UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from June 30 to September 30, 1999
Commission File Number 000-22605
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
California 94-3120525
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1155 Market Street, San Francisco, California 94103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 437-1100
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of each class Outstanding at September 30, 1999
------------------- ---------------------------------
Common Stock, no par value 25,458,013 Shares
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- --------------------------------------------------------------------------------------------------------
September 30, June 30,
ASSETS 1999 1999
---------------------------------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 65,080 $ 44,271
Short-term investments 7,629 17,426
Accounts receivable, net 52,165 44,802
Prepaid expenses and other 7,794 8,229
---------------------------------------
Total current assets 132,668 114,728
PROPERTY AND EQUIPMENT, net 16,679 17,026
INTANGIBLES, net 7,832 8,190
OTHER ASSETS 8,260 7,563
---------------------------------------
$165,439 $147,507
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 66 $ 65
Accounts payable 4,482 3,328
Accrued payroll and related benefits 5,399 5,585
Other accrued liabilities 11,409 7,236
Deferred revenues 22,132 21,259
---------------------------------------
Total current liabilities 43,488 37,473
LONG-TERM OBLIGATIONS 57 66
---------------------------------------
STOCKHOLDERS' EQUITY
Common stock 117,610 112,920
Deferred stock compensation (707) (964)
Stockholder notes receivable (631) (686)
Cumulative translation adjustment 74 (572)
Retained earnings 5,548 (730)
---------------------------------------
Total stockholders' equity 121,894 109,968
---------------------------------------
$165,439 $147,507
=======================================
- --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONDENSED CONSOLIDTED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
--------------------------------------------------------------------------------------------------------
Three Months Ended
September 30
-----------------------------------------
1999 1998
-----------------------------------------
REVENUES: (Unaudited)
License $36,606 $23,662
Service 9,272 5,346
-----------------------------------------
Total revenues 45,878 29,008
-----------------------------------------
COST OF REVENUES:
License 1,568 1,052
Service 6,158 4,055
-----------------------------------------
Total cost of revenues 7,726 5,107
-----------------------------------------
GROSS MARGIN 38,152 23,901
-----------------------------------------
OPERATING EXPENSES:
Research and development 6,847 5,403
Sales and marketing 17,918 10,403
General and administrative 4,275 2,703
-----------------------------------------
Total operating expenses 29,040 18,509
-----------------------------------------
INCOME FROM OPERATIONS 9,112 5,392
INTEREST AND OTHER INCOME (EXPENSE), net 547 484
-----------------------------------------
INCOME BEFORE PROVISION FOR TAXES 9,659 5,876
PROVISION FOR INCOME TAXES 3,381 2,057
-----------------------------------------
NET INCOME $ 6,278 $ 3,819
=========================================
NET INCOME PER SHARE:
BASIC $0.25 $0.17
=========================================
DILUTED $0.21 $0.15
=========================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 25,178 22,628
=========================================
DILUTED 29,936 25,779
=========================================
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------------------------------
Three Months Ended September 30
--------------------------------------
1999 1998
--------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Net income $ 6,278 $ 3,819
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred stock compensation expense 257 119
Depreciation and amortization 3,245 1,918
Provision for doubtful accounts - 100
Changes in operating assets and liabilities:
Accounts receivable (7,363) (547)
Prepaid expenses and other 435 (405)
Accounts payable 1,154 (1,881)
Accrued payroll and related benefits (186) 837
Other accrued liabilities 4,173 2,753
Deferred revenues 873 2,015
--------------------------------------
Net cash provided by operating activities 8,866 8,728
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of short-term investments 36,759 13,408
Purchases of short-term investments, net (26,962) (6,580)
Purchases of property and equipment (1,848) (4,488)
Increase in other assets (1,388) (693)
--------------------------------------
Net cash provided by investing activities 6,561 1,647
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of advances from related parties - (90)
Principal payments on capital lease obligations (9) (9)
Payment of shareholder notes receivable 550 -
Proceeds from sales of common stock 4,195 2,051
--------------------------------------
Net cash provided by financing activities 4,736 1,952
--------------------------------------
Effect of exchange rate changes on cash 646 -
--------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 20,809 12,327
CASH AND CASH EQUIVALENTS:
Beginning of Period 44,271 30,256
--------------------------------------
End of Period $ 65,080 $42,583
======================================
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying condensed consolidated financial statements have been
prepared by Genesys Telecommunications Laboratories, Inc. (the "Company" or
"Genesys") without audit and reflect all adjustments which are, in the opinion
of management, necessary for a fair presentation of the financial position and
the results of operations of the Company for the interim periods. The statements
have been prepared in accordance with the regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles. The results
of operations for the three months ended September 30, 1999 are not necessarily
indicative of the operating results to be expected for the full fiscal year or
future operating periods. The information included in this report should be read
in conjunction with the audited consolidated financial statements and notes
thereto as set forth in the Company's Annual Report on Form 10-K/A for the
fiscal year ended June 30, 1999.
These condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
2. NET INCOME PER SHARE
Basic and Diluted Weighted Average Shares Outstanding presented in the
accompanying statements of operations (as rounded) are comprised of the
following (in thousands):
- --------------------------------------------------------------------------------------------------------
Three Months Ended
September 30
---------------------------------
1999 1998
---------------------------------
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 25,178 22,628
Dilutive effect of employee stock options and employee stock purchase
plan options 4,758 3,151
---------------------------------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 29,936 25,779
=================================
- --------------------------------------------------------------------------------------------------------
Approximately 31,150 common stock equivalents were excluded from the diluted
weighted average common shares for the quarter ended September 30, 1999 as their
effect would have been anti-dilutive.
