1 DRAFT OF JULY 26, 2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000 AMDOCS LIMITED Tower Hill House Le Bordage GY1 3QT St. Peter Port, Island of Guernsey, Channel Islands -------------- Amdocs, Inc. 1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017 (Address of principal executive offices) (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F) Form 20 F X Form 40 F -- ---- (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934.) YES NO X --- --
2 AMDOCS LIMITED FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER FOR THE QUARTER ENDED JUNE 30, 2000 INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Unaudited Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 6-K SIGNATURES EXHIBIT INDEX 2
3 Part I Financial Information Item 1. Financial Statements AMDOCS LIMITED CONSOLIDATED BALANCE SHEETS (in U.S. dollars, unless otherwise stated) (in thousands, except per share data) As of ---------------------------------- June 30, September 30, 2000 1999 -------------- ---------------- ASSETS (unaudited) Current Assets: Cash and cash equivalents $ 302,972 $ 85,174 Short-term interest-bearing investments 7,880 - Accounts receivable, including unbilled of $12,342 and $3,415, less allowances of $7,021 and $0, respectively 251,246 145,184 Accounts receivable from related parties, including unbilled of $132 and $828, respectively 30,666 14,128 Deferred income taxes and taxes receivable 33,497 29,899 Prepaid expenses and other current assets 32,356 16,390 -------------- ------------ Total current assets 658,617 290,775 Equipment, vehicles and leasehold improvements, net 106,003 83,997 Deferred income taxes 13,820 5,605 Goodwill and other intangible assets, net 1,062,322 20,742 Other noncurrent assets 35,995 28,892 -------------- ---------------- Total assets $ 1,876,757 $ 430,011 ============== ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses $ 120,953 $ 68,594 Accrued personnel costs 61,046 40,092 Short-term financing arrangements -- 2,381 Deferred revenue 126,719 104,688 Short-term portion of capital lease obligations 5,813 5,722 Deferred income taxes and taxes payable 79,438 33,412 -------------- ---------------- Total current liabilities 393,969 254,889 Long-term portion of capital lease obligations 14,851 17,148 Deferred income taxes 10,474 -- Other noncurrent liabilities 51,245 34,237 -------------- ---------------- Total liabilities 470,539 306,274 -------------- ---------------- Shareholders' Equity: Preferred Shares - Authorized 25,000 shares; Pound Sterling 0.01 par value; 0 issued and outstanding - - Ordinary Shares - Authorized 550,000 shares; Pound Sterling 0.01 par value; 220,986 and 198,800 outstanding, respectively 3,536 3,181 Additional paid-in capital 1,772,326 489,099 Accumulated other comprehensive income (loss) 2,556 (1,157) Unearned compensation (1,629) (3,830) Accumulated deficit (370,571) (363,556) -------------- ---------------- Total shareholders' equity 1,406,218 123,737 -------------- ---------------- Total liabilities and shareholders' equity $ 1,876,757 $ 430,011 ============== ================ The accompanying notes are an integral part of these unaudited consolidated financial statements. 3
4 AMDOCS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in U.S. dollars) (in thousands, except per share data) Three months ended Nine months ended June 30, June 30, ------------------------------------- -------------------------------- 2000 1999 2000 1999 ---------------- ----------------- ------------- ------------- Revenue: License (*) $ 32,663 $ 19,639 $ 89,606 $ 51,987 Service (*) 264,339 145,245 713,647 392,152 ---------------- ----------------- ------------- ------------- 297,002 164,884 803,253 444,139 ---------------- ----------------- ------------- ------------- Operating expenses: Cost of license 1,715 1,367 4,346 4,060 Cost of service (*) 167,686 94,456 462,425 254,651 Research and development 20,275 11,005 52,958 28,524 Selling, general and administrative (*) 37,321 20,274 97,868 53,336 Amortization of goodwill and purchased intangible assets 54,070 -- 56,870 -- In-process research and development and other indirect acquisition related costs 55,741 -- 75,617 -- ---------------- ----------------- ------------- ------------- 336,808 127,102 750,084 340,571 ---------------- ----------------- ------------- ------------- Operating income (loss) (39,806) 37,782 53,169 103,568 Other income (expense), net 3,355 (1,467) 6,018 (5,420) ---------------- ----------------- ------------- ------------- Income (loss) before income taxes (36,451) 36,315 59,187 98,148 Income taxes 30,708 10,894 66,202 29,444 ---------------- ----------------- ------------- ------------- Net income (loss) $ (67,159) $ 25,421 $ (7,015) $ 68,704 ================ ================= ============= ============= Basic earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.35 ================ ================= ============= ============= Diluted earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.34 ================ ================= ============= ============= Basic weighted average number of shares outstanding 219,962 197,322 208,706 196,976 ================ ================= ============= ============= Diluted weighted average number of shares outstanding 219,962 200,310 208,706 199,649 ================ ================= ============= ============= (*) See Note 3. The accompanying notes are an integral part of these unaudited consolidated financial statements. 4
5 AMDOCS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) (in U.S. dollars) (in thousands) Accumulated Other Ordinary Shares Additional Comprehensive Total ----------------------- Paid-in Income Unearned Accumulated Shareholders' Shares Amount Capital (Loss) Compensation Deficit Equity ------------ --------- ----------- ------------- -------------- ----------- ------------ Balance as of September 30, 1999 198,800 $3,181 $ 489,099 $(1,157) $(3,830) $(363,556) $ 123,737 Net Loss - - - - - (7,015) (7,015) Issuance of ordinary shares related to acquisitions, net 20,297 325 1,263,233 - - - 1,263,558 Employees' stock options exercised 1,889 30 19,814 - - - 19,844 Unrealized gain on other comprehensive income, net of $1,591 tax - - - 3,713 - - 3,713 Stock options granted, net of forfeitures - - 180 - - - 180 Amortization of unearned compensation - - - - 2,201 - 2,201 ------------ --------- ----------- ------------- -------------- ----------- ------------ Balance as of June 30, 2000 220,986 $3,536 $1,772,326 $ 2,556 $(1,629) $(370,571) $1,406,218 ============ ========= =========== ============= ============== =========== ============ The accompanying notes are an integral part of these unaudited consolidated financial statements. 5
6 AMDOCS LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in U.S. dollars) (in thousands) Nine months ended June 30, 2000 1999 -------------------- ------------------- Cash flow from Operating Activities: Net income (loss) $ (7,015) $ 68,704 Reconciliation of net income to net cash provided by operating activities: Depreciation 24,818 13,763 Amortization 63,324 8,211 In-process research and development expenses 70,430 -- Loss on sale of equipment 163 518 Deferred income taxes 5 1,368 Unrealized income on other comprehensive income 5,304 5,789 Net changes in operating assets and liabilities: Accounts receivable (48,585) (64,143) Prepaid expenses and other current assets (10,438) (8,848) Other noncurrent assets (6,687) (6,827) Accounts payable and accrued expenses 21,768 17,204 Deferred revenue 17,486 63,503 Income taxes payable 39,614 (2,146) Other noncurrent liabilities 16,409 5,704 -------------------- ------------------- Net cash provided by operating activities 186,596 102,800 -------------------- ------------------- Cash flow from Investing Activities: Proceeds from sale of equipment, vehicles and leasehold improvements 1,007 1,212 Payments for purchase of equipment, vehicles, leasehold improvements and other (42,320) (32,913) Purchase of short-term interest-bearing investments, net (7,880) -- Net cash acquired in acquisitions 67,803 -- -------------------- ------------------- Net cash provided by (used in) investing activities 18,610 (31,701) -------------------- ------------------- Cash flow from Financing Activities: Net proceeds from issuance of ordinary shares -- 42,535 Net proceeds from employee stock options exercised 19,844 -- Payments under short-term finance arrangements (284,464) (293,012) Borrowings under short-term finance arrangements 282,083 228,008 Principal payments under long-term capital lease obligations (4,871) (2,941) -------------------- ------------------- Net cash provided by (used in) financing activities 12,592 (25,410) -------------------- ------------------- Net increase in cash and cash equivalents 217,798 45,689 Cash and cash equivalents at beginning of period 85,174 25,389 -------------------- ------------------- Cash and cash equivalents at end of period $ 302,972 $ 71,078 ==================== =================== Supplementary cash flow information Cash paid for: Income taxes, net of refunds $ 24,234 $ 26,710 Interest 1,988 4,582 Non-cash investing and financing activities Capital lease obligations of $2,516 and $7,881 were incurred during the nine months ended June 30, 2000 and 1999, respectively, when the Company (as hereinafter defined) entered into lease agreements for the purchase of fixed assets. The Company issued 6,451 ordinary shares and 1,103 options in connection with the acquisition of ITDS (as hereinafter defined). The Company issued 13,846 exchangeable shares and 1,654 options in connection with the acquisition of Solect (as hereinafter defined). See Note 2. The accompanying notes are an integral part of these unaudited consolidated financial statements. 6
7 AMDOCS LIMITED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (in U.S. dollars) (in thousands, except per share data) 1. Basis of Presentation Amdocs Limited (the "Company") is a leading provider of software products and services to the communications industry. The Company designs, develops, markets and supports information systems solutions to major wireless wireline and Internet companies throughout the world. The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. In the opinion of management, all adjustments considered necessary for a fair presentation of the unaudited interim consolidated financial statements have been included therein and are of a normal recurring nature. The preparation of financial statements during interim periods requires management to make numerous estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses. Estimates and assumptions are reviewed periodically and the effect of revisions is reflected in the results of operations for the interim periods in which changes are determined to be necessary. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. These statements should be read in conjunction with the Company's consolidated financial statements for the year ended September 30, 1999 set forth in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission. The Company classifies all of its short-term interest-bearing investments as available-for-sale securities. Such short-term interest-bearing investments consist primarily of United States governmental securities which are stated at market value. Unrealized gains and losses are comprised of the difference between market value and amortized cost of such securities and are reflected, net of tax, as other comprehensive income in shareholders' equity. Realized gains and losses on short-term interest-bearing investments are included in earnings and are derived using the specific identification method for determining the cost of securities. It is the Company's intent to maintain a liquid portfolio to take advantage of investment opportunities; therefore, all securities are considered to be available-for-sale and are classified as current assets. 2. Acquisitions ITDS On November 30, 1999, the Company completed the purchase of International Telecommunication Data Systems, Inc. (ITDS), in a stock-for-stock transaction. ITDS is a leading provider of solutions for outsourcing of billing operations to communications companies. The total purchase price of $188,733, based on a per share price of $28.25 for our ordinary shares, included issuance of ordinary shares, the grant of options and transaction costs. The acquisition was accounted for using the purchase method of accounting. The fair market value of ITDS' assets and liabilities has been included in the balance sheet as of the acquisition date. The results of ITDS' operations are included in the consolidated statement of operations, commencing December 1, 1999. An acquired technology valuation, which was independently determined, included both existing technology and in-process research and development. The valuation of these technologies was made by applying the income forecast method which considers the present value of cash flows by product lines. The fair value of existing technology products was valued at $12,342 and is being amortized over five years. Purchased in-process research and development, valued at $19,876, was charged to expense immediately following the completion of 7
8 AMDOCS LIMITED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (in U.S. dollars) (in thousands, except per share data) the acquisition (during the quarter ended December 31, 1999) as this technology had not reached technological feasibility and has no alternative use. This technology required additional development, coding and testing efforts before technological feasibility could be determined. The fair value of customer base was valued at $647 and the fair value of workforce-in-place was valued at $5,407, each of which is being amortized over five years. The excess of the purchase price over the fair value of the net assets acquired, or goodwill, of $70,796 is being amortized over 15 years. Solect On April 5, 2000, the Company completed the purchase of Solect Technology Group Inc. (Solect), in a stock-for-stock transaction. Solect is a leading provider of customer care and billing software to IP service providers. Under the terms of the combination agreement, all then outstanding Solect common shares were exchanged for shares of a newly issued class of exchangeable shares of Solect. The Company then acquired all of the original common shares of Solect. The Solect exchangeable shares entitle holders to dividends and other rights economically equivalent to the Company's ordinary shares, including the right, through a voting trust, to vote at the Company's shareholder meetings, and are exchangeable at the option of holders into the Company's ordinary shares on a one-for-one basis. The total purchase price of $1,088,154, based on a per share price of $69.875 for the Company's ordinary shares, included both the issuance of 13,846,302 exchangeable shares, the grant of options to purchase 1,653,662 ordinary shares, as well as transaction costs. An aggregate 1,170,000 of the exchangeable shares issued in the transaction have been placed in escrow until April, 2001 to indemnify the Company against any breaches of representations or warranties under the combination agreement. The acquisition was accounted for using the purchase method of accounting. The fair market value of Solect's assets and liabilities has been included in the balance sheet as of the acquisition date. The results of Solect's operations are included in the consolidated statement of operations, commencing April 6, 1999. An acquired technology valuation, which was independently determined, included both existing technology and in-process research and development. The valuation of these technologies was made by applying the income-forecast method that considers the present value of cash flows by product lines. The fair value of existing technology products was valued at $18,272 and is being amortized over two years. Purchased in-process research and development, valued at $50,554, was charged to expense immediately following the completion of the acquisition as this technology had not reached technological feasibility and has no alternative use. This technology will require varying additional development, coding and testing efforts before technological feasibility can be determined. The fair value of customer base was valued at $1,211 and the fair value of workforce-in-place was valued at $3,286, each of which is being amortized over three years. The excess of the purchase price over the fair value of net assets acquired, or goodwill, of $986,756 is being amortized over five years. Set forth below is the pro forma revenue, operating income (loss), net loss and loss per share as if ITDS and Solect had been acquired as of the beginning of the respective periods, excluding the write off of purchased in-process research and development and other indirect acquisition related costs, for the following periods: Three months ended Nine months ended June 30, June 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------- -------------- -------------- ------------- Revenue $ 297,002 $ 202,778 $ 837,716 $ 551,952 Operating income (loss) 15,935 (8,849) 20,561 (38,453) Net income (loss) (11,418) (24,083) (38,509) (79,286) Basic earnings (loss) per share (0.05) (0.11) (0.18) (0.36) Diluted earnings (loss) per share (0.05) (0.11) (0.18) (0.36) 8
