SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULES 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of October 2002
GENESYS S.A.
(Exact name of registrant as specified in its charter)
L'Acropole, 954-980 avenue Jean Mermoz, 34000 Montpellier, FRANCE
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________.
GENESYS, S.A.
FORM 6-K
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002
U.S. GAAP
- --------------------------------------------------------------------------------
1. MD&A
2. Financial Statements
3. Notes
- --------------------------------------------------------------------------------
1. Management's Discussion and Analysis of Financial Condition and Results of
Operations
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the financial
statements and footnotes for the three and six months ended June 30, 2002
contained herein and the Form 20-F for the year ended December 31, 2001 filed
with the Securities and Exchange Commission.
We include the results of acquired companies in our results of operations
from their respective dates of acquisition. As a result, our historical
financial statements are not directly comparable from one period to the next.
The consolidated statements of operations for the three and six months ended
June 30, 2001 include the results for Vialog Corporation from April 25, 2001.
And the consolidated statements of operations for the six months ended June 30,
2001 include the results for Astound Incorporated from March 27, 2001. Note No.
9, Proforma information, to the attached financial statements presents a
proforma statement of operations for the three and six months ended June 30,
2001.
On February 6, 2002, we announced plans to consolidate our call center
operations in North America from six call centers to three call centers to
provide higher levels of customer service and improve operating efficiencies.
The three remaining call centers have the capacity to absorb the current volume
and to provide for future growth. The restructuring costs related to these
closings are estimated to be (euro) 7.6 million and are primarily for unusable
future facility lease commitments, the write-off of certain leasehold
improvements and equipment, employee severance as well as other miscellaneous
costs associated with the call center consolidation. Components of these costs
by call center to be closed are presented in the table below.
Bedford Denver Montgomery Total costs
------- ------ ---------- -----------
accrued
-------
Write-offs of leasehold improvements,
equipment and other tangible assets........................ (euro) 218 (euro) 2,099 (euro) 1,059 (euro) 3,376
Future lease payments under non cancelable
operating leases........................................... 912 1,185 1,092 3,189
Severance and other people related expenses................ 117 327 411 855
Other related expenses..................................... 25 60 105 190
-- -- --- ---
Total...................................................... (euro) 1,272 (euro) 3,671 (euro) 2,667 (euro) 7,610
============ ============ ============ ============
Of the restructuring costs related to the call center closings
described above, (euro) 3.7 million (pre-tax) was recorded as a non-recurring
restructuring charge in the three months ended March 31, 2002 and (euro) 3.9
million was recorded as an increase to goodwill arising from the acquisition of
Vialog. We estimate that future annual cost savings from the consolidation will
range from (euro) 3.5 to (euro) 4.0 million beginning in the third quarter of
2002.
On March 20, 2002, our Bedford, Massachusetts call center was closed and
all traffic formerly serviced in Bedford has been re-routed to our Reston,
Virginia call center. Actual costs incurred for the Bedford closing compared to
the costs accrued through June 30, 2002 are presented in the table below :
Costs Currency Incurred in Balance at
----- --------- ----------- ----------
accrued translation the six June 30, 2002
------- ------------ -------- -------------
adjustment months ended
---------- ------------
June 30, 2002
-------------
Write-offs of leasehold improvements,
equipment and other tangible assets............ (euro) 218 (euro) (27) (euro) (110) (euro) 81
Future lease payments under non
cancelable operating leases.................... 912 (117) (36) 759
Severance and other people
related expenses............................... 117 (15) (102) --
Other related expenses......................... 25 (3) (22) --
-- ---
Total.......................................... (euro) 1,272 (euro) (162) (euro) (270) (euro) 840
============ ============= ============= ============
On June 30, 2002, our Company's Denver, Colorado call center was closed
and all traffic formerly generated in Denver has been re-routed to our other
call centers. Actual costs incurred for the Denver closing compared to the costs
accrued through June 30, 2002 are presented in the table below :
Costs Currency Incurred in Balance at
----- --------- ----------- ----------
accrued translation the six June 30, 2002
------- ------------ -------- -------------
adjustment months ended
---------- ------------
June 30, 2002
-------------
Write-offs of leasehold improvements,
equipment and other tangible assets................ (euro) 2,099 (euro) (268) -- (euro) 1,831
Future lease payments under non
cancelable operating leases........................ 1,185 (150) -- 1,035
Severance and other people related expenses........ 327 (43) (258) 26
Other related expenses............................. 60 (8) (25) 27
-- --- ---- --
Total.............................................. (euro) 3,671 (euro) (469) (euro) (283) (euro) 2,919
============ ============= ============ =============
We expect to close the call center located in Montgomery, Alabama early in
the fourth quarter of 2002.
Other costs relating to the consolidation of call centers were or will be
recorded as expenses as incurred during the first, second and third quarters of
2002, in accordance with generally accepted accounting principles. These costs
include retention bonuses and duplicative costs in closing the affected call
centers. The expected amount of these costs is (euro) 827 , as follows :
- actual(euro)174 (including(euro)85 for duplicative costs
and(euro)89 for retention bonus) in the three months ended March
31, 2002,
- actual(euro)557 (including(euro)429 for duplicative costs
and(euro)128 for retention bonus) in the three months ended June
30, 2002,
- expected(euro)96 for duplicative costs in the three months ended
September 30, 2002.
Three months ended June 30, 2002 compared with the three months ended June 30,
2001
Revenue
The following table sets forth our revenues for the three months ended June
30, 2001 and 2002 by category and expressed as a percentage of total revenues.
Three months ended June 30,
------------------------------------
2001 2002
--------------- -------------
(euro) in % of (euro) in % of
thousands revenues thousands revenues
Audio conferencing......... 41,593 88.8% 47,721 91.8%
Video conferencing......... 2,931 6.3% 2,387 4.6%
Data conferencing.......... 922 2.0% 1,225 2.4%
Web streaming.............. 732 1.5% 266 0.5%
Products................... 640 1.4% 347 0.7%
-------- -------- -------- --------
Total revenues............. 46,818 100.0% 51,946 100.0%
======== ======== ======== ========
Total revenues increased (euro) 5.1 million, or 10.9%, from (euro) 46.8
million to (euro) 51.9 million for the three months ended June 30, 2001 and
2002, respectively. Of the net increase, (euro) 7.1 million was attributable to
including revenues for the full quarter in 2002 and only a partial quarter for
the three months ended June 30, 2001 related to the acquisition of Vialog
completed on April 25, 2001. The impact of currency exchange rate movements, as
the dollar depreciated against the euro, had a negative impact of approximately
(euro) 1.8 million. Total conferencing minutes increased by 61.1%, from 175
million minutes (or 202 million minutes when combined with Vialog) to 282
million minutes for the three months ended June 30, 2001 and 2002, respectively.
Audio conferencing. Audio conferencing revenues increased (euro) 6.1
million , or 14.7%, from (euro) 41.6 million to (euro) 47.7 million for the
three months ended June 30, 2001 and 2002, respectively. Of the net increase,
(euro) 6.9 million was attributable to including revenues for the full quarter
in 2002 and only a partial quarter for the three months ended June 30, 2001
related to the acquisition of Vialog completed on April 25, 2001. The impact of
currency exchange rate movements, as the dollar depreciated against the euro,
had a negative impact of approximately (euro) 1.7 million. The remaining (euro)
0.9 million net increase was mainly driven by revenue growth in some European
countries. Call volumes minutes increased by 61.5%, from 174 million minutes (or
201 million minutes when combined with Vialog) to 281 million minutes for the
three months ended June 30, 2001 and 2002, respectively. The increase in call
volume minutes is significantly higher than the increase in audio conferencing
revenues primarily due to the significant shift from operator-assisted services
to automated services, which are at a lower per-minute price. This shift is more
significant in North America, which historically has a high proportion of
operator-assisted calls. Automated services represented 53% of revenue and 71%
of call volumes in the three months ended June 30, 2002 compared to 34% of
revenue and 46% of call volumes for the three months ended June 30, 2001.
Additionally, average per-minute prices for audio conferencing have declined,
primarily as a result of the effect of volume discounts and competitive
pressure.
Video conferencing. Video conferencing revenues decreased (euro) 0.5, from
(euro) 2.9 million to (euro) 2.4 million for the three months ended June 30,
2001 and 2002, respectively. The decrease is mainly due to the loss of
maintenance contracts for video equipment that were included as part of the
acquisition of Cable & Wireless' European video conferencing activities in 2000.
Data conferencing. Data conferencing revenues increased (euro) 0.3 million,
or 32.9%, from (euro) 0.9 million to (euro) 1.2 million for the three months
ended June 30, 2001 and 2002, respectively. The increase is mainly due to the
launching, in October 2001, of Genesys Meeting Center, which is our fully
integrated audio, data and video conferencing platform. Under Genesys Meeting
Center, our data conferencing service is primarily sold on a monthly
subscription basis. Each subscription includes the use of 15 seats. As of June
30, 2002, we have sold more than 120,000 seats.
