e20vf
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 20-F
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o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
September 30,
2011
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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OR
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o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this
shell company report
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For the transition period from
to
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Commission File Number 1-14840
AMDOCS LIMITED
(Exact name of Registrant as
specified in its charter)
Guernsey
(Jurisdiction of incorporation
or organization)
Suite 5, Tower Hill House
Le Bordage
St. Peter Port, Island of
Guernsey, GY1 3QT
Amdocs, Inc.
1390 Timberlake Manor
Parkway, Chesterfield, Missouri 63017
(Address of principal executive
offices)
Thomas G. OBrien
Amdocs, Inc.
1390 Timberlake Manor Parkway,
Chesterfield, Missouri 63017
Telephone:
314-212-8328
Email:
dox_info@amdocs.com
(Name, Telephone, Email and/or
Facsimile number and Address of Company Contact
Person)
Securities registered or to be
registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Exchange on Which Registered
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Ordinary Shares, par value £0.01
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New York Stock Exchange
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Securities registered or to be
registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a
reporting obligation pursuant to Section 15(d) of the
Act:
None
Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close
of the period covered by the annual report.
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Ordinary Shares, par value £0.01
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174,691,685(1)
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(Title of class)
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(Number of shares)
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act.(Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
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U.S.
GAAP þ
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International Financial Reporting Standards as
issued o
by the International Accounting Standards Board
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Other o
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If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
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(1) |
Net of 72,948,182 shares held in treasury. Does not include
(a) 20,445,645 ordinary shares reserved for issuance upon
exercise of stock options granted under our stock option plan or
by companies we have acquired, and (b) 23,655 ordinary
shares reserved for issuance upon conversion of outstanding
convertible debt securities.
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AMDOCS
LIMITED
FORM 20-F
ANNUAL
REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011
INDEX
2
Unless the context otherwise requires, all references in this
Annual Report on
Form 20-F
to Amdocs, we, our,
us and the Company refer to Amdocs
Limited and its consolidated subsidiaries and their respective
predecessors, and references to our software products, such as
Amdocs CES 8, refer to current and future versions. Our
consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United
States, or U.S. GAAP, and are expressed in
U.S. dollars. References to dollars or
$ are to U.S. dollars. Our fiscal year ends on
September 30 of each year. References to any specific fiscal
year refer to the year ended September 30 of the calendar year
specified.
We own, have rights to or use trademarks or trade names in
conjunction with the sale of our products and services,
including, without limitation, each of the following:
Amdocstm,
Bridgewater
Systemstm,
ChangingWorldstm,
Clarifytm,
Cramertm,
CEStm,
Collabrenttm,
DST
Innovistm
Ensembletm,
Enablertm,
Intelecabletm,
Intentional Customer
Experiencetm,
JacobsRimelltm,
jNetXtm,
MX
Telecomtm,
OpenMarkettm,
Qpasstm,
SigValuetm,
Streamezzotm,
Stibo Graphic
Softwaretm
and
Xaccttm.
Forward
Looking Statements
This Annual Report on
Form 20-F
contains forward-looking statements (within the meaning of the
U.S. 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, intend and
may, and other words that convey uncertainty of
future events or outcome. Statements that we make in this Annual
Report 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;
the loss of a significant customer; consolidation within the
industries in which our customers operate; 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, please read the information set forth below
under the caption Risk Factors.
3
PART I
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ITEM 1.
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IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Not applicable.
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ITEM 2.
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OFFER
STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
Selected
Financial Data
Our historical consolidated financial statements are prepared in
accordance with U.S. GAAP, and presented in
U.S. dollars. The selected historical consolidated
financial information set forth below has been derived from our
historical consolidated financial statements for the years
presented. Historical information as of and for the five years
ended September 30, 2011 is derived from our consolidated
financial statements, which have been audited by
Ernst & Young LLP, our independent registered public
accounting firm. You should read the information presented below
in conjunction with those statements.
The information presented below is qualified by the more
detailed historical consolidated financial statements, the notes
thereto and the discussion under Operating and Financial
Review and Prospects included elsewhere in this Annual
Report.
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2011
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2010
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2009(1)
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2008(1)
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2007(1)
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(In thousands, except per share data)
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Statement of Operations Data:
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Revenue
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$
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3,177,728
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$
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2,984,223
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$
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2,862,607
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$
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3,162,096
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$
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2,836,173
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Operating income
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404,364
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410,433
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367,319
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405,596
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357,433
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Net income
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346,665
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343,906
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326,176
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378,906
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364,937
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Basic earnings per share
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1.87
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1.70
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1.60
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1.82
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1.75
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Diluted earnings per share
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1.86
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1.69
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1.57
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1.74
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1.65
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Dividends declared per share
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2011
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2010
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2009
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2008
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2007
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(In thousands)
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Balance Sheet Data:
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Cash, cash equivalents and short-term interest-bearing
investments
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$
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1,173,470
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$
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1,433,299
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$
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1,173,041
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$
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1,244,378
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$
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1,179,280
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Total assets
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4,636,572
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4,820,604
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4,328,417
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4,579,063
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4,345,350
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Long-term obligations
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Convertible Senior Notes(2)
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1,020
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1,020
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1,020
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450,000
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450,000
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Long-term portion of capital lease obligations
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457
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353
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510
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356
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Shareholders equity
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3,023,301
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3,229,380
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3,213,053
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2,805,191
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2,600,243
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(1) |
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The basic and diluted weighted average number of shares
outstanding for the fiscal years ended September 30, 2009,
2008 and 2007 have been retroactively adjusted to reflect the
adoption of new earnings per share authoritative guidance
requiring the inclusion of unvested share-based payment awards
containing nonforfeitable rights to dividends or dividend
equivalents in the calculation of basic weighted average number
of shares outstanding. This adjustment reduced basic and/or
diluted earnings per share for the fiscal years ended
September 30, 2009, 2008 and 2007 by up to $0.01. |
4
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(2) |
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During fiscal 2009, using proceeds from our revolving credit
facility, we purchased $449.0 million aggregate principal
amount of our 0.50% convertible notes at an average price of
99.5% of the principal amount, excluding accrued interest and
transaction fees. As of September 30, 2011,
$1.02 million principal amount of the notes remain
outstanding, due in 2024, in accordance with their terms. |
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Additional
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Ordinary Shares
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Paid-In
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Shares
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Amount
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Capital
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Treasury Stock
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(In thousands)
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Statement of Changes in Shareholders Equity Data:
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Balance as of September 30, 2007
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209,762
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$
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3,850
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$
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2,168,234
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$
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(652,229
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Employee stock options exercised
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2,052
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41
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37,527
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Tax benefit of stock options exercised/cancelled
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1,549
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Repurchase of shares
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(8,370
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(255,051
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)
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Issuance of restricted stock, net of forfeitures
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472
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9
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Equity-based compensation expense related to employees
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57,490
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Balance as of September 30, 2008
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203,916
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3,900
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2,264,800
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(907,280
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Employee stock options exercised
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1,289
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23
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27,863
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Tax benefit of stock options exercised/cancelled
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(1,484
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Repurchase of shares
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(468
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(12,594
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Issuance of restricted stock, net of forfeitures
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342
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7
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Equity-based compensation expense related to employees
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42,911
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Balance as of September 30, 2009
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205,079
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3,930
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2,334,090
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(919,874
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Employee stock options exercised
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1,097
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17
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23,618
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Repurchase of shares
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(13,695
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(389,287
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)
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Issuance of restricted stock, net of forfeitures
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568
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9
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Equity-based compensation expense related to employees
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44,455
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Balance as of September 30, 2010
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193,049
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$
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3,956
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$
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2,402,163
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$
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(1,309,161
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Employee stock options exercised
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2,590
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42
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56,417
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Repurchase of shares(1)
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(21,866
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(624,241
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Issuance of restricted stock, net of forfeitures
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919
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15
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Equity-based compensation expense related to employees
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36,631
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Balance as of September 30, 2011
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174,692
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$
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4,013
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$
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2,495,211
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$
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(1,933,402
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)
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(1) |
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In April 2010, our board of directors adopted a share repurchase
plan authorizing the repurchase of up to $700.0 million of
our outstanding ordinary shares over the following
12 months. In February 2011, our board of directors adopted
an additional share repurchase plan authorizing the repurchase
of up to $1 billion of our outstanding ordinary shares over
the following 24 months. The authorizations permit us to
purchase our ordinary shares in open market or privately
negotiated transactions at times and prices that we consider
appropriate. In April 2011, we completed the repurchase of the
remaining authorized amount under the April 2010 share
repurchase plan and started executing repurchases under the
February 2011 plan. In fiscal 2011, we repurchased
21.9 million ordinary shares at an average price of $28.53
per share (excluding broker and transaction fees). As of
September 30, 2011, we had remaining authority to
repurchase up to $687.1 million of our outstanding ordinary
shares. |
5
Risk
Factors
We are
exposed to general global economic and market conditions,
particularly those impacting the communications
industry.
Developments in the communications industry, such as the impact
of global economic conditions, industry consolidation, emergence
of new competitors, commoditization of voice services and
changes in the regulatory environment, at times have had, and
could continue to have, a material adverse effect on our
existing or potential customers. In the past, these conditions
reduced the high growth rates that the communications industry
had previously experienced, and caused the market value,
financial results and prospects and capital spending levels of
many communications companies to decline or degrade. During
previous economic downturns, the communications industry
experienced significant financial pressures that caused many in
the industry to cut expenses and limit investment in capital
intensive projects and, in some cases, led to restructurings and
bankruptcies. The recent worldwide recession has had, and the
European debt crisis and the continuing uncertainty as to
economic recovery may have, adverse consequences for our
customers and our business.
Downturns in the business climate for communications companies
have in the past resulted in slowed customer buying decisions
and price pressures that adversely affected our ability to
generate revenue. Adverse market conditions may have a negative
impact on our business by decreasing our new customer
engagements and the size of initial spending commitments under
those engagements, as well as decreasing the level of
discretionary spending by existing customers. In addition, a
slowdown in buying decisions may extend our sales cycle period
and may limit our ability to forecast our flow of new contracts.
If such adverse business conditions arise in the future, our
business may be harmed.
If we
fail to adapt to changing market conditions and cannot compete
successfully with existing or new competitors, our business
could be harmed.
We may be unable to compete successfully with existing or new
competitors. Our failure to adapt to changing market conditions
and to compete successfully with established or new competitors
could have a material adverse effect on our results of
operations and financial condition. We face intense competition
for the software products and services that we sell, including
competition for managed services we provide to customers under
long-term service agreements. These managed services include
services such as management of data center operations and IT
infrastructure, application management and ongoing support,
systems modernization and consolidation and management of
end-to-end
business processes for billing and customer care operations.
The market for communications information systems is highly
competitive and fragmented, and we expect competition to
continue to increase. We compete with independent software and
service providers and with the in-house IT and network
departments of communications companies. Our main competitors
include firms that provide IT services (including consulting,
systems integration and managed services), software vendors that
sell products for particular aspects of a total information
system, software vendors that specialize in systems for
particular communications services (such as Internet, wireline
and wireless services, cable, satellite and service bureaus) and
network equipment providers that offer software systems in
combination with the sale of network equipment. We also compete
with companies that provide digital commerce software and
solutions.
We believe that our ability to compete depends on a number of
factors, including:
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the development by others of software products that are
competitive with our products and services,
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the price at which others offer competitive software and
services,
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the ability of competitors to deliver projects at a level of
quality that rivals our own,
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the responsiveness of our competitors to customer needs, and
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the ability of our competitors to hire, retain and motivate key
personnel.
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A number of our competitors have long operating histories, large
customer bases, substantial financial, technical, sales,
marketing and other resources, and strong name recognition.
Current and potential competitors have established, and may
establish in the future, cooperative relationships among
themselves or with third parties
6
to increase their abilities to address the needs of our existing
or prospective customers. In addition, our competitors have
acquired, and may continue to acquire in the future, companies
that may enhance their market offerings. Accordingly, new
competitors or alliances among competitors may emerge and
rapidly acquire significant market share. As a result, our
competitors may be able to adapt more quickly than us to new or
emerging technologies and changes in customer requirements, and
may be able to devote greater resources to the promotion and
sale of their products. We cannot assure you that we will be
able to compete successfully with existing or new competitors.
If we fail to adapt to changing market conditions and to compete
successfully with established or new competitors, our results of
operations and financial condition may be adversely affected.
If we
do not continually enhance our products and service offerings,
we may have difficulty retaining existing customers and
attracting new customers.
We believe that our future success will depend, to a significant
extent, upon our ability to enhance our existing products and to
introduce new products and features to meet the requirements of
our customers in a rapidly developing and evolving market. We
are currently devoting significant resources to refining and
expanding our base software modules and to developing our
customer experience systems. Our present or future products may
not satisfy the evolving needs of the communications industry or
of other industries that we serve. If we are unable to
anticipate or respond adequately to such needs, due to resource,
technological or other constraints, our business and results of
operations could be harmed.
Our
business is dependent on a limited number of significant
customers, and the loss of any one of our significant customers
could harm our results of operations.
Our business is dependent on a limited number of significant
customers, of which AT&T has historically been our largest.
AT&T accounted for 29% of our revenue in fiscal 2011 and
2010. In fiscal 2011, our two next largest customers were Bell
Canada and Sprint Nextel, and certain of their subsidiaries,
each of which accounted for approximately 10% or more of our
revenue in fiscal 2011. Revenue from Bell Canada will be
negatively affected by a scheduled price reduction under our
contract with Bell Canada to be effective in fiscal 2012.
Aggregate revenue derived from the multiple business
arrangements we have with our ten largest customers accounted
for approximately 73% of our revenue in fiscal 2011 and 75% of
our revenue in fiscal 2010. The loss of any significant customer
or a significant decrease in business from any such customer
could harm our results of operations and financial condition.
Revenue from individual customers may fluctuate from time to
time based on the commencement and completion of projects, the
timing of which may be affected by market conditions.
Although we have received a substantial portion of our revenue
from recurring business with established customers, many of our
major customers do not have any obligation to purchase
additional products or services from us and generally have
already acquired fully paid licenses to their installed systems.
Therefore, our customers may not continue to purchase new
systems, system enhancements or services in amounts similar to
previous years or may delay implementation or significantly
reduce the scope of committed projects, each of which could
reduce our revenue and profits.
Our
future success will depend on our ability to develop long-term
relationships with our customers and to meet their expectations
in providing products and performing services.
We believe that our future success will depend to a significant
extent on our ability to develop long-term relationships with
successful network operators and service providers with the
financial and other resources required to invest in significant
ongoing customer experience systems. If we are unable to develop
new customer relationships, our business will be harmed. In
addition, our business and results of operations depend in part
on our ability to provide high quality services to customers
that have already implemented our products. If we are unable to
meet customers expectations in providing products or
performing services, our business and results of operations
could be harmed.
7
We may
seek to acquire companies or technologies that could disrupt our
ongoing business, divert the attention of our management and
employees and adversely affect our results of
operations.
It is a part of our business strategy to pursue acquisitions and
other initiatives in order to offer new products or services or
otherwise enhance our market position or strategic strengths.
Since 1999, we have completed numerous acquisitions, which,
among other things, have expanded our business into customer
management and billing solutions for broadband media cable and
satellite companies, as well as digital commerce software and
solutions, enhanced our offerings in the operational support
systems, or OSS, market, extended our presence into the network
policy management market, and enabled us to provide integrated
billing and customer care systems in high-growth emerging
markets. In the future, we may acquire other companies that we
believe will advance our business strategy. We cannot assure you
that suitable future acquisition candidates can be found, that
acquisitions can be consummated on favorable terms or that we
will be able to complete otherwise favorable acquisitions
because of antitrust or other regulatory concerns.
We cannot assure you that the acquisitions we have completed, or
any future acquisitions that we may make, will enhance our
products or strengthen our competitive position. We also cannot
assure you that we have identified, or will be able to identify,
all material adverse issues related to the integration of our
acquisitions, such as significant defects in the internal
control policies of companies that we have acquired. In
addition, our acquisitions could lead to difficulties in
integrating acquired personnel and operations and in retaining
and motivating key personnel from these businesses. Any failure
to recognize significant defects in the internal control
policies of acquired companies or to properly integrate and
retain personnel may require a significant amount of time and
resources to address. Acquisitions may disrupt our ongoing
operations, divert management from
day-to-day
responsibilities, increase our expenses and harm our results of
operations or financial condition.
The
skilled and highly qualified workforce that we need to develop,
implement and modify our solutions may be difficult to hire,
train and retain, and we could face increased costs to attract
and retain our skilled workforce.
Our business operations depend in large part on our ability to
attract, train, motivate and retain highly skilled information
technology professionals, software programmers and
communications engineers on a worldwide basis. In addition, our
competitive success will depend on our ability to attract and
retain other outstanding, highly qualified personnel. Because
our software products are highly complex and are generally used
by our customers to perform critical business functions, we
depend heavily on skilled technology professionals. Skilled
technology professionals are often in high demand and short
supply. If we are unable to hire or retain qualified technology
professionals to develop, implement and modify our solutions, we
may be unable to meet the needs of our customers. In addition,
serving several new customers or implementing several new
large-scale projects in a short period of time, may require us
to attract and train additional IT professionals at a rapid
rate. We may face difficulties identifying and hiring qualified
personnel. Although we are heavily investing in training our new
employees, we may not be able to train them rapidly enough to
meet the increasing demands on our business, particularly in
light of high attrition rates in some regions where we have
operations. Our inability to hire, train and retain the
appropriate personnel could increase our costs of retaining a
skilled workforce and make it difficult for us to manage our
operations, meet our commitments and compete for new customer
contracts. In particular, wage costs in some of the countries in
which we maintain development centers, such as Cyprus and India,
have historically been significantly lower than wage costs in
the United States, Europe and Israel for comparably-skilled
professionals, although such costs are increasing. We may need
to increase the levels of our employee compensation more rapidly
than in the past to remain competitive.
As a result of our entry into the digital commerce space, we now
compete for high quality employees in that spaces limited
and competitive talent market. In addition, cost containment
measures effected in recent years, such as the relocation of
projects to lower costs countries, may lead to greater employee
attrition and increase the cost of retaining our most skilled
employees. The transition of projects to new locations may also
lead to business disruptions due to differing levels of employee
knowledge, organizational and leadership skills.
8
Our success will also depend, to a certain extent, upon the
continued active participation of a relatively small group of
senior management personnel. The loss of the services of all or
some of these executives could harm our operations and impair
our efforts to expand our business.
Our
quarterly operating results may fluctuate, and a decline in
revenue in any quarter could result in lower profitability for
that quarter and fluctuations in the market price of our
ordinary shares.
We have experienced fluctuations in our quarterly operating
results and anticipate that such movements may continue.
Fluctuations may result from many factors, including:
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the size, timing and pace of progress of significant customer
projects and license and service fees,
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delays in or cancellations of significant projects by customers,
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changes in operating expenses,
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increased competition,
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changes in our strategy,
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personnel changes,
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foreign currency exchange rate fluctuations,
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penetration of new markets, and
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general economic and political conditions.
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Generally, our combined license fee revenue and service fee
revenue relating to customization, modification, implementation
and integration are recognized as work is performed, using the
percentage of completion method of accounting. Given our
reliance on a limited number of significant customers, our
quarterly results may be significantly affected by the size and
timing of customer projects and our progress in completing such
projects.
We believe that the placement of customer orders may be
concentrated in specific quarterly periods due to the time
requirements and budgetary constraints of our customers.
Although we recognize a significant portion of our revenue as
projects are performed, progress may vary significantly from
project to project, and we believe that variations in quarterly
revenue are sometimes attributable to the timing of initial
order placements. Due to the relatively fixed nature of certain
of our costs, a decline of revenue in any quarter could result
in lower profitability for that quarter. In addition,
fluctuations in our quarterly operating results could cause
significant fluctuations in the market price of our ordinary
shares.
Our
revenue, earnings and profitability are affected by the length
of our sales cycle, and a longer sales cycle could adversely
affect our results of operations and financial
condition.
Our business is directly affected by the length of our sales
cycle. Information systems for communications companies are
relatively complex and their purchase generally involves a
significant commitment of capital, with attendant delays
frequently associated with large capital expenditures and
procurement procedures within an organization. The purchase of
these types of products and services typically also requires
coordination and agreement across many departments within a
potential customers organization. Delays associated with
such timing factors could have a material adverse effect on our
results of operations and financial condition. In periods of
economic slowdown in the communications industry, such as during
2009, our typical sales cycle lengthens, which means that the
average time between our initial contact with a prospective
customer and the signing of a sales contract increases. The
lengthening of our sales cycle could reduce growth in our
revenue. In addition, the lengthening of our sales cycle
contributes to increased selling expenses, thereby reducing our
profitability.
9
If the
market for our products deteriorates, we may be required to
reduce the scope of our operations, and if we fail to
successfully plan and manage changes in the size of our
operations, our business will suffer.
Over the last several years, we have both grown and contracted
our operations in order to profitably offer our products and
services in a rapidly changing market. If we are unable to
manage these changes and plan and manage any future changes in
the size and scope of our operations, our business will suffer.
Restructurings and cost reduction measures that we have
implemented, from time to time, have reduced the size of our
operations and workforce. Reductions in personnel can result in
significant severance, administrative and legal expenses and may
also adversely affect or delay various sales, marketing and
product development programs and activities. These cost
reduction measures have included, and may in the future include,
employee separation costs and consolidating
and/or
relocating certain of our operations to different geographic
locations. We accrued restructuring charges totaling
$27.3 million in fiscal 2008 and 2009.
Acquisitions and organic growth have, from time to time,
increased our headcount. During periods of expansion, we may
need to serve several new customers or implement several new
large-scale projects in short periods of time. This may require
us to attract and train additional IT professionals at a rapid
rate, which we may have difficulties doing successfully.
Volatility
and turmoil in the worlds capital markets may adversely
affect our investment portfolio and other financial
assets.
Our cash, cash equivalents and short-term interest-bearing
investments totaled $923 million, net of short-term debts,
as of September 30, 2011. Our policy is to retain
sufficient cash balances in order to support our growth. Our
short-term investments consist primarily of money market funds,
U.S. government treasuries, corporate bonds, government
guaranteed debt and U.S. agency securities. Although we
believe that we generally adhere to conservative investment
guidelines, adverse market conditions have resulted in
immaterial impairments of the carrying value of certain of our
investment assets. Continuing adverse market conditions may lead
to additional impairments. Realized or unrealized losses in our
investments or in our other financial assets may adversely
affect our financial condition.
Declines in the financial condition of banks or other global
financial institutions may adversely affect our normal financial
operations.
We may
be exposed to the credit risk of customers that have been
adversely affected by weakened markets.
We typically sell our software and related services as part of
long-term projects. During the life of a project, a
customers budgeting constraints can impact the scope of a
project and the customers ability to make required
payments. In addition, adverse general business conditions may
degrade the creditworthiness of our customers over time, and we
can be adversely affected by bankruptcies or other business
failures.
Our
international presence exposes us to risks associated with
varied and changing political, cultural, legal and economic
conditions worldwide.
We are affected by risks associated with conducting business
internationally. We maintain development facilities in Brazil,
Cyprus, India, Ireland, Israel and the United States, and have
operations in North America, Europe, Latin America and the
Asia-Pacific region. Although a substantial majority of our
revenue is derived from customers in North America and Europe,
we obtain significant revenue from customers in the Asia-Pacific
region and Latin America. Our strategy is to continue to broaden
our North American and European customer bases and to expand
into international markets, including emerging markets, such as
those in Latin America, the Commonwealth of Independent States,
India and Southeast Asia. Conducting business internationally
exposes us to certain risks inherent in doing business in
international markets, including:
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lack of acceptance of non-localized products,
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legal and cultural differences in the conduct of business,
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difficulties in staffing and managing foreign operations,
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longer payment cycles,
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difficulties in collecting accounts receivable and withholding
taxes that limit the repatriation of earnings,
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trade barriers,
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difficulties in complying with varied legal and regulatory
requirements across jurisdictions,
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immigration regulations that limit our ability to deploy our
employees,
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political instability and threats of terrorism, and
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variations in effective income tax rates among countries where
we conduct business.
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One or more of these factors could have a material adverse
effect on our international operations, which could harm our
results of operations and financial condition. For example, in
2005, as part of our strategic plan to establish a local China
presence in order to help penetrate that market, we acquired
Longshine Information Technology Company Ltd., or Longshine.
Although it had been our plan to fully integrate Longshine into
our operations, our expansion there met with a number of
business challenges, and we did not do so. In 2010, we realigned
our strategy in China by divesting a majority stake in
Longshine, and now retain a minority interest in that company.
As we
continue to develop our business in emerging markets, we face
increasing challenges that could adversely impact our results of
operations, reputation and business.
As we continue to expand our business in emerging markets, such
as those in Latin America, the Commonwealth of Independent
States, India and Southeast Asia, we face challenges related to
more volatile economic conditions, competition from companies
that are already present in the market, the need to identify
correctly and leverage appropriate opportunities for sales and
marketing, poor protection of intellectual property, inadequate
protection against crime (including counterfeiting, corruption
and fraud), inadvertent breaches of local laws or regulations
and not being able to recruit sufficient personnel with
appropriate skills and experience. In addition, local business
practices in jurisdictions in which we operate, and particularly
in emerging markets, may be inconsistent with international
regulatory requirements, such as anti-corruption and
anti-bribery regulations to which we are subject. It is possible
that some of our employees, subcontractors, agents or partners
may violate such legal and regulatory requirements, which may
expose us to criminal or civil enforcement actions, including
penalties and suspension or disqualification from
U.S. federal procurement contracting. If we fail to comply
with such legal and regulatory requirements, our business and
reputation may be harmed.
Our
international operations expose us to risks associated with
fluctuations in foreign currency exchange rates that could
adversely affect our business.
Although we have operations throughout the world, approximately
70% to 80% of our revenue and approximately 50% to 60% of our
operating costs are denominated in, or linked to, the
U.S. dollar. Accordingly, we consider the U.S. dollar
to be our functional currency. Fluctuations in exchange rates
between the currencies in which such costs are incurred and the
dollar may have a material adverse effect on our results of
operations and financial condition. From time to time we may
experience increases in the costs of our operations outside the
United States, as expressed in dollars, which could have a
material adverse effect on our results of operations and
financial condition.
For example, during fiscal 2008, we recognized higher than usual
foreign exchange losses under interest and other expense, net,
mainly due to the significant revaluation of assets and
liabilities denominated in other currencies attributable to the
rapid and significant foreign exchange rate changes associated
with the global economic turbulence. Although our foreign
exchange losses have been less significant since then as a
result of enhanced hedging strategies, we believe that foreign
exchange rates may continue to present challenges in future
periods.
In addition, a portion of our revenue (approximately 20% to 30%
in fiscal 2011) is not incurred in dollars or linked to the
dollar, and, therefore, fluctuations in exchange rates between
the dollar and the currencies in which such revenue is incurred
may have a material effect on our results of operations and
financial condition. If more of
11
our customers seek contracts that are denominated in currencies
such as the euro and not the dollar, our exposure to
fluctuations in currency exchange rates could increase.
Our policy is to hedge significant net exposures in the major
foreign currencies in which we operate, and we generally hedge
our net currency exposure with respect to expected revenue and
operating costs and certain balance sheet items. We do not hedge
all of our currency exposure, including for currencies for which
the cost of hedging is prohibitively expensive. We cannot assure
you that we will be able to effectively limit all of our
exposure to currency exchange rate fluctuations.
The imposition of exchange or price controls or other
restrictions on the conversion of foreign currencies could also
have a material adverse effect on our business, results of
operations and financial condition.
Political and economic conditions in the Middle East and
other countries may adversely affect our business.
Of the development centers we maintain worldwide, our two
largest development centers are located in Israel and India. In
Israel, the centers are located in three different sites
throughout Israel, and approximately 24% of our software and
information technology, sales and marketing workforce is located
in Israel. As a result, we are directly influenced by the
political, economic and military conditions affecting Israel and
its neighboring regions. Any major hostilities involving Israel
could have a material adverse effect on our business. We have
developed contingency plans to provide ongoing services to our
customers in the event that escalated political or military
conditions disrupt our normal operations. These plans include
the transfer of some development operations within Israel to
various of our other sites both within and outside of Israel. If
we have to implement these plans, our operations would be
disrupted and we would incur significant additional
expenditures, which would adversely affect our business and
results of operations.
While Israel has entered into peace agreements with both Egypt
and Jordan, Israel has not entered into peace arrangements with
any other neighboring countries and the numerous uprisings in
North Africa and the Middle East, including in Egypt, Syria and
Jordan which border Israel, have introduced additional
uncertainty in the region. Recent events in Iran, including
reports of its continuing nuclear development program, have
further strained relations between Israel and Iran. Continued
political or economic uncertainty, or violence, in the region
could have a material adverse effect on our business.
Over the past several years there has been a significant
deterioration in Israels relationship with the Palestinian
Authority and a related increase in violence, including recent
hostilities related to Lebanon and the Gaza Strip. Efforts to
resolve the problem have failed to result in a permanent
solution. Continued violence between the Palestinian community
and Israel may have a material adverse effect on our business.
Further deterioration of relations with the Palestinian
Authority or other countries in the Middle East might require
more military reserve service by some of our workforce, which
may have a material adverse effect on our business.
In recent years, we have expanded our operations
internationally, particularly in India and the Commonwealth of
Independent States (including Russia). Conducting business in
these and other countries involves unique challenges, including
political instability, threats of terrorism, the transparency,
consistency and effectiveness of business regulation, business
corruption, the protection of intellectual property, and the
availability of sufficient qualified local personnel. Any of
these or other challenges associated with operating in these
countries may adversely affect our business or operations. We
have development and other facilities at multiple locations in
India, and approximately 36% of our software and information
technology, sales and marketing workforce is located in India.
Terrorist activity in India and Pakistan has contributed to
tensions between those countries and our operations in India may
be adversely affected by future political and other events in
the region.
In addition, our development facility in Cyprus may be adversely
affected by political conditions in that country. As a result of
intercommunal strife between the Greek and Turkish communities,
Turkish troops invaded Cyprus in 1974 and continue to occupy a
large portion of the island. Despite the admission of Cyprus
into the European Union and recent improvements in the relations
between the parties, discussions facilitated by the
United Nations, the European Union and the United States
have not resulted in a plan of reunification for Cyprus. Major
hostilities between Cyprus and Turkey could have a material
adverse effect on our development facility in Cyprus.
12
If we
are unable to protect our proprietary technology from
misappropriation, our business may be harmed.
Any misappropriation of our technology or the development of
competitive technology could seriously harm our business. Our
software and software systems are largely comprised of software
and systems we have developed or acquired and that we regard as
proprietary. We rely upon a combination of trademarks, patents,
contractual rights, trade secret law, copyrights, non-disclosure
agreements and other methods to protect our proprietary rights.
We enter into non-disclosure and confidentiality agreements with
our customers, workforce and marketing representatives and with
certain contractors with access to sensitive information, and we
also limit our customer access to the source codes of our
software and our software systems. However, we generally do not
include in our software any mechanisms to prevent or inhibit
unauthorized use.
The steps we have taken to protect our proprietary rights may be
inadequate. If so, we might not be able to prevent others from
using what we regard as our technology to compete with us.
Existing trade secret, copyright and trademark laws offer only
limited protection. In addition, the laws of some foreign
countries do not protect our proprietary technology or allow
enforcement of confidentiality covenants to the same extent as
the laws of the United States.
If we have to resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be
burdensome, protracted and expensive and could involve a high
degree of risk.
Claims
by others that we infringe their proprietary technology could
harm our business and subject us to potentially burdensome
litigation.
Our software and software systems are the results of long and
complex development processes, and, although our technology is
not significantly dependent on patents or licenses from third
parties, certain aspects of our products make use of readily
available software components that we license from third
parties, including our employees and contractors. As a developer
of complex software systems, third parties may claim that
portions of our systems violate their intellectual property
rights. The ability to develop and use our software and software
systems requires knowledge and professional experience that we
believe is unique to us and would be very difficult for others
to independently obtain, however, our competitors may
independently develop technologies that are substantially
equivalent or superior to ours.
We expect that software developers will increasingly be subject
to infringement claims as the number of products and competitors
providing software and services to the communications industry
increases and overlaps occur. Any claim of infringement by a
third party could cause us to incur substantial costs defending
against the claim and could distract our management from our
business. Furthermore, a party making such a claim, if
successful, could secure a judgment that requires us to pay
substantial damages. A judgment could also include an injunction
or other court order that could prevent us from selling our
products or offering our services, or prevent a customer from
continuing to use our products. Additionally, since our 2006
acquisition of Qpass, we support service providers and media
companies with respect to digital content services, which could
subject us to claims related to such services. Our entry into
the digital content services market has also subjected us to
direct legal claims from retail consumers arising from the
delivery of such services.
If anyone asserts a claim against us relating to proprietary
technology or information, we might seek to license their
intellectual property. We might not, however, be able to obtain
a license on commercially reasonable terms or on any terms. In
addition, any efforts to develop non-infringing technology could
be unsuccessful. Our failure to obtain the necessary licenses or
other rights or to develop non-infringing technology could
prevent us from selling our products and could therefore
seriously harm our business.
Product
defects or software errors could adversely affect our
business.
Design defects or software errors may cause delays in product
introductions and project implementations, damage customer
satisfaction and may have a material adverse effect on our
business, results of operations and financial condition. Our
software products are highly complex and may, from time to time,
contain design defects or software errors that may be difficult
to detect and correct.
13
Because our products are generally used by our customers to
perform critical business functions, design defects, software
errors, misuse of our products, incorrect data from external
sources or other potential problems within or outside of our
control may arise during implementation or from the use of our
products, and may result in financial or other damages to our
customers, for which we may be held responsible. Although we
have license agreements with our customers that contain
provisions designed to limit our exposure to potential claims
and liabilities arising from customer problems, these provisions
may not effectively protect us against such claims in all cases
and in all jurisdictions. In addition, as a result of business
and other considerations, we may undertake to compensate our
customers for damages caused to them arising from the use of our
products, even if our liability is limited by a license or other
agreement. Claims and liabilities arising from customer problems
could also damage our reputation, adversely affecting our
business, results of operations and financial condition and the
ability to obtain Errors and Omissions insurance.
System
disruptions and failures may result in customer dissatisfaction,
customer loss or both, which could materially and adversely
affect our reputation and business.
Our systems are an integral part of our customers business
operations. The continued and uninterrupted performance of these
systems by our customers is critical to our success. Customers
may become dissatisfied by any system failure that interrupts
our ability to provide services to them. Sustained or repeated
system failures would reduce the attractiveness of our services
significantly and could result in decreased demand for our
products and services.
Our ability to serve our customers depends on our ability to
protect our computer systems against damage from fire, power
loss, water damage, telecommunications failures, earthquake,
terrorism attack, vandalism and similar unexpected adverse
events. Despite our efforts to implement network security
measures, our systems are also vulnerable to computer viruses,
break-ins and similar disruptions from unauthorized tampering.
Although we maintain insurance that we believe is appropriate
for our business and industry, such coverage may not be
sufficient to compensate for any significant losses that may
occur as a result of any of these events.
We have experienced systems outages and service interruptions in
the past. To date, these outages have not had a material adverse
effect on us. However, in the future, a prolonged system-wide
outage or frequent outages could cause harm to our reputation
and could cause our customers to make claims against us for
damages allegedly resulting from an outage or interruption. Any
damage or failure that interrupts or delays our operations could
result in material harm to our business and expose us to
material liabilities.
The
termination or reduction of certain government programs and tax
benefits could adversely affect our overall effective tax
rate.
There can be no assurance that our effective tax rate of 12.4%
for the year ended September 30, 2011 will not change over
time as a result of changes in corporate income tax rates or
other changes in the tax laws of Guernsey, the jurisdiction in
which our holding company is organized, or of the various
countries in which we operate.
We have benefited or currently benefit from a variety of
government programs and tax benefits that generally carry
conditions that we must meet in order to be eligible to obtain
any benefit. For example, through subsidiaries, we operate
development centers and a business processing operations center
in India. In 2011, the effective corporation tax rate applicable
in India on trading activities was 32.4%. Our subsidiaries in
India operate under specific favorable tax entitlements that are
based upon pre-approved information technology related services
activity. As a result, our subsidiary in Delhi and a business
unit we established in Pune are entitled to considerable
corporate income tax reductions for certain of their respective
eligible income, which reduce their current applicable tax rate
(cash basis) to 20%. Such favorable tax treatment is applied on
all income derived from such pre-approved information technology
activity, provided the subsidiaries continue to meet the
conditions required for such tax benefits. The benefits
applicable to our subsidiaries based in Pune expired on
March 31, 2011 and the benefits applicable to our Delhi
subsidiary and the business unit established in Pune in 2010 are
scheduled to phase out over 15 years from the commencement
of operations. Proposed changes in Indian tax law may reduce or
eliminate the availability of the noted beneficial tax rates for
our Indian subsidiaries. Please see
Item 10 Additional
Information Taxation Certain Indian Tax
Considerations for more information.
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If we fail to meet the conditions upon which certain favorable
tax treatment is based, we would not be able to claim future tax
benefits and could be required to refund tax benefits already
received. In addition, any of the following could have a
material effect on our overall effective tax rate:
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some tax benefit programs may be limited in duration or may be
discontinued,
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we may be unable to meet the requirements for continuing to
qualify for some programs,
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these programs and tax benefits may be unavailable at their
current levels, or
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upon expiration of a particular benefit, we may not be eligible
to participate in a new program or qualify for a new tax benefit
that would offset the loss of the expiring tax benefit.
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The
market price of our ordinary shares has and may continue to
fluctuate widely.
