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UNITED STATES 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 March 31, 2007
Commission File Number 1-14840
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 if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule
101(b)(1):
----
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule
101(b)(7):
----
Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
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AMDOCS LIMITED
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
FOR THE QUARTER ENDED MARCH 31, 2007
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 1. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities
Item 2. Reports on Form 6-K
SIGNATURES
This report on Form 6-K shall be incorporated by reference into the Registration
Statements on Form F-3 (File Nos. 333-114079 and 333-114344) and any other
Registration Statement filed by the Registrant that by its terms automatically
incorporates the Registrant's filings and submissions with the SEC under
Sections 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934.
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEETS
(dollar and share amounts in thousands, except per share data)
AS OF
------------------------------
MARCH 31, SEPTEMBER 30,
2007 2006
----------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 621,230 $ 607,187
Short-term interest-bearing investments 418,205 372,194
Accounts receivable, net 476,224 425,805
Deferred income taxes and taxes receivable 113,650 136,044
Prepaid expenses and other current assets 99,259 97,476
----------- -------------
Total current assets 1,728,568 1,638,706
Equipment, vehicles and leasehold improvements, net 242,784 220,290
Deferred income taxes 179,703 133,690
Goodwill 1,495,487 1,461,606
Intangible assets, net 342,896 347,716
Other noncurrent assets 172,579 160,820
----------- -------------
Total assets $ 4,162,017 $ 3,962,828
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 178,046 $ 148,398
Accrued expenses and other current liabilities 212,492 270,268
Accrued personnel costs 165,035 178,441
Short-term portion of financing arrangements 2,003 1,963
Deferred revenue 264,663 253,376
Deferred income taxes and taxes payable 176,368 179,241
----------- -------------
Total current liabilities 998,607 1,031,687
Convertible notes 450,000 450,000
Deferred income taxes 130,607 129,339
Noncurrent liabilities and other 187,217 197,637
----------- -------------
Total liabilities 1,766,431 1,808,663
----------- -------------
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; 235,687 and
233,932 issued and 208,548 and 206,793 outstanding, respectively 3,797 3,763
Additional paid-in capital 2,094,269 2,035,309
Treasury stock, at cost - 27,139 Ordinary Shares (602,392) (602,392)
Accumulated other comprehensive income 4,637 2,723
Retained earnings 895,275 714,762
----------- -------------
Total shareholders' equity 2,395,586 2,154,165
----------- -------------
Total liabilities and shareholders' equity $ 4,162,017 $ 3,962,828
=========== =============
The accompanying notes are an integral part of these consolidated
financial statements.
2
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollar and share amounts in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -----------------------------
2007 2006 2007 2006
---------- ---------- ------------ ------------
Revenue:
License $ 37,526 $ 30,291 $ 69,270 $ 61,952
Service 668,835 570,838 1,328,123 1,126,205
---------- ---------- ------------ ------------
706,361 601,129 1,397,393 1,188,157
---------- ---------- ------------ ------------
Operating expenses:
Cost of license 1,016 916 2,085 1,978
Cost of service 446,860 388,333 881,981 762,384
Research and development 57,734 41,823 118,202 84,937
Selling, general and administrative 91,280 73,799 180,450 152,349
Amortization of purchased intangible
assets 18,912 7,469 36,610 15,041
Restructuring charges, in-process
research and development and other 6,761 - 6,761 -
---------- ---------- ------------ ------------
622,563 512,340 1,226,089 1,016,689
---------- ---------- ------------ ------------
Operating income 83,798 88,789 171,304 171,468
Interest income and other, net 10,899 10,307 22,638 18,721
---------- ---------- ------------ ------------
Income before income taxes 94,697 99,096 193,942 190,189
Income taxes 7,526 17,334 13,429 33,093
---------- ---------- ------------ ------------
Net income $ 87,171 $ 81,762 $ 180,513 $ 157,096
========== ========== ============ ============
Basic earnings per share $ 0.42 $ 0.40 $ 0.87 $ 0.78
========== ========== ============ ============
Diluted earnings per share $ 0.40 $ 0.38 $ 0.82 $ 0.74
========== ========== ============ ============
Basic weighted average number of shares
outstanding 207,293 202,515 206,867 201,509
========== ========== ============ ============
Diluted weighted average number of shares
outstanding 222,499 217,919 222,608 216,394
========== ========== ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
AMDOCS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(dollar and share amounts in thousands)
Accumulated
Ordinary Shares Additional Other Total
------------------ Paid-in Treasury Comprehensive Retained Shareholders'
Shares Amount Capital Stock Income Earnings Equity
-------- -------- ----------- ----------- -------------------------- --------------
BALANCE AS OF SEPTEMBER
30, 2006 206,793 $ 3,763 $ 2,035,309 $ (602,392) $ 2,723 $ 714,762 $ 2,154,165
Comprehensive income:
Net income - - - - - 180,513 180,513
Unrealized gain on
foreign currency
hedging contracts,
net of $807 tax - - - - 1,499 - 1,499
Unrealized gain on
short-term
interest-bearing
investments, net of
$(6) tax - - - - 415 - 415
--------------
Comprehensive income - - - - - - 182,427
--------------
Employee stock options
exercised 1,474 29 28,919 - - - 28,948
Issuance of restricted
stock, net of
cancellations 281 5 - - - - 5
Issuance of stock options
related to acquisition - - 768 - - - 768
Tax benefit of stock
options exercised and
restricted stock vested - - 1,963 - - - 1,963
Equity-based compensation
expense related to
employees - - 27,291 - - - 27,291
Equity-based compensation
expense related to non
employee stock options - - 19 - - - 19
-------- -------- ----------- ----------- ------------- ----------- --------------
BALANCE AS OF MARCH 31,
2007 208,548 $ 3,797 $ 2,094,269 $ (602,392) $ 4,637 $ 895,275 $ 2,395,586
======== ======== =========== =========== ============= =========== ==============
As of March 31, 2007 and September 30, 2006, accumulated other comprehensive
income is comprised of unrealized gain on foreign currency hedging contracts,
net of tax, of $4,340 and $2,841, respectively, and unrealized gain (loss) on
short-term interest-bearing investments, net of tax, of $297 and $(118),
respectively.
The accompanying notes are an integral part of these
consolidated financial statements.
4
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollar in thousands)
SIX MONTHS ENDED MARCH 31,
-------------------------------
2007 2006
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 180,513 $ 157,096
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization 77,805 54,131
In-process research and development and other 750 -
(Gain) Loss on sale of equipment (278) 864
Equity-based compensation expense 27,291 21,000
Deferred income taxes (8,674) 10,425
Excess tax benefit from equity-based compensation (265) (1,595)
Realized gain from short-term interest-bearing
investments (1,289) (3,781)
Net changes in operating assets and liabilities, net of
amounts acquired:
Accounts receivable (49,329) (45,364)
Prepaid expenses and other current assets (695) 456
Other noncurrent assets (11,666) (2,813)
Accounts payable and accrued expenses 933 (29,202)
Deferred revenue (5,418) 16,185
Income taxes payable (22,671) 2,042
Noncurrent liabilities and other 3,296 1,987
----------- ------------
Net cash provided by operating activities 190,303 181,431
----------- ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment, vehicles and leasehold
improvements 1,347 3,525
Payments for purchase of equipment, vehicles and
leasehold improvements (84,889) (27,106)
Proceeds from sale of short-term interest-bearing
investments 440,440 524,178
Purchase of short-term interest-bearing investments (484,753) (890,670)
Net cash paid for acquisitions (77,598) (1,858)
----------- ------------
Net cash used in investing activities (205,453) (391,931)
----------- ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from employee stock options exercised 28,953 54,178
Excess tax benefit from equity-based compensation 265 1,595
Principal payments under financing arrangements and other - (4,677)
Principal payments on capital lease obligations (25) (3,127)
----------- ------------
Net cash provided by financing activities 29,193 47,969
----------- ------------
Net increase (decrease) in cash and cash equivalents 14,043 (162,531)
Cash and cash equivalents at beginning of period 607,187 707,552
----------- ------------
Cash and cash equivalents at end of period $ 621,230 $ 545,021
=========== =============-
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Income taxes, net of refunds $ 38,351 $ 18,490
Interest 2,011 1,882
The accompanying notes are an integral part of these
consolidated financial statements.
