-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QxAP9GoVvvblntZcI8981bwbzuesVq+nkF8CupCjQPHg+dCueO3pIevGWwxQjZf4 E/Eta1fhW3BODYVIip07pw== 0000950130-95-002324.txt : 19951109 0000950130-95-002324.hdr.sgml : 19951109 ACCESSION NUMBER: 0000950130-95-002324 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMVERSE TECHNOLOGY INC/NY/ CENTRAL INDEX KEY: 0000803014 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 133238402 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15502 FILM NUMBER: 95588016 BUSINESS ADDRESS: STREET 1: 170 CROSSWAYS PARK DR CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5166777200 MAIL ADDRESS: STREET 1: 170 CROSSWAYS PARK DRIVE STREET 2: 170 CROSSWAYS PARK DRIVE CITY: WOODBURY STATE: NY ZIP: 11797 10-Q 1 FORM 10-Q FOR QUARTER ENDING 9/30/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-15502 COMVERSE TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) NEW YORK 13-3238402 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 170 CROSSWAYS PARK DRIVE, WOODBURY, NY 11797 (Address of principal executive offices) (Zip Code) (516) 677-7200 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares of Common Stock, par value $0.10 per share, outstanding as of November 3, 1995 was 21,258,611 Page 1 of 18 Total Pages (Exhibit Index Appears on Page 15) PART I FINANCIAL INFORMATION Page ---- ITEM 1. Financial Statements 1. Condensed Consolidated Balance Sheets as of December 31, 1994 and September 30, 1995 3 2. Condensed Consolidated Statements of Income for the Three Month and Nine Month Periods Ended September 30, 1994 and September 30, 1995 4 3. Condensed Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1994 and the Nine Month Period Ended September 30, 1995 5 4. Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended September 30, 1994 and September 30, 1995 6 4. Notes to Condensed Consolidated Financial Statements 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Page 2 of 18 COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 1994 1995 1994 1995 (Unaudited) (Unaudited) Current assets: Current liabilities: Cash and cash equivalents $ 39,225 $ 80,336 Accounts payable and Bank time deposits and accrued expenses $ 19,192 $ 27,208 short-term investments 89,368 44,560 Advance payments Accounts receivable, net 24,181 35,187 from customers 5,387 5,131 Inventories 12,427 16,015 Due to related parties 278 338 Prepaid expenses and Other current liabilities 3,591 874 other current assets 4,591 6,538 -------- -------- -------- -------- Total current liabilities 28,448 33,551 Total current assets 169,792 182,636 5-1/4% Convertible Subordinated Debentures 60,000 60,000 Long-term receivables, net 1,093 2,362 Liability for severance pay 1,352 2,331 Other liabilities 676 1,073 Property and equipment 17,162 21,460 Minority interest 413 320 Less: accumulated depreci- -------- -------- ation and amortization (8,119) (10,202) Total liabilities 90,889 97,275 -------- -------- 9,043 11,258 Stockholders' equity: Investments 616 3,699 Common Stock, $.10 par value authorized 100,000,000 shares; Goodwill, net 1,384 1,354 issued and outstanding 20,981,456 and 21,222,356 2,098 2,122 Software development costs, net 6,512 8,374 Additional paid-in-capital 73,300 74,790 Cumulative translation adjustment (118) (40) Other intangible assets, net 1,827 1,663 Unrealized gain on available for sale securities, net of tax 15 931 Deferred costs and other assets, net 2,235 1,922 Retained earnings 26,318 38,190 -------- -------- -------- -------- Total stockholders' equity 101,613 115,993 -------- -------- $192,502 $213,268 $192,502 $213,268 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. Page 3 of 18 COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1994 1995 1994 1995 Revenues: Sales $ 78,818 $ 99,126 $28,893 $36,116 Interest and other income 3,917 6,533 1,452 2,209 -------- -------- ------- ------- Total revenues 82,735 105,659 30,345 38,325 - ------------------------------ -------- -------- ------- ------- Costs and expenses: Research and development 12,236 19,806 4,448 7,078 Less reimbursement (3,143) (5,148) (1,049) (1,846) -------- -------- ------- ------- Net research and development 9,093 14,658 3,399 5,232 Cost of sales 34,909 42,879 12,569 15,665 Selling, general and administrative 24,041 29,594 8,848 10,643 Royalties and license fees 1,880 1,828 584 551 Minority interest and equity in loss of affiliates 280 (105) (15) (60) Interest expense and other 2,883 3,459 1,145 1,017 -------- -------- ------- ------- Total costs and expenses 73,086 92,313 26,530 33,048 -------- -------- ------- ------- Income before income tax provision 9,649 13,346 3,815 5,277 Income tax provision 1,289 1,474 343 570 -------- -------- ------- ------- Net income $ 8,360 $ 11,872 $ 3,472 $ 4,707 ======== ======== ======= ======= Primary and fully diluted earnings per share $0.38 $0.53 $0.16 $0.21 ======== ======== ======= =======
