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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 September 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 November 5, 1999, 40,857,650 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............................................. 18
Item 6. Exhibits and Reports on Form 8-K.............................. 18
</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 Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES .......................................... $ 321.9 $ 282.2 $ 918.1 $ 755.9
EXPENSES
Client Project Expenses................... 168.0 153.4 486.8 417.8
Other Operating Expenses.................. 97.2 79.0 274.5 218.5
Corporate Expenses........................ 24.8 22.0 67.8 54.9
Provision for Specific Contract........... - 3.0 20.0 3.0
------- ------- ------- -------
290.0 257.4 849.1 694.2
INCOME FROM OPERATIONS............................. 31.9 24.8 69.0 61.7
OTHER (INCOME) EXPENSE
Interest (Income) Expense................. 0.3 (0.5) 0.4 0.5
Other (Income) Expense.................... (0.3) 0.4 0.7 0.8
Loss on Investments in Other Companies.... 1.3 - 2.7 -
------- ------- ------- -------
1.3 (0.1) 3.8 1.3
INCOME BEFORE INCOME TAXES......................... 30.6 24.9 65.2 60.4
INCOME TAXES....................................... 12.5 10.2 26.7 24.8
------- ------- ------- -------
NET INCOME......................................... $ 18.1 $ 14.7 $ 38.5 $ 35.6
======= ======= ======= =======
WEIGHTED AVERAGE SHARES............................ 42.0 42.3 42.3 42.2
======= ======= ======= =======
BASIC NET INCOME PER SHARE......................... $ 0.43 $ 0.35 $ 0.91 $ 0.85
======= ======= ======= =======
WEIGHTED AVERAGE SHARES AND EQUIVALENTS............ 42.5 43.2 43.0 43.0
======= ======= ======= =======
DILUTED NET INCOME PER SHARE....................... $ 0.43 $ 0.34 $ 0.90 $ 0.83
======= ======= ======= =======
</TABLE>
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(1) Certain amounts have been reclassified for comparative purposes.
2
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American Management Systems, Incorporated
CONSOLIDATED REVENUES BY MARKET(1)
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Telecommunications Firms............................... $ 95.6 $ 68.2 $ 253.9 $ 190.0
Financial Services Institutions........................ 48.8 55.3 143.0 155.4
State and Local Governments and Education.............. 82.9 75.9 254.5 189.7
Federal Government Agencies............................ 79.1 66.8 218.8 179.6
Other Corporate Clients................................ 15.5 16.0 47.9 41.2
------- ------- ------- -------
Total Revenues......................................... $ 321.9 $ 282.2 $ 918.1 $ 755.9
======= ======= ======= =======
</TABLE>
- --------
(1) Certain amounts have been reclassified for comparative purposes.
3
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American Management Systems, Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
<TABLE>
<CAPTION>
9/30/99
ASSETS (Unaudited) 12/31/98
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<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents.......................................... $ 80.3 $ 119.3
Accounts and Notes Receivable...................................... 273.7 260.3
Prepaid Expenses and Other Current Assets.......................... 15.8 8.8
------- -------
369.8 388.4
FIXED ASSETS
Equipment ....................................................... 54.3 59.7
Furniture and Fixtures............................................. 25.1 23.6
Leasehold Improvements............................................. 18.1 17.3
------- -------
97.5 100.6
Accumulated Depreciation and Amortization.......................... (65.8) (63.0)
------- -------
31.7 37.6
OTHER ASSETS
Purchased and Developed Computer Software (Net of Accumulated
Amortization of $82,400,000 and $72,000,000).................... 112.6 83.6
Intangibles (Net of Accumulated Amortization of $5,300,000 and
$4,700,000)...................................................... 6.4 4.3
Other Assets (Net of Accumulated Amortization of $1,000,000 and
$920,000) ....................................................... 27.3 23.7
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146.3 111.6
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TOTAL ASSETS ....................................................... $ 547.8 $ 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>
9/30/99
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 12/31/98
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<S> <C> <C>
CURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..................... $ 6.3 $ 5.3
Accounts Payable.................................................... 15.6 21.3
Accrued Incentive Compensation...................................... 38.8 55.8
Other Accrued Compensation and Related Items........................ 48.9 39.8
Deferred Revenues................................................... 31.9 37.7
Other Accrued Liabilities........................................... 11.6 4.8
Provision for Contract Losses....................................... 27.2 7.3
