FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-27512
CSG SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0783182
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7887 EAST BELLEVIEW, SUITE 1000
ENGLEWOOD, COLORADO 80111
(Address of principal executive offices, including zip code)
(303) 796-2850
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ______
-----
Shares of common stock outstanding at May 7, 1998: 25,568,622
CSG SYSTEMS INTERNATIONAL, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
PAGE NO.
--------
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997........................................ 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1997......................... 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997......................... 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 8
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 13
Signatures................................................... 14
Index to Exhibits............................................ 15
2
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31, December 31,
1998 1997
------------- ------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents.............................................................. $ 16,068 $ 20,417
Accounts receivable-
Trade-
Billed, net of allowance of $1,435 and $1,394................................... 51,620 45,122
Unbilled........................................................................ 1,854 2,080
Other............................................................................... 1,742 1,400
Deferred income taxes.................................................................. 706 443
Other current assets................................................................... 2,736 2,664
------------- ------------
Total current assets................................................................ 74,726 72,126
------------- ------------
Property and equipment, net of depreciation of $18,059 and $16,343....................... 18,836 17,157
Software, net of amortization of $34,275 and $34,104..................................... 2,359 1,959
Noncompete agreements and goodwill, net of amortization of $20,847 and $19,490........... 11,652 13,938
Client contracts and related intangibles, net of amortization of $13,890 and $12,822..... 63,572 64,640
Deferred income taxes.................................................................... 11,244 6,909
Other assets............................................................................. 2,836 3,064
------------- ------------
Total assets....................................................................... $ 185,225 $ 179,793
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................................................... $ 9,000 $ 6,750
Customer deposits...................................................................... 7,132 7,002
Trade accounts payable................................................................. 10,369 11,795
Accrued liabilities.................................................................... 9,938 11,023
Deferred revenue....................................................................... 7,351 11,063
Conversion incentive payments.......................................................... 19,527 17,768
Accrued income taxes................................................................... 6,522 3,207
------------- ------------
Total current liabilities........................................................... 69,839 68,608
------------- ------------
Non-current liabilities:
Long-term debt, net of current maturities.............................................. 126,000 128,250
Deferred revenue....................................................................... 7,677 7,789
Conversion incentive payments.......................................................... 6,460 8,232
------------- ------------
Total non-current liabilities....................................................... 140,137 144,271
------------- ------------
Stockholders' deficit:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized;
zero shares issued and outstanding.................................................. - -
Common stock, par value $.01 per share; 100,000,000 shares authorized;
25,524,114 shares and 25,479,968 shares outstanding................................. 255 255
Common stock warrants; 1,500,000 warrants issued and outstanding...................... 26,145 26,145
Additional paid-in capital............................................................. 114,516 112,870
Deferred employee compensation......................................................... (562) (636)
Notes receivable from employee stockholders............................................ (544) (685)
Cumulative translation adjustments..................................................... 79 (1)
Treasury stock, at cost, 24,000 shares and zero shares................................. (90) -
Accumulated deficit.................................................................... (164,550) (171,034)
------------- ------------
Total stockholders' deficit......................................................... (24,751) (33,086)
------------- ------------
Total liabilities and stockholders' deficit......................................... $ 185,225 $ 179,793
============= ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(in thousands, except share and per share amounts)
Three months ended
-------------------------------
March 31, March 31,
1998 1997
--------------- --------------
Total revenues................................................... $ 49,308 $ 38,582
Expenses:
Cost of revenues:
Direct costs.............................................. 22,082 18,581
Amortization of acquired software......................... - 2,884
Amortization of client contracts and related intangibles.. 1,068 1,023
--------------- --------------
Total cost of revenues.............................. 23,150 22,488
--------------- --------------
Gross margin................................................. 26,158 16,094
--------------- --------------
Operating expenses:
Research and development.................................. 6,525 4,855
Selling and marketing..................................... 2,397 2,341
General and administrative:
General and administrative............................. 5,602 4,129
Amortization of noncompete agreements and goodwill..... 1,341 1,731
Stock-based employee compensation...................... 74 202
