SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2001
AMDOCS LIMITED
Suite 5, Tower Hill House Le Bordage
St. Peter Port, Island of Guernsey, GY1 3QT Channel Islands
Amdocs, Inc.
1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES NO X
--- ---
AMDOCS LIMITED
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
FOR THE QUARTER ENDED DECEMBER 31, 2001
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statement of Changes in Shareholders'
Equity
Consolidated Statements of Cash Flows
Notes to Unaudited Consolidated Financial
Statements
Item 2. Operating and Financial Review and Prospects
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 6-K
SIGNATURES
EXHIBIT INDEX
1
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEETS
(in U.S. dollars, unless otherwise stated)
(in thousands, except per share data)
AS OF
-----------------------------------
DECEMBER 31, SEPTEMBER 30,
--------------- -----------------
2001 2001
--------------- -----------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 452,862 $ 872,998
Short-term interest-bearing investments 526,602 237,069
Accounts receivable, including unbilled of $22,911 and $23,272, less
allowances of $15,031 and $3,219, respectively (*) 423,458 384,851
Deferred income taxes and taxes receivable 41,503 38,916
Prepaid expenses and other current assets 51,546 38,045
--------------- ------------
Total current assets 1,495,971 1,571,879
Equipment, vehicles and leasehold improvements, net 173,847 173,695
Deferred income taxes 25,759 19,722
Goodwill and other intangible assets, net 938,363 788,187
Other noncurrent assets 86,421 70,953
--------------- -----------------
Total assets $ 2,720,361 $ 2,624,436
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 226,675 $ 166,527
Accrued personnel costs 108,568 103,990
Deferred revenue 148,572 140,033
Short-term portion of capital lease obligations 10,180 10,400
Deferred income taxes and taxes payable 99,662 91,026
---------------- -----------------
Total current liabilities 593,657 511,976
Convertible notes and long-term portion of capital lease obligations 522,595 524,779
Deferred income taxes 5,351 7,410
Other noncurrent liabilities 78,891 68,180
---------------- -----------------
Total liabilities 1,200,494 1,112,345
---------------- -----------------
Shareholders' equity:
Preferred Shares - Authorized 25,000 shares;(pound)0.01 par value; 0 shares
issued and outstanding -- --
Ordinary Shares - Authorized 550,000 shares;(pound)0.01 par value; 222,823
and 222,628 outstanding, respectively 3,563 3,560
Additional paid-in capital 1,808,620 1,806,290
Accumulated other comprehensive loss (5,458) (6,382)
Unearned compensation -- (185)
Accumulated deficit (286,858) (291,192)
---------------- -----------------
Total shareholders' equity 1,519,867 1,512,091
---------------- -----------------
Total liabilities and shareholders' equity $ 2,720,361 $ 2,624,436
================ =================
(*) See Note 2.
See accompanying notes
2
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------
2001 2000
---------- ----------
Revenue:
License (*) $ 42,290 $ 38,076
Service (*) 380,351 304,091
---------- ---------
422,641 342,167
---------- ---------
Operating expenses:
Cost of license 980 1,658
Cost of service (*) 230,603 191,788
Research and development 28,557 23,579
Selling, general and administrative (*) 53,779 43,450
Amortization of goodwill and purchased
intangible assets 56,782 54,160
In-process research and development and
nonrecurring charge 30,711 --
---------- ----------
401,412 314,635
---------- ----------
Operating income 21,229 27,532
Interest income and other, net 3,327 5,562
---------- ----------
Income before income taxes 24,556 33,094
Income taxes 20,222 20,518
---------- ----------
Net income $ 4,334 $ 12,576
========== ==========
Basic earnings per share $ 0.02 $ 0.06
========== ==========
Diluted earnings per share $ 0.02 $ 0.06
========== ==========
Basic weighted average number of
shares outstanding 222,696 221,217
========== ==========
Diluted weighted average number of
shares outstanding 225,090 226,361
========== ==========
(*) See Note 2.
See accompanying notes
3
AMDOCS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(in thousands)
ACCUMULATED
ORDINARY SHARES ADDITIONAL OTHER TOTAL
----------------------- PAID-IN COMPREHENSIVE UNEARNED ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL LOSS COMPENSATION DEFICIT EQUITY
---------- --------- ---------- ---------------- -------------- -------------- -------------
BALANCE AS OF
SEPTEMBER 30, 2001 222,628 $3,560 $1,806,290 $ (6,382) $ (185) $ (291,192) $ 1,512,091
Comprehensive income:
Net income -- -- -- -- -- 4,334 4,334
Decrease in unrealized
loss on derivatives,
net of $441 tax
expenses -- -- -- 1,135 -- -- 1,135
Increase in unrealized
loss on cash
equivalents and
short-term interest-
bearing investments,
net of $82 tax benefit -- -- -- (211) -- -- (211)
------------
Comprehensive income 5,258
------------
Employee stock options
exercised 195 3 2,035 -- -- -- 2,038
Tax benefit of stock
options exercised -- -- 253 -- -- -- 253
Stock options granted -- -- 42 -- -- -- 42
Amortization of unearned
compensation -- -- -- -- 185 -- 185
---------- --------- ------------- ---------------- -------------- -------------- ------------
BALANCE AS OF
DECEMBER 31, 2001 222,823 $3,563 $ 1,808,620 $ (5,458) $ -- $ (286,858) $1,519,867
========== ========= ============= ================ ============== ============== ============
As of December 31, 2001 and September 30, 2001, accumulated other comprehensive
loss is comprised of unrealized loss on derivatives, net of tax, of $(6,767) and
$(7,902), respectively, and unrealized gain on cash equivalents and short-term
interest-bearing investments, net of tax, of $1,309 and $1,520, respectively.
