|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
98-0346908
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
PART
I – FINANCIAL INFORMATION
|
3
|
Item
1. Financial Statements
|
3
|
Consolidated
Balance Sheets – December 31, 2009 and March 31, 2010
(Unaudited)
|
3
|
Consolidated
Statements of Income – Three months ended March 31, 2009 and 2010
(Unaudited)
|
5
|
Consolidated
Statements of Cash Flows – Three months ended March 31, 2009 and 2010
(Unaudited)
|
6
|
Notes
to Interim Consolidated Financial Statements – March 31, 2010
(Unaudited)
|
8
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
23
|
Forward-Looking
Statements
|
23
|
Overview
|
23
|
Recent
Developments
|
24
|
Consolidated
Results of Operations
|
25
|
Three
Months Ended March 31, 2010 Compared to the Three Months Ended March 31,
2009
|
25
|
Quarterly
Results of Operations
|
28
|
Results
by Business Segment
|
29
|
Liquidity
and Capital Resources
|
30
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
33
|
Item
4. Controls and Procedures
|
33
|
Evaluation
of Disclosure Controls and Procedures
|
33
|
Changes
in Internal Control Over Financial Reporting
|
34
|
PART
II – OTHER INFORMATION
|
35
|
Item
1. Legal Proceedings
|
35
|
Item
1A. Risk Factors
|
35
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
35
|
Item 3. Defaults upon Senior
Securities
|
35 |
Item
4. (Removed and Reserved)
|
36
|
Item
5. Other Information
|
36
|
Item
6. Exhibits
|
36
|
SIGNATURES
|
37
|
EXHIBIT
INDEX
|
38
|
December
31, 2009
|
March 31,
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 40,218 | $ | 41,194 | ||||
Restricted
cash
|
2,470 | 2,925 | ||||||
Short-term
bank deposits
|
25,939 | 20,776 | ||||||
Trade
receivables, net of allowance for doubtful accounts of $2,789 at December
31, 2009 and $2,356 at March 31, 2010
|
131,452 | 124,130 | ||||||
Unbilled
receivables
|
28,012 | 29,847 | ||||||
Other
accounts receivable and prepaid expenses
|
27,832 | 27,187 | ||||||
Work
in progress
|
9,690 | 8,168 | ||||||
Total
assets attributed to discontinued operations
|
43,212 | 36,639 | ||||||
Total
current assets
|
308,825 | 290,866 | ||||||
LONG-TERM
ASSETS:
|
||||||||
Long-term
prepaid expenses and other assets
|
6,083 | 6,151 | ||||||
Unbilled
receivables
|
4,654 | 4,904 | ||||||
Deferred
income taxes, net
|
3,608 | 3,293 | ||||||
Severance
pay fund
|
53,145 | 54,919 | ||||||
Property
and equipment, net
|
35,739 | 34,699 | ||||||
Intangible
assets, net
|
10,016 | 8,494 | ||||||
Goodwill
|
263,541 | 261,421 | ||||||
Total
long-term assets
|
376,786 | 373,881 | ||||||
Total
assets
|
$ | 685,611 | $ | 664,747 |
December
31, 2009
|
March 31,
2010
|
|||||||
(Unaudited)
|
||||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Short-term
bank credit
|
$ | 500 | $ | — | ||||
Current
maturities of long-term debt
|
21,332 | 23,194 | ||||||
Trade
payables
|
30,914 | 28,955 | ||||||
Advances
from customers and deferred revenues
|
40,639 | 36,734 | ||||||
Other
accounts payable and accrued expenses
|
99,464 | 95,276 | ||||||
Total
liabilities attributed to discontinued operations
|
25,461 | 24,121 | ||||||
Total
current liabilities
|
218,310 | 208,280 | ||||||
LONG-TERM
LIABILITIES:
|
||||||||
Long-term
debt, net of current maturities
|
50,836 | 43,071 | ||||||
Other
long-term liabilities
|
6,689 | 7,070 | ||||||
Deferred
income taxes
|
2,045 | 1,849 | ||||||
Accrued
severance pay
|
56,443 | 58,348 | ||||||
Total
long-term liabilities
|
116,013 | 110,338 | ||||||
COMMITMENTS
AND CONTINGENT LIABILITIES
|
||||||||
STOCKHOLDERS’
EQUITY:
|
||||||||
Preferred
stock of $0.01 par value – Authorized: 8,500,000 shares at December 31,