Depreciation.............................................. 1,842 1,509
--------------- --------------
Total operating expenses............................ 17,781 14,767
--------------- --------------
Operating income................................................. 8,377 1,327
--------------- --------------
Other income (expense):
Interest expense.......................................... (2,546) (641)
Interest income........................................... 660 211
Other..................................................... (7) 267
--------------- --------------
Total other......................................... (1,893) (163)
--------------- --------------
Income before income taxes....................................... 6,484 1,164
Income tax (provision) benefit............................... - -
--------------- --------------
Net income....................................................... $ 6,484 $ 1,164
=============== ==============
Basic net income per common share:
Net income available to common stockholders.................. $ 0.25 $ 0.05
=============== ==============
Weighted average common shares................................ 25,512,342 25,489,258
=============== ==============
Diluted net income per common share:
Net income available to common stockholders.................. $ 0.25 $ 0.05
=============== ==============
Weighted average common shares................................ 26,368,285 25,750,510
=============== ==============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
Three months ended
-------------------------------
March 31, March 31,
1998 1997
-------------- ---------------
Cash flows from operating activities:
Net income.................................................................................. $ 6,484 $ 1,164
Adjustments to reconcile net income to net cash provided by (used in) operating activities-
Depreciation............................................................................. 1,842 1,509
Amortization............................................................................. 2,846 5,758
Deferred income taxes.................................................................... (3,313) (895)
Stock-based employee compensation........................................................ 74 202
Changes in operating assets and liabilities:
Trade accounts and other receivables, net.............................................. (6,540) 3,279
Other current and noncurrent assets.................................................... (94) (653)
Accounts payable and other liabilities................................................. (2,947) (2,314)
-------------- ---------------
Net cash provided by (used in) operating activities.................................. (1,648) 8,050
-------------- ---------------
Cash flows from investing activities:
Purchases of property and equipment, net.................................................... (3,494) (2,540)
Additions to software....................................................................... (571) (3,196)
-------------- ---------------
Net cash used in investing activities................................................ (4,065) (5,736)
-------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock...................................................... 1,260 87
Purchase and cancellation of common stock................................................... - (6)
Payments on long-term debt.................................................................. - (2,500)
-------------- ---------------
Net cash provided by (used in) financing activities.................................. 1,260 (2,419)
-------------- ---------------
Effect of exchange rate fluctuations on cash.................................................. 104 (237)
-------------- ---------------
Net decrease in cash and cash equivalents..................................................... (4,349) (342)
Cash and cash equivalents, beginning of period................................................ 20,417 6,134
-------------- ---------------
Cash and cash equivalents, end of period...................................................... $ 16,068 $ 5,792
============== ===============
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for-
Interest.................................................................................. $ 2,311 $ 532
Income taxes.............................................................................. $ (70) $ 1,272
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
CSG SYSTEMS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The condensed consolidated financial statements at March 31, 1998, and for the
three months then ended are unaudited and reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim period. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, filed with the Securities and
Exchange Commission. The results of operations for the three months ended March
31, 1998, are not necessarily indicative of the results for the entire year
ending December 31, 1998.
2. NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net income per common share is consistent with the
calculation of basic net income per common share while giving effect to dilutive
potential common shares outstanding during the period. For both periods
presented, dilutive potential common shares consisted entirely of stock
options.
For the quarter ended March 31, 1998, the weighted average dilutive potential
common shares from Common Stock Warrants of 612,693 are excluded from the
diluted net income per common share calculation as the events necessary to allow
the exercise of the warrants had not been satisfied as of March 31, 1998.
3. COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), which establishes standards
for reporting and display of comprehensive income and its components in a
financial statement for the period in which they are recognized. Total
comprehensive income, consisting of net income and foreign currency translation
adjustments, for the quarters ended March 31, 1998 and 1997 was $6.6 million and
$0.6 million, respectively.
4. SECONDARY STOCK OFFERING
In April 1998, the Company completed a secondary public stock offering of
approximately 3.5 million shares of Common Stock. The primary shareholders in
the offering included Morgan Stanley affiliated entities and General Motors
employee benefit plan trusts. The Company received none of the proceeds from
the offering, nor incurred any expense.
