog alone nearly tripled the size of our North American operations. One of the effects of our expansion into new markets has been to increase our exposure to exchange rate fluctuations, and in particular, the U.S. dollar. In 2002, the U.S. dollar declined significantly compared to the euro. The impact of exchange rate fluctuations is discussed in more detail below. |
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• | Increased acquisition-related charges. We have recorded significant goodwill in connection with our acquisitions. Until the end of 2001, we amortized our goodwill. Beginning in 2002, in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, we stopped amortizing our goodwill and instead test goodwill at least annually for impairment. We have recorded significant charges for impairment of goodwill and other intangible assets in 2001 and 2002, as discussed further below. We have also recorded significant restructuring expenses resulting from the integration of Vialog's operations with ours and the related reduction of workforce and consolidation of call centers. | |
• | Increased Indebtedness and Financial Expenses. We incurred significant amounts of debt in connection with our acquisition of Vialog under a $125 million credit facility that we signed in April 2001, which has been amended on several occasions. Our increased debt has resulted in a significant increase in our financial expenses. In addition, we have had to negotiate with our lenders waivers of and amendments to certain terms of that credit facility, including financial ratio covenants and our principal repayment schedule in order to maintain compliance with the credit facility and to give us the financial flexibility to develop our business. See “Liquidity and Capital Resources” below for more detail. |
Segments
Key Factors Affecting Results of Operations
Revenues
We generate our revenues primarily from fees charged to our customers for conferencing and related services. In our geographic segments, we earn services revenues from our Genesys Meeting Center and Genesys Events and Managed Services platforms, while in our global video segment we earn revenues from video conferencing services. The key drivers of our revenues in each of these areas are described below:
• | Genesys Meeting Center. This is our platform for automated services, providing fully integrated audio, video and web conferencing accessible on demand through the web and over the phone. We bill services associated with our Genesys Meeting Center platform on a per-user, per-minute basis and, in the case of the Web conferencing service available in Genesys Meeting Center, primarily on a monthly subscription basis, under which subscribing customers pay a monthly fee for a certain number of concurrent users in a virtual conference room. We launched Genesys Meeting Center in October 2001. For comparability with 2002, we have grouped the revenues and related costs for prior years of our fully automated audio conferencing service, TeleMeeting, and our fully automated Web conferencing service, Powershare, and the related web browser, Multi Conference Manager, under our Genesys Meeting Center platform. |
• | Genesys Events & Managed Services. This platform provides for our managed event services, which consists of a fully operator managed audio conference service and our web-based audio and video streaming applications. In connection with our events and managed services platform, we bill our attended audio conferencing services on a per-line, per-minute basis, and we charge for Web streaming services on a per event basis that takes into account the size and complexity of the services requested. We launched Genesys Events & Managed Services in May 2002. For comparability with 2002, we have grouped the revenues and related costs for prior years of our fully operated-assisted audio conference service, TeleEvent, and our Web-based audio and video streaming applications, EventStream and PowerStream, under our Genesys Events & Managed Services Platform. |
• | Video conferencing. Video conferencing is similar to audio conferencing except that generally one or more participants are viewing the video broadcast from select video-point locations. We bill our video conferencing services on a per-line, per-minute basis. |
We generally recognize revenue upon completion of conferencing services or at the time of shipment of equipment, unless we have future obligations for installation or have to obtain customer acceptance, in which case we defer revenue recognition until these obligations are met. We include amounts billed in excess of revenue recognized as deferred revenue in our consolidated balance sheet.
Cost of Revenue and Gross Profit
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• | Research and development costs, which consist primarily of salaries and benefits for research and development personnel, depreciation of research and development equipment and related expenses; |
• | Selling and marketing expenses, which consist primarily of the costs of advertising and marketing materials and salaries and benefits paid to sales personnel; |
• | General and administrative expenses, which consist primarily of personnel costs and costs for general corporate functions, including finance, accounting, facilities and administration and human resources, and fees for professional services such as consulting, legal and accounting services. Expenses relating to software and information system network maintenance and development are classified as general and administrative expenses rather than research and development expenses. In 2001 and 2002, some costs relating to development of an integrated reservation and billing system were capitalized. |
Seasonality of Business
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
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2000 | 2001 | 2002 | ||||
(in thousands of euros) | ||||||
Operating loss | (2,962 | ) | (91,266 | ) | (109,814 | ) |
Depreciation | 7,474 | 15,862 | 15,728 | |||
Amortization of goodwill and intangibles | 7,015 | 30,768 | 13,888 | |||
Impairment of goodwill and intangibles | — | 61,269 | 93,613 | |||
EBITDA | 11,527 | 16,633 | 13,415 | |||
Non-recurring charges | 202 | 294 | 13,337 | |||
EBITDA before non-recurring charges | 11,729 | 16,927 | 26,752 |
Year ended December 31, 2002 compared with year ended December 31, 2001
Impact of Call Center Consolidation
Revenue
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Year ended December 31, | |||||||||
2001 | 2002 | ||||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | ||||||
North America | 108,035 | 60.4 | % | 126,977 | 63.3 | % | |||
Europe | 53,762 | 30.0 | % | 58,233 | 29.0 | % | |||
Asia-Pacific | 6,210 | 3.5 | % | 6,480 | 3.2 | % | |||
Global Video | 10,944 | 6.1 | % | 8,973 | 4.5 | % | |||
Total revenues | 178,951 | 100.0 | % | 200,663 | 100.0 | % | |||
Year ended December 31, | |||||||||
2001 | 2002 | ||||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | ||||||
Genesys Meeting Center(1) | 72,656 | 40.5 | % | 109,857 | 54.7 | % | |||
Genesys Events and Managed Services(1) | 93,520 | 52.3 | % | 80,238 | 40.0 | % | |||
Video conferencing | 10,944 | 6.1 | % | 8,973 | 4.5 | % | |||
Products | 1,831 | 1.1 | % | 1,595 | 0.8 | % | |||
Total revenues | 178,951 | 100.0 | % | 200,663 | 100.0 | % | |||
(1) For periods prior to October 2001 and January 2002, revenues set forth under the headings “Genesys Meeting Center” and “Genesys Events and Managed Services”, respectively, relate to predecessor services. See “Overview — Key Factors Affecting Results of Operations — Revenues” above. |
Gross Profit
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Year ended December 31, | |||||||||
2001 | 2002 | ||||||||
in thousands of € | % of segment revenues | in thousands of € | % of segment revenues | ||||||
North America | 58,134 | 53.8 | % | 63,823 | 50.3 | % | |||
Europe | 39,556 | 73.6 | % | 43,562 | 74.8 | % | |||
Asia-Pacific | 3,138 | 50.5 | % | 3,636 | 56.1 | % | |||
Global Video | 1,947 | 17.8 | % | 2,199 | 24.5 | % | |||
Total gross profit | 102,775 | 57.4 | % | 113,220 | 56.4 | % | |||
Operating Loss and operating expenses
Year ended December 31, | ||||||||||||
2001 | 2002 | |||||||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | |||||||||
Research and development | 5,366 | 3.0 | % | 4,734 | 2.4 | % | ||||||
Selling and marketing | 42,718 | 23.9 | % | 49,976 | 24.9 | % | ||||||
General and administrative | 53,920 | 30.1 | % | 56,487 | 28.2 | % | ||||||
Restructuring charge | — | — | 4,336 | 2.1 | % | |||||||
Impairment of goodwill and other intangibles | 61,269 | 34.2 | % | 93,613 | 46.7 | % | ||||||
Amortization of goodwill and other intangibles | 30,768 | 17.2 | % | 13,888 | 6.9 | % | ||||||
Total operating expenses | 194,041 | 108.4 | % | 223,034 | 111.2 | % | ||||||
Research and Development
Selling and Marketing
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General and Administrative
Impairment of Goodwill and Other Intangibles
Amortization of Goodwill and Other Intangibles
Operating loss by segment
The following table breaks down our operating loss by segment for each of 2001 and 2002.
2001 | 2002 | |||
(in thousands of euros) | ||||
North America | (62,611 | ) | (103,520 | ) |
Europe | (7,986 | ) | 15,904 | |
Asia-Pacific | (618 | ) | (232 | ) |
Global Video | (24 | ) | (1,131 | ) |
Corporate(1) | (20,027 | ) | (20,835 | ) |
Total operating loss | (91,266 | ) | (109,814 | ) |
(1) | Corporate includes primarily non-operating charges and expenses and research and development expenses. |
EBITDA
Our EBITDA decreased from €16.6 million, or 9.3% of revenue in 2001, to €13.4 million, or 6.7% of revenue in 2002. EBITDA in 2002 included non-recurring charges of €13.3 million in 2002, as follows: €4.3 million restructuring charge for call center consolidation in North America and Germany, €3.2 million for the termination of a Rich Media contract, €1.6 million of duplicate costs and retention bonus associated with the consolidation of call centers in North America, €1.2 million for severance of General and Administrative staff, partly associated with the North America consolidation, €1.2 million for the early fulfillment of our obligations under a U.S. long distance contract, €0.9 million for streamlining the senior management and €0.9 million for separation costs of selling and marketing staff. EBITDA included non-recurring charges of €0.3 million in 2001. Excluding the impact of non-recurring charges, our EBITDA increased from €16.6 million, or 9.3% of revenue, in 2001, to €26.7 million, or 13.3% of revenue, in 2002.
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For a reconciliation of EBITDA to operating loss, see “Overview – EBITDA” above.
The following table sets forth our EBITDA, including non-recurring charges, by segment for 2001 and 2002, both as an absolute amount and as a percentage of segment revenues.
Year ended December 31, | ||||||||
2001 | 2002 | |||||||
in thousands of € | % of segment revenues | in thousands of € | % of segment revenues | |||||
North America | 12,532 | 11.6 | % | 12,808 | 10.1 | % | ||
Europe | 21,116 | 39.3 | % | 21,601 | 37.1 | % | ||
Asia-Pacific | 472 | 7.6 | % | 663 | 10.2 | % | ||
Global Video | 1,474 | 13.5 | % | 10 | 0.1 | % | ||
Corporate | (18,961 | ) | n.s. | (21,667 | ) | n.s. | ||
Total | 16,633 | 9.3 | % | 13,415 | 6.7 | % | ||
Financial Income (Expense)
Income Tax Expense
Net Loss
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Year ended December 31, 2001 compared with year ended December 31, 2000
Revenue
Year ended December 31, | ||||||||
2000 | 2001 | |||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | |||||
North America | 40,357 | 43.7 | % | 108,035 | 60.1 | % | ||
Europe | 35,781 | 38.7 | % | 53,762 | 30.3 | % | ||
Asia-Pacific | 4,044 | 4.4 | % | 6,210 | 3.5 | % | ||
Video | 12,237 | 13.2 | % | 10,944 | 6.1 | % | ||
Total revenues | 92,419 | 100.0 | % | 178,951 | 100.0 | % | ||
Year ended December 31, | ||||||||
2000 | 2001 | |||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | |||||
Genesys Meeting Center | 27,950 | 30.2 | % | 72,655 | 40.5 | % | ||
Genesys Events and Managed services | 49,148 | 53.2 | % | 93,520 | 52.3 | % | ||
Video conferencing | 12,238 | 13.2 | % | 10,944 | 6.1 | % | ||
Products | 3,083 | 3.3 | % | 1,831 | 1.1 | % | ||
Total revenues | 92,419 | 100.0 | % | 178,951 | 100.0 | % | ||
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Gross Profit
Year ended December 31, | ||||||||
2000 | 2001 | |||||||
in thousands of € | % of segment revenues | in thousands of € | % of segment revenues | |||||
North America | 19,904 | 49.3 | % | 58,134 | 53.8 | % | ||
Europe | 26,217 | 73.3 | % | 39,556 | 73.6 | % | ||
Asia-Pacific | 1,993 | 49.3 | % | 3,138 | 50.5 | % | ||
Global Video | 3,584 | 29.3 | % | 1,947 | 17.8 | % | ||
Total gross profit | 51,698 | 55.9 | % | 102,775 | 57.4 | % | ||
Operating Loss and operating expenses
Year ended December 31, | ||||||||
2000 | 2001 | |||||||
in thousands of € | % of revenues | in thousands of € | % of revenues | |||||
Research and development | 2,613 | 2.8 | % | 5,366 | 3.0 | % | ||
Selling and marketing | 17,867 | 19.3 | % | 42,718 | 23.9 | % | ||
General and administrative | 27,165 | 29.4 | % | 53,920 | 30.1 | % | ||
Impairment of goodwill and other intangibles | — | — | 61,269 | 34.2 | % | |||
Amortization of goodwill and other intangibles | 7,015 | 7.6 | % | 30,768 | 17.2 | % | ||
Total operating expenses | 54,660 | 59.1 | % | 194,041 | 108.4 | % | ||
Research and Development
Selling and Marketing
General and Administrative
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Impairment of Goodwill and Other Intangibles
Amortization of Goodwill and Other Intangibles
Operating loss by segment
The following table breaks down our operating loss by segment for each of 2000 and 2001.
2000 | 2001 | |||
(in thousands of euros) | ||||
North America | 1,925 | (62,611 | ) | |
Europe | 4,703 | (7,986 | ) | |
Asia-Pacific | 43 | (618 | ) | |
Global Video | 3,584 | (24 | ) | |
Corporate(1) | (13,217 | ) | (20,027 | ) |
Total operating loss | (2,962 | ) | (91,266 | ) |
(1) | Corporate includes primarily non-operating charges and expenses and research and development expenses. |
EBITDA Margin
Our EBITDA, excluding the impairment loss on goodwill and identifiable intangible assets increased from €11.7 million in 2000 to €16.6 million in 2001. Excluding the non-recurring charge of €0.3 million, our EBITDA amounted to €16.9 in 2001. Our EBITDA margin decreased from 12.7% in 2000 to 9.3% in 2001. The decrease in EBITDA margin primarily reflects the increased level of selling and marketing expenses, general and administrative expenses and research and development expenses described above. These negative effects were partially offset by the improvement in our gross margins. For a reconciliation of EBITDA to operating loss, see “Overview – EBITDA” above.
The following table sets forth our EBITDA, including non-recurring charges, by segment for 2000 and 2001, both as an absolute amount and as a percentage of segment revenues.