5
3. COMPREHENSIVE INCOME
Comprehensive income includes foreign currency translation gains and losses
and unrealized gains and losses on equity securities that have been previously
excluded from net income and reflected instead in stockholders' equity. The
following table sets forth the calculation of comprehensive income on an interim
basis (in thousands):
- --------------------------------------------------------------------------------------------------------
Three Months Ended
September 30
------------------------------------
1999 1998
------------------------------------
Net income $6,278 $3,819
Foreign currency translation gains (losses) 646 (34)
------------------------------------
TOTAL COMPREHENSIVE INCOME $6,924 $3,785
====================================
- ---------------------------------------------------------------------------------------------------------
4. SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), "Disclosures about Segments of an Enterprise and Related
Information", in fiscal 1999. SFAS No. 131 established standards for reporting
information about operating segments in the Company's financial statements.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision makers, or decision making group, in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision making group is the Executive Committee, which is comprised of the
Chief Executive Officer, the Chief Financial Officer and various Vice Presidents
of the Company.
The Company is organized geographically and by line of business. The Company
has two major lines of business operating segments: license and service. The
Company also evaluates certain subsets of business segments by service
categories. While the Executive Committee evaluates results in a number of
different ways, the line of business management structure is the primary basis
for which it assesses financial performance and allocates resources. The
Company does not track assets by operating segments. Consequently, it is not
practical to show assets by operating segments.
6
- ------------------------------------------------------------------------------------------
Three Months Ended September 30,
(in thousands)
--------------------------------------------
1999 1998
--------------------------------------------
Revenues from unaffiliated customers:
License revenue $36,606 $23,662
Service revenue:
Professional service 4,412 3,100
Maintenance service 4,860 2,246
--------------------------------------------
Total service revenue 9,272 5,346
--------------------------------------------
$45,878 $29,008
--------------------------------------------
Cost of revenue:
License $ 1,568 $ 1,052
Service 6,158 4,055
--------------------------------------------
$ 7,726 $ 5,107
--------------------------------------------
Gross Margin 38,152 23,901
============================================
- -------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Three Months Ended September 30 (in thousands)
--------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------
Total Total
Revenues Assets Revenues Assets
--------------------------------------------------------------------
United States $24,632 $112,478 $16,004 $ 87,956
United Kingdom 5,945 25,677 6,438 14,601
France 5,600 13,086 1,079 4,189
Germany 1,653 5,294 731 578
Canada 855 3,594 1,796 3,784
Japan 1,463 2,244 606 1,340
Other Foreign Countries 5,730 3,066 2,354 1,832
--------------------------------------------------------------------
Total $45,878 $165,439 $29,008 $114,280
====================================================================
- -------------------------------------------------------------------------------------------
Revenues generated from international sales of the Company's products, which
includes export shipments originating in the United States to unaffiliated
customers and sales to unaffiliated customers from the Company's foreign
offices, represented 46 % and 45% of total revenues in the first quarters of
fiscal 2000 and 1999, respectively.
7
5. ACQUISITION OF GENESYS BY ALCATEL
On September 27, 1999, Genesys entered into an Agreement and Plan of Merger
and Reorganization (the "Merger Agreement") with Alcatel, a company organized
under the laws of France ("Alcatel"), pursuant to which Alcatel has agreed to
acquire Genesys (the "Acquisition"). The Acquisition will be effected through
the issuance of 1.667 American Depositary Shares of Alcatel (the "ADSs"), each
of which ADS represents one-fifth of a share, nominal value 10 Euros per share
of Alcatel, in exchange for each share of common stock of Genesys outstanding
immediately prior to the consummation of the Acquisition, subject to the collar
provision described below. The exchange ratio is subject to a collar such that
the value provided to each Genesys share, based on the 10 day trading average
ADS price for the period ending 2 trading days prior to Genesys' shareholder
meeting, shall not exceed $55.00 or be less than $45.00. Alcatel will have the
option to pay $45.00 in cash per share if such trading average ADS price does
not exceed $24.00. Alcatel will also assume Genesys' stock options outstanding
at the effective date of the Acquisition, based on such exchange ratio. The
amount of such consideration was determined based upon arm's-length negotiations
between Alcatel and Genesys. The Merger Agreement also provides for the payment
by Genesys to Alcatel under certain circumstances of a fee of $45 million in the
event the Merger Agreement is terminated.
Unless Alcatel exercises its option to pay cash instead of exchanging
stock, the Acquisition is intended to qualify as a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and is intended to be accounted
for as a French pooling of interests.
The consummation of the Acquisition is subject to the satisfaction of
certain conditions, including certain regulatory approvals and the approval of
the shareholders of Genesys.
6. LITIGATION
From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. As of
September 30, 1999, the Company was not a party of any legal proceedings that,
if decided adversely to the Company, would, individually or in the aggregate,
have a material adverse effect on the Company's business, financial condition or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis for Genesys focuses on material changes
in financial conditions from June 30, 1999 and in results of operations for the
quarters ended September 30, 1999 and 1998. Please read the following
discussion and analysis with management's discussion and analysis included in
the Company's 1999 Annual Report on Form10-K/A and with the Company's
Consolidated Financial Statements and accompanying Notes included herein.
On September 27, 1999, Genesys entered into a Merger Agreement with Alcatel.
See Notes to Condensed Consolidated Financial Statements for further discussion.
Results of Operations
The following table sets forth statement of operations data of the Company
expressed as a percentage of total revenues for the periods indicated.