2009 and at March 31, 2010; Issued and outstanding: none at December 31,
2009 and March 31, 2010
|
— | — | ||||||
Common
stock of $0.01 par value – Authorized: 76,500,000 shares at December 31,
2009 and at March 31, 2010; Issued: 39,628,994 at December 31, 2009 and at
March 31, 2010; Outstanding: 38,399,290 at December 31, 2009 and
38,282,590 at March 31, 2010
|
396 | 396 | ||||||
Additional
paid-in capital
|
332,928 | 333,757 | ||||||
Accumulated
other comprehensive income
|
16,176 | 15,488 | ||||||
Retained
earnings
|
6,476 | 1,787 | ||||||
Treasury
stock, at cost (1,229,704 shares at December 31, 2009 and 1,346,404 at
March 31, 2010)
|
(4,688 | ) | (5,299 | ) | ||||
Total
stockholders’ equity
|
351,288 | 346,129 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 685,611 | $ | 664,747 |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenues
|
$ | 126,281 | $ | 133,333 | ||||
Cost
of revenues
|
94,359 | 96,521 | ||||||
Gross
profit
|
31,922 | 36,812 | ||||||
Selling
and marketing
|
9,212 | 10,053 | ||||||
General
and administrative
|
23,585 | 24,342 | ||||||
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
(2,610 | ) | — | |||||
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
(2,534 | ) | — | |||||
Total
operating expenses
|
27,653 | 34,395 | ||||||
Operating
income
|
4,269 | 2,417 | ||||||
Financial
expenses, net
|
(1,156 | ) | (209 | ) | ||||
Income
before taxes on income
|
3,113 | 2,208 | ||||||
Taxes
on income
|
642 | 1,510 | ||||||
Net
income from continuing operations
|
$ | 2,471 | $ | 698 | ||||
Net
loss from discontinued operations
|
(943 | ) | (5,387 | ) | ||||
Net
income (loss)
|
$ | 1,528 | $ | (4,689 | ) | |||
Basic
net earnings per share from continuing operations
|
$ | 0.06 | $ | 0.02 | ||||
Diluted
net earnings per share from continuing operations
|
$ | 0.06 | $ | 0.02 | ||||
Basic
net loss per share from discontinued operations
|
$ | (0.02 | ) | $ | (0.14 | ) | ||
Diluted
net loss per share from discontinued operations
|
$ | (0.02 | ) | $ | (0.14 | ) | ||
Basic
net earnings (loss) per share
|
$ | 0.04 | $ | (0.12 | ) | |||
Diluted
net earnings (loss) per share
|
$ | 0.04 | $ | (0.12 | ) |
(*)
|
Includes
stock-based compensation, as
follows:
|
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cost
of revenues
|
$ | 63 | $ | 53 | ||||
Selling
and marketing
|
57 | 44 | ||||||
General
and administrative
|
808 | 732 |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash flows from
operating activities:
|
||||||||
Net
income (loss)
|
$ | 1,528 | $ | (4,689 | ) | |||
Adjustments
required to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Net
loss from discontinued operations
|
943 | 5,387 | ||||||
Stock-based
compensation-related expenses
|
928 | 829 | ||||||
Currency
fluctuation of restricted cash and short-term bank
deposits
|
— | (957 | ) | |||||
Depreciation
and amortization
|
4,203 | 4,169 | ||||||
Loss
on sale of property and equipment and impairment and sale of cost
investments
|
248 | 66 | ||||||
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
(2,534 | ) | — | |||||
Decrease
in trade receivables, net
|
22,906 | 7,163 | ||||||
Decrease
(increase) in unbilled receivables
|
105 | (2,460 | ) | |||||
Decrease
in other accounts receivable and prepaid expenses
|
1,376 | 964 | ||||||
Decrease
in work-in-progress
|
18 | 1,265 | ||||||
Increase
in long-term prepaid expenses
|
(274 | ) | (41 | ) | ||||
Deferred
income taxes, net
|
(945 | ) | 456 | |||||
Decrease
in trade payables
|
(5,432 | ) | (1,568 | ) | ||||
Decrease
in advances from customers and deferred revenues
