8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 27, 2005

Aspect Communications Corporation

(Exact name of registrant as specified in its charter)

0-18391
(Commission File Number)

California	94-2974062
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation)

1320 Ridder Park Drive
San Jose, CA 95131
(Address of principal executive offices, with zip code)

(408) 325-2200
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Table of Contents

Item 2.02 Results of Operations and Financial Condition.

     (a) On January 27, 2005, Aspect Communications Corporation issued a press release of the financial results for the fourth quarter and fiscal year ended December 31, 2004. A copy of the press release is attached as Exhibit 99.1 hereto.

Item 9.01 Financial Statements and Exhibits.

     (c) Exhibits.

          99.1 Press Release of Aspect Communications Corporation dated January 27, 2005 (earnings results for fourth quarter and fiscal year 2004) furnished pursuant to Item 2.02 of this Report on Form 8-K.

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Table of Contents

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 hereunto duly authorized.

	Aspect Communications Corporation
Date: January 27, 2005	By:	/s/ Gary E. Barnett
		Gary E. Barnett
		President and Chief Executive Officer

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Table of Contents

ASPECT COMMUNICATIONS CORPORATION
INDEX TO EXHIBITS

Exhibit
Number	Description
99.1	Press Release of Aspect Communications Corporation dated January 27, 2005 (earnings results for fourth quarter and fiscal year 2004).

EX-99.1

Exhibit 99.1

ASPECT COMMUNICATIONS REPORTS FOURTH QUARTER AND
FISCAL YEAR 2004 FINANCIAL RESULTS

SAN JOSE, Calif., January 27, 2005 — Aspect Communications Corporation (Nasdaq: ASPT), a leading provider of enterprise customer contact solutions, today reported financial results for the fourth quarter and fiscal year ended December 31, 2004.

FOURTH QUARTER FINANCIAL RESULTS:

Revenues for the fourth quarter of 2004 totaled $96.8 million compared to $91.2 million for the third quarter of 2004 and $97.4 million for the fourth quarter last year. Product revenue in the fourth quarter of 2004 was $33.7 million compared to $30.8 million for the third quarter of 2004 and $32.5 million for the fourth quarter of 2003. Services revenue totaled $63.0 million in the fourth quarter compared to $60.4 million for the third quarter of 2004 and $64.8 million for the fourth quarter of 2003.

Net income attributable to common shareholders for the fourth quarter was $15.5 million or a profit of $0.19 per share on a basic and fully diluted basis. This compares with a net income attributable to common shareholders of $11.3 million or a profit of $0.14 per share for the third quarter of 2004 and a net income attributable to common shareholders of $14.6 million or a profit of $0.19 per share for the fourth quarter of 2003.

“I am exceptionally pleased with our results this quarter,” said Gary Barnett, Aspect President and CEO. “What makes Aspect unique in the marketplace is the knowledge and experience that comes with our 20-year history. We have made great progress in several key areas of our business, including further strengthening our financial position, improving our market position, and introducing a number of key new solutions. We look forward to furthering the foundation we have built.”

For the fourth quarter of 2004, gross margins were 60%. This compares to 59% for the third quarter of 2004 and 62% for the fourth quarter of 2003. Operating expenses were $39.0 million for the fourth quarter of 2004 compared to $39.0 million for the third quarter of 2004 and $41.4 million in the fourth quarter of 2003.

- more -

Aspect Communications Announces Financial Results for the Quarter and Fiscal Year ended December 31, 2004, page 2

Cash, cash equivalents, and short-term investments totaled $202.6 million as of December 31, 2004. This compares to $183.3 million as of September 30, 2004. The company generated $18.7 million in cash from operations during the fourth quarter. Accounts receivable at quarter-end totaled $49.2 million and days sales outstanding were 38 days compared to 32 days at September 30, 2004.

FISCAL YEAR 2004 FINANCIAL RESULTS:

Revenues for the full fiscal year ended December 31, 2004 totaled $370.4 million compared to $363.8 million for fiscal year 2003. Product revenue in 2004 was $122.5 million compared to $114.4 million in fiscal year 2003. Services revenue in 2004 was $247.9 million compared to $249.4 million in fiscal year 2003.

