<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 April 30, 1998
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 June 4, 1998 was 43,672,689.
Page 1 of 17 Total Pages
(Exhibit Index Appears on Page 15)
<PAGE>
QUAD=CENTER)
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Page
----
1. Condensed Consolidated Balance Sheets as
of January 31, 1998 and April 30, 1998 3
2. Condensed Consolidated Statements of Income
for the Three Month Periods Ended March 31, 1997
and April 30, 1998 4
3. Condensed Consolidated Statements of Cash
Flows for the Three Month Periods Ended
March 31, 1997 and April 30, 1998 5
4. Notes to Condensed Consolidated Financial
Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
Page 2 of 17 Total Pages
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COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
January 31, April 30,
1998* 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $180,855 $171,827
Bank time deposits and
short-term investments 96,047 74,400
Accounts receivable, net 79,693 158,308
Inventories 63,024 55,703
Prepaid expenses and
other current assets 29,515 32,070
-------- --------
TOTAL CURRENT ASSETS 449,134 492,308
PROPERTY AND EQUIPMENT, NET 53,413 56,425
INVESTMENTS 6,838 8,521
OTHER ASSETS 18,267 18,888
-------- --------
TOTAL ASSETS $527,652 $576,142
======== ========
- ---------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable and accrued expenses $125,941 $130,496
Bank loans 16,600 16,514
Advance payments from customers 22,680 37,482
Other current liabilities 3,120 4,879
-------- --------
TOTAL CURRENT LIABILITIES 168,341 189,371
CONVERTIBLE SUBORDINATED DEBENTURES 115,000 115,000
LIABILITY FOR SEVERANCE PAY 4,481 4,755
OTHER LIABILITIES 8,440 7,812
-------- --------
TOTAL LIABILITIES 296,262 316,938
STOCKHOLDERS' EQUITY:
Common Stock, $0.10 par value authorized 100,000,000 shares,
issued and outstanding, 43,390,797 and 43,585,368 shares 4,339 4,358
Additional paid-in capital 219,362 222,505
Retained earnings 6,559 30,529
Accumulated other comprehensive income 1,130 1,812
-------- --------
TOTAL STOCKHOLDERS' EQUITY 231,390 259,204
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $527,652 $576,142
======== ========
</TABLE>
*The Condensed Consolidated Balance Sheet as of January 31, 1998 has been
summarized from the Company's audited Consolidated Balance Sheet as of that
date.
The accompanying notes are an integral part of these financial statements.
Page 3 of 17 Total Pages
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COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months ended
March 31, April 30,
1997* 1998
Sales $126,848 $160,481
Cost of sales 52,627 65,865
-------- --------
Gross margin 74,221 94,616
Operating expenses:
Research and development, net 22,652 30,654
Selling, general and administrative 29,100 35,324
Royalties and license fees 3,591 3,618
-------- --------
Income from operations 18,878 25,020
Interest and other income (expense), net 881 1,619
-------- --------
Income before income tax provision 19,759 26,639
Income tax provision 4,265 2,669
-------- --------
Net income $ 15,494 $ 23,970
======== ========
Earnings per share:
Basic $ 0.37 $ 0.55
======== ========
Diluted $ 0.34 $ 0.51
======== ========
* Restated for pooling of interests with Boston Technology, Inc.
The accompanying notes are an integral part of these
financial statements.
Page 4 of 17 Total Pages
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
March 31, April 30,
1997* 1998
<S> <C> <C>
Cash flows from operating activities:
Net cash from operations after adjustment
for non-cash items $ 21,441 $ 29,669
Changes in assets and liabilities:
Accounts receivable (28,259) (78,615)
Inventories (5,056) 7,321
Prepaid expenses and other current assets (3,832) (2,556)
Accounts payable and accrued expenses 4,942 4,555
Advance payments from customers 11,375 14,802
Liability for severance pay 713 274
Other (285) 666
-------- --------
Net cash provided by operating activities 1,039 (23,884)
Cash flows from investing activities:
Maturities and sales (purchase) of bank time deposits
and investments, net (34,655) 21,106
Purchases of property and equipment (8,313) (7,639)
Increase in software development costs (1,534) (2,225)
Other (23) -
-------- --------
Net cash used in investing activities (44,525) 11,242
Cash flows from financing activities:
Net borrowings of bank loans and other debt 19,466 452
Proceeds from issuance of common stock 3,364 3,162
-------- --------
Net cash provided by financing activities 22,830 3,614
Net decrease in cash and cash equivalents (20,656) (9,028)
Cash acquired in pooling of Enhanced
Communications Corporation 1,658 -
Cash and cash equivalents, beginning of period 210,756 180,855
-------- --------
Cash and cash equivalents, end of period $191,758 $171,827
======== ========
</TABLE>
* Restated for pooling of interests with Boston Technology, Inc.