Income Taxes Payable................................................ 0.8 9.1
-------- --------
181.1 181.1
Deferred Income Taxes............................................... 3.0 4.9
-------- --------
184.1 186.0
NONCURRENT LIABILITIES
Notes Payable and Capitalized Lease Obligations..................... 18.1 22.7
Other Accrued Liabilities........................................... 26.8 15.9
Deferred Income Taxes............................................... 21.2 21.1
-------- --------
66.1 59.7
-------- --------
TOTAL LIABILITIES ........................................................ 250.2 245.7
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 40,891,838 and 42,026,510
Outstanding)..................................................... 0.5 0.5
Capital in Excess of Par Value...................................... 87.7 96.7
Retained Earnings................................................... 278.8 240.3
Currency Translation Adjustment..................................... (9.3) (6.3)
Common Stock in Treasury, at Cost (10,165,376 and
9,030,704 Shares)................................................ (60.1) (39.3)
------- -------
297.6 291.9
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $ 547.8 $ 537.6
======= =======
</TABLE>
5
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American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ..................................................................... $ 38.5 $ 35.6
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation .............................................................. 9.9 13.3
Amortization............................................................... 21.0 15.0
Loss on Investments in Other Companies..................................... 2.7 -
Deferred Income Taxes...................................................... (1.9) 14.0
Provision for Doubtful Accounts............................................ 5.0 8.8
Provision for Contract Losses.............................................. 19.9 3.0
Changes in Assets and Liabilities:
Increase in Trade Receivables............................................ (18.3) (2.7)
(Increase) Decrease in Prepaid Expenses and Other Current Assets......... (7.0) 0.9
Increase in Other Assets................................................. (10.6) (9.6)
(Decrease) Increase in Accrued Incentive Compensation.................... (11.9) 9.5
Increase in Accounts Payable, Other Accrued Compensation and
Liabilities........................................................... 21.2 13.8
Decrease in Deferred Revenue............................................. (5.8) (11.5)
Decrease in Income Taxes Payable......................................... (8.3) (5.4)
------- ------
Net Cash Provided by Operating Activities........................................ 54.4 84.7
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets......................................................... (6.8) (7.5)
Purchase of Computer Software and Investment in Software Products ............... (47.2) (28.4)
Other Investments and Intangibles................................................ (2.7) 1.0
Proceeds from Sale of Fixed Assets and Purchased Computer Software............... 5.0 0.9
------- ------
Net Cash Used in Investing Activities............................................ (51.7) (34.0)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings ..................................................................... - -
Payments on Borrowings........................................................... (3.6) (6.7)
Proceeds from Common Stock Options Exercised..................................... 6.6 10.7
Payments to Acquire Treasury Stock............................................... (41.7) (12.5)
------- ------
Net Cash Used in Financing Activities............................................ (38.7) (8.5)
------- ------
(DECREASE) INCREASE IN CURRENCY TRANSLATION ADJUSTMENT................................. (3.0) 2.5
------- ------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS................................... (39.0) 44.7
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................................... 19.3 49.6
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................. $ 80.3 $ 94.3
======= ======
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....................... $ 9.1 $ 1.5
</TABLE>
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American Management Systems, Incorporated
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In millions)
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
NET INCOME.................................... $18.1 $14.7 $38.5 $35.6
OTHER COMPREHENSIVE INCOME (LOSS):
Currency Translation Adjustment......... 2.0 2.8 (3.0) 2.5
----- ----- ----- -----
COMPREHENSIVE INCOME.......................... $20.1 $17.5 $35.5 $38.1
===== ===== ===== =====
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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"), excluding percentage changes in de minimus dollar amounts. 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 Nine Months Ended
September 30, September 30, 1999 September 30, 1999
vs. vs.