The accompanying notes are an integral part of these financial statements. Page 4 of 18 COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
Common Stock Additional Cumulative Unrealized Number Par Paid in Translation Gains Retained of Shares Value Capital Adjustment (Losses) Earnings Total ---------- ------- ----------- ------------ ----------- --------- --------- BALANCE AT JANUARY 1, 1994 as previously reported 19,814,461 $1,981 $73,047 $ (95) $ - $15,517 $ 90,450 Pooling of interests 1,078,944 108 (98) - - 1,148 1,158 ---------- ------ ------- ----------- ---------- ------- -------- Balance, as restated 20,893,405 2,089 72,949 (95) - 16,665 91,608 Adjustment to beginning balance for unrealized gain on available-for-sale securities, net of tax - - - - 353 - 353 Unrealized loss on available-for-sale securities, net of tax - - - - (338) - (338) Common stock issued in connection with exercise of stock options and warrants 88,051 9 351 - - - 360 Translation adjustment - - - (23) - - (23) Net income, year ended December 31, 1994 - - - - - 12,098 12,098 Adjustment to conform fiscal year of pooled company - - - - - (2,445) (2,445) ---------- ------ ------- ----------- ---------- ------- -------- BALANCE AT DECEMBER 31, 1994 20,981,456 2,098 73,300 (118) 15 26,318 101,613 Unrealized gain on available-for-sale securities, net of tax - - - - 916 - 916 Common stock issued in connection with exercise of stock options and warrants 230,204 23 1,336 - - - 1,359 Common stock issued in connection with acquisition of additional interest in majority-owned subsidiary 10,696 1 154 - - - 155 Translation adjustment - - - 78 - - 78 Net income, nine months ended September 30, 1995 - - - - - 11,872 11,872 ---------- ------ ------- ----------- ---------- ------- -------- BALANCE AT SEPTEMBER 30, 1995 21,222,356 $2,122 $74,790 $ (40) $ 931 $38,190 $115,993 ========== ====== ======= =========== ========== ======= ========
The accompanying notes are an integral part of these financial statements. Page 5 of 18 COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) NINE MONTHS ENDED SEPTEMBER 30, 1994 1995 Cash flows from operating activities: Net cash from operations after adjustments for non-cash items $ 11,230 $ 16,013 Changes in assets and liabilities: Accounts receivable ( 5,474) (12,275) Inventories ( 2,471) (3,588) Prepaid expenses and other receivables ( 105) (2,485) Accounts payable and accrued expenses 5,048 8,016 Advance payments from customers 615 (256) Due to related parties 122 60 Liability for severance pay 564 979 -------- -------- Net cash provided by operating activities 9,529 6,464 Cash flows from investing activities: Maturities and sales (purchases) of bank time deposits and investments, net ( 55,067) 43,130 Purchases of property and equipment ( 3,256) (4,298) Increase in software development costs ( 2,099) (3,688) -------- -------- Net cash (used in) provided by investing activities ( 60,422) 35,144 Cash flows from financing activities: Decrease in short- and long-term debt, net ( 101) (1,856) Proceeds from issuance of common stock 217 1,359 -------- -------- Net cash provided by (used in) financing activities 116 (497) Net increase (decrease) in cash and cash equivalents ( 50,777) 41,111 Cash and cash equivalents, beginning of period 119,438 39,225 -------- Cash and cash equivalents, end of period $ 68,661 $ 80,336 ======== ======== The accompanying notes are an integral part of these financial statements. Page 6 of 18 COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION. The foregoing financial statements have been prepared by Comverse Technology, Inc. (the "Company" or "Comverse") and are unaudited. All adjustments (which, except as hereinafter described, consist solely of normal recurring adjustments) have been made that, in the opinion of the Company's management, are necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. The consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements, and the notes thereto, for the year ended December 31, 1994. The financial statements appearing herein have been restated to reflect the acquisition of Dale, Gesek, McWilliams & Sheridan, Inc. ("DGM&S") described below. The