<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-15502
COMVERSE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3238402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
170 CROSSWAYS PARK DRIVE, WOODBURY, NY 11797
(Address of principal executive offices) (Zip Code)
(516) 677-7200
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock, par value $0.10 per share,
outstanding as of November 3, 1995 was 21,258,611
Page 1 of 18 Total Pages
(Exhibit Index Appears on Page 15)
<PAGE>
PART I
FINANCIAL INFORMATION
Page
----
ITEM 1. Financial Statements
1. Condensed Consolidated Balance Sheets as
of December 31, 1994 and September 30, 1995 3
2. Condensed Consolidated Statements of Income
for the Three Month and Nine Month Periods
Ended September 30, 1994 and September 30, 1995 4
3. Condensed Consolidated Statements of Stockholders'
Equity for the Year Ended December 31, 1994 and the
Nine Month Period Ended September 30, 1995 5
4. Condensed Consolidated Statements of Cash Flows
for the Nine Month Periods Ended
September 30, 1994 and September 30, 1995 6
4. Notes to Condensed Consolidated Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Page 2 of 18
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1994 1995 1994 1995
(Unaudited) (Unaudited)
Current assets: Current liabilities:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 39,225 $ 80,336 Accounts payable and
Bank time deposits and accrued expenses $ 19,192 $ 27,208
short-term investments 89,368 44,560 Advance payments
Accounts receivable, net 24,181 35,187 from customers 5,387 5,131
Inventories 12,427 16,015 Due to related parties 278 338
Prepaid expenses and Other current liabilities 3,591 874
other current assets 4,591 6,538 -------- --------
-------- --------
Total current liabilities 28,448 33,551
Total current assets 169,792 182,636
5-1/4% Convertible
Subordinated Debentures 60,000 60,000
Long-term receivables, net 1,093 2,362 Liability for severance pay 1,352 2,331
Other liabilities 676 1,073
Property and equipment 17,162 21,460 Minority interest 413 320
Less: accumulated depreci- -------- --------
ation and amortization (8,119) (10,202) Total liabilities 90,889 97,275
-------- --------
9,043 11,258
Stockholders' equity:
Investments 616 3,699 Common Stock, $.10 par value
authorized 100,000,000 shares;
Goodwill, net 1,384 1,354 issued and outstanding
20,981,456 and 21,222,356 2,098 2,122
Software development costs, net 6,512 8,374 Additional paid-in-capital 73,300 74,790
Cumulative translation adjustment (118) (40)
Other intangible assets, net 1,827 1,663 Unrealized gain on available for
sale securities, net of tax 15 931
Deferred costs and other assets, net 2,235 1,922 Retained earnings 26,318 38,190
-------- -------- -------- --------
Total stockholders' equity 101,613 115,993
-------- --------
$192,502 $213,268 $192,502 $213,268
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 18
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Revenues:
Sales $ 78,818 $ 99,126 $28,893 $36,116
Interest and other income 3,917 6,533 1,452 2,209
-------- -------- ------- -------
Total revenues 82,735 105,659 30,345 38,325
- ------------------------------ -------- -------- ------- -------
Costs and expenses:
Research and development 12,236 19,806 4,448 7,078
Less reimbursement (3,143) (5,148) (1,049) (1,846)
-------- -------- ------- -------
Net research and development 9,093 14,658 3,399 5,232
Cost of sales 34,909 42,879 12,569 15,665
Selling, general and administrative 24,041 29,594 8,848 10,643
Royalties and license fees 1,880 1,828 584 551
Minority interest and equity
in loss of affiliates 280 (105) (15) (60)
Interest expense and other 2,883 3,459 1,145 1,017
-------- -------- ------- -------
Total costs and expenses 73,086 92,313 26,530 33,048
-------- -------- ------- -------
Income before income tax provision 9,649 13,346 3,815 5,277
Income tax provision 1,289 1,474 343 570
-------- -------- ------- -------
Net income $ 8,360 $ 11,872 $ 3,472 $ 4,707
======== ======== ======= =======
Primary and fully diluted earnings per share $0.38 $0.53 $0.16 $0.21
======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 18
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Unrealized