The accompanying notes are an integral part of these financial statements.
Page 5 of 17 Total Pages
<PAGE>
COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION. The accompanying financial information should
be read in conjunction with the financial statements, including the notes
thereto, for the transition period ended January 31, 1998. The financial
information included herein is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods. The results of operations for the three month period ended
April 30, 1998 are not necessarily indicative of the results to be expected for
the full year.
On January 14, 1998, Comverse Technology, Inc., a New York corporation
("Comverse" and, together with its subsidiaries, the "Company"), consummated a
merger (the "Merger") with Boston Technology, Inc., a Delaware corporation
("Boston") in a transaction in which former shareholders of Boston received an
aggregate of 18,141,185 shares of Comverse's Common Stock, par value $0.10 per
share ("Common Stock"). The Merger has been accounted for as a pooling of
interests and, in connection with the Merger, the Company changed its fiscal
year from the calendar year to the year ending January 31, coinciding with the
fiscal year of Boston. This report presents the financial statements of the
Company, at and for the three-month period ended April 30, 1998. The financial
information for the 1997 period combines the financial information of the
Company for the three month period ended March 31, 1997 with the financial
information of Boston for the three month period ended April 30, 1997.
INVENTORIES. The composition of inventories at January 31, 1998 and
April 30, 1998 is as follows:
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1998 1998
(In thousands)
<S> <C> <C>
Raw materials $29,735 $28,881
Work in process 20,413 12,444
Finished goods 12,876 14,378
------- -------
$63,024 $55,703
======= =======
</TABLE>
RESEARCH AND DEVELOPMENT EXPENSES. The Company has historically
supported a 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 that must be submitted for approval on an annual basis to
the applicable funding agencies. In addition, in certain instances the Company
may receive funding for research and development projects from its customers.
During the three month periods ended March 31, 1997 and April 30, 1998,
reimbursement from funding agencies and customers amounted to $4,667,000 and
$4,780,000, respectively. See
Page 6 of 17 Total Pages
<PAGE>
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Trends and Uncertainties."
EARNINGS PER SHARE. For the three month periods ended March 31, 1997
and April 30, 1998, the computation of basic earnings per share is based on the
weighted average number of outstanding common shares. Diluted earnings per
share further assumes the issuance of common shares for all dilutive potential
common shares outstanding. The assumed conversion of the convertible
subordinated debentures was antidilutive for the three month periods ended March
31, 1997 and April 30, 1998. The shares used in the computations are as
follows:
THREE MONTHS ENDED
March 31, 1997 April 30, 1998
(In thousands)
Basic 41,551 43,477
Diluted 45,626 47,331
COMPREHENSIVE INCOME. For the three month periods ended March 31,
1997 and April 30, 1998, total comprehensive income was $16,075,000 and
$24,652,000, respectively. The elements of comprehensive income include net
income, unrealized gains on available for sale securities and foreign currency
translation adjustments.
Page 7 of 17 Total Pages
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
RESULTS OF OPERATIONS.
Sales. Sales for the three month period ended April 30, 1998
-----
increased by approximately $33,633,000 (27%) from the 1997 period. The increase
is attributable primarily to a higher volume of sales of systems and parts in
Europe.
Cost of Sales. Cost of sales for the three month period ended April
-------------
30, 1998 increased by approximately $13,238,000 (25%) from the corresponding
period in 1997. The increase is attributable primarily to the increase in
sales. Gross margin (expressed as a percentage of sales) for the three month
period ended April 30, 1998 increased to approximately 59.0% from approximately
58.5% from the corresponding 1997 period.
Research and Development Expenses. Net research and development
---------------------------------
expenses for the three month period ended April 30, 1998 increased by
approximately $8,002,000 (35%) from the corresponding period in 1997 due to the
overall growth of research and development operations, the initiation of
significant new research and development projects, and increases in salaries and
other costs associated with research and development operations.
Selling, General and Administrative Expenses. Selling, general and
--------------------------------------------
administrative expenses for the three month period ended April 30, 1998
increased by approximately $6,224,000 (21%) from the corresponding period in
1997. Such increase was 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.
Royalties and License Fees. Royalties and license fees for the three
--------------------------
month period ended April 30, 1998 increased by approximately $27,000 (1%) from
the corresponding period in 1997.
