<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1999
AMDOCS LIMITED
Tower Hill House Le Bordage GY1 3QT
St. Peter Port, Island of Guernsey, Channel Islands
--------------
Amdocs, Inc.
1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F)
Form 20 F X FORM 40 F
----- -----
(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of
1934.)
YES NO X
--- ----
<PAGE> 2
AMDOCS LIMITED
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
FOR THE QUARTER ENDED DECEMBER 31, 1999
INDEX
PART I FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Changes in Shareholders'
Equity
Consolidated Statements of Cash Flows
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 6-K
SIGNATURES
EXHIBIT INDEX
<PAGE> 3
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS, UNLESS OTHERWISE STATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF
-------------------------------
DECEMBER SEPTEMBER 30,
31, 1999 1999
--------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 165,819 $ 85,174
Short-term interest-bearing investments 20,384 -
Accounts receivable, including unbilled of $8,296 and $3,415, less allowances
of $5,024 and $0, respectively 179,926 145,184
Accounts receivable from related parties, including unbilled of
$0 and $828, respectively 15,706 14,128
Deferred income taxes and taxes receivable 32,488 29,899
Prepaid expenses and other current assets 39,856 16,390
--------------- --------------
Total current assets 454,179 290,775
Equipment, vehicles and leasehold improvements, net 94,012 83,997
Deferred income taxes 13,615 5,605
Goodwill and other intangible assets , net 110,132 20,742
Other noncurrent assets 29,151 28,892
--------------- --------------
Total assets $ 701,089 $ 430,011
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 82,604 $ 68,594
Accrued personnel costs 56,825 40,092
Short-term financing arrangements 11,696 2,381
Deferred revenue 105,060 104,688
Short-term portion of capital lease obligations 6,037 5,722
Deferred income taxes and taxes payable 46,251 33,412
--------------- --------------
Total current liabilities 308,473 254,889
Long-term portion of capital lease obligations 16,708 17,148
Other noncurrent liabilities 41,945 34,237
--------------- --------------
Total liabilities 367,126 306,274
--------------- --------------
Shareholders' equity:
Preferred Shares - Authorized 25,000 shares;
Pound Sterling 0.01 par value; 0 issued and outstanding - -
Ordinary Shares - Authorized 550,000 shares;
Pound Sterling 0.01 par value; 205,251 and 198,800 outstanding, respectively 3,284 3,181
Additional paid-in capital 674,886 489,099
Accumulated other comprehensive income (loss) 4,599 (1,157)
Unearned compensation (2,531) (3,830)
Accumulated deficit (346,275) (363,556)
--------------- --------------
Total shareholders' equity 333,963 123,737
--------------- --------------
Total liabilities and shareholders' equity $ 701,089 $ 430,011
=============== ==============
</TABLE>
See accompanying notes
<PAGE> 4
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN U.S. DOLLARS, UNLESS OTHERWISE STATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------------------------------
1999 1998
--------------------- ---------------------
<S> <C> <C>
Revenue:
License (*) $ 26,502 $ 15,040
Service (*) 209,004 116,385
--------------------- ---------------------
235,506 131,425
--------------------- ---------------------
Operating expenses:
Cost of license 1,173 1,323
Cost of service (*) 139,034 75,915
Research and development 14,970 8,379
Selling, general and administrative (*) 27,593 15,647
In-process research and development expenses 19,876 -
--------------------- ---------------------
202,646 101,264
--------------------- ---------------------
Operating income 32,860 30,161
Other income (expense), net 345 (1,387)
--------------------- ---------------------
Income before income taxes 33,205 28,774
Income taxes 15,924 8,632
--------------------- ---------------------
Net income $ 17,281 $ 20,142
===================== =====================
Basic earnings per share $ 0.09 $ 0.10
===================== =====================
Diluted earnings per share $ 0.08 $ 0.10
===================== =====================
Basic weighted average number of shares
outstanding 201,020 196,800
===================== =====================
Diluted weighted average number of shares
outstanding 204,867 198,905
===================== =====================
</TABLE>
(*) See Note 3.
