TIER
TECHNOLOGIES, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
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
|
|
See
Notes to Consolidated Financial Statements
TIER
TECHNOLOGIES, INC.
|
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
|
|
See
Notes to Consolidated Financial Statements
TIER
TECHNOLOGIES, INC.
|
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
|
|
See
Notes to Consolidated Financial Statements
TIER
TECHNOLOGIES, INC.
|
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
|
|
See
Notes to Consolidated Financial Statements
TIER
TECHNOLOGIES, INC.
|
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
|
|
TIER
TECHNOLOGIES, INC.
|
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
|
|
See
Notes to Consolidated Financial Statements
|
NOTE
1—ORGANIZATIONAL OVERVIEW
|
Tier
Technologies,
Inc., or Tier or the Company, provides federal, state and local government
and
other public sector clients with electronic payment and other transaction
processing services, as well as software and systems integrations
services. During fiscal 2007, we undertook a strategic initiative
that evaluated the risks, costs, benefits and growth potential of each of
our
product lines and services. As a result of this process, we concluded
that our company's focus should be on our core business—Electronic Payment
Processing, or EPP. As such, we began to seek buyers for certain
portions of our business in April 2007.
At
the beginning of
fiscal 2007 our company was organized into three segments: EPP,
Government Business Process Outsourcing, or GBPO, and Packaged Software and
Systems Integration, or PSSI. During fiscal 2007, we reorganized our
business to facilitate the growth of our electronic payment processing services,
as well as the timely and efficient transfer of the operations that we
held-for-sale to potential buyers. By September 30, 2007, our number
of segments evolved from three segments down to one operating segment, certain
wind-down operations and the operations of our discontinued, or held-for-sale
businesses.
As
of September 30,
2007, our
Continuing Operations
were composed
of:
·
|
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.
|
On
June 29,
2007 we sold our 46.96% investment in the outstanding common stock of CPAS
Systems, Inc., or CPAS, a Canadian-based supplier of pension administration
software systems, back to CPAS for $4.8 million
(USD). Previously, we reported our investment in CPAS under the
equity method of accounting.
All
historical
financial information presented in our Consolidated Financial Statements
and
Notes to Our Consolidated Financial Statements has been reclassified to conform
to the current year’s presentation. For additional information about
our continuing operations, see Note 12—
Segments.
For
additional information about the businesses that we have classified as
held-for-sale, see Note 15—
Discontinued Operations
.
|
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
SIGNIFICANT
ACCOUNTING POLICIES
Basis
of
Presentation.
These financial statements and the
accompanying notes are prepared in accordance with accounting principles
generally accepted in the United States of America and conform to Regulation
S-X
under the Securities Exchange Act of 1934, as amended. We believe we
have made all necessary adjustments so that the financial statements are
presented fairly and that all such adjustments are of a normal recurring
nature.
Principles
of Consolidation.
The financial statements include the
accounts of Tier Technologies, Inc. and its
subsidiaries. Intercompany transactions and balances have been
eliminated. Prior to the sale of our investment in CPAS, Inc. (an
investment in which we exercised significant influence, but did not control
or
act as the primary beneficiary) in June 2007, we accounted for our 46.96%
interest in CPAS using the equity method, under which our share of CPAS’ net
income (loss) was recognized in the period in which it was earned by
CPAS.
Use
of
Estimates.
Preparing financial statements requires
management to make estimates and assumptions that affect the amounts reported
on
our Consolidated Financial Statements and accompanying notes. We
believe that near-term changes could reasonably impact the following
estimates: project costs and percentage of completion; effective tax
rates; deferred taxes and associated valuation allowances; collectibility
of
receivables; share-based compensation; and valuation of goodwill, intangibles
and investments. Although we believe the estimates and assumptions
used in preparing our Consolidated Financial Statements and notes thereto
are
reasonable in light of known facts and circumstances, actual results could
differ materially.
Foreign
Currencies.
We use the local foreign currency as the
functional currency to translate our investment in certain inactive operations
and our former investment in CPAS. The assets and liabilities of the
subsidiaries are translated into U.S. dollars using exchange rates in effect
at
the balance sheet date, revenues and expenses are translated using the average
exchange rate for the period and gains and losses from this translation process
are included in
Other comprehensive income
in the shareholders’ equity
section of our Consolidated Balance Sheets.
Cash
and
Cash Equivalents.
Cash equivalents are highly liquid
investments with maturities of three months or less at the date of purchase
and
are stated at amounts that approximate fair value, based on quoted market
prices. Cash equivalents consist principally of investments in
interest-bearing demand deposit accounts with financial
institutions.
In
the course of
operating a payment processing center for a client, we have maintained one
or
more bank accounts to deposit and disburse funds for the client. The
cash balance of the accounts and the related liability of the same amount
was
netted in the accompanying Consolidated Balance Sheets, since we had the
right
to offset such amounts. Beginning on July 1, 2007 we no longer
had transactions which required the maintenance of a cash account with an
offsetting liability.
Revenue
Recognition and Credit Risk.
We recognize revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the
fee is
fixed or determinable and collectibility is probable. We assess
collectibility based upon our clients’ financial condition and prior payment
history, as well as our performance under the contract. When we enter into
certain arrangements where we are obligated to deliver multiple products
and/or
services, we account for each unit of the contract separately when each unit
provides value to the customer on a standalone basis and there is objective
evidence of the fair value of the standalone unit.
Typically,
our
payment processing and call center operations earn revenues based upon a
specific fee per transaction or percentage of the dollar amount
processed. We recognize these revenues in the month that the service
is provided.
We
use the
percentage-of-completion method to recognize revenues for software licenses
and
related services for projects that require significant modification or
customization that is essential to the functionality of the
software. We record a provision in those instances in which we
believe a contract will probably generate a net loss and we can reasonably
estimate this loss. If we cannot reasonably estimate the loss, we
limit the amount of revenue that we recognize to the costs we have incurred,
until we can estimate the total loss. Advance
payments
from
clients and amounts billed to clients in excess of revenue recognized are
recorded as deferred revenue. Amounts recognized as revenue in
advance of contractual billing are recorded as unbilled
receivables.
For
the sale of
software that does not require significant modification, we recognize revenues
from license fees when persuasive evidence of an agreement exists, delivery
of
the software has occurred, no significant implementation or integration
obligations exist, the fee is fixed or determinable and collectibility is
probable. If we do not believe it is probable that we will collect a
fee, we do not recognize the associated revenue until we collect the
payment.
For
software
license arrangements with multiple obligations (for example, undelivered
maintenance and support), we allocate revenues to each component of the
arrangement using the residual value method of accounting based on the fair
value of the undelivered elements, which is specific to our
company. Fair value for the maintenance and support obligations for
software licenses is based upon the specific renewal rates.
Our
license
agreements do not offer return rights or price protection; therefore, we
do not
have provisions for sales returns on these types of agreements. We
do, however, offer routine, short-term warranties that our proprietary software
will operate free of material defects and in conformity with written
documentation. Under these agreements, if we have an active
maintenance agreement, we record a liability for our estimated future warranty
claims, based on historical experience. If there is no maintenance
contract, the warranty is considered implied maintenance and we defer revenues
consistent with other maintenance and support obligations.
