x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Delaware
|
13-3475943
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
Three
University Plaza
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07601
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|
Hackensack,
New Jersey
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(Zip
Code)
|
|
(Address
of principal executive offices)
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Page
No.
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||||
Part
I – Financial Information
|
||||
Item
1.
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Condensed
Consolidated Financial Statements (Unaudited):
|
|||
Condensed
Consolidated Balance Sheets as of June 30, 2009 and December 31,
2008
|
1
|
|||
Condensed
Consolidated Statements of Operations for the three months ended June 30,
2009 and 2008
|
2
|
|||
Condensed
Consolidated Statements of Operations for the six months ended June 30,
2009 and 2008
|
3
|
|||
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2009 and 2008
|
4
|
|||
Condensed
Consolidated Statement of Stockholders’ Equity for the six months ended
June 30, 2009 and 2008
|
5
|
|||
Notes
to Condensed Consolidated Financial Statements
|
6
|
|||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
24
|
||
Item
4.
|
Controls
and Procedures
|
24
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||
|
||||
Part
II – Other Information
|
|
|||
Item
1.
|
Legal
Proceedings
|
26
|
||
Item
1A.
|
Risk
Factors
|
26
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
||
Item
3.
|
Defaults
Upon Senior Securities
|
26
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
26
|
||
Item
5.
|
Other
Information
|
27
|
||
Item
6.
|
Exhibits
|
27
|
||
|
||||
Signatures
|
28
|
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 23,118 | $ | 13,875 | ||||
Accounts
receivable, net
|
14,177 | 14,017 | ||||||
Prepaid
expenses and other current assets
|
2,949 | 2,246 | ||||||
Deferred
income taxes
|
2,282 | 4,115 | ||||||
Total
current assets
|
42,526 | 34,253 | ||||||
Property
and equipment, net
|
6,133 | 6,726 | ||||||
Other
assets
|
2,694 | 2,825 | ||||||
Deferred
income taxes
|
948 | 906 | ||||||
Goodwill
|
675 | 675 | ||||||
Total
assets
|
$ | 52,976 | $ | 45,385 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 1,185 | $ | 1,053 | ||||
Accrued
expenses
|
2,773 | 2,540 | ||||||
Accrued
salaries, wages and related benefits
|
5,481 | 5,289 | ||||||
Income
and other taxes
|
1,437 | 1,649 | ||||||
Current
portion of long term obligations
|
865 | 915 | ||||||
Total
current liabilities
|
11,741 | 11,446 | ||||||
Deferred
income taxes
|
2,075 | 2,080 | ||||||
Long
term obligations
|
1,348 | 1,671 | ||||||
Commitments
and contingencies
|
||||||||
STOCKHOLDERS’
EQUITY:
|
||||||||
Serial
preferred stock; 5,000,000 shares authorized, none
outstanding
|
- | - | ||||||
Common
stock, $.01 par value; 75,000,000 shares authorized; 25,198,000 issued
and
|
||||||||
24,410,000
outstanding at June 30, 2009; and 24,907,000 issued and
|
||||||||
24,119,000
outstanding at December 31, 2008
|
252 | 249 | ||||||
Additional
paid-in capital
|
17,606 | 16,614 | ||||||
Retained
earnings
|
21,557 | 14,772 | ||||||
Accumulated
other comprehensive income
|
586 | 742 | ||||||
40,001 | 32,377 | |||||||
Less:
treasury stock, 788,000 shares at cost
|
(2,189 | ) | (2,189 | ) | ||||
Total
stockholders’ equity
|
37,812 | 30,188 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 52,976 | $ | 45,385 |
Three Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
$ | 21,635 | $ | 17,870 | ||||
Operating
costs and expenses:
|
||||||||
Direct
operating costs
|
14,199 | 13,738 | ||||||
Selling
and administrative expenses
|
3,063 | 4,074 | ||||||
Interest
income, net
|
(6 | ) | (50 | ) | ||||
Totals
|
17,256 | 17,762 | ||||||
Income
before provision for income taxes
|
4,379 | 108 | ||||||
Provision
for income taxes
|
1,175 | 72 | ||||||
Net
income
|
$ | 3,204 | $ | 36 | ||||
Income
per share:
|
||||||||
Basic
and diluted
|
$ | .13 | $ | - | ||||
Weighted
average shares outstanding:
|
||||||||
Basic
|
24,249 | 24,600 | ||||||
Diluted
|
25,373 | 25,408 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Revenues