1999 1998 September 30, 1998 September 30, 1998
---- ---- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues............................................. 100.0% 100.0% 14.1% 21.5%
Expenses
Client Project Expenses........................ 52.2 54.4 9.5 16.5
Other Operating Expenses....................... 30.2 28.0 23.0 25.6
Corporate Expenses............................. 7.7 7.8 12.7 23.5
Provision for Specific Contract................ - 1.0 (100.0) 566.7
------ ------
Total.......................................... 90.1 91.2 12.7 22.3
Income from Operations............................... 9.9 8.8 28.6 11.8
Other (Income) Expense............................... 0.4 - - 192.3
------ ------
Income Before Income Taxes........................... 9.5 8.8 22.9 7.9
Income Taxes......................................... 3.9 3.6 22.5 7.7
------ ------
Net Income........................................... 5.6 5.2 23.1 8.1
Weighted Average Shares.............................. (0.7) 0.2
Basic Net Income per Share........................... 22.9 7.1
Weighted Average Shares and Equivalents............. (1.6) -
Diluted Net Income per Share......................... 26.5 8.4
</TABLE>
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RESULTS OF OPERATIONS (continued)
REVENUES
Revenues increased 14% during the third quarter and 22% for the first nine
months of 1999, compared to the same 1998 periods. Revenues in the third quarter
and nine months of 1999 increased in all major markets compared to the same 1998
periods, with the exception of the Financial Institutions market. The Company
expects revenue growth for 1999 as a whole to be slightly lower than the revenue
growth rate experienced in the first nine months of 1999.
Business with non-US clients increased 11% (to $60.7 million) during the
third quarter and increased 9% (to $170.6 million) for the first nine months of
1999 compared to the same 1998 periods. Business with non-US clients now
represents 19% of the Company's revenues for the nine months of 1999. 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
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. The Company expects revenue growth for projects with an eCommerce
component to double for all of 1999 when compared to the 1998 eCommerce revenues
of approximately $200 million.
In the Telecommunications Firms market, a market that continues to be
characterized by large projects with relatively few clients, revenues increased
40% in the third quarter and 34% for the first nine months, compared to the same
1998 periods. This revenue increase reflects the Company's continued success in
acquiring new clients, both in the wireless and wireline sectors of the market,
expanding service offerings, and initiating several systems integration
engagements within the Telecommunications Firms market. Non-US revenues in this
market increased 36% (to $42.2 million) for the quarter and 22% (to $111.1
million) for the first nine months, compared to the same 1998 periods. For the
year 1999, the Company anticipates revenue growth in this market to increase at
a slower rate of increase than that experienced in the first nine months 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 materially to
revenue growth in this market in 1999 and the first half of 2000; rather, they
will reduce capitalized software costs. Although the first release of the
software has been delivered, the development effort continues for the second
release which is scheduled to be delivered at the end of the first half of 2000.
There continues to be 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. Additionally, the Company works in countries located in regions
other than Western Europe and North America from time to time and the delivery
risks in some of 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 nine months of 1999.
In the Financial Services Institutions target market, 1999 revenues in the
third quarter and first nine months decreased 12% and 8%, respectively, when
compared to the same 1998 periods. This decrease is
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due to large projects winding down in the fourth quarter of 1998 and certain new
projects not ramping up as quickly as anticipated. The Company believes that
there are Year 2000 compliance-related business impacts in this market but has
not been able to estimate their magnitude. Business with non-US clients,
primarily European, accounted for approximately 32% of the third quarter
revenues ($15.7 million) and 35% of the nine month revenues ($49.9 million) in
this market. For 1999, the Company anticipates revenue in this market to be less
than in 1998. However, the Company expects increasing revenues in the fourth
quarter of 1999 when compared to the third quarter of 1999.
In the State and Local Governments and Education target market, revenues
increased 9% in the third quarter and 34% for the first nine months of 1999. The
Company's revenues in this market experienced significant growth over the past
several quarters, and therefore the moderating increase in the third quarter of
1999 was expected. The revenue increase for the first nine months of 1999 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 integrated financial systems.
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 deferred
recognition of revenues until that point at which management could predict, with
reasonable certainty, that the benefit stream would generate amounts sufficient
to fund the contract. From that point forward, revenues were recognized on a
percentage of completion basis. All of the current large multi-year
benefit-funded contracts are now being recognized on a percentage of completion
basis. As the number of such contracts, and therefore, the Company's experience
with predicting the timing and certainty of such revenues have increased over
time, the Company expects to begin recognizing revenues under the normal percent
of completion method in the future, at the start of a new engagement. 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 nine
months of 1999 compared with the same period in 1998.
Revenues in the Federal Government Agencies target market increased 18% in
the third quarter and 22% in the first nine 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 45% of the third
quarter and 34% of the first nine months of 1999 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 contracts with clients using the Company's federal
financial systems.
Revenues in the Other Corporate Clients market decreased 3% during the
third quarter and increased 16% during the first nine months of 1999, compared
to the same 1998 periods. 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 nine
months of 1999.
EXPENSES
Client project expenses and other operating expenses together increased 14%
during the third quarter and 20% for the first nine months of 1999. Both of
these increases were in line with the growth rate in revenues in the comparable
periods. For all of 1999, the Company anticipates that these expenses will
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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 have been and will be
capitalized. As the different releases of the Tapestry software are completed
and delivered, amortization will begin. Key software deliveries have been made
early in the fourth quarter of 1999 and the Company is targeting another
delivery of the software for mid 2000.
Corporate Expenses increased 13% during the third quarter and 24% for the
first nine months of 1999, compared to the same 1998 periods. Corporate expenses
increased faster than the revenue growth during the first nine months, due to
the dedication of resources applied to the Year 2000 remediation of internal
systems and increases in accruals for corporate level performance-based
incentive compensation. For the year 1999, the Company expects corporate
expenses to grow at rates slightly above the Company's revenue growth rate.
The Company is continuing to address the ongoing disputes on a project an
AMS subsidiary undertook for Bezeq, the Israeli telephone company ("Bezeq"),
mentioned in the Company's Form 10-Q for the second quarter filed on August 13,
1999. At the end of the first nine months of 1999, the Company continues to
maintain the $27 million provision, established in 1998 and 1999 for potential
losses related to this project. The Company has no information that would cause
it to change the amount of the provision.
INCOME FROM OPERATIONS
Income from operations increased 29% for the third quarter and 12% for the
first nine months 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 increased 160% during the third quarter and
decreased 20% during the first nine months of 1999 compared with the same
periods in 1998. The nine month decrease is due to lower amounts of short-term
borrowings, as a result of significantly improved cash flow from operations
during all of 1999. 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 nine months of 1999, compared to the same
period in 1998, primarily because of a write-off of certain leasehold
improvements and fixed assets during the first half of 1999.
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, Inc. (formerly
Competix, L.L.C.). The Company incurred a loss of $1.3 million during the third
quarter and $2.7 million during the first nine months of 1999 related to this
joint venture, due to the continued start up costs of this new company.
FOREIGN CURRENCY EXCHANGE
Approximately 19% of the Company's 1999 revenues in the first nine months
of 1999 were derived from non-US business. The Company's practice is to
negotiate contracts in the same currency, in which
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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 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 September 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
September 30, 1999, the Company's cash and cash equivalents totaled $80.3
million down from $119.3 million at the end of 1998. Cash provided by operating
activities for the first nine months of 1999 was $54.4 million.
During the first nine months of 1999, the Company invested over $51.7
million in fixed assets, software purchases, and computer software. Revolving
line-of-credit borrowings were zero at September 30, 1999. During the nine
months of 1999, the Company made approximately $3.6 million in installment
payments of principal on outstanding debt owed to banks; the Company also
received proceeds of approximately $6.6 million during the period from the
exercise of stock options and the tax benefits related thereto. The Company
repurchased approximately 1,500,000 shares of common stock during the first nine
months of 1999, at a cost of $41.7 million.
On September 21, 1999 the Company announced that its Board of Directors has
authorized the purchase, from time to time, of up to 2 million shares of its
common stock through open market and negotiated purchases. This authorization is
in addition to the actions in August of 1998 and in February 1999, where in both
cases the Board of Directors authorized the purchase of 1 million shares. The
Company has acquired in open market purchases approximately 2,150,000 shares
through September 30, 1999, and as of such date had authorization to purchase up
to 1,850,000 additional shares.
At September 30, 1999, the Company's debt-equity ratio, as measured by
total liabilities divided by stockholders' equity was 0.84, the same as that
shown at December 31, 1998.
The Company's material unused source of liquidity at the end of the first
nine months 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 Bezeq, a subsidiary
of the Company has entered into bank guarantees in Bezeq's favor securing its
performance under this contract. At September 30, 1999, $19.8 million was
outstanding under such bank guarantees. See "Results of Operations - Expenses,"
above for additional information about the Bezeq contract. On August 8, 1999,
12
<PAGE> 15
the Company's subsidiary sought and received a temporary injunction from the
Jerusalem District Court prohibiting Bezeq from realizing on the guarantees.
This injunction remains in effect pending a District Court determination whether
to proceed to trial on the merits of the underlying claim. In the event the
Jerusalem District Court does not grant a permanent injunction, and Bezeq were
to call on these guarantees, there should not be any material adverse effect on
the Company's liquidity. In September 1999, Bezeq sent a notice to the relevant
AMS subsidiary purporting to terminate the contract, which the Company does not
agree that Bezeq is entitled to do. Also in September, Bezeq sued the AMS
subsidiary party to the contract in Jerusalem District Court. Bezeq alleges
damages of approximately $41 million based on breach of contract, which figure
includes amounts Bezeq could seek to draw under the bank guarantees. The
Company's subsidiary is contesting these allegations vigorously in appropriate
court submissions. The Company does not anticipate any material adverse effect
on its liquidity as a result of these claims alleged by Bezeq against the AMS
subsidiary.
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.
Since 1997, the Company has been 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, have been monitoring the Company's status
with respect to Year 2000 issues and Year 2000 program managers have been
designated throughout the Company to oversee Year 2000 efforts. These managers
have provided reports, on a quarterly basis, to the senior management and the
Internal Auditor of the Company since the second quarter of 1998; another round
of reports to senior management is scheduled for late November and early
December 1999. 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.
The Company has completed reviews of its major internal application systems
for Year 2000 compliance and has implemented a program of testing and
remediation for its application systems. Each of the major company-wide
application subsystems has been remediated and has passed unit and subsystem
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 has been going well and is scheduled
for completion by the end of November 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
13
<PAGE> 16
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 most of its major 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 has
also tested 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 the end of November 1999.
Total costs of achieving Year 2000 compliance in the Company's internal
systems, which costs have been and will continue to be expensed as they are
incurred, are estimated to be approximately $3.5 million for 1999, and $0.5
million for 2000. For the past three years, approximately $5.3 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. The Company
believes, however, that marginal decreases in business in certain vertical
markets may be due to clients delaying certain non-critical software projects
until after the Year 2000 changeover. 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 a limited number of strategic consulting
engagements in which it assists clients with the performance of their own Year
2000 projects but does not generally perform actual remediation work. 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 substantially all of
its product 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 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
14
<PAGE> 17
risk in connection with such third-party products. Nevertheless, in order to
avoid any disruptions in connection with third-party products, the Company
continues to seek 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.
The Company has also developed contingency plans for supporting its clients
through the Year 2000 changeover. These plans include provision of client
support during non-standard support hours, resolving any public relations or
legal issues that may arise, and business continuity strategies should the
internal infrastructure or public utilities on which the Company (or its
clients, to the extent the Company has staff at client sites) relies (e.g.,
telephone, power, internet) suffer disruptions relating to Year 2000 issues.
These plans, which are in the process of being communicated to the Company's
clients, vary by the nature of the client and the system in place at the
client's site. In addition, the Company has established a "Y2K Command Center"
to monitor Year 2000 activity across the Company and its clients and to
coordinate centrally any notable Year 2000 issues that may arise. The Y2K
Command Center participants will continue to meet regularly through the century
changeover and the period surrounding February 29, 2000.
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
$0.5 million for 2000. For the past three years, $6.0 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 almost all of its lessors indicating that the
systems in the buildings either already are Year 2000 compliant, or are expected
to be before the end of 1999.
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 fourth quarter 1999
and first half of 2000; 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 delay non-Year 2000 related software
projects that are not mission-critical 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 delays. 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.
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 to continue to manage its
growth in revenues. 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. Any such development in a
project could result in a decline in revenues or profits, the need to relocate
staff, a 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. 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. All
of 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.
The Company could also face delays by clients, or client suspensions or
cancellations of projects, because of the failure of client systems to be Year
2000 compliant. Various companies, including AMS clients, have imposed 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. The Company has
experienced, and may continue to experience into 2000, some diversion of work,
both pending and new opportunities, and decreases in revenues and profit
margins, as a result of client Year 2000 compliance issues. Although these risks
exist potentially across the Company's engagements, they are magnified in
certain target markets, such as the Financial Services Institutions market given
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 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
historically has deferred 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. As the number of such
16
<PAGE> 19
contracts, and the Company's experience with predicting the timing and certainty
of such revenues, have increased over time, the Company expects to be able to
recognize revenues earlier on such contracts in the future.
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 Forms 10-Q filed May 17, 1999 and
August 13, 1999, the State of Mississippi sued AMS in April 1999, 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. On May 24, 1999, AMS filed an answer and counterclaim for payment for
certain deliverables accepted by the State, including work in progress.
Discovery continues and is expected to be completed by the second quarter of
2000. AMS expects 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
NONE.
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).
18
<PAGE> 21
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 Certficate
of Incorporation of the Company (incorporated herein by reference to Exhibit 3.4
of the Company's quarterly report on Form 10-Q for the quarter ended June 30,
1999).
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).
19
<PAGE> 22
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
(b) Reports on Form 8-K
NONE.
20
<PAGE> 23
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 15, 1999 /s/ Paul A. Brands
----------------- -------------------
Paul A. Brands, Chairman and Chief Executive Officer
Date: November 15, 1999 /s/ Ronald L. Schillereff
----------------- -------------------------
Ronald L. Schillereff, Chief Financial Officer,
Treasurer, and Executive Vice President
21
<PAGE> 24
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <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 (incorporated herein by reference
to Exhibit 3.4 of the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1999).
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>
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <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
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1999 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 80,300
<SECURITIES> 0
<RECEIVABLES> 273,700
<ALLOWANCES> 10,090
<INVENTORY> 0
<CURRENT-ASSETS> 369,800
<PP&E> 97,500
<DEPRECIATION> 65,800
<TOTAL-ASSETS> 547,800
<CURRENT-LIABILITIES> 184,100
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> 297,600
<TOTAL-LIABILITY-AND-EQUITY> 547,800
<SALES> 918,100
<TOTAL-REVENUES> 918,100
<CGS> 486,800
<TOTAL-COSTS> 849,100
<OTHER-EXPENSES> 3,800
<LOSS-PROVISION> 5,000
<INTEREST-EXPENSE> 400
<INCOME-PRETAX> 65,200
<INCOME-TAX> 26,700
<INCOME-CONTINUING> 38,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,500
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.90
</TABLE>