5
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
1. Basis of Presentation
Amdocs Limited (the "Company") is a leading provider of software products
and services primarily to the communications industry. The Company and its
subsidiaries operate in one segment offering products and services that enable
their customers to move toward an integrated approach to customer management.
The Company designs, develops, markets, supports, operates, and provides managed
services for information system solutions primarily for leading communications
companies throughout the world.
The unaudited consolidated financial statements of the Company have been
prepared in accordance with U.S. generally accepted accounting principles
("GAAP"). In the opinion of the Company's 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 fiscal 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, 2006, set forth in the Company's Annual Report on Form 20-F filed
with the U.S. Securities and Exchange Commission (the "SEC").
Reclassification
Certain immaterial amounts in prior year financial statements have been
reclassified to conform to the current year presentation.
2. Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board ("FASB") issued
Statement No. 159 "The Fair Value Option for Financial Assets and Financial
Liabilities" including an amendment of FASB Statement No. 115 ("SFAS 159"),
which allows an entity the irrevocable option to elect fair value for the
initial and subsequent measurement for certain financial assets and liabilities
under an instrument-by-instrument election. If the fair value option is elected
for an instrument, subsequent changes in fair value for that instrument will be
recognized in earnings. SFAS 159 also establishes additional disclosure
requirements and is effective for fiscal years beginning after November 15,
2007, with early adoption permitted provided that the entity also adopts
Statement No. 157, "Fair Value Measurements" ("SFAS 157"). The Company is
currently evaluating the effect that the application of SFAS 159 will have on
its consolidated results of operations and financial condition.
In September 2006, the FASB issued SFAS 157. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies under other accounting pronouncements that require or permit
fair value measurements. SFAS 157 will be effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years, with
early adoption permitted. The Company
6
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
is currently evaluating the effect that the application of SFAS 157 will have on
its consolidated results of operations and financial condition.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Financial Statements - Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"). SAB
108 requires companies to quantify the impact of all correcting misstatements,
including both the carryover and reversing effects of prior year misstatements,
on the current year financial statements. SAB 108 is effective for fiscal years
ending after November 15, 2006. The Company applied the provisions of SAB 108 in
the first quarter of fiscal 2007 and there was no impact to the consolidated
financial statements.
In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes," An Interpretation of SFAS No. 109, ("FIN 48"). FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return that results in a tax
benefit. Additionally, FIN 48 provides guidance on de-recognition, income
statement classification of interest and penalties, accounting in interim
periods, disclosure, and transition. This interpretation is effective for fiscal
years beginning after December 15, 2006. The Company is currently evaluating the
effect that the application of FIN 48 will have on its consolidated results of
operations and financial condition.
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments," an amendment of FASB Statement No. 133 and 140
("SFAS 155"), which permits fair value measurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation, with changes in fair value recognized in earnings. The fair-value
election will eliminate the need to separately recognize certain derivatives
embedded in hybrid financial instruments under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. In January 2007,
the FASB issued Statement 133 Implementation Issue No. B40 "Application of
Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets", which
provides a possibility of an exemption from bifurcation analysis in paragraph
13(b) of Statement 133 for certain securitized interests in prepayable financial
assets. The Company applied the provisions of SFAS 155 and Statement 133
Implementation Issue No. B40 in the first quarter of fiscal 2007 and there was
no impact to the consolidated financial statements.
3. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consists of the following:
As of
-----------------------------------------
MARCH 31, SEPTEMBER 30,
2007 2006
------------------ -------------------
Accounts receivable - billed $ 438,218 $ 383,763
Accounts receivable - unbilled 57,977 54,117
Less-allowances (19,971) (12,075)
------------------ -------------------
Accounts receivable, net $ 476,224 $ 425,805
================== ===================
7
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
4. 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 SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------- -----------------------------------
2007 2006 2007 2006
------------- -------------- --------------- ----------------
Net income $ 87,171 $ 81,762 $ 180,513 $ 157,096
Other comprehensive income (loss):
Unrealized (loss) gain on
foreign currency hedging
contracts, net of tax (168) 1,505 1,499 4,158
Unrealized gain (loss) on
short-term interest-bearing
investments, net of tax 521 (307) 415 (257)
------------- -------------- --------------- ----------------
Comprehensive income $ 87,524 $ 82,960 $ 182,427 $ 160,997
============= ============== =============== ===============
5. INCOME TAXES
The provision for income taxes for the following periods consisted of:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------- --------------------------------
2007 2006 2007 2006
------------- ------------- ------------ --------------
Current $ 19,424 $ 12,500 $ 23,168 $ 22,432
Deferred (11,898) 4,834 (9,739) 10,661
------------- -------------- -------------- --------------
$ 7,526 $ 17,334 $ 13,429 $ 33,093
============= ============= ============= ===============
8
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
The effective income tax rate varied from the statutory Guernsey tax rate
as follows for the following periods:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- -------------------------------
2007 2006 2007(1) 2006
--------------- -------------- -------------- -------------
Statutory Guernsey tax rate 20% 20% 20% 20%
Guernsey tax-exempt status (20) (20) (20) (20)
Foreign taxes 14 18 12 18
--------------- -------------- -------------- -------------
Income tax rate before effect of 14 18 12 18
acquisition-related costs,
restructuring charges and
equity-based compensation expense (2)
Effect of acquisition-related costs, (6) (1) (5) (1)
restructuring charges and
equity-based compensation expense (2)
--------------- -------------- -------------- -------------
8% 17% 7% 17%
--------------- -------------- -------------- -------------
(1) The six months ended March 31, 2007 includes the Company's net
release of $11,924 of tax reserves attributable to a resolved tax
audit of a prior year, as well as changes in the Company's tax
reserves in the ordinary course of business. The changes in the
Company's tax reserves are recognized through income taxes or
through other balance sheet items.
(2) Acquisition-related costs include amortization of purchased
intangible assets, in-process research and development write-off and
other.
As a Guernsey company with tax-exempt status, the Company's overall
effective tax rate is attributable to foreign taxes.
As of March 31, 2007, deferred tax assets of $42,736, derived from net
capital and operating loss carry forwards related to some of the Company's
subsidiaries, were offset by valuation allowances related to the uncertainty of
realizing tax benefit for such losses. When realization of the tax benefits
associated with such net capital and operating losses is deemed more likely than
not, the valuation allowance will be released through income taxes or through
goodwill when it relates to a business combination.
9
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- -------------------------------
2007 2006 2007 2006
--------------- ------------- ------------- -------------
Numerator:
Numerator for basic earnings per
share
$ 87,171 $ 81,762 $ 180,513 $ 157,096
Effect of assumed conversion of
0.50% convertible notes 985 979 1,970 1,979
--------------- ------------- ------------- -------------
Numerator for diluted earnings per $ 88,156 $ 82,741 $ 182,483 $ 159,075
share
=============== ============= ============= =============
Denominator:
Denominator for basic earnings per
share- weighted average number
of shares outstanding 207,293 202,515 206,867 201,509
Effect of assumed conversion of
0.50% convertible notes 10,436 10,436 10,436 10,436
Effect of dilutive stock options
granted 4,442 4,856 4,986 4,373
Effect of restricted stock issued 328 112 319 76
--------------- ------------- ------------- -------------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 222,499 217,919 222,608 216,394
=============== ============= ============= =============
Basic earnings per share $ 0.42 $ 0.40 $ 0.87 $ 0.78
=============== ============= ============= =============
Diluted earnings per share $ 0.40 $ 0.38 $ 0.82 $ 0.74
=============== ============= ============= =============
10
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
7. ACQUISITIONS
SIGVALUE
On February 7, 2007, the Company acquired SigValue Technologies, Inc.
("SigValue"), a provider of an integrated billing, customer care and service
control platform designed for telecommunications service providers in
high-growth emerging markets around the world, where the customer base is
predominantly comprised of mobile pre-paid subscribers. Prior to the
acquisition, the Company owned 14% of SigValue's outstanding capital stock.
