x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
94-3145844
|
(State
or other jurisdiction
of
incorporation or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1
|
|
1
|
|
1
|
|
2
|
|
3
|
|
4
|
|
6
|
|
6
|
|
7
|
|
7
|
|
8
|
|
10
|
|
10
|
|
12
|
|
13
|
|
13
|
|
15
|
|
15
|
|
16 | |
17 | |
17
|
|
19
|
|
28
|
|
28
|
|
29
|
|
29 | |
29
|
|
Item 5. Other Information | 34 |
36
|
|
37
|
(in
thousands)
|
June
30,
2007
|
September 30,
2006
|
||||||
(unaudited)
|
||||||||
ASSETS:
|
||||||||
Current
assets:
|
||||||||
Cash
and cash
equivalents
|
$ |
29,235
|
$ |
18,486
|
||||
Investments
in
marketable securities
|
39,500
|
36,950
|
||||||
Accounts
receivable, net
|
2,525
|
3,857
|
||||||
Unbilled
receivables
|
560
|
1,916
|
||||||
Prepaid
expenses and other current assets
|
1,641
|
1,623
|
||||||
Current
assets—held-for-sale
|
29,668
|
29,775
|
||||||
Total
current
assets
|
103,129
|
92,607
|
||||||
Property,
equipment and software, net
|
3,734
|
3,781
|
||||||
Goodwill
|
29,531
|
37,567
|
||||||
Other
intangible assets, net
|
14,262
|
16,395
|
||||||
Restricted
investments
|
18,361
|
12,287
|
||||||
Investment
in
unconsolidated affiliate
|
—
|
3,978
|
||||||
Other
assets
|
874
|
2,934
|
||||||
Total
assets
|
$ |
169,891
|
$ |
169,549
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY:
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
634
|
$ |
626
|
||||
Income
taxes
payable
|
—
|
7,326
|
||||||
Accrued
compensation liabilities
|
4,313
|
3,389
|
||||||
Accrued
subcontractor expenses
|
364
|
457
|
||||||
Accrued
discount fees
|
4,738
|
3,631
|
||||||
Other
accrued
liabilities and deferred income
|
5,051
|
6,523
|
||||||
Current
liabilities—held-for-sale
|
14,272
|
12,054
|
||||||
Total
current
liabilities
|
29,372
|
34,006
|
||||||
Other
liabilities
|
213
|
1,333
|
||||||
Total
liabilities
|
29,585
|
35,339
|
||||||
Contingencies
and commitments (Note 9)
|
||||||||
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:
20,402 and 20,383; shares outstanding: 19,518 and 19,499
|
186,053
|
184,387
|
||||||
Treasury
stock—at cost, 884 shares
|
(8,684 | ) | (8,684 | ) | ||||
Notes
receivable from related parties
|
(106 | ) | (4,275 | ) | ||||
Accumulated
other comprehensive loss
|
(5 | ) | (33 | ) | ||||
Accumulated
deficit
|
(36,952 | ) | (37,185 | ) | ||||
Total
shareholders’ equity
|
140,306
|
134,210
|
||||||
Total
liabilities and shareholders’ equity
|
$ |
169,891
|
$ |
169,549
|
Three
months ended
June
30,
|
Nine
months ended
June
30,
|
|||||||||||||||
(in
thousands, except per share data)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenues
|
$ |
57,660
|
$ |
56,269
|
$ |
140,651
|
$ |
133,625
|
||||||||
Costs
and
expenses:
|
||||||||||||||||
Direct
costs
|
42,246
|
42,033
|
102,584
|
100,625
|
||||||||||||
General
and
administrative
|
8,953
|
11,748
|
27,508
|
27,530
|
||||||||||||
Selling
and
marketing
|
3,737
|
3,623
|
9,163
|
8,943
|
||||||||||||
Depreciation
and amortization
|
971
|
1,306
|
3,693
|
3,950
|
||||||||||||
Impairment
of
goodwill and assets held-for-sale
|
8,585
|
—
|
8,585
|
—
|
||||||||||||
Total
costs
and expenses
|
64,492
|
58,710
|
151,533
|
141,048
|
||||||||||||
Loss
from
continuing operations before other income and income taxes
|
(6,832 | ) | (2,441 | ) | (10,882 | ) | (7,423 | ) | ||||||||
Other
income:
|
||||||||||||||||
Income
from
investment:
|
||||||||||||||||
Equity
in net
(loss) income in unconsolidated affiliate
|
(511 | ) |
35
|
475
|
556
|
|||||||||||
Realized
foreign currency gain
|
239
|
—
|
239
|
—
|
||||||||||||
Gain