See accompanying notes
2
<PAGE> 5
AMDOCS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(IN U.S. DOLLARS, UNLESS OTHERWISE STATED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
other
Ordinary Shares Additional comprehensive
-------------------------------- Paid-in income Unearned
Shares Amount Capital (loss) Compensation
------------- -------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Balance as of
September 30, 1999 198,800 $ 3,181 $ 489,099 $ (1,157) $ (3,830)
Net income - - - - -
Issuance of Ordinary
Shares related to an
acquisition, net 6,451 103 185,744 - -
Employees' stock options
exercised (*) (*) 15 - -
Unrealized gain on other
comprehensive income,
net of $2,474 tax - - - 5,756 -
Stock options granted, net
of forfeitures - - 28 - -
Acquired unearned
compensation related
to an acquisition - - - - (18)
Amortization of
unearned
Compensation - - - - 1,317
------------- -------------- --------------- ----------------- -------------------
Balance as of
December 31, 1999 205,251 $ 3,284 $ 674,886 $ 4,599 $ (2,531)
============= ============== =============== ================= ===================
</TABLE>
<TABLE>
<CAPTION>
Total
Accumulated Shareholders'
Deficit Equity
----------------- ------------------
<S> <C> <C>
Balance as of
September 30, 1999 $ (363,556) $ 123,737
Net income 17,281 17,281
Issuance of Ordinary
Shares related to an
acquisition, net - 185,847
Employees' stock options
exercised - 15
Unrealized gain on other
comprehensive income,
net of $2,474 tax - 5,756
Stock options granted, n
of forfeitures - 28
Acquired unearned
compensation related
to an acquisition - (18)
Amortization of
unearned
Compensation - 1,317
----------------- ------------------
Balance as of
December 31, 1999 $ (346,275) $ 333,963
================= ==================
</TABLE>
(*) Less than one thousand
See accompanying notes
3
<PAGE> 6
AMDOCS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN U.S. DOLLARS, UNLESS OTHERWISE STATED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
1999 1998
--------------------------- --------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 17,281 $ 20,142
Reconciliation of net income to net cash provided
by operating activities:
Depreciation 6,916 3,842
Amortization 3,246 2,678
Write-off of purchased in-process research and
Development 19,876 -
Loss on sale of equipment 59 179
Deferred income taxes (2,714) 1,438
Unrealized income (loss) on other comprehensive income 8,230 (3,046)
Net changes in operating assets and liabilities:
Accounts receivable 16,397 (38,635)
Prepaid expenses and other current assets (18,469) (2,673)
Other noncurrent assets (1,805) (1,038)
Accounts payable and accrued expenses 9,986 11,771
Deferred revenue (55) 22,880
Income taxes payable 7,343 (132)
Other noncurrent liabilities 7,939 465
--------------------------- --------------------------
Net cash provided by operating activities 74,230 17,871
--------------------------- --------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of equipment, vehicles and leasehold
improvements 446 463
Payments for purchase of equipment, vehicles, leasehold
improvements and other (13,408) (8,893)
Purchase of short-term interest bearing investments (20,384) -
Acquisition, net of cash acquired 31,900 -
--------------------------- --------------------------
Net cash used in investing activities (1,446) (8,430)
--------------------------- --------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from employees' stock options exercised 15 -
Payments under short-term finance arrangements (83,282) (95,650)
Borrowings under short-term finance arrangements 92,597 79,793
Principal payments under long-term capital
lease obligations (1,469) (844)
--------------------------- --------------------------
Net cash provided by (used in) financing activities 7,861 (16,701)
--------------------------- --------------------------
Net increase (decrease) in cash and cash equivalents 80,645 (7,260)
Cash and cash equivalents at beginning of period 85,174 25,389
--------------------------- --------------------------
Cash and cash equivalents at end of period $ 165,819 $ 18,129
=========================== ==========================
SUPPLEMENTARY CASH FLOW INFORMATION
Cash paid for:
Income taxes, net of refunds $ 8,498 $ 7,368
Interest 543 1,435
</TABLE>
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations of $1,317 and $3,491 were incurred during
the three months ended December 31, 1999 and 1998, respectively, when the
Company (as hereinafter defined) entered into lease agreements for the purchase
of fixed assets.
See accompanying notes
4
<PAGE> 7
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S.. DOLLARS, UNLESS OTHERWISE STATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
AMDOCS Limited (the "Company") is a leading provider of product-driven
information system solutions to the communications industry. The Company
and its subsidiaries operate in one business segment, providing computer
systems integration and related services for the communications industry.
The Company designs, develops, markets and supports computer software
products and related services to communications companies throughout the
world.
The unaudited consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in
the United States. In the opinion of management, all adjustments
considered necessary for a fair presentation of the unaudited interim
consolidated financial statements have been included therein and are of a
normal recurring nature.
The preparation of financial statements during interim periods requires
management to make numerous estimates and assumptions that impact the
reported amounts of assets, liabilities, revenue and expenses. Estimates
and assumptions are reviewed periodically and the effect of revisions is
reflected in the results of operations of the interim periods in which
changes are determined to be necessary.
The results of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the full year.
These statements, however, do not include all information and footnotes
necessary for a complete presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. These statements should be read in conjunction with the
Company's consolidated financial statements for the year ended September
30, 1999 set forth in the Company's Annual Report on Form 20-F filed with
the Securities and Exchange Commission.
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 United States governmental securities
which are stated at market value, with unrealized gains and losses on such
securities reflected, net of tax, as other comprehensive income in
shareholders' equity. Realized gains and losses on short-term
interest-bearing investments are included in earnings and are derived
using the specific identification method for determining the cost of
securities. It is the Company's intent to maintain a liquid portfolio to
take advantage of investment opportunities; therefore, all securities are
considered to be available-for-sale and are classified as current assets.