Net income attributable to common shareholders for the full fiscal year 2004 was $52.4 million or a profit of $0.65 per share. This compares with a net income attributable to common shareholders of $29.0 million or a profit of $0.39 per share on a fully diluted basis, for the 2003 fiscal year.

For 2004, gross margin was 60%, compared to 57%, for 2003.

Operating expenses totaled $154.4 million in 2004. This compares to operating expenses of $159.6 million in 2003.

FOURTH QUARTER OPERATIONAL HIGHLIGHTS:

Aspect received revenue from customers across a variety of industry segments. Some of these Aspect customers included: Ameren Corporation, ASV Direktmarketing GmbH, Comcast Corporation, National Grid Transco plc, Regence BlueCross BlueShield, UK Inland Revenue and Vivento.

Additionally, for the second consecutive year the company was also named U.S. workforce management software market-share leader in Saddletree Research’s report “The U.S. Workforce Management Software Market: 2004-2008.”

Aspect Communications Announces Financial Results for the Quarter and Fiscal Year ended December 31, 2004, page 3

BUSINESS OUTLOOK:

The following statements are forward-looking, and actual results may differ materially:

The company is planning for first quarter total revenue to be in a range of $88.0 million to $90.0 million.

First quarter operating income is expected to be in a range of $11 million to $13 million.

Earnings per share for the first quarter are expected to be in a range of $0.11 per share to $0.13 per share.

The company will host a conference call and web-cast today at 2:00 pm Pacific Time to discuss fourth quarter and fiscal year 2004 results. A replay of the conference call will be available from January 27, 2005 at 5:00 pm Pacific Time through February 3, 2005 at 8:59 pm Pacific Time by calling 800-839-5490 or 402-220-2550. The web-cast and replay of the conference call may be accessed from the company’s home page at www.aspect.com.

About Aspect Communications

Aspect Communications Corporation is a leading provider of contact center solutions and services that enable businesses to manage and optimize customer communications. Aspect’s global customer base includes more than two-thirds of the Fortune 50 and leading corporations in a range of industries, including transportation, financial services, insurance, telecommunications, retail and outsourcing, as well as large government agencies. The company’s leadership is based on two decades of expertise. Aspect is headquartered in San Jose, Calif., with offices in countries around the world.

Notes on financial presentation: Actual financial results are prepared in accordance with U.S. generally accepted accounting principles.

Certain statements contained in this press release, including but not limited to, statements relating to expected first quarter total revenue, operating income and earnings per share are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and are made under its safe-harbor

Aspect Communications Announces Financial Results for the Quarter and Fiscal Year ended December 31, 2004, page 4

provisions. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Specific factors that may cause actual revenue, operating income and earnings per share results to differ include: the significant percentage of Aspect’s quarterly sales consummated in the last few days of the quarter and the potential for delays in closing of sales or product deliveries make financial predictions especially difficult and raise a substantial risk of variance in actual results; changes in the overall mix and volume of product line revenues can have a significant impact on gross margin and profitability; the loss of support customers or if one or more support contracts is delayed, reduced or cancelled; fluctuations in our North American and International business levels and/or economic conditions, the hiring and retention of key employees, insufficient, excess or obsolete inventory and variations in valuation, and foreign exchange rate fluctuations can all cause revenues and income to fall significantly short of anticipated levels. The economic, political and other uncertainties caused in the United States and throughout other regions of the world add to these challenges. Additional risks that could cause actual results to differ materially from those projected are discussed in Aspect’s Form 10-K/A for the year ended December 31, 2003 and Form 10-Q for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004, all filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. Aspect undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Aspect, the Aspect logo and the phrases and marks relating to other Aspect products and services discussed in this press release constitute one or both of the following: (1) registered trademarks and/or service marks of Aspect Communications Corporation in the United States and/or other countries or (2) intellectual property subject to protection under common law principles. All other names and marks mentioned in this document are properties of their respective owners.