|
$ | 43,450 | $ | 36,270 | ||||
Operating
costs and expenses
|
||||||||
Direct
operating costs
|
27,309 | 27,067 | ||||||
Selling
and administrative expenses
|
6,670 | 8,391 | ||||||
Interest
income, net
|
(19 | ) | (106 | ) | ||||
Total
|
33,960 | 35,352 | ||||||
Income
before provision for income taxes
|
9,490 | 918 | ||||||
Provision
for income taxes
|
2,705 | 49 | ||||||
Net
income
|
$ | 6,785 | $ | 869 | ||||
Income
per share:
|
||||||||
Basic
|
$ | .28 | $ | .04 | ||||
Diluted
|
$ | .27 | $ | .03 | ||||
Weighted
average shares outstanding:
|
||||||||
Basic
|
24,194 | 24,662 | ||||||
Diluted
|
24,912 | 25,807 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flow from operating activities:
|
||||||||
Net
income
|
$ | 6,785 | $ | 869 | ||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
and amortization
|
1,816 | 1,836 | ||||||
Stock-based
compensation
|
166 | 73 | ||||||
Deferred
income taxes
|
1,781 | 197 | ||||||
Pension
cost
|
85 | 345 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(160 | ) | 1,880 | |||||
Prepaid
expenses and other current assets
|
(431 | ) | (279 | ) | ||||
Other
assets
|
(117 | ) | (88 | ) | ||||
Accounts
payable and accrued expenses
|
227 | (533 | ) | |||||
Accrued
salaries, wages and related benefits
|
192 | (65 | ) | |||||
Income
and other taxes
|
(290 | ) | (288 | ) | ||||
Net
cash provided by operating activities
|
10,054 | 3,947 | ||||||
Cash
flow from investing activities:
|
||||||||
Capital
expenditures
|
(975 | ) | (1,622 | ) | ||||
Cash
flow from financing activities:
|
||||||||
Payment
of long term obligations
|
(471 | ) | (517 | ) | ||||
Purchase
of treasury stock
|
- | (1,367 | ) | |||||
Proceeds
from exercise of stock options
|
635 | 71 | ||||||
Net
cash provided by (used in) financing activities
|
164 | (1,813 | ) | |||||
Increase
in cash and cash equivalents
|
9,243 | 512 | ||||||
Cash
and cash equivalents, beginning of period
|
13,875 | 14,751 | ||||||
Cash
and cash equivalents, end of period
|
$ | 23,118 | $ | 15,263 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid for interest
|
$ | 18 | $ | 33 | ||||
Cash
paid for income taxes
|
$ | 1,522 | $ | 552 | ||||
Non-cash
investing and financing activities:
|
||||||||
Vendor
financed software licenses acquired
|
$ | - | $ | 1,650 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||
Common Stock
|
Paid-in
|
Retained
|
Comprehensive
|
Treasury
|
||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income (Loss)
|
Stock
|
Total
|
||||||||||||||||||||||
January 1, 2009
|
24,119 | $ | 249 | $ | 16,614 | $ | 14,772 | $ | 742 | $ | (2,189 | ) | $ | 30,188 | ||||||||||||||
Net income
|
- | - | - | 6,785 | - | - | 6,785 | |||||||||||||||||||||
Issuance of common stock upon exercise of stock options
|
291 | 3 | 826 | - | - | - | 829 | |||||||||||||||||||||
Stock-based compensation
|
- | - | 166 | - | - | - | 166 | |||||||||||||||||||||
Change in transitional projected benefit obligation, net
|
||||||||||||||||||||||||||||
of taxes
|
- | - | - | - | (18 | ) | - | (18 | ) | |||||||||||||||||||
Change in fair value of derivatives, net of taxes
|
- | - | - | - | (138 | ) | - | (138 | ) | |||||||||||||||||||
June 30, 2009
|
24,410 | $ | 252 | $ | 17,606 | $ | 21,557 | $ | 586 | $ | (2,189 | ) | $ | 37,812 | ||||||||||||||
January 1, 2008
|
24,699 | $ | 249 | $ | 16,323 | $ | 7,188 | $ | (211 | ) | $ | (319 | ) | $ | 23,230 | |||||||||||||
Net income
|
- | - | - | 869 | - | - | 869 | |||||||||||||||||||||
Issuance of common stock upon exercise of stock options
|
26 | - | 71 | - | - | - | 71 | |||||||||||||||||||||
Purchase of treasury stock
|
(430 | ) | - | - | - | - | (1,367 | ) | (1,367 | ) | ||||||||||||||||||
Stock-based compensation
|
- | - | 73 | - | - | - | 73 | |||||||||||||||||||||
Change in transitional projected benefit obligation, net
|
||||||||||||||||||||||||||||
of taxes
|
- | - | - | - | 41 | - | 41 | |||||||||||||||||||||
Change in fair value of derivatives, net of taxes
|
- | - | - | - | (949 | ) | - | (949 | ) | |||||||||||||||||||
June 30, 2008
|
24,295 | $ | 249 | $ | 16,467 | $ | 8,057 | $ | (1,119 | ) | $ | (1,686 | ) | $ | 21,968 |
1.