Number Par Paid in Translation Gains Retained
of Shares Value Capital Adjustment (Losses) Earnings Total
---------- ------- ----------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994
as previously reported 19,814,461 $1,981 $73,047 $ (95) $ - $15,517 $ 90,450
Pooling of interests 1,078,944 108 (98) - - 1,148 1,158
---------- ------ ------- ----------- ---------- ------- --------
Balance, as restated 20,893,405 2,089 72,949 (95) - 16,665 91,608
Adjustment to beginning balance for
unrealized gain on available-for-sale
securities, net of tax - - - - 353 - 353
Unrealized loss on available-for-sale
securities, net of tax - - - - (338) - (338)
Common stock issued in connection with
exercise of stock options and warrants 88,051 9 351 - - - 360
Translation adjustment - - - (23) - - (23)
Net income, year ended
December 31, 1994 - - - - - 12,098 12,098
Adjustment to conform fiscal year
of pooled company - - - - - (2,445) (2,445)
---------- ------ ------- ----------- ---------- ------- --------
BALANCE AT DECEMBER 31, 1994 20,981,456 2,098 73,300 (118) 15 26,318 101,613
Unrealized gain on available-for-sale
securities, net of tax - - - - 916 - 916
Common stock issued in connection with
exercise of stock options and warrants 230,204 23 1,336 - - - 1,359
Common stock issued in connection with
acquisition of additional interest
in majority-owned subsidiary 10,696 1 154 - - - 155
Translation adjustment - - - 78 - - 78
Net income, nine months ended
September 30, 1995 - - - - - 11,872 11,872
---------- ------ ------- ----------- ---------- ------- --------
BALANCE AT SEPTEMBER 30, 1995 21,222,356 $2,122 $74,790 $ (40) $ 931 $38,190 $115,993
========== ====== ======= =========== ========== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 18
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
1994 1995
Cash flows from operating activities:
Net cash from operations after adjustments
for non-cash items $ 11,230 $ 16,013
Changes in assets and liabilities:
Accounts receivable ( 5,474) (12,275)
Inventories ( 2,471) (3,588)
Prepaid expenses and other receivables ( 105) (2,485)
Accounts payable and accrued expenses 5,048 8,016
Advance payments from customers 615 (256)
Due to related parties 122 60
Liability for severance pay 564 979
-------- --------
Net cash provided by operating activities 9,529 6,464
Cash flows from investing activities:
Maturities and sales (purchases) of
bank time deposits and investments, net ( 55,067) 43,130
Purchases of property and equipment ( 3,256) (4,298)
Increase in software development costs ( 2,099) (3,688)
-------- --------
Net cash (used in) provided by investing activities ( 60,422) 35,144
Cash flows from financing activities:
Decrease in short- and long-term debt, net ( 101) (1,856)
Proceeds from issuance of common stock 217 1,359
-------- --------
Net cash provided by (used in) financing activities 116 (497)
Net increase (decrease) in cash and cash equivalents ( 50,777) 41,111
Cash and cash equivalents, beginning of period 119,438 39,225
--------
Cash and cash equivalents, end of period $ 68,661 $ 80,336
======== ========
The accompanying notes are an integral part of these
financial statements.
Page 6 of 18
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION. The foregoing financial statements have been
prepared by Comverse Technology, Inc. (the "Company" or "Comverse") and are
unaudited. All adjustments (which, except as hereinafter described, consist
solely of normal recurring adjustments) have been made that, in the opinion of
the Company's management, are necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. The consolidated financial statements presented herein should be
read in conjunction with the consolidated financial statements, and the notes
thereto, for the year ended December 31, 1994. The financial statements
appearing herein have been restated to reflect the acquisition of Dale, Gesek,
McWilliams & Sheridan, Inc. ("DGM&S") described below. The results of
operations for the nine and three month periods ended September 30, 1995 are
not necessarily indicative of the results to be expected for any other interim
period or the entire fiscal year.
