UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission File Number 000-21771
West TeleServices Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 47-0777362
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
11808 Miracle Hills Drive, Omaha, Nebraska 68154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (402) 963-1500
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 __
-
At May 8, 2000, 63,971,873 shares of Common Stock, par value $.01 per share, of
the registrant were outstanding.
INDEX
Page No.
PART I. FINANCIAL INFORMATION...................................................................... 3
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000 and December 31, 1999..................... 3
Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and 1999........................................... 4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 2000 and 1999.............................................................. 5
Notes to Consolidated Financial Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................. 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk.............................. 10
PART II. OTHER INFORMATION......................................................................... 11
Item 1. Legal Proceedings................................................................... 11
Item 5. Other Information................................................................... 12
Item 6. Exhibits and Reports on Form 8-K.................................................... 12
SIGNATURES.......................................................................................... 13
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WEST TELESERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
March 31, December 31,
2000 1999
--------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 77,182 $ 61,865
Accounts receivable, net of allowance for doubtful accounts of $6,152 and $4,717 101,916 88,056
Notes receivable 4,463 18,604
Accounts receivable - financing 209 267
Other 25,517 16,348
--------- ---------
Total current assets 209,287 185,140
PROPERTY AND EQUIPMENT:
Land and improvements 5,355 5,355
Buildings 30,048 29,908
Telephone and computer equipment 172,341 164,691
Office furniture and equipment 33,165 30,748
Leasehold improvements 46,471 41,372
Construction in process 11,958 6,731
--------- ---------
Total property and equipment 299,338 278,805
Accumulated depreciation and amortization (120,025) (110,871)
--------- ---------
Total property and equipment, net 179,313 167,934
GOODWILL, net of accumulated amortization of $5,643 and $5,222 44,890 45,311
NOTES RECEIVABLE AND OTHER ASSETS 10,125 10,604
--------- ---------
TOTAL ASSETS $ 443,615 $ 408,989
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 31,867 $ 33,745
Customer deposits and holdbacks 9,760 9,273
Accrued wages and benefits 14,250 7,411
Accrued phone expense 6,239 5,245
Other current liabilities 6,060 10,157
Current maturities of long-term obligations 15,931 14,882
Income tax payable 11,438 -
--------- ---------
Total current liabilities 95,545 80,713
LONG TERM OBLIGATIONS, less current maturities 27,831 30,314
DEFERRED INCOME TAXES 5,804 6,000
COMMITMENTS AND CONTINGENCIES (Note 3) - -
STOCKHOLDERS' EQUITY
Preferred stock $0.01 par value, 10,000 shares authorized,
no shares issued and outstanding - -
Common stock $0.01 par value, 200,000 shares authorized,
63,892 and 63,330 shares issued and outstanding 639 633
Additional paid-in capital 163,086 157,647
Retained earnings 150,710 133,682
--------- ---------
Total stockholders' equity 314,435 291,962
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 443,615 $ 408,989
========= =========
The accompanying notes are an integral part of these financial statements.
3
WEST TELESERVICES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------------
2000 1999
------------------ ---------------
REVENUE $ 170,059 $ 137,992
COST OF SERVICES 86,198 71,729
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 57,490 44,461
------------------ ---------------
NET OPERATING INCOME 26,371 21,802
OTHER INCOME (EXPENSE):
Interest income 1,159 1,048
Interest expense - including interest expense - financing of
$31 and $172 (772) (779)
Other income (expense), net 142 109
------------------ ---------------
Net other income 529 378
------------------ ---------------
NET INCOME BEFORE INCOME TAX EXPENSE 26,900 22,180
INCOME TAX EXPENSE:
Current income tax expense 10,583 8,790
Deferred income tax (benefit) (711) (519)
------------------ ---------------
Total income tax expense 9,872 8,271
------------------ ---------------
NET INCOME $ 17,028 $ 13,909
================== ===============
EARNINGS PER COMMON SHARE:
Basic $ 0.27 $ 0.22
================== ===============
Diluted $ 0.25 $ 0.22
================== ===============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic common shares 63,892 63,330
Dilutive impact of potential common shares from stock options 3,603 459
------------------ ---------------
Diluted common shares 67,495 63,789
================== ===============
The accompanying notes are an integral part of these financial statements.