Web streaming. Web streaming revenues decreased (euro) 0.4 million, from
(euro) 0.7 million to (euro) 0.3 million for the three months ended June 30,
2001 and 2002, respectively. The decrease was due to a rich media contract which
was terminated in the three months ended June 30, 2002. This contract
termination may also negatively impact future revenues from this service.
Segment revenues. The following table shows our revenues by segments for
each of the three months ended June 30, 2001 and 2002 and expressed as a
percentage of total revenues.
In addition to the three geographic segments that existed prior to 2002, we
now have a fourth segment for our recently created Global Video Conferencing
division. Amounts for the quarter ended June 30, 2001 have been restated to
reflect our current four segments structure.
Three months ended June 30,
------------------------------------
2001 2002
--------------- --------------
(euro) in % of (euro) in % of
thousands revenues thousands revenues
North America...... 29,102 62.2% 32,305 62.2%
Europe............. 13,454 28.7% 15,572 30.0%
Asia-Pacific....... 1,331 2.8% 1,682 3.2%
Global Video....... 2,931 6.3% 2,387 4.6%
------ ------ ------ ------
Total revenues..... 46,818 100.0% 51,946 100.0%
====== ====== ====== ======
The composition of revenues remained stable. In North America, the impact
of currency exchange rate movements partly offset the increase due to the
acquisition of Vialog on April 25, 2001.
Gross Profit
Gross profit increased (euro) 1.4 million, or 5.1%, from (euro) 27.3
million to (euro) 28.7 million for the three months ended June 30, 2001 and
2002, respectively. Of the net increase, (euro) 3.5 million, was attributable to
including gross profit for the full quarter in 2002 and only a partial quarter
for the three months ended June 30, 2002 related to the acquisition of Vialog
completed on April 25, 2001. The impact of currency exchange rate movements, as
the dollar depreciated against the euro, had a negative impact of approximately
(euro) 0.8 million. Additionally, cost of revenue for the three months ended
June 30, 2002 included non-recurring costs that consist of (euro)1.2 million (or
2.3% of revenue) associated with the early termination / fulfillment of a U.S.
long distance supplier contract and (euro) 0.5 million (or 1.0% of revenue) of
duplicate personnel costs related to the North American call center
consolidation. The remaining amount of (euro) 0.4 million that explains the net
increase of the gross profit is due to higher revenues. Gross profit decreased
as a percentage of revenues from 58.4% to 55.3% for the three months ended June
30, 2001 and 2002, respectively. This decrease is due to the non-recurring costs
mentioned above which represent 3.3% of revenues.
We expect to continue the migration of customers, in North America and UK
particularly, from operator-assisted services to higher margin, automated
services during the next several quarters. We expect the consolidation of our
North America call centers to be completed early in the fourth quarter of 2002
and the new U.S. long distance supplier contract to have a positive impact on
our gross margin due to the expected reduction in our cost of revenues.
Operating Expenses
The following table breaks down our operating costs and expenses that are
not included in cost of revenues for the three months ended June 30, 2001 and
2002 by major components.
Three months ended June 30,
------------------------------------
2001 2002
--------------- --------------
(euro) in % of (euro) in % of
thousands revenues thousands revenues
Research and development....... 1,178 2.5% 1,188 2.3%
Selling and marketing.......... 13,399 28.6% 13,864 26.7%
General and administrative..... 13,630 29.1% 16,371 31.5%
Amortization of goodwill
and other intangibles.......... 9,027 19.3% 3,832 7.4%
------- ------- ------- -------
Total operating expenses....... 37,234 79.5% 35,255 67.9%
======= ======= ======= =======
Research and Development
Our research and development expenses remained stable and essentially
steady as a percentage of our revenues. Our major development activities have
been the development and enhancement of our Genesys Meeting Center, which is our
fully integrated, automated, audio, web and video conferencing platform. Our
development activities also include the development in progress of our Genesys
Event and Managed Services platform which is expected to be launched in the call
centers by the end of 2002 and will be our platform for our new
operator-assisted services.
Selling and Marketing
Our selling and marketing expenses increased (euro) 0.5 million, or 3.7%,
from (euro) 13.4 million to (euro) 13.9 million for the three months ended June
30, 2001 and 2002, respectively. As a percentage of revenues, our selling and
marketing expenses decreased from 28.6% to 26.7% for the three months ended June
30, 2001 and 2002, respectively. Our selling and marketing efforts are focused
on further penetrating the market and increasing global brand awareness.
General and Administrative
Our general and administrative expenses increased (euro) 2.8 million, or
20.6%, from (euro) 13.6 million to (euro) 16.4 million for the three months
ended June 30, 2001 and 2002, respectively. This net increase is primarily due
to a (euro) 2.5 million charge related to the termination of a rich media
contract. Also, (euro) 1.4 million was attributable to including general and
administrative expenses for the full quarter in 2002 and only a partial quarter
for the three months ended June 30, 2002 related to the acquisition of Vialog
completed on April 25, 2001. The currency exchange rate movements, as the dollar
depreciated against the euro, had a favorable impact of approximately (euro) 0.4
million. The remaining expense decrease of (euro) 0.7 million is due to our cost
reduction efforts. As a percentage of revenues, our general and administrative
expenses increased by 2.4%, from 29.1% to 31.5% for the three months ended June
30, 2001 and 2002, respectively. Excluding the (euro) 2.5 million charge related
to the termination of a rich media contract, our general and administrative
expenses would have decreased by 2.4%.
Amortization of Goodwill and Other Intangibles
Amortization of goodwill and other intangibles decreased (euro) 5.2
million, or 57.8%, from (euro) 9.0 million to (euro) 3.8 million for the three
months ended June 30, 2001 and 2002, respectively. The net decrease was
primarily due to Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, that we have applied since January 1,
2002. Application of the non-amortization provisions of SFAS No. 142 decreased
the amortization expenses by approximately (euro) 5.0 million for the three
months ended June 30, 2002. Additionally, the partial impairment of Astound
technology and European customer list of Cable & Wireless recorded at year-end
2001 decreased the amortization expenses by (euro) 0.7 million. However, the
preceding items were partly offset by (euro) 0.5 million that was attributable
to including amortization of Vialog customer lists for the full quarter in 2002
and only a partial quarter for the three months ended June 30, 2001 related to
the acquisition of Vialog made on April 25, 2001.
EBITDA
Our EBITDA decreased from (euro) 2.9 million to (euro) 1.8 million for the
three months ended June 30, 2001 and 2002, respectively. Our EBITDA margin
decreased 2.7%, from 6.1% to 3.4% for the three months ended June 30, 2001 and
2002, respectively. The decrease in EBITDA margin primarily reflects the
decreased level of gross margin by 3.1%, from 58.4% to 55.3%, explained by the
non-recurring costs occurred during the three months ended June 30, 2002 that
consist of (euro)1.2 million (or 2.3% of revenue) associated with the early
termination / fulfillment of a U.S. long distance supplier contract and (euro)
0.5 million (or 1.0% of revenue) of duplicate personnel costs related to the
North American call center consolidation. The decrease in EBITDA margin is also
due to increased level of general and administrative expenses by 2.4%, from
29.1% to 31.5%, that included a (euro)2.5 million non-recurring charge (or 4.8%
of revenue) related to the termination of a rich media contract. However, the
preceding items were partly offset by the decreased level of selling and
marketing expenses by 1.9%, from 28.6% to 26.7%. Excluding the non-recurring
costs and expenses that amounted to (euro) 4.2 million, or 8.1% of revenues,
EBITDA would amount to (euro) 6.0 million, or 11.6% of revenue, for the three
months ended June 30, 2002. We expect that the consolidation of our North
America call centers to be completed early in the fourth quarter of 2002 and new
U.S. long distance supplier contract will improve operating efficiency and that
this will improve our EBITDA margin.
Operating Loss
Our operating loss decreased from (euro) 9.9 million to (euro) 6.5 million
for the three months ended June 30, 2001 and 2002, respectively. Excluding the
non-recurring items included in cost of revenue and general and administrative
expenses described above, our operating loss decreased to (euro) 2.3 million for
the three months ended June 30, 2002.
Financial Income (Expenses)
We incurred net financial expenses of (euro) 3.3 million for the three
months ended June 30, 2002, compared to (euro) 2.7 million for the three months
ended June 30, 2001. The change primarily reflects a significant increase in
interest expenses, due to a significant increase in our long-term debt following
the Vialog acquisition on April 25, 2001. As part of the acquisition of Vialog,
we entered into a U.S. $ 125 million credit facility that replaced our previous
U.S. $ 35 million multi-currency term loan and Vialog's existing long term debt
(U.S. $ 75 million senior notes payable).