|
(420 | ) | (3,747 | ) | ||||
Increase
in other long-term liabilities
|
332 | 420 | ||||||
Decrease
in other accounts payable and accrued expenses
|
(13,847 | ) | (4,204 | ) | ||||
Increase
(decrease) in accrued severance pay, net
|
(23 | ) | 104 | |||||
Net
cash provided by (used in) discontinued operations
|
(518 | ) | 1,578 | |||||
Net
cash provided by operating activities
|
8,594 | 4,735 | ||||||
Cash flows from
investing activities:
|
||||||||
Consideration
from sale of a consolidated subsidiary, net of
cash-in-hand
|
— | 1,384 | ||||||
Proceeds
from maturity of (investment in) short-term bank deposits,
net
|
(11,082 | ) | 5,662 | |||||
Proceeds
from sale of property and equipment
|
171 | — | ||||||
Purchase
of property and equipment and capitalization of software developed for
internal use
|
(3,076 | ) | (1,744 | ) | ||||
Net
cash used in discontinued operations
|
(3,114 | ) | (2,655 | ) | ||||
Net
cash provided by (used in) investing activities
|
(17,101 | ) | 2,647 | |||||
Cash flows from
financing activities:
|
||||||||
Repurchase
of shares
|
(1,217 | ) | (611 | ) | ||||
Short-term
bank loans and credit, net
|
207 | (500 | ) | |||||
Principal
payments of long-term debt
|
(1,731 | ) | (3,121 | ) | ||||
Net
cash used in discontinued operations
|
(242 | ) | — | |||||
Net
cash used in financing activities
|
(2,983 | ) | (4,232 | ) |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(1,273 | ) | (2,174 | ) | ||||
Increase
(decrease) in cash and cash equivalents
|
(12,763 | ) | 976 | |||||
Cash
and cash equivalents at the beginning of the period
|
44,585 | 40,218 | ||||||
Cash
and cash equivalents at the end of the period
|
$ | 31,822 | $ | 41,194 |
Non-cash
activity
|
||||||||
Accrual
for additional consideration for acquisitions
|
$ | 2,984 | $ | — | ||||
Loss
from mark-to-market of foreign exchange forward contracts and interest
rate swap
|
$ | 232 | $ | 69 |
|
a.
|
Unaudited Interim
Financial Information
|
|
b.
|
Reclassification
|
|
c.
|
Use of
estimates
|
|
d.
|
Principles of
consolidation
|
|
e.
|
Fair value
measurements
|
Level
1
|
Valuations
based on quoted prices in active markets for identical assets or
liabilities that we have the ability to directly
access.
|
|
Level
2
|
Valuations
based on quoted prices for similar assets or liabilities; valuations for
interest-bearing securities based on non-daily quoted prices in active
markets; quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable data for
substantially the full term of the assets or
liabilities.
|
|
Level
3
|
Valuations
based on inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or
liabilities.
|
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
Derivative
instruments (recurring basis)
|
$ | 1,694 | $ | — | $ | 1,694 | $ | — | ||||||||
Goodwill
and intangible assets, net (non-recurring basis)
|
$ | 269,915 | $ | — | $ | 269,915 | ||||||||||
Total
assets
|
$ | 271,609 | $ | — | $ | 1,694 | $ | 269,915 | ||||||||
Derivative
instruments (recurring basis)
|
$ | 1,763 | $ | — | $ | 1,763 | $ | — | ||||||||
Total
liabilities
|
$ | 1,763 | $ | — | $ | 1,763 | $ | — |
Total
|
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
Derivative
instruments (recurring basis)
|
$ | 1,221 | $ | — | $ | 1,221 | $ | — | ||||||||
Goodwill
and intangible assets, net (non-recurring basis)
|
$ | 273,557 | $ | — | $ | — | $ | 273,557 | ||||||||
Total
assets
|
$ | 274,778 | $ | — | $ | 1,221 | $ | 273,557 | ||||||||
Derivative
instruments (recurring basis)
|
$ | 665 | $ | — | $ | 665 | $ | — | ||||||||
Total
liabilities
|
$ | 665 | $ | — | $ | 665 | $ | — |
|
f.