Income Tax Provision. Provision for income taxes for the three month
--------------------
period ended April 30, 1998 decreased by approximately $1,596,000 (37%) from the
1997 period due to increased sales from lower tax jurisdictions. The Company's
overall effective tax rate was approximately 22% in the 1997 period and 10% in
the three month period ended April 30, 1998. 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 three month period ended
----------
April 30, 1998 increased by approximately $8,476,000 (55%) from the 1997 period,
primarily as a result of the factors described above. Net income after taxes as
a percentage of sales increased to
Page 8 of 17 Total Pages
<PAGE>
approximately 14.9% in the three month period ended April 30, 1998 from
approximately 12.2% in the 1997 period.
LIQUIDITY AND CAPITAL RESOURCES. At April 30, 1998, the Company had
cash and cash equivalents of approximately $171,827,000, bank time deposits and
short-term investments of approximately $74,400,000 and working capital of
approximately $302,937,000. 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 and 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, and 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'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 Company has benefited from the growth in its business and capital
base over the past several years to make significant new investment in its
operations and infrastructure intended to enhance its opportunities for future
growth and profitability. The Company's results of operations reflect the
significant increase in its investment in operations over the past three years.
The Company intends to continue to make significant investments in the growth of
its business, and to examine opportunities for additional growth through
acquisitions and strategic investments. The impact of these decisions on future
profitability cannot be predicted with assurance, and the Company's commitment
to growth may increase its vulnerability to unforeseen downturns in its markets,
technology changes and shifts in competitive conditions. However, the Company
believes that significant opportunities exist in the markets for each of its
main product lines, and that continued strong investment in its technical,
product development, marketing and sales capabilities will enhance its
opportunities for long term growth and profitability.
The Merger involves the integration of two companies that have
previously operated independently. The combination of two sizable technology-
based companies involves significant complexities, and no assurance can be
given that the combined Company will be able to integrate the operations of
Boston into the Company without encountering difficulties or experiencing the
loss of key Comverse or Boston personnel or that the benefits expected from such
integration will be realized. The integration of two companies across
geographically dispersed operations
Page 9 of 17 Total Pages
<PAGE>
can create the risk of disruption in operations of the combined company, and
neither company's management has substantial experience in managing such
integration or the operations of an entity the size of the combined Company. The
Company does not expect to realize cost savings in the near future as a result
of the Merger, and no assurance can be given that any savings can be achieved in
future periods. Furthermore, there can be no certainty that the Merger will not
adversely affect the relationships with key customers or key vendors of either
company. As a result of its significantly greater concentration on a small
number of large telephone company customers, Boston's business has historically
been considerably more volatile than that of Comverse, and the operations of the
combined Company are likely to be less predictable and subject to greater risks
from actions of individual customers than the operations of Comverse in recent
years.
The telecommunications industry is subject to rapid technological
change. The Company's revenue stream will depend on its ability to enhance its
existing products and to introduce new products on a timely and cost-effective
basis. This includes any customer-requested custom software enhancements
required in the normal course of product delivery and customer demands for the
technological convergence of the Company's products. The Company's products
involve sophisticated hardware and software technology that performs critical
functions to highly demanding standards. There can be no assurance that the
Company's current or future products will not develop operational problems,
which could have a material adverse effect on the Company. In addition, if the
Company were to delay the introduction of new products, or to delay the delivery
of specific custom software enhancements, the Company's operating results could
be adversely affected. The Company sells a majority of its products to
companies in the telecommunications industry. This industry is undergoing
significant change as a result of deregulation and privatization worldwide,
reducing restrictions on competition in the industry. Unforeseen changes in the
regulatory environment may have an impact on the Company's revenues and/or costs
in any given part of the world. The worldwide enhanced services systems
industry is already highly competitive and the Company expects competition to
intensify. The Company believes that existing competitors will continue to
present substantial competition, and that other companies, many with
considerably greater financial, marketing and sales resources than the Company,
may enter the enhanced services systems markets. The 1997 acquisition of Octel
Communications Corporation, a significant competitor of the Company, by Lucent
Technologies, Inc. may intensify the competitive environment in the industry,
and there can be no assurance that similar business combinations or industry
consolidation will not occur in the future.