When
we provide
ongoing maintenance and support services, the associated revenue is deferred
and
recognized on a straight-line basis over the life of the related
contract—typically one year. Generally, we recognize the revenues
earned for non-essential training and consulting support when the services
are
performed.
Finally,
under the
terms of a number of our contracts, we are reimbursed for certain costs that
we
incur to support the project, including postage, stationery and
printing. We include the amounts that we are entitled to be
reimbursed and any associated mark-up on these expenses in
Revenues
and
include the expenses in
Direct costs
in our Consolidated Statements of
Operations.
Allowance
for Doubtful Accounts.
The allowance for doubtful accounts
reflects our best estimate of probable losses inherent in the accounts
receivable balance. We determine the allowance based on known
troubled accounts, historical experience and other currently available
evidence. In addition, our OPC subsidiary records a sales return
allowance, calculated monthly at 0.35% of gross revenues on the applicable
contracts, to establish an allowance for the reversal of convenience
fees. Convenience fees are charged to cardholders on a per
transaction basis and are reinstated to cardholders upon an approved payment
reversal. Additions to the provision for bad debts are included in
General and administrative
on our Consolidated Statements of
Operations, while the provision for sales return allowance is included in
Revenues
. The balance of our allowance for doubtful accounts
for continuing operations was $1.2 million at September 30, 2007 and
$0.9 million at September 30, 2006.
Fair
Value
of Financial Instruments.
The carrying amounts of certain
financial instruments, including cash equivalents, restricted cash, accounts
receivable, accounts payable and accrued liabilities, approximate fair value
due
to their short maturities.
Investments
in Marketable Securities.
Investments in marketable
securities are composed of available-for-sale securities. Restricted investments
pledged in connection with performance bonds and real estate operating leases
are reported as
Restricted investments
on the Consolidated Balance
Sheets. Unrestricted investments with remaining maturities of
90 days or less (as of the date that we purchased the securities) are
classified as cash equivalents. Other securities that would not
otherwise be included in
Restricted investments
or
Cash and cash
equivalents
are classified on the Consolidated Balance Sheets as
Investments in marketable securities
. Our investments are
categorized as available-for-sale and recorded at estimated fair value, based
on
quoted market prices. Increases and decreases in fair value are
recorded as unrealized gains and losses in
Other comprehensive
income
. Realized gains and losses and declines in fair value
judged to be other-than-temporary are included in
Loss on sale of
investment
. Interest earned is included in
Interest income,
net
.
Advertising
Expense.
We expense advertising costs, net of cooperative
advertising cash contributions received from partners, during the period
the
advertising takes place. We incurred $0.7 million during fiscal
year 2007, $0.4 million during fiscal 2006 and $0.4 million during
fiscal 2005, of net advertising expenses from continuing
operations.
Property,
Equipment and Software.
Property, equipment and software are
stated at cost and depreciated using the straight-line method over the
shorter
of the estimated useful lives of the assets or the lease terms, ranging
from
three to seven years. When assets are retired or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts
and any
resulting gain or loss is reflected in operations in the period
realized. We recognize the fair value of the liability for
conditional asset retirement obligations when incurred—generally upon
acquisition, construction or development and/or through the normal operation
of
the asset.
We
expense the
cost of software that we expect to sell, lease or market as research
and
development costs, prior to the time that technical feasibility is
established. Once technical feasibility is established, we capitalize
software development costs until the date that the software is available
for
sale. Similarly, we expense the costs incurred for software that we
expect to use internally until the preliminary project stage has been
completed. Subsequently, we capitalize direct service and material
costs, as well as direct payroll and payroll-related costs and interest
costs
incurred during development. We amortize capitalized software costs
at the greater of (a) the ratio of current revenues to total projected
revenues
or (b) the straight-line method over the estimated remaining economic
life of
the software.
Goodwill
.
Goodwill
is tested for impairment on an annual basis during the fourth fiscal quarter
and
between annual tests if indicators of potential impairment exist, using a
fair-value based approach. During the third quarter of fiscal 2007,
due to our intentions to sell the majority of our GBPO and PSSI operations
we
tested the goodwill associated with the assets of these operations for
impairment. We recorded goodwill impairment of $8.5 million for
continuing operations and $2.5 million for discontinued operations during
fiscal 2007, as a result of the reclassification of assets and liabilities
to a
held-for-sale status.
Intangible
Assets.
We amortize intangible assets with finite lives
using the straight-line method over their estimated benefit period, ranging
from
one to ten years. We evaluate the recoverability of intangible assets
periodically and take into account events or circumstances that warrant revised
estimates of useful lives or that indicate that impairment
exists. Initially in April 2007, we classified our VSA operations as
held-for-sale. At that time we suspended all depreciation and
amortization of long-term VSA assets in accordance with SFAS
144. When we reclassified the VSA assets back to held and used in
September 2007, we determined that the carrying value at March 31, 2007,
adjusted for depreciation that would have been recognized through September
2007, was less than fair value at September 30, 2007. To comply
with this requirement, we reduced the fair value of our intangible assets
by
$0.7 million. In addition, we recognized an impairment loss of
$0.2 million on two of our other wind-down businesses during fiscal 2007,
which we recorded as a reduction of intangible assets.
Held-For-Sale
Assets and Liabilities.
Held-for-sale assets and
liabilities are presented on our Consolidated Balance Sheet at the lower
of
their carrying value or fair value less costs to sell, once the criteria
for
held-for-sale status has been met. In accordance with Statement of
Financial Accounting Standards No. 144—
Impairment or Disposal of Long-Lived
Assets
, or SFAS 144, assets are not depreciated or amortized while they are
classified as held-for-sale. At that time the asset group is classified as
held-for-sale and during each subsequent reporting period, we also evaluate
goodwill for impairment at the segment level, whenever the businesses classified
as held-for-sale have been fully integrated into the segment and the acquired
goodwill benefits the rest of the reporting unit. In the event that
the asset group being disposed of represents a business that is part of a
segment, we allocate goodwill to be included in the carrying amount of the
business based on the relative fair values of the business to be disposed
of in
relation to the remaining businesses in the segment, in accordance with
Statement of Accounting Standards No. 142—
Goodwill and Other
Intangibles
.
(Loss)
Earnings Per Share.
Basic (loss) earnings per share are
computed by dividing net (loss) income by the weighted-average number of
shares
of common stock outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock.
Share-Based
Payment.
Effective October 1, 2005, we adopted
Statement of Financial Accounting Standards No. 123(R)—
Share-Based
Payment
, or SFAS 123R, which requires companies to expense share-based
compensation based on fair value.
Income
Taxes.
We account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109—
Accounting for
Income Taxes
, or SFAS 109, which requires the use of the liability method
in accounting for income taxes. Under this method, deferred income
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using
enacted
tax rules and laws that are expected to be in effect when the differences
are
expected to reverse. Valuation allowances are established against net
deferred tax assets when it is more likely than not that some portion or
all of
the deferred tax assets will not be realized.