See accompanying notes
4
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
2001 2000
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 4,334 $ 12,576
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization 77,587 68,979
In-process research and development 17,400 --
Loss (income) on sale of equipment 88 (16)
Deferred income taxes (5,267) (7,012)
Tax benefit of stock options exercised 253 810
Unrealized income on other comprehensive income 1,536 287
Net changes in operating assets and liabilities, net of
amounts acquired:
Accounts receivable (14,542) (34,125)
Prepaid expenses and other current assets (2,239) (3,890)
Other noncurrent assets (2,925) (43)
Accounts payable and accrued expenses 47,763 1,046
Deferred revenue (22,271) 7,973
Income taxes payable 310 13,884
Other noncurrent liabilities 6,044 2,986
------------- -------------
Net cash provided by operating activities 108,071 63,455
------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of equipment, vehicles and leasehold
improvements 368 475
Payments for purchase of equipment, vehicles, leasehold
improvements and other (13,740) (14,028)
Purchase of short-term interest- bearing investments,
net (289,533) (73,836)
Investment in noncurrent assets (13,543) (1,000)
Cash paid for acquisition (210,900) --
-------------- -------------
Net cash used in investing activities (527,348) (88,389)
-------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from employee stock options exercised 2,038 814
Payments under short-term finance arrangements -- (20,000)
Principal payments on capital lease obligations (2,897) (2,653)
-------------- -------------
Net cash used in financing activities (859) (21,839)
-------------- -------------
Net decrease in cash and cash equivalents (420,136) (46,773)
Cash and cash equivalents at beginning of period 872,998 402,300
-------------- -------------
Cash and cash equivalents at end of period $ 452,862 $ 355,527
============== =============
See accompanying notes
5
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
(in thousands)
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
2001 2000
------------- -------------
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Income taxes, net of refunds $ 22,998 $ 10,878
Interest 5,429 813
NON CASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations of $493 and $5,819 were incurred during the
three months ended December 31, 2001 and 2000, respectively, when the
Company (as defined below) entered into lease agreements for the purchase
of fixed assets.
See accompanying notes
6
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Amdocs Limited ("Amdocs" or the "Company") is a leading provider of
software products and services to the communications industry. The Company
and its subsidiaries operate in one business segment, the provision of
business support systems and related services. Focused on the communications
industry, the Company designs, develops, markets, supports and operates
information system solutions primarily to leading communications companies
throughout the world.
The unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in
the United States ("GAAP"). In the opinion of management, all adjustments
considered necessary for a fair presentation of the unaudited interim
consolidated financial statements have been included herein and are of a
normal recurring nature.
The preparation of financial statements during interim periods requires
management to make numerous estimates and assumptions that impact the
reported amounts of assets, liabilities, revenue and expenses. Estimates and
assumptions are reviewed periodically and the effect of revisions is
reflected in the results of operations of the interim periods in which
changes are determined to be necessary.
The results of operations for the interim periods presented herein are
not necessarily indicative of the results to be expected for the full year.
These statements do not include all information and footnotes necessary for
a complete presentation of financial position, results of operations and
cash flows in conformity with GAAP. These statements should be read in
conjunction with the Company's consolidated financial statements for the
fiscal year ended September 30, 2001 set forth in the Company's Annual
Report on Form 20-F filed with the Securities and Exchange Commission.
2. RELATED PARTY TRANSACTIONS
The following related party balances are included in the balance sheet:
AS OF
------------------------------------
DECEMBER 31, SEPTEMBER 30,
--------------- -----------------
2001 2001
--------------- -----------------
Accounts receivable, including unbilled of $3,278 and
$4,479, respectively $91,433 $104,096
Other noncurrent assets (*) 19,449 7,827
(*) Consists of convertible debentures issued to the Company by Certen
Inc., a company formed by Bell Canada and the Company in January 2001
(the "Convertible Debentures").
7
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company licenses software and provides computer systems integration
and related services to several affiliates of a significant shareholder of
the Company. The following related party revenue is included in the
statements of income for the following periods:
THREE MONTHS ENDED DECEMBER 31,
------------------------------------
2001 2000
--------------- -----------------
License $ 2,930 $ 3,583
Service 95,664 42,667
The following related party expenses are included in the statements of
income for the following periods:
THREE MONTHS ENDED DECEMBER 31,
------------------------------------
2001 2000
-------------- --------------
Operating expenses (1):
Cost of service 461 387
Selling, general and administrative 98 127
Interest income and other, net (2): (123) --
(1) The Company leases office space on a month-to-month basis and
purchases other miscellaneous support services from affiliates
of a certain shareholder.
(2) Represents interest and exchange rate differences on the Convertible
Debentures.
3. COMPREHENSIVE INCOME
Comprehensive income represents the change in shareholders' equity
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity except those resulting
from investments by owners and distributions to owners.
The following table sets forth the reconciliation from net income to
comprehensive income for the following periods:
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2001 2000
--------------- ----------------
Comprehensive income:
Net income $ 4,334 $ 12,576
Other comprehensive income:
Unrealized income on derivative instruments, net of tax 1,135 41
Unrealized income (loss) on short-term interest-bearing
investments, net of tax (211) 160
--------------- ----------------
Comprehensive income $ 5,258 $ 12,777
=============== ================
8
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
4. INCOME TAXES
The provision for income taxes for the following periods consisted of:
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2001 2000
--------------- ----------------
Current $ 25,489 $ 27,530
Deferred (5,267) (7,012)
------------- -------------
$ 20,222 $ 20,518
============= =============
The effective income tax rate from continuing operations varied from
the statutory Guernsey tax rate as follows for the following periods:
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2001 2000
--------------- ----------------
Statutory Guernsey tax rate 20% 20%
Guernsey tax-exempt status (20) (20)
Foreign taxes 28 30
--------------- ----------------
Income tax rate before effect of acquisition-related costs 28 30
Effect of acquisition-related costs 21 32
--------------- ----------------
Effective income tax rate 49% 62%
=============== ================
9
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
As a Guernsey corporation with tax-exempt status, the Company's
overall effective tax rate is attributable solely to foreign taxes and for
fiscal year 2002 is expected to be approximately 28%, compared to our
historical effective tax rate of approximately 30%. In connection with
acquisitions, the Company has incurred non-cash charges related to the
amortization of purchased intangible assets, in-process research and
development and a nonrecurring charge resulting from the closing of one of
the Company's facilities - see Note 7 below. Since a significant portion of
such costs and charges are not deductible for tax purposes, the effective
tax rate is adversely affected during the period such charges are recorded.
For the three-month period ended December 31, 2001, the Company's blended
effective tax rate from continuing operations, calculated based on income
before income taxes, excluding the impact of one-time charges for
in-process research and development and the nonrecurring charge, was 49%,
and for the three-month period ended December 31, 2000 was 62%. If the
impact of the one-time charges had been included, the effective tax rate
for the three-month period ended December 31, 2001 would have been 82%.