8
- -------------------------------------------------------------------------------------
Three Months Ended
September 30
-----------------------------
1999 1998
-----------------------------
Revenues:
License 79.8% 81.6%
Service 20.2 18.4
-----------------------------
Total revenues 100.0 100.0
-----------------------------
Cost of revenues:
License 3.4 3.6
Service 13.4 14.0
-----------------------------
Total cost of revenues 16.8 17.6
-----------------------------
Gross Margin 83.2 82.4
-----------------------------
Operating expenses:
Research and development 14.9 18.6
Sales and marketing 39.1 35.9
General and administrative 9.3 9.3
-----------------------------
Total operating expenses 63.3 63.8
-----------------------------
Income from operations 19.9 18.6
Interest and other income (expense), net 1.2 1.7
-----------------------------
Income before provision for income taxes 21.1 20.3
Provision for income taxes 7.4 7.1
-----------------------------
Net income 13.7% 13.2%
=============================
- -------------------------------------------------------------------------------------
Revenues
License. License revenues increased by 54.7% from $23.6 million in the three
months ended September 30, 1998 to $36.6 million in the three months ended
September 30, 1999. This increase resulted from the market's growing acceptance
of the Company's products and underlying technology, an expansion of the
Company's product offerings, and a significant increase in the Company's sales,
marketing and customer service organizations. The Company does not believe that
the historical growth rates of license revenues will be sustainable or are
indicative of future results.
Service. Service revenues primarily comprise fees from consulting, post-
contract support and, to a lesser extent, training services. Service revenues
increased by 73.4% from $5.3 million in the three months ended September 30,
1998 to $9.2 million in the three months ended September 30, 1999. The
Company's software license agreements often provide for maintenance, consulting
and training. Accordingly, increases in licensing activity have resulted in
increases in revenues from services related to maintenance, consulting and
training.
Service revenues are largely dependent upon the extent to which product
implementation services are performed by the Company's internal professional
services personnel versus third party organizations such as systems integrators.
To the extent that the Company utilizes more internal resources to perform
product implementations, service revenues could increase as a percentage of
total revenues. Conversely, if the Company utilizes to a greater extent third-
party organizations such as systems integrators to implement the Company's
products, service revenues may decrease as a percentage of total revenues.
Maintenance revenues as a percentage of
9
total revenues are expected to increase due to continued expansion of the
Company's installed base. The Company does not believe that the historical
growth rates of service revenues will be sustainable or are indicative of future
results.
Cost of Revenues
License. Cost of license revenues includes the costs of product media,
product duplication and manuals, as well as allocated labor and overhead costs
associated with the preparation and shipment of products. Cost of license
revenues were $1.5 million and $1.1 million, in the three months ended September
30, 1999, and 1998, respectively. The increase in absolute dollar amounts
relates primarily to an increase in the volume of products shipped by the
Company, and the resulting increase in documentation material costs and
personnel necessary to assemble and ship the products.
Service. Cost of service revenues are primarily comprised of employee-
related costs incurred in providing consulting, post-contract support and
training services. Cost of service revenues were $6.1 million and $4.1 million
in the three months ended September 30, 1999, and 1998, respectively. The
increase in absolute dollars was due primarily to increases in consulting,
support and training personnel, and increases in overhead costs associated with
travel, computer equipment and facilities. The cost of service revenues as a
percentage of service revenues may vary between periods due to the mix of
services provided by the Company and the resources used to provide these
services.
Operating Expenses
For the three months ended September 30, 1999, and 1998, the Company's
operating expenses were $29 million and $18.5 million, or 63.3% and 63.8% of
total revenues, respectively.
Research and Development. Research and development expenses were $6.8 million
and $5.4 million, or 14.9% and 18.6% of total revenues in the three months ended
September 30, 1999 and 1998, respectively. These expenses increased in absolute
dollars primarily as a result of an increase in personnel to support the
Company's product development activities. The Company expects that research and
development expenditures will continue to increase in absolute dollars.
Research and development expenses are generally charged to operations as
incurred. In accordance with Statement of Financial Accounting Standards No. 86,
the Company capitalized approximately $0.8 and $0.4 million of software
development costs incurred in the three months ended September 30, 1999 and
1998, respectively.
10
Sales and Marketing. Sales and marketing expenses were $17.9 million and
$10.4 million, representing 39.1% and 35.9% of total revenues in the three
months ended September 30, 1999 and 1998, respectively. These expenses increased
in absolute dollars primarily due to the Company's investment in building a
direct sales force in North America and in Europe. During the first quarter
ended September 30, 1999, the Company increased the number of its sales and
marketing personnel from approximately 246 to 272 worldwide, and incurred higher
commission expenses related to higher sales levels. In addition, the Company
incurred increased marketing expenses associated with the Company's expanding
product line, including trade shows and promotional expenses. The Company
expects to continue to expand its direct sales and marketing efforts and to
continue to invest in its channel sales organization, and therefore, anticipates
sales and marketing expenditures will continue to increase significantly in
absolute dollars.
General and Administrative. General and administrative expenses were $4.3
million and $2.7 million, or 9.3% of total revenues in each of the three months
ended September 30, 1999, and 1998, respectively. These expenses increased in
absolute dollars during these periods principally due to the addition of staff
and information system investments to support the growth of the Company's
business during these periods. The Company expects to continue to increase
general and administrative expenses in absolute dollars, but expects that these
expenses as a percentage of total revenues will remain consistent.
Provision for Income Taxes
The Company's effective tax rates have historically differed from the federal
statutory rate primarily because of tax credits, certain foreign sales
corporation income that is not taxed, state taxes, foreign income taxes provided
at rates greater than the federal statutory rate, as well as foreign losses that
could not be utilized. The effective tax rate was 35% in the first quarters of
fiscal 2000 and 1999.
Liquidity and Capital Resources
As of September 30, 1999, the Company's primary sources of liquidity included
cash and cash equivalents of $65 million and short-term investments of $7.6
million.
Working capital increased $33 million in the first quarter of fiscal 2000
over the corresponding quarter in fiscal 1999, due primarily to increased cash
flow from operations, which resulted in higher cash and cash investment levels.
