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EX-31.1 - EX-31.1 - ADVISORY BOARD CO | w83659exv31w1.htm |
EX-32.1 - EX-32.1 - ADVISORY BOARD CO | w83659exv32w1.htm |
EX-31.2 - EX-31.2 - ADVISORY BOARD CO | w83659exv31w2.htm |
EXCEL - IDEA: XBRL DOCUMENT - ADVISORY BOARD CO | Financial_Report.xls |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2011
or
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number: 000-33283
THE ADVISORY BOARD COMPANY
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
52-1468699 (I.R.S. Employer Identification Number) |
|
2445 M Street, NW, Washington, D.C. | 20037 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (202) 266-5600
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of August 1, 2011, the company had outstanding 16,199,922 shares of Common Stock, par value
$0.01 per share.
THE ADVISORY BOARD COMPANY
INDEX TO FORM 10-Q
Page No. | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements. |
THE ADVISORY BOARD COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(In thousands, except share and per share amounts)
June 30, | March 31, | |||||||
2011 | 2011 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 35,194 | $ | 30,378 | ||||
Membership fees receivable, net |
197,611 | 179,162 | ||||||
Prepaid expenses and other current assets |
10,873 | 7,069 | ||||||
Deferred income taxes, net |
6,317 | 5,894 | ||||||
Total current assets |
249,995 | 222,503 | ||||||
Property and equipment, net |
33,689 | 29,529 | ||||||
Intangible assets, net |
17,845 | 18,450 | ||||||
Goodwill |
67,155 | 67,155 | ||||||
Deferred incentive compensation and other charges |
54,475 | 46,226 | ||||||
Deferred income taxes, net of current portion |
8,659 | 9,646 | ||||||
Other non-current assets |
11,500 | 11,500 | ||||||
Marketable securities |
83,565 | 86,179 | ||||||
Total assets |
$ | 526,883 | $ | 491,188 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Deferred revenue |
$ | 240,205 | $ | 223,876 | ||||
Accounts payable and accrued liabilities |
58,670 | 51,957 | ||||||
Accrued incentive compensation |
4,922 | 13,609 | ||||||
Total current liabilities |
303,797 | 289,442 | ||||||
Long-term deferred revenue |
49,840 | 42,139 | ||||||
Other long-term liabilities |
14,238 | 11,015 | ||||||
Total liabilities |
367,875 | 342,596 | ||||||
Stockholders equity: |
||||||||
Preferred stock, par value $0.01; 5,000,000 shares authorized, zero shares issued and outstanding |
| | ||||||
Common stock, par value $0.01; 90,000,000 shares authorized, 22,766,387 and 22,530,909 shares issued
as of June 30, 2011 and March 31, 2011, respectively, and 16,201,680 and 16,010,238 shares outstanding
as of June 30, 2011 and March 31, 2011, respectively |
228 | 225 | ||||||
Additional paid-in capital |
274,992 | 267,242 | ||||||
Retained earnings |
168,320 | 164,449 | ||||||
Accumulated elements of other comprehensive income (loss) |
950 | (120 | ) | |||||
Treasury stock, at cost 6,564,707 and 6,520,671 shares as of June 30, 2011 and March 31, 2011,
respectively |
(285,482 | ) | (283,204 | ) | ||||
Total stockholders equity |
159,008 | 148,592 | ||||||
Total liabilities and stockholders equity |
$ | 526,883 | $ | 491,188 | ||||
The accompanying notes are an integral part of these consolidated balance sheets.
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Table of Contents
THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(In thousands, except per share amounts)
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Revenue |
$ | 81,615 | $ | 66,688 | ||||
Costs and expenses: |
||||||||
Cost of services |
45,490 | 34,632 | ||||||
Member relations and marketing |
17,980 | 15,200 | ||||||
General and administrative |
10,823 | 8,221 | ||||||
Depreciation
and amortization of property and equipment |
1,925 | 1,690 | ||||||
Income from operations |
5,397 | 6,945 | ||||||
Other income, net |
797 | 221 | ||||||
Income before provision for income taxes |
6,194 | 7,166 | ||||||
Provision for income taxes |
(2,323 | ) | (2,573 | ) | ||||
Net income |
$ | 3,871 | $ | 4,593 | ||||
Earnings per share: |
||||||||
Net income per share basic |
$ | 0.24 | $ | 0.30 | ||||
Net income per share diluted |
$ | 0.23 | $ | 0.29 | ||||
Weighted average number of shares outstanding: |
||||||||
Basic |
16,118 | 15,548 | ||||||
Diluted |
16,897 | 15,990 |
The accompanying notes are an integral part of these consolidated financial statements.
