<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File No. 0-9233
American Management Systems, Incorporated
(Exact name of registrant as specified in its charter)
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization: Delaware Identification No.: 54-0856778
4050 Legato Road
Fairfax, Virginia 22033
(Address of principal executive office).
Registrant's Telephone No., Including Area Code: (703) 267-8000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
As of November 9, 1995, 26,610,332 shares of common stock were outstanding.
<PAGE>
CONTENTS
Page
----
Part I Financial Information
---------------------
Item 1. Financial Statements................................... 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 7
Part II Other Information Required in Report
------------------------------------
Item 1. Legal Proceedings...................................... 11
Item 2. Changes in Securities.................................. 11
Item 3. Defaults Upon Senior Securities........................ 11
Item 4. Submission of Matters to a Vote of Security Holders.... 11
Item 5. Other Information...................................... 11
Item 6. Exhibits and Reports on Form 8-K....................... 11
<PAGE>
Part I FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
--------------------
The information furnished in the accompanying Consolidated Statements of
Operations, Consolidated Revenues by Market, Consolidated Balance Sheets, and
Consolidated Statements of Cash Flows reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations and financial condition for the interim periods. The accompanying
financial statements and notes thereto should be read in conjunction with the
financial statements and notes for the year ended December 31, 1994, included in
the American Management Systems, Incorporated (the "Company" or "AMS") Annual
Report on Form 10-K (File No. 0-9233) filed with the Securities and Exchange
Commission on March 30, 1995.
1
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In thousands except per share data)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES
Services and Products............. $143,774 $107,419 $406,141 $291,567
Reimbursed Expenses............... 18,924 11,713 49,780 37,613
-------- -------- -------- --------
162,698 119,132 455,921 329,180
EXPENSES
Client Project Expenses........... 92,678 62,605 259,038 177,973
Other Operating Expenses.......... 44,716 36,874 133,446 99,318
Corporate Expenses................ 12,092 9,628 30,485 23,580
-------- -------- -------- --------
149,486 109,107 422,969 300,871
INCOME FROM OPERATIONS............. 13,212 10,025 32,952 28,309
OTHER (INCOME) EXPENSE
Interest Expense.................. 501 345 1,236 942
Other (Income) Expense............ (274) (131) (1,006) (388)
-------- -------- -------- --------
227 214 230 554
INCOME BEFORE INCOME TAXES......... 12,985 9,811 32,722 27,755
INCOME TAXES....................... 5,453 4,023 13,743 11,380
-------- -------- -------- --------
NET INCOME......................... 7,532 5,788 18,979 16,375
DIVIDENDS AND ACCRETION ON
SERIES B PREFERRED STOCK........... - - - 266
-------- -------- -------- --------
NET INCOME TO COMMON SHAREHOLDERS.. $ 7,532 $ 5,788 $ 18,979 $ 16,109
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
AND EQUIVALENTS.................... 27,242 26,588 27,069 25,650
======== ======== ======== ========
NET INCOME PER COMMON SHARE........ $ 0.28 $ 0.22 $ 0.70 $ 0.63
======== ======== ======== ========
</TABLE>
2
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED REVENUES BY MARKET
Unaudited
(In thousands)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial Services Institutions........ $ 34,663 $ 24,323 $ 93,976 $ 63,407
Federal Government Agencies............ 25,192 22,757 72,403 66,033
State and Local Government and
Education............................. 21,998 21,409 68,150 60,615
Telecommunications Firms............... 53,920 34,170 146,683 82,616
Other Corporate Clients................ 8,001 4,760 24,929 18,896
-------- -------- -------- --------
Total Services and Products Revenues... 143,774 107,419 406,141 291,567
Reimbursed Expenses Revenues........... 18,924 11,713 49,780 37,613
-------- -------- -------- --------
Total Revenues......................... $162,698 $119,132 $455,921 $329,180
======== ======== ======== ========
</TABLE>
3
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
9/30/95
ASSETS (Unaudited) 12/31/94
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents............................ $ 35,542 $ 34,238
Accounts and Notes Receivable........................ 187,993 141,089
Prepaid Expenses and Other Current Assets............ 5,467 6,669
-------- --------
229,002 181,996
FIXED ASSETS
Equipment............................................ 46,342 52,697
Furniture and Fixtures............................... 13,249 12,044
Leasehold Improvements............................... 11,350 10,608
-------- --------
70,941 75,349
Accumulated Depreciation and Amortization............ (34,038) (46,674)
-------- --------
36,903 28,675
OTHER ASSETS
Purchased and Developed Computer Software (Net of
Accumulated Amortization of $44,212,000
and $41,094,000).................................... 33,257 28,786
Intangibles (Net of Accumulated Amortization of
$1,957,000 and $1,581,000).......................... 7,012 7,365
Other Assets (Net of Accumulated Amortization of
$4,113,000 and $3,513,000).......................... 7,365 5,360
-------- --------
47,634 41,511
-------- --------
TOTAL ASSETS.......................................... $313,539 $252,182
======== ========
</TABLE>
4
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
9/30/95
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 12/31/94
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..... $ 29,625 $ 9,424
Accounts Payable.................................... 11,982 6,988
Accrued Incentive Compensation...................... 16,778 17,134
Other Accrued Compensation and Related Items........ 27,772 16,603
Deferred Revenues................................... 19,175 25,673
Other Accrued Liabilities........................... 2,580 3,896
Income Taxes Payable................................ - 1,778
-------- --------
107,912 81,496
Deferred Income Taxes............................... 13,321 11,047
-------- --------
121,233 92,543
NONCURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..... 22,106 12,933
Other Accrued Liabilities........................... 677 704
Deferred Income Taxes............................... 7,722 7,688
-------- --------
30,505 21,325
-------- --------
TOTAL LIABILITIES.................................... 151,738 113,868
OTHER STOCKHOLDERS' EQUITY
Preferred Stock ($0.10 Par Value, 4,000,000 Shares
Authorized, None Issued or Outstanding)............
Common Stock ($0.01 Par Value, 100,000,000 Shares
Authorized, 32,428,148 and 32,201,104 Issued and
26,543,190 and 26,196,520 Outstanding,
Respectively)...................................... 324 322
Capital in Excess of Par Value...................... 62,183 60,341
Retained Earnings................................... 131,562 112,583
Currency Translation Adjustment..................... (765) (1,354)
Common Stock in Treasury, at Cost
(5,884,958 and 6,004,584 Shares)................... (31,503) (33,578)
-------- --------
161,801 138,314
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $313,539 $252,182
======== ========
</TABLE>
5
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
1995 1994
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................................... $ 18,979 $ 16,375
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization.................................. 21,932 15,214
Deferred Income Taxes.......................................... 2,308 3,825
Provision for Doubtful Accounts................................ 1,200 1,100
Changes in Assets and Liabilities:
Increase in Trade Receivables............................... (48,104) (45,591)
Decrease in Prepaid Expenses and Other Current Assets....... 1,202 2,891
Increase in Other Assets.................................. (5,745) (1,277)
Increase (Decrease) in Accrued Incentive Compensation....... 2,544 (3,082)
Increase in Accounts Payable, Other Accrued
Compensation, and Other Accrued Liabilities................ 14,820 5,413
(Decrease) Increase in Deferred Revenue..................... (6,498) 125
Decrease in Income Taxes Payable............................ (1,778) (174)
-------- --------
Net Cash Provided (Used) by Operating Activities............... 860 (5,181)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets........................................... (18,388) (11,204)
Purchase of Computer Software...................................... (1,779) (1,188)
Investment in Software Products.................................... (10,914) (7,720)
Increase in Other Investments...................................... 254 (102)
Proceeds from Sale of Furniture, Equipment, and
Computer Software................................................. 289 165
-------- --------
Net Cash Used by Investing Activities.......................... (30,538) (20,049)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings......................................................... 33,058 10,900
Payments on Borrowings............................................. (3,684) (3,151)
Proceeds from Common Stock Options Exercised....................... 1,844 4,482
Payments to Acquire Treasury Stock................................. (826) -
Dividends Paid to Preferred Shareholders........................... - (288)
-------- --------
Net Cash Provided by Financing Activities...................... 30,392 11,943
Decrease in Currency Translation Adjustment........................ 590 432
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................. 1,304 (12,855)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... 34,238 15,600
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 35,542 $ 2,745
======== ========
NON-CASH OPERATING AND FINANCIAL ACTIVITIES:
Treasury Stock Utilized to Satisfy Accrued Incentive Compensation
Liability......................................................... $ 2,900 $ 600
Conversion of Preferred Stock to Common Stock...................... - $ 8,478
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
- ---------------------
The following table sets forth for the periods indicated the percentage of
revenues of major items in the Consolidated Statements of Operations and the
percentage of change in such items from period to period, excluding percentage
changes in deminimus dollar amounts.
<TABLE>
<CAPTION>
Percentage of Period-to-Period Change
Total Revenues ---------------------------------------
---------------- Quarter Ended Nine Months Ended
Quarter Ended September 30, 1995 September 30, 1995
September 30, vs. vs.