11
- -----------------------------------------------------------------------------------------------------------
Three Months Ended
September 30 (in thousands)
--------------------------------------------------
1999 1998 % Change
--------------------------------------------------
Working Capital $89,180 $55,302 61.3%
Cash and cash investments $72,709 $52,740 37.9%
Cash provided by operating activities $ 9,511 $ 8,728 9.0%
Cash provided by investing activities $ 5,912 $ 1,647 259%
Cash provided by financing activities $ 4,736 $ 1,952 143%
- -----------------------------------------------------------------------------------------------------------
Operating Activities. The Company generated higher positive cash flows from
operating activities in the three months ended September 30, 1999 over the
corresponding period ended September 30, 1998, related primarily to an improved
profitability as well as an increase in accrued liabilities and accounts
payable.
Investing Activities. The Company generated cash from the net maturity of
$9.8 million of short-term investments in the three months ended September 30,
1999, and $6.8 million in the three months ended September 30, 1998. The Company
used cash of $3.2 million and $5.2 million for the purchase of property,
equipment and other assets in the three months ended September 30, 1999, and
1998, respectively. The Company expects to continue to invest in capital and
other assets to support its growth.
Financing Activities. The Company generated cash of $4.7 million and $2.0
million from financing activities in the three months ended September 30, 1999,
and 1998, respectively, related primarily to proceeds from the exercise of stock
options and the sale of stock under the Employee Stock Purchase Plan.
The Company has established subsidiaries in foreign countries, including the
United Kingdom, France, Germany, Sweden, Canada, Russia, Japan, Singapore and
Australia, which function primarily as sales offices in those locations. The
Company expects to establish offices in other foreign countries as it continues
to expand its international operations. The capital expenditures necessary to
establish a foreign office are not significant, and, accordingly, the Company
does not expect that the establishment of these subsidiaries will have a
material adverse effect on its liquidity and capital resources.
The Company believes that its existing sources of liquidity will satisfy the
Company's projected working capital and capital requirements for at least the
next twelve months.
Year 2000
The Year 2000 computer issue creates risks for Genesys; the full extent and
scope of which have not yet been fully assessed. To address Year 2000 issues
Genesys initiated a Year 2000 program, managed by a team of internal staff,
designed to identify and address potential Year 2000 problems that could effect
the Genesys Products, internal operating systems and critical third party
relationships.
The Company has put in place a program to verify the Year 2000 compliance of
its products. In 1998 the company's analysis and testing confirmed that the
Genesys 5.0 and 5.1 Suite are Year 2000 ready. The company has established, and
continues to expand, a comprehensive set of Year 2000 test cases. As part of
the company's normal test process Genesys verifies new products for Year 2000
compliance prior to release and the company continues to regression test Genesys
5.0 and 5.1 maintenance releases relative to Year 2000. The costs incurred to
test the Company's products for Year 2000 compliance were incurred as normal
product development expenses.
While the Company believes that its currently developed and actively marketed
products are Year 2000 compliant, some of Genesys' customers might be running
older versions of the Company's products that might not be Year 2000 compliant.
It is possible that Genesys may experience increased expenses in addressing
mitigation issues for these customers. In addition, the Company's products
frequently are integrated into larger networks involving sophisticated hardware
and software products supplied by other vendors. Each of the Company's
customers' networks involves different combinations of third party products.
The Company cannot evaluate whether a customer's third party products are Year
2000 compliant. Genesys may face claims based on Year 2000 problems in other
companies' products or based on issues arising from the integration of multiple
products within the overall network. Although no such claims have been made,
the Company may in the future be required to defend its products in legal
proceedings, which could be expensive regardless of the merits of such claims.
The Company has implemented a plan to test internal operating systems, such as
computer hardware and software, telephone/PBX systems, fax machines as well as
facilities systems such as building access and other miscellaneous systems. The
company has approached its Year 2000 internal readiness review by following a
methodology of assessing, implementing and monitoring the Year 2000 compliance
of Genesys' internal operating systems. This methodology includes taking an
inventory of the company's internal systems prioritized by risk, gathering
appropriate vendor information and identifying risks, defining a solution
strategy to ensure readiness and finally, testing and fixing the operating
systems to resolve any Year 2000 issues discovered. The internal readiness
review has been executed and continues to be monitored by the company. Costs
incurred to complete this process have not been material.
12
Genesys does not believe that the Year 2000 issue will pose significant
operational problems to its internal operating systems. However, new
developments may occur that could affect Genesys' estimates for Year 2000
readiness. The failure to correct a material Year 2000 problem could result in
an interruption in, or a failure of, certain normal business activities or
operations of Genesys. Such failures could materially and adversely affect
Genesys' business, operating results and financial condition.
The Company has been in contact with its key third-party relationships
regarding their Year 2000 compliance. The Company has received responses from
its critical third-party relationships who have stated that they expect to
address all of their significant Year 2000 issues in a timely manner. The
company is working to identify and analyze the most reasonably likely worst case
scenarios for key third party relationships affected by Year 2000. These
scenarios could include possible infrastructure collapse, the failure of water
and power supplies, major transportation disruptions and failures of
communications or financial systems - any of which could have a material adverse
effect on the Company's ability to deliver its products and services to its
customers. While the Company has contingency plans in place to address most
issues under its control, an infrastructure problem outside of its control could
result in a delay in product shipments, depending on the nature and severity of
the problems. The Company has analyzed its key third party systems and believes
all of them to be largely Year 2000 compliant. Costs incurred to complete this
process have not been material.
Although the Company has spent time and resources to address potential Year
2000 problems, there is no assurance that the company will be successful in its
efforts to identify and address all Year 2000 issues. Even though the Company
has acted in a timely manner to complete all of its assessments and planned
solutions, some problems may not have been identified or corrected in time to
prevent material adverse consequences to the company. The reasonably likely
worst case of a Year 2000 problem is that (a) Genesys' operations could be
disrupted for a few days before the problem could be identified and remediated
and (b) a customer project including Genesys products could be delayed for a
short period of time before the problem can be identified and remediated by
Genesys' support process. Genesys uses contract terms to limit direct and
indirect damages that may be incurred by customers, although no assurance can be
given that such terms are enforceable. In addition, there could be Year 2000
problems or issues relating to the possible failure in third party systems over
which the Company has no control and which the Company has no ready substitute,
such as, but not limited to, power and telecommunications services.