Year ended December 31, | ||||||||
2000 | 2001 | |||||||
in thousands of € | % of segment revenues | in thousands of € | % of segment revenues | |||||
North America | 5,786 | 14.3 | % | 12,532 | 11.6 | % | ||
Europe | 13,991 | 39.1 | % | 21,116 | 39.3 | % | ||
Asia-Pacific | 343 | 8.5 | % | 472 | 7.6 | % | ||
Global Video | 4,493 | 36.7 | % | 1,474 | 13.5 | % | ||
Corporate | (12,884 | ) | n.s. | (18,961 | ) | n.s. | ||
Total | 11,729 | 12.7 | % | 16,633 | 9.3 | % | ||
The decline in our EBITDA margin in North America in 2001 is associated with the acquisition of Vialog during the transition period before consolidation of business. Our EBITDA margin declined substantially in our Global Video segment, for the same reason than the decrease of our gross margin in this segment.
Financial Income (Expense)
Income Tax Expense
Net Loss
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Liquidity and Capital Resources
General
Our liquidity requirements are driven primarily by our working capital requirements, capital expenditures on telecommunications and bridging equipment, servers, computers and software, our debt service requirements and, until 2001, our acquisitions. To date, we have funded our liquidity requirements through a combination of equity offerings, borrowings (including bank financings and convertible debt issuances), and operating cash flow.
At December 31, 2002, our principal sources of liquidity included €10.0 million in cash and cash equivalents and a total of €5.1 million of short-term credit facilities (of which €3.4 million was used as of December 31, 2002). However, the terms of our U.S. $125 million credit facility may limit our ability to borrow under our short-term credit facilities.
Cash Flows
Cash and cash equivalents decreased from €17.5 million at the end of December 2001 to €10.0 million at the end of December 2002.
We generated cash of €7.2 million in operating activities in 2002. This cash was mainly provided from a decrease in accounts receivable of €3.5 million and in prepaid expenses of €3.6 million, and an increase in other liabilities of €3.8 million, which were partially offset by a decrease in accounts payable of €5.6 million. The decrease in accounts receivable was the result of enhanced billing and collection processes, which lead to a reduction in day sales outstanding as of December 31, 2002 compared to December 31, 2001 and to the lower reported revenues in the fourth quarter of 2002 compared to the fourth quarter of 2001.
We used cash of €10.1 million in investing activities, primarily in connection with the acquisition of Astound (€4.3 million for an additional acquisition price payment in early 2002) and capital expenditures of €6.8 million for telecommunications and bridging equipment, servers, computers, software (including €2.6 million relating to the capitalized development of an integrated reservation and billing system). Our practice is generally to purchase additional bridging and streaming capacity when average daily usage reaches approximately 70% of available capacity. Our capital expenditures as a percentage of revenues were 11.4%, 8.9% and 3.4% of revenues in 2000, 2001 and 2002, respectively.
Contractual Obligations and Commercial Commitments
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As of December 31, 2002, the repayment schedule for all of our contractual obligations and commercial commitments is as follows:
Payments due by period | ||||||||||
2003 | 2004- 2005 | 2006- 2007 | 2008 and thereafter | Total | ||||||
Term loans, variable rate | €1,106 | €59,121 | €42,910 | €103,137 | ||||||
Revolving loans, variable rate | — | — | 9,536 | 9,536 | ||||||
Term loans, fixed rate | 37 | 37 | — | — | 74 | |||||
3% Convertible notes | — | 8,441 | — | — | 8,441 | |||||
Interest free loan from ANVAR | — | 84 | 36 | — | 120 | |||||
Capital lease obligations | 191 | 81 | 68 | — | 340 | |||||
Total long-term debt, excluding accrued interest | 1,334 | 67,764 | 52,550 | — | 121,648 | |||||
Operating leases | 8,723 | 10,831 | 4,112 | 1,609 | 25,275 | |||||
Other long term liabilities (1) | — | 3,039 | 2,403 | 1,202 | 6,644 | |||||
Total contractual cash obligations | €10,057 | €81,634 | €59,065 | €2,811 | €153,567 | |||||
According to the amendment signed on April 30, 2003, which is subject to certain conditions, as described under “Financial Restructuring” below, the amended principal payment schedule on an annual basis compared to the prior maturity schedule is as follows:
Original repayments | Repayments according to amendment signed on April 30, 2003 | Difference of repayments | Difference of repayments | |||||
in millions of U.S. dollars | in millions of euros | |||||||
2003 | $17.0 | $1.0 | €(16.0 | ) | €(15,3 | ) | ||
2004 | 22.0 | $18.0 | (4.0 | ) | (3,8 | ) | ||
2005 | 24.0 | $22.0 | (2.0 | ) | (1,9 | ) | ||
2006 | 55.0 | $30.0 | (25.0 | ) | (23,8 | ) | ||
2007 | — | $23,5 | 23.5 | 22,4 | ||||
2008 | — | $23,5 | $23.5 | €22,4 | ||||
Total | $118.0 | $118.0 | — | — | ||||
The following breakdown of our financial indebtedness by principal repayment date does take into account the amendment of the U.S. $125 million credit facility agreement, which is subject to certain conditions, as described under “Financial restructuring” below.
Payments due by period (as amended on April 30, 2003) | ||||||||||
2003 | 2004- 2005 | 2006- 2007 | 2008 and thereafter | Total | ||||||
Term loans, variable rate | €1,106 | €38,142 | €41,480 | €22,409 | €103,137 | |||||
Revolving loans, variable rate | — | — | 9,536 | — | 9,536 | |||||
Term loans, fixed rate | 37 | 37 | — | — | 74 | |||||
3% Convertible notes | — | 8,441 | — | — | 8,441 | |||||
Interest free loan from ANVAR | — | 84 | 36 | — | 120 | |||||
Capital lease obligations | 191 | 81 | 68 | — | 340 | |||||
Total long-term debt, excluding accrued interest | 1,334 | 46,785 | 51,120 | 22,409 | 121,648 | |||||
Operating leases | 8,723 | 10,831 | 4,112 | 1,609 | 25,275 | |||||
Other long term liabilities (1) | — | 3,039 | 2,403 | 1,202 | 6,644 | |||||
Total contractual cash obligations | €10,057 | €60,655 | €57,635 | €25,220 | €153,567 | |||||
(1) | Other long-term liabilities include primarily accrued restructuring expenses associated with consolidation of call centers and the fair value of our interest-rate swap agreement obligation. |
Credit Facility
On April 20, 2001, we and Vialog entered into a U.S. $125 million credit facility agreement with BNP Paribas, CIBC World Markets and Fortis Bank. This credit facility, which was amended thereafter, replaced our then outstanding U.S. $35 million multi-currency term loan and the long-term debt of Vialog (U.S. $75 million senior notes payable) that existed prior to our acquisition of Vialog. Prior to the signature on April 30, 2003 of the amendment described under “Financial Restructuring” below, the U.S. $125 million credit facility included the following terms:
— | a U.S. $50 million senior term loan facility granted to Vialog, which was used by Vialog to refinance its existing debt. This facility matured on April 28, 2006 and bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $30 million senior term loan facility granted to Vialog, which was used by Vialog to refinance its existing debt. This facility matured on October 31, 2006 and bears interest at the rate of Libor USD plus a margin of 3.15% per annum. |
— | a U.S. $35 million senior term loan facility granted to our company, which we used to partially refinance our existing debt. This facility matured on April 28, 2006 and bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $5 million revolving loan facility granted to Vialog, to be used by Vialog for working capital purposes. This facility bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $5 million revolving loan facility granted to our company, which we use for working capital purposes. This facility bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
Prior to the financial restructuring, the U.S. $50 million and U.S. $35 million term loans granted to Vialog and our company, respectively, were to be repaid in semi-annual installments in accordance with the schedule set forth in the credit facility agreement. The U.S. $30 million facility was to be repaid in one payment at maturity. All amounts borrowed are repayable at any time in whole or in part at the option of the borrower.
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Bank Financing Restructuring
Terms of the Financial Restructuring
On April 11, 2003, we reached an agreement in principle with our lenders under the $125 million credit facility, several of the holders of our 3% convertible bonds and certain of our shareholders (some of who are also bondholders) on a financial restructuring plan that is designed to facilitate our continuing growth in the coming years. The agreement was negotiated with the assistance of a mediator who had been appointed by a French court at our request to facilitate the renegotiation process.
The financial restructuring is essentially comprised of:
• | various amendments to our April 2001 $125 million credit facility that would extend the maturity of the remaining principal through October 2008; |
• | deferral of the maturity date for 50% of the principal of our outstanding 3% convertible bonds; and |
• | a €6 to 8 million offering of rights to subscribe for our ordinary shares. |
The various components of the financial restructuring plan, which are subject to several conditions precedent and subsequent (including receiving shareholder and bondholder approvals), are described in more detail below.
Amendments to our April 2001 $125 Million Credit Facility
On April 30, 2003, we signed an amendment to our April 2001 $125 million credit facility with our main bank creditors. The amendment provides for the extension of the final maturity of the $118 million (€112.5 million) remaining principal amount under the credit facility from October 2006 to October 2008, and the rescheduling of principal repayments, in each case subject to the satisfaction of certain conditions subsequent, which are described below. A copy of this amendment is included under Item 19 as an Exhibit to this annual report.
Under the amendment, $7 million of principal would be payable on April 30, 2004 and $11 million of principal would be payable on October 31, 2004, with varying amounts of principal payable every six months thereafter until maturity. Interest will continue to be paid according to the original schedule (i.e. semi-annually on April 30 and October 31), subject to an increase of up to 200 basis points commencing in 2007. We have also agreed to prepay the loan if and to the extent our excess cash flows (excluding the proceeds of the proposed rights offering described below) exceed certain levels.
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• | we must complete a rights offering, which must first be approved by our shareholders with gross proceeds of at least €6 million by August 31, 2003, and |
• | we must amend the terms of our 3% convertible bonds due September 1, 2004 by June 30, 2003 to provide that 50% of the €18.37 of principal per bond will be repayable on the original maturity date, (i.e. September 1, 2004) and the remaining 50% of principal per bond will be repayable on October 31, 2005. |
Deferral of 50% of Principal Repayment for our 3% Convertible Bonds due 2004
Subscription Rights Offering
Reduction in Capital
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Factoring Arrangement
Financial Restructuring Fees and Expenses
Other Commitments
Research and Development, Patents and Licenses, etc.
Trend Information
Critical accounting policies
Allowance for doubtful accounts
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<<<<<
Impairment of goodwill and identifiable intangible assets
Deferred tax assets
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Item 6. Directors, Senior Management and Employees |
A. | Directors and Senior Management |
Directors |
François Legros | Age: | 37 | ||
Chairman and | First elected: | June 1997 | ||
Chief Executive Officer | Term expires: | 2005 | ||
Principal occupation: | Chairman and Chief Executive Officer, Genesys | |||
Other directorships and business experience: | Director of Genesys Conferencing Inc., Genesys Conferencing Ltd, Genesys Conferencing Ltd (HK), Genesys Conferencing Pte Ltd, Genesys Conferencing Pty Ltd, Maga Fund Ltd and Genesys Conferencing Ltd (Canada) Chairman of Nextventure SA | |||
Jean-Jacques Bertrand | Age: | 50 | ||
Director | First elected: | October 1998* | ||
Term expires: | 2005 | |||
Principal occupation: | Managing Director, BNP Paribas Private Equity | |||
Other directorships and business experience: | Former Executive Vice President, Head of Communications Industry at Banexi; Director of Multitel (Spain) and Musiwave (France) | |||
Jean-Charles Bouillet | Age: | 56 | ||
Director | First elected: | March 2000* | ||
Term expires: | 2003 | |||
Principal occupation: | Director for Corporate Development, Unilog S.A. France | |||
Other directorships and business experience: | ||||
Patrick S. Jones | Age: | 59 | ||
Director | First elected: | June 2001 | ||
Term expires: | 2004 | |||
Principal occupation: | Retired | |||
Other directorships and business experience: | Chairman of the Board, Dione Plc; Director of XRT-CERG Smart Trust AB and QRS Corp.; Former Senior Vice President, Chief Financial Officer, Gemplus S.A.; Former Vice President and Corporate Controller of Intel Corp. | |||
* | Mr. Bertrand sat on our Board as the representative of Finovectron SA from 1990 to 1998 (except from September 1996 to April 1998, when Finovectron had another representative); Mr. Bouillet sat on our Board as the representative of STM-Goupil from 1988 to 1991. |
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Paul Sfez presently sits on or chairs the board of the following companies: Pop Corn Pub (French SAS), Ateliers Modèles (French SA), Sorgem O&D (French SA), FM Management (French SARL), Sud Sud International (French SA), Euro Mediterranean Investment Fund (Tunisian SICAF).