1995 1994 September 30, 1994 September 30, 1994
---- ---- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues
Services and Products........................... 88.4% 90.2% 33.8% 39.3%
Reimbursed Expenses............................. 11.6 9.8 61.6 32.3
----- -----
Total........................................... 100.0 100.0 36.6 38.5
Expenses
Client Project Expenses......................... 57.0 52.6 48.0 45.5
Other Operating Expenses........................ 27.5 31.0 21.3 34.4
Corporate Expenses.............................. 7.4 8.1 25.6 29.3
----- -----
Total........................................... 91.9 91.7 37.0 40.6
Income from Operations............................ 8.1 8.3 31.8 16.4
Other (Income) Expense............................ 0.1 0.2 6.1 (58.5)
Income Before Income Taxes........................ 8.0 8.1 32.4 17.9
Income Taxes...................................... 3.4 3.4 35.5 20.8
Net Income........................................ 4.6 4.7 30.1 15.9
Dividends and Accretion on Series B
Preferred Stock.................................. 0.0 0.0 0.0 (100.0)
Net Income to Common Shareholders................. 4.6 4.7 30.1 17.8
Weighted Average Shares and Equivalents........... - - 2.5 5.5
Earnings per Share................................ - - 27.3 11.1
</TABLE>
7
<PAGE>
Results of Operations (continued)
- ---------------------
Revenues
Services and Products revenues ("S&P Revenues") increased 34% in the third
quarter and 39% for the first nine months of 1995 compared to the same 1994
periods, and all of the Company's target markets experienced revenue growth in
both the quarter and the nine month period. S&P Revenues derived from business
with non-US clients increased approximately 59% during the third quarter (to
$44.0 million) and 101% during the first nine months (to $117.3 million) and
accounted for approximately 45% of the third quarter and 51% of the nine month
S&P Revenue increases.
In the Financial Services Institutions target market, S&P Revenues increased
43% in the third quarter and 48% in the first nine months of 1995 (to $34.6
millon and $94.0 million, respectively) over the comparable 1994 periods, owing
principally to build-ups in business with clients who started large projects in
the second half of 1994. The Company expects that S&P Revenues in this market
for the year will increase at approximately the same rate as the Company's
overall revenue growth rate.
S&P Revenues in the Federal Government Agencies target market increased
approximately 10% for both the quarter and the first nine months (to $25.2
million and $72.4 million, respectively) when compared to the same 1994 periods.
The Company expects S&P Revenues in this market for the year to continue to
increase, but at rates lower than the overall growth in total S&P Revenues.
In the State and Local Government and Education target market, S&P Revenues
increased 3% during the quarter and 12% during the nine months, compared to
1994. The nine-month increase was principally due to the completion, during the
second quarter of 1995, of a performance-based contract with a client, which was
being accounted for under the completed contracts method. The Company expects
S&P Revenue growth in this market for the year to be at a slower growth rate
than the Company's overall growth rate for 1995.
In the Telecommunications market, S&P Revenues increased 58% in the third
quarter and 78% in the first nine months of 1995 over the comparable 1994
periods. This increase is mainly attributable to international business, which
increased 59% to $34.1 million in S&P Revenues in the quarter, and 115% to $88.4
million in the first nine months. The Company expects revenue growth in this
market for the year to continue to outpace that of the Company as a whole.
S&P Revenues from Other Corporate Clients increased 68% during the third
quarter and 32% during the first nine months of 1995, compared to 1994. This
market grouping includes business not covered by the Company's other markets,
including business which may at some point be treated as a separate target
market. The Company expects S&P Revenues in this market to grow, for the year
as a whole, at rates below that of the Company overall.
8
<PAGE>
Expenses
Client Project Expenses increased 48% during the third quarter and 46% during
the first nine months of 1995, compared to the same 1994 periods. These
expenses increased at rates greater than S&P Revenues, due principally to
assimilating new staff onto client projects. The Company expects these expenses
for the year to increase at rates greater than the S&P Revenue growth of the
Company.
Other Operating Expenses increased 21% in the quarter and 34% for the first
nine months, compared to the same 1994 periods. The nine month rate of increase
is in line with the increase in S&P Revenues, and the Company expects these
expenses for the year to increase at a rate below that of the S&P Revenue
growth, owing primarily to a leveling of certain expenses in the second half of
the year.
Corporate Expenses increased 26% and 29% during the quarter and the first nine
months, respectively, compared to the third quarter and the first nine months of
1994. The Company expects Corporate Expenses to continue to increase at rates
slower than the overall revenue growth rates.
Other (Income) Expense
Interest Expense increased 45% during the third quarter and 31% during the
first nine months of 1995, due to increased borrowing by international
subsidiaries under a line of credit agreement and additional term debt
borrowings during the third quarter of 1995. Other Income, primarily interest
income, increased 109% in the third quarter and 159% for the first nine months
of 1995, owing to higher levels of investments and higher interest rates in the
US.
LIQUIDITY AND CAPITAL RESOURCES
The Company provides for its operating cash requirements primarily through
funds generated from operations, and using bank borrowings primarily for cash
management with respect to the short term impact of certain cyclical uses, such
as annual payments of incentive compensation and financing capital acquisitions.
At September 30, 1995, the Company's cash and cash equivalents totaled $35.5
million, up from $34.2 million at the end of 1994. Cash provided from operating
activities was $0.9 million due principally to payments made in the first
quarter of the year for incentive compensation and other employee benefits and
increases in accounts receivable. Additionally, the Company invested over $31.1
million in fixed assets and software purchases, and computer software
development. The Company borrowed an additional $33.1 million during the first
nine months; $18.1 million for short-term borrowings by its European
subsidiaries, and $15.0 million in long-term term debts. Additionally, the
Company made approximately $3.7 million in debt repayments during the first nine
months and received approximately $1.8 million from employees, related to stock
options being exercised. As previously reported, the Company has subcontracts
with a prime contractor in the human services business. At September 30, 1995,
the accounts receivable balance related to these subcontracts is approximately
9% of total accounts receivable. These amounts span four contracts which the
prime contractor has with state/local government clients, in three different
states.
9
<PAGE>
The Company has two line of credit facilities which it can use to generate
working capital, for which the principal need is to finance the growth in
accounts receivable. At September 30, 1995, the Company had $22.8 million
outstanding under one of the line of credit agreements.
At September 30, 1995, the Company's material unused source of liquidity
consisted of approximately $16.2 million available under its revolving lines of
credit. Also at September 30, 1995, the Company's debt-equity ratio, as
measured by total liabilities divided by common stockholders' equity, was 0.94.
At December 31, 1994, the debt-equity ratio was 0.82.
The Company believes that its liquidity needs can be met from the resources
described above.
10
<PAGE>
Part II OTHER INFORMATION REQUIRED IN REPORT
------------------------------------
Item 1. Legal Proceedings
-----------------
As reported in AMS's Form 10-Q for the quarter ended June 30, 1995 and
filed August 14, 1995, Andersen Consulting LLP ("Andersen") sued AMS on July 20,
1995 claiming copyright infringement and appropriation of trade secrets, and
seeking injunctive relief as well as damages. On August 25, 1995 the United
States District Court for the Southern District of New York, in which the suit
is pending, denied Andersen's request for a preliminary injunction based on
Andersen's delay in filing suit.
AMS has vigorously contested Andersen's claims. On August 30, 1995,
AMS served its answer together with counterclaims against Andersen. In its
answer, AMS has denied any liability to Andersen. AMS believes that no trade
secret protection exists in the concepts cited by Andersen and that AMS has
utilized no confidential information of Andersen. AMS has claimed that Andersen
defamed AMS and attempted to interfere with AMS's contracts and opportunities by
disseminating false statements regarding AMS.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
11
<PAGE>
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.
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED
Date: November 14, 1995 /s/ Philip M. Giuntini
----------------- ------------------------------------------
Philip M. Giuntini, President
Date: November 14, 1995 /s/ James E. Marshall
----------------- ------------------------------------------
James E. Marshall, Controller
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 35,542
<SECURITIES> 0
<RECEIVABLES> 187,993
<ALLOWANCES> 4,454
<INVENTORY> 0
<CURRENT-ASSETS> 229,002
<PP&E> 70,941
<DEPRECIATION> (34,038)
<TOTAL-ASSETS> 313,539
<CURRENT-LIABILITIES> 121,233
<BONDS> 0
<COMMON> 324
0
0
<OTHER-SE> 161,477
<TOTAL-LIABILITY-AND-EQUITY> 313,539
<SALES> 455,921
<TOTAL-REVENUES> 455,921
<CGS> 259,038
<TOTAL-COSTS> 422,969
<OTHER-EXPENSES> 230
<LOSS-PROVISION> 1,200
<INTEREST-EXPENSE> 1,236
<INCOME-PRETAX> 32,722
<INCOME-TAX> 13,743
<INCOME-CONTINUING> 18,979
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,979
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
</TABLE>