|
Impact of recently
issued and adopted accounting
pronouncements
|
|
a.
|
Gilon Business Insight
Ltd.
|
|
b.
|
Goodwill
|
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenues
|
$ | 3,602 | $ | 4,783 | ||||
Operating
loss
|
$ | (661 | ) | $ | (2,286 | ) | ||
Net
loss from discontinued operations
|
$ | (764 | ) | $ | (2,305 | ) | ||
Basic
net earnings per share from discontinued operations
|
$ | (0.02 | ) | $ | (0.06 | ) | ||
Diluted
net earnings per share from discontinued operations
|
$ | (0.02 | ) | $ | (0.06 | ) |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenues
|
$ | 4,923 | $ | 3,787 | ||||
Operating
loss
|
$ | (357 | ) | $ | (2,991 | ) | ||
Net
loss from discontinued operations
|
$ | (277 | ) | $ | (3,082 | ) | ||
Basic
net earnings per share from discontinued operations
|
$ | (0.01 | ) | $ | (0.08 | ) | ||
Diluted
net earnings per share from discontinued operations
|
$ | (0.01 | ) | $ | (0.08 | ) |
Three months
ended
|
||||
March 31, 2009
|
||||
(Unaudited)
|
||||
Revenues
|
$ | 1,628 | ||
Operating
income
|
$ | 115 | ||
Net
income from discontinued operations
|
$ | 98 | ||
Basic
net earnings per share from discontinued operations
|
$ | (0.00 | ) | |
Diluted
net earnings per share from discontinued operations
|
$ | (0.00 | ) |
Fair Values of Derivative Instruments
|
||||||||||
Assets
|
Liabilities
|
|||||||||
Balance Sheet Item
|
March 31,
2010
|
Balance Sheet Item
|
March 31,
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||||
Cash
flow hedging:
|
||||||||||
Foreign
exchange forward contracts
|
“Other
accounts receivable and
prepaid
expenses”
|
$ | 1,689 |
“Other
accounts payable and
accrued
expenses”
|
$ | — | ||||
Interest
rate swap
|
— |
“Other
long-term liabilities”
|
501 | |||||||
Total
cash flow hedging
|
$ | 1,689 | $ | 501 | ||||||
Derivatives
not designated as hedging:
|
||||||||||
Foreign
exchange forward contracts
|
“Other
accounts receivable and
prepaid expenses” |
5 |
“Other
accounts payable and
accrued
expenses”
|
1,262 | ||||||
Total
derivatives
|
$ | 1,694 | $ | 1,763 |
Gain (loss) Recognized in Statements of Income
|
|||||||||||||
Gain (loss)
|
Three
|
Three
|
|||||||||||
Recognized in Other
|
months
|
months
|
|||||||||||
Comprehensive
|
Ended
|
ended
|
|||||||||||
Income
|
March 31,
|
March 31,
|
|||||||||||
March 31, 2010
|
Statements of Income Item
|
2009
|
2010
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||
Cash
flow hedging:
|
|||||||||||||
Foreign
exchange forward contracts
|
$ | 1,489 |
“Cost
of revenues” and
“Total
operating expenses”
|
$ | (1,860 | ) | $ | 753 | |||||
Interest
rate swap
|
(246 | ) |
“Financial
expenses, net”
|
(37 | ) | (131 | ) | ||||||
Total
cash flow hedging
|
$ | 1,243 | $ | (1,897 | ) | $ | 622 | ||||||
Derivatives
not designated as hedging:
|
|||||||||||||
Foreign
exchange forward contracts
|
“Financial
expenses, net”
|
(973 | ) | (980 | ) | ||||||||
Total
derivatives
|
$ | (2,870 | ) | $ | (358 | ) |
|
a.
|
Litigation
|
|
b.
|
Guarantees
|
|
c.
|
Liens and
charges
|
|
d.
|
Covenants
|
1.