Excluding the impact of these items, the Company's overall effective tax
rate would have remained approximately 28% and 30% for the three-month
periods ended December 31, 2001 and 2000, respectively.
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
2001 2000
---------------- ----------------
Numerator:
Net income $ 4,334 $ 12,576
================ ===============
Denominator:
Denominator for basic earnings per share -
weighted average number of shares outstanding (*) 222,696 221,217
Effect of dilutive stock options granted 2,394 5,144
---------------- ---------------
Denominator for dilutive earnings per share -
adjusted weighted average shares and assumed
conversions(*) 225,090 226,361
================ ================
Basic earnings per share $0.02 $0.06
================ ================
Diluted earnings per share $0.02 $0.06
================ ================
(*) The weighted average number of shares outstanding includes
exchangeable shares held by shareholders of Amdocs Canada, Inc
(formerly Solect Technology Group Inc. ("Solect")) pursuant to our
acquisition of Solect in April 2000, which are exchangeable for our
Ordinary Shares on a one-for-one basis.
The effect of the 2% Convertible Notes due June 1, 2008 issued by the
Company in May, 2001 (the "Notes") on diluted earnings per share was
anti-dilutive for the three months ended December 31, 2001, and therefore
was not included in the calculation above.
10
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
6. ACQUISITION
On November 28, 2001, the Company completed its acquisition from
Nortel Networks Corporation of substantially all of the assets of its
Clarify business ("Clarify"), a leading provider of Customer Relationship
Management ("CRM") software to communications companies and other
enterprise sectors. This acquisition positions the Company as a leading
provider of CRM to the communications industry and reinforces its
leadership in delivering a comprehensive portfolio of business software
applications.
The aggregate purchase price for Clarify was $203,750 in cash. The
purchase price is subject to final price adjustments that may result in a
reduction. In addition, transaction costs were $7,150. The acquisition was
accounted for as a business combination using the purchase method of
accounting, as required by Statements of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" ("SFAS 141"). The fair market
value of Clarify's assets and liabilities has been included in the
Company's balance sheet and the results of Clarify's operations are
included in the Company's consolidated statement of income, as of the
closing date of the acquisition.
The Company is in the process of obtaining a final valuation of the
intangible assets acquired in the Clarify transaction. The value of
acquired technology will include both existing technology and in-process
research and development. The valuation of these technologies is being made
by applying the income forecast method, which considers the present value
of cash flows by product lines. Of the $65,600 of acquired identifiable
intangible assets based on a preliminary valuation, $17,400 is being
assigned to in-process research and development and is being written off as
of the closing date of the acquisition, in accordance with FASB No. 4,
"Applicability of FASB Statement No. 2 to Business Combinations Accounted
for by the Purchase Method". This write-off is being included in
"in-process research and development and nonrecurring charge". The fair
value preliminarily assigned to core technology is $13,400 and is being
amortized over two years commencing on November 28, 2001. The fair value
preliminarily assigned to customer backlog is $34,800 and is being
amortized over three years commencing on November 28, 2001.
The excess of the purchase price over the fair value of the net assets
acquired, or goodwill, is $159,917. The amount assigned to goodwill is
subject to certain price adjustments and contingencies. The goodwill is
accounted for under SFAS No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"). In accordance with SFAS 142, goodwill is no longer amortized
and will be subject to impairment tests. Under the transition provisions of
SFAS 142, goodwill for acquisitions prior to July 1, 2001, will continue to
be amortized until full adoption of the standard, which will occur on
October 1, 2002. Therefore, goodwill associated with previous acquisitions
will be amortized throughout this fiscal year.
Set forth below is the unaudited pro forma revenue, operating income,
net income (loss) and earnings (loss) per share as if Clarify had been
acquired as of the beginning of the respective periods, excluding the
write-off of purchased in-process research and development:
THREE MONTHS ENDED DECEMBER 31,
-------------------------------------
2001 2000
---------------- -----------------
Revenue $ 442,641 $ 424,585
Operating income 27,030 11,072
Net income (loss) 11,783 (3,566)
Basic earnings (loss) per share 0.05 (0.02)
Diluted earnings (loss) per share 0.05 (0.02)
11
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. OPERATIONAL EFFICIENCY
As part of a plan to achieve increased operational efficiency and to
reduce costs, the Company consolidated its Stamford, Connecticut data
center into its Champaign, Illinois facility, and is closing the Stamford
facility. As a direct result of this closure, the Company incurred a
nonrecurring charge of $13,311, primarily for the write-off of leasehold
improvements and rent obligations, with the remainder for severance
payments. This nonrecurring charge is included in "in-process research and
development and nonrecurring charge". In addition, as part of its ongoing
efforts to reduce costs, the Company recently has decreased its overall
commitments for employee compensation.
8. SHARE REPURCHASE PROGRAM
On November 6, 2001, the Company announced that its board of directors
had approved a share repurchase program authorizing the repurchase of up to
11,000 Ordinary Shares, or approximately 5% of the Company's outstanding
Ordinary Shares as of that date. Under the program, from time to time over
the twelve-month period commencing November 6, 2001, shares may be
repurchased on the open market, in privately negotiated transactions or
otherwise, in accordance with any applicable laws, and at prices per share
as the Company deems appropriate. If any repurchases are made, the Company
intends to fund the repurchases with available funds. During the three
months ended December 31, 2001, the Company made no repurchases.
12
ITEM 2. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
FORWARD LOOKING STATEMENTS
Some of the information in this section contains forward looking statements
(within the meaning of the Private Securities Litigation Reform Act of 1995)
that involve substantial risks and uncertainties. You can identify these
statements by forward looking words such as "expect", "anticipate", "believe",
"seek", "estimate", "project", "forecast", "continue", "potential" and similar
words. Statements that we make in this section that are not statements of
historical fact also may be forward looking statements. Forward looking
statements are not guarantees of future performance, and involve risks,
uncertainties and assumptions that may cause our actual results to differ
materially from the expectations we describe in our forward looking statements.
There may be events in the future that we are not accurately able to predict, or
over which we have no control. You should not place undue reliance on forward
looking statements. We do not promise to notify you if we learn that our
assumptions or projections are wrong for any reason. We disclaim any obligation
to update our forward looking statements.