on sale
of unconsolidated affiliate
|
80
|
—
|
80
|
—
|
||||||||||||
Interest
income, net
|
820
|
859
|
2,304
|
2,133
|
||||||||||||
Total
other
income
|
628
|
894
|
3,098
|
2,689
|
||||||||||||
Loss
from
continuing operations before income taxes
|
(6,204 | ) | (1,547 | ) | (7,784 | ) | (4,734 | ) | ||||||||
Income
tax
(benefit) provision
|
(7 | ) |
40
|
60
|
45
|
|||||||||||
Net
loss from
continuing operations
|
(6,197 | ) | (1,587 | ) | (7,844 | ) | (4,779 | ) | ||||||||
Income
from
discontinued operations, net
|
478
|
—
|
8,077
|
—
|
||||||||||||
Net
(loss)
income
|
$ | (5,719 | ) | $ | (1,587 | ) | $ |
233
|
$ | (4,779 | ) | |||||
(Loss)
earnings per share—Basic:
|
||||||||||||||||
From
continuing operations
|
$ | (0.32 | ) | $ | (0.08 | ) | $ | (0.40 | ) | $ | (0.25 | ) | ||||
From
discontinued operations
|
$ |
0.03
|
$ |
—
|
$ |
0.41
|
$ |
—
|
||||||||
(Loss)
earnings per share—Basic
|
$ | (0.29 | ) | $ | (0.08 | ) | $ |
0.01
|
$ | (0.25 | ) | |||||
(Loss)
earnings per share—Diluted:
|
||||||||||||||||
From
continuing operations
|
$ | (0.32 | ) | $ | (0.08 | ) | $ | (0.40 | ) | $ | (0.25 | ) | ||||
From
discontinued operations
|
$ |
0.03
|
$ |
—
|
$ |
0.41
|
$ |
—
|
||||||||
(Loss)
earnings per share—Diluted
|
$ | (0.29 | ) | $ | (0.08 | ) | $ |
0.01
|
$ | (0.25 | ) | |||||
Weighted
average common shares used in computing:
|
||||||||||||||||
Basic
(loss)
earnings per share
|
19,511
|
19,499
|
19,505
|
19,494
|
||||||||||||
Diluted
(loss)
earnings per share
|
19,511
|
19,499
|
19,630
|
19,494
|
Three
months ended
June
30,
|
Nine
months ended
June
30,
|
|||||||||||||||
(in
thousands)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Net
(loss)
income
|
$ | (5,719 | ) | $ | (1,587 | ) | $ |
233
|
$ | (4,779 | ) | |||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||
Unrealized
(loss) gain on investments in marketable securities
|
(2 | ) |
1
|
(3 | ) |
55
|
||||||||||
Foreign
currency translation:
|
||||||||||||||||
Foreign
currency translation adjustment
|
(179 | ) |
56
|
(208 | ) |
45
|
||||||||||
Less
impact of
realized gains (transferred from AOCI into net (loss)
income)
|
239
|
—
|
239
|
—
|
||||||||||||
Other
comprehensive income
|
58
|
57
|
28
|
100
|
||||||||||||
Comprehensive
(loss) income
|
$ | (5,661 | ) | $ | (1,530 | ) | $ |
261
|
$ | (4,679 | ) |
Nine
months ended June 30,
|
||||||||
(in
thousands)
|
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income
(loss)
|
$ |
233
|
$ | (4,779 | ) | |||
Less:
Income
from discontinued operations, net
|
8,077
|
—
|
||||||
Loss
from
continuing operations, net
|
(7,844 | ) | (4,779 | ) | ||||
Non-cash
items
included in net income from continuing operations:
|
||||||||
Depreciation
and amortization
|
5,536
|
6,725
|
||||||
Loss
on
retirement of equipment and software
|
6
|
283
|
||||||
Provision
for
doubtful accounts
|
(26 | ) |
957
|
|||||
Equity
in net
income of unconsolidated affiliate
|
(475 | ) | (556 | ) | ||||
Gain
on sale
of unconsolidated affiliate
|
(80 | ) |
—
|
|||||
Foreign
currency translation gain realized on sale of unconsolidated
affiliate
|
(239 | ) |
—
|
|||||
Share-based
compensation
|
1,451
|
1,123
|
||||||
Accrued
forward loss on contracts
|
(79 | ) |
1,478
|
|||||
Settlement
of
pension contract
|
1,254
|
—
|
||||||
Impairment
of
goodwill and held-for-sale assets
|
8,585
|
—
|
||||||
Net
effect of
changes in assets and liabilities:
|
||||||||
Accounts
receivable and unbilled receivables
|
4
|
4,819
|
||||||
Prepaid
expenses and other assets
|
2,931
|
(2,345 | ) | |||||
Accounts