The market price of our ordinary shares has fluctuated widely
and may continue to do so. From September 30, 2009 to
November 30, 2011, our ordinary shares have traded as high
as $32.44 and as low as $24.10 per share. As of
November 30, 2011, the closing price of our ordinary shares
was $28.24 per share. Many factors could cause the market price
of our ordinary shares to rise and fall, including:
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market conditions in the industry and the economy as a whole,
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variations in our quarterly operating results,
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changes in our backlog levels,
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announcements of technological innovations by us or our
competitors,
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introductions of new products or new pricing policies by us or
our competitors,
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trends in the communications or software industries, including
industry consolidation,
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acquisitions or strategic alliances by us or others in our
industry,
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changes in estimates of our performance or recommendations by
financial analysts,
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changes in our shareholder base, and
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political developments in the Middle East or other areas of the
world.
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In addition, in recent years, the stock market has experienced
significant price and volume fluctuations. In the past, market
fluctuations have, from time to time, particularly affected the
market prices of the securities of many high technology
companies. These broad market fluctuations could adversely
affect the market price of our ordinary shares.
It may
be difficult for our shareholders to enforce any judgment
obtained in the United States against us or our
affiliates.
We are incorporated under the laws of the Island of Guernsey and
a majority of our directors and executive officers are not
citizens or residents of the United States. A significant
portion of our assets and the assets of those persons are
located outside the United States. As a result, it may not be
possible for investors to effect service of process upon us
within the United States or upon such persons outside their
jurisdiction of residence. Also, we have been advised that there
is doubt as to the enforceability in Guernsey of judgments of
the U.S. courts of civil liabilities predicated solely upon
the laws of the United States, including the federal securities
laws.
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ITEM 4.
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INFORMATION
ON THE COMPANY
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History,
Development and Organizational Structure of Amdocs
Amdocs Limited was organized as a company with limited liability
under the laws of the Island of Guernsey in 1988. Since 1995,
Amdocs Limited has been a holding company for the various
subsidiaries that conduct our business on a worldwide basis. Our
global business is providing software and services solutions to
enable
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communications companies that are major services providers in
North America, Europe and the rest of the world to move toward
an integrated approach to customer management. Our registered
office is Suite 5, Tower Hill House Le Bordage, St.
Peter Port, Guernsey, GY1 3QT, and the telephone number at that
location is +44-1481-728444.
The executive offices of our principal subsidiary in the United
States are located at 1390 Timberlake Manor Parkway,
Chesterfield, Missouri 63017, and the telephone number at that
location is +1-314-212-8328.
Our subsidiaries are organized under and subject to the laws of
several countries. Our principal operating subsidiaries are in
Canada, Cyprus, Hungary, India, Ireland, Israel and the United
States.
We have pursued and may continue to pursue acquisitions in order
to offer new products or services or otherwise enhance our
market position or strategic strengths. Since fiscal 2000, we
have completed numerous acquisitions; our principal acquisitions
since fiscal 2006 are summarized below:
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Fiscal Year
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Acquired Business
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Description of Business
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2006
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Qpass
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Software systems for digital commerce
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2006
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Cramer
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Operation support software systems
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2007
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SigValue
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Customer care, billing and service control systems for
communications providers in high-growth emerging markets
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2008
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JacobsRimell
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Fulfillment software for the broadband cable industry
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2009
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ChangingWorlds
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Mobile device personalization technology
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2010
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jNetX
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Service delivery platform provider
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2010
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MX Telecom
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Mobile payments and messaging aggregator
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2011
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Bridgewater Systems
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Policy management and network control solutions
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Our acquisitions have enabled us to expand our service offerings
and our customer base and to enhance our ability to provide
managed services solutions to our customers. Through
acquisitions, we have also expanded our presence in growing and
emerging communications markets, reinforcing our leadership in
delivering a comprehensive portfolio of business software
applications.
As the result of our organic growth and acquisitions, our
software and information technology, sales and marketing
workforce has increased since the recent economic downturn from
15,871 as of the end of fiscal 2009 to 18,051 as of the end of
fiscal 2010 to 18,361 as of the end of fiscal 2011. In the past,
our workforce has fluctuated with changes in business conditions.
Our principal capital expenditures for fiscal 2011, 2010 and
2009 have been for computer equipment in our operating
facilities and development centers, for which we spent
approximately $98.6 million, $70.6 million and
$71.5 million, respectively. We anticipate our principal
capital expenditures in fiscal 2012 will be financed internally
and will consist of additional computer equipment.
Business
Overview
Amdocs is a leading provider of software and services for
communications, media and entertainment industry service
providers. Although our market focus has traditionally been
primarily on Tier-1 and Tier-2 service providers in developed
markets, we have also focused in the last several years on
Tier-3 and Tier-4 providers in developed markets and on
providers in emerging markets, such as Latin America, the
Commonwealth of Independent States, India and Southeast Asia.
We develop, implement and manage software and services
associated with business support systems (BSS) and operational
support systems (OSS) to enable service providers to introduce
new products quickly, understand their customers more deeply,
process orders more efficiently and support new business models.
We refer to these systems collectively as customer experience
systems because of the crucial impact that these systems have on
the service providers end-user experience.
We believe the demand for our customer experience systems is
driven by the need of service providers to anticipate and
respond to consumer demands. Regardless of whether providers are
bringing their first offerings to market, scaling for growth,
consolidating systems or transforming the way they do business,
we believe that
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providers seek to differentiate their offerings by delivering a
customer experience that is simple, personal and valuable at
every point of service. We refer to this type of customer
experience as the intentional customer experience.
In a global communications industry impacted by a growing number
of connected devices and the resulting demand for increased
bandwidth, consumers expect immediate and constant connectivity
to personalized services, information and applications. We seek
to address these market forces through a strategy of innovation
from the network and business support systems to the device and
end user. We continue to introduce and enhance products and
services that deliver organizational and process improvements to
bring value to our customers as they and their
markets grow and change. Our goal is to supply
scalable offerings that provide the functionality and
flexibility to service providers that facilitate innovation and
enable cost-effective execution.
Industry
Background
Communications
Industry
As economic conditions remain uncertain, we believe that service
providers will continue to maintain a strong focus on cost
reduction and efficient operations, as seen by a number of
transformation projects planned by leading service providers
worldwide. The rise of the smartphone and communications and
entertainment applications, or apps, is already
providing unprecedented growth in data demand, while other
connected devices such as the iPad, Kindle and the improvement
in
machine-to-machine
(M2M) technologies will only further this growth in what we
refer to as the connected world. In response to the
demand for increased bandwidth, service providers, both wireline
and wireless, are investing in their networks and are searching
for ways to optimize and monetize their investment.
In recent years, non-traditional service providers and device
manufacturers have penetrated the wireless market and are now
poised to compete for customer attention in the television
market as well. Additionally, social networks such as Facebook
and Twitter are becoming widely-accepted alternatives to
traditional voice communication. To meet the challenges from new
competitors and differentiate themselves, service providers are
moving towards a model of converged services, with wireline
operators offering Internet Protocol TV services as well as the
convergence of fixed-mobile networks. Service providers are also
looking to strengthen their standing with enterprise customers
as well as exploring new opportunities in the wholesale market
and providing M2M services to new vertical market segments, such
as the health and automotive industries.
To capture new revenue streams in the connected world, service
providers will need the ability to expand within existing and
non-traditional business models; they will need to provide
customers with a simple and personalized experience across
devices, networks, screens and services, and they must continue
to build cost-efficient businesses and technical environments
that can change quickly and onboard new partners. We believe
service providers will place a greater emphasis on modernization
and transformation projects for both networks and business
support systems as they look for innovative ways to improve
operations.
As a result, we believe service providers require customer
experience systems that provide the level of integration,
flexibility and scalability needed to improve operational
efficiency and to differentiate themselves from their
competitors in an increasingly crowded marketplace. We believe
these factors create significant opportunities for vendors of
information technology software products and providers of
managed services, such as Amdocs.
The
Amdocs Offerings
We believe that our product-driven approach, commitment to and
support of quality personnel and deep industry knowledge and
expertise enable us to create and deliver effective offerings
that are highly innovative, reliable and cost-effective. In
addition, we offer software products that address the specific
business needs of service providers. We believe our success
derives from a combination of the following factors that
differentiate us from most of our competitors.
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Software Products. In fiscal 2011, we
continued to release aspects of our Amdocs CES (Customer
Experience Systems) 8 portfolio. We are planning additional
releases of Amdocs CES 8 throughout 2012. Amdocs CES 8 provides
integration between our post-paid and pre-paid billing, customer
relationship management, operational support and ordering
applications that are designed to enable our customers to
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achieve integrated customer management and deliver an
intentional customer experience. The CES 8 portfolio was
designed to enable our customers to support new business models,
devices and partnerships by centralizing common assets, such as
customer, network and product data. Our portfolio of
pre-integrated software products was built to span the entire
customer lifecycle across BSS, OSS and service delivery to align
business processes around the end customer. In addition, our
products are designed to allow modular expansion as a service
provider evolves, ensuring rapid, low-cost, reduced-risk
implementations.
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The Amdocs CES 8 portfolio is based on an open architecture that
is intended to provide the functionality, scalability,
modularity and adaptability required by service providers in
their dynamic, highly competitive markets. The open architecture
is based on the principles of service-oriented architecture
(SOA) and business process management, which helps to ensure our
products operate together or as stand-alone applications within
existing environments. We believe this flexibility enables our
customers to achieve significant
time-to-market
advantages and reduces their dependence on technical and other
personnel.
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Services. Our services include business
consulting, systems integration and delivery services, managed
services and product services to support the deployment and
operations of our products. We combine deep industry knowledge,
advanced methodologies, industry best practices and
pre-configured tools to deliver consistent results and minimize
our customers risks.
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Solution Bundles and Packs. Building on
products included in the Amdocs CES 8 portfolio, we offer
bundled solutions of products (including those of Amdocs and
third parties) and services that address specific business
issues, such as subscriber profitability, the identification of
consumer segments to be targeted, and system strengths to be
enhanced. Packs are turnkey versions of our
products, designed for fast, lower-cost implementation. We
believe that these bundled and packaged offerings provide our
customers with timely, cost-effective, relatively low-risk
solutions to specific business issues at a consistent level of
quality.
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Experience. We are able to offer our customers
superior products and services on a worldwide basis in large
part because of our highly qualified and trained technical,
sales, marketing, consulting and management personnel. We invest
significantly in the ongoing training of our personnel in key
areas such as industry knowledge, software technologies and
management capabilities. Leveraging ongoing training and
experience, we have developed a field-tested set of business
processes, tools and methodologies that we apply to all ongoing
product development and service delivery. Based in significant
part on the skills and knowledge of our workforce, we believe
that we have developed a reputation for reliably delivering
quality solutions.
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Due to the complex and dynamic nature of our customers
business needs, the products and services that we provide are
typically integrated and designed to work in concert to provide
each customer with a complete solution.
Business
Strategy
Our goal is to provide products, services and support to the
worlds leading service providers as they evolve to remain
relevant and competitive in the connected world. We seek to
accomplish our goal by pursuing the strategies described below.
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Continued Focus on the Communications, Media and
Entertainment Industry. We focus our primary
resources and efforts on providing customer experience systems
to service providers in the communications, media and
entertainment industry. This strategy has enabled us to develop
the specialized industry know-how and capability necessary to
deliver the technologically advanced, large-scale,
specifications-intensive customer experience systems required by
the leading wireless, wireline, broadband cable and satellite
companies. We consider our longstanding and continuing focus on
this industry a competitive advantage.
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Target Industry Leaders. We intend to continue
to direct our marketing efforts primarily toward communications,
media and entertainment industry leaders. By targeting such
leading service providers, which require the most sophisticated
customer experience systems, we believe that we are better able
to remain at the forefront of developments in the industry. We
derive the substantial majority of our revenues from our
customer base of major service providers. We believe that the
development of this customer base has helped position us as a
market leader, while contributing to the core strength of our
business.
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Continued Expansion into Emerging Markets. We
continue to improve our ability to serve the needs of service
providers operating in emerging markets. Prepaid subscriber
growth remains high and average revenue per user remains
relatively low in these markets in comparison to more developed
Western markets. At the same time, however, we have started to
see a shift in service provider focus as they begin to regard
the customer experience as a key competitive differentiator. Our
prospective customers in these markets vary dramatically, with
some service providers serving subscriber bases already
numbering in the hundreds of millions and others introducing
communications services to communities for the first time. We
believe this shift in focus on the customer experience and the
spectrum of emerging market service providers requires offerings
ranging from relatively low-cost systems with pre-packaged
services that can be implemented rapidly, to more robust
service, to complete customer experience systems.
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Provide Customers with a Broad, Deep Portfolio of Integrated
Products. We seek to provide our customers with a
broad, yet integrated, portfolio of products to help them
deliver an intentional customer experience. We provide customer
experience systems across the BSS, OSS and network control
domains, service delivery platforms and multiple lines of
business, including wireline, wireless, broadband cable and
satellite services. Integration of our systems is achieved
through an open, service-oriented architecture, allowing our
products to work well together and with third-party products.
This holistic approach serves to support the worlds
largest service providers throughout their often international
operations. We believe that our ability to provide a broad, deep
suite of products helps position us as a strategic partner for
our customers, and also provides us with multiple avenues for
strengthening and expanding our ongoing customer relationships.
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Leverage Our Managed Services
Capabilities. Managed services enable us to
assume responsibility for the operation and management of our
customers Amdocs systems, as well as systems developed by
in-house IT departments or by other vendors. Our customers
receive improved efficiencies and long-term savings over the
day-to-day
costs of operating and maintaining these systems, so they can
focus on their own internal strengths, leaving systems concerns
to us. Managed services also benefit us, as they can be a source
of predictable revenue and long-term relationships.
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Leverage Our Consulting Capabilities. We seek
to maintain and develop long-term, mutually-beneficial
relationships with our customers, and have organized our
internal operations to better anticipate and respond to their
needs. These relationships, which include consulting
engagements, can lead to the sale of new licenses and additional
services projects. In addition, our consultants experience
in the field is channeled into our product development process,
applying the best practices and business processes we have
accumulated over nearly 30 years to enhance the performance
of our products and improve the success of future projects for
our customers.
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Maintain and Develop Long-Term Customer
Relationships. We find that our most positive,
productive customer relationships lead to additional product
sales, as well as ongoing, long-term support, system enhancement
and maintenance, and managed services agreements. We believe
that such relationships are facilitated in many cases by the
mission-critical, strategic nature of Amdocs systems and by the
added value we provide through our specialized skills and
knowledge. We believe that the longevity of our customer
relationships and the recurring revenue that such relationships
produce provide a competitive advantage for us.
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Products
Our product offerings consist of an extensive software portfolio
that we have developed to provide comprehensive customer
experience systems functionality for service providers. Our
software systems support the full span of the customer
lifecycle: revenue management, customer management, operations
support and service delivery. Further, our systems support
portfolio enablers which consist of offerings to help service
providers make intelligent decisions, manage the product
lifecycle and simplify the integration, operation and
administration of applications. We also provide solutions for
high growth and emerging markets, as well as advertising and
media solutions for directory publishers.
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Our products focus on:
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Revenue Management: Products that enable
service providers to manage and collect all sources of revenue
through any channel, from service consumption to
cash-in-hand.
Amdocs Revenue Management offerings include:
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Convergent Charging and Billing: facilitates
the purchase, consumption and payment for all customer types,
services and payment methods, including pre-paid and post-paid,
across multiple lines of business.
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Mediation: enables service providers to
address BSS/OSS data processing and event handling needs across
all lines of business and to transform raw network data into
actionable business information that can be used to authorize
events on the network, bill a customer or pay a content provider.
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Partner Relationship Management: enables
end-to-end
partner lifecycle management for different aspects of
partnership relationships, including interconnect, roaming,
wholesale and mobile virtual network operator (MVNO) (a mobile
service provider that does not have its own spectrum), content
and advertising and dealer management.
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Compact Convergence: is a real-time converged
billing and service delivery solution for small to medium-sized
service providers, MVNOs and for mobile virtual network enablers
that provide services to MVNOs. This offering features
out-of-the-box
essential business functionality, such as invoicing and
provisioning, customer care, self Web-care and reporting
capabilities.
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Customer Management: Products that transform
the way service providers deliver a cost-effective, superior
customer experience across all interaction channels and touch
points. Amdocs Customer Management offerings include:
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Customer Care: provides a one-stop
shop solution that delivers a complete view of the
customer across all lines of business, enabling customer service
representatives to deliver personalized service from a single,
intuitive desktop application.
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Sales and Ordering: provides the complete
order-to-cash
cycle from a business or an end customer across all lines of
business by capturing orders initiated from any channel,
validating customer orders and sending requests to the
appropriate system for completion.
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Operation Support Systems (OSS): Products that
comprise the core operational support systems, such as network
planning, service fulfillment and assurance. Amdocs OSS
offerings include:
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Network Planning: enables network planners to
analyze current, short- and long-term consumption trends of
network resources and to plan and roll out a service-ready
network.
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Service Fulfillment: includes pre-packaged
automation for specific services and lines of business,
including broadband, satellite and cable; also supports the
fulfillment of multiple services, either to support a convergent
services bundle, or to standardize fulfillment across the
organization with a single interface to orchestrate all
fulfillment processes.
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Service Assurance: supports service assurance
by managing the problem resolution process, including impact
analysis to assess what services are affected by outages.
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Inventory and Discovery: provides a single
source of service and network inventory and performance data, to
support network planning and service fulfillment and assurance.
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Service Order Management: provides an
automated,
end-to-end
solution to manage the entire order fulfillment lifecycle,
including multiple order channels and lines of business.
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Network Control: Portfolio of products that
feature network controls to manage how and under which
circumstances subscribers and devices can access networks, and
dynamic policy controls that manage what happens to the device
or subscriber when on the network, such as bandwidth usage
controls. The portfolio
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features Service Controller (AAA), Policy Controller (PCRF) and
Home Subscriber Server (HSS), anchored by a common identity
management system that stores subscriber plan, location and
other data. We believe that by combining recently acquired
Bridgewaters real-time network and policy control
capabilities with Amdocs convergent charging technology,
service providers will be able to accelerate data monetization
with innovative services based on a complete view of the
customer, including his or her plan, preferences and real-time
data experience status.
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Service Delivery: Solutions that help service
providers solve delivery challenges for Internet Protocol (IP)
and next-generation services, often known as Telco 2.0. Our
service delivery offerings include:
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Convergent Service Platform: provides a
standards-based Java service platform for developing and
deploying innovative end-user applications across any network
topology. Deployed in the network, the platform gives service
providers the ability to transform business models without
affecting their BSS and OSS configurations.
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Convergent Applications: runs on the Amdocs
Convergent Service Platform, providing network-based
applications for fixed, mobile and emerging devices; includes a
broad suite of call-control applications and charging-based
applications, helping service providers move away from legacy
environments and fully leverage and monetize all their network
assets.
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Digital Services: provides a complete portal,
storefront, commerce search and advertising platform that allows
service providers to provide a personalized digital experience;
supports mobile, broadband and IPTV.
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Portfolio Enablers: Products that serve as the
underlying drivers for technology innovation across the Amdocs
CES portfolio of offerings. These products provide the
foundation, enablers and building blocks to quickly create and
modify business processes, provide a single customer view and
effectively manage products to deliver an intentional customer
experience and achieve
time-to-market
advantage.
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Advertising
and Media Solutions
Our advertising and media offerings for local marketing service
providers and search and directory publishers are comprised of a
comprehensive set of products and services designed to enable
the management of the media selling, fulfillment, consumer
experience and financial processes across online, print and
mobile media. These directory systems offerings include:
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Sales Productivity: Offerings that enable cost
effective sales operations within media sales organizations
through innovative sales tools and best practice sales processes.
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Business Agility: Sales, CRM, ordering,
product lifecycle management, fulfillment, content management,
campaign management and billing offerings that enhance the
productivity and cost efficiency of digital and print local
marketing service providers.
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Consumer Engagement and
Monetization: Offerings that enable local search
and directory publishers to add advanced search, ad serving,
mobile and social lead generation functionalities to the
consumers local search experience, and to scale up partner
content syndication and advertising networks.
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Technology
Our portfolio architecture is designed to increase our
customers business agility and lower their overall total
cost of ownership. Our technology platform allows our
applications to work in multiple customer environments,
including:
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Hardware: IBM, Hewlett-Packard, Oracle/Sun,
Intel
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Operating Systems: IBM AIX, HP-UX, Solaris,
Windows, Red Hat Linux
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Database Management Systems: Oracle, SQL
Server, IBM UDB
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Middleware: Oracle WebLogic, IBM WebSphere
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Storage: EMC, NetApp, IBM, Hewlett-Packard
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We believe our technology platforms flexibility affords
our customers the freedom to choose a preferred operating
environment and to maximize return on existing infrastructure
investments. To help service providers
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respond more quickly to changes in their markets and lower their
integration costs, we employ service-oriented architecture
principles in our portfolio design. For example, Amdocs
Integration Framework includes a central service repository for
defining business services for both Amdocs and external
applications, allowing our applications to integrate with each
other and with third party enterprise server bus or legacy
applications.
Our portfolio applications are based around consistent
architectural guidelines and software infrastructure and they
also leverage, where appropriate, consistent foundation tools
and services for areas such as integration, process management,
monitoring and control, security and information management. Our
platform-agnostic foundation layer spans our applications and
helps us evolve our products towards robust service-oriented
architecture integration and business process support. With
these tools, we aim to provide our customers a sound framework
upon which to implement, integrate and centralize their
operating environments. This allows service providers to
mitigate many costs associated with deploying and operating new
applications, such as those related to installation,
configuration, integration and monitoring.
Our product portfolio also includes the following key
characteristics:
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Scalability. Our applications are designed to
take full advantage of the scalability capabilities of the
underlying platform, allowing progressive system expansion,
proportional with the customers growth in business
volumes. Using the same software, our applications can support
operations for small, as well as very large service providers.
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Modularity. Our product portfolio is comprised
of sets of individual functional application products. Each of
our applications can be installed on an individual stand-alone
basis, interfacing with the customers existing systems, or
as part of an integrated Amdocs system environment. This
modularity provides our customers with a highly flexible and
cost-effective solution that is able to incrementally expand
with the customers growing needs and capabilities. The
modular approach preserves the customers initial
investment in products, while minimizing future disruptions and
the overall cost of system implementation.
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Portability. Our applications support diverse
hardware and operating systems to ensure that our customers can
choose from a variety of vendors.
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Openness. Our product portfolio can integrate
with other industry products to benefit customers that prefer a
best of breed solution. Partner selection is based
on the preferences of our customers.
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Services
We offer a broad suite of services to advise, transform, support
and optimize business and technology processes. We provide
consulting, systems integration, delivery services, managed
services and product support to assist our customers with their
business strategy, system implementation, integration,
modification, consolidation, modernization and ongoing support,
enhancement and maintenance needs. In addition, we offer
comprehensive learning services to help our customers develop
competency in their Amdocs systems and applications. Our
services methodology incorporates rigorous focus on the people,
processes and technology of an organization, and we invite
active customer participation at all stages to help prioritize
and implement time-critical system solutions that address the
customers individual needs.
Our services portfolio includes:
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Business Consulting Services These services
span the project lifecycle and range from assessment and
advisory services to optimization services that measure and
improve operational performance, and help to define the project
scope and implementation path of business solutions to deliver
tangible operations improvements.
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System Integration Services This suite of
services allows us to act as a prime integrator from project
deployment to implementation and operations. These services span
the entire business lifecycle, including vision and strategy,
transformation and delivery and management and optimization. We
have developed advanced methodologies, industry best practices
and pre-configured tools to deliver a cohesive implementation
plan, including solution, architecture, change management and
business benefit realization.
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Managed Services This set of flexible
strategic sourcing services is uniquely tailored for the service
provider industry to outsource the performance and management of
their support business functions, operations and infrastructure
support across all environments, whether Amdocs systems or other
implementations. Managed services offerings include
comprehensive software and other services related to the managed
operations, such as IT and infrastructure management,
application management and ongoing support, systems
modernization and consolidation, business process operation
support, end to end transformational business process
outsourcing (BPO), IT outsourcing (ITO) and delivery. Our
managed services models can be leveraged to support
day-to-day
operations and to foster strategic business objectives.
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Product Support Services These services are
designed to help our customers solve key challenges and to
protect and maximize their investment in our products throughout
the entire product life cycle. Our global product support
organization uses certified methodologies and provides support
options, including online services and personalized interactions.
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The extent of services provided varies from customer to
customer. Our services engagements can range in size and scope
from deploying single point solutions to orchestrating
large-scale transformation projects. Depending on the
customers needs, system implementation and integration
activities are often conducted jointly by teams from Amdocs and
the customer. Implementation and integration activities include
project management, development of training methods and
procedures, design of work flows, hardware planning and
installation, network and system design and installation, system
conversion and documentation. In some cases, Amdocs personnel
provide support services to the customers own
implementation and integration team, which has primary
responsibility for the task. In other cases, we take a primary
role in facilitating implementation and integration. In yet
other instances, customers require turnkey solutions, in which
case we provide full system implementation and integration
services.
Once the system becomes operational, we are generally retained
by the customer to provide ongoing services, such as
maintenance, enhancement design and development and operational
support. For a substantial number of our customers, the
implementation and integration of an initial system has been
followed by the sale of additional systems and modules. We aim
to establish long-term maintenance and support contracts with
our customers. These contracts generally involve an expansion in
the scope of support provided, while also providing us with
recurring revenue.
Our business is conducted on a global basis. We maintain
development and support facilities worldwide, including Brazil,
Cyprus, India, Ireland, Israel and the United States, and have
operations in North America, Europe, Israel, Latin America and
the Asia-Pacific region.
Sales
and Marketing
Our sales and marketing activities are primarily directed at
major communications, media and entertainment companies. As a
result of the strategic importance of our customer experience
systems to the operations of these companies, a number of
constituencies within a customers organization are
typically involved in purchasing decisions, including senior
management, information systems personnel and user groups, such
as the finance, customer service and marketing departments. We
maintain sales offices in the United States, Europe, Latin
America and Asia Pacific.
Our sales activities are supported by marketing efforts and
increasing cooperation with strategic partners. We interact with
other third parties in our sales activities, including
independent sales agents, information systems consultants
engaged by our customers or prospective customers and systems
integrators that provide complementary products and services to
such customers. We also have value-added reseller agreements
with certain hardware and database vendors. Our marketing
activities also continue to support projects with partner
companies, such as IBM, Alcatel-Lucent, Hewlett-Packard and
others.
Customers
Our target market is comprised of service providers in the
communication, media and entertainment industry that require
customer experience systems with advanced functionality and
technology. The companies in our target segment are typically
market leaders. By working with such companies, we help ensure
that we remain at the
23
forefront of developments in the communication, media and
entertainment industry and that our product offerings continue
to address the markets most sophisticated needs. We have
an international orientation. We have a broad base of customers
in North America and Europe, however, due to our expansion in
emerging markets, we also have customers in geographies as
diverse as the Commonwealth of Independent States, India, Latin
America and Southeast Asia.
Our customers include global communications leaders and leading
network operators and service providers, as well as directory
publishers in the United States and around the world. Our
customers include:
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America Movil
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DexOne
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AT&T
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Rogers
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Bakcell
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Sprint Nextel
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Bell Canada
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Telefonica de Espana
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BT
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|
Telefonica 02 Germany
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Cablevision
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Telkom South Africa
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Cellcom
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Telstra
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Claro Brazil
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TELUS
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Clearwire
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T-Mobile
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Comcast
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TIM Brasil
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Deutsche Telekom
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US Cellular
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DIRECTV
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Verizon Communications
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Elisa
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VimpelCom
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Instituto Costarricense de Electricidad
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Virgin Media
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J:COM
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Vodafone Germany
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Kazakhtelecom
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Vodafone Netherlands
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KPN
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Vodafone UK
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MetroPCS
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XL Axiata
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Our business is dependent on a limited number of significant
customers, of which AT&T has historically been our largest.
AT&T accounted for 29% of our revenue in fiscal 2011 and
2010. In fiscal 2011, our two next largest customers were Bell
Canada and Sprint Nextel, and certain of their subsidiaries,
each of which accounted for approximately 10% or more of our
revenue in fiscal 2011. Revenue from Bell Canada will be
negatively affected by a scheduled price reduction under our
contract with Bell Canada to be effective in fiscal 2012.
Aggregate revenue derived from the multiple business
arrangements we have with our ten largest customers accounted
for approximately 73% of our revenue in fiscal 2011 and 75% of
our revenue in fiscal 2010. The following is a summary of
revenue by geographic area. Revenue is attributed to geographic
region based on the location of the customer:
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|
|
|
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2011
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2010
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2009
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North America
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73.4
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%
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|
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75.8
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%
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75.3
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%
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Europe
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|
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12.7
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|
|
|
11.8
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|
|
|
13.8
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Rest of the World
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|
|
13.9
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|
|
|
12.4
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|
|
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10.9
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Competition
The market for customer experience systems and services in the
communication, media and entertainment industry continues to
become increasingly more competitive. Amdocs competitive
landscape is comprised of internal IT departments of large
communication companies as well as independent competitors that
can be categorized as follows:
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providers of BSS/OSS systems, including Comverse, Convergys, CSG
Systems, Ericsson/Telcordia and Oracle;
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24
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system integrators and providers of IT services, such as
Accenture, Cognizant, Hewlett-Packard, Huawei, IBM Global
Services, Infosys, Tata Consultancy Services, Tech Mahindra Ltd
and Wipro (some of whom we also cooperate with in certain
opportunities and projects); and
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network equipment providers such as Alcatel-Lucent, Ericsson,
Huawei, Nokia Siemens, NEC and ZTE (some of whom we also
cooperate with in certain opportunities and projects).
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We expect the competition in our industry to increase from such
companies.
We believe that we are able to differentiate ourselves from
these competitors by, among other things:
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applying our nearly 30-year heritage to the development and
delivery of products and professional services that enable our
customers to achieve service differentiation by means of an
intentional customer experience,
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focusing on communications service providers and continuing to
design and develop solutions targeted specifically to this
industry,
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innovating and enabling our customers to adopt new business
models that will improve their ability to drive new revenues,
and compete and win in a changing market,
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providing high-quality, reliable, scalable, integrated, yet
modular applications,
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providing flexible and tailored IT and business process
outsourcing solutions and delivery models, and
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offering customers
end-to-end
accountability from a single vendor.
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We compete with a number of companies that have long operating
histories, large customer bases, substantial financial,
technical, sales, marketing and other resources, and strong name
recognition. Some of these companies are continuing their
attempts to expand their market penetration in the
communications industry. Current and potential competitors have
established, and may establish in the future, cooperative
relationships among themselves or with third parties to increase
their ability to address the needs of our existing or
prospective customers. Accordingly, new competitors or alliances
among competitors may emerge and rapidly acquire significant
market share. There can be no assurance that we will be able to
compete successfully with existing or new competitors. Our
failure to adapt to changing market conditions and compete
successfully with established or new competitors would have a
material adverse effect on the results of our operations and
financial condition.
Employees
We invest significant resources in the training, retention and
motivation of high quality personnel. Training programs cover
areas such as technology, applications, development methodology,
project methodology, programming standards, industry background,
business, management development and leadership. Our management
development efforts are reinforced by an organizational
structure that provides opportunities for talented managers to
gain experience in general management roles. We also invest
considerable resources in personnel motivation, including
providing various incentive plans for sales staff and high
quality employees. Our future success depends in large part upon
our continuing ability to attract and retain highly qualified
managerial, technical, sales and marketing personnel and
outstanding leaders.
See Directors, Senior Management and Employees
Workforce Personnel for further details regarding our
employees and our relationships with them.
Research
and Development, Patents and Licenses
Our research and development activities involve the development
of new software architecture, modules and product offerings in
response to an identified market demand, either as part of our
internal product development programs or in conjunction with a
customer project. We also expend additional amounts on applied
research and software development activities to keep abreast of
new technologies in the communications markets and to provide
new and enhanced functionality to our existing product offerings.
25
In fiscal 2011, we continued to release aspects of our Amdocs
CES (Customer Experience Systems) 8 portfolio. We are
planning additional releases of Amdocs CES 8 throughout 2012. We
dedicated significant efforts and resources to the integration
among CES 8 portfolio including deeper integration between our
charging and billing, customer relationship management, ordering
and foundation applications. The CES 8 portfolio was designed to
enable our customers to support new business models, devices and
partnerships by centralizing common assets, such as customer,
network and product data. Our portfolio of pre-integrated
software products was built to span the entire customer
lifecycle across BSS and OSS to align their business processes
around the end customer. Our products are designed to allow
modular expansion as a service provider evolves, ensuring rapid,
low-cost, reduced-risk implementations. In addition, Amdocs
focuses on offering business solutions that leverage
functionality from across the CES portfolio combined with
services and industry knowledge. These business solutions
address larger business problems and provide greater value to
our customers.
Our next major product portfolio release will address additional
challenges and opportunities of the connected world by
delivering enhanced functionality to enable our customers to
implement more cost-effective innovative solutions relating to
network monetization and enhanced customer experience. For
software development, Amdocs uses Agile, a software development
methodology based on iterative and incremental development where
requirements and solutions evolve through collaboration between
self-organizing, cross-functional teams.
The majority of our research and development expenditures is
directed at our customer experience systems, and the remainder
is directed at directory solutions. 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.
Our products are largely comprised of software and systems that
we have developed or acquired and that we regard as proprietary.
Our software and software systems are the results of long and
complex development processes, and although our technology is
not significantly dependent on patents or licenses from third
parties, certain aspects of our products make use of readily
available software components licensed from third parties. As a
developer of complex software systems, third parties may claim
that portions of our systems infringe their intellectual
property rights. The ability to develop and use our software and
software systems requires knowledge and professional experience
that we believe is unique to us and would be very difficult for
others to independently obtain. However, our competitors may
independently develop technologies that are substantially
equivalent or superior to ours. We have taken, and intend to
continue to take, several measures to establish and protect our
proprietary rights in our products and technologies from
third-party infringement. We rely upon a combination of
trademarks, patents, contractual rights, trade secret law,
copyrights and nondisclosure agreements. We enter into
non-disclosure and confidentiality agreements with our
customers, employees and marketing representatives and with
certain contractors with access to sensitive information; and we
also limit customer access to the source code of our software
and software systems.
See the discussion under Operating and Financial Review
and Prospects Research and Development, Patents and
Licenses.
26
Property,
Plants and Equipment
Facilities
We lease land and buildings for our executive offices, sales,
marketing, administrative, development and support centers. We
lease an aggregate of approximately 2.8 million square feet
worldwide, including significant leases in the United States,
Israel, Canada, Cyprus, India and the United Kingdom. Our
aggregate annual lease costs with respect to our properties as
of October 31, 2011, including maintenance and other
related costs, were approximately $58 million. The
following table summarizes information with respect to the
principal facilities leased by us and our subsidiaries as of
October 31, 2011:
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Area
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Location
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(Sq. Feet)
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|
United States:
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St. Louis, MO
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91,928
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San Jose, CA(*)
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112,120
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Champaign, IL
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178,063
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Eldorado Hills, CA(*)
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113,291
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Others
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210,457
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Total
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705,859
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Israel:
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Raanana
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674,413
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Hod-Hasharon
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81,138
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Haifa
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38,147
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|
Others(*)
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108,665
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|
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Total
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902,363
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|
Canada:
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|
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Toronto(*)
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76,317
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|
Montreal
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59,537
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|
Ottawa
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40,422
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|
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|
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Total
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176,276
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|
Cyprus (Limassol)
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74,675
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India:
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|
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Pune
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|
548,277
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|
Delhi
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|
|
134,533
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|
|
|
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|
Total
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|
|
682,810
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|
United Kingdom(*)
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|
|
79,095
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|
Rest of the world(*)(**)
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|
|
186,323
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|
|
|
|
|
|
Total
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|
|
2,807,401
|
|
|
|
|
(*) |
|
Includes space sublet to third parties. |
|
(**) |
|
Primarily includes Australia, Austria, Brazil, China, Czech
Republic, France, Indonesia, Ireland, Malaysia, Mexico,
Netherlands, Russia, and South Africa. |
Our leases expire on various dates between calendar years 2011
through 2020, not including various options to terminate or
extend lease terms.
Equipment
We develop our customer experience systems over a system of
UNIX, Linux and Windows servers owned or leased by us. We use a
variety of software products in our development centers,
including products by Microsoft,
27
Oracle, Synscsort, RedHat, CA, IBM and Hewlett-Packard. Our data
storage is based on equipment from EMC, SUN, NetApp, IBM,
Hitachi and Hewlett-Packard. Our development servers are
connected to more than 20,000 personal computers owned or
leased by us.
Automatic tape libraries and virtual tape libraries (VTL)
provide full and incremental backups of the data used in and
generated by our business. The backup tapes are kept
on-site and
off-site, as appropriate, to ensure security and integrity, and
are used as part of our disaster recovery plan. The distributed
development sites that we operate worldwide are connected by a
high-speed redundant wide area network, using telecommunication
equipment manufactured by, among others, Cisco and Avaya.
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ITEM 4A.
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UNRESOLVED
STAFF COMMENTS
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Not applicable.
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ITEM 5.
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OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
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Overview
of Business and Trend Information
Amdocs is a leading provider of software and services for
communications, media and entertainment industry service
providers. Although our market focus has traditionally been
primarily on Tier-1 and Tier-2 service providers in developed
markets, we have also focused in the last several years on
Tier-3 and Tier-4 providers in developed markets, and on
providers in emerging markets, such as the Commonwealth of
Independent States, India, Latin America and Southeast Asia.