|
Description
of Business and Summary of Significant Accounting
Policies
|
2.
|
Long term
obligations
|
2009
|
2008
|
|||||||
Vendor
obligations:
|
||||||||
Capital
lease obligations
|
$ | 297 | $ | 453 | ||||
Deferred
lease payments
|
68 | 89 | ||||||
Microsoft
license
|
825 | 1,100 | ||||||
Pension
obligations:
|
||||||||
Accrued
pension liability
|
1,023 | 944 | ||||||
2,213 | 2,586 | |||||||
Less:
current portion of long term obligations
|
865 | 915 | ||||||
Totals
|
$ | 1,348 | $ | 1,671 |
3.
|
Income
taxes
|
Unrecognized tax
benefits
|
||||
Balance
- January 1, 2009
|
$
|
840
|
||
Interest
accrual
|
14
|
|||
Balance
– June 30, 2009
|
$
|
854
|
4.
|
Commitments
and contingencies
|
5.
|
Stock
options
|
Number of Shares
|
Weighted-Average
Exercise Price
|
Weighted-Average Remaining
Contractual Term (years)
|
Aggregate Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2009
|
3,173,111 | $ | 2.68 | |||||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
(291,197 | ) | 2.85 | |||||||||||||
Forfeited/Expired
|
(51,000 | ) | 2.54 | |||||||||||||
Outstanding
at June 30, 2009
|
2,830,914 | $ | 2.66 | 4.22 | $ | 5,430,702 | ||||||||||
Exercisable
at June 30, 2009
|
2,782,246 | $ | 2.65 | 4.15 | $ | 5,365,478 |
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Direct
operating costs
|
$ | 3 | $ | 17 | $ | 6 | $ | 31 | ||||||||
Selling
and adminstrative expenses
|
80 | 17 | 160 | 42 | ||||||||||||
Total
stock-based compensation
|
$ | 83 | $ | 34 | $ | 166 | $ | 73 |
6.
|
Comprehensive
income (loss)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
income
|
$ | 3,204 | $ | 36 | $ | 6,785 | $ | 869 | ||||||||
Pension
liability adjustment
|
(8 | ) | 20 | (18 | ) | 41 | ||||||||||
Unrealized
loss from derivatives
|
(138 | ) | (858 | ) | (138 | ) | (949 | ) | ||||||||
Comprehensive
income (loss)
|
$ | 3,058 | $ | (802 | ) | $ | 6,629 | $ | (39 | ) |
7.
|
Restructuring
charges
|
8.
|
Segment
reporting and concentrations
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Unites
States
|
$ | 18,186 | $ | 13,769 | $ | 36,389 | $ | 28,452 | ||||||||
The
Netherlands
|
1,257 | 1,857 | 2,876 | 3,841 | ||||||||||||
Other
- principally Europe
|
2,192 | 2,244 | 4,185 | 3,977 | ||||||||||||
$ | 21,635 | $ | 17,870 | $ | 43,450 | $ | 36,270 |
2009
|
2008
|
|||||||
United
States
|
$ | 1,290 | $ | 1,372 | ||||
Foreign
countries:
|
||||||||
Philippines
|
3,091 | 3,379 | ||||||
India
|
1,554 | 1,675 | ||||||
Sri
Lanka
|
555 | 654 | ||||||
Israel
|
318 | 321 | ||||||
Total
foreign
|
5,518 | 6,029 | ||||||
$ | 6,808 | $ | 7,401 |
9.