payable and accrued liabilities
|
2,658
|
1,996
|
||||||
Income
taxes
payable
|
311
|
(213 | ) | |||||
Deferred
income
|
148
|
(2,750 | ) | |||||
Cash
provided
by operating activities from continuing operations
|
14,141
|
6,738
|
||||||
Cash
provided
by discontinued operations:
|
||||||||
Income
from
discontinued operations, net
|
8,077
|
—
|
||||||
Non-cash
items
included in income from discontinued operations, net:
|
||||||||
Reversal
of
income tax reserve
|
(7,599 | ) |
—
|
|||||
Liquidation
of
Australian operations
|
(478 | ) |
—
|
|||||
Cash
provided
by operating activities from discontinued operations
|
—
|
—
|
||||||
Cash
provided
by operating activities
|
14,141
|
6,738
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
of
marketable securities
|
(6,108 | ) | (45,950 | ) | ||||
Sales
and
maturities of marketable securities
|
3,550
|
37,164
|
||||||
Purchase
of
restricted investments
|
(19,272 | ) | (3,878 | ) | ||||
Sales
and
maturities of restricted investments
|
13,398
|
3,367
|
||||||
Purchase
of
equipment and software
|
(3,888 | ) | (3,688 | ) | ||||
Repayment
of
notes and accrued interest from related parties
|
4,295
|
—
|
||||||
Proceeds
from
sale of unconsolidated affiliate
|
4,784
|
—
|
||||||
Other
investing activities
|
(232 | ) |
—
|
|||||
Cash
used in
investing activities
|
(3,473 | ) | (12,985 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
proceeds
from issuance of common stock
|
89
|
69
|
||||||
Capital
lease
obligations and other financing arrangements
|
3
|
(80 | ) | |||||
Cash
provided
by (used in) financing activities
|
92
|
(11 | ) | |||||
Effect
of
exchange rate changes on cash
|
(11 | ) |
36
|
|||||
Net
increase
(decrease) in cash and cash equivalents
|
10,749
|
(6,222 | ) | |||||
Cash
and cash
equivalents at beginning of period
|
18,486
|
27,843
|
||||||
Cash
and cash
equivalents at end of period
|
$ |
29,235
|
$ |
21,621
|
Nine
months ended June 30,
|
||||||||
(in thousands) |
2007
|
|
2006
|
|||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid
during the period for:
|
||||||||
Interest
|
$ |
9
|
$ |
13
|
||||
Income
taxes
paid, net
|
$ |
128
|
$ |
189
|
||||
SUPPLEMENTAL
DISCLOSURES OF NON-CASH TRANSACTIONS:
|
||||||||
Interest
accrued on shareholder notes
|
$ |
126
|
$ |
206
|
||||
Equipment
acquired under capital lease obligations and other financing
arrangements
|
$ |
26
|
$ |
64
|
·
|
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;
|
·
|
Government
Business Process Outsourcing, or GBPO—focuses on child support
payment processing, child support financial institution data match
services, health and human services consulting, computer telephony
and
call centers, and other related systems integration services;
and
|
·
|
Packaged
Software and Systems Integration, or PSSI—provides software and
systems implementation services through practice areas in financial
management systems, public pension administration systems, unemployment
insurance administration systems, electronic government services,
and
systems integration services for the State of
Missouri.
|
·
|
Official
Payments Corporation, or OPC—provides proprietary
telephone and Internet systems, transaction processing and settlement
for
electronic payments to federal, state, and municipal government agencies,
educational institutions and other public sector clients;
and
|
·
|
EPOS
Corporation, or EPOS—provides interactive communications and
payment processing technologies to federal, state, and municipal
government agencies, educational institutions and other public sector
clients.