Comprehensive
(Loss) Income.
Our comprehensive income is composed of net
(loss) income, foreign currency translation adjustments and unrealized gains
(losses) on marketable investment securities, net of related taxes.
Guarantees.
We
record guarantees at the fair value of the guarantee at its inception when
a
guarantor is required to make payments to the guaranteed party upon failure
of
the third party to perform under the obligations of the contract.
Accrued
Discount Fees.
Our direct costs for our EPP operations
primarily consist of credit card interchange fees, in addition to assessments
and other costs passed onto us by our processors. Collectively, these
fees and costs are considered to be discount fees. Discount fees are
charged to us as a percentage of the dollar volume we transact, and for expense
purposes, are incurred during the month that the related transaction is
authorized for payment. Accrued discount fees represent the total
amount of discount fees which have been incurred by us on authorized
transactions, but have yet to be remitted by us as of the reporting
date. Discount fees are typically remitted by us in the calendar
month which follows the date of transaction authorization.
RECENT
ACCOUNTING PRONOUNCEMENTS
SFAS
157—Fair Value Measurements.
In October 2006, FASB issued
Statement of Financial Accounting Standards No. 157—
Fair Value
Measurements
, or SFAS 157. This standard establishes a framework
for measuring fair value and expands disclosures about fair value measurement
of
a company’s assets and liabilities. This standard also requires that
the fair value measurement should be determined based on the assumptions
that
market participants would use in pricing the asset or liability. SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007 and, generally, must be applied
prospectively. We expect to adopt this standard beginning in October
2008. We do not expect that the adoption of SFAS 157 will have a
material effect on our financial position and results of
operations.
FIN
48—Accounting for Uncertainty in Income Taxes.
In July 2006,
FASB Interpretation No. 48—
Accounting for Uncertainty in Income
Taxes
, or FIN 48, was issued. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with FASB Statement No. 109—
Accounting for Income
Taxes
. FIN 48 is effective for fiscal years beginning after
December 15, 2006. We implemented FIN 48 on October 1,
2007. We do not expect that FIN 48 will have a material effect on our
financial position or results of operation.
SFAS
159—The
Fair Value Option for Financial Assets and Financial
Liabilities.
In February 2007, FASB issued Statement of
Financial Accounting Standard No. 159—
The Fair Value Option for Financial
Assets and Financial Liabilities
, or SFAS 159, which allows companies to
choose to measure many financial instruments and certain other items at fair
value. Entities that elect the fair value option will report
unrealized gains and losses in earning at each subsequent reporting
date. The principle can be applied on an instrument by instrument
basis, is irrevocable and must be applied to the entire
instrument. SFAS 159 amends previous guidance to extend the use of
the fair value option to available-for-sale and held-to-maturity
securities. SFAS 159 also establishes presentation and disclosure
requirements to help financial statement users understand the effect of the
election. SFAS 159 is effective as of the beginning of each reporting
fiscal year beginning after November 15, 2007. We do not believe
that the adoption of SFAS 159 will have a material effect on our financial
position or results of operations.
|
NOTE
3—(LOSS) EARNINGS PER
SHARE
|
The
following table
sets forth the computation of basic and diluted (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
|
|
The
following
options were not included in the computation of diluted (loss) earnings per
share because the exercise price was greater than the average market price
of
our common stock for the periods stated and, therefore, the effect would
be
anti-dilutive:
|
|
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
|
|
In
addition,
154,500 shares at September 30, 2007 and 91,000 shares at
September 30, 2006, of common stock equivalents were excluded from the
calculation of diluted loss per share since their effect would have been
anti-dilutive.
|
NOTE
4—CUSTOMER CONCENTRATION AND
RISK
|
We
derive a
significant portion of our revenue from a limited number of governmental
customers. Typically, the contracts allow these customers to
terminate all or part of the contract for convenience or
cause. During the fiscal year ended September 30, 2007, our
contract with the Internal Revenue Service contributed revenues of
$28.1 million, or 25.3%, of our revenues from continuing
operations. During fiscal year 2006, this contract generated
$25.0 million, or 25.9%, of our revenues from continuing
operations.
Accounts
receivable, net.
As of September 30, 2007 and 2006,
we reported $5.1 million and $5.3 million, respectively, in
Accounts receivable, net
on our Consolidated Balance
Sheets. This item represents the
short-term portion of
receivables to our customers and other parties and retainers that we expect
to
receive. Approximately 64.4% and 74.8% of the balances reported at
September 30, 2007 and 2006, respectively, represent accounts receivable,
net
that are attributable to operations that we intend to wind-down during the
course of the next five years (See Note 12—
Segment Information
, for
additional information about our wind-down operations). The remainder
of the
Accounts receivable, net
balance is composed of receivables from
certain of our EPP customers. None of our customers have receivables
that exceed 10% of our total receivable balance. As of
September 30, 2007 and 2006,
Accounts receivable net
, included an
allowance for uncollectible accounts of $1.2 million and $0.9 million,
respectively, which represents the balance of receivables that we believe
are
likely to become uncollectible.
Certain
of our
contracts allow customers to retain a portion of the amounts owed to us until
predetermined milestones are achieved or until the project is
completed. At September 30, 2007,
Accounts receivable, net
included $0.8 million of retainers that we expected to receive in one
year. At September 30, 2006,
Accounts receivable, net
included $1.0 million of retainers that we expected to receive in one year
and
Other assets
on our
Consolidated
Balance Sheet included $2.8 million of retainers that we expected to be
outstanding for more than one year.
Unbilled
receivables
represent revenues that we have earned for the work that has
been performed to date that cannot be billed under the terms of the applicable
contract until we have completed specific project milestones or the customer
has
accepted our work. At September 30, 2007, total unbilled
receivables, all of which are expected to become billable in one year, were
$0.5 million, of which one customer accounted for 56.2% of the total and
another customer accounted for the remaining 43.8% of the total. At
September 30, 2006, total unbilled receivables, all of which were expected
to become billable in one year, were $1.9 million, of which three customers
accounted for 50.0%, 32.2% and 17.9%, respectively, of the total.
All
of the
retainers and unbilled receivable balances discussed above are associated
with
businesses that we intend to wind-down over the next five years (See Note
12—
Segment Information).
Debt
and Equity
Securities
Investments
are
composed of available-for-sale debt and equity securities as defined in SFAS
No. 115—
Accounting for Certain Investments in Debt and
Equity
Securities,
or SFAS 115. Restricted investments
totaling $5.5 million at September 30, 2007 and $12.3 million at
September 30, 2006 were pledged in connection with performance bonds and
real
estate operating leases and will be restricted for the terms of the project
performance periods and lease periods, the latest of which is estimated to
end
in March 2010. At September 30, 2007, a $6.0 million money
market investment was also used as a compensating balance for a bank account
used for certain operations. These investments are reported as
Restricted investments
on the Consolidated Balance Sheets.