Senior Management |
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B. | Compensation |
Compensation |
Director | Attendance Fees | |||
François Legros | €0 | |||
Jean-Jacques Bertrand | €12,000 | |||
Jean-Charles Bouillet | €12,000 | |||
Patrick Jones | €37,500 | |||
David Lougee* | €10,000 | |||
Philippe Piriou** | €8,000 | |||
Alan Senter*** | €20,000 | |||
Total | €99,500 | |||
* | Mr. Lougee resigned from his position in March 2002. |
** | Mr Piriou requested that his term not be renewed in 2002. |
*** | Mr Senter resigned from his position in August 2002. |
Stock Options |
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Pension or Retirement Benefits |
C. | Board Practices |
Audit Committee |
• | making regular reports to our board of directors; |
• | reviewing and reassessing the adequacy of the audit committee charter annually and recommending any proposed changes to the board of directors for approval; |
• | reviewing the annual audited financial statements with management; |
• | reviewing with management and our independent auditor our annual and interim financial statements prior to the filing of such financial statements with the U.S. Securities and Exchange Commission or the French Commission des Opérations de Bourse; |
• | meeting periodically with management to review our major financial risk exposures and the steps management has taken to monitor and control such exposures; |
• | reviewing major changes to our auditing and accounting principles and practices; |
• | receiving periodic reports from our independent auditor regarding our auditor’s independence, discussing such reports with our auditor, and if so determined by the audit committee, taking or recommending that the full board of directors take appropriate action to oversee the independence of the auditor; |
• | reviewing the appointment and replacement of any senior internal auditing executive; |
• | reviewing the significant reports to management prepared by the internal auditing department and management’s responses; |
• | obtaining reports from management, our senior internal auditing executive and the independent auditor that our subsidiaries and/or foreign affiliated entities are in conformity with applicable legal requirements; |
• | reviewing with our independent auditor any problems or difficulties our auditor may have encountered and any management letter provided by our auditor and our response to that letter; |
• | advising our board of directors with respect to our policies and procedures regarding compliance with applicable laws and regulations; and |
• | reviewing with our legal counsel legal matters that may have a material impact on our financial statements, our compliance policies and any material reports or inquiries received from regulators or governmental agencies. |
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Compensation Committee |
• | approving the compensation of all elected officers; |
• | reviewing and making recommendations with respect to compensation and benefits for executive officers and taking all related actions that are not reserved for our board; and |
• | administering our stock option plan and other salary, compensation or benefit plans that it is designed to administer. |
Disclosure Committee |
• | Checking compliance with the information obligations that our company is subject to, in particular with a view to the requirements of applicable stock exchange and financial regulations, and giving its opinion on our compliance with such obligations; |
• | Preparing our publications and communications calendar and their model content; |
• | Preparing and organizing analysts’ meetings; |
• | Preparing and organizing press conferences; |
• | Selecting the media used to publish information (press releases, electronic supports, etc.); |
• | Making sure that the internal collection procedures and procedures for supervision of information to be made public by our company are defined, guaranteeing the reliability of such procedures, and overseeing compliance with such procedures; |
• | Regularly assessing, under the supervision of the Chief Executive Officer and the Chief Financial Officer, the internal collection procedures and procedures for supervision of information, recommending modifications to such procedures, if any, and overseeing the implementation any modifications approved by the Chief Executive Officer and the Chief Financial Officer; |
• | At least once a year and with our statutory auditors and external consultants, defining and undertaking an assessment of the procedures for internal supervision of financial information, and providing its opinion on any significant problems likely to affect the collection and communication of financial information and/or any identified fraud involving members of the management or other persons having significant responsibilities within our company; |
• | Appointing the person(s) in charge of preparing and drafting our reports and communications, who may be, at the disclosure committee’s discretion, different persons depending on the subject of the reports or communications; |
• | Organizing the training of the persons involved in the process of communicating information about our company; |
• | Reviewing each draft report or communication of our company, examining the information included therein and providing an opinion on the opportunity to conduct additional diligence or investigations to verify such information; |
• | Providing an opinion on the significance of any event or other information relating to our company; |
• | Providing an opinion on the opportunity to submit the draft report or communication to the statutory auditors, to legal counsel or to any other third party expert for validation of the information included in such report or communication; |
• | Providing an opinion on the necessity of obtaining approval from our Board of Directors on the content of the draft report or communication; |
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• | Approving the final version of any report or communication that we must make public; and |
• | Approving the procedures for publication and distribution of reports or communications that have been approved by the disclosure committee, as well as the terms and conditions of filing or registration thereof with the stock exchange authorities. |
D. | Employees |
As of December 31: | |||||||||||||||||||
2002 | % | 2001 | % | 2000 | % | ||||||||||||||
Europe | 413 | 36.91 | % | 494 | 32.3 | % | 380 | 54.7 | % | ||||||||||
North America | 612 | 54.69 | % | 971 | 63.5 | % | 272 | 39.1 | % | ||||||||||
Asia Pacific | 94 | 8.40 | % | 65 | 4.2 | % | 43 | 6.2 | % | ||||||||||
TOTAL | 1,119 | 100.0 | % | 1,553 | 100.0 | % | 695 | 100.0 | % | ||||||||||
As of December 31: | |||||||||||||||||||
2002 | % | 2001 | % | 2000 | % | ||||||||||||||
Sales & Marketing | 229 | 20.46 | % | 408 | 26.6 | % | 180 | 25.9 | % | ||||||||||
Research and Development | 61 | 5.45 | % | 64 | 4.2 | % | 33 | 4.7 | % | ||||||||||
Operators and Reservationists | 476 | 42.54 | % | 740 | 48.4 | % | 335 | 48.2 | % | ||||||||||
Administrative and Managerial | 257 | 22.97 | % | 272 | 17.8 | % | 123 | 17.7 | % | ||||||||||
MIS and Operations | 96 | 8.58 | % | 46 | 3.0 | % | 24 | 3.5 | % | ||||||||||
TOTAL | 1,119 | 100.0 | % | 1,530 | 100.0 | % | 695 | 100.0 | % | ||||||||||
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E. | Share Ownership |
• | Each of our directors, including our nominees for director, and named senior management; and |
• | All directors, including our nominees for director, and named senior management as a group. |
Name | Shares Owned | % of Outstanding Shares | |||||
François Legros | 22,599 | * | |||||
Jean-Jacques Bertrand | 795,363 | (1) | 5.14 | % | |||
Jean-Charles Bouillet | 3,000 | * | |||||
Patrick S. Jones | 1,000 | (2) | * | ||||
David Detert | 648 | * | |||||
Universal Capital Partners | 1,800,000 | 11.64 | % | ||||
Paul Sfez | 1 | * | |||||
Thomas Abbott | 5,000 | (2) | * | ||||
Margie Medalle | 0 | * | |||||
Olivier Fourcade | 574 | * | |||||
Jim Huzell | 3,700 | * | |||||
Michael E. Savage | 117 | * | |||||
Marie Capela-Laborde | 2,152 | * | |||||
Shelly Robertson | 147 | * | |||||
Denise Persson | 1,000 | * | |||||
Mark Taverner | 0 | * | |||||
Jim Lysinger | 0 | * | |||||
All directors, including our nominees for director, and senior management as a group (17 persons) | 2,632,611 | 17 | % | ||||
* | Less than one percent. |
(1) | Mr. Bertrand may be considered the beneficial owner of 795,362 shares held of record by BNP Europe and Media Fund II L.P., for which shares he disclaims beneficial ownership except to the extent of his pecuniary interest therein. |
(2) | Shares held as ADSs (which represent one-half of one ordinary share). |
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• | Each of our named senior management; and |
• | All senior management as a group. |
Name | Number of Shares underlying options | Exercise Price | Expiration Date | |||||||
François Legros | 12,363 | (1) | €15.32 | 09/15/07 | ||||||
23,900 | (1) | €14.30 | 01/07/10 | |||||||
Margie Medalle | 10,000 | (1) | €53.17 | 03/08/08 | ||||||
15,000 | (2) | €22.09 | 04/24/09 | |||||||
Michael E. Savage | 1,676 | (3) | €11.93 | 01/26/10 | ||||||
8,379 | (3) | €14.92 | 02/10/10 | |||||||
33,515 | (3) | €10.63 | 11/11/09 | |||||||
26,390 | (3) | €31.33 | 10/02/10 | |||||||
Marie Capela-Laborde | 1,021 | (1) | €15.32 | 09/15/07 | ||||||
7,000 | (2) | €53.17 | 03/08/08 | |||||||
Mark Taverner | 5,070 | (1) | €15.32 | 09/15/07 | ||||||
1,000 | (1) | €53.17 | 03/08/08 | |||||||
Denise Persson | 3,000 | (1) | €15.32 | 09/15/07 | ||||||
7,000 | (1) | €53.17 | 03/08/08 | |||||||
Shelly Robertson | 3,351 | (3) | €10.63 | 11/11/09 | ||||||
335 | (3) | €23.87 | 04/16/09 | |||||||
1,675 | (3) | €13.80 | 04/29/09 | |||||||
13,194 | (3) | €31.33 | 10/02/09 | |||||||
Jim Lysinger | 10,140 | (1) | €15.32 | 09/15/07 | ||||||
3,000 | (1) | €53.17 | 03/08/08 | |||||||
11,858 | (2) | €22.90 | 04/24/09 | |||||||
All senior management as a group (8 individuals) | 198,867 | |||||||||
(1) | Granted pursuant to the 1999 plan. |
(2) | Granted pursuant to the 2000 plan. |
(3) | Granted pursuant to the Vialog stock plans. |
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Item 7. Major Shareholders and Related Party Transactions |
A. | Major Shareholders |
Company | Number of shares | % of share capital | % of voting rights* | |||||||
Universal Capital Partners*(1) | 1 800 000 | 11,64 | % | 11,33 | % | |||||
IN-COM SA*(1) | 165 185 | 1,06 | % | 1,07 | % | |||||
PART’COM*(1) | 423 786 | 2,74 | % | 4,45 | % | |||||
Group total | 2 388 971 | 15,44 | % | 16,85 | % | |||||
CDC Ixis Private Equity*(3) | 187 471 | 1,21 | % | 1,54 | % | |||||
FCPI CDC Innovatech 1 | 50 837 | 0,32 | % | 0,32 | % | |||||
Banexi Communication | 281 120 | 1,81 | % | 1,75 | % | |||||
Geneval (Societe Générale) | 217 000 | 1.40 | % | 1,36 | % | |||||
BNP Europ Telecom & Media FD II LP*(2) | 795 362 | 5,15 | % | 5,00 | % | |||||
Intrepid Capital Management | 867 000 | 5,60 | % | 5,43 | % | |||||
Ocean Fund c/o Plievier Beleggingen, BV | 326 500 | 2,13 | % | 2,05 | % | |||||
Ring Partners, LP | 210 850 | 1,36 | % | 1,33 | % | |||||
Michael Jesselson c/o Phillip Brothers | 186 500 | 1,21 | % | 1,18 | % | |||||
SMA gestion | 180 500 | 1,17 | % | 1,13 | % | |||||
* | Pursuant to our status (bylaws) shares held in registered form for more than two years, acquire double voting rights. See Item 10 “Additional Information – Memorandum and Articles of Association.” |
(1) | Universal Capital Partners, Part’Com S.A. and In-Com S.A. (a wholly-owned subsidiary of Part’Com S.A.) have entered into a letter agreement to form a group to influence the policies of our company. This agreement is described in more details below. |
(2) | Mr. Jean-Jacques Bertrand, one of our directors, has informed us that he could be deemed to be the beneficial owner of the shares held by BNP Europ and Telecom Media Fund II L.P. He has disclaimed beneficial ownership of such shares. |
(3) | Part’Com S.A. is a wholly-owned subsidiary of CDC Ixis Private Equity, however, CDC Ixis is not a party to the letter agreement. |
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B. | Related Party Transactions |
C. | Interests of Experts and Counsel |
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Item 8. Financial Information |
A. | Consolidated Statements and Other Financial Information |
Legal Proceedings |
Dividend Distribution Policy |
B. | Significant Changes |
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Item 9. The Offer and Listing |
A. | Offer and Listing Details |
Euronext Paris | Nasdaq | ||||||||||||
Period | High | Low | High | Low | |||||||||
(ordinary share price in €) | (ADS price in $) | ||||||||||||
1998 | |||||||||||||
beginning (October 1, 1998) | 12.04 | 8.54 | — | — | |||||||||
1999 | 37.00 | 9.90 | — | — | |||||||||
2000 | 79.50 | 30.00 | — | — | |||||||||
2001 (Nasdaq beginning April 26, 2001) | 53.80 | 9.76 | 15.29 | 4.55 | |||||||||
First Quarter | 53.80 | 20.12 | — | — | |||||||||
Second Quarter (Nasdaq beginning April 26, 2001) | 35.82 | 26.02 | 15.29 | 9.90 | |||||||||
Third Quarter | 25.60 | 9.76 | 11.00 | 4.55 | |||||||||
Fourth Quarter | 16.94 | 11.03 | 8.35 | 5.10 | |||||||||
2002 | 14.45 | 1.81 | 6.80 | 0.95 | |||||||||
First Quarter | 14.45 | 7.57 | 6.80 | 3.35 | |||||||||
Second Quarter | 14.33 | 7.50 | 6.54 | 2.70 | |||||||||
Third Quarter | 5.32 | 2.00 | 2.70 | 0.96 | |||||||||
Fourth Quarter | 3.45 | 1.81 | 1.61 | 0.95 | |||||||||
2003 (through April 30, 2003) | 3.06 | 1.10 | 1.59 | 0.59 | |||||||||
First Quarter | 3.06 | 1.10 | 1.59 | 0.59 | |||||||||
Second Quarter (through April 30, 2003) | 2.77 | 2.14 | 1.50 | 1.19 | |||||||||
2002 | |||||||||||||
November | 2.95 | 1.99 | 1.42 | 1.03 | |||||||||
December | 3.45 | 1.81 | 1.61 | 0.95 | |||||||||
2003 | |||||||||||||
January | 2.25 | 1.28 | 1.07 | 0.78 | |||||||||
February | 1.59 | 1.10 | 1.10 | 0.59 | |||||||||
March | 3.10 | 1.10 | 1.59 | 0.64 | |||||||||
April (through April 30, 2003) | 2.77 | * | 2.14 | 1.50 | 1.19 | ||||||||
* | Source: Euronext Paris and The Bank of New York. Two ADSs represent one ordinary share. Trading of our ADSs on the Nasdaq National Market began on April 26, 2001. |
B. | Plan of Distribution |
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C. | Markets |
Trading On The Nouveau Marché |
General |
Nouveau Marché |
• | are a component of the SBF 120 Index; or |
• | have both a total market capitalization of at least €1 billion and a daily average volume of trades of at least €1 million. |
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Trading by the Company in its Shares |
D. | Selling Shareholders |
E. | Dilution |
F. | Expenses of the Issue |
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Item 10. Additional Information
A. Share Capital