ACQUISITION OF DGM&S. On August 30, 1995, the Company acquired
DGM&S, a New Jersey corporation that develops and markets telecommunications
software products. To effect the acquisition, the Company issued 1,078,944
shares of common stock for all the outstanding common stock of DGM&S. The
acquisition has been accounted for as a pooling of interests; therefore, prior
financial statements and information have been restated to include DGM&S, as
if the companies had been combined for all periods presented.
Prior to the acquisition, DGM&S prepared its financial statements on
the basis of a fiscal year ending September 30. In 1995, the combined
companies will report on the basis of Comverse's fiscal year, which ends on
December 31. To conform the financial reporting periods of the combined
companies, DGM&S's operating results for the three month period ended December
31, 1994, comprising total revenues and a net loss of approximately $2,122,000
and $2,445,000, respectively, are reflected as an adjustment to retained
earnings on the December 31, 1994 consolidated balance sheet, and the 1994
interim financial statements appearing above reflect the combination of
Comverse's results for the three and nine month periods ended September 30,
1994 with DGM&S's results for the three and nine month periods ended June 30,
1994.
The table below sets forth the unaudited separate and combined
results of Comverse and DGM&S for the three-month periods ended March 31,
1995, June 30, 1995 and September 30,1995.
Page 7 of 18
<PAGE>
Three Months Ended
March 31, June 30, September 30,
1995 1995 1995
-------- ------- ------------
(In Thousands)
(Unaudited)
Total Revenues
--------------
Comverse $28,744 $31,918 $34,044
DGM&S 2,778 3,894 4,550
Less: Intercompany eliminations - - (269)
------- ------- -------
$31,522 $35,812 $38,325
======= ======= =======
Net Income
----------
Comverse $ 3,517 $ 4,071 $ 4,418
DGM&S (628) 205 310
Less: Intercompany eliminations - - (21)
------- ------- -------
$ 2,889 $ 4,276 $ 4,707
======= ======= =======
INVENTORIES. The composition of inventories at December 31, 1994
and September 30, 1995 is as follows:
DECEMBER 31, SEPTEMBER 30,
1994 1995
(In Thousands)
Raw materials $ 7,196 $ 9,796
Work in process 2,342 4,001
Finished goods 2,889 2,218
------- -------
$12,427 $16,015
======= =======
RESEARCH AND DEVELOPMENT EXPENSES. The Company has historically
supported a substantial portion of its research and development activities
through participation in government sponsored funding programs, which in
general provide reimbursement for a portion of research and development
expenditures incurred under project budgets approved on an annual basis by the
applicable funding agencies. During the nine month and three month periods
ended September 30, 1995, gross research and development expenses amounted to
approximately $19,806,000 and $7,078,000, respectively, of which
approximately $5,148,000 and $1,846,000, respectively, was reimbursed.
EARNINGS PER SHARE. For the nine month and three month periods ended
September 30, 1994 and 1995, the computation of earnings per share is based on
the weighted average number of outstanding common shares and additional shares
assuming the exercise of stock options. For the nine month and three month
periods ended
Page 8 of 18
<PAGE>
September 30, 1994, the computation of fully diluted earnings per share was
antidilutive. The shares used in the computations are as follows (also see
Exhibit 11):
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1994 1995
(In Thousands)
Primary 21,806 22,468 21,773 22,827
Fully diluted 21,806 22,612 21,773 22,929
Page 9 of 18
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
---------------------------------------------
RESULTS OF OPERATIONS.