4
WEST TELESERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
---------------------------------------
2000 1999
------------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,028 $ 13,909
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 10,430 8,342
Loss on sale of equipment 47 14
Deferred income tax expense (benefit) (711) (519)
Changes in operating assets and liabilities:
Accounts receivable (13,859) (8,430)
Other assets and vendor receivables (8,177) (3,560)
Accounts payable (1,879) 2,776
Other liabilities and accrued expenses 3,737 2,750
Customer deposits and holdbacks 488 2,168
Income tax payable 11,438 8,438
------------------- --------------
Net cash flows from operating activities 18,542 25,888
------------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (19,685) (13,005)
Proceeds from disposal of property and equipment 1,076 55
Issuance of notes receivable (255) (2,153)
Proceeds from payments of notes receivable 14,396 1,225
------------------- --------------
Net cash flows from investing activities (4,468) (13,878)
------------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term obligations (4,259) (3,089)
Net change in line of credit agreement - 1,000
Proceeds from stock option exercises 5,444 -
Net change in accounts receivable financing and notes
payable financing 58 (1,013)
------------------- --------------
Net cash flows from financing activities 1,243 (3,102)
------------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 15,317 8,908
CASH AND CASH EQUIVALENTS, Beginning of period 61,865 6,928
------------------- --------------
CASH AND CASH EQUIVALENTS, End of period $ 77,182 $ 15,836
=================== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 747 $ 781
=================== ==============
Cash paid during the period for income taxes $ 172 $ 274
=================== ==============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of property through assumption of
long-term obligations $ 2,825 $ 9,257
=================== ==============
The accompanying notes are an integral part of these financial statements.
5
WEST TELESERVCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF CONSOLIDATION AND PRESENTATION
West TeleServices Corporation and its direct and indirect subsidiaries (the
"Company") is one of the largest independent providers of customer relationship
management, or CRM, solutions in the United States. The Company enables its
clients to completely outsource a full range of services, including processing
of customer initiated contracts, automated voice response services, and direct
marketing services. The Company provides its CRM solutions to Fortune 500
companies, leading Internet oriented companies and e-commerce companies. These
services help the Company's clients acquire customers, provide customer support
and generate repeat sales. The Company provides these integrated CRM services
through three operating divisions - Operator TeleServices, Interactive
TeleServices and Direct TeleServices.
The Company's Operator Teleservices division provides agent processing of
customer initiated transactions such as order capture, product support and
general customer service. The Company's Interactive Teleservices division
provides technology oriented automated voice response services for customer
initiated transactions, consisting of computerized transaction-processing
programs such as automated product information requests, computerized surveys
and polling and secure automated credit card activation. The Company's Direct
Teleservices division provides our clients with a premium service that includes
agent direct marketing applications, including product sales, customer
acquisition and retention campaigns. As part of the Company's complete customer
care solution the Company offers West iCare, a full suite of Internet services,
including "chat", e-mail, Voice over the Internet, call back requests, form
sharing, electronic faxing and co-browsing. West iCare is integrated with other
services or can be provided on a stand-alone basis.
The accompanying unaudited consolidated financial statements reflect all
normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results,
and cash flows for the interim periods. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Form 10-K for
the year ended December 31, 1999. All significant intercompany balances and
transactions have been eliminated.
Certain amounts in prior fiscal periods have been reclassified for
comparative purposes.
2. STOCKHOLDER'S EQUITY
Under the conditions set forth in the 1996 Stock Incentive Plan 1,403,700
options vested on January 1, 2000. During the period ended March 31, 2000,
561,945 stock options were exercised at an average exercise price of $9.688 per
share.
3. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to lawsuits and claims which
arise out of its operations in the normal course of its business. The Company
and certain of its subsidiaries are defendants in various litigation matters in
the ordinary course of business, some of which involve claims for damages that
are substantial in amount. The Company believes, except for the items discussed
below and in its Form 10-K for the year ended December 31, 1999, for which the
Company is currently unable to predict the outcome, the disposition of claims
currently pending will not have a material adverse effect on the Company's
financial position or results of operations.