results of operations for the nine and three month periods ended September 30, 1995 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year. ACQUISITION OF DGM&S. On August 30, 1995, the Company acquired DGM&S, a New Jersey corporation that develops and markets telecommunications software products. To effect the acquisition, the Company issued 1,078,944 shares of common stock for all the outstanding common stock of DGM&S. The acquisition has been accounted for as a pooling of interests; therefore, prior financial statements and information have been restated to include DGM&S, as if the companies had been combined for all periods presented. Prior to the acquisition, DGM&S prepared its financial statements on the basis of a fiscal year ending September 30. In 1995, the combined companies will report on the basis of Comverse's fiscal year, which ends on December 31. To conform the financial reporting periods of the combined companies, DGM&S's operating results for the three month period ended December 31, 1994, comprising total revenues and a net loss of approximately $2,122,000 and $2,445,000, respectively, are reflected as an adjustment to retained earnings on the December 31, 1994 consolidated balance sheet, and the 1994 interim financial statements appearing above reflect the combination of Comverse's results for the three and nine month periods ended September 30, 1994 with DGM&S's results for the three and nine month periods ended June 30, 1994. The table below sets forth the unaudited separate and combined results of Comverse and DGM&S for the three-month periods ended March 31, 1995, June 30, 1995 and September 30,1995. Page 7 of 18 Three Months Ended March 31, June 30, September 30, 1995 1995 1995 -------- ------- ------------ (In Thousands) (Unaudited) Total Revenues -------------- Comverse $28,744 $31,918 $34,044 DGM&S 2,778 3,894 4,550 Less: Intercompany eliminations - - (269) ------- ------- ------- $31,522 $35,812 $38,325 ======= ======= ======= Net Income ---------- Comverse $ 3,517 $ 4,071 $ 4,418 DGM&S (628) 205 310 Less: Intercompany eliminations - - (21) ------- ------- ------- $ 2,889 $ 4,276 $ 4,707 ======= ======= ======= INVENTORIES. The composition of inventories at December 31, 1994 and September 30, 1995 is as follows: DECEMBER 31, SEPTEMBER 30, 1994 1995 (In Thousands) Raw materials $ 7,196 $ 9,796 Work in process 2,342 4,001 Finished goods 2,889 2,218 ------- ------- $12,427 $16,015 ======= ======= RESEARCH AND DEVELOPMENT EXPENSES. The Company has historically supported a substantial portion of its research and development activities through participation in government sponsored funding programs, which in general provide reimbursement for a portion of research and development expenditures incurred under project budgets approved on an annual basis by the applicable funding agencies. During the nine month and three month periods ended September 30, 1995, gross research and development expenses amounted to approximately $19,806,000 and $7,078,000, respectively, of which approximately $5,148,000 and $1,846,000, respectively, was reimbursed. EARNINGS PER SHARE. For the nine month and three month periods ended September 30, 1994 and 1995, the computation of earnings per share is based on the weighted average number of outstanding common shares and additional shares assuming the exercise of stock options. For the nine month and three month periods ended Page 8 of 18 September 30, 1994, the computation of fully diluted earnings per share was antidilutive. The shares used in the computations are as follows (also see Exhibit 11): NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1994 1995 1994 1995 (In Thousands) Primary 21,806 22,468 21,773 22,827 Fully diluted 21,806 22,612 21,773 22,929 Page 9 of 18 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. --------------------------------------------- RESULTS OF OPERATIONS. Total Revenues. Total revenues for the nine month and three month -------------- periods ended September 30, 1995 increased by approximately $22,924,000 (28%) and approximately $7,980,000 (26%), respectively, from the corresponding periods in 1994. The increase is attributable primarily to a higher volume of sales of systems and parts. Sales for the nine month and three month periods ended September 30, 1995 increased by approximately $20,308,000 (26%) and approximately $7,223,000 (25%), respectively, from the 1994 periods. The growth in sales for the nine month period ended September 30, 1995 occurred in both the TRILOGUE and AUDIODISK