9 AMDOCS LIMITED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (in U.S. dollars) (in thousands, except per share data) 3. Related-Party Transactions The following related party transactions are included in the consolidated statement of operations for the following periods: Three months ended Nine months ended June 30, June 30, ------------------------------- ------------------------------ 2000 1999 2000 1999 ------------- -------------- ------------- ------------- Revenue: License $ 1,707 $ 140 $ 8,737 $ 418 Service 36,671 22,473 102,650 68,422 Operating expenses: Cost of service 785 987 2,413 2,044 Selling, general and administrative 140 196 538 428 4. Comprehensive Income (Loss) Comprehensive income (loss) represents the change in shareholders' equity during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity except those resulting from investments by owners and distributions to owners. The following table sets forth the reconciliation from net income (loss) to comprehensive income (loss) for the following periods: Three months ended Nine months ended June 30, June 30, ------------------------------ ------------------------------ 2000 1999 2000 1999 ------------- ------------- ------------- ------------- Net income (loss) $ (67,159) $ 25,421 $ (7,015) $ 68,704 Other comprehensive income: Unrealized income (loss) on derivative instruments, net of tax (2,677) 2,333 3,693 4,053 Unrealized income on short-term interest-bearing investments, net of tax 20 -- 20 -- ------------- ------------- ------------- ------------- Comprehensive income (loss) $ (69,816) $ 27,754 $ (3,302) $ 72,757 ============= ============= ============= ============= 5. Income Taxes The provision for income taxes for the following periods consists of the following: Three months ended Nine months ended June 30, June 30, --------------------------------- ------------------------------ 2000 1999 2000 1999 --------------- -------------- ------------- ------------ Current $ 35,728 $ 14,325 $ 66,187 $ 28,076 Deferred (5,020) (3,431) 5 1,368 --------------- -------------- ------------- ------------ $ 30,708 $ 10,894 $ 66,202 $ 29,444 =============== ============== ============= ============ 9
10 AMDOCS LIMITED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (in U.S. dollars) (in thousands, except per share data) As a Guernsey corporation with tax-exempt status, the Company's overall effective tax rate is attributable solely to foreign taxes and has historically approximated 30%. In conjunction with the acquisitions of ITDS and Solect, the Company has incurred indirect acquisition-related costs, as well as non-cash charges related to the amortization of purchased intangible assets and in-process research and development. Since a significant portion of such costs and charges are not deductible for tax purposes, the effective tax rate will be adversely affected during the period such charges are recorded. Excluding the impact of these items, the Company's overall effective tax rate would have remained approximately 30% for the three- and nine-month periods ended June 30, 2000. For the nine-month period ended June 30, 2000, the Company's blended effective tax rate, calculated based on income before income taxes excluding the impact of the non-recurring charges of in-process research and development and indirect acquisition-related costs, is 49%. The Company anticipates that the 49% effective tax rate will be applied in the fourth quarter of the current fiscal year. 6. Earnings (Loss) Per Share The following table sets forth the computation of basic and diluted earnings (loss) per share: Three months ended Nine months ended June 30, June 30, --------------------------------- ----------------------------- 2000 1999 2000 1999 --------------- ------------- ------------- ----------- Numerator: Net income (loss) $ (67,159) $ 25,421 $ (7,015) $68,704 =============== ============= ============= =========== Denominator: Denominator for basic earnings (loss) per share - weighted average number of shares outstanding 219,962 197,322 208,706 196,976 Effect of dilutive stock options granted (*) -- 2,988 (*) -- 2,673 --------------- ------------- ------------- ----------- Denominator for dilutive earnings (loss) per share - adjusted weighted average shares and assumed conversions 219,962 200,310 208,706 199,649 =============== ============= ============= =========== Basic earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.35 =============== ============= ============= =========== Diluted earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.34 =============== ============= ============= =========== (*)Due to net loss, potentially issuable shares are excluded from the computation of diluted average number of shares outstanding. 10
11 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Introduction In Management's Discussion and Analysis we explain the general financial condition and the results of operations for Amdocs and its subsidiaries including: - what factors affect our business, - what our revenue and costs were in the nine months and three months ended June 30, 2000 and 1999, - why those revenue and costs were different from period to period, - the sources of our revenue, - how all of this affects our overall financial condition, - what our expenditures were in the nine months and three months ended June 30, 2000 and 1999, and - the sources of our cash to pay for future capital expenditures. Management's Discussion and Analysis should be read in conjunction with Amdocs' consolidated financial statements. In Management's Discussion and Analysis, we analyze and explain the nine months to nine months and three months to three months changes in the specific line items in the consolidated statements of operations. Our analysis contains certain forward-looking statements that involve risk and uncertainties. Our actual results could differ materially from the results reflected in these forward-looking statements as they are subject to a variety of risk factors. We disclaim any obligation to update our forward-looking statements. Overview We are a leading provider of software products and services to the communications industry. Our Business Support Systems, or BSS, consist of families of customized software products and services designed to meet the mission-critical needs of specific communications market sectors. We provide primarily Customer Care, Billing and Order Management Systems, or CC&B Systems, for network operators and service providers. Our systems support a wide range of communications services including local, long distance, international, mobile, cable television, data, electronic commerce and Internet services. We also support companies that offer multiply service packages, commonly referred to as convergent services. In addition, we provide a full range of Directory Sales and Publishing Systems, or Directory Systems, to publishers of both traditional printed yellow page and white page directories and electronic Internet directories. Due to the complexity of BSS projects and the expertise required for system support, we also provide extensive customization, implementation, system integration, ongoing support, system enhancement, maintenance and outsourcing services. We derive our revenue principally from: - the initial sale of our products and related services, including license fees and customization, implementation and integration services, and - recurring revenue from ongoing maintenance, support, outsourcing and other related services provided to our customers and, to a lesser degree, from incremental license fees resulting from increases in a customer's subscribers. 11
