DELAWARE
(State
or other jurisdiction of
Incorporation
or organization)
|
94-3145844
(I.R.S.
Employer
Identification
No.)
|
Title
of each class
COMMON
STOCK, $0.01 PAR VALUE
|
Name
of each exchange on which registered
The
NASDAQ STOCK MARKET, LLC
|
·
|
Financial
Management
Systems—develops,
implements and supports financial management and purchasing systems
for
state and local governments;
|
·
|
Unemployment
Insurance
Systems—provides
software application, development and integration services to state
governments that are reforming unemployment insurance
systems;
|
·
|
State
Systems
Integration—provides
information technology development, integration and maintenance
support
projects, primarily for the State of Missouri;
and
|
·
|
Independent
Validation and Verification—provides quality assurance reviews of
third-party software.
|
·
|
economic
conditions in the marketplace;
|
·
|
our
customers’ budgets and demand for our
services;
|
·
|
seasonality
of business;
|
·
|
timing
of
service and product
implementations;
|
·
|
unplanned
increases in costs;
|
·
|
delays
in
completion of projects;
|
·
|
intense
competition;
|
·
|
variability
of software license revenues; and
|
·
|
integration
and costs of acquisitions.
|
Name,
age and position with Registrant
|
Date
elected
or
appointed
|
Ronald
L. Rossetti, Age 64 (a)
|
|
Chairman
of the Board, Chief Executive Officer
|
May
2006
|
David
E. Fountain, Age 47 (b)
|
|
Senior
Vice President, Chief Financial Officer and Treasurer
|
May
2005
|
Michael
A. Lawler, Age 44 (c)
|
|
Senior
Vice President, Electronic Payment Processing
|
June
2004
|
Deanne
M. Tully, Age 49
|
|
Vice
President, General Counsel and Corporate Secretary
|
July
2003
|
Vice
President, General Counsel
|
February
2001
|
Steven
M. Beckerman, Age 49 (d)
|
|
Senior
Vice President, Business Process Outsourcing
|
March
2006
|
Kevin
C. Connell, Age 40
|
|
Senior
Vice President, Sales & Marketing
|
November
2006
|
Senior
Vice President, Business Development (OPC)
|
July
2003
|
Vice
President, Business Development (OPC)
|
August
2002
|
(a)
Mr. Rossetti
served as President of Riverside Capital Partners, Inc., a venture
capital
investment firm since 1997. Since 1997, Mr. Rossetti has also
been a general partner in several real estate general partnerships,
all
commonly controlled by Riverside Capital Holdings.
|
|
(b)
Mr. Fountain
served as Chief Financial Officer and Treasurer of National Processing
Inc., a provider of payment processing services, from 1999 to October
2004.
|
|
(c)
Mr. Lawler
served as EPOS Corporation President and Chairman from 1991 to
June 2004
and became Senior Vice President at Tier upon the acquisition of
EPOS.
|
|
(d)
Mr.
Beckerman served as Senior Vice President, Product Management of
Certegy
Card Services, a company that provides debit, credit and merchant
card
processing, from January 2004 to February 2006. From July 2000
to December 2003, Mr. Beckerman served as Certegy's Vice President,
Sales
and Marketing.
|
Year
ended September 30,
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
High
|
Low
|
High
|
Low
|
|||||||||||||
First
quarter
|
$ |
7.30
|
$ |
6.35
|
$ |
8.50
|
$ |
6.93
|
||||||||
Second
quarter
|
$ |
8.90
|
$ |
5.85
|
$ |
8.08
|
$ |
7.34
|
||||||||
Third
quarter
|
$ |
10.05
|
$ |
8.25
|
$ |
8.70
|
$ |
5.67
|
||||||||
Fourth
quarter
|
$ |
10.26
|
$ |
8.33
|
$ |
7.05
|
$ |
5.25
|
Measurement
Date
|
Tier
Technologies,
Inc.
|
NASDAQ
Composite
|
Russell
2000
|
|||||||||
9/30/02
|
$ | 100.00 | $ | 100.00 | $ | 100.00 | ||||||
9/30/03
|
47.09
|
150.59
|
136.50
|
|||||||||
9/30/04
|
51.00
|
162.89
|
162.12
|
|||||||||
9/30/05
|
45.72
|
185.48
|
191.23
|
|||||||||
9/30/06
|
35.94
|
196.37
|
210.20
|
|||||||||
9/30/07
|
53.91
|
236.60
|
236.14
|
Fiscal
years ended September 30,
|
||||||||||||||||||||
(in
thousands, except per share data)
|
2007
|
2006
|
2005
|
2004
|
2003
|
|||||||||||||||
Revenues
|
$ |
111,148
|
$ |
96,492
|
$ |
78,695
|
$ |
61,948
|
$ |
51,779
|
||||||||||
Costs
and expenses
|
133,425
|
118,825
|
98,936
|
83,503
|
81,343
|
|||||||||||||||
Loss
before discontinued and other income (loss)
|
(22,277 | ) | (22,333 | ) | (20,241 | ) | (21,555 | ) | (29,564 | ) | ||||||||||
Other
income
|
4,094
|
3,457
|
874
|
835
|
904
|
|||||||||||||||
Loss
before income taxes & discontinued operations
|
(18,183 | ) | (18,876 | ) | (19,367 | ) | (20,720 | ) | (28,660 | ) | ||||||||||
Income
tax provision (benefit)
|
76
|
45
|
127
|
—
|
(2,764 | ) | ||||||||||||||
Loss
from continuing operations
|
(18,259 | ) | (18,921 | ) | (19,494 | ) | (20,720 | ) | (25,896 | ) | ||||||||||
Income
from discontinued operations, net
|
15,225
|
9,470
|
20,620
|
20,657
|
20,460
|
|||||||||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
$ | (63 | ) | $ | (5,436 | ) | ||||||
Total
assets
|
$ |
166,424
|
$ |
169,860
|
$ |
176,742
|
$ |
171,980
|
$ |
161,374
|
||||||||||
Long-term
obligations, less current portion
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
89
|
$ |
195
|
||||||||||
(Loss)
earnings per share—Basic and diluted:
|
||||||||||||||||||||
Continuing
operations
|
$ | (0.94 | ) | $ | (0.97 | ) | $ | (1.00 | ) | $ | (1.09 | ) | $ | (1.38 | ) | |||||
Discontinued
operations
|
$ |
0.78
|
$ |
0.49
|
$ |
1.06
|
$ |
1.09
|
$ |
1.09
|
||||||||||
(Loss)
earnings per share—Basic and diluted
|
$ | (0.16 | ) | $ | (0.48 | ) | $ |
0.06
|
$ |
—
|
$ | (0.29 | ) | |||||||
Weighted
average common shares used in computing:
|
||||||||||||||||||||
Basic
and diluted (loss) earning per share
|
19,512
|
19,495
|
19,470
|
18,987
|
18,782
|
Variance
|
||||||||||||||||||||||||||||
Year
ended September 30,
|
2007
vs. 2006
|
2006
vs. 2005
|
||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2006
|
2005
|
$
Amount
|
%
|
$
Amount
|
%
|
|||||||||||||||||||||
Revenues
|
$ |
111,148
|
$ |
96,492
|
$ |
78,695
|
$ |
14,656
|
15.2 | % | $ |
17,797
|
22.6 | % | ||||||||||||||
Costs
and expenses
|
133,425
|
118,825
|
98,936
|
14,600
|
12.3 | % |
19,889
|
20.1 | % | |||||||||||||||||||
Loss
from continuing operations before other income and income
taxes
|
(22,277 | ) | (22,333 | ) | (20,241 | ) |
56
|
—
|
(2,092 | ) | 10.3 | % | ||||||||||||||||
Other
income
|
4,094
|
3,457
|
874
|
637
|
18.4 | % |
2,583
|
*
|
||||||||||||||||||||
Loss
from continuing operations before income taxes
|
(18,183 | ) | (18,876 | ) | (19,367 | ) |
693
|
3.7 | % |
491
|
2.5 | % | ||||||||||||||||
Income
tax provision
|
76
|
45
|
127
|
31
|
68.9 | % | (82 | ) | (64.6 | )% | ||||||||||||||||||
Loss
from continuing operations
|
(18,259 | ) | (18,921 | ) | (19,494 | ) |
662
|
3.5 | % |
573
|
2.9 | % | ||||||||||||||||
Income
from discontinued operations, net
|
15,225
|
9,470
|
20,620
|
5,755
|
60.8 | % | (11,150 | ) | (54.1 | )% | ||||||||||||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
$ |
6,417
|
67.9 | % | $ | (10,577 | ) |
*
|
||||||||||||
*
Not meaningful
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Revenues
|
$ |
111,148
|
$ |
96,492
|
$ |
78,695
|
||||||
Costs
and expenses:
|
||||||||||||
Direct
costs
|
83,891
|
71,670
|
59,951
|
|||||||||
General
and administrative
|
27,486
|
32,860
|
24,176
|
|||||||||
Selling
and marketing
|
8,243
|
9,162
|
8,836
|
|||||||||
Depreciation
and amortization
|
4,573
|
5,133
|
5,973
|
|||||||||
Write-down
of goodwill and intangibles
|
9,232
|
—
|
—
|
|||||||||
Total
costs and expenses
|
133,425
|
118,825
|
98,936
|
|||||||||
Loss
from continuing operations before other income and income
taxes
|
(22,277 | ) | (22,333 | ) | (20,241 | ) | ||||||
Other
income
|
4,094
|
3,457
|
874
|
|||||||||
Loss
from continuing operations before income taxes
|
(18,183 | ) | (18,876 | ) | (19,367 | ) | ||||||
Income
tax provision
|
76
|
45
|
127
|
|||||||||
Loss
from continuing operations
|
$ | (18,259 | ) | $ | (18,921 | ) | $ | (19,494 | ) |
Fiscal
2007 vs. 2006
|
Fiscal
2006 vs. 2005
|
|||||||||||||||||||||||||||||||
Year
ended September 30,
|
Variance
|
Year
ended September 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
99,433
|
$ |
78,578
|
$ |
20,855
|
26.5 | % | $ |
78,578
|
$ |
56,452
|
$ |
22,126
|
39.2 | % | ||||||||||||||||
Wind-down
|
12,100
|
18,065
|
(5,965 | ) | (33.0 | )% |
18,065
|
27,316
|
(9,251 | ) | (33.9 | )% | ||||||||||||||||||||
Eliminations
|
(385 | ) | (151 | ) | (234 | ) | (155.0 | )% | (151 | ) | (5,073 | ) |
4,922
|
97.0 | % | |||||||||||||||||
Total
|
$ |
111,148
|
$ |
96,492
|
$ |
14,656
|
15.2 | % | $ |
96,492
|
$ |
78,695
|
$ |
17,797
|
22.6 | % |
Fiscal
2007 vs. 2006
|
Fiscal
2006 vs. 2005
|
|||||||||||||||||||||||||||||||
Year
ended September 30,
|
Variance
|
Year
ended September 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
||||||||||||||||||||||||
Direct
costs
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
75,294
|
$ |
59,966
|
$ |
15,328
|
25.6 | % | $ |
59,966
|
$ |
42,199
|
$ |
17,767
|
42.1 | % | ||||||||||||||||
Wind-down
|
8,597
|
11,704
|
(3,107 | ) | (26.5 | )% |
11,704
|
17,752
|
(6,048 | ) | (34.1 | )% | ||||||||||||||||||||
Total
|
$ |
83,891
|
$ |
71,670
|
$ |
12,221
|
17.1 | % | $ |
71,670
|
$ |
59,951
|
$ |
11,719
|
19.6 | % |
Fiscal
2007 vs. 2006
|
Fiscal
2006 vs. 2005
|
|||||||||||||||||||||||||||||||
Year
ended September 30,
|
Variance
|
Year
