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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 1-7516

KEANE, INC.
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

As of June 30, 2004, there were issued and outstanding 61,787,078 shares of the registrant's Common Stock (excluding 14,042,912 shares held in treasury) and no shares of the registrant's Class B Common Stock.

Keane, Inc.

Table of Contents

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Keane, Inc.

Part I. Financial Information

Item 1. Financial Statements

Keane, Inc.
Unaudited Condensed Consolidated Statements of Income

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Keane, Inc.

Unaudited Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Keane, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Keane, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1.     Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of Keane, Inc. and our wholly and majority owned subsidiaries. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of operations for the interim periods reported and of our financial condition as of the date of the interim balance sheet have been included. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004 or for any other period.

The balance sheet at December 31, 2003 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation. Such reclassifications have no effect on previously reported net income or stockholders' equity.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004.

Note 2.     Earnings Per Share Data

The computation of earnings per share for the three and six months ended June 30, 2004 and 2003 is as follows (in thousands, except per share data):

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Potential common shares consist of employee stock options and restricted common stock. Employee stock options to purchase 1,378,836 and 1,809,734 shares for the three months ended June 30, 2004 and 2003, and 1,352,097 and 2,914,559 shares for the six months ended June 30, 2004 and 2003, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the exercise price of the stock options was greater than the average share price of the common shares during the period and, therefore, their effect would have been anti-dilutive.

Our 2.0% Convertible Subordinated Debentures due 2013 ("Debentures") are convertible at the option of the holder into shares of our common stock at an initial conversion rate of 54.4989 shares of common stock per $1,000 principal amount of Debentures, which is equivalent to an initial conversion price of approximately $18.349 per share. The Debentures become convertible under the following circumstances: (a) during any fiscal quarter commencing after September 30, 2003 when, among other circumstances, the closing price per share of our common stock is more than 120% of the conversion price (approximately $22.019 per share) for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter; (b) during the five business days after any five consecutive trading day period in which the trading price per $1,000 principal amount of Debentures for each day of that period was less that 98% of the product of the closing sale price per share of our common stock and the number of shares issuable upon conversion of $1,000 principal amount of the Debentures; (c) if the Debentures have been called for redemption; or (d) upon the occurrence of specified corporate transactions. The total amount of shares issuable upon the conversion of the Debentures is approximately 8.2 million.

For the quarter and six month period ended June 30, 2004, the 8.2 million shares issuable upon the conversion of the Debentures were not included in the computation of diluted earnings per share because, in accordance with their terms, the Debentures had not yet become convertible.

During the quarter ended June 30, 2004, we adopted the provisions of Emerging Issues Task Force ("EITF") Issue No. 03-6 ("EITF 03-6"), "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share," which requires that convertible participating securities should be included in the computation of basic earnings per share using the two-class method. Our Debentures are not participating securities under the provisions of EITF 03-6 as they do not participate in undistributed earnings with our common stock. No separate disclosure of basic or diluted earnings per share has been made for the Class B common stock as the impact was immaterial and, effective February 1, 2004, all of the Class B common stock was converted into shares of our common stock. In addition, there was no impact on the basic and diluted earnings per share for our common stock for all periods presented in the accompanying condensed consolidated statements of income. See Note 8 "Capital Stock" for further discussion.

Note 3.     Stock-Based Compensation

We have stock-based compensation plans for which we apply the provisions of Accounting Principles Board ("APB") Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," to our stock-based compensation and, accordingly, we use the intrinsic value-based method to account for stock option grants and restricted stock awards. We grant stock options for a fixed number of shares to employees with an exercise price equal to the closing price of the shares at the date of grant and, therefore, do not recognize compensation expense. We also grant restricted stock for a fixed number of shares to employees for nominal consideration. In 2003, in connection with our acquisition of a majority interest in

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Worldzen, Inc., now Keane Worldzen, Inc. ("Keane Worldzen"), certain employees were granted Keane Worldzen stock options. In accordance with Financial Accounting Standards Board ("FASB") Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving Stock Compensation," and Statement of Financial Accounting Standards ("SFAS") No. 141 ("SFAS 141"), "Business Combinations," these Keane Worldzen stock options were recorded as unearned compensation at the date of acquisition and vest over the life of the stock option. Compensation expense related to restricted stock awards and the Keane Worldzen stock options is recorded ratably over the restriction and vesting period, respectively, and is included in the selling, general, and administrative expenses in the accompanying unaudited condensed consolidated statements of income. Our Employee Stock Purchase Plan ("ESPP") is non-compensatory as defined in APB 25 and, accordingly, we do not recognize compensation expense in our consolidated financial statements.