12 License revenue is primarily recognized as work is performed, using the percentage of completion method of accounting. Service revenue that involves significant ongoing obligations, including fees for customization, implementation and initial support services, is also recognized as work is performed, under the percentage of completion method of accounting. In outsourcing contracts, where the CC&B Systems solution includes the operation and maintenance of customers' billing systems, revenue is recognized in the period in which the bills are produced. Revenue from ongoing support services is recognized as work is performed. Revenue from third party hardware and software sales is recognized upon delivery. Maintenance revenue is recognized ratably over the term of the maintenance agreement. As a result of our percentage of completion accounting method, the size and timing of customer projects and our progress in completing such projects may significantly affect our quarterly operating results. - License and service fee revenue from the sale of CC&B Systems amounted to $703.1 million and $325.4 million in the nine months ended June 30, 2000 and 1999, respectively, representing 87.5% and 73.3%, respectively, of our total revenue for such periods. License and service fee revenue from the sale of CC&B Systems amounted to $264.4 million and $125.8 million in the three months ended June 30, 2000 and 1999, respectively, representing 89.0% and 76.3%, respectively, of our total revenue for such periods. We believe that the demand for CC&B Systems will continue to increase due to, among other key factors: - the growth and globalization of the communications market, - intensifying competition among communications carriers, - rapid technological changes, such as the introduction of wireless Internet services via WAP (Wireless Application Protocol) and GPRS (General Packet Radio Services) technology, - the proliferation of new communications products and services, and - a shift from in-house management to vendor solutions and outsourcing. We also believe that a key driver of demand is the continuing trend for network operators and service providers to offer to their subscribers multiple service packages, commonly referred to as convergent services (combinations of local, long distance, international, mobile, cable television, IP, data and electronic commerce). As a result of these developments, we believe that CC&B Systems will continue to account for the largest share of our total revenue. Although the business of publishing traditional yellow page and white page directories is a mature business in the United States, it continues to be a significant source of revenue for us worldwide. We believe that we are a leading provider of Directory Systems in most of the markets that we serve. - License and service fee revenue from the sale of Directory Systems totaled $100.2 million and $118.8 million in the nine months ended June 30, 2000 and 1999, respectively, accounting for 12.5% and 26.7%, respectively, of our total revenue for such periods. License and service fee revenue from the sale of Directory Systems totaled $32.6 million and $39.1 million in the three months ended June 30, 2000 and 1999, respectively, accounting for 11.0% and 23.7%, respectively, of our total revenue for such periods. The decrease in revenue from Directory Systems reflects a lowering of the volume of Directory Systems services required by our existing customers. We expect that the demand for our Directory Systems might modestly decrease in future periods resulting in the decrease of the contribution to total revenue of license and service fees from Directory Systems services over time. 12
13 Our research and development activities involve the development of new software modules and product offerings in response to an identified market demand, either in conjunction with a customer project or as part of our product development program. We also expend additional amounts on applied research and software development activities to keep abreast of new technologies in the communications market. Research and development expenditures amounted to $53.0 million and $28.5 million in the nine months ended June 30, 2000 and 1999, respectively, representing 6.6% and 6.4% of our revenue in these periods, respectively. Research and development expenditures amounted to $20.3 million and $11.0 million in the three month ended June 30, 2000 and 1999, respectively, representing 6.8% and 6.7% of our revenue in these periods, respectively. In the next several years, we intend to continue to make substantial investments in our research and development and anticipate a significant increase in absolute dollar terms in research and development expenditures. As a percentage of our expected revenue for this period, we believe that our research and development expenditures will increase only modestly. On November 30, 1999, we completed the purchase of ITDS, in a stock-for-stock transaction. ITDS is a leading provider of solutions for outsourcing of billing operations to communications companies. This acquisition has expanded the scope of our CC&B Systems offering and, we believe, has further established our leadership in providing total solutions to the communications industry. In connection with the consummation of this transaction, we issued 6,450,714 ordinary shares and granted 1,102,955 options to purchase ordinary shares. The total purchase price of $188.7 million includes issuance of ordinary shares, the grant of options and transaction costs. The acquisition was accounted for using the purchase method of accounting. The fair market value of ITDS' assets and liabilities has been included in our balance sheet as of the acquisition date. An acquired technology valuation, which was determined by an independent appraiser, included both existing technology and in-process research and development. The valuation of these items was made by applying the income forecast method which considers the present value of cash flows by product lines. The fair value of existing technology products was valued at $12.3 million and is being amortized over five years. In-process research and development, valued at $19.9 million, was charged to expense immediately following the completion of the acquisition (in the quarter ended December 31, 1999) as this technology had not reached technological feasibility and has no alternative use. Additional development, coding and testing efforts were required before technological feasibility could be determined. The fair value of customer base was valued at $0.6 million and the fair value of workforce-in-place was valued at $5.4 million, both of which are being amortized over five years. The excess of the purchase price over the net assets acquired, or goodwill, of $70.8 million is being amortized over 15 years. On April 5, 2000, we completed the purchase of Solect, in a stock-for-stock transaction. Solect is a leading provider of IP billing and customer care software to Internet service providers, including wireless and application service providers, or ASP's. The Solect acquisition is expected to expand our Internet customer base for CC&B Systems. Under the terms of the combination agreement, all then outstanding Solect common shares were exchanged for shares of a newly issued class of exchangeable shares of Solect. We acquired all of the original common shares of Solect. The Solect exchangeable shares entitle holders to dividends and other rights economically equivalent to our ordinary shares, including the right, through a voting trust, to vote at our shareholder meetings, and are exchangeable at the option of the holders into our ordinary shares on a