ended September 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
||||||||||||||||||||||||
General
& administrative
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
7,847
|
$ |
6,009
|
$ |
1,838
|
30.6 | % | $ |
6,009
|
$ |
4,591
|
$ |
1,418
|
30.9 | % | ||||||||||||||||
Wind-down
|
3,663
|
3,535
|
128
|
3.6 | % |
3,535
|
4,194
|
(659 | ) | (15.7 | )% | |||||||||||||||||||||
Corporate
|
15,976
|
23,316
|
(7,340 | ) | (31.5 | )% |
23,316
|
15,391
|
7,925
|
51.5 | % | |||||||||||||||||||||
Total
|
$ |
27,486
|
$ |
32,860
|
$ | (5,374 | ) | (16.4 | )% | $ |
32,860
|
$ |
24,176
|
$ |
8,684
|
35.9 | % |
Year
ended September 30,
|
Variance
|
Year
ended September 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
||||||||||||||||||||||||
Selling
and marketing
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
7,151
|
$ |
5,963
|
$ |
1,188
|
19.9 | % | $ |
5,963
|
$ |
4,921
|
$ |
1,042
|
21.2 | % | ||||||||||||||||
Wind-down
|
1,092
|
1,046
|
46
|
4.4 | % |
1,046
|
1,690
|
(644 | ) | (38.1 | )% | |||||||||||||||||||||
Corporate
|
—
|
2,153
|
(2,153 | ) | (100.0 | )% |
2,153
|
2,225
|
(72 | ) | (3.2 | )% | ||||||||||||||||||||
Total
|
$ |
8,243
|
$ |
9,162
|
$ | (919 | ) | (10.0 | )% | $ |
9,162
|
$ |
8,836
|
$ |
326
|
3.7 | % |
Year
ended September 30,
|
Variance
|
Year
ended September 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
||||||||||||||||||||||||
Depreciation
& amortization
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
3,205
|
$ |
3,170
|
$ |
35
|
1.1 | % | $ |
3,170
|
$ |
3,428
|
$ | (258 | ) | (7.5 | )% | |||||||||||||||
Wind-down
|
764
|
1,590
|
(826 | ) | (51.9 | )% |
1,590
|
1,987
|
(397 | ) | (20.0 | )% | ||||||||||||||||||||
Corporate
|
604
|
373
|
231
|
61.9 | % |
373
|
558
|
(185 | ) | (33.2 | )% | |||||||||||||||||||||
Total
|
$ |
4,573
|
$ |
5,133
|
$ | (560 | ) | (10.9 | )% | $ |
5,133
|
$ |
5,973
|
$ | (840 | ) | (14.1 | )% |
Year
ended September 30, 2007
|
Year
ended September 30, 2006
|
Year
ended September 30, 2005
|
||||||||||||||||||||||||||||||||||||||||||||||
(in
thousands)
|
GBPO
|
PSSI
|
Other
and Eliminations
|
Total
|
GBPO
|
PSSI
|
Other
and Eliminations
|
Total
|
GBPO
|
PSSI
|
Other
and Eliminations
|
Total
|
||||||||||||||||||||||||||||||||||||
Revenues
|
$ |
34,835
|
$ |
31,372
|
$ |
—
|
$ |
66,207
|
$ |
39,902
|
$ |
32,337
|
$ |
—
|
$ |
72,239
|
$ |
40,250
|
$ |
31,645
|
$ |
10
|
$ |
71,905
|
||||||||||||||||||||||||
Costs
and expenses:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Direct
costs
|
22,378
|
21,557
|
(385 | ) |
43,550
|
32,041
|
22,779
|
(646 | ) |
54,174
|
27,761
|
20,053
|
(3,949 | ) |
43,865
|
|||||||||||||||||||||||||||||||||
General
and administrative
|
2,257
|
6,717
|
—
|
8,974
|
1,510
|
4,194
|
13
|
5,717
|
1,100
|
3,708
|
17
|
4,825
|
||||||||||||||||||||||||||||||||||||
Selling
and marketing
|
1,097
|
2,620
|
—
|
3,717
|
610
|
1,701
|
—
|
2,311
|
437
|
2,065
|
—
|
2,502
|
||||||||||||||||||||||||||||||||||||
Depreciation
and amortization
|
2
|
95
|
—
|
97
|
2
|
122
|
—
|
124
|
—
|
93
|
—
|
93
|
||||||||||||||||||||||||||||||||||||
Write-down
of goodwill and intangibles
|
2,601
|
120
|
—
|
2,721
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||||
Total
costs and expenses
|
28,335
|
31,109
|
(385 | ) |
59,059
|
34,163
|
28,796
|
(633 | ) |
62,326
|
29,298
|
25,919
|
(3,932 | ) |
51,285
|
|||||||||||||||||||||||||||||||||
Income
before other income and income taxes
|
6,500
|
263
|
385
|
7,148
|
5,739
|
3,541
|
633
|
9,913
|
10,952
|
5,726
|
3,942
|
20,620
|
||||||||||||||||||||||||||||||||||||
Other
income
|
—
|
—
|
478
|
478
|
—
|
—
|
13
|
13
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||||
Income
before income taxes
|
6,500
|
263
|
863
|
7,626
|
5,739
|
3,541
|
646
|
9,926
|
10,952
|
5,726
|
3,942
|
20,620
|
||||||||||||||||||||||||||||||||||||
Income
tax (benefit) provision
|
—
|
—
|
(7,599 | ) | (7,599 | ) |
—
|
—
|
456
|
456
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||||||||||
Income
from discontinued
operations,
net
|
$ |
6,500
|
$ |
263
|
$ |
8,462
|
$ |
15,225
|
$ |
5,739
|
$ |
3,541
|
$ |
190
|
$ |
9,470
|
$ |
10,952
|
$ |
5,726
|
$ |
3,942
|
$ |
20,620
|
·
|
Transaction-based
contracts—revenues
are
recognized based on fees charged on a per-transaction basis or
fees
charged as a percentage of dollars
processed;
|
·
|
Fixed-price
contracts—revenues
are
recognized either on a percentage-of-completion basis or when our
customers accept the services we
provide;
|
·
|
Time
and materials
contracts—revenues
are
recognized when we perform services and incur
expenses;
|
·
|
Delivery-based
contracts—revenues
are
recognized when we have delivered, and the customer has accepted,
the
product or service;
|
·
|
Software
licenses—revenues are recognized for perpetual software
licenses upon delivery when the fees are fixed and determinable,
collection is probable and specific objective evidence exists
to determine
the value of any undeliverable elements of the
arrangement. Revenues for software licenses with a fixed term
are recognized on a straight-line period over the term of the
license;
and
|
·
|
Software
maintenance contracts—revenues are recognized on a straight-line
basis over the contract term, which is typically one
year.
|
(in
thousands)
|
Total
|
Due
in 1 year or less
|
Due
after 1 year through 3 years
|
Due
after 3 years through 5 years
|
||||||||||||
Capital
lease
obligations (equipment)
|
$ |
108
|
$ |
47
|
$ |
58
|
$ |
3
|
||||||||
|
||||||||||||||||
Operating
lease obligations:
|
||||||||||||||||
Facilities
leases
|
6,360
|
3,339
|
3,021
|
—
|
||||||||||||
Equipment
leases
|
87
|
58
|
29
|
—
|
||||||||||||
|
||||||||||||||||
Purchase
obligations:
|
||||||||||||||||
Subcontractor
|
1,974
|
1,818
|
156
|
—
|
||||||||||||
Purchase
order
|
274
|
274
|
—
|
—
|
||||||||||||
Total
contractual obligations
|
$ |
8,803
|
$ |
5,536
|
$ |
3,264
|
$ |
3
|
Report
of
Independent Registered Public Accounting Firm
|
33
|
Consolidated
Balance Sheets
|
34
|
Consolidated
Statements of Operations
|
35
|
Consolidated
Statements of Shareholders' Equity
|
36
|
Consolidated
Statements of Comprehensive (Loss) Income
|
37
|
Consolidated
Statements of Cash Flows
|
38
|
Notes
to
Consolidated Financial Statements
|
40
|
Schedule
II—Valuation and Qualifying Accounts
|
63
|
September
30,
|
||||||||
(in
thousands)
|
2007
|
2006
|
||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ |
16,516
|
$ |
18,468
|
||||
Investments
in marketable securities
|
57,815
|
36,950
|
||||||
Accounts
receivable, net
|
5,083
|
5,274
|
||||||
Unbilled
receivables
|
546
|
1,916
|
||||||
Prepaid
expenses and other current assets
|
2,160
|
2,615
|
||||||
Current
assets—held-for-sale
|
36,705
|
36,612
|
||||||
Total
current assets
|
118,825
|
101,835
|
||||||
Property, equipment and software, net
|
3,745
|
3,954
|
||||||
Goodwill
|
14,526
|
22,980
|
||||||
Other intangible assets, net
|
17,640
|
21,879
|
||||||
Restricted investments
|
11,526
|
12,287
|
||||||
Investment in unconsolidated affiliate
|
—
|
3,978
|
||||||
Other assets
|
162
|
2,947
|
||||||
Total
assets
|
$ |
166,424
|
$ |
169,860
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts
payable
|
$ |
878
|
$ |
871
|
||||
Accrued
compensation liabilities
|
4,710
|
3,605
|
||||||
Accrued
subcontractor expense
|
522
|
426
|
||||||
Accrued
discount fees
|
4,529
|
3,631
|
||||||
Deferred
income
|
2,649
|
2,520
|
||||||
Other
accrued liabilities
|
4,160
|
6,459
|
||||||
Liabilities
of discontinued operations
|
—
|
7,599
|
||||||
Current
liabilities—held-for-sale
|
11,262
|
9,180
|
||||||
Total
current liabilities
|
28,710
|
34,291
|
||||||
Other liabilities
|
200
|
1,359
|
||||||
Total
liabilities
|
28,910
|
35,650
|
||||||
Commitments
and contingencies (Note 8)
|
||||||||
Shareholders’
equity:
|
||||||||
Preferred
stock, no par value; authorized shares: 4,579;
no
shares issued and outstanding
|
—
|
—
|
||||||
Common
stock and paid-in capital—Shares authorized: 44,260;
shares
issued: 20,425 and 20,383; and shares outstanding: 19,541 and
19,499
|
186,417
|
184,387
|
||||||
Treasury
stock—at cost, 884 shares
|
(8,684 | ) | (8,684 | ) | ||||
Notes
receivable from related parties
|
—
|
(4,275 | ) | |||||
Accumulated
other comprehensive loss
|
—
|
(33 | ) | |||||
Accumulated
deficit
|
(40,219 | ) | (37,185 | ) | ||||
Total
shareholders’ equity
|
137,514
|
134,210
|
||||||
Total
liabilities and shareholders’ equity
|
$ |
166,424
|
$ |
169,860
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Year
ended September 30,
|
||||||||||||
(in
thousands, except per share data)
|
2007
|
2006
|
2005
|
|||||||||
Revenues
|
$ |
111,148
|
$ |
96,492
|
$ |
78,695
|
||||||
Costs
and expenses:
|
||||||||||||
Direct
costs
|
83,891
|
71,670
|
59,951
|
|||||||||
General
and administrative
|
27,486
|
32,860
|
24,176
|
|||||||||
Selling
and marketing
|
8,243
|
9,162
|
8,836
|
|||||||||
Depreciation
and amortization
|
4,573
|
5,133
|
5,973
|
|||||||||
Write-down
of goodwill and intangible assets
|
9,232
|
—
|
—
|
|||||||||
Total
costs and expenses
|
133,425
|
118,825
|
98,936
|
|||||||||
Loss
from continuing operations before other income and income
taxes
|
(22,277 | ) | (22,333 | ) | (20,241 | ) | ||||||
Other
income:
|