Under the terms of the agreement, the Company acquired all of SigValue's
remaining share capital. The Company expects that this acquisition will expand
its offering for the fast growing emerging markets.
The aggregate purchase price for the remaining 86% of SigValue's
outstanding capital stock was $71,827, which consisted of $70,428 in cash
(including cash on hand), $768 related to the assumption of stock options held
by SigValue employees and $631 of transaction costs. The fair value of the stock
options was estimated using the Black-Scholes option pricing model. The
acquisition was accounted for using the purchase method of accounting, as
required by Statement of Financial Accountung Standard No. 141, "Business
Combinations" ("SFAS No. 141"). The fair market value of SigValue's assets and
liabilities has been included in the Company's consolidated balance sheet and
the results of SigValue's operations are included in the Company's consolidated
statements of operations, commencing on February 8, 2007. The Company obtained a
preliminary independent valuation of the intangible assets acquired in the
SigValue transaction. The total purchase price was allocated to SigValue's
assets and liabilities, including identifiable intangibles, based on their
respective estimated fair values, on the date the transaction was consummated.
The excess of the purchase price over 86% of the fair value of the net assets
and identifiable intangibles acquired, or goodwill, was $29,810 of which none is
tax deductible.
As described above, prior to the acquisition the Company's ownership
interest in SigValue was 14%, and therefore the Company accounted for the
investment in SigValue under the cost method. In the second quarter of 2007, the
Company recognized its 14% share in SigValue's results from the time it first
acquired an ownership interest in SigValue through the acquisition of 100%
ownership of SigValue on February 7. The Company's share in SigValue's
pre-acquisition results was an income of $1,916, and is included in
restructuring charges, in-process research and development and other for the
three and six months ended March 31, 2007.
The following is the allocation of the purchase price:
ESTIMATED USEFUL
LIFE (IN YEARS)
--------------------
Assets acquired (1) $22,232
Liabilities assumed (2,628)
--------------------
Net assets acquired 19,604
Core technology 19,513 4
Customer arrangements (2) 4,775 6
Trademark 482 2
In-process research and development (3) 2,666
Net deferred tax liability resulting from the difference
between the assigned value of certain assets and their
respective tax bases and loss carry forward, net (5,023)
Goodwill 29,810
--------------------
$71,827
====================
11
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
(1) Includes primarily cash and cash equivalent.
(2) The fair value assigned to customer arrangements is being amortized based
on pro-rata amounts of the future discounted cash flows.
(3) The in-process research and development was written-off as of the closing
date of the acquisition, in accordance with Financial Accounting Standards
Board Interpretation No. 4, "Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method." The
in-process research and development had no alternative future use and had
not reached technological feasibility as of the closing date of the
acquisition.
CRAMER
On August 14, 2006, the Company acquired all of the capital stock of
Cramer Systems Group Limited, or Cramer, a privately-held leading provider of
operations support systems (OSS) solutions. The Company expects that this
acquisition will enable it to leverage and greatly enhance its current assets in
the BSS (business support systems) and OSS market.
The aggregate purchase price for Cramer was $421,357, which consisted of
$412,775 in cash (including cash on hand), $2,228 related to the assumption of
stock options and restricted shares held by Cramer employees and $6,354 of
transaction costs. The purchase price was adjusted in the first quarter of
fiscal 2007 as a result of post closing adjustments which were not material. The
fair value of the stock options was estimated using the Black-Scholes option
pricing model and the fair value of the restricted shares was valued based on
the market value of the underlying shares at the date of grant.
QPASS
On May 31, 2006, the Company acquired all of the capital stock of Qpass
Inc., or Qpass, a leading provider of digital commerce software and solutions.
The Company expects that this acquisition will allow it to support service
providers and media companies seeking to launch and monetize digital content,
and believes that this acquisition positions it as the leader in the emerging
digital content market.
The aggregate purchase price for Qpass was $280,973, which consisted of
$274,024 in cash, (including cash on hand), $2,405 related to the assumption of
stock options held by Qpass employees and $4,544 of transaction costs. The fair
value of the stock options was estimated using the Black-Scholes option pricing
model.
12
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
8. STOCK OPTION AND INCENTIVE PLAN
In January 1998, the Company adopted the 1998 Stock Option and Incentive
Plan (the "Plan"), which provides for the grant of restricted stock awards,
stock options and other equity-based awards to employees, officers, directors
and consultants. The purpose of the Plan is to enable the Company to attract and
retain qualified personnel and to motivate such persons by providing them with
an equity participation in the Company. Since its adoption, the Plan has been
amended on several occasions to, among other things, increase the number of
Ordinary Shares issuable under the Plan. In January 2006, the maximum number of
Ordinary Shares authorized to be granted under the Plan was increased from
38,300 to 46,300. Awards granted under the Plan generally vest over a period of
four years and stock options have a term of ten years. In the fourth quarter of
fiscal 2005, the Company commenced routinely granting restricted shares and the
Company's equity-based grant package may be comprised of restricted stock awards
and stock options.
The following table summarizes information about options to purchase the
Company's Ordinary Shares, as well as changes during the six month period ended
March 31, 2007:
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING
NUMBER OF EXERCISE CONTRACTUAL
OPTIONS PRICE TERM
------- ----- ----
Outstanding as of October 1, 2006 22,794 $29.02
Granted 2,332 35.61
Exercised (1,474) 19.64
Forfeited (566) 32.62
------
Outstanding as of March 31, 2007 23,086 $30.20 6.36
====== ====== ====
Exercisable on March 31, 2007 13,984 $30.75 4.88
====== ====== ====
The following table summarizes information relating to awards of
restricted shares, as well as changes to such awards during the six month period
ended on March 31, 2007:
WEIGHTED
NUMBER OF AVERAGE GRANT
SHARES DATE FAIR VALUE
------ ---------------
Outstanding unvested shares as of
October 1, 2006 780 $32.89
Granted 292 36.67
Vested (125) 30.61
Forfeited (10) 37.73
---- ------
Outstanding unvested shares as of
March 31, 2007 937 $34.32
==== ======
13
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
As of March 31, 2007, there was $66,655 of unrecognized compensation
expense related to unvested stock options and unvested restricted stock awards.
The Company recognizes compensation costs using the graded vesting attribution
method which results in a weighted average period of approximately one year over
which the unrecognized compensation expense is expected to be recognized.
On October 1, 2005, the Company adopted FASB Statement No. 123 (revised
2004), "Share-Based Payment," a revision of SFAS No. 123 ("SFAS 123(R)"). SFAS
123(R) requires all equity-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. In March 2005, the SEC issued Staff Accounting Bulletin No. 107
("SAB 107"), which provides supplemental implementation guidance on SFAS 123(R).
The Company has applied the provisions of SAB 107 in its adoption of SFAS
123(R).
Employee equity-based compensation pre-tax expense under SFAS 123(R) for
the three and six months ended March 31, 2007 and 2006 was as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2007 2006 2007 2006
---- ---- ---- ----
Cost of service $ 6,005 $ 3,717 $12,327 $ 8,072
Research and development 1,587 720 3,365 1,809
Selling, general and
administrative 4,374 5,503 11,599 11,120
------- ------- ------- -------
Total $11,966 $ 9,940 $27,291 $21,001
The total income tax benefit recognized in the income statement for
stock-based compensation (including restricted shares) for the three months
ended March 31, 2007 and 2006 was $1,914 and $1,131, respectively, and for the
six months ended March 31, 2007 and 2006 was $4,306 and $2,534, respectively.
The Company selected the Black-Scholes option pricing model as the most
appropriate fair value method for its equity-based awards and recognizes
compensation costs using the graded vesting attribution method. The
Black-Scholes option pricing model assumptions used are noted in the following
table (all in weighted averages for options granted during the period):
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
2007 2006 2007 2006
---- ---- ---- ----
Risk-free interest rate (1) 4.70% 4.50% 4.61% 4.47%
Expected life of stock options (2) 4.65 4.50 4.54 4.50
Expected volatility (3) 0.31 0.30 0.32 0.33
Expected dividend yield (4) None None None None
Fair value per option $12.50 $ 10.39 $12.74 $ 9.96
(1) Risk-free interest rate is based upon U.S. Treasury yield curve
appropriate for the term of the Company's employee stock options.