In
accordance with
SFAS No. 95—
Statement of Cash Flows
, unrestricted investments with
remaining maturities of 90 days or less, as of the date of purchase, are
classified as cash equivalents. We exclude from cash equivalents
certain investments such as mutual funds and auction rate
securities. Securities such as these, and all other securities that
would not otherwise be included in
Restricted investments
or
Cash
and cash equivalents
, are classified on the Consolidated Balance Sheets as
Investments in marketable securities
. Except for our
investment in CPAS and our restricted investments, all of our investments
are
categorized as available-for-sale under SFAS 115. As such, our
securities are recorded at estimated fair value, based on quoted market
prices. Increases and decreases in fair value are recorded as
unrealized gains and losses in other comprehensive income.
The
following table
shows the balance sheet classification, amortized cost and estimated fair
values
of investments included in cash equivalents, investments in marketable
securities and restricted 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
|
|
As
of
September 30, 2007, all of the debt securities that were included in
marketable securities had remaining maturities in excess of ten
years. While all of these debt securities have long-term maturities,
all of our debt securities are auction rate securities with interest that
typically resets every 28 days.
We
evaluate certain
available-for-sale investments for other-than-temporary impairment when the
fair
value of the investment is lower than its book value. Factors that we
consider when evaluating for other-than-temporary impairment include: the
length
of time and the extent to which market value has been less than cost; the
financial condition and near-term prospects of the issuer; interest rates,
credit risk, the value of any underlying portfolios or investments; and our
intent and ability to hold the investment for a period of time sufficient
to
allow for any anticipated recovery in the market. We do not adjust
the recorded book value for declines in fair value that we believe are temporary
if we have the intent and ability to hold the associated investments for
the
foreseeable future and we have not made the decision to dispose of the
securities as of the reported date.
If
we determine
impairment is other-than-temporary, we reduce the recorded book value of
the
investment by the amount of the impairment and recognize a realized loss
on the
investment. At September 30, 2007 and September 30, 2006,
we do not believe that any of our investments were other-than-temporarily
impaired.
Equity
Investments
In
June 2007 we
sold our 46.96% investment of the outstanding common stock of CPAS, a
Canadian-based supplier of pension administration software systems, back
to CPAS
for $4.8 million (USD). The sale price was approximately equal
to the US-dollar equivalent of our book value in the CPAS investment as of
June 30, 2007, plus estimated taxes and other disposal costs. In
June 2007, we recorded a gain of $80,000 on the sale of this investment and
realized a foreign currency gain on the investment of $239,000.
|
NOTE
6—PROPERTY, EQUIPMENT AND
SOFTWARE
|
Property,
equipment and software, net
consist of the following:
|
|
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
|
|
We
depreciate fixed
assets on a straight-line basis over their estimated useful
lives. Leasehold improvements are amortized over the lesser of the
estimated remaining life of the leasehold or the remaining term of the lease.
Depreciation and amortization expense associated with property, equipment
and
software that we held and used for our continuing operations is reported
on the
following lines on our Consolidated Statements of Operations:
|
|
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
|
|
In
addition to the
depreciation and amortization reflected in the above table, the line titled
Income from discontinued operation, net
on our Consolidated Statements
of Operations included depreciation and amortization expenses of
$1.9 million for fiscal 2007, $3.6 million for fiscal 2006 and
$2.6 million for fiscal 2005. These amounts represent
depreciation and amortization expense that was recorded prior to April 2007
when
these assets were classified as held for sale. Property, equipment,
software and capitalized leases used by our operations that are held-for-sale
are reported as
Current assets—held-for-sale
on our Consolidated
Balance Sheets. See Note 15—
Discontinued Operations
for
additional information.
The
cost of assets
acquired under capital leases for our continuing operations was approximately
$0.3 million at September 30, 2007 and $0.5 million at
September 30, 2006. The related accumulated depreciation and amortization
was $0.2 million at September 30, 2007 and $0.4 million at
September 30, 2006.
|
NOTE
7—GOODWILL AND OTHER INTANGIBLE
ASSETS
|
Goodwill
The
following table
summarizes changes in the carrying amount of goodwill during fiscal years
2007
and 2006 for our continuing and discontinued operations. The goodwill
for our continuing operations is reported on the line titled
Goodwill
on our Consolidated Balance Sheets, while the goodwill for our
discontinued
operations is included in the line titled
Current
assets—held-for-sale.
|
|
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
|
|
As
a general
practice, we test goodwill for impairment during the fourth quarter of each
fiscal year at the reporting unit level using a fair value approach in
accordance with SFAS 142. If an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting unit
below
its carrying value, we would evaluate goodwill for impairment between annual
tests. One such triggering event is when there is a
more-likely-than-not expectation that a reporting unit or a significant portion
of a reporting unit will be sold or otherwise disposed of. Hence, our
intention to sell the majority of our GBPO and PSSI assets and liabilities
triggered a requirement to review the goodwill associated with these asset
groups for impairment. Because we intend to divest portions of two
reporting units, we tested each business within our PSSI and GBPO segments
for
impairment.
We
reviewed the
goodwill for all asset groups classified as held-for-sale during the quarter
ended June 30, 2007. In September 30, 2007, we reviewed for impairment
the goodwill assets classified as held-for-sale, as well goodwill for our
assets
classified as held and used. As a result of the June and September
reviews, we identified the need to reduce goodwill by $8.5 million for our
wind-down operations and $2.5 million for our discontinued GBPO
operations.
Other
Intangible Assets, Net
Initially
in April
2007, we classified our VSA operations as held-for-sale. At that time
we suspended all depreciation and amortization of long-term VSA assets in
accordance with SFAS 144. As of September 30, 2007, we removed our
VSA business from the held-for-sale classification. We made this
decision because the VSA business supports a portion of our EPP segment and
because we believe the return for our stockholders would be greater if we
were
to continue to operate the VSA business for the near term. At that
time we reclassified the VSA assets back to held and used and we determined
that
the carrying value at April 2007, adjusted for depreciation and amortization
that would have been recognized through September 2007, was less than fair
value
at September 30, 2007. As a result, we were required to
recognize an impairment loss of $0.7 million. This impairment
loss was allocated to our intangible assets based upon the amortization we
would
have
accrued if VSA
had never been classified as held-for-sale. The following table
summarizes our
Other intangible assets, net
, for our continuing
operations:
|
|
|
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
|
|
Amortization
expense for other intangible assets was $3.6 million for fiscal year 2007,
$4.3 million for fiscal year 2006 and $4.5 million for fiscal year
2005, all of which is related to continuing operations. As of
September 30, 2007, we expect to recognize the following amortization
expense on other intangible assets over the next five years:
(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
|
LEGAL
ISSUES
From
time to time
during the normal course of business, we are a party to litigation and/or
other
claims. At September 30, 2007, none of these matters were
expected to have a material impact on our financial position, results of
operations or cash flows. At September 30, 2007 and 2006, we had
legal accruals of $1.0 million and $1.4 million based upon estimates
of key legal matters.
In
November 2003,
we were granted conditional amnesty in relation to a Department of Justice
Antitrust Division investigation involving the child support payment processing
industry. We have cooperated, and will continue to cooperate, with
the investigation and, therefore, will continue to incur legal
costs.