2. ACQUISITION
On November 30, 1999, the Company completed the purchase of International
Telecommunication Data Systems, Inc. ("ITDS"), in a stock-for-stock
transaction. The total purchase price of $188,733 includes issuance of
ordinary shares, options and transaction costs. The acquisition was
accounted for using the purchase method of accounting. The fair market
value of ITDS' assets and liabilities has been included in the balance
sheet as of December 31, 1999. The results of ITDS' operations are
included in the Consolidated Statements of Operations, commencing December
1, 1999. The acquired technology valuation, which was independently
determined, included both existing technology and in-process research and
development. The valuation of these technologies was made by applying the
income forecast method which considers the present value of cash flows by
product lines. The fair value of existing technology products was valued
at $12,342 and is being amortized over five years. In-process research
and development, valued at $19,876, was charged to expense immediately
following the completion of the acquisition as this technology had not
reached technological feasibility and has
5
<PAGE> 8
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
no alternative use. This technology will require varying additional
development, coding and testing efforts before technological feasibility
can be determined. The fair value of customer list was valued at $647 and
the fair value of workforce in place was valued at $5,407, both of which
will be amortized over five years. The excess of the purchase price over
the net assets acquired, or goodwill, of $70,796 is being amortized over
15 years.
The pro forma revenue, operating income, net income and earnings per share
as if ITDS had been acquired as of the beginning of the respective
periods, excluding the write off of in-process research and development,
for the following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------------------------------------
1999 1998
--------------------------- --------------------------
<S> <C> <C>
Revenue $ 258,795 $ 164,687
Operating income 53,609 36,449
Net income 37,150 24,052
Basic earnings per share 0.18 0.12
Diluted earnings per share 0.18 0.12
</TABLE>
3. RELATED-PARTY TRANSACTIONS
The following related party transactions are included in the statements of
operations for the following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------------------------------------
1999 1998
--------------------------- --------------------------
<S> <C> <C>
Revenue:
License $ 1,100 $ 100
Service 23,596 21,398
Operating expenses:
Cost of service 919 500
Selling, general and administrative 242 112
</TABLE>
4. COMPREHENSIVE INCOME
Comprehensive income represents the change in shareholders' equity during
a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity except those resulting
from investments by owners and distributions to owners.
The following table sets forth the reconciliation from net income to
comprehensive income for the following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------------------------
1999 1998
--------------------- --------------------
<S> <C> <C>
Net income $ 17,281 $ 20,142
Other comprehensive income:
Unrealized income (loss) on derivative instruments, net of tax 5,773 (2,131)
Unrealized loss on short-term interest-bearing investments, net
of tax (17) -
--------------------- --------------------
Comprehensive income $ 23,037 $ 18,011
===================== ====================
</TABLE>
6
<PAGE> 9
AMDOCS LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The provision for income taxes for the following periods consists of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------------------------
1999 1998
--------------------- --------------------
<S> <C> <C>
Current $ 18,638 $ 7,194
Deferred (2,714) 1,438
--------------------- --------------------
$ 15,924 $ 8,632
===================== ====================
</TABLE>
The effective income tax rate varied from the statutory Guernsey tax rate
as follows for the following periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------------------------
1999 1998
--------------------- -------------------
<S> <C> <C>
Statutory Guernsey tax rate 20% 20%
Guernsey tax-exempt status (20) (20)
Foreign taxes 30 30
In-process research and development expenses (*) 18 -
--------------------- -------------------
Effective income tax rate 48% 30%
===================== ===================
Effective income tax rate excluding in-process research and
development expenses (*) 30% 30%
===================== ===================
</TABLE>
(*) In connection with the acquisition of ITDS the Company wrote off
$19,876 of in-process research and development which is not tax
deductible.
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
Numerator:
Net income $ 17,281 $ 20,142
================= ================
Denominator:
Denominator for basic earnings per share -
weighted average number of shares
outstanding 201,020 196,800
Effect of dilutive stock options granted 3,847 2,105
----------------- ----------------
Denominator for dilutive earnings per share -
adjusted weighted average shares and
assumed conversions 204,867 198,905
================= ================
Basic earnings per share $0.09 $0.10
================= ================
Diluted earnings per share $0.08 $0.10
================= ================
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
INTRODUCTION
In Management's Discussion and Analysis we explain the general
financial condition and the results of operations for Amdocs and its
subsidiaries including:
- what factors affect our business,
- what our revenue and costs were in the three months ended December
31, 1999 and 1998,
- why those revenue and costs were different from period to period,
- the sources of our revenue,
- how all of this affects our overall financial condition,
- what our expenditures were in the three months ended December 31,
1999 and 1998, and
- the sources of our cash to pay for future capital expenditures.
Management's Discussion and Analysis should be read in conjunction
with Amdocs' consolidated financial statements. In Management's Discussion and
Analysis, we analyze and explain the three month to three month changes in the
specific line items in the consolidated statements of operations. Our analysis
contains certain forward looking statements that involve risk and
uncertainties. Our actual results could differ materially from the results
reflected in these forward looking statements as they are subject to a variety
of risk factors. We disclaim any obligation to update our forward looking
statements.