5. LEGAL PROCEEDINGS
In October 1996, a former senior vice president of CSG Systems filed a lawsuit
against the Company and certain of its officers in the District Court of
Arapahoe County, Colorado. The suit claims that certain amendments to stock
agreements between the plaintiff and the Company are unenforceable, and that the
plaintiff's rights were otherwise violated in connection with those amendments.
The plaintiff is seeking
6
damages of approximately $2.0 million, and in addition, seeks to have such
damages trebled under certain Colorado statutes that the plaintiff claims are
applicable. The Company denies the allegations and intends to vigorously defend
the lawsuit at all stages. The trial is currently scheduled to commence in July
1998.
7
CSG SYSTEMS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated (in thousands):
Three months ended March 31,
---------------------------------------------------
1998 1997
------------------------- -------------------------
% of % of
Amount Revenue Amount Revenue
------------ ------------ ------------- -----------
Total revenues................................................... $ 49,308 100.0% $ 38,582 100.0%
Expenses:
Cost of revenues:
Direct costs................................................. 22,082 44.8 18,581 48.2
Amortization of acquired software............................ - - 2,884 7.5
Amortization of client contracts and related intangibles..... 1,068 2.1 1,023 2.7
------------ ------------ ------------- -----------
Total cost of revenues................................ 23,150 46.9 22,488 58.4
------------ ------------ ------------- -----------
Gross margin................................................... 26,158 53.1 16,094 41.7
------------ ------------ ------------- -----------
Operating expenses:
Research and development..................................... 6,525 13.2 4,855 12.6
Selling and marketing........................................ 2,397 4.9 2,341 6.1
General and administrative:
General and administrative ................................ 5,602 11.4 4,129 10.7
Amortization of noncompete agreements and goodwill......... 1,341 2.7 1,731 4.5
Stock-based employee compensation.......................... 74 0.2 202 0.5
Depreciation................................................. 1,842 3.7 1,509 3.9
------------ ------------ ------------- -----------
Total operating expenses................................... 17,781 36.1 14,767 38.3
------------ ------------ ------------- -----------
Operating income (loss).......................................... 8,377 17.0 1,327 3.4
------------ ------------ ------------- -----------
Other income (expense):
Interest expense............................................. (2,546) (5.2) (641) (1.7)
Interest income.............................................. 660 1.3 211 0.5
Other........................................................ (7) - 267 0.7
------------ ------------ ------------- -----------
Total other................................................ (1,893) (3.9) (163) (0.5)
------------ ------------ ------------- -----------
Income before income taxes....................................... 6,484 13.1 1,164 2.9
Income tax (provision) benefit................................. - - - -
------------ ------------ ------------- -----------
Net income....................................................... $ 6,484 13.1% $ 1,164 2.9%
============ ============ ============= ===========
8
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues. Total revenues for the three months ended March 31, 1998, increased
27.8% to $49.3 million, from $38.6 million for the three months ended March 31,
1997, due to increased revenues from the Company's processing and related
services, and increased revenues from software and related product sales and
professional consulting services.
Revenues from processing and related services for the three months ended March
31, 1998, increased 29.6% to $39.8 million, from $30.7 million for the three
months ended March 31, 1997. This increase is due primarily to an increase in
the number of customers of the Company's clients which were serviced by the
Company and increased revenue per customer. Customers serviced as of March 31,
1998, and 1997, respectively, were 23.6 million and 19.6 million, an increase of
20.2%. The increase in the number of customers serviced was due to the
conversion of additional customers by new and existing clients to the Company's
systems, and internal customer growth experienced by existing clients. From
January 1, 1998 through March 31, 1998, the Company converted and processed
approximately 2.3 million additional customers on its systems. Revenue per
customer increased due primarily to (i) the 15-year Tele-Communications, Inc.
(TCI) processing contract (the TCI Contract) executed in September 1997, (ii)
increased usage of ancillary services by clients, and (iii) price increases
included in client contracts.