The discussion above includes forward-looking statements regarding Year 2000
and is based on the Company's best estimates given information that is currently
available and is subject to change. As the Company continues to progress with
its Year 2000 programs, it may discover that actual results will differ
materially from these estimates. Such results could materially and adversely
effect the Company's business, operating results and financial condition.
RISK FACTORS
In addition to the other information contained in this Quarterly Report on
Form 10-Q, the following additional risk factors should be considered carefully
in evaluating the Company and its business. Certain statements contained in this
Quarterly Report on Form 10-Q, including, without limitation, statements
containing the words "believes," "anticipates," "estimates," "expects"
and words of similar import, constitute "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Given these uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements.
Quarterly Results of Operations and Forward Looking Statements
The Company's quarterly operating results have varied significantly in the
past. The Company's quarterly revenues and operating results may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside the Company's control. These factors include:
. market acceptance of the Company products
. competition
. size, timing and recognition of revenue from significant orders
. ability to develop and market new products and product enhancements
. new product releases by the Company and its competitors and the timing of
such releases
. length of sales and implementation cycles
. ability to integrate acquired businesses
. success in establishing indirect sales channels and expanding its direct
sales force
. success in retaining and training third-party support personnel
. delay or deferral of significant revenues until acceptance of software
required by any specific license transaction
. deferral of customer orders in anticipation of new products and product
enhancements
. changes in pricing policies by the Company and its competitors
. the mix of revenues derived from the Company's direct sales force and
various indirect distribution and marketing channels
. the mix of revenues derived from domestic and international customers
. seasonality
13
. changes in relationships with strategic partners
. personnel changes
. foreign currency exchange rate fluctuations
. ability to control costs, and
. general economic factors.
While the Company generally operates with limited backlog, from time to time
it receives orders from customers that are for project development over an
extended period of time. The Company derives substantially all of its revenues
from licenses of the Company's platform and related applications software and
services. The Company believes that the purchase of its products is relatively
discretionary and generally involves a significant commitment of capital and
other resources by a customer. The Company's typical order size ranges from
$200,000 to $400,000. The timing of the receipt and shipment of a single order
can have a significant impact on the Company's revenues and results of
operations for a particular quarter. In situations requiring customer
acceptance of implementation, the Company does not recognize license revenues
until installations are complete and does not recognize the consulting component
of service revenues until the services are rendered. As a result, revenue
recognition may be delayed in many instances. Historically, the Company has
often recognized a substantial portion of its revenues in the last month of a
quarter, with these revenues frequently concentrated in the last two weeks of a
quarter. As a result, product revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter and revenues for any
future quarter are not predictable with any meaningful degree of certainty.
Product revenues are also difficult to forecast because the market for the
Company's software products is rapidly evolving, and the Company's sales cycle,
which may last from three to nine months or more, varies substantially from
customer to customer. The Company's quarterly revenues are also subject to
seasonal fluctuations, particularly in the quarter ending in September when
reduced activity outside North America during the summer months can adversely
affect the Company's revenues. The Company's expenses are relatively fixed and
are based, in part, on expectations as to future revenues. Consequently, if
future revenue levels were below expectations, net income would be
disproportionately affected because a proportionately smaller amount of the
Company's expenses varies with its revenues. In addition, the Company expects
that sales derived through indirect channels, which are more difficult to
forecast and generally have lower gross margins than direct sales, will increase
as a percentage of total revenues. Due to all of the foregoing factors, the
Company believes that period-to-period comparisons of its results of operations
are not meaningful and should not be relied upon as indications of future
performance. It is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock could be materially
adversely affected.
Because of these factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future performance.
Lengthy Sales Cycle
The long sales and implementation cycles for the Company's products may cause
revenues and operating results to vary significantly from quarter to quarter. A
customer's decision to purchase the Company's products involves a significant
commitment of its resources and a lengthy evaluation process. Throughout the
sales cycle, Genesys often spends considerable time educating and providing
information to prospective customers regarding the use and benefits of the
Company's products. The cost of the Company's products is typically only a
small portion of the related hardware, software, development, training and
integration costs associated with implementing an overall solution. As a result,
the Company's sales cycle may be lengthy. Although it varies substantially from
customer to customer, Genesys' sales cycle generally lasts from three to nine
months or more. Even after making the decision to purchase the Company's
products, its customers tend to deploy them slowly. Deployment of the
14
Company's products extends from a few weeks to several months depending on the
complexity of a customer's telecommunications and computing infrastructure.
Deployment also may involve a pilot implementation phase, the successful
completion of which is typically a prerequisite for full-scale deployment. This
deployment may present significant technical challenges, particularly as large
numbers of employees of a customer attempt to use the Company's products
concurrently. Because of their complexity, larger implementations, especially
multi-site or enterprise-wide implementations, can take several quarters.
Genesys generally relies upon internal resources or third-party consultants to
assist in the implementation of the Company's products. The Company has
experienced difficulty implementing customer orders on a timely basis in the
past due to the limited personnel resources available to the Company. The
Company cannot guarantee that it will not experience delays in the
implementation of orders in the future, or that third-party consultants will be
available as needed by the Company. As a result of this lengthy sales and
deployment cycle, the Company may experience a delay in the recognition of
applicable license revenue. In addition, the delays inherent in such a lengthy
sales and deployment cycle raise the risks that the Company's customers may
decide to cancel or change their orders, which could result in the loss of
anticipated revenue. The Company's business, financial condition and results of
operations would suffer if the customers reduce or delay their orders or choose
not to release products using our technology.