Carrie Kovac
Director, Investor Relations
Aspect Communications
(408) 325-2437
carrie.kovac@aspect.com

ASPECT COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts — unaudited)

	Three months ended						Three months ended						Twelve months ended
	December 31,						September 30,						December 31,
	2004			2003			2004			2003			2004			2003
Net revenues:
Software license	$	20,743		$	21,469		$	17,753		$	18,710		$	74,062		$	71,461
Hardware		12,999			11,076			13,040			11,582			48,453			42,981
Services:
Software license updates and product support		51,995			55,796			52,178			54,558			210,996			216,313
Professional services and education		11,015			9,045			8,243			7,779			36,926			33,093
Services		63,010			64,841			60,421			62,337			247,922			249,406
Total net revenues		96,752			97,386			91,214			92,629			370,437			363,848
Cost of revenues:
Cost of software license revenues		2,672			2,515			2,188			1,663			8,715			8,987
Cost of hardware revenues		8,308			9,128			8,849			9,314			33,739			37,493
Cost of services revenues		27,377			24,582			25,316			25,328			103,204			102,152
Amortization of intangible assets and stock-based compensation		724			725			724			1,238			2,898			4,417
Impairment of intangible assets		—			—			—			2,000			—			2,000
Total cost of revenues		39,081			36,950			37,077			39,543			148,556			155,049
Gross margin		57,671			60,436			54,137			53,086			221,881			208,799
Operating expenses:
Research and development		10,624			11,284			11,314			12,189			44,450			48,775
Sales and marketing		19,632			20,813			19,863			19,598			78,610			81,035
General and administrative		6,499			8,412			7,744			7,091			28,405			25,342
Restructuring charges		—			818			—			—			—			3,814
Amortization of intangible assets and stock-based compensation		2,261			32			95			205			2,896			595
Total operating expenses		39,016			41,359			39,016			39,083			154,361			159,561
Income from operations		18,655			19,077			15,121			14,003			67,520			49,238
Interest and other income (expense), net		743			(342	)		184			(1,182	)		1,250			(4,665	)
Net income before income taxes		19,398			18,735			15,305			12,821			68,770			44,573
Provision for income taxes		1,627			2,000			1,821			2,575			7,513			7,071
Net income before cumulative effect of change in accounting principle		17,771			16,735			13,484			10,246			61,257			37,502
Cumulative effect of change in accounting principle		—			—			—			—			—			(777	)
Net income		17,771			16,735			13,484			10,246			61,257			36,725
Less preferred stock dividend, accretion, and amortization		(2,269	)		(2,095	)		(2,223	)		(2,053	)		(8,808	)		(7,700	)
Net income attributable to common shareholders	$	15,502		$	14,640		$	11,261		$	8,193		$	52,449		$	29,025
Earnings per share before cumulative effect of change in accounting principle	$	0.19		$	0.19		$	0.14		$	0.11		$	0.65		$	0.40
Cumulative effect of change in accounting principle		—			—			—			—			—		$	(0.01	)
Basic earnings per share (1)	$	0.19		$	0.19		$	0.14		$	0.11		$	0.65		$	0.39
Basic weighted average shares outstanding		59,973			56,309			59,373			54,612			58,961			54,453
Diluted earnings per share	$	0.19		$	0.19		$	0.14		$	0.11		$	0.65		$	0.39
Diluted weighted average shares outstanding		85,882			84,974			85,117			81,967			85,743			78,874

(1) Pursuant to GAAP, the Company is required to present earnings per share “as if” all earnings were distributed to Common and Preferred Shareholders. Under this “two class” method, earnings are allocated to Common and Preferred Shareholders in proportion to their respective ownership interests. This calculation for the three months ended December 31, 2004 would allocate approximately 73% of the current earnings to Common Shareholders and yield $0.19 earnings per share per Common Shareholder, as shown above. The calculation for the twelve months ended December 31, 2004 would allocate approximately 73% of the current earnings to Common Shareholders and yield $0.65 earnings per share per Common Shareholder, as shown above. However, the Company has not in the past, and does not currently intend to, declare a distribution of earnings. Absent this “as if” apportionment, diluted earnings per Common share would be $0.21 for the three months ended December 31, 2004 and $0.71 for the twelve months ended December 31, 2004.