Richard Carney, et al. v. West TeleServices, Inc., et al. was filed on
October 31, 1997 in the 131st Judicial District Court of Bexar County, Texas.
The parties were notified on March 22, 2000 that the court would certify the
class. No order has been entered as of the date of this filing. The certified
class consists of hourly employees
6
of the Company and several of its subsidiaries. Plaintiffs allege that they were
not paid for all compensable work performed by them during their employment.
Plaintiff sued under theories of breach of contract, quantum meriut, common law
fraud, common law debt, conversion and civil theft. A partial summary judgment
was granted to the defendants on March 8, 2000 on breach of express contract and
civil theft and on all claims against the individual defendants. No claims
remain in the lawsuit that allow for an award of punitive damages under Texas
law. The Court granted class certification of the remaining claims on March 22,
2000. The defendants intend to appeal certification.
West Telemarketing Corporation Outbound ("Outbound") is a defendant in
three cases which have been consolidated into one proceeding entitled Bone,
Zarella, et al. individually and on behalf of a class of all other persons
similarly situated vs. Horry Telephone Cooperative, Inc.; AT&T Corp.; AT&T
Communications, Inc., AT&T Communications of the Southern States, Inc.; and West
Telemarketing Outbound Corporation, pending in the United States District Court
for the District of South Carolina. The plaintiffs in these cases alleged they
were marketed AT&T long distance calling plans, and did not receive the full
benefits of the marketed plans. Outbound provided telemarketing services to AT&T
in connection with AT&T's marketing of these plans. The Federal judge referred
the consolidated case to the Federal Communications Commission, and on March 10,
2000, the plaintiff filed a Motion Seeking Conditional Certification of the
Settlement Class, Preliminary Approval of a Settlement, and Approval and Order
for Class Notice to be Given. The Company and the co-defendants concurred in the
motion. On March 23, 2000, the Federal judge approved the plaintiffs' motion and
conditionally certified a class settlement and preliminarily approved the
settlement. Under the proposed settlement AT&T will pay the entire settlement
amount and neither the Company nor Outbound will be responsible for any such
costs. AT&T is in the process of notifying potential class members of the
settlement and a fairness hearing has been set for November 3, 2000.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto. Certain statements under this
caption constitute forward-looking statements, which involve risks and
uncertainties. The Company's actual results in the future could differ
significantly from the results discussed or implied in such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, the effect on financial performance of increased
competition in the teleservices industry, potential future competition,
competitive pricing for services, potential future competing technologies and
trends, dependence on technology and phone service, dependence on the Company's
labor force, reliance on major clients, the success of new product innovations,
legal proceedings and government regulation.
Results of Operations
Comparison of the Three Months Ended March 31, 2000 and 1999
Revenue: For the three months ended March 31, 2000, revenue increased
$32.1 million, or 23.3%, to $170.1 million up from $138.0 million for the three
months ended March 31, 1999. For the three months ended March 31, 2000, revenue
from Operator Teleservices increased approximately $26.5 million to $85.4
million. Revenue from Interactive Teleservices increased approximately $3.7
million to $32.9 million. Revenue from Direct Teleservices increased
approximately $1.9 million to $51.8 million. The increase in revenue across all
three divisions, is primarily the result of servicing the growing needs of the
Company's existing clients.
Cost of services: Cost of services represents direct labor, telephone
expense and other costs directly related to services activities. Costs of
services increased $14.5 million, or 20.2%, in the first quarter of 2000 to
$86.2 million, up from $71.7 million for the comparable period of 1999. As a
percentage of revenue, cost of services decreased to 50.7% for the first quarter
of 2000 compared to 52.0% for the comparable period in 1999. The decrease in
cost of services as a percentage of revenue can be attributed to the Company's
ability to continue to hire cost effective quality labor as it enters new
markets through the addition of contact centers. Contact center additions
during the first quarter of 2000 included Oklahoma City, Oklahoma and Erie,
Pennsylvania. Further, the decrease in cost of services as a percentage of
revenue was also due to lower telecommunication costs and the change in the
service mix from Interactive Teleservices to the Operator Teleservices division.