|
·
|
Customer
receivables—receivables from our
clients;
|
·
|
Mispost
receivables—receivables from individuals to whom our payment
processing centers made incorrect payments;
and
|
·
|
Not
Sufficient Funds (“NSF”) receivables—receivables from individuals who
paid their child support payment with a check that had insufficient
funds.
|
(in
thousands)
|
June
30, 2007
|
September
30, 2006
|
||||||
Accounts
receivable from:
|
||||||||
Customers
|
$ |
2,668
|
$ |
3,163
|
||||
Recipients
of
misposted payments
|
349
|
1,290
|
||||||
Payers
of NSF
child support
|
430
|
769
|
||||||
Total
accounts
receivable
|
3,447
|
5,222
|
||||||
Allowance
for
uncollectible accounts receivable:
|
||||||||
Customer
|
(419 | ) | (580 | ) | ||||
Mispost
|
(349 | ) | (1,023 | ) | ||||
NSF
|
(429 | ) | (751 | ) | ||||
Total
allowance for uncollectible accounts
|
(1,197 | ) | (2,354 | ) | ||||
Short-term
accounts receivable retainer
|
275
|
989
|
||||||
Accounts
receivable, net
|
$ |
2,525
|
$ |
3,857
|
June
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
|
$ |
4,916
|
$ |
—
|
$ |
4,916
|
$ |
9,053
|
$ |
—
|
$ |
9,053
|
||||||||||||
Commercial
paper
|
4,472
|
(3 | ) |
4,469
|
—
|
—
|
—
|
|||||||||||||||||
Total
investments included in cash
and cash equivalents
|
9,388
|
(3 | ) |
9,385
|
9,053
|
—
|
9,053
|
|||||||||||||||||
Investments
in marketable securities:
|
||||||||||||||||||||||||
Debt
securities(Primarily state and local
bonds/notes)
|
39,500
|
—
|
39,500
|
36,950
|
—
|
36,950
|
||||||||||||||||||
Total
investments in marketable securities
|
39,500
|
—
|
39,500
|
36,950
|
—
|
36,950
|
||||||||||||||||||
Restricted
investments:
|
||||||||||||||||||||||||
Certificates
of deposit
|
8,941
|
—
|
8,941
|
8,941
|
—
|
8,941
|
||||||||||||||||||
Money
market
|
6,079
|
—
|
6,079
|
—
|
—
|
—
|
||||||||||||||||||
U.S.
government sponsored enterprise obligations
|
3,343
|
(2 | ) |
3,341
|
3,348
|
(2 | ) |
3,346
|
||||||||||||||||
Total
restricted investments
|
18,363
|
(2 | ) |
18,361
|
12,289
|
(2 | ) |
12,287
|
||||||||||||||||
Total
investments
|
$ |
67,251
|
$ | (5 | ) | $ |
67,246
|
$ |
58,292
|
$ | (2 | ) | $ |
58,290
|
|
Operating
Segment
|
|
||||||||||||||
(in
thousands)
|
EPP
|
GBPO
|
PSSI
|
Total
|
||||||||||||
Balance
of
goodwill at September 30, 2006
|
$ |
14,323
|
$ |
5,711
|
$ |
17,533
|
$ |
37,567
|
||||||||
Reclassification
of goodwill due to restructuring in October 2006
|
203
|
8,036
|
(8,239 | ) |
—
|
|||||||||||
Goodwill
written off related to classification of assets as
held-for-sale
|
—
|
(8,036 | ) |
—
|
(8,036 | ) | ||||||||||
Balance
at
June 30, 2007
|
$ |
14,526
|
$ |
5,711
|
$ |
9,294
|
$ |
29,531
|
June 30,
2007
|
September
30, 2006
|
||||||||||||||||||||||||
(in
thousands)
|
Amortization
period
|
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||||||||
Client
relationships
|
10
years
|
$ |
28,749
|
$ | (13,226 | ) | $ |
15,523
|
$ |
28,749
|
$ | (11,176 | ) | $ |
17,573
|
||||||||||
Reclassed
to
held-for-sale
|
(4,210 | ) |
1,192
|
(3,018 | ) | (4,210 | ) |
983
|
(3,227 | ) | |||||||||||||||
24,539
|
(12,034 | ) |
12,505
|
24,539
|
(10,193 | ) |
14,346
|
||||||||||||||||||
Technology
& research and development
|
3-10
years
|
4,289
|
(2,429 | ) |
1,860