14
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
(2) Expected life of stock options is based upon historical experience.
(3) Expected volatility is based on a combination of implied volatility of the
Company's traded options and historical stock price volatility ("blended
volatility").
(4) Expected dividend yield is based on the Company's history and future
expectation of dividend payouts.
Equity-based compensation recognized is reduced for estimated forfeitures
and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates.
9. OPERATIONAL EFFICIENCY AND COST REDUCTION PROGRAMS
In the quarter ended March 31, 2007, the Company commenced a series of
measures designed to align its operational structure to its expected future
growth and to improve efficiency. As part of this plan, the Company recorded a
charge of $6,011, consisting primarily of employee separation costs in
connection with the termination of the employment of software and information
technology specialists and administrative professionals at various locations
around the world and for facility related costs. Approximately $2,872 of the
total charge had been paid in cash as of March 31, 2007. The facility related
costs are expected to be paid through May 2013, and the remaining separation
costs are expected to be paid during the fiscal year ending September 30, 2007.
Each of these expenses related to our operational efficiency and cost
reduction program is included in restructuring charges and in-process research
and development and other.
The restructuring accrual for this cost reduction program is comprised of
the following as of March 31, 2007:
EMPLOYEE
SEPARATION
COSTS FACILITIES TOTAL
----- ---------- -----
Balance as of January 1,
2007 $ - $ - $ -
Charge in second quarter of
fiscal 2007 4,935 1,076 6,011
Cash payments (2,872) - (2,872)
Non-cash (86) (48) (134)
-------- -------- --------
Balance as of March 31, 2007 $ 1,977 $ 1,028 $ 3,005
In connection with the acquisition of DST Innovis, Inc. and DST
Interactive, Inc ("DST Innovis") in fiscal 2005, the Company commenced
integration activities with respect to the DST Innovis business based on a plan
to exit specific research and development activities and to terminate employees
associated with these activities. The liabilities associated with this plan,
which were recorded as part of the purchase accounting, are presented in the
following table:
15
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollar and share amounts in thousands, except per share data)
CONTRACTUAL
OBLIGATIONS OTHER TOTAL
----------- ----- -----
Balance as of October 1, 2006 $ 6,875 $ 112 $ 6,987
Cash payments (1,228) - (1,228)
-------- ----- -------
Balance as of March 31, 2007 $ 5,647 $ 112 $ 5,759
======== ===== =======
10. CONTINGENCIES
Legal Proceedings
The Company is involved in various legal proceedings arising in the normal
course of its business. Based upon the advice of counsel, the Company does not
believe that the ultimate resolution of these matters will have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows.
The Company generally sells its products with a limited warranty for a
period of 90 days. The Company's policy is to account for warranty costs, if
needed, based on historical trends in product failure. Based on the Company's
experience, only minimal warranty services have been required and, as a result,
the Company did not accrue any amounts for product warranty liability during the
six months ended March 31, 2007 and 2006.
The Company generally indemnifies its customers against claims of
intellectual property infringement made by third parties arising from the use of
the Company's software. To date, the Company has incurred only minimal costs as
a result of such obligations and has not accrued any liabilities related to such
indemnification in its consolidated financial statements.
16
ITEM 2. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
FORWARD LOOKING STATEMENTS
This section contains forward-looking statements (within the meaning of
the United States federal securities laws) that involve substantial risks and
uncertainties. You can identify these forward-looking statements by words such
as "expect", "anticipate", "believe", "seek", "estimate", "project", "forecast",
"continue", "potential", "should", "would", "could", and "may", and other words
that convey uncertainty of future events or outcome. Statements that we make in
this document 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 that 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, except where applicable law may otherwise require us to do so.
Important factors that may affect these projections or expectations
include, but are not limited to: changes in the overall economy; changes in
competition in markets in which we operate; changes in the demand for our
products and services; consolidation within the industries in which our
customers operate; the loss of a significant customer; changes in the
telecommunications regulatory environment; changes in technology that impact
both the markets we serve and the types of products and services we offer;
financial difficulties of our customers; losses of key personnel; difficulties
in completing or integrating acquisitions; litigation and regulatory
proceedings; and acts of war or terrorism. For a discussion of these important
factors and other risks, please read the information set forth under the caption
"Risk Factors" in our Annual Report on Form 20-F for fiscal 2006 that we filed
with the United States Securities and Exchange Commission ("SEC").
17
OVERVIEW OF BUSINESS AND TREND INFORMATION
Amdocs is a leading provider of software and services for communications
service providers. Our market focus is primarily tier one and tier two companies
in the communications industry, including leading wireline and wireless
telecommunications, broadband cable and satellite companies.
We develop, implement and manage software and services associated with the
business support systems and operational support systems that enable service
providers to deliver a better customer experience, by, for example, introducing
products quickly, understanding their customers more deeply, processing orders
efficiently and solving problems productively. We refer to these systems as
Customer Experience Systems.
We believe the demand for our Customer Experience Systems is primarily
driven by the need of communications service providers to transform their
systems in order to deliver a better, differentiated customer experience and to
introduce new products faster. Although the pace at which service providers are
embarking on transformation projects at the beginning of the year was not as we
expected, we continue to regard these projects as a long term industry trend
that will continue to drive the demand for our Customer Experience Systems.
In fiscal 2006, we acquired Qpass Inc. and Cramer Systems Group Limited -
which we refer to as Qpass and Cramer - to further enhance our portfolio of
product offerings, provide a complete end-to-end offering (combined business
support and operations support systems, or BSS/OSS) and meet the growing demand
for the delivery of next-generation services. During the second quarter of
fiscal 2007 we acquired SigValue Technologies, Inc. ("SigValue") which we
believe will expand our offering for fast growing emerging markets, where the
customer base is predominantly comprised of mobile pre-paid subscribers. As part
of our strategy, we may continue to pursue acquisitions and other initiatives in
order to offer new products or services or otherwise enhance our market position
or strategic strengths.
OFFERINGS
Amdocs' Customer Experience Systems offerings consist of:
- a complete, modular portfolio of software across BSS and OSS
including revenue management (billing, mediation and partner
settlement), customer management (ordering, customer relationship
management, or CRM, and self-service), service and resource
management (planning, fulfillment and customer-centric assurance)
and digital commerce management (content revenue management). In the
past, we referred to these systems as ICM Enabling Systems.
- a comprehensive line of services, from strategy to execution.
Because our customers' projects are complex and require systems
support expertise, we also provide information technology, or IT,
services, including extensive consulting, business strategy, system
implementation, training, integration, modification, ongoing
support, enhancement and maintenance services. In addition, we offer
Managed Services, which include services such as system
modernization and consolidation, the operation of data centers,
ongoing support, maintenance services, system modification, the
provision of rating and billing services and communications facility
management services.
We have designed our Customer Experience Systems to meet the
mission-critical needs of leading communications service providers throughout
the entire customer lifecycle. We support different lines of business, including
wireline, wireless, cable and satellite, and a wide range of communications
services, including voice, video, data, IP, broadband, content, electronic and
mobile commerce. We also support
18
companies that offer multiple service packages, commonly referred to as bundled
or convergent service packages. In addition, we are also leveraging our
experience by working with service providers in the financial services sector,
because some of the challenges faced by companies in this sector are similar to
those encountered by communications service providers.
We also offer a full range of directory sales and publishing systems and
related line of services, which we refer to as Directory Systems, for publishers
of both traditional printed yellow page and white page directories and
electronic Internet directories.
We conduct our business globally, and, as a result we are subject to the
effects of global economic conditions and, in particular, market conditions in
the communications industry. We maintain development facilities in Canada,
China, Cyprus, India, Ireland, Israel and the United States.
We believe that demand for our Customer Experience Systems is primarily
driven by the following key factors:
- - Industry transformation, including:
- global use of communications and content services,
- increase in digital and mobile commerce,
- ongoing consolidation within the communications industry, and
- continued convergence of communications, broadband cable and
satellite industries.