On
May 31,
2006, we received a subpoena from the Philadelphia District Office of the
Securities and Exchange Commission requesting documents relating to financial
reporting and personnel issues. We have cooperated, and will continue
to cooperate fully, in this investigation.
On
November 20,
2006, we were served with a purported class action lawsuit on behalf of
purchasers of our common stock from November 29, 2001 to October 25,
2006. Subsequently, the complaint was amended to narrow the purported
class period. The suit alleges that Tier and certain of our former
officers issued false and misleading statements from November 2001 to
May 2006, but did not specify the damages being sought. On
July 24, 2007, the United States District Court for the Eastern District of
Virginia entered an order denying the plaintiff's motion for class certification
for the purported class action lawsuit. The time to appeal the
Court's order has expired without an appeal. We have a motion pending
before the court to dismiss the lawsuit in its entirety. We believe
we have minimal, if any, exposure associated with this complaint. See
Note 16—
Subsequent Events
for information on key recent events
associated with this case.
BANK
LINES OF
CREDIT
Throughout
the
majority of fiscal 2006, the first quarter of fiscal 2007 and the majority
of
the second quarter of fiscal 2007, we had a credit facility that allowed
us to
obtain letters of credit up to a total of $15.0 million and also granted
the lender a perfected security interest in cash collateral in an amount
equal
to all issued and to be issued letters of credit. This credit
facility was scheduled to mature on March 31, 2007. On
March 23, 2007, we elected to reduce the line of credit to
$10.0 million and entered into an amendment to extend the term of the
credit facility for an additional six months. On September 26,
2007, we entered into a second amendment to this credit facility. We
elected to reduce the line of credit to $7.5 million. In
addition, this amendment eliminated the unused facility fee and reduced the
issuance fee from 1.0% to 0.75% per annum. Currently, this credit
facility is scheduled to mature on September 30, 2008. The
amendment grants the lender a perfected security interest in cash collateral
in
an amount equal to all issued and to be issued letters of credit. As
of September 30, 2007, $5.5 million of letters of credit were
outstanding under this credit facility.
OTHER
LETTERS
OF CREDIT
At
September 30,
2006, we had a $3.0 million letter of credit outstanding that was
collateralized by certain securities in our investment
portfolio. This letter of credit was issued to secure a performance
bond. Effective July 2007, this letter of credit was
released. We reported the investments used to collateralize the
letters of credit as
Restricted investments
on our Consolidated Balance
Sheets.
CREDIT
RISK
We
maintain our
cash in bank deposit accounts which, at times, may exceed federally insured
limits. We have not experienced any losses in such accounts and
believe that any associated credit risk is
de minimis
. As
can be seen in Note 5—
Investments
, we held $72.9 million of cash
equivalents, unrestricted marketable securities, and restricted investments
at
September 30, 2007. All of our investments are in highly liquid
AAA securities, most of which are government-guaranteed. Because we
have a stringent policy of investing only in securities that are essentially
risk-free, our investments are not exposed to significant write-downs in
fair
value that have plagued other financial institutions.
OPERATING
AND
CAPITAL LEASE OBLIGATIONS
We
lease our
principal facilities and certain equipment under non-cancelable operating
and
capital leases, which expire at various dates through fiscal year
2011. Future minimum lease payments for non-cancelable leases with
terms of one year or more are as follows:
(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.
|
|
Certain
leases
contain provisions for rental options and rent escalations based on scheduled
increases, as well as increases resulting from a rise in certain costs incurred
by the lessor. We recorded rent expense of $2.8 million during
fiscal 2007, $2.8 million during fiscal 2006 and $3.1 million during
fiscal 2005.
GUARANTEES
In
conjunction with
our participation as a subcontractor in a three-year contract for unemployment
insurance-related services, we guaranteed the performance of the prime
contractor on the project. The contract does not establish a
limitation to the maximum potential future payments under the guarantee;
however, we estimate that the maximum potential undiscounted cost of the
guarantee is $4.5 million. In accordance with FASB
Interpretation No. 45—
Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect
Guarantees
of
Indebtedness of Others
, we valued this guarantee based upon the sum of
probability-weighted present values of possible future cash flows. As
of September 30, 2007, the remaining liability was $0.1 million, which
is being amortized over the term of the contract. We believe that the
probability is remote that the guarantee provision of this contract will
be
invoked.
PERFORMANCE
BONDS
Under
certain
contracts, we are required to obtain performance bonds from a licensed surety
and to post the performance bonds with our customers. Fees for
obtaining the bonds are expensed over the life of each bond and are included
in
Direct costs
on our Consolidated Statement of Operations. At
September 30, 2007, we had $16.4 million of bonds posted with
clients. There were no claims pending against any of these
bonds.
EMPLOYMENT
AGREEMENTS
As
of
September 30, 2007, we have employment and change of control agreements
with five executives, a former executive and 24 other key
managers. During October 2007, we entered into employment agreements
with two of our executives, which supersede the change of control agreements
referenced above. See Note 16—
Subsequent Events
for
information regarding these employment agreements. If certain termination
or
change of control events were to occur under the 30 remaining contracts,
we
could be required to pay up to $5.5 million. See Note
16—
Subsequent Events
for information regarding a key change to the
status of two of our executive officers.
As
of
September 30, 2007, we also had agreements with 32 key employees under
which these individuals would be entitled to receive three to twelve months
of
their base salaries over a one-to-two year period, after completing defined
employment service periods. We expect to recognize a maximum expense
of $0.9 million during fiscal year 2008 and $0.3 million during fiscal
year 2009 for these agreements.
As
of
September 30, 2007, we had change of control agreements with 38 key
employees within our held-for-sale operations, which we entered into in February
2007. Under these agreements, individuals are entitled to receive
three to twelve months of their base salaries plus three to twelve months
of
COBRA benefits should certain change of control events occur. Under
these agreements we would be required to pay up to $2.4 million if a change
of control occurred.
INDEMNIFICATION
AGREEMENTS
We
have
indemnification agreements with each of our directors and a number of key
executives. These agreements provide such persons with indemnification to
the
maximum extent permitted by our Articles of Incorporation or Bylaws or by
the
General Corporation Law of the State of Delaware, against all expenses, claims,
damages, judgments and other amounts (including amounts paid in settlement)
for
which such persons become liable as a result of acting in any capacity on
our
behalf, subject to certain limitations. We are not able to estimate
our maximum exposure under these agreements.
