<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 March 31, 1996
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 Offices)
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 May 10, 1996, 40,649,056 shares of common stock were outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Pursuant to Form 10-Q General Instruction D(1), in response to item 2
of this Form 10-Q, registrant hereby incorporates by reference the section
entitled, "Assumptions Underlying Certain Forward-Looking Statements and Factors
That May Affect Future Results," which is contained in Exhibit 13 to the
registrant's Annual Report on Form 10-K for its fiscal year ended December 31,
1995 (File No. 0-9233), filed with the Securities and Exchange Commission on
April 1, 1996.
<PAGE>
CONTENTS
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Page
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<S> <C> <C>
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
-----------------
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
</TABLE>
<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, 1995, 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 April 1, 1996.
1
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions except per share data)
<TABLE>
<CAPTION>
For the Quarter
Ended March 31,
1996 1995
-------- --------
<S> <C> <C>
REVENUES
Services and Products................. $163.5 $121.8
Reimbursed Expenses................... 17.9 14.0
------ ------
181.4 135.8
EXPENSES
Client Project Expenses............... 109.5 75.8
Other Operating Expenses.............. 49.6 42.9
Corporate Expenses.................... 10.8 9.0
------ ------
169.9 127.7
INCOME FROM OPERATIONS................... 11.5 8.1
OTHER (INCOME) EXPENSE
Interest Expense...................... 0.7 0.3
Other Income.......................... (0.5) (0.5)
------ ------
0.2 (0.2)
INCOME BEFORE INCOME TAXES............... 11.3 8.3
INCOME TAXES............................. 4.7 3.4
------ ------
NET INCOME............................... $ 6.6 $ 4.9
====== ======
WEIGHTED AVERAGE SHARES AND EQUIVALENTS.. 41.7 40.4
NET INCOME PER SHARE..................... $ 0.16 $ 0.12
====== ======
</TABLE>
2
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED REVENUES BY MARKET
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter
Ended March 31,
1996 1995
-------- --------
<S> <C> <C>
Telecommunications Firms................... $ 63.7 $ 42.3
Financial Services Institutions............ 37.0 27.7
State and Local Governments and Education.. 28.3 20.1
Federal Government Agencies................ 25.1 23.0
Other Corporate Clients.................... 9.4 8.7
------ ------
Total Services and Products Revenues....... 163.5 121.8
Reimbursed Expenses Revenues............... 17.9 14.0
------ ------
Total Revenues............................. $181.4 $135.8
====== ======
</TABLE>
3
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
<TABLE>
<CAPTION>
3/31/96
ASSETS (Unaudited) 12/31/95
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents......................................... $ 23.2 $ 35.8
Accounts and Notes Receivable..................................... 225.9 206.1
Prepaid Expenses and Other Current Assets......................... 10.5 8.9
------ ------
259.6 250.8
FIXED ASSETS
Equipment......................................................... 48.8 47.4
Furniture and Fixtures............................................ 14.3 14.2
Leasehold Improvements............................................ 7.7 11.4
------ ------
70.8 73.0
Accumulated Depreciation and Amortization (33.1) (35.9)
------ ------
37.7 37.1
OTHER ASSETS
Purchased and Developed Computer Software (Net of Accumulated
Amortization of $50,500,000 and $47,700,000) 33.5 33.0
Intangibles (Net of Accumulated Amortization of $2,200,000 and
$2,100,000)...................................................... 6.7 6.8
Other Assets (Net of Accumulated Amortization of $10,900,000 and
$4,900,000)...................................................... 6.4 9.8
------ ------
46.6 49.6
------ ------
TOTAL ASSETS......................................................... $343.9 $337.5
====== ======
</TABLE>
4
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
<TABLE>
<CAPTION>
3/31/96
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 12/31/95
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..................... $ 29.3 $ 23.1
Accounts Payable.................................................... 9.9 8.6
Accrued Incentive Compensation...................................... 11.9 28.3
Other Accrued Compensation and Related Items........................ 27.7 25.3
Deferred Revenues................................................... 29.3 26.3
Other Accrued Liabilities........................................... 3.1 2.3
Income Taxes Payable................................................ 1.2 2.3
------ ------
112.4 116.2
Deferred Income Taxes............................................... 21.6 19.0
------ ------
134.0 135.2
NONCURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..................... 18.7 20.4
Other Accrued Liabilities........................................... 0.8 0.7
Deferred Income Taxes............................................... 5.7 5.7
------ ------
25.2 26.8
------ ------
TOTAL LIABILITIES...................................................... 159.2 162.0
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,
49,299,531 and 48,867,891 Issued and 40,663,039 and 40,040,454
Outstanding)....................................................... 0.5 0.5
Capital in Excess of Par Value...................................... 68.3 65.4
Retained Earnings................................................... 148.4 141.8
Currency Translation Adjustment..................................... (1.0) (0.7)
Common Stock in Treasury, at Cost (8,636,492 and 8,827,437 Shares).. (31.5) (31.5)
------ ------
184.7 175.5
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $343.9 $337.5
====== ======
</TABLE>
5
<PAGE>
American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter
Ended March 31,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................................... $ 6.6 $ 4.9
Adjustments to Reconcile Net Income to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization.................................... 12.6 6.3
Deferred Income Taxes............................................ 2.5 3.1
Provision for Doubtful Accounts.................................. 0.5 0.4
Changes in Assets and Liabilities:
Increase in Trade Receivables.................................. (20.4) (8.9)
Increase in Prepaid Expenses and Other Current Assets.......... (1.6) (1.0)
Increase in Other Assets....................................... (2.9) (2.8)
Decrease in Accrued Incentive Compensation..................... (16.4) (11.9)
Increase in Accounts Payable, Other Accrued Compensation,
and Other Accrued Liabilities................................. 4.6 3.5
Increase (Decrease) in Deferred Revenues....................... 3.0 (2.7)
Decrease in Income Taxes Payable............................... (1.1) (1.8)
------ ------
Net Cash Used by Operating Activities............................ (12.6) (10.9)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets............................................ (4.2) (6.1)
Purchase of Computer Software....................................... (1.1) (0.7)
Investment in Software Products..................................... (2.3) (1.8)
Decrease in Other Investments....................................... 0.3 0.1
Proceeds from Sale of Fixed Assets and Purchased Computer Software.. 0.1 0.1
------ ------
Net Cash Used by Investing Activities............................ (7.2) (8.4)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings.......................................................... 6.3 5.4
Payments on Borrowings.............................................. (1.7) (1.0)
Proceeds from Common Stock Options Exercised........................ 2.9 1.0
------ ------
Net Cash Provided by Financing Activities........................ 7.5 5.4
(Decrease) Increase in Currency Translation Adjustment.............. (0.3) 0.3
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................. (12.6) (13.5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...................... 35.8 34.2
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................ $ 23.2 $ 20.7
====== ======
</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 de minimus dollar amounts.
<TABLE>
<CAPTION>
Percentage of Period-to-Period
Total Revenues Change
-------------- ----------------
Quarter Ended Quarter Ended
March 31, March 31, 1996
vs.
1996 1995 March 31, 1995
-------- -------- ----------------
<S> <C> <C> <C>
Revenues
Services and Products................... 90.1% 89.7% 34.2
Reimbursed Expenses..................... 9.9 10.3 27.9
----- -----
Total................................... 100.0 100.0 33.6
Expenses
Client Project Expenses................. 60.4 55.8 44.5
Other Operating Expenses................ 27.3 31.6 15.6
Corporate Expenses...................... 6.0 6.6 20.0
----- -----
Total................................... 93.7 94.0 33.1
Income from Operations................... 6.3 6.0 42.0
Other (Income) Expense................... 0.1 (0.1)
Income Before Income Taxes............... 6.2 6.1 36.1
Income Taxes............................. 2.6 2.5 38.2
Net Income............................... 3.6 3.6 34.7
Weighted Average Shares and Equivalents.. - - 3.2
Net Income per Share..................... - - 33.3
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS (continued)
This Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") contains certain forward-looking statements. In
addition, the Company or its representatives from time to time may make, or may
have made, forward-looking statements, orally or in writing, including, without
limitation, in the MD&A contained in other filings with the Securities and
Exchange Commission. The Company wishes to ensure that such forward-looking
statements are accompanied by meaningful cautionary statements so as to ensure
to the fullest extent possible the protections of the safe harbor established by
the Private Securities Litigation Reform Act of 1995. Accordingly, such forward-
looking statements made by, or on behalf of, the Company are qualified in their
entirety by reference to, and are accompanied by, the discussion in this Form
10-Q and in documents incorporated by reference herein of important factors that
could cause the Company's actual results to differ materially from those
projected in such forward-looking documents.
REVENUES
Services and products revenues ("S&P revenues") increased 34% during
the first quarter of 1996, compared to 1995, with growth occurring in all of the
Company's target markets. The Company expects continued substantial growth for
the remainder of the year, however at lower rates of increase than was
experienced in the first quarter.
Business with non-US clients increased 87% (to $61.7 million) during
the first quarter of 1996, compared to the same 1995 period. This increase
accounted for approximately 69% of the total S&P revenue increase of the
Company. Business with European clients, which has dominated the rise in non-US
business, increased 108% (to $54.3 million), with revenues from
Telecommunications Firms being the principal factor. For the year as a whole,
the Company expects the rate of increase in non-US business, and European
business in particular, to be somewhat lower than the rates of increase realized
in the first quarter of 1996.
In the Telecommunications Firms target market, S&P revenues in the
first quarter increased 51% compared to the first quarter of 1995. The majority
of this increase is attributable to business with non-US clients, which
increased 105% during the first quarter of 1996 (to $49.4 million). Business in
this market is characterized by very large projects, with relatively few
clients. For all of 1996, the Company expects the growth in this market will be
greater than the Company's overall growth, but will not continue at the rate of
growth shown in the first quarter.
In the Financial Services Institutions target market, first quarter S&P
revenues increased 34% over the comparable 1995 period, owing principally to
build-ups in business with clients who started large projects in the second half
of 1995. Business with non-US clients, which increased 52% (to $11.2 million)
now accounts for approximately 30% of the revenues in this market. The Company
expects S&P revenue growth in this market, for the year, to increase at rates in
line with the Company's overall revenue growth.
In the State and Local Governments and Education target market, S&P
revenues in the first quarter increased 41% compared to 1995. This increase was
fueled by several large contracts with state taxation departments looking to
make substantial improvements in their ability to collect delinquent taxes. The
Company expects S&P revenues in the State and Local Governments and Education
market to increase for all of 1996, but at rates in line with the increase in
the Company's overall S&P revenues.
8
<PAGE>
S&P revenues in the Federal Government Agencies target market increased
9% in the first quarter of 1996. The Company expects S&P revenues in this target
market, for all of 1996, to increase at approximately the same rate as the first
quarter.
S&P revenues from Other Corporate Clients increased 9% during the first
quarter, compared to the same 1995 period. S&P revenues from this market, which
represents business not covered by the Company's other markets, for all of 1996,
are expected to increase at a rate comparable to the Company's overall growth in
S&P revenues.
EXPENSES
Client project expenses and other operating expenses combined increased
34% during the first quarter of 1996, which was the same rate as the S&P revenue
growth rate. For 1996 as a whole, the Company anticipates that these expenses
will continue to be in line with the revenue growth.
Corporate expenses increased 20% during the first quarter of 1996.
While some expenses, such as corporate sponsored technology, recruiting, and
training, increased at rates greater than the increase in revenues, other
expenses, such as corporate management, corporate level performance-based
compensation, and other corporate activities, grew at rates much slower than the
revenue increase.
INCOME FROM OPERATIONS
Income from operations increased 42% during the first quarter of 1996,
compared to the same 1995 period. This rate of increase was greater than the
S&P revenue increase. For 1996 the Company expects profit margins to continue
to improve.
OTHER (INCOME) EXPENSE
Interest expense increased 82% in the first quarter because of interest
payments on additional debt incurred by the Company during the prior year and
the first quarter of 1996. Other income decreased 7% during the quarter,
compared to 1995, due primarily to lower levels of investments.
FOREIGN CURRENCY EXCHANGE
Approximately 38% of the Company's total S&P revenues in the first
quarter of 1996 were derived from non-US business. The Company's practice is to
negotiate contracts in the same currency of which the predominant expenses are
incurred, thereby mitigating the exposure to foreign currency exchange
fluctuations. It is not possible to accomplish this in all cases, and the
Company does take some risk that profits will be adversely affected by foreign
currency exchange fluctuations. However, these risks may be mitigated to the
extent the Company: 1) successfully negotiates short-term contracts of one year
or less, or 2) negotiates provisions that allow pricing adjustments related to
currency fluctuations.
9
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LIQUIDITY AND CAPITAL RESOURCES
The Company provides for its operating cash requirements primarily
through funds generated from operations, using bank borrowings primarily for
cash and currency management with respect to the short term impact of certain
cyclical uses such as annual payments of incentive compensation. At March 31,
1996, the Company's cash and cash equivalents totaled $23.2 million, down from
$35.8 million at December 31, 1995. Cash used in operating activities was $12.6
million, due primarily to increases in accounts receivable and payments made in
the first quarter of the year for incentive compensation and other employee
benefits. During the first quarter, the Company continued to experience delays
in collecting accounts receivable related to subcontract work with a prime
contractor in the child support enforcement business, and a receivable related
to a contract with a foreign government which is experiencing continued cash
flow problems. The Company expects to receive all funds due from these clients,
and did receive payments in the first quarter.
The Company's cash flows from investing activities were approximately
$7.2 million, primarily for fixed assets and software purchases, and computer
software development during the quarter. The Company borrowed $6.3 million, all
of which was foreign currency borrowings by the Company's foreign subsidiaries
under the Company's $25 million multi-currency revolving line of credit with a
U.S. bank, increasing the total borrowed under such line of credit to $22.6
million. During the first quarter, the Company made approximately $1.7 million
in installment payments of principal on outstanding debt owed to banks; the
Company also received approximately $2.9 million during the period from the
exercise of stock options.
At March 31, 1996, the Company's debt-equity ratio, as measured by
total liabilities divided by common stockholders' equity was 0.86, down from
0.92 at December 31, 1995.
The Company's material unused source of liquidity at the end of the
first quarter of 1996 consisted of approximately $16.4 million under its
revolving lines of credit. During the second quarter of 1996, the Company
increased its multi-currency line of credit to $40 million, which raised the
aggregate borrowing capacity, under line of credit facilities, to $55 million.
The Company believes that its liquidity needs can be met from the various
sources described above.
10
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PART II OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
As reported in AMS's Form 10-K for the year ended December 31, 1995 and
filed April 1, 1996, 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 denied any liability by Andersen. AMS claimed no trade secret protection
exists in the concepts cited by Andersen and that AMS has utilized no
confidential information of Andersen. AMS claimed that Andersen defamed AMS and
attempted to interfere with AMS's contracts and opportunities by disseminating
false statements regarding AMS. On April 29, 1996, AMS amended its answer and
counterclaim to add additional counterclaims against Andersen for trade secret
misappropriation and unfair competition.
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.
(b) Reports on Form 8-K
NONE.
11
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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: May 15, 1996 /s/ Philip M. Giuntini
---------------- -----------------------------------------
Philip M. Giuntini, President
Date: May 15, 1996 /s/ James E. Marshall
---------------- -----------------------------------------
James E. Marshall, Controller
12
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 23,200
<SECURITIES> 0
<RECEIVABLES> 225,900
<ALLOWANCES> 5,400
<INVENTORY> 0
<CURRENT-ASSETS> 259,600
<PP&E> 70,800
<DEPRECIATION> 33,100
<TOTAL-ASSETS> 343,900
<CURRENT-LIABILITIES> 134,000
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 184,700
<TOTAL-LIABILITY-AND-EQUITY> 343,900
<SALES> 181,400
<TOTAL-REVENUES> 181,400
<CGS> 109,500
<TOTAL-COSTS> 169,900
<OTHER-EXPENSES> 200
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 700
<INCOME-PRETAX> 11,300
<INCOME-TAX> 4,700
<INCOME-CONTINUING> 6,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,600
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