- - Technology advances, such as:
- emergence of new communications products and services,
especially video, broadband, data and content services,
including IP-based services, such as Internet Protocol
Television (IPTV) and Voice over IP (VoIP),
- evolution to next generation networks such as IP Multimedia
Subsystem (IMS), that enable truly converged services
offerings like fixed-mobile convergence, and
- technological changes, such as the introduction of 3G wireless
technology, next-generation content systems and WiFi- and
WiMax- based access technologies.
- - Customer focus, such as:
- the desire of service providers to focus on their customers in
order to build profitable customer relationships,
- the "authority shift" toward the consumer, with customers
demanding new, innovative services that can be accessed
anytime and anywhere, as well as higher levels of customer
service, and
- the need for service providers to differentiate themselves by
creating a unique and mutually valuable customer experience.
- - The need for operational efficiency, including :
- the shift from in-house management to vendor solutions,
- business needs of service providers to reduce costs and lower
total cost of ownership while retaining high value customers
in a highly competitive environment,
- automating and integrating business processes that span across
business support systems (BSS) and operations support systems
(OSS), and
- OSS transformation projects, designed to transform fragmented
legacy OSS systems that can make it difficult to introduce new
services in a timely and cost-effective manner.
We derive our revenue principally from:
- - the initial sales of licenses to use our products and related services,
including modification, implementation and integration services,
- - providing Managed Services and other related IT services, and
19
- - recurring revenue from ongoing support, maintenance and enhancements
provided to our customers, and from incremental license fees resulting
from increases in a customer's business volume.
Revenue is recognized only when all of the following conditions have been
met: (i) there is persuasive evidence of an arrangement; (ii) delivery has
occurred; (iii) the fee is fixed and determinable; and (iv) collectability of
the fee is reasonably assured. We usually sell our software licenses as part of
an overall solution offered to a customer that combines the sale of software
licenses with a broad range of services, which normally include significant
customization, modification, implementation and integration. As a result, we
generally recognize combined license and service revenue over the course of
these long-term projects, using the percentage of completion method of
accounting. Initial license fee revenue is recognized as work is performed,
using the percentage of completion method of accounting. Subsequent license fee
revenue is recognized upon completion of specified conditions in each contract,
based on a customer's subscriber or transaction volume or other measurements
when greater than the level specified in the contract for the initial license
fee. Service revenue that involves significant ongoing obligations, including
fees for software customization, implementation and modification, also is
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 or as services are
provided. In Managed Services contracts, we typically recognize revenue from the
operation of a customer's system either ratably over the service period or as
services are performed. Revenue from ongoing support services is recognized as
work is performed. Revenue from third-party hardware sales is recognized upon
delivery and installation, and revenue from third-party software sales is
recognized upon delivery. Maintenance revenue is recognized ratably over the
term of the maintenance agreement. As a result of a significant 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.
Revenue from Managed Services arrangements (from the sale of Customer
Experience Systems and Directory Systems) is included in both license and
service revenue. Managed Services projects are a significant part of our
business, accounting for approximately 40% and 35% of our total revenue in the
six months ended March 31, 2007 and 2006, respectively, and generating
substantial, long-term revenue streams, cash flow and operating income. In the
initial period of our Managed Services projects, we generally invest in
modernization and consolidation of the customer's systems. Invoices are usually
structured on a periodic fixed or unit charge basis. As a result, Managed
Services projects can be less profitable in the initial period. Margins tend to
improve over time as we benefit from the operational efficiencies provided by
system modernization and consolidation.
OPERATIONAL EFFICIENCY AND COST REDUCTION PROGRAM
In the quarter ended March 31, 2007, we commenced a series of measures
designed to align our operational structure to our expected future growth and to
improve efficiency. As part of this plan, we recorded a charge of $6.0 million,
consisting primarily of employee separation costs in connection with the
termination of the employment of software and information technology specialists
and administrative professionals at various locations around the world and for
rent obligations.
RECENT EVENTS
Effective April 1, 2007, we entered into an agreement to provide AT&T with
operational and tier one support services in support of an AT&T billing platform
beginning in May 2007. In April 2007, we also entered into an agreement to
provide AT&T with application management services in support of AT&T's ordering
and wholesale platforms, including software maintenance and development, testing
and production support.
20
RECENT ACCOUNTING STANDARDS
In February 2007, the Financial Accounting Standards Board ("FASB") issued
Statement No. 159 "The Fair Value Option for Financial Assets and Financial
Liabilities" including an amendment of FASB Statement No. 115 ("SFAS 159"),
which allows an entity the irrevocable option to elect fair value for the
initial and subsequent measurement for certain financial assets and liabilities
under an instrument-by-instrument election. If the fair value option is elected
for an instrument, subsequent changes in fair value for that instrument will be
recognized in earnings. SFAS 159 also establishes additional disclosure
requirements and is effective for fiscal years beginning after November 15,
2007, with early adoption permitted provided that the entity also adopts
Statement No. 157, "Fair Value Measurements" ("SFAS 157"). We are currently
evaluating the effect that the application of SFAS 159 will have on our
consolidated results of operations and financial condition.
In September 2006, the FASB issued SFAS 157. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies under other accounting pronouncements that require or permit
fair value measurements. SFAS 157 will be effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. We are
currently evaluating the effect that the application of SFAS 157 will have on
our consolidated results of operations and financial condition.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Financial Statements - Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"). SAB
108 requires companies to quantify the impact of all correcting misstatements,
including both the carryover and reversing effects of prior year misstatements,
on the current year financial statements. SAB 108 is effective for fiscal years
ending after November 15, 2006. We applied the provisions of SAB 108 in the
first quarter of fiscal 2007 and there was no impact to the consolidated
financial statements.
In June 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes," An Interpretation of SFAS No. 109, ("FIN 48"). FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return that results in a tax
benefit. Additionally, FIN 48 provides guidance on de-recognition, income
statement classification of interest and penalties, accounting in interim
periods, disclosure, and transition. This interpretation is effective for fiscal
years beginning after December 15, 2006. We are currently evaluating the effect
that the application of FIN 48 will have on our consolidated results of
operations and financial condition.
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments," an amendment of FASB Statement No. 133 and 140
("SFAS 155"), which permits fair value measurement for any hybrid financial
instrument that contains an embedded derivative that otherwise, would require
bifurcation, with changes in fair value recognized in earnings. The fair-value
election will eliminate the need to separately recognize certain derivatives
embedded in hybrid financial instruments under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. In January 2007,
the FASB issued Statement 133 Implementation Issue No. B40 "Application of
Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets", which
provides a possibility of an exemption from bifurcation analysis in paragraph
13(b) of Statement 133 for certain securitized interests in prepayable financial
assets. We applied the provisions of SFAS 155 and Statement 133 Implementation
Issue No. B40 in the first quarter of fiscal 2007 and there was no impact to the
consolidated financial statements.
21
RESULTS OF OPERATIONS
The following table sets forth for the three and six months ended March
31, 2007 and 2006 certain items in our consolidated statements of income
reflected as a percentage of total revenue:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ -----------------------
2007 2006 2007 2006
---------- ---------- ---------- ---------
Revenue:
License ............................ 5.3% 5.0% 5.0% 5.2%
Service ............................ 94.7 95.0 95.0 94.8
----- ----- ----- -----
100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Cost of license .................... 0.1 0.1 0.1 0.2
Cost of service .................... 63.3 64.6 63.1 64.2
Research and development ........... 8.2 7.0 8.5 7.1
Selling, general and
administrative ................... 12.9 12.3 12.9 12.8
Amortization of purchased intangible
assets ........................... 2.7 1.2 2.6 1.3
Restructuring charges, in-process
research and development and other 0.9 -- 0.5 --
----- ----- ----- -----
88.1 85.2 87.7 85.6
----- ----- ----- -----
Operating income ..................... 11.9 14.8 12.3 14.4
Interest income and other, net ....... 1.5 1.7 1.6 1.6
----- ----- ----- -----
Income before income taxes ........... 13.4 16.5 13.9 16.0
Income taxes ......................... 1.1 2.9 1.0 2.8
----- ----- ----- -----
Net income ........................... 12.3% 13.6% 12.9% 13.2%
===== ===== ===== =====
22
SIX MONTHS ENDED MARCH 31, 2007 AND 2006
The following is a tabular presentation of our results of operations for
the six months ended March 31, 2007 compared to the six months ended March 31,
2006. Following the table is a discussion and analysis of our business and
results of operations for the mentioned periods.