product lines and for the three month period ended September 30, 1995 occurred in the TRILOGUE product line. Interest and other income for the nine month and three month periods ended September 30, 1995 increased by approximately $2,616,000 (67%) and approximately $757,000 (52%), respectively, over the corresponding periods in 1994, resulting from increased interest rates and realized gains on sales of short-term investments. Cost of Sales. Cost of sales for the nine month and three month ------------- periods ended September 30, 1995 increased by approximately $7,970,000 (23%) and approximately $3,096,000 (25%), respectively, from the corresponding periods in 1994. The increase is attributable primarily to the increase in sales. Gross margin (expressed as a percentage of sales) for the nine month and three month periods ended September 30, 1995 increased to approximately 57% from approximately 56% during the corresponding 1994 periods. Research and Development Expenses. Gross research and development --------------------------------- expenses for the nine month and three month periods ended September 30, 1995 increased by approximately $7,570,000 (62%) and approximately $2,630,000 (59%), respectively, from the corresponding periods in 1994. Net research and development expenses, after reimbursement under government funding programs, for the nine month and three month periods ended September 30, 1995 increased by approximately $5,565,000 (61%) and approximately $1,833,000 (54%), respectively, from the corresponding periods in 1994. Such increases are due to the overall growth of research and development operations, the initiation of significant new research and development projects for both product lines, and increases in salaries and other costs associated with research and development operations in Israel. Selling, General and Administrative Expenses. Selling, general and -------------------------------------------- administrative expenses for the nine month and three month periods ended September 30, 1995 increased by approximately $5,553,000 (23%) and approximately $1,795,000 (20%), respectively, from the corresponding periods in 1994. Such increases were the result of increased sales, marketing, and administrative activities associated with the overall growth of the Company's operations, and particularly with the expansion of direct sales and marketing activities internationally and in the United States. Page 10 of 18 Royalties and License Fees. Royalties and license fees for the nine -------------------------- month and three month periods ended September 30, 1995 decreased by approximately $52,000 (3%) and approximately $33,000 (6%), respectively, from the corresponding periods in 1994. Royalties and license fees for the nine and three month periods ended September 30, 1995, as a percentage of total sales, decreased from approximately 2.4% and approximately 2.0%, respectively, in the 1994 periods, to approximately 1.8% and approximately 1.5%, respectively, in the 1995 periods reflecting an increase in the proportion of total sales comprised of products bearing lower rates of royalty or for which no royalties are due. Income Tax Provision. Provision for income taxes for the nine month -------------------- and three month periods ended September 30, 1995 increased by approximately $185,000 (14%) and approximately $227,000 (66%), respectively, from the corresponding periods in 1994. The Company's overall effective tax rate decreased from approximately 13% during the nine month period ended September 30, 1994 to approximately 11% in the corresponding period of 1995, and increased from approximately 9% during the three month period ended September 30, 1994 to approximately 11% in the corresponding period in 1995. The Company's overall rate of tax is reduced significantly by the tax benefits associated with qualified activities of one of its subsidiaries in Israel. Net Income. Net income after taxes for the nine month and three ---------- month periods ended September 30, 1995 increased by approximately $3,512,000 (42%) and approximately $1,235,000 (36%), respectively, from the corresponding periods in 1994, primarily as a result of the factors described above. Net income after taxes as a percentage of total revenues increased to approximately 11.2% and approximately 12.3%, respectively, in the nine month and three month periods ended September 30, 1995 from approximately 10.1% and approximately 11.4%, respectively, in the corresponding periods in 1994. LIQUIDITY AND CAPITAL