We have adopted the disclosure-only provisions of SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation—Transition and Disclosure," an amendment of SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation." Accordingly, no compensation expense has been recognized for our stock-based compensation plans other than for restricted stock and certain stock options.

Had compensation expense for our stock-based compensation plans been determined based on the fair value at the grant dates as calculated in accordance with SFAS 123, our net income and earnings per share for the three and six months ended June 30, 2004 and 2003 would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):

Note 4.     Comprehensive Income and Accumulated Other Comprehensive Loss

Total comprehensive income (i.e., net income plus available-for-sale securities valuation adjustments, currency translation adjustments and adjustments related to a foreign defined benefit plan, net of tax) was $5.7 million and $7.2 million for the three and six months ended June 30, 2004, respectively, and was $8.2 million and $18.6 million for the three and six months ended June 30, 2003, respectively.

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During the First Quarter of 2004, we closed our United Kingdom ("UK") defined benefit plan ("UK DBP") to future salary accruals effective April 1, 2004. Accordingly, we accounted for the closing of the UK DBP as a curtailment under SFAS No. 88 ("SFAS 88"), "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." In the First Quarter of 2004, we recorded a curtailment loss of approximately $0.2 million to expense the unrecognized prior service cost, and we recorded an additional required minimum pension liability of approximately $5.2 million through accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. As of June 30, 2004, the UK pension liability was approximately $10.6 million and is included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.

Note 5.     Business Acquisitions

Nims Associates, Inc.

On February 27, 2004, we acquired Nims Associates, Inc. ("Nims"), an information technology and consulting services company with offices in the Midwest and Advanced Development Centers ("ADCs") in Indianapolis and Dallas to expand our customer base, primarily in the financial and insurance industries. In exchange for all of Nims' outstanding capital stock, we paid $18.2 million in cash to the shareholders of Nims, with the potential to pay up to an additional $15.0 million in earn-out consideration over the next three years, contingent upon the achievement of certain future financial targets. The additional payments for earn-out consideration, if any, will be accounted for as additional purchase price. The acquisition was accounted for under the purchase method in accordance with SFAS 141 and SFAS No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." The purchase price for this acquisition may be subject to further refinements based on future adjustments relating to the value of the acquired net assets. The portion of the purchase price related to the intangible assets has been finalized and was identified by independent appraisers utilizing standard valuation procedures and techniques. The total cost of the acquisition through June 30, 2004 is $23.1 million, which includes net assets acquired of approximately $5.2 million, goodwill of approximately $10.8 million and intangible assets of $7.0 million, the majority of which is being amortized on a straight-line basis over 10 years, and approximates the expected period of benefit. Total assets acquired of $8.8 million consisted primarily of accounts receivable of $5.6 million. The operating results of Nims have been included in our unaudited condensed consolidated statements of income beginning March 1, 2004.

At the date of acquisition, we entered into a plan to exit certain activities, to consolidate facilities and to implement a workforce reduction of 22 non-billable employees. As a result, we recorded a restructuring liability of $1.4 million related to the lease obligations and certain other costs for those facilities and $0.3 million related to severance and retention. In accordance with EITF Issue No. 95-3 ("EITF 95-3"), "Recognition of Liabilities in Connection with a Purchase Business Combination," these costs, which are not associated with the generation of future revenues and have no future economic benefit, are reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired.