Operator Teleservices traditionally has lower direct costs as a percentage of
revenue.
Selling, general and administrative ("SG&A") expenses: SG&A expenses
increased by $13.0 million, or 29.3%, to $57.5 million for the first quarter of
2000 up from $44.5 million for the comparable period of 1999. As a percentage of
revenue, SG&A expenses increased to 33.8% for the first quarter of 2000 compared
to 32.2% for the comparable period of 1999. The increase can be attributed to
increased depreciation expense and other costs associated with call center
expansion and the change in the service mix from Interactive Teleservices to the
Operator Teleservices division. Operator Teleservices traditionally has higher
SG&A expenses as a percentage of revenue.
Net operating income: Net operating income increased by $4.6 million, or
21.0%, to $26.4 million in the first quarter of 2000 up from $21.8 million in
the first quarter of 1999. As a percentage of revenue, net operating income
decreased to 15.5% for the first quarter of 2000 compared to 15.8% for the
corresponding period of 1999 due to the factors discussed above for revenue,
cost of services and SG&A expenses.
8
Net other income: Net other income includes interest income from short-term
investments, interest income from an accounts receivable financing program (net
of the related interest expense to fund the program), interest income from
customer notes receivable and interest expense from short-term and long-term
borrowings under credit facilities, a mortgage note and capital leases. Other
income for the first quarter of 2000 totaled $529,000 compared to $378,000 for
the first quarter of 1999.
Net income: Net income increased by $3.1 million, or 22.4%, for the first
quarter of 2000, to $17.0 million from net income of $13.9 million for the first
quarter of 1999. Net income includes a provision for income tax expense at an
effective rate of approximately 36.7% for the three months ended March 31, 2000,
and approximately 37.3% for the comparable period of 1999.
Liquidity and Capital Resources
The Company's primary source of liquidity has been cash flow from
operations, supplemented by proceeds from notes payable, capital leases and
borrowings under its revolving bank lines of credit.
The Company has a $25.0 million unsecured revolving credit facility.
Advances under the revolving credit facility bear interest at the prime rate
less 1.0%. The revolving credit facility expires on June 29, 2000. There were no
borrowings outstanding under this facility at March 31, 2000. The Company's
credit facility contains certain financial covenants and restrictions, which
were met at March 31, 2000. The Company expects to renew the unsecured revolving
credit facility when it expires and believes it could increase the amount of the
facility, if needed.
The Company also has a $10.0 million revolving bank line used to fund an
accounts receivable financing program offered to certain customers in the pay-
per-call industry. Borrowings under the facility are limited to a borrowing base
of pledged accounts receivable from certain of the Company's qualified customers
which were assigned by the Company to the bank. Borrowings bear interest at 1.0%
below the prime rate. There were no borrowings under this credit facility at
March 31, 2000. The credit facility expires on June 29, 2000. The Company
expects to renew the revolving bank line when it expires and believes it could
increase the amount of the credit facility, if needed.
Net cash flow from operating activities decreased $7.4 million, or 28.6%,
to $18.5 million for the three months ended March 31, 2000, compared to net cash
flows from operating activities of $25.9 million for the three months ended
March 31, 1999. The decrease was due principally to an increase in trade
accounts receivable, an increase in other assets and a decrease in accounts
payable.
Net cash flow used in investing activities was $4.5 million for the three
months ended March 31, 2000, compared to $13.9 million for the comparable period
of 1999. The decrease was primarily due to proceeds received on notes
receivable. The Company also invested $22.5 million in contact center expansion
to support the growth of the Company's business. The Company financed $2.8
million of equipment with capital leases. The remaining $19.7 million of
property and equipment purchases were financed through cash flow from
operations.
Net cash flow from financing activities was $1.2 million for the three
months ended March 31, 2000, compared to ($3.1) million for the comparable
period of 1999. In the three months ended March 31, 2000 and 1999, net cash flow
used in financing activities was primarily for payments of debt and capital
lease obligations. In 2000, this cash usage was offset by $5.4 million of
proceeds from the exercise of stock options.