RESOURCES. At September 30, 1995, the Company had cash and cash equivalents of approximately $80,336,000, bank time deposits and short-term investments of approximately $44,560,000 and working capital of approximately $149,085,000. The Company believes that its existing working capital, together with funds generated from operations, will be sufficient to provide for its planned operations for the foreseeable future. The Company regularly examines opportunities for strategic acquisitions of other companies or lines of business. Such acquisitions may require significant investment of capital, both in payment of the acquisition cost and in providing working capital for any acquired businesses. There can be no assurance as to whether or when any acquired business would contribute positive operating results commensurate with the associated investment. The Company anticipates that it may from time to time issue additional debt and/or equity securities either as direct consideration for such acquisitions or to raise additional funds to be used (in whole or in part) in payment for acquired securities or assets. The issuance of such securities could be expected to have a dilutive impact on the Company's shareholders. Page 11 of 18 The Company's liquidity and capital resources have not been, and are not anticipated to be, materially affected by restrictions pertaining to the ability of its foreign subsidiaries to pay dividends or by withholding taxes associated with any such dividend payments. CERTAIN TRENDS AND UNCERTAINTIES. The industries in which the Company is principally involved are characterized by frequent technological and market changes and are highly competitive. The Company faces competition from a variety of sources, including competitors that are larger than the Company and have more established positions in certain market segments. The voice processing and message management industry has experienced a continuing evolution of product offerings and alternatives for delivery of services. These trends have affected and may be expected to have a significant continuing influence on conditions in the industry, although the impact on the industry generally and on the Company's position in the industry cannot be predicted with assurance. Significant changes in the industry make planning decisions more difficult and increase the risk inherent in the planning process. The market for telecommunications monitoring systems is also in a period of significant transition. Budgetary constraints, uncertainties resulting from the introduction of new technologies in the telecommunications environment and shifts in the pattern of government expenditures resulting from geopolitical events have increased uncertainties in the market, resulting in certain instances in the attenuation of government procurement programs beyond their originally expected performance periods and an increased incidence of delay, cancellation or reduction of planned projects. Sales to government customers may also be affected by decisions of certain government agencies to increase their internal product development capabilities, with a concomitant reduction in their procurements from third party vendors. Competitive conditions in this sector have also been affected by the efforts of government contractors, particularly developers and integrators of technology products, to redirect their marketing strategies and product plans in reaction to cut-backs in their traditional areas of focus, resulting in an increase in the number of competitors and the range of products offered in response to particular requests for proposals. The lack of predictability in the timing and scope of government procurements have similarly made planning decisions more difficult and have increased the associated risks. The Company has historically derived a significant portion of its revenue and operating profit from a relatively small number of contracts for large system installations with customers in both the commercial and government sectors. While the growth of the Company's business has reduced its dependence on any specific customers, it continues to emphasize large capacity systems in its product development and marketing strategies. Contracts for large system installations typically involve a lengthy and complex bidding and selection process, and the ability of the Company to obtain particular contracts is inherently difficult to predict. The Company believes that opportunities for these installations will continue to grow in both its