SIX MONTHS ENDED
MARCH 31, INCREASE (DECREASE)
----------------------- ---------------------
2007 2006 AMOUNT %
--------- ---------- ---------- -------
(in thousands)
------------------------------------
Revenue:
License ............................. $ 69,270 $ 61,952 $ 7,318 11.8%
Service ............................. 1,328,123 1,126,205 201,918 17.9
1,397,393 1,188,157 209,236 17.6
Operating expenses:
Cost of license ..................... 2,085 1,978 107 5.4
Cost of service ..................... 881,981 762,384 119,597 15.7
Research and development ............ 118,202 84,937 33,265 39.2
Selling, general and administrative
................................ 180,450 152,349 28,101 18.4
Amortization of purchased intangible
assets ........................... 36,610 15,041 21,569 143.4
Restructuring charges, in-process
research and development and other 6,761 - 6,761 -
---------- ---------- ----------
1,226,089 1,016,689 209,400 20.6
---------- ---------- ----------
Operating income ....................... 171,304 171,468 (164) (0.1)
Interest income and other, net ......... 22,638 18,721 3,917 20.9
---------- ---------- ----------
Income before income taxes ............. 193,942 190,189 3,753 2.0
Income taxes ........................... 13,429 33,093 (19,664) (59.4)
---------- ---------- ----------
Net income ............................. $ 180,513 $ 157,096 $ 23,417 14.9%
========== ========== ==========
REVENUE. Total revenue increased by $209.2 million, or 17.6%, in the six
months ended March 31, 2007 to $1,397.4 million from $1,188.2 million in the six
months ended March 31, 2006. Approximately 48% of the increase was attributable
to revenue contributed by acquisitions made during fiscal 2006 and 2007, and the
remainder was primarily attributable to additional revenue from consolidation
and transformation projects for tier one customers.
License and service revenue attributable to the sale of Customer
Experience Systems was $1,256.9 million in the six months ended March 31, 2007,
an increase of $206.2 million, or 19.6%, over the six months ended March 31,
2006. Approximately 48% of the increase was attributable to revenue contributed
by acquisitions made during fiscal 2006 and 2007, and the remainder was
primarily attributable to additional revenue from consolidation and
transformation projects for tier one customers. License and service revenue
resulted from the sale of Customer Experience Systems represented 89.9% and
88.4% of our total revenue in the six months ended March 31, 2007 and 2006,
respectively. We believe the demand for our Customer Experience Systems is
primarily driven by the need of communications service providers to transform
their systems in order to deliver a better, differentiated customer experience
and to introduce new products faster. Although the pace at which service
providers are embarking on transformation projects at the beginning of the year
was not as we expected, we continue to regard these projects as a long term
industry trend that will continue to drive the demand for our Customer
Experience Systems.
23
License and service revenue from the sale of Directory Systems was $140.5
million in the six months ended March 31, 2007, an increase of $3.0 million, or
2.2%, over the six months ended March 31, 2006. The increase in Directory
Systems revenue in the six months ended March 31, 2007 was primarily
attributable to increase in revenue from customers in Europe. License and
service revenue from the sale of Directory Systems represented 10.1% and 11.6%
of our total revenue in the six months ended March 31, 2007 and 2006,
respectively. We believe that we are a leading provider of Directory Systems in
most of the markets we serve. We expect that our revenue from Directory Systems
in absolute amount will increase in fiscal 2007.
In the six months ended March 31, 2007, revenue from customers in North
America, Europe and the rest of the world accounted for 67.5%, 22.5% and 10.0%,
respectively, of total revenue compared to 71.4%, 20.2% and 8.4%, respectively,
in the six months ended March 31, 2006. Revenue from customers in North America
increased in absolute amounts, but the increase was less than the 17.6% increase
in our total revenue which resulted in a decrease in revenue from customers in
North America as a percentage of total revenue. Approximately 62% of the
increase in revenue from customers in Europe, in absolute amount, was
attributable to revenues contributed by acquisitions made during fiscal 2006 and
2007, and the remainder was primarily attributable to projects for tier one
customers. The increase in revenue from customers in the rest of the world in
the six months ended March 31, 2007 was attributable primarily to revenue
contributed in Asia Pacific and to revenue contributed by an acquisitions made
during fiscal 2006 and 2007.
COST OF LICENSE. Cost of license mainly includes amortization of purchased
computer software and intellectual property rights. Because such amortization is
relatively stable from period to period and, absent impairment, is generally
fixed in amount, an increase or decrease in license revenue will cause a
significant fluctuation in cost of license as a percentage of license revenue.
In the six months ended March 31, 2007, cost of license as a percentage of
license revenue was 3.0%, compared to 3.2% in the six months ended March 31,
2006.
COST OF SERVICE. Cost of service consists primarily of costs associated
with providing services to customers, including compensation expense, warranty
expense and costs of third-party products. The increase in cost of service in
the six months ended March 31, 2007 was $119.6 million or 15.7%, which is less
than the increase in our total revenue in the six months ended March 31, 2007.
The increase in cost of service in the six months ended March 31, 2007 in
absolute amount was attributable to cost of service expense related to our
fiscal 2006 acquisitions as well as to expense relating to our core business
which grew at a lower percentage than revenue. As a percentage of revenue, cost
of service was 63.1% in the six months ended March 31, 2007, compared to 64.2%
in the six months ended March 31, 2006. Our cost of service and gross margin may
vary depending on the types and geographic locations of projects that we
undertake.
RESEARCH AND DEVELOPMENT. Research and development expense is primarily
comprised of compensation expense. Research and development expense increased by
$33.3 million, or 39.2%, in the six months ended March 31, 2007 to $118.2
million from $84.9 million in the six months ended March 31, 2006. Research and
development expense increased as a percentage of revenue from 7.1% in the six
months ended March 31, 2006 to 8.5% in the six months ended March 31, 2007. The
increase in research and development expense was attributable mainly to research
and development activities related to our fiscal 2006 acquisitions, as well as
to an increase in research and development efforts to support our growth
strategy. We believe that our research and development efforts are a key element
of our strategy and are essential to our success. However, an increase or a
decrease in our total revenue would not necessarily result in a proportional
increase or decrease in the levels of our research and development expenditures,
which could affect our operating margin.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased by $28.1 million, or 18.4%, in the six months ended March 31,
2007 to $180.4 million, from $152.3 million in the six months ended March 31,
2006. Selling, general and administrative expense is primarily comprised of
compensation expense. The increase in selling, general and administrative
expense in absolute amount is attributable to selling, general and
administrative expense related to our fiscal 2006 acquisitions. Selling,
24
general and administrative expense relating to our core business decreased in
absolute amount in the six months ended March 31, 2007 compared to the six
months ended March 31, 2006.
AMORTIZATION OF PURCHASED INTANGIBLE ASSETS. Amortization of purchased
intangible assets in the six months ended March 31, 2007 was $36.6 million,
compared to $15.0 million in the six months ended March 31, 2006. The increase
in amortization of purchased intangible assets was due to purchased intangible
assets acquired in our fiscal 2006 and 2007 acquisitions.
RESTRUCTURING CHARGES AND IN-PROCESS RESEARCH AND DEVELOPMENT AND OTHER.
Restructuring charges, in-process research and development and other in the six
months ended March 31, 2007 consisted of a $6.0 million restructuring charge
related to our restructuring plan in the second quarter of fiscal 2007, and a
charge of $2.7 million for the write-off of purchased in-process research and
development related to our acquisition of SigValue, offset by the cumulative
effect of our 14% share in SigValue's pre-acquisition results of $1.9 million.
