UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 000-23195
TIER TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
| California | 94-3145844 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
10780 Parkridge Boulevard, Suite 400
Reston, Virginia 20191
(Address of principal executive offices)
Not applicable
(Former name, former address, and former fiscal year, if changed since last report)
(571) 382-1090
(Registrant’s telephone number, including area code)
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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At May 4, 2005, there were 20,356,461 shares of the Registrant’s Class B Common Stock outstanding.
TABLE OF CONTENTS
Private Securities Litigation Reform Act Safe Harbor Statement
Certain statements contained in this report, including statements regarding the development of and demand for our services and our markets, anticipated trends in various expenses, expected costs of legal proceedings and other statements that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements relate to future events or our future financial and/or operating performance and can generally be identified as such because the context of the statement will include words such as “may”, “will”, “intends”, “plans”, “believes”, “anticipates”, “expects”, “estimates”, “shows”, “predicts”, “potential”, “continue”, or “opportunity”, the negative of these words or words of similar import. These forward-looking statements are subject to risks and uncertainties, including the risks and uncertainties described and referred to under Factors That May Affect Future Results beginning on page 19, which could cause actual results to differ materially from those anticipated as of the date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
i
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
| (in thousands) |
March 31, 2005 |
September 30, 2004 |
||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 40,052 | $ | 35,174 | ||||
| Short-term investments |
16,347 | 20,909 | ||||||
| Accounts receivable, net |
20,285 | 16,091 | ||||||
| Unbilled receivables |
6,343 | 5,046 | ||||||
| Short-term portion of notes and accrued interest receivable from related parties |
488 | 405 | ||||||
| Prepaid expenses and other current assets |
7,424 | 6,699 | ||||||
| Total current assets |
90,939 | 84,324 | ||||||
| Property, equipment and software (net of $21,171 and $22,941 depreciation and amortization at March 31, 2005 and September 30, 2004, respectively) |
12,143 | 7,158 | ||||||
| Long-term notes and accrued interest receivable from related parties, less current portion |
2,182 | 2,001 | ||||||
| Goodwill |
40,594 | 37,824 | ||||||
| Other acquired intangible assets, net |
28,454 | 30,761 | ||||||
| Long-term investments |
797 | 10,135 | ||||||
| Restricted investments |
3,391 | 3,329 | ||||||
| Other assets |
1,912 | 1,937 | ||||||
| Total assets |
$ | 180,412 | $ | 177,469 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accrued liabilities |
$ | 7,913 | $ | 7,501 | ||||
| Income taxes payable |
7,139 | 7,007 | ||||||
| Deferred income |
5,587 | 5,269 | ||||||
| Accrued compensation liabilities |
5,088 | 4,623 | ||||||
| Accounts payable |
3,158 | 2,626 | ||||||
| Accrued subcontractor expenses |
3,065 | 2,478 | ||||||
| Other current liabilities |
145 | 228 | ||||||
| Total current liabilities |
32,095 | 29,732 | ||||||
| Other liabilities |
1,935 | 1,787 | ||||||
| Total liabilities |
34,030 | 31,519 | ||||||
| Commitments and contingencies (Note 10) |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, no par value (Class B stock authorized: 42,600 shares; Class B stock issued and outstanding: 20,356 and 20,324 shares at March 31, 2005 and September 30, 2004, respectively) |
172,387 | 172,136 | ||||||
| Notes receivable from shareholders |
(1,773 | ) | (1,773 | ) | ||||
| Accumulated other comprehensive loss |
(252 | ) | (258 | ) | ||||
| Accumulated deficit |
(23,980 | ) | (24,155 | ) | ||||
| Total shareholders’ equity |
146,382 | 145,950 | ||||||
| Total liabilities and shareholders’ equity |
$ | 180,412 | $ | 177,469 | ||||
See Notes to Condensed Consolidated Financial Statements
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended March 31, |
Six Months Ended March 31, |
||||||||||||||
| (in thousands, except per share data) |
2005 |
2004 |
2005 |
2004 |
|||||||||||
| Net revenues |
$ | 35,277 | $ | 29,659 | $ | 66,956 | $ | 56,169 | |||||||
| Costs and expenses: |
|||||||||||||||
| Direct costs |
23,061 | 19,399 | 44,944 | 37,367 | |||||||||||
| General and administrative |
6,871 | 6,293 | 13,751 | 12,593 | |||||||||||
| Selling and marketing |
3,013 | 1,756 | 5,592 | 3,133 | |||||||||||
| Depreciation and amortization |
1,570 | 1,107 | 3,120 | 2,238 | |||||||||||
| Restructuring and other charges |
— | 5 | — | 1,261 | |||||||||||
| Total costs and expenses |
34,515 | 28,560 | 67,407 | 56,592 | |||||||||||
| Income (loss) before other income (loss), income taxes and discontinued operations |
762 | 1,099 | (451 | ) | (423 | ) | |||||||||
| Other income (loss): |
|||||||||||||||
| Equity in net loss of unconsolidated affiliate |
(152 | ) | — | (252 | ) | — | |||||||||
| Net interest income |
519 | 293 | 898 | 570 | |||||||||||
| Total other income |
367 | 293 | 646 | 570 | |||||||||||
| Income before income taxes and discontinued operations |
1,129 | 1,392 | 195 | 147 | |||||||||||
| Provision for income taxes |
20 | 35 | 20 | 70 | |||||||||||
| Net income from continuing operations |
1,109 | 1,357 | 175 | 77 | |||||||||||
| Income (loss) from discontinued operations, net of income taxes |
— | 164 | — | (1,401 | ) | ||||||||||
| Net income (loss) |
$ | 1,109 | $ | 1,521 | $ | 175 | $ | (1,324 | ) | ||||||
| Income from continuing operations, net of income taxes: |
|||||||||||||||
| Per basic share |
$ | 0.06 | $ | 0.07 | $ | 0.01 | $ | — | |||||||
| Per diluted share |
$ | 0.06 | $ | 0.07 | $ | 0.01 | $ | — | |||||||
| Income (loss) from discontinued operations, net of income taxes: |
|||||||||||||||
| Per basic share |
$ | — | $ | 0.01 | $ | — | $ | (0.07 | ) | ||||||
| Per diluted share |
$ | — | $ | 0.01 | $ | — | $ | (0.07 | ) | ||||||
| Net income (loss): |
|||||||||||||||
| Per basic share |
$ | 0.06 | $ | 0.08 | $ | 0.01 | $ | (0.07 | ) | ||||||
| Per diluted share |
$ | 0.06 | $ | 0.08 | $ | 0.01 | $ | (0.07 | ) | ||||||
| Shares used in computing: |
|||||||||||||||
| Basic income (loss) per share |
19,464 | 18,808 | 19,448 | 18,755 | |||||||||||
| Diluted income (loss) per share |
19,539 | 19,217 | 19,573 | 19,083 | |||||||||||
See Notes to Condensed Consolidated Financial Statements
2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
| Three Months Ended March 31, |
Six Months Ended March 31, |
||||||||||||||
| (in thousands) |
2005 |
2004 |
2005 |
2004 |
|||||||||||
| Net income (loss) |
$ | 1,109 | $ | 1,521 | $ | 175 | $ | (1,324 | ) | ||||||
| Other comprehensive income (loss): |
|||||||||||||||
| Unrealized gain (loss) on available-for-sale investments |
(30 | ) | 112 | (78 | ) | (26 | ) | ||||||||
| Foreign currency translation adjustment |
(33 | ) | 21 | 84 | 254 | ||||||||||
| Other comprehensive income (loss) |
(63 | ) | 133 | ||||||||||||