commercial and government markets, and intends to continue to expand its research and development, Page 12 of 18 manufacturing, sales and marketing and product support capabilities in anticipation of such growth. However, the timing and scope of these opportunities and the pricing and margins associated with any eventual contract award are difficult to forecast, and may vary substantially from transaction to transaction. The Company's future operating results may accordingly exhibit a higher degree of volatility than the operating results of other companies in its industries that have adopted different strategies, and than the Company has experienced in prior periods. Although the Company is actively pursuing a number of significant procurement opportunities in the United States and internationally, both the timing of any eventual procurements and the probability of the Company's receipt of significant contract awards are uncertain. The degree of dependence by the Company on large orders, and the investment required to enable the Company to perform such orders, without assurance of continuing order flow from the same customers and predictability of gross margins on any future orders, increase the risk associated with its business. The Company has significantly increased its expenditures in all areas of its operations during recent periods, including the areas of research and development and marketing and sales, and the Company plans to further increase these for the foreseeable future. The increase in research and development expenditures reflects the Company's concentration on enhancing the range of features and capabilities of its existing product lines and developing new generations of its products. The Company believes that these efforts are essential for the long- and short-term competitiveness of its product offerings and for positioning itself to participate in future growth opportunities in both the commercial and government sectors. The increase in sales and marketing expenditures primarily results from the Company's decision to expand its activities and direct presence in a number of world markets. The Company's costs of operations have also been affected by increases in the cost of its operations in Israel, resulting both from general inflation and increases in the cost of attracting and retaining qualified scientific, engineering and technical personnel in Israel, where the demand for such personnel is growing rapidly with the expansion of technology-based industries in that country. The increase in these costs in recent periods has not been offset by proportional devaluation of the Israeli shekel against the U.S. dollar, and accordingly has had a negative impact on the Company's overall results of operations. The Company currently derives a majority of its total revenues from sales to customers outside of the United States. International transactions involve particular risks, including political decisions affecting tariffs and trade conditions, rapid and unforeseen changes in economic conditions in individual countries, turbulence in foreign currency and credit markets, and increased costs resulting from lack of proximity to the customer. Volatility in international currency exchange rates may have a significant impact on the Company's operating results to the extent that it is unable to completely hedge the exchange rate risk of long term contracts denominated in foreign currencies, or by the cost of such hedging. The trading price of the Company's shares may be affected by the factors noted above as well as prevailing economic and financial trends and conditions in the public securities markets. During recent periods, share prices of companies in technology and government contracting businesses, and particularly smaller and medium-sized Page 13 of 18 publicly traded companies such as the Company, have exhibited a high degree of volatility. Shortfalls in revenues or earnings from the levels anticipated by the public markets could have an immediate and significant effect on the trading price of the Company's shares in any given period. Such shortfalls may result from events that are beyond the Company's immediate control, can be unpredictable and, since a significant proportion of the Company's sales during each fiscal quarter tend to occur in the latter stages of the quarter, may not be discernible until the end of a financial reporting period, which may contribute to the volatility of the trading value of its shares regardless of the Company's long-term prospects. The