Regardless of whether providers are bringing their first
offerings to market, scaling for growth, consolidating systems
or transforming the way they do business, we believe that
providers seek to differentiate their offerings by delivering a
customer experience that is simple, personal and valuable at
every point of service. We refer to this type of customer
experience as the intentional customer experience.
We develop, implement and manage software and services
associated with business support systems (BSS) and operational
support systems (OSS), to enable service providers to introduce
new products quickly, understand their customers more deeply,
process orders more efficiently and support new business models.
We refer to these systems collectively as customer experience
systems because of the crucial impact that these systems have on
the service providers end-user experience.
In a global communications industry impacted by unprecedented
growth in data demand, increasing number of connected devices,
improvement in M2M technologies, the rising influence of device
makers and
over-the-top
players that bypass traditional television providers, consumers
expect immediate and constant connectivity to personalized
services, information and applications. To capture new revenue
streams in this connected world, service providers will need the
ability to expand within existing and non-traditional business
models as they simultaneously attempt to reduce their costs in
providing current and new services. We seek to address these
market forces through a strategy of innovation from the network
and business support systems to the device and end user. Our
goal is to supply cost-effective, scalable software products and
services that provide functionality and flexibility to service
providers as they and their markets grow
and change.
In part, we have sought to expand both our functionality and
geographic markets through acquisitions. Since 1999, we have
completed numerous acquisitions, which, among other things, have
expanded our business into customer care and billing solutions
for cable and satellite companies and enhanced our offerings in
the OSS, digital content and commerce markets and high growth
emerging markets. In fiscal 2011, we acquired Bridgewater
Systems, a Canadian-based provider of policy management and
network control solutions. 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.
Please see Note 3 to our consolidated financial statements
for more information regarding our acquisitions.
28
Offerings
Amdocs offerings of software and related services consist
of:
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A complete, modular yet integrated portfolio of customer
experience systems, including revenue management (convergent
charging and billing, mediation, and partner relationship
management), customer management (customer care, and sales and
ordering), OSS (network planning, service fulfillment, service
assurance, inventory and discovery, service order management and
OSS systems integration services), service delivery (convergent
service platform, digital services, and convergent
applications), portfolio enablers and network control.
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A comprehensive line of services. Because our customers
projects are complex and require systems support expertise, we
provide business process and information technology, or IT,
services, including consulting, systems integration and delivery
services, managed services and product support to assist our
customers with their business strategy, system implementation,
integration, modification, consolidation, modernization, ongoing
support, enhancement and maintenance needs. In addition, we
offer comprehensive learning services to help our customers
develop competency in their Amdocs systems and applications.
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We have designed our customer experience systems to meet the
high-volume, complex needs of Tier-1 and Tier-2 service
providers and to address the unique issues of service providers
in high growth emerging markets. We support our customers
various lines of business, including wireline, wireless, cable
and satellite, and a wide range of communication services,
including voice, video, data, broadband, content, electronic and
mobile commerce applications. In addition, we support companies
that offer bundled or convergent service packages.
We also offer advertising and media products and services for
local marketing service providers and search and directory
publishers designed to enable those providers and publishers to
manage the entire media selling, fulfillment, consumer
experience and financial processes across online, print and
mobile media.
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, media and entertainment
industry. In fiscal 2011, customers in North America accounted
for 73.4% of our revenue, while customers in Europe and the rest
of the world accounted for 12.7% and 13.9%, respectively.
Customers in emerging markets accounted for 8.6% of our revenue
in fiscal 2011. We maintain development facilities in Brazil,
Cyprus, India, Ireland, Israel and the United States.
Historically, AT&T has been our largest customer,
accounting for 29% of our revenue in fiscal 2010 and 2011.
Aggregate revenue derived from the multiple business
arrangements we have with our ten largest customers accounted
for approximately 73% of our revenue in fiscal 2011 and 75% of
our revenue in fiscal 2010.
We believe that demand for our customer experience systems is
primarily driven by the following key factors:
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Industry transformation, including:
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increasing use of communications and content services,
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widespread access to content, information and applications,
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continued rapid growth in emerging markets,
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expansion into new lines of business
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consolidation among service providers in established markets,
often including companies with multi-national operations,
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increased competition, including non-traditional players,
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continued bundling and blending of communications and
entertainment, and
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continued commoditization and pricing pressure.
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Technology advances, such as:
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emergence and development of new communications products and
services, such as web services, video, broadband, data and
content services, including
IP-based
services, such as Internet Protocol (IP), Internet
|
29
|
|
|
|
|
Protocol Television (IPTV),
machine-to-machine
(M2M), worldwide interoperability for microwave access (WiMax)
and Voice over IP (VoIP),
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evolution to and expansion of more sophisticated and connected
communication devices, such as smart devices, electronic book
readers, energy meters, global positioning systems and home
security systems that enable communication across and between
devices and widespread access to information,
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|
evolution to next-generation networks, such as IP Multimedia
Subsystem (IMS), that enable converged services offerings, such
as fixed-mobile convergence, and
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|
technological changes, such as the introduction of 3G and 4G
wireless technology, next-generation content systems, FTTx,
Carrier Ethernet, WiMax-, and LTE-based access technologies.
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Customer focus, such as:
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|
the need for service providers to focus on their customers in
order to build profitable customer relationships,
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|
the need for service providers to have a unified view of the
customer across multiple services, devices and channels,
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|
the authority shift toward the consumer, with
increased customer expectations for new, innovative services and
applications that are personally relevant and that can be
accessed anytime, anywhere and from any device,
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the ever-increasing expectation of customer service and support,
including access to self-service options that are convenient and
consistent across all channels, and
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the need for service providers to differentiate themselves by
creating a unique and mutually-valuable customer experience.
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The need for operational efficiency, including:
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|
the shift from in-house management to vendor solutions,
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|
business needs of service providers to reduce costs and lower
total cost of ownership of software systems while retaining
high-value customers in a highly competitive environment,
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automating and integrating business processes that span service
providers BSS and OSS systems and create a simple,
one-company face to customers,
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implementing and integrating new next-generation networks (and
retiring legacy networks) to deploy new technologies, and
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transforming fragmented legacy OSS systems to introduce new
services in a timely and cost-effective manner.
|
In fiscal 2011, our total revenue was $3.18 billion, of
which $2.98 billion, or 93.7%, was attributable to the sale
of customer experience systems. Revenue from managed services
arrangements (for customer experience systems and directory
systems) is included in both license and service revenue.
Revenue generated in connection with managed services
arrangements is a significant part of our business generating
substantial, long-term recurring revenue streams and cash flow.
Revenue from managed services arrangements accounted for
approximately $1.52 billion and $1.40 billion of
revenue in fiscal 2011 and 2010, respectively. In managed
services contracts revenue from the operation of a
customers system is recognized as services are performed
based on time elapsed, output produced or volume of data
processed. In the initial period of our managed services
projects, we often invest in modernization and consolidation of
the customers systems. Managed services engagements can be
less profitable in their early stages; however, margins tend to
improve over time, more rapidly in the initial period of an
engagement, as we derive benefit from the operational
efficiencies and from changes in the geographical mix of our
resources.
30
Research
and Development, Patents and Licenses
Our research and development activities involve the development
of new software architecture, modules and product offerings in
response to an identified market demand, either as part of our
internal product development programs or in conjunction with a
customer project. We also expend additional amounts on applied
research and software development activities to keep abreast of
new technologies in the communications markets and to provide
new and enhanced functionality to our existing product offerings.
In fiscal 2011, we continued to release aspects of our Amdocs
CES (Customer Experience Systems) 8 portfolio. We are
planning additional releases of Amdocs CES 8 throughout 2012. We
dedicated significant efforts and resources to the integration
among CES 8 portfolio including deeper integration between our
charging and billing, customer relationship management, ordering
and foundation applications. The CES 8 portfolio was designed to
enable our customers to support new business models, devices and
partnerships by centralizing common assets, such as customer,
network and product data. Our portfolio of pre-integrated
software products was built to span the entire customer
lifecycle across BSS and OSS to align their business processes
around the end customer. Our products are designed to allow
modular expansion as a service provider evolves, ensuring rapid,
low-cost, reduced-risk implementations. In addition, Amdocs
focuses on offering business solutions that leverage
functionality from across the CES portfolio combined with
services and industry knowledge. These business solutions
address larger business problems and provide greater value to
our customers.
Our next major product portfolio release will address additional
challenges and opportunities of the connected world by
delivering enhanced functionality to enable our customers to
implement more cost-effective and innovative solutions relating
to network monetization and enhanced customer experience. For
software development, Amdocs uses Agile, a software development
methodology based on iterative and incremental development where
requirements and solutions evolve through collaboration between
self-organizing, cross-functional teams.
The majority of our research and development expenditures is
directed at our customer experience systems, and the remainder
is directed at directory solutions. 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.
31
Operating
Results
The following table sets forth for the fiscal years ended
September 30, 2011, 2010 and 2009, certain items in our
consolidated statements of income reflected as a percentage of
total revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
|
3.8
|
%
|
|
|
3.4
|
%
|
|
|
4.7
|
%
|
Service
|
|
|
96.2
|
|
|
|
96.6
|
|
|
|
95.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Cost of service
|
|
|
65.0
|
|
|
|
63.8
|
|
|
|
64.0
|
|
Research and development
|
|
|
7.0
|
|
|
|
7.0
|
|
|
|
7.3
|
|
Selling, general and administrative
|
|
|
12.9
|
|
|
|
12.5
|
|
|
|
12.0
|
|
Amortization of purchased intangible assets and other
|
|
|
2.3
|
|
|
|
2.9
|
|
|
|
3.0
|
|
Restructuring charges and in-process research and development
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87.3
|
|
|
|
86.3
|
|
|
|
87.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
12.7
|
|
|
|
13.7
|
|
|
|
12.8
|
|
Interest and other expense, net
|
|
|
0.3
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
12.4
|
|
|
|
12.9
|
|
|
|
12.8
|
|
Income taxes
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
10.9
|
%
|
|
|
11.5
|
%
|
|
|
11.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
Fiscal
Years Ended September 30, 2011 and 2010
The following is a tabular presentation of our results of
operations for the fiscal year ended September 30, 2011,
compared to the fiscal year ended September 30, 2010.
Following the table is a discussion and analysis of our business
and results of operations for these years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
Increase (Decrease)
|
|
|
|
2011
|
|
|
2010
|
|
|
Amount
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
119,237
|
|
|
$
|
100,967
|
|
|
$
|
18,270
|
|
|
|
18.1
|
%
|
Service
|
|
|
3,058,491
|
|
|
|
2,883,256
|
|
|
|
175,235
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,177,728
|
|
|
|
2,984,223
|
|
|
|
193,505
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license
|
|
|
2,627
|
|
|
|
2,021
|
|
|
|
606
|
|
|
|
30.0
|
|
Cost of service
|
|
|
2,066,740
|
|
|
|
1,903,645
|
|
|
|
163,095
|
|
|
|
8.6
|
|
Research and development
|
|
|
221,886
|
|
|
|
207,836
|
|
|
|
14,050
|
|
|
|
6.8
|
|
Selling, general and administrative
|
|
|
409,465
|
|
|
|
373,585
|
|
|
|
35,880
|
|
|
|
9.6
|
|
Amortization of purchased intangible assets and other
|
|
|
72,646
|
|
|
|
86,703
|
|
|
|
(14,057
|
)
|
|
|
(16.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,773,364
|
|
|
|
2,573,790
|
|
|
|
199,574
|
|
|
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
404,364
|
|
|
|
410,433
|
|
|
|
(6,069
|
)
|
|
|
(1.5
|
)
|
Interest and other expense, net
|
|
|
8,657
|
|
|
|
25,135
|
|
|
|
(16,478
|
)
|
|
|
(65.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
395,707
|
|
|
|
385,298
|
|
|
|
10,409
|
|
|
|
2.7
|
|
Income taxes
|
|
|
49,042
|
|
|
|
41,392
|
|
|
|
7,650
|
|
|
|
18.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
346,665
|
|
|
$
|
343,906
|
|
|
$
|
2,759
|
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue. Total revenue increased by
$193.5 million, or 6.5%, to $3,177.7 million in fiscal
2011, from $2,984.2 million in fiscal 2010. The increase in
revenue was primarily attributable to revenue related to
existing and new managed services arrangements and to a lesser
extent to revenue related to implementation and integration
projects. Our fiscal 2011 revenue was also positively impacted
by foreign exchange fluctuations.
License revenue in fiscal 2011 increased by $18.2 million,
or 18.1%, to $119.2 million, from $101.0 million in
fiscal 2010. The increase in license revenue was primarily
attributable to new implementation and integration projects.
License and service revenue attributable to the sale of customer
experience systems increased by $203.0 million, or 7.3%, to
$2,978.3 million in fiscal 2011, from $2,775.3 million
in fiscal 2010. The increase in revenue was primarily
attributable to revenue related to existing and new managed
services arrangements, and to a lesser extent to revenue related
to implementation and integration projects. License and service
revenue resulting from the sale of customer experience systems
represented 93.7% and 93.0% of our total revenue in fiscal 2011
and 2010, respectively.
License and service revenue from the sale of directory systems
decreased by $9.5 million, or 4.6%, to $199.4 million
in fiscal 2011, from $208.9 million in fiscal 2010. The
decrease was primarily attributable to a decrease in revenue
from existing customers. License and service revenue from the
sale of directory systems represented 6.3% and 7.0% of our total
revenue in fiscal 2011 and 2010, respectively.
In fiscal 2011, revenue from customers in North America, Europe
and the rest of the world accounted for 73.4%, 12.7% and 13.9%,
respectively, of total revenue, compared to 75.8%, 11.8% and
12.4%, respectively, for fiscal 2010. The increase in revenue as
a percentage of total revenue from customers in Europe and the
rest of the world, of which a significant portion was from
emerging markets, was primarily attributable to revenue related
to
33
new implementation and integration projects as well as to new
managed services arrangements. Revenue from North American
customers, in absolute amounts, increased during fiscal 2011,
primarily from existing and new implementation and integration
projects and managed services arrangements. However, our revenue
growth rate in Europe and the rest of the world was greater than
the growth rate we experienced in North America which resulted
in a decrease in revenue from customers in North America as a
percentage of total revenue.
Cost of License and Service. Cost of license
includes license fees and royalty payments to software
suppliers. Cost of service consists primarily of costs
associated with providing services to customers, including
compensation expense and costs of third-party products. Cost of
license and service increased by $163.7 million, or 8.6%,
to $2,069.4 million in fiscal 2011, from
$1,905.7 million in fiscal 2010. As a percentage of
revenue, cost of license and service increased to 65.1% in
fiscal 2011 from 63.9% in fiscal 2010. The increase in our cost
of license and services as a percentage of revenue was primarily
attributable to several key customer implementations that
required incremental spending as well as to investment in
internal training and knowledge building programs for our
employees. Our cost of license and service was also negatively
impacted by foreign exchange fluctuations.
Research and Development. Research and
development is primarily comprised of compensation expense.
Research and development expense increased by
$14.1 million, or 6.8%, to $221.9 million in fiscal
2011, from $207.8 million in fiscal 2010. The increase in
research and development expense is primarily attributable to
investments in our next release of the Amdocs CES portfolio, as
well as to foreign exchange impacts. Research and development
expense as a percentage of revenue was 7.0% in fiscal years 2011
and 2010. Our research and development efforts are a key element
of our strategy and are essential to our success, and we intend
to maintain our commitment to research and development. 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. Please see Research and
Development, Patents and Licenses.
Selling, General and Administrative. Selling,
general and administrative expense increased by
$35.9 million, or 9.6%, to $409.5 million in fiscal
2011, from $373.6 million in fiscal 2010. Selling, general
and administrative expense is primarily comprised of
compensation expense. The increase in selling, general and
administrative expense as a percentage of revenue was primarily
attributable to increased selling efforts, a significant portion
of which were in emerging markets and in Europe, as well as to
an increase in accounts receivable allowances.
Amortization of Purchased Intangible Assets and
Other. Amortization of purchased intangible
assets and other decreased by $14.1 million, or 16.2%, to
$72.6 million in fiscal 2011, from $86.7 million in
fiscal 2010. The decrease in amortization of purchased
intangible assets and other was primarily due to purchased
intangible assets that were fully amortized in prior periods, as
well as to the timing of amortization charges resulting from the
use of accelerated amortization methods for certain intangible
assets purchased in prior periods, partially offset by
amortization of intangible assets and other acquisition costs
related to several small acquisitions in fiscal 2011 and 2010.
Operating Income. Operating income decreased
by $6.0 million, or 1.5%, to $404.4 million in fiscal
2011, from $410.4 million in fiscal 2010. Operating income
decreased as a percentage of revenue, from 13.7% in fiscal 2010
to 12.7% in fiscal 2011. The decrease in operating income as a
percentage of revenue was primarily attributable to the increase
of cost of service and selling, general and administrative
expense, which was higher than the increase in revenue,
partially offset by the decrease in amortization of purchased
intangible assets and other. The positive foreign exchange
fluctuations on our revenue were offset by similar negative
fluctuations on our operating expense resulting in an immaterial
impact on our operating income.
Interest and Other Expense, Net. Interest and
other expense, net decreased by $16.4 million to
$8.7 million in fiscal 2011, from $25.1 million in
fiscal 2010. The decrease was primarily attributable to the
effect of a loss in fiscal 2010 from divestiture of a Chinese
subsidiary in which a majority interest was sold in April 2010,
partially offset by foreign exchange loss in fiscal 2011.
Income Taxes. Income taxes for fiscal 2011
were $49.0 million on pre-tax income of
$395.7 million, resulting in an effective tax rate of
12.4%, compared to 10.7% in fiscal 2010. Our effective tax rate
may fluctuate between quarters as a result of discrete items
that may affect a specific quarter. Please see Note 11 to
our consolidated financial statements.
34
Net Income. Net income increased by
$2.8 million, or 0.8%, to $346.7 million in fiscal
2011, from $343.9 million in fiscal 2010. The increase in
net income was attributable mainly to the decrease in interest
and other expense, net, partially offset by a decrease in
operating income and an increase in income tax expense.
Diluted Earnings Per Share. Diluted earnings
per share increased by $0.17, or 10.1%, to $1.86 in fiscal 2011,
from $1.69 in fiscal 2010. The increase in diluted earnings per
share resulted primarily from the decrease in diluted weighted
average numbers of shares outstanding as a result of repurchase
of our ordinary shares. Please see Note 20 to our
consolidated financial statements.
Fiscal
Years Ended September 30, 2010 and 2009
The following is a tabular presentation of our results of
operations for the fiscal year ended September 30, 2010,
compared to the fiscal year ended September 30, 2009.
Following the table is a discussion and analysis of our business
and results of operations for these years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
Increase (Decrease)
|
|
|
|
2010
|
|
|
2009
|
|
|
Amount
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
100,967
|
|
|
$
|
135,146
|
|
|
$
|
(34,179
|
)
|
|
|
(25.3
|
)%
|
Service
|
|
|
2,883,256
|
|
|
|
2,727,461
|
|
|
|
155,795
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,984,223
|
|
|
|
2,862,607
|
|
|
|
121,616
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license
|
|
|
2,021
|
|
|
|
2,686
|
|
|
|
(665
|
)
|
|
|
(24.8
|
)
|
Cost of service
|
|
|
1,903,645
|
|
|
|
1,831,947
|
|
|
|
71,698
|
|
|
|
3.9
|
|
Research and development
|
|
|
207,836
|
|
|
|
210,387
|
|
|
|
(2,551
|
)
|
|
|
(1.2
|
)
|
Selling, general and administrative
|
|
|
373,585
|
|
|
|
344,335
|
|
|
|
29,250
|
|
|
|
8.5
|
|
Amortization of purchased intangible assets and other
|
|
|
86,703
|
|
|
|
85,153
|
|
|
|
1,550
|
|
|
|
1.8
|
|
Restructuring charges and in-process research and development
|
|
|
|
|
|
|
20,780
|
|
|
|
(20,780
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,573,790
|
|
|
|
2,495,288
|
|
|
|
78,502
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
410,433
|
|
|
|
367,319
|
|
|
|
43,114
|
|
|
|
11.7
|
|
Interest and other expense, net
|
|
|
25,135
|
|
|
|
1,165
|
|
|
|
23,970
|
|
|
|
2,057.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
385,298
|
|
|
|
366,154
|
|
|
|
19,144
|
|
|
|
5.2
|
|
Income taxes
|
|
|
41,392
|
|
|
|
39,978
|
|
|
|
1,414
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
343,906
|
|
|
$
|
326,176
|
|
|
$
|
17,730
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue. Total revenue increased by
$121.6 million, or 4.2%, to $2,984.2 million in fiscal
2010, from $2,862.6 million in fiscal 2009. The increase in
revenue was primarily attributable to revenue related to managed
services arrangements and to foreign exchange impacts. The
increase was partially offset by decreases in revenue related to
implementation and integration projects. In the second half of
fiscal 2009, AT&T reduced its discretionary spending with
us. The lower resulting revenue level persisted into 2010,
offset in part by an increase in our managed services for
AT&T; however, revenue from AT&T on a quarterly basis
in 2010 was relatively stable.
License revenue in fiscal 2010 decreased by $34.2 million,
or 25.3%, to $101.0 million, from $135.1 million in
fiscal 2009. License revenue declined primarily due to the
completion of some implementation and integration projects and
the impact of fewer project signings in 2009.
License and service revenue attributable to the sale of customer
experience systems increased by $89.8 million, or 3.3%, to
$2,775.3 million in fiscal 2010, from $2,685.5 million
in fiscal 2009. License and service revenue
35
resulting from the sale of customer experience systems
represented 93.0% and 93.8% of our total revenue in fiscal 2010
and 2009, respectively.
License and service revenue from the sale of directory systems
increased by $31.8 million, or 18.0%, to
$208.9 million in fiscal 2010, from $177.1 million in
fiscal 2009. The increase was primarily attributable to the
completion of major project milestones. License and service
revenue from the sale of directory systems represented 7.0% and
6.2% of our total revenue in fiscal 2010 and 2009, respectively.
In fiscal 2010, revenue from customers in North America, Europe
and the rest of the world accounted for 75.8%, 11.8% and 12.4%,
respectively, of total revenue, compared to 75.3%, 13.8% and
10.9%, respectively, for fiscal 2009. The increase as a
percentage of revenue from customers in North America was
primarily attributable to an increase in revenue from other than
our top three customers, mainly related to managed services
arrangements. The decrease in revenue from customers in Europe
was primarily attributable to a decline in implementation and
integration projects related revenue. Revenue from customers in
the rest of the world increased primarily due to revenue
contributed by customers in emerging markets as well as
completion of major project milestones.
Cost of License and Service. Cost of license
includes license fees and royalty payments to software
suppliers. Cost of service consists primarily of costs
associated with providing services to customers, including
compensation expense and costs of third-party products. Cost of
license and service increased by $71.0 million, or 3.9%, to
$1,905.7 million in fiscal 2010, from $1,834.6 million
in fiscal 2009. As a percentage of revenue, cost of license and
service decreased to 63.9% in fiscal 2010 from 64.1% in fiscal
2009. The increase in our cost of license and service was
primarily attributable to increase in our headcount to support
the growth in the size of our operations, partially offset by
costs savings resulting primarily from expansion into lower cost
jurisdictions. Our cost of service, as a percentage of revenue,
in fiscal 2010 was positively affected by higher margins from
existing managed services arrangements. Margins from existing
managed services tend to improve over time, especially in the
initial period of an engagement, as we create cost efficiencies
and improve business processes.
Research and Development. Research and
development is primarily comprised of compensation expense.
Research and development expense decreased by $2.6 million,
or 1.2%, to $207.8 million in fiscal 2010, from
$210.4 million in fiscal 2009. Research and development
expense decreased as a percentage of revenue from 7.3% in
fiscal, 2009 to 7.0% in fiscal 2010. Our research and
development efforts are a key element of our strategy and are
essential to our success, and we intend to maintain our
commitment to research and development. 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. Please see Research and Development, Patents and
Licenses.
Selling, General and Administrative. Selling,
general and administrative expense increased by
$29.3 million, or 8.5%, to $373.6 million in fiscal
2010, from $344.3 million in fiscal 2009. Selling, general
and administrative expense is primarily comprised of
compensation expense. The increase in selling, general and
administrative expense in fiscal 2010 was primarily attributable
to selling efforts, a significant portion of which were in
emerging markets.
Restructuring Charges and In-Process Research and
Development. In fiscal 2009, we recorded
restructuring charges and in-process research and development
expenses of $20.8 million, which consisted of a
$15.1 million restructuring charge related primarily to our
restructuring plan in the first quarter of fiscal 2009 and a
$5.7 million charge for the write-off of purchased
in-process research and development related to a small
acquisition during the first quarter of fiscal 2009. We did not
take any such restructuring charges in fiscal 2010. Effective
October 1, 2009, we adopted revised accounting guidance for
business combinations and as a result capitalized immaterial
in-process research and development.
Operating Income. Operating income increased
by $43.1 million, or 11.7%, to $410.4 million in
fiscal 2010, from $367.3 million in fiscal 2009. Operating
income increased as a percentage of revenue, from 12.8% in
fiscal 2009 to 13.7% in fiscal 2010. The increase in operating
income as a percentage of revenue was primarily attributable to
our continued efforts to improve efficiencies including
expansion into lower cost jurisdictions, the effect of our
fiscal 2009 restructuring charges and in-process research and
development charges, and foreign exchange impacts, partially
offset by the increase in selling expense in fiscal 2010.
36
Interest and Other Expense, Net. Interest and
other expense, net increased by $24.0 million to
$25.1 million in fiscal 2010, from $1.2 million in
fiscal 2009. The increase in interest and other expense, net,
was primarily attributable to a $23.4 million loss from our
April 2010 divestiture of a majority interest in a Chinese
subsidiary. We retain a minority interest in this Chinese
company. Please see Note 16 to our consolidated financial
statements.
Income Taxes. Income taxes for fiscal 2010
were $41.4 million on pre-tax income of
$385.3 million, resulting in an effective tax rate of
10.7%, compared to 10.9% in fiscal 2009. Our effective tax rate
may fluctuate between quarters as a result of discrete items
that may affect a specific quarter. Please see Note 11 to
our consolidated financial statements.
Net Income. Net income increased by
$17.7 million, or 5.4%, to $343.9 million in fiscal
2010, from $326.2 million in fiscal 2009. The increase in
net income was attributable mainly to the increase in operating
income, partially offset by the increase in interest and other
expense, net.
Diluted Earnings Per Share. Diluted earnings
per share increased by $0.12, or 7.6%, to $1.69 in fiscal 2010,
from $1.57 in fiscal 2009. The increase in diluted earnings per
share resulted primarily from the increase in net income, as
well as the decrease in diluted weighted average shares
outstanding resulting primarily from our repurchase of ordinary
shares in fiscal 2010. Please see Note 20 to our
consolidated financial statements.
Liquidity
and Capital Resources
Cash, cash equivalents and short-term interest-bearing
investments, net of short-term debt, totaled $0.92 billion
as of September 30, 2011, compared to $1.23 billion as
of September 30, 2010. The decrease during fiscal 2011 was
mainly attributable to $624.2 million used to repurchase
our ordinary shares pursuant to our share repurchase programs,
$146.7 million in net cash paid for an acquisition and
$109.8 million for capital expenditures, net, partially
offset by $535.5 million in cash flow from operations. Net
cash provided by operating activities amounted to
$535.5 million and $685.2 million for fiscal 2011 and
2010, respectively.
Our policy is to retain sufficient cash balances in order to
support our growth. 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.
Our interest-bearing investments are classified as
available-for-sale
securities. Such short-term interest-bearing investments consist
primarily of money market funds, U.S. government
treasuries, corporate bonds, government guaranteed debt and
U.S. agency securities. We believe we have conservative
investment policy guidelines. Our interest-bearing investments
are stated at fair value with the unrealized gains or losses
reported as a separate component of accumulated other
comprehensive (loss) income, net of tax. Our interest-bearing
investments are priced by pricing vendors and are classified as
Level 1 or Level 2 investments, since these vendors
either provide a quoted market price in an active market or use
observable inputs. Please see Notes 4 and 5 to our
consolidated financial statements. During fiscal 2011 and 2010,
we recognized immaterial credit losses. As of September 30,
2011, unrealized losses of $0.7 million related to
other-than-temporarily
impaired securities was included in accumulated other
comprehensive (loss) income.
In November 2007, we entered into an unsecured
$500.0 million five-year revolving credit facility with a
syndicate of banks, which is available for general corporate
purposes, including acquisitions and repurchases of ordinary
shares that we may consider from time to time. The interest rate
for borrowings under the revolving credit facility is chosen at
our option from several pre-defined alternatives, depends on the
circumstances of any advance and is based on our credit rating.
As of September 30, 2011, we were in compliance with the
financial covenants under the revolving credit facility. In
September 2010, we borrowed an aggregate of $200.0 million
under the facility and repaid it in October 2010. In September
2011, we borrowed an aggregate of $250.0 million under the
facility and repaid it in October 2011.
As of September 30, 2011, we had outstanding letters of
credit and bank guarantees from various banks totaling
$41.2 million. As of September 30, 2011, we had
outstanding obligations of $1.1 million in connection with
leasing arrangements.
37
Our capital expenditures, net, were approximately
$109.8 million in fiscal 2011. Approximately 90% of these
expenditures consisted of purchases of computer equipment, with
the remainder attributable mainly to leasehold improvements. Our
fiscal 2011 capital expenditures were mainly attributable to
investments in our operating facilities and our development
centers around the world. Our policy is to fund our capital
expenditures principally from operating cash flows, and we do
not anticipate any changes to this policy in the foreseeable
future.
In April 2010, our board of directors authorized a share
repurchase plan allowing the repurchase of up to
$700.0 million of our outstanding ordinary shares over the
following 12 months. In February 2011, our board of
directors adopted a share repurchase plan authorizing the
repurchase of up to $1.0 billion of our outstanding
ordinary shares over the following 24 months. The
authorizations permit us to purchase our ordinary shares in open
market or privately negotiated transactions at times and prices
we consider appropriate. In April 2011 we completed the
repurchase of the remaining authorized amount under the April
2010 share repurchase plan and started executing
repurchases under the February 2011 plan. In fiscal 2011, we
repurchased 21.9 million ordinary shares at an average
price of $28.53 per share (excluding broker and transaction
fees). As of September 30, 2011, we had remaining authority
to repurchase up to $687.1 million of our outstanding
ordinary shares.
Off-Balance
Sheet Arrangements
We do not have any off-balance sheet arrangements.
Contractual
Obligations
The following table summarizes our contractual obligations as of
September 30, 2011, and the effect such obligations are
expected to have on our liquidity and cash flows in future
periods (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
1-3
|
|
|
4-5
|
|
|
More Than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Convertible notes including interest
|
|
$
|
1.1
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1.1
|
|
Pension funding
|
|
|
15.5
|
|
|
|
1.9
|
|
|
|
5.6
|
|
|
|
3.4
|
|
|
|
4.6
|
|
Purchase obligations
|
|
|
43.3
|
|
|
|
28.6
|
|
|
|
14.7
|
|
|
|
|
|
|
|
|
|
Non-cancelable operating leases
|
|
|
250.8
|
|
|
|
61.1
|
|
|
|
112.4
|
|
|
|
77.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
310.7
|
|
|
$
|
91.6
|
|
|
$
|
132.7
|
|
|
$
|
80.7
|
|
|
$
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total amount of unrecognized tax benefits for uncertain tax
positions was $132.9 million as of September 30, 2011.
Payment of these obligations would result from settlements with
taxing authorities. Due to the difficulty in determining the
timing of resolution of audits, these obligations are not
included in the above table.
Deferred
Tax Asset Valuation Allowance
As of September 30, 2011, we had deferred tax assets of
$137.8 million, derived primarily from net capital and
operating loss carryforwards related to some of our
subsidiaries, which were offset by valuation allowances due to
the uncertainty of the realizing any 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 earnings.
Critical
Accounting Policies
Our discussion and analysis of our consolidated financial
condition and results of operations are based upon our
consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements
requires us to make estimates, assumptions and judgments that
affect the reported amounts of assets, liabilities, revenue and
expenses and related disclosure of contingent liabilities. On a
regular basis, we evaluate and may revise our estimates. We base
our estimates on historical experience and various other
assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not
38
readily apparent. Actual results could differ materially from
the estimates under different assumptions or conditions.
We believe that the estimates, assumptions and judgments
involved in the accounting policies described below have the
greatest potential impact on our financial statements, so we
consider these to be our critical accounting policies. These
policies require that we make estimates in the preparation of
our financial statements as of a given date. Our critical
accounting policies are as follows:
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|
|
|
Revenue recognition and contract accounting
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|
|
|
Tax accounting
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|
|
|
Business combinations
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|
|
|
Share-based compensation expense
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|
|
|
Goodwill, intangible assets and long-lived assets-impairment
assessment
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|
|
|
Derivative and hedge accounting
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|
|
|
Fair value measurement of short-term interest-bearing investments
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|
|
|
Accounts receivable reserves
|
Below, we discuss these policies further, as well as the
estimates and judgments involved. We also have other key
accounting policies. We believe that, compared to the critical
accounting policies listed above, the other policies either do
not generally require us to make estimates and judgments that
are as difficult or as subjective, or it is less likely that
they would have a material impact on our reported consolidated
results of operations for a given period.
Revenue
Recognition and Contract Accounting
We derive our revenue principally from:
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|
|
|
|
the initial sales of licenses to use our products and related
services, including modification, implementation, integration
and customization services,
|
|
|
|
providing managed services in our domain expertise and other
related services, and
|
|
|
|
recurring revenue from ongoing support, maintenance and
enhancements provided to our customers, and from incremental
license fees resulting from increases in a customers
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 or determinable; and (iv) collectibility 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. Those services are
deemed essential to the software. As a result, we generally
recognize initial license fee and related service revenue over
the course of these long-term projects, 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 customers subscriber or transaction
volume or other measurements when greater than the level
specified in the contract for the initial license fee. Revenue
from software solutions that do not require significant
customization, implementation and modification is recognized
upon delivery. Revenue from services that do not involve
significant ongoing obligations is recognized as services are
rendered. In managed services contracts, we typically recognize
revenue from the operation of a customers system as
services are performed based on time elapsed, output produced or
volume of data processed, depending on the specific contract
terms of the managed services arrangement. Typically, managed
services contracts are long-term in duration and are not subject
to seasonality. 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.
39
A significant portion of our revenue is recognized over the
course of long-term implementation and integration projects
under the percentage of completion method of accounting. When
total cost estimates exceed revenues in a fixed-price
arrangement, the estimated losses are recognized immediately
based upon the cost applicable to the project. The percentage of
completion method requires the exercise of judgment on a
quarterly basis, such as with respect to estimations of
progress-to-completion,
contract revenue, loss contracts and contract costs. Progress in
completing such projects may significantly affect our annual and
quarterly operating results.
We follow very specific and detailed guidelines, several of
which are discussed above, in measuring revenue; however,
certain judgments affect the application of our revenue
recognition policy.
Our revenue recognition policy takes into consideration the
credit-worthiness and past transaction history of each customer
in determining the probability of collection as a criterion of
revenue recognition. This determination requires the exercise of
judgment, which affects our revenue recognition. If we determine
that collection of a fee is not reasonably assured, we defer the
revenue recognition until the time collection becomes reasonably
assured, which is generally upon receipt of cash. We regularly
review the allowance for doubtful accounts by considering
factors that may affect a customers ability to pay, such
as historical experience, credit quality, age of the accounts
receivable balances, and current economic conditions.
For arrangements with multiple deliverables within the scope of
software revenue recognition guidance, we allocate revenue to
each component based upon its relative fair value, which is
determined in reliance on the Vendor Specific Objective Evidence
(VSOE) of fair value for that element. Such
determination is judgmental and for most contracts is based on
normal pricing and discounting practices for those elements when
sold separately in similar arrangements. In the absence of fair
value for a delivered element, we use the residual method. The
residual method requires that we first allocate revenue to the
fair value of the undelivered elements and residual revenue to
the delivered elements. If VSOE of any undelivered items does
not exist, revenue from the entire arrangement is deferred and
recognized at the earlier of (i) delivery of those elements
for which VSOE does not exist or (ii) when VSOE can be
established. However, in limited cases where maintenance is the
only undelivered element without VSOE, the entire arrangement
fee is recognized ratably. The residual method is used mainly in
multiple element arrangements that include license for the sale
of software solutions that do not require significant
customization, modification and implementation and maintenance
to determine the appropriate value for the license component.
Beginning October 1, 2009, we adopted the new authoritative
guidance for revenue arrangements with multiple deliverables
that are outside the scope of the software revenue recognition
guidance. Under this guidance, we allocate revenue to each
element based upon the relative fair value. Fair value would be
allocated by using a hierarchy of (1) VSOE,
(2) third-party evidence of selling price for that element,
or (3) estimated selling price, or ESP, for individual
elements of an arrangement when VSOE or third-party evidence of
selling price is unavailable. This results in the elimination of
the residual method of allocating revenue consideration. We
determine ESP for the purposes of allocating the consideration
to individual elements of an arrangement by considering several
external and internal factors including, but not limited to,
pricing practices, margin objectives, geographies in which we
offer our services and internal costs. The determination of ESP
is judgmental and is made through consultation with and approval
by management.
Revenue from third-party hardware and software sales is recorded
at a gross or net amount according to certain indicators. The
application of these indicators for gross and net reporting of
revenue depends on the relative facts and circumstances of each
sale and requires significant judgment.