OPERATING INCOME. Operating income slightly decreased by $0.2 million, or
0.1%, in the six months ended March 31, 2007, to $171.3 million, or 12.3% of
revenue, from $171.5 million, or 14.4% of revenue, in the six months ended March
31, 2006. The decrease in operating income as a percentage of revenue was
attributable to a 20.6% increase in operating expense which grew at a greater
rate than the 17.6% increase in revenue during the six months ended March 31,
2007. The increase in operating expense as a percentage of revenue is primarily
attributable to the increases in amortization of purchased intangible assets,
restructuring charges, in-process research and development and other and to
operating expense related to our fiscal 2006 acquisitions, partially offset by a
decrease in our ongoing operating expenses as a percentage of revenue.
INTEREST INCOME AND OTHER, NET. Interest income and other, net increased
by $3.9 million in the six months ended March 31, 2007 to $22.6 million from
$18.7 million in the six months ended March 31, 2006. The increase in interest
income and other, net, is primarily attributable to the impact of foreign
exchange benefits.
INCOME TAXES. Income taxes for the six months ended March 31, 2007 were
$13.4 million on pretax income of $193.9 million, resulting in an effective tax
rate of 6.9% compared to 17.4% in the six months ended March 31, 2006. Of the
reduction in our effective tax rate, 5.0% was attributable to release of tax
reserves as a result of the resolution of a prior year tax audit, as well as
changes in the Company's tax reserves made during six months ended March 31,
2007, in the ordinary course of business, approximately 5.2% was attributable to
the net effect of acquisition-related costs (which include amortization of
purchased intangible assets, in-process research and development and other),
restructuring charges and equity-based compensation expense and the remaining
difference was primarily attributable to the geographical distribution of
earnings from global operations. Our effective tax rate for fiscal year 2007 is
expected to be between 8% and 12% on an annualized basis compared to 14.8% in
fiscal year 2006. Our effective tax rate may fluctuate between quarters as a
result of discrete items that may affect a specific quarter as well as changes
in the Company's tax reserves in the ordinary course of business.
NET INCOME. Net income was $180.5 million in the six months ended March
31, 2007, compared to net income of $157.1 million in the six months ended March
31, 2006. The increase in net income is attributable to the decrease of our
effective tax rate in the six months ended March 31, 2007 as well as to the
increase in interest income and other, net.
DILUTED EARNINGS PER SHARE. Diluted earnings per share increased by $0.08,
or 10.8%, in the six months ended March 31, 2007 to $0.82 from $0.74 in the six
months ended March 31, 2006. The increase in diluted earnings per share resulted
from the increase in net income partially offset by the increase in diluted
weighted average number of shares outstanding.
25
THREE MONTHS ENDED MARCH 31, 2007 AND 2006
The following is a tabular presentation of our results of operations for
the three months ended March 31, 2007 compared to the three months ended March
31, 2006. Following the table is a discussion and analysis of our business and
results of operations for such periods.
THREE MONTHS ENDED
MARCH 31, INCREASE (DECREASE)
--------------------- --------------------
2007 2006 AMOUNT %
--------- --------- --------- -----
(in thousands)
---------------------------------
Revenue:
License ......................... $ 37,526 $ 30,291 $ 7,235 23.9%
Service ......................... 668,835 570,838 97,997 17.2
--------- --------- ---------
706,361 601,129 105,232 17.5
--------- --------- ---------
Operating expenses:
Cost of license ................. 1,016 916 100 10.9
Cost of service ................. 446,860 388,333 58,527 15.1
Research and development ........ 57,734 41,823 15,911 38.0
Selling, general and
administrative ............... 91,280 73,799 17,481 23.7
Amortization of purchased
intangible assets ............ 18,912 7,469 11,443 153.2
Restructuring charges, in-process
research and development and
other ........................ 6,761 - 6,761 -
--------- --------- ---------
622,563 512,340 110,223 21.5
--------- --------- ---------
Operating income ................... 83,798 88,789 (4,991) (5.6)
Interest income and other, net ..... 10,899 10,307 592 5.7
--------- --------- ---------
Income before income taxes ......... 94,697 99,096 (4,399) (4.4)
Income taxes ....................... 7,526 17,334 (9,808) (56.6)
--------- --------- ---------
Net income ......................... $ 87,171 $ 81,762 $ 5,409 6.6%
========= ========= =========
REVENUE. Total revenue increased by $105.2 million, or 17.5%, in the three
months ended March 31, 2007 to $706.4 million from $601.1 million in the three
months ended March 31, 2006. Approximately 49% of the increase was attributable
to revenue contributed by acquisitions made during fiscal 2006 and 2007, and the
remainder was primarily attributable to additional revenue from consolidation
and transformation projects for tier one customers.
License and service revenue attributable to the sale of Customer
Experience Systems was $637.5 million in the three months ended March 31, 2007,
an increase of $105.7 million, or 19.9%, over the three months ended March 31,
2006. Approximately 49% of the increase was attributable to revenue contributed
by acquisitions made during fiscal 2006 and 2007, and the remainder was
primarily attributable to additional revenue from consolidation and
transformation projects for tier one customers. License and service revenue
resulted from the sale of Customer Experience Systems represented 90.2% and
88.5% of our total revenue in the three months ended March 31, 2007 and 2006,
respectively. We believe the demand for our Customer Experience Systems is
primarily driven by the need of communications service providers to transform
their systems in order to deliver a better, differentiated customer experience
and to introduce new products faster. Although the pace at which service
providers are embarking on transformation projects at the beginning of the year
was not as we expected, we continue to regard these projects as a long term
industry trend that will continue to drive the demand for our Customer
Experience Systems.
26
License and service revenue attributable to the sale of Directory Systems
was $68.9 million in the three months ended March 31, 2007, compared to $69.3
million in the three months ended March 31, 2006. License and service revenue
from the sale of Directory Systems represented 9.8% and 11.5% of our total
revenue in the three months ended March 31, 2007 and 2006, respectively. We
believe that we are a leading provider of Directory Systems in most of the
markets we serve. We expect that our revenue from Directory Systems in absolute
amount will increase slightly in fiscal 2007.
In the three months ended March 31, 2007, revenue from customers in North
America, Europe and the rest of the world accounted for 66.5%, 23.0% and 10.5%,
respectively, of total revenue compared to 69.8%, 22.0% and 8.2%, respectively,
in the three months ended March 31, 2006. Revenue from customers in North
America increased in absolute amounts, but the increase was less than the 17.5%
increase in our total revenue which resulted in a decrease in revenue from
customers in North America as a percentage of total revenue. Approximately 71.7%
of the increase in revenue from customers in Europe, in absolute amount, was
attributable to revenues contributed by acquisitions made during fiscal 2006 and
2007, and the remainder was primarily attributable to projects for tier one
customers. The increase in revenue from customers in the rest of the world in
the three months ended March 31, 2007 was attributable primarily to revenue
contributed in Asia Pacific and to revenues contributed by acquisitions made
during fiscal 2006 and 2007.
COST OF LICENSE. Cost of license mainly includes amortization of purchased
computer software and intellectual property rights. Because such amortization is
relatively stable from period to period and, absent impairment, is generally
fixed in amount, an increase or decrease in license revenue will cause a
significant fluctuation in cost of license as a percentage of license revenue.
In the three months ended March 31, 2007 and 2006, cost of license as a
percentage of license revenue was 2.7% and 3.0%.
COST OF SERVICE. Cost of service consists primarily of costs associated
with providing services to customers, including compensation expense, warranty
expense and costs of third-party products. The increase in cost of service in
the three months ended March 31, 2007 was 15.1%, which is less than the increase
in our total revenue in the three months ended March 31, 2007. The increase in
cost of service in the three months ended March 31, 2007 in absolute amount was
attributable to cost of service expense related to our fiscal 2006 acquisitions
as well as to expense relating to our core business, which grew at a lower
percentage than revenue. As a percentage of revenue, cost of service was 63.3%
in the three months ended March 31, 2007, compared to 64.6% in the three months
ended March 31, 2006. Our cost of service and gross margin may vary depending on
the types and geographic locations of projects that we undertake.