trading price of the Company's shares may also be affected by developments, including reported financial results and fluctuations in trading prices of the shares of other publicly- held companies in the voice processing industry, which may not have any direct relationship with the Company's business or prospects. Page 14 of 18 PART II Other Information ----------------- ITEM 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibit Index. -------------- Item Number Exhibit Page ------ ------- ---- 11. Statement re: computation of per share earnings 17 - 18 27. Financial data schedule Filed electronically (b) Reports on Form 8-K. ------------------- None Page 15 of 18 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMVERSE TECHNOLOGY, INC. Dated: November 7, 1995 S / Kobi Alexander ------------------ Kobi Alexander President, Chairman of the Board and Chief Executive Officer Dated: November 7, 1995 S / Igal Nissim --------------- Igal Nissim Vice President, Finance and Chief Financial Officer Page 16 of 18 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 COMVERSE TECHNOLOGY, INC. STATEMENT OF COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED SEPTEMBER 30, 1994 (1) 1995 Primary earnings per share: Net income $ 3,472 $ 4,707 ======== ======= Weighted average number of outstanding common shares 20,942 21,146 Additional shares assuming exercise of stock options 831 1,681 -------- ------- Weighted average number of outstanding common and common equivalent shares 21,773 22,827 ======== ======= Primary earnings per share $ 0.16 $ 0.21 ======== ======= Fully diluted earnings per share: Net income $4,707 ====== Weighted average number of outstanding common shares 21,146 Additional shares assuming exercise of stock options 1,783 ------- Weighted average number of outstanding common shares assuming full dilution 22,929 ======= Fully diluted earnings per share $ 0.21 ======= (1) Fully diluted earnings per share for the three month period ended September 30, 1994 were antidilutive and are omitted. Page 17 of 18 EXHIBIT 11 (continued) COMVERSE TECHNOLOGY, INC. STATEMENT OF COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) NINE MONTHS ENDED SEPTEMBER 30, 1994 (1) 1995 [S] [C] [C] Primary earnings per share: Net income $ 8,360 $11,872 ======= ======= Weighted average number of outstanding common shares 20,921 21,061 Additional shares assuming exercise of stock options 885 1,407 ------- ------- Weighted average number of outstanding common and common equivalent shares 21,806 22,468 ======= ======= Primary earnings per share $ 0.38 $ 0.53 ======= ======= Fully diluted earnings per share: Net income $11,872 ======= Weighted average number of outstanding common shares 21,061 Additional shares assuming exercise of stock options 1,551 ------- Weighted average number of outstanding common shares assuming full dilution 22,612 ======= Fully diluted earnings per share $ 0.53 ======= (1) Fully diluted earnings per share for the nine month period ended September 30, 1994 were antidilutive and are omitted. Page 18 of 18 EX-27 3 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR 9/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 3-MOS 6-MOS 9-MOS DEC-31-1994 DEC-31-1995 DEC-31-1995 DEC-31-1995 JAN-01-1994 JAN-01-1995 JAN-01-1995 JAN-01-1995 DEC-31-1994 MAR-31-1995 JUN-30-1995 SEP-30-1995 39,225 48,104 67,412 80,336 89,368 76,456 63,913 44,560 24,181 25,417 28,891 35,187 0 0 0 0 12,427 15,539 15,208 16,015 169,792 171,180 180,353 182,636 17,162 18,250 19,618 21,460 (8,119) (8,710) (9,433) (10,202) 192,502 198,980 209,233 213,268 28,448 30,113 34,684 33,551 60,000 60,000 60,000 60,000 2,098 2,101 2,110 2,122 0 0 0 0 0 0 0 0 99,515 102,818 108,549 113,871 192,502 198,980 209,233 213,268 108,150 29,383 63,010 99,126 114,312 31,522 67,334 105,659 47,715 12,921 27,214 42,879 100,431 28,229 59,265 92,313 0 0 0 0 0 0 0 0 3,947 1,210 2,442 3,459 13,881 3,293 8,069 13,346 1,783 404 904 1,474 12,098 2,889 7,165 11,872 0 0 0 0 0 0 0 0 0 0 0 0 12,098 2,889 7,165 11,872 0.55 0.13 0.32 0.53 0.55 0.13 0.32 0.53 December 1994, March 1995 and June 1995 amounts are restated to reflect pooling of interests with Dale, Gesek, McWilliams & Sheridan, Inc. ("DGM&S"). DGM&S' fiscal year-end was September 30. Accordingly, reflects combination of Comverse results for year-end December 1994 with DGM&S results for year-end September 1994. DGM&S results for the three month period ended December 1994 are reflected as an adjustment to retained earnings.
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