The enhanced services platforms 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
Page 10 of 17 Total Pages
<PAGE>
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. The continuing delay and uncertainties surrounding the
Communications Assistance for Law Enforcement Act ("CALEA") have had a
significant impact on acquisition plans of law enforcement agencies in North
America engaged in monitoring activities, and no assurances can be given as to
the timing or ultimate content of the proposed legislation. Competitive
conditions in this sector have also been affected by the increasing use by
certain potential government customers of their own internal development
resources rather than outside vendors to provide certain technical solutions. In
addition, a number of established government contractors, particularly
developers and integrators of technology products, have taken steps 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
sales and operating profit from a relatively small number of contracts for large
system installations with major customers. Boston's operating results, in
particular, have often been characterized by volatility and lack of
predictability, reflecting its traditional customer concentration among major
telecommunications services providers such as the Regional Bell Operating
Companies. The Company continues to emphasize large capacity systems in its
product development and marketing strategies. Contracts for large 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 large installations will
continue to grow in both its commercial and government markets, and intends to
continue to expand its research and development, 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 expenditures in the foreseeable future. The
Page 11 of 17 Total Pages
<PAGE>
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 continuing
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 growing
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 United States dollar, and accordingly has had a negative impact on the
Company's overall results of operations. Continuation of such trends may have a
material adverse effect on the Company's future results of operations.
A significant portion of the Company's research and development and
manufacturing operations are located in Israel and may be affected by
regulatory, political, military and economic conditions in that country. The
Company's historical operating results reflect substantial benefits from
programs sponsored by the Israeli government for the support of research and
development, as well as favorable tax rates available to "Approved Enterprises"
in Israel. The Israeli government has indicated its intention to reexamine
certain of its policies in these areas. Recently, the government acted to
increase, from between 2% and 3% of associated product sales to 3% of associated
product revenues (including service and other related revenues), the annual rate
of royalties to be applied to repayment of benefits under the conditional grant
program administered by the Office of the Chief Scientist of the Ministry of
Industry and Trade, a program in which the Company has regularly participated
and under which it continues to receive significant benefits through
reimbursement of qualified research and development expenditures. The Company's
repayment of amounts received under the program will be accelerated through
these higher royalty rates until repayment is completed. In addition,
permission from the government of Israel is required for the Company to
manufacture outside of Israel products resulting from research and development
activities funded under such programs, or to transfer outside of Israel related
technology rights, and in order to obtain such permission the Company may be
required to increase the royalties to the applicable funding agencies and/or
repay certain amounts received as reimbursement of research and development
costs. The Company expects to incur additional royalty expenses and/or
repayment obligations as a result of the Merger and the location of certain
manufacturing and research and development operations pertaining to its TRILOGUE
product line at its Boston facilities. The Israeli authorities have also
indicated that these research and development funding programs will be further
reduced in the future, particularly for larger entities such as the Company.
The Israeli government has also shortened the period of the tax moratorium
applicable to "Approved Enterprises" from four years to two years. Although
this change has not affected the tax status of the Company's projects that were
eligible for the moratorium prior to 1997, it applies to the subsequent
"Approved Enterprises" of the Company. If further changes in the law or
government policies regarding those programs were to result in their termination
or adverse modification, or if the Company
Page 12 of 17 Total Pages
<PAGE>
were to become unable to participate in or take advantage of those programs, the
cost to the Company of its operations in Israel would materially increase and
there would be an adverse effect on the results of the Company's operations as a
whole. To the extent the Company increases its activities outside Israel, which
will result from the Merger and possible future acquisitions, such increased
activities will not be eligible for programs sponsored by Israel. Most of the
Company's research and development and manufacturing operations attributable to
Boston are expected to continue to be located in the United States and thus will
not be eligible for the benefits of those programs. Accordingly, the effective
cost to the Company of its future research and development activities in
particular, and its operations in general, could significantly increase relative
to that of Comverse, historically.
The Company currently derives a significant portion of its total sales from
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. The Company has, and anticipates that it will
continue to receive, significant contracts denominated in foreign (primarily
Western European and Japanese) currencies. As a result of the unpredictable
timing of purchase orders and payments under such contracts and other factors,
it is often not practicable for the Company to effectively hedge the risk of
significant changes in currency rates during the contract period. Since the
Company will hedge the exchange rate risks associated with long-term contracts
denominated in foreign currencies only to a limited extent, operating results
can be affected by the impact of currency fluctuations as well as the cost of
such hedging.
Prevailing economic conditions in the Far East and Southeast Asia have
reduced the demand for the Company's systems in certain countries. The Company
cannot currently predict the effect on its business should regional economic
conditions fail to improve.