one-for-one basis. The total purchase price of $1,088.2 million includes the issuance of 13,846,302 exchangeable shares, the grant of options to purchase 1,653,662 ordinary shares and transaction costs. An aggregate 1,170,000 of the exchangeable shares issued in the transaction have been placed in escrow until April 2001 to indemnify the Company against any breaches of representations or warranties under the combination agreement. The acquisition was accounted for using the purchase method of accounting. The fair market value of Solect's assets and liabilities has been included in our balance sheet as of the acquisition date. An acquired technology valuation, which was determined by an independent appraiser, included both existing technology and in-process research and development. The valuation of these items was made by applying the income-forecast method, which considers the present value of cash flows, by product lines. The fair value of existing technology products was valued at $18.3 million and is being amortized over two years. In-process research and development, valued at $50.6 million, was charged to expense immediately following the completion of the acquisition as this technology had not reached technological feasibility and has no alternative use. Additional development, coding and testing efforts will be required before technological feasibility can be determined. The fair value of customer base was valued at $1.2 million and the fair value of workforce-in-place was valued at $3.3 million, both of 13
14 which are being amortized over three years. The excess of the purchase price over the net assets acquired, or goodwill, of $986.8 million is being amortized over five years. Results of Operations The following table sets forth, for each of the nine and three months ended June 30, 2000 and 1999, respectively, certain items in our consolidated statements of operations reflected as a percentage of total revenue: Three months ended Nine months ended June 30, June 30, ------------------------------------------ ----------------------------------------- 2000 1999 2000 1999 ---------------------------- --------- ------------------------- --------- Pro forma(*) As reported Pro forma(*) As reported ---------------------------- ------------------------- Revenue: License 11.0% 11.0% 11.9% 11.2% 11.2% 11.7% Service 89.0 89.0 88.1 88.8 88.8 88.3 ---- ---- ---- ---- ---- ---- 100.0 100.0 100.0 100.0 100.0 100.0 ----- ----- ----- ----- ----- ----- Operating expenses: Cost of license 0.6 0.6 0.8 0.5 0.5 0.9 Research and development 6.8 6.8 6.7 6.6 6.6 6.4 Selling, general and administrative 12.5 12.5 12.3 12.2 12.2 12.0 Amortization of goodwill and purchased intangible assets -- 18.2 -- -- 7.1 -- In-process research and development and other indirect acquisition related costs -- 18.8 -- -- 9.4 -- ---- ---- ---- ---- - --- ---- 76.4 113.4 77.1 76.9 93.4 76.7 ---- ----- ---- ---- ---- ---- Operating income (loss) 23.6 (13.4) 22.9 23.1 6.6 23.3 Other income (expense), net 1.1 1.1 (0.9) 0.8 0.7 (1.2) --- --- ----- --- --- ----- Income (loss) before income taxes 24.7 (12.3) 22.0 23.9 7.3 22.1 Income taxes 7.4 10.3 6.6 7.2 8.2 6.6 ---- ----- ----- ----- ------ ----- Net income (loss) 17.3% (22.6%) 15.4% 16.7% (0.9%) 15.5% ===== ======= ===== ===== ====== ===== (*) The pro forma financial information excludes purchased in-process research and development, indirect acquisition related costs, amortization of goodwill and purchased intangible assets and related tax effect related to the ITDS and Solect transactions. 14
15 Nine Months Ended June 30, 2000 and 1999 Revenue. Revenue for the nine months ended June 30, 2000 was $803.3 million, an increase of $359.1 million, or 80.9%, compared to the nine months ended June 30, 1999, primarily due to the continuance of the growth in the demand for our CC&B Systems solutions and, to a lesser degree, from the acquisition of ITDS. License revenue increased from $52.0 million in the nine months ended June 30, 1999 to $89.6 million during the nine months ended June 30, 2000, an increase of 72.4%, and service revenue increased 82.0% in the nine months ended June 30, 2000 from $392.2 million in the nine months ended June 30, 1999 to $713.6 million in the nine months ended June 30, 2000. Total CC&B Systems revenue for the nine months ended June 30, 2000 was $703.1 million, an increase of $377.7 million, or 116%, compared to the nine months ended June 30, 1999. Revenue from Directory Systems was $100.2 million for the nine months ended June 30, 2000, a decrease of $18.6 million, or 15.7%, from the nine months ended June 30, 1999. The decrease in revenue from Directory Systems reflects a decrease in the volume of Directory Systems services required by our existing customers. In the nine months ended June 30, 2000, revenue from customers in North America, Europe, and the rest of the world accounted for 46%, 42% and 12%, respectively, compared to 40%, 39% and 21%, respectively, for the nine months ended June 30, 1999. The growth in North America was primarily attributable to the revenue from already existing ITDS customers in North America and, to a lesser degree, new Amdocs customers in North America. The growth in revenue from customers in Europe was primarily attributable to increased competition among communications companies within and continued deregulation of the European market. Cost of License. Cost of license for the nine months ended June 30, 2000 was $4.3 million, an increase of $0.3 million, or 7.0%, from cost of license for the nine months ended June 30, 1999. Cost of license includes amortization of purchased computer software and intellectual property rights. Cost of Service. Cost of service increased from $254.7 million for the nine months ended June 30, 1999 to $462.4 million for the nine months ended June 30, 2000. The increase in cost of service is consistent with the increase in revenue for the period, and reflects increased employment levels required to support the continuing growth in revenue. As a percentage of revenue, cost of service of 57.6% for the nine months ended June 30, 2000 essentially was unchanged from 57.4% for the nine months ended June 30, 1999. Research and Development. Research and development expense was primarily comprised of compensation expense attributable to research and development activities, either in conjunction with customer projects or as part of our product development program. In the nine months ended June 30, 2000, research and development expense was $53.0 million, or 6.6% of revenue, compared with $28.5 million, or 6.4% of revenue, in the nine months ended June 30, 1999. The increase in research and development expense represents ongoing expenditures primarily for CC&B Systems and, to a lesser extent, for Directory Systems. Selling, General and Administrative. Selling, general and administrative expense, primarily comprised of compensation expense, increased from $53.3 million for the nine months ended June 30, 1999 to $97.9 million for the nine months ended June 30, 2000. The increase in selling, general and administrative expense is in line with the increase in our revenue for the nine months ended June 30, 2000. As a percentage of revenue, selling, general and administrative expense of 12.2% for the nine months ended June 30, 2000 essentially was unchanged from 12.0% for the nine months ended June 30, 1999. Amortization of Goodwill and Purchased Intangible Assets. Amortization of goodwill and purchased intangible assets in the nine months ended June 30, 2000 relates to the Solect and ITDS transactions. In-process Research and Development and Other Indirect Acquisition Related Costs. In-process research and development and other indirect acquisition related costs in the nine months ended June 30, 2000 consisted primarily of one-time charges of $19.9 million and $50.6 million of write-offs of purchased in-process research and development related to the ITDS and Solect transactions, respectively. 15