OVERVIEW
We are a leading provider of software products and services to the
communications industry, primarily Customer Care, Billing and Order Management
Systems, or CC&B Systems, for wireline, wireless, Internet Protocol ("IP"), data
and multiple-service or convergent network operators and service providers. We
also supply Directory Sales and Publishing Systems, or Directory Systems, to
publishers of both traditional printed yellow page and white page directories
and Internet directories. Our products are mission-critical for a customer's
operations. Due to the complexity of the process and the expertise required for
system support, we also provide extensive customization, implementation,
integration, ongoing support, system enhancement, maintenance and outsourcing
services.
We derive our revenue principally from:
- the initial sale of our products and related services, including
license fees and customization, implementation and integration
services, and
- recurring revenue from ongoing maintenance, support, outsourcing
and other related services provided to our customers and, to a
lesser degree, from incremental license fees resulting from
increases in a customer's subscribers.
License revenue is recognized concurrently as work is performed,
using the percentage of completion method of accounting. Service revenue that
involves significant ongoing obligations, including fees for customization,
implementation and initial support services, is also recognized as work is
performed, under the percentage of completion method of accounting. In
outsourcing contracts, where the CC&B Systems solution includes the operation
and maintenance of customers' billing systems, revenue is recognized in the
period in which the bills are produced. Revenue from ongoing support services is
8
<PAGE> 11
recognized as work is performed. Revenue from third party hardware and software
sales is recognized upon delivery. Maintenance revenue is recognized ratably
over the term of the maintenance agreement. As a result of our percentage of
completion accounting method, the size and timing of customer projects and our
progress in completing such projects may significantly affect our quarterly
operating results.
License and service fee from the sale of CC&B Systems amounted to
$204.8 million and $90.4 million in the three months ended December 31, 1999 and
1998, respectively, representing 87.0% and 68.8%, respectively, of our revenue
for such periods.
We believe that the demand for CC&B Systems will continue to
increase due to, among other key factors:
- the growth and globalization of the communications market,
- intensifying competition among communications carriers,
- rapid technological changes, such as the introduction of wireless
Internet services via WAP (Wireless Application Protocol) and GPRS
(General Packet Radio Services) technology,
- the proliferation of new communications products and services, and
- a shift from in-house management to vendor solutions and
outsourcing.
We also believe that a key driver of demand is the continuing trend
for network operators and service providers to offer to their subscribers
multiple service packages, commonly referred to as convergent services
(combinations of local, long distance, international, mobile, cable television,
IP, data and electronic commerce).
As a result of these developments, we believe that CC&B Systems will
continue to account for the largest share of our total revenue.
Although the business of publishing traditional yellow page and
white page directories is a mature business in the United States, it continues
to be a significant source of revenue for us worldwide. We believe that we are a
leading provider of Directory Systems in most of the markets that we serve.
- License and service fee revenue from the sale of Directory Systems
totaled $30.7 million and $41.0 million in the three months ended
December 31, 1999 and 1998, respectively, accounting for 13.0% and
31.2%, respectively, of our revenue for such periods.
We believe that the demand for Directory Systems will be favorably
impacted by a broader introduction of electronic directories. We anticipate that
over the next several years revenue will continue to grow from our Directory
Systems offerings. However, we anticipate that the relative contribution to our
total revenue of license and service fees from Directory Systems will decrease
over time.
Our research and development activities involve the development of
new software modules and product offerings in response to an identified market
demand, either in conjunction with a customer project or as part of our product
development program. We also expend additional amounts on applied research and
software development activities to keep abreast of new technologies in the
communications market. Research and development expenditures amounted to $15.0
million and $8.4 million in the three months ended December 31, 1999 and 1998,
respectively, representing 6.4% of our revenue in both these periods. In the
next several years, we intend to continue to make substantial investments in our
research and development and anticipate a significant increase in absolute
dollar terms in research and development expenditures for fiscal 2000. As a
percentage of our expected revenue for this period, we believe that our research
and development expenditures will increase only modestly. Approximately $25.0
million of this increased budget is expected to result from significant
investments in research and development in the IP systems area.
9
<PAGE> 12
On November 30, 1999, we completed the purchase of International
Telecommunication Data Systems, Inc. ("ITDS"), in a stock-for-stock transaction.