Keane Worldzen

On October 17, 2003, we acquired a controlling interest in Keane Worldzen, a privately held Business Process Outsourcing ("BPO") firm. In connection with the acquisition, we paid $9.0 million to acquire the Series A preferred shares of Worldzen Holdings Limited held by

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an unrelated third party. We contributed to Keane Worldzen our Worldzen Holdings Limited shares, $4.3 million in cash and certain assets of our Keane Consulting Group ("KCG"), our business consulting arm. This transaction was accounted for under the purchase method in accordance with SFAS 141 and SFAS 142. As a result of the transaction, we own approximately 62% of Keane Worldzen's outstanding capital stock. The former majority shareholders of Worldzen Holdings Limited contributed their Worldzen Holdings Limited shares to Keane Worldzen in exchange for approximately 38% of Keane Worldzen's outstanding capital stock and are currently members of Keane Worldzen's management. The assets and liabilities contributed to Keane Worldzen were recorded in relation to each shareholder's ownership percentage in Keane Worldzen as follows: (i) carryover basis related to assets and liabilities contributed to Keane Worldzen for which the individual shareholder had a prior interest; and (ii) fair value for assets and liabilities for which an individual shareholder had no prior interest. As a result, we recorded goodwill of approximately $13.8 million in the accompanying condensed consolidated balance sheets.

In connection with the acquisition, we obtained the right to purchase certain of the remaining shares held by the minority shareholders of Keane Worldzen at different times ("call options"). Our first call option is exercisable during the period beginning on January 1, 2006 and ending on December 31, 2006 and is based on a stated value for the underlying shares of $6.5 million. The fair value of the first call option, using a Black Scholes valuation model, is approximately $3.8 million and is included in deferred taxes and other assets, net, in the accompanying condensed consolidated balance sheets. The other call options are exercisable at the fair market value of the underlying shares during the call periods, which are exercisable at certain times during the period January 1, 2007 through December 31, 2009. Since these other call options can only be exercised at the fair value of the underlying shares, no amounts have been recorded for these call options in our condensed consolidated financial statements.

Also in connection with the acquisition, the minority shareholders were given the right to require us to purchase certain of their remaining shares at various times ("put options") subject to the achievement of certain operating and financial milestones related to Keane Worldzen's business performance. The first put option, the term of which is October 17, 2003 through December 31, 2005, is exercisable based on a stated value for the underlying shares of $2.8 million. The fair value of this put option, using a Black Scholes valuation model, was approximately $279,000 at the acquisition date and is currently being recognized as compensation expense in the accompanying consolidated financial statements through the expiration date of the option. The other put options are exercisable at fair market value for the underlying shares during the put periods, which are exercisable at certain times during the period January 1, 2008 through March 1, 2010. Because these other put options can only be exercised at the fair value of the underlying shares, no amounts have been recorded for these put options in our condensed consolidated financial statements.

Also in connection with the acquisition, the minority shareholders granted two Keane Worldzen employees options to purchase an aggregate of approximately 720,000 of the shares of Keane Worldzen held by the minority shareholders. These stock options were granted at an exercise price below the fair market value of the shares at the grant date and vest over six years. In accordance with FIN 44 and APB 25, the intrinsic value of the stock options granted was approximately $0.4 million and was recorded as unearned compensation in Keane Worldzen's consolidated balance sheet. As a result, Keane Worldzen will recognize compensation expense over the vesting period through December 31, 2009.

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In addition to the Nims and Keane Worldzen acquisitions, we completed an acquisition of a business complementary to our business strategy during the Third Quarter of 2002. The merger and consideration costs of this acquisition, which were accounted for using the purchase method of accounting, totaled $13.2 million, which includes a $0.2 million liability adjustment in the First Quarter of 2004. The purchase price included contingent consideration based upon operating performance of the acquired business. During the First Quarter of 2003, we paid an additional $0.9 million related to earn-outs for this acquisition and recorded this amount as additional purchase price.

The results of operations of these acquired companies have been included in our unaudited condensed consolidated statements of income from the date of acquisition. The excess of the purchase price over the fair value of the net assets has been allocated to identifiable intangible assets and goodwill. Identifiable intangible assets associated with these acquisitions are being amortized on a straight-line basis over periods ranging from three to 10 years and approximate the expected periods of benefit. Pro forma results of operations for these acquisitions have not been provided since these acquisitions were not material.