Customer Concentration
A significant portion of the Company's revenues has been recognized from a
limited number of customers. In fiscal 1999, no customer accounted for more than
10% of total revenues. In fiscal 1998 and 1997, MCI Telecommunications
accounted for 14.1% and 11.1%, respectively, of total revenues. The Company
expects that a majority of its revenues will continue to depend on sales of
products to a small number of customers. The Company also expects that
customers will vary from period-to-period. In general, the Company's customers
have acquired fully paid licenses to the installed product and are not
contractually obligated to license or purchase additional products or services
from us. If the Company fails to successfully sell its products to one or more
targeted customers in any particular period, or one or more customers defer or
cancel their orders, the Company's revenues and results of operations could be
harmed.
Competition
If the Company were unable to maintain its market share in the intensely
competitive software market, its financial condition and results of operations
would be harmed. Genesys' competitors include companies such as:
. computer telephony platform developers;
. computer telephony applications software developers; and
. telecommunications equipment vendors.
These competitors include Aspect Communications, Cisco Systems, Davox
Corporation, Dialogic Corporation, Hewlett-Packard, IBM Corporation, IEX
Corporation, Kana Communications, Lucent Technologies, Melita International
Corporation, Nortel Networks and Quintus Corporation. Several of these
competitors have longer operating histories, significantly greater resources,
greater name recognition and a larger customer base than the Company. Genesys
expects to continue to encounter significant competition from these and other
sources. In addition, as the market for the Company's products develops,
companies with greater resources may attempt to increase their presence in the
market by acquiring or forming strategic alliances with the Company's
competitors. If new competitors or alliances among current competitors emerge
and acquire significant market share, the Company's business and results of
operations could be seriously harmed.
Dependence on New Products; Rapid Technological Change
15
Rapid technological change, frequent new product introductions, changes in
customer requirements and evolving industry standards characterize the market
for the Company's products. The introduction by competitors of products
embodying new technologies and the emergence of new industry standards could
render the Company's existing products obsolete. Genesys' future success also
will depend upon its ability to develop and manage key customer relationships in
order to introduce a variety of new products and product enhancements that
address the increasingly sophisticated needs of its customers. The Company's
failure to establish and maintain these customer relationships may adversely
affect the ability to develop new product and product enhancements. In
addition, the Company may experience delays in releasing new products and
product enhancements in the future. Material delays in introducing new products
and enhancements or the Company's inability to introduce competitive new
products may cause customers to forego purchases of the Company's products and
purchase those of competitors. Due to the complexity of Genesys' software and
the difficulty in gauging the engineering effort required to produce new
products and product enhancements, these planned products and product
enhancements can require long development and testing periods. As a result,
significant delays in the general availability of such new releases or
significant problems in the installation or implementation of such new releases
could have a material adverse effect on the Company's business, operating
results and financial condition. The Company has experienced delays in the past
releasing new products and new product enhancements. The Company cannot
guarantee that it will be successful in the future in:
. developing and marketing, on a timely and cost-effective basis, new products
or new product enhancements that respond to technological change, evolving
industry standards or customer requirements;
. avoiding difficulties that could delay or prevent the successful development,
introduction or marketing of these products; or
. achieving market acceptance for the Company's new products and product
enhancements.
Software products, like those offered by the Company, might contain errors or
defects, which are sometimes called ''bugs''. These bugs are particularly
common when new products are first introduced or as new versions or enhancements
to old products are released. In the past, the Company has discovered software
errors in certain of its new products after their introduction. Despite
testing, current versions, new versions or enhancements may still have defects
and errors after they are shipped to customers. The presence of such bugs could
lead to lost revenues or delays in market acceptance, which could harm the
Company's business and operating results.
Integration of Acquired Businesses into the Company; Risks Associated with
Acquisitions
The Company continually evaluates strategic acquisitions of businesses and
technologies that would complement its products or enhance its market coverage
or technological capabilities. In December 1998, Genesys acquired Plato
Software Corporation and in June 1999, it acquired Next Age Technology, Inc.
The Company may continue to make such acquisitions and investments in the future
and there are a number of risks that future transactions could entail. These
risks include the following:
. inability to successfully integrate or commercialize acquired technologies or
otherwise realize anticipated synergies or economies of scale on a timely
basis;
. the diversion of management's attention;
. the disruption of the Company's ongoing business;
. inability to retain technical and managerial personnel for both companies;
. inability to establish and maintain uniform standards, controls, procedures
and processes;
. negative response by the government or our competitors to the proposed
transactions; and
. the impairment of our relationships with employees, vendors, and/or
customers.
In connection with the Acquisition of Genesys by Alcatel, the Merger
Agreement provides for the payment by Genesys to Alcatel under certain
circumstances of a fee of $45 million in the event the Merger Agreement is
terminated. See Notes to Condensed Consolidated Financials for further
discusssion.
In addition, the Company could affect future acquisitions without shareholder
approval. Acquisitions could
16
dilute shareholder equity, or cause the Company to incur debt and contingent
liabilities and amortize acquisition expenses related to goodwill and other
intangible assets. The occurrence of any of the foregoing risks could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Management of Growth
The Company has experienced a period of rapid growth and expansion that has
placed and will continue to place a significant strain on its resources. During
this period, the Company has experienced revenue growth, an increase in the
number of employees, an expansion in the scope of its operating and financial
systems and an expansion in the geographic area of its operations. As of
September 30, 1999, the Company had approximately 765 employees, as compared to
approximately 730 on June 30, 1999 and 538 on June 30, 1998. The Company
anticipates that it will expand further to address potential growth in its
customer base and market opportunities. The Company expects to add additional
key personnel in the near future. To manage this anticipated growth, the
Company will be required to successfully do the following things:
. improve and enhance its operational, financial and management information
controls, reporting systems and procedures;
. hire, train and manage additional qualified personnel;
. expand and upgrade its core technologies; and
. effectively manage multiple relationships with customers, suppliers and other
third parties.