||||||||||||
Income
(loss) from investments:
|
||||||||||||
Equity
in net income (loss) of unconsolidated affiliate
|
475
|
445
|
(168 | ) | ||||||||
Realized
foreign currency gain
|
239
|
—
|
—
|
|||||||||
Gain
on sale of unconsolidated affiliate
|
80
|
—
|
—
|
|||||||||
Loss
on sale of investment
|
—
|
—
|
(501 | ) | ||||||||
Interest
income, net
|
3,300
|
2,938
|
1,543
|
|||||||||
Other
income
|
—
|
74
|
—
|
|||||||||
Total
other income
|
4,094
|
3,457
|
874
|
|||||||||
Loss
from continuing operations before income taxes
|
(18,183 | ) | (18,876 | ) | (19,367 | ) | ||||||
Income
tax provision
|
76
|
45
|
127
|
|||||||||
Loss
from continuing operations
|
(18,259 | ) | (18,921 | ) | (19,494 | ) | ||||||
Income
from discontinued operations, net
|
15,225
|
9,470
|
20,620
|
|||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
||||
(Loss)
earnings per share—Basic and diluted:
|
||||||||||||
From
continuing operations
|
$ | (0.94 | ) | $ | (0.97 | ) | $ | (1.00 | ) | |||
From
discontinued operations
|
0.78
|
0.49
|
1.06
|
|||||||||
(Loss)
earnings per share—Basic and diluted
|
$ | (0.16 | ) | $ | (0.48 | ) | $ |
0.06
|
||||
Weighted
average common shares used in computing:
|
||||||||||||
Basic
and diluted (loss) earning per share
|
19,512
|
19,495
|
19,470
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’
EQUITY
|
Common
Stock Issued
|
Treasury
Stock
|
|||||||||||||||||||||||||||||||||||
(in
thousands)
|
Shares
|
Amount
|
Paid-in-
capital
|
Shares
|
Amount
|
Notes
receivable from related parties
|
Accumulated
other comprehensive (loss) income
|
Accumulated
deficit
|
Total
shareholders' equity
|
|||||||||||||||||||||||||||
Balance
at September 30, 2004
|
20,324
|
$ |
180,820
|
$ |
659
|
(884 | ) | $ | (8,684 | ) | $ | (4,113 | ) | $ | (128 | ) | $ | (28,860 | ) | $ |
139,694
|
|||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
1,126
|
1,126
|
|||||||||||||||||||||||||||
Exercise
of stock
options
|
10
|
54
|
6
|
—
|
—
|
—
|
—
|
—
|
60
|
|||||||||||||||||||||||||||
Common
stock issuance—business
combinations
|
7
|
79
|
—
|
—
|
—
|
—
|
—
|
—
|
79
|
|||||||||||||||||||||||||||
Common
stock
issuance—other
|
33
|
242
|
—
|
—
|
—
|
—
|
—
|
—
|
242
|
|||||||||||||||||||||||||||
Conversion
of Class B common
stock to $0.01 par
value common stock
|
—
|
(180,991 | ) |
180,991
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||||
Notes
and interest receivable
from
related parties
|
—
|
—
|
206
|
—
|
—
|
115
|
—
|
—
|
321
|
|||||||||||||||||||||||||||
Unrealized
gain on
investments
|
—
|
—
|
—
|
—
|
—
|
—
|
70
|
—
|
70
|
|||||||||||||||||||||||||||
Realized
gain on
investments
|
—
|
—
|
—
|
—
|
—
|
—
|
19
|
—
|
19
|
|||||||||||||||||||||||||||
Foreign
currency translation
adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
(72 | ) |
—
|
(72 | ) | |||||||||||||||||||||||||
Balance
at September 30, 2005
|
20,374
|
204
|
181,862
|
(884 | ) | (8,684 | ) | (3,998 | ) | (111 | ) | (27,734 | ) |
141,539
|
||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(9,451 | ) | (9,451 | ) | |||||||||||||||||||||||||
Exercise
of stock
options
|
9
|
—
|
69
|
—
|
—
|
—
|
—
|
—
|
69
|
|||||||||||||||||||||||||||
Interest
receivable from
related
parties
|
—
|
—
|
277
|
—
|
—
|
(277 | ) |
—
|
—
|
—
|
||||||||||||||||||||||||||
Share-based
payment
|
—
|
—
|
1,975
|
—
|
—
|
—
|
—
|
—
|
1,975
|
|||||||||||||||||||||||||||
Unrealized
gain on
investments
|
—
|
—
|
—
|
—
|
—
|
—
|
53
|
—
|
53
|
|||||||||||||||||||||||||||
Foreign
currency translation
adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
25
|
—
|
25
|
|||||||||||||||||||||||||||
Balance
at September 30, 2006
|
20,383
|
204
|
184,183
|
(884 | ) | (8,684 | ) | (4,275 | ) | (33 | ) | (37,185 | ) |
134,210
|
||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(3,034 | ) | (3,034 | ) | |||||||||||||||||||||||||
Exercise
of stock
options
|
42
|
—
|
213
|
—
|
—
|
—
|
—
|
—
|
213
|
|||||||||||||||||||||||||||
Notes
and interest receivable
from
related parties
|
—
|
—
|
126
|
—
|
—
|
4,275
|
—
|
—
|
4,401
|
|||||||||||||||||||||||||||
Share-based
payment
|
—
|
—
|
1,691
|
—
|
—
|
—
|
—
|
—
|
1,691
|
|||||||||||||||||||||||||||
Unrealized
gain on
investments
|
—
|
—
|
—
|
—
|
—
|
—
|
2
|
—
|
2
|
|||||||||||||||||||||||||||
Impact
of realized foreign
currency
gains
|
—
|
—
|
—
|
—
|
—
|
—
|
(239 | ) |
—
|
(239 | ) | |||||||||||||||||||||||||
Foreign
currency translation
adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
270
|
—
|
270
|
|||||||||||||||||||||||||||
Balance
at September 30, 2007
|
20,425
|
$ |
204
|
$ |
186,213
|
(884 | ) | $ | (8,684 | ) | $ |
—
|
$ |
—
|
$ | (40,219 | ) | $ |
137,514
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
||||
Other
comprehensive (loss) income, net of taxes:
|
||||||||||||
Investments
in marketable securities:
|
||||||||||||
Unrealized gain
|
2
|
53
|
19
|
|||||||||
Less
impact of realized
losses (transferred from accumulated other comprehensive income
and
included in net income)
|
—
|
—
|
70
|
|||||||||
Foreign
currency translation:
|
||||||||||||
Foreign currency translation adjustment
|
270
|
25
|
(72 | ) | ||||||||
Less
impact of
realized gains (transferred from accumulated other comprehensive
income
and included in net loss)
|
(239 | ) |
—
|
—
|
||||||||
Other
comprehensive income
|
33
|
78
|
17
|
|||||||||
Comprehensive
(loss) income
|
$ | (3,001 | ) | $ | (9,373 | ) | $ |
1,143
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Year
ended September 30,
|
||||||||||||
(In
thousands)
|
2007
|
2006
|
2005
|
|||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
||||
Less:
Income from discontinued operations, net
|
15,225
|
9,470
|
20,620
|
|||||||||
Loss
from continuing operations, net
|
(18,259 | ) | (18,921 | ) | (19,494 | ) | ||||||
Non-cash
items included in net income from continuing operations:
|
||||||||||||
Depreciation
and amortization
|
4,664
|
5,343
|
6,106
|
|||||||||
(Gain)
loss on retirement of equipment and software
|
(8 | ) |
76
|
41
|
||||||||
Provision
for doubtful accounts
|
(49 | ) |
809
|
259
|
||||||||
Equity
in net income of unconsolidated affiliate
|
(475 | ) | (445 | ) |
168
|
|||||||
Gain
on sale of unconsolidated affiliate
|
(80 | ) |
—
|
—
|
||||||||
Foreign
currency translation gain realized on sale of unconsolidated
affiliate
|
(239 | ) |
—
|
—
|
||||||||
Share-based
compensation
|
1,520
|
1,768
|
—
|
|||||||||
Accrued
forward loss on contracts
|
3
|
(270 | ) |
—
|
||||||||
Settlement
of pension contract
|
1,254
|
—
|
—
|
|||||||||
Write-down
of goodwill and intangible assets
|
9,232
|
—
|
571
|
|||||||||
Other
non-cash items included in net income
|
8
|
37
|
(90 | ) | ||||||||
Net
effect of changes in assets and liabilities:
|
||||||||||||
Accounts
receivable and unbilled receivables
|
(667 | ) |
1,289
|
(359 | ) | |||||||
Prepaid
expenses and other assets
|
3,579
|
(229 | ) |
1,638
|
||||||||
Accounts
payable and accrued liabilities
|
(262 | ) |
961
|
(800 | ) | |||||||
Income
taxes receivable
|
3
|
(336 | ) | (262 | ) | |||||||
Deferred
income
|
129
|
(70 | ) |
1,112
|
||||||||
Cash
provided by (used in) operating activities from continuing
operations
|
353
|
(9,988 | ) | (11,110 | ) | |||||||
Cash
provided by operating activities from discontinued
operations
|
13,420
|
14,748
|
23,960
|
|||||||||
Cash
provided by operating activities
|
13,773
|
4,760
|
12,850
|
|||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Purchases
of marketable securities
|
(21,012 | ) | (45,950 | ) | (75,702 | ) | ||||||
Sales
and maturities of marketable securities
|
3,550
|
44,278
|
72,669
|
|||||||||
Purchases
of restricted investments
|
(22,611 | ) | (14,255 | ) |
—
|
|||||||
Sales
and maturities of restricted investments
|
20,098
|
6,570
|
3,328
|
|||||||||
Purchase
of equipment and software
|
(917 | ) | (1,312 | ) | (1,225 | ) | ||||||
Repayment
of notes and accrued interest from related parties
|
4,401
|
—
|
411
|
|||||||||
Proceeds
from sale of unconsolidated affiliate
|
4,784
|
—
|
—
|
|||||||||
Business
combinations, net of cash acquired
|
—
|
—
|
(4,135 | ) | ||||||||
Other
investing activities
|
(164 | ) |
—
|
(64 | ) | |||||||
Cash
used in investing activities for continuing operations
|
(11,871 | ) | (10,669 | ) | (4,718 | ) | ||||||
Cash
used in investing activities for discontinued operations
|
(4,024 | ) | (3,458 | ) | (8,916 | ) | ||||||
Cash
used in investing activities
|
(15,895 | ) | (14,127 | ) | (13,634 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Net
proceeds from issuance of common stock
|
213
|
69
|
302
|
|||||||||
Capital
lease obligations and other financing arrangements
|
(26 | ) | (38 | ) | (77 | ) | ||||||
Cash
provided by financing activities from continuing
operations
|
187
|
31
|
225
|
|||||||||
Cash
used in financing activities for discontinued operations
|
(6 | ) | (45 | ) | (44 | ) | ||||||
Cash
provided by (used in) financing activities
|
181
|
(14 | ) |
181
|
||||||||
Effect
of exchange rate changes on cash
|
(11 | ) |
17
|
(60 | ) | |||||||
Net
(decrease) in cash and cash equivalents
|
(1,952 | ) | (9,364 | ) | (663 | ) | ||||||
Cash
and cash equivalents at beginning of period
|
18,468
|
27,832
|
28,495
|
|||||||||
Cash
and cash equivalents at end of period
|
