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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 June 30, 1999
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 August 6, 1999 42,027,899 shares of common stock were outstanding.
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CONTENTS
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Page
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Part I Financial Information
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Item 1. Financial Statements......................................... 1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk... 18
Part II Other Information
-----------------
Item 1. Legal Proceedings............................................ 18
Item 2. Changes in Securities........................................ 18
Item 3. Defaults Upon Senior Securities.............................. 18
Item 4. Submission of Matters to a Vote of Security Holders.......... 18
Item 5. Other Information............................................ 19
Item 6. Exhibits and Reports on Form 8-K............................. 19
</TABLE>
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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,
Consolidated Statements of Cash Flows, and Consolidated Statements of
Comprehensive Income 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, 1998, 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 26, 1999.
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American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS(1)
Unaudited
(In millions except per share data)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES .......................................... $ 305.3 $ 250.7 $ 596.2 $ 473.7
EXPENSES
Client Project Expenses................... 166.1 141.1 318.8 264.4
Other Operating Expenses.................. 87.9 71.4 177.3 139.4
Corporate Expenses........................ 22.1 17.3 43.0 32.9
Provision for Specific Contract........... 20.0 - 20.0 -
-------- -------- -------- --------
296.1 229.8 559.1 436.7
INCOME FROM OPERATIONS............................. 9.2 20.9 37.1 37.0
OTHER (INCOME) EXPENSE
Interest (Income) Expense................. 0.2 0.6 0.1 1.1
Other (Income) Expense.................... 0.1 - 1.0 0.4
Loss on Investments in Other Companies.... 1.1 - 1.4 -
-------- -------- -------- --------
1.4 0.6 2.5 1.5
INCOME BEFORE INCOME TAXES......................... 7.8 20.3 34.6 35.5
INCOME TAXES....................................... 3.2 8.3 14.2 14.5
-------- -------- -------- --------
NET INCOME......................................... $ 4.6 $ 12.0 $ 20.4 $ 21.0
======== ======== ======== ========
WEIGHTED AVERAGE SHARES............................ 42.5 42.3 42.3 42.1
======== ======== ======== ========
BASIC NET INCOME PER SHARE......................... $ 0.11 $ 0.29 $ 0.48 $ 0.50
======== ======== ======== ========
WEIGHTED AVERAGE SHARES AND EQUIVALENTS............ 43.2 43.1 43.2 42.9
======== ======== ======== ========
DILUTED NET INCOME PER SHARE....................... $ 0.10 $ 0.28 $ 0.47 $ 0.49
======== ======== ======== ========
</TABLE>
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(1) Certain amounts have been reclassified for comparative purposes.
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American Management Systems, Incorporated
CONSOLIDATED REVENUES BY MARKET(1)
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Telecommunications Firms....................... $ 84.0 $ 63.5 $ 158.3 $ 121.8
Financial Services Institutions................ 47.4 53.6 94.2 100.1
State and Local Governments and Education...... 83.4 63.1 171.6 113.8
Federal Government Agencies.................... 74.7 58.3 139.7 112.8
Other Corporate Clients........................ 15.8 12.2 32.4 25.2
-------- -------- -------- --------
Total Revenues................................. $ 305.3 $ 250.7 $ 596.2 $ 473.7
======== ======== ======== ========
</TABLE>
- ---------------------
(1) Certain amounts have been reclassified for comparative purposes.
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American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
<TABLE>
<CAPTION>
6/30/99
ASSETS (Unaudited) 12/31/98
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<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents.......................................... $115.0 $119.3
Accounts and Notes Receivable...................................... 256.6 260.3
Prepaid Expenses and Other Current Assets.......................... 10.5 8.8
------ ------
382.1 388.4
FIXED ASSETS
Equipment ....................................................... 54.7 59.7
Furniture and Fixtures............................................. 23.7 23.6
Leasehold Improvements............................................. 16.4 17.3
------ ------
94.8 100.6
Accumulated Depreciation and Amortization.......................... (64.0) (63.0)
------ ------
30.8 37.6
OTHER ASSETS
Purchased and Developed Computer Software (Net of Accumulated
Amortization of $82,800,000 and $72,000,000).................... 99.9 83.6
Intangibles (Net of Accumulated Amortization of $5,000,000 and
$4,700,000)...................................................... 6.6 4.3
Other Assets (Net of Accumulated Amortization of $990,000 and
$920,000) ....................................................... 28.7 23.7
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135.2 111.6
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TOTAL ASSETS ....................................................... $548.1 $537.6
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</TABLE>
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American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
<TABLE>
<CAPTION>
6/30/99
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 12/31/98
----------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations....................... $ 6.3 $ 5.3
Accounts Payable...................................................... 14.0 21.3
Accrued Incentive Compensation........................................ 20.0 55.8
Other Accrued Compensation and Related Items.......................... 44.3 39.8
Deferred Revenues..................................................... 42.2 37.7
Other Accrued Liabilities............................................. 8.7 4.8
Provision for Contract Losses......................................... 27.2 7.3
Income Taxes Payable.................................................. 0.8 9.1
------ ------
163.5 181.1
Deferred Income Taxes................................................. 6.4 4.9
------ ------
169.9 186.0
NONCURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations....................... 19.6 22.7
Other Accrued Liabilities............................................. 25.6 15.9
Deferred Income Taxes................................................. 21.2 21.1
------ ------
66.4 59.7
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TOTAL LIABILITIES .......................................................... 236.3 245.7
STOCKHOLDERS' EQUITY
Preferred Stock ($0.10 Par Value; 4,000,000 Shares Authorized,
None Issued or Outstanding)
Common Stock ($0.01 Par Value; 200,000,000 Shares Authorized,
51,057,214 and 51,057,214 Issued and 42,477,724 and 42,026,510
Outstanding)........................................................ 0.5 0.5
Capital in Excess of Par Value........................................ 89.2 96.7
Retained Earnings..................................................... 260.7 240.3