Tax
Accounting
As part of the process of preparing our consolidated financial
statements, we are required to estimate our income tax expense
in each of the jurisdictions in which we operate. In the
ordinary course of a global business, there are many
transactions and calculations where the ultimate tax outcome is
uncertain. Some of these uncertainties arise as a consequence of
revenue sharing and reimbursement arrangements among related
entities, the process of identifying items of revenue and
expenses that qualify for preferential tax treatment and
segregation of foreign and domestic income and expense to avoid
double taxation. We also assess temporary differences resulting
from differing treatment of items, such as deferred revenue, for
tax and accounting differences. These differences result in
deferred tax assets and liabilities, which are included within
our consolidated balance sheet. We
40
may record a valuation allowance to reduce our deferred tax
assets to the amount of future tax benefit that is more likely
than not to be realized.
Although we believe that our estimates are reasonable and that
we have considered future taxable income and ongoing prudent and
feasible tax strategies in estimating our tax outcome and in
assessing the need for the valuation allowance, there is no
assurance that the final tax outcome and the valuation allowance
will not be different than those that are reflected in our
historical income tax provisions and accruals. Such differences
could have a material effect on our income tax provision, net
income and cash balances in the period in which such
determination is made.
We recognize the tax benefit from an uncertain tax position only
if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes,
if any. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest
benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement.
Significant judgment is required in evaluating our uncertain tax
positions and determining our provision for income taxes.
Although we believe our reserves are reasonable, no assurance
can be given that the final tax outcome of these matters will
not be different from that which is reflected in our historical
income tax provisions and accruals. We adjust these reserves in
light of changing facts and circumstances, such as the closing
of a tax audit or the refinement of an estimate. To the extent
that the final tax outcome of these matters is different than
the amounts recorded, such differences will affect the provision
for income taxes in the period in which such determination is
made. The provision for income taxes includes the effect of
reserve provisions and changes to reserves that are considered
appropriate, as well as the related net interest.
We have filed or are in the process of filing tax returns that
are subject to audit by the respective tax authorities. Although
the ultimate outcome is unknown, we believe that any adjustments
that may result from tax return audits are not likely to have a
material, adverse effect on our consolidated results of
operations, financial condition or cash flows.
Business
Combinations
In accordance with business combination accounting, we allocate
the purchase price of acquired companies to the tangible and
intangible assets acquired and liabilities assumed, as well as
to in-process research and development based on their estimated
fair values. Such valuations require management to make
significant estimates and assumptions, especially with respect
to intangible assets.
Although we believe the assumptions and estimates of fair value
we have made in the past have been reasonable and appropriate,
they are based in part on historical experience and information
obtained from the management of the acquired companies and are
inherently uncertain. Critical estimates in valuing certain
assets acquired and liabilities assumed include, but are not
limited to: future expected cash flows from license and service
sales, maintenance, customer contracts and acquired developed
technologies, expected costs to develop the in-process research
and development into commercially viable products and estimated
cash flows from the projects when completed and the acquired
companys brand awareness and discount rate. Unanticipated
events and circumstances may occur that may affect the accuracy
or validity of such assumptions, estimates or actual results.
As discussed above under Tax Accounting, we may
establish a valuation allowance for certain deferred tax assets
and estimate the value of uncertain tax positions of a newly
acquired entity. This process requires significant judgment and
analysis.
Share-Based
Compensation Expense
Share-based compensation cost is measured at the grant date
based on the value of the award and is recognized as expense
over the requisite service periods. We estimate the fair value
of employee stock options using a
Black-Scholes
valuation model and value restricted stock based on the market
value of the underlying shares at the date of grant. We
recognize compensation costs using the graded vesting
attribution method that results in an accelerated recognition of
compensation costs in comparison to the straight line method.
41
The fair value of an award is affected by our stock price on the
date of grant and other assumptions, including the estimated
volatility of our stock price over the term of the awards and
the estimated period of time that we expect employees to hold
their stock options. We use a combination of implied volatility
of our traded options and historical stock price volatility
(blended volatility) as the expected volatility
assumption required in the
Black-Scholes
option valuation model. Share-based compensation expense
recognized in our consolidated statements of income was reduced
for estimated forfeitures.
Determining the fair value of share-based awards at the grant
date requires the exercise of judgment. In addition, the
exercise of judgment is also required in estimating the amount
of share-based awards that are expected to be forfeited. If
actual results differ significantly from these estimates,
share-based compensation expense and our results of operations
could be materially affected. Please see Note 19 to our
consolidated financial statements.
Goodwill,
Intangible Assets and Long-Lived Assets - Impairment
Assessment
Goodwill is measured as the excess of the cost of acquisition
over the sum of the amounts assigned to tangible and
identifiable intangible assets acquired less liabilities
assumed. Goodwill is subject to periodic impairment tests.
Goodwill impairment is deemed to exist if the net book value of
a reporting unit exceeds its estimated fair value. The goodwill
impairment test involves a two-step process. The first step,
identifying a potential impairment, compares the fair value of a
reporting unit with its carrying amount, including goodwill. If
the carrying value of the reporting unit exceeds its fair value,
the second step would need to be conducted; otherwise, no
further steps are necessary as no potential impairment exists.
The second step, measuring the impairment loss, compares the
implied fair value of the reporting unit goodwill with the
carrying amount of that goodwill. Any excess of the reporting
unit goodwill carrying value over the respective implied fair
value is recognized as an impairment loss.
We perform an annual goodwill impairment test during the fourth
quarter of each fiscal year, or more frequently if impairment
indicators are present. We operate in one operating segment, and
this segment comprises our only reporting unit. In calculating
the fair value of the reporting unit, we used our market
capitalization and a discounted cash flow methodology. There was
no impairment of goodwill in fiscal 2011, 2010 and 2009.
We test long-lived assets, including definite life intangible
assets, for impairment in the event an indication of impairment
exists. Impairment indicators include any significant changes in
the manner of our use of the assets or the strategy of our
overall business, significant negative industry or economic
trends and significant decline in our share price for a
sustained period.
If the sum of expected future cash flows (undiscounted and
without interest charges) of the long-lived assets is less than
the carrying amount of such assets, an impairment would be
recognized and the assets would be written down to their
estimated fair values, based on expected future discounted cash
flows. There was no impairment of long-lived assets in fiscal
2011, 2010 and 2009.
Derivative
and Hedge Accounting
Approximately 70% to 80% of our revenue and 50% to 60% of our
operating expenses are denominated in U.S. dollars or
linked to the U.S. dollar. We enter into foreign exchange
forward contracts and options to hedge a significant portion of
our foreign currency net exposure resulting from revenue and
expense in major foreign currencies in which we operate, in
order to reduce the impact of foreign currency on our results.
We also enter into foreign exchange forward contracts and
options to reduce the impact of foreign currency on balance
sheet items. The effective portion of changes in the fair value
of forward exchange contracts and options that are classified as
cash flow hedges are recorded in other comprehensive (loss)
income. We estimate the fair value of such derivative contracts
by reference to forward and spot rates quoted in active markets.
Establishing and accounting for foreign exchange contracts
involve judgments, such as determining the fair value of the
contracts, determining the nature of the exposure, assessing its
amount and timing, and evaluating the effectiveness of the
hedging arrangement.
Although we believe that our estimates are accurate and meet the
requirement of hedge accounting, if actual results differ from
these estimates, such difference could cause fluctuation of our
recorded revenue and expenses.
42
Fair
Value Measurement of Short-Term Interest-Bearing
Investments
Our short-term interest-bearing investments are classified as
available-for-sale
securities and are stated at fair value in our consolidated
balance sheets. Unrealized gains or losses are reported as a
separate component of accumulated other comprehensive (loss)
income, net of tax. Such short-term interest-bearing investments
consist primarily of money market funds, U.S. government
treasuries, corporate bonds, government guaranteed debt and
U.S. agency securities. We believe we have conservative
investment policy guidelines. Our interest-bearing investments
are priced by pricing vendors and are classified as Level 1
or Level 2 investments, since these vendors either provide
a quoted market price in an active market or use observable
inputs such as quoted market prices for similar instruments,
market dealer quotes, market spreads, non-binding market prices
that are corroborated by observable market data and other
observable market information and discounted cash flow
techniques using observable market inputs. Effective at the
beginning of the third quarter of fiscal 2009, we were required
to evaluate our
available-for-sale
securities for
other-than-temporary
impairments subject to updated accounting guidance. Pursuant to
this accounting guidance, for securities with unrealized losses
that we intend to sell or it is more likely than not that we
will be required to sell the securities before recovery, the
entire difference between amortized cost and fair value is
recognized in earnings. For securities that we do not intend to
sell and it is not more likely than not that we will be required
to sell, we used a discounted cash flow analysis to determine
the portion of the impairment that relates to credit losses. To
the extent that the net present value of the projected cash
flows was less than the amortized cost of the security, the
difference is considered credit loss and is recorded through
earnings. The inputs on the future performance of the underlying
assets used in the cash flow models include prepayments,
defaults and loss severity assumptions. Prior to April 2009, we
reviewed various factors in determining whether we should
recognize an impairment charge for our short-term
interest-bearing investments, including our intent and ability
to hold the investment for a period of time sufficient to allow
for any anticipated recovery in market value, the length of time
and extent to which the fair value has been less than our cost
basis, the credit ratings of the securities and the financial
condition and near-term prospects of the issuers. The
other-than-temporary
impairment on our short-term interest-bearing investments was
immaterial during fiscal 2011, 2010 and 2009.
Given the relative reliability of the inputs we use to value our
investment portfolio, and because substantially all of our
valuation inputs are obtained using quoted market price in an
active market or observable inputs, we do not believe that the
nature of estimates and assumptions affected by levels of
subjectivity and judgment was material to the valuation of the
investment portfolio as of September 30, 2011.
It is possible that the valuation of the securities will further
fluctuate, and as market conditions change, we may determine
that unrealized losses, which are currently considered temporary
in nature, may become other than temporary resulting
in additional impairment charges.
Accounts
Receivable Reserves
The allowance for doubtful accounts is for estimated losses
resulting from accounts receivable for which their collection is
not reasonably assured. We evaluate accounts receivable to
determine if they will ultimately be collected. Significant
judgments and estimates are involved in performing this
evaluation, which we base on factors that may affect a
customers ability and intent to pay, such as past
experience, credit quality of the customer, age of the
receivable balance and current economic conditions. If
collection is not reasonably assured at the time the transaction
is consummated, we do not recognize revenue until collection
becomes reasonably assured. If we estimate that our
customers ability and intent to make payments have been
impaired, additional allowances may be required. The allowance
for doubtful accounts is established either through a charge to
selling, general and administrative expenses or as a reduction
to revenue.
Within the context of these critical accounting policies, we are
not currently aware of any reasonably likely events or
circumstances that would result in materially different amounts
being reported.
Recent
Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board, or
FASB, issued a revised accounting standard update intended to
simplify how an entity tests goodwill for impairment. The
amendment will allow an entity to first assess qualitative
factors to determine whether it is necessary to perform the
two-step quantitative goodwill
43
impairment test. An entity no longer will be required to
calculate the fair value of a reporting unit unless the entity
determines, based on a qualitative assessment, that it is more
likely than not that its fair value is less than its carrying
amount. This accounting standard update will be effective for us
beginning October 1, 2012 and early adoption is permitted.
We do not expect that the adoption of this new guidance will
have a material impact on our financial statements.
In June 2011, the FASB issued guidance to require an entity to
present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either
in a single continuous statement of comprehensive income or in
two separate but consecutive statements. The guidance eliminates
the option to present the components of other comprehensive
income as part of the statement of equity, and will become
effective for us beginning October 1, 2012. We are still
evaluating whether to present other comprehensive income in a
single continuous statement of comprehensive income or in two
separate but consecutive statements.
In May 2011, the FASB issued guidance to provide a consistent
definition of fair value and ensure that the fair value
measurement and disclosure requirements are similar between
U.S. GAAP and International Financial Reporting Standards.
The guidance changes certain fair value measurement principles
and enhances the disclosure requirements particularly for
Level 3 fair value measurements, and will become effective
for us beginning January 1, 2012. We do not expect that the
adoption of this new guidance will have a material impact on our
financial statements.
Adoption
of New Accounting Standards
In June 2009, the FASB issued authoritative guidance on the
consolidation of variable interest entities, which was effective
for us beginning October 1, 2010. The new guidance requires
revised evaluations of whether entities represent variable
interest entities, ongoing assessments of control over such
entities, and additional disclosures for variable interests. The
adoption of this new guidance did not have a material impact on
our financial statements.
|
|
ITEM 6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
Directors
and Senior Management
We rely on the executive officers of our principal operating
subsidiaries to manage our business. In addition, Amdocs
Management Limited, our management subsidiary, performs certain
executive coordination functions for all of our operating
subsidiaries. In November 2010, Dov Baharav, who had been our
President and Chief Executive Officer and a director since 2002,
retired from these offices, and Eli Gelman, who was our
Executive Vice President from 2002 to 2008, our Chief Operating
Officer from 2006 to 2008 and a director since 2002, became our
President and Chief Executive Officer. In addition, James Liang,
our Senior Vice President and Chief Strategy Officer, resigned
effective January 31, 2011, Charles E. Foster and Richard
Sarnoff each resigned from our board of directors, effective
April 28, 2011 and Bruce K. Anderson resigned as Chairman
of the Board, effective October 1, 2011, although
Mr. Anderson continues as a director. Robert A. Minicucci,
who has been a director since 1997, has
44
succeeded Mr. Anderson as Chairman of the Board. As of
November 30, 2011, our directors and senior managers were
as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Robert A. Minicucci(3)(4)
|
|
|
59
|
|
|
Chairman of the Board, Amdocs Limited
|
Bruce K. Anderson(2)(4)(5)
|
|
|
71
|
|
|
Director and Chairman of the Executive Committee, Amdocs Limited
|
Adrian Gardner(1)(3)
|
|
|
49
|
|
|
Director and Chairman of the Audit Committee, Amdocs Limited
|
John T. McLennan(1)(2)
|
|
|
66
|
|
|
Director and Chairman of the Compensation Committee, Amdocs
Limited
|
Simon Olswang(1)(3)
|
|
|
67
|
|
|
Director and Chairman of the Nominating and Corporate Governance
Committee, Amdocs Limited
|
Zohar Zisapel(3)(5)
|
|
|
62
|
|
|
Director and Chairman of the Technology and Innovation
Committee, Amdocs Limited
|
Julian A. Brodsky(2)(3)
|
|
|
78
|
|
|
Director, Amdocs Limited
|
James S. Kahan(4)
|
|
|
64
|
|
|
Director, Amdocs Limited
|
Richard T.C. LeFave
|
|
|
59
|
|
|
Director, Amdocs Limited
|
Nehemia Lemelbaum(4)(5)
|
|
|
69
|
|
|
Director, Amdocs Limited
|
Giora Yaron(5)
|
|
|
62
|
|
|
Director, Amdocs Limited
|
Eli Gelman(4)(5)
|
|
|
53
|
|
|
Director, Amdocs Limited; President and Chief Executive Officer,
Amdocs Management Limited
|
Tamar Rapaport-Dagim
|
|
|
40
|
|
|
Senior Vice President and Chief Financial Officer, Amdocs
Management Limited
|
Ayal Shiran
|
|
|
46
|
|
|
Senior Vice President and Head of Customer Business Group,
Amdocs Management Limited
|
Brian Shepherd
|
|
|
44
|
|
|
Senior Vice President and Head of Broadband Cable and Satellite
Group, Diversification and Global Marketing Amdocs, Inc.
|
Anshoo Gaur
|
|
|
43
|
|
|
Division President, Amdocs Development Center India Pvt. Ltd.
|
Thomas G. OBrien
|
|
|
50
|
|
|
Treasurer and Secretary, Amdocs Limited
|
|
|
|
(1) |
|
Member of the Audit Committee |
|
(2) |
|
Member of the Compensation Committee |
|
(3) |
|
Member of the Nominating and Corporate Governance Committee |
|
(4) |
|
Member of the Executive Committee |
|
(5) |
|
Member of the Technology and Innovation Committee |
Robert A. Minicucci has been Chairman of the Board of Directors
of Amdocs since October 2011 and a director since September
1997. He has been a general partner of Welsh, Carson,
Anderson & Stowe, or WCAS, an investment firm that
specializes in the acquisition of companies in the information
and business services and health care industries, since 1993.
Until September 2003, investment partnerships affiliated with
WCAS had been among our largest shareholders. From 1992 to 1993,
Mr. Minicucci served as Senior Vice President and Chief
Financial Officer of First Data Corporation, a provider of
information processing and related services for credit card and
other payment transactions. From 1991 to 1992, he served as
Senior Vice President and Treasurer of the American Express
Company. He served for 12 years with Lehman Brothers (and
its predecessors) until his resignation as a Managing Director
in 1991. Mr. Minicucci is also a director of two other
publicly-held companies: Alliance Data Systems, Inc. and Retalix
Ltd., and several private companies. Mr. Minicuccis
career in information technology investing, including as a
director of more than twenty different public and private
companies, and his experience as chief financial officer to a
public company and treasurer of another public company, have
provided him with strong business acumen and strategic and
financial expertise.
45
Bruce K. Anderson has been a director since September 1997 and
is Chairman of the Executive Committee. Mr. Anderson was
Chairman of the Board of Directors of Amdocs from September 1997
to September 2011. Since August 1978, Mr. Anderson has been
a general partner of WCAS. Mr. Anderson served for nine
years with Automated Data Processing, Inc. (ADP)
until his resignation as Executive Vice President and a director
of ADP, and President of ADP International, effective August
1978. Mr. Anderson serves on the board of Alliance Data
Systems, Inc., a publicly-held company that provides
transaction, credit and marketing services to large consumer
based businesses. Mr. Andersons career in information
technology investing and service, and his experience as a
director of many public and private companies, have given him
sharp business acumen, financial expertise and extensive
experience providing strategic and financial advisory services
to complex organizations.
Adrian Gardner has been a director of Amdocs since April 1998
and is Chairman of the Audit Committee. Since October 2011,
Mr. Gardner has been Chief Financial Officer and a director
of RSM Tenon Group PLC, a London-based accounting and advisory
firm listed on the London Stock Exchange. From March 2011 to
October 2011, Mr. Gardner was a private investor.
Mr. Gardner was Chief Financial Officer of PA Consulting
Group, a London-based business consulting firm from November
2007 to March 2011. From April until November 2007,
Mr. Gardner was a private investor. Mr. Gardner was
Chief Financial Officer of ProStrakan Group plc, a
pharmaceuticals company based in the United Kingdom and listed
on the London Stock Exchange, from 2002 until April 2007 and a
director from April 2002 until June 2007. Prior to joining
ProStrakan, he was a Managing Director of Lazard LLC, based in
London, where he worked with technology and
telecommunications-related companies. Prior to joining Lazard in
1989, Mr. Gardner qualified as a chartered accountant with
Price Waterhouse (now PricewaterhouseCoopers). Mr. Gardner
is a member of the Institute of Chartered Accountants in
England & Wales. Mr. Gardners extensive
experience as an accountant, technology investment banker and
chief financial officer enables him to make valuable
contributions to our strategic and financial affairs.
John T. McLennan has been a director of Amdocs since November
1999 and is Chairman of the Compensation Committee. From May
2000 until June 2004, he served as Vice-Chair and Chief
Executive Officer of Allstream (formerly AT&T Canada).
Mr. McLennan founded and was the President of Jenmark
Consulting Inc. from 1997 until May 2000. From 1993 to 1997,
Mr. McLennan served as the President and Chief Executive
Officer of Bell Canada. Prior to that, he held various positions
at several telecommunications companies, including BCE Mobile
Communications and Cantel Inc. Mr. McLennan is also a
director of Air Canada Jazz, a publicly-held regional airline
company, Chairman of Emera Inc., a Canadian publicly-held energy
services company, and director of Nova Scotia Power Inc., a
wholly-owned subsidiary of Emera Inc. From 2005 to 2008,
Mr. McLennan also served as a director of Medisys Inc., a
healthcare management company. We believe
Mr. McLennans qualifications to sit on our board of
directors include his years of experience in the
telecommunications industry, including as chief executive
officer of a leading Canadian telecommunications provider, and
his experience providing strategic advice to complex
organizations across a variety of industries, including as a
public company director.
Simon Olswang has been a director of Amdocs since November 2004
and is Chairman of the Nominating and Corporate Governance
Committee. In 2002, Mr. Olswang retired as Chairman of
Olswang, a media and communications law firm in the United
Kingdom that he founded in 1981. He is a member of the Advisory
Board of Palamon Capital Partners LLP and of the Board of
Directors of Amiad Filtration Systems Limited, an Israeli
company listed on the London AIM market, which is active in the
clean water industry. Mr. Olswang was a member of the Board
of Directors of The British Library until March 2008 and has
served as a non-executive director of a number of companies and
organizations, including Aegis Group plc, The Press Association
and the British Film Institute. Mr. Olswang previously
served as Trustee of Langdon College of Further (Special)
Education in Salford, of which he is a co-founder. We believe
Mr. Olswangs qualifications to sit on our board of
directors include his extensive experience providing strategic
and legal advisory services to complex organizations, as well as
startups, in the media and communications industry.
Zohar Zisapel has been a director of Amdocs since July 2008 and
is the Chairman of the Technology and Innovation Committee.
Mr. Zisapel co-founded RAD Data Communications Ltd. and has
been its chairman since 1982, a privately-held voice and data
communications company and part of the RAD Group, a family of
independent networking and telecommunications companies.
Mr. Zisapel also serves as chairman of Ceragon Networks
Ltd., RADVision Ltd. and RADCOM Ltd., each of which is a
publicly-traded member of the RAD Group, as a director of
Silicom Ltd., a public company, as well as on the boards of
directors of several privately-held
46
companies. Mr. Zisapel previously served as chairman of the
Israel Association of Electronic Industries from 1998 until
2001. Mr. Zisapels experience as founder, chairman
and director of several public and private high technology
companies, and his leadership in several government
organizations, demonstrate his leadership capability and provide
him with valuable insights into the voice and data
communications industries.
Julian A. Brodsky has been a director of Amdocs since July 2003.
Mr. Brodsky served as a director and as Vice Chairman of
Comcast Corporation from 1989 to 2011. From 1989 to May 2004,
Mr. Brodsky was Chairman of Comcast Interactive Capital,
LP, a venture fund affiliated with Comcast. He is a director of
RBB Fund, Inc. Mr. Brodsky brings to our board of directors
deep and extensive knowledge of the cable industry gained
through his longstanding executive leadership roles at Comcast,
as well as financial expertise in capital markets, accounting
and tax matters gained through his experience as Chief Financial
Officer of Comcast and as a practicing CPA.
James S. Kahan has been a director of Amdocs since April 1998
and is a member of the Executive Committee. From 1983 until his
June 2007 retirement, he worked at SBC, which is now AT&T,
and served as a Senior Executive Vice President from 1992 until
June 2007. AT&T is our most significant customer. Prior to
joining AT&T, Mr. Kahan held various positions at
several telecommunications companies, including Western
Electric, Bell Laboratories, South Central Bell and AT&T
Corp. Mr. Kahan also serves on the Board of Directors of
Live Nation Entertainment, Inc., the worlds largest live
music and ticketing entity, and Frontier Communication
Corporation, the largest U.S. provider of rural
communication services. Mr. Kahans long service at
SBC and AT&T, as well as his management and financial
experience at several public and private companies, have
provided him with extensive knowledge of the telecommunications
industry, particularly with respect to corporate development,
mergers and acquisitions and business integration.
Richard T.C. LeFave has been a director of Amdocs since November
2011. Since May 2008, Mr. LeFave has been a Principal at
D&L Partners, LLC, an information technology consulting
firm. Mr. LeFave served as Chief Information Officer for
Nextel Communications, a telecommunications company, from 1999
until its merger with Sprint Corporation in September 2005,
after which he served as Chief Information Officer for Sprint
Nextel Corporation until May 2008. From 1995 to 1999,
Mr. LeFave served as Chief Information Officer for Southern
New England Telephone Company, a provider of communications
products and services. We believe Mr. LeFaves
qualifications to sit on our board include his extensive
experience and leadership in the information technology and
telecommunications industry.
Nehemia Lemelbaum has been a director of Amdocs since December
2001 and was a Senior Vice President of Amdocs Management
Limited from 1985 until January 2005. Since 2005,
Mr. Lemelbaum has been a private investor and since
November 2009, he has been a director of Retalix, a
publicly-held global software company. Since December 2006,
Mr. Lemelbaum has also been a director and the Chief
Executive Officer of EHYN, a privately-held investment company.
He joined Amdocs in 1985, with initial responsibility for
U.S. operations. Mr. Lemelbaum led our development of
graphic products for the Yellow Pages industry and later led our
development of customer care and billing systems, as well as our
penetration into that market. Prior to joining Amdocs, he served
for nine years with Contahal Ltd., a leading Israeli software
company, first as a senior consultant, and later as Chief
Executive Officer. From 1967 to 1976, Mr. Lemelbaum was
employed by the Ministry of Communications of Israel (the
organization that predated Bezeq, the Israel Telecommunication
Corp. Ltd.), with responsibility for computer technology in the
area of business data processing. With more than two decades in
our leadership ranks, including representing us with analysts
and investors for five years during and after our initial public
offering, Mr. Lemelbaum has extensive communication
software industry experience, and deep institutional knowledge
and understanding of our business and strategy.
Dr. Giora Yaron has been a director of Amdocs since July
2009. Dr. Yaron co-founded Itamar Medical Ltd., a
publicly-traded medical technology company, and has been its
co-chairman since 1997. Dr. Yaron provides consulting
services to Itamar Medical and to various other technology
companies. He co-founded P-cube, Pentacom, Qumranet, Exanet and
Comsys, privately-held companies sold to multinational
corporations. In 2009, Dr. Yaron also co-founded Qwilt,
Inc., a privately-held video technology company and serves as
one of its directors. Since 2010, Dr. Yaron has been the
chairman of The Executive Council of Tel Aviv University, an
institution of higher education. Dr. Yaron also has served
on the advisory board of Rafael Advanced Defense Systems, Ltd.,
a developer of high-tech defense systems, since 2008 and on the
advisory board of the Israeli
47
Ministry of Defense since 2011. Dr. Yaron has served as the
chairman of Mercury Interactive from 1996 to 2006, a
publicly-traded IT optimization software company acquired by
Hewlett-Packard. We believe that Dr. Yarons
qualifications to sit on our board of directors include his
experience as an entrepreneur and the various leadership
positions he has held on the boards of directors of software and
technology companies.
Eli Gelman has been a director of Amdocs since 2002. On
November 15, 2010, Mr. Gelman became the President and
Chief Executive Officer of Amdocs Management Limited, our
wholly-owned subsidiary. Since January 2010, Mr. Gelman has
served as a director of Retalix, a publicly-held global software
company, and from January 2010 to December 2010, he also served
as the Chairman of Retalix. From April 2008 to December 2010,
Mr. Gelman devoted his time to charitable matters focused
on youth education. He served as Executive Vice President of
Amdocs Management Limited from October 2002 until April 2008 and
as our Chief Operating Officer from October 2006 until April
2008. Prior to October 2002, he was a Senior Vice President,
where he headed our U.S. sales and marketing operations and
helped spearhead our entry into the customer care and billing
systems market. Before that, Mr. Gelman was an account
manager for our major European and North American installations,
and has led several major software development projects. Before
joining Amdocs, Mr. Gelman was involved in the development
of real-time software systems for communications networks.
Mr. Gelmans qualifications to serve on our board of
directors include his more than two decades of service to Amdocs
and its customers, including as our Chief Operating Officer.
With more than 29 years of experience in the software
industry, he possesses a vast institutional knowledge and
strategic understanding of our organization and industry.
Tamar Rapaport-Dagim has been Senior Vice President and Chief
Financial Officer of Amdocs Management Limited since November
2007. Ms. Rapaport-Dagim joined Amdocs in 2004 and served
as Vice President of Finance from 2004 until 2007. Prior to
joining Amdocs, from 2000 to 2004, Ms. Rapaport-Dagim was
the Chief Financial Officer of Emblaze, a provider of multimedia
solutions over wireless and IP networks. She has also served as
controller of Teledata Networks (formerly a subsidiary of ADC
Telecommunications) and has held various finance management
positions in public accounting.
Ayal Shiran has been Senior Vice President and Head of the
Customer Business Group since August 2008. Mr. Shiran
joined Amdocs in 2004, with initial responsibility as President
of our Customer Business Unit responsible for Amdocs business
with Cingular Wireless and later as Division President,
responsible for Amdocs business with the AT&T group of
companies, including SBC, Bellsouth and Cingular. Prior to
joining Amdocs, Mr. Shiran served as Acting Vice President
at TTI Team Telecom International, a telecommunications company.
He also served in the Israel Air Force, where he was responsible
for various projects concerning the development of computer
systems for the F-15 jet airplane, and software development
laboratories for the F-15 at Boeing.
Brian A. Shepherd has been our Senior Vice President and Head of
Broadband Cable and Satellite Group, Diversification and Global
Marketing since November 2010. He joined Amdocs as Business Unit
President of Cable and Satellite in 2005 as part of our
acquisition of DST Innovis, where he had been Senior Vice
President of Customer Business Operations since 2002. From
October 2006 to October 2008, he served as our
Division President North America Communications
and Cable, from November 2008 to April 2010, he served as
President of Amdocs Interactive, leading our digital commerce
and content business, and from May 2010 to October 2010, he was
Group President Digital Services, Global Marketing,
and Broadband Cable and Satellite. Prior to his experience with
DST Innovis and Amdocs, Mr. Shepherd was an executive with
SoDeog Technologies, a wireless software company, and as a
strategy consultant with McKinsey & Company.
Anshoo Gaur has been our Division President for India
operations since August 2007. From 2006 to 2007, Mr. Gaur
was the President of IT Infrastructure Management of
EDS/MphasiS, a technology services company. From 2005 to 2006,
Mr. Gaur served as the Managing Director of EDS India
Enterprise (EDS), where he was responsible for India
strategy and operations. From 2003 to 2005, Mr. Gaur was
the Global Transformation Director for Desktop Services of EDS.
Thomas G. OBrien has been Treasurer and Secretary of
Amdocs Limited since 1998 and has held other financial
management positions within Amdocs since 1995. From 1993 to
1995, Mr. OBrien was Controller of Big River Minerals
Corporation, a diversified natural resources company. From 1989
to 1993, Mr. OBrien was the Assistant Controller for
Big River Minerals Corporation. From 1983 to 1989,
Mr. OBrien was with Arthur Young and Company (now
Ernst & Young LLP).
48
Compensation
During fiscal 2011, each of our directors who was not our
employee, or Non-Employee Directors, received compensation for
their services as directors in the form of cash and restricted
shares. Each Non-Employee Director received an annual cash
payment of $80,000. Each member of our Audit and Executive
Committees who is a Non-Employee Director and who is not the
chairman of such committees received an annual cash payment of
$5,000. Each member of our Compensation, Nominating and
Corporate Governance and Technology and Innovation Committees,
who is a Non-Employee Director and who is not the chairman of
such committees, received an annual cash payment of $1,000. The
Chairmen of our Audit and Executive Committees each received an
annual cash payment of $10,000 and the Chairmen of our
Compensation, Nominating and Corporate Governance and Technology
and Innovation Committees each received an annual cash payment
of $5,000. Each Non-Employee Director received an annual grant
of restricted shares at a total value of $150,000. The Chairman
of the Board of Directors received an additional annual amount
equal to $200,000, of which $75,000 was paid in cash and
$125,000 was awarded in the form of restricted shares. All
restricted share awards to our Non-Employee Directors are
immediately vested with respect to 25%, with the remainder
vesting annually in three equal installments. The price per
share for the purpose of determining the value of the grants to
our Non-Employee Directors was the NYSE closing price of our
shares on the last trading day preceding the grant date. We also
reimburse all of our Non-Employee Directors for their reasonable
travel expenses incurred in connection with attending Board or
committee meetings.
A total of 20 persons who served either as directors of
Amdocs or members of its senior management during all or part of
fiscal 2011 received remuneration from Amdocs. The aggregate
remuneration paid by us to such persons in fiscal 2011 was
approximately $13.3 million, compared to $7.8 million
in fiscal 2010 and $4.4 million in fiscal 2009, which
includes amounts set aside or accrued to provide cash bonuses,
pension, retirement or similar benefits, but does not include
amounts expended by us for automobiles made available to such
persons, expenses (including business travel, professional and
business association dues) or other fringe benefits. During
fiscal 2011, we granted to such persons options to purchase an
aggregate of 1,042,161 ordinary shares at a weighted average
price of $26.57 per share with vesting generally over three to
four-year terms and expiring ten years from the date of grant,
and an aggregate of 341,642 restricted shares subject to three
to four-year vesting. All options and restricted share awards
were granted pursuant to our 1998 Stock Option and Incentive
Plan, as amended. See discussion below Share
Ownership Employee Stock Option and Incentive
Plan.
Board
Practices
The size of our Board of Directors is 13; 13 directors were
elected to our Board of Directors at our annual meeting of
shareholders on January 26, 2010, two directors resigned
from our Board of Directors effective April 28, 2011, and
one director was appointed to our Board of Directors effective
November 29, 2011 leaving one vacancy. All directors hold
office until the next annual meeting of our shareholders, which
generally is in January of each calendar year, or until their
respective successors are duly elected and qualified or their
positions are earlier vacated by resignation or otherwise.
The executive officers of Amdocs Limited and each of its
subsidiaries are elected by the board of directors of the
relevant company on an annual basis and serve until the next
annual meeting of such board of directors or until their
respective successors have been duly elected and qualified or
their positions are earlier vacated by resignation or otherwise.
Other than the employment agreement between us and our President
and Chief Executive Officer, which provides for immediate cash
severance upon termination of employment, there are currently no
service contracts in effect between us and any of our directors
providing for immediate cash severance upon termination of their
employment. The employment agreement between us and our former
President and Chief Executive Officer also provided for
immediate cash severance upon termination of employment.
Board
Committees
Our Board of Directors has formed five committees set forth
below. Members of each committee are appointed by the Board of
Directors.
49
The Audit Committee reviews, acts on and reports to the Board of
Directors with respect to various auditing and accounting
matters, including the selection of our independent registered
public accounting firm, the scope of the annual audits, fees to
be paid to, and the performance of, such public accounting firm,
and assists with the Board of Directors oversight of our
accounting practices, financial statement integrity and
compliance with legal and regulatory requirements, including
establishing and maintaining adequate internal control over
financial reporting. The current members of our Audit Committee
are Messrs. Gardner (Chair), McLennan and Olswang, all of
whom are independent directors, as defined by the rules of the
NYSE, and pursuant to the categorical director independence
standards adopted by our Board of Directors. The Board of
Directors has determined that Mr. Gardner is an audit
committee financial expert as defined by rules promulgated
by the SEC, and that each member of the Audit Committee is
financially literate as required by the rules of the NYSE. The
Audit Committee written charter is available on our website at
www.amdocs.com.
The Nominating and Corporate Governance Committee identifies
individuals qualified to become members of our Board of
Directors, recommends to the Board of Directors the persons to
be nominated for election as directors at the annual general
meeting of shareholders, develops and makes recommendations to
the Board of Directors regarding our corporate governance
principles and oversees the evaluations of our Board of
Directors and our management. The current members of the
Nominating and Corporate Governance Committee are
Messrs. Olswang (Chair), Brodsky, Gardner, Kahan and
Minicucci, all of whom are independent directors, as required by
the NYSE listing standards, and pursuant to the categorical
director independence standards adopted by our Board of
Directors. The Nominating and Corporate Governance Committee
written charter is available on our website at
www.amdocs.com. The Nominating and Corporate Governance
Committee has approved corporate governance guidelines that are
also available on our website at www.amdocs.com.
The Compensation Committee discharges the responsibilities of
our Board of Directors relating to the compensation of the Chief
Executive Officer of Amdocs Management Limited and makes
recommendations to our Board of Directors with respect to the
compensation of our other executive officers. The current
members of our Compensation Committee are Messrs. McLennan
(Chair), Anderson and Brodsky, all of whom are independent
directors, as defined by the rules of the NYSE, and pursuant to
the categorical director independence standards adopted by our
Board of Directors. The Compensation Committee written charter
is available on our website at www.amdocs.com.
The Executive Committee has such responsibilities as may be
delegated to it from time to time by the Board of Directors. The
current members of our Executive Committee are
Messrs. Anderson (Chair), Gelman, Kahan, Lemelbaum and
Minicucci.
The Technology and Innovation Committee was established to
assist the Board of Directors in reviewing our technological
development, opportunities and innovation, in connection with
the current and future business and markets. The current members
of our Technology and Innovation Committee are
Messrs. Zisapel (Chair), Anderson, Gelman, Lemelbaum and
Dr. Yaron.
Our independent directors receive no compensation from us,
except in connection with their membership on the Board of
Directors and its committees as described above regarding
Non-Employee Directors under
Compensation.
50
Workforce
Personnel
The following table presents the approximate number of our
workforce as of each date indicated, by function and by
geographical location (in each of which we operate at multiple
sites):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Software and Information Technology, Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
4,836
|
|
|
|
4,725
|
|
|
|
4,547
|
|
Israel
|
|
|
4,334
|
|
|
|
4,306
|
|
|
|
3,616
|
|
India
|
|
|
6,582
|
|
|
|
6,588
|
|
|
|
4,418
|
|
Rest of the World
|
|
|
2,609
|
|
|
|
2,432
|
|
|
|
3,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,361
|
|
|
|
18,051
|
|
|
|
15,871
|
|
Management and Administration
|
|
|
1,465
|
|
|
|
1,404
|
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Workforce
|
|
|
19,826
|
|
|
|
19,455
|
|
|
|
17,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a company with global operations, we are required to comply
with various labor and immigration laws throughout the world,
including laws and regulations in Australia, Brazil, Canada,
China, Cyprus, France, Germany, India, Israel, Japan, Mexico,
South Africa, the United Kingdom and the United States. Our
employees in certain countries of Europe, and to a limited
extent in Canada and Brazil, are protected by mandatory
collective bargaining agreements. To date, compliance with such
laws has not been a material burden for us. As the number of our
employees increases over time in specific countries, our
compliance with such regulations could become more burdensome.