9
Capital Expenditures
The Company's operations continue to require significant capital
expenditures for capacity expansion and upgrades. Capital expenditures were
$22.5 million for the three months ended March 31, 2000. Capital expenditures
for the three months ended March 31, 2000 consisted primarily of equipment
purchases. The Company projects its capital expenditures for the remainder of
2000 to be approximately $18.0 million to $28.0 million, primarily for capacity
expansion and upgrades at existing facilities.
The Company believes cash flow from operations, together with existing cash
and cash equivalents, financing through capital or operating leases, and
available borrowings under its credit facilities will be adequate to meet its
capital requirements for the foreseeable future. The Company may pledge
additional property or assets of the Company or its subsidiaries, which are not
already pledged as collateral securing existing credit facilities or future
credit facilities. The Company or any of its affiliates may be required to
guarantee any existing or additional credit facilities.
Year 2000 Issue
The Company has not experienced any year 2000-related problems with our
hardware or software or with third-party software, hardware or services on which
the Company relies. It is possible that Year 2000 compliance problems exist
that the Company cannot yet identify. If problems arise and the Company fails
to address them on a timely basis, it could result in lost revenue, increased
operating costs, the loss of customers and other business interruptions.
Effects of Inflation
The Company does not believe that inflation has had a material effect on
its results of operations. However, there can be no assurance that the Company's
business will not be affected by inflation in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Certain statements under this caption constitute forward-looking statements
which involve risks and uncertainties. The Company's actual results in the
future could differ significantly from the results discussed or implied in such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, the effect on financial performance
of increased competition in the teleservices industry, potential future
competition, competitive pricing for services, potential future competing
technologies and trends, the challenge of managing the Company's growth
effectively, dependence on technology and phone service, dependence on the
Company's labor force, reliance on major clients, the success of new product
innovations, legal proceedings and government regulation.
The Company does not use derivative financial and commodity instruments.
The Company's other financial instruments include cash and cash equivalents,
accounts and notes receivable, accounts and notes payable and long-term
obligations. The Company's cash and cash equivalents, accounts and notes
receivable and accounts and notes payable balances are generally short-term in
nature and do not expose the Company to material market risk. At March 31, 2000,
the Company had $43.8 million of long-term obligations and $35.0 million
available under its credit facilities. (See Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources.) There were no borrowings outstanding under these credit
facilities at March 31, 2000. Management does not believe that changes in future
interest rates on these fixed and variable rate long-term obligations and credit
facilities would have a material effect on the Company's results of operations
given the Company's currently existing obligations under such long-term
obligations and credit facilities.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is subject to lawsuits and claims which
arise out of its operations in the normal course of its business. The Company
and certain of its subsidiaries are defendants in various litigation matters in
the ordinary course of business, some of which involve claims for damages that
are substantial in amount. The Company believes, except for the items discussed
below and in its Form 10-K for the year ended December 31, 1999, for which the
Company is currently unable to predict the outcome, the disposition of claims
currently pending will not have a material adverse effect on the Company's
financial position or results of operations.
Richard Carney, et al. v. West TeleServices, Inc., et al. was filed on
October 31, 1997 in the 131st Judicial District Court of Bexar County, Texas.
The parties were notified on March 22, 2000 that the court would certify the
class. No order has been entered as of the date of this filing. The certified
class consists of hourly employees of the Company and several of its
subsidiaries. Plaintiffs allege that they were not paid for all compensable work
performed by them during their employment. Plaintiff sued under theories of
breach of contract, quantum meriut, common law fraud, common law debt,
conversion and civil theft. A partial summary judgment was granted to the
defendants on March 8, 2000 on breach of express contract and civil theft and on
all claims against the individual defendants. No claims remain in the lawsuit
that allow for an award of punitive damages under Texas law. The Court granted
class certification of the remaining claims on March 22, 2000. The defendants
intend to appeal certification.
