(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, 2003

OR

o

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 of incorporation or organization)

(I.R.S. Employer 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)

YES   x

 NO   o

YES   x

 NO   o

Page No.

Part I      -

FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 (Unaudited)

3

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 (Unaudited)

5

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

36

Part II      -

OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item 6.

Exhibits and Reports on Form 8-K

37

Signatures

38

Certifications

39

Index to Exhibits

41

March 31,
2003

December 31,
2002

(unaudited)

ASSETS

Current assets:

   Cash and cash equivalents

$

113,332

$

94,424

   Short-term investments

1,019

1,013

         Total cash, cash equivalents and short-term investments

114,351

95,437

   Trade accounts receivable-

         Billed, net of allowance of $12,609 and $12,079

169,964

160,417

         Unbilled and other

25,555

28,856

   Purchased Kenan Business accounts receivable

—  

603

   Deferred income taxes

9,334

8,355

   Other current assets

10,647

10,568

         Total current assets

329,851

304,236

Property and equipment, net of depreciation of $77,601 and $74,023

44,054

46,442

Software, net of amortization of $51,984 and $48,582

47,266

50,478

Goodwill

214,799

220,065

Client contracts, net of amortization of $45,549 and $42,954

61,707

63,805

Deferred income taxes

36,217

37,163

Other assets

8,632

9,128

         Total assets

$

742,526

$

731,317

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Current maturities of long-term debt

$

20,393

$

16,370

   Client deposits

16,836

16,350

   Trade accounts payable

22,384

24,810

   Accrued employee compensation

14,637

26,707

   Deferred revenue

59,892

45,411

   Accrued income taxes

32,049

30,469

   Other current liabilities

26,531

24,337

         Total current liabilities

192,722

184,454

Non-current liabilities:

   Long-term debt, net of current maturities

248,532

253,630

   Deferred revenue

2,044

2,090

   Other non-current liabilities

8,702

9,038

         Total non-current liabilities

259,278

264,758

Stockholders' equity:

   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;

         52,262,017 shares and 51,726,528 shares outstanding

578

577

   Additional paid-in capital

255,926

255,452

   Deferred employee compensation

(9,276

)

(3,904

)

   Accumulated other comprehensive income (loss):

         Unrealized gain (loss) on short-term investments, net of tax

1

(6

)

         Cumulative translation adjustments

(984

)

1,060

   Treasury stock, at cost, 5,499,796 shares and 5,979,796 shares

(171,111

)

(186,045

)

   Accumulated earnings

215,392

214,971

         Total stockholders' equity

290,526

282,105

         Total liabilities and stockholders' equity

$

742,526

$

731,317

Three months ended

March 31,
2003

March 31,
2002

(unaudited)

Revenues:

Processing and related services

$

91,176

$

90,934

Software

10,164

22,500

Maintenance

22,403

12,219

Professional services

18,189

4,722

Total revenues

141,932

130,375

Cost of Revenues:

Cost of processing and related services

34,115

35,060

Cost of software and maintenance

18,309

5,308

Cost of professional services

18,552

11,049

Total cost of revenues

70,976

51,417

Gross margin (exclusive of depreciation)

70,956

78,958

Operating expenses:

Research and development

15,495

17,086

Selling, general and administrative

29,732

21,193

Depreciation

4,599

4,188

Restructuring charges

3,159

—  

Kenan Business acquisition-related expenses

—  

23,792

Total operating expenses

52,985

66,259

Operating income

17,971

12,699

Other income (expense):

Interest expense

(3,874

)

(1,911

)

Interest and investment income, net

288

842

Other

386

87

Total other

(3,200

)

(982

)

Income before income taxes

14,771

11,717

Income tax provision

(5,968

)

(9,254

)

Net income

$

8,803

$

2,463

Basic net income per common share:

Net income available to common stockholders

$

0.17

$

0.05

Weighted average common shares

51,306

52,679

Diluted net income per common share:

Net income available to common stockholders

$

0.17

$

0.05

Weighted average common shares

51,494

53,450

Three months ended

March 31,
2003

March 31,
2002

(unaudited)

Cash flows from operating activities:

Net income

$

8,803

$

2,463

Adjustments to reconcile net income to net cash provided by operating activities-

Depreciation

4,599

4,188

Amortization

6,591

3,179

Charge for in-process purchased research and development

—  

19,300

Restructuring charge for abandonment of facilities

683

—  

Gain on short-term investments

—  

(49

)

Deferred income taxes