Income Tax Expense
We generated a net income tax credit of (euro) 0.3 million for the three
months ended June 30, 2002, after incurring income tax expense of (euro) 4.2
million for the three months ended June 30, 2001. The net decrease of (euro) 4.5
million mainly consists of (euro) 3.8 million in tax on the acquisition costs
included in the purchase price of Vialog recorded in the three months ended June
30, 2001. Additionally, (euro) 1.2 million in deferred tax credit relating to
amortization of identifiable intangible assets in connection with the
acquisition of identifiable intangible assets from Astound and Vialog in 2001
was recorded in the three months ended June 30, 2002.
Net Loss
We recorded a net loss of (euro) 9.6 million for the three months ended
June 30, 2002, compared to a net loss of (euro) 16.9 million for the three
months ended June 30, 2001.
Six months ended June 30, 2002 compared with the six months ended June 30, 2001
Revenue
The following table sets forth our revenues for the six months ended June
30, 2001 and 2002 by category and expressed as a percentage of total revenues.
Six months ended June 30,
------------------------------------
2001 2002
--------------- --------------
(euro) in % of (euro) in % of
thousands revenues thousands revenues
Audio conferencing.... 64,540 87.7% 97,658 90.9%
Video conferencing.... 5,599 7.6% 4,938 4.6%
Data conferencing..... 929 1.3% 1,559 1.5%
Web streaming......... 1,276 1.7% 2,384 2.2%
Products.............. 1,244 1.7% 859 0.8%
-------- -------- -------- --------
Total revenues........ 73,588 100.0% 107,398 100.0%
======== ======== ======== ========
Total revenues increased (euro) 33.8 million, or 45.9%, from (euro) 73.6
million to (euro) 107.4 million for the six months ended June 30, 2001 and 2002,
respectively. Of the net increase, (euro) 33.2 million, or 98.2%, was
attributable to including revenues for the full semester in 2002 and only a
partial semester for the six months ended June 30, 2002 related to the
acquisition of Vialog completed on April 25, 2001. The impact of currency
exchange rate movements, as the dollar depreciated against the euro, had a
negative impact of approximately (euro) 1.0 million. Total conferencing minutes
increased by 99.3%, from 275 million minutes (or 414 million minutes when
combined with Vialog) to 548 million minutes for the six months ended June 30,
2001 and 2002, respectively.
Audio conferencing. Audio conferencing revenues increased (euro) 33.2
million, or 51.3%, from (euro) 64.5 million to (euro) 97.7 million for the six
months ended June 30, 2001 and 2002, respectively. Of the increase, (euro) 32.1
million, or 97.0% of the increase, was attributable to including revenues for
the full semester in 2002 and only a partial semester for the six months ended
June 30, 2002 related to the acquisition of Vialog completed on April 25, 2001.
The impact of currency exchange rate movements, as the dollar depreciated
against the euro, had a negative impact of approximately (euro) 0.9 million.
Call volumes minutes increased by 100.0%, from 273 million minutes (or 412
million minutes when combined with Vialog) to 546 million minutes for the six
months ended June 30, 2001 and 2002, respectively. The increase in call volume
minutes is significantly higher than the increase in audio conferencing revenues
primarily due to the significant shift from operator-assisted services to
automated services, which are at a lower per-minute price. This shift is more
significant in North America, which historically has a high proportion of
operator-assisted calls. Automated services represented 53% of revenue and 61%
of call volumes in the three months ended June 30, 2002 compared to 31% of
revenue and 45% of call volumes for the three months ended June 30, 2001.
Additionally, average per-minute prices for audio conferencing have declined,
primarily as a result of the effect of volume discounts and competitive
pressure.
Video conferencing. Video conferencing revenues decreased (euro)0.7, from
(euro) 5.6 million to (euro) 4.9 million for the six months ended June 30, 2001
and 2002, respectively. The decrease is mainly due to the loss of maintenance
contracts for video equipment that were included as part of the acquisition of
Cable & Wireless' European video conferencing activities in 2000.
Data conferencing. Data conferencing revenues increased (euro) 0.7 million,
or 32.9%, from (euro) 0.9 million to (euro) 1.6 million for the six months ended
June 30, 2001 and 2002, respectively. The increase was mainly attributable to
the acquisition of the data conferencing company Astound at the end of March
2001 and, thereafter, the launching, in October 2001, of Genesys Meeting Center,
which is our fully integrated audio, data and video conferencing platform. Under
Genesys Meeting Center, our data conferencing service is primarily sold on a
monthly subscription basis. Each subscription includes use of 15 seats. As of
June 30, 2002, we have sold more than 120,000 seats.
Web streaming. Web streaming revenues increased (euro) 1.1 million, from
(euro) 1.3 million to (euro) 2.4 million for the six months ended June 30, 2001
and 2002, respectively. The increase is due to organic growth of web streaming
in Europe. However, a rich media contract was terminated in the six months ended
June 30, 2002, which may negatively impact future revenues from this service.
Segment revenues. The following table shows our revenues by segments for
each of the six months ended June 30, 2001 and 2002 and expressed as a
percentage of total revenues.
In addition to the three geographic segments that existed prior to 2002, we
now have a fourth segment for our recently created Global Video Conferencing
division. Amounts for the semester ended June 30, 2001 have been restated to
reflect our current four segments structure.
Six months ended June 30,
------------------------------------
2001 2002
--------------- --------------
(euro) in % of (euro) in % of
thousands revenues thousands revenues
North America...... 39,287 53.4% 69,845 65.0%
Europe............. 26,099 35.5% 29,569 27.6%
Asia-Pacific....... 2,603 3.5% 3,046 2.8%
Global Video....... 5,599 7.6% 4,938 4.6%
======= ======= ======= =======
Total revenues..... 73,588 100.0% 107,398 100.0%
======= ======= ======= =======
The shift in the composition of revenues is primarily a result of the
impact of the acquisition of Astound in March 2001 and Vialog in April 2001,
which were based in North America.
Gross Profit
Gross profit increased (euro) 17.8 million, or 41.4%, from (euro) 43.0
million to (euro) 60.8 million for the six months ended June 30, 2001 and 2002,
respectively. Of the net increase, (euro) 18.4 million was attributable to
including gross profit for the full six months in 2002 and for only a portion of
the six months ended June 30, 2002 related to the acquisition of Vialog
completed on April 25, 2001. Additionally, cost of revenue for the six months
ended June 30, 2002 included non-recurring costs that consist of (euro)1.2
million (or 1.1% of revenue) associated with the early termination / fulfillment
of a U.S. long distance supplier contract and (euro) 0.5 million (or 0.5% of
revenue) of duplicate personnel costs related to the North American call center
consolidation. Gross profit decreased as a percentage of revenues from 58.5% to
56.6% for the six months ended June 30, 2001 and 2002, respectively. This
decrease is primarily due to non-recurring costs described above and the
significant proportion of operator-assisted conferencing used by the customers
obtained with the Vialog acquisition. These services have lower margins than
automated services. We expect to continue the migration of customers, in North
America and the UK particularly, from operator-assisted services to higher
margin, automated services during the next several quarters. We also expect the
consolidation of our North America call centers to be completed early in the
fourth quarter of 2002 and the new U.S. long distance supplier contract to have
a positive impact on our gross margin due to the expected reduction in our cost
of revenues.
Operating Expenses
The following table breaks down our operating costs and expenses that are
not included in cost of revenues for the six months ended June 30, 2001 and 2002
by major components.
Six months ended June 30,
------------------------------------
2001 2002
--------------- --------------
(euro) in % of (euro) in % of
thousands revenues thousands revenue
Research and development.... 1,873 2.5% 2,448 2.3%
Selling and marketing....... 19,044 25.9% 27,372 25.5%
General and administrative.. 22,729 30.9% 31,581 29.4%
Non-recurring charge........ -- -- 3,671 3.4%
Amortization of goodwill
and other intangibles....... 11,351 15.4% 7,481 7.0%
------- -------
Total operating expenses.... 54,997 74.7% 72,553 67.6%
======= =======
Research and Development
Our research and development expenses increased (euro) 0.5, from (euro) 1.9
million to (euro) 2.4 million for the six months ended June 30, 2001 and 2002,
respectively, although they remained essentially steady as a percentage of our
revenues. The increase in research and development expenses resulted primarily
from the expansion of our workforce resulting from our acquisition of Astound at
the end of March 2001. Our major development activities have been the
development and enhancement of our Genesys Meeting Center, which is our fully
integrated, automated, audio, web and video conferencing platform. Our
development activities also include the development in progress of our Genesys
Event and Managed Services platform, which is expected to be launched in the
call centers by the end of 2002 and will be our platform for our new
operator-assisted services.
Selling and Marketing
Our selling and marketing expenses increased (euro) 8.4 million, or 44.2%,
from (euro) 19.0 million to (euro) 27.4 million for the six months ended June
30, 2001 and 2002, respectively, although they remained essentially steady as a
percentage of our revenues. Of the increase, (euro) 6.1 million, or 72.6% of the
increase, was attributable to the Astound and Vialog acquisitions completed at
the end of March 2001 and April 2001, respectively. The Vialog acquisition more
than doubled our sales force in North America. The remaining amount of increase
mainly related to the organic growth of our sales force, particularly in the
United States, and the expansion of our global marketing team. Our selling and
marketing efforts are focused on further penetrating the market and increasing
global brand awareness. Additionally, selling and marketing expenses included
(euro) 0.3 million of employee separation costs in the six months ended June 30,
2002.