FORWARD
LOSSES
Throughout
the term
of our customer contracts, we forecast revenues and expenses over the total
life
of the contract. In accordance with generally accepted accounting
principles, if we determine that the total expenses over the entire term
of the
contract will probably exceed the total forecasted revenues over the term
of the
contract, we record an accrual in the current period equal to the total
forecasted losses over the term of the contract, less losses recognized to
date,
if any. As of September 30, 2007 and 2006, accruals totaling
$0.9 million and $1.0 million, respectively, were included in
Current liabilities—held-for-sale
on our Consolidated Balance
Sheets. Changes in the accrued forward losses are reflected in
Income from
discontinued operations, net
on our Consolidated
Statements of Operations.
|
NOTE
9—SHAREHOLDERS’ EQUITY
|
In
July 2005, we
changed our state of incorporation from California to Delaware and converted
all
shares of our Class B common stock to $0.01 par value common
stock. Accordingly, as of September 30, 2007 and 2006,
no
shares
of
Class B common stock were authorized or outstanding. As of September
30, 2007, a total of 44,259,762 shares of common stock were authorized, of
which
19,540,206 shares were outstanding, and a total of 4,579,047 shares of preferred
stock were authorized, of which none were outstanding. Under our
current credit facility, we are prohibited from declaring or paying any
dividends (see Note 8—
Commitment and Contingencies
)
COMMON
STOCK
REPURCHASE PROGRAM
In
October 1998, our Board of Directors authorized the repurchase of up to one
million shares of Class B common stock. The purchases were to be made in
the open market or in privately negotiated transactions at the discretion
of our
management, depending on financial and market conditions or as otherwise
provided by the Securities and Exchange Commission and the Nasdaq rules and
regulations. In April 2003, our Board increased the number of
shares authorized for repurchase to two million shares. As of
September 30, 2007, we had repurchased 884,400 shares of common stock for
$8.7
million. All such repurchases of our common stock were made prior to
fiscal 2004. All stock purchased under the common stock repurchase
program is reported as
Treasury stock
on our Consolidated Balance
Sheets.
STOCKHOLDER
RIGHTS PLAN
On
July 12,
2007, we amended our Stockholder Rights Plan, or the Rights Plan. The
amendment increased the beneficial ownership threshold for an acquiring person
from 10% to 15%. The adoption of the Rights Plan was originally
approved by our Board of Directors on January 10, 2006. On that
date, our Board of Directors declared a dividend distribution of one right
for
each outstanding share of our common stock to stockholders of record on the
close of business on January 23, 2006. Upon the occurrence of
certain events, each right entitles the registered holder to purchase from
us
one one-thousandth of a share of Series A Junior Participating Preferred
Stock,
$0.01 par value per share, at a purchase price of $50.00 in cash, subject
to
adjustment. The rights are intended to protect our stockholders in
the event of an unfair or coercive offer to acquire us and to provide our
Board
of Directors with adequate time to evaluate unsolicited offers.
EQUITY
INCENTIVE PLAN
Under
our
Amended and Restated 2004 Stock Incentive Plan
, options for 2,113,091
shares of common stock were outstanding at
September 30, 2007.
|
NOTE
10—SHARE-BASED PAYMENT
|
Stock
options are
issued under the Amended and Restated 2004 Stock Incentive Plan, or the
Plan. The Plan provides our Board of Directors with discretion in
creating employee equity incentives, including incentive and non-statutory
stock
options. Generally, these options vest as to 20% of the underlying
shares each year on the anniversary of the date granted and expire in ten
years. At September 30, 2007, there were 2,321,722 shares of
common stock reserved for future grant under the Plan. On
October 1, 2007 and October 29, 2007, we issued 775,000 and 60,000,
respectively, options to purchase stock to several key employees. See
Note 16—
Subsequent Events
for additional information.
Stock-based
compensation expense for all stock-based compensation awards granted was
based
on the grant-date fair value using the Black-Scholes model. We
recognize compensation expense for stock option awards on a ratable basis
over
the requisite service period of the award. Stock-based compensation
expense was $1.7 million for fiscal year ended September 30, 2007 and
$2.0 million for fiscal year ended September 30, 2006.
Prior
to adopting
SFAS 123R on October 1, 2005, we applied the recognition and measurement
principles of Accounting Principles Board Opinion No. 25—
Accounting for
Stock-Based Compensation
and provided the pro forma disclosures previously
required by SFAS 123. Prior to adopting SFAS 123R, we did not include
compensation expense for employee stock options in net income (loss), since
all
stock options granted under those plans had an exercise price equal to the
market value of the common stock on the date of the grant. The
following table illustrates the effects on net income (loss) after tax and
earnings per common share as if we had applied the fair value recognition
provisions of SFAS 123 to stock-based compensation during fiscal year ended
September 30, 2005:
(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
|
)
|
The
following
tables shows the weighted average assumptions we used to calculate fair value
of
share-based options using the Black-Scholes model, as well as the
weighted-average fair value of options granted and the weighted-average
intrinsic value of options exercised.
|
|
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
|
|
Expected
volatilities are based on both the implied and historical volatility of our
stock. In addition, we used historical data to estimate option
exercise and employee termination within the valuation model.
Stock
option
activity for the fiscal year ended September 30, 2007 is as
follows:
|
|
|
|
|
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
|
|
As
of
September 30, 2007, a total of $1.4 million of unrecognized
compensation cost related to stock options, net of estimated forfeitures,
was
expected to be recognized over a 3.2 year weighted-average
period.
|
NOTE
11—RELATED PARTY
TRANSACTIONS
|
NOTES
AND
INTEREST RECEIVABLE
At
September 30, 2006, we had $4.3 million of full-recourse notes and
interest receivable from a former Chairman of the Board and Chief Executive
Officer. These notes matured in 2007 and payment of principal and
accrued interest on all notes was received during fiscal year
2007. Approximately $2.2 million of these full-recourse notes
were issued in connection with the exercise of options to purchase shares
of our
common stock.
The
notes with the
former officer were entered into prior to the effective date of the
Sarbanes-Oxley Act of 2002. We have not entered into any notes with any
directors or officers following the effective date of that act.
These
notes and the
associated accrued interest are reported as
Notes receivable from related
parties
in the shareholders’ equity section of our Consolidated Balance
Sheets. Interest earned on these notes is included in
Common
stock and paid-in-capital
in the shareholders’ equity section of our
Consolidated Balance Sheets.
OTHER
RELATED-PARTY TRANSACTIONS
CPAS
Throughout
the
majority of fiscal 2007, we owned a 46.96% interest in CPAS, a Canadian-based
supplier of pension administration software systems. We accounted for
this investment using the equity method. We sold our interest back to
CPAS on June 29, 2007 for $4.8 million (USD), which resulted in an
$80,000 gain on the disposition of our equity interest in CPAS and the
realization of a $0.2 million gain on foreign currency
translation.
During
the fiscal
year ended September 30, 2007, we recognized $137,000 in revenue related to
a pension project in which we are a subcontractor to CPAS. In
addition, CPAS is a subcontractor on a pension project for which we are the
prime contractor.
Nuance
Communications, Inc.
During
the fiscal
year ended September 30, 2007, we purchased $131,000 of software licenses,
maintenance and related services from Nuance Communications, Inc., a company
affiliated with a member of our Board of Directors.
ITC
Deltacom, Inc.
During
the fiscal
year ended September 30, 2007, we purchased $268,000 of telecom services
from ITC Deltacom, Inc., a company affiliated with a member of our Board
of
Directors.
|
NOTE
12—SEGMENT INFORMATION
|
As
described more
fully in Note 15—
Discontinued Operations
, in April 2007, we announced
our intention to seek buyers for the sale of the majority of our PSSI and
GBPO
operations. The assets and liabilities associated with these disposal
groups were classified as
Current assets—held-for-sale
and
Current
liabilities—held-for-sale
on our consolidated Balance
Sheets. The results of operations for these disposal groups reported
as
Income from discontinued operations, net
on our Consolidated
Statements of Operations.