Our principal operating subsidiaries are not party to any
collective bargaining agreements. However, our Israeli
subsidiaries are subject to certain provisions of general
extension orders issued by the Israeli Ministry of Labor and
Welfare which derive from various labor related statutes. The
most significant of these provisions provide for mandatory
pension benefits and wage adjustments in relation to increases
in the consumer price index, or CPI. The amount and frequency of
these adjustments are modified from time to time.
A small number of employees in Canada have union representation.
In addition, all employees in Brazil, including local senior
employees, are represented by unions. Collective bargaining
between employers and unions is mandatory in those countries,
negotiated annually, and covers work conditions, including cost
of living increases, minimum wages that exceed government
thresholds and overtime pay. We have a works council body in the
Netherlands and France which represents the employees and with
which we work closely to ensure compliance with the applicable
local law. We also have an employee representative body in
France.
We consider our relationship with our employees to be good and
have never experienced an organized labor dispute, strike or
work stoppage.
Share
Ownership
Security
Ownership of Directors and Senior Management and Certain Key
Employees
As of December 5, 2011, the aggregate number of our
ordinary shares beneficially owned by our directors and senior
management was 5,024,526 shares. As of December 5,
2011, none of our directors or members of senior management,
other than Mr. Anderson, beneficially owned 1% or more of
our outstanding ordinary shares. Mr. Anderson beneficially
owned 1,942,860 ordinary shares, or approximately 1.1% of
our ordinary shares outstanding as of December 5, 2011.
Beneficial ownership by a person, as of a particular date,
assumes the exercise of all options and warrants held by such
person that are currently exercisable or are exercisable within
60 days of such date.
51
Stock
Option and Incentive Plan
Our Board of Directors has adopted, and our shareholders have
approved, our 1998 Stock Option and Incentive Plan, as amended,
which we refer to as the 1998 Plan, pursuant to which up to
55,300,000 of our ordinary shares may be issued. The 1998 Plan
expires on January 17, 2016. Subject to stockholder
approval at our 2012 Annual General Meeting, our Board of
Directors has approved a 7,000,000 ordinary share increase in
the size of the 1998 Stock Option Plan, with the limitation that
these additional ordinary shares may only be used to grant stock
options or stock appreciation rights.
The 1998 Plan provides for the grant of restricted shares, stock
options and other stock-based awards to our directors, officers,
employees and consultants. The purpose of the 1998 Plan is to
enable us to attract and retain qualified personnel and to
motivate such persons by providing them with an equity
participation in Amdocs. As of September 30, 2011, of the
55,300,000 ordinary shares available for issuance under the 1998
Plan, 26,234,063 ordinary shares had been issued as a result of
option exercises and restricted share issuances under the
provisions of the 1998 Plan, and 8,850,377 ordinary shares
remained available for future grants, subject to a sublimit
applicable to the award of restricted shares or awards dominated
in stock units. As of November 30, 2011, there were
outstanding options to purchase an aggregate of 19,071,061
ordinary shares at exercise prices ranging from $6.40 to $39.82
per share.
The 1998 Plan is administered by a committee, which determines
all the terms of the awards (subject to the above), including
which employees, directors or consultants are granted awards.
The Board of Directors may amend or terminate the 1998 Plan,
provided that shareholder approval is required to increase the
number of ordinary shares available under the 1998 Plan, to
materially increase the benefits accruing to participants, to
change the class of employees eligible for participation, to
decrease the basis upon which the minimum exercise price of
options is determined or to extend the period in which awards
may be granted or to grant an option that is exercisable for
more than ten years. Ordinary shares subject to restricted stock
awards are subject to certain restrictions on sale, transfer or
hypothecation. No awards may be granted after January 2016.
As a result of acquisitions, as of September 30, 2011, we
are obligated to issue (and have reserved for issuance) an
additional 230,085 ordinary shares upon exercise of options that
had previously been granted under the option plans of the
acquired companies and were exchanged for options to purchase
our ordinary shares. These options have exercise prices ranging
from $0.38 to $37.66 per share. No additional options have been
or will be granted under these predecessor plans.
|
|
ITEM 7.
|
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
Major
Shareholders
The following table sets forth specified information with
respect to the beneficial ownership of the ordinary shares as of
December 5, 2011 of (i) any person known by us to be
the beneficial owner of more than 5% of our ordinary shares, and
(ii) all of our directors and executives officers as a
group. Beneficial ownership is determined in accordance with the
rules of the SEC and, unless otherwise indicated, includes
voting and investment power with respect to all ordinary shares,
subject to community property laws, where applicable. The number
of ordinary shares used in calculating the percentage beneficial
ownership included in the table below is based on
172,265,944 ordinary shares outstanding as of
December 5, 2011. Information concerning shareholders is
based on periodic public filings made by such shareholders and
may not necessarily be accurate as of December 5, 2011.
None of our major shareholders have voting rights that are
different from those of any other shareholder.
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Beneficially
|
|
|
Percentage
|
|
Name
|
|
Owned
|
|
|
Ownership
|
|
|
Manning & Napier Advisors, Inc.(1)
|
|
|
17,713,713
|
|
|
|
10.28
|
%
|
Thornburg Investment Management Inc.(2)
|
|
|
15,757,400
|
|
|
|
9.15
|
%
|
Ameriprise Financial, Inc.(3)
|
|
|
12,931,201
|
|
|
|
7.51
|
%
|
All directors and executive officers as a group
(17 persons)(4)
|
|
|
5,024,526
|
|
|
|
2.88
|
%
|
52
|
|
|
(1) |
|
Based on a Schedule 13G filed by Manning & Napier
Advisors, Inc., or Manning & Napier, with the SEC on
February 11, 2011, Manning & Napier had sole
voting power over 15,822,958 of our ordinary shares and sole
dispositive power over 17,713,713 of our ordinary shares. The
address of Manning & Napier is 290 Woodcliff Drive,
Fairport, New York 14450. |
|
(2) |
|
The address of Thornburg Investment Management Inc., or
Thornburg, is 2300 North Ridgetop Road, Santa Fe, New Mexico
87506. Based on a Schedule 13G filed by Thornburg with the
SEC on January 24, 2011, Thornburg had sole voting and
dispositive power over all of these ordinary shares. |
|
(3) |
|
Based on a Schedule 13G filed by Ameriprise Financial,
Inc., or Ameriprise, and Columbia Management Investment
Advisers, LLC, or Columbia, with the SEC on February 11,
2011, Ameriprise and Columbia had shared voting power over
4,010,936 of our ordinary shares and shared dispositive power
over 12,931,201 of our ordinary shares. Ameriprise is the parent
company of Columbia. Ameriprise and Columbia disclaim beneficial
ownership of these shares. The address of Ameriprise and
RiverSource is 145 Ameriprise Financial Center, Minneapolis,
Minnesota 55474. |
|
(4) |
|
Includes options held by such directors and executive officers
that are exercisable within 60 days after December 5,
2011. |
Over the last three years, our major shareholders have included
our directors and executive officers as a group, Thornberg,
Manning, Ameriprise and its affiliates, AT&T and its
affiliates, and other institutional investors, including T. Rowe
Price, Janus Capital Management LLC (Janus),
J&W Seligman & Co. Incorporated
(Seligman) and Glenview Capital Management, LLC
(Glenview). AT&Ts share ownership
decreased below 5.0% during fiscal 2009 from 5.2% in November
2006. T. Rowe Price, Janus and Glenview Capital Management, LLC
ceased to be major shareholders in fiscal 2009. Seligman was
acquired by Ameriprise in 2008.
As of December 5, 2011, our ordinary shares were held by
907 record holders. Based on a review of the information
provided to us by our transfer agent, 592 record holders,
holding approximately 99.96% of our outstanding ordinary shares
held of record, were residents of the United States.
Related
Party Transactions
AT&T, together with some of its operating subsidiaries, is
our most significant customer. During fiscal 2011, AT&T and
those subsidiaries accounted for 29% of our revenue. AT&T
is also a beneficial owner of companies that provide certain
miscellaneous support services to us in the United States.
|
|
ITEM 8.
|
FINANCIAL
INFORMATION
|
Financial
Statements
See Financial Statements for our audited
Consolidated Financial Statements and Financial Statement
Schedule filed as part of this Annual Report.
Legal
Proceedings
We are involved in various legal proceedings arising in the
normal course of our business. Based upon the advice of counsel,
we do not believe that the ultimate resolution of these matters
will have a material adverse effect on our consolidated
financial position, results of operations or cash flows.
Dividend
Policy
After the payment of dividends in 1998 that followed a corporate
reorganization, we decided in general to retain earnings to
finance the development of our business, and we have not paid
any cash dividends on our ordinary shares since that time. The
payment of any future dividends will be paid by us based on
conditions then existing, including our earnings, financial
condition and capital requirements, as well as other conditions
we deem relevant. The terms of our revolving credit facility
restrict, and the terms of any other debt that we may incur
could effectively limit, our ability to pay dividends.
53
|
|
ITEM 9.
|
THE
OFFER AND LISTING
|
Our ordinary shares have been quoted on the NYSE since
June 19, 1998, under the symbol DOX. The
following table sets forth the high and low reported sale prices
for our ordinary shares for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal Year Ended September 30
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
40.74
|
|
|
$
|
32.50
|
|
2008
|
|
$
|
38.03
|
|
|
$
|
24.65
|
|
2009
|
|
$
|
27.71
|
|
|
$
|
14.61
|
|
2010
|
|
$
|
32.44
|
|
|
$
|
24.10
|
|
2011
|
|
$
|
32.00
|
|
|
$
|
25.41
|
|
Quarter
|
|
|
|
|
|
|
|
|
Fiscal 2010:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
29.04
|
|
|
$
|
24.10
|
|
Second Quarter
|
|
$
|
30.94
|
|
|
$
|
27.75
|
|
Third Quarter
|
|
$
|
32.44
|
|
|
$
|
26.65
|
|
Fourth Quarter
|
|
$
|
29.26
|
|
|
$
|
25.64
|
|
Fiscal 2011:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
30.96
|
|
|
$
|
25.75
|
|
Second Quarter
|
|
$
|
30.65
|
|
|
$
|
26.83
|
|
Third Quarter
|
|
$
|
31.00
|
|
|
$
|
28.34
|
|
Fourth Quarter
|
|
$
|
32.00
|
|
|
$
|
25.41
|
|
Fiscal 2012:
|
|
|
|
|
|
|
|
|
First Quarter (through November 30, 2011)
|
|
$
|
31.06
|
|
|
$
|
25.67
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
June 2011
|
|
$
|
30.50
|
|
|
$
|
28.34
|
|
July 2011
|
|
$
|
31.98
|
|
|
$
|
30.29
|
|
August 2011
|
|
$
|
32.00
|
|
|
$
|
25.81
|
|
September 2011
|
|
$
|
28.66
|
|
|
$
|
25.41
|
|
October 2011
|
|
$
|
31.06
|
|
|
$
|
25.67
|
|
November 2011
|
|
$
|
30.74
|
|
|
$
|
27.36
|
|
|
|
ITEM 10.
|
ADDITIONAL
INFORMATION
|
Memorandum
and Articles of Incorporation
Amdocs Limited is registered as a company with limited liability
pursuant to the laws of the Island of Guernsey with company
number 19528 and whose registered office situated at
Suite 5, Tower Hill House, Le Bordage, St Peter Port,
Guernsey, GY1 3QT. The telephone number at that location is
+44-1481-728444.
Our Memorandum of Incorporation, or the Memorandum, provides
that the objects and powers of Amdocs Limited are not restricted
and our Articles of Incorporation, or the Articles, provide that
our business is to engage in any lawful act or activity for
which companies may be organized under the Companies (Guernsey)
Law, 2008, as amended, or the Companies Law.
The Articles grant the Board of Directors all the powers
necessary for managing, directing and supervising the management
of the business and affairs of Amdocs Limited.
Article 70(1) of the Articles provides that a director may
vote in respect of any contract or arrangement in which such
director has an interest notwithstanding such directors
interest and an interested director will not be liable to us for
any profit realized through any such contract or arrangement by
reason of such director holding the
54
office of director. Article 71(1) of the Articles provides
that the directors shall be paid out of the funds of Amdocs
Limited by way of fees such sums as the Board shall reasonably
determine. Article 73 of the Articles provides that
directors may exercise all the powers of Amdocs Limited to
borrow money, and to mortgage or charge its undertaking,
property and uncalled capital or any part thereof, and to issue
securities whether outright or as security for any debt,
liability or obligation of the Amdocs Limited for any third
party. Such borrowing powers can only be altered through an
amendment to the Articles by special resolution. Our Memorandum
and Articles do not impose a requirement on the directors to own
shares of Amdocs Limited in order to serve as directors,
however, the Board of Directors has adopted guidelines for
minimum share ownership by the directors, who have until 2013 to
be in compliance with the guidelines.
On January 22, 2009 the Board of Directors was granted a
five-year standing authority by the shareholders to issue a
maximum of (i) 25,000,000 preferred shares and
(ii) 700,000,000 ordinary shares, consisting of voting and
non-voting ordinary shares. As of September 30, 2011,
174,691,685 ordinary shares were outstanding (net of treasury
shares) and no non-voting ordinary shares or preferred shares
were outstanding. The rights, preferences and restrictions
attaching to each class of the shares were not changed by the
amendment to our charter documents and are set out in the
Memorandum and Articles and are as follows:
Preferred
Shares
|
|
|
|
|
Issue the preferred shares may be issued from
time to time in one or more series of any number of shares up to
the amount authorized.
|
|
|
|
Authorization to Issue Preferred Shares
authority is vested in the directors from time
to time to authorize the issue of one or more series of
preferred shares and to provide for the designations, powers,
preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions
thereon.
|
|
|
|
Relative Rights all shares of any one series
of preferred shares must be identical with each other in all
respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends
shall accrue.
|
|
|
|
Liquidation in the event of any liquidation,
dissolution or
winding-up
of Amdocs Limited, the holders of preferred shares are entitled
to a preference with respect to payment and to receive payment
(at the rate fixed in any resolution or resolutions adopted by
the directors in such case) plus an amount equal to all
dividends accumulated to the date of final distribution to such
holders. The holders of preferred shares are entitled to no
further payment other than that stated above. If upon any
liquidation our assets are insufficient to pay in full the
amount stated above, then such assets shall be distributed among
the holders of preferred shares ratably in accordance with the
respective amount such holder would have received if all amounts
had been paid in full.
|
|
|
|
Voting Rights except as otherwise provided
for by the directors upon the issue of any new series of
preferred shares, the holders of preferred shares have no right
or power to vote on any question or in any proceeding or to be
represented at, or to receive notice of, any meeting of
shareholders.
|
Ordinary
Shares and Non-Voting Ordinary Shares
Except as otherwise provided by the Memorandum and Articles, the
ordinary shares and non-voting ordinary shares are identical and
entitle holders thereof to the same rights and privileges.
|
|
|
|
|
Dividends when and as dividends are declared
on our shares, the holders of voting ordinary shares and
non-voting shares are entitled to share equally, share for
share, in such dividends except that if dividends are declared
that are payable in voting ordinary shares or non-voting
ordinary shares, dividends must be declared that are payable at
the same rate in both classes of shares.
|
|
|
|
Conversion of Non-Voting Ordinary Shares into Voting Ordinary
Shares upon the transfer of non-voting ordinary
shares from the original holder thereof to any third party not
affiliated with such original holder,
|
55
|
|
|
|
|
non-voting ordinary shares are redesignated in our books as
voting ordinary shares and automatically convert into the same
number of voting ordinary shares.
|
|
|
|
|
|
Liquidation upon any liquidation, dissolution
or
winding-up,
any assets remaining after creditors and the holders of any
preferred shares have been paid in full shall be distributed to
the holders of voting ordinary shares and non-voting ordinary
shares equally share for share.
|
|
|
|
Voting Rights the holders of voting ordinary
shares are entitled to vote on all matters to be voted on by the
shareholders, and the holders of non-voting ordinary shares are
not entitled to any voting rights.
|
|
|
|
Preferences the voting ordinary shares and
non-voting ordinary shares are subject to all the powers,
rights, privileges, preferences and priorities of the preferred
shares as are set out in the Articles.
|
As regards both preferred shares and voting and non-voting
ordinary shares, we have the power to purchase any of our own
shares, whether or not they are redeemable and may make a
payment out of capital for such purchase. If we repurchase
shares off market, the repurchase must be approved by special
resolution of our shareholders. If we are making a market
acquisition of our own shares, the acquisition must be approved
by an ordinary resolution of our shareholders. In practice, we
expect that we would continue to effect any future repurchases
of our ordinary shares through our subsidiaries.
The Articles now provide that our directors, officers and other
agents will be indemnified by us from and against all
liabilities to Amdocs Limited or third parties (including our
shareholders) sustained in connection with their performance of
their duties, except to the extent prohibited by the Companies
Law. Under the Companies Law, Amdocs Limited may not indemnify a
director for certain excluded liabilities, which are:
|
|
|
|
|
fines imposed in criminal proceedings;
|
|
|
|
regulatory fines;
|
|
|
|
expenses incurred in defending criminal proceedings resulting in
a conviction;
|
|
|
|
expenses incurred in defending civil proceedings brought by
Amdocs Limited or an affiliated company in which judgment is
rendered against the director; and
|
|
|
|
expenses incurred in unsuccessfully seeking judicial relief from
claims of a breach of duty.
|
In addition to the excluded liabilities listed above, directors
may also not be indemnified by us for liabilities to us or any
of our subsidiaries arising out of negligence, default, breach
of duty or breach of trust of a director in relation to us or
any of our subsidiaries. The Companies Law authorizes Guernsey
companies to purchase insurance against such liabilities to
companies or to third parties for the benefit of directors. We
currently maintain such insurance. Judicial relief is available
for an officer charged with a neglect of duty if the court
determines that such person acted honestly and reasonably,
having regard to all the circumstances of the case.
There are no provisions in the Memorandum or Articles that
provide for a classified board of directors or for cumulative
voting for directors.
If the share capital is divided into different classes of
shares, Article 11 of the Articles provides that the rights
attached to any class of shares (unless otherwise provided by
the terms of issue) may be varied with the consent in writing of
the holders of three-fourths of the issued shares of that class
or with the sanction of a special resolution of the holders of
the shares of that class.
A special resolution is defined by the Companies Law as being a
resolution passed by a majority of shareholders representing not
less than 75% of the total voting rights of the shareholders
present in person or by proxy.
Rather than attend general or special meetings of our
shareholders, shareholders may confer voting authority by proxy
to be represented at such meetings. Generally speaking, proxies
will not be counted as voting in respect of any matter as to
which abstention is indicated, but abstentions will be counted
as ordinary shares that are present for purposes of determining
whether a quorum is present at a general or special meeting.
Nominees who are members of the NYSE, and who, as brokers, hold
ordinary shares in street name for customers have,
by NYSE rules, the
56
authority to vote on certain items in the absence of
instructions from their customers, the beneficial owners of the
ordinary shares. If such nominees or brokers indicate that they
do not have authority to vote shares as to a particular matter,
we will not count those votes in favor of such matter, however,
such broker non-votes will be counted as ordinary
shares that are present for purposes of determining whether a
quorum is present.
Provisions in respect of the holding of general meetings and
extraordinary general meetings are set out at
Articles 22-41
of the Articles. The Articles provide that an annual general
meeting must be held once in every calendar year (provided that
not more than 15 months have elapsed since the last such
meeting) at such time and place as the directors appoint. The
shareholders of the Company may waive the requirement to hold an
annual general meeting in accordance with the Companies Law. The
directors may, whenever they deem fit, convene an extraordinary
general meeting. General meetings may be convened by any
shareholders holding more than 10% in the aggregate of Amdocs
Limiteds share capital. Shareholders may participate in
general meetings by video link, telephone conference call or
other electronic or telephonic means of communication.
A minimum of ten days written notice is required in
connection with an annual general meeting and a minimum of
14 days written notice is required for an
extraordinary general meeting, although a general meeting may be
called by shorter notice if all shareholders entitled to attend
and vote agree. The notice shall specify the place, the day and
the hour of the meeting, and in the case of any special
business, the general nature of that business and details of any
special resolutions, waiver resolutions or unanimous resolutions
being proposed at the meeting. The notice must be sent to every
shareholder and every director and may be published on a website.
At general meetings, the Chairman of the Board may choose
whether a resolution put to a vote shall be decided by a show of
hands or by a poll. However, a poll may be demanded by not less
than five shareholders having the right to vote on the
resolution or by shareholders representing not less than 10% of
the total voting rights of all shareholders having the right to
vote on the resolution.
A shareholder is entitled to appoint another person as his proxy
to exercise all or any of his rights to attend and to speak and
vote at a meeting of Amdocs Limited.
Amdocs Limited may pass resolutions by way of written resolution.
There are no limitations on the rights to own securities,
including the rights of non-resident or foreign shareholders to
hold or exercise voting rights on the securities.
There are no provisions in the Memorandum or Articles that would
have the effect of delaying, deferring or preventing a change in
control of Amdocs Limited and that would operate only with
respect to a merger, acquisition or corporate restructuring
involving us (or any of our subsidiaries).
There are no provisions in the Memorandum or Articles governing
the ownership threshold above which our shareholder ownership
must be disclosed. U.S. federal law, however, requires that
all directors, executive officers and holders of 10% or more of
the stock of a company that has a class of stock registered
under the Securities Exchange Act of 1934, as amended (other
than a foreign private issuer, such as Amdocs Limited), disclose
such ownership. In addition, holders of more than 5% of a
registered equity security of a company (including a foreign
private issuer) must disclose such ownership.
The directors may reduce our share capital or any other capital
subject to us satisfying the solvency requirements set out in
the Companies Law.
Material
Contracts
On November 27, 2007, we entered into a Credit Agreement
among us, certain of our subsidiaries, the lenders from time to
time party thereto, JPMorgan Chase Bank, N.A., as administrative
agent, J.P. Morgan Europe Limited, as London agent, and
JPMorgan Chase Bank, N.A., Toronto branch, as Canadian agent.
The agreement provides for an unsecured $500 million
five-year revolving credit facility with a syndicate of banks,
which is available for general corporate purposes, including
acquisitions and repurchases of our ordinary shares that we may
consider from time to time.
57
On December 31, 2009, we entered into a Further Amended and
Restated Information Technology Services Agreement, which amends
and restates in its entirety the Information Technology Services
Agreement that we entered into effective April 17, 2007
with AT&T Services, as well as the Amended and Restated
Information Technology Services Agreement that we entered into
effective December 28, 2007 with AT&T Services. The
agreement provides that Amdocs will provide services for
application software to AT&T for fees as specified therein.
In the past two years, we have not entered into any other
material contracts other than contracts entered into in the
ordinary course of our business.
Taxation
Taxation
of the Company
The following is a summary of certain material tax
considerations relating to Amdocs and our subsidiaries. To the
extent that the discussion is based on tax legislation that has
not been subject to judicial or administrative interpretation,
there can be no assurance that the views expressed in the
discussion will be accepted by the tax authorities in question.
The discussion is not intended, and should not be construed, as
legal or professional tax advice and is not exhaustive of all
possible tax considerations.
General
Our effective tax rate was 12.4% for fiscal 2011, compared to
10.7% for fiscal 2010 and 10.9% for fiscal 2009.
There can be no assurance that our effective tax rate will not
change over time as a result of a change in corporate income tax
rates or other changes in the tax laws of Guernsey, the
jurisdiction in which our holding company is organized, or of
the various countries in which we operate. Moreover, our
effective tax rate in future years may be adversely affected in
the event that a tax authority challenged the manner in which
items of income and expense are allocated among us and our
subsidiaries. In addition, we and certain of our subsidiaries
benefit from certain special tax benefits. The loss of any such
tax benefits could have an adverse effect on our effective tax
rate.
Certain
Guernsey Tax Considerations
Tax legislation enacted in Guernsey with effect from
January 1, 2008 subjected us to a zero percent corporate
tax rate. In October 2009, Guernsey officials announced that
Guernseys corporate income tax regime was under review.
Certain
Indian Tax Considerations
Through subsidiaries, we operate a development center and a
business processing operations center in Pune, India, and
another development center in Delhi, India. In 2011, the
corporation tax rate applicable in India on trading activities
was 32.4%. Our subsidiaries in India operate under specific
favorable tax entitlements that are based upon pre-approved
information technology related services activity. As a result,
our subsidiary in Delhi and a business unit we established in
Pune are entitled to considerable corporate income tax
exemptions on all income derived from such pre-approved
information technology activity, provided they continue to meet
the conditions required for such tax benefits. The benefits
applicable for our Pune-based subsidiaries expired on
April 1, 2011. However, as of March 31, 2011, the
Minimum Alternative Tax, or MAT, became applicable to all our
Indian subsidiaries. The MAT is levied on book profits at the
effective rate of 20% (during the Indian fiscal year commencing
on April 1, 2011) and can be carried forward for
10 years to be credited against corporate income tax.
Our-Delhi based subsidiary and the unit established in Pune are
subject to a separate tax entitlement under which each is exempt
from tax on its tax incentive-eligible activity for its first
five years of operation and each will enjoy 50% reduction on its
corporate income tax for such activity for the following five
years. After 10 years of operations, such 50% reduction may
be available for an additional five years, subject to further
investment-related undertakings that we would be required to
make. Under Indian laws, any dividend distribution by our Indian
subsidiaries would be subject to a dividend distribution tax at
the rate of 16.2% to be paid by such subsidiaries. The Indian
government has published a draft for the replacement of the
countrys tax code. This draft, if enacted, would
58
substantially change Indian tax laws, and might reduce or
eliminate the availability of these beneficial tax rates for our
Indian subsidiaries.
Certain
Israeli Tax Considerations
Our Israeli subsidiary, Amdocs (Israel) Limited, operates one of
our largest development centers. Discussed below are certain
Israeli tax considerations relating to this subsidiary.
General Corporate Taxation in Israel. In 2005,
the Israeli parliament enacted legislation that has gradually
reduced the Companies Tax rates of taxable income
apply to Israeli companies. According to this legislation, the
Companies Tax rate on taxable income will be 25% for 2010 and
thereafter. However, the effective tax rate payable by an
Israeli company that derives income from an Approved Enterprise
may be considerably less.
Law for the Encouragement of Capital Investments,
1959. Certain production and development
facilities of our Israeli subsidiary have been granted
Approved Enterprise status pursuant to the Law for
the Encouragement of Capital Investments, 1959, or the
Investment Law, which provides certain tax and financial
benefits to investment programs that have been granted such
status.
In general, investment programs of our Israeli subsidiary that
have already obtained instruments of approval for an Approved
Enterprise by the Israeli Investment Center prior to the change
in legislation in 2005 continue to be subject to the old
provisions of the Investment Law as described below. The
revisions that were introduced into the Investment Law in 2005
did not affect our effective tax rate for year ended
September 30, 2011 and we do not expect them to have a
significant impact on our effective tax rate in fiscal 2012.
The provisions of the Investment Law applicable to investment
programs approved prior to the effective date of the amendments
to the Investment Law provide that capital investments in
production facilities (or other eligible assets) may, upon
application to the Israeli Investment Center, be designated as
an Approved Enterprise. Each instrument of approval
for an Approved Enterprise relates to a specific investment
program delineated both by the financial scope of the
investment, including source of funds, and by the physical
characteristics of the facility or other assets. The tax
benefits available under any instrument of approval relate only
to taxable profits attributable to the specific investment
program and are contingent upon compliance with the conditions
set out in the instrument of approval.
Tax Benefits. Taxable income derived from an
Approved Enterprise is subject to a reduced corporate tax rate
of 25% until the earliest of:
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seven consecutive years (or ten in the case of an FIC (as
defined below)) commencing in the year in which the Approved
Enterprise first generates taxable income,
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12 years from the year of commencement of
production, or
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14 years from the year of the approval of the Approved
Enterprise status.
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Such income is eligible for further reductions in tax rates if
we qualify as a Foreign Investors Company, or FIC,
depending on the percentage of the foreign ownership. Subject to
certain conditions, an FIC is a company more than 25% of whose
share capital (in terms of shares, rights of profits, voting and
appointment of directors) and more than 25% of whose combined
share and loan capital is owned by non-Israeli residents. The
tax rate is 20% if the foreign investment is 49% or more but
less than 74%; 15% if the foreign investment is 74% or more but
less than 90%; and 10% if the foreign investment is 90% or more.
The determination of foreign ownership is made on the basis of
the lowest level of foreign ownership during the tax year. A
company that owns an Approved Enterprise approved after
April 1, 1986, may elect to forego the entitlement to
grants and apply for an alternative package of tax benefits. In
addition, a company (like our Israeli subsidiary) with an
enterprise outside the National Priority Regions (which is not
entitled to grants) may also apply for the alternative benefits.
Under the alternative benefits, undistributed income from the
Approved Enterprise operations is fully tax exempt (a tax
holiday) for a defined period. The tax holiday ranges between
two to ten years from the first year of taxable income subject
to the limitations as described above, depending principally
upon the geographic location within Israel. On expiration of the
tax holiday, the Approved Enterprise is eligible for a
beneficial tax rate (25% or lower in the case of an FIC, as
described above) for the remainder of the otherwise applicable
period of benefits.
59
Our primary Israeli subsidiary has elected the alternative
benefits with respect to its current Approved Enterprise and its
enlargements, pursuant to which the Israeli subsidiary enjoys,
in relation to its Approved Enterprise operations, certain tax
holidays, based on the location of activities within Israel, for
a period of two or ten years (and in some cases for a period of
four years) and, in the case of a two year tax holiday, reduced
tax rates for an additional period of up to eight years. In case
this Israeli subsidiary pays a dividend, at any time, out of
income earned during the tax holiday period in respect of its
Approved Enterprise, it will be subject, assuming that the
current level of foreign investment in Amdocs is not reduced, to
corporate tax at the otherwise applicable rate of 10% of the
income from which such dividend has been paid and up to 25% if
such foreign investments are reduced (as detailed above). This
tax is in addition to the withholding tax on dividends as
described below. Under an instrument of approval issued in
December 1997 and an amendment issued in September 2006 to an
instrument of approval issued in December 2000 and relating to
specific investment programs of our Israeli subsidiary and to
the income derived therefrom, the subsidiary is entitled to a
reduced tax rate period of 13 years (instead of the
eight-year period referred to above). The tax benefits,
available with respect to an Approved Enterprise only to taxable
income attributable to that specific enterprise, are given
according to an allocation formula provided for in the
Investment Law or in the instrument of approval, and are
contingent upon the fulfillment of the conditions stipulated by
the Investment Law, the regulations published thereunder and the
instruments of approval for the specific investments in the
Approved Enterprises. In the event our Israeli subsidiary fails
to comply with these conditions, the tax and other benefits
could be canceled, in whole or in part, and the subsidiary might
be required to refund the amount of the canceled benefits, with
the addition of CPI linkage differences and interest. We believe
that the Approved Enterprise of our Israeli subsidiary
substantially complies with all such conditions currently, but
there can be no assurance that it will continue to do so.
In recent years changes were introduced to the Encouragements of
Capital Investment Act. Among other things, these changes
include a prospective cancellation of all tax incentives under
existing law. However, under the proposed transition rules,
incentive programs commenced prior to 2011 would continue to
apply until expired, unless the company elects to apply the
regimes provided by the new law. Additionally, the amendments
include a tax incentive package that consists of flat tax rates
of 10% through 15%, depending on size and location of the
taxable entity, for calendar years 2011 through 2012; 7% through
12.5%, depending on size and location of the taxable entity from
2013 through 2014, and 6% through 12% for calendar years 2015
forward. These incentives would apply to industrial companies
that meet certain criteria.
Dividends
Dividends paid out of income derived by an Approved Enterprise
during the benefit periods (or out of dividends received from a
company whose income is derived by an Approved Enterprise) are
subject to withholding tax at a reduced rate of 15% (deductible
at source). In the case of companies that do not qualify as a
FIC, the reduced rate of 15% is limited to dividends paid at any
time up to 12 years thereafter. This withholding tax is in
addition to the corporate tax that a company is subject to in
the event it pays a dividend out of income earned during the tax
holiday period related to its Approved Enterprise status.
Taxation
Of Holders Of Ordinary Shares
Certain
United States Federal Income Tax Considerations
The following discussion describes the material
U.S. federal income tax consequences to the ownership or
disposition of our ordinary shares to a U.S. holder. A
U.S. holder is:
(i) an individual who is a citizen or resident of the
United States;
(ii) a corporation created or organized in, or under the
laws of, the United States or of any state thereof;
(iii) an estate, the income of which is includable in gross
income for U.S. federal income tax purposes regardless of
its source; or
(iv) a trust, if a court within the United States is able
to exercise primary supervision over the administration of the
trust and one or more U.S. persons has the authority to
control all substantial decisions of the trust.
60
This summary generally considers only U.S. holders that own
ordinary shares as capital assets. This summary does not discuss
the U.S. federal income tax consequences to a holder of
ordinary shares that is not a U.S. holder.
This discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended, or the Code, current and
proposed Treasury regulations promulgated thereunder, and
administrative and judicial decisions as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
This discussion does not address all aspects of
U.S. federal income taxation that may be relevant to a
holder of ordinary shares based on such holders particular
circumstances (including potential application of the
alternative minimum tax), U.S. federal income tax
consequences to certain holders that are subject to special
treatment (such as taxpayers who are broker-dealers, insurance
companies, tax-exempt organizations, financial institutions,
holders of securities held as part of a straddle,
hedge or conversion transaction with
other investments, or holders owning directly, indirectly or by
attribution at least 10% of the ordinary shares), or any aspect
of state, local or
non-U.S. tax
laws. Additionally, this discussion does not consider the tax
treatment of persons who hold ordinary shares through a
partnership or other pass-through entity or the possible
application of U.S. federal gift or estate taxes.
This summary is for general information only and is not binding
on the Internal Revenue Service, or the IRS. There can be no
assurance that the IRS will not challenge one or more of the
statements made herein. U.S. holders are urged to consult
their own tax advisers as to the particular tax consequences to
them of owning and disposing of our ordinary shares.
Dividends. In general, a U.S. holder
receiving a distribution with respect to the ordinary shares
will be required to include such distribution (including the
amount of foreign taxes, if any, withheld therefrom) in gross
income as a taxable dividend to the extent such distribution is
paid from our current or accumulated earnings and profits as
determined under U.S. federal income tax principles. Any
distributions in excess of such earnings and profits will first
be treated, for U.S. federal income tax purposes, as a
nontaxable return of capital to the extent of the
U.S. holders tax basis in the ordinary shares, and
then, to the extent in excess of such tax basis, as gain from
the sale or exchange of a capital asset. See Disposition
of Ordinary Shares below. In general, U.S. corporate
shareholders will not be entitled to any deduction for
distributions received as dividends on the ordinary shares.
Dividend income is generally taxed as ordinary income. However,
a maximum U.S. federal income tax rate of 15% will apply to
qualified dividend income received by individuals
(as well as certain trusts and estates) before January 1,
2011, provided that certain holding period requirements are met.
Qualified dividend income includes dividends paid on
shares of U.S. corporations as well as dividends paid on
shares of qualified foreign corporations, including
shares of a foreign corporation that are readily tradable on an
established securities market in the United States. Since our
ordinary shares are readily tradable on the NYSE, we believe
that dividends paid by us with respect to our ordinary shares
should constitute qualified dividend income for
U.S. federal income tax purposes, provided that the holding
period requirements are satisfied and none of the other special
exceptions applies.
The amount of foreign income taxes that may be claimed as a
credit against U.S. federal income tax in any year is
subject to certain complex limitations and restrictions, which
must be determined on an individual basis by each
U.S. holder. The limitations set out in the Code include,
among others, rules that may limit foreign tax credits allowable
with respect to specific classes of income to the
U.S. federal income taxes otherwise payable with respect to
each such class of income. Dividends paid by us generally will
be foreign source passive income or financial
services income for U.S. foreign tax credit purposes.
Disposition of Ordinary Shares. Upon the sale,
exchange or other disposition of our ordinary shares, a
U.S. holder generally will recognize capital gain or loss
in an amount equal to the difference between the amount realized
on the disposition by such U.S. holder and its tax basis in
the ordinary shares. Such capital gain or loss will be long-term
capital gain or loss if the U.S. holder has held the
ordinary shares for more than one year at the time of the
disposition. In the case of a U.S. holder that is an
individual, trust or estate, long-term capital gains realized
upon a disposition of the ordinary shares during taxable years
beginning before January 1, 2011 generally will be subject
to a maximum U.S. federal tax income rate of 15%. Gains
realized by a U.S. holder on a sale, exchange or other
disposition of ordinary shares generally will be treated as
U.S. source income for U.S. foreign tax credit
purposes.
Information Reporting and Backup
Withholding. Dividend payments with respect to
the ordinary shares and proceeds from the sale, exchange or
redemption of ordinary shares may be subject to information
reporting to the
61
IRS and possible U.S. backup withholding. Backup
withholding will not apply, however, to a U.S. holder who
furnishes a correct taxpayer identification number and makes any
other required certification or who is otherwise exempt from
backup withholding. Generally a U.S. holder will provide
such certification on IRS
Form W-9
(Request for Taxpayer Identification Number and Certification).