General and Administrative
Our general and administrative expenses increased (euro) 8.9 million, or
39.0%, from (euro) 22.7 million to (euro) 31.6 million for the six months ended
June 30, 2001 and 2002, respectively. Of the net increase, (euro) 6.9 million
was attributable to Astound and Vialog acquisitions completed at the end of
March 2001 and April 2001, respectively. Additionally, the general and
administrative expenses included non-recurring items for (euro) 2.5 million
related to the termination of a rich media contract and (euro) 0.6 million of
separation costs, partly relating to our North America restructuring. The
preceding items that explain the net increase were partly offset by our cost
reduction efforts and the impact of currency exchange rate movements, as the
dollar depreciated against the euro. As a percentage of revenues, our general
and administrative expenses decreased by 1.5%, from 30.9% to 29.4% for the six
months ended June 30, 2001 and 2002, respectively.
Non-Recurring Charge
As described above, on February 6, 2002, we announced plans to consolidate
our call center operations in North America. The restructuring costs related to
these closings are estimated to be (euro) 7.6 million. Of this amount, (euro)
3.7 million was recorded as a non-recurring restructuring charge in the six
months ended June 30, 2002. The remaining amount of (euro) 3.9 million was
recorded as an increase to goodwill arising from the acquisition of Vialog.
Amortization of Goodwill and Other Intangibles
Amortization of goodwill and other intangibles decreased (euro) 3.9
million, or 34.2%, from (euro) 11.4 million to (euro)7.5 million for the six
months ended June 30, 2001 and 2002, respectively. The decrease was primarily
due to Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets, that we have applied since January 1, 2002. Application
of the non-amortization provisions of SFAS No. 142 decreased the amortization
expenses by approximately (euro) 7.1 million for the six months ended June 30,
2002.
This effect of the application of SFAS No. 142 was partly offset by the
amortization of identifiable intangible assets relating to the acquisition of
Astound (technology) and Vialog (customer lists) made at the end of March 2001
and April 2001, respectively. Amortization of these intangible assets amounted
to (euro) 3.6 million and (euro)7.0 million for the six months ended June 30,
2001 and 2002, respectively.
EBITDA
Our EBITDA, excluding the non-recurring charge of (euro) 3.7 million for
the consolidation of the North American call centers described above, increased
(euro)3.3, from (euro) 5.2 million to (euro) 8.5 million for the six months
ended June 30, 2001 and 2002, respectively. Our EBITDA margin increased from
7.1% to 7.9% for the six months ended June 30, 2001 and 2002, respectively. The
increase in EBITDA margin primarily reflects the decreased level of expenses for
general and administrative and other operating expenses, partly offset by our
lower gross margin, as described above. EBITDA for the six months ended June 30,
2002 included some non-recurring costs and expenses that consist of (euro)1.2
million (or 1.1% of revenue) associated with the early termination / fulfillment
of a U.S. long distance supplier contract, (euro) 0.5 million (or 0.5% of
revenue) of duplicate personnel costs related to the North American call center
consolidation, (euro) 2.5 million (or 2.3% of revenue) for the termination of a
rich media contract and (euro) 0.6 million (or 0.6% of revenue) of separation
costs, partly relating to North America. Excluding the non-recurring costs and
expenses that amounted to (euro) 4.8 million, or 4.5% of revenues, EBITDA would
amount to (euro) 13.3 million, or 12.3% of revenue, for the six months ended
June 30, 2002. We expect that the consolidation of our North America call
centers to be completed early in the fourth quarter of 2002 and the new U.S.
long distance supplier contract will improve operating efficiency and that this
will improve our EBITDA margin.
Operating Loss
Our operating loss decreased from (euro) 12.0 million to (euro) 11.8
million for the six months ended June 30, 2001 and 2002, respectively. Excluding
the non-recurring charge of (euro) 3.7 million for the consolidation of the
North American call centers described above, our operating loss decreased to
(euro) 8.1 million for the six months ended June 30, 2002. Excluding also other
non-recurring costs and expenses that amounted to (euro) 4.8 million, or 4.5% of
revenues, operating loss would amount to (euro) 3.3 million for the six months
ended June 30, 2002.
Financial Income (Expenses)
We incurred net financial expenses of (euro) 6.4 million for the six months
ended June 30, 2002 compared to (euro) 1.3 million for the six months ended June
30, 2001. The change primarily reflects a significant increase in interest
expenses, due to a significant increase in our long-term debt following the
Vialog acquisition. As part of the acquisition of Vialog, in April 2001, we
entered into a U.S. $ 125 million credit facility that replaced our previous
U.S. $ 35 million multi-currency term loan and Vialog's existing long term debt
(U.S. $ 75 million senior notes payable). Additionally, we incurred a net
foreign exchange loss of (euro) 0.6 million for the six months ended June 30,
2002 compared to a net foreign exchange gain of (euro) 1.5 million for the six
months ended June 30, 2001.
Income Tax Expense
We generated a net income tax credit of (euro) 0.7 million for the six
months ended June 30, 2002, after incurring income tax expense of (euro) 5.6
million for the six months ended June 30, 2001. The net decrease of (euro) 6.3
million mainly consists of (euro) 4.5 million in tax on the acquisition costs
included in the purchase price of Vialog recorded in the six months ended June
30, 2001. Additionally, (euro) 2.4 million in deferred tax credit relating to
amortization of identifiable intangible assets in connection with the
acquisition of identifiable intangible assets from Astound and Vialog in 2001
was recorded in the six months ended June 30, 2002.
Net Loss
We recorded a net loss of (euro) 17.5 million for the six months ended June
30, 2002, compared to a net loss of (euro) 18.9 million for the six months ended
June 30, 2001. The net loss before the non-recurring charge amounted to (euro)
13.9 million for the six months ended June 30, 2002.
Liquidity and Capital Resources
General
Our capital requirements are driven primarily by our (i) capital
expenditures for telecommunications and bridging equipment, servers, computers
and software and (ii) to fund acquisitions. To date, we have funded our capital
requirements through a combination of equity offerings, borrowings (including
bank financings and convertible debt issuances), and operating cash flow.
At June 30, 2002, our principal sources of liquidity included (euro) 3.0
million in cash and cash equivalents and a total of (euro) 5.4 million of
unutilized short-term credit facilities. Under the term of our U.S. $ 125
million credit facility, we may only have U.S. $ 4.0 million of additional
indebtedness, which may limit our ability to borrow under our short-term credit
facilities.
In connection with the acquisition of Vialog, in April 2001, we and Vialog
entered into a U.S.$ 125 million credit facility, which was used to refinance
existing debt of our company and Vialog and for working capital purposes. This
facility is described in more detail below.
We believe that our cash flows from operations, supplemented by our current
cash available and our short-term credit facilities, will meet or exceed our
working capital needs, debt service requirements and planned capital
expenditures for property and equipment for the next twelve months. We expect to
meet our longer term liquidity requirements through a combination of working
capital, cash flow from operations, borrowings, and future issuances of debt
and/or equity securities. However, no assurances can be given that such funds
will be available when required or on favorable terms to meet our longer term
liquidity requirements.
Cash Flows
Cash and cash equivalents decreased from (euro) 17.5 million at the end of
December 2001 to (euro) 3.0 million at the end of June 2002.
Cash of (euro) 5.1 million was used in operating activities. Cash was
mainly used in the decrease of accounts payable ((euro) 5.6 million) and the
increase of accounts receivable ((euro) 1.4 million), partly offset by the cash
provided by the increase in other liabilities ((euro) 3.6 million), including
mainly restructuring costs accrued.
Cash of (euro) 7.8 million was used in investing activities, of which
(euro) 4.3 million was for the final payment, or "top up", for the acquisition
of Astound. Additionally, cash of (euro) 4.2 million was used to fund capital
expenditures for telecommunications and bridging equipment, servers, computers
and software,.
Cash of(euro)2.6 million was used in financing activities, including
mainly a U.S.$ 2 million repayment of the U.S.$ 125 million credit facility
described below.
Credit Facility and Other Outstanding Indebtedness
On April 20, 2001 Vialog and we 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. The U.S. $ 125 million credit facility includes the following items :
- 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
matures 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 tour company,
which we used to partially refinance our 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.$ 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.
The U.S.$ 50 million and U.S.$ 35 million term loans granted to Vialog and
our company, respectively, are 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 is 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.
The U.S. $125 million credit facility requires us to comply with certain
financial covenants, consisting of leverage, interest cover, and cash cover
ratios. We are currently in compliance with all of the terms of the credit
facility, as confirmed on October 21, 2002 by the bank syndicate. In addition,
the credit facility places limits on our ability to make capital expenditures
and prohibits our payment of dividends. We have pledged as security for our
credit facility the , shares of our principal subsidiaries, as well as the
accounts receivable of our U.S. subsidiary. If our financial results do not
reach the levels required by our debt covenants and we are unable to obtain a
waiver from our lenders, our debt would be in default and callable by our
lenders.
