EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NASDAQ: AMSY
Investor Relations Contact:
Ronald Schillereff
703-267-5140
ronald.schillereff@ams.com
Media Relations Contact:
Charlene Wheeless
703-267-7075
charlene.wheeless@ams.com
AMS REPORTS Q3 2003 RESULTS
AMS Earns $0.20 Per Share; Continues Growth Path
FAIRFAX, Va., October 23, 2003 – American Management Systems, Incorporated (NASDAQ: AMSY), a global business and IT consulting firm, today announced third quarter 2003 earnings of $8.6 million, $0.20 per diluted share, compared to earnings of $8.3 million, $0.20 per diluted share, in the third quarter of 2002 and a loss of $46.6 million, $(1.10) per diluted share, in the second quarter of 2003.
Revenues for the third quarter of 2003 were $248.1 million compared to $247.5 million for the third quarter of 2002 and $232.0 million for the second quarter of 2003. Revenues and earnings were both positively impacted by the acquisition of R. M. Vredenburg & Co. on August 1, 2003.
“AMS performed well in the third quarter. We delivered on earnings expectations and again reported sequential revenue growth. Additionally, the benefits of our restructuring continue to materialize in the form of improving profitability, ongoing cost containment and strong balance sheet fundamentals,” said AMS Chairman and Chief Executive Officer Alfred T. Mockett. He added, “I am cautiously optimistic about the future and confident that we are on the right track. We have a solid base of business which is growing steadily, further bolstered by strong results from the Vredenburg acquisition.”
Results in the third quarter were also positively impacted by a decrease in the Company’s quarterly effective tax rate. This decrease is a result of the reduction in the third quarter of certain non-deductible expenses expected for the tax year 2003. This adjustment decreased income tax expense in the third quarter by $0.7 million, and increased earnings per share by $0.02.
AMS Q3 2003 Results – October 23, 2003—2
Revenue excluding the impact of Vredenburg was $233.6 million, demonstrating modest quarter over quarter organic growth, though $1.4 million below prior guidance. Excluding the impact of Vredenburg, earnings for the third quarter were at the high end of prior guidance at $6.7 million, $0.16 per diluted share1.
The third quarter gross margin of 37.5% increased slightly over the second quarter gross margin of 37.1%. The third quarter margin was diluted by the acquired Vredenburg business, which contributed at a margin of approximately 31% during the third quarter. Excluding the impact of Vredenburg, the gross margin increased by approximately 0.8% over the second quarter of 20031.
Capital expenditures for software development were $13.7 million in the third quarter and $13.2 million in the second quarter of 2003 primarily related to an initiative to replatform and upgrade core product offerings sold to Federal and Financial Services customers.
AMS will hold a conference call to review third quarter results at 8:00 a.m. Eastern Time on Thursday, October 23, 2003 that will be accessible by dialing 913-981-5507. An audio replay of the call will be available from 11:00 a.m. on October 23, 2003 through 12:00 midnight, November 6, 2003 by dialing 719-457-0820 and entering pass code 531357. The call may also be accessed via a live webcast on the AMS website atwww.ams.com. The webcast will be available for replay through October 23, 2004.
AMS is a premier business and IT consulting firm to the government, financial services, and communications industries around the globe. AMS combines IT ingenuity and industry IQ to drive high-performance results. Known for its delivery and service excellence for more than 30 years, AMS specializes in enterprise resource planning, credit risk management, customer relationship management, and enterprise security. AMS applies both proprietary and partner technologies, and provides solutions through business consulting, systems integration, and outsourcing. Founded in 1970, AMS is headquartered in Fairfax, Va., and has offices worldwide. The company is traded on the NASDAQ National Market under the symbol AMSY. For detailed information about AMS, visit www.ams.com.
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Investors are cautioned that this release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, relating to our operations that are based on management’s current expectations, estimates and projections. Words such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” and similar expressions are used to identify these forward-looking statements. These statements are subject to risks, uncertainty and changes in circumstances. Forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Actual results may differ materially from what is expressed or forecast in these forward-looking statements. The reasons for this include changes in general economic and political conditions, including fluctuations in exchange rates, and the factors discussed in AMS’s Annual Report on Form 10-K for the year ended December 31, 2002. The Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s estimates or views as of any subsequent date.