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Table of Contents
THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(In thousands)
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 3,871 | $ | 4,593 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization of property and equipment |
1,925 | 1,690 | ||||||
Amortization of intangible assets |
1,049 | 1,123 | ||||||
Deferred income taxes |
(13 | ) | (127 | ) | ||||
Excess tax benefits from stock-based awards |
(869 | ) | (618 | ) | ||||
Stock-based compensation expense |
2,715 | 2,306 | ||||||
Amortization of marketable securities premiums |
264 | 191 | ||||||
Changes in operating assets and liabilities: |
||||||||
Membership fees receivable |
(18,449 | ) | (15,795 | ) | ||||
Prepaid expenses and other current assets |
(2,935 | ) | (130 | ) | ||||
Deferred incentive compensation and other charges |
(8,249 | ) | 773 | |||||
Deferred revenues |
24,030 | 15,231 | ||||||
Accounts payable and accrued liabilities |
6,713 | (3,996 | ) | |||||
Accrued incentive compensation |
(8,687 | ) | (9,144 | ) | ||||
Other long-term liabilities |
3,223 | (153 | ) | |||||
Net cash provided by / (used in) operating activities |
4,588 | (4,056 | ) | |||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(6,085 | ) | (1,515 | ) | ||||
Capitalized external use software development costs |
(444 | ) | (283 | ) | ||||
Cash paid for acquisition, net of cash acquired |
| (36,012 | ) | |||||
Redemptions of marketable securities |
4,000 | 11,850 | ||||||
Purchases of marketable securities |
| (8,026 | ) | |||||
Net cash used in investing activities |
(2,529 | ) | (33,986 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock from exercise of stock options |
5,359 | 3,512 | ||||||
Withholding of shares to satisfy minimum employee tax withholding for vested
restricted stock units |
(1,250 | ) | (352 | ) | ||||
Proceeds from issuance of common stock under employee stock purchase plan |
57 | 40 | ||||||
Excess tax benefits from stock-based awards |
869 | 618 | ||||||
Purchases of treasury stock |
(2,278 | ) | (2,000 | ) | ||||
Net cash provided in financing activities |
2,757 | 1,818 | ||||||
Net increase / (decrease) in cash and cash equivalents |
4,816 | (36,224 | ) | |||||
Cash and cash equivalents, beginning of period |
30,378 | 61,238 | ||||||
Cash and cash equivalents, end of period |
$ | 35,194 | $ | 25,014 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for income taxes |
$ | 3,393 | $ | 4,071 |
The accompanying notes are an integral part of these consolidated statements.
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Table of Contents
THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business description and basis of presentation
The Advisory Board Company (individually and collectively with its subsidiaries, the
Company) provides best practices research and analysis, business intelligence and software tools,
and management and advisory services to hospitals, health systems, pharmaceutical and biotech
companies, health care insurers, medical device companies, colleges, universities, and other
educational institutions through discrete programs. Members of each program are typically charged a
fixed annual fee and have access to an integrated set of services that may include best practices
research studies, executive education seminars, customized research briefs, web-based access to the
programs content database, and business intelligence and software tools.
The unaudited consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (GAAP) for interim financial information and pursuant to
the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for reporting on
Form 10-Q. Accordingly, certain information and footnote disclosures required for complete
financial statements are not included herein. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements and related notes as
reported in the Companys annual report on Form 10-K for the fiscal year ended March 31, 2011. The
unaudited consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries after elimination of all significant intercompany transactions.
In the opinion of management, all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair presentation of the consolidated financial position, results of
operations, and cash flows as of the dates and for the periods presented have been included. The
consolidated balance sheet presented as of March 31, 2011 has been derived from the financial
statements that have been audited by the Companys independent registered public accounting firm.
The consolidated results of operations for the three months ended June 30, 2011 may not be
indicative of the results that may be expected for the Companys fiscal year ending March 31, 2012,
or any other period.
Note 2. Summary of significant accounting policies
Except to the extent updated or described below, a detailed description of the Companys
significant accounting policies is included in the Companys 2011 annual report on Form 10-K filed
with the SEC on June 14, 2011. The following notes should be read in conjunction with such policies
and other disclosures contained therein.
Revenue Recognition
Revenue is recognized when (1) there is persuasive evidence of an arrangement, (2) the fee is
fixed or determinable, (3) services have been rendered and payment has been contractually earned,
and (4) collectability is reasonably assured. Fees are generally billable when a letter of
agreement is signed by the member, and fees receivable during the subsequent twelve month period
and related deferred revenue are recorded upon the commencement of the agreement or collection of
fees, if earlier. In many of the Companys higher priced programs and membership agreements with
terms that are greater than one year, fees may be billed on an installment basis. Members whose
membership agreements are subject to the service guarantee may request a refund of their fees,
which is provided on a pro rata basis relative to the length of the service period.
In October 2009, the Financial Accounting Standards Board (FASB) amended the accounting
standards for revenue recognition with multiple elements for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. The amended guidance
allows the use of managements best estimate of selling price for individual elements of an
arrangement when vendor specific objective evidence or third party evidence is unavailable.
Additionally, it eliminates the residual method of revenue recognition in accounting for multiple
element arrangements and expands the disclosure requirements for revenue recognition. This guidance
was adopted prospectively by the Company on April 1, 2011, and as a result, the Company has updated its
accounting policy for revenue recognition related to multiple-deliverable arrangements. The Company
has historically and will continue to recognize the majority of its revenue on a ratable basis over
the term of the memberships. The adoption of this guidance did not have a material impact on the
Companys financial position or results of operations.