Other Commitments
We have entered into an interest rate swap agreements to hedge our
exposure on a portion of our debt. The comprehensive loss for this interest rate
swap agreement amounted to (euro) 2.6 million at June 30, 2002.
We do not have any material guarantees outstanding, nor do we have any
securitization or other off balance sheet financing arrangements, other than
those described in note No 14, Commitments and Contingencies, to the financial
statements contained in the Form 20-F for the year ended December 31, 2001 filed
with the Securities and Exchange Commission.
Trend Information
On August 13, 2002, we updated our guidance for the year ending December
31, 2002. For internal planning purposes, we have targeted revenues to reach
between (euro) 200 million and (euro) 210 million based on the acceleration of
automated services deployment and unfavorable U.S. dollar exchange rate, from
prior guidance of (euro) 230 million to (euro) 250 million.
However, these revenue targets are subject to significant uncertainty, and
might not be reached for any number or reasons, including those described under
Item 3, "key information - Risk Factors" of the Form 20-F for the year ended
December 31, 2001.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with
generally accepted accounting principles in the United States. The preparation
of these financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosure of contingent assets and liabilities.
We believe the following critical accounting policies, among others,
represent the more significant judgments and estimates used in preparation of
our consolidated financial statements.
Allowance for Doubtful Accounts
We evaluate the collectibility of our accounts receivable based on a
combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations to us (e.g., bankruptcy
filings, failure to pay amounts due to us or others), we record a specific
reserve for bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be collected. For all other
customers, we recognize reserves for bad debts based on past write-off history
(average percentage of receivables written off historically), and the length of
time the receivables are past due. If circumstances change (i.e. higher than
expected defaults or an unexpected material adverse change in a major customer's
ability to meet its financial obligations to us), our estimates of the
recoverability of amounts due us could be reduced by a material amount.
Impairment of Goodwill and Identifiable Intangible Assets
In reviewing the recoverability of our goodwill and identifiable
intangible assets, we must make assumptions regarding estimated future cash
flows and other factors to determine the fair value of the respective assets.
These assumptions require us to exercise significant judgment, often on a
subjective basis. If these estimates or their related assumptions change in the
future, we may be required to record additional impairment charges for these
assets. In the three months ended December 31, 2001, we recorded under SFAS 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, an impairment charge on these intangible assets of (euro) 61.3
million.
Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. Under SFAS 142, we
discontinued amortizing our goodwill, but we were required to complete the
transitional goodwill impairment test at adoption date, i.e. January 1, 2002,
and then on an annual basis thereafter. Based on the circumstances and
underlying assumptions made when the impairment reviews are performed in the
future, further impairment charges could be required.
Based on the results of the impairment review, including a report from an
independent expert, that we performed January 1, 2002, no impairment charge was
recorded. At June 30, 2002, no impairment indicators requiring an additional
impairment assessment occurred.
We continue to amortize our identifiable intangible assets that have
determinable lives, but we are still required to review the recoverability of
these assets whenever events or changes in business circumstances indicate that
the assets may be impaired. Based on the circumstances and underlying
assumptions made at the time of these reviews, further impairment charges could
be required.
Deferred Tax Assets
We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based upon historical losses, projected future
taxable income for each subsidiary and the expected timing of the reversals of
existing temporary differences. As a result of this review, we have recorded a
deferred tax asset of (euro) 0.3 million as of June 30, 2002, and we have
established a full valuation allowance on the remaining amount of our deferred
tax assets.
2. Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, June 30,
2001 2002
-------- --------
Assets (Unaudited)
Current assets:
Cash and cash equivalents ................................................. (euro) 17,510 (euro) 2,999
Accounts receivable, less allowances of(euro)3,201 at December 31, 2001
and(euro)3,215 at June 30, 2002 ....................................... 48,989 42,619
Inventory ................................................................. 146 187
Prepaid expenses .......................................................... 7,156 2,208
Other current assets ...................................................... 6,664 5,138
-------- --------
Total current assets ................................................. 80,465 53,151
Property and equipment, net .................................................... 47,697 38,305
Goodwill and other intangibles, net ............................................ 275,058 258,134
Investment in affiliated company ............................................... 126 112
Deferred tax assets ............................................................ 236 278
Deferred financing costs, net .................................................. 4,722 4,494
Other assets ................................................................... 2,100 1,880
-------- --------
Total assets ................................................ 410,404 356,354
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable .......................................................... (euro) 24,533 (euro) 14,735
Accrued liabilities ....................................................... 7,148 5,889
Accrued compensation ...................................................... 7,489 6,703
Tax payable ............................................................... 9,929 7,693
Deferred revenue .......................................................... 4,198 922
Current portion of long-term debt ......................................... 6,901 11,347
Current portion of capitalized lease obligations .......................... 266 70
Current portion of deferred tax liability ................................. 5,346 4,972
Current portion of accrued restructuring expenses ......................... -- 5,003
Other current liabilities ................................................. 6,894 3,550
-------- --------
Total current liabilities ............................................ 72,704 60,884
Long-term portion of long-term debt ............................................ 142,552 119,651
Long-term portion of capitalized lease obligations ............................. 171 365
Long-term portion of deferred tax liability .................................... 28,503 24,908
Other long term liability ...................................................... 3,606 5,650
Commitments and contingencies .................................................. -- --
Shareholders' equity:
Ordinary shares; (euro) 5.00 nominal value; 15,271,064 and 15,358,954
shares issued and outstanding at December 31, 2001 and June 30, 2002
respectively .............................................................. 76,356 76,795
Common shares to be issued;(euro)5.00 nominal value; 250,687 and
188,328 shares at December 31, 2001 and June 30, 2002, respectively ...... 1,253 942
Additional paid-in capital ................................................ 194,019 194,168
Accumulated other comprehensive income .................................... 3,749 3,152
Deferred compensation ..................................................... (465) (342)
Accumulated deficit ....................................................... (111,293) (129,068)
-------- --------
163,619 145,647
Less cost of treasury shares: 22,131 shares at December 31, 2001 and
June 30, 2002 (751) (751)
-------- --------
Total shareholders' equity ........................................... 162,868 144,896
-------- --------
Total liabilities and shareholders' equity ........... (euro)410,404 (euro)356,354
============= =============
See notes to financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except share data)
Three Months ended Six Months ended
June 30, June 30,
2001 2002 2001 2002
---------- ---------- ---------- ----------
Revenue:
Services ..................................... (euro) 46,178 (euro) 51,599 (euro) 72,344 (euro) 106,539
Products ..................................... 640 347 1,244 859
---------- ---------- ---------- ----------
46,818 51,946 73,588 107,398
Cost of revenue:
Services ..................................... 19,133 23,010 29,736 45,944
Products ..................................... 355 218 838 703
---------- ---------- ---------- ----------
19,488 23,228 30,574 46,647
---------- ---------- ---------- ----------
Gross profit ...................................... 27,330 28,718 43,014 60,751
Operating expenses:
Research and development ..................... 1,178 1,188 1,873 2,448
Selling and marketing ........................ 13,399 13,864 19,044 27,372
General and administrative ................... 13,630 16,371 22,729 31,581
Non-recurring charge ......................... -- -- -- 3,671
Amortization of goodwill and other
intangibles ............................ 9,027 3,832 11,351 7,481
---------- ---------- ---------- ----------
Total operating expenses .......................... 37,234 35,255 54,997 72,553
---------- ---------- ---------- ----------
Operating loss .................................... (9,904) (6,537) (11,983) (11,802)
Financial income (expense)
Interest income .............................. 23 31 156 89
Interest expense ............................. (2,161) (2,811) (3,069) (5,108)
Foreign exchange gain (loss) ................. 309 (25) 1,530 (565)
Other financial income (expense), net ........ (910) (520) 92 (795)
---------- ---------- ---------- ----------
Financial expense, net ............................ (2,739) (3,325) (1,291) (6,379)
Equity in loss of affiliated company .............. (40) (3) (40) (11)
---------- ---------- ---------- ----------
Loss before taxes ................................. (12,683) (9,865) (13,314) (18,192)
Income tax expense ................................ (4,263) 302 (5,609) 651
---------- ---------- ---------- ----------
Net loss ..........................................(euro) (16,946) (euro) (9,563) (euro)(18,923) (euro)(17,541)
=============== ============== ============== ==============
Basic and diluted net loss per share ..............(euro) (1.31) (euro) (0.62) (euro) (1.69) (euro) (1.13)
=============== ============== ============== ==============
Number of shares used in computing basic
and diluted net loss per share .................... 12,945,264 15,544,450 11,191,218 15,536,374
================ ============= ============== =============
See notes to financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Six Months ended June 30,
2001 2002
-------- --------
Cash flows from operating activities:
Net loss ................................................................................... (euro) (18,923) (euro)(17,541)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation ............................................................................ 6,004 9,118
Amortization of goodwill and other intangibles .......................................... 11,351 7,481
Amortization of deferred financing costs and debt issuance discount ..................... 395 678
Amortization of deferred charges ........................................................ 59 39
Allowance for bad debts ................................................................. 962 1,658
Amortization of deferred stock-based compensation ....................................... 56 123
Loss (Gain) on disposal of assets ....................................................... 10 (70)
Deferred tax credit ..................................................................... (257) (2,418)
Equity in loss of affiliated company .................................................... (40) 11
Changes in operating assets and liabilities, net of effects of acquisition of
businesses:
(Increase) in accounts receivable ....................................................... (4,263) (1,437)
Decrease (increase) in inventory ........................................................ 11 (41)
Decrease (increase) in prepaid expenses ................................................. (1,104) 1,953
Decrease in other assets ................................................................ 3,030 884
Decrease in intangibles ................................................................ 5,919 --
(Increase) in note receivable .......................................................... (18,462) --
(Decrease) in accounts payable .......................................................... (3,799) (5,576)
(Decrease) in accrued liabilities ....................................................... (294) (929)
Increase (decrease) in accrued compensation ............................................. 402 (355)
Increase (decrease) in accrued taxes .................................................... 4,355 (1,974)
Increase (decrease) in deferred revenue ................................................. 425 (304)
Increase (decrease) in other liabilities ................................................ (4,547) 3,556
-------- --------
Net cash used in operating activities ...................................................... (18,710) (5,144)
======== ========
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired ........................................... (20,522) (4,299)
Acquisition of furniture and equipment ..................................................... (8,785) (4,245)
Proceeds from sales of furniture and equipment ............................................. 456 768
-------- --------
Net cash used in investing activities ...................................................... (28,851) (7,776)
======== ========
Cash flows from financing activities:
Increase in bank overdrafts ................................................................ 79 --
Net proceeds from issuance of common stock ................................................. -- 277
Purchase of treasury shares ................................................................ (515) --
Proceeds from the issuance of long-term debt ............................................... 5,586 --
Principal payments on long-term debt ....................................................... (815) (2,296)
Deferred financing costs ................................................................... (2,087) (607)
-------- --------
Net cash provided by (used in) financing activities ........................................ 22,478 (2,626)
======== ========
Effect of foreign exchange rate changes on cash and cash equivalents ....................... 2,411 1,035
Decrease in cash and cash equivalents ...................................................... (42,902) (14,511)
Cash and cash equivalents, beginning of period ............................................. 49,705 17,510
-------- --------
Cash and cash equivalents, end of period ................................................... 6,802 2,999
======== ========
Supplemental disclosures of cash flow information:
Interest paid ........................................................................... (euro) 2,906 (euro) 4,761
Income taxes paid ....................................................................... 614 1,820
Non-cash investing and financing transactions:
Issuance of common stock in connection with acquisitions ................................ 101,940 --
Acquisition of businesses:
Assets acquired ......................................................................... (euro) 330,933 --
Liabilities assumed and issued .......................................................... (200,569) --
Common stock issued .................................................................... (94,724) --
Common stock committed to be issued ..................................................... (7,217) --
Cash incurred during previous period for current year acquisitions ...................... (1,682) --
Cash to be paid in the following period ................................................. (4,170) --
Cash paid in connection with previous period acquisitions ............................... 1,112 (euro) 4,299
-------- --------
Cash paid ............................................................................... 23,683 4,299
Less cash acquired ...................................................................... (3,161) --
-------- --------
Net cash paid for acquisitions of businesses ............................................... (euro) 20,522 (euro) 4,299
============== ============
See notes to financial statements
3. NOTES
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands, except share data and when indicated)
Note 1. Organization and business
Genesys S.A., together with its subsidiaries ("the Company"), is a limited
liability company organized under the laws of France.
The Company is a global communications specialist, providing practical and
innovative real-time collaborative and managed event services worldwide.
Note 2. Basis of presentation
As a publicly traded company on the Nouveau Marche of Euronext Paris since
October 1998, the Company publishes consolidated financial statements that have
been prepared in accordance with generally accepted accounting principles in
France, which differ in certain respects from generally accepted accounting
principles in the United States.
In addition, the Company has been listed on the Nasdaq Stock Market since
April 26, 2001. As a result, the Company publishes consolidated financial
statements prepared in accordance with generally accepted accounting principles
in the United States.
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States and pursuant to the rules and regulations of the
Securities and Exchange Commission for interim financial information. These
financial statements reflect all adjustments (consisting of normal recurring
accruals) which, in the opinion of management, are necessary for a fair
presentation of the interim periods presented. The unaudited results of
operations for the three and six months ended June 30, 2002 are not necessarily
an indication of the results of operations that may be expected for the full
year ending December 31, 2002. These financial statements do not include all
disclosures associated with annual financial statements and, accordingly, should
be read in conjunction with the financial statements and footnotes for the year
ended December 31, 2001 included in the Company's Form 20-F.
The consolidated financial statements include the accounts of the Company
and its subsidiaries.
The main consolidation principles are as follows:
- 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.
The Company has applied Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets, since January 1, 2002. Statement 142
prohibits the amortization of goodwill and indefinite-lived intangible assets.
Statement 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets that have definite lives will continue to be
amortized over their useful lives.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Application of the non-amortization provisions of Statement 142 resulted
in a decrease in amortization expenses of approximately (euro) 5.0 million and
(euro) 7.1 million for the three and six months ended June 30, 2002. The Company
also reclassified an assembled workforce intangible asset with an unamortized
balance of (euro) 6.5 million (along with a deferred tax liability of (euro) 1.8
million) to goodwill at January 1, 2002. The Company tests goodwill for
impairment using the two-step process prescribed in Statement 142. The first
step is a screen for potential impairment, while the second step measures the
amount of the impairment, if any. In the first quarter of 2002, the Company
performed the first of the required impairment tests of goodwill and indefinite
lived intangible assets as of January 1, 2002. Based on the results of this
review, including a report from an independent expert, no impairment charge was
recorded.
The following companies have been consolidated:
Interest and
------------
control
-------
Name Location
--------------------------------- --------------
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
(formerly Astound, Inc) ................. 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%
On January 1, 2002, Genesys Conferencing Inc merged into Genesys
Conferencing of Massachusetts, Inc. Thereafter, Genesys Conferencing of
Massachusetts, Inc. was renamed to Genesys Conferencing Inc.
Note 3. Non-recurring charge
On February 6, 2002, the Company announced plans to consolidate its call
center operations in North America from six call centers to three call centers
to provide higher levels of customer service and improve operating efficiencies.
The three remaining call centers have the capacity to absorb the current volume
and to provide for future growth. The restructuring costs related to these
closings are estimated to be (euro) 7.6 million and are primarily for unusable
future facility lease commitments, the write-off of certain leasehold
improvements and equipment, employee severance as well as other miscellaneous
costs associated with the call center consolidation. Components of these costs
by call center to be closed are presented in the table next page.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Bedford Denver Montgomery Total costs
------- ------ ---------- -----------
accrued
-------
Write-offs of leasehold improvements,
equipment and other tangible assets.........................(euro) 218 (euro) 2,099 (euro) 1,059 (euro) 3,376
Future lease payments under
non cancelable operating leases............................. 912 1,185 1,092 3,189
Severance and other people related expenses................. 117 327 411 855
Other related expenses...................................... 25 60 105 190
----- ----- ----- -----
Total.......................................................(euro) 1,272 (euro) 3,671 (euro) 2,667 (euro) 7,610
=========== ============ ============ ============
Of the (euro) 7.6 million accrued restructuring costs, (euro) 3.7 million
was recorded as a non-recurring restructuring charge and (euro) 3.9 million was
recorded as an increase to goodwill arising from the acquisition of Vialog in
the three months ended March 31, 2002. The Company estimates that future annual
cost savings from the consolidation will range from (euro) 3.5 to (euro) 4.0
million beginning the third quarter of 2002.
On March 20, 2002, the Company's Bedford, Massachusetts call center was
closed and all traffic formerly generated in Bedford has been re-routed to the
Company's Reston, Virginia call center. Actual costs incurred for the Bedford
closing compared to the costs accrued through June 30, 2002 are presented in the
table below :
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Costs Currency Incurred in Balance at
----- --------- ----------- ----------
accrued translation the six June 30, 2002
------- ------------ -------- -------------
adjustment months ended
---------- ------------
June 30, 2002
-------------
Write-offs of leasehold improvements,
equipment and other tangible assets.............(euro) 218 (euro) (27) (euro) (110) (euro) 81
Future lease payments under non
cancelable operating leases..................... 912 (117) (36) 759
Severance and other people related expenses..... 117 (15) (102) --
Other related expenses.......................... 25 (3) (22) --
---- ----
Total...........................................(euro) 1,272 (euro) (162) (euro) (270) (euro) 840
============ ============ ============= ===========
On June 30, 2002, the Company's Denver, Colorado call center was closed
and all traffic formerly generated in Denver has been re-routed to the Company's
other call centers. Actual costs incurred for the Denver closing compared to the
costs accrued through June 30, 2002 are presented in the table below :
Costs Currency Incurred in Balance at
----- --------- ----------- ----------
accrued translation the six June 30, 2002
------- ------------ -------- -------------
adjustment months ended
---------- ------------
June 30, 2002
-------------
Write-offs of leasehold improvements,
equipment and other tangible assets.............(euro) 2,099 (euro) (268) -- (euro) 1,831
Future lease payments under non
cancelable operating leases..................... 1,185 (150) -- 1,035
Severance and other people related expenses..... 327 (43) (258) 26
Other related expenses.......................... 60 (8) (25) 27
---- ---- ---- --
Total...........................................(euro) 3,671 (euro) (469) (euro) (283) (euro) 2,919
============= ============ ============ ==============
The Company expects to close the call center located in Montgomery, Alabama
early in the fourth quarter of 2002.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Other costs relating to the consolidation of call centers were or will be
recorded as expenses as incurred during the first, second and third quarters of
2002, in accordance with generally accepted accounting principles. These costs
include retention bonuses and duplicative costs in closing the affected call
centers. The expected amount of these costs is (euro) 827 , as follows :
- actual (euro)174 (including(euro)85 for duplicative costs
and (euro)89 for retention bonus) in the three months ended March
31, 2002,
- actual (euro)557 (including(euro)429 for duplicative costs
and (euro)128 for retention bonus) in the three months ended June
30, 2002
- expected (euro)96 for duplicative costs in the three months ended
September 30, 2002.
Note 4. Acquisitions
On March 27, 2001, the Company completed the acquisition of Astound Inc., a
web conferencing and web streaming company headquartered in Canada.
The total purchase price was (euro)58,739 and consisted of :
- (euro) 14,399 in cash paid immediately;
- (euro) 4,000 in cash (named "top up") paid on January 4, 2002,
together with interests Libor USD 9 months + spread 2,75% thereon
( (euro)171);
- 916,391 convertible notes, each with a principal amount of (euro)
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 (euro) 26,383 at acquisition date;
- (euro) 1,659 of acquisition costs;
- (euro) 1,561 for deferred compensation relating to 188,116 stock
options;
- (euro) 10,566 for deferred tax relating to identifiable
intangible assets.
The purchase price exceeded the fair value of the net tangible assets
acquired by (euro) 60,263. Based on an independent report, this excess was
allocated to :
- technology for (euro) 30,351, classified in other intangibles and
amortized over 4 years.
- assembled workforce for (euro) 1,349, classified in other
intangibles and amortized over 3 years. In accordance with
Statement No 142, the unamortized balance of assembled workforce
was reclassified to goodwill at January 1, 2002.
- goodwill for(euro)28,563 and amortized over 5 years. In
accordance with Statement No 142, goodwill has been no longer
amortized since January 1, 2002.
Based on the results of the review of the carrying value of Astound's
goodwill and identifiable intangible assets performed as of December 31, 2001,
an impairment charge of (euro) 32,777 was recorded in 2001.
On April 25, 2001, the Company completed the acquisition of Vialog
Corporation, an audio, video and data conferencing company listed on the
American Stock Exchange (AMEX).
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
The total purchase price as adjusted in the first quarter of 2002,
primarily to reflect the closing of two Vialog's call centers (see note 2), was
(euro) 122,046 and consisted of :
- 3,446,969 shares of Genesys S.A. with a fair market value of
(euro) 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;
- (euro) 8,717 of acquisition costs;
- (euro) 8,648 for deferred compensation relating to 2,466,889
stock options;
- (euro) 29,124 for deferred tax relating to allocated purchase
price.
The purchase price exceeded the fair value of the net tangible assets
acquired by (euro) 207,031. Based on an independent report, this excess was
allocated to :
- customer list for retail conferencing for (euro) 81,551,
classified in other intangibles and amortized over 10 years;
- customer list for wholesale conferencing for (euro) 4,245,
classified in other intangibles and amortized over 5 years;
- assembled workforce for (euro) 5,250, classified in other
intangibles and amortized over 4 years. In accordance with
Statement No 142, the unamortized balance of assembled workforce
was reclassified to goodwill at January 1, 2002.
- goodwill for (euro) 115,985 and amortized over 20 years. In
accordance with Statement No 142, goodwill has been no longer
amortized since January 1, 2002.
Note 5. Long-term debt
Long-term debt consists of the following:
December 31, June 30,
------------ --------
2001 2002
------ ------
Term loans, variable rate................... (euro) 128,812 (euro) 111,585
Revolving loans, variable rate.............. 12,108 10,787
3% Convertible notes, net of unamortized
discount of(euro)469 and
(euro)563 at December 31, 2001 and
June 30, 2002, respectively................. 8,281 8,374
Interest free loan from Anvar............... 252 252
Capital lease obligations................... 437 435
------- -------
Total long-term debt........................ 149,890 131,433
Less current portion........................ (7,167) (11,417)
------- -------
Long-term debt, less current portion........ (euro)142,723 (euro) 120,016
============= ===============
On April 20, 2001, Genesys S.A. ("Genesys") and Vialog Corporation
("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 the $ 35 million multi-currency term loan of
Genesys and long term debt of Vialog (U.S. $ 75 million senior notes payable),
which existed prior to the acquisition by Genesys. The U.S. $ 125 million credit
facility includes the following items :
- 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.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
- a U.S.$ 30 million senior term loan facility granted to Vialog,
which was used by Vialog to refinance its existing debt. This
facility matures 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 Genesys,
which was used by Genesys to partially 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.$ 5 million revolving loan facility granted to Vialog,
which was 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 Genesys,
which was used by Genesys for working capital purposes. This
facility bears interest at the rate of Libor USD plus a margin of
2.65% per annum.
The U.S.$ 50 million and U.S.$ 35 million term loans granted to Vialog and
Genesys, respectively, are 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 is 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.
The U.S. $ 125 million credit facility requires the Company to comply with
certain financial covenants, consisting of leverage, interest cover, and cash
cover ratios. The Company is currently in compliance with all the terms of the
credit facility, as confirmed on October 21, 2002 by the bank syndicate.
Note 6. Shareholders' equity
On January 7, 2002, 7,098 stocks options of Genesys S.A. were exercised. As
a result, ordinary shares and additional paid-in-capital increased by (euro) 35
and (euro) 36, respectively.
In April 2002, 55,000 stocks options issued by Vialog Corporation before
its acquisition by the Company on April 25, 2001 were exercised. In accordance
with the merger agreement and using the final exchange ratio, these stock
options represented 18,431 ordinary shares of Genesys S.A. As a result, ordinary
shares and additional paid-in-capital increased by (euro) 92 and (euro) 163,
respectively.
In February 2002, 2,928 convertible notes issued on March 27, 2001 to
finance the acquisition of Astound have been converted into shares. As a result,
(euro) 14 was reclassified from common shares to be issued to ordinary shares.
In April and May 2002, 59,433 convertible notes issued on March 27, 2001 to
finance the acquisition of Astound have been converted into shares. As a result,
(euro) 298 was reclassified from common shares to be issued to ordinary shares.