|
4,289
|
(1,986 | ) |
2,303
|
||||||||||||||||
Reclassed
to
held-for-sale
|
(3,990 | ) |
2,257
|
(1,733 | ) | (3,990 | ) |
1,858
|
(2,132 | ) | |||||||||||||||
299
|
(172 | ) |
127
|
299
|
(128 | ) |
171
|
||||||||||||||||||
Trademarks
|
7-10
years
|
3,214
|
(1,584 | ) |
1,630
|
3,214
|
(1,342 | ) |
1,872
|
||||||||||||||||
Non-compete
agreements
|
2-3
years
|
615
|
(584 | ) |
31
|
615
|
(484 | ) |
131
|
||||||||||||||||
Reclassed
to
held-for-sale
|
(560 | ) |
529
|
(31 | ) | (560 | ) |
435
|
(125 | ) | |||||||||||||||
55
|
(55 | ) |
—
|
55
|
(49 | ) |
6
|
||||||||||||||||||
Other
intangible assets, net
|
$ |
28,107
|
$ | (13,845 | ) | $ |
14,262
|
$ |
28,107
|
$ | (11,712 | ) | $ |
16,395
|
Three
months ended
June
30,
|
Nine
months ended
June
30,
|
|||||||||||||||
(in
thousands, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Numerator:
|
||||||||||||||||
Net
(loss)
income from:
|
||||||||||||||||
Continuing
operations, net of income taxes
|
$ | (6,197 | ) | $ | (1,587 | ) | $ | (7,844 | ) | $ | (4,779 | ) | ||||
Discontinued
operations
|
478
|
—
|
8,077
|
—
|
||||||||||||
Net
(loss)
income
|
$ | (5,719 | ) | $ | (1,587 | ) | $ |
233
|
$ | (4,779 | ) | |||||
Denominator:
|
||||||||||||||||
Weighted-average
common shares
outstanding
|
19,511
|
19,499
|
19,505
|
19,494
|
||||||||||||
Effects
of dilutive common stock
options
|
—
|
—
|
125
|
—
|
||||||||||||
Adjusted
weighted-average shares
|
19,511
|
19,499
|
19,630
|
19,494
|
||||||||||||
(Loss)
earnings per share—Basic:
|
||||||||||||||||
From
continuing
operations
|
$ | (0.32 | ) | $ | (0.08 | ) | $ | (0.40 | ) | $ | (0.25 | ) | ||||
From
discontinued
operations
|
$ |
0.03
|
$ |
—
|
$ |
0.41
|
$ |
—
|
||||||||
(Loss)
earnings per share—Basic
|
$ | (0.29 | ) | $ | (0.08 | ) | $ |
0.01
|
$ | (0.25 | ) | |||||
(Loss)
earnings per share—Diluted:
|
||||||||||||||||
From
continuing
operations
|
$ | (0.32 | ) | $ | (0.08 | ) | $ | (0.40 | ) | $ | (0.25 | ) | ||||
From
discontinued
operations
|
$ |
0.03
|
$ |
—
|
$ |
0.41
|
$ |
—
|
||||||||
(Loss)
earnings per share—Diluted
|
$ | (0.29 | ) | $ | (0.08 | ) | $ |
0.01
|
$ | (0.25 | ) |
Three
months ended
June
30,
|
Nine
months ended
June
30,
|
|||||||||||||||
(in
thousands, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Weighted-average
options excluded from computation of diluted earnings per
share
|
798
|
1,807
|
1,668
|
2,184
|
||||||||||||
Range
of
exercise prices per share:
|
||||||||||||||||
High
|
$ |
20.70
|
$ |
20.70
|
$ |
20.70
|
$ |
20.70
|
||||||||
Low
|
$ |
6.85
|
$ |
6.96
|
$ |
5.91
|
$ |
6.96
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||||||||||||||||||||||||||
(in
thousands)
|
EPP(1)
|
GBPO(2)
|
PSSI(3)
|
Eliminations
|
Total
|
EPP(1)
|
GBPO(2)
|
PSSI(3)
|
Eliminations
|
Total
|
||||||||||||||||||||||||||||||
June
30, 2007:
|
||||||||||||||||||||||||||||||||||||||||
Revenues
|
$ |
38,380
|
$ |
11,102
|
$ |
8,284
|
$ | (106 | ) | $ |
57,660
|
$ |
81,109
|
$ |
35,718
|
$ |
24,093
|
$ | (269 | ) | $ |
140,651
|
||||||||||||||||||
Direct
costs
|
$ |
30,021
|
$ |
6,147
|
$ |
6,184
|
$ | (106 | ) | $ |
42,246
|
$ |
61,539
|
$ |
23,424
|
$ |
17,890
|
$ | (269 | ) | $ |
102,584
|
||||||||||||||||||
June
30, 2006:
|
||||||||||||||||||||||||||||||||||||||||