INTRODUCTION
In this section, we discuss the general financial condition and the results
of operations for Amdocs and its subsidiaries including:
- what factors affect our business,
- what our revenue and costs were in the three months ended December 31,
2001 and 2000,
- why those revenue and costs were different from period to period,
- the sources of our revenue,
- how all of this affects our overall financial condition,
- what our expenditures were in the three months ended December 31, 2001
and 2000, and
- the sources of our cash to pay for future capital expenditures.
In this section, we also analyze and explain the three months to three
months changes in the specific line items in our consolidated statements of
income. This section should be read in conjunction with our consolidated
financial statements.
OVERVIEW OF BUSINESS AND TREND INFORMATION
We are a leading provider of software products and services to the
communications industry. Our Business Support Systems ("BSS") consist primarily
of Customer Care and Billing, CRM and Order Management Systems (collectively,
"CC&B Systems"). Our market focus is the communications industry. Our products
are designed to meet the mission-critical needs of leading communications
service providers. Our systems support a wide range of communications services,
including wireline, wireless, broadband, electronic and mobile commerce and
Internet Protocol ("IP") services. We also support companies that offer multiple
service packages, commonly referred to as convergent services. In addition, we
provide a full range of Directory Sales and Publishing Systems ("Directory
Systems") to publishers of both traditional printed yellow page and white page
directories and electronic Internet directories. Due to the complexity of BSS
projects and the expertise required for system support, we also provide
extensive customization, implementation, system integration, ongoing support,
system enhancement, maintenance and outsourcing services.
13
In the future, we may consider, as part of our strategy, acquisitions and
other initiatives in order to offer new products or services or otherwise
enhance our market position or strategic strengths. See discussion below --
"Acquisition".
We derive our revenue principally from:
- the initial sale of our products and related services, including
license fees and customization, implementation and integration
services, and
- recurring revenue from ongoing support, maintenance, outsourcing
and other related services provided to our customers and, to a
lesser degree, from incremental license fees resulting from
increases in the number of a customer's subscribers.
We usually sell our software as part of an overall solution offered to a
customer, in which significant customization and modification to our software
generally is required. As a result, revenue generally is recognized over the
course of these long-term projects. Initial license revenue is recognized as
work is performed, using the percentage of completion method of accounting.
Subsequent license fee revenue is recognized upon completion of the specified
conditions in each contract. Service revenue that involves significant ongoing
obligations, including fees for customization, implementation and modification,
is also recognized as work is performed, under the percentage of completion
method of accounting. Revenue from software solutions that do not require
significant customization and modification is recognized upon delivery. In
outsourcing contracts, revenue from the operation and maintenance of customers'
billing systems is recognized in the period in which the bills are produced.
Revenue from ongoing support services is recognized as work is performed.
Revenue from third-party hardware and software sales is recognized upon
delivery. Maintenance revenue is recognized ratably over the term of the
maintenance agreement. As a result of a substantial portion of our revenue being
subject to the percentage of completion accounting method, the size and timing
of customer projects and our progress in completing such projects may
significantly affect our annual and quarterly operating results.
Our business is subject to the effects of general global economic
conditions and, in particular, market conditions in the communications industry.
Recently, these conditions have reduced the high growth that the communications
industry had experienced over the past several years. As a result, the market
value, financial results and prospects, and capital spending levels of many
communications companies have declined or degraded.
During 2001, our sales cycle lengthened and currently ranges between six to
twelve months for the majority of our new sales. We believe that the current
length of our sales cycle and the impact of the current general economic
downturn on the communications industry may result in slower revenue growth
rates for us than have been achieved in recent years.
License and service fees from the sale of CC&B Systems amounted to $380.5
million and $306.7 million in the three months ended December 31, 2001 and 2000,
respectively, representing 90.0% and 89.6%, respectively, of our revenue for
such periods.
We believe that we are a leading global provider of CC&B Systems. We
provide a broad set of CC&B Systems, with proven functionality and scalability,
accompanied by a comprehensive range of support services.
We believe that the demand for our CC&B Systems will continue to increase
due to, among other key factors:
- the growth and deregulation of the communications market,
14
- the global penetration and expansion of communications services,
- the proliferation of new communications products and services,
especially IP and data services,
- rapid technological changes, such as the introduction of wireless
Internet services via GPRS (General Packet Radio Services) and UMTS
(Universal Mobile Telecommunications System) technology,
- intensifying competition among communications carriers, and
- a shift from in-house management to vendor solutions and outsourcing.
We also believe that a key driver of demand is the continuing trend for
communications service providers to offer to their subscribers multiple service
packages, commonly referred to as convergent services (combinations of voice,
broadband, electronic and mobile commerce and IP services).
In addition, we believe that our CC&B solutions enable communications
providers to improve productivity and reduce costs.
License and service fee revenue from the sale of Directory Systems totaled
$42.1 million and $35.5 million in the three months ended December 31, 2001 and
2000, respectively, accounting for 10.0% and 10.4%, respectively, of our revenue
for such periods.
We believe that we are a leading provider of Directory Systems in most of
the markets that we serve.
We expect that the demand for our Directory Systems will remain relatively
stable in future periods.
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
Our research and development activities involve the development of new
software modules and product offerings in response to an identified market
demand, either in conjunction with a customer project or as part of our internal
product development programs. We also expend additional amounts on applied
research and software development activities to keep abreast of new technologies
in the communications and IP markets. Research and development expenditures
amounted to $28.6 million and $23.6 million in the three months ended December
31, 2001 and 2000, respectively, representing 6.8% and 6.9%, respectively, of
our revenue in these periods. In the next several years we intend to continue to
make substantial investments in our research and development activities.
We regard significant portions of our software products and systems as
proprietary and rely on a combination of statutory and common law copyright,
trademark and trade secret laws, customer licensing agreements, employee and
third-party nondisclosure agreements and other methods to protect our
proprietary rights. We generally enter into confidentiality agreements with our
employees, consultants, customers and potential customers and limit access to,
and distribution of, our proprietary information. We believe that the
sophistication and complexity of our BSS offerings make it very difficult to
copy such information or to subject such information to unauthorized use. We
maintain sole ownership of our software products.
ACQUISITION
On November 28, 2001, we completed our acquisition from Nortel Networks
Corporation of substantially all of the assets of Clarify, a leading provider of
CRM software to communications companies and other enterprise sectors. This
acquisition positions us as a leading provider of CRM to the communications
industry and reinforces our leadership in delivering a comprehensive portfolio
of business software applications.