Revenues from software and related product sales and professional consulting
services for the three months ended March 31, 1998, increased 20.6% to $9.5
million, from $7.9 million for the three months ended March 31, 1997. This
increase relates to the continued growth of the Company's software products and
related product sales and professional consulting services.
Amortization of Acquired Software. Amortization of acquired software decreased
to zero for the three months ended March 31, 1998, from $2.9 million for the
three months ended March 31, 1997, due to acquired software from the Company's
leveraged buy-out of CSG Systems, Inc. (the Acquisition) in November 1994
becoming fully amortized as of November 30, 1997.
Amortization of Client Contracts and Related Intangibles. Amortization of
client contracts and related intangibles for the three months ended March 31,
1998, increased 4.4% to $1.1 million, from $1.0 million for the three months
ended March 31, 1997. The increase in expense is due to $0.3 million of
amortization of the value assigned to the TCI Contract, offset by a decrease of
$0.2 million of amortization due to client conversion methodologies from the
Acquisition becoming fully amortized as of November 30, 1997.
Gross Margin. Gross margin for the three months ended March 31, 1998, increased
62.5% to $26.2 million, from $16.1 million for the three months ended March 31,
1997, due primarily to revenue growth. The gross margin percentage increased to
53.1% for the three months ended March 31, 1998, compared to 41.7% for the three
months ended March 31, 1997. The overall increase in the gross margin
percentage is due primarily to the increase in revenues while the amount of
amortization of acquired software and amortization of client contracts and
related intangibles decreased, and to a lesser degree, the improvement in the
gross margin percentage for processing and related services, due primarily to
the increase in revenue per customer while controlling the cost of delivering
such services.
Research and Development Expense. Research and development (R&D) expense for
the three months ended March 31, 1998, increased 34.4% to $6.5 million, from
$4.9 million for the three months ended March 31, 1997. As a percentage of
total revenues, R&D expense increased to 13.2% for the three months ended March
31, 1998, from 12.6% for the three months ended March 31, 1997.
During the three months ended March 31, 1997, the Company capitalized software
development costs of approximately $3.1 million, which consisted of $2.8 million
of internal development costs and $0.3 million of purchased software. The
Company capitalized third party, contracted costs of approximately $0.6 million
during the three months ended March 31, 1998, related primarily to enhancements
to existing products. As a result, total R&D development expenditures (i.e., the
total R&D costs expensed, plus the capitalized development costs) for the three
months ended March 31, 1998 and 1997, were $7.1 million, or 14.4% of total
revenues, and $7.7 million, or 19.8% of total revenues, respectively. The
overall decrease in the R&D
9
expenditures between periods is due primarily to effective control of
development costs, primarily the reduction of third-party, contracted
programming services.
Selling and Marketing Expense. Selling and marketing (S&M) expense for the
three months ended March 31, 1998, increased 2.4% to $2.4 million, from $2.3
million for the three months ended March 31, 1997. As a percentage of total
revenues, S&M expense decreased to 4.9% for the three months ended March 31,
1998, from 6.1% for the three months ended March 31, 1997. The decrease in S&M
expenses as a percentage of total revenues is due primarily to increased
revenues, while controlling S&M costs.
General and Administrative Expense. General and administrative (G&A) expense
for the three months ended March 31, 1998, increased 35.7% to $5.6 million, from
$4.1 million for the three months ended March 31, 1997. As a percentage of
total revenues, G&A expense increased to 11.4% for the three months ended March
31, 1998, from 10.7% for the three months ended March 31, 1997. The increase in
G&A expense relates primarily to the continued expansion of the Company's
administrative staff and other administrative costs to support the Company's
overall growth.
Amortization of Noncompete Agreements and Goodwill. Amortization of noncompete
agreements and goodwill for the three months ended March 31, 1998, decreased
22.5%, to $1.3 million, from $1.7 million for the three months ended March 31,
1997. The decrease in amortization expense is due primarily to a write-down of
certain intangible assets in the fourth quarter of 1997.
Depreciation Expense. Depreciation expense for the three months ended March 31,
1998, increased 22.1% to $1.8 million, from $1.5 million for the three months
ended March 31, 1997. The increase in expense relates to capital expenditures
made throughout 1997 and the first three months of 1998 in support of the
overall growth of the Company.