Revenues
|
$ |
33,912
|
$ |
12,613
|
$ |
9,787
|
$ | (43 | ) | $ |
56,269
|
$ |
64,485
|
$ |
40,564
|
$ |
28,677
|
$ | (101 | ) | $ |
133,625
|
||||||||||||||||||
Direct
costs
|
$ |
26,950
|
$ |
8,049
|
$ |
7,077
|
$ | (43 | ) | $ |
42,033
|
$ |
49,487
|
$ |
31,275
|
$ |
19,964
|
$ | (101 | ) | $ |
100,625
|
||||||||||||||||||
(1)
During the three and nine months ended June 30, 2007, the revenues
from one customer produced 52.6% and 37.2%, respectively, of the
revenues
for the EPP segment. During the three and nine months ended
June 30, 2006, the revenues from this customer produced 58.5% and
41.7%, respectively, of the revenues for the EPP segment.
(2)
The revenues from one customer produced 31.2% and 31.0%, respectively,
of
the revenues for the GBPO segment during the three and nine months
ended
June 30, 2007, and produced 35.1% and 32.1%, respectively, of GBPO
revenues during the three and nine months ended June 30,
2006.
The
revenues
from another customer produced 18.5% and 16.9%, respectively, of
the GBPO
revenues for the three and nine months ended June 30, 2007, while the
revenues from this customer produced 15.2% and 14.0%, respectively,
of
GBPO revenues during the three and nine months ended June 30,
2006. The contract with this customer expired on June 29,
2007.
(3)
During the three and nine months ended June 30, 2007, the
revenues from one customer produced 33.0% and 27.9%, respectively,
of the
revenues for the PSSI segment. During the three and nine months ended
June 30, 2006, the revenues from this customer produced 27.6% and
24.6%, respectively, of the revenues for the PSSI segment. The
revenues from another customer produced 28.1% and 24.8%, respectively,
of
the PSSI revenues for the three and nine months ended June 30, 2007,
while the revenues from this customer produced 19.3% and 16.1%,
respectively, of the PSSI revenues during the three and nine months
ended
June 30, 2006.
|
(in
thousands)
|
June
30, 2007
|
September
30, 2006
|
||||||
EPP
|
$ |
95,523
|
$ |
85,236
|
||||
GBPO
|
24,100
|
39,795
|
||||||
PSSI
|
24,766
|
25,894
|
||||||
Corporate(1)
|
25,502
|
18,624
|
||||||
Total
|
$ |
169,891
|
$ |
169,549
|
||||
(1)Represents
assets that are not assignable to a specific segment
|
(in
thousands)
|
Facilities
closures
|
|||
Balance
at
September 30, 2006
|
$ |
401
|
||
Cash
payments
|
(163 | ) | ||
Balance
at
June 30, 2007
|
$ |
238
|
Three
months ended
June
30,
|
Nine
months ended
June
30,
|
|||||||||||||||
2007(1)
|
2006
|
2007
|
2006
|
|||||||||||||
Weighted-average
assumptions used in Black-Scholes model:
|
||||||||||||||||
Expected
period that options will be outstanding (in
years)
|
—
|
5.00
|
5.00
|
5.00
|
||||||||||||
Interest
rate
(based on U.S. Treasury yields at time of grant)
|
—
|
4.88 | % | 4.66 | % | 4.71 | % | |||||||||
Volatility
|
—
|
46.99 | % | 47.54 | % | 47.64 | % | |||||||||
Dividend
yield
|
—
|
—
|
—
|
—
|
||||||||||||
Weighted-average
fair value of options granted
|
$ |
—
|
$ |
4.11
|
$ |
3.53
|
$ |
4.07
|
||||||||
Weighted-average
intrinsic value of options exercised (in
thousands)
|
$ |
19
|
$ |
—
|
$ |
71
|
$ |
7
|
||||||||
(1)
No options were granted during the three months ended June 30,
2007.