Amounts withheld under the backup withholding rules may be
credited against a U.S. holders tax liability or
refunded if the holder provides the required information to the
IRS.
Passive Foreign Investment Company
Considerations. If, during any taxable year, 75%
or more of our gross income consists of certain types of passive
income, or the average value during a taxable year of passive
assets (generally assets that generate passive income) is 50% or
more of the average value of all of our assets, we will be
treated as a passive foreign investment company
under U.S. federal income tax law for such year and
succeeding years. If we are treated as a passive foreign
investment company, we do not intend to take steps necessary to
qualify as a qualified electing fund. However, if we are treated
as a passive foreign investment company, a U.S. holder may
be subject to increased tax liability upon the sale of our
ordinary shares or upon the receipt of certain distributions,
unless such U.S. holder makes an election to mark our
ordinary shares to market annually.
Based on an analysis of our financial position, we believe that
we have not been a passive foreign investment company for
U.S. federal income tax purposes for any preceding taxable
year and expect that we will not become a passive foreign
investment company during the current taxable year. However,
because the tests for determining passive foreign investment
company status are applied as of the end of each taxable year
and are dependent upon a number of factors, some of which are
beyond our control, including the value of our assets, based on
the market price of our ordinary shares, and the amount and type
of our gross income, we cannot guarantee that we will not become
a passive foreign investment company in the future or that the
IRS will agree with our conclusion regarding our current passive
foreign investment company status. We intend to use reasonable
efforts to avoid becoming a passive foreign investment company.
Rules relating to a passive foreign investment company are very
complex. U.S. holders should consult their own tax advisors
regarding the U.S. federal income tax considerations
discussed above and the applicability of passive foreign
investment company rules to their investments in our ordinary
shares.
Certain
Guernsey Tax Considerations
Under the laws of Guernsey as currently in effect, a holder of
our ordinary shares who is not a resident of Guernsey and who
does not carry on business in Guernsey through a permanent
establishment situated there is exempt from Guernsey income tax
on dividends paid with respect to the ordinary shares and is not
liable for Guernsey income tax on gains realized on sale or
disposition of such ordinary shares. In addition, Guernsey does
not impose a withholding tax on dividends paid by us to the
holders of our ordinary shares. Tax legislation was enacted in
Guernsey, effective as of January 1, 2008, to tax Guernsey
resident shareholders on actual or deemed distribution of
certain profits of a Guernsey company. We do not believe this
legislation will affect the taxation of a holder of ordinary
shares who is not a resident of Guernsey and who does not carry
on business in Guernsey through a permanent establishment
situated there.
There are no capital gains, gift or inheritance taxes levied by
Guernsey, and the ordinary shares generally are not subject to
any transfer taxes, stamp duties or similar charges on issuance
or transfer.
Documents
On Display
We are subject to the reporting requirements of foreign private
issuers under the U.S. Securities Exchange Act of 1934.
Pursuant to the Exchange Act, we file reports with the SEC,
including this Annual Report on
Form 20-F.
We also submit reports to the SEC, including
Form 6-K
Reports of Foreign Private Issuers. You may read and copy such
reports at the SECs public Reference Room at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330
for further information about the Public Reference Room. Such
reports are also available to the public on the SECs
website at www.sec.gov. Some of this information may also
be found on our website at www.amdocs.com.
62
You may request copies of our reports, at no cost, by writing to
or telephoning us as follows:
Amdocs, Inc.
Attention: Thomas G. OBrien
1390 Timberlake Manor Parkway
Chesterfield, Missouri 63017
Telephone: +1-314-212-8328
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ITEM 11.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Foreign
Currency Risk
We manage our foreign subsidiaries as integral direct components
of our operations. The operations of our foreign subsidiaries
provide the same type of services with the same type of
expenditures throughout the Amdocs group. We have determined
that the U.S. dollar is our functional currency. We
periodically assess the applicability of the U.S. dollar as
our functional currency by reviewing the salient indicators as
indicated in the authoritative guidance for foreign currency
matters.
During fiscal 2011, our revenue and operating expenses in the
U.S. dollar or linked to the U.S. dollar were
approximately 70% to 80% and 50% to 60%, respectively. If more
customers will seek contracts in currencies other than the
U.S. dollar, the percentage of our revenue and operating
expenses in the U.S. dollar or linked to the
U.S. dollar may decrease over time and our exposure to
fluctuations in currency exchange rates could increase.
In managing our foreign exchange risk, we enter into various
foreign exchange contracts. 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 use such contracts to
hedge net exposure to changes in foreign currency exchange rates
associated with revenue denominated in a foreign currency,
primarily Canadian dollars, euros and Australian dollars, and
anticipated costs to be incurred in a foreign currency,
primarily Israeli shekels, Indian rupees and British pounds. We
also use such contracts to hedge the net impact of the
variability in exchange rates on certain balance sheet items
such as accounts receivable and employee related accruals
denominated primarily in Israeli shekels, Canadian dollars,
euros and Australian dollars. We seek to minimize the net
exposure that the anticipated cash flow from sales of our
products and services, cash flow required for our expenses and
the net exposure related to our balance sheet items, denominated
in a currency other than our functional currency will be
affected by changes in exchange rates. Please see Note 6 to
our consolidated financial statements.
The table below (all dollar amounts in millions) presents the
total volume or notional amounts and fair value of our
derivative instruments as of September 30, 2011. Notional
values are U.S. dollar translated and calculated based on
forward rates as of September 30, 2011 for forward
contracts, and based on spot rates as of September 30, 2011
for options.
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Fair Value of
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Notional Value*
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Derivatives
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Foreign exchange contracts
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$
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1,156
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$
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(10.3
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(*) |
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Gross notional amounts do not quantify risk or represent assets
or liabilities of the Company, but are used in the calculation
of settlements under the contracts. |
Interest
Rate Risk
Our interest expenses and income are sensitive to changes in
interest rates, as all of our cash reserves and some of our
borrowings, are subject to interest rate changes. Our short-term
interest-bearing investments are invested in short term
conservative debt instruments, primarily
U.S. dollar-denominated, and consist mainly of money market
funds, U.S. government treasuries, corporate bonds,
government guaranteed debt and U.S. agency securities. As
of September 30, 2011, there was $250.0 million of
short-term outstanding borrowing under our revolving lines of
credit, which we repaid in October 2011.
63
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ITEM 12.
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DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
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Not applicable.
PART II
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ITEM 13.
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DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
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Not applicable.
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ITEM 14.
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MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
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Not applicable.
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ITEM 15.
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CONTROLS
AND PROCEDURES
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Our management, with the participation of the Chief Executive
Officer and Chief Financial Officer of Amdocs Management
Limited, evaluated the effectiveness of our disclosure controls
and procedures as of September 30, 2011. The term
disclosure controls and procedures, as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to
be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed,
summarized and reported, within the time period specified in the
SECs rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is
accumulated and communicated to the companys management,
including its principal executive and principal financial
officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating
the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls
and procedures as of September 30, 2011, the Chief
Executive Officer and the Chief Financial Officer of Amdocs
Management Limited concluded that, as of such date, our
disclosure controls and procedures were effective at the
reasonable assurance level.
No change in our internal control over financial reporting (as
defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) occurred during the fiscal year ended
September 30, 2011 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
Managements report on our internal control over financial
reporting (as such defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act), and the related reports of our
independent public accounting firm, are included on pages F-2,
F-3 and F-4 of this Annual Report on
Form 20-F,
and are incorporated herein by reference.
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ITEM 16A.
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AUDIT
COMMITTEE FINANCIAL EXPERT
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Our Board of Directors has determined that there is at least one
audit committee financial expert, Adrian Gardner, serving on our
Audit Committee. Our Board of Directors has determined that
Mr. Gardner is an independent director.
Our Board of Directors has adopted a Code of Ethics and Business
Conduct that sets forth legal and ethical standards of conduct
for our directors and employees, including our principal
executive officer, principal financial officer and other
executive officers, our subsidiaries and other business entities
controlled by us worldwide.
64
Our Code of Ethics and Business Conduct is available on our
website at www.amdocs.com, or you may request a copy of
our code of ethics, at no cost, by writing to or telephoning us
as follows:
Amdocs, Inc.
Attention: Thomas G. OBrien
1390 Timberlake Manor Parkway
Chesterfield, Missouri 63017
Telephone: +1-314-212-8328
We intend to post on our website within five business days all
disclosures that are required by law or NYSE rules concerning
any amendments to, or waivers from, any provision of the code.
|
|
ITEM 16C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
During each of the last three fiscal years, Ernst &
Young LLP has acted as our independent registered public
accounting firm.
Audit
Fees
Ernst & Young billed us approximately
$3.3 million for audit services for fiscal 2011, including
fees associated with the annual audit and reviews of our
quarterly financial results submitted on
Form 6-K,
consultations on various accounting issues and performance of
local statutory audits. Ernst & Young billed us
approximately $3.2 million for audit services for fiscal
2010.
Audit-Related
Fees
Ernst & Young billed us approximately
$1.2 million for audit-related services for fiscal 2011.
Audit-related services principally include SAS 70 report
issuances and due diligence examinations. Ernst &
Young billed us approximately $1.7 million for
audit-related services for fiscal 2010.
Tax
Fees
Ernst & Young billed us approximately
$1.8 million for tax advice, including fees associated with
tax compliance, tax advice and tax planning services for fiscal
2011. Ernst & Young billed us approximately
$1.4 million for tax advice in fiscal 2010.
All Other
Fees
Ernst & Young did not bill us for services other than
Audit Fees, Audit-Related Fees and Tax Fees described above for
fiscal 2011 or fiscal 2010.
Pre-Approval
Policies for Non-Audit Services
The Audit Committee has adopted policies and procedures relating
to the approval of all audit and non-audit services that are to
be performed by our independent registered public accounting
firm. These policies generally provide that we will not engage
our independent registered public accounting firm to render
audit or non-audit services unless the service is specifically
approved in advance by the Audit Committee or the engagement is
entered into pursuant to the pre-approval procedure described
below.
From time to time, the Audit Committee may pre-approve specified
types of services that are expected to be provided to us by our
independent registered public accounting firm during the next
12 months. Any such pre-approval is detailed as to the
particular service or type of services to be provided and is
also generally subject to a maximum dollar amount. In fiscal
2011, our Audit Committee approved all of the services provided
by Ernst & Young.
|
|
ITEM 16D.
|
EXEMPTION FROM
THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
Not applicable.
65
|
|
ITEM 16E.
|
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
The following table provides information about purchases by us
and our affiliated purchasers during the fiscal year ended
September 30, 2011 of equity securities that are registered
by us pursuant to Section 12 of the Exchange Act:
Ordinary
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Maximum Number (or
|
|
|
|
(a)
|
|
|
|
|
|
Purchased as Part
|
|
|
Approximate Dollar Value)
|
|
|
|
Total Number of
|
|
|
(b)
|
|
|
of Publicly
|
|
|
of Shares that
|
|
|
|
Shares
|
|
|
Average Price
|
|
|
Announced Plans
|
|
|
May Yet Be Purchased Under
|
|
Period
|
|
Purchased
|
|
|
Paid per Share
|
|
|
or Programs
|
|
|
the Plans or Programs(1)
|
|
|
10/1/10-10/31/10
|
|
|
731,229
|
|
|
$
|
29.53
|
|
|
|
731,229
|
|
|
$
|
289,391,334
|
|
11/1/10-11/30/10
|
|
|
1,653,408
|
|
|
$
|
27.10
|
|
|
|
1,653,408
|
|
|
$
|
224,586,773
|
|
12/1/10-12/31/10
|
|
|
1,747,354
|
|
|
$
|
26.87
|
|
|
|
1,747,354
|
|
|
$
|
197,635,065
|
|
01/1/11-01/31/11
|
|
|
1,621,724
|
|
|
$
|
28.02
|
|
|
|
1,621,724
|
|
|
$
|
152,198,297
|
|
02/1/11-02/28/11
|
|
|
1,764,402
|
|
|
$
|
29.43
|
|
|
|
1,764,402
|
|
|
$
|
1,100,278,602
|
|
03/1/11-03/31/11
|
|
|
2,179,520
|
|
|
$
|
29.26
|
|
|
|
2,179,520
|
|
|
$
|
1,036,503,245
|
|
04/1/11-04/30/11
|
|
|
1,656,698
|
|
|
$
|
29.44
|
|
|
|
1,656,698
|
|
|
$
|
987,722,371
|
|
05/1/11-05/31/11
|
|
|
1,815,713
|
|
|
$
|
29.95
|
|
|
|
1,815,713
|
|
|
$
|
933,344,426
|
|
06/1/11-06/30/11
|
|
|
1,833,829
|
|
|
$
|
29.36
|
|
|
|
1,833,829
|
|
|
$
|
879,503,876
|
|
07/1/11-07/31/11
|
|
|
1,324,458
|
|
|
$
|
30.82
|
|
|
|
1,324,458
|
|
|
$
|
838,678,294
|
|
08/1/11-08/31/11
|
|
|
2,926,702
|
|
|
$
|
27.45
|
|
|
|
2,926,702
|
|
|
$
|
758,346,795
|
|
09/1/11-09/30/11
|
|
|
2,610,500
|
|
|
$
|
27.28
|
|
|
|
2,610,500
|
|
|
$
|
687,136,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,865,537
|
|
|
$
|
28.53
|
|
|
|
21,865,537
|
|
|
$
|
687,136,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In April 2010, our board of directors adopted a share repurchase
plan authorizing the repurchase of up to $700.0 million of
our outstanding ordinary shares over the following
12 months. In February 2011, our board of directors adopted
an additional share repurchase plan authorizing the repurchase
of up to $1 billion of our outstanding ordinary shares over
the following 24 months. The authorizations permit us to
purchase our ordinary shares in open market or privately
negotiated transactions at times and prices that we consider
appropriate. In April 2011, we completed the repurchase of the
remaining authorized amount under the April 2010 share
repurchase plan and started executing repurchases under the
February 2011 plan. In fiscal 2011, we repurchased
21.9 million ordinary shares at an average price of $28.53
per share (excluding broker and transaction fees). As of
September 30, 2011, we had remaining authority to
repurchase up to $687.1 million of our outstanding ordinary
shares. |
|
|
ITEM 16F.
|
CHANGE
IN REGISTRANTS CERTIFYING ACCOUNTANT
|
Not applicable.
|
|
ITEM 16G.
|
CORPORATE
GOVERNANCE
|
We believe there are no significant ways that our corporate
governance practices differ from those followed by
U.S. domestic companies under the NYSE listing standards.
For further information regarding our corporate governance
practices, please refer to our Notice and Proxy Statement to be
mailed to our shareholders in December 2011, and to our website
at www.amdocs.com.
66
PART III
|
|
ITEM 17.
|
FINANCIAL
STATEMENTS
|
Not applicable.
|
|
ITEM 18.
|
FINANCIAL
STATEMENTS
|
Financial
Statements And Schedule
The following Financial Statements and Financial Statement
Schedule of Amdocs Limited, with respect to financial results
for the fiscal years ended September 30, 2011, 2010 and
2009, are included at the end of this Annual Report:
Audited
Financial Statements of Amdocs Limited
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 30, 2011 and
2010
Consolidated Statements of Income for the years ended
September 30, 2011, 2010 and 2009
Consolidated Statements of Changes in Shareholders Equity
for the years ended September 30, 2011, 2010 and 2009
Consolidated Statements of Cash Flows for the years ended
September 30, 2011, 2010 and 2009
Notes to Consolidated Financial Statements
Financial
Statement Schedules of Amdocs Limited
Valuation and Qualifying Accounts
All other schedules have been omitted since they are either not
required or not applicable, or the information has otherwise
been included.
The exhibits listed on the Exhibit Index hereof are filed
herewith in response to this Item.
67
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on
Form 20-F
and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.
Amdocs Limited
Thomas G. OBrien
Treasurer and Secretary
Authorized U.S. Representative
Date: December 8, 2011
68
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
1
|
.1
|
|
Amended and Restated Memorandum of Incorporation of Amdocs
Limited (incorporated by reference to Exhibits 99.1 to
Amdocs
Form 6-K
filed January 26, 2009)
|
|
1
|
.2
|
|
Amended and Restated Articles of Incorporation of Amdocs Limited
(incorporated by reference to Exhibit 1.2 to Amdocs
Annual Report on
Form 20-F,
filed December 7, 2010)
|
|
2
|
.a.1
|
|
Indenture, dated March 5, 2004, between Amdocs Limited and
The Bank of New York, as trustee, for 0.50% Convertible
Senior Notes due 2024 (incorporated by reference to
Exhibit 99.1 to Amdocs
Form 6-K,
filed March 5, 2004)
|
|
2
|
.a.2
|
|
Registration Rights Agreement, dated March 5, 2004, among
Amdocs Limited and Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co. and Merrill Lynch, Pierce
Fenner & Smith Incorporated (incorporated by reference
to Exhibit 99.2 to Amdocs
Form 6-K,
filed March 5, 2004)
|
|
4
|
.b.1
|
|
Further Amended and Restated Information Technology Services
Agreement, dated September 1, 2007, between Amdocs, Inc.
and AT&T Services, Inc. (confidential material has been
redacted and complete exhibits have been separately filed with
the Securities and Exchange Commission) (incorporated by
reference to Exhibit 99.3 to Amdocs Report of Foreign
Private Issuer on
Form 6-K
dated December 3, 2007)
|
|
4
|
.b.2
|
|
Master Agreement for Software and Services between Amdocs, Inc.
and SBC Operations, Inc., effective July 7, 1998
(confidential material has been redacted and complete exhibits
have been separately filed with the Securities and Exchange
Commission) (incorporated by reference to Exhibit 10.13 to
Amdocs Amendment No. 1 to Registration Statement on
Form F-1,
dated May 21, 1999, Registration
No. 333-75151)
|
|
4
|
.b.3
|
|
Software Master Agreement between Amdocs Software Systems
Limited and SBC Services, Inc., effective December 10, 2003
(confidential material has been redacted and complete exhibits
have been separately filed with the Securities and Exchange
Commission) (incorporated by reference to Exhibit 99.2 to
Amdocs Amendment No. 1 to Registration Statement on
Form F-3,
dated September 21, 2004, Registration
No. 333-114344)
|
|
4
|
.b.4
|
|
Agreement between Amdocs, Inc. and SBC Services, Inc. for
Software and Professional Services, effective August 7,
2003 (confidential material has been redacted and complete
exhibits have been separately filed with the Securities and
Exchange Commission) (incorporated by reference to
Exhibit 99.3 to Amdocs Amendment No. 1 to
Registration Statement on
Form F-3,
dated September 21, 2004, Registration
No. 333-114344)
|
|
4
|
.b.5
|
|
Amended and Restated Customer Care and Billing Services
Agreement, dated as of July 1, 2006, between Sprint/United
Management Company and Amdocs Software Systems Limited
(confidential material has been redacted and complete exhibits
have been separately filed with the Securities and Exchange
Commission) (incorporated by reference to Exhibit 99.1 to
Amdocs
Form 6-K
dated December 13, 2006)
|
|
4
|
.b.6
|
|
Agreement Amending the Further Amended and Restated Master
Outsourcing Agreement and Master License and Services Agreement,
dated as of October 5, 2006, between Bell Canada and Amdocs
Canadian Managed Services Inc. (confidential material has been
redacted and complete exhibits have been separately filed with
the Securities and Exchange Commission) (incorporated by
reference to Exhibit 4.c.1 to Amdocs Report of
Foreign Private Issuer on
Form 6-K
dated December 13, 2006)
|
|
4
|
.b.7
|
|
Further Amended and Restated Information Technology Services
Agreement, dated as of December 31, 2009, by and between
AT&T Services, Inc. and Amdocs Inc. (confidential material
has been redacted and complete exhibits have been separately
filed with the Securities and Exchange Commission) (incorporated
by reference to Exhibit 99.1 to Amdocs Report of
Foreign Private Issuer on
Form 6-K
dated November 1, 2010)
|
|
4
|
.b.8
|
|
Credit Agreement, dated as of November 27, 2007, among
Amdocs Limited, certain of its subsidiaries, the lenders from
time to time party thereto, JPMorgan Chase Bank, N.A., as
administrative agent, J.P. Morgan Europe Limited, as London
agent, and JPMorgan Chase Bank, N.A., Toronto branch, as
Canadian agent (incorporated by reference to Exhibit 4.B.9
to Amdocs Annual Report on
Form 20-F
filed December 3, 2007)
|
|
4
|
.c.1
|
|
Amdocs Limited 1998 Stock Option and Incentive Plan, as amended
(incorporated by reference to Exhibit 99.1 to Amdocs
Report of Foreign Private Issuer on
Form 6-K
filed May 12, 2009)
|
69
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
8
|
|
|
Subsidiaries of Amdocs Limited
|
|
12
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)
|
|
12
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)
|
|
13
|
.1
|
|
Certification of Chief Executive Officer pursuant to
18 U.S.C. 1350
|
|
13
|
.2
|
|
Certification of Chief Financial Officer pursuant to
18 U.S.C. 1350
|
|
14
|
.1
|
|
Consent of Ernst & Young LLP
|
|
100
|
.1
|
|
The following financial information from Amdocs Limiteds
Annual Report on
Form 20-F
for the year ended September 30, 2011, formatted in
Extensible Business Reporting Language (XBRL):
(i) Consolidated Balance Sheets as of September 30,
2011 and 2010, (ii) Consolidated Statements of Income for
the years ended September 30, 2011, 2010 and 2009,
(iii) Consolidated Statements of Changes in
Shareholders Equity for the years ended September 30,
2011, 2010 and 2009, (iv) the Consolidated Statements of
Cash Flows for the years ended September 30, 2011, 2010 and
2009, and (iv) Notes to Consolidated Financial Statements
|
70
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting for the Company. Internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
directors of the Company; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
September 30, 2011. In making this assessment, the
Companys management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on its assessment, management concluded that, as of
September 30, 2011, the Companys internal control
over financial reporting is effective based on those criteria.
The financial statements and internal control over financial
reporting have been audited by Ernst & Young LLP, an
independent registered public accounting firm which has issued
an attestation report on the Companys internal control
over financial reporting included elsewhere in this Annual
Report on
Form 20-F.
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Amdocs Limited
We have audited the accompanying consolidated balance sheets of
Amdocs Limited as of September 30, 2011 and 2010, and the
related consolidated statements of income, changes in
shareholders equity, and cash flows for each of the three
years in the period ended September 30, 2011. Our audits
also included the financial statement schedule listed in the
Index at Item 18 of Part III. These financial
statements and the schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Amdocs Limited at September 30, 2011
and 2010, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
September 30, 2011, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Amdocs Limiteds internal control over financial reporting
as of September 30, 2011, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated December 8, 2011 expressed an unqualified opinion
thereon.
New York, New York
December 8, 2011
F-3
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Amdocs Limited
We have audited Amdocs Limiteds internal control over
financial reporting as of September 30, 2011, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Amdocs
Limiteds management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Amdocs Limited maintained, in all material
respects, effective internal control over financial reporting as
of September 30, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Amdocs Limited as of
September 30, 2011 and 2010, and the related consolidated
statements of income, changes in shareholders equity, and
cash flows for each of the three years in the period ended
September 30, 2011 of Amdocs Limited and our report dated
December 8, 2011 expressed an unqualified opinion thereon.
New York, New York
December 8, 2011
F-4
AMDOCS
LIMITED
(In thousands, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
831,371
|
|
|
$
|
1,036,195
|
|
Short-term interest-bearing investments
|
|
|
342,099
|
|
|
|
397,104
|
|
Accounts receivable, net
|
|
|
565,853
|
|
|
|
580,000
|
|
Deferred income taxes and taxes receivable
|
|
|
112,656
|
|
|
|
126,083
|
|
Prepaid expenses and other current assets
|
|
|
127,341
|
|
|
|
112,417
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,979,320
|
|
|
|
2,251,799
|
|
Equipment and leasehold improvements, net
|
|
|
258,402
|
|
|
|
258,273
|
|
Deferred income taxes
|
|
|
123,171
|
|
|
|
132,403
|
|
Goodwill
|
|
|
1,739,732
|
|
|
|
1,637,416
|
|
Intangible assets, net
|
|
|
193,422
|
|
|
|
218,762
|
|
Other noncurrent assets
|
|
|
342,525
|
|
|
|
321,951
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,636,572
|
|
|
$
|
4,820,604
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
126,977
|
|
|
$
|
168,321
|
|
Accrued expenses and other current liabilities
|
|
|
255,212
|
|
|
|
250,455
|
|
Accrued personnel costs
|
|
|
212,414
|
|
|
|
202,773
|
|
Short-term financing arrangements
|
|
|
250,000
|
|
|
|
200,000
|
|
Deferred revenue
|
|
|
151,423
|
|
|
|
184,481
|
|
Deferred income taxes and taxes payable
|
|
|
15,180
|
|
|
|
18,117
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,011,206
|
|
|
|
1,024,147
|
|
Deferred income taxes and taxes payable
|
|
|
310,045
|
|
|
|
293,723
|
|
Other noncurrent liabilities
|
|
|
292,020
|
|
|
|
273,354
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,613,271
|
|
|
|
1,591,224
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred Shares Authorized 25,000 shares;
£0.01 par value; 0 shares issued and outstanding
|
|
|
|
|
|
|
|
|
Ordinary Shares Authorized 700,000 shares;
£0.01 par value; 247,640 and 244,131 issued and
174,692 and 193,049 outstanding, in 2011 and 2010, respectively
|
|
|
4,013
|
|
|
|
3,956
|
|
Additional paid-in capital
|
|
|
2,495,211
|
|
|
|
2,402,163
|
|
Treasury stock, at cost 72,948 and 51,082 ordinary
shares in 2011 and 2010, respectively
|
|
|
(1,933,402
|
)
|
|
|
(1,309,161
|
)
|
Accumulated other comprehensive (loss) income
|
|
|
(19,656
|
)
|
|
|
1,952
|
|
Retained earnings
|
|
|
2,477,135
|
|
|
|
2,130,470
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
3,023,301
|
|
|
|
3,229,380
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
4,636,572
|
|
|
$
|
4,820,604
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
AMDOCS
LIMITED
(In thousands, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
License
|
|
$
|
119,237
|
|
|
$
|
100,967
|
|
|
$
|
135,146
|
|
Service
|
|
|
3,058,491
|
|
|
|
2,883,256
|
|
|
|
2,727,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,177,728
|
|
|
|
2,984,223
|
|
|
|
2,862,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of license
|
|
|
2,627
|
|
|
|
2,021
|
|
|
|
2,686
|
|
Cost of service
|
|
|
2,066,740
|
|
|
|
1,903,645
|
|
|
|
1,831,947
|
|
Research and development
|
|
|
221,886
|
|
|
|
207,836
|
|
|
|
210,387
|
|
Selling, general and administrative
|
|
|
409,465
|
|
|
|
373,585
|
|
|
|
344,335
|
|
Amortization of purchased intangible assets and other
|
|
|
72,646
|
|
|
|
86,703
|
|
|
|
85,153
|
|
Restructuring charges and in-process research and development
|
|
|
|
|
|
|
|
|
|
|
20,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,773,364
|
|
|
|
2,573,790
|
|
|
|
2,495,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
404,364
|
|
|
|
410,433
|
|
|
|
367,319
|
|
Interest and other expense, net
|
|
|
8,657
|
|
|
|
25,135
|
|
|
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
395,707
|
|
|
|
385,298
|
|
|
|
366,154
|
|
Income taxes
|
|
|
49,042
|
|
|
|
41,392
|
|
|
|
39,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
346,665
|
|
|
$
|
343,906
|
|
|
$
|
326,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.87
|
|
|
$
|
1.70
|
|
|
$
|
1.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.86
|
|
|
$
|
1.69
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares outstanding
|
|
|
185,213
|
|
|
|
202,584
|
|
|
|
204,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares outstanding
|
|
|
186,559
|
|
|
|
204,076
|
|
|
|
208,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
AMDOCS
LIMITED
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
Total
|
|
|
|
Ordinary Shares
|
|
|
Paid-in
|
|
|
Treasury
|
|
|
(Loss)
|
|
|
Retained
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Income
|
|
|
Earnings
|
|
|
Equity
|
|
|
Balance as of October 1, 2008
|
|
|
203,916
|
|
|
$
|
3,900
|
|
|
$
|
2,264,800
|
|
|
$
|
(907,280
|
)
|
|
$
|
(14,834
|
)
|
|
$
|
1,458,605
|
|
|
$
|
2,805,191
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
326,176
|
|
|
|
326,176
|
|
Unrealized gain on foreign currency hedging contracts, net of
$647 tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,092
|
|
|
|
|
|
|
|
18,092
|
|
Unrealized gain on short-term interest-bearing investments, net
of $218 tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,828
|
|
|
|
|
|
|
|
4,828
|
|
Unrealized gain on defined benefit plan, net of $1,078 tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,040
|
|
|
|
|
|
|
|
2,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,136
|
|
Cumulative effect from adoption of FSP
No. 115-2/124-2
(primarily codified in
ASC 320-10-
Investments-Debt and Equity Securities-Overall) at April 1,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,783
|
)
|
|
|
1,783
|
|
|
|
|
|
Employee stock options exercised
|
|
|
1,289
|
|
|
|
23
|
|
|
|
27,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,886
|
|
Repurchase of shares
|
|
|
(468
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,594
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,594
|
)
|
Tax benefit of stock options exercised/cancelled
|
|
|
|
|
|
|
|
|
|
|
(1,484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,484
|
)
|
Issuance of restricted stock, net of forfeitures
|
|
|
342
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Equity-based compensation expense related to employees
|
|
|
|
|
|
|
|
|
|
|
42,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2009
|
|
|
205,079
|
|
|
|
3,930
|
|
|
|
2,334,090
|
|
|
|
(919,874
|
)
|
|
|
8,343
|
|
|
|
1,786,564
|
|
|
|
3,213,053
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
343,906
|
|
|
|
343,906
|
|
Unrealized loss on foreign currency hedging contracts, net of
$(1,537) tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,934
|
)
|
|
|
|
|
|
|
(6,934
|
)
|
Unrealized gain on short-term interest-bearing investments, net
of $129 tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,150
|
|
|
|
|
|
|
|
5,150
|
|
Unrealized loss on defined benefit plan, net of $(2,011) tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,607
|
)
|
|
|
|
|
|
|
(4,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
337,515
|
|
Employee stock options exercised
|
|
|
1,097
|
|
|
|
17
|
|
|
|
23,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,635
|
|
Repurchase of shares
|
|
|
(13,695
|
)
|
|
|
|
|
|
|
|
|
|
|
(389,287
|
)
|
|
|
|
|
|
|
|
|
|
|
(389,287
|
)
|
Issuance of restricted stock, net of forfeitures
|
|
|
568
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Equity-based compensation expense related to employees
|
|
|
|
|
|
|
|
|
|
|
44,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
193,049
|
|
|
|
3,956
|
|
|
|
2,402,163
|
|
|
|
(1,309,161
|
)
|
|
|
1,952
|
|
|
|
2,130,470
|
|
|
|
3,229,380
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
346,665
|
|
|
|
346,665
|
|
Unrealized loss on foreign currency hedging contracts, net of
$(1,589) tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,439
|
)
|
|
|
|
|
|
|
(20,439
|
)
|
Unrealized loss on short-term interest-bearing investments, net
of $(24) tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(756
|
)
|
|
|
|
|
|
|
(756
|
)
|
Unrealized loss on defined benefit plan, net of $(145) tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
325,057
|
|
Employee stock options exercised
|
|
|
2,590
|
|
|
|
42
|
|
|
|
56,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,459
|
|
Repurchase of shares
|
|
|
(21,866
|
)
|
|
|
|
|
|
|
|
|
|
|
(624,241
|
)
|
|
|
|
|
|
|
|
|
|
|
(624,241
|
)
|
Issuance of restricted stock, net of forfeitures
|
|
|
919
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
Equity-based compensation expense related to employees
|
|
|
|
|
|
|
|
|
|
|
36,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2011
|
|
|
174,692
|
|
|
$
|
4,013
|
|
|
$
|
2,495,211
|
|
|
$
|
(1,933,402
|
)
|
|
$
|
(19,656
|
)
|
|
$
|
2,477,135
|
|
|
$
|
3,023,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011, 2010 and 2009, accumulated other
comprehensive (loss) income is comprised of unrealized (loss)
gain on derivatives, net of tax, of $(14,437), $6,002 and
$12,936, unrealized loss on short-term interest-bearing
investments, net of tax, of $(2,023), $(1,267) and $(6,417) and
unrealized (loss) gain on defined benefit plan, net of tax, of
$(3,196), $(2,783) and $1,824.
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
AMDOCS
LIMITED
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cash Flow from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
346,665
|
|
|
$
|
343,906
|
|
|
$
|
326,176
|
|
Reconciliation of net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
181,477
|
|
|
|
195,940
|
|
|
|
198,119
|
|
Loss from divestiture of a subsidiary
|
|
|
|
|
|
|
23,399
|
|
|
|
|
|
In-process research and development expenses
|
|
|
|
|
|
|
|
|
|
|
5,640
|
|
Equity-based compensation expense
|
|
|
36,631
|
|
|
|
44,455
|
|
|
|
42,911
|
|
Deferred income taxes
|
|
|
1,252
|
|
|
|
(19,137
|
)
|
|
|
16,249
|
|
Gain on repurchase of convertible notes
|
|
|
|
|
|
|
|
|
|
|
(2,185
|
)
|
Excess tax benefit from equity-based compensation
|
|
|
(178
|
)
|
|
|
(126
|
)
|
|
|
(18
|
)
|
Loss (gain) from short-term interest-bearing investments
|
|
|
1,386
|
|
|
|
(1,284
|
)
|
|
|
4,449
|
|
Net changes in operating assets and liabilities, net of amounts
acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
38,062
|
|
|
|
(131,387
|
)
|
|
|
131,527
|
|
Prepaid expenses and other current assets
|
|
|
(10,741
|
)
|
|
|
9,009
|
|
|
|
(13,614
|
)
|
Other noncurrent assets
|
|
|
(15,807
|
)
|
|
|
(35,948
|
)
|
|
|
(2,690
|
)
|
Accounts payable, accrued expenses and accrued personnel
|
|
|
(46,976
|
)
|
|
|
187,652
|
|
|
|
(160,321
|
)
|
Deferred revenue
|
|
|
(34,444
|
)
|
|
|
33,927
|
|
|
|
20,956
|
|
Income taxes payable, net
|
|
|
27,289
|
|
|
|
20,272
|
|
|
|
(19,980
|
)
|
Other noncurrent liabilities
|
|
|
10,876
|
|
|
|
14,520
|
|
|
|
(28,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
535,492
|
|
|
|
685,198
|
|
|
|
519,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for purchase of equipment and leasehold improvements,
net
|
|
|
(109,779
|
)
|
|
|
(86,945
|
)
|
|
|
(82,331
|
)
|
Proceeds from sale of short-term interest-bearing investments
|
|
|
591,147
|
|
|
|
1,503,231
|
|
|
|
1,045,278
|
|
Purchase of short-term interest-bearing investments
|
|
|
(521,999
|
)
|
|
|
(1,449,494
|
)
|
|
|
(963,433
|
)
|
Net cash paid for acquisitions
|
|
|
(162,964
|
)
|
|
|
(200,307
|
)
|
|
|
(65,890
|
)
|
Net cash received from divestiture of a subsidiary
|
|
|
|
|
|
|
20,275
|
|
|
|
|
|
Other
|
|
|
(18,076
|
)
|
|
|
1,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(221,671
|
)
|
|
|
(211,506
|
)
|
|
|
(66,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under financing arrangements
|
|
|
250,000
|
|
|
|
200,000
|
|
|
|
450,000
|
|
Payments under financing arrangements
|
|
|
(200,000
|
)
|
|
|
|
|
|
|
(450,000
|
)
|
Redemption of convertible notes
|
|
|
|
|
|
|
|
|
|
|
(330,780
|
)
|
Repurchase of convertible notes
|
|
|
|
|
|
|
|
|
|
|
(116,015
|
)
|
Repurchase of shares
|
|
|
(624,241
|
)
|
|
|
(389,287
|
)
|
|
|
(20,014
|
)
|
Proceeds from employee stock options exercised
|
|
|
56,474
|
|
|
|
23,644
|
|
|
|
27,893
|
|
Payments under capital lease, short-term financing arrangements
and other
|
|
|
(878
|
)
|
|
|
(616
|
)
|
|
|
(3,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(518,645
|
)
|
|
|
(166,259
|
)
|
|
|
(442,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(204,824
|
)
|
|
|
307,433
|
|
|
|
9,912
|
|
Cash and cash equivalents at beginning of year
|
|
|
1,036,195
|
|
|
|
728,762
|
|
|
|
718,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
831,371
|
|
|
$
|
1,036,195
|
|
|
$
|
728,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and Income Taxes Paid
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes, net of refunds
|
|
$
|
19,611
|
|
|
$
|
46,448
|
|
|
$
|
39,793
|
|
Interest
|
|
|
433
|
|
|
|
2,846
|
|
|
|
3,321
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
AMDOCS
LIMITED
(dollar and share amounts in thousands, except per share
data)
|
|
Note 1
|
Nature of
Entity
|
Amdocs Limited (the Company) is a leading provider
of software and services for communications, media and
entertainment industry service providers. The Company and its
subsidiaries operate in one segment, providing integrated
products and services. The Company designs, develops, markets,
supports, implements and operates customer experience systems
primarily for leading wireless, wireline, cable and satellite
service providers throughout the world. Amdocs also offers a
full range of advertising and media solutions for local
marketing service providers and search and directory publishers.
The Company is a Guernsey corporation, which directly or
indirectly holds numerous wholly-owned subsidiaries around the
world. The majority of the Companys customers are in North
America, Europe, Latin America and the Asia-Pacific region.
The Companys main production and operating facilities are
located in Brazil, Canada, Cyprus, India, Ireland, Israel and
the United States.
|
|
Note 2
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
The consolidated financial statements are prepared in accordance
with U.S. generally accepted accounting principles, or
U.S. GAAP.
Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Use of
Estimates
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the dates of the financial statements, and the reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain immaterial amounts in prior years financial
statements have been reclassified to conform to the current
years presentation.
Functional
Currency
The Company manages its foreign subsidiaries as integral direct
components of its operations. The operations of the
Companys foreign subsidiaries provide the same type of
services with the same type of expenditures throughout the
Amdocs group. The Company has determined that its functional
currency is the U.S. dollar. The Company periodically
assesses the applicability of the U.S. dollar as the
Companys functional currency by reviewing the salient
indicators as indicated in the authoritative guidance for
foreign currency matters.
Cash
and Cash Equivalents
Cash and cash equivalents consist of cash and interest-bearing
investments with insignificant interest rate risk and maturities
from acquisition date of 90 days or less.
F-9
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
Investments
The Company classifies all of its short-term interest-bearing
investments as
available-for-sale
securities. Such short-term interest-bearing investments consist
primarily of money market funds, U.S. government
treasuries, corporate bonds, government guaranteed debt and
U.S. agency securities, which are stated at market value.
Unrealized gains and losses are comprised of the difference
between market value and amortized costs of such securities and
are reflected, net of tax, as accumulated other
comprehensive (loss) income in shareholders equity.
Realized gains and losses on short-term interest-bearing
investments are included in earnings and are derived using the
first in first out (FIFO) method for determining the cost of
securities. The Company recognizes an impairment charge in
earnings when a decline in the fair value of its investments
below the cost basis is judged to be
other-than-temporary.
For securities with an unrealized loss that the Company intends
to sell, or it is more likely than not that the Company will be
required to sell before recovery of their amortized cost basis,
the entire difference between amortized cost and fair value is
recognized in earnings. For securities that do not meet these
criteria, the amount of impairment recognized in earnings is
limited to the amount related to credit losses, while other
declines in fair value related to other factors are recognized
in other comprehensive (loss) income. The Company uses a
discounted cash flow analysis to determine the portion of the
impairment that relates to the credit losses. To the extent that
the net present value of the projected cash flows is less than
the amortized cost of the security, the difference is considered
credit loss.
Equipment
and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Assets
under capital leases are recorded at the present value of the
future minimum lease payments at the date of acquisition.
Depreciation is computed using the straight-line method over the
estimated useful life of the asset, which primarily ranges from
three to ten years and includes the amortization of assets under
capitalized leases. Leasehold improvements are amortized over
the shorter of the estimated useful lives or the term of the
related lease.
Goodwill,
Intangible Assets and Long-Lived Assets
Goodwill and intangible assets deemed to have indefinite lives
are subject to an annual impairment test or more frequently if
impairment indicators are present. Goodwill impairment is deemed
to exist if the net book value of a reporting unit exceeds its
estimated fair value. The goodwill impairment test involves a
two-step process. The first step, identifying a potential
impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. If the carrying value of
the reporting unit exceeds its fair value, the second step would
need to be conducted; otherwise, no further steps are necessary
as no potential impairment exists. The second step, measuring
the impairment loss, compares the implied fair value of the
reporting unit goodwill with the carrying amount of that
goodwill. Any excess of the reporting unit goodwill carrying
value over the respective implied fair value is recognized as an
impairment loss.
The total purchase price of business acquisitions accounted for
using the purchase method is allocated first to identifiable
assets and liabilities based on estimated fair values. The
excess of the purchase price over the fair value of net assets
of purchased businesses is recorded as goodwill.
Other definite-life intangible assets consist primarily of core
technology, customer arrangements and trademarks. Core
technology and trademarks acquired by the Company are amortized
over their estimated useful lives on a straight-line basis.
Some of the acquired customer arrangements are amortized over
their estimated useful lives in proportion to the economic
benefits realized. This accounting policy generally results in
accelerated amortization of such customer arrangements as
compared to the straight-line method. All other acquired
customer arrangements are amortized over their estimated useful
lives on a straight-line basis.
F-10
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The Company tests long-lived assets, including definite life
intangible assets, for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets
may not be recoverable. Determination of recoverability of
long-lived assets is based on an estimate of the undiscounted
future cash flows resulting from the use of the cash generating
unit and its eventual disposition. Measurement of an impairment
loss for long-lived assets, including definite life intangible
assets that management expects to hold and use is based on the
fair value of the cash generating unit. Long-lived assets,
including definite life intangible assets, to be disposed of are
reported at the lower of carrying amount or fair value less
costs to sell.
Comprehensive
(Loss) Income
Comprehensive (loss) income, net of related taxes where
applicable, includes, in addition to net income:
(i) unrealized gains and losses on
available-for-sale
securities;
(ii) unrealized gains and losses in respect of derivative
instruments designated as a cash flow hedge; and
(iii) unrealized losses on defined benefit plans.
Treasury
Stock
The Company repurchases its ordinary shares from time to time on
the open market or in other transactions and holds such shares
as treasury stock. The Company presents the cost to repurchase
treasury stock as a reduction of shareholders equity.
Income
Taxes
The Company records deferred income taxes to reflect the net tax
effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting and tax purposes.
Deferred taxes are computed based on tax rates anticipated to be
in effect when the deferred taxes are expected to be paid or
realized. A valuation allowance is provided for deferred tax
assets if it is more likely than not, the Company will not be
able to realize their benefit.
Deferred tax liabilities and assets are classified as current or
noncurrent based on the classification of the related asset or
liability for financial reporting, or according to the expected
reversal dates of the specific temporary differences if not
related to an asset or liability for financial reporting, and
also include anticipated withholding taxes due on
subsidiaries earnings when paid as dividends to the
Company.
The Company recognizes the tax benefit from an uncertain tax
position only if the weight of available evidence indicates that
it is more likely than not that the position will be sustained
on audit, including resolution of related appeals or litigation
processes, if any. The tax benefits recognized in the financial
statements from such a position is measured based on the largest
benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. The Company will classify the
liability for unrecognized tax benefits as current to the extent
that the Company anticipates payment of cash within one year.
Interest and penalties related to uncertain tax positions are
recognized in the provision for income taxes. Please see
Note 11 to the consolidated financial statements.
Revenue
Recognition
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 or determinable; and (iv) collectibility of the
fee is reasonably assured. The Company usually sells its
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, combined license and service revenue generally is
recognized over the course of these long-term projects, using
the percentage of completion
F-11
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
method of accounting. When total cost estimates for these types
of arrangements exceed revenues in a fixed-price arrangement,
the estimated losses are recognized immediately based upon the
cost applicable to the delivering unit.
Initial license fee for software revenue is recognized as work
is performed, under the percentage of completion method of
accounting. Subsequent license fee revenue is recognized upon
completion of specified conditions in each contract, based on a
customers subscriber level 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, modification,
implementation and integration as part of a long-term contract,
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. Service revenue that does not
involve significant ongoing obligations is recognized as
services are rendered.
Fees are generally considered fixed and determinable unless a
significant portion (more than 10%) of the license and related
service fee is due more than 12 months after delivery, in
which case license and related services fees are recognized when
payments are due.
In managed services contracts and in other long term contracts,
revenue from the operation of a customers system is
recognized either as services are performed based on time
elapsed, output produced or volume of data processed. 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. Revenue from third-party
hardware and software sales is recorded at gross amount for
transactions in which the Company is the primary obligor under
the arrangement as well as, in some cases, possesses other
attributes such as pricing and supplier selection latitude. In
specific circumstances where the Company does not meet the above
criteria, particularly when the contract stipulates that the
Company is not the primary obligor, the Company recognizes
revenue on a net basis. Revenue from third-party sales is
included in service revenue and was less than 10% of total
revenue in each of fiscal 2011, 2010 and 2009.
Maintenance revenue is recognized ratably over the term of the
maintenance agreement, which in most cases is one year.
As a result of a significant portion of the Companys
revenue being subject to the percentage of completion accounting
method, the Companys annual and quarterly operating
results may be significantly affected by the size and timing of
customer projects and the Companys progress in completing
such projects.
Many of the Companys agreements include multiple
deliverables. The Companys multiple element arrangements
are comprised of a variety of different combinations of the
deliverables mentioned above. For multiple element arrangements
within the scope of software revenue recognition guidance, the
Company allocates revenue to each element based upon its
relative fair value as determined by Vendor Specific Objective
Evidence (VSOE). In the absence of fair value for a
delivered element the Company uses the residual method. The
residual method requires that the Company first allocate revenue
to the fair value of the undelivered elements and residual
revenue to delivered elements. If VSOE of any undelivered items
does not exist, revenue from the entire arrangement is deferred
and recognized at the earlier of (i) delivery of those
elements for which VSOE does not exist or (ii) when VSOE
can be established. However, in limited cases where maintenance
is the only undelivered element without VSOE, the entire
arrangement fee is recognized ratably. The residual method is
used mainly in multiple element arrangements that include
license for the sale of software solutions that do not require
significant customization, modification, implementation and
integration and maintenance to determine the appropriate value
for the license component. Beginning October 1, 2009, the
Company adopted the new authoritative guidance for revenue
arrangements with multiple deliverables that are outside the
scope of the software revenue recognition guidance. Under this
guidance the Company allocates revenue to each element based
upon the relative fair value. Fair value
F-12
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
would be allocated by using a hierarchy of 1) VSOE,
2) third-party evidence of selling price for that element,
or 3) estimated selling price, or ESP, for individual
elements of an arrangement when VSOE or third-party evidence of
selling price is unavailable. This results in the elimination of
the residual method of allocating revenue consideration. The
Company determines ESP for the purposes of allocating the
consideration to individual elements of an arrangement by
considering several external and internal factors including, but
not limited to, pricing practices, margin objectives,
geographies in which the Company offers its services and
internal costs. The determination of ESP is judgmental and is
made through consultation with and approval by management.
In circumstances where the Company enters into a contract with a
customer for the provision of managed services for a defined
period of time, the Company defers certain incremental costs
incurred at the inception of the contract. These costs include
time and expense incurred in association with the origination of
a contract. In addition, if the revenue for a delivered item is
not recognized because it is not separable from the undelivered
item, then the Company also defers the cost of the delivered
item. The deferred costs are amortized on a straight-line basis
over the managed services period, or over the recognition period
of the undelivered item. Revenue associated with these
capitalized costs is deferred and is recognized over the same
period.
Deferred revenue represents billings to customers for licenses
and services for which revenue has not been recognized. Deferred
revenue that is expected to be recognized beyond the next
12 months is considered long-term deferred revenue.
Unbilled accounts receivable include all revenue amounts that
had not been billed as of the balance sheet date due to
contractual or other arrangements with customers. Unbilled
accounts receivable that are expected to be billed beyond the
next 12 months are considered long-term unbilled
receivables. Allowances that are netted against accounts
receivable represent amounts provided for accounts for which
their collectibility is not probable.
Cost
of License and Cost of Service
Cost of license and cost of service consist of all costs
associated with providing software licenses and services to
customers, including identified losses on contracts and warranty
expense. Estimated losses on contracts are recognized in the
period in which the loss is identified. Estimated costs related
to warranty obligations are initially provided at the time the
product is delivered and are revised to reflect subsequent
changes in circumstances and estimates. Cost of license includes
license fees and royalty payments to software suppliers.
Cost of service also includes costs of third-party products
associated with reselling third-party computer hardware and
software products to customers, when revenue from third-party
products is recorded at the gross amount. Customers purchasing
third-party products from the Company generally do so in
conjunction with the purchase of the Companys software and
services.
Research
and Development
Research and development expenditures consist of costs incurred
in the development of new software modules and product
offerings, either as part of the Companys internal product
development programs, which are sold, leased or otherwise
marketed, or in conjunction with customer projects. Research and
development costs are expensed as incurred.
Based on the Companys product development process,
technological feasibility is established upon completion of a
detailed program design or, in the absence thereof, completion
of a working model. Costs incurred by the Company after
achieving technological feasibility and before the product is
ready for customer release have been insignificant.
F-13
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
Equity-Based
Compensation
The Company measures and recognizes the compensation expense for
all equity-based payments to employees and directors based on
their estimated fair values. The Company estimates the fair
value of employee stock options at the date of grant using a
Black-Scholes valuation model and values restricted stock based
on the market value of the underlying shares at the date of
grant. The Company recognizes compensation costs using the
graded vesting attribution method that results in an accelerated
recognition of compensation costs in comparison to the
straight-line method.
The Company uses a combination of implied volatility of the
Companys traded options and historical stock price
volatility (blended volatility) as the expected
volatility assumption required in the Black-Scholes option
valuation model. As equity-based compensation expense recognized
in the Companys consolidated statements of income is based
on awards ultimately expected to vest, it has been reduced for
estimated forfeitures.
Concentrations
of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and
cash equivalents, short-term interest-bearing investments, and
trade receivables. Cash and cash equivalents are maintained with
several financial institutions. Generally, these deposits may be
redeemed upon demand and are maintained with financial
institutions with reputable credit and therefore bear minimal
credit risk. The Company seeks to mitigate its credit risks by
spreading such risks across multiple financial institutions and
monitoring the risk profiles of these counterparties. The
Company has conservative investment policy guidelines under
which it invests its excess cash primarily in highly liquid
U.S. dollar-denominated securities. The Companys
revenue is generated primarily in North America. To a lesser
extent, revenue is generated in Europe, the Asia-Pacific region
and Latin America. Most of the Companys customers are
among the largest communications and directory publishing
companies in the world (or are owned by them). The
Companys business is subject to the effects of general
global economic conditions and market conditions in the
communications industry. The Company performs ongoing credit
analyses of its customer base and generally does not require
collateral.
The Company evaluates accounts receivable to determine if they
will ultimately be collected. Significant judgments and
estimates are involved in performing this evaluation, which are
based on factors that may affect a customers ability to
pay, such as past experience, credit quality of the customer,
age of the receivable balance and current economic conditions.
The allowance for doubtful accounts is for estimated losses
resulting from accounts receivable for which their collection is
not reasonably probable. As of September 30, 2011, the
Company had two customers, including their subsidiaries, with
accounts receivable balance of more than 10% of total accounts
receivable, aggregating 35.3%, which is lower than their
respective portion of total revenue. As of September 30,
2010, the Company had one customer, including its subsidiaries,
with an accounts receivable balance of more than 10% of total
accounts receivable, aggregating 30.0%.
Earnings
per Share
Basic earnings per share is calculated using the weighted
average number of shares outstanding during the period. Diluted
earnings per share is computed on the basis of the weighted
average number of shares outstanding, the effect of dilutive
outstanding equity-based awards using the treasury stock method
and the effect of dilutive outstanding convertible notes using
the if-converted method.
Derivatives
and Hedging
The Company carries out transactions involving foreign currency
exchange derivative financial instruments. The transactions are
designed to hedge the Companys exposure in currencies
other than the U.S. dollar. The Company recognizes
derivative instruments as either assets or liabilities and
measures those instruments at fair
F-14
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
value. If a derivative meets the definition of a cash flow hedge
and is so designated, changes in the fair value of the
derivative are recognized in other comprehensive (loss) income
until the hedged item is recognized in earnings. The ineffective
portion of a derivative designated as a cash flow hedge is
recognized in earnings. If a derivative does not meet the
definition of a cash flow hedge, the changes in the fair value
are included in earnings.
Recent
Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board, or
FASB, issued a revised accounting standard update intended to
simplify how an entity tests goodwill for impairment. The
amendment will allow an entity to first assess qualitative
factors to determine whether it is necessary to perform the
two-step quantitative goodwill impairment test. An entity no
longer will be required to calculate the fair value of a
reporting unit unless the entity determines, based on a
qualitative assessment, that it is more likely than not that its
fair value is less than its carrying amount. This accounting
standard update will be effective for the Company beginning
October 1, 2012 and early adoption is permitted. The
Company does not expect the adoption of this new guidance will
have a material impact on its financial statements.
In June 2011, the FASB issued guidance to require an entity to
present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either
in a single continuous statement of comprehensive income or in
two separate but consecutive statements. The guidance eliminates
the option to present the components of other comprehensive
income as part of the statement of equity, and will become
effective for the Company beginning October 1, 2012. The
Company is still evaluating whether to present other
comprehensive income in a single continuous statement of
comprehensive income or in two separate but consecutive
statements.
In May 2011, the FASB issued guidance to provide a consistent
definition of fair value and ensure that the fair value
measurement and disclosure requirements are similar between
U.S. GAAP and International Financial Reporting Standards.
The guidance changes certain fair value measurement principles
and enhances the disclosure requirements particularly for
Level 3 fair value measurements, and will become effective
for the company beginning January 1, 2012. The Company does
not expect the adoption of this new guidance will have a
material impact on its financial statements.
Adoption
of New Accounting Standards
In June 2009, the FASB issued authoritative guidance on the
consolidation of variable interest entities, which was effective
for the Company beginning October 1, 2010. The new guidance
requires revised evaluations of whether entities represent
variable interest entities, ongoing assessments of control over
such entities, and additional disclosures for variable
interests. The adoption of this new guidance did not have a
material impact on the Companys financial statements.
The Company acquired several entities during fiscal 2011, 2010
and 2009. The entities have been consolidated into the
Companys results of operations since their respective
acquisition dates. These acquisitions, individually and in the
aggregate, were not material in any fiscal year.
|
|
Note 4
|
Fair
Value Measurements
|
The Company accounts for certain assets and liabilities at fair
value. Fair value is the price that would be received from
selling an asset or that would be paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be recorded
at fair value, the Company considers the principal or most
advantageous market
F-15
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
in which it would transact and it considers assumptions that
market participants would use when pricing the asset or
liability.
The hierarchy below lists three levels of fair value based on
the extent to which inputs used in measuring fair value are
observable in the market. The Company categorizes each of its
fair value measurements in one of these three levels based on
the lowest level input that is significant to the fair value
measurement in its entirety.
The three levels of inputs that may be used to measure fair
value are as follows:
Level 1: Quoted prices in active markets
for identical assets or liabilities;
Level 2: Observable inputs other than
quoted prices included in Level 1, such as quoted prices
for similar assets or liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets
with insufficient volume or infrequent transactions (less active
markets), or other inputs that are observable (model-derived
valuations in which significant inputs are observable) or can be
derived principally from, or corroborated by, observable market
data; and
Level 3: Unobservable inputs that are
supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
The following tables present the Companys assets and
liabilities measured at fair value on a recurring basis as of
September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
510,711
|
|
|
$
|
|
|
|
$
|
510,711
|
|
U.S. government treasuries
|
|
|
110,339
|
|
|
|
|
|
|
|
110,339
|
|
Corporate bonds
|
|
|
|
|
|
|
80,355
|
|
|
|
80,355
|
|
Government guaranteed debt
|
|
|
|
|
|
|
71,160
|
|
|
|
71,160
|
|
U.S. agency securities
|
|
|
|
|
|
|
57,540
|
|
|
|
57,540
|
|
Supranational and sovereign debt
|
|
|
|
|
|
|
10,270
|
|
|
|
10,270
|
|
Mortgages (including agencies and corporate)
|
|
|
|
|
|
|
6,395
|
|
|
|
6,395
|
|
Asset backed obligations
|
|
|
|
|
|
|
4,509
|
|
|
|
4,509
|
|
Commercial paper and certificates of deposit
|
|
|
10,105
|
|
|
|
6,105
|
|
|
|
16,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
|
631,155
|
|
|
|
236,334
|
|
|
|
867,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net
|
|
|
|
|
|
|
(10,270
|
)
|
|
|
(10,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
631,155
|
|
|
$
|
226,064
|
|
|
$
|
857,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
867,335
|
|
|
$
|
|
|
|
$
|
867,335
|
|
U.S. government treasuries
|
|
|
111,912
|
|
|
|
|
|
|
|
111,912
|
|
Corporate bonds
|
|
|
|
|
|
|
58,742
|
|
|
|
58,742
|
|
Government guaranteed debt
|
|
|
|
|
|
|
102,112
|
|
|
|
102,112
|
|
U.S. agency securities
|
|
|
|
|
|
|
65,724
|
|
|
|
65,724
|
|
Supranational and sovereign debt
|
|
|
|
|
|
|
23,771
|
|
|
|
23,771
|
|
Mortgages (including agencies and corporate)
|
|
|
|
|
|
|
18,948
|
|
|
|
18,948
|
|
Asset backed obligations
|
|
|
|
|
|
|
7,147
|
|
|
|
7,147
|
|
Commercial paper and certificates of deposit
|
|
|
10,048
|
|
|
|
9,254
|
|
|
|
19,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
|
989,295
|
|
|
|
285,698
|
|
|
|
1,274,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net
|
|
|
|
|
|
|
4,333
|
|
|
|
4,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
989,295
|
|
|
$
|
290,031
|
|
|
$
|
1,279,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities classified as Level 2 assets
are priced using observable data that may include quoted market
prices for similar instruments, market dealer quotes, market
spreads, non-binding market prices that are corroborated by
observable market data and other observable market information
and discounted cash flow techniques. The Companys
derivative instruments are classified as Level 2 as they
represent foreign currency forward and option contracts valued
primarily based on observable inputs including forward rates and
yield curves. The Company did not have any transfers between
Level 1 and Level 2 fair value measurements during
fiscal 2011.
Fair
Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, accrued personal costs, short-term
financing arrangements and other current liabilities
approximates their fair value because of the relatively short
maturity of these items.
F-17
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
Note 5
|
Available-For-Sale
Securities
|
Available-for-sale
securities consist of the following interest-bearing investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2011
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Money market funds
|
|
$
|
510,711
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
510,711
|
|
U.S. government treasuries
|
|
|
110,021
|
|
|
|
318
|
|
|
|
|
|
|
|
110,339
|
|
Corporate bonds
|
|
|
80,517
|
|
|
|
400
|
|
|
|
562
|
|
|
|
80,355
|
|
Government guaranteed debt
|
|
|
70,725
|
|
|
|
435
|
|
|
|
|
|
|
|
71,160
|
|
U.S. agency securities
|
|
|
57,232
|
|
|
|
308
|
|
|
|
|
|
|
|
57,540
|
|
Supranational and sovereign debt
|
|
|
10,247
|
|
|
|
23
|
|
|
|
|
|
|
|
10,270
|
|
Mortgages (including agencies and corporate)
|
|
|
7,576
|
|
|
|
|
|
|
|
1,181
|
|
|
|
6,395
|
|
Asset backed obligations
|
|
|
5,469
|
|
|
|
|
|
|
|
960
|
|
|
|
4,509
|
|
Commercial paper and certificates of deposit
|
|
|
17,092
|
|
|
|
|
|
|
|
882
|
|
|
|
16,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(1)
|
|
$
|
869,590
|
|
|
$
|
1,484
|
|
|
$
|
3,585
|
|
|
$
|
867,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Available-for-sale
securities are classified as short-term interest-bearing
investments on the Companys balance sheet, except for
$525,390 of securities with maturities from date of acquisition
of 90 days or less which are included in cash and cash
equivalents as of September 30, 2011. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
Money market funds
|
|
$
|
867,335
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
867,335
|
|
U.S. government treasuries
|
|
|
111,685
|
|
|
|
227
|
|
|
|
|
|
|
|
111,912
|
|
Corporate bonds
|
|
|
59,247
|
|
|
|
728
|
|
|
|
1,233
|
|
|
|
58,742
|
|
Government guaranteed debt
|
|
|
100,832
|
|
|
|
1,280
|
|
|
|
|
|
|
|
102,112
|
|
U.S. agency securities
|
|
|
64,837
|
|
|
|
887
|
|
|
|
|
|
|
|
65,724
|
|
Supranational and sovereign debt
|
|
|
23,672
|
|
|
|
99
|
|
|
|
|
|
|
|
23,771
|
|
Mortgages (including agencies and corporate)
|
|
|
21,062
|
|
|
|
372
|
|
|
|
2,486
|
|
|
|
18,948
|
|
Asset backed obligations
|
|
|
8,230
|
|
|
|
|
|
|
|
1,083
|
|
|
|
7,147
|
|
Commercial paper and certificates of deposit
|
|
|
19,414
|
|
|
|
|
|
|
|
112
|
|
|
|
19,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(2)
|
|
$
|
1,276,314
|
|
|
$
|
3,593
|
|
|
$
|
4,914
|
|
|
$
|
1,274,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Available-for-sale
securities are classified as short-term interest-bearing
investments on the Companys balance sheet, except for
$877,889 of securities with maturities from date of acquisition
of 90 days or less which are included in cash and cash
equivalents as of September 30, 2010. |
As of September 30, 2011, the unrealized losses were
primarily due to credit market conditions and interest rate
movements. A significant portion of the unrealized losses has
been in a continuous loss position for 12 months or
greater. The Company assessed whether such unrealized losses for
the investments in its portfolio were
other-than-temporary.
Based on this assessment, an immaterial credit loss was
recognized through earnings in fiscal 2011, 2010 and 2009. As of
September 30, 2011, unrealized losses of $718 related to
other-than-temporarily
impaired securities are included in accumulated other
comprehensive (loss) income.
F-18
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The following table presents a cumulative roll forward of credit
losses recognized in earnings as of September 30, 2011:
|
|
|
|
|
Balance as of October 1, 2009
|
|
$
|
1,757
|
|
Credit losses on debt securities for which an
other-than-temporary
impairment was not previously recognized
|
|
|
198
|
|
Additional credit losses on debt securities for which an
other-than-temporary
impairment was previously recognized
|
|
|
562
|
|
Reductions for securities realized during the period
|
|
|
(930
|
)
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
1,587
|
|
Credit losses on debt securities for which an
other-than-temporary
impairment was not previously recognized
|
|
|
73
|
|
Additional credit losses on debt securities for which an
other-than-temporary
impairment was previously recognized
|
|
|
289
|
|
Reductions for securities realized during the period
|
|
|
(1,221
|
)
|
|
|
|
|
|
Balance as of September 30, 2011
|
|
$
|
728
|
|
|
|
|
|
|
As of September 30, 2011, the Companys
available-for-sale
securities had the following maturity dates:
|
|
|
|
|
|
|
Market Value
|
|
|
within one year
|
|
$
|
672,112
|
|
1 to 2 years
|
|
|
138,223
|
|
2 to 3 years
|
|
|
38,655
|
|
3 to 4 years
|
|
|
3,479
|
|
Thereafter
|
|
|
15,020
|
|
|
|
|
|
|
|
|
$
|
867,489
|
|
|
|
|
|
|
|
|
Note 6
|
Derivative
Financial Instruments
|
The Companys risk management strategy includes the use of
derivative financial instruments to reduce the volatility of
earnings and cash flows associated with changes in foreign
currency exchange rates. The Company does not enter into
derivative transactions for trading purposes.
The Companys derivatives expose it to credit risks from
possible non-performance by counterparties. The Company utilizes
standard counterparty master netting agreements that net certain
foreign currency transactions in the event of the insolvency of
one of the parties to the transaction. These master netting
arrangements permit the Company to net amounts due from the
Company to a counterparty with amounts due to the Company from
the same counterparty. The Company has elected to present the
related assets and liabilities on a gross basis. The maximum
amount of loss due to credit risk that the Company would incur
if counterparties to the derivative financial instruments failed
completely to perform according to the terms of the contracts,
based on the fair value of the Companys derivative
contracts that are favorable to the Company, was approximately
$10,475 as of September 30, 2011. The Company has limited
its credit risk by entering into derivative transactions
exclusively with investment-grade rated financial institutions
and monitors the credit-worthiness of these financial
institutions on an ongoing basis.
The Company classifies cash flows from its derivative
transactions as cash flows from operating activities in the
consolidated statements of cash flow.
F-19
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The table below presents the total volume or notional amounts of
the Companys derivative instruments as of
September 30, 2011. Notional values are U.S. dollar
translated and calculated based on forward rates as of
September 30, 2011 for forward contracts, and based on spot
rates as of September 30, 2011 for options.
|
|
|
|
|
|
|
Notional Value*
|
|
Foreign exchange contracts
|
|
$
|
1,156,073
|
|
|
|
|
(*) |
|
Gross notional amounts do not quantify risk or represent assets
or liabilities of the Company, but are used in the calculation
of settlements under the contracts. |
The Company records all derivative instruments on the balance
sheet at fair value. Please see Note 4 to the consolidated
financial statements. The fair value of the open foreign
exchange contracts recorded by the Company on its consolidated
balance sheets as of September 30, 2011 and
September 30, 2010, as an asset or a liability is as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
$
|
3,800
|
|
|
$
|
8,993
|
|
Other noncurrent assets
|
|
|
597
|
|
|
|
669
|
|
Accrued expenses and other current liabilities
|
|
|
(14,292
|
)
|
|
|
(960
|
)
|
Other noncurrent liabilities
|
|
|
(4,622
|
)
|
|
|
(292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,517
|
)
|
|
|
8,410
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
9,411
|
|
|
|
4,020
|
|
Accrued expenses and other current liabilities
|
|
|
(5,164
|
)
|
|
|
(8,097
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
4,247
|
|
|
|
(4,077
|
)
|
|
|
|
|
|
|
|
|
|
Net fair value
|
|
$
|
(10,270
|
)
|
|
$
|
4,333
|
|
|
|
|
|
|
|
|
|
|
Cash
Flow Hedges
In order to reduce the impact of changes in foreign currency
exchange rates on its results, the Company enters into foreign
currency exchange forward and option contracts to purchase and
sell foreign currencies to hedge a significant portion of its
foreign currency net exposure resulting from revenue and expense
transactions denominated in currencies other than the
U.S. dollar. The Company designates these contracts for
accounting purposes as cash flow hedges. The Company currently
hedges its exposure to the variability in future cash flows for
a maximum period of two years (a significant portion of the
forward and option contracts outstanding as of
September 30, 2011 are expected to mature within the next
12 months).
The effective portion of the gain or loss on the derivative
instruments is initially recorded as a component of other
comprehensive (loss) income, a separate component of
shareholders equity, and subsequently reclassified into
earnings to the same line item as the related forecasted
transaction and in the same period or periods during which the
hedged exposure affects earnings. The cash flow hedges are
evaluated for effectiveness at least quarterly. As the critical
terms of the forward contract or options and the hedged
transaction are matched at inception, the hedge effectiveness is
assessed generally based on changes in the fair value for cash
flow hedges as compared to the changes in the fair value of the
cash flows associated with the underlying hedged transactions.
Hedge
F-20
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
ineffectiveness, if any, and hedge components, such as time
value, excluded from assessment of effectiveness testing for
hedges of estimated revenue from customers, are recognized
immediately in interest and other expense, net.
The effect of the Companys cash flow hedging instruments
in the consolidated statement of income for the fiscal years
ended September 30, 2011 and 2010, respectively, which
partially offset the foreign currency impact from the underlying
exposures, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) Reclassified from
|
|
|
|
Other Comprehensive (Loss) Income (Effective Portion)
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Line item in statement of income:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
(2,410
|
)
|
|
$
|
(3,466
|
)
|
Cost of service
|
|
|
11,244
|
|
|
|
9,131
|
|
Research and development
|
|
|
2,477
|
|
|
|
2,490
|
|
Selling, general and administrative
|
|
|
2,220
|
|
|
|
1,306
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,531
|
|
|
$
|
9,461
|
|
|
|
|
|
|
|
|
|
|
An aggregate gain of $11,956 and $8,138, net of taxes, was
reclassified from other comprehensive (loss) income in the
fiscal years ended September 30, 2011 and 2010,
respectively. The ineffective portion of the change in fair
value of a cash flow hedge, including the time value portion
excluded from effectiveness testing for the fiscal years ended
September 30, 2011 and 2010, was not material.
As of September 30, 2011, net losses related to derivatives
designated as cash flow hedges and recorded in accumulated other
comprehensive (loss) income totaled $14,437, of which $11,211
will be reclassified into earnings within the next
12 months and will partially offset the foreign currency
impact from the underlying exposures. The amount ultimately
realized in earnings will likely differ due to future changes in
foreign exchange rates. (Losses) gains from cash flow hedges
recognized in other comprehensive (loss) income during the
fiscal years ended September 30, 2011 and 2010 were
$(8,497) and $990, or $(8,483) and $1,204, net of taxes,
respectively.
Cash flow hedges are required to be discontinued in the event it
becomes probable that the underlying forecasted hedged
transaction will not occur. The Company did not discontinue any
cash flow hedges during any of the periods presented nor does
the Company anticipate any such discontinuance in the normal
course of business.
The activity related to the changes in net unrealized (losses)
gains on cash flow hedges, net of tax, is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Net unrealized gains on cash flow hedges, net of tax, beginning
of period
|
|
$
|
6,002
|
|
|
$
|
12,936
|
|
Changes associated with hedging transactions, net of tax
|
|
|
(8,483
|
)
|
|
|
1,204
|
|
Reclassification into earnings, net of tax
|
|
|
(11,956
|
)
|
|
|
(8,138
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gains on cash flow hedges, net of tax, end
of period
|
|
$
|
(14,437
|
)
|
|
$
|
6,002
|
|
|
|
|
|
|
|
|
|
|
Other
Risk Management Derivatives
The Company also enters into foreign currency exchange forward
and option contracts that are not designated as hedging
instruments under hedge accounting and are used to reduce the
impact of foreign currency on certain balance sheet exposures
and certain revenue and expense transactions.
F-21
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
These instruments are generally short-term in nature, with
typical maturities of less than 12 months, and are subject
to fluctuations in foreign exchange rates.
The effect of the Companys derivative instruments not
designated as hedging instruments in the consolidated statement
of income for the fiscal years ended September 30, 2011 and
2010, respectively, which partially offset the foreign currency
impact from the underlying exposure, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
|
Recognized in Income
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Line item in statement of income:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
(2,060
|
)
|
|
$
|
(2,461
|
)
|
Cost of service
|
|
|
(1,301
|
)
|
|
|
1,464
|
|
Research and development
|
|
|
151
|
|
|
|
280
|
|
Selling, general and administrative
|
|
|
(254
|
)
|
|
|
339
|
|
Interest and other expense, net
|
|
|
1,713
|
|
|
|
(1,613
|
)
|
Income taxes
|
|
|
(311
|
)
|
|
|
(489
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,062
|
)
|
|
$
|
(2,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note 7
|
Accounts
Receivable, Net
|
Accounts receivable, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Accounts receivable billed
|
|
$
|
509,371
|
|
|
$
|
529,182
|
|
Accounts receivable unbilled
|
|
|
72,048
|
|
|
|
62,246
|
|
Less allowances
|
|
|
(15,566
|
)
|
|
|
(11,428
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
565,853
|
|
|
$
|
580,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8
|
Equipment
and Leasehold Improvements, Net
|
Components of equipment and leasehold improvements, net are:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Computer equipment
|
|
$
|
866,691
|
|
|
$
|
777,135
|
|
Leasehold improvements
|
|
|
164,781
|
|
|
|
157,268
|
|
Furniture, fixtures and other
|
|
|
57,710
|
|
|
|
55,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,089,182
|
|
|
|
989,532
|
|
Less accumulated depreciation
|
|
|
(830,780
|
)
|
|
|
(731,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
258,402
|
|
|
$
|
258,273
|
|
|
|
|
|
|
|
|
|
|
Total depreciation expense on equipment and leasehold
improvements for fiscal years 2011, 2010 and 2009, was $113,910,
$111,966 and $110,365, respectively.
F-22
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
Note 9
|
Goodwill
and Intangible Assets, Net
|
The following table presents details of the Companys total
goodwill:
|
|
|
|
|
As of October 1, 2009
|
|
$
|
1,539,424
|
|
Goodwill resulting from immaterial acquisitions
|
|
|
151,434
|
|
Decrease in goodwill as a result of divestiture of a
subsidiary(1)
|
|
|
(53,442
|
)
|
|
|
|
|
|
As of September 30, 2010
|
|
|
1,637,416
|
|
Goodwill resulting from an immaterial acquisition(2)
|
|
|
103,586
|
|
Other
|
|
|
(1,270
|
)
|
|
|
|
|
|
As of September 30, 2011
|
|
$
|
1,739,732
|
|
|
|
|
|
|
|
|
|
(1) |
|
Please see Note 16 to the consolidated financial statements. |
|
(2) |
|
During fiscal 2011, the Company acquired Bridgewater Systems
(Bridgewater), a provider of policy management and
network control solutions. In allocating the total preliminary
purchase price for Bridgewater, based on estimated fair values,
the Company recorded $103,586 of goodwill, $16,900 of core
technology amortized over 8 years, $22,899 of customer
arrangements amortized over 10 years and $2,329 of other
intangible assets amortized over 5 years. |
The following table presents the amortization expense of the
Companys purchased intangible assets, included in each
financial statement caption reported in the consolidated
statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cost of service
|
|
$
|
1,609
|
|
|
$
|
1,533
|
|
|
$
|
1,820
|
|
Amortization of purchased intangible assets
|
|
|
65,958
|
|
|
|
82,441
|
|
|
|
85,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
67,567
|
|
|
$
|
83,974
|
|
|
$
|
86,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company performs an annual goodwill impairment test during
the fourth quarter of each fiscal year, or more frequently if
impairment indicators are present. The Company operates in one
operating segment, and this segment comprises its only reporting
unit. In calculating the fair value of the reporting unit, the
Company used its market capitalization and a discounted cash
flow methodology. There was no impairment of goodwill in fiscal
2011, 2010 and 2009.