15
The aggregate purchase price for Clarify was $203.8 million in cash. The
purchase price is subject to final price adjustments that may result in a
reduction. In addition, transaction costs were $7.2 million. The acquisition was
accounted for as a business combination using the purchase method of accounting,
as required by SFAS 141. The fair market value of Clarify's assets and
liabilities has been included in our balance sheet and the results of Clarify's
operations are included in our consolidated statement of income, as of the
closing date of the acquisition.
We are in the process of obtaining a final valuation of the intangible
assets acquired in the Clarify transaction. The value of acquired technology
will include both existing technology and in-process research and development.
The valuation of these technologies is being made by applying the income
forecast method, which considers the present value of cash flows by product
lines. Of the $65.6 million of acquired identifiable intangible assets based on
a preliminary valuation, $17.4 million is being assigned to in-process research
and development and is being written off as of the closing date of the
acquisition, in accordance with FASB No. 4, "Applicability of FASB Statement No.
2 to Business Combinations Accounted for by the Purchase Method". This write-off
is being included in "in-process research and development and nonrecurring
charge". The fair value preliminarily assigned to core technology is $13.4
million and is being amortized over two years commencing on November 28, 2001.
The fair value preliminarily assigned to customer backlog is $34.8 million and
is being amortized over three years commencing on November 28, 2001.
The excess of the purchase price over the fair value of the net assets
acquired, or goodwill, is $159.9 million. The amount assigned to goodwill is
subject to certain price adjustments and contingencies. The goodwill is
accounted for under SFAS 142. In accordance with SFAS 142, goodwill is no
longer amortized and will be subject to impairment tests. Under the transition
provisions of SFAS 142, goodwill for acquisitions prior to July 1, 2001, will
continue to be amortized until full adoption of the standard, which will occur
on October 1, 2002. Therefore, goodwill associated with previous acquisitions
will be amortized throughout this fiscal year.
OPERATIONAL EFFICIENCY
As part of a plan to achieve increased operational efficiency and to reduce
costs, we consolidated our Stamford, Connecticut data center into our Champaign,
Illinois facility, and we are closing the Stamford facility. As a direct result
of this closure, we incurred a nonrecurring charge of $13.3 million, primarily
for the write-off of leasehold improvements and rent obligations, with the
remainder for severance payments. This nonrecurring charge is included in
"in-process research and development and nonrecurring charge". In addition, as
part of our ongoing efforts to reduce costs, we recently have decreased our
overall commitments for employee compensation.
SHARE REPURCHASE PROGRAM
On November 6, 2001, we announced that our board of directors had approved
a share repurchase program authorizing the repurchase of up to 11.0 million of
our ordinary shares, or approximately 5% of our outstanding ordinary shares as
of that date. Under the program, from time to time over the twelve-month period
commencing November 6, 2001, shares may be repurchased on the open market, in
privately negotiated transactions or otherwise, in accordance with any
applicable laws, and at prices per share as we deem appropriate. If any
repurchases are made, we intend to fund the repurchases with available funds.
During the three months ended December 31, 2001 we made no repurchases.
16
RESULTS OF OPERATIONS
The following table sets forth for the three months ended December 31, 2001
and 2000 certain items in our consolidated statements of income reflected as a
percentage of total revenue:
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2001 2000 2001 2000
---- ---- ---- ----
PRO FORMA (*) AS REPORTED
------------- -----------
Revenue:
License 10.0% 11.1% 10.0% 11.1%
Service 90.0 88.9 90.0 88.9
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Cost of license 0.2 0.5 0.2 0.5
Cost of service 54.6 56.0 54.6 56.0
Research and development 6.8 6.9 6.8 6.9
Selling, general and
administrative 12.7 12.7 12.7 12.7
Amortization of goodwill and
purchased intangible assets -- -- 13.4 15.8
In-process research and
development and nonrecurring
charge -- -- 7.3 --
----- ----- ----- -----
74.3 76.1 95.0 91.9
----- ----- ----- -----
Operating income 25.7 23.9 5.0 8.1
Interest income and other, net 0.8 1.6 0.8 1.6
----- ----- ----- -----
Income before income taxes 26.5 25.5 5.8 9.7
Income taxes 7.4 7.7 4.8 6.0
----- ----- ----- -----
Net income 19.1% 17.8% 1.0% 3.7%
====== ===== ===== =====
(*) The pro forma financial information regarding our operating results is
provided as a complement to results reported in accordance with GAAP.
The pro forma financial information excludes (i) amortization of
goodwill and purchased intangible assets and all related tax effects
attributable to acquisitions and (ii) for the three months ended
December 31, 2001 only, purchased in-process research and development
attributable to the acquisition of Clarify and a nonrecurring charge
related to the consolidation of data centers and the resulting closure
of our Stamford, Connecticut facility, and all related tax effects.
17
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
REVENUE. Revenue for the three months ended December 31, 2001 was $422.6
million, an increase of $80.5 million, or 23.5%, over the three months ended
December 31, 2000. The increase in revenue was due to the continued growth in
the demand for our CC&B Systems solutions in our traditional target markets of
high-end and mid-tier communications companies. License revenue increased from
$38.1 million in the three months ended December 31, 2000 to $42.3 million
during the three months ended December 31, 2001, an increase of 11.1%, and
service revenue increased 25.1% from $304.1 million in the three months ended
December 31, 2000 to $380.4 million in the three months ended December 31, 2001.
Total CC&B Systems revenue for the three months ended December 31, 2001 was
$380.5 million, an increase of $73.8 million, or 24.1%, over the three months
ended December 31, 2000. In the three months ended December 31, 2001, the demand
for our CC&B Systems was primarily driven by the need for communications
companies to upgrade their customer care and billing, CRM and order management
systems in response to competition in the subscriber markets, the need to offer
convergent and IP services, and the need to improve productivity and operational
efficiency.
Revenue from Directory Systems was $42.1 million for the three months ended
December 31, 2001, an increase of $6.6 million, or 18.6%, over the three months
ended December 31, 2000. The increase is attributable primarily to extensions of
agreements with and additional services rendered to existing customers.
In the three months ended December 31, 2001, revenue from customers in
North America, Europe and the rest of the world accounted for 61.3%, 28.3% and
10.4%, respectively, compared to 54.0%, 36.4% and 9.6%, respectively, for the
three months ended December 31, 2000. The growth in North America was
attributable primarily to revenue we gained from forming or expanding
relationships with new or existing customers in the three months ended December
31, 2001.