Share Capital
Stock Options
Convertible Bonds and Warrants
Share Capital Resolutions
B. Memorandum and Articles of Association
General
• | Title II of the French Commercial Code (previously French Company Law No. 66-537 of July 24, 1966, as amended), and |
• | the statuts themselves. |
Shareholder Identification
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Shareholders’ Meetings and Voting Rights |
General |
• | electing, replacing and removing directors; |
• | appointing independent auditors; |
• | approving the annual accounts; |
• | declaring dividends or authorizing dividends to be paid in shares provided the statuts contain a provision to that effect; |
• | issuing non-convertible bonds; and |
• | approval of stock repurchase programs. |
• | changing our company’s name or corporate purpose; |
• | increasing or decreasing our share capital; |
• | creating a new class of equity securities; |
• | authorizing the issuance of investment certificates, convertible or exchangeable securities; |
• | establishing any other rights to equity securities; |
• | selling or transferring substantially all of our assets; and |
• | the voluntary liquidation of our company. |
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Annual Ordinary Meetings |
• | one or several shareholders holding at least 5% of our share capital, |
• | any interested party in cases of urgency, or |
Notice of Shareholders’ Meetings |
• | one or several shareholders holding a specified percentage of shares, or |
• | a duly qualified association of shareholders who have held their shares in registered form for at least two years and who together hold at least 0.76% of our voting rights. |
Attendance and Voting at Shareholders’ Meetings |
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Proxies and Votes by Mail |
Quorum |
• | an ordinary general meeting, |
• | an extraordinary general meeting where only an increase in our share capital is proposed through incorporation of reserves, profits or share premium. |
Majority |
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Shareholder Rights |
Financial Statements and Other Communications with Shareholders |
Dividends |
Legal Reserve |
Approval of Dividends |
Distribution of Dividends |
Timing of Payment |
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Changes in Share Capital |
Increases in Share Capital |
• | issuing additional shares, |
• | increasing the nominal value of existing shares, or |
• | creating a new class of equity securities. |
• | in consideration for cash, |
• | in consideration for assets contributed in kind, |
• | through an exchange offer, |
• | by conversion of debt securities previously issued, |
• | by capitalization of profits, reserves or share premiums, or |
• | subject to various conditions, in satisfaction of debt incurred by our company. |
Decreases in Share Capital |
Preferential Subscription Rights |
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Form, Holding and Transfer of Shares |
Form of Shares |
Holding of Shares |
Transfer of Shares |
Liquidation Rights |
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Requirements for Holdings Exceeding Certain Percentages |
Purchase of Our Own Shares |
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• | keep the shares; |
• | sell or transfer them, including to our employees under an authorized profit-sharing plan or stock option plan; |
• | cancel the shares, with our shareholders’ approval at an extraordinary general meeting. |
• | respond to market conditions; |
• | regulate market prices; |
• | provide shares to our employees and officers under stock option plans or shares purchase plans; |
• | finance external growth; |
• | grant shares following the exercise of rights attached to securities that give the right to receive shares; and |
• | optimize our capital allocation. |
Trading in Our Own Shares |
• | trades must be executed on behalf of the company by only one intermediary in each trading session, unless the issuer executes its purchase plan partly through derivative instruments, in which case two intermediaries may be used, but only to the extent that the issuer is able to ensure adequate coordination between the intermediaries; |
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• | any block trades may not be made at a price above the current market price; and |
• | each trade must be made at a price that falls between the lowest and the highest trading price of the trading session during which it is executed. |
• | the trade must not influence the determination of the quoted price before the opening of trading, at the first trade of the shares, at the reopening of trading following a suspension, or, as applicable, in the last half-hour of any trading session or at the fixing of the closing price; |
• | the trade must not account for more than 25% of the average total daily trading volume on Euronext Paris in the shares during the three trading days immediately preceding the trade; and |
• | the trade must not be carried out in order to influence the price of a derivative instrument relating to the company’s shares. |
• | trades by a company in its own shares that are used to finance an acquisition are deemed valid, regardless of whether the six requirements listed above are met if (a) the acquisition takes place at least three months after the company’s last trade in its own shares and (b) an independent advisor has been appointed in order to assess the value of the shares, the value of the assets acquired and the fairness of the exchange ratio; and |
• | trades by a company in its own shares that are executed on behalf of the company by an intermediary pursuant to a liquidity agreement are deemed valid, regardless of whether the first two requirements listed above regarding continuous quotation and the two restrictions regarding the trading period are met if the terms of the liquidity agreement comply with the ethics guidelines (charte de déontologie) approved by the COB in its Instruction of April 10, 2001. |
Ownership of Shares by Non-French Persons |
• | the acquiring party’s intentions, |
• | the acquiring party’s ability to elect directors, or |
• | financial reliance by the company on the acquiring party. |
Enforceability of Civil Liabilities |
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C. | Material Contracts |
D. | Exchange Controls |
E. | Taxation |
French Taxation |
Taxation of Dividends on Shares |
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Taxation on Sale or Disposition of Shares |
Estate and Gift Tax |
Taxation of U.S. Investors |
• | the beneficial owner of the shares or ADSs (and the dividends paid with respect thereto); |
• | an individual resident of the United States, a U.S. corporation, or a partnership, estate or trust to the extent its income is subject to taxation in the United States in its hands or in the hands of its partners or beneficiaries; |
• | not also a resident of France for French tax purposes; and |
• | not subject to an anti-treaty shopping article that applies in limited circumstances. |
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Dividends |
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Procedures for Claiming Treaty Benefits |
• | the simplified certificate described below; or |
• | an application for refund on French Treasury Form RF 1A EU-No. 5052. |
• | you are a U.S. resident within the meaning of the Treaty; |
• | you do not maintain a permanent establishment or fixed base in France with which the holding giving rise to the dividend is effectively connected; |
• | you own all the rights attached to the full ownership of the shares (including dividend rights); and |
• | you meet all the requirements of the Treaty for obtaining the benefit of the reduced rate of withholding tax and the refund of the avoir fiscal. |
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Capital Gains |
French Estate and Gift Tax |
U.S. Information Reporting and Backup Withholding Rules |
F. | Dividends and Paying Agents |
G. | Statement by Experts |
H. | Documents on Display |
I. | Subsidiary Information. |
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Item 11. Quantitative and Qualitative Disclosures about Market Risk |
Foreign Currency Exchange Rate Risk |
Interest Rate Risk |
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Item 12. Description of Securities other than Equity Securities |
A. | Debt Securities |
B. | Warrants and Rights |
C. | Other Securities |
D. | American Depositary Shares |
American Depositary Receipts |
• | Société Générale, 32 Rue Champ de Tir, Nantes, France. |
Share Dividends and Other Distributions |
How Will You Receive Dividends And Other Distributions on the Shares? |
75/128
Deposit, Withdrawal and Cancellation |
How Does the Depositary Deliver ADRs? |
How Do ADR Holders Cancel an ADR and Obtain Shares? |
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Voting Rights |
How Do You Vote? |
Fees and Expenses |
ADR holders must pay: | For: | ||
$5.00 (or less) per 100 ADSs (or portion thereof) | Each issuance of an ADS, including as a result of a distribution of shares or rights or other property | ||
Each cancellation of an ADS, including if the deposit agreement terminates | |||
$.02 (or less) per ADS (or portion thereof) | Any cash payment | ||
Registration or Transfer Fees | Transfer and registration of shares on the share register of the foreign registrar from your name to the name of the depositary or its agent when you deposit or withdraw shares | ||
Expenses of The Bank of New York | Conversion of foreign currency to U.S. dollars | ||
Cable, telex and facsimile transmission expenses | |||
Servicing of shares or deposited securities | |||
Taxes and other governmental charges the depositary or the Custodian have to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary |
Payment of Taxes |
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Changes Affecting Deposited Securities |
We: | |||||
• | Change the nominal or par value of our shares. | • | Distribute securities on the deposited shares that are not distributed to you. | ||
• | Reclassify, split up or consolidate any of the deposited securities. | • | Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action. | ||
Then either: | |||||
The cash, shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities. | The depositary may, and will if we ask it to, distribute some or all of the cash, shares or other securities it receives. It may also deliver new ADRs or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities. |
Disclosure of Interests |
Amendment and Termination |
How May the Deposit Agreement be Amended? |
How May the Deposit Agreement be Terminated? |
Limitations on Obligations and Liability to ADR Holders |
Limits on Our Obligations and Obligations of the Depositary; Limits on Liability to ADR holders |
• | are obligated only to take the actions specifically set forth in the deposit agreement without negligence or bad faith; |
• | are not liable if either is prevented or delayed by law or circumstances beyond its control from performing its obligations under the deposit agreement; |
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• | are not liable if either exercises or fails to exercise discretion provided for under the deposit agreement; |
• | have no obligation to become involved in a lawsuit or other proceeding related to the ADRs or the deposit agreement on your behalf or on behalf of any other party; |
• | are not liable for any acts or omissions in reliance upon the advice of or any information from any person reasonably believed in good faith to be competent to give such advice or information; |
• | may rely upon any documents it believes in good faith to be genuine and to have been signed or presented by the proper party; and |
• | are not liable for any failure to carry out voting instructions or for the manner in which a vote was cast, provided they act in good faith. |
Requirements for Depositary Actions |
• | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; |
• | production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and |
• | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
Your Right to Receive the Shares Underlying Your ADRs |
• | when temporary delays arise when we or the depositary have closed our transfer books or the deposit of shares is blocked in connection with voting at a shareholders’ meeting, or the payment of dividends; |
• | when you or other ADR holders seeking to withdraw shares owe money to pay fees, taxes and similar charges; or |
• | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADRs or to the withdrawal of shares or other deposited securities. |
Pre-release of ADRs |
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PART II |
Item 13. Defaults, Dividend Arrearages and Delinquencies. |
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. |
Item 15. Controls and Procedures |
Item 16. [Reserved] |
Item 17. Financial Statements |
Item 18. Financial Statements |
Item 19. Exhibits |
1.1 | Bylaws (statuts) of Genesys (English translation) (as adopted by the General Meeting on June 28, 2002). |
2.1 | Form of Deposit Agreement (incorporated herein by reference to Exhibit A to the Registration Statement on Form F-6 relating to our American Depositary Shares). |
4.1 | U.S. $125 million Credit Facility among Vialog Corporation, Genesys S.A., BNP Paribas and Others dated April 20, 2001, as amended November 27 2001, as amended June 11, 2002 (incorporated herein by reference to Exhibit 4.1 of our annual report on Form 20-F for the year ended December 31, 2001 as filed with the SEC on June 12, 2002). |
4.2 | Excerpt from the Information Document (Note d’Information) of our company relating to the terms and conditions of our 3% convertible bonds due September 2004 (incorporated herein by reference to Exhibit 10.2 to our Registration Statement on Form F-4, File No. 333-55392). |
4.3 | Amendment to our U.S. $125 million Credit Facility dated April 30, 2003. |
8.1 | For a list of our significant subsidiaries, see Item 4 “Information on the Company — Organizational Structure”. |
99.1 | Certifications by François Legros, Chairman and Chief Executive Officer, and Michael E. Savage, Chief Financial Officer, required by Section 906 of the Sarbanes-Oxley Act of 2002. |
99.2 | Certifications by François Legros, Chairman and Chief Executive Officer, and Michael E. Savage, Chief Financial Officer, required by Section 302 of the Sarbanes-Oxley Act of 2002. |
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GENESYS S.A.
FOR THE YEAR ENDED DECEMBER 31, 2002
U.S. GAAP
Page | |||
F-2 | |||
F-3 | |||
F-4 | |||
F-5 | |||
F-6 | |||
F-8 |
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Genesys S.A.
ERNST & YOUNG AUDIT |
/s/ Antoine Peskine Represented by Antoine Peskine |
Montpellier, France
May 12, 2003
F-2
GENESYS S.A.