Because
of our
decision to sell the majority of PSSI and GBPO, we have only one reportable
segment as of September 30, 2007, comprised primarily of Electronic Payment
Processing, or EPP segment. In addition, we expect to retain and
wind-down three minor businesses from our former PSSI and GBPO
segments. The following table presents the results of operations for
our EPP segment and our wind-down operations for fiscal years 2007, 2006
and
2005. As of September 30, 2007, our Senior Management team
allocates resources to and assesses the performance of our operations in
three
major categories: EPP, Wind-down and Discontinued Operations. See
Note 15—
Discontinued Operations
for additional information
regarding the discontinued operations of our PSSI and GBPO
segments.
The
Corporate &
Eliminations column of the following table includes corporate overhead and
other
costs that could not be directly assigned either to our EPP operations or
to our
discontinued operations, as well as eliminations for transactions between
our
continuing and discontinued operations. The operations reported for
fiscal years 2006 and 2005 are consistent with those reported for the fiscal
year ended September 30, 2007.
|
|
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
|
)
|
Our
total assets
for each of these businesses are shown in the following table:
|
|
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.
|
|
See
Note
15—
Discontinued Operations
for a breakdown of assets that are
classified as held-for-sale.
The
components of
deferred tax liabilities and assets are as follows:
|
|
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)
|
|
$
|
—
|
|
|
$
|
—
|
|
At
September 30, 2007, we had $0.6 million of excess foreign tax
carryforwards for the purpose of offsetting future U.S. federal income
tax. Such foreign tax carryforwards will begin to expire in
2010. The benefit from the foreign tax carryforwards may be limited
in certain circumstances. We believe sufficient uncertainty exists
regarding the realizability of the foreign tax carryforwards such that a
full
valuation allowance is required.
At
September 30, 2007, we had $73.1 million of federal net operating loss
carryforwards, which expire beginning in fiscal 2018. At September
30, 2007, we had $62.6 million of state net operating loss carryforwards,
which begin to expire in fiscal 2008. Of these amounts,
$48.6 million of federal net operating loss carryforwards and
$29.6 million of state net operating loss carryforwards were acquired in
the acquisition of OPC during fiscal 2002. Our ability to utilize the
acquired federal net operating loss carryforward is limited to $3,350,000
per
year pursuant to Internal Revenue Code Section 382, which imposes an annual
limitation on the utilization of net operating loss carryforwards following
ownership changes.
At
September 30,
2007, we maintained a full valuation allowance against the net deferred tax
assets due to the uncertainty regarding their utilization. As of
September 30, 2007, a total of $20.6 million of the valuation allowance
related to deferred tax assets for which any subsequently recognized tax
benefits would reduce goodwill and $2.8 million of the valuation allowance
related to deferred tax assets for which any subsequently recognized tax
benefits would increase common stock.
Our
fiscal 2002 tax
return included a $22.5 million loss on disposal of Australian
operations. In fiscal 2003 we requested and received
$6.5 million of federal income tax refunds associated with this
disposal. Although we received the refund in October 2003, we fully
reserved the entire balance because of uncertainty about the final review
and
resolution of this transaction by the Internal Revenue Service. From
October 2003 to February 2007, we increased our reserve by $1.1 million to
recognize the potential interest and penalties we could have incurred if
the
Internal Revenue Service had made an unfavorable decision.
In
March 2007, we
were notified by the Internal Revenue Service that its Joint Committee on
Taxation had completed its review and had approved the $6.5 million
refund. As a result, during the second quarter of fiscal 2007, we
reversed the $6.5 million of reserve for the refund and the
$1.1 million reserve for potential interest and penalties. This
$7.6 million reversal has been recorded on our Consolidated Statement of
Operations as
Income from discontinued operations
.
Significant
components of the provision for income taxes are as follows:
|
|
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
|
|
|
$
|
—
|
|
There
were no
deferred income tax provisions or benefits during the years ended September
30,
2007, 2006 or 2005.
The
effective tax
rate differs from the applicable U.S. statutory federal income tax rate as
follows:
|
|
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
|
%
|
During
2004, we
incurred facility closure and severance costs associated with the relocation
of
our administrative functions from Walnut Creek, California to Reston,
Virginia. During the fourth quarter of fiscal year 2005, we also
moved our Financial Institution Data Match Program offices from New Jersey
to
Michigan. The severance and office closure costs associated with both of
these
relocations are shown in
General and administrative
in our
Consolidated Statements of Operations.
The
following table
summarizes restructuring charges we incurred during fiscal years 2007, 2006
and
2005:
|
|
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
|
|
The
following table
summarizes restructuring liabilities associated with continuing operations
for
fiscal years 2007 through 2005:
(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
|
|
As
shown in the preceding table, we had $0.2 million of
restructuring liabilities associated with our continuing operations at
September 30, 2007 and $0.4 million at September 30,
2006. At September 30, 2007, the entire liability was included
in
Other current liabilities
in the Consolidated Balance
Sheet. At September 30, 2006,
$0.2 million
was included in
Other current liabilities
and $0.2 million was
included in
Other accrued liabilities
. We expect to pay the
remaining $0.2 million liability during fiscal year 2008.
|
NOTE
15—DISCONTINUED OPERATIONS
|
GBPO
and
PSSI Asset Groups
Early
in fiscal
2007, we undertook a strategic initiative to determine how we could best
utilize
our financial and management resources. As a result of that
initiative, we concluded that maximum value to our stockholders could be
achieved if we focused on our core business—Electronic Payment
Processing. As a result, in April 2007, we announced our intention to
seek buyers for the sale of the majority of our PSSI and GBPO
segments. Beginning in the quarter ended June 30, 2007, we classified
the assets and liabilities associated with these divestures as
Current
assets—held-for-sale
and
Current liabilities—held-for-sale
in
accordance with SFAS 144—
Accounting for the Impairment or Disposal of
Long-Lived Assets.
Because
the
practice areas that comprise the GBPO and PSSI segments have widely divergent
operations and customer bases, each practice area, which represents a separate
business, is being marketed for sale separately. In total, we expect
to divest these practice areas through a series of at least five transactions
to
separate buyers. During the quarter ended September 30, 2007, we
removed our Voice and Systems Automation, or VSA, operation, which is a practice
area within the GBPO segment, from the held-for-sale
classification. We made this decision because the VSA business
supports a portion of our EPP segment and because we believe the returns
for our
stockholders would be greater if we were to continue to operate the VSA business
for the near-term. The decision to reclassify the VSA business to
continuing operations does not impact the classification of the remaining
assets
as held-for-sale on our Consolidated Balance Sheets.