ITDS is a leading provider of billing and customer care service bureau solutions
to wireless communication service providers. This acquisition is expected to
expand the scope of our CC&B Systems offering and further establish our
leadership in providing total solutions to the communications industry. We
issued 6,450,714 ordinary shares and 1,102,955 options for ordinary shares in
connection with the consummation of the transaction. The total purchase price of
$188.7 million, based on a per share price of $28.25 for our ordinary shares,
includes issuance of ordinary shares, options and transaction costs. The
acquisition was accounted for using the purchase method of accounting. The fair
market value of ITDS' assets and liabilities has been included in our balance
sheet as of December 31, 1999. An acquired technology valuation, which was
determined by an independent appraiser, included both existing technology and
in-process research and development ("in-process R&D"). The valuation of these
items was made by applying the income forecast method which considers the
present value of cash flows by product lines. The fair value of existing
technology products was valued at $12.3 million and is being amortized over five
years. In-process R&D, valued at $19.9 million, was charged to expense
immediately following the completion of the acquisition as this technology had
not reached technological feasibility and has no alternative use. Additional
development, coding and testing efforts will be required before technological
feasibility can be determined. The fair value of customer lists was valued at
$0.6 million and the fair value of workforce in place was valued at $5.4
million, both of which are being amortized over five years. The excess of the
purchase price over the net assets acquired, or goodwill, of $70.8 million is
being amortized over 15 years.
RESULTS OF OPERATIONS
The following table sets forth for the three months ended December
31, 1999 and 1998, certain items in our consolidated statements of operations
reflected as a percentage of total revenue:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Revenue:
License 11.3% 11.4%
Service 88.7 88.6
---- ----
100.0 100.0
----- -----
Operating expenses:
Cost of license 0.5 1.0
Cost of service 59.0 57.8
Research and development 6.4 6.4
Selling, general and administrative 11.7 11.9
In-process research and development expenses 8.4 --
--- ----
86.0 77.1
---- ----
Operating income (*) 14.0 22.9
Other income (expense), net 0.1 (1.0)
--- -----
Income before income taxes 14.1 21.9
Income taxes 6.8 6.6
--- ---
Net income (*) 7.3% 15.3%
==== =====
</TABLE>
(*) Excluding the one-time charge of write-off of in-process
R&D expenses related to the ITDS transaction, operating
income and net income for the three months ended December
31, 1999 are 22.4% and 15.7%, respectively, of total
revenue.
10
<PAGE> 13
Three Months Ended December 31, 1999 and 1998
REVENUE. Revenue for the three months ended December 31, 1999 was
$235.5 million, an increase of $104.1 million, or 79.2%, compared to the three
months ended December 31, 1998, primarily due to the continuance of the growth
in the demand for our CC&B Systems solutions. License revenue increased from
$15.0 million in the three months ended December 31, 1998 to $26.5 million
during the three months ended December 31, 1999, an increase of 76.2%, and
service revenue increased 79.6% in the three months ended December 31, 1999 from
$116.4 million in the three months ended December 31, 1998 to $209.0 million in
the three months ended December 31, 1999. Total CC&B Systems revenue for the
three months ended December 31, 1999 was $204.8 million, an increase of $114.4
million, or 126.6%, compared to the three months ended December 31, 1998.
Revenue from Directory Systems was $30.7 million for the three months ended
December 31, 1999, a decrease of $10.4 million, or 25.3%, from the three months
ended December 31, 1998.
The results of ITDS' operations, included in our consolidated
statement of operations commencing December 1, 1999, had an insignificant impact
on our revenue for the three-months ended December 31, 1999.
In the three months ended December 31, 1999, revenue from customers
in Europe, North America and the rest of the world accounted for 44.0%, 39.2%
and 16.8%, respectively, compared to 38.0%, 44.1% and 17.9% respectively, for
the three months ended December 31, 1998. The growth in revenue from customers
in Europe was primarily attributable to increased competition among
communications companies within and continued deregulation of the European
market.
COST OF LICENSE. Cost of license for the three months ended December
31, 1999 was $1.2 million, a decrease of $0.2 million, or 11.3%, from cost of
license for the three months ended December 31, 1998. Cost of license includes
amortization of purchased computer software and intellectual property rights.
The decrease in cost of license for the three months ended December 31, 1999 was
attributable primarily to decreases in the required amorization of purchased
computer software.
COST OF SERVICE. Cost of service for the three months ended December
31, 1999 was $139.0 million, an increase of $63.1 million, or 83.1%, from cost
of service of $75.9 million for the three months ended December 31, 1998. As a
percentage of revenue, cost of service increased to 59.0% in the three months
ended December 31, 1999 from 57.8% in the three months ended December 31, 1998.
The increase in cost of service is consistent with the increase in revenue for
the three months ended December 31, 1999, and reflects increased employment
levels required to support the continuing growth in revenue.
RESEARCH AND DEVELOPMENT. Research and development expense was
primarily comprised of compensation expense attributed to research and
development activities, either in conjunction with customer projects or as part
of our product development program. In the three months ended December 31, 1999,
research and development expense was $15.0 million, or 6.4% of revenue, compared
with $8.4 million, or 6.4% of revenue, in the three months ended December 31,
1998. The absolute increase in research and development expense represents
ongoing expenditures primarily for CC&B Systems and also for Directory Systems.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expense was primarily comprised of compensation expense and
increased by 76.3% to $27.6 million, or 11.7% of revenue, in the three months
ended December 31, 1999 from $15.6 million, or 11.9% of revenue, in the three
months ended December 31, 1998. The absolute increase in selling, general and
administrative expense is in line with the increase in our revenue for the three
months ended December 31, 1999.
IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES. In-process R&D
expenses in the three months ended December 31, 1999 consisted of a one-time,
non-cash charge of $19.9 million for the write-off of in-process R&D resulting
from our acquisition of ITDS completed on November 30, 1999.
11
<PAGE> 14
OPERATING INCOME. Operating income in the three months ended
December 31, 1999, excluding the one-time charge related to the acquisition of
ITDS, was $52.7 million, as compared with $30.2 million in the three months
ended December 31, 1998, an increase of 74.8% primarily due to an increase in
profit margin on license revenue. Actual operating income decreased to 14.0% of
revenue for the three months ended December 31, 1999 as compared to 22.9% for
the three months ended December 31, 1998, primarily due to the one-time charge
related to the acquisition of ITDS. The results of the ITDS transaction had an
insignificant impact on our overall operating income.
OTHER INCOME (EXPENSE), NET. In the three months ended December 31,
1999, other income, net was $0.3 million, an increase of $1.7 million from the
three months ended December 31, 1998. The increase in other income, net, is
primarily attributed to the reduction in debt through the use of cash from
operations and interest from accumulating cash equivalents and short-term
interest-bearing investments.
INCOME TAXES. Income taxes in the three months ended December 31,
1999 were $15.9 million on income before taxes of $33.2 million. In the three
months ended December 31, 1998, income taxes were $8.6 million on income before
taxes of $28.8 million. In the three months ended December 31, 1999, the
effective tax rate was 48%, resulting from the one-time charge related to the
acquisition of ITDS, which is not tax deductible. The effective tax rate
excluding the one-time charge of ITDS for the three months ended December 31,
1999, is 30%. See discussion below - "Effective Tax Rate".
NET INCOME. Net income in the three months ended December 31, 1999
increased by 84.5% from the three months ended December 31, 1998, reaching $37.2
million, or $0.18 per diluted share, excluding the one-time charge related to
the acquisition of ITDS. Actual net income for the three months ended December
31, 1999 was $17.3 million, or $0.08 per diluted share, compared to $20.1
million, or $0.10 per diluted share, in the three months ended December 31,
1998.
LIQUIDITY AND CAPITAL RESOURCES
Financing Transactions
We have primarily financed our operations through cash generated
from operations and borrowings from banks and other lenders. Cash and cash
equivalents totaled $165.8 million as of December 31, 1999 compared to $85.2
million as of September 30, 1999. The increase in cash and cash equivalents as
of December 31, 1999 is attributable primarily to cash flows from operations and
the $31.9 million of cash we acquired in the ITDS transaction. Net cash provided
by operating activities amounted to $74.2 million and $17.9 million for the
three months ended December 31, 1999 and 1998, respectively. A significant
portion of our cash flow from operations during the three months ended December
31, 1999 was used to invest in cash equivalents and short-term interest-bearing
investments. We currently intend to retain our future earnings to support the
further expansion of our business.
As of December 31, 1999, we had short-term lines of credit totaling
$152.0 million from various banks or bank groups, of which $11.7 million was
outstanding. As of that date, we also had utilized approximately $16.4 million
of a revolving credit facility to support outstanding bank guarantees.
As of December 31, 1999, we had positive working capital of $145.7
million as compared to positive working capital of $35.9 million as of September
30, 1999. The increase in working capital is primarily attributed to cash
generated from operating activities and to the cash obtained from the
acquisition of ITDS. We believe that current cash balances, cash generated from
operations and our current lines of credit will provide sufficient resources to
meet our needs in the near future.
As of December 31, 1999, we had long-term obligations outstanding of
$22.7 million in connection with leasing arrangements. Currently, our capital
expenditures, consisting primarily of computer equipment and vehicles, are
funded principally by operating cash flows and capital leasing arrangements. We
do not anticipate any change to this policy in the foreseeable future.
12
<PAGE> 15
Net Deferred Tax Assets
Based on our assessment, it is more likely than not that all the net
deferred tax assets as of December 31, 1999 will be realized through future
taxable earnings. No significant increase in future taxable earnings would be
required to fully realize the net deferred tax assets.
YEAR 2000 ISSUES
We believe we have identified the information technology, or IT, and
non-IT systems, software and products involved in our business that could be
affected by year 2000 issues. We believe that systems, software and products for
which we have responsibility currently are year 2000 compliant. We are not aware
of any substantial year 2000 issues with any of our customers. Detailed existing
contingency plans are being refined as appropriate to address potential year
2000 issues. These plans are focused on matters which appear to be our most
likely year 2000 risks, such as possible additional customer support efforts by
us that would be necessary if customers or vendors are not year 2000 compliant.
No significant issues have arisen to date or are expected that would require
implementing these contingency plans.