COST OF LICENSE. Cost of license for the three months ended December 31,
2001 was $1.0 million, a decrease of $0.7 million, or 40.9%, over the cost of
license for the three months ended December 31, 2000. Cost of license includes
amortization of purchased computer software and intellectual property rights.
COST OF SERVICE. Cost of service for the three months ended December 31,
2001 was $230.6 million, an increase of $38.8 million, or 20.2%, over the cost
of service of $191.8 million for the three months ended December 31, 2000. As a
percentage of revenue, cost of service decreased to 54.6% in the three months
ended December 31, 2001 from 56.0% in the three months ended December 31, 2000.
The decrease in cost of service as a percentage of revenue is primarily due to
increases in our operational efficiency in the three months ended December 31,
2001.
RESEARCH AND DEVELOPMENT. Research and development expense was primarily
comprised of compensation expense attributed to research and development
activities, either in conjunction with customer projects or as part of our
internal product development program. In the three months ended December 31,
2001, research and development expense was $28.6 million, or 6.8% of revenue,
compared with $23.6 million, or 6.9% of revenue, in the three months ended
December 31, 2000. The increase represents ongoing expenditures primarily for
CC&B Systems.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense was primarily comprised of compensation expense and increased by 23.8%
to $53.8 million, or 12.7% of revenue, in the three months ended December 31,
2001 from $43.5 million, or 12.7% of revenue, in the three months ended December
31, 2000. The increase is attributable to the increase in our revenue for the
three months ended December 31, 2001.
AMORTIZATION OF GOODWILL AND PURCHASED INTANGIBLE ASSETS. Amortization of
goodwill and purchased intangible assets for the three months ended December 31,
2001 was $56.8 million, compared to $54.2 million in the three months ended
December 31, 2000.
18
IN-PROCESS RESEARCH AND DEVELOPMENT AND NONRECURRING CHARGE. In-process
research and development and nonrecurring charge in the three months ended
December 31, 2001 consisted of a one-time charge of $17.4 million related to the
Clarify transaction for write-off of purchased in-process research and
development, and a nonrecurring charge of $13.3 million related to the
consolidation of data centers and the resulting closure of our Stamford,
Connecticut facility.
OPERATING INCOME. Operating income in the three months ended December 31,
2001, was $21.2 million, compared to $27.5 million in the three months ended
December 31, 2000, a decrease of 22.9%, due to Clarify acquisition-related
charges and the nonrecurring charge resulting from the Stamford facility
closing. Pro forma operating income for the three months ended December 31,
2001, excluding acquisition-related charges and the nonrecurring charge, was
$108.7 million, or 25.7% of revenue, compared to $81.7 million, or 23.9% of
revenue, for the three months ended December 31, 2000, an increase of 33.1%.
INTEREST INCOME AND OTHER, NET. In the three months ended December 31,
2001, interest income and other, net, was $3.3 million, a decrease of $2.2
million over the three months ended December 31, 2000. The decrease in interest
income and other, net, is primarily attributable to the overall interest rate
declines partially offset by increase in our cash equivalents and short-term
interest-bearing investments, net of convertible notes.
INCOME TAXES. Income taxes in the three months ended December 31, 2001 were
$20.2 million on income before income taxes of $24.6 million. Our effective tax
rate from continuing operations (calculated based on the income taxes out of the
income before income taxes, excluding a one-time charge for write-off of
purchased in-process research and development and the nonrecurring charge
resulting from the Stamford facility closing) in the three months ended December
31, 2001 was 49%, resulting from the non-cash amortization of goodwill related
to the acquisitions, much of which is not tax deductible. The pro forma
effective tax rate for the three months ended December 31, 2001, excluding the
acquisition-related charges, was 28%. In the three months ended December 31,
2000, income taxes were $20.5 million on income before taxes of $33.1 million.
The pro forma effective tax rate for the three months ended December 31, 2000,
excluding acquisition-related charges and the nonrecurring charge resulting from
the Stamford facility closing, was 30%. See discussion below -- "Effective Tax
Rate".
NET INCOME. Net income was $4.3 million in the three months ended December
31, 2001, compared to $12.6 million in the three months ended December 31, 2000.
Net income was 1.0% of revenue for the three months ended December 31, 2001,
compared to 3.7% for the three months ended December 31, 2000. Pro forma net
income in the three months ended December 31, 2001, excluding the
acquisition-related charges and the nonrecurring charge resulting from the
Stamford facility closing, increased by 32.1% over the three months ended
December 31, 2000, reaching $80.7 million, representing 19.1% of revenue.
DILUTED EARNINGS PER SHARE. Diluted earnings per share were $0.02 for the
three months ended December 31, 2001, compared to $0.06 in the three months
ended December 31, 2000. Pro forma diluted earnings per share in the three
months ended December 31, 2001, excluding the acquisition-related charges and
the nonrecurring charge resulting from the Stamford facility closing, increased
by 33.3% from the three months ended December 31, 2000, reaching $0.36 per
diluted share.
19
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term interest-bearing investments totaled
$979.5 million as of December 31, 2001, compared to $1,110.1 million as of
September 30, 2001. The decrease is attributable primarily to the acquisition of
Clarify and is partially offset by cash flows from operations. Net cash provided
by operating activities amounted to $108.1 million and $63.5 million for the
three months ended December 31, 2001 and 2000, respectively. The increase in
cash flows from operations was due to increased net income before depreciation,
amortization, and a one-time charge for write-off of in-process research and
development, and a decrease in working capital. We currently intend to retain
our future operating cash flows to support the further expansion of our
business.
As of December 31, 2001, we had positive working capital of $902.3 million,
compared to positive working capital of $1,059.9 million as of September 30,
2001. The decrease is attributable primarily to the acquisition of Clarify. We
believe that current cash balances, cash generated from operations and our
current lines of credit will provide sufficient resources to meet our needs in
the near future.
All of the Notes were outstanding as of December 31, 2001, representing an
aggregate principal amount of $500.0 million plus accumulated interest.