$ |
16,516
|
$ |
18,468
|
$ |
27,832
|
|
CONSOLIDATED
SUPPLEMENTAL CASH FLOW
INFORMATION
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$ |
13
|
$ |
13
|
$ |
23
|
||||||
Income
taxes paid, net
|
$ |
128
|
$ |
248
|
$ |
34
|
||||||
SUPPLEMENTAL
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
|
||||||||||||
Interest
accrued on shareholder notes
|
$ |
126
|
$ |
277
|
$ |
206
|
||||||
Equipment
acquired under capital lease obligations and other financing
arrangements
|
$ |
26
|
$ |
78
|
$ |
40
|
||||||
Class
B common stock issued in business combination and
acquisition
|
$ |
—
|
$ |
—
|
$ |
79
|
|
NOTE
1—ORGANIZATIONAL OVERVIEW
|
·
|
Electronic
Payment Processing, or EPP—provides electronic payment processing
options, including payment of taxes, fees and other obligations
owed to
government entities, educational institutions, utilities and other
public
sector clients. EPP services are provided by our two wholly
owned subsidiaries: Official Payments Corporation, or OPC, and
EPOS Corporation, or EPOS;
|
·
|
Wind-down
operations—represents portions of our GBPO and PSSI operations
that we expect to wind-down over a five-year period because they
are
neither compatible with our long-term strategic direction nor
complementary with the other businesses that we are
divesting. These operations
include:
|
o
|
Voice
and Systems Automation (formerly part of GBPO)—provides call
center interactive voice response systems and support services,
including
customization, installation and
maintenance;
|
o
|
Health
and Human Services (formerly part of GBPO)—provides certain
consulting services to state agencies;
and
|
o
|
Public
Pension Administration Systems (formerly part of PSSI)—provides
services to support the design, development and implementation
of pension
applications for state, county and city
governments.
|
·
|
Corporate
Operations—represents those functions that support our corporate
governance, as well as certain shared-services, including information
technology and business
development.
|
Our
Discontinued Operations, or held-for sale
businesses, represent those portions of GBPO and PSSI for which
we are
seeking buyers, including the
following:
|
·
|
GBPO
Discontinued Operations—include our child support payment
processing, child support financial institution data match services,
and
computer telephony and call centers operations;
and
|
·
|
PSSI
Discontinued Operations—include our financial management systems,
unemployment insurance administration systems, systems integration
and
independent validation and verification lines of
business.
|
|
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
NOTE
3—(LOSS) EARNINGS PER
SHARE
|
Year
ended September 30,
|
||||||||||||
(in
thousands, except per share data)
|
2007
|
2006
|
2005
|
|||||||||
Numerator:
(Loss)
income from:
|
||||||||||||
Continuing
operations, net of income taxes
|
$ | (18,259 | ) | $ | (18,921 | ) | $ | (19,494 | ) | |||
Discontinued
operations, net of income taxes
|
15,225
|
9,470
|
20,620
|
|||||||||
Net
(loss) income
|
$ | (3,034 | ) | $ | (9,451 | ) | $ |
1,126
|
||||
Denominator:
|
||||||||||||
Weighted-average
common shares outstanding
|
19,512
|
19,495
|
19,470
|
|||||||||
Effects
of dilutive common stock options
|
—
|
—
|
—
|
|||||||||
Adjusted
weighted-average shares
|
19,512
|
19,495
|
19,470
|
|||||||||
(Loss)
earnings per basic and diluted share
|
||||||||||||
From
continuing operations
|
$ | (0.94 | ) | $ | (0.97 | ) | $ | (1.00 | ) | |||
From
discontinued operations
|
$ |
0.78
|
$ |
0.49
|
$ |
1.06
|
||||||
(Loss)
earnings per basic and diluted share
|
$ | (0.16 | ) | $ | (0.48 | ) | $ |
0.06
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Weighted-average
options excluded from computation of diluted (loss) earnings per
share
|
1,523
|
2,022
|
1,893
|
|
NOTE
4—CUSTOMER CONCENTRATION AND
RISK
|
|
NOTE
5—INVESTMENTS
|
September
30, 2007
|
September
30, 2006
|
|||||||||||||||||||||||
(in
thousands)
|
Amortized
cost
|
Unrealized
loss
|
Estimated
fair
value
|
Amortized
cost
|
Unrealized
loss
|
Estimated
fair
value
|
||||||||||||||||||
Cash
equivalents:
|
||||||||||||||||||||||||
Money
market
|
$ |
3,537
|
$ |
—
|
$ |
3,537
|
$ |
9,053
|
$ |
—
|
$ |
9,053
|
||||||||||||
Total
investments included in cash and cash equivalents
|
3,537
|
—
|
3,537
|
9,053
|
—
|
9,053
|
||||||||||||||||||
Investments
in marketable securities:
|
||||||||||||||||||||||||
Debt
securities (Primarily state and local bonds/notes)
|
54,400
|
—
|
54,400
|
36,950
|
—
|
36,950
|
||||||||||||||||||
Certificates
of deposit
|
3,415
|
—
|
3,415
|
—
|
—
|
—
|
||||||||||||||||||
Total
investments in marketable securities
|
57,815
|
—
|
57,815
|
36,950
|
—
|
36,950
|
||||||||||||||||||
Restricted
investments:
|
||||||||||||||||||||||||
Certificates
of deposit
|
5,526
|
—
|
5,526
|
8,941
|
—
|
8,941
|
||||||||||||||||||
Money
market
|
6,000
|
—
|
6,000
|
—
|
—
|
—
|
||||||||||||||||||
U.S.
government sponsored enterprise obligations
|
—
|
—
|
—
|
3,348
|
(2 | ) |
3,346
|
|||||||||||||||||
Total
restricted investments
|
11,526
|
—
|
11,526
|
12,289
|
(2 | ) |
12,287
|
|||||||||||||||||
Total
investments
|
$ |
72,878
|
$ |
—
|
$ |
72,878
|
$ |
58,292
|
$ | (2 | ) | $ |
58,290
|
|
NOTE
6—PROPERTY, EQUIPMENT AND
SOFTWARE
|
September
30,
|
||||||||
(in
thousands)
|
2007
|
2006
|
||||||
Software
|
$ |
749
|
$ |
525
|
||||
Computer
equipment
|
5,056
|
4,996
|
||||||
Furniture
and equipment
|
3,328
|
2,788
|
||||||
Land
and building
|
2,452
|
2,452
|
||||||
Leasehold
improvements
|
508
|
503
|
||||||
Total
property, equipment and software, gross
|
12,093
|
11,264
|
||||||
Less:
Accumulated depreciation and amortization
|
(8,348 | ) | (7,310 | ) | ||||
Total
property, equipment and software, net
|
$ |
3,745
|
$ |
3,954
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Depreciation
and amortization expenses for property, equipment and
software:
|
||||||||||||
Included
in
Direct costs:
|
||||||||||||
Software
|
$ |
12
|
$ |
3
|
$ |
3
|
||||||
Equipment
|
78
|
184
|
130
|
|||||||||
Total
included
in Direct costs
|
90
|
187
|
133
|
|||||||||
Included
in
Depreciation and amortization:
|
||||||||||||
Software
|
171
|
95
|
122
|
|||||||||
Equipment
|
828
|
705
|
899
|
|||||||||
Total
included
in Depreciation and amortization
|
999
|
800
|
1,021
|
|||||||||
Total
depreciation and amortization expense for property, equipment
and
software
|
$ |
1,089
|
$ |
987
|
$ |
1,154
|
|
NOTE
7—GOODWILL AND OTHER INTANGIBLE
ASSETS
|
Continuing
Operations
|
Discontinued
Operations
|
|||||||||||||||||||||||||||
(in
thousands)
|
EPP
|
Wind-down
|
Total
|
GBPO
|
PSSI
|
Total
|
Total
|
|||||||||||||||||||||
Balance
at September 30, 2005
|
$ |
14,526
|
$ |
8,454
|
$ |
22,980
|
$ |
5,680
|
$ |
8,907
|
$ |
14,587
|
$ |
37,567
|
||||||||||||||
Balance
at September 30, 2006
|
14,526
|
8,454
|
22,980
|
5,680
|
8,907
|
14,587
|
37,567
|
|||||||||||||||||||||
Fiscal
year 2007 goodwill
impairment
|
—
|
(8,454 | ) | (8,454 | ) | (2,461 | ) |
—
|
(2,461 | ) | (10,915 | ) | ||||||||||||||||
Balance
at September 30, 2007
|
$ |
14,526
|
$ |
—
|
$ |
14,526
|
$ |
3,219
|
$ |
8,907
|
$ |
12,126
|
$ |
26,652
|
September
30, 2007
|
September
30, 2006
|
||||||||||||||||||||||||
(in
thousands)
|
Amortization
period
|
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||||||||
Client
relationships
|
7-10
years
|
$ |
28,749
|
$ | (13,840 | ) | $ |
14,909
|
$ |
28,749
|
$ | (11,176 | ) | $ |
17,573
|
||||||||||
Impairment
write-down
|
(341 | ) |
—
|
(341 | ) |
—
|
—
|
—
|
|||||||||||||||||
28,408
|
(13,840 | ) |
14,568
|
28,749
|
(11,176 | ) |
17,573
|
||||||||||||||||||
Technology
and research and development
|
5
years
|
4,289
|
(2,444 | ) |
1,845
|
4,289
|
(1,986 | ) |
2,303
|
||||||||||||||||
Impairment
write-down
|
(323 | ) |
—
|
(323 | ) |
—
|
—
|
—
|
|||||||||||||||||
3,966
|
(2,444 | ) |
1,522
|
4,289
|
(1,986 | ) |
2,303
|
||||||||||||||||||
Trademarks
|
6
-10 years
|
3,214
|
(1,664 | ) |
1,550
|
3,214
|
(1,342 | ) |
1,872
|
||||||||||||||||
Non-compete
agreements
|
3
years
|
560
|
(529 | ) |
31
|
615
|
(484 | ) |
131
|
||||||||||||||||
Impairment
write-down
|
(31 | ) |
—
|
(31 | ) |
—
|
—
|
—
|
|||||||||||||||||
529
|
(529 | ) |
—
|
615
|
(484 | ) |
131
|
||||||||||||||||||
Other
intangible assets, net
|
$ |
36,117
|
$ | (18,477 | ) | $ |
17,640
|
$ |
36,867
|
$ | (14,988 | ) | $ |
21,879
|
(in
thousands)
|
Future
expense
|
|||
Years
ending September 30,
|
||||
2008
|
$ |
4,056
|
||
2009
|
3,820
|
|||
2010
|
3,190
|
|||
2011
|
3,184
|
|||
2012
|
2,721
|
|||
Thereafter
|
669
|
|||
Total
future amortization expense
|
$ |
17,640
|
|
NOTE
8—CONTINGENCIES AND
COMMITMENTS
|
(in
thousands)
|
Operating
leases
|
Capital
leases(1)
|
Total
|
|||||||||
Year
ending September 30,
|
||||||||||||
2008
|
$ |
3,397
|
$ |
47
|
$ |
3,444
|
||||||
2009
|
2,109
|
38
|
2,147
|
|||||||||
2010
|
941
|
20
|
961
|
|||||||||
2011
|
—
|
3
|
3
|
|||||||||
Total
minimum lease payments
|
$ |
6,447
|
$ |
108
|
$ |
6,555
|
||||||
(1)On
our
Consolidated Balance Sheets, the amount due in fiscal year 2008
is
included in Total current liabilities, while the liability for
capital
lease payments due in fiscal years 2009 through 2011 is included
in Other
liabilities.