|
Weighted-average
|
||||||||||||||||
Shares
under option
(000)
|
Exercise
price per share
|
Remaining
contractual term
|
Aggregate
intrinsic value
($000)
|
|||||||||||||
Options
outstanding at October 1, 2006
|
2,237
|
$ |
8.45
|
|||||||||||||
Granted
|
240
|
7.48
|
||||||||||||||
Exercised
|
(18 | ) |
4.81
|
|||||||||||||
Forfeitures
or
expirations
|
(307 | ) |
7.60
|
|||||||||||||
Options
outstanding at June 30, 2007
|
2,152
|
$ |
8.49
|
7.36
|
$ |
5,141
|
||||||||||
Options
exercisable at June 30, 2007
|
1,294
|
$ |
9.37
|
6.56
|
$ |
2,638
|
June
30, 2007
|
September
30, 2006
|
|||||||||||||||||||||||
(In
thousands)
|
GBPO
|
PSSI
|
Total
|
GBPO
|
PSSI
|
Total
|
||||||||||||||||||
Assets:
|
||||||||||||||||||||||||
Current
assets
|
$ |
5,840
|
$ |
7,771
|
$ |
13,611
|
$ |
8,521
|
$ |
5,104
|
$ |
13,625
|
||||||||||||
Property,
equipment and software, net
|
5,194
|
5,747
|
10,941
|
5,863
|
3,821
|
9,684
|
||||||||||||||||||
Intangible
assets, net
|
4,782
|
—
|
4,782
|
5,484
|
—
|
5,484
|
||||||||||||||||||
Other
assets
|
20
|
314
|
334
|
23
|
959
|
982
|
||||||||||||||||||
Total
assets
|
$ |
15,836
|
$ |
13,832
|
$ |
29,668
|
$ |
19,891
|
$ |
9,884
|
$ |
29,775
|
||||||||||||
Liabilities:
|
||||||||||||||||||||||||
Current
liabilities
|
$ |
6,065
|
$ |
7,824
|
$ |
13,889
|
$ |
5,211
|
$ |
6,254
|
$ |
11,465
|
||||||||||||
Other
liabilities
|
359
|
24
|
383
|
513
|
76
|
589
|
||||||||||||||||||
Total
liabilities
|
$ |
6,424
|
$ |
7,848
|
$ |
14,272
|
$ |
5,724
|
$ |
6,330
|
$ |
12,054
|
||||||||||||
Net
assets and
liabilities of disposal group
|
$ |
9,412
|
$ |
5,984
|
$ |
15,396
|
$ |
14,167
|
$ |
3,554
|
$ |
17,721
|
Three
months ended
June
30,
|
Variance
|
Nine
months ended June 30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2006
|
$
Amount
|
%
|
2007
|
2006
|
$
Amount
|
%
|
||||||||||||||||||||||||
Revenues
|
$ |
57,660
|
$ |
56,269
|
$ |
1,391
|
2 | % | $ |
140,651
|
$ |
133,625
|
$ |
7,026
|
5 | % | ||||||||||||||||
Costs
and
expenses
|
64,492
|
58,710
|
5,782
|
10 | % |
151,533
|
141,048
|
10,485
|
7 | % | ||||||||||||||||||||||
(Loss)
gain
before other income, income taxes
|
(6,832 | ) | (2,441 | ) | (4,391 | ) |
*
|
(10,882 | ) | (7,423 | ) | (3,459 | ) | (47 | )% | |||||||||||||||||
Other
income
|
628
|
894
|
(266 | ) | (30 | )% |
3,098
|
2,689
|
409
|
15 | % | |||||||||||||||||||||
(Loss)
gain
before income taxes
|
(6,204 | ) | (1,547 | ) | (4,657 | ) |
*
|
(7,784 | ) | (4,734 | ) | (3,050 | ) | (64 | )% | |||||||||||||||||
(Benefit)
provision for income taxes
|
(7 | ) |
40
|
(47 | ) |
*
|
60
|
45
|
15
|
33
|
% | |||||||||||||||||||||
Net
(loss)
income from continuing operations
|
(6,197 | ) | (1,587 | ) | (4,610 | ) |
*
|
(7,844 | ) | (4,779 | ) | (3,065 | ) | (64 | )% | |||||||||||||||||
Net
income
from discontinued operations
|
478
|
—
|
478
|
*
|
8,077
|
—
|
8,077
|
*
|
||||||||||||||||||||||||
Net
(loss)
income
|
$ | (5,719 | ) | $ | (1,587 | ) | $ | (4,132 | ) |
*
|
$ |
233
|
$ | (4,779 | ) | $ |
5,012
|
*
|