Total Revenues. Total revenues for the nine month and three month
--------------
periods ended September 30, 1995 increased by approximately $22,924,000 (28%)
and approximately $7,980,000 (26%), respectively, from the corresponding
periods in 1994. The increase is attributable primarily to a higher volume of
sales of systems and parts. Sales for the nine month and three month periods
ended September 30, 1995 increased by approximately $20,308,000 (26%) and
approximately $7,223,000 (25%), respectively, from the 1994 periods. The
growth in sales for the nine month period ended September 30, 1995 occurred in
both the TRILOGUE and AUDIODISK product lines and for the three month period
ended September 30, 1995 occurred in the TRILOGUE product line. Interest and
other income for the nine month and three month periods ended September 30,
1995 increased by approximately $2,616,000 (67%) and approximately $757,000
(52%), respectively, over the corresponding periods in 1994, resulting from
increased interest rates and realized gains on sales of short-term
investments.
Cost of Sales. Cost of sales for the nine month and three month
-------------
periods ended September 30, 1995 increased by approximately $7,970,000 (23%)
and approximately $3,096,000 (25%), respectively, from the corresponding
periods in 1994. The increase is attributable primarily to the increase in
sales. Gross margin (expressed as a percentage of sales) for the nine month
and three month periods ended September 30, 1995 increased to approximately
57% from approximately 56% during the corresponding 1994 periods.
Research and Development Expenses. Gross research and development
---------------------------------
expenses for the nine month and three month periods ended September 30, 1995
increased by approximately $7,570,000 (62%) and approximately $2,630,000
(59%), respectively, from the corresponding periods in 1994. Net research and
development expenses, after reimbursement under government funding programs,
for the nine month and three month periods ended September 30, 1995 increased
by approximately $5,565,000 (61%) and approximately $1,833,000 (54%),
respectively, from the corresponding periods in 1994. Such increases are due
to the overall growth of research and development operations, the initiation
of significant new research and development projects for both product lines,
and increases in salaries and other costs associated with research and
development operations in Israel.
Selling, General and Administrative Expenses. Selling, general and
--------------------------------------------
administrative expenses for the nine month and three month periods ended
September 30, 1995 increased by approximately $5,553,000 (23%) and
approximately $1,795,000 (20%), respectively, from the corresponding periods
in 1994. Such increases were the result of increased sales, marketing, and
administrative activities associated with the overall growth of the Company's
operations, and particularly with the expansion of direct sales and marketing
activities internationally and in the United States.
Page 10 of 18
<PAGE>
Royalties and License Fees. Royalties and license fees for the nine
--------------------------
month and three month periods ended September 30, 1995 decreased by
approximately $52,000 (3%) and approximately $33,000 (6%), respectively, from
the corresponding periods in 1994. Royalties and license fees for the nine
and three month periods ended September 30, 1995, as a percentage of total
sales, decreased from approximately 2.4% and approximately 2.0%, respectively,
in the 1994 periods, to approximately 1.8% and approximately 1.5%,
respectively, in the 1995 periods reflecting an increase in the proportion of
total sales comprised of products bearing lower rates of royalty or for which
no royalties are due.
Income Tax Provision. Provision for income taxes for the nine month
--------------------
and three month periods ended September 30, 1995 increased by approximately
$185,000 (14%) and approximately $227,000 (66%), respectively, from the
corresponding periods in 1994. The Company's overall effective tax rate
decreased from approximately 13% during the nine month period ended September
30, 1994 to approximately 11% in the corresponding period of 1995, and
increased from approximately 9% during the three month period ended September
30, 1994 to approximately 11% in the corresponding period in 1995. The
Company's overall rate of tax is reduced significantly by the tax benefits
associated with qualified activities of one of its subsidiaries in Israel.
Net Income. Net income after taxes for the nine month and three
----------
month periods ended September 30, 1995 increased by approximately $3,512,000
(42%) and approximately $1,235,000 (36%), respectively, from the corresponding
periods in 1994, primarily as a result of the factors described above. Net
income after taxes as a percentage of total revenues increased to
approximately 11.2% and approximately 12.3%, respectively, in the nine month
and three month periods ended September 30, 1995 from approximately 10.1% and
approximately 11.4%, respectively, in the corresponding periods in 1994.
LIQUIDITY AND CAPITAL RESOURCES. At September 30, 1995, the Company
had cash and cash equivalents of approximately $80,336,000, bank time deposits
and short-term investments of approximately $44,560,000 and working capital of
approximately $149,085,000. The Company believes that its existing working
capital, together with funds generated from operations, will be sufficient to
provide for its planned operations for the foreseeable future.
The Company regularly examines opportunities for strategic
acquisitions of other companies or lines of business. Such acquisitions may
require significant investment of capital, both in payment of the acquisition
cost and in providing working capital for any acquired businesses. There can
be no assurance as to whether or when any acquired business would contribute
positive operating results commensurate with the associated investment. The
Company anticipates that it may from time to time issue additional debt and/or
equity securities either as direct consideration for such acquisitions or to
raise additional funds to be used (in whole or in part) in payment for
acquired securities or assets. The issuance of such securities could be
expected to have a dilutive impact on the Company's shareholders.
Page 11 of 18
<PAGE>
The Company's liquidity and capital resources have not been, and are
not anticipated to be, materially affected by restrictions pertaining to the
ability of its foreign subsidiaries to pay dividends or by withholding taxes
associated with any such dividend payments.
CERTAIN TRENDS AND UNCERTAINTIES. The industries in which the
Company is principally involved are characterized by frequent technological
and market changes and are highly competitive. The Company faces competition
from a variety of sources, including competitors that are larger than the
Company and have more established positions in certain market segments.
The voice processing and message management industry has experienced
a continuing evolution of product offerings and alternatives for delivery of
services. These trends have affected and may be expected to have a
significant continuing influence on conditions in the industry, although the
impact on the industry generally and on the Company's position in the industry
cannot be predicted with assurance. Significant changes in the industry make
planning decisions more difficult and increase the risk inherent in the
planning process.
The market for telecommunications monitoring systems is also in a
period of significant transition. Budgetary constraints, uncertainties
resulting from the introduction of new technologies in the telecommunications
environment and shifts in the pattern of government expenditures resulting
from geopolitical events have increased uncertainties in the market, resulting
in certain instances in the attenuation of government procurement programs
beyond their originally expected performance periods and an increased
incidence of delay, cancellation or reduction of planned projects. Sales to
government customers may also be affected by decisions of certain government
agencies to increase their internal product development capabilities, with a
concomitant reduction in their procurements from third party vendors.
Competitive conditions in this sector have also been affected by the efforts
of government contractors, particularly developers and integrators of
technology products, to redirect their marketing strategies and product plans
in reaction to cut-backs in their traditional areas of focus, resulting in an
increase in the number of competitors and the range of products offered in
response to particular requests for proposals. The lack of predictability in
the timing and scope of government procurements have similarly made planning
decisions more difficult and have increased the associated risks.
The Company has historically derived a significant portion of its
revenue and operating profit from a relatively small number of contracts for
large system installations with customers in both the commercial and
government sectors. While the growth of the Company's business has reduced
its dependence on any specific customers, it continues to emphasize large
capacity systems in its product development and marketing strategies.
Contracts for large system installations typically involve a lengthy and
complex bidding and selection process, and the ability of the Company to
obtain particular contracts is inherently difficult to predict. The Company
believes that opportunities for these installations will continue to grow in
both its commercial and government markets, and intends to continue to expand
its research and development,
Page 12 of 18
<PAGE>
manufacturing, sales and marketing and product support capabilities in
anticipation of such growth. However, the timing and scope of these
opportunities and the pricing and margins associated with any eventual
contract award are difficult to forecast, and may vary substantially from
transaction to transaction. The Company's future operating results may
accordingly exhibit a higher degree of volatility than the operating results
of other companies in its industries that have adopted different strategies,
and than the Company has experienced in prior periods. Although the Company is
actively pursuing a number of significant procurement opportunities in the
United States and internationally, both the timing of any eventual
procurements and the probability of the Company's receipt of significant
contract awards are uncertain. The degree of dependence by the Company on
large orders, and the investment required to enable the Company to perform
such orders, without assurance of continuing order flow from the same
customers and predictability of gross margins on any future orders, increase
the risk associated with its business.
The Company has significantly increased its expenditures in all
areas of its operations during recent periods, including the areas of research
and development and marketing and sales, and the Company plans to further
increase these for the foreseeable future. The increase in research and
development expenditures reflects the Company's concentration on enhancing the
range of features and capabilities of its existing product lines and
developing new generations of its products. The Company believes that these
efforts are essential for the long- and short-term competitiveness of its
product offerings and for positioning itself to participate in future growth
opportunities in both the commercial and government sectors. The increase in
sales and marketing expenditures primarily results from the Company's decision
to expand its activities and direct presence in a number of world markets.
The Company's costs of operations have also been affected by increases in the
cost of its operations in Israel, resulting both from general inflation and
increases in the cost of attracting and retaining qualified scientific,
engineering and technical personnel in Israel, where the demand for such
personnel is growing rapidly with the expansion of technology-based industries
in that country. The increase in these costs in recent periods has not been
offset by proportional devaluation of the Israeli shekel against the U.S.
dollar, and accordingly has had a negative impact on the Company's overall
results of operations.
The Company currently derives a majority of its total revenues from
sales to customers outside of the United States. International transactions
involve particular risks, including political decisions affecting tariffs and
trade conditions, rapid and unforeseen changes in economic conditions in
individual countries, turbulence in foreign currency and credit markets, and
increased costs resulting from lack of proximity to the customer. Volatility
in international currency exchange rates may have a significant impact on the
Company's operating results to the extent that it is unable to completely
hedge the exchange rate risk of long term contracts denominated in foreign
currencies, or by the cost of such hedging.
The trading price of the Company's shares may be affected by the
factors noted above as well as prevailing economic and financial trends and
conditions in the public securities markets. During recent periods, share
prices of companies in technology and government contracting businesses, and
particularly smaller and medium-sized
Page 13 of 18
<PAGE>
publicly traded companies such as the Company, have exhibited a high degree of
volatility. Shortfalls in revenues or earnings from the levels anticipated by
the public markets could have an immediate and significant effect on the
trading price of the Company's shares in any given period. Such shortfalls may
result from events that are beyond the Company's immediate control, can be
unpredictable and, since a significant proportion of the Company's sales
during each fiscal quarter tend to occur in the latter stages of the quarter,
may not be discernible until the end of a financial reporting period, which
may contribute to the volatility of the trading value of its shares regardless
of the Company's long-term prospects. The trading price of the Company's
shares may also be affected by developments, including reported financial
results and fluctuations in trading prices of the shares of other publicly-
held companies in the voice processing industry, which may not have any direct
relationship with the Company's business or prospects.
Page 14 of 18
<PAGE>
PART II
Other Information
-----------------
ITEM 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibit Index.
--------------
Item
Number Exhibit Page
------ ------- ----
11. Statement re: computation of
per share earnings 17 - 18
27. Financial data schedule Filed electronically
(b) Reports on Form 8-K.
-------------------
None
Page 15 of 18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMVERSE TECHNOLOGY, INC.
Dated: November 7, 1995 S / Kobi Alexander
------------------
Kobi Alexander
President, Chairman of the Board
and Chief Executive Officer
Dated: November 7, 1995 S / Igal Nissim
---------------
Igal Nissim
Vice President, Finance
and Chief Financial Officer
Page 16 of 18
<PAGE>
EXHIBIT 11
COMVERSE TECHNOLOGY, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 30,
1994 (1) 1995
Primary earnings per share:
Net income $ 3,472 $ 4,707
======== =======
Weighted average number of outstanding common shares 20,942 21,146
Additional shares assuming exercise of stock options 831 1,681
-------- -------
Weighted average number of outstanding common
and common equivalent shares 21,773 22,827
======== =======
Primary earnings per share $ 0.16 $ 0.21
======== =======
Fully diluted earnings per share:
Net income $4,707
======
Weighted average number of outstanding common shares 21,146
Additional shares assuming exercise of stock options 1,783
-------
Weighted average number of outstanding common shares
assuming full dilution 22,929
=======
Fully diluted earnings per share $ 0.21
=======
(1) Fully diluted earnings per share for the three month period ended September
30, 1994 were antidilutive and are omitted.
Page 17 of 18
<PAGE>
EXHIBIT 11
(continued)
COMVERSE TECHNOLOGY, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
SEPTEMBER 30,
1994 (1) 1995
[S] [C] [C]
Primary earnings per share:
Net income $ 8,360 $11,872
======= =======
Weighted average number of outstanding common shares 20,921 21,061
Additional shares assuming exercise of stock options 885 1,407
------- -------
Weighted average number of outstanding common
and common equivalent shares 21,806 22,468
======= =======
Primary earnings per share $ 0.38 $ 0.53
======= =======
Fully diluted earnings per share:
Net income $11,872
=======
Weighted average number of outstanding common shares 21,061
Additional shares assuming exercise of stock options 1,551
-------
Weighted average number of outstanding common shares
assuming full dilution 22,612
=======
Fully diluted earnings per share $ 0.53
=======
(1) Fully diluted earnings per share for the nine month period ended September
30, 1994 were antidilutive and are omitted.
Page 18 of 18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q
FOR 9/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED><F1>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1995 JAN-01-1995
<PERIOD-END> DEC-31-1994 MAR-31-1995 JUN-30-1995 SEP-30-1995
<CASH> 39,225 48,104 67,412 80,336
<SECURITIES> 89,368 76,456 63,913 44,560
<RECEIVABLES> 24,181 25,417 28,891 35,187
<ALLOWANCES> 0 0 0 0
<INVENTORY> 12,427 15,539 15,208 16,015
<CURRENT-ASSETS> 169,792 171,180 180,353 182,636
<PP&E> 17,162 18,250 19,618 21,460
<DEPRECIATION> (8,119) (8,710) (9,433) (10,202)
<TOTAL-ASSETS> 192,502 198,980 209,233 213,268
<CURRENT-LIABILITIES> 28,448 30,113 34,684 33,551
<BONDS> 60,000 60,000 60,000 60,000
<COMMON> 2,098 2,101 2,110 2,122
0 0 0 0
0 0 0 0
<OTHER-SE> 99,515 102,818 108,549 113,871
<TOTAL-LIABILITY-AND-EQUITY> 192,502 198,980 209,233 213,268
<SALES> 108,150<F2> 29,383 63,010 99,126
<TOTAL-REVENUES> 114,312<F2> 31,522 67,334 105,659
<CGS> 47,715<F2> 12,921 27,214 42,879
<TOTAL-COSTS> 100,431<F2> 28,229 59,265 92,313
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 3,947<F2> 1,210 2,442 3,459
<INCOME-PRETAX> 13,881<F2> 3,293 8,069 13,346
<INCOME-TAX> 1,783<F2> 404 904 1,474
<INCOME-CONTINUING> 12,098<F2> 2,889 7,165 11,872
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 12,098<F2> 2,889 7,165 11,872
<EPS-PRIMARY> 0.55<F2> 0.13 0.32 0.53
<EPS-DILUTED> 0.55<F2> 0.13 0.32 0.53
<FN>
<F1>December 1994, March 1995 and June 1995 amounts are restated to reflect pooling of interests with Dale, Gesek, McWilliams &
Sheridan, Inc. ("DGM&S").
<F2>DGM&S' fiscal year-end was September 30. Accordingly, reflects combination
of Comverse results for year-end December 1994 with DGM&S results for
year-end September 1994. DGM&S results for the three month period ended
December 1994 are reflected as an adjustment to retained earnings.
</FN>
</TABLE>