|
|
NOTE
9—SHAREHOLDERS’ EQUITY
|
|
NOTE
10—SHARE-BASED PAYMENT
|
(in
thousands, except per share data)
|
Fiscal
year ended
September
30, 2005
|
|||
Net
income
|
$ |
1,126
|
||
Less:
Total
stock-based compensation expense, determined under fair value-based
method
for all awards, net of tax effect
|
2,527
|
|||
Net
loss, pro
forma
|
$ | (1,401 | ) | |
Earnings
(loss) per basic and diluted share:
|
||||
As
reported
|
$ |
0.06
|
||
Pro
forma
|
$ | (0.07 | ) |
September
30,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Weighted-average
assumptions used in Black-Scholes Model:
|
||||||||||||
Expected
period that options will be outstanding (in
years)
|
5.00
|
5.00
|
4.55
|
|||||||||
Interest
rate
(based on 3-year U.S. Treasury Yields at time of
grant)
|
4.66 | % | 4.87 | % | 3.76 | % | ||||||
Volatility
|
47.54 | % | 48.21 | % | 54.63 | % | ||||||
Dividend
yield
|
—
|
—
|
—
|
|||||||||
Weighted-average
fair value of options granted
|
$ |
3.53
|
$ |
2.95
|
$ |
4.11
|
||||||
Weighted-average
intrinsic value of options exercised (in
thousands)
|
$ |
122
|
$ |
7
|
$ |
33
|
Weighted-average
|
|||||||||||||
(in
thousands, except per share data)
|
Shares
under
option
|
Exercise
price
|
Remaining
contractual
term
|
Aggregate
intrinsic value
|
|||||||||
Options
outstanding at October 1, 2006
|
2,239
|
$ |
8.45
|
||||||||||
Granted
|
241
|
7.48
|
|||||||||||
Exercised
|
(42 | ) |
5.15
|
||||||||||
Forfeitures
or expirations
|
(325 | ) |
7.54
|
||||||||||
Options
outstanding at September 30, 2007
|
2,113
|
$ |
8.54
|
7.18
years
|
$ |
5,703
|
|||||||
Options
exercisable at September 30, 2007
|
1,396
|
$ |
9.18
|
6.59
years
|
$ |
3,399
|
|
NOTE
11—RELATED PARTY
TRANSACTIONS
|
|
NOTE
12—SEGMENT INFORMATION
|
Continuing
Operations
|
||||||||||||||||
(in
thousands)
|
EPP
|
Wind-
down
|
Corporate
&
Eliminations
|
Total
|
||||||||||||
Fiscal
Year Ended September 30, 2007:
|
||||||||||||||||
Revenues
|
$ |
99,433
|
$ |
12,100
|
$ | (385 | ) | $ |
111,148
|
|||||||
Costs
and expenses:
|
||||||||||||||||
Direct
costs
|
75,294
|
8,597
|
—
|
83,891
|
||||||||||||
General
and administrative
|
7,847
|
3,663
|
15,976
|
27,486
|
||||||||||||
Selling
and marketing
|
7,151
|
1,092
|
—
|
8,243
|
||||||||||||
Depreciation
and amortization
|
3,205
|
764
|
604
|
4,573
|
||||||||||||
Write-down
of goodwill and intangible assets
|
—
|
9,232
|
—
|
9,232
|
||||||||||||
Total
costs and expenses
|
93,497
|
23,348
|
16,580
|
133,425
|
||||||||||||
(Loss)
income from continuing operations before
other
income and income taxes
|
5,936
|
(11,248 | ) | (16,965 | ) | (22,277 | ) | |||||||||
Other
income:
|
||||||||||||||||
Interest
income
|
2,507
|
—
|
793
|
3,300
|
||||||||||||
Income
from equity investments
|
—
|
—
|
794
|
794
|
||||||||||||
Total
other income
|
2,507
|
—
|
1,587
|
4,094
|
||||||||||||
(Loss)
income from continuing operations before taxes
|
8,443
|
(11,248 | ) | (15,378 | ) | (18,183 | ) | |||||||||
Income
tax provision
|
76
|
—
|
—
|
76
|
||||||||||||
(Loss)
income from continuing operations
|
$ |
8,367
|
$ | (11,248 | ) | $ | (15,378 | ) | $ | (18,259 | ) | |||||
Fiscal
Year Ended September 30, 2006:
|
||||||||||||||||
Revenues
|
$ |
78,578
|
$ |
18,065
|
$ | (151 | ) | $ |
96,492
|
|||||||
Costs
and expenses:
|
||||||||||||||||
Direct
costs
|
59,966
|
11,704
|
—
|
71,670
|
||||||||||||
General
and administrative
|
6,009
|
3,535
|
23,316
|
32,860
|
||||||||||||
Selling
and marketing
|
5,963
|
1,046
|
2,153
|
9,162
|
||||||||||||
Depreciation
and amortization
|
3,170
|
1,590
|
373
|
5,133
|
||||||||||||
Total
costs and expenses
|
75,108
|
17,875
|
25,842
|
118,825
|
||||||||||||
(Loss)
income from continuing operations before
other
income and income taxes
|
3,470
|
190
|
(25,993 | ) | (22,333 | ) | ||||||||||
Other
income:
|
||||||||||||||||
Interest
income
|
2,136
|
—
|
802
|
2,938
|
||||||||||||
Income
from equity investments
|
—
|
—
|
519
|
519
|
||||||||||||
Other
income
|
2,136
|
—
|
1,321
|
3,457
|
||||||||||||
(Loss)
income from continuing operations before taxes
|
5,606
|
190
|
(24,672 | ) | (18,876 | ) | ||||||||||
Income
tax provision
|
45
|
—
|
—
|
45
|
||||||||||||
(Loss)
income from continuing operations
|
$ |
5,561
|
$ |
190
|
$ | (24,672 | ) | $ | (18,921 | ) |
Continuing
Operations
|
||||||||||||||||
(in thousands) |
EPP
|
Wind-
down
|
Corporate
&
Eliminations
|
Total
|
||||||||||||
Fiscal
Year Ended September 30, 2005:
|
|
|
||||||||||||||
Revenues
|
$ |
56,452
|
$ |
27,316
|
$ | (5,073 | ) | $ |
78,695
|
|||||||
Costs
and expenses:
|
||||||||||||||||
Direct
costs
|
42,199
|
17,752
|
—
|
59,951
|
||||||||||||
General
and administrative
|
4,591
|
4,194
|
15,391
|
24,176
|
||||||||||||
Selling
and marketing
|
4,921
|
1,690
|
2,225
|
8,836
|
||||||||||||
Depreciation
and amortization
|
3,428
|
1,987
|
558
|
5,973
|
||||||||||||
Total
costs and expenses
|
55,139
|
25,623
|
18,174
|
98,936
|
||||||||||||
(Loss)
income from continuing operations before
other income and income taxes
|
1,313
|
1,693
|
(23,247 | ) | (20,241 | ) | ||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
886
|
—
|
657
|
1,543
|
||||||||||||
Loss
from equity investments
|
—
|
—
|
(669 | ) | (669 | ) | ||||||||||
Total
other income (expense)
|
886
|
—
|
(12 | ) |
874
|
|||||||||||
(Loss)
income from continuing operations before taxes
|
2,199
|
1,693
|
(23,259 | ) | (19,367 | ) | ||||||||||
Income
tax provision
|
78
|
49
|
—
|
127
|
||||||||||||
(Loss)
income from continuing operations
|
$ |
2,121
|
$ |
1,644
|
$ | (23,259 | ) | $ | (19,494 | ) |
As
of September 30,
|
||||||||
(in
thousands)
|
2007
|
2006
|
||||||
Continuing
Operations:
|
||||||||
EPP
|
$ |
96,527
|
$ |
85,296
|
||||
Wind-down
|
8,676
|
24,102
|
||||||
Corporate
(1)
|
24,516
|
23,850
|
||||||
Assets
for
continuing operations
|
129,719
|
133,248
|
||||||
Assets-held-for-sale
|
36,705
|
36,612
|
||||||
Total
assets
|
$ |
166,424
|
$ |
169,860
|
||||
(1) Represents
assets for our continuing businesses that are not assignable
to a specific
operation.