Operating Income. Operating income for the three months ended March 31, 1998,
was $8.4 million or 17.0% of total revenues, compared to $1.3 million or 3.4% of
total revenues for the three months ended March 31, 1997. The increase between
years relates to the factors discussed above.
The Company incurred certain one-time or acquisition-related charges
(Acquisition Charges) in connection with the Acquisition in November 1994. The
Acquisition Charges include amortization of acquired software, client contracts
and related intangibles, noncompete agreement, goodwill, and stock-based
compensation. Operating income for the three months ended March 31, 1998 and
1997, excluding Acquisition Charges of $2.1 million and $5.5 million, was $10.4
million or 21.1% of total revenues, and $6.9 million or 17.8% of total revenues,
respectively. See the Company's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, for additional
discussion regarding the Acquisition Charges and the impact of such charges on
operations.
Interest Expense. Interest expense for the three months ended March 31, 1998,
increased 297.2% to $2.5 million, from $0.6 million for the three months ended
March 31, 1997, with the increase attributable primarily to the financing of the
Company's acquisition of the SUMMITrak assets in September 1997.
Interest Income. Interest income for the three months ended March 31, 1998,
increased 212.8% to $0.7 million, from $0.2 million for the three months ended
March 31, 1997, with the increase attributable primarily to an increase in
operating funds available for investment and an increase in interest charges on
aged customer accounts.
Income Taxes
- ------------
At March 31, 1998, the Company concluded that it was more likely than not that
certain of the Company's deferred tax assets would be realized. Accordingly,
the Company has recognized a net deferred tax asset of approximately $12.0
million. The Company has recorded a valuation allowance of approximately $55.7
million against the remaining net deferred tax assets since realization of these
future benefits is not sufficiently assured as of March 31, 1998.
10
The Company intends to analyze the realizability of the net deferred tax assets
at each future quarterly reporting period. The current quarterly results of
operations, as well as the Company's projected results of operations, will
determine the required valuation allowance at the end of each quarter. Based on
its current projections of operating results for 1998, the Company expects to
pay U.S. income taxes and realize additional deferred tax assets in 1998. As a
result, the Company does not expect income tax expense for 1998 to be
significant.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1998, the Company's principal sources of liquidity included cash
and cash equivalents of $16.1 million. The Company also has a revolving credit
facility in the amount of $40.0 million, of which there were no borrowings
outstanding. The Company's ability to borrow under the revolving credit
facility is subject to maintenance of certain levels of eligible receivables.
At March 31, 1998, $35.2 million of the $40.0 million revolving credit facility
was available to the Company based on the current level of eligible receivables.
The revolving credit facility expires in September 2002.
During the three months ended March 31, 1998, the Company used $1.6 million of
net cash flow for operating activities, primarily due to an increase in accounts
receivable during the period. Current cash and cash equivalents and proceeds of
$1.3 million from the issuance of common stock through the Company's stock
incentive plans were used to fund capital expenditures of $3.5 million and
additions to software of $0.6 million.
Earnings from operations before interest, taxes, depreciation and amortization
(EBITDA) for the three months ended March 31, 1998 was $12.9 million or 26.1% of
total revenues, compared to $9.1 million or 23.5% of total revenues for the
three months ended March 31, 1997. EBITDA is presented here as a measure of the
Company's debt service ability and is not intended to represent cash flows for
the periods.
The Company financed the SUMMITrak asset acquisition with a $150.0 million term
credit facility in September 1997. In December 1997, the Company made an
optional principal payment on the term credit facility of $15.0 million. The
first scheduled principal payment on the term credit facility is June 30, 1998
in the amount of $2.3 million. Interest rates for the term and revolving
credit facilities are chosen at the option of the Company and are based on the
LIBOR rate or the prime rate, plus an additional percentage spread, with the
spread dependent upon the Company's leverage ratio. For the three months ended
March 31, 1998, the spread on the LIBOR rate and prime rate was 1.0 percent and
0 percent, respectively. Based on the Company's leverage ratio as of March 31,
1998, the spread on the LIBOR rate was reduced to 0.75 percent, effective April
1, 1998.