As of December 31, 2001, we had short-term general revolving lines of
credit totaling $40.0 million, none of which were outstanding. In addition, as
of December 31, 2001 we had credit facilities totaling $40.8 million limited
for the use of letters of credit and bank guaranties from various banks. We had
used approximately $27.2 million from these credit facilities and from
compensating cash balances to support outstanding letters of credit and bank
guarantees as of December 31, 2001.
We had outstanding long-term obligations of $32.8 million in connection
with leasing arrangements as of December 31, 2001.
Currently, our capital expenditures consist primarily of computer equipment
and vehicles and are funded principally by operating cash flows and capital
leasing arrangements. We do not anticipate any change to this policy in the
foreseeable future.
NET DEFERRED TAX ASSETS
As of December 31, 2001, deferred tax assets of $31.8 million, derived
primarily from carry-forward net operating losses relating to losses incurred by
Solect prior to our acquisition of the company in April 2000, were offset by
valuation allowances due to the uncertainty of realizing any tax benefit for
such losses. When realization of the tax benefits associated with such net
operating losses is deemed probable, the valuation allowance will be released,
resulting primarily in an offsetting reduction of the goodwill recorded in the
Solect acquisition.
EFFECTIVE TAX RATE
Our overall pro forma effective tax rate for fiscal year 2002 is expected
to be approximately 28% due to the corporate income tax rates in the various
countries in which we operate and the relative magnitude of our business in
those countries, compared to our historical pro forma effective tax rate of
approximately 30%. Our consolidated effective tax rate from continuing
operations (based on the ratio between income taxes and income before income
20
taxes, excluding one-time charges for write-offs of purchased in-process
research and development and the nonrecurring charge resulting from the Stamford
facility closing) for the three months ended December 31, 2001 was 49%, compared
to 62% in the three months ended December 31, 2000. This high effective tax rate
was attributable to amortization of goodwill related to our acquisitions, much
of which is not tax deductible. If the impact of the one-time charges had been
included, the effective tax rate for the three-month period ended December 31,
2001 would have been 82%.
CURRENCY FLUCTUATIONS
Approximately 90% of our revenue is in U.S. dollars or linked to the dollar
and therefore the dollar is our functional currency. Approximately 60% of our
operating expenses (excluding amortization for goodwill and intangible assets,
in-process research and development and nonrecurring charge) are paid in dollars
or linked to dollars. Other significant currencies in which we receive revenue
or pay expenses are Australian dollars, British pounds, Canadian dollars, the
European Monetary Union currency ("euro") and Israeli shekels. Historically, the
effect of fluctuations in currency exchange rates has had a minimal impact on
our operations. As we expand our operations outside of the United States, our
exposure to fluctuations in currency exchange rates could increase. In managing
our foreign exchange risk, we enter from time to time into various foreign
exchange contracts. As of December 31, 2001, we had hedged significant exposures
in currencies other than the dollar.
21
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K.
(a) Exhibits
EXHIBIT NO DESCRIPTION
- ---------- -----------
99.1 Amdocs Limited Press Release dated January 22, 2002.
(b) Reports on Form 6-K
The Company filed the following reports on Form 6-K during the three
months ended December 31, 2001:
(1) Form 6-K dated October 10, 2001.
(2) Form 6-K dated December 12, 2001.
(3) Form 6-K dated December 27, 2001.
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.
AMDOCS LIMITED
/s/ Thomas G. O'Brien
---------------------
Thomas G. O'Brien
Treasurer and Secretary
Authorized U.S. Representative
Date: January 30, 2002
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
- ---------- -----------
99.1 Amdocs Limited Press Release dated January 22, 2002.
EXHIBIT 99.1
AMDOCS LIMITED FIRST QUARTER PRO FORMA EPS GROWS 33.3%, REACHING $0.36
FIRST QUARTER REVENUE INCREASES 23.5% TO $422.6 MILLION
ST. LOUIS, MO -- JANUARY 22, 2002 -- Amdocs Limited (NYSE: DOX) today reported
that for the first quarter ended December 31, 2001, revenue reached $422.6
million, an increase of 23.5% over last year's first quarter. Excluding
acquisition-related costs and a nonrecurring charge in the current quarter, net
income increased 32.1% to $80.7 million, while earnings per share increased
33.3% to $0.36 per diluted share, compared to net income of $61.1 million, or
$0.27 per diluted share, in the first quarter of fiscal 2001. The Company's
as-reported net income, which includes acquisition-related charges for write-off
of in-process research and development, amortization of goodwill and purchased
intangible assets, a nonrecurring charge in the current quarter and related tax
effects, was $4.3 million, or $0.02 per diluted share, compared to a net income
of $12.6 million, or $0.06 per diluted share, in the first quarter of fiscal
2001.
Avi Naor, Chief Executive Officer of Amdocs Management Limited, noted, "We had
excellent new business wins this quarter which confirm that we are the
undisputed leader in our market. We continued to show growth and achieved our
business and financial objectives. We had very good sales results globally, in
both the wireline and mobile sectors, and for both CRM and billing systems."
Naor continued, "This was a significant quarter for both new business wins and
major implementations. We had major wins across lines of business and
geographies including such Tier One customers as Telefonica de Espana with 16
million subscribers, where we're providing convergent voice and data services
including ADSL. We had successful implementations for such major customers as BT
with 21 million customers in the United Kingdom, Nextel with 8 million
subscribers and Bell Nexxia, which is part of our overall modernization at Bell
Canada. Amdocs is the only company whose business offering combines
market-leading products and twenty years of experience in successful solution
implementations."
"During the first quarter, we further strengthened our leadership of the CRM and
billing market for communications," Naor added. "We completed our acquisition of
Clarify, which establishes Amdocs as the world's number one provider of CRM to
communications service providers. This acquisition is already creating momentum,
with some important CRM sales to major operators during the quarter. We further
expanded our global CRM capabilities in the quarter through our relationships
with NEC to serve the CRM market in Japan. Our new Amdocs Enabler product for
next generation services, announced in October, has also generated strong sales
momentum with new and existing customers. These customers have cited Enabler's
market-leading technology and scalability as the key factors in their decision.
Pre-integrated and production ready, Enabler employs open API's and is designed
for quick, cost-effective deployment."
Naor concluded, "Despite the overall economic climate, demand for Amdocs
solutions is strong. We believe that our financial stability, broad portfolio
and unparalleled reliability are key factors for leading operators, especially
in the current environment, as they choose long-term partners for their
mission-critical system needs. The scale and focus of our R&D program also
assure customers that Amdocs systems will put them
in front, and keep them in front. As a result of this demand, we have a strong
diverse pipeline. With our high visibility and proven business model, based on
the solutions approach, long-term customer relationships and recurring revenue
flows, we are very confident regarding our business prospects in the coming
quarters."