|
|
NOTE
13—INCOME TAXES
|
September 30,
|
||||||||
(in
thousands)
|
2007
|
2006
|
||||||
Deferred
tax liabilities:
|
||||||||
Internally
developed software
|
$ |
2,088
|
$ |
1,650
|
||||
Intangibles
|
1,688
|
2,992
|
||||||
Other
deferred tax liabilities
|
581
|
569
|
||||||
Investment
in subsidiary
|
106
|
105
|
||||||
Total
deferred tax liabilities
|
4,463
|
5,316
|
||||||
Deferred
tax assets:
|
||||||||
Accrued
expenses
|
2,842
|
3,309
|
||||||
Deferred
income
|
—
|
6
|
||||||
Depreciation
|
416
|
526
|
||||||
Accounts
receivable allowance
|
719
|
313
|
||||||
Other
deferred tax assets
|
847
|
924
|
||||||
Net
operating loss carryforward
|
27,948
|
27,669
|
||||||
Foreign
tax credit carryforward
|
566
|
566
|
||||||
Valuation
allowance
|
(28,875 | ) | (27,997 | ) | ||||
Total
deferred tax assets
|
4,463
|
5,316
|
||||||
Net
deferred tax assets (liabilities)
|
$ |
—
|
$ |
—
|
Continuing
Operations
|
Discontinued
Operations
|
|||||||||||||||||||||||
Year
ended September 30,
|
Year
ended September 30,
|
|||||||||||||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
2007
|
2006
|
2005
|
||||||||||||||||||
Current
income tax provision:
|
||||||||||||||||||||||||
Federal
|
$ |
—
|
$ |
—
|
$ |
37
|
$ | (7,599 | ) | $ |
456
|
$ |
—
|
|||||||||||
State
|
76
|
45
|
90
|
—
|
—
|
—
|
||||||||||||||||||
Total
provision for income taxes
|
$ |
76
|
$ |
45
|
$ |
127
|
$ | (7,599 | ) | $ |
456
|
$ |
—
|
Year
ended September 30,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
U.S
statutory federal tax rate
|
34.0 | % | 34.0 | % | 34.0 | % | ||||||
State
taxes, net of federal tax benefit
|
3.9 | % | 3.5 | % | 12.6 | % | ||||||
Tax
exempt interest income
|
0.2 | % | 0.3 | % | (4.6 | )% | ||||||
Tax
effect of foreign operations
|
—
|
—
|
11.8 | % | ||||||||
Meals
and entertainment
|
(0.9 | )% | (1.5 | )% | 7.5 | % | ||||||
Goodwill
and intangible asset impairment
|
(27.7 | )% |
—
|
—
|
||||||||
Valuation
allowance
|
(7.0 | )% | (32.1 | )% | (59.3 | )% | ||||||
Stock-based
compensation
|
(3.2 | )% | (4.2 | )% |
—
|
|||||||
Other
|
—
|
(5.6 | )% | 8.1 | % | |||||||
Effective
tax
rate
|
(0.7 | )% | (5.6 | )% | 10.1 | % |
|
NOTE
14—RESTRUCTURING
|
Year
ended September 30,
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Office
closure
costs (net of sublease income)
|
$ |
—
|
$ |
32
|
$ |
15
|
||||||
Severance
costs
|
—
|
3
|
31
|
|||||||||
Total
restructuring charges
|
$ |
—
|
$ |
35
|
$ |
46
|
(in
thousands)
|
Severance
|
Facilities
closures
|
Total
|
|||||||||
Balance
at September 30, 2005
|
$ |
330
|
$ |
610
|
$ |
940
|
||||||
Additions
|
—
|
—
|
—
|
|||||||||
Cash
payments
|
(330 | ) | (209 | ) | (539 | ) | ||||||
Balance
at September 30, 2006
|
$ |
—
|
$ |
401
|
$ |
401
|
||||||
Additions
|
—
|
—
|
—
|
|||||||||
Cash
payments
|
—
|
(221 | ) | (221 | ) | |||||||
Balance
at September 30, 2007
|
$ |
—
|
$ |
180
|
$ |
180
|
|
NOTE
15—DISCONTINUED OPERATIONS
|
September
30, 2007
|
September
30, 2006
|
|||||||||||||||||||||||||||||||
(in
thousands)
|
GBPO
|
PSSI
|
Eliminations
|
Total
|
GBPO
|
PSSI
|
Eliminations
|
Total
|
||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||
Current
assets
|
$ |
4,009
|
$ |
6,961
|
$ |
39
|
$ |
11,009
|
$ |
6,290
|
$ |
5,104
|
$ |
151
|
$ |
11,545
|
||||||||||||||||
Property,
equipment and software, net
|
5,606
|
6,657
|
(476 | ) |
11,787
|
6,409
|
3,821
|
(718 | ) |
9,512
|
||||||||||||||||||||||
Goodwill
|
3,219
|
8,907
|
—
|
12,126
|
5,680
|
8,907
|
—
|
14,587
|
||||||||||||||||||||||||
Other
assets
|
5
|
1,778
|
—
|
1,783
|
9
|
959
|
—
|
968
|
||||||||||||||||||||||||
Total
assets
|
$ |
12,839
|
$ |
24,303
|
$ | (437 | ) | $ |
36,705
|
$ |
18,388
|
$ |
18,791
|
$ | (567 | ) | $ |
36,612
|
||||||||||||||
Liabilities:
|
||||||||||||||||||||||||||||||||
Current
liabilities
|
$ |
3,037
|
$ |
7,923
|
$ |
—
|
$ |
10,960
|
$ |
2,384
|
$ |
6,233
|
$ |
—
|
$ |
8,617
|
||||||||||||||||
Other
liabilities
|
284
|
18
|
—
|
302
|
487
|
76
|
—
|
563
|
||||||||||||||||||||||||
Total
liabilities
|
$ |
3,321
|
$ |
7,941
|
$ |
—
|
$ |
11,262
|
$ |
2,871
|
$ |
6,309
|
$ |
—
|
$ |
9,180
|
||||||||||||||||
Net
assets and liabilities of disposal group
|
$ |
9,518
|
$ |
16,362
|
$ | (437 | ) | $ |
25,443
|
$ |
15,517
|
$ |
12,482
|
$ | (567 | ) | $ |
27,432
|
Year
ended September 30, 2007
|
||||||||||||
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||||
Revenues
(Discontinued operations):
|
||||||||||||
GBPO
|
$ |
34,835
|
$ |
39,902
|
$ |
40,250
|
||||||
PSSI
|
31,372
|
32,337
|
31,645
|
|||||||||
Other/eliminations
|
—
|
—
|
10
|
|||||||||
Total
Revenues
|
$ |
66,207
|
$ |
72,239
|
$ |
71,905
|
||||||
Income
before taxes (Discontinued operations):
|
||||||||||||
GBPO
|
$ |
6,500
|
$ |
5,739
|
$ |
10,952
|
||||||
PSSI
|
263
|
3,541
|
5,726
|
|||||||||
Other/eliminations
|
863
|
646
|
3,942
|
|||||||||
Total
income before taxes
|
$ |
7,626
|
$ |
9,926
|
$ |
20,620
|
|
NOTE
16—SUBSEQUENT EVENTS
|
|
SELECTED
QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
2007
fiscal quarters
|
2006
fiscal quarters
|
|||||||||||||||||||||||||||||||
(In
thousands, except per share data)
|
Fourth
|
Third
|
Second
|
First
|
Fourth
|
Third
|
Second
|
First
|
||||||||||||||||||||||||
Consolidated
statement of operations data:
|
||||||||||||||||||||||||||||||||
Revenues
|
$ |
20,871
|
$ |
40,358
|
$ |
23,783
|
$ |
26,136
|
$ |
18,630
|
$ |
37,760
|
$ |
19,102
|
$ |
21,000
|
||||||||||||||||
Costs
and expenses:
|
||||||||||||||||||||||||||||||||
Direct
costs
|
15,270
|
31,795
|
17,727
|
19,099
|
13,593
|
29,466
|
14,368
|
14,243
|
||||||||||||||||||||||||
General
and administrative
|
5,759
|
6,821
|
9,165
|
5,741
|
9,026
|
10,600
|
7,585
|
5,649
|
||||||||||||||||||||||||
Selling
and marketing
|
1,756
|
2,821
|
2,075
|
1,591
|
1,971
|
2,929
|
2,193
|
2,069
|
||||||||||||||||||||||||
Depreciation
and amortization
|
895
|
971
|
1,355
|
1,352
|
1,204
|
1,298
|
1,318
|
1,313
|
||||||||||||||||||||||||
Impairment
of goodwill & held-for-sale assets
|
647
|
8,585
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Loss
from continuing operations
|
(3,456 | ) | (10,635 | ) | (6,539 | ) | (1,647 | ) | (7,164 | ) | (6,533 | ) | (6,362 | ) | (2,274 | ) | ||||||||||||||||
Total
other income
|
996
|
628
|
784
|
1,686
|
771
|
893
|
1,146
|
647
|
||||||||||||||||||||||||
(Loss)
income from continuing operations before income taxes
|
(2,460 | ) | (10,007 | ) | (5,755 | ) |
39
|
(6,393 | ) | (5,640 | ) | (5,216 | ) | (1,627 | ) | |||||||||||||||||
Income
tax provision (benefit)
|
16
|
(7 | ) |
7
|
60
|
45
|
—
|
—
|
—
|
|||||||||||||||||||||||
Loss
from continuing operations
|
(2,476 | ) | (10,000 | ) | (5,762 | ) | (21 | ) | (6,438 | ) | (5,640 | ) | (5,216 | ) | (1,627 | ) | ||||||||||||||||
(Loss)
income from discontinued operations, net
|
(791 | ) |
4,281
|
9,500
|
2,235
|
1,766
|
4,053
|
215
|
3,436
|
|||||||||||||||||||||||
Net
(loss) income
|
$ | (3,267 | ) | $ | (5,719 | ) | $ |
3,738
|
$ |
2,214
|
$ | (4,672 | ) | $ | (1,587 | ) | $ | (5,001 | ) | $ |
1,809
|
|||||||||||
Average
shares issued and outstanding:
|
||||||||||||||||||||||||||||||||
Basic
|
19,512
|
19,511
|
19,501
|
19,499
|
19,495
|
19,499
|
19,493
|
19,490
|
||||||||||||||||||||||||
Diluted
|
19,512
|
19,511
|
19,617
|
19,591
|
19,495
|
19,499
|
19,493
|
19,627
|
||||||||||||||||||||||||
Performance
ratios:
|
||||||||||||||||||||||||||||||||
Return
on average assets
|
(1.94 | )% | (3.34 | )% | 2.16 | % | 1.29 | % | (2.72 | )% | (0.91 | )% | (2.82 | )% | 1.01 | % | ||||||||||||||||
Return
on average shareholders' equity
|
(2.35 | )% | (4.00 | )% | 2.65 | % | 1.63 | % | (3.43 | )% | (1.14 | )% | (3.53 | )% | 1.27 | % | ||||||||||||||||
Total
ending equity to total ending assets
|
82.63 | % | 82.59 | % | 84.35 | % | 79.06 | % | 79.01 | % | 79.45 | % | 79.64 | % | 79.71 | % | ||||||||||||||||
Total
average equity to total average
assets
|
82.61 | % | 83.47 | % | 81.70 | % | 79.04 | % | 79.23 | % | 79.55 | % | 79.68 | % | 79.89 | % | ||||||||||||||||
Per
share of common stock data:
|
||||||||||||||||||||||||||||||||
(Loss)
earnings per share—Basic:
|
||||||||||||||||||||||||||||||||
Continuing
operations(1)
|
$ | (0.13 | ) | $ | (0.51 | ) | $ | (0.29 | ) | $ |
—
|
$ | (0.33 | ) | $ | (0.29 | ) | $ | (0.27 | ) | $ | (0.08 | ) | |||||||||
Discontinued
operations(1)
|
$ | (0.04 | ) | $ |
0.22
|
$ |
0.48
|
$ |
0.11
|
$ |
0.09
|
$ |
0.21
|
$ |
0.01
|
$ |
0.17
|
|||||||||||||||
(Loss)
earnings per share—Basic
|
$ | (0.17 | ) | $ | (0.29 | ) | $ |
0.19
|
$ |
0.11
|
$ | (0.24 | ) | $ | (0.08 | ) | $ | (0.26 | ) | $ |
0.09
|
|||||||||||
(Loss)
earnings per share—Diluted:
|
||||||||||||||||||||||||||||||||
Continuing
operations(1)
|
$ | (0.13 | ) | $ | (0.51 | ) | $ | (0.29 | ) | $ |
—
|
$ | (0.33 | ) | $ | (0.29 | ) | $ | (0.27 | ) | $ | (0.08 | ) | |||||||||
Discontinued
operations(1)
|
$ | (0.04 | ) | $ |
0.22
|
$ |
0.48
|
$ |
0.11
|
$ |
0.09
|
$ |
0.21
|
$ |
0.01
|
$ |
0.17
|
|||||||||||||||
(Loss)
earnings per share—Diluted
|
$ | (0.17 | ) | $ | (0.29 | ) | $ |
0.19
|
$ |
0.11
|
$ | (0.24 | ) | $ | (0.08 | ) | $ | (0.26 | ) | $ |
0.09
|
|||||||||||
Book
value
|
$ |
7.05
|
$ |
7.19
|
$ |
7.42
|
$ |
6.98
|
$ |
6.88
|
$ |
7.08
|
$ |
7.14
|
$ |
7.33
|
||||||||||||||||
Average
balance sheet data:
|
||||||||||||||||||||||||||||||||
Total
assets
|
$ |
165,158
|
$ |
171,249
|
$ |
172,808
|
$ |
171,435
|
$ |
171,815
|
$ |
174,269
|
$ |
177,573
|
$ |
178,560
|
||||||||||||||||
Total
liabilities
|
$ |
29,248
|
$ |
28,299
|
$ |
31,620
|
$ |
35,938
|
$ |
35,684
|
$ |
35,646
|
$ |
36,089
|
$ |
35,903
|
||||||||||||||||
Total
shareholders' equity
|
$ |
138,910
|
$ |
142,950
|
$ |
141,188
|
$ |
135,497
|
$ |
136,131
|
$ |
138,623
|
$ |
141,484
|
$ |
142,657
|
||||||||||||||||
Market
price per share of common stock:
|
||||||||||||||||||||||||||||||||
High
|
$ |
10.26
|
$ |
10.05
|
$ |
8.90
|
$ |
7.30
|
$ |
7.05
|
$ |
8.70
|
$ |
8.08
|
$ |
8.50
|
||||||||||||||||
Low
|
$ |
8.33
|
$ |
8.25
|
$ |
5.85
|
$ |
6.35
|
$ |
5.25
|
$ |
5.67
|
$ |
7.34
|
$ |
6.93
|
||||||||||||||||
(1)The
sum of
quarterly per share amounts may not equal annual per share amounts
as the
quarterly calculations are based on varying numbers of shares of
common
stock.
|
(in
thousands)
|
Balance
at beginning of period
|
Additions/
(reductions)
|
Write-offs
|
Balance
at
end
of period
|
||||||||||||
Year
ended September 30, 2007:
|
||||||||||||||||
Allowance
for receivables
|
$ |
935
|
$ |
444
|
$ | (183 | ) | $ |
1,196
|
|||||||
Deferred
tax asset valuation allowance
|
27,997
|
878
|
—
|
28,875
|
||||||||||||
Inventory
allowance
|
75
|
—
|
—
|
75
|
||||||||||||
Year
ended September 30, 2006:
|
||||||||||||||||
Allowance
for receivables
|
400
|
557
|
(22 | ) |
935
|
|||||||||||
Deferred
tax asset valuation allowance
|
25,754
|
2,243
|
—
|
27,997
|
||||||||||||
Inventory
allowance
|
75
|
—
|
—
|
75
|
||||||||||||
Year
ended September 30, 2005:
|
||||||||||||||||
Allowance
for receivables
|
493
|
(42 | ) | (51 | ) |
400
|
||||||||||
Deferred
tax asset valuation allowance
|
22,699
|
3,055
|
—
|
25,754
|
||||||||||||
Inventory
allowance
|
75
|
—
|
—
|
75
|
·
|
pertain
to
the maintenance of records that in reasonable detail accurately
and fairly
reflect the transactions and dispositions of the assets of the
company;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that receipts and expenditures of the
company
are being made only in accordance with authorizations of management
and
directors of the company; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
|
·
|
Financial
Statements – The financial statements are set forth under Item 8 of this
Annual Report on Form 10-K. See Financial Statements and
Supplementary Data on page 32.
|
·
|
Financial
Statement Schedules – Schedule II—Valuation and Qualifying
Accounts is set forth under Item 8 of this Annual Report on Form
10-K on page 63. All other schedules have been omitted because
they were either not required or not applicable or because the
information
is otherwise included.
|
·
|
Exhibits
|
Exhibit
number
|
Exhibit
description
|
3.1
|
Restated
Certificate of Incorporation (1)
|
3.2
|
Amended
and Restated Bylaws of Tier Technologies, Inc., as amended (2)
|
3.3
|
Certificate
of Designations of Series A Junior Participating Preferred Stock
(3)
|
4.1
|
Form
of common stock certificate (1)
|
4.2
|
See
Exhibits 3.1, 3.2 and 3.3, for provisions of the Restated Certificate
of
Incorporation and Amended and Restated Bylaws, as amended of the
Registrant defining rights of the holders of common stock of the
Registrant
|
4.3
|
Rights
Agreement, dated as of January 10, 2006, by and between Tier Technologies,
Inc. and American Stock Transfer & Trust Company, as Rights Agent
(3)
|
4.4
|
Form
of Rights Certificate (3)
|
4.5
|
First
Amendment to Rights Agreement, dated July 12, 2007, by and between
Tier
Technologies, Inc. and American Stock Transfer & Trust Company, as
Rights Agent (4)
|
10.1
|
Amended
and Restated 1996 Equity Incentive Plan, dated January 28, 1999 (5)*
|
10.2
|
Form
of Incentive Stock Option Agreement under the Registrant’s Amended and
Restated 1996 Equity Incentive Plan (6)*
|
10.3
|
Form
of Nonstatutory Stock Option Agreement under the Registrant’s Amended and
Restated 1996 Equity Incentive Plan (6)*
|
10.4
|
Amended
and Restated 2004 Stock Incentive Plan (7)*
|
10.5
|
Form
of Incentive Stock Option Agreement under the Registrant’s Amended and
Restated 2004 Stock Incentive Plan (7)*
|
10.6
|
Form
of Nonstatutory Stock Option Agreement under the Registrant’s Amended and
Restated 2004 Stock Incentive Plan (7)*
|
10.7
|
Form
of Restricted Stock Agreement under the Registrant’s Amended and Restated
2004 Stock Incentive Plan (7)*
|
10.8
|
Form
of California Indemnification Agreement (8)
|
10.9
|
Form
of Delaware Indemnification Agreement for officers *
|
10.10
|
Form
of Delaware Indemnification Agreement for directors *
|
10.11
|
Tier
Corporation 401(k) Plan, Summary Plan Description (8)*
|
10.12
|
Incentive
Compensation Plan, as amended (9)*
|
10.13
|
Management
Incentive Plan (10)*
|
10.14
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of January 2, 1997 (8)
|
10.15
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of May 31, 1997 (8)
|
Exhibit
number
|
Exhibit
description
|
10.16
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of July 15, 1997 (8)
|
10.17
|
Amended
and Restated Full Recourse Secured Promissory Note, dated as of
April 1,
1998, by and between the Registrant and James L. Bildner (11)
|
10.18
|
Amended
and Restated Full Recourse Secured Promissory Note, dated as of
April 1,
1998, by and between the Registrant and James L. Bildner(
11)
|
10.19
|
Amended
and Restated Pledge Agreement, dated as of June 30, 1999, by and
between
the Registrant and James L. Bildner (12)
|
10.20
|
Second
Amendment and Restated Pledge Agreement, dated as of June 30, 1999,
by and
between the Registrant and James L. Bildner (12)
|
10.21
|
Third
Amendment and Restated Pledge Agreement, dated as of June 30, 1999,
by and
between the Registrant and James L. Bildner (12)
|
10.22
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of March 27, 2000. (Assignment of the Note by
and between the Registrant and William G. Barton, previously filed
as
Exhibit 10.17 to Form S-1) (13)
|
10.23
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of March 27, 2000. (Assignment of the Note by
and between the Registrant and William G. Barton, previously filed
as
Exhibit 10.18 to Form S-1) (13)
|
10.24
|
Full
Recourse Promissory Note by and between the Registrant and James
L.
Bildner, dated as of March 27, 2000. (Assignment of the Note by
and between the Registrant and William G. Barton, previously filed
as
Exhibit 10.19 to Form S-1) (13)
|
10.25
|
Pledge
Agreement by and between the Registrant and James L. Bildner, dated
as of
March 27, 2000 (13)
|
10.26
|
Termination
Agreement dated October 14, 2003, by and between Tier and James
L. Bildner
(14)*
|
10.27
|
Pledge
Agreement between Tier and James L. Bildner, dated April 1, 2004
(15)
|
10.28
|
First
Amendment, dated June 14, 2004, to the Pledge Agreement between
Tier and
James L. Bildner, dated March 27, 2000 (15)
|
10.29
|
First
Amendment, dated June 14, 2004, to the Second Amended and Restated
Pledge
Agreement between Tier and James L. Bildner, dated June 30, 1999
(15)
|
10.30
|
First
Amendment, dated June 14, 2004, to the Third Amended and Restated
Pledge
Agreement between Tier and James L. Bildner, dated June 30, 1999
(15)
|
10.31
|
Cross-Collateralization
Agreement dated December 13, 2004, by and between the Registrant
and
James L. Bildner (16)
|
10.32
|
Severance
and Change in Control Benefits Agreement by and between the Registrant
and
James Weaver, dated September 1, 2001 (17)*
|
10.33
|
Executive
Employment Agreement, dated November 9, 2004, by and between Registrant
and James R. Weaver (6)*
|
10.34
|
Credit
and Security Agreement as of January 29, 2003, by and between the
Registrant, Official Payments Corporation and City National Bank
(18)
|
10.35
|
Amendment,
dated January 24, 2005, to the Credit and Security Agreement, dated
January 29, 2003, by and between the Registrant, Official Payments
Corporation and City National Bank (19)
|
10.36
|
Third
Amendment, dated June 28, 2005, to the Credit and Security Agreement,
dated January 29, 2003, by and between the Registrant, Official
Payments
Corporation and City National Bank (7)
|
10.37
|
Letter
Agreement, dated June 28, 2005, by and between Registrant and City
National Bank (7)
|
10.38
|
Employment
Agreement dated May 28, 2004, by and between EPOS Corporation and
Michael
A. Lawler (20)*
|
10.39
|
Supplemental
Indemnity Agreement by and between Registrant and Bruce R. Spector,
dated
September 2, 2004 (21)*
|
10.40
|
Summary
of Board Compensation (19)*
|
Exhibit
number
|
Exhibit
Description
|
10.41
|
Offer
Letter by and between Registrant and David Fountain, dated May
2, 2005
(21)*
|
10.42
|
Executive
Incentive Metrics for Chief Executive Officer and Chief Financial
Officer
for fiscal year ended September 30, 2005 (21)*
|
10.43
|
Senior
Vice President – Human Resources Compensation Summary (21)*
|
10.44
|
Separation
Agreement and Release between Registrant and Jeffrey McCandless,
dated
March 9, 2005 (22)*
|
10.45
|
Employment
Agreement dated July 2, 2003 by and between Tier and Mr. Jeffrey
A.