EFFECTIVE TAX RATE
Our overall effective tax rate has historically been approximately
30% due to the various corporate income tax rates in the countries in which we
operate and the relative magnitude of our business in those countries. Our
consolidated effective tax rate for the three months ended December 31, 1999 was
48% compared to 30% in the three months ended December 31, 1998. The effective
tax rate of 48% for the three months ended December 31, 1999 was due to the
write-off of in-process R&D expenses associated with the acquisition of ITDS,
which is not tax deductible. Excluding the impact of the write-off of in-process
R&D associated with the ITDS acquisition, the effective tax rate for the three
months ended December 31, 1999 was 30%.
CURRENCY FLUCTUATIONS
Approximately 85% of our revenue is in U.S. dollars ("dollar") or
linked to the dollar and therefore the dollar is our functional currency.
Approximately 58% of our operating expenses are paid in dollars or are linked to
dollars. Other significant currencies in which we receive revenue or pay
expenses are Australian dollars, British pounds, Canadian dollars, the euro and
Israeli shekels. Historically, the effect of fluctuations in currency exchange
rates has had a minimal impact on our operations. As we expand our operations
outside of the United States, our exposure to fluctuations in currency exchange
rates could increase. In managing our foreign exchange risk, we enter from time
to time into various foreign exchange contracts. As of December 31, 1999, we had
hedged most of our significant exposures in currencies other than the dollar.
13
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
99.1 Amdocs Limited Press Release dated January
25, 2000.
</TABLE>
(b) Reports on Form 6-K.
The Company filed the following reports on Form 6-K during the three
months ended December 31, 1999:
(1) Form 6-K dated September 10, 1999 and Form 6-K dated
December 13, 1999, each relating to the acquisition of
International Telecommunication Data Systems, Inc., a
Delaware coporation; and
(2) Form 6-K dated December 17, 1999 relating to the
Company's Notice of Annual General Meeting of
Shareholders on January 26, 2000.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Amdocs Limited
/s/ Thomas G. O'Brien
---------------------
Thomas G. O'Brien
Treasurer and Secretary
Authorized U.S. Representative
Date: February 10, 2000
15
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
99.1 Amdocs Limited Press Release dated January 25, 2000.
</TABLE>
16
<PAGE> 1
EXHIBIT 99.1
99.1. PRESS RELEASE.
AMDOCS LIMITED FIRST QUARTER REVENUE GROWS 79.2%,
REACHING $235.5 MILLION
- EARNINGS BEFORE ONE-TIME CHARGE GROW 84.5% TO $37.2 MILLION, OR $0.18 PER
SHARE -
ST. LOUIS, MO - JANUARY 25, 2000, Amdocs Limited (NYSE: DOX) today reported that
for the first quarter ended December 31, 1999, revenue reached $235.5 million,
an increase of 79.2%. Operating income increased 74.8% to $52.7 million,
excluding a one-time, non-cash charge of $19.9 million for write-off of
in-process R&D from the acquisition of International Telecommunication Data
Systems Inc. (ITDS) in November 1999. Net income increased 84.5%, reaching $37.2
million, or $0.18 per diluted share, excluding the one-time charge. As-reported
net income for the quarter was $17.3 million, or $0.08 per diluted share,
compared to $20.1 million or $0.10 per diluted share in the same quarter last
year.
Avi Naor, Chief Executive Officer of Amdocs Management Limited, noted, "This
quarter's results and our continued growth reflect Amdocs' leading position in a
very strong customer care and billing market. Moreover, with our strengths in
convergent systems, high-end scalability, and end-to-end solutions and
outsourcing, together with market-leading R&D investment, we are well-positioned
to leverage the growth in the customer care and billing sector."
Naor continued, "Demand is strong, both in the wireline and wireless voice
markets, as well as the IP and data services market. In the IP arena, we are
providing a two-pronged offering. We are targeting our flagship Ensemble system
for voice-IP convergence and leading IP service providers. In addition, we are
vigorously addressing the market for new ISPs and emerging players with a proven
entry-level solution."
Naor added, "We are involved in a surge of activity in the IP sector. Many of
our existing wireless customers are already using or implementing our convergent
Ensemble platform for market trials and introductions of mobile commerce, WAP
and GPRS services. We are also working with major wireline providers to support
broadband and IP services, integrated with their voice operations. For telecom
carriers expanding into IP services, voice-IP convergence is crucial as they
seek to leverage product bundling and unified customer service. At the
organizational level, we have established an IP division to focus our efforts in
this market, and we are investing $25 million in fiscal 2000 in R&D for IP
systems. With the scope of our R&D investment, together with our depth of
resources, knowhow and solutions base, we are extremely well placed to become
the leading provider of business systems to the IP services market."
Naor concluded, "The results of our first quarter for fiscal 2000 demonstrate
the business stability and growth momentum we have achieved over recent years.
Based on long-term customer relationships, visibility is exceptionally high.