1 See attached Reconciliation of Non-GAAP Financial Measures
AMS Q3 2003 Results – October 23, 2003—3
American Management Systems, Incorporated
CONSOLIDATED CONDENSED INCOME STATEMENTS
Unaudited
(In thousands, except per share data)
For the Three Months | For the Nine Months | ||||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||
REVENUES | $ | 248,122 | $ | 247,480 | $ | 707,105 | $ | 750,607 | |||||||||
EXPENSES: | |||||||||||||||||
Cost of Revenues | 155,067 | 143,369 | 435,952 | 437,867 | |||||||||||||
Selling, General and Administrative | 77,471 | 82,290 | 232,199 | 239,508 | |||||||||||||
Research and Development | 2,892 | 5,981 | 9,907 | 19,809 | |||||||||||||
Restructuring Charge | — | 6,000 | 24,785 | 22,087 | |||||||||||||
Software Asset Impairments | — | — | 9,555 | — | |||||||||||||
Contract Litigation Settlement Expense | — | — | 45,489 | — | |||||||||||||
INCOME (LOSS) FROM OPERATIONS | 12,692 | 9,840 | (50,782 | ) | 31,336 | ||||||||||||
OTHER (INCOME) EXPENSE, NET: | |||||||||||||||||
Interest Expense (Income) | 338 | (1,074 | ) | 852 | 19 | ||||||||||||
Other (Income) Expense | (130 | ) | 870 | (426 | ) | 1,179 | |||||||||||
208 | (204 | ) | 426 | 1,198 | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 12,484 | 10,044 | (51,208 | ) | 30,138 | ||||||||||||
INCOME TAXES | 3,852 | 1,707 | (19,459 | ) | 9,946 | ||||||||||||
NET INCOME (LOSS) | $ | 8,632 | $ | 8,337 | $ | (31,749 | ) | $ | 20,192 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||
Basic | 42,348 | 42,169 | 42,309 | 42,032 | |||||||||||||
Diluted | 42,733 | 42,372 | 42,309 | 42,460 | |||||||||||||
EARNINGS (LOSS) PER SHARE | |||||||||||||||||
Basic | $ | 0.20 | $ | 0.20 | $ | (0.75 | ) | $ | 0.48 | ||||||||
Diluted | $ | 0.20 | $ | 0.20 | $ | (0.75 | ) | $ | 0.48 |
Certain amounts from prior year have been reclassified for comparative purposes. |
AMS Q3 2003 Results – October 23, 2003—4
American Management Systems, Incorporated
CONSOLIDATED REVENUES BY MARKET
Unaudited
(In thousands)
For the Three Months | For the Three Months | For the Nine Months | ||||||||||||||||||||||
Ended June 30, | Ended September 30, | Ended September 30, | ||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||
Federal Government Agencies | $ | 84,503 | $ | 84,511 | $ | 101,219 | $ | 86,639 | $ | 271,645 | $ | 254,825 | ||||||||||||
State and Local Governments and Education | 65,518 | 70,040 | 65,852 | 68,634 | 192,752 | 210,199 | ||||||||||||||||||
Communications, Media and Entertainment | 43,159 | 52,975 | 44,790 | 45,689 | 130,546 | 151,866 | ||||||||||||||||||
Financial Services Institutions | 31,662 | 28,803 | 30,132 | 30,366 | 92,062 | 89,949 | ||||||||||||||||||
Other Corporate Clients | 7,169 | 15,368 | 6,129 | 16,152 | 20,100 | 43,768 | ||||||||||||||||||
Total Revenues | $ | 232,011 | $ | 251,697 | $ | 248,122 | $ | 247,480 | $ | 707,105 | $ | 750,607 | ||||||||||||
AMS Q3 2003 Results – October 23, 2003—5
American Management Systems, Incorporated
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
September 30, 2003 | |||||||||||
ASSETS | (Unaudited) | December 31, 2002 | |||||||||
CURRENT ASSETS: | |||||||||||
Cash and Cash Equivalents | $ | 55,394 | $ | 136,191 | |||||||
Accounts Receivable, Net | 251,421 | 212,098 | |||||||||
Prepaid Expenses and Other Current Assets | 29,601 | 35,126 | |||||||||