Note 6.     Restructurings

Workforce reductions

In connection with the Nims acquisition noted above, we entered into a plan to reduce workforce by 22 employees, most of whom had a termination date of April 30, 2004. The employees affected in the reduction were non-billable personnel whose responsibilities were integrated into our existing operations to realize the synergies of the two operations. We recorded a liability of $321,000 associated with severance, retention and other termination benefits and expect the plan to be substantially completed by December 31, 2004. In accordance with EITF 95-3, these costs have been reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired. As of June 30, 2004, we had paid $264,000 in severance and retention costs.

During the Second Quarter of 2003, we had a workforce reduction related to one of our North America branches, which included a headcount reduction of 50 employees. In connection with the 2003 workforce reduction, we recorded a charge of $321,000 related to retention and severance costs consisting of salaries, wages, and other direct costs. We also reevaluated the estimates recorded for a restructuring charge taken in 2002 for a workforce reduction, and, as a result, reduced our accruals by $882,000. The net impact during the Second Quarter of 2003 was an expense reduction to our condensed consolidated statements of income of $561,000. During the Third Quarter of 2003, we had an additional workforce reduction for 25 employees related to our business consulting arm. As a result of these workforce reductions, we recorded a total restructuring charge of $1.3 million in 2003, consisting of retention and severance costs. In accordance with SFAS No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal Activities," we accrued for these costs beginning at the time of an employee's notification through the termination date. No further costs are anticipated to be incurred related to either of the two workforce reductions in 2003.

As of June 30, 2004, we had completed all of the terminations related to the reductions in force for our business consulting arm and North America branch, respectively. Cash expenditures for the six months ended June 30, 2004 related to the 2003 severance and retention restructuring accruals were $0.2 million. No further payments related to the 2003 workforce reductions will be paid.

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In the Fourth Quarter of 2002 we recorded a restructuring charge under EITF Issue No. 94-3 ("EITF 94-3"), "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)," of $3.2 million related to a workforce reduction of approximately 229 employees. In 2002, we also had a change in estimate of $251,000 in connection with workforce reduction, which resulted in a net workforce restructuring charge of $2.9 million. Cash expenditures for the six months ended June 30, 2004 related to 2002 workforce reductions were $24,000. No further payments related to the 2002 workforce reductions will be paid.

Branch office closures

In connection with the Nims acquisition noted above, we entered into a plan to exit certain activities and to consolidate certain facilities. As a result, we have recorded an initial restructuring liability of $1.4 million related to the lease obligation and certain other costs for eight facilities. In accordance with EITF 95-3, these costs, which are not associated with the generation of future revenues and have no future economic benefit, are reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired.

During December 2003, in accordance with SFAS 146, we accrued $0.9 million for a restructuring of two of our real estate locations from which we no longer were receiving economic benefit. Additionally, during the Fourth Quarter of 2003, we performed an evaluation of our restructuring balances for properties restructured in prior periods and determined that we over-accrued by $1.0 million, as a result of negotiating early lease terminations or obtaining a subtenant. In prior years, in accordance with EITF 94-3, we performed reviews of our business strategy and concluded that consolidating some of our branch offices was key to our success. Cash expenditures in 2004 related to all branch office closings totaled $4.0 million, which is net of approximately $0.8 million of sublease payments received.

As part of our acquisitions of Metro Information Services, Inc. ("Metro") on November 30, 2001 and SignalTree Solutions ("SignalTree") on March 15, 2002, we entered into a plan to exit certain activities and to consolidate facilities and recorded restructuring liabilities. Included in the total of $4.0 million branch office cash expenditures, were cash payments of $0.8 million and $0.2 million, net of sublease income, for the lease obligations and other expenses associated with the restructured locations assumed with the Metro and SignalTree acquisitions, respectively. As of June 30, 2004, we have a remaining lease obligation liability of approximately $1.1 million and $1.2 million for Metro and SignalTree, respectively. Our lease obligations for Metro and SignalTree extend until April 30, 2007 and December 31, 2007, respectively.

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The activity for the six months ended June 30, 2004 associated with restructuring charges is as follows (in thousands, except per share data):