|
Long-term
loans denominated in dollars and euros contain covenants which, among
other things, require us to maintain positive operating income in the last
four quarters; require a certain ratio of total financial obligations to
EBITDA and of total stockholders’ equity to total consolidated assets; and
place limitations on our ability to merge or transfer assets to third
parties. As of December 31, 2009, we were not in compliance with covenants
under certain long-term loans requiring positive operating income and a
certain ratio of total financial obligations to EBITDA. We received a
waiver from the banks with respect to the covenants as of December 31,
2009, and the banks agreed to provide, as substitutes, less stringent
covenants to apply through September 30, 2010. As of March 31, 2010, we
were in compliance and expect to remain in compliance with these
covenants.
|
2.
|
A
long-term loan and bank guarantees denominated in NIS contain covenants
which, among other things, require our Israeli subsidiary to maintain
positive annual net income in a fiscal year; require a certain ratio of
total stockholders’ equity to total consolidated assets and minimum
stockholders’ equity; and place limitations on its ability to merge,
transfer or pledge assets to third parties. As of March 31, 2010, we were
in compliance with these
covenants.
|
|
a.
|
Total comprehensive
income:
|
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Net
income (loss)
|
$ | 1,528 | $ | (4,689 | ) | |||
Foreign
currency translation adjustments, net
|
(22,733 | ) | (1,482 | ) | ||||
Unrealized
income on foreign exchange forward contracts and interest rate
swap
|
232 | 794 | ||||||
Comprehensive
loss
|
$ | (20,973 | ) | $ | (5,377 | ) |
|
b.
|
Changes in accumulated
other gain (loss) due to cash flow hedging
strategy:
|
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Balance
at the beginning of the period
|
$ | (4,000 | ) | $ | 449 | |||
Mark
to market of foreign exchange forward contracts and interest rate
swap
|
(1,492 | ) | 1,416 | |||||
Loss
(gain) recognized in earnings during the period
|
1,872 | (622 | ) | |||||
Balance
at the end of the period
|
$ | (3,620 | ) | $ | 1,243 |
|
c.
|
Option
exercises:
|
|
d.
|
Treasury
stock:
|
1.
|
Software Product
Engineering, in which, through our Software Product Labs business
unit, we offer software product research and development services. We set
up these labs for clients and operate them on an ongoing basis, enabling
us to collaborate with our clients’ engineering teams to extend their
capacity and budgets throughout the software product life cycle. We locate
our Software Product Labs predominantly in India and in Central and
Eastern Europe and we operate them across multiple locations as needed to
optimize global delivery. They primarily serve customers in North America
and Europe, and may include team members local to the
client.
|
2.
|
System Integration and
Application Development, in which we offer a broad set of IT
services to our clients in the areas of system integration, application
development, consulting and software distribution. We provide these
services to customers in over 20 countries throughout North America,
Europe, Israel and Asia Pacific. We deliver the services through a global
delivery model that includes local teams as well as offshore and
near-shore resources. We provide these services for a wide range of
clients in many verticals, including utilities and government, financial
services, defense and homeland security, life sciences and healthcare,
manufacturing and transportation, retail, and
others.