Total Current Assets | 336,416 | 383,415 | |||||||||
NONCURRENT ASSETS: | |||||||||||
Property and Equipment (Net of Accumulated Depreciation and Amortization of $48,799 and $44,751) | 22,568 | 24,518 | |||||||||
Purchased and Developed Computer Software (Net of Accumulated Amortization of $155,890 and $136,591) | 116,501 | 90,797 | |||||||||
Goodwill, Net | 60,600 | 24,331 | |||||||||
Cash Value of Life Insurance | 25,307 | 29,830 | |||||||||
Other Assets | 25,732 | 69,605 | |||||||||
Total Noncurrent Assets | 250,708 | 239,081 | |||||||||
TOTAL ASSETS | $ | 587,124 | $ | 622,496 | |||||||
AMS Q3 2003 Results – October 23, 2003—6
American Management Systems, Incorporated
CONSOLIDATED CONDENSED BALANCE SHEETS — continued
(In thousands, except share data)
September 30, 2003 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | (Unaudited) | December 31, 2002 | ||||||||
CURRENT LIABILITIES: | ||||||||||
Accounts Payable | $ | 30,670 | $ | 17,118 | ||||||
Accrued Compensation and Related Items | 48,975 | 52,674 | ||||||||
Deferred Revenues | 18,321 | 26,115 | ||||||||
Accrued Liabilities | 16,788 | 14,592 | ||||||||
Accrued Restructuring Charge | 13,004 | 7,988 | ||||||||
Income Taxes Payable | 368 | 1,061 | ||||||||
Deferred Income Taxes | 1,454 | 17,159 | ||||||||
Total Current Liabilities | 129,580 | 136,707 | ||||||||
NONCURRENT LIABILITIES: | ||||||||||
Deferred Compensation and Other Noncurrent Liabilities | 30,359 | 36,364 | ||||||||
Deferred Income Taxes | 20,588 | 20,044 | ||||||||
Accrued Restructuring Charge | 9,844 | 9,356 | ||||||||
Total Noncurrent Liabilities | 60,791 | 65,764 | ||||||||
TOTAL LIABILITIES | 190,371 | 202,471 | ||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||
Preferred Stock ($0.10 Par Value; 4,000,000 Shares Authorized, None Issued or Outstanding) | — | — | ||||||||
Common Stock ($0.01 Par Value; 200,000,000 Shares Authorized, 51,057,214 and 51,057,214 Issued and 42,351,969 and 42,324,218 Outstanding) | 510 | 510 | ||||||||
Capital in Excess of Par Value | 82,298 | 80,309 | ||||||||
Unearned Compensation | (847 | ) | (2,146 | ) | ||||||
Retained Earnings | 353,314 | 385,063 | ||||||||
Accumulated Other Comprehensive Loss | (6,455 | ) | (14,915 | ) | ||||||
Treasury Stock, at Cost (8,705,245 and 8,732,996 Shares) | (32,067 | ) | (28,796 | ) | ||||||
Total Stockholders’ Equity | 396,753 | 420,025 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 587,124 | $ | 622,496 | ||||||
AMS Q3 2003 Results – October 23, 2003—7
American Management Systems, Incorporated
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
(In thousands)
For the Nine Months | ||||||||||
Ended September 30, | ||||||||||
2003 | 2002 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
Net (Loss) Income | $ | (31,749 | ) | $ | 20,192 | |||||
Adjustments to Reconcile Net (Loss) Income to Net Cash (Used in) Provided by Operating Activities | ||||||||||
Depreciation | 5,138 | 5,701 | ||||||||
Amortization | 25,042 | 27,118 | ||||||||
Stock Compensation Expense | 1,070 | 2,446 | ||||||||
Deferred Income Taxes | (20,324 | ) | 333 | |||||||
(Increase) Decrease in Cash Surrender Value of Life Insurance | (1,355 | ) | 840 | |||||||
Loss on Disposal of Assets | 405 | 324 | ||||||||
Provision for Doubtful Accounts | 750 | — | ||||||||
Software Asset Impairments | 9,555 | — | ||||||||
Contract Litigation Asset Write-off | 30,489 | — | ||||||||