The Company's systems, procedures and controls may not be adequate to support
its operations. If the Company fails to improve its operational, financial and
management information systems, or to hire, train, motivate or manage its
employees, the business, financial condition and results of operations could
suffer.
Dependence on Third-Party Resellers
The Company's success depends on its ability to continue to develop channels
with third-party resellers such as original equipment manufacturers, systems
integrators and telecommunications switch vendors. The Company has entered into
reseller agreements with some of the telecommunications switch vendors,
including those that compete with Genesys. Genesys is also seeking to establish
strategic relationships with independent software vendors. Genesys does not
have a substantial direct sales force and derives a significant portion of its
revenue from its third-party resellers. Many of these third-party resellers do
not have minimum purchase or resale requirements and can cease marketing the
Company's products at any time. These sales channels could be affected by a
number of additional factors including:
. pressures placed on third-party resellers to sell competing products;
. competing product lines offered by certain third-party resellers;
. failure to adequately support the third-party resellers;
. failure of current third-party resellers to provide the level of services and
technical support required by Genesys' customers;
. loss of a significant number of third-party resellers; and
. failure to attract and retain third-party resellers who have the expertise
necessary to successfully sell the Company's products.
Even if Genesys is able to increase its sales through third-party reseller's,
those sales may be at more discounted rates. This would result in lower
revenues to the Company than what it would generate by licensing the same
products to customers directly.
17
The Company is also seeking to incorporate its products into the products
offered by telecommunications switch vendors and local and long distance network
carriers. In the near term, the Company is focused on enabling network service
providers to offer computer telephony integration services to their business
customers. The Company cannot guarantee that it will be able to establish
relationships with network service providers or telecommunication switch vendors
or that they will successfully incorporate Genesys' products into theirs. The
Company also cannot guarantee that its corporate partners or its business
customers will be interested in purchasing products that incorporate Genesys
software and are offered by network service providers or telecommunications
switch vendors. If the Company fails to develop this sales channel, its
business and results of operations could be harmed.
Dependence on Emerging Market
The market for customer interaction software, particularly across multiple
media channels, is an emerging market that is extremely competitive and highly
fragmented. This market is currently evolving and subject to rapid
technological change. The Company's success will depend in large part on
continued growth in the number of organizations adopting customer interaction
solutions across multiple media channels. The market for Genesys' products is
relatively new and undeveloped, and recent customers and prospective customers
have little experience with deploying, maintaining or managing customer
interaction solutions. If this market demand fails to develop, or develops more
slowly than the Company currently anticipates, this could have a material
adverse effect on the demand for the Company's products and on its business,
financial condition and results of operations.
Risks Associated With International Sales and Operations
For the first quarter of fiscal 2000 and 1999, the Company derived 46% and
45% of its total revenues, respectively, from sales outside the United States.
The Company anticipates that a significant portion of its revenues will continue
to be concentrated in international markets for the foreseeable future. The
Company intends to expand operations in its existing international markets and
to enter new international markets, which will require management attention and
resources. The Company may not be successful in expanding its international
operations. In addition, a successful international expansion of Genesys'
software solutions will be limited to those countries where there is regulatory
approval of the third-party telephony hardware supported by Genesys' products.
The Company expects to commit additional development resources to customizing
its products for selected international markets and to developing international
sales and support channels.
Furthermore, to increase revenues in international markets, Genesys will need
to continue to establish foreign operations, to hire additional personnel to run
such operations and to maintain good relations with the Company's foreign
systems integrators and distributors. To the extent that Genesys is unable to
successfully do so, its growth in international sales will be limited. The
failure to expand international sales could have a material adverse effect on
the Company's business, operating results and financial condition.
A substantial portion of the Company's business is conducted in currencies
other than the U.S. dollar. Changes in the value of major foreign currencies
relative to the value of the U.S. dollar could potentially have an adverse
affect on revenues and operating results. The Company has established a foreign
currency hedging program to manage its foreign currency exchange rate risk. In
certain instances, the Company finds it impractical to hedge all foreign
currencies in which it conducts business, as a result, the Company may continue
to experience foreign currency gains and losses. (See Item 3. Quantitative and
Qualitative Disclosure about Market Risk)
In addition to currency fluctuation risks, international operations involve a
number of risks not typically present in domestic operations. Such risks
include:
18
. changes in regulatory requirements;
. costs and risks of deploying systems in foreign countries;
. timing and availability of export licenses;
. tariffs and other trade barriers;
. political and economic instability;
. difficulties in staffing and managing foreign operations;
. potentially adverse tax consequences;
. difficulties in obtaining governmental approvals for products;
. the burden of complying with a wide variety of complex foreign laws and
treaties;
. the possibility of difficult accounts receivable collections; and
. difficulties in managing distributors.
Foreign laws that may differ significantly from laws of the United States may
govern distributors' customers purchase agreements. The Company is also subject
to the risks associated with the imposition of legislation and regulations
relating to the import or export of high technology products. The Company
cannot predict whether quotas, duties, taxes or other charges or restrictions
upon the importation or exportation of its products will be implemented by the
United States or other countries, leading to a reduction in sales and
profitability in that country. Future international activity may result in
sales dominated by foreign currencies. Gains and losses on the conversion to
United States dollars of accounts receivables, accounts payable and other
monetary assets and liabilities arising from international operations may
contribute to fluctuations in the Company's operating results. Any of these
factors could materially affect the Company's business, operating results and
financial condition.
Product Concentration
Substantially all of the Company's revenues to date have been attributable to
the license of the Company's platform and related applications software and
services and, in particular, revenues from the license of the Company's platform
products accounted for 45% of total revenues in fiscal 1999. Genesys' platform
and related applications software and services are currently expected to account
for substantially all of the Company's revenues for the foreseeable future.