Note 7. Revenue breakdown
Revenues consist of the following:
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Three months ended Six months ended
June 30, June 30,
------------------- ----------------
2001 2002 2001 2002
---- ---- ---- ----
Services
- --Audio conferencing...................... (euro) 41,593 (euro) 47,721 (euro) 64,540 (euro) 97,658
- --Video conferencing...................... 2,931 2,387 5,599 4,938
- --Data conferencing....................... 922 1,225 929 1,559
- --Web streaming........................... 732 266 1,276 2,384
Products.................................. 640 347 1,244 859
------ ------ ------ ------
Total..................................... (euro) 46,818 (euro) 51,946 (euro) 73,588 (euro) 107,398
=============== ============== ============== ==============
Note 8. Segment and geographic information
The Company and its subsidiaries currently operate in four reportable
segments: North America, Europe, Asia-Pacific and, starting in 2002, a Global
Video division. The Company makes key decisions and evaluates performance of the
Company based on these segments. Transfers between segments are accounted for at
amounts that are generally above cost and consistent with the rules and
regulations of governing tax authorities. Such transfers are eliminated in the
consolidated financial statements. Corporate items include non-operating
overhead and research and development expenditures. Corporate assets mainly
include research and development telecommunications equipment.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
The following is a summary of operations by segment for the three months
ended June 30, 2001 and 2002 :
North Asia- Global Inter-
America Europe Pacific Video Corporate segment Total
------- ------ ------- ----- --------- ------- -----
Three months ended
June 30, 2001
Revenue ...................(euro) 29,204 (euro) 13,602 (euro) 1,331 (euro) 2,931 -- (euro) (250) (euro) 46,818
Gross Profit............... 16,454 9,713 777 386 -- -- 27,330
EBITDA..................... 5,336 3,673 195 (99) (euro) (6,242) -- 2,863
Operating income (loss).... (5,449) 2,166 130 (982) (5,769) -- (9,904)
Three months ended
June 30, 2002
Revenue....................(euro) 33,115 (euro)15,873 (euro) 1,682 (euro) 2,387 -- (euro)(1,111) (euro) 51,946
Gross Profit............... 15,975 11,516 895 332 -- -- 28,718
EBITDA..................... 7,695 1,475 336 (377) (euro) (7,368) -- 1,761
Operating income (loss).... 1,445 211 111 (653) (7,651) -- (6,537)
The following is a summary of operations by segment for the six months ended June 30, 2001 and 2002 :
North Asia- Global Inter-
America Europe Pacific Video Corporate segment Total
------- ------ ------- ----- --------- ------- -----
Six months ended
June 30, 2001
Revenue ...................(euro) 39,516 (euro) 26,099 (euro) 2,603 (euro) 5,599 -- (euro) (229) (euro) 73,588
Gross Profit............... 22,547 18,173 1,389 905 -- -- 43,014
EBITDA..................... 6,748 8,379 364 (372) (euro) (9,882) -- 5,237
Operating income (loss).... (5,333) 4,143 227 (1,475) (9,545) -- (11,983)
Six months ended
June 30, 2002
Revenue....................(euro) 69,653 (euro) 30,706 (euro) 3,083 (euro) 4,938 -- (euro) (962)(euro) 107,398
Gross Profit............... 35,060 22,912 1,681 1,098 -- -- 60,751
EBITDA..................... 8,805 10,279 383 (183) (euro)(14,487) -- 4,797
Operating income (loss).... (4,288) 8,235 (59) (778) (15,030) -- (11,802)
EBITDA and operating loss of North America for six months ended June 30,
2002 included the non-recurring restructuring charge amounting to (euro) 3,671,
as described in Note No. 3. EBITDA before the non-recurring charge amounted to
(euro) 8,481 for the six months ended June 30, 2002.
Note 9. Commitments and contingencies
Interest rate swap relating to the U.S. $ 125 million credit facility
On June 29, 2001, the Company entered into a U.S. $ 57.5 million interest
rate swap agreement to hedge its exposure on 50% of its outstanding term loans
under the U.S.$ 125 million credit facility, excluding the U.S. $ 10 million
revolving line of credit, granted in April 2001, denominated in U.S. dollars.
The termination date of this agreement is 2004. The effect of the agreement was
to convert underlying variable rate debt based on Libor USD to fixed rate debt
with an interest rate before margin of 5.52 %.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Each interest-rate swap agreement is designated with all or a portion of
the principal balance. This agreement involves the exchange of amounts based on
a fixed interest rate for amounts based on variable interest rates over the life
of the agreement without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received as interest rates
change is accrued and recognized as an adjustment of interest expense related to
the debt. The related amount payable to or receivable from third parties is
included in other liabilities or assets. The fair value of the swap agreement
and changes in the fair value as a result of changes in market interest rates
are recognized as comprehensive income or loss. As a result, the comprehensive
loss for this interest rate swap agreement amounted to (euro) 2.6 million at
June 30, 2002.
Securities relating to the U.S. $ 125 million credit facility
The U.S. $ 125 million credit facility agreement signed on April 20, 2001
with BNP Paribas, CIBC World Markets and Fortis Bank is secured by the
following:
- stock pledge of shares of Genesys Conferencing Ltd (England),
Genesys Conferencing AB (Sweden) and Genesys Conferencing Inc;
- security over some assets such as accounts receivable,
inventories and property, plant and equipment of Genesys
Conferencing Inc.
Note 10. Reconciliation net income (loss) and shareholders' equity to French
GAAP
Reconciliation net income (loss) to French GAAP
The following is a summary of differences between French GAAP and U.S. GAAP
net loss for the three and six months ended June 30, 2001 and 2002 :
Three months ended Six months ended
June 30, June 30,
-------- --------
2001 2002 2001 2002
---- ---- ---- ----
Net loss according to French GAAP.......... (euro) (14,888) (euro) (13,393) (euro) (18,435) (euro) (21,438)
U.S. GAAP adjustments :.
- --Foreign currency gains and losses......... (2,134) 696 69 --
- --Amortization of goodwill and intangibles. (1,408) 2,359 (1,525) 5,221
- --Deferred compensation (Astound and Vialog) 699 (62) 699 (123)
- --Debt issuance costs....................... 52 (436) 7 (3)
- --Income tax and deferred tax............... 716 1,206 245 2,409
- --Accrued restructuring costs.............. -- -- -- (3,671)
- --Treasury shares........................... -- 69 -- 64
- --Others, net............................... 17 (2) 17 --
------- ------- ------- -------
Total...................................... (euro) (2,058) (euro) 3,830 (euro) (488) (euro) 3,897
=============== ============== ============== ===============
Net loss according to U.S. GAAP............ (euro) (16,946) (euro) (9,563) (euro) (18,923) (euro) (17,541)
=============== ============== =============== ===============
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Reconciliation shareholders' equity to French GAAP
The following is a summary of differences between French GAAP and U.S. GAAP
shareholders' equity at December 31, 2001 and June 30, 2002 :
December 31, June 30,
------------ --------
2001 2002
---- ----
Shareholders' equity according to
French GAAP (euro) 167,947 (euro) 146,194
U.S. GAAP adjustments :.
- --Fair value of financial instruments....... (2,249) (2,576)
- --Amortization of goodwill
and intangibles........................... (5,406) (595)
- --Impairment of goodwill and intangibles.... (9,386) (9,328)
- --Deferred compensation (Astound and Vialog) 4,315 4,290
- --Debt issuance costs....................... 215 213
- --Income tax and deferred tax............... 7,555 9,964
- --Accrued restructuring costs.............. -- (3,210)
- --Treasury shares........................... (106) (42)
- --Others, net............................... (17) (14)
------ ------
Total...................................... (euro) (5,079) (euro) (1,298)
============== ==============
Shareholders' equity according to U.S. GAAP (euro) 162,868 (euro) 144,896
============== ==============
Note 11. Proforma information
The following schedules set forth unaudted pro forma condensed
consolidated financial information for the Company which has been prepared to
reflect the acquisitions made by the Company since January 1, 2001. These
acquisitions included :
- - Astound, acquired on March 27, 2001,
- - Vialog,acquired on April 25, 2001.
The consolidated pro forma information has been prepared in accordance
with generally accepted accounting principles in the United States.
The unaudited pro forma condensed consolidated statement of operations for
the three and six months ended June 30, 2001 gives effect to the acquisitions of
Astound and Vialog, as if they had occurred on January 1, 2001.
The pro forma statement of operations include :
- 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. These
opening adjustments are added back for EBITDA calculation.
The pro forma information is not necessarily indicative of the financial
statements that would have been obtained had these acquisitions actually
occurred at January 1, 2001, nor are they necessarily indicative of future
consolidated information.
GENESYS S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited)
(in thousands, except share data and when indicated)
Unaudited pro forma condensed consolidated statement of operations
Three months Six months
------------ ----------
ended ended
----- -----
June 30, June 30,
-------- --------
2001 2001
-------- --------
Revenue........................... (euro) 54,021 (euro) 106,642
Cost of revenue: 23,160 45,930
------- ------
Gross profit................................. 30,861 60,712
Operating expenses:
Research and development................ 1,180 2,423
Selling, general and administrative..... 33,269 58,557
Amortization of goodwill and
other intangibles....................... 10,407 20,416
------- ------
Total operating expenses..................... 44,856 81,396
------- ------
Operating loss............................... (13,995) (20,684)
Financial expense, net....................... (2,649) (3,570)
Equity in loss of affiliated company......... (40) (40)
------- ------
Loss before taxes............................ (16,684) (24,294)
Income tax expense........................... (4,316) (5,680)
------- -------
Net loss.....................................(euro)(21,000) (euro)(29,974)
============== ==============
Basic and diluted net loss per share.........(euro) (1.51) (euro) (2.17)
============== ==============
Number of shares used in computing
basic and diluted net loss per share......... 13,902,755 13,841,461
============== ==============
Supplementary information :
EBITDA (euro) 3,986 (euro) 11,326
============== ==============
On October 30, 2002, we published our results for the six months ended June 30,
2002, prepared in accordance with French GAAP in the Bulletin des Annonces
Legales Obligatoire (the BALO).
All of the material terms of the French GAAP publication in the BALO are
included in the release concerning our results for the six months ended June 30,
2002, prepared in accordance with U.S. GAAP, which is included in this current
report on Form 6-K.
We omitted the certification of our auditors, included in the BALO publication,
from the U.S. GAAP release. The auditors' certification included an
"observation" with respect to our liquidity, which is discussed in the U.S. GAAP
release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: October 29, 2002
GENESYS SA
By: /s/ Francois Legros
----------------------------
Name: Francois Legros
Title: Chairman and Chief
Executive Officer