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
(in thousands, except share data) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | €49,705 | €17,510 | €9,976 | |||||||
Accounts receivable, less allowances of €1,431 in 2000 €3,201 in 2001and €3,502 in 2002 | 22,974 | 48,989 | 35,930 | |||||||
Inventory | 136 | 146 | 72 | |||||||
Prepaid expenses | 2,517 | 7,156 | 1,874 | |||||||
Other current assets | 2,006 | 6,664 | 5,261 | |||||||
Total current assets | 77,338 | 80,465 | 53,113 | |||||||
Property and equipment, net | 22,475 | 47,697 | 32,234 | |||||||
Goodwill, net | 83,385 | 163,768 | 79,963 | |||||||
Customer lists, net | 13,370 | 88,405 | 77,594 | |||||||
Technology, net | — | 16,332 | 630 | |||||||
Other intangibles, net | 3,503 | 6,553 | 26 | |||||||
Investment in affiliated company | 109 | 126 | 118 | |||||||
Deferred tax assets | 281 | 236 | 361 | |||||||
Deferred financing costs, net | 756 | 4,722 | 3,797 | |||||||
Promissory notes | 5,462 | — | — | |||||||
Other assets | 490 | 2,100 | 1,897 | |||||||
Total assets | €207,169 | €410,404 | €249,733 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Bank overdrafts | €1,882 | — | €3,417 | |||||||
Accounts payable | 8,462 | €24,533 | 14,344 | |||||||
Accrued liabilities | 4,244 | 7,148 | 7,178 | |||||||
Accrued compensation | 3,956 | 7,489 | 6,555 | |||||||
Taxes payable | 4,750 | 9,929 | 8,998 | |||||||
Deferred revenue | 863 | 4,198 | 352 | |||||||
Current portion of long-term debt | 6,782 | 6,901 | 1,143 | |||||||
Current portion of capitalized lease obligations | 503 | 266 | 191 | |||||||
Current portion of deferred tax liability | 400 | 5,346 | 3,097 | |||||||
Current portion of other long-term liabilities | — | — | 2,284 | |||||||
Other current liabilities | 2,791 | 6,894 | 1,759 | |||||||
Total current liabilities | 34,633 | 72,704 | 49,318 | |||||||
Long-term portion of long-term debt | 44,041 | 142,552 | 120,165 | |||||||
Long-term portion of capitalized lease obligations | 382 | 171 | 149 | |||||||
Long term portion of deferred tax liabilities | — | 28,503 | 20,666 | |||||||
Other long-term liability | — | 3,606 | 6,644 | |||||||
Commitments and contingencies | — | — | — | |||||||
Shareholders’ equity: | ||||||||||
Ordinary shares; €5.00 nominal value; 9,342,381,15,271,064 and 15,409,933 shares issued and outstanding at December 31, 2000, 2001 and 2002, respectively | 46,712 | 76,356 | 77,050 | |||||||
Common shares to be issued: €5.00 nominal value; 250,687 and 137,347 shares at December 31, 2001 and 2002, respectively | — | 1,253 | 687 | |||||||
Additional paid-in capital | 90,199 | 194,019 | 194,217 | |||||||
Accumulated other comprehensive income | 4,117 | 3,749 | 6,980 | |||||||
Deferred compensation | — | (465 | ) | (220 | ) | |||||
Accumulated deficit | (12,766 | ) | (111,293 | ) | (225,172 | ) | ||||
128,262 | 163,619 | 53,542 | ||||||||
Less cost of treasury shares: 2,905, 22,131 and 22,131 shares at December 31, 2000, 2001 and 2002, respectively | (149 | ) | (751 | ) | (751 | ) | ||||
Total shareholders’ equity | 128,113 | 162,868 | 52,791 | |||||||
Total liabilities and shareholders’ equity | €207,169 | €410,404 | €249,733 | |||||||
See notes to financial statements
F-3
GENESYS S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
(in thousands, except share data) | ||||||||||
Revenue: | ||||||||||
Services | €89,336 | €177,120 | €199,068 | |||||||
Products | 3,083 | 1,831 | 1,595 | |||||||
92,419 | 178,951 | 200,663 | ||||||||
Cost of revenue: | ||||||||||
Services | 38,173 | 74,774 | 86,193 | |||||||
Products | 2,548 | 1,402 | 1,250 | |||||||
40,721 | 76,176 | 87,443 | ||||||||
Gross profit | 51,698 | 102,775 | 113,220 | |||||||
Operating expenses: | ||||||||||
Research and development | 2,613 | 5,366 | 4,734 | |||||||
Selling and marketing | 17,867 | 42,718 | 49,976 | |||||||
General and administrative | 27,165 | 53,920 | 56,487 | |||||||
Restructuring charge | — | — | 4,336 | |||||||
Impairment of goodwill and other intangibles | — | 61,269 | 93,613 | |||||||
Amortization of goodwill and other intangibles | 7,015 | 30,768 | 13,888 | |||||||
Total operating expenses | 54,660 | 194,041 | 223,034 | |||||||
Operating loss | (2,962 | ) | (91,266 | ) | (109,814 | ) | ||||
Financial income (expense) | ||||||||||
Interest income | 1,486 | 380 | 99 | |||||||
Interest expense | (3,558 | ) | (8,407 | ) | (9,256 | ) | ||||
Foreign exchange gain | 767 | 1,520 | 1,276 | |||||||
Other financial income (expense), net | 1,960 | (215 | ) | (1,106 | ) | |||||
Financial income (expense), net | 655 | (6,722 | ) | (8,987 | ) | |||||
Equity in loss of affiliated company | (76 | ) | (55 | ) | (8 | ) | ||||
Loss before taxes | (2,383 | ) | (98,043 | ) | (118,809 | ) | ||||
Income tax (expense) credit | (3,589 | ) | (484 | ) | 5,043 | |||||
Net loss | €(5,972 | ) | €(98,527 | ) | €(113,766 | ) | ||||
Basic and diluted net loss per share | €(0.76 | ) | €(7.65 | ) | €(7.32 | ) | ||||
Number of shares used in computing basic and diluted net loss per share | 7,831,257 | 12,878,594 | 15,541,898 |
See notes to financial statements
F-4
GENESYS S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Ordinary shares | Ordinary shares to be issued Amount | Additional paid-in capital | Accumulated other comprehensive income | Shareholders’ equity | ||||||||||||||||||||||||
Treasury shares | Deferred compensation | Accumulated deficit | ||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
(in thousands, except share data) | ||||||||||||||||||||||||||||
Balance at January 1, 2000 | 6,627,607 | €30,311 | — | €15,146 | — | — | €(6,794 | ) | €2,671 | €41,334 | ||||||||||||||||||
Issuance of ordinary shares at prices ranging from €43.14 to €60.37 per share, net of offering expenses | 2,714,774 | 12,684 | 78,800 | 91,484 | ||||||||||||||||||||||||
Conversion of capital into euro and increase in par value from €4.57 to €5.00 | 3,717 | (3,747 | ) | (30 | ) | |||||||||||||||||||||||
Purchase of treasury shares | €(149 | ) | (149 | ) | ||||||||||||||||||||||||
Components of comprehensive income: | ||||||||||||||||||||||||||||
Net loss | (5,972 | ) | (5,972 | ) | ||||||||||||||||||||||||
Unrealized loss on investments | (43 | ) | (43 | ) | ||||||||||||||||||||||||
Foreign currency translation | 1,489 | 1,489 | ||||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | (5,972 | ) | 1,446 | (4,526 | ) | ||||||||||||||||||
Balance at December 31, 2000 | 9,342,381 | 46,712 | — | €90,199 | €(149 | ) | — | €(12,766 | ) | €4,117 | €128,113 | |||||||||||||||||
Issuance of ordinary shares at prices ranging from €14.70 to €54.00 per share, net of offering expenses | 5,928,683 | 29,644 | 87,003 | 116,647 | ||||||||||||||||||||||||
Ordinary shares to be issued | €1,253 | 5,964 | 7,217 | |||||||||||||||||||||||||
Issuance of replacement stocks options relating to the acquisition of Vialog and Astound | 10,853 | 10,853 | ||||||||||||||||||||||||||
Deferred stock-based compensation | €(644 | ) | (644 | ) | ||||||||||||||||||||||||
Amortization of deferred Stock-based compensation | 179 | 179 | ||||||||||||||||||||||||||
Purchase of treasury shares | (529 | ) | (529 | ) | ||||||||||||||||||||||||
Net loss of disposed treasury shares | (73 | ) | (73 | ) | ||||||||||||||||||||||||
Components of comprehensive loss: | ||||||||||||||||||||||||||||
Net loss | (98,527 | ) | (98,527 | ) | ||||||||||||||||||||||||
Foreign currency translation | 1,881 | 1,881 | ||||||||||||||||||||||||||
Unrealized loss on cash flow hedges | (2,249 | ) | (2,249 | ) | ||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | (98,527 | ) | (368 | ) | (98,895 | ) | |||||||||||||||||
Balance at December 31, 2001 | 15,271,064 | €76,356 | €1,253 | €194,019 | €(751 | ) | €(465 | ) | €(111,293 | ) | €3,749 | €162,868 | ||||||||||||||||
Exercised stock-options | 25,529 | 128 | 198 | 326 | ||||||||||||||||||||||||
Converted notes | 113,340 | 566 | (566 | ) | — | |||||||||||||||||||||||
Amortization of deferred Stock-based compensation | 245 | 245 | ||||||||||||||||||||||||||
Other movements | (113 | ) | (113 | ) | ||||||||||||||||||||||||
Components of comprehensive income: | ||||||||||||||||||||||||||||
Net loss | (113,766 | ) | (113,766 | ) | ||||||||||||||||||||||||
Foreign currency translation | 2,821 | 2,821 | ||||||||||||||||||||||||||
Unrealized gain on cash flow hedges | 410 | 410 | ||||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | (113,766 | ) | 3,231 | (110,535 | ) | ||||||||||||||||||
Balance at December 31, 2002 | 15,409,933 | €77,050 | €687 | €194,217 | €(751 | ) | €(220 | ) | €(225,172 | ) | €6,980 | €52,791 | ||||||||||||||||
See notes to financial statements
F-5
GENESYS S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Cash flows from operating activities: | ||||||||||
Net loss | €(5,972 | ) | €(98,527 | ) | €(113,766 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||
Depreciation | 7,474 | 15,862 | 15,728 | |||||||
Amortization of goodwill and other intangibles | 7,015 | 30,768 | 13,888 | |||||||
Impairment of goodwill and other intangibles | — | 61,269 | 93,613 | |||||||
Amortization of deferred financing costs and debt issuance discount | 437 | 1,107 | 1,365 | |||||||
Amortization of deferred charges | — | 119 | 80 | |||||||
Allowance for bad debt | 297 | 2,948 | 2,617 | |||||||
Amortization of deferred stock-based compensation | — | 179 | 245 | |||||||
Loss (gain) on disposal of assets | 49 | 293 | (71 | ) | ||||||
Deferred taxes expense (credit) | 378 | (3,062 | ) | (8,367 | ) | |||||
Equity in loss of affiliated companies | 75 | 55 | 8 | |||||||
Changes in unrealized losses on investments | (43 | ) | — | — | ||||||
Changes in operating assets and liabilities, net of effects of acquisition of businesses: | ||||||||||
Decrease (increase) in accounts receivable | (3,614 | ) | (7,449 | ) | 3,462 | |||||
Decrease in inventory | 169 | 32 | 74 | |||||||
Decrease (increase) in prepaid expenses | (344 | ) | (5,897 | ) | 3,620 | |||||
Decrease (increase) in other assets | (1,843 | ) | 638 | 782 | ||||||
(Increase) in note receivable | — | (18,462 | ) | — | ||||||
Increase (decrease) in accounts payable | 1,719 | (2,412 | ) | (5,607 | ) | |||||
Increase (decrease) in accrued liabilities | 645 | 1,828 | (897 | ) | ||||||
Increase (decrease) in accrued compensation | 2,569 | 734 | (409 | ) | ||||||
Increase (decrease) in accrued taxes | 1,861 | (78 | ) | (710 | ) | |||||
Increase (decrease) in deferred revenue | (740 | ) | 659 | (2,214 | ) | |||||
Increase (decrease) in other liabilities | (830 | ) | 1,097 | 3,768 | ||||||
Net cash provided by (used in) operating activities | 9,302 | (18,299 | ) | 7,209 | ||||||
Cash flows from investing activities: | ||||||||||
Acquisition of customer list | (4,470 | ) | — | — | ||||||
Acquisitions of businesses, net of cash acquired | (7,498 | ) | (21,432 | ) | (4,299 | ) | ||||
Acquisition of furniture and equipment | (10,593 | ) | (15,952 | ) | (6,785 | ) | ||||
Proceeds from sales of furniture and equipment | 119 | 1,327 | 980 | |||||||
Issuance of promissory notes | (5,793 | ) | — | — | ||||||
Net cash used in investing activities | (28,235 | ) | (36,057 | ) | (10,104 | ) | ||||
Cash flows from financing activities: | ||||||||||
Increase (decrease) in bank overdrafts | 1,099 | (1,882 | ) | 3,417 | ||||||
Net proceeds from issuance of common stock | 55,206 | 21,347 | 326 | |||||||
Purchase of treasury shares | (149 | ) | (529 | ) | — | |||||
Net proceeds from sales of treasury shares | — | (74 | ) | — | ||||||
Proceeds from the issuance of long-term debt | 5,376 | 6,594 | — | |||||||
Principal payments on long-term debt | (7,971 | ) | (3,023 | ) | (6,481 | ) | ||||
Deferred financing costs | — | (1,731 | ) | (572 | ) | |||||
Net cash provided by (used in) financing activities | 53,561 | 20,701 | (3,310 | ) | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 1,323 | 1,459 | (1,329 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 35,951 | (32,195 | ) | (7,534 | ) | |||||
Cash and cash equivalents, beginning of period | 13,754 | 49,705 | 17,510 | |||||||
Cash and cash equivalents, end of period | €49,705 | €17,510 | €9,976 | |||||||
Supplemental disclosures of cash flow information: | ||||||||||
Interest paid | €3,472 | €7,310 | €7,578 | |||||||
Income taxes paid | 1,677 | 1,933 | 3,286 | |||||||
Non-cash investing and financing transactions: | ||||||||||
Fixed assets acquired under capital lease | €397 | — | €218 | |||||||
Issuance of common stock in connection with acquisitions | 22,429 | 101,941 | — | |||||||
Acquisition of businesses: | ||||||||||
Assets acquired | €28,818 | €331,843 | — | |||||||
Liabilities assumed and issued | (2,648 | ) | (200,569 | ) | — | |||||
Common stock issued | (22,435 | ) | (94,724 | ) | — | |||||
Common stock committed to be issued | — | (7,217 | ) | — | ||||||
Acquisition costs incurred in connection with probable acquisitions | 2,914 | — | — | |||||||
Costs incurred during previous period for current year acquisitions | — | (1,682 | ) | — | ||||||
Cash to be paid in the following period | (920 | ) | (4,170 | ) | — | |||||
Cash paid in connection with previous period acquisitions | 1,876 | 1,112 | 4,299 | |||||||
Cash paid | 7,605 | 24,593 | 4,299 | |||||||
Less cash acquired | (107 | ) | (3,161 | ) | — | |||||
Net cash paid for acquisitions of businesses | €7,498 | €21,432 | €4,299 | |||||||
See notes to financial statements
F-6
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 1. Organization and business |
Note 2. Summary of significant accounting policies |
Basis of presentation |
• | Companies which are wholly owned or which the Company controls are consolidated; |
• | Companies over which the Company exercises significant influence but does not control are accounted for under the equity method of accounting; |
• | All significant inter-company transactions and balances are eliminated. |
Scope of consolidation |
F-7
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Name | Location | Interest and control | |||||
Fully consolidated companies: | |||||||
Genesys S.A | Montpellier, France | Parent company | |||||
Genesys Conferencing France, S.A. | Ivry, France | 100 | % | ||||
Genesys Conferencing A.B | Stockholm, Sweden | 100 | % | ||||
Genesys Conferencing S.A | Brussels, Belgium | 100 | % | ||||
Genesys Conferencing Ltd | Croydon, England | 100 | % | ||||
Genesys Conferencing Pte Ltd | Singapore | 100 | % | ||||
Genesys Conferencing Pty Ltd | Melbourne, Australia | 100 | % | ||||
Genesys Conferencing Ltd | Hong Kong | 100 | % | ||||
Genesys Conferencing, Inc | Denver, USA | 100 | % | ||||
Genesys Conferencing S.R.L | Milan, Italy | 100 | % | ||||
Genesys Conferencing Ltd | Toronto, Canada | 100 | % | ||||
Darome Teleconferencing GmbH | Berlin, Germany | 100 | % | ||||
Eesys, S.A.S | Paris, France | 100 | % | ||||
Geene, S.A.S | Paris, France | 100 | % | ||||
305 4344 Nova Scotia Ltd | Halifax, Canada | 100 | % | ||||
305 4345 Nova Scotia Ltd | Halifax, Canada | 100 | % | ||||
Affiliates accounted for under the equity method: | |||||||
Genesys Conferencing Iberia | Madrid, Spain | 20 | % |
Use of estimates |
Translation of financial statements of foreign subsidiaries |
Transactions in foreign currencies |
Revenue recognition |
F-8
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Cost of services |
Cost of products |
Cash and cash equivalents |
Inventories |
Accounts receivable |
Goodwill and identifiable intangible assets |
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Reported net loss | €(5,972 | ) | €(98,527 | ) | €(113,766 | ) | ||||
Add back: amortization of goodwill | 7,015 | 30,768 | — | |||||||
Adjusted net loss | €1,043 | €(67,759 | ) | €(113,766 | ) | |||||
Reported basic and diluted net loss per share | €(0.76 | ) | €(7.65 | ) | €(7.32 | ) | ||||
Add back: amortization of goodwill | 0.89 | 2.39 | — | |||||||
Adjusted basic and diluted net loss per share | €0.13 | €(5.26 | ) | €(7.32 | ) | |||||
F-9
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Property and equipment |
Software and systems | 1 to 5 years | ||
Bridges and other telecommunications equipment | 5 years | ||
Fixtures and fittings | 5 to 10 years | ||
Office and computer equipment | 3 to 5 years | ||
Furniture | 5 to 10 years | ||
Buildings | 25 years |
Impairment of long-lived assets |
Research and development |
Computer software costs |
Deferred financing costs |
F-10
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Income taxes |
Stock options |
2000 | 2001 | 2002 | |||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | |
Expected volatility | 0.913 | 0.985 | 0.865 | ||||
Risk-free interest rate | 5.40 | % | 5.05 | % | 4.93 | % | |
Weighted average expected life | 5.6 years | 5.5 years | 5.5 years |
Years ended December 31, | |||||||
2000 | 2001 | 2002 | |||||
Net loss, as reported | €(5,972 | ) | €(98,527 | ) | €(113,766 | ) | |
Add: Stock-based employee compensation expense included in reported net loss | — | 179 | 245 | ||||
Deduct: Stock-based employee compensation expense determined under fair value method for all stock option grants (SFAS 123 expense) | (3,438 | ) | (9,645 | ) | (8,837 | ) | |
Pro forma net loss | €(9,410 | ) | €(107,993 | ) | €(122,358 | ) | |
Basic and diluted net loss per common share, as reported | (0.76 | ) | (7.65 | ) | (7.32 | ) | |
Pro forma basic and diluted net loss per common share | (1.20 | ) | (8.39 | ) | (7.87 | ) | |
Years ended December 31, | |||||||
2000 | 2001 | 2002 | |||||
Options whose price was less than the market price of the underlying shares on the grant date | €46.98 | €18.10 | €— | ||||
Options whose price was greater than the market price of the underlying shares on the grant date | 39.93 | 12.62 | 13.72 |
Comprehensive income (loss) |
F-11
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Net earnings per share |
Segment reporting |
Advertising expense |
Derivative instruments |
Concentration of risk |
F-12
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Allowance balance at January 1 | €1,235 | €1,431 | €3,201 | |||||||
Amounts charged to expense | 676 | 3,189 | 2,617 | |||||||
Amounts written off | (525 | ) | (1,469 | ) | (1,935 | ) | ||||
Currency translation adjustment | — | 50 | (381 | ) | ||||||
Net assets acquired | 45 | — | — | |||||||
Allowance balance at December 31 | €1,431 | €3,201 | €3,502 | |||||||
Recent accounting pronouncements |
F-13
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 3. Impairment of goodwill and identifiable intangible assets |
Years ended December 31, | |||||||
2001 | 2002 | ||||||
Impairment of: | |||||||
Goodwill | €50,611 | €81,749 | |||||
Identifiable intangible assets | 10,658 | 11,864 | |||||
€61,269 | €93,613 | ||||||
2001 |
F-14
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
2002 |
Note 4. Acquisitions |
Below are described acquisitions from January 1, 2000.