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Table of Contents
Multiple deliverable arrangements
The Companys membership agreements with its customers generally include more than one
deliverable. Deliverables are determined based upon the availability and delivery method of the
services and may include: best practices research; executive education curricula; web-based
content, databases, and calculators; performance or benchmarking reports; diagnostic tools;
interactive advisory support; and business intelligence software tools. Access to the previously
mentioned deliverables is generally available on an unlimited basis over the membership period.
When an agreement contains multiple deliverables the Company reviews the deliverables to determine
if they qualify as separate units of accounting.
In order for deliverables in a multiple-deliverable arrangement to be treated as separate units of accounting, the
deliverables must have standalone value upon delivery and delivery or performance of undelivered items in an arrangement with
a general right of return must be probable.
If the Company determines that there are separate
units of accounting, arrangement consideration at the inception of the membership period is
allocated to all deliverables based on the relative selling price method in accordance with the
selling price hierarchy, which includes vendor specific objective evidence (VSOE) if available;
third-party evidence (TPE) if VSOE is not available; or best estimate of selling price (BESP)
if neither VSOE nor TPE is available.
The Companys membership programs contain certain deliverables
that do not have standalone value and therefore are not accounted for separately.
In general,
the deliverables in membership programs are consistently available throughout the
membership period, and, as a result, the consideration is recognized ratably over the membership period. When a
service offering includes unlimited and limited service offerings, revenue is then recognized over
the appropriate service period, either ratably, if the service is consistently available, or, if
the service is not consistently available, upon the earlier of, the delivery of the service or the
completion of the membership period, provided that the all other criteria for recognition have been
met.
Certain membership programs incorporate hosted business intelligence and software tools. In
many of these agreements, members are charged set up fees in addition to subscription fees for
access to the hosted web-based business intelligence tools and related membership services. Both
set up fees and subscription fees are recognized ratably over the term of the membership agreement,
which is generally one to three years and is consistent with the pattern of the delivery of services under these arrangements. Upon launch of a new program that incorporates a business
intelligence software tool, all program revenue is deferred until the program is generally available
for release to the Companys membership, and then recognized ratably over the remainder of the
contract term of each agreement.
One of the Companys
programs includes delivered software
together with implementation services, technical support, and related membership services. For
these arrangements, the Company separates the fair value of the technical support and related
membership services from the total value of the contract based on VSOE of fair value. The fees
related to the software and implementation services are bundled and recognized as implementation services
are performed using project hours as the basis to measure progress towards completion. Fees
associated with the technical support and related membership services are recorded as revenue
ratably over the term of the agreement, beginning when all other elements have been delivered.
Multiple contracts with a single member are treated as separate arrangements for revenue
recognition purposes.
The Company also performs professional services sold under separate agreements that include
management and consulting services. The Company recognizes professional services revenues on a
time-and-materials basis as services are rendered.
Note 3. Recent accounting pronouncements
Recently adopted
In October 2009, the FASB amended the accounting standards for revenue arrangements with
software elements. The amended guidance modifies the scope of the software revenue recognition
guidance to exclude tangible products that contain both software and non-software components that
function together to deliver the products essential functionality. The pronouncement is effective
for fiscal years beginning on or after June 15, 2010. This guidance was adopted by the Company on
April 1, 2011. The adoption of this guidance did not have a material impact on the Companys
financial position or results of operations.
The Company adopted the amended accounting standards for revenue recognition with multiple
elements on April 1, 2011 as discussed in Note 2, Summary of significant accounting policies.
Accounting pronouncements not yet adopted
In May 2011, the FASB issued Accounting Standards Update 2011-4, Fair Value Measurement
(Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in
U.S. GAAP and IFRS. This accounting update represents the converged guidance of the FASB and the
International Accounting Standards Board on fair value measurement. The guidance clarifies how a
principal market is determined, addresses the fair value measurement of instruments with offsetting
market or counterparty credit risks, addresses the concept of valuation premise and highest and
best use, extends the prohibition on blockage
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factors to all three levels of the fair value hierarchy, and requires additional disclosures.
The new guidance is effective for interim and annual periods beginning after December 15, 2011 and
is applied prospectively. The Company is currently evaluating the impact of this new accounting
update and has not yet determined its impact on the Companys condensed consolidated financial
statements.
In June 2011, the FASB amended its guidance on the presentation of comprehensive income in
financial statements to improve the comparability, consistency, and transparency of financial
reporting and to increase the prominence of items that are recorded in other comprehensive income.
The new accounting guidance requires entities to report components of comprehensive income in
either a single continuous statement of comprehensive income, or in two separate but consecutive
statements. The new guidance eliminates the option to present components of other comprehensive
income as part of the statement of equity. The provisions of this new guidance are effective for
fiscal years, and interim periods within those years, beginning after December 15, 2011. The
Company does not expect the adoption of this guidance to have a material effect on its results of
operations or financial position.
Note 4. Marketable securities
The aggregate value, amortized cