UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

     (Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

INDUS INTERNATIONAL, INC.

(770) 952-8444
(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 þ Noo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ Noo

As of February 3, 2005, the Registrant had outstanding 57,394,969 shares of Common Stock, $.001 par value.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDUS INTERNATIONAL, INC.

See accompanying notes.

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INDUS INTERNATIONAL, INC.

See accompanying notes.

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INDUS INTERNATIONAL, INC.

See accompanying notes.

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INDUS INTERNATIONAL, INC.

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial information has been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission’s (“SEC”) rules and regulations. In the opinion of management, these condensed consolidated financial statements contain all normal adjustments considered necessary for a fair presentation of the financial position at December 31, 2004, the results of operations for the three and nine-month periods ended December 31, 2004 and 2003 and changes in cash flows for the nine-month periods ended December 31, 2004 and 2003. The condensed, consolidated balance sheet at March 31, 2004 has been derived from the audited consolidated financial statements at that date.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended March 31, 2004 that are included in the Company’s 2004 Annual Report on Form 10-K as filed with the SEC. The consolidated results of operations for the three and nine months ended December 31, 2004 are not necessarily indicative of the results to be expected for any subsequent quarter or period, or for the entire fiscal year ending March 31, 2005.

2. Restructuring Expenses

The Company recorded a restructuring credit of $1.0 million and restructuring costs of $11.4 million for the three and nine months ended December 31, 2004, respectively.

In the nine months ended December 31, 2004, the Company recorded net restructuring charges of $11.4 million for revisions to accounting estimates from prior business restructurings and for additional restructuring charges related to office and business consolidations and employee severance. Revisions to the Company’s expected sublease income for two unoccupied floors in San Francisco comprised $0.4 million of this expense, inclusive of the $1.0 million benefit recorded in the quarter ended December 31, 2004 to reduce a lease reserve based on an agreement entered into in October 2004 to sublease a portion of the respective office space. Further consolidation of office space in San Francisco and Atlanta resulted in $7.8 million in new restructuring charges for the nine months ended December 31, 2004. This consolidation included vacating three floors in Atlanta and one additional floor in San Francisco. The remaining $3.2 million in restructuring expense is associated with the elimination of approximately 140 positions, including the transfer of certain functions to the company-owned office buildings in Columbia, SC and the outsourcing of some development functions to India. At December 31, 2004, $6.8 million remains in the restructuring accrual for this initiative and is related to employee severance and excess lease costs associated with subleasing the Company’s vacated office space in Atlanta and San Francisco. These restructuring charges have been recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” and SFAS No. 112, “Employer’s Accounting for Postemployment Benefits.”

Between January 1, 2000 and March 31, 2004, the Company recorded restructuring charges totaling $22.7 million relating to two restructuring initiatives: (1) the relocation of the Company’s headquarters from San Francisco, CA to Atlanta, GA and (2) the suspension of the United Kingdom Ministry of Defense (“MoD”) project. At December 31, 2004, $7.7 million remains in the restructuring accrual for these initiatives, all of which is related to excess lease costs associated with subleasing the Company’s vacated office space in San Francisco, Dallas and Pittsburgh.

The restructuring accruals remaining as of December 31, 2004 are included in the Condensed Consolidated Financial Statements in “Accrued liabilities” for amounts due within one year and “Other liabilities” for amounts due after one year. The following is a summary of activity in the restructuring accruals for the nine months ended December 31, 2004 (in thousands):

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Company headquarters relocation and MoD project suspension:

3. Earnings (Loss) per Share

Basic earnings (loss) per share is computed using net income (loss) and the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share is computed using net income (loss) and the weighted average number of outstanding common shares and dilutive common stock equivalents (“common stock equivalents”) during each period.

As of December 31, 2004 and 2003, stock options and warrants to purchase an aggregate of 10.6 million and 10.4 million shares, respectively, were outstanding. The warrants expired in June 2004. The 8% Convertible Notes issued in March 2003 to fund the acquisition of Indus Utility Systems, Inc. (“IUS”), formerly SCT Utility Systems, Inc., were converted into 9,751,859 shares of common stock in July 2003.

The calculations of the weighted average number of shares outstanding for the three and nine months ended December 31, 2004 and 2003 are as follows (in thousands):

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4. Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss), foreign currency translation adjustments and unrealized gains and losses on securities investments that are excluded from net income (loss) and reflected in stockholders’ equity.

The following table sets forth the calculation of comprehensive income (loss) for the three and nine months ended December 31, 2004 and 2003, respectively (in thousands):

5. Stock-Based Compensation

As currently permitted under SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, the Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly recognizes no compensation expense for the stock option grants as long as the exercise price is equal to or greater than the fair value of the shares at the date of grant.

For purposes of pro forma disclosures, as required by SFAS No. 123, which also requires that the pro forma information be determined as if the Company had accounted for its employee stock option grants under the fair value method required by SFAS No. 123, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma net income (loss) including pro forma compensation expense, net of tax for the three and nine months ended December 31, 2004 and 2003, respectively, is as follows (in thousands, except per share amounts):

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