The loan agreement restricts, among other things, the payment of dividends or
other types of distributions on any class of the Company's stock unless the
Company's leverage ratio, as defined in the loan agreement, is under 1.50. As
of March 31, 1998, the leverage ratio was 2.50.
The purchase price for the SUMMITrak assets acquired in September 1997 included
up to $26.0 million in conversion incentive payments. The timing of the
conversion incentive payments is based upon the achievement of certain milestone
by TCI and the Company, as specified in the SUMMITrak asset acquisition
agreement. The milestones are based principally upon the number of TCI's
customers converted to, and the total number of TCI customers processed on, the
Company's customer care and billing system. Such payments to date have not been
significant. Based on the conversions performed to date and the future
conversions scheduled as of March 31, 1998, the Company expects to pay $19.5
million to TCI within the next 12 months, with the remaining amount payable by
the end of the third quarter of 1999.
The Company believes that cash generated from operations, together with the
current cash and cash equivalents and the amount available under the revolving
credit facility, will be sufficient to meet its anticipated cash requirements
for operations (including research and development expenditures), income taxes,
debt service, conversion incentive payments and capital expenditures for both
its short and long-term purposes.
11
Year 2000
- ---------
In 1995, the Company began efforts to identify and assess any issues associated
with its software's ability to properly utilize dates and process data beyond
the year 2000. The Company recognizes that the failure to properly and timely
address issues surrounding the year 2000 could have a material impact on its
operations, and as a result it appointed a project team to undertake a Company-
wide study to determine the full scope and related costs to the Company of
ensuring that its systems can continue to meet the Company's internal needs, as
well as those of its customers. The Company's year 2000 project team is
communicating with vendors and customers to coordinate year 2000 conversion and
continues to report to the Company's management the progress on year 2000
compliance. The Company currently believes that it will be able to effectively
mitigate risks associated with the year 2000 and that its Company-wide year 2000
project will be substantially complete by the end of the fourth quarter of 1998.
The Company does not expect the costs to make its systems year 2000 compliant to
be material to its financial condition or results of operations.
12
CSG SYSTEMS INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1-5. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2.19A* Second Amendment to Restated and Amended CSG Master
Subscriber Management System Agreement Between CSG
Systems, Inc. and TCI Cable Management Corporation,
dated January 9, 1998.
10.04A Second Amendment of Employee Performance Stock Purchase
Agreement, dated March 18, 1998.
27.01 Financial Data Schedule (EDGAR Version only)
99.01 Safe Harbor for Forward-Looking Statements Under the
Private Securities Litigation Reform Act of 1995-Certain
Cautionary Statements and Risk Factors
(b) Reports on Form 8-K
None
__________________
* Portions of the exhibit have been omitted pursuant to an application for
confidential treatment, and the omitted portions have been filed separately
with the Commission.
13
SIGNATURES
- ----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 15, 1998
CSG SYSTEMS INTERNATIONAL, INC.
/s/ Neal C. Hansen
--------------------------------------------
Neal C. Hansen
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Greg A. Parker
--------------------------------------------
Greg A. Parker
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Randy R. Wiese
--------------------------------------------
Randy R. Wiese
Controller and Principal Accounting Officer
(Principal Accounting Officer)
14
CSG SYSTEMS INTERNATIONAL, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.19A* Second Amendment to Restated and Amended CSG Master Subscriber
Management System Agreement between CSG Systems, Inc. and TCI Cable
Management Corporation, dated January 9, 1998.
10.04A Second Amendment of Employee Performance Stock Purchase Agreement,
dated March 18, 1998.
27.01 Financial Data Schedule (EDGAR Version only)
99.01 Safe Harbor for Forward-Looking Statements Under the Private
Securities Litigation Reform Act of 1995-Certain Cautionary
Statements and Risk Factors
__________________
* Portions of the exhibit have been omitted pursuant to an application for
confidential treatment, and the omitted portions have been filed separately
with the Commission.
15