F-23
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The following table presents details of the Companys total
purchased intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
(in years)
|
|
|
Gross
|
|
|
Amortization
|
|
|
Net
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology
|
|
|
4-8
|
|
|
$
|
381,056
|
|
|
$
|
(311,541
|
)
|
|
$
|
69,515
|
|
Customer arrangements
|
|
|
6-15
|
|
|
|
327,207
|
|
|
|
(215,961
|
)
|
|
|
111,246
|
|
Intellectual property rights and purchased computer software
|
|
|
3-10
|
|
|
|
51,996
|
|
|
|
(51,996
|
)
|
|
|
|
|
Other
|
|
|
2-10
|
|
|
|
23,082
|
|
|
|
(10,421
|
)
|
|
|
12,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
783,341
|
|
|
$
|
(589,919
|
)
|
|
$
|
193,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology
|
|
|
4-8
|
|
|
$
|
364,057
|
|
|
$
|
(272,798
|
)
|
|
$
|
91,259
|
|
Customer arrangements
|
|
|
6-15
|
|
|
|
304,308
|
|
|
|
(189,062
|
)
|
|
|
115,246
|
|
Intellectual property rights and purchased computer software
|
|
|
3-10
|
|
|
|
51,996
|
|
|
|
(51,996
|
)
|
|
|
|
|
Other
|
|
|
2-10
|
|
|
|
20,753
|
|
|
|
(8,496
|
)
|
|
|
12,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
741,114
|
|
|
$
|
(522,352
|
)
|
|
$
|
218,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated future amortization expense of purchased
intangible assets as of September 30, 2011 is as follows:
|
|
|
|
|
|
|
Amount
|
|
|
Fiscal year:
|
|
|
|
|
2012
|
|
$
|
52,145
|
|
2013
|
|
|
35,787
|
|
2014
|
|
|
26,493
|
|
2015
|
|
|
21,736
|
|
2016
|
|
|
18,590
|
|
Thereafter
|
|
|
38,671
|
|
|
|
|
|
|
Total
|
|
$
|
193,422
|
|
|
|
|
|
|
|
|
Note 10
|
Other
Noncurrent Assets
|
Other noncurrent assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Funded employee benefit costs(1)
|
|
$
|
137,515
|
|
|
$
|
131,274
|
|
Deferred costs(2)
|
|
|
94,546
|
|
|
|
109,698
|
|
Long term accounts receivable-unbilled
|
|
|
32,657
|
|
|
|
43,018
|
|
Prepaid expense
|
|
|
31,894
|
|
|
|
6,523
|
|
Other
|
|
|
45,913
|
|
|
|
31,438
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
342,525
|
|
|
$
|
321,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Please see Note 18 to the consolidated financial statements. |
|
(2) |
|
Please see Note 2 to the consolidated financial statements. |
F-24
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The provision (benefit) for income taxes consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Current
|
|
$
|
47,791
|
|
|
$
|
60,529
|
|
|
$
|
21,361
|
|
Deferred
|
|
|
1,251
|
|
|
|
(19,137
|
)
|
|
|
18,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,042
|
|
|
$
|
41,392
|
|
|
$
|
39,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All income taxes are from continuing operations reported by the
Company in the applicable taxing jurisdiction. Income taxes also
include anticipated withholding taxes due on subsidiaries
earnings when paid as dividends to the Company.
Deferred income taxes are comprised of the following components:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
$
|
40,436
|
|
|
$
|
37,304
|
|
Employee compensation and benefits
|
|
|
65,320
|
|
|
|
66,804
|
|
Intangible assets, computer software and intellectual property
|
|
|
16,882
|
|
|
|
21,184
|
|
Net operating loss carryforwards
|
|
|
136,940
|
|
|
|
144,830
|
|
Other
|
|
|
92,412
|
|
|
|
63,358
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
351,990
|
|
|
|
333,480
|
|
Valuation allowances(1)
|
|
|
(137,836
|
)
|
|
|
(106,743
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets, net
|
|
|
214,154
|
|
|
|
226,737
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Anticipated withholdings on subsidiaries earnings
|
|
|
(36,640
|
)
|
|
|
(37,521
|
)
|
Intangible assets, computer software and intellectual property
|
|
|
(106,408
|
)
|
|
|
(111,423
|
)
|
Managed services costs
|
|
|
(11,110
|
)
|
|
|
(13,898
|
)
|
Other
|
|
|
(23,674
|
)
|
|
|
(18,819
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(177,832
|
)
|
|
|
(181,661
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
36,322
|
|
|
$
|
45,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Subsequent releases of the valuation allowance will be
recognized through earnings. |
The effective income tax rate varied from the statutory Guernsey
tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Statutory Guernsey tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Foreign taxes
|
|
|
12
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
12
|
%
|
|
|
11
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a Guernsey company subject to a corporate tax rate of zero
percent, the Companys overall effective tax rate is
attributable to foreign taxes. The Companys income before
income tax expense is considered to be foreign income.
F-25
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
During fiscal 2011, the net increase in valuation allowances was
$31,093, which related to the uncertainty of realizing tax
benefits primarily for net capital and operating loss
carryforwards related to certain of the Companys
subsidiaries. Of the increase, $12,625 was charged to other
accounts, primarily goodwill in connection with a 2011
immaterial acquisition, with the remainder recorded to earnings.
As of September 30, 2011, the Company had net operating
loss carryforwards of $485,199, of which $152,738 have
expiration dates through 2031 and the remainder do not expire.
During fiscal 2010, the net increase in valuation allowances was
$23,963, which related to the uncertainty of realizing tax
benefits primarily for net capital and operating loss
carryforwards related to certain of the Companys
subsidiaries. Of the increase, $10,541 was charged to other
accounts, primarily goodwill in connection with 2010 immaterial
acquisitions, with the remainder recorded to earnings. As of
September 30, 2010, the Company had net operating loss
carryforwards of $520,098, of which $159,682 have expiration
dates through 2029 and the remainder do not expire.
The aggregate changes in the balance of the Companys gross
unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Balance at beginning of fiscal year
|
|
$
|
118,662
|
|
|
$
|
103,304
|
|
Additions based on tax positions related to the current year
|
|
|
19,849
|
|
|
|
19,883
|
|
Additions for tax positions of prior years(1)
|
|
|
3,548
|
|
|
|
19,832
|
|
Settlements with tax authorities
|
|
|
(5,231
|
)
|
|
|
(20,703
|
)
|
Lapse of statute of limitations
|
|
|
(3,967
|
)
|
|
|
(3,654
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of fiscal year
|
|
$
|
132,861
|
|
|
$
|
118,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Additions for tax positions of prior years in fiscal 2010,
primarily relates to immaterial acquisitions in fiscal 2010. |
The total amount of unrecognized tax benefits, which includes
interest and penalties, was $132,861 as of September 30,
2011, all of which would affect the effective tax rate if
realized.
The Company recognizes interest and penalties related to
unrecognized tax benefits in the provision for income taxes. As
of September 30, 2011, the Company has accrued $17,973 in
income taxes payable for interest and penalties relating to
unrecognized tax benefits, of which $2,403 was recognized in the
statement of income in fiscal 2011. As of September 30,
2010, the Company has accrued $15,570 in income taxes payable
for interest and penalties relating to unrecognized tax
benefits, of which $880 was recognized in the statement of
income in fiscal 2010.
The Company is currently under audit in several jurisdictions
for the tax years 2005 and onwards. Timing of the resolution of
audits is highly uncertain and therefore the Company generally
cannot estimate the change in unrecognized tax benefits
resulting from these audits within the next 12 months.
Within the next 12 months the Company believes that the
amount of unrecognized tax benefits will increase in the
ordinary course of business. In addition it is reasonably
possible that the amount of unrecognized tax benefits will
decrease by $14,230 as a result of lapse of statute of
limitations in jurisdictions in which the Company operates.
|
|
Note 12
|
Repurchase
of Shares
|
In April 2010, the Companys board of directors authorized
a share repurchase plan allowing the repurchase of up to
$700,000 of its outstanding ordinary shares over the following
12 months. In February 2011, the Companys board of
directors adopted a share repurchase plan authorizing the
repurchase of up to $1,000,000 of the Companys
F-26
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
outstanding ordinary shares over the following 24 months.
The authorizations permit the Company to purchase its ordinary
shares in open market or privately negotiated transactions at
times and prices that it considers appropriate. In April 2011,
the Company completed the repurchase of the remaining authorized
amount under the April 2010 share repurchase plan and began
executing repurchases under the February 2011 plan. In fiscal
2011, the Company repurchased 21,866 ordinary shares at an
average price of $28.53 per share (excluding broker and
transaction fees). In fiscal 2010, the Company repurchased
13,695 ordinary shares at an average price of $28.41 per share
(excluding broker and transaction fees). As of
September 30, 2011, the Company had remaining authority to
repurchase up to $687,137 of its outstanding ordinary shares.
|
|
Note 13
|
Financing
Arrangements
|
In November 2007, the Company entered into an unsecured $500,000
five-year revolving credit facility with a syndicate of banks,
which is available for general corporate purposes, including
acquisitions and repurchases of ordinary shares that the Company
may consider from time to time. The interest rate for borrowings
under the revolving credit facility is chosen at the
Companys option from several pre-defined alternatives,
depending on the circumstances of any advance and is based on
the Companys credit ratings. As of September 30,
2011, the Company was in compliance with the financial covenants
under the revolving credit facility. In September 2010, the
Company borrowed an aggregate of $200,000 under the facility and
repaid it in October 2010. In September 2011, the Company
borrowed an aggregate of $250,000 under the facility and repaid
it in October 2011.
As of September 30, 2011, the Company had outstanding
letters of credit and bank guarantees of $41,225. These were
supported by a combination of the credit facilities and
restricted cash balances that the Company maintains with various
banks. In addition, as of September 30, 2011, the Company
had outstanding obligations of $1,126 in connection with leasing
arrangements.
|
|
Note 14
|
Other
Noncurrent Liabilities
|
Other noncurrent liabilities consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
Accrued employees costs(1)
|
|
$
|
181,890
|
|
|
$
|
170,780
|
|
Noncurrent deferred revenue
|
|
|
80,560
|
|
|
|
75,826
|
|
Accrued pension liability(2)
|
|
|
14,926
|
|
|
|
15,173
|
|
Other
|
|
|
14,644
|
|
|
|
11,575
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
292,020
|
|
|
$
|
273,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily severance pay liability in accordance with Israeli
law. Please see Note 18 to the consolidated financial
statements. |
|
(2) |
|
Primarily relates to funded status of non-contributory defined
benefit plans. Please see Note 18 to the consolidated
financial statements. |
F-27
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
Note 15
|
Interest
and other expense, net
|
Interest and other expense, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Interest income
|
|
$
|
(6,180
|
)
|
|
$
|
(7,670
|
)
|
|
$
|
(16,371
|
)
|
Interest expense
|
|
|
2,882
|
|
|
|
3,135
|
|
|
|
7,865
|
|
Gain from repurchase of 0.5% Notes
|
|
|
|
|
|
|
|
|
|
|
(2,185
|
)
|
Foreign exchange loss
|
|
|
9,737
|
|
|
|
5,551
|
|
|
|
5,713
|
|
Loss from divestiture of a subsidiary(1)
|
|
|
|
|
|
|
23,399
|
|
|
|
|
|
Other, net
|
|
|
2,218
|
|
|
|
720
|
|
|
|
6,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,657
|
|
|
$
|
25,135
|
|
|
$
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 16 to the consolidated financial statements. |
|
|
Note 16
|
Divestiture
of a Subsidiary
|
In April 2010, the Company divested an 81% majority stake in
Longshine Information Technology Company Ltd., its Chinese
subsidiary acquired in 2005, to a newly formed and
locally-managed entity, Longshine Technology Holding, Ltd. for
approximately $26,730. The Company divested its stake after the
market dynamics in China did not evolve as it had anticipated
and the Company believed the divestiture would enable it to
better focus its efforts on service provider opportunities in
China with the Companys CES 8 portfolio. The Company
retains a minority interest in Longshine, which is accounted
using the cost method. In connection with the divestiture,
during fiscal 2010, the Company recorded a loss of $23,399. The
loss has been reflected in interest and other expense, net.
Commitments
The Company leases office space and vehicles under
non-cancelable operating leases in various countries in which it
does business. Future minimum non-cancelable lease payments
based on the Companys contractual obligations as of
September 30, 2011 are as follows:
|
|
|
|
|
For the years ended September 30,
|
|
|
|
|
2012
|
|
$
|
60,391
|
|
2013
|
|
|
47,125
|
|
2014
|
|
|
36,153
|
|
2015
|
|
|
28,663
|
|
Thereafter
|
|
|
77,354
|
|
|
|
|
|
|
|
|
$
|
249,686
|
|
|
|
|
|
|
Future minimum non-cancelable lease payments, as stated above,
do not reflect committed future sublease income of $4,292,
$2,791, $603 and $83 for the years ended September 30,
2012, 2013, 2014 and 2015, respectively.
Rent expense net of sublease income, including accruals for
future lease losses, was approximately $40,104, $40,560 and
$43,726 for fiscal 2011, 2010 and 2009, respectively.
F-28
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
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 Companys consolidated financial position, results
of operations or cash flows.
Guarantors
Accounting and Disclosure Requirements for
Guarantees
The Company generally offers its products with a limited
warranty for a period of 90 days. The Companys policy
is to accrue for warranty costs, if needed, based on historical
trends in product failure. Based on the Companys
experience, only minimal warranty charges have been required
after revenue was fully recognized and, as a result, the Company
did not accrue any amounts for product warranty liability during
fiscal years 2011, 2010 and 2009.
The Company generally indemnifies its customers against claims
of intellectual property infringement made by third parties
arising from the use of the Companys software. To date,
the Company has incurred and recorded only minimal costs as a
result of such obligations in its consolidated financial
statements.
|
|
Note 18
|
Employee
Benefits
|
The Company accrues severance pay for the employees of its
Israeli operations in accordance with Israeli law and certain
employment procedures on the basis of the latest monthly salary
paid to these employees and the length of time that they have
worked for the Israeli operations. The severance pay liability,
which is included as accrued employee costs in other noncurrent
liabilities, is partially funded by amounts on deposit with
insurance companies, which are included in other noncurrent
assets. These severance expenses were $28,054, $19,570 and
$14,616 for fiscal 2011, 2010 and 2009, respectively.
The Company sponsors defined contribution plans covering certain
of its employees around the world. The plans primarily provide
for Company matching contributions based upon a percentage of
the employees contributions. The Companys
contributions in fiscal 2011, 2010 and 2009 under such plans
were not material compared to total operating expenses.
The Company maintains non-contributory defined benefit plans
that provide for pension, other retirement and post employment
benefits for certain employees of a Canadian subsidiary based on
length of service and rate of pay. The Company accrues its
obligations to these employees under employee benefit plans and
the related costs net of returns on plan assets. Pension expense
and other retirement benefits earned by employees are
actuarially determined using the projected benefit method
pro-rated on service and based on managements best
estimates of expected plan investments performance, salary
escalation, retirement ages of employees, discount rate,
inflation and expected health care costs. The Company recognized
the funded status of such plans in the balance sheet.
The fair value of the employee benefit plans assets is
based on market values. The plan assets are valued at market
value for the purpose of calculating the expected return on plan
assets and the amortization of experienced gains and losses.
Past service costs, which may arise from plan amendments, are
amortized on a straight-line basis over the average remaining
service period of the employees who were active at the date of
amendment. The excess of the net actuarial gain (loss) over 10%
of the greater of the benefit obligation and the market-related
value of plan assets is amortized over the average remaining
service period of active employees.
The pension and other benefits costs related to the
non-contributory defined benefit plans were immaterial in fiscal
2011, 2010 and 2009.
F-29
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
Note 19
|
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. The maximum number of
ordinary shares authorized to be granted under the Plan is
55,300. Awards granted under the Plan generally vest over a
period of four years and stock options have a term of ten years.
The following table summarizes information about options to
purchase the Companys ordinary shares, as well as
changes during the years ended September 30, 2011, 2010 and
2009:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Share
|
|
|
Weighted Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Outstanding as of October 1, 2008
|
|
|
22,388
|
|
|
$
|
32.89
|
|
Granted
|
|
|
3,658
|
|
|
|
18.70
|
|
Exercised
|
|
|
(1,289
|
)
|
|
|
21.63
|
|
Forfeited
|
|
|
(3,436
|
)
|
|
|
34.20
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2009
|
|
|
21,321
|
|
|
|
30.93
|
|
Granted
|
|
|
4,735
|
|
|
|
27.71
|
|
Exercised
|
|
|
(1,097
|
)
|
|
|
21.55
|
|
Forfeited
|
|
|
(2,761
|
)
|
|
|
40.64
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2010
|
|
|
22,198
|
|
|
|
29.50
|
|
Granted
|
|
|
4,210
|
|
|
|
28.00
|
|
Exercised
|
|
|
(2,590
|
)
|
|
|
21.79
|
|
Forfeited
|
|
|
(3,372
|
)
|
|
|
38.73
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2011(1)
|
|
|
20,446
|
|
|
$
|
28.64
|
|
|
|
|
|
|
|
|
|
|
Exercisable on September 30, 2011(1)
|
|
|
12,656
|
|
|
$
|
29.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At September 30, 2011, the weighted average remaining
contractual life of outstanding and exercisable options was 6.20
and 4.82 years, respectively. |
F-30
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The following table summarizes information relating to awards of
restricted shares, as well as changes during the years ended
September 30, 2011, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Grant Date Fair
|
|
|
|
Shares
|
|
|
Value
|
|
|
Outstanding as of October 1, 2008
|
|
|
1,105
|
|
|
$
|
33.78
|
|
Granted
|
|
|
583
|
|
|
|
18.42
|
|
Vested
|
|
|
(315
|
)
|
|
|
33.43
|
|
Forfeited
|
|
|
(248
|
)
|
|
|
34.80
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2009
|
|
|
1,125
|
|
|
|
25.69
|
|
Granted
|
|
|
650
|
|
|
|
27.43
|
|
Vested
|
|
|
(445
|
)
|
|
|
26.83
|
|
Forfeited
|
|
|
(78
|
)
|
|
|
26.95
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2010
|
|
|
1,252
|
|
|
|
26.11
|
|
Granted
|
|
|
1,154
|
|
|
|
28.99
|
|
Vested
|
|
|
(437
|
)
|
|
|
26.03
|
|
Forfeited
|
|
|
(235
|
)
|
|
|
27.93
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2011
|
|
|
1,734
|
|
|
$
|
27.80
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised and the value of
restricted shares vested during fiscal 2011 was $19,394 and
$12,376, respectively. The aggregate intrinsic value of
outstanding and exercisable stock options as of
September 30, 2011 was $27,504 and $15,091, respectively.
The total income tax benefit recognized in the income statement
for stock-based compensation (including restricted shares) for
fiscal 2011, 2010 and 2009 was $2,350, $3,677 and $5,660,
respectively.
As of September 30, 2011, there was $46,441 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.
F-31
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
The following table summarizes information about stock options
outstanding as of September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Life
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
Exercise Price
|
|
Outstanding
|
|
|
(in Years)
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$ 0.38 16.75
|
|
|
285
|
|
|
|
2.11
|
|
|
$
|
11.14
|
|
|
|
245
|
|
|
$
|
10.99
|
|
16.92 19.12
|
|
|
1,086
|
|
|
|
7.22
|
|
|
|
17.34
|
|
|
|
458
|
|
|
|
17.47
|
|
19.94 25.38
|
|
|
1,542
|
|
|
|
5.59
|
|
|
|
21.37
|
|
|
|
877
|
|
|
|
21.95
|
|
25.89 26.50
|
|
|
2,058
|
|
|
|
6.77
|
|
|
|
26.05
|
|
|
|
1,955
|
|
|
|
26.04
|
|
26.57 27.47
|
|
|
2,725
|
|
|
|
8.84
|
|
|
|
26.68
|
|
|
|
191
|
|
|
|
26.72
|
|
27.60 29.14
|
|
|
4,208
|
|
|
|
7.53
|
|
|
|
28.59
|
|
|
|
1,445
|
|
|
|
27.92
|
|
29.19 32.12
|
|
|
2,908
|
|
|
|
2.42
|
|
|
|
31.18
|
|
|
|
2,513
|
|
|
|
31.22
|
|
32.15 33.16
|
|
|
2,890
|
|
|
|
6.18
|
|
|
|
33.04
|
|
|
|
2,599
|
|
|
|
33.07
|
|
33.74 35.00
|
|
|
1,499
|
|
|
|
5.44
|
|
|
|
34.74
|
|
|
|
1,287
|
|
|
|
34.71
|
|
35.45 37.66
|
|
|
905
|
|
|
|
5.72
|
|
|
|
35.80
|
|
|
|
746
|
|
|
|
35.88
|
|
38.02 39.82
|
|
|
340
|
|
|
|
5.09
|
|
|
|
39.12
|
|
|
|
340
|
|
|
|
39.12
|
|
Employee equity-based compensation pre-tax expense for the years
ended September 30, 2011, 2010 and 2009 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cost of service
|
|
$
|
14,641
|
|
|
$
|
20,061
|
|
|
$
|
21,733
|
|
Research and development
|
|
|
2,701
|
|
|
|
4,218
|
|
|
|
4,249
|
|
Selling, general and administrative
|
|
|
19,289
|
|
|
|
20,176
|
|
|
|
16,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,631
|
|
|
$
|
44,455
|
|
|
$
|
42,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of options granted was estimated on the date of
grant using the Black-Scholes pricing model with the assumptions
noted in the following table (all in weighted averages for
options granted during the year):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Risk-free interest rate(1)
|
|
|
1.50
|
%
|
|
|
1.98
|
%
|
|
|
1.94
|
%
|
Expected life of stock options(2)
|
|
|
4.50
|
|
|
|
4.32
|
|
|
|
4.46
|
|
Expected volatility(3)
|
|
|
30.5
|
%
|
|
|
31.5
|
%
|
|
|
47.9
|
%
|
Expected dividend yield(4)
|
|
|
None
|
|
|
|
None
|
|
|
|
None
|
|
Fair value per option
|
|
$
|
7.76
|
|
|
$
|
7.66
|
|
|
$
|
7.54
|
|
|
|
|
(1) |
|
Risk-free interest rate is based upon U.S. Treasury yield curve
appropriate for the term of the Companys employee stock
options. |
|
(2) |
|
Expected life of stock options is based upon historical
experience. |
|
(3) |
|
Expected volatility is based on blended volatility. Please see
Note 2 to the consolidated financial statements. |
|
(4) |
|
Expected dividend yield is based on the Companys history
and future expectation of dividend payouts. |
F-32
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
Note 20
|
Earnings
Per Share
|
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per share
|
|
$
|
346,665
|
|
|
$
|
343,906
|
|
|
$
|
326,176
|
|
Effect of assumed conversion of 0.50% convertible notes
|
|
|
|
|
|
|
|
|
|
|
1,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted earnings per share
|
|
$
|
346,665
|
|
|
$
|
343,906
|
|
|
$
|
327,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share weighted
average number of shares outstanding
|
|
|
185,213
|
|
|
|
202,584
|
|
|
|
204,023
|
|
Effect of assumed conversion of 0.50% convertible notes
|
|
|
24
|
|
|
|
24
|
|
|
|
3,948
|
|
Effect of dilutive stock options granted
|
|
|
1,322
|
|
|
|
1,468
|
|
|
|
379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for dilutive earnings per share adjusted
weighted average shares and assumed conversions
|
|
|
186,559
|
|
|
|
204,076
|
|
|
|
208,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.87
|
|
|
$
|
1.70
|
|
|
$
|
1.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.86
|
|
|
$
|
1.69
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average effect of the repurchase of ordinary shares
by the Company has been included in the calculation of basic
earnings per share.
For the fiscal year ended September 30, 2011, 2010 and
2009, 14,970, 16,201 and 20,623 shares, respectively were
attributable to antidilutive outstanding stock options and
therefore were not included in the calculation of diluted
earnings per share.
|
|
Note 21
|
Segment
Information and Sales to Significant Customers
|
The Company and its subsidiaries operate in one operating
segment, providing software products and services for the
communications, media and entertainment industry.
Geographic
Information
The following is a summary of revenue and long-lived assets by
geographic area. Revenue is attributed to geographic region
based on the location of the customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,899,173
|
|
|
$
|
1,847,351
|
|
|
$
|
1,754,309
|
|
Canada
|
|
|
433,923
|
|
|
|
404,658
|
|
|
|
400,264
|
|
Europe
|
|
|
403,115
|
|
|
|
353,239
|
|
|
|
394,263
|
|
Rest of the world
|
|
|
441,517
|
|
|
|
378,975
|
|
|
|
313,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,177,728
|
|
|
$
|
2,984,223
|
|
|
$
|
2,862,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Long-lived Assets(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
81,773
|
|
|
$
|
110,245
|
|
|
$
|
138,520
|
|
Israel
|
|
|
45,669
|
|
|
|
40,717
|
|
|
|
43,978
|
|
India
|
|
|
35,071
|
|
|
|
36,322
|
|
|
|
32,578
|
|
Europe
|
|
|
47,717
|
|
|
|
35,353
|
|
|
|
35,366
|
|
Rest of the world
|
|
|
48,172
|
|
|
|
35,636
|
|
|
|
29,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
258,402
|
|
|
$
|
258,273
|
|
|
$
|
279,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes equipment and leasehold improvements. |
Revenue
and Customer Information
Customer experience systems includes the following offerings:
revenue management (convergent charging and billing, mediation,
and partner relationship management), customer management
(customer care, and sales and ordering), operations support
systems (OSS) (network planning, service fulfillment, service
assurance, inventory and discovery, service order management and
OSS systems integration services), service delivery (convergent
service platform, digital services, and convergent
applications), portfolio enablers and network control. Customer
experience systems also include a comprehensive line of services
such as consulting, delivery and managed services, system
implementation, integration, modification, consolidation,
modernization and ongoing support, enhancement and maintenance.
Directory includes comprehensive set of products and services
for local marketing service providers and search and directory
publishers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Customer experience systems
|
|
$
|
2,978,288
|
|
|
$
|
2,775,271
|
|
|
$
|
2,685,460
|
|
Directory
|
|
|
199,440
|
|
|
|
208,952
|
|
|
|
177,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,177,728
|
|
|
$
|
2,984,223
|
|
|
$
|
2,862,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to Significant Customers
The following table summarizes the percentage of sales to
significant customer groups (when they amount to at least
10 percent of total revenue for the year).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Customer 1
|
|
|
29
|
%
|
|
|
29
|
%
|
|
|
33
|
%
|
Customer 2
|
|
|
11
|
|
|
|
12
|
|
|
|
10
|
|
Customer 3
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
|
Note 22
|
Operational
Efficiency Program
|
In the three months ended December 31, 2008, the Company
commenced a series of measures designed to align its operational
structure to its expected future activities and to improve
efficiency. In fiscal 2009, as part of this plan and in
connection with a previous year plan, the Company recorded a
charge of $15,140 consisting primarily of employee separation
costs in connection with the termination of the employment of
software and information
F-34
AMDOCS
LIMITED
NOTES TO
THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(dollar
and share amounts in thousands, except per share data)
technology specialists and administrative professionals at
various locations around the world. The majority of the payments
for the separation of employees were made in fiscal 2009.
Remaining amounts were paid in fiscal 2010.
|
|
Note 23
|
Selected
Quarterly Results of Operations
(Unaudited)
|
The following are details of the unaudited quarterly results of
operations for the three months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
812,203
|
|
|
$
|
801,409
|
|
|
$
|
788,935
|
|
|
$
|
775,181
|
|
Operating income
|
|
|
104,552
|
|
|
|
105,672
|
|
|
|
106,556
|
|
|
|
87,584
|
|
Net income
|
|
|
87,379
|
|
|
|
91,785
|
|
|
|
94,110
|
|
|
|
73,391
|
|
Basic earnings per share
|
|
|
0.49
|
|
|
|
0.50
|
|
|
|
0.50
|
|
|
|
0.38
|
|
Diluted earnings per share
|
|
|
0.49
|
|
|
|
0.50
|
|
|
|
0.50
|
|
|
|
0.38
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
762,194
|
|
|
$
|
753,249
|
|
|
$
|
743,969
|
|
|
$
|
724,811
|
|
Operating income
|
|
|
102,888
|
|
|
|
105,269
|
|
|
|
103,127
|
|
|
|
99,149
|
|
Net income
|
|
|
94,738
|
|
|
|
92,265
|
|
|
|
68,550
|
|
|
|
88,353
|
|
Basic earnings per share
|
|
|
0.49
|
|
|
|
0.45
|
|
|
|
0.33
|
|
|
|
0.43
|
|
Diluted earnings per share
|
|
|
0.48
|
|
|
|
0.45
|
|
|
|
0.33
|
|
|
|
0.43
|
|
F-35
Schedule
Valuation and Qualifying Accounts
VALUATION
AND QUALIFYING ACCOUNTS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowances
|
|
|
|
|
|
|
on Net
|
|
|
|
Accounts Receivable
|
|
|
Deferred Tax
|
|
|
|
Allowances
|
|
|
Assets
|
|
|
Balance as of October 1, 2008
|
|
$
|
34,564
|
|
|
$
|
76,481
|
|
Charged to costs and expenses
|
|
|
1,436
|
|
|
|
22,756
|
(1)
|
Charged to revenue
|
|
|
3,768
|
|
|
|
|
|
Charged to other accounts
|
|
|
3,397
|
(2)
|
|
|
|
|
Deductions
|
|
|
(33,287
|
) (4)
|
|
|
(16,457
|
) (3)
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2009
|
|
|
9,878
|
|
|
|
82,780
|
|
Charged to costs and expenses
|
|
|
2,710
|
|
|
|
18,344
|
(5)
|
Charged to revenue
|
|
|
1,329
|
|
|
|
|
|
Charged to other accounts
|
|
|
1,503
|
(7)
|
|
|
15,601
|
(6)
|
Deductions
|
|
|
(3,992
|
)
|
|
|
(9,982
|
) (8)
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2010
|
|
|
11,428
|
|
|
|
106,743
|
|
Charged to costs and expenses
|
|
|
7,602
|
|
|
|
24,372
|
(9)
|
Charged to revenue
|
|
|
2,132
|
|
|
|
|
|
Charged to other accounts
|
|
|
1,488
|
(11)
|
|
|
16,685
|
(10)
|
Deductions
|
|
|
(7,084
|
)
|
|
|
(9,964
|
)(12)
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2011
|
|
$
|
15,566
|
|
|
$
|
137,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Valuation allowances on deferred tax assets incurred during
fiscal 2009. |
|
(2) |
|
Acquired as part of a 2009 small acquisition. |
|
(3) |
|
$3,481 of valuation allowances on deferred tax assets incurred
primarily in connection with 2006 and 2008 acquisitions was
released through goodwill, $7,172 of valuation allowances on
deferred tax assets was written off against the related deferred
tax assets, the remaining deductions in the valuation allowances
on net deferred tax assets were released to earnings. |
|
(4) |
|
Primarily attributable to a settlement with a customer in which
the allowances were written off against the related accounts
receivable. |
|
(5) |
|
Valuation allowances on deferred tax assets incurred during
fiscal 2010. |
|
(6) |
|
Includes valuation allowances on deferred tax assets incurred in
connection with 2010 small acquisitions. |
|
(7) |
|
Acquired as part of 2010 small acquisitions. |
|
(8) |
|
$5,060 of valuation allowances on deferred tax assets were
written off against the related deferred tax assets, and the
remaining deductions in the valuation allowances on net deferred
tax assets were released to earnings. |
|
(9) |
|
Valuation allowances on deferred tax assets incurred during
fiscal 2011. |
|
(10) |
|
Includes valuation allowances on deferred tax assets incurred in
connection with 2011 small acquisition. |
|
(11) |
|
Acquired as part of 2011 small acquisition. |
|
(12) |
|
$4,060 of valuation allowances on deferred tax assets were
written off against the related deferred tax assets, and the
remaining deductions in the valuation allowances on net deferred
tax assets were released to earnings. |
F-36
exv8
Exhibit 8
Significant
Subsidiaries of Amdocs Limited
|
|
|
|
|
|
|
Jurisdiction of
|
|
|
|
|
Incorporation or
|
|
|
List of the Subsidiaries*
|
|
Organization
|
|
Business Name
|
|
Amdocs Astrum Limited
|
|
Ireland
|
|
Amdocs Astrum Limited
|
Amdocs Canadian Managed Services, Inc.
|
|
Canada
|
|
Amdocs Canadian Managed Services Inc.
|
Amdocs (Denmark) ApS
|
|
Denmark
|
|
Amdocs (Denmark) ApS
|
Amdocs Development Centre India Private Limited
|
|
India
|
|
Amdocs Development Centre India Private Limited
|
Amdocs Development Limited
|
|
Republic of Cyprus
|
|
Amdocs Development Limited
|
Amdocs Holdings ULC
|
|
Canada
|
|
Amdocs Holdings ULC
|
Amdocs, Inc.
|
|
State of Delaware
|
|
Amdocs, Inc.
|
Amdocs International GmbH
|
|
Switzerland
|
|
Amdocs International GmbH
|
Amdocs (Israel) Limited
|
|
Israel
|
|
Amdocs (Israel) Limited
|
Amdocs Management Limited
|
|
United Kingdom
|
|
Amdocs Management Limited
|
Amdocs Software Solutions Kft
|
|
Hungary
|
|
Amdocs Software Solutions Limited Liability Company
|
Amdocs Software Systems Ltd.
|
|
Ireland
|
|
Amdocs Software Systems Ltd.
|
Amdocs (UK) Limited
|
|
United Kingdom
|
|
Amdocs (UK) Limited
|
European Software Marketing Ltd.
|
|
Island of Guernsey, Channel Islands
|
|
European Software Marketing Ltd.
|
Sypress, Inc.
|
|
State of Delaware
|
|
Sypress, Inc.
|
|
|
|
* |
|
Each subsidiary listed is directly or indirectly wholly-owned by
Amdocs Limited. |
exv12w1
EXHIBIT 12.1
CERTIFICATIONS
I, Eli Gelman, certify that:
1. I have reviewed this annual report on
Form 20-F
of Amdocs Limited;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the company as of, and
for, the periods presented in this report;
4. The companys other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the company and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the company, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the companys
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
companys internal control over financial reporting that
occurred during the period covered by the annual report that has
materially affected, or is reasonably likely to materially
affect, the companys internal control over financial
reporting; and
5. The companys other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the companys auditors
and the audit committee of the companys board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
companys ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
companys internal control over financial reporting.
Chief Executive Officer
Amdocs Management Limited
Date: December 8, 2011
exv12w2
EXHIBIT 12.2
CERTIFICATIONS
I, Tamar Rapaport-Dagim, certify that:
1. I have reviewed this annual report on
Form 20-F
of Amdocs Limited;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the company as of, and
for, the periods presented in this report;
4. The companys other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act
Rules 13a-15(f)
and
15d-15(f))
for the company and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the company, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the companys
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
companys internal control over financial reporting that
occurred during the period covered by the annual report that has
materially affected, or is reasonably likely to materially
affect, the companys internal control over financial
reporting; and
5. The companys other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the companys auditors
and the audit committee of the companys board of directors
(or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
companys ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
companys internal control over financial reporting.
Chief Financial Officer
Amdocs Management Limited
Date: December 8, 2011
exv13w1
EXHIBIT 13.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on
Form 20-F
of Amdocs Limited (the Company) for the period ended
September 30, 2011 as filed with the Securities and
Exchange Commission on the date hereof (the Report),
the undersigned, Eli Gelman, Chief Executive Officer of the
Company, hereby certifies, pursuant to 18 U.S.C.
Section 1350, that to the best of his knowledge and belief:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
Eli Gelman
Chief Executive Officer
Amdocs Management Limited
Dated: December 8, 2011
exv13w2
EXHIBIT 13.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on
Form 20-F
of Amdocs Limited (the Company) for the period ended
September 30, 2011 as filed with the Securities and
Exchange Commission on the date hereof (the Report),
the undersigned, Tamar Rapaport-Dagim, Chief Financial Officer
of the Company, hereby certifies, pursuant to 18 U.S.C.
Section 1350, that to the best of her knowledge and belief:
(1) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Company.
Tamar Rapaport-Dagim
Chief Financial Officer
Amdocs Management Limited
Dated: December 8, 2011
exv14w1
Exhibit 14.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm in the head note to Item 3. Key Information
Selected Financial Data included in this Annual Report (Form 20-F) of Amdocs Limited and to the
incorporation by reference in the following Registration Statements:
Form S-8, No. 333-91847
Form S-8, No. 333-92705
Form S-8, No. 333-31506
Form S-8, No. 333-34104
Form S-8, No. 333-58454
Form S-8, No. 333-114077
Form S-8, No. 333-132968
Form S-8, No. 333-135320
Form S-8, No. 333-137617
Form S-8, No. 333-139310
Form S-8, No. 333-140728
Form S-8, No. 333-159163
Form F-3 (and related Prospectus), No. 333-39278
Form F-3 (and related Prospectus), No. 333-44994
Form F-3 (and related Prospectus), No. 333-57036
Form F-3 (and related Prospectus), No. 333-67572
Form F-3 (and related Prospectus), No. 333-114079
Form F-3 (and related Prospectus), No. 333-114344
of our reports dated December 8, 2011, with respect to the consolidated financial statements and
schedule of Amdocs Limited and the effectiveness of internal control over financial reporting of
Amdocs Limited, included in this Annual Report (Form 20-F) of Amdocs Limited for the year ended
September 30, 2011.
/s/ Ernst & Young LLP
New York, New York
December 8, 2011