McCandless (23)*
|
10.46
|
Employment
Agreement dated July 1, 2004 between Tier and Ms. Deanne M. Tully
(39)*
|
10.47
|
Executive
Severance and Change in Control Benefits Agreement (39)*
|
10.48
|
Third
Amendment to Credit and Security Agreement with City National Bank,
dated
June 28, 2005 (24)
|
10.49
|
Shareholder
Rights Plan and Rights Agreement, dated January 10, 2006 (25)
|
10.50
|
Assumption
Agreement between Tier Technologies, Inc., Official Payments Corporation
and EPOS Corporation, dated January 6, 2006 (26)
|
10.51
|
Security
Agreement as of January 6, 2006 by and between the Registrant,
Official
Payments Corporation, EPOS Corporation and City National Bank (26)
|
10.52
|
Board
approval of two one-time bonuses to David E. Fountain, dated February
21,
2006 (27)*
|
10.53
|
Amended
and Restated Credit and Security Agreement between the Registrant,
Official Payments Corporation, EPOS Corporation and City National
Bank
(28)
|
10.54
|
Form
of Employment Security Agreements between Tier Technologies, Inc.,
and
each of Steven Beckerman, Todd Vucovich, and Michael Lawler, dated
March
28, 2006(29)*
|
10.55
|
Management
Incentive Plan for Steven Beckerman, Todd Vucovich, Steven Wade,
Michael
Lawler and Deanne Tully, dated March 28, 2006 (29)*
|
10.56
|
Separation
Agreement between Tier Technologies, Inc., and James R. Weaver,
dated May
31, 2006 (30)*
|
10.57
|
Employment
Agreement between Tier Technologies, Inc., and Ronald L. Rossetti,
dated
July 26, 2006 (31)*
|
10.58
|
Non-Statutory
Stock Option Agreement between Tier and Ronald L. Rossetti, dated
July 26,
2006 (31)*
|
10.59
|
Discretionary
Incentive Compensation Plan, dated August 22, 2006 (32)*
|
10.60
|
Option
Grants awarded to David E. Fountain, Steven M. Beckerman, Michael
Lawler,
Deanne Tully, Stephen Wade, Charles Berger, Samuel Cabot, Morgan
Guenther,
T. Michael Scott Bruce Spector, and fifteen other employees, dated
August
24, 2006 (33)*
|
10.61
|
Employment
Agreement between Tier Technologies, Inc. and David E. Fountain,
dated
December 11, 2006 (34)*
|
10.62
|
First
Amendment to Amended and Restated Credit and Security Agreement
dated
March 20, 2007 between the Registrant, Official Payments Corporation,
EPOS
Corporation and City National Bank (35)
|
10.63
|
Second
Amendment to Amended and Restated Credit and Security Agreement
dated
September 26, 2007 between the Registrant, Official Payments Corporation,
EPOS Corporation and City National Bank (36)
|
10.64
|
Share
Repurchase Agreement between CPAS Systems, Inc., Tier Ventures
Corporation
and Tier Technologies, Inc. dated June 29, 2007 (37)
|
10.65
|
Employment
Agreement between Tier Technologies, Inc., and Kevin Connell, dated
August
9, 2007 (38)*
|
10.66
|
Transition
Agreement between Tier Technologies, Inc., and Deanne M. Tully
dated
December 12, 2007 *
|
10.67
|
Separation
Agreement and Release between Tier Technologies, Inc., and Todd
F.
Vucovich, dated February 12, 2007 *
|
10.68
|
Amendment
to the Separation Agreement and Release between Tier Technologies,
Inc.,
and Todd F. Vucovich, dated November 15, 2007 *
|
21.1
|
Subsidiaries
of the Registrant
|
Exhibit
number
|
Exhibit
description
|
23.1
|
Consent
of McGladrey & Pullen, LLP, Independent Registered Public Accounting
Firm
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of 1934
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of 1934
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
*
Management
contract or compensatory plan required to be filed as an exhibit
to this
report
(1)
Filed
as an
exhibit to Form 8-K, filed on July 19, 2005, and incorporated herein
by
reference
(2)
Filed as an
exhibit to Form 10-Q, filed August 9, 2007, and incorporated herein
by
reference
(3)
Filed
as an
exhibit to Form 8-K, filed January 11, 2006, and incorporated herein
by
reference
(4)
Filed as an
exhibit to Form 8-K, filed July 12, 2007, and incorporated herein
by
reference
(5)
Filed
as an
exhibit to Form 10-Q, filed May 11, 2001, and incorporated herein by
reference
(6)
Filed
as an
exhibit to Form 8-K, filed November 12, 2004, and incorporated herein
by reference
(7)
Filed
as an
exhibit to Form 8-K, filed July 5, 2005 and incorporated herein by
reference
(8)
Filed
as an
exhibit to Form S-1 (No. 333-37661), filed on October 10, 1997,
and
incorporated herein by reference
(9)
Filed as an
exhibit to Form 8-K, filed on May 5, 2005, and incorporated herein
by
reference
(10)
Filed as an
exhibit to Form 8-K, filed on May 27, 2005, and incorporated herein
by reference
(11)
Filed as an
exhibit to Form S-1/A (No. 333-52065), filed on May 7, 1998, and
incorporated herein by reference
(12)
Filed as an
exhibit to Form 10-Q, filed August 16, 1999, and incorporated herein
by
reference
(13)
Filed as an
exhibit to Form 10-Q, filed May 15, 2000, and incorporated herein
by
reference
(14)
Filed as an
exhibit to Form 10-Q, filed February 13, 2004, and incorporated
herein by
reference
(15)
Filed as an
exhibit to Form 10-Q, filed August 15, 2004, and incorporated herein
by
reference
(16)
Filed as an
exhibit to Form 8-K, filed December 15, 2004, and incorporated
herein by
reference
(17)
Filed as an
exhibit to Form 10-K, filed November 29, 2001, and incorporated
herein by
reference
(18)
Filed as an
exhibit to Form 10-Q, filed May 12, 2003, and incorporated herein
by
reference
(19)
Filed as an
exhibit to Form 10-Q, filed February 9, 2005, and incorporated
herein by
reference
(20)
Filed as an
exhibit to Form 10-K filed December 28 2004, and incorporated herein
by
reference
(21).Filed
as an
exhibit to Form 10-Q, filed May 6, 2005, and incorporated herein
by
reference
(22)
Filed as an
exhibit to Form 8-K, filed March 14, 2005, and incorporated herein by
reference
(23)
Filed as an
exhibit to Form 10-Q, filed May 11, 2004, and incorporated herein
by
reference
(24)
Filed as an
exhibit to Form 8-K, filed July 5, 2005, and incorporated herein
by
reference
(25)
Filed as an
exhibit to Form 8-K, filed January 11, 2006, and incorporated herein
by
reference
(26)
Filed as an
exhibit to Form 8-K, filed January 11, 2006, and incorporated herein
by
reference
(27)
Filed as an
exhibit to Form 8-K, filed February 22, 2006, and incorporated
herein by
reference
(28)
Filed as an
exhibit to Form 8-K, filed March 9, 2006, and incorporated herein
by
reference
(29)
Filed as an
exhibit to Form 8-K, filed April 3, 2006, and incorporated herein
by
reference
(30)
Filed as an
exhibit to Form 8-K, filed June 1, 2006, and incorporated herein
by
reference
(31)
Filed as an
exhibit to Form 8-K, filed August 1, 2006, and incorporated herein
by
reference
(32)
Filed as an
exhibit to Form 8-K, filed August 25, 2006, and incorporated herein
by
reference
(33)
Filed as an
exhibit to Form 8-K, filed August 29, 2006, and incorporated herein
by
reference
(34)
Filed as an
exhibit to Form 10-K, filed December 13, 2006, and incorporated
herein by
reference
(35)
Filed as an
exhibit to Form 8-K, filed March 28, 2007, and incorporated herein
by
reference
(36)
Filed as an
exhibit to Form 8-K, filed September 27, 2007, and incorporated
herein by
reference
|
Exhibit
number
|
Exhibit
Description
|
(37)
Filed as an exhibit to Form 8-K, filed July 3, 2007, and incorporated
herein by reference.
(38)
Filed as an exhibit to Form 10-Q, filed August 9, 2007, and incorporated
herein by reference.
(39)
Filed as an exhibit to Form 10-K, filed October 27, 2006, and incorporated
by reference.
|
Tier
Technologies, Inc.
|
||
Dated:December
13, 2007
|
By:
|
/s/
RONALD L. ROSSETTI
|
Ronald
L. Rossetti
Chief
Executive
Officer
|
Signature
|
Title
|
Date
|
/s/
RONALD L. ROSSETTI
Ronald
L. Rossetti
|
Chief
Executive Officer and Chairman of the Board (principal executive
officer)
|
December 13
2007
|
/s/
DAVID E. FOUNTAIN
David
E. Fountain
|
Chief
Financial Officer (principal financial officer and principal accounting
officer)
|
December
13, 2007
|
/s/
CHARLES W. BERGER
Charles
W. Berger
|
Director
|
December
13, 2007
|
/s/
SAMUEL CABOT III
Samuel
Cabot III
|
Director
|
December
13, 2007
|
/s/
JOHN J. DELUCCA
John
J. Delucca
|
Director
|
December
13, 2007
|
/s/
MORGAN P. GUENTHER
Morgan
P. Guenther
|
Director
|
December
13, 2007
|
/s/
T. MICHAEL SCOTT
T.
Michael Scott
|
Director
|
December 13,
2007
|
/s/
BRUCE R. SPECTOR
Bruce
R. Spector
|
Director
|
December
13, 2007
|
/s/
JAMES R. STONE
James
R. Stone
|
Director
|
December
13, 2007
|