F-15
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
— | €14,399 in cash paid immediately; |
— | €4,000 in cash (named “top up”) paid on January 4, 2002, together with interests Libor USD 9 months + spread 2.75% thereon (€171); |
— | 916,391 convertible notes, each with a principal amount of €28.79. Each note is convertible into one share of common stock, not later than March 27, 2011. The fair market value of these notes amounted to €26,383 at acquisition date; |
— | €1,659 of acquisition costs; |
— | €1,561 for deferred compensation relating to 188,116 stock options; |
— | €10,766 for deferred tax relating to identifiable intangible assets. |
— | technology for €30,351, classified in other intangibles and amortized over 4 years; |
— | assembled workforce for €1,349, classified in other intangibles and amortized over 3 years until effective date of Statement No. 142 on January 1, 2002. In accordance with FAS 142, the unamortized balance of assembled workforce was reclassified to goodwill at January 1, 2002; |
— | goodwill for €28,763 and amortized over 5 years until effective date of Statement No. 142 on January 1, 2002. |
F-16
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
— | 3,446,969 shares of Genesys S.A. with a fair market value of €75,557 at the time of issuance. Vialog shareholders received ADS’s for each Vialog share at an exchange ratio of 0.33515 Genesys share per Vialog share, resulting in approximately 24.65% ownership of Genesys S.A. One Genesys ADS is equivalent to one-half Genesys common shares; |
— | €8,717 of acquisition costs; |
— | €8,648 for deferred compensation relating to 2,466,889 stock options; |
— | €30,589 for deferred tax relating to allocated purchase price. |
— | customer list for retail conferencing for €81,551, classified in other intangibles and amortized over 10 years; |
— | customer list for wholesale conferencing for €4,245, classified in other intangibles and amortized over 5 years; |
— | assembled workforce for €5,250, classified in other intangibles and amortized over 4 years until effective date of Statement No. 142 on January 1, 2002. In accordance with FAS 142, the unamortized balance of assembled workforce was reclassified to goodwill at January 1, 2002; |
— | goodwill for €113,045 and amortized over 20 years until effective date of Statement No. 142 on January 1, 2002. In 2002, original goodwill was increased by : |
• | U.S.$3,437 (or €3,940) due to accrued restructuring expenses associated with the closure of the Vialog Corporation’s call centers located in Bedford, Massachusetts and Montgomery, Alabama, as described in Note 13, Other long-term liability; |
• | U.S.$1,509 (or €1,730) due to some additional liabilities relating to future operating leases payment for call centers closed in 1998 and 1999 and stock-options. |
Note 5. Cash equivalents |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Cash equivalents: | ||||||||||
Money market funds | €3,096 | €1,569 | €6 | |||||||
Term deposits | 39,062 | 6,886 | 85 | |||||||
€42,158 | €8,455 | €91 | ||||||||
Note 6. Property and equipment |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Telecommunications equipment | €23,522 | €43,612 | €39,503 | |||||||
Software and systems | 5,916 | 13,341 | 14,969 | |||||||
Office and computer equipment | 5,997 | 11,351 | 9,704 | |||||||
Leasehold improvements | 2,128 | 5,586 | 4,715 | |||||||
Software development in progress | 281 | 3,229 | 564 | |||||||
37,844 | 77,119 | 69,455 | ||||||||
Less accumulated depreciation | (15,369 | ) | (29,422 | ) | (37,221 | ) | ||||
€22,475 | €47,697 | €32,234 | ||||||||
F-17
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 7. Goodwill and other intangible assets |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Goodwill | €91,458 | €237,134 | €229,675 | |||||||
Customer lists | 16,383 | 102,510 | 101,413 | |||||||
Technology | — | 30,351 | 30,351 | |||||||
Assembled workforce | 2,797 | 9,513 | — | |||||||
Costs incurred in connection with probable acquisitions | 1,682 | — | — | |||||||
Others | 44 | 20 | 26 | |||||||
112,364 | 379,528 | 361,465 | ||||||||
Less accumulated amortization | (12,106 | ) | (43,201 | ) | (55,483 | ) | ||||
Less impairment loss (see Note No. 3) | — | (61,269 | ) | (147,769 | ) | |||||
€100,258 | €275,058 | €158,213 | ||||||||
In accordance with Statement No. 142, assembled workforce was reclassified to goodwill on January 1, 2002. |
2003 | €10,459 | |||
2004 | 10,429 | |||
2005 | 10,219 | |||
2006 | 9,582 | |||
2007 | 9,168 |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Balances as of the beginning of the year | €69,820 | €100,258 | €275,058 | |||||||
Add: goodwill for current year acquisitions | 32,011 | 264,554 | — | |||||||
Less: amortization of goodwill & other intangibles | (7,015 | ) | (30,768 | ) | (13,888 | ) | ||||
Less: impairment of goodwill & other intangibles | — | (61,269 | ) | (93,613 | ) | |||||
Adjustments of goodwill and other intangibles for previous year acquisitions | — | 387 | 3,053 | |||||||
Impact of foreign currency fluctuations | 5,442 | 1,896 | (12,397 | ) | ||||||
Balances as of the end of the year | €100,258 | €275,058 | €158,213 | |||||||
F-18
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 8. Short-term credit facilities |
Note 9. Long-term debt |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Term loans, variable rate | €38,601 | €128,812 | €103,137 | |||||||
Term loans, fixed rate | — | — | 74 | |||||||
Revolving loans, variable rate | — | 12,108 | 9,536 | |||||||
3% Convertible notes, net of unamortized discount of €659 in 2000, €469 in 2001and €297 in 2002 | 11,326 | 8,281 | 8,441 | |||||||
British Pound (GBP) denominated loan | 642 | — | — | |||||||
Interest free loan from ANVAR | 254 | 252 | 120 | |||||||
Capital lease obligations | 885 | 437 | 340 | |||||||
Total long-term debt | 51,708 | 149,890 | 121,648 | |||||||
Less current portion (see below for 2002) | (7,285 | ) | (7,167 | ) | (1,334 | ) | ||||
Long-term debt, less current portion | €44,423 | €142,723 | €120,314 | |||||||
Future repayments |
2003 | €16,400 | ||
2004 | 25,070 | ||
2005 | 27,356 | ||
2006 | 52,482 | ||
2007 | — | ||
2008 | — | ||
2009 and thereafter | — | ||
Total | €121,308 | ||
F-19
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Original repayments | Repayments according to amendment signed on April 30, 2003 | Difference in repayments | Difference in repayments | ||||||||||
in millions of U.S. dollars | in millions of euros | ||||||||||||
2003 | $ | 17.0 | $ | 1.0 | $ | (16.0 | ) | € | (15,3 | ) | |||
2004 | 22.0 | $ | 18.0 | (4.0 | ) | (3,8 | ) | ||||||
2005 | 24.0 | $ | 22.0 | (2.0 | ) | (1,9 | ) | ||||||
2006 | 55.0 | $ | 30.0 | (25.0 | ) | (23,8 | ) | ||||||
2007 | — | $ | 23,5 | 23.5 | 22,4 | ||||||||
2008 | — | $ | 23,5 | $ | 23.5 | € | 22,4 | ||||||
Total | $ | 118.0 | $ | 118.0 | — | — | |||||||
2003 | € | 1,143 | ||
2004 | 25,676 | |||
2005 | 21,028 | |||
2006 | 28,643 | |||
2007 | 22,409 | |||
2008 | 22,409 | |||
2009 and thereafter | — | |||
Total | €121,308 | |||
U.S. dollar denominated credit facility |
— | a U.S. $50 million senior term loan facility granted to Vialog, which was used by Vialog to refinance its existing debt. This facility matures on April 28, 2006 and bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $30 million senior term loan facility granted to Vialog, which was used by Vialog to refinance its existing debt. This facility matured on October 31, 2006 and bears interest at the rate of Libor USD plus a margin of 3.15% per annum. |
F-20
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
— | a U.S. $35 million senior term loan facility granted to its company, which the Company used to partially refinance its existing debt. This facility matured on April 28, 2006 and bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $5 million revolving loan facility granted to Vialog, to be used by Vialog for working capital purposes. This facility bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
— | a U.S. $5 million revolving loan facility granted to the Company, which the Company uses for working capital purposes. This facility bears interest at the rate of Libor USD plus a margin of 2.65% per annum. |
Bank Financing Restructuring |
Terms of the Financial Restructuring |
• | various amendments to its April 2001 $125 million credit facility that would extend the maturity of the remaining principal through October 2008; |
• | deferral of the maturity date for 50% of the principal of its outstanding 3% convertible bonds; and |
• | a €6-8 million offering of rights to subscribe for its ordinary shares. |
Amendments to the April 2001 $125 Million Credit Facility |
F-21
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Year | Amended Credit Facility | Prior Maturity Schedule | |||||
2003 | $ | 1 million | $ | 17 million | |||
2004 | $ | 18 million | $ | 22 million | |||
2005 | $ | 22 million | $ | 24 million | |||
2006 | $ | 30 million | $ | 55 million | |||
2007 | $ | 23.5 million | — | ||||
2008 | $ | 23.5 million | — |
• | the Company must complete a rights offering, which must first be approved by its shareholders with gross proceeds of at least €6 million by August 31, 2003, and |
• | the Company must amend the terms of its 3% convertible bonds due September 1, 2004 by June 30, 2003 to provide that 50% of the €18.37 of principal per bond will be repayable on the original maturity date, i.e. September 1, 2004 and the remaining 50% of principal per bond will be repayable on October 31, 2005. |
Deferral of 50% of Principal Repayment for the 3% Convertible Bonds due 2004 |
Subscription Rights Offering |
F-22
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Reduction in Capital |
Factoring Arrangement |
Financial Restructuring Fees and Expenses |
Other long-term debt |
F-23
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 10. Fair value of financial instruments |
2000 | 2001 | 2002 | |||||||||||||||||
Fair value | Carrying Value | Fair value | Carrying Value | Fair value | Carrying Value | ||||||||||||||
Long-term debt | €53,373 | €44,423 | €141,187 | €142,719 | €114,565 | €120,314 | |||||||||||||
Of which Convertible notes | €24,680 | €11,326 | €8,097 | €8,281 | €2,739 | €8,441 |
Note 11. Shareholders’ equity |
Astound acquisition |
Issuance of convertible notes on March 27 | Converted notes | Anticipated conversion | Remaining convertible notes at Dec 31, 2001 | Converted notes | Forfeited notes | Remaining convertible notes at Dec 31, 2002 | ||||||||||||||||
Number of notes issued for future exercise of replacement options | 156,109 | 3,144 | 7,860 | 145,105 | — | 46,497 | 98,608 | |||||||||||||||
Number of notes issued for future exercise of special options | 30,700 | — | — | 30,700 | — | — | 30,700 | |||||||||||||||
Number of other notes | 916,391 | 665,704 | — | 250,687 | 113,340 | — | 137,347 | |||||||||||||||
Total | 1,103,200 | 668,848 | 7,860 | €426,492 | 113,340 | 46,497 | €266,655 | |||||||||||||||
Vialog acquisition |
F-24
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Other acquisitions |
Stock Options of Genesys S.A. |
Public offerings |
Other movements |
F-25
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Stock repurchase program |
Preemptive subscription rights |
Dividend rights |
Note 12. Employee stock option plans |
1998, 1999 and 2000 Stock Plans |
On September 23, 1998, the Board of Directors approved the 1998 Stock Plan (“the 1998 plan”) for grants of options for ordinary shares to directors, officers and key employees. A total of 412,890 shares are authorized for issuance under the 1998 plan. Stock options under the 1998 plan are granted at prices equivalent to the price of the initial public offering on October 1, 1998. Under the terms of the 1998 plan, the options give the right to purchase one share per option. The options generally vest at a rate of 20% by the first year anniversary (“bracket A”), 50% by the third year anniversary (“bracket B”) and the final 30% by the fourth year anniversary (“bracket C”). Shares acquired upon the exercise of stock options must be held for 3 years for bracket A options and 2 years for bracket B and bracket C options. The options expire eight years after the date of grant. Ordinary shares attributable to awards, which have expired, terminated or been canceled or forfeited, are available for issuance or use in connection with future awards.