As-reported operating income for the first quarter included a one-time charge of
$17.4 million for write-off of in-process research and development related to
the acquisition of Clarify, which closed during the quarter. Following a
successful implementation for Nextel Communications, and as part of a plan to
achieve increased operational efficiency and reduce costs, Amdocs consolidated
its Stamford, Connecticut data center into its Champaign, Illinois facility and
recorded a nonrecurring charge of $13.3 million largely for facilities and
severance charges.
Amdocs is the world's leading provider of CRM, billing and order management
systems for the communications industry. Amdocs has an unparalleled success
record in project delivery of its mission-critical products. With human
resources of over 9,050 information systems professionals, Amdocs supports a
global customer base. For more information visit our Web site at www.amdocs.com.
Amdocs will host a conference call on January 22 at 5 p.m. Eastern Standard Time
to discuss the Company's first quarter results. The call will be carried live on
the Internet via www.vcall.com and the Amdocs website, www.amdocs.com.
This press release may contain forward-looking statements as defined under the
Securities Act of 1933, as amended, including statements about Amdocs' growth
and business results in future quarters. Although we believe the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, we can give no assurance that our expectations will be obtained or
that any deviations will not be material. Such statements involve risks and
uncertainties that may cause future results to differ from those anticipated.
These risks include, but are not limited to, the effects of general economic
conditions, Amdocs' ability to grow in the mobile, wireline and IP business
segments, adverse effects of market competition, rapid technological shifts that
may render the Company's products and services obsolete, potential loss of a
major customer, our ability to develop long-term relationships with our
customers, and risks associated with operating businesses in the international
market. These and other risks are discussed at greater length in the Company's
filings with the Securities and Exchange Commission, including in our Form 20-F
filed on December 27, 2001.
CONTACT:
Thomas G. O'Brien
Treasurer and Director of Investor Relations
Amdocs Limited
314/212-8328
E-mail: dox_info@amdocs.com
AMDOCS LIMITED
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
EXCLUDING PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT,
AMORTIZATION OF GOODWILL AND PURCHASED INTANGIBLE ASSETS, NONRECURRING CHARGE
AND RELATED TAX EFFECTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 30,
DECEMBER 31,
---------------------------------
2001 (1) 2000 (1)
-------------- ---------------
Revenue:
License $ 42,290 $ 38,076
Service 380,351 304,091
-------------- ---------------
422,641 342,167
Operating expenses:
Cost of license 980 1,658
Cost of service 230,603 191,788
Research and development 28,557 23,579
Selling, general and administrative 53,779 43,450
-------------- ---------------
313,919 260,475
-------------- ---------------
Operating income 108,722 81,692
Interest income and other, net 3,327 5,562
-------------- ---------------
Income before income taxes 112,049 87,254
Income taxes 31,374 26,176
-------------- ---------------
Net income $ 80,675 $ 61,078
============== ===============
Diluted earnings per share $ 0.36 $ 0.27
============== ===============
Diluted weighted average number of shares 225,090 226,361
outstanding ============== ===============
(1) Excludes $56,782 and $54,160 for amortization of goodwill and purchased
intangible assets, $17,400 and $0 for write-off of purchased in-process
research and development related to the Clarify acquisition, $13,311 and $0
of a nonrecurring charge related to the consolidation of data centers and
the resulting closure of our Stamford, Connecticut facility, and tax
effects related to the above of $(11,152) and $(5,658) for the three months
ended December 31, 2001 and 2000, respectively. Including the above items,
income before income taxes was $24,556 and $33,094, and diluted earnings
per share were $0.02 and $0.06 for the three months ended December 31, 2001
and 2000, respectively.
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 30,
DECEMBER 31,
----------------------------------
2001 2000
--------------- ---------------
Revenue:
License $ 42,290 $ 38,076
Service 380,351 304,091
--------------- ---------------
422,641 342,167
Operating expenses:
Cost of license 980 1,658
Cost of service 230,603 191,788
Research and development 28,557 23,579
Selling, general and administrative 53,779 43,450
Amortization of goodwill and purchased
intangible assets 56,782 54,160
In-process research and development
and nonrecurring charge 30,711 -
--------------- ---------------
401,412 314,635
--------------- ---------------
Operating income 21,229 27,532
Interest income and other, net 3,327 5,562
--------------- ---------------
Income before income taxes 24,556 33,094
Income taxes 20,222 20,518
--------------- ---------------
Net income $ 4,334 $ 12,576
=============== ===============
Basic earnings per share $ 0.02 $ 0.06
=============== ===============
Diluted earnings per share $ 0.02 $ 0.06
=============== ===============
Basic weighted average number of shares
outstanding 222,696 221,217
=============== ===============
Diluted weighted average number of shares
outstanding 225,090 226,361
=============== ===============
AMDOCS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
AS OF
------------------- -- -------------------
DECEMBER 31, SEPTEMBER 30,
2001 2001
------------------- -------------------
(UNAUDITED)
ASSETS
Current assets
Cash, cash equivalents and short-term interest-bearing
investments $ 979,464 $ 1,110,067
Accounts receivable, including unbilled of $22,911 and $23,272,
respectively 423,458 384,851
Deferred income taxes and taxes receivable 41,503 38,916
Prepaid expenses and other current assets 51,546 38,045
------------------- --------------------
Total current assets 1,495,971 1,571,879
Equipment, vehicles and leasehold improvements, net 173,847 173,695
Goodwill and other intangible assets, net 938,363 788,187
Other noncurrent assets 112,180 90,675
------------------- -------------------
Total assets $ 2,720,361 $ 2,624,436
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accruals $ 335,243 $ 270,517
Short-term portion of capital lease obligations 10,180 10,400
Deferred revenue 148,572 140,033
Deferred income taxes and income taxes payable 99,662 91,026
------------------- -------------------
Total current liabilities 593,657 511,976
Convertible notes and other noncurrent liabilities 606,837 600,369
Shareholders' equity 1,519,867 1,512,091
------------------- -------------------
Total liabilities and shareholders' equity $ 2,720,361 $ 2,624,436
=================== ===================