The
following
schedule shows the current carrying value of the assets and liabilities in
the
GBPO and PSSI segments that are in the disposal group as of September 30,
2007
and 2006. Consistent with our other financial statements and
disclosures in this report, we have reclassified certain line items for
historical periods to conform to the current year’s
presentation:
|
|
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
|
|
We
performed
impairment analyses of all of held-for-sale assets in accordance with SFAS
144
and SFAS 142. As a result of this analysis, we determined that two
businesses within the GBPO segment had a carrying value that exceeded fair
value. As a result, during fiscal 2007, we recorded an impairment
expense of $2.6 million, of which $2.5 million relates to goodwill impairment
under SFAS 142 and $0.1 million relates to long-lived asset impairment
under
SFAS 144 during fiscal 2007. This impairment is included in
Income from discontinued operations.
Except
for minor
transitional activities, we do not believe that we will have any ongoing
involvement or cash flows in these businesses. Thus, we classified
the results of operations for these businesses as
Income from discontinued
operations, net
on our Consolidated Statements of Operations in accordance
with SFAS 144. The following table summarizes our revenue and pre-tax
income generated by these operations in fiscal years 2007, 2006 and
2005.
|
|
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
|
|
Australian
operations
In
fiscal 2002, we
disposed of most of our Australian operations and in fiscal 2003 we requested
and received $6.5 million of federal income tax refunds associated with
this disposal. Although we received the refund in October 2003, we
fully reserved the entire balance because of uncertainty about the final
review
and resolution of this transaction by the Internal Revenue
Service. Since October 2003, we increased our reserve by
$1.1 million to recognize the potential interest and penalties we could
have incurred if the Internal Revenue Service made an unfavorable
decision.
In
March 2007, we
were notified by the Internal Revenue Service that its Joint Committee on
Taxation had completed its review and had approved the $6.5 million of
refund. As a result, during the second quarter of fiscal 2007, we
reversed the $6.5 million of reserve for the refund and the
$1.1 million reserve for potential interest and penalties. This
$7.6 million reversal has been recorded on our Consolidated Statements of
Operations as
Income from discontinued operations
in accordance with
SFAS 144.
In
May 2007 we were
notified by the Australian government that our operations in Australia, which
were primarily disposed of in fiscal 2002, were able to be fully
liquidated. During the quarter ended June 30, 2007, we recorded
net income of $0.5 million associated with the reversal of certain accruals
that had been recorded in anticipation of costs, which did not actualize,
associated with the final close-out of the Australian operations.
|
NOTE
16—SUBSEQUENT EVENTS
|
Employment
Agreements
On
October 29,
2007, we entered into two-year employment agreements with Michael A. Lawler,
Senior Vice President, Electronic Payment Processing, and Steven M. Beckerman,
Senior Vice President, Government Business Process Outsourcing. Under
the terms of their individual agreements, Mr. Lawler is entitled to a base
salary of $237,000 per annum and Mr. Beckerman is entitled to a base salary
of
$220,000 per annum. The employment agreements entitle each executive
to participate in any Company incentive plans, programs and/or arrangements
applicable to senior-level executives, assuming satisfaction of applicable
performance goals. In addition, each executive is entitled to
participate in any equity-based plans and any executive fringe benefit plans,
programs or arrangements applicable to senior-level executives. In
the event that an executive's employment is terminated as a result of death,
certain instances of disability, resignation for prescribed events of "Good
Reason," or without cause he will be entitled to, among other things one
year's
base salary, plus twelve months of COBRA health continuation
benefits. If an executive were terminated by the company within one
year after a change in control or if the executive resigned for prescribed
events of "Good Reason" within one year after a change in control, the executive
would be entitled to receive two times his base salary, and a bonus equal
to two
times the average annual bonus paid to him during the past three years, plus
eighteen months of COBRA health continuation benefits. In the event
of a defined change of control and loss of employment, all options granted
on
August 24, 2006 would vest immediately and all other options that would
have vested within eighteen months of the date of termination would immediately
vest.
Stock
Option
Grants
On
October 1,
2007 and October 29, 2007, we awarded options to purchase 775,000 and
60,000, respectively, shares of common stock to several key corporate employees
and key employees in our EPP segment, none of which are executive
officers. These options were awarded to individuals as an incentive
to promote stability in our ongoing operations.
Purported
Class Action Lawsuit
On
December 5,
2007, the United States District Court for the Eastern District of Virginia
granted our motion to dismiss plaintiff's complaint but permitted plaintiff
an
opportunity to file an amended complaint. Plaintiff's amended
complaint must be filed by December 28, 2007.
Acceleration
of Director Grants
On
August 24, 2006, each of our independent directors was issued a stock
option under the Company’s 2004 Amended and Restated 2004 Stock Incentive Plan
to purchase 40,000 shares of our common stock at an exercise price of $5.95
per
share. When initially granted, the options vested at the rate of 20% on
each anniversary of the grant date that each recipient remained on the Board
of
Directors and vested 100% upon a change in control. On December 10,
2007, the Compensation Committee of the Board of Directors passed a resolution
that accelerated the vesting of these options in full as of December 7,
2007.
Executive
Officer Change of Employment Status
On
December 12, 2007, we agreed with Deanne M. Tully that she would cease to
serve as Vice President, General Counsel and Corporate Secretary of Tier,
effective March 31, 2008. We have entered into a Transition
Agreement, or the Agreement, with Ms. Tully dated December 12, 2007, which
provides that, if she does not resign and is not terminated for cause prior
to
March 31, 2008, and if she satisfies the conditions of the Executive
Severance and Change in Control Benefits Agreement, or the Severance Agreement,
dated July 30, 2003 between Ms. Tully and Tier, Ms. Tully will receive 12
months’ base salary, COBRA premiums for the shorter of 12 months or the period
during which she is eligible for COBRA, pursuant to the terms of the Severance
Agreement, and up to $7,500 for expenses related to outplacement incurred
in
2008. The Agreement also provides that Ms. Tully will serve as a
consultant to Tier, to ensure a smooth transition, for six months following
March 31, 2008, for a monthly retainer of $18,333.33.
On
February 12, 2007, we entered into a Separation Agreement and Release, or
the Separation Agreement, with Todd F. Vucovich, Senior Vice President, Packaged
Software and Systems Integration, in which Mr. Vucovich resigned his position
effective November 30, 2007. Under the terms of the Separation
Agreement, Mr. Vucovich is entitled to a lump sum severance payment equal
to 6
months' salary, 12 months' COBRA premiums, $75,000 for relocation
reimbursement, and up to $7,500 for expenses related to outplacement
incurred. On November 15, 2007, we entered into Amendment No. 1
to the Separation Agreement and Release, which revised the separation date
to
December 31, 2007 and provided Mr. Vucovich, in addition to the sums
described above, an additional $10,000.
|
SELECTED
QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
The
following
tables set forth certain unaudited consolidated quarterly statements of
operations data for each of the eight fiscal quarters ended September 30,
2007. In our opinion, this information has been prepared on the same
basis as the audited Consolidated Financial Statements contained
herein. This information should be read in conjunction with our
Consolidated Financial Statements and the notes thereto appearing elsewhere
in
this report. Our operating results for any one quarter are not
necessarily indicative of results for any future period.
|
|
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.
|
|