16 Operating Income. Operating income of $53.2 million decreased to 6.6% of revenue for the nine months ended June 30, 2000, as compared to 23.3% for the nine months ended June 30, 1999, primarily due to the one-time charges for in-process research and development related to the acquisitions of ITDS and Solect. Pro forma operating income in the nine months ended June 30, 2000, excluding the ITDS and Solect acquisitions related charges, was $185.7 million, or 23.1% of revenue, as compared with $103.6 million, or 23.3% of revenue, in the nine months ended June 30, 1999, an increase of 79.3%. Other Income (Expense), Net. In the nine months ended June 30, 2000, other income (expense), net was $6.0 million, an increase of $11.4 million from the nine months ended June 30, 1999. The increase in other income (expense), net, is primarily attributable to the reduction in debt through the use of cash from operations and interest from accumulating cash equivalents and short-term interest-bearing investments. Income Taxes. Income taxes in the nine months ended June 30, 2000 were $66.2 million on income before taxes of $59.2 million. Income taxes were $29.4 million on income before taxes of $98.1 million in the nine months ended June 30, 1999. In the nine months ended June 30, 2000, the effective tax rate was 49%, resulting from the non-cash amortization related to the acquisitions of ITDS and Solect, much of which are not tax deductible. The pro forma effective tax rate for the nine months ended June 30, 2000, excluding the ITDS and Solect acquisitions related charges, is 30%. See discussion below - "Effective Tax Rate". Net Income (Loss). Net loss for the nine months ended June 30, 2000 was $7.0 million, or $0.03 per diluted share, compared to net income of $68.7 million, or $0.34 per diluted share, in the nine months ended June 30, 1999. Pro forma net income in the nine months ended June 30, 2000, excluding the one-time charges of in-process research and development, indirect acquisition related costs and the amortization expenses related to the acquisitions of ITDS and Solect, increased by 95.3% from the nine months ended June 30, 1999, reaching $134.2 million, or $0.64 per diluted share. Three Months Ended June 30, 2000 and 1999 Revenue. Revenue for the three months ended June 30, 2000 was $297.0 million, an increase of $132.1 million, or 80.1%, compared to the three months ended June 30, 1999, primarily due to the continuance of the growth in the demand for our CC&B Systems solutions and, to a lesser degree, from the acquisitions of ITDS and Solect. License revenue increased from $19.6 million in the three months ended June 30, 1999 to $32.7 million during the three months ended June 30, 2000, an increase of 66.3%. Service revenue increased 82.0% to $264.3 million in the three months ended June 30, 2000 from $145.2 million in the three months ended June 30, 1999. Total CC&B Systems revenue for the three months ended June 30, 2000 was $264.4 million, an increase of $138.6 million, or 110%, compared to the three months ended June 30, 1999. Revenue from Directory Systems was $32.6 million for the three months ended June 30, 2000, a decrease of $6.5 million, or 16.7%, from the three months ended June 30, 1999. The decrease in revenue from Directory Systems reflects a decrease in the volume of Directory Systems services required by our existing customers. In the three months ended June 30, 2000, revenue from customers in North America, Europe, and the rest of the world accounted for 45%, 42% and 13%, respectively, compared to 32%, 44% and 24%, respectively, for the three months ended June 30, 1999. The growth in North America was primarily attributable to the revenue from already existing ITDS customers in North America and, to a lesser degree, new Amdocs customers in North America. Cost of License. Cost of license for the three months ended June 30, 2000 was $1.7 million, an increase of $0.3 million, or 25.5%, from cost of license for the three months ended June 30, 1999. Cost of license includes amortization of purchased computer software and intellectual property rights. The increase in cost of license for the three months ended June 30, 2000 was attributable primarily to the increase in the required amortization of purchased computer software. Cost of Service. Cost of service increased from $94.5 million for the three months ended June 30, 1999 to $167.7 million for the three months ended June 30, 2000. The increase in cost of service is consistent with the increase in revenue for the quarter, and reflects increased employment levels required to support the continuing growth in revenue. As a percentage of revenue, cost of service decreased from 57.3% for the three months ended June 30, 1999 to 56.5% for the three months ended June 30, 2000. 16
17 Research and Development. Research and development expense was primarily comprised of compensation expense attributable to research and development activities, either in conjunction with customer projects or as part of our product development program. In the three months ended June 30, 2000, research and development expense was $20.3 million, or 6.8% of revenue, compared with $11.0 million, or 6.7% of revenue, in the three months ended June 30, 1999. The increase in research and development expense represents ongoing expenditures primarily for CC&B Systems and, to a lesser extent, for Directory Systems. Selling, General and Administrative. Selling, general and administrative expense, primarily comprised of compensation expense, increased from $20.3 million for the three months ended June 30, 1999 to $37.3 million for the three months ended June 30, 2000. The increase in selling, general and administrative expense is in line with the increase in our revenue for the three months ended June 30, 2000. As a percentage of revenue, selling, general and administrative expense of 12.5% for the three months ended June 30, 2000 was essentially unchanged from 12.3% for the three months ended June 30, 1999.. Amortization of Goodwill and Purchased Intangible Assets. Amortization of goodwill and purchased intangible assets in the three months ended June 30, 2000 relates to the Solect and ITDS acquisitions. In-process Research and Development and Other Indirect Acquisition Related Costs. In-process research and development and other indirect acquisition related costs in the three months ended June 30, 2000 consisted primarily of a one-time charge of $50.6 million of write-off of purchased in-process research and development related to the acquisition of Solect. Operating Income (Loss). Operating loss was $39.8 million for the three months ended June 30, 2000, as compared to operating income of $37.8 million for the three months ended June 30, 1999, a decrease of $77.6 million. The decrease is primarily due to the one-time charge of in-process research and development related to the acquisition of Solect. Pro forma operating income in the three months ended June 30, 2000, excluding the ITDS and Solect acquisitions related charges, was $70.0 million, or 23.6% of revenue, as compared with $37.8 million, or 22.9% of revenue, in the three months ended June 30, 1999, an increase of 85.3% . Other Income (Expense), Net. In the three months ended June 30, 2000, other income (expense), net, was $3.4 million, an increase of $4.8 million from the three months ended June 30, 1999. The increase in other income (expense), net, is primarily attributable to the reduction in debt through the use of cash from operations and interest from accumulating cash equivalents and short-term interest-bearing investments. Income Taxes. Income taxes in the three months ended June 30, 2000 were $30.7 million on loss before taxes of $36.5 million. Income taxes were $10.9 million on income before taxes of $36.3 million in the three months ended June 30, 1999. In the three months ended June 30, 2000, the disproportionate tax rate, resulted primarily from the in-process research and development related to the acquisition of Solect, which is not tax deductible. The pro forma effective tax rate for the three months ended June 30, 2000, excluding the ITDS and Solect acquisitions related charges, is 30%. See discussion below - "Effective Tax Rate". Net Income (Loss). Net loss for the three months ended June 30, 2000 was $67.2 million, or $0.31 per diluted share, compared to net income of $25.4 million, or $0.13 per diluted share, in the three months ended June 30, 1999. Pro forma net income in the three months ended June 30, 2000, excluding the one-time charges of in-process research and development, indirect acquisition related costs and the amortization expenses related primarily to the Solect acquisition, increased by 102% from the three months ended June 30, 1999, reaching $51.4 million, or $0.23 per diluted share. 17