Changes in Assets and Liabilities, Net of Acquisition: | ||||||||||
(Increase) Decrease in Accounts Receivable | (21,403 | ) | 19,311 | |||||||
Decrease in Prepaid Expenses and Other Assets | 19,106 | 4,170 | ||||||||
Increase (Decrease) in Accounts Payable and Accrued Liabilities | 4,225 | (5,526 | ) | |||||||
Decrease in Accrued Compensation and Related Items | (21,241 | ) | (5,292 | ) | ||||||
Decrease in Deferred Revenue | (8,478 | ) | (13,196 | ) | ||||||
Decrease (Increase) in Accrued Restructuring Charge | 5,504 | (1,380 | ) | |||||||
Decrease in Income Taxes Payable | (755 | ) | (13,947 | ) | ||||||
Net Cash (Used in) Provided by Operating Activities | (4,021 | ) | 41,094 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Purchase of Property and Equipment | (2,542 | ) | (1,069 | ) | ||||||
Purchase and Development of Computer Software | (40,347 | ) | (19,227 | ) | ||||||
Acquisition, Net of Cash Acquired | (43,896 | ) | — | |||||||
Other Assets | 5,627 | (1,100 | ) | |||||||
Net Cash Used in Investing Activities | (81,158 | ) | (21,396 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Proceeds from Employee Stock Purchase Plan and Common Stock Options Exercised | 3,649 | 6,889 | ||||||||
Payments to Acquire Treasury Stock | (5,019 | ) | (2,948 | ) | ||||||
Net Cash (Used in) Provided by Financing Activities | (1,370 | ) | 3,941 | |||||||
Effect of Exchange Rate Changes on Cash | 5,752 | 1,779 | ||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (80,797 | ) | 25,418 | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 136,191 | 53,347 | ||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 55,394 | $ | 78,765 | ||||||
AMS Q3 2003 Results – October 23, 2003—8
American Management Systems, Incorporated
Reconciliation of Non-GAAP Financial Measures
Unaudited
(In thousands)
Earnings, diluted earnings per share, and gross margins excluding the impact of Vredenburg are reported in the press release in order to provide information comparable to prior periods. This information is also used by management in evaluating its ongoing business in relation to prior forecasts. Management believes that the presentation of this information is useful to investors as it provides clarity regarding the current period earnings impact of the Vredenburg acquisition.
Earnings and Diluted Earnings per Share Reconciliation
For the Three Months | |||||
Ended September 30, 2003 | |||||
Income Before Income Taxes | $ | 12,484 | |||
Less: | |||||
Vredenburg Income Before Income Taxes | 3,256 | ||||
Income Before Income Taxes, as adjusted | 9,228 | ||||
Income Taxes, as adjusted | 2,506 | ||||
Net Income, excluding Vredenburg | $ | 6,722 | |||
Weighted Average Shares and Equivalents | 42,733 | ||||
Diluted Earnings Per Share, as adjusted | $ | 0.16 |
Gross Margin Reconciliation
Gross Margin | Gross Margin | ||||||||||
(Dollars) | (Percentage) | ||||||||||
For the Three Months Ended September 30, 2003: | |||||||||||
Gross Margin | $ | 93,055 | 37.5 | % | |||||||
Less: | |||||||||||
Vredenburg Gross Margin | 4,457 | 30.7 | % | ||||||||
Gross Margin, excluding Vredenburg | 88,598 | 37.9 | % | ||||||||
For the Three Months Ended June 30, 2003: | |||||||||||
Gross Margin | 86,173 | 37.1 | % | ||||||||
Gross Margin Increase from June 30, 2003 to September 30, 2003, excluding Vredenburg | $ | 2,425 | 0.8 | % | |||||||