Consequently, a decline in pricing or demand for, or failure to achieve broad
market acceptance of, Genesys' platform and related applications software
products, as a result of competition, technological change or otherwise, would
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's application products, other than the
Adante e-mail and Next Age Work Force Management products can only be used in
conjunction with the Company's platform products. As a result, a decline in
demand for the Company's platform products would materially adversely affect
sales of the Company's application products. Furthermore, if customers
experience problems with the Company's platform products, it would adversely
affect their ability to utilize the Company's application products. The
Company's future financial performance will depend in part on the successful
development, introduction and customer acceptance of new and enhanced versions
of its platform and related applications software products. There can be no
assurance that the Company will continue to be successful in marketing its
platform products, related applications software or any new or enhanced
products.
Government Regulation of Immigration
As of June 30, 1999, over 26% of the Company's employees, including
approximately 57% of the Company's technical staff, are foreign citizens.
Accordingly, the Company must comply with the immigration laws of the United
States. Most of the Company's foreign employees are working in the United States
under H-1 temporary work visas ("H-1 Visas"). An H-1 Visa allows the holder to
work in the United States for three years and, thereafter,
19
to apply for a three-year extension. If the H-1 Visa holder has not become a
Lawful Permanent United States Resident or has obtained some other legal status
permitting continued employment before expiration of this six-year period, the
holder must spend at least one year abroad before reapplying for an H-1 Visa.
Furthermore, Congress and administrative agencies with jurisdiction over
immigration matters have periodically expressed concerns over the level of
immigration into the United States. The inability of the Company to utilize the
continued services of such employees would have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Ability to Integrate with Third-Party Technology
The Company's products currently integrate with most major telephony systems
and interoperate across most major computing platforms, operating systems and
databases. If the Company's platform did not readily integrate with major
telephone systems and computing platforms, operating systems or databases, (for
instance, as a result of technology enhancements or upgrades of such systems)
the Company could be required to redesign its platform product to ensure
compatibility with such systems. The Company cannot guarantee that it would be
able to redesign its products or that any redesign would achieve market
acceptance. If the Company's platform products did not integrate with third-
party technology, there would be a material adverse effect on the Company's
business, financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosures about Market Risk
Interest Rate Risk. The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's investment portfolio. The
Company's investments consist primarily of tax-exempt debt securities, are
classified as available for sale and are stated at fair value. The Company is
averse to principal loss and seeks to preserve its invested funds by limiting
default risk, market risk and reinvestment risk.
Table of Investment Securities:
- -------------------------------------------------------------------------------------------------
(in thousands) Principal Average Interest
Amount Rate
---------------------------------------
Cash and cash equivalents $65,080 2.63%
Short-term investments 7,629 3.35%
---------------------------------------
Total cash and investment securities $72,709 --
=======================================
- -------------------------------------------------------------------------------------------------
Currency Rate Risk. The Company's subsidiaries primarily operate in foreign
markets and predominantly have their local currencies as their functional
currencies. These subsidiaries do not have third party borrowings in currencies
other than their local currencies, and therefore there are no appropriate
quantitative disclosures.
The Company's primary currency rate risk exposures relates to:
. decentralized operations, whereby approximately 50% of the Company's
revenues are derived from operations outside the United States,
denominated in currencies other than the U.S. dollar,
. investments in foreign subsidiaries being primarily directly from the U.S.
parent, resulting in U.S. dollar investments in foreign currency
functional companies, and
. location of operating subsidiaries in a number of countries that have seen
significant exchange rate changes against the U.S. dollar.
20
The Company has established a foreign currency hedging program, utilizing
foreign currency forward exchange contracts (forward contracts) to hedge certain
foreign currency transaction exposures. Under this program, gains and losses on
the forward contracts offset increases or decreases in the Company's foreign
currency transactions, so as to mitigate the possibility of foreign currency
transaction gains and losses. The Company does not use forward contracts for
trading purposes. All outstanding forward contracts at the end of a period are
marked-to-market with unrealized gains and losses included in other income and
thus are recognized in income in advance of the actual foreign currency cash
flows. As these forward contracts mature, the realized gains and losses are
recorded and are included in net income as a component of other income. The
Company's ultimate realized gain or loss with respect to currency fluctuations
will depend on the currency exchange rates and other factors in effect as the
contracts mature. The unrealized loss on the outstanding forward contracts at
September 30, 1999 was immaterial to the Company's consolidated financial
statements.
The Company's outstanding forward contracts as of September 30, 1999 are
presented in the following table. The table presents the contract amounts and
the contractual foreign currency exchange rates. These exchange rates are quoted
using market conventions where the currency is expressed in currency units per
U.S. dollar, except for the UK. All of these forward contracts and equity hedges
mature in ninety days or less as of September 30, 1999.
Table of Forward Contracts
Functional Currency Contract Amount Contract Exchange Rate
- -------------------------------------------------------------------------------------------
Canadian Dollar $ 300,000 1.5235
French Franc 4,000,000 6.3210
German Mark 1,250,000 1.8830
UK Pound 8,800,000 1.5738
-----------
Total $14,350,000
===========
- -------------------------------------------------------------------------------------------
21
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Incorporated herein by reference to the list of Exhibits contained
in the Exhibit Index that begins on Page 24 of this Report.
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and Exchange
Commission on September 29, 1999.
22
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.
GENESYS TELECOMMUNICATIONS LABORATORIES, INC.
Date: November 12, 1999 By: /s/ Christopher C. Brennan
----------------------------------
Christopher C. Brennan
Chief Financial Officer, Senior Vice President,
Finance & Administration and Principal Financial
Officer
23
INDEX TO EXHIBITS
Exhibit Exhibit
Number
27.1 Financial Data Schedule (submitted for SEC use only).
24