Furthermore, with the acquisition of ITDS and their strong outsourcing
capabilities, we are well-positioned to reinforce business stability and
visibility through large-scale, multi-year outsourcing projects. We are very
confident that our positive momentum can be maintained."
Amdocs is a leading provider of customer care, billing and order management
systems for communications and internet services. Amdocs has an unparalleled
success record in project delivery of its mission-critical products. With human
resources of over 5,600 information systems professionals, Amdocs has an
installed base of successful projects with more than 75 major service providers
throughout the world. For more information visit our Web site at www.amdocs.com
This press release may contain forward looking statements as defined under the
Securities Act of 1933, as amended. Such statements involve risks and
uncertainties that may cause future results to differ from those anticipated.
These risks include, but are not limited to, the adverse effects of market
competition, rapid changes in technology that may render the company's products
and services obsolete, potential loss of a major customer, and risks associated
with operating businesses in the international market. These and other risks are
discussed at greater length in the company's filings with the Securities and
Exchange Commission.
17
<PAGE> 2
Contact:
Thomas G. O'Brien
Treasurer and Director of Investor Relations
Amdocs Limited
314/212-8328
E-mail: [email protected]
-TABLES FOLLOW-
18
<PAGE> 3
AMDOCS LIMITED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF
-----------------------------------------------
DECEMBER 31, 1999 SEPTEMBER 30, 1999
-------------------- ----------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 165,819 $ 85,174
Short-term interest-bearing investments 20,384 -
Accounts receivable, including unbilled of $8,296 and $3,415,
less allowances of $5,024 and $0, respectively 179,926 145,184
Accounts receivable from related parties, including unbilled
of $0 and $828, respectively 15,706 14,128
Deferred income taxes and taxes receivable 32,488 29,899
Prepaid expenses and other current assets 39,856 16,390
-------------------- ----------------------
Total current assets 454,179 290,775
Equipment, vehicles and leasehold improvements, net 94,012 83,997
Deferred income taxes 13,615 5,605
Goodwill and other intangible assets, net 110,132 20,742
Other noncurrent assets 29,151 28,892
-------------------- ----------------------
Total assets $ 701,089 $ 430,011
==================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 82,604 $ 68,594
Accrued personnel costs 56,825 40,092
Short-term financing arrangements 11,696 2,381
Deferred revenue 105,060 104,688
Short-term portion of capital lease obligations 6,037 5,722
Deferred income taxes and taxes payable 46,251 33,412
-------------------- ----------------------
Total current liabilities 308,473 254,889
Long-term portion of capital lease obligations 16,708 17,148
Other noncurrent liabilities 41,945 34,237
-------------------- ----------------------
Total liabilities 367,126 306,274
-------------------- ----------------------
Shareholders' equity:
Preferred Shares - Authorized 25,000 shares;
Pound Sterling 0.01 par value; 0 issued and outstanding - -
Ordinary Shares - Authorized 550,000 shares;
Pound Sterling 0.01 par value; 205,251 and 198,800
outstanding, respectively 3,284 3,181
Additional paid-in capital 674,886 489,099
Accumulated other comprehensive income (loss) 4,599 (1,157)
Unearned compensation (2,531) (3,830)
Accumulated deficit (346,275) (363,556)
-------------------- ----------------------
Total shareholders' equity 333,963 123,737
-------------------- ----------------------
Total liabilities and shareholders' equity $ 701,089 $ 430,011
==================== ======================
</TABLE>
19
<PAGE> 4
AMDOCS LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------------------------------------
1999 1998
---------------------- ----------------------
<S> <C> <C>
Revenue:
License $ 26,502 $ 15,040
Service 209,004 116,385
---------------------- ----------------------
235,506 131,425
---------------------- ----------------------
Operating expenses:
Cost of license 1,173 1,323
Cost of service 139,034 75,915
Research and development 14,970 8,379
Selling, general and administrative 27,593 15,647
In-process research and development expenses 19,876 -
---------------------- ----------------------
202,646 101,264
---------------------- ----------------------
Operating income 32,860 30,161
Other income (expense), net 345 (1,387)
---------------------- ----------------------
Income before income taxes 33,205 28,774
Income taxes 15,924 8,632
---------------------- ----------------------
Net income $ 17,281 $ 20,142
====================== ======================
Basic earnings per share $ 0.09 $ 0.10
====================== ======================
Diluted earnings per share $ 0.08 $ 0.10
====================== ======================
EFFECT OF ONE-TIME, NON-CASH CHARGE ON DILUTED
EARNINGS PER SHARE (a)
Diluted earnings per share before one-time
charge $ 0.18 $ 0.10
One-time charge 0.10 -
---------------------- ----------------------
Diluted earnings per share $ 0.08 $ 0.10
====================== ======================
</TABLE>
(a) Amdocs incurred a one-time, non-cash charge related to the write-off of
acquired in-process R&D of $19.9 million, or $0.10 per share, resulting
from the acquisition of ITDS in November 1999.
# # #
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