On September 15, 1999, the Board of Directors approved the 1999 Stock Plan (“the 1999 plan”) for grants of options for ordinary shares to directors, officers and key employees. A total of 301,483 shares are authorized for issuance under the 1999 plan. Stock options under the 1999 plan are granted at prices equivalent to the average market value of the Company’s ordinary shares calculated over the 20 trading sessions prior to the date of grant. The other terms of the 1999 plan are identical to the 1998 plan.
On September 8, 2000, the Board of Directors of the Company approved the 2000 Stock Plan (“the 2000 plan”) pursuant to the authorization given by the shareholders’ meeting held on June 6, 2000. A total of 550,000 shares are authorized for issuance under the 2000 plan. Stock options under the 2000 plan are granted at prices equivalent to the average market value of the Company’s ordinary shares calculated over the 20 trading sessions prior to the date of grant. Under the terms of the 2000 plan, the options give the right to purchase one share per option. The options generally vest at a rate of 20% by the first year anniversary (“bracket A”), 50% by the third year anniversary (“bracket B”) and the final 30% by the fourth year anniversary (“bracket C”). Shares acquired upon the exercise of stock options must be held for 3 years for bracket A options and 2 years for bracket B and bracket C options. Options expire eight years after the date of grant.
F-26
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Ordinary shares attributable to awards, which have expired, terminated or been canceled or forfeited, are available for issuance or use in connection with future awards.
On September 8, 2000, the Board of Directors amended these three stock option plans with respect to the change of control clause that stipulates that if an individual shareholder or a group of shareholders (acting together) acquires more than 25% of the Company’s shares, the vesting of options can be accelerated, at the discretion of the Board for certain identified employees of the Company.
2001 Stock Plan
On September 26, 2001, the Board of Directors of the Company approved the 2001 Stock Plan (“the 2001 plan”) pursuant to the authorization given by the shareholders’ meeting held on June 26, 2001. A total of 550,000 shares are authorized for issuance under the 2001 plan. This plan is divided into two parts.
The first part of the 2001 plan relates to French residents or signers of a work contract according to French Law. Stock options under this part are granted at prices equivalent to the average market value of the Company’s ordinary shares calculated over the 20 trading sessions prior to the date of grant. Under the terms of this part of the 2001 plan, the options give the right to purchase one share per option. The options generally vest at a rate of 20% by the first year anniversary (“bracket A”), 50% by the third year anniversary (“bracket B”) and the final 30% by the fourth year anniversary (“bracket C”). Shares acquired upon the exercise of stock options must be held for 3 years for bracket A options and 2 years for bracket B and bracket C options. Options expire eight years after the date of grant. Ordinary shares attributable to awards, which have expired, terminated or been canceled or forfeited, are available for issuance or use in connection with future awards.
The second part of the 2001 plan relates to non-French residents or non-signers of a work contract according to the French Law. Stock options under this part are granted at prices equivalent to the average market value of the Company’s ordinary shares calculated over the 20 trading sessions prior to the date of grant. The options are exercised on the Nasdaq Stock Market only. Under the terms of this part of the 2001 plan, the options give the right to purchase 2 ADS’s per option. If on the effective date of the exercise of a vested option, the grantee is a restricted participant, such grantee shall receive one ordinary share instead of 2 ADS’s. The options vest at rate of 10% upon the first year anniversary and an additional 7,5% for each quarter thereafter, until fully vested. Options can be exercised immediately upon vesting and there are no holding restrictions on the underlying ADS’s (or ordinary shares for restricted participant). Options expire eight years after the date of grant. ADS’s (or ordinary shares for restricted participant) attributable to awards which have expired, terminated or been canceled or forfeited are available for issuance or use in connection with future awards.
In December 2002, 1,045,511 options of plans described above were cancelled after acceptance of grantees and 64,570 options were forfeited after the grantees’ leave from the Company. In addition to remaining authorized but not yet granted options, these cancelled and forfeited options could be granted until their expiration date.
Stock option activity under the 1998, 1999, 2000 and 2001 plans was as follows:
Shares available for grant | Options outstanding | Weighted average exercise price | ||||
Balance as of January 1, 2000 | 50,000 | 593,394 | 12.20 | |||
Authorized | 550,000 | — | — | |||
Granted | (335,500 | ) | 335,500 | 51.04 | ||
Canceled | 37,542 | (37,542 | ) | 11.21 | ||
Balance as of December 31, 2000 | 302,042 | 891,352 | 26.86 | |||
Authorized | 550,000 | — | — | |||
Granted | (694,358 | ) | 694,358 | 21.15 | ||
Exercised | — | (100 | ) | 15.32 | ||
Canceled | 24,650 | (24,650 | ) | 37.97 | ||
Balance as of December 31, 2001 | 182,334 | 1,560,960 | 23.32 | |||
Granted | (161,000 | ) | 161,000 | 13.98 | ||
Exercised | — | (7,098 | ) | 9.99 | ||
Forfeited | 102,750 | (110,820 | ) | 28.67 | ||
Canceled | 1,041,511 | (1,041,511 | ) | 21.64 | ||
Balance as of December 31, 2002 | 1,165,595 | 562,531 | 22.47 | |||
F-27
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Options outstanding | |||||||
Range of exercise price | Number outstanding | Weighted- average remaining contractual life (in years) | Number exercisable | ||||
€9.91 — €12.97 | 90,839 | 4.0 | 60,839 | ||||
€15.32 — € 15.86 | 259,834 | 4.6 | 120,553 | ||||
€22.09 — €25.02 | 121,858 | 5.4 | 24,371 | ||||
€50.42 — €53.47 | 90,000 | 4.5 | 18,000 | ||||
562,531 | 4.6 | 223,763 | |||||
Stock plan at Genesys Conferencing, Inc. (formerly Vialog Corporation)
In accordance to the merger agreement, Vialog stock options remain outstanding after the acquisition by Genesys S.A., on the same terms and conditions, except that, upon exercise the holder receives a right to receive Genesys ADSs for Vialog common stock based on the same exchange ratio used in connection with the merger.
On February 14, 1996 and April 29, 1999, Vialog’s Board of Directors approved the 1996 and 1999 Vialog Stock Plan, respectively. The maximum number of shares of Vialog’s common stock that may subject to outstanding awards may have not exceeded 3,250,000 shares and 1,500,000 shares as of December 31, 2001 for the 1996 and 1999 Vialog’s Stock Plans, respectively. Shares of common stock attributable to awards, which have expired, terminated or been canceled or forfeited are available for issuance or use in connection with future awards. The 1996 and 1999 Vialog Stock Plans will remain in effect until February 14, 2006 and April 29, 2009, respectively, unless terminated earlier by the Vialog’s Board of Directors.
Stock option activity under the 1996 and 1999 Vialog Stock Plans was as follows:
Number of options available for grant | Number of outstanding Vialog stock options | Equivalent number of Genesys ordinary shares | Equivalent weighted average exercise price of Genesys ordinary share | |||||
Balance as of April 25, 2001 | 881,659 | 2,385,362 | 799,454 | 19.43 | ||||
Exercised | — | (261,110 | ) | (87,510 | ) | 12.43 | ||
Canceled | 78,406 | (78,406 | ) | (26,279 | ) | 19.68 | ||
Balance as of December 31, 2001 | 960,065 | 2,045,846 | 685,665 | 20.65 | ||||
Exercised | — | (55,000 | ) | (18,433 | ) | 11.21 | ||
Forfeited | 1,202,556 | (1,202,556 | ) | (403,037 | ) | 19.45 | ||
Balance as of December 31, 2002 | 2,162,621 | 788,290 | 264,195 | 17.06 | ||||
Options outstanding | |||||||
Range of equivalent exercise price | Equivalent outstanding number of Genesys ordinary shares | Weighted- average remaining contractual life (in years) | Equivalent exercisable number of Genesys ordinary shares | ||||
€6.26 — €14.49 | 121,492 | 5.1 | 121,352 | ||||
€15.65 — €21.90 | 68,625 | 5.7 | 68,625 | ||||
€25.03 | 15,836 | 5.1 | 15,836 | ||||
€31.29 — €32.86 | 58,242 | 6.6 | 41,565 | ||||
264,195 | 5.6 | 247,565 | |||||
F-28
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 13. Other long-term liabilities |
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Accrued restructuring expenses (Unites States, 2002 plan) | — | — | €3,583 | |||||||
Accrued restructuring expenses (United States, 1998-99 plans) | — | 876 | 1,353 | |||||||
Accrued restructuring expenses (Germany) | — | — | 448 | |||||||
Accrued severance and related litigation | — | 122 | 1,409 | |||||||
Fair value of interest-rate swap | — | 2,249 | 1,839 | |||||||
Deferred rent | — | 268 | 217 | |||||||
Others | — | 91 | 79 | |||||||
Total other long-term liabilities | — | 3,606 | 8,928 | |||||||
Less current portion of accrued restructuring expenses | — | — | (2,284 | ) | ||||||
Other long-term liabilities, less current portion | — | €3,606 | €6,644 | |||||||
Consolidation of North America call centers in 2002 |
Date of announcement: | On February 6, 2002 | On November 14, 2002 | |||||||||||||||||||||||
Bedford | Denver | Montgomery | Sub total | Denver | Honolulu | Sub total | Total costs accrued | ||||||||||||||||||
Write-offs of property, plant and equipment | €218 | €2,099 | €1,059 | €3,376 | — | €199 | €199 | €3,575 | |||||||||||||||||
Future lease payments under non cancelable operating leases. | 912 | 1,185 | 1,092 | 3,189 | €(1,562 | ) | 968 | (594 | ) | 2,595 | |||||||||||||||
Severance and other people related expenses | 117 | 327 | 411 | 855 | — | 437 | 437 | 1,292 | |||||||||||||||||
Other related expenses | 25 | 60 | 105 | 190 | — | 25 | 25 | 215 | |||||||||||||||||
Total | €1,272 | €3,671 | €2,667 | €7,610 | €(1,562 | ) | €1,629 | €67 | €7,677 | ||||||||||||||||
Costs accrued | Currency translation adjustment | Incurred in 2002 | Balance at December 31, 2002 | ||||||||||
Write-offs of leasehold improvements, equipment and other tangible assets | €218 | €(31 | ) | €(110 | ) | €77 | |||||||
Future lease payments under non cancelable operating leases | 912 | (144 | ) | (114 | ) | 654 | |||||||
Severance and other people related expenses | 117 | (15 | ) | (102 | ) | — | |||||||
Other related expenses | 25 | (3 | ) | (22 | ) | — | |||||||
Total | €1,272 | €(193 | ) | €(348 | ) | €731 | |||||||
F-29
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Costs accrued | Currency translation adjustment | Incurred in 2002 | Reversals | Balance at December 31, 2002 | ||||||||||||
Write-offs of leasehold improvements, equipment and other tangible assets | €2,099 | €(208 | ) | €(1,032 | ) | €(528 | ) | €331 | ||||||||
Future lease payments under non cancelable operating leases | 1,185 | (151 | ) | — | (1,034 | ) | — | |||||||||
Severance and other people related expenses | 327 | (20 | ) | (307 | ) | — | — | |||||||||
Other related expenses | 60 | (9 | ) | (25 | ) | — | 26 | |||||||||
Total | €3,671 | €(389 | ) | €(1,364 | ) | €(1562 | ) | €357 | ||||||||
Costs accrued | Currency translation adjustment | Incurred in 2002 | Balance at December 31, 2002 | ||||||||||
Write-offs of leasehold improvements, equipment and other tangible assets | €1,059 | €(84 | ) | €(809 | ) | €166 | |||||||
Future lease payments under non cancelable operating leases | 1,092 | (175 | ) | (100 | ) | 817 | |||||||
Severance and other people related expenses | 411 | (46 | ) | (361 | ) | 4 | |||||||
Other related expenses | 105 | (9 | ) | (77 | ) | 19 | |||||||
Total | €2,667 | €(314 | ) | €(1,347 | ) | €1,006 | |||||||
Costs accrued | Currency translation adjustment | Incurred in 2002 | Balance at December 31, 2002 | ||||||||||
Write-offs of leasehold improvements, equipment and other tangible assets | €199 | €(9 | ) | — | €190 | ||||||||
Future lease payments under non cancelable operating leases | 968 | (45 | ) | — | 923 | ||||||||
Severance and other people related expenses | 437 | (19 | ) | (67 | ) | 351 | |||||||
Other related expenses | 25 | (1 | ) | — | 24 | ||||||||
Total | €1,629 | €(74 | ) | €(67 | ) | €1,488 | |||||||
Consolidation of North America call centers in 1998-99 |
F-30
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Closing of the Frankfurt, Germany call center |
Fair value of interest rate swap |
Note 14. Income taxes |
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Current: | €3,326 | €3,546 | €3,307 | |||||||
— Domestic | 1,152 | 11 | 35 | |||||||
— Foreign | 2,174 | 3,535 | 3,289 | |||||||
Deferred: | 263 | (3,062 | ) | (8,367 | ) | |||||
— Domestic | (14 | ) | 2,639 | (2 | ) | |||||
— Foreign | 277 | (5,701 | ) | (8,365 | ) | |||||
Net income tax provision (credit) | €3,589 | €484 | €(5,043 | ) | ||||||
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Loss before taxes | €(2,383 | ) | €(98,043 | ) | €(118,809 | ) | ||||
French statutory tax rate | 37.76 | % | 36.43 | % | 35.43 | % | ||||