RESEARCH AND DEVELOPMENT. Research and development expense is primarily
comprised of compensation expense. Research and development expense increased by
$15.9 million, or 38.0%, in the three months ended March 31, 2007 to $57.7
million from $41.8 million in the three months ended March 31, 2006. Research
and development expense increased as a percentage of revenue from 7.0% in the
three months ended March 31, 2006 to 8.2% in the three months ended March 31,
2007. The increase in research and development expense was attributable mainly
to research and development activities related to our fiscal 2006 acquisitions,
as well as to an increase in research and development efforts to support our
growth strategy. We believe that our research and development efforts are a key
element of our strategy and are essential to our success. However, an increase
or a decrease in our total revenue would not necessarily result in a
proportional increase or decrease in the levels of our research and development
expenditures, which could affect our operating margin.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased by $17.5 million, or 23.7%, in the three months ended March
31, 2007 to $91.3 million, from $73.8 million in the three months ended March
31, 2006. Selling, general and administrative expense is primarily comprised of
compensation expense. The increase in selling, general and administrative
expense in absolute amount is attributable to selling, general and
administrative expense related to our fiscal 2006 acquisitions. Selling, general
and administrative expense relating to our core business decreased as a
percentage of revenue.
27
AMORTIZATION OF PURCHASED INTANGIBLE ASSETS. Amortization of purchased
intangible assets in the three months ended March 31, 2007 was $18.9 million,
compared to $7.5 million in the three months ended March 31, 2006. The increase
in amortization of purchased intangible assets was due to purchased intangible
assets acquired in our fiscal 2006 and 2007 acquisitions.
RESTRUCTURING CHARGES, IN-PROCESS RESEARCH AND DEVELOPMENT AND OTHER.
Restructuring charges, in-process research and development and other in the
three months ended March 31, 2007 consisted of a $6.0 million restructuring
charge related to our restructuring plan in the second quarter of fiscal 2007,
and a charge of $2.7 million for the write-off of purchased in-process research
and development related to our acquisition of SigValue, offset by the cumulative
effect of our 14% share in SigValue's pre-acquisition results of $1.9 million.
OPERATING INCOME. Operating income decreased by $5.0 million, or 5.6%, in
the three months ended March 31, 2007, to $83.8 million, or 11.9% of revenue,
from $88.8 million, or 14.8% of revenue, in the three months ended March 31,
2006. The decrease in operating income was attributable to a 21.5% increase in
operating expense which grew at a greater rate than the 17.5% increase in
revenue during the three months ended March 31, 2007. The increase in operating
expense as a percentage of revenue is primarily attributable to the increase in
amortization of purchased intangible assets, restructuring charges, in-process
research and development and other and to operating expense related to our
fiscal 2006 acquisitions, partially offset by a decrease in our ongoing
operating expenses as a percentage of revenue.
INTEREST INCOME AND OTHER, NET. Interest income and other, net increased
by $0.6 million in the three months ended March 31, 2007 to $10.9 million from
$10.3 million in the three months ended March 31, 2006.
INCOME TAXES. Income taxes for the three months ended March 31, 2007 were
$7.5 million on pretax income of $94.7 million, resulting in an effective tax
rate of 7.9% compared to 17.5% in the three months ended March 31, 2006. Of the
reduction in our effective tax rate, 5.6% was attributable to the net effect of
acquisition-related costs (which include amortization of purchased intangible
assets, in-process research and development and other), restructuring charges
and equity-based compensation expense and the remaining difference was primarily
attributable to the geographical distribution of earnings from global
operations. Our effective tax rate for fiscal year 2007 is expected to be
between 8% and 12% on an annualized basis compared to 14.8% in fiscal year 2006.
Our effective tax rate may fluctuate between quarters as a result of discrete
items that may affect a specific quarter as well as changes in the Company's tax
reserves in the ordinary course of business.
NET INCOME. Net income was $87.2 million in the three months ended March
31, 2007, compared to net income of $81.8 million in the three months ended
March 31, 2006. The increase in net income is attributable to the decrease of
our effective tax rate in the three months ended March 31, 2007 partially offset
by the decrease in our operating income.
DILUTED EARNINGS PER SHARE. Diluted earnings per share increased by $0.02,
or 5.3%, in the three months ended March 31, 2007 to $0.40 from $0.38 in the
three months ended March 31, 2006. The increase in diluted earnings per share
resulted from the increase in net income.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term interest-bearing investments totaled
$1,039.4 million as of March 31, 2007, compared to $979.4 million as of
September 30, 2006. The increase is mainly attributable to positive cash flows
from operations of $190.3 million, proceeds from employee stock options
exercised of $29.0 million, partially offset by $84.9 million of capital
expenditures and $77.6 million in net cash paid for acquisitions. Net cash
provided by operating activities amounted to $190.3 million and $181.4 million
for the six months ended March 31, 2007 and 2006, respectively.
28
Our policy is to retain substantial cash balances in order to support the
growth of the Company. We believe that our current cash balances, cash generated
from operations and our current lines of credit will provide sufficient
resources to meet our operational needs for at least the next fiscal year.
As of March 31, 2007, $450.0 million and $0.2 million aggregate principal
amount of our 0.50% Convertible Senior Notes due 2024 and 2% Convertible Notes
due 2008 were outstanding, respectively. As of March 31, 2007, we had available
short-term general revolving lines of credit totaling $31.0 million, none of
which was outstanding, and outstanding letters of credit and bank guarantees
from various banks totaling $11.1 million. As of March 31, 2007, we had
outstanding short term loans totalling $1.8 million secured by specified pledges
and guaranties.
We have contractual obligations for our convertible notes, financing
arrangements and non-cancelable operating leases that were summarized in a table
of contractual obligations in our Annual Report on Form 20-F for fiscal 2006.
Since September 30, 2006, there have been no material changes in contractual
obligations outside the ordinary course of our business.
Our capital expenditures were approximately $84.9 million in the six
months ended March 31, 2007. Approximately 60% of these expenditures consisted
of purchases of computer equipment, and the remainder primarily to leasehold
improvements. The capital expenditures in the six months ended March 31, 2007
were mainly attributable to invetsments in our operating facilities and our
development centers around the world. We funded our capital expenditures
principally from operating cash flows. We do not anticipate any changes to this
policy in the foreseeable future.
CURRENCY FLUCTUATIONS
We manage our foreign subsidiaries as integral direct components of our
operations. The U.S. dollar is our functional currency. According to the salient
economic factors indicated in SFAS No.52, "Foreign Currency Translation", our
cash flow, sale price, sales market, expense, financing and intercompany
transactions and arrangement indicators are predominately denominated in the
U.S. dollar. The operations of our foreign subsidiaries provide the same type of
services with the same type of expenditure throughout the Amdocs group.
During the three and six months ended March 31, 2007 and 2006,
approximately 70% to 80% of our revenue and approximately 50% to 60% of our
operating expenses were in U.S. dollars or linked to the U.S. dollar. As a
result of long-term contracts in currencies other than the U.S. dollar and more
customers seeking contracts that are denominated in currencies such as the Euro,
the percentage of our revenue and operating expenses in U.S. dollar or linked to
the U.S. dollar may decrease slightly over time. Historically, the effect of
fluctuations in currency exchange rates on our consolidated operations was not
material. As more of our customers seek contracts that are denominated in
currencies other than the U.S. dollar, 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 hedging contracts and options.
We do not hedge all of our exposure in currencies other than the U.S. dollar,
but rather our policy is to hedge significant net exposures in the major foreign
currencies in which we operate. We periodically assess the applicability of the
U.S. dollar as our functional currency by reviewing the salient indicators.
29
PART II OTHER INFORMATION
ITEM 1.CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Not applicable
30
ITEM 2. REPORTS ON FORM 6-K
(a) Reports on Form 6-K
The Company furnished or filed the following reports on Form 6-K during
the three months ended March 31, 2007:
(1) Form 6-K dated February 6, 2007.
(2) Form 6-K dated January 18, 2007.
(3) Form 6-K dated January 10, 2007.
31
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: May 11, 2007