Currency Translation Adjustment....................................... (11.3) (6.3)
Common Stock in Treasury, at Cost (8,579,490 and 9,030,704 Shares).... (27.1) (39.3)
------ ------
311.8 291.9
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $548.1 $537.6
====== ======
</TABLE>
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American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ........................................................... $ 20.4 $ 21.0
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation .................................................... 6.9 8.8
Amortization..................................................... 11.6 8.2
Loss on Investments in Other Companies........................... 1.4 -
Deferred Income Taxes............................................ 1.6 5.7
Provision for Doubtful Accounts.................................. 3.8 6.8
Provision for Contract Losses.................................... 20.0 -
Changes in Assets and Liabilities:
(Increase) Decrease in Trade Receivables......................... (0.1) 11.3
Increase in Prepaid Expenses and Other Current Assets............ (1.7) (0.4)
Increase in Other Assets......................................... (6.4) (7.2)
Decrease in Accrued Incentive Compensation....................... (30.6) (10.7)
Increase in Accounts Payable, Other Accrued
Compensation, and Liabilities................................. 10.7 9.1
Increase (Decrease) in Deferred Revenue.......................... 4.4 (10.0)
Decrease in Income Taxes Payable................................. (8.3) (2.4)
------- ------
Net Cash Provided by Operating Activities.............................. 33.7 40.2
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets............................................... (3.5) (4.1)
Purchase of Computer Software and Investment in Software Products ..... (27.7) (15.7)
Other Investments and Intangibles...................................... (2.7) 1.0
Proceeds from Sale of Fixed Assets and Purchased Computer Software..... 3.6 0.4
------ ------
Net Cash Used in Investing Activities.................................. (30.3) (18.4)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings .......................................................... - -
Payments on Borrowings................................................. (2.1) (5.2)
Proceeds from Common Stock Options Exercised........................... 5.3 8.0
Payments to Acquire Treasury Stock..................................... (5.9) (0.4)
------ ------
Net Cash (Used in) Provided by Financing Activities.................... (2.7) 2.4
------ ------
DECREASE IN CURRENCY TRANSLATION ADJUSTMENT.................................. (5.0) (0.3)
------ ------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................... (4.3) 23.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................. 119.3 49.6
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................... $115.0 $ 73.5
====== ======
NON-CASH OPERATING AND FINANCING ACTIVITIES:
Treasury Stock Utilized to Satisfy Accrued Incentive
Compensation Liability.............................................. $ 5.2 $ -
Treasury Stock Utilized to Satisfy Stock Options Exercised............. $ 7.6 $ -
</TABLE>
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American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INCOME ............................... $ 4.6 $ 12.0 $ 20.4 $ 21.0
OTHER COMPREHENSIVE INCOME (LOSS):
Currency Translation Adjustment..... (1.4) - (5.0) (0.3)
------ ------ ------ ------
COMPREHENSIVE INCOME...................... $ 3.2 $ 12.0 $ 15.4 $ 20.7
====== ====== ====== ======
</TABLE>
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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, certain forward-looking statements, orally or in writing, including,
without limitation, any such statements made in this MD&A, press releases, or
any such statements made, or to be made, 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 section 27A of the Securities Act of 1933, as
amended and section 21E of the Securities Exchange Act of 1934, as amended.
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 herein of important factors that could cause the Company's actual
results to differ materially from those projected in such forward-looking
statements.
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 change in such items from period to period (see "Financial
Statements"). The effect of inflation and price changes on the Company's
revenues, income from operations, and expenses is generally comparable to the
general rate of inflation in the U.S. economy.
<TABLE>
<CAPTION>
Percentage of
Total Revenues Period-to-Period Change
-------------- -----------------------
Quarter Ended Quarter Ended Six Months Ended
June 30, June 30, 1999 June 30, 1999
vs. vs.
1999 1998 June 30, 1998 June 30, 1998
-------- ------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues.................................. 100.0% 100.0% 21.8% 25.9%
Expenses
Client Project Expenses............. 54.4 56.3 17.7 20.6
Other Operating Expenses............ 28.8 28.5 23.1 27.2
Corporate Expenses.................. 7.2 6.9 27.7 30.7
Provision for Specific Contract..... 6.6 0.0
----- -----
Total............................... 97.0 91.7 28.9 28.0
Income from Operations.................... 3.0 8.3 (56.0) 0.3
Other (Income) Expense.................... 0.5 0.2 133.3 66.7
----- -----
Income Before Income Taxes................ 2.5 8.1 (61.6) (2.5)
Income Taxes.............................. 1.0 3.3 (61.4) (2.1)
----- -----
Net Income................................ 1.5 4.8 (61.7) (2.9)
Weighted Average Shares................... 0.5 0.5
Basic Net Income per Share................ (62.1) (4.0)
Weighted Average Shares and Equivalents... 0.2 0.7
Diluted Net Income per Share.............. (64.3) (4.1)
</TABLE>
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RESULTS OF OPERATIONS (continued)
REVENUES
Revenues increased 22% during the second quarter and 26% during the
first six months of 1999, compared to the same 1998 periods. For the second
quarter and first six months of 1999, growth occurred in all target markets
except the Financial Services Institutions market. Looking ahead to the rest of
1999, the Company expects revenue growth company-wide to continue at
approximately the same rates that were experienced in 1998.
Business with non-US clients increased 7% (to $56.2 million) during the
second quarter and 8% (to $109.9 million) for the first six months of 1999,
compared to the same 1998 periods. Business with non-US clients now represents
18% of the Company's revenues. The Company increased its non-US client base and
expanded the number of services offered to these clients. For the year 1999, the
Company expects non-US business and European business in particular, to exceed
1998 levels, mainly in the Telecommunications Firms and the State and Local
Governments and Education target markets.
As part of its growth strategy the Company has formed a cross-target
market practice that will focus on delivering high-value, customer-facing Web
solutions - including eBill, eCare and eMarketing - tailored to clients in
financial services, telecommunications, government and utilities. These
solutions will help firms achieve greater cost savings, deliver improved
customer service and leverage cross-sell and up-sell opportunities in their
markets. The new "eCustomer" practice builds upon the Company's existing,
significant eCommerce client base.
In the Telecommunications Firms market, a market characterized by large
projects with relatively few clients, revenues increased 32% in the second
quarter and 30% for the first six months, compared to the same 1998 periods.
This revenue increase reflects the Company's continued success in acquiring new
clients, expanding service offerings, and initiating several systems integration
engagements within the Telecommunications Firms market. Non-US revenues in this
market increased 18% (to $36.0 million) for the quarter and 14% (to $69.0
million) for the first six months, compared to the same 1998 periods. For the
year 1999, the Company anticipates revenue growth in this market to increase at
the same rate of increase experienced in the first half of 1999. The Company's
development of its next generation of customer care and billing software, known
as "Tapestry", is continuing to progress through a contract with a European
client. Because that client is sharing part of the cost of development,
collections from that contract will not contribute to revenue growth in this
market in 1999; rather, they will reduce capitalized software costs. Key
software deliveries have been made in the first half of 1999 and the Company is
targeting another delivery of the software late in the second half of 1999.
There is significant market interest in Tapestry.
Notwithstanding actual and projected revenue growth, there continue to
be risks in this market. Competition for experienced staff is especially intense
in the telecommunications field, and staffing remains one of the Company's
critical challenges for the Telecommunications Firms market. Additionally, the
Company works in countries located in regions other than Western Europe and
North America and the delivery risks in these other countries may be higher.
Revenues in the Telecommunications Firms market in these countries were less
than 4% of the Company's total revenues for the first half of 1999.
In the Financial Services Institutions target market, 1999 revenues
decreased 12% and 6% in the second quarter and first half, respectively, when
compared to the same 1998 periods. This decrease is due to large projects
winding down in the fourth quarter of 1998 and certain new projects not ramping
up until late in the second quarter of 1999. Business with non-US clients,
primarily European, accounted for approximately 36% of both the second quarter
revenues ($16.9 million) and of the six months revenues ($34.2 million) in this
market. For 1999, the Company anticipates revenue growth in this market to
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increase at rates below the Company's overall revenue growth rate, with
increasing revenues in the second half of 1999. The Company believes that there
are Year 2000 compliance-related business impacts in this market but has not
been able to estimate their magnitude.
In the State and Local Governments and Education target market, revenues
increased 32% in the second quarter and 51% in the first half of 1999, compared
to the same 1998 periods. The revenue increase was driven by the rapid build-up
of several large contracts with state taxation departments looking to make
substantial improvements in their ability to collect delinquent taxes and
several new engagements for financial and revenue systems. Several of these
financial management systems are to be delivered early in the second half of
1999. The Company enjoys strong demand in this market. On certain of the
contracts with state taxation departments, the Company's fees are paid out of
the benefits (increased collections) that the client achieves. On benefit-funded
contracts (contracts whereby the amounts due the Company are payable based on
actual benefits derived by the client), the Company defers recognition of
revenues until that point at which management can predict, with reasonable
certainty, that the benefit stream will generate amounts sufficient to fund the
contract. From that point forward, revenues are recognized on a percentage of
completion basis. Beginning in the second quarter of 1998, the Company started
work on several large multi-year benefit-funded contracts, all of which are
currently being recognized on a percentage of completion basis. Revenues for
1999 in the State and Local Governments and Education market are expected to
increase over 1998 at a rate approximating the Company's overall revenue growth
rate and thus at significantly lower rates than experienced in the first half of
1999 compared with the same period in 1998.
Revenues in the Federal Government Agencies target market increased 28%
during the second quarter and 24% during the first six months of 1999, compared
to the same 1998 periods. This increase was attributable predominantly to the
award in mid-1997 of a significant multi-year contract with the Department of
Defense for its Standard Procurement System ("SPS"), which accounted for 30% of
both the 1999 second quarter and first half revenue growth. In addition, there
was increased business with existing clients and new business with both defense
and civilian agencies. For the year 1999, the Company expects revenues in this
target market to increase over 1998 at a rate approximating the Company's
overall revenue growth rate. These revenue increases will continue to be driven
primarily by the SPS contract and by contracts with clients using the Company's
federal financial systems.
Revenues in the Other Corporate Clients market increased 30% during the
second quarter and 29% during the first half of 1999, compared to the same 1998
period. The 1999 increase is mainly attributable to increased business with new
clients in the electric and gas utilities market and the health care market. For
all of 1999, the Company expects revenue growth in this market to increase at
the same rate of growth experienced in the first half of 1999.
EXPENSES
Client project expenses and other operating expenses together increased
20% during the second quarter and 23% during first half of 1999, compared to the
same 1998 periods. Both of these increases were slightly lower than the growth
rate in revenues in the comparable periods. For all of 1999, the Company
anticipates that these expenses will continue to grow at rates lower than the
revenue growth rate. The Company expects to make significant expenditures
related to research and development of the "Tapestry" software. A majority of
these expenditures will be capitalized. Once the Tapestry software is completed
and delivered, currently targeted for late in the second half of 1999,
amortization will begin. No client project expense or other operating expense
was required to be recorded as a result of the cancellation by the State of
Mississippi of a contract for the development by the Company of a revenue
management system to be used by the Mississippi State Tax Commission. During the
second quarter of 1999, the Company recorded a charge against its allowance for
doubtful accounts, in the amount of $2.4 million, to write-off all
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accounts receivable associated with this contract. See "Other Information -
Legal Proceedings" in Part II below for information about the status of the
lawsuit pending in connection with this contract.
Corporate Expenses increased 28% during the second quarter and 31% for
the first six months of 1999, compared to the same 1998 periods. Corporate
expenses increased faster than the revenue growth during the first half of 1999,
due to the dedication of resources applied to the Year 2000 remediation of
internal systems, increases in accruals for corporate level performance-based
incentive compensation, and profit-based compensation accruals under the
Company's restricted stock program. For the year 1999, the Company expects
corporate expenses to grow slightly above the Company's revenue growth rate.
During the second quarter of 1999, the Company recorded a $20 million
provision to cover ongoing disputes on a contract between an AMS subsidiary and
Bezeq, the Israeli telephone company ("Bezeq"). This contract was signed in 1997
and has been problematic since that time. Until very recently, management
believed that the differences could be resolved and that work could be performed
within the reserves established in 1998. Current events now make this most
unlikely. At the end of the first half of 1999, the cumulative reserves ($27
million) represent management's judgement of the total expected impact of this
dispute on the Company's consolidated financial statements.
INCOME FROM OPERATIONS
Income from operations decreased 56% for the second quarter and was flat
for the first half of 1999, compared to the same 1998 periods. This decrease is
due to the above-mentioned provision taken on the Bezeq contract. Absent this
provision, income from operations would have increased 40% during the second
quarter and 54% during the first half of 1999 compared to the same 1998 periods.
The Company's profit margins have continued to improve due to an ongoing
emphasis on well-structured and priced engagements and tightly managed delivery
risk. In addition, the Company is continuing to focus on controlling expenses.
For 1999 as a whole, the Company will continue to emphasize managed growth and
expects improved profit margins when compared with 1998 results.
OTHER (INCOME) EXPENSE
Interest (income) expense decreased 67% during the second quarter and
91% during the first half of 1999 compared with the same periods in 1998,
because of lower amounts of short-term borrowings, as a result of significantly
improved cash flow from operations. In addition, the increased cash from
operations was invested in short-term instruments, which resulted in higher
interest income. Other (income) expense increased in the first half of 1999,
compared to the same period in 1998, primarily because of a write-off of certain
leasehold improvements and fixed assets.
In late 1998, the Company established a joint venture with Bank of
Montreal to provide online processing services for loan applications to small
and mid-size financial institutions via a new firm, Competix, L.L.C. The Company
incurred a loss of $1.1 million during the second quarter and $1.4 million
during the first half of 1999 related to this joint venture, due to the
continued start up costs of this new company.
FOREIGN CURRENCY EXCHANGE
Approximately 18% of the Company's 1999 first half revenues were derived
from non-US business. The Company's practice is to negotiate contracts in the
same currency, in 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; thus, there is some risk that profits
will be
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affected by foreign currency exchange fluctuations. However, the Company
seeks to negotiate provisions in contracts with non-US clients that allow
pricing adjustments related to currency fluctuations. In a further effort to
mitigate foreign currency exchange risk, the Company has established a notional
cash pool with a European bank. This arrangement allows the Company to better
utilize its cash resources among all of the Company's subsidiaries, without
incurring foreign currency conversion risks, thereby mitigating foreign currency
exposure for these transactions. The Company also actively manages the excess
cash balances in the cash pool, which will increase interest income on
short-term investments. During the past two years, the Company also has employed
limited hedging of intercompany balance sheet transactions through derivative
instruments (foreign currency swap contracts); however, as of June 30, 1999, the
Company had no outstanding derivative contracts.
LIQUIDITY AND CAPITAL RESOURCES
The Company provides for its operating cash requirements primarily
through funds generated from operations. Through an available bank facility, the
Company can also provide for cash and currency management with respect to the
short-term impact of certain cyclical uses, such as annual payments of incentive
compensation as well as financing from time to time accounts receivable. At June
30, 1999, the Company's cash and cash equivalents totaled $115 million, slightly
down from $119.3 million at the end of 1998. Cash provided by operating
activities for the first half of 1999 was $33.7 million which reflects the
above-mentioned contract provision.
During the first half of 1999, the Company invested over $30.3 million
in fixed assets, software purchases, and computer software. Revolving
line-of-credit borrowings were zero at June 30, 1999. During the first half, the
Company made approximately $2.1 million in installment payments of principal on
outstanding debt owed to banks; the Company also received proceeds of
approximately $5.3 million during the period from the exercise of stock options
and the tax benefits related thereto. The Company repurchased approximately
176,000 shares of common stock, during the first half of 1999, at a cost of $5.9
million.
At June 30, 1999, the Company's debt-equity ratio, as measured by total
liabilities divided by stockholders' equity was 0.76, down from 0.84 at December
31, 1998.
The Company's material unused source of liquidity at the end of the
first half of 1999 consisted of $120.0 million under the multi-currency
revolving credit agreement with Bank of America and Wachovia Bank as agents. The
Company believes that its liquidity needs can be met from the various sources
described above.
As required by the original terms of its contract with the client, the
Company has entered into bank guarantees due upon request for performance under
its contract with Bezeq. At June 30, 1999, the Company had $19.8 million
outstanding under such bank guarantees. See "Results of Operations - Expenses,"
above for additional information about the Bezeq contract. On August 8, 1999,
the Company sought and received a temporary injunction from the Jerusalem
District Court prohibiting Bezeq from realizing on the guarantees. In the event
the Jerusalem District Court does not grant a permanent injunction after a
hearing on the Company's petition, and Bezeq were to call on these guarantees,
there should not be any material adverse effect on the Company's liquidity.
12
<PAGE> 15
YEAR 2000 ISSUES
Companies in the business of providing information technology services,
software products or custom-developed software, such as the Company, face "Year
2000 compliance" issues in at least three critical areas: internal information
and communication technology systems, client software systems, and embedded
systems (products which are made with microprocessor (computer) chips such as
environmental systems, physical security systems and elevators). "Year 2000
compliance" means the ability of hardware, software and other processing
capabilities to interpret and manipulate correctly all date data up to and
through the year 2000, including proper computation of leap years. With respect
to embedded systems, Year 2000 compliance means that the occurrence of the Year
2000 will not cause the product in which the microprocessor chip is embedded to
fail to operate properly. Failure of hardware, software and related capabilities
used by the Company or, under certain circumstances, furnished to clients, to be
Year 2000 compliant could have a material adverse impact on the Company.
Accordingly, the Company is focusing at the most senior levels on Year
2000 issues. The Audit Committee of the Board of Directors, in conjunction with
the Company's Executive Vice President and Chief Administrative Officer, the
Company's Internal Auditor and others, is monitoring the Company's analysis and
status with respect to Year 2000 issues. Year 2000 program managers have been
designated throughout the Company to oversee Year 2000 efforts and provide
periodic reports, on at least a quarterly basis, to the senior management and
the Internal Auditor of the Company. Incentive compensation programs currently
include achievement of Year 2000 compliance objectives. Funds expended and to be
expended on Year 2000 compliance have been allocated out of the Company's normal
operating budget. The Company has not delayed any significant projects as a
result of its investment of resources on Year 2000 issues.
Early in 1997, the Company completed reviews of its major internal
application systems for Year 2000 compliance. The Company began a program of
testing and remediation for its application systems in 1997. The company-wide
application subsystems have now been remediated and have successfully passed
unit testing. A system integration test of the combined functioning of
company-wide application subsystems began, on schedule, on March 3, 1999. The
integration testing for significant transactions required through early 2000 was
completed on schedule in the first half of 1999. The integration testing for
other significant year 2000 and 2001 transactions is expected to be completed
during the third quarter of 1999. In addition to the scheduled early completion
date of testing, the Company has also developed certain other contingency plans
relating to these internal systems. The Company has also developed and
implemented a limited incentive program to encourage certain experienced
internal systems programmers to remain with the Company through the summer of
the Year 2000.
With respect to its company-wide hardware infrastructure, the Company
has obtained Year 2000 certifications from many of the outside vendors with whom
the Company contracts for the provision of utilities, goods and certain internal
functionality. The Company is continuing to work to obtain outstanding
certifications from the remaining outside vendors at this time. In addition to
relying on certifications from outside vendors where available, the Company is
also engaged in a program of testing certain subcomponents of and interfaces
with the systems provided by the outside vendors.
In addition, the Company is coordinating centrally its worldwide efforts
to achieve Year 2000 compliance of its internal hardware and application systems
that are not company-wide by third quarter 1999.
Total costs of achieving Year 2000 compliance in the Company's internal
systems, which costs will be expensed as they are incurred are estimated to be
approximately $3.5 million for 1999, and $0.5
13
<PAGE> 16
million for 2000. For the past three years, approximately $4.4 million has been
expended by the Company on Year 2000 compliance in respect of its internal
systems.
With respect to its clients, the Company does not presently anticipate
material costs or risks allocable specifically to Year 2000 compliance issues,
but is continuing to assess the scope and status of such risks. Client
engagements for specific Year 2000 remediation work have not been a strategic
marketing focus. However, in many of the Company's existing engagements, Year
2000 replacement work is implicit, as the Company's clients are replacing
systems for various business reasons. In addition, the Company has accepted
limited engagements in which it assists clients with the performance of their
own Year 2000 projects. The Company has drafted these contracts to limit or
exclude liability for Year 2000 related claims and does not anticipate any
special risks or costs attributable to Year 2000 compliance issues in performing
such projects.
With respect to contractual obligations to active clients (clients for
which the Company is still obligated to furnish products or services, such as
maintenance), the Company similarly does not anticipate in the aggregate
material costs or risks associated with Year 2000 compliance. Its contracts with
active clients primarily are either for recent or new software that is Year 2000
compliant or for which a Year 2000 compliant upgrade is available, or do not
explicitly obligate the Company to furnish an updated release that is Year 2000
compliant. Early in 1997, the Company began a program to test its active
software products (including upgrades, where applicable) and assess their status
relative to Year 2000 compliance. Based on the results of this testing, the
Company has been releasing new versions of many of its software products that
have been designed and tested for performance of the functionality described in
their applicable specifications up to and through the Year 2000. It also has
been communicating with its software product clients regarding Year 2000
compliance of its products, and notifying the clients of the status of their
software and of the availability of updated Year 2000 compliant releases for
certain older software known to the Company to be still in use by that client.
The Company has already communicated such information to nearly all of its
product clients and is undertaking to contact the remaining clients. The Company
also has been reviewing various custom software contracts to identify and
resolve any potential Year 2000 problems with its custom software clients. The
Company expects to continue the ongoing processes of monitoring the status of
Year 2000 compliance of the Company-developed software in use by various
clients.
The Company has generally avoided, and continues to avoid, accepting
contractual liability for failures of third-party software. Accordingly, the
Company does not anticipate any material Year 2000 risk in connection with such
third-party products. Nevertheless, in order to avoid any disruptions in
connection with third-party products, the Company is seeking Year 2000
certification from third-party vendors to the extent the Company uses, or
recommends the use of, third party products in its own customer products.
In the Company's judgment, the most reasonably likely worst case
scenarios in connection with the Year 2000 are possible delays in current
business and reductions in the availability of new business during the second
half of 1999; and the costs of resolving potential Year 2000 lawsuits by the
Company's clients. The potential reductions in business may arise as some
current and prospective clients encounter Year 2000 failures of their non-AMS
information technology systems and/or institute "code freezes" under which no
new information technology development projects will be authorized until after
the Year 2000 changeover. Based on the Company's existing commitments through
the Year 2000, the Company does not expect to be affected materially by any such
information technology failures or "code freezes." Additionally, although the
ultimate outcome of any possible Year 2000 litigation is uncertain, the Company
does not believe that the ultimate aggregate amount of liability, if any, from
any such client litigation would have a material effect on the Company.
14
<PAGE> 17
Total costs of assessing the Year 2000 compliance of client systems and
of communicating with clients about the Year 2000, which costs will be expensed
as they are incurred, are estimated to be approximately $1.5 million for 1999,
and $0.8 million for 2000. For the past three years, $5.6 million has been
expended by the Company on Year 2000 compliance in respect of client systems in
order to expedite development of Year 2000 compliant upgrades for noncompliant
systems, to notify clients of the Year 2000 compliance of their AMS products and
to staff Year 2000 compliance efforts.
The majority of the embedded systems on which the Company relies in its
day to day operations are owned and managed by the lessors of the buildings in
which the Company's offices are located, or by agents of such lessors. The
Company has sent letters to its lessors and, as applicable, their agents
requesting certifications of the Year 2000 compliance of the embedded systems.
The Company has received responses from a substantial majority of its lessors
indicating that the systems in the buildings either already are, or are expected
to be before the end of 1999, Year 2000 compliant. The Company will prioritize
systems and develop necessary test plans based on the further responses it
continues to receive, or not to receive, to its letters.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133 entitled "Accounting for Derivative Instruments and Hedging
Activities." This Statement requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The FASB has delayed its effective date for one
year to fiscal years beginning after June 15, 2000. The Company will be required
to adopt this new accounting standard by January 1, 2001. The Company does not
anticipate early adoption of this new standard. Due to the complexity of this
new standard, the Company has not completed an assessment of the impact it will
have on its financial position or results of operations. The Company currently
has no material derivative transactions, which would be impacted by this new
standard.
15
<PAGE> 18
ASSUMPTIONS UNDERLYING CERTAIN FORWARD-LOOKING
STATEMENTS AND
FACTORS THAT MAY AFFECT FUTURE RESULTS
In the next couple of years, the Company expects its managed growth in
revenues to be approximately comparable to that realized for 1998. The
continuing controlled growth in revenues should enable the Company to improve
its profit margins. Cancellations of two major projects and related attrition
rates which were higher than historical rates for the Company, heavy investment
in building up staff capacity and infrastructure, and the stress of absorbing
many new professional staff, contributed to those reduced margins in 1996 and
1997.
The Company faces continuing risks in the area of project delivery and
staffing. AMS has established a reputation in the marketplace of being a firm
which delivers on time and in accordance with specifications regardless of the
complexity of the application and the technology. The Company's customers often
have a great deal at stake in being able to meet market and regulatory demands,
and demand very ambitious delivery requirements. In order to meet its
contractual commitments, AMS must continue to recruit, train, and assimilate
successfully large numbers of entry-level and experienced employees annually, as
well as to provide sufficient senior managerial experience on engagements,
especially on large, complex projects. Moreover, this staff must be re-deployed
on projects globally. Staffing projects in certain less industrialized countries
can pose special risks and challenges. The Company must also manage rates of
attrition, in view of increased competition for its talent.
There is also the risk of successfully managing large projects and the
risk of a material impact on results because of the unanticipated delay,
suspension, renegotiation or cancellation of a large project. As was the case in
1996-1997 when cancellations of two major projects occurred, and the second
quarter of 1999 when disputes with Bezeq proved difficult to resolve, any such
development in a project could result in a decline in revenues or profits, the
need to relocate staff, a potential lawsuit or other dispute with a client
regarding money owed, or damages incurred as a result of alleged non-performance
by AMS and a diminution of AMS's reputation. These risks are magnified in the
largest projects and markets simply because of their size. The Company's
business is characterized by large contracts producing high percentages of the
Company's revenues. For example, 35% of the Company's total revenues in 1998
were derived from business with 17 clients.
Changing client requirements, such as scope changes and process issues,
and delays in client acceptance of interim project deliverables, are other
examples of risks of performing, especially in large complex projects. These
risks presently are perhaps the most significant for the Company, in the context
of two significant projects, one involving substantial research and development
expenditures (Tapestry); and the other, the Bezeq project described above. These
risks are greater in certain geographic markets where such projects are less
common, for example outside Europe and the United States.
The Company could also face delays by clients, or client suspensions or
cancellation of projects, because of client systems' failures to be Year 2000
compliant. Many companies are expected to impose freezes on changes in code
programming after a specified date in 1999 in order to ensure their systems'
Year 2000 compliance by the end of the year 1999. Any such actions, if taken by
clients of the Company, could result in diversion of work, both pending and new
opportunities, and decreases in revenues and profit margins. Although these
risks exist potentially across the Company's engagements, they may be magnified
in certain target markets, such as the Financial Services Institutions market,
given
16
<PAGE> 19
the need for Year 2000 compliance certainty in those markets. See "YEAR
2000 ISSUES" section in MD&A for additional information on Year 2000 compliance
issues.
There is also the risk of revenues not being realized when expected,
such as in certain contracts in the State and Local Governments and Education
market. On certain large contracts, the Company's fees are paid out of the
benefits (for example, increased revenues from tax collections) that the client
achieves. The Company typically defers recognition of such revenues until
management can predict, with reasonable certainty, that the benefit stream will
generate amounts sufficient to fund the contract. From that point forward
revenues are recognized on a percentage of completion basis.
The Company also faces the risk of increased competition in the markets
in which it participates. In addition to any risk that the Company's competitors
may create, some of the Company's current or prospective clients may decide to
perform projects with their in-house staff that the Company might otherwise have
undertaken. Increased competition from industry rivals, as well as decisions by
clients to outsource fewer projects, could have a negative impact on pricing,
revenues and margins.
Events such as unanticipated declines in revenues or profits could in
turn result in immediate fluctuations in the trading price and volume of the
Company's stock. Certain other risks, including, but not limited to, the
Company's international scope of operations, are discussed elsewhere in this
Form 10-Q. Increasingly, the Company conducts business in countries other than
Western Europe and North America. Contracts being performed in such non-Western
countries can have higher delivery risks for a variety of reasons. Because the
Company operates in a rapidly changing and highly competitive market, additional
risks not discussed in this Form 10-Q may emerge from time to time. The Company
cannot predict such risks or assess the impact, if any, such risks may have on
its business. Consequently, the Company's various forward-looking statements,
made, or to be made, should not be relied upon as a prediction of actual
results.
17
<PAGE> 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is hereby incorporated by
reference to the Company's annual report on Form 10-K for the year ended
December 31, 1998, filed with the Securities and Exchange Commission on March
26, 1999. There have been no material changes in the Company's market risk from
that disclosed in the Company's 1998 Form 10-K.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
As previously described in the Company's Form 10-Q filed May 17, 1999,
the State of Mississippi has sued AMS alleging claims for breach of contract,
bad faith breach of contract, and unjust enrichment, and seeks various forms of
injunctive relief as well as compensatory damages of approximately $234 million
and punitive damages of approximately $750 million. The lawsuit arose in
conjunction with the cancellation by the State of a contract with AMS for the
development of a revenue management system to be used by the Mississippi State
Tax Commission and was filed against AMS soon before the State was to go live
in April 1999. AMS filed an answer and counterclaim on May 24, 1999. Discovery
is underway and is expected to be completed by the second quarter of 2000. AMS
intends to continue to contest the lawsuit vigorously.
Item 2. Changes in Securities
NONE.
Item 3. Defaults Upon Senior Securities
NONE.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of stockholders of the Company was
held in Fairfax, Virginia on May 21, 1999 for the purposes of electing the board
of directors.
(b) Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder, and there was no solicitation in opposition to
management's solicitations. All of management's nominees for director were
elected.
18
<PAGE> 21
(c) Three proposals were submitted to a vote of stockholders as
follows:
1. The stockholders approved the election of the following
persons as directors of the Company:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Daniel J. Altobello 35,655,027 81,198
Paul A. Brands 35,629,366 106,859
James J. Forese 35,655,140 81,085
Patrick W. Gross 35,656,510 79,715
Dorothy Leonard 35,655,493 80,605
W. Walker Lewis 35,655,284 80,941
Frederic V. Malek 35,643,856 92,369
Frank A. Nicolai 35,537,001 199,224
Alan G. Spoon 35,653,575 82,650
</TABLE>
2. The stockholders approved with 28,288,006 affirmative
votes, 7,408,957 negative votes, 39,262 abstinentions, and zero broker non-votes
the Amendment to the Second Restated Certificate of Incorporation increasing the
authorized number of shares of Common Stock to 200,000,000, we report that there
were 42,514,408 common shares issued and outstanding all of which were entitled
to vote with respect to such matter.
3. The stockholders approved with 32,576,302 affirmative
votes, 3,066,716 negative votes, 93,207 abstentions, and zero broker non-votes
an Amended 1996 Amended Stock Option Plan F, we report that 35,736,225 of the
common shares were present and entitled to vote with respect to such matter.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. Articles of Incorporation and By-laws
3.1 Second Restated Certificate of Incorporation of
the Company (incorporated herein by reference to the Company's 1995 Annual
Report on Form 10-K, filed on April 1, 1996).
3.2 Certificate of Designation of Series A Junior
Participating Preferred Stock (incorporated herein by reference to Exhibit 2 to
the Company's Registration Statement on Form 8-A filed on August 4, 1998).
3.3 By-Laws of the Company, as amended and restated
February 27, 1998 (incorporated herein by reference to Exhibit 3.2 of the
Company's 1997 Annual Report on Form 10-K).
19
<PAGE> 22
3.4 Certificate of Amendment of Second Restated
Certficate of Incorporation of the Company (filed herewith).
4. Instruments Defining the Rights of Security Holders
4.1 Specimen Common Stock Certificate (incorporated
herein by reference to Exhibit 4.1 of the Company's quarterly report on Form
10-Q for the quarter ended March 31, 1997).
4.2 Rights Agreement dated as of July 31, 1998,
between the Company and ChaseMellon Shareholder Services L.L.C. as Rights Agent
(incorporated herein by reference to the Company's Form 8-A filed on August 4,
1998, including form of Rights Certificate).
10. Material Contracts
10.1 1996 Amended Stock Option Plan F (incorporated
herein by reference to Exhibit A to the Company's definitive Proxy Statement
filed on April 11, 1997).
10.2 Outside Directors Stock-for-Fees Plan
(incorporated herein by reference to Exhibit C to the Company's definitive Proxy
Statement filed on April 10, 1996).
10.3 1992 Amended and Restated Stock Option Plan E,
as amended (incorporated herein by reference to Exhibit B to the Company's
definitive Proxy Statement filed on April 17, 1995).
10.4 Executive Deferred Compensation Plan, as amended
September 1, 1997 (incorporated herein by reference to Exhibit 10.4 of the
Company's 1997 Annual Report on Form 10-K).
10.5 Outside Director Deferred Compensation Plan,
effective January 1, 1997 (incorporated herein by reference to Exhibit 10.5 of
the Company's 1997 Annual Report on Form 10-K).
10.6 Multi-Currency Revolving Credit Agreement dated
as of January 9, 1998 among the Company, certain of the Company's subsidiaries,
the Lenders named therein, and NationsBank N.A. as administrative agent and
Wachovia Bank N.A., as documentation agent (incorporated herein by reference to
Exhibit 10.6 of the Company's 1997 Annual Report on Form 10-K).
10.7 Agreement of Lease between Joshua Realty
Corporation and the Company, dated August 10, 1992, as amended (incorporated
herein by reference to Exhibit 10.7 of the Company's 1997 Annual Report on Form
10-K).
10.8 Office Lease Agreement between Hyatt Plaza
Limited Partnership and the Company, dated August 12, 1993, as amended
(incorporated herein by reference to Exhibit 10.8 of the Company's 1997 Annual
Report on Form 10-K).
10.9 Lease Agreement between Fairfax Gilbane, L.P.
and the Company, dated February 15, 1994, as amended (incorporated herein by
reference to Exhibit 10.9 of the Company's 1997 Annual Report on Form 10-K).
10.10 Deed of Lease between Principal Mutual Life
Insurance Company and the Company, dated December 1996 (incorporated herein by
reference to Exhibit 10.10 of the Company's 1997 Annual Report on Form 10-K).
20
<PAGE> 23
10.11 1996 Incentive Compensation Plan for Executive
Officers.
13. 1998 Financial Report
27. Financial Data Schedule
(b) Reports on Form 8-K
NONE.
21
<PAGE> 24
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: August 13, 1999 /s/ Paul A. Brands
------------------- ----------------------------------------------------
Paul A. Brands, Chairman and Chief Executive Officer
Date: August 13, 1999 /s/ Ronald L. Schillereff
------------------- ----------------------------------------------------
Ronald L. Schillereff, Chief Financial Officer,
Treasurer, and Executive Vice President
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
3.1 Second Restated Certificate of Incorporation of the Company *
(incorporated herein by reference to the Company's 1995
Annual Report on Form 10-K filed on April 1, 1996).
3.2 Certificate of Designation of Series A Junior Participating *
Preferred Stock (incorporated herein by reference to
Exhibit 2 to the Company's Registration Statement on
Form 8-A filed on August 4, 1998).
3.3 By-laws of the Company, as amended and restated February *
27, 1998 (incorporated herein by reference to Exhibit
3.2 of the Company's 1997 Annual Report on Form 10-K).
3.4 Certificate of Amendment of Second Restated Certificate of
Incorporation of the Company.
4.1 Specimen Common Stock Certificate (incorporated herein by *
reference to Exhibit 4.1 of the Company's quarterly report
on Form 10-Q for the Quarter ended March 31, 1997).
4.2 Rights Agreement dated as of July 31, 1998, between the Company *
and ChaseMellon Shareholder Services L.L.C. as Rights Agent
(incorporated herein by reference to the Company's Form 8-A
filed on August 4, 1998, including form of Rights Certificate).
10.1 1996 Amended Stock Option Plan F (incorporated herein by *
reference to Exhibit A to the Company's definitive Proxy
Statement filed on April 11, 1997).
10.2 Outside Directors Stock-for-Fees Plan (incorporated herein by *
reference to Exhibit C to the Company's definitive Proxy
Statement filed on April 10, 1996).
10.3 1992 Amended and Restated Stock Option Plan E, as amended *
(incorporated herein by reference to Exhibit B to the Company's
definitive Proxy Statement filed on April 17, 1995).
10.4 Executive Deferred Compensation Plan, as amended *
September 1, 1997 (incorporated herein by reference to Exhibit
10.4 of the Company's 1997 Annual Report on Form 10-K).
10.5 Outside Director Deferred Compensation Plan, effective *
January 1, 1997 (incorporated herein by reference to Exhibit
10.5 of the Company's 1997 Annual Report on Form 10-K).
</TABLE>
23
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
10.6 Multi-Currency Revolving Credit Agreement dated as of *
January 9, 1998 among the Company, certain of the Company's
subsidiaries, the Lenders named therein, and NationsBank N.A.
as administrative agent and Wachovia Bank N.A., as
Documentation agent. (incorporated herein by reference to
Exhibit 10.6 of the Company's 1997 Annual Report on Form 10-K).
10.7 Agreement of Lease between Joshua Realty Corporation and the *
Company, dated August 10, 1992, as amended (incorporated herein
by reference to Exhibit 10.7 of the Company's 1997 Annual Report
on Form 10-K).
10.8 Office Lease Agreement between Hyatt Plaza Limited Partnership *
and the Company, dated August 12, 1993, as amended (incorporated
herein by reference to Exhibit 10.8 of the Company's 1997 Annual
Report on Form 10-K).
10.9 Lease Agreement between Fairfax Gilbane, L.P. and the Company, *
dated February 15, 1994, as amended (incorporated herein by
reference to Exhibit 10.9 of the Company's 1997 Annual Report on
Form 10-K).
10.10 Deed of Lease between Principal Mutual Life Insurance Company *
and the Company, dated December 1996 (incorporated herein
by reference to Exhibit 10.10 of the Company's 1997 Annual
Report on Form 10-K).
10.11 1996 Incentive Compensation Plan for Executive Officers *
13. 1998 Financial Report *
27. Financial Data Schedule
</TABLE>
- -----------------------
*Previously filed.
24
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT OF
SECOND RESTATED CERTIFICATE OF INCORPORATION OF
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
AMERICAN MANAGEMENT SYSTEMS, INCORPORATED, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
FIRST: That at a meeting of the Board of Directors of the Corporation a
resolution was duly adopted setting forth a proposed amendment to the Second
Restated Certificate of Incorporation of the Company and declaring said
amendment to be advisable. The resolution setting forth the proposed amendment
is as follows:
RESOLVED, that the first sentence of Section 1 of Article FOURTH of
the Second Restated Certificate of Incorporation of the Corporation is
hereby deleted in its entirety and replaced with the following (the
"Amendment"), subject to approval by the shareholders of the Corporation at
the next annual meeting of the shareholders of the Corporation scheduled
for May 21, 1999 (the "Annual Meeting"); such Amendment to become effective
upon the filing of the same with the Secretary of State of the State of
Delaware:
Section 1. Authorized Shares. The total authorized capital stock
of the Corporation shall be 204,000,000 shares, consisting of
4,000,000 shares of Preferred Stock, par value $.10 per share (herein
called the "Preferred Stock"), and 200,000,000 shares of Common Stock,
par value $0.01 per share (herein called the "Common Stock").
SECOND: That thereafter, pursuant to AMS's Bylaws and pursuant to
resolution of its Board of Directors, the annual meeting of shareholders of AMS
was duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at which meeting a majority of
the shareholders entitled to vote thereon voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 2
IN WITNESS WHEREOF, AMERICAN MANAGEMENT SYSTEMS, INCORPORATED has caused
this Certificate to be signed by Paul A. Brands, its Chief Executive Officer,
and Frank A. Nicolai, its Secretary, on this 20th day of July, 1999.
By: /s/ PAUL A. BRANDS
---------------------------
Paul A. Brands
Chief Executive Officer
Attested by:
By: /s/ FRANK A. NICOLAI
---------------------------
Frank A. Nicolai
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE
30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 115,000
<SECURITIES> 0
<RECEIVABLES> 256,600
<ALLOWANCES> 9,800
<INVENTORY> 0
<CURRENT-ASSETS> 382,100
<PP&E> 94,800
<DEPRECIATION> 64,000
<TOTAL-ASSETS> 548,100
<CURRENT-LIABILITIES> 169,900
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 311,800
<TOTAL-LIABILITY-AND-EQUITY> 548,100
<SALES> 596,200
<TOTAL-REVENUES> 596,200
<CGS> 318,800
<TOTAL-COSTS> 559,100
<OTHER-EXPENSES> 2,500
<LOSS-PROVISION> 3,800
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 34,600
<INCOME-TAX> 14,200
<INCOME-CONTINUING> 20,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,400
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.47
</TABLE>