West Telemarketing Corporation Outbound ("Outbound") is a defendant in
three cases which have been consolidated into one proceeding entitled Bone,
Zarella, et al. individually and on behalf of a class of all other persons
similarly situated vs. Horry Telephone Cooperative, Inc.; AT&T Corp.; AT&T
Communications, Inc., AT&T Communications of the Southern States, Inc.; and West
Telemarketing Outbound Corporation, pending in the United States District Court
for the District of South Carolina. The plaintiffs in these cases alleged they
were marketed AT&T long distance calling plans, and did not receive the full
benefits of the marketed plans. Outbound provided telemarketing services to AT&T
in connection with AT&T's marketing of these plans. The Federal judge referred
the consolidated case to the Federal Communications Commission, and on March 10,
2000, the plaintiff filed a Motion Seeking Conditional Certification of the
Settlement Class, Preliminary Approval of a Settlement, and Approval and Order
for Class Notice to be Given. The Company and the co-defendants concurred in the
motion. On March 23, 2000, the Federal judge approved the plaintiffs' motion and
conditionally certified a class settlement and preliminarily approved the
settlement. Under the proposed settlement AT&T will pay the entire settlement
amount and neither the Company nor Outbound will be responsible for any such
costs. AT&T is in the process of notifying potential class members of the
settlement and a fairness hearing has been set for November 3, 2000.
11
Item 5. Other Information
Sale by Selling Stockholder
Pursuant to a registration request by Troy L. Eaden, the Company registered
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock") on a Registration Statement on Form S-3 for sale by Mr. Eaden and
another selling stockholder in an underwritten public offering. The Company's
Registration Statement on Form S-3 became effective on April 27, 2000 and the
offering by the selling stockholders to the public of 4,000,000 shares of Common
Stock at $21.00 per share was consummated on May 3, 2000. To the extent the
underwriters sell more than 4,000,000 shares of Common Stock, they have the
option prior to May 27, 2000 to purchase up to an additional 600,000 shares from
the selling stockholders. As of May 12, 2000, the underwriters had not
exercised any of this option. The Company did not receive, and will not
receive, any proceeds from such sale of Common Stock.
New Technology Venture
On May 4, 2000, the Company consummated the purchase of an equity interest
in excess of 80% in a new venture that was formed to develop and commercialize
an innovative new technology that is the subject of a patent issued on April 25,
2000. The technology relates to a process that the Company believes could have
applications in the Company's industry and a wide range of other industries. The
covered technology may not be successfully commercialized. In order to
incentivize management to develop and to pursue the commercialization process,
some of the Company's executive officers were granted in the aggregate
approximately a 6.5% equity interest in the venture, which is subject to a five-
year vesting period and non-transferable prior to vesting. In addition, the
Company's venture partner will have the option during the first 18 months of the
venture, to surrender its 5% equity interest in the venture in exchange for $12
million in cash plus an option to acquire 325,000 shares of the Company's Common
Stock, exercisable at $26.03 per share.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
---------------------------------------------------------------------------------------------------------------
Exhibit
Number Description
---------------------------------------------------------------------------------------------------------------
10.01 Employment Agreement between the Company and Thomas B. Barker as amended January
1, 2000
---------------------------------------------------------------------------------------------------------------
10.02 Employment Agreement between the Company and Michael A. Micek as amended January
1, 2000
---------------------------------------------------------------------------------------------------------------
10.03 Employment Agreement between the Company and Nancee R. Berger as amended January
1, 2000
---------------------------------------------------------------------------------------------------------------
10.04 Employment Agreement between the Company and Michael M. Sturgeon as amended
January 1, 2000
---------------------------------------------------------------------------------------------------------------
10.05 Employment Agreement between the Company and John W. Erwin as amended January 1,
2000
---------------------------------------------------------------------------------------------------------------
27.01 Financial Data Schedule
---------------------------------------------------------------------------------------------------------------
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company for the quarter ended
March 31, 2000.
12
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.
WEST TELESERVICES CORPORATION
By: /s/ Thomas B. Barker
------------------------------------
Thomas B. Barker
President and Chief Executive Officer
By: /s/ Michael A. Micek
------------------------------------
Michael A. Micek
Chief Financial Officer,
Executive Vice President-Finance and
Treasurer
Date: May 12, 2000
13