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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2002
 
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:  0-18391
 
 
ASPECT COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
 
California
  
94-2974062
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
1310 Ridder Park Drive, San Jose, California  95131-2313
(Address of principal executive offices and zip code)
 
Registrant’s telephone number:  (408) 325-2200
 
 
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 ¨
 
The number of shares outstanding of the Registrant’s Common Stock, $.01 par value, was 53,038,358 at November 12, 2002.
 
For the three and nine months ended September 30, 2001, this filing includes condensed consolidated financial statements that are corrected with respect to the following matters:
 
 
•
 
to correct certain billing errors attributable to customer support contracts, including a reduction in the provision for doubtful accounts as a result of a reduction in the related corrected accounts receivable balance,
 
 
•
 
to correct the period over which capitalized debt issuance costs are amortized, and
 
 
•
 
to expense certain costs that were determined not to qualify for capitalization as a fixed asset.
 
The effects of the restatement are presented in Note 2 to the condensed consolidated financial statements.
 

Table of Contents
 
ASPECT COMMUNICATIONS CORPORATION
 
TABLE OF CONTENTS
 
         
Page Number
Part I:
   
Financial Information
     
Item 1:
   
Financial Statements
     
       
3
       
4
       
5
       
6
Item 2:
      
15
Item 3:
      
32
Item 4:
      
32
           
Part II:
   
Other Information
     
Item 1:
      
32
Item 5:
      
33
Item 6:
      
33
  
34

2

Table of Contents
ASPECT COMMUNICATIONS CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts—unaudited)
 
    
September 30, 2002
     
December 31, 2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
65,967
 
   
$
72,564
 
Short-term investments
   
 
79,275
 
   
 
62,585
 
Accounts receivable, net
   
 
61,557
 
   
 
79,463
 
Inventories
   
 
4,773
 
   
 
12,044
 
Other current assets
   
 
17,054
 
   
 
23,360
 
    
  
Total current assets
   
 
228,626
 
   
 
250,016
 
Property and equipment, net
   
 
92,587
 
   
 
111,319
 
Goodwill
   
 
2,707
 
   
 
54,138
 
Intangible assets, net
   
 
11,061
 
   
 
61,231
 
Other assets
   
 
9,876
 
   
 
18,334
 
    
  
Total assets
   
$
344,857
 
   
$
495,038
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Short-term borrowings
   
$
7,321
 
   
$
17,851
 
Accounts payable
   
 
11,712
 
   
 
5,988
 
Accrued compensation and related benefits
   
 
19,050
 
   
 
18,916
 
Other accrued liabilities
   
 
69,262
 
   
 
70,378
 
Deferred revenues
   
 
35,139
 
   
 
29,776
 
    
  
Total current liabilities
   
 
142,484
 
   
 
142,909
 
Long term borrowings
   
 
42,989
 
   
 
25,790
 
Deferred taxes
   
 
—
 
   
 
3,944
 
Other long-term liabilities
   
 
22,313
 
   
 
13,324
 
Convertible subordinated debentures
   
 
123,152
 
   
 
183,577
 
Contingencies (Note 12)
                  
Shareholders’ equity:
                  
Preferred stock, $.01 par value: 2,000,000 shares authorized, none outstanding
   
 
—  
 
   
 
—  
 
Common stock, $.01 par value: 100,000,000 shares authorized, shares outstanding: 53,025,453 and 51,889,454 at September 30, 2002 and December 31, 2001, respectively
   
 
198,326
 
   
 
195,663
 
Deferred stock compensation
   
 
(565
)
   
 
(1,147
)
Accumulated other comprehensive loss
   
 
(1,850
)
   
 
(1,995
)
Accumulated deficit
   
 
(181,992
)
   
 
(67,027
)
    
  
Total shareholders’ equity
   
 
13,919
 
   
 
125,494
 
    
  
Total liabilities and shareholders’ equity
   
$
344,857
 
   
$
495,038
 
    
  
 
See Notes to Condensed Consolidated Financial Statements

3

Table of Contents
ASPECT COMMUNICATIONS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data—unaudited)
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
           
(as Restated, see Note 2)
            
(as Restated, see Note 2)
  
Net revenues:
                                    
License
   
$
21,529
 
   
$
21,813
 
   
$
62,248
 
   
$
81,925
 
Services
   
 
58,925
 
   
 
68,000
 
   
 
185,260
 
   
 
191,369
 
Other
   
 
16,047
 
   
 
18,596
 
   
 
51,609
 
   
 
60,684
 
    
  
  
  
Total net revenues
   
 
96,501
 
   
 
108,409
 
   
 
299,117
 
   
 
333,978
 
    
  
  
  
Cost of revenues:
                                    
Cost of license revenues
   
 
42,581
 
   
 
4,378
 
   
 
53,606
 
   
 
10,864
 
Cost of services revenues
   
 
29,846
 
   
 
36,134
 
   
 
98,611
 
   
 
112,774
 
Cost of other revenues
   
 
12,655
 
   
 
16,512
 
   
 
45,212
 
   
 
54,885
 
    
  
  
  
Total cost of revenues
   
 
85,082
 
   
 
57,024
 
   
 
197,429
 
   
 
178,523
 
    
  
  
  
Gross margin
   
 
11,419
 
   
 
51,385
 
   
 
101,688
 
   
 
155,455
 
Operating expenses:
                                    
Research and development
   
 
13,563
 
   
 
23,371
 
   
 
44,080
 
   
 
74,028
 
Selling, general and administrative
   
 
36,319
 
   
 
52,926
 
   
 
118,774
 
   
 
178,824
 
Restructuring charges
   
 
22,699
 
   
 
—  
 
   
 
22,699
 
   
 
20,107
 
    
  
  
  
Total operating expenses
   
 
72,581
 
   
 
76,297
 
   
 
185,553
 
   
 
272,959
 
    
  
  
  
Loss from operations
   
 
(61,162
)
   
 
(24,912
)
   
 
(83,865
)
   
 
(117,504
)
Interest and other income (expense), net
   
 
1,560
 
   
 
(1,204
)
   
 
(7,671
)
   
 
(3,397
)
    
  
  
  
Loss before income taxes
   
 
(59,602
)
   
 
(26,116
)
   
 
(91,536
)
   
 
(120,901
)
Provision (benefit) for income taxes
   
 
377
 
   
 
75
 
   
 
(28,002
)
   
 
225
 
    
  
  
  
Net loss before cumulative effect of change in accounting principle
   
 
(59,979
)
   
 
(26,191
)
   
 
(63,534
)
   
 
(121,126
)
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(51,431
)
   
 
—  
 
    
  
  
  
Net loss
   
$
(59,979
)
   
$
(26,191
)
   
$
(114,965
)
   
$
(121,126
)
    
  
  
  
Basic and diluted loss per share before cumulative effect of change in accounting principle
   
$
(1.14
)
   
$
(0.51
)
   
$
(1.21
)
   
$
(2.35
)
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(0.98
)
   
 
—  
 
    
  
  
  
Basic and diluted loss per share
   
$
(1.14
)
   
$
(0.51
)
   
$
(2.19
)
   
$
(2.35
)
Basic and diluted weighted average shares outstanding
   
 
52,678
 
   
 
51,624
 
   
 
52,381
 
   
 
51,449
 
 
See Notes to Condensed Consolidated Financial Statements

4

Table of Contents
ASPECT COMMUNICATIONS CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands—unaudited)
 
    
Nine Months Ended
September 30,
  
    
2002
     
2001
  
           
(as Restated, see Note 2)
  
Cash flows from operating activities:
                  
Net loss
   
$