Income tax benefit at statutory rate | €(900 | ) | €(35,717 | ) | €(42,094 | ) | ||||
Increase (reduction) in taxes resulting from | ||||||||||
Foreign income tax rates different from the French statutory tax rate | (192 | ) | (752 | ) | (376 | ) | ||||
Amortization of non-deductible goodwill and other intangibles | 1,422 | 9,633 | 4,140 | |||||||
Non deductible impairment on goodwill and identifiable intangible assets | — | 22,320 | 33,167 | |||||||
Valuation allowance on deferred tax assets | 1,753 | 9,433 | 8,405 | |||||||
Public offering expenses | — | (1,826 | ) | — | ||||||
Tax on acquisitions costs of companies classified in goodwill and intangible assets | 1,174 | 4,796 | — | |||||||
Deferred tax due to amortization and impairment of identifiable intangible assets | — | (7,555 | ) | (8,484 | ) | |||||
Others | 332 | 152 | 199 | |||||||
Reported current and deferred income tax provision | €3,589 | €484 | €(5,043 | ) | ||||||
F-31
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Total deferred tax liability | €(400 | ) | €(36,791 | ) | €(23,763 | ) | ||||
Net operating losses carried forward: | ||||||||||
France | 905 | 9,720 | 11,127 | |||||||
Belgium | 221 | 244 | — | |||||||
Germany | 796 | 1,673 | 416 | |||||||
Italy | — | 67 | 226 | |||||||
Canada | — | 7,596 | 5,901 | |||||||
United States | 573 | 21,416 | 39,848 | |||||||
Singapore | 353 | 529 | 238 | |||||||
Australia | 30 | 110 | 133 | |||||||
Hong Kong | 58 | 149 | 61 | |||||||
Total | 2,936 | 41,504 | 57,950 | |||||||
Others | 2,587 | 494 | 385 | |||||||
Total deferred tax assets | 5,523 | 41,998 | 58,335 | |||||||
Valuation allowance | (5,242 | ) | (41,762 | ) | (57,974 | ) | ||||
Total deferred tax assets, net | 281 | 236 | 361 | |||||||
Deferred taxes, net | €(119 | ) | €(36,555 | ) | €(23,402 | ) | ||||
The breakdown per expiration date of net operating losses carried forward is as follows
2003 | €3,694 | |||
2004 | 1,854 | |||
2005 | 1,971 | |||
2006 | 8,601 | |||
2007 | 21,193 | |||
2008 | 1,991 | |||
2009 | 2,637 | |||
2018-2023 (United States) | 102,193 | |||
No expiration date | 11,212 | |||
Total | €155,346 | |||
Note 15. Commitments and contingencies |
Lease contracts |
2003 | 8,723 | |||
2004 | 6,748 | |||
2005 | 4,083 | |||
2006 | 2,259 | |||
2007 | 1,853 | |||
Thereafter | 1,609 | |||
Total | €25,275 | |||
F-32
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
2003 | €207 | |||
2004 | 58 | |||
2005 | 28 | |||
2006 | 28 | |||
Thereafter | 42 | |||
363 | ||||
Less imputed interest | (23 | ) | ||
Present value of future minimum lease payments | €340 | |||
Less current portion | (191 | ) | ||
Long-term portion | €149 | |||
Interest rate swap and term purchase agreement |
Tax audit and risk |
F-33
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Commitments |
— | Stock pledge of shares of Genesys Conferencing Ltd (England), Genesys Conferencing AB (Sweden), Genesys Conferencing Inc; |
— | Security over some assets such as accounts receivable of Genesys Conferencing Inc, including assets previously hold by Vialog before the merger with Genesys Conferencing Inc on January 1, 2002. |
Others |
Note 16. Employee retirement and benefit plans |
Note 17. Revenues |
Years ended December 31, | ||||||||||
2000 | 2001 | 2002 | ||||||||
Services | ||||||||||
Genesys Meeting Center | €27,950 | €72,656 | €109,857 | |||||||
Events & Managed Services | 49,148 | 93,520 | 80,238 | |||||||
Video Conferencing | 12,238 | 10,944 | 8,973 | |||||||
Products | 3,083 | 1,831 | 1,595 | |||||||
Total | €92,419 | €178,951 | €200,663 | |||||||
F-34
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 18. Segment and geographic information |
North America | Europe | Asia- Pacific | Global Video | Corporate | Inter- segment | Total | ||||||||||||||||
2000 | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||
Customers | €40,357 | €35,781 | €4,044 | €12,237 | — | — | €92,419 | |||||||||||||||
Intercompany | 464 | 22 | — | — | — | €(486 | ) | — | ||||||||||||||
Gross profit | 19,904 | 26,217 | 1,993 | 3,584 | — | — | 51,698 | |||||||||||||||
EBITDA (see below) | 5,786 | 13,789 | 343 | 4,493 | €(12,884 | ) | — | 11,527 | ||||||||||||||
Operating income (loss) | 1,925 | 4,703 | 43 | 3,584 | (13,217 | ) | — | (2,962 | ) | |||||||||||||
Net interest (expense) income | (1,605 | ) | 2,270 | (10 | ) | — | — | — | 655 | |||||||||||||
Equity in loss of affiliated company | — | (76 | ) | — | — | — | — | (76 | ) | |||||||||||||
Income (loss) before tax | 320 | 6,897 | 33 | 3,584 | (13,217 | ) | — | (2,383 | ) | |||||||||||||
Income tax expense | (126 | ) | (3,231 | ) | (232 | ) | — | — | — | (3,589 | ) | |||||||||||
Total assets | 66,955 | 134,789 | 3,862 | — | 1,563 | — | 207,169 | |||||||||||||||
Depreciation | 3,259 | 2,660 | 312 | 909 | 334 | — | 7,474 | |||||||||||||||
Additions to property and equipment | 3,062 | 5,246 | 678 | — | 1,607 | — | 10,593 | |||||||||||||||
2001 | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||
Customers | €108,035 | €53,762 | €6,210 | €10,944 | — | — | €178,951 | |||||||||||||||
Intercompany | 1,138 | 22 | 26 | — | — | €(1,186 | ) | — | ||||||||||||||
Gross profit | 58,134 | 39,556 | 3,138 | 1,947 | — | — | 102,775 | |||||||||||||||
EBITDA before impairment of goodwill and identifiable intangibles (see below) | 12,532 | 20,822 | 472 | 1,474 | €(18,961 | ) | — | 16,633 | ||||||||||||||
Operating loss | (62,611 | ) | (7,986 | ) | (618 | ) | (24 | ) | (20,027 | ) | — | (91,266 | ) | |||||||||
Net interest expense | (5,247 | ) | (1,409 | ) | (66 | ) | — | — | — | (6,722 | ) | |||||||||||
Equity in loss of affiliated company | — | (55 | ) | — | — | — | — | (55 | ) | |||||||||||||
Income (loss) before tax | (67,858 | ) | (9,450 | ) | (684 | ) | (24 | ) | (20,027 | ) | — | (98,043 | ) | |||||||||
Income tax (expense) credit | 5,365 | (5,848 | ) | 1 | — | — | — | (484 | ) | |||||||||||||
Total assets | 316,736 | 84,302 | 3,486 | — | 5,880 | — | 410,404 | |||||||||||||||
Depreciation | 9,914 | 2,996 | 388 | 1,498 | 1,066 | — | 15,862 | |||||||||||||||
Additions to property and equipment | 6,660 | 6,884 | 355 | — | 2,053 | — | 15,952 | |||||||||||||||
2002 | ||||||||||||||||||||||
Net sales | ||||||||||||||||||||||
Customers | €126,977 | €58,233 | €6,480 | €8,973 | — | — | €200,663 | |||||||||||||||
Intercompany | 950 | 2,050 | 33 | — | — | €(3,033 | ) | — | ||||||||||||||
Gross profit | 63,823 | 43,562 | 3,636 | 2,199 | — | — | 113,220 | |||||||||||||||
EBITDA before impairment of goodwill and identifiable intangible assets (see below) | 12,808 | 21,601 | 663 | 10 | €(21,667 | ) | — | 13,415 | ||||||||||||||
Operating loss | (103,520 | ) | 15,904 | (232 | ) | (1,131 | ) | (20,835 | ) | — | (109,814 | ) | ||||||||||
Net interest (expense) income | (6,666 | ) | 389 | (101 | ) | — | (2,609 | ) | — | (8,987 | ) | |||||||||||
Equity in loss of affiliated company | — | (8 | ) | — | — | — | — | (8 | ) | |||||||||||||
Income (loss) before tax | (110,186 | ) | 16,285 | (333 | ) | (1,131 | ) | (23,444 | ) | — | (118,809 | ) | ||||||||||
Income tax (expense) credit | 8,484 | (3,460 | ) | 47 | — | (28 | ) | — | 5,043 | |||||||||||||
Total assets | 176,457 | 55,750 | 3,417 | — | 14,109 | — | 249,733 | |||||||||||||||
Depreciation | 10,056 | 2,801 | 462 | 1,141 | 1,268 | — | 15,728 | |||||||||||||||
Additions to property and equipment | 1,985 | 1,110 | 742 | — | 2,948 | — | 6,785 |
F-35
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
2000 | 2001 | 2002 | ||||||||
Operating loss | (2,962 | ) | (91,266 | ) | (109,814 | ) | ||||
Depreciation | 7,474 | 15,862 | 15,728 | |||||||
Amortization of goodwill and intangibles | 7,015 | 30,768 | 13,888 | |||||||
Impairment of goodwill and intangibles | — | 61,269 | 93,613 | |||||||
EBITDA | 11,527 | 16,633 | 13,415 | |||||||
Geographic area information: |
United States | France | England | Nordic | Australia | Other foreign countries | Total | ||||||||||||||||
2000 | ||||||||||||||||||||||
Revenue | €42,097 | €10,726 | €26,444 | €5,010 | €2,918 | €5,224 | €92,419 | |||||||||||||||
Property and equipment, net | 9,139 | 4,346 | 5,022 | 1,240 | 667 | 2,061 | 22,475 | |||||||||||||||
2001 | ||||||||||||||||||||||
Revenue | €113,481 | €13,750 | €30,576 | €7,077 | €4,088 | €9,979 | €178,951 | |||||||||||||||
Property and equipment, net | 30,575 | 7,698 | 4,524 | 1,432 | 583 | 2,885 | 47,697 | |||||||||||||||
2002 | ||||||||||||||||||||||
Revenue | €130,986 | €13,409 | €30,219 | €9,083 | €4,575 | €12,391 | €200,663 | |||||||||||||||
Property and equipment, net | 16,747 | 9,078 | 2,738 | 1,066 | 859 | 1,746 | 32,234 | |||||||||||||||
F-36
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Note 19. Subsequent events |
— | the approval of the bondholders to vote on the rescheduling of 50% of the principal payment for the 3% convertible notes. |
— | the completion of a rights offering not later than August 31, 2003 that will permit all of the existing shareholders to subscribe for newly issued shares. |
Note 20. Unaudited proforma information |
F-37
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
The consolidated “pro forma” information has been derived from accounting data prepared in accordance with generally accepted accounting principles in the United States.
— | goodwill and other intangible assets relating to the acquisitions; |
— | long term debt and common stock issued to finance the acquisitions; |
— | opening adjustments relating to the acquisition of Vialog. |
Unaudited “pro forma” condensed consolidated statements of operations |
Year ended December 31, | |||||||
2000 | 2001 | ||||||
Revenue | €181,778 | €212,005 | |||||
Cost of revenue: | 84,068 | 91,532 | |||||
Gross profit | 97,710 | 120,473 | |||||
Operating expenses: | |||||||
Research and development | 4,966 | 5,916 | |||||
Selling, general and administrative | 86,226 | 113,424 | |||||
Impairment of goodwill and other intangibles | — | 61,269 | |||||
Amortization of goodwill and other intangibles | 39,775 | 39,825 | |||||
Total operating expenses | 130,967 | 220,434 | |||||
Operating loss | (33,257 | ) | (99,961 | ) | |||
Financial expense, net | (8,648 | ) | (9,003 | ) | |||
Equity in loss of affiliated company | (75 | ) | (55 | ) | |||
Loss before taxes | (41,980 | ) | (109,019 | ) | |||
Income tax expense | (3,951 | ) | (555 | ) | |||
Net loss | €(45,931 | ) | €(109,574 | ) | |||
Basic and diluted net loss per share | €(3.67 | ) | €(7.72 | ) | |||
Number of shares used in computing basic and diluted net loss per share | 12,495,893 | 14,191,595 | |||||
Supplementary information: | |||||||
EBITDA excluding impairment of goodwill and other Intangibles | €21,179 | €22,872 | |||||
EBITDA CALCULATION
Years ended December 31, | |||||||
2000 | 2001 | ||||||
Operating loss | €(33,257 | ) | €(99,961 | ) | |||
Depreciation | 13,687 | 18,348 | |||||
Amortization of goodwill and intangibles | 39,775 | 39,825 | |||||
Impairment of goodwill and intangibles | — | 61,269 | |||||
Vialog opening adjustments | 974 | 3,194 | |||||
Non-recurring charge | — | 197 | |||||
Total | €21,179 | €22,872 | |||||
F-38
GENESYS S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and when indicated)
Reconciliation with net loss |
Year ended December 31, | |||||||
2000 | 2001 | ||||||
“Proforma” net loss | €(45,931 | ) | €(109,574 | ) | |||
Vialog net loss before April 25, 2001 | 9,913 | 5,834 | |||||
Astound net loss before March 27, 2001 | 5,587 | 2,935 | |||||
Open Media companies net loss before Acquisition date (June and July 2000) | 1,723 | — | |||||
German companies net loss before Acquisition date (September 2000) | 1,408 | — | |||||
Amortization of goodwill and intangibles | 26,192 | 7,530 | |||||
Interest expenses (income) for financing the Astound and Vialog acquisitions and refinancing long-term Debt of Vialog | (6,362 | ) | (3,180 | ) | |||
Other adjustments | 1,498 | (2,072 | ) | ||||
Net loss | €(5,972 | ) | €(98,527 | ) | |||
Unaudited “pro forma” condensed consolidated balance sheet |
December 31, 2000 | ||||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | €22,958 | |||
Accounts receivables | 43,885 | |||
Inventory | 161 | |||
Prepaid expenses and other current assets | 5,338 | |||
Total current assets | 72,342 | |||
Property and equipment, net | 47,709 | |||
Goodwill and other intangibles, net | 359,036 | |||
Investment in affiliated company | 109 | |||
Deferred tax assets | 281 | |||
Deferred financing costs and other assets, net | 4,858 | |||
Total assets | €484,335 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Current liabilities: | ||||
Bank overdrafts | — | |||
Revolving line of credit | €7,995 | |||
Accounts payable | 27,528 | |||
Accrued liabilities and accrued compensation | 11,370 | |||
Taxes payable | 4,758 | |||
Deferred revenue | 3,189 | |||
Current portion of long-term debt | 8,014 | |||
Current portion of deferred tax liability | 400 | |||
Other current liabilities | 4,097 | |||
Total current liabilities | 67,351 | |||
Long-term portion of long-term debt | 139,567 | |||
Long-term portion of deferred tax liability | 36,742 | |||
Other long term liability | 1,155 | |||
Commitments and contingencies | — | |||
Shareholders’ equity | 239,520 | |||
Total liabilities and shareholders’ equity | €484,335 | |||
F-39
SIGNATURES
GENESYS S.A. | ||
By /s/ FRANÇOIS LEGROS | ||
Name: François Legros | ||
Title: Chairman and Chief Executive Officer |
Date: May 15, 2003