ASPECT COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands — unaudited)

	December 31,		September 30,		December 31,
	2004		2004		2003
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	202,631	$	183,277	$	163,992
Accounts receivable, net		49,163		41,168		39,561
Inventories		3,340		3,981		6,176
Other current assets		13,138		15,008		19,145
Total current assets		268,272		243,434		228,874
Property and equipment, net		62,494		65,306		68,599
Intangible assets, net		5,015		5,739		7,930
Other assets		4,723		4,935		5,182
Total assets	$	340,504	$	319,414	$	310,585
Liabilities, redeemable convertible preferred stock and shareholders’ equity
Current liabilities:
Short-term borrowings	$	150	$	181	$	1,732
Accounts payable		7,491		7,309		4,936
Accrued compensation and related benefits		19,252		20,788		17,773
Other accrued liabilities		61,954		59,187		64,790
Deferred revenues		48,003		49,132		50,200
Total current liabilities		136,850		136,597		139,431
Long term borrowings		155		180		39,436
Other long-term liabilities		5,793		5,200		11,021
Total liabilities		142,798		141,977		189,888
Redeemable convertible preferred stock		42,490		40,222		33,681
Shareholders’ equity		155,216		137,215		87,016
Total liabilities, redeemable convertible preferred stock and shareholders’ equity	$	340,504	$	319,414	$	310,585

ASPECT COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands - unaudited)

	Three months ended						Twelve months ended
	December 31,						December 31,
	2004			2003			2004			2003
Cash flows from operating activities:
Net income	$	17,771		$	16,735		$	61,257		$	36,725
Reconciliation of net income to cash provided by operating activities:
Depreciation		5,807			6,086			23,335			24,635
Amortization of intangible assets		724			757			2,915			4,567
Non-cash compensation and services expenses		2,261			—			2,879			446
Loss on disposal of property		10			108			40			405
Loss on extinguishment of debt		—			—			—			17
Loss on short-term investments, net		371			—			1,656			—
Cumulative effect of change in accounting principle		—			—			—			777
Impairment of intangible assets		—			—			—			2,000
Accretion of convertible debentures		—			14			—			4,423
Changes in operating assets and liabilities:
Accounts receivable		(6,215	)		7,077			(7,977	)		14,722
Inventories		769			2,028			2,925			1,146
Other current assets and other assets		2,394			(1,298	)		7,962			(3,167	)
Accounts payable		147			(1,830	)		2,505			(764	)
Accrued compensation and related benefits		(1,794	)		1,251			1,213			1,389
Other accrued liabilities		(2,509	)		922			(14,143	)		(6,507	)
Deferred revenues		(1,072	)		(1,276	)		(2,364	)		18,305
Net cash provided by operating activities		18,664			30,574			82,203			99,119
Cash flows from investing activities:
Purchase of short-term investments		(36,777	)		(69,075	)		(198,748	)		(203,290	)
Proceeds from sales and maturities of short-term investments		39,580			48,929			171,204			194,413
Property and equipment purchases		(2,783	)		(2,595	)		(16,720	)		(5,740	)
Net cash provided by (used in) investing activities		20			(22,741	)		(44,264	)		(14,617	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		2,358			10,450			15,084			16,844
Proceeds from issuance of preferred stock, net		—			—			—			43,564
Payments on capital lease obligations		(56	)		(33	)		(213	)		(376	)
Proceeds from borrowings		—			—			40,000			—
Payments on borrowings		—			(1,739	)		(80,979	)		(6,886	)
Payments on financing costs		(32	)		—			(1,128	)		—
Payments on repurchase of convertible subordinated debentures		—			(970	)		—			(129,409	)
Net cash provided by (used in) financing activities		2,270			7,708			(27,236	)		(76,263	)
Effect of exchange rate changes on cash and cash equivalents		1,941			1,644			2,894			1,363
Net increase in cash and cash equivalents		22,895			17,185			13,597			9,602
Cash and cash equivalents:
Beginning of period		66,355			58,468			75,653			66,051
End of period		89,250			75,653			89,250			75,653
Short-term investments at the end of period		113,381			88,339			113,381			88,339
Cash, cash equivalents and short-term investments	$	202,631		$	163,992		$	202,631		$	163,992
Supplemental disclosure of cash flow information:
Cash paid for interest	$	142		$	616		$	1,599		$	2,811
Cash paid for income taxes	$	16		$	520		$	4,908		$	916
Supplemental schedule of noncash investing and financing activities
Accrued preferred stock dividend and amortization of redemption premium	$	1,898		$	1,742		$	7,351		$	6,389
Amortization of beneficial conversion feature	$	371		$	353		$	1,457		$	1,311
Beneficial conversion feature	$	—		$	—		$	—		$	17,583
Issuance (cancellation) of restricted stock	$	—		$	—		$	408		$	(56	)