18 Liquidity and Capital Resources Cash and cash equivalents totaled $303.0 million as of June 30, 2000, compared to $85.2 million as of September 30, 1999. This increase in cash and cash equivalents is attributable primarily to cash flows from operations, and, to a lesser degree, to cash balances of $31.9 million and $35.9 million we acquired as part of the acquisition of ITDS and Solect, respectively, and exercising of employee stock options. Net cash provided by operating activities amounted to $186.6 million and $102.8 million for the nine months ended June 30, 2000 and 1999, respectively. A significant portion of our cash flow from operations during the nine months ended June 30, 2000 was used to invest in cash equivalents and short-term interest-bearing investments. We currently intend to retain our future earnings to support the further expansion of our business. As of June 30, 2000, we had short-term revolving lines of credit totaling $141.0 million from various banks or bank groups, none of which was outstanding. As of that date, we also had utilized approximately $23.3 million of revolving credit facilities to support outstanding bank guarantees. As of June 30, 2000, we had positive working capital of $264.7 million as compared to positive working capital of $35.9 million as of September 30, 1999, $145.7 million as of December 31, 1999 and $201.0 million as of March 31, 2000. The increase in working capital is primarily attributable to cash generated from operating activities and to the cash obtained from our acquisitions of ITDS and Solect. We believe that current cash balances, cash generated from operations and our current lines of credit will provide sufficient resources to meet our liquidity needs in the near future. As of June 30, 2000, we had long-term obligations outstanding of $20.7 million in connection with leasing arrangements. Currently, our capital expenditures, consisting primarily of computer equipment and vehicles, are funded principally by operating cash flows and capital leasing arrangements. We do not anticipate any change to this policy in the foreseeable future. Net Deferred Tax Assets Based on our assessment, it is more likely than not that all the net deferred tax assets as of June 30, 2000 will be realized through future taxable earnings. No significant increase in future taxable earnings would be required to fully realize the net deferred tax assets. Year 2000 Issues In prior years, we discussed the nature and progress of our plans to become Year 2000 ready. In late 1999, we completed our remediation and testing of systems. As a result of our planning and implementation efforts, we experienced no significant disruptions in mission-critical technology and non-information technology systems and believe those systems successfully responded to the Year 2000 date change. We are not aware of any material problems resulting from Year 2000 issues, either with our products and internal systems or the products and services of third parties. We will continue to monitor our mission-critical computer and software applications and those of our suppliers and vendors throughout the year 2000 to ensure than any latent Year 2000 matters that may arise are addressed promptly. Effective Tax Rate Our overall effective tax rate has historically been approximately 30% due to the various corporate income tax rates in the countries in which we operate and the relative magnitude of our business in those countries. Our consolidated effective tax rate (calculated as the income taxes out of the income before income taxes excluding non recurring charges of write off of purchased in-process research and development and other non recurring indirect acquisition related costs) for the nine months ended June 30, 2000 was 49%, compared to 30% in the nine months ended June 30, 1999. This higher effective tax rate was attributable to amortization charges related to our acquisitions of ITDS and Solect, much of which is not tax deductible. Excluding the impact of these charges, the effective tax rate for the nine months ended June 30, 2000 was 30%. 18
19 Currency Fluctuations Approximately 87% of our revenue is in U.S. dollars or linked to the dollar and therefore the dollar is our functional currency. Approximately 58% of our operating expenses is paid in dollars or is linked to dollars. Other significant currencies in which we receive revenue or pay expenses are Australian dollars, British pounds, Canadian dollars, the euro and Israeli shekels. Historically, the effect of fluctuations in currency exchange rates has had a minimal impact on our operations. As we expand our operations outside of the United States, our exposure to fluctuations in currency exchange rates could increase. In managing our foreign exchange risk, we enter from time to time into various foreign exchange contracts. As of June 30, 2000, we had hedged most of our significant exposures in currencies other than the dollar. 19
20 AMDOCS LIMITED Part II. Other Information Item 6. Exhibits and Reports on Form 6-K. (a) Exhibits Exhibit No. Description - ----------- ----------- 99.1 Amdocs Limited Press Release dated July 18, 2000. (b) Reports on Form 6-K. The Company filed the following reports on Form 6-K during the three months ended June 30, 2000: (1) Form 6-K dated April 11, 2000, relating to the acquisition of Solect Technology Group, Inc. ("Solect"), a private company based in Toronto, Canada. (2) Form 6-K dated May 11, 2000, relating to the fiscal quarter ended March 31, 2000. (3) Form 6-K/A dated June 8, 2000, amending Form 6-K dated April 11, 2000, relating to the acquisition of Solect, including pro forma, unaudited and audited financial information. 20
21 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. Amdocs Limited /s/ Thomas G. O'Brien ---------------------- Thomas G. O'Brien Treasurer and Secretary Authorized U.S. Representative Date: July 31, 2000 21
22 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Amdocs Limited Press Release dated July 18, 2000. 22
1 Exhibit 99.1 99.1. PRESS RELEASE. AMDOCS LIMITED CONTINUES STRONG, CONSISTENT GROWTH IN THIRD QUARTER Revenue increases by 80.1% to $297.0 million and EPS excluding acquisition-related charges, increases by 76.9% to $0.23 St. Louis, MO - July 18, 2000, Amdocs Limited (NYSE: DOX) today reported that for the third quarter ended June 30, 2000, revenue reached $297.0 million, an increase of 80.1% over last year's third quarter. Excluding acquisition-related charges, net income increased 102% to $51.4 million, while diluted earnings per share increased 76.9% to $0.23. The acquisition-related charges derive primarily from the acquisition of Solect Technology Group Inc., which was completed in April 2000. These charges include write-off of purchased in-process research and development, amortization of goodwill and purchased intangible assets, other costs and related tax effects. As a result of the acquisition-related charges, the Company's as-reported results showed a net loss of $67.2 million, or a loss of $0.31 per diluted share, compared to net income of $25.4 million or $0.13 per diluted share in the third quarter of fiscal 1999. Avi Naor, Chief Executive Officer of Amdocs Management Limited, noted, "Amdocs continues to demonstrate strong growth and consistent performance with another excellent quarter. As the world's leader in customer care and billing systems, Amdocs is uniquely positioned to leverage the demand for advanced systems in the communications and Internet industries." Naor continued, "We are experiencing strong demand for our systems in all target segments: wireline, wireless and IP. Our momentum in the market continues with major new projects for total solutions. For example, at CenturyTel