|
Income per
share
|
Three months ended
June 30,
|
Six
months ended
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
Net
income
|
$ | 3,204 | $ | 36 | $ | 6,785 | $ | 869 | ||||||||
Weighted
average common shares outstanding
|
24,249 | 24,600 | 24,194 | 24,662 | ||||||||||||
Dilutive
effect of outstanding options
|
1,124 | 808 | 718 | 1,145 | ||||||||||||
Adjusted
for dilution computation
|
25,373 | 25,408 | 24,912 | 25,807 | ||||||||||||
Basic
net income per share
|
$ | .13 | $ | - | $ | .28 | $ | .04 | ||||||||
Diluted
net income per share
|
$ | .13 | $ | - | $ | .27 | $ | .03 |
10.
|
Derivatives
|
Asset Derivative
|
Liability Derivative
|
||||||||||
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
||||||||
Derivative
designated as hedging
|
|||||||||||
instruments
under SFAS 133:
|
|||||||||||
Prepaid
expenses and other
|
|||||||||||
Foreign
currency forward contracts
|
current
assets
|
$ | — |
Accrued
expenses
|
$ | 138 | |||||
Total
derivative
|
$ | — | $ | 138 |
Three months ended
June 30, 2009
|
Six months ended
June 30, 2009
|
|||||||
Net gain (loss) recognized in
AOCI (1)
|
$ | (138 | ) | $ | (138 | ) | ||
Net
gain (loss) reclassified from accumulated AOCI into income
|
$ | — | $ | — | ||||
Net
gain (loss) recognized in income
|
$ | — | $ | — |
11.
|
Financial
Instruments
|
·
|
Level 1: Unadjusted
quoted price in active market for identical assets and
liabilities.
|
·
|
Level 2: Observable
inputs other than those included in Level
1.
|
·
|
Level 3: Unobservable
inputs reflecting management’s own assumptions about the inputs used in
pricing the asset or
liability.
|
Level
1
|
Level
2
|
Level
3
|
||||||||||
Assets
|
||||||||||||
Derivatives
|
$ | — | $ | — | $ | — | ||||||
Liabilities
|
||||||||||||
Derivatives
|
$ | — | $ | 138 | $ | — |
June 30, 2009
|
December 31, 2008
|
|||||||
Cash
and cash equivalents
|
$ | 23,118 | $ | 13,875 | ||||
Working
capital
|
30,785 | 22,807 |
Payments Due by Period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than
1 year
|
1-3 years
|
4-5 years
|
After
5 years
|
|||||||||||||||
Capital
lease obligations
|
$ | 297 | $ | 242 | $ | 55 | $ | - | $ | - | ||||||||||
Non-cancelable
operating leases
|
1,551 | 675 | 839 | 37 | - | |||||||||||||||
Long
term vendor obligation
|
825 | 275 | 550 | - | - | |||||||||||||||
Total
contractual cash obligations
|
$ | 2,673 | $ | 1,192 | $ | 1,444 | $ | 37 | $ | - |
Nominee
|
For
|
Withheld
|
|||
Jack
Abuhoff
|
20,401,813
|
1,382,483
|
|||
Haig
Bagerdjian
|
19,942,811
|
1,841,485
|
|||
Louise
Forlenza
|
20,214,519
|
1,569,777
|
|||
Stewart
Massey
|
20,941,740
|
842,556
|
|||
Todd
Solomon
|
21,127,966
|
656,330
|
|||
Anthea
Stratigos
|
20,966,212
|
818,084
|
For
|
Against
|
Abstain
|
|||||||
Auditors
|
21,551,444
|
159,348
|
73,504
|
For
|
|
|
Against
|
Abstain
|
Broker Non-Vote
|
||||
Stock
Plan
|
7,683,756
|
2,062,856
|
189,570
|
11,848,114
|
Date:
August 6, 2009
|
/s/ Jack Abuhoff
|
Jack
Abuhoff
|
|
Chairman
of the Board,
|
|
Chief
Executive Officer and President
|
|
Date:
August 6, 2009
|
/s/ Jurgen C. Tanpho
|
Jurgen
C. Tanpho
|
|
Interim
Chief Financial Officer
and
Principal Accounting Officer
|