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. Share prices of companies in technology and
government contracting businesses, and particularly smaller and medium-sized
publicly traded companies such as the Company, tend to exhibit a high degree of
volatility. The Company's revenues and earnings may be more volatile than those
of Comverse historically as a result of the greater concentration of Boston's
business on a limited number of large customers. 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. These factors 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
Page 13 of 17 Total Pages
<PAGE>
in the telecommunications equipment industry in general, and the enhanced
services platform industry in particular, which may not have any direct
relationship with the Company's business or prospects.
FORWARD-LOOKING STATEMENTS. From time to time, the Company makes forward-
looking statements. Forward-looking statements include financial projections,
statements of plans and objectives for future operations, statements of future
economic performance, and statements of assumptions relating thereto.
The Company may include forward-looking statements in its periodic reports
to the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K, in its
annual report to shareholders, in its proxy statements, in its press releases,
in other written materials, and in statements made by employees to analysts,
investors, representatives of the media, and others.
By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risks exist that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. Actual results may differ materially due to a variety of factors,
including without limitation those discussed under "Certain Trends and
Uncertainties" and elsewhere in this report. Investors and others should
carefully consider these and other uncertainties and events, whether or not the
statements are described as forward-looking.
Forward-looking statements made by the Company are intended to apply only
at the time they are made, unless explicitly stated to the contrary. Moreover,
whether or not stated in connection with a forward-looking statement, the
Company undertakes no obligation to correct or update a forward-looking
statement should the Company later become aware that it is not likely to be
achieved. If the Company were in any particular instance to update or correct a
forward-looking statement, investors and others should not conclude that the
Company will make additional updates or corrections thereafter.
Page 14 of 17 Total Pages
<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
27. Financial data schedule Filed electronically
(b) Reports on Form 8-K.
-------------------
None
Page 15 of 17 Total Pages
<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: June 5, 1998 S/ Kobi Alexander
-----------------
Kobi Alexander
President, Chairman of the Board
and Chief Executive Officer
Dated: June 5, 1998 S / Igal Nissim
---------------
Igal Nissim
Chief Financial Officer
Page 16 of 17 Total Pages
<PAGE>
EXHIBIT 11
COMVERSE TECHNOLOGY, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended
MARCH 31, 1997 APRIL 30, 1998
<S> <C> <C>
Basic earnings per share:
Net income $15,494 $23,970
======= =======
Weighted average number of outstanding common shares 41,551 43,477
======= =======
Basic earnings per share $ 0.37 $ 0.55
======= =======
Diluted earnings per share:
Net income $15,494 $23,970
======= =======
Weighted average number of outstanding common shares 41,551 43,477
Additional shares assuming exercise of stock options 4,075 3,854
------- -------
Weighted average number of outstanding common shares
assuming full dilution 45,626 47,331
======= =======
Diluted earnings per share $ 0.34 $ 0.51
======= =======
</TABLE>
Page 17 of 17 Total Pages
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR
APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED> <F1>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1999 DEC-31-1997
<PERIOD-START> FEB-01-1998 JAN-01-1997
<PERIOD-END> APR-30-1998 MAR-31-1997
<CASH> 171,827 191,758
<SECURITIES> 74,400 83,388
<RECEIVABLES> 158,308 143,829
<ALLOWANCES> 0 0
<INVENTORY> 55,703 55,596
<CURRENT-ASSETS> 492,308 491,620
<PP&E> 56,425 50,200
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 576,142 578,575
<CURRENT-LIABILITIES> 189,371 125,997
<BONDS> 115,000 115,000
4,358 4,176
0 0
<COMMON> 0 0
<OTHER-SE> 254,846 304,343
<TOTAL-LIABILITY-AND-EQUITY> 576,142 578,575
<SALES> 160,481 126,848
<TOTAL-REVENUES> 160,481 126,848
<CGS> 65,865 52,627
<TOTAL-COSTS> 65,865 52,627
<OTHER-EXPENSES> 69,596 55,343
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 26,639 19,759
<INCOME-TAX> 2,669 4,265
<INCOME-CONTINUING> 23,970 15,494
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23,970 15,494
<EPS-PRIMARY> 0.55 0.37
<EPS-DILUTED> 0.51 0.34
<FN>
<F1>Three months ended March 31, 1997 is restated to reflect pooling of interests
with Boston Technology, Inc.
</FN>
</TABLE>