we have been selected to provide an end-to-end convergent customer care and billing system." Naor added, "In the IP arena, we are rapidly expanding our market share. We are working with innovators in all key emerging IP segments, such as VISPs (virtual ISPs), ASPs, wireless IP and DSL providers. In the explosive wireless IP sector, Amdocs is the established market leader with installations and projects in GPRS, WAP, m-commerce and wireless portal environments. Our IP offerings support the full range of business models in the IP market, including convergent voice-IP, hybrid and standalone architectures." Naor concluded, "Through our long-term, ongoing customer relationships, Amdocs achieves both recurring revenue for ongoing support, as well as new opportunities in existing customers. These are key factors in ensuring that we maintain our sales momentum. Amdocs' visibility continues to be high. Through the combination of Amdocs' business stability, together with emerging new opportunities, we are very confident moving forward." Amdocs is the world's leader in customer care and billing systems for communications and Internet service providers. Amdocs has an unparalleled success record in project delivery of its mission-critical products. With over 6,500 information systems professionals deployed worldwide, Amdocs supports a global customer base. In April 2000, Amdocs completed the acquisition of Solect Technology Group Inc., a leading provider of customer care and billing systems for IP service providers. For more information visit our Web site at www.amdocs.com. THIS PRESS RELEASE MAY CONTAIN FORWARD LOOKING STATEMENTS AS DEFINED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT MAY CAUSE FUTURE RESULTS TO DIFFER FROM THOSE ANTICIPATED. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE ADVERSE EFFECTS OF MARKET COMPETITION, RAPID CHANGES IN TECHNOLOGY THAT MAY RENDER THE COMPANY'S PRODUCTS AND SERVICES OBSOLETE, POTENTIAL LOSS OF A MAJOR CUSTOMER, AND RISKS ASSOCIATED WITH OPERATING BUSINESSES IN THE INTERNATIONAL MARKET. THESE AND OTHER RISKS ARE DISCUSSED AT GREATER LENGTH IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. CONTACT: Thomas G. O'Brien Treasurer and Director of Investor Relations Amdocs Limited 314/212-8328 E-mail: dox_info@amdocs.com - TABLES TO FOLLOW - 23
2 AMDOCS LIMITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) EXCLUDING PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT, ACQUISITION RELATED COSTS, AMORTIZATION OF GOODWILL AND PURCHASED INTANGIBLE ASSETS AND RELATED TAX EFFECTS (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, --------------------------------- -------------------------------- 2000 (1) 1999 2000 (2) 1999 --------------- -------------- ------------- --------------- Revenue: License $ 32,663 $ 19,639 $ 89,606 $ 51,987 Service 264,339 145,245 713,647 392,152 --------------- -------------- ------------- --------------- 297,002 164,884 803,253 444,139 Operating expenses: Cost of license 1,715 1,367 4,346 4,060 Cost of service 167,686 94,456 462,425 254,651 Research and development 20,275 11,005 52,958 28,524 Selling, general and administrative 37,321 20,274 97,868 53,336 --------------- -------------- ------------- --------------- 226,997 127,102 617,597 340,571 --------------- -------------- ------------- --------------- Operating income 70,005 37,782 185,656 103,568 Other income (expense), net 3,355 (1,467) 6,018 (5,420) --------------- -------------- ------------- --------------- Income before income taxes 73,360 36,315 191,674 98,148 Income taxes 22,008 10,894 57,502 29,444 --------------- -------------- ------------- --------------- Net income $ 51,352 $ 25,421 $ 134,172 $ 68,704 =============== ============== ============= =============== Diluted earnings per share $ 0.23 $ 0.13 $ 0.63 $ 0.34 =============== ============== ============= =============== Diluted weighted average number of shares outstanding 226,304 200,310 213,898 199,649 =============== ============== ============= =============== (1) Excludes $54,070 of amortization of goodwill and purchased intangible assets, $50,554 write off of purchased in-process research and development, $5,187 of acquisition related costs, and tax effects related to the above of $8,700. Including the above items, loss before income taxes was $36,451 and diluted net loss per share was $0.31 for the three months ended June 30, 2000. (2) Excludes $56,870 of amortization of goodwill and purchased intangible assets, $70,430 write off of purchased in-process research and development, $5,187 of acquisition related costs, and tax effects related to the above of $8,700. Including the above items, income before income taxes was $59,187 and diluted net loss per share was $0.03 for the nine months ended June 30, 2000. 24
3 AMDOCS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED NINE MONTHS ENDED JUNE 30, JUNE 30, ---------------------------------- --------------------------------- 2000 1999 2000 1999 --------------- --------------- --------------- ----------- Revenue: License $ 32,663 $ 19,639 $ 89,606 $ 51,987 Service 264,339 145,245 713,647 392,152 --------------- --------------- --------------- ------------ 297,002 164,884 803,253 444,139 Operating expenses: Cost of license 1,715 1,367 4,346 4,060 Cost of service 167,686 94,456 462,425 254,651 Research and development 20,275 11,005 52,958 28,524 Selling, general and administrative 37,321 20,274 97,868 53,336 Amortization of goodwill and purchased intangible assets 54,070 -- 56,870 -- In-process research and development and other costs 55,741 -- 75,617 -- --------------- --------------- --------------- ------------ 336,808 127,102 750,084 340,571 --------------- --------------- --------------- ------------ Operating income (loss) (39,806) 37,782 53,169 103,568 Other income (expense), net 3,355 (1,467) 6,018 (5,420) --------------- --------------- --------------- ------------- Income (loss) before income taxes (36,451) 36,315 59,187 98,148 Income taxes 30,708 10,894 66,202 29,444 --------------- --------------- --------------- ------------- Net income (loss) $ (67,159) $ 25,421 $ (7,015) $ 68,704 =============== =============== =============== ============= Basic earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.35 =============== =============== =============== ============= Diluted earnings (loss) per share $ (0.31) $ 0.13 $ (0.03) $ 0.34 =============== =============== =============== ============= Basic weighted average number of shares outstanding 219,962 197,322 208,706 196,976 =============== =============== =============== ============= Diluted weighted average number of shares outstanding 219,962(1) 200,310 208,706(1) 199,649 =============== =============== =============== ============= (1) Due to net loss, contingently issuable shares are excluded from the computation of diluted weighted average number of shares. 25
4 AMDOCS LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS) AS OF ------------------- -- ------------------- JUNE 30, SEPTEMBER 30, 2000 1999 ------------------- ------------------- ASSETS Current assets Cash, cash equivalents and short term interest bearing investments $ 310,852 $ 85,174 Accounts receivable, net 281,912 159,312 Deferred income taxes and taxes receivable 33,497 29,899 Prepaid expenses and other current assets 32,356 16,390 ------------------- ------------------- Total current assets 658,617 290,775 Equipment, vehicles and leasehold improvements, net 106,003 83,997 Goodwill and other intangible assets, net 1,062,322 20,742 Other assets 49,815 34,497 ------------------- ------------------- Total assets $ 1,876,757 $ 430,011 =================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accruals $ 181,999 $ 108,686 Short-term financing arrangements 5,813 8,103 Deferred revenue 126,719 104,688 Deferred income taxes and income taxes payable 79,438 33,412 ------------------- ------------------- Total current liabilities 393,969 254,889 Noncurrent liabilities 76,570 51,385 Shareholders' equity 1,406,218 123,737 ------------------- ------------------- Total liabilities and shareholders' equity $ 1,876,757 $ 430,011 =================== =================== # # # 26