||||||||||||||
*Not
meaningful
|
Three
months ended
June
30,
|
Variance
|
Nine
months ended
June
30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2006
|
$
Amount
|
%
|
2007
|
2006
|
$
Amount
|
%
|
||||||||||||||||||||||||
Revenue,
by
segment:
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
38,380
|
$ |
33,912
|
$ |
4,468
|
13 | % | $ |
81,109
|
$ |
64,485
|
$ |
16,624
|
26 | % | ||||||||||||||||
GBPO
|
11,102
|
12,613
|
(1,511 | ) | (12 | )% |
35,718
|
40,564
|
(4,846 | ) | (12 | )% | ||||||||||||||||||||
PSSI
|
8,284
|
9,787
|
(1,503 | ) | (15 | )% |
24,093
|
28,677
|
(4,584 | ) | (16 | )% | ||||||||||||||||||||
Eliminations(1)
|
(106 | ) | (43 | ) | (63 | ) |
*
|
(269 | ) | (101 | ) | (168 | ) |
*
|
||||||||||||||||||
Total
revenues
|
$ |
57,660
|
$ |
56,269
|
$ |
1,391
|
2 | % | $ |
140,651
|
$ |
133,625
|
$ |
7,026
|
5 | % | ||||||||||||||||
(1)Represents
elimination entry for revenues earned by our EPP segment for electronic
payment processing services it provides to our GBPO
segment.
*Not
meaningful
|
Three
months ended
June
30,
|
Variance
|
Nine
months ended
June
30,
|
Variance
|
|||||||||||||||||||||||||||||
(in
thousands, except percentages)
|
2007
|
2006
|
$
Amount
|
%
|
2007
|
2006
|
$
Amount
|
%
|
||||||||||||||||||||||||
Direct
cost,
by segment:
|
||||||||||||||||||||||||||||||||
EPP
|
$ |
30,021
|
$ |
26,950
|
$ |
3,071
|
11 | % | $ |
61,539
|
$ |
49,487
|
$ |
12,052
|
24 | % | ||||||||||||||||
GBPO
|
6,147
|
8,049
|
(1,902 | ) | (24 | )% |
23,424
|
31,275
|
(7,851 | ) | (25 | )% | ||||||||||||||||||||
PSSI
|
6,184
|
7,077
|
(893 | ) | (13 | )% |
17,890
|
19,964
|
(2,074 | ) | (10 | )% | ||||||||||||||||||||
Eliminations(1)
|
(106 | ) | (43 | ) | (63 | ) |
*
|
(269 | ) | (101 | ) | (168 | ) |
*
|
||||||||||||||||||
Total
direct
costs
|
$ |
42,246
|
$ |
42,033
|
$ |
213
|
1 | % | $ |
102,584
|
$ |
100,625
|
$ |
1,959
|
2 | % | ||||||||||||||||
(1)Represents
elimination entry for revenues earned by our EPP segment for electronic
payment processing services it provides to our GBPO
segment.
|
·
|
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.
|
Exhibit
Number
|
Description
|
|
||
3.1
|
Amended
and
Restated Bylaws of Tier Technologies, Inc., as amended.
†
|
|||
10.1
|
Share
Repurchase Agreement between CPAS Systems, Inc., Tier Ventures Corporation
and Tier Technologies, Inc. dated June 29,
2007(1)
|
|||
10.2
|
Employment Agreement between Tier Technologies, Inc. and Kevin Connell, dated August 9, 2007† | |||
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, as
amended.†
|
|||
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, as
amended.†
|
|||
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.†
|
|||
†Filed
herewith.
(1) Filed
as an exhibit on current report Form 8-K, filed on June 29, 2007, and
incorporated herein by reference.
|
TIER
TECHNOLOGIES, INC.
|
||
By:
|
/s/
David E.
Fountain
|
|
Name:
|
David
E. Fountain
|
|
Title:
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|
||
Dated:
August
9, 2007
|