|
Three months ended March 31, 2010
|
||||||||||||||||
Software
Product
Engineering
|
System
Integration &
Application
Development
|
Unallocated
Expenses
|
Total
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenues
from external customers
|
$ | 26,397 | $ | 106,936 | $ | — | $ | 133,333 | ||||||||
Operating
income (loss)
|
$ | 3,853 | $ | 3,227 | $ | (4,663 | ) | 2,417 | ||||||||
Financial
expenses, net
|
(209 | ) | ||||||||||||||
Income
before taxes on income
|
$ | 2,208 |
Three months ended March 31, 2009
|
||||||||||||||||
Software
Product
Engineering
|
System
Integration &
Application
Development
|
Unallocated
Expenses
|
Total
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenues
from external customers
|
$ | 24,966 | $ | 101,315 | $ | — | $ | 126,281 | ||||||||
Operating
income (loss)
|
$ | 4,114 | $ | 5,311 | $ | (5,156 | ) | 4,269 | ||||||||
Financial
expenses, net
|
(1,156 | ) | ||||||||||||||
Income
before taxes on income
|
$ | 3,113 |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Revenues
from sales to unaffiliated customers:
|
||||||||
Israel
|
$ | 45,270 | $ | 47,639 | ||||
North
America
|
42,479 | 45,249 | ||||||
Europe
(excluding Czech Republic)
|
20,035 | 20,096 | ||||||
Czech
Republic
|
16,438 | 18,905 | ||||||
Asia
Pacific
|
2,059 | 1,444 | ||||||
$ | 126,281 | $ | 133,333 |
December
31,
2009
|
March
31,
2010
|
|||||||
(Unaudited)
|
||||||||
Long-lived
assets:
|
||||||||
Israel
|
$ | 21,984 | $ | 22,302 | ||||
India
|
6,812 | 6,311 | ||||||
Europe
|
4,183 | 3,546 | ||||||
North
America
|
2,760 | 2,540 | ||||||
$ | 35,739 | $ | 34,699 |
Balance
as of January 1, 2010
|
$ | 3,892 | ||
Reductions
related to changes in interest rates and foreign currency exchange
rates
|
(22 | ) | ||
Additions
related to tax positions taken during the period
|
380 | |||
Balance
as of March 31, 2010
|
$ | 4,250 |
Three
months ended
March
31,
|
||||||||
2009
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Numerator:
|
||||||||
Net
income (loss), numerator for basic and diluted per share
|
$ | 1,528 | $ | (4,689 | ) | |||
Denominator:
|
||||||||
Weighted
average number of shares of common stock, denominator for basic net
earnings per share from continuing operations, denominator for basic net
earnings (loss) per share, denominator for diluted net loss per
share
|
38,922 | 38,299 | ||||||
Effect
of dilutive securities:
|
||||||||
Employee
stock options and restricted stock units
|
593 | 423 | ||||||
Denominator
for diluted net earnings per share from continuing operations, denominator
for diluted net earnings per share - weighted average assuming exercise of
options and restricted stock units
|
39,515 | 38,722 |
Three months ended
March 31,
|
||||||||
2009
|
2010
|
|||||||
Revenues
|
100.0 | % | 100.0 | % | ||||
Cost
of revenues
|
74.7 | 72.4 | ||||||
Gross
profit
|
25.3 | 27.6 | ||||||
Operating
expenses:
|
||||||||
Selling
and marketing
|
7.3 | 7.5 | ||||||
General
and administrative
|
18.7 | 18.3 | ||||||
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
(2.1 | ) | — | |||||
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
(2.0 | ) | — | |||||
Total
operating expenses
|
21.9 | 25.8 | ||||||
Operating
income
|
3.4 | 1.8 | ||||||
Financial
expenses, net
|
(0.9 | ) | (0.2 | ) | ||||
Income
before taxes on income
|
2.5 | 1.7 | ||||||
Taxes
on income
|
0.5 | 1.1 | ||||||
Net
income from continuing operations
|
2.0 | 0.5 | ||||||
Net
loss from discontinued operations
|
(0.7 | ) | (4.0 | ) | ||||
Net
income (loss)
|
1.2 | (3.5 | ) |
Three months ended
March 31,
|
Increase
|
|||||||||||||||
2009
|
2010
|
$
|
%
|
|||||||||||||
Revenues
|
$ | 126,281 | $ | 133,333 | 7,052 | 5.6 | ||||||||||
Cost
of revenues
|
94,359 | 96,521 | 2,162 | 2.3 | ||||||||||||
Gross
profit
|
$ | 31,922 | $ | 36,812 | 4,890 | 15.3 | ||||||||||
Gross
margin
|
25.3 | % | 27.6 | % |
Three months ended
March 31,
|
Increase
(Decrease)
|
|||||||||||||||
2009
|
2010
|
$
|
%
|
|||||||||||||
Selling
and marketing
|
$ | 9,212 | $ | 10,053 | 841 | 9.1 | ||||||||||
General
and administrative
|
23,585 | 24,342 | 757 | 3.2 | ||||||||||||
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
(2,610 | ) | — | 2,610 | (100.0 | ) | ||||||||||
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
(2,534 | ) | — | 2,534 | (100.0 | ) | ||||||||||
Total
operating expenses
|
27,653 | 34,395 | 6,742 | 24.4 | ||||||||||||
Operating
income
|
$ | 4,269 | $ | 2,417 | (1,852 | ) | (43.4 | ) |
Three months ended
March 31,
|
Increase
(Decrease)
|
|||||||||||||||
2009
|
2010
|
$
|
%
|
|||||||||||||
Operating
income
|
$ | 4,269 | $ | 2,417 | (1,852 | ) | (43.4 | ) | ||||||||
Financial
expenses, net
|
(1,156 | ) | (209 | ) | 947 | (81.9 | ) | |||||||||
Income
before taxes on income
|
3,113 | 2,208 | (905 | ) | (29.1 | ) | ||||||||||
Taxes
on income
|
642 | 1,510 | 868 | 135.2 | ||||||||||||
Net
income from continuing operations
|
2,471 | 698 | (1,773 | ) | (71.8 | ) | ||||||||||
Net
loss from discontinued operations
|
(943 | ) | (5,387 | ) | (4,444 | ) | 471.3 | |||||||||
Net
income (loss)
|
$ | 1,528 | $ | (4,689 | ) | (6,217 | ) | N/A |
Three months ended
|
||||||||||||||||||||||||||||||||
Mar 31,
2008
|
Jun 30,
2008
|
Sep 30,
2008
|
Dec 31,
2008
|
Mar 31,
2009
|
Jun 30,
2009
|
Sep 30,
2009
|
Dec 31,
2009
|
|||||||||||||||||||||||||
(unaudited) (dollars in thousands)
|
||||||||||||||||||||||||||||||||
Revenues
|
$ | 145,990 | $ | 153,810 | $ | 150,487 | $ | 154,325 | $ | 126,281 | $ | 126,887 | $ | 123,202 | $ | 135,577 | ||||||||||||||||
Cost
of revenues
|
104,868 | 108,332 | 112,451 | 114,725 | 94,359 | 92,542 | 89,780 | 109,380 | ||||||||||||||||||||||||
Gross
profit
|
41,122 | 45,478 | 38,036 | 39,600 | 31,922 | 34,345 | 33,422 | 26,197 | ||||||||||||||||||||||||
Operating
expenses:
|
||||||||||||||||||||||||||||||||
Selling
and marketing
|
10,561 | 11,713 | 10,939 | 11,843 | 9,212 | 9,681 | 10,033 | 12,242 | ||||||||||||||||||||||||
General
and administrative
|
20,509 | 24,350 | 22,875 | 24,694 | 23,585 | 21,233 | 19,521 | 25,253 | ||||||||||||||||||||||||
Gain
from sale of SAP sales and distribution operations, net
|
— | — | (18,366 | ) | — | — | — | — | — | |||||||||||||||||||||||
Insurance
settlement related to 2007 arbitration expense, net of related
expenses
|
— | — | — | — | (2,610 | ) | — | — | — | |||||||||||||||||||||||
Commissions
related to the sale of Israeli SAP sales and distribution
operations
|
— | — | — | — | (2,534 | ) | — | — | — | |||||||||||||||||||||||
Total
operating expenses
|
31,070 | 36,063 | 15,448 | 36,537 | 27,653 | 30,914 | 29,554 | 37,495 | ||||||||||||||||||||||||
Operating
income (loss)
|
10,052 | 9,415 | 22,588 | 3,063 | 4,269 | 3,431 | 3,868 | (11,298 | ) | |||||||||||||||||||||||
Financial
expenses, net
|
(1,360 | ) | (896 | ) | (967 | ) | (1,875 | ) | (1,156 | ) | (666 | ) | (388 | ) | (788 | ) | ||||||||||||||||
Other
income (expenses), net
|
— | — | (392 | ) | 2 | — | — | — | — | |||||||||||||||||||||||
Income
(loss) before taxes on income
|
8,692 | 8,519 | 21,229 | 1,190 | 3,113 | 2,765 | 3,480 | (12,086 | ) | |||||||||||||||||||||||
Taxes
on income
|
1,748 | 1,671 | 5,422 | 295 | 642 | 537 | 826 | 5,266 | ||||||||||||||||||||||||
Net
income (loss) from continuing operations
|
$ | 6,944 | $ | 6,848 | $ | 15,807 | $ | 895 | $ | 2,471 | $ | 2,228 | $ | 2,654 | $ | (17,352 | ) | |||||||||||||||
Net
income (loss) from discontinued operations
|
(50 | ) | 1,242 | 340 | 3,433 | (943 | ) | (1,186 | ) | (1,812 | ) | (38,514 | ) | |||||||||||||||||||
Net
income (loss)
|
$ | 6,894 | $ | 8,090 | $ | 16,147 | $ | 4,328 | $ | 1,528 | $ | 1,042 | $ | 842 | $ | (55,866 | ) |
1.
|
Software Product
Engineering, in which, through our Software Product Labs business
unit, we offer software product research and development services. We set
up these labs for clients and operate them on an ongoing basis, enabling
us to collaborate with our clients’ engineering teams to extend their
capacity and budgets throughout the software product life cycle. We locate
our Software Product Labs predominantly in India and in Central and
Eastern Europe and we operate them across multiple locations as needed to
optimize global delivery. They primarily serve customers in North America
and Europe, and may include team members local to the
client.
|
2.
|
System Integration and
Application Development, in which we offer a broad set of IT
services to our clients in the areas of system integration, application
development, consulting and software distribution. We provide these
services to customers in over 20 countries throughout North America,
Europe, Israel and Asia Pacific. We deliver the services through a global
delivery model that includes local teams as well as offshore and
near-shore resources. We provide these services for a wide range of
clients in many verticals, including utilities and government, financial
services, defense and homeland security, life sciences and healthcare,
manufacturing and transportation, retail, and
others.
|
Three months ended
March 31,
|
||||||||
Segment
Data:
|
2009
|
2010
|
||||||
Revenues:
|
||||||||
Software
Product Engineering
|
$ | 24,966 | $ | 26,397 | ||||
System
Integration and Application Development
|
101,315 | 106,936 | ||||||
$ | 126,281 | $ | 133,333 | |||||
Operating
Income (Loss):
|
||||||||
Software
Product Engineering
|
$ | 4,114 | $ | 3,853 | ||||
System
Integration and Application Development
|
5,311 | 3,227 | ||||||
Unallocated
Expenses
|
(5,156 | ) | (4,663 | ) | ||||
$ | 4,269 | $ | 2,417 |
Three months ended
March 31,
|
||||||||
2009
|
2010
|
|||||||
Net
cash provided by operating activities
|
$ | 8,594 | $ | 4,735 | ||||
Net
cash provided by (used in) investing activities
|
(17,101 | ) | 2,647 | |||||
Net
cash used in financing activities
|
(2,983 | ) | (4,232 | ) | ||||
Effect
of exchange rate changes on cash and cash equivalents
|
(1,273 | ) | (2,174 | ) | ||||
Increase
(decrease) in cash and cash equivalents
|
(12,763 | ) | 976 | |||||
Cash
and cash equivalents at the beginning of the period
|
44,585 | 40,218 | ||||||
Cash
and cash equivalents at the end of the period
|
$ | 31,822 | $ | 41,194 |
Period
|
Total
Number of
Shares
Repurchased
|
Average
Price Paid
per Share
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
|
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
|
||||||||||||
January
1-31, 2010
|
104,900 | $ | 5.21 | 104,900 | 2,665,396 | |||||||||||
February
1-28, 2010
|
11,800 | $ | 5.48 | 11,800 | 2,653,596 | |||||||||||
March
1-31, 2010
|
— | $ | — | — | 2,653,596 | |||||||||||
Total
|
116,700 | $ | 5.24 | 116,700 | 2,653,596 |
Exhibit Number
|
Description
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
NESS
TECHNOLOGIES, INC.
|
||
(Registrant)
|
||
Date:
May 6,
2010
|
By:
|
/s/ Issachar
Gerlitz
|
Issachar
Gerlitz
|
||
Chief
Executive Officer, President and Director
|
||
(principal
executive officer)
|
||
Date:
May 6,
2010
|
By:
|
/s/ Ofer
Segev
|
Ofer
Segev
|
||
Executive
Vice President and Chief Financial Officer
|
||
(principal
financial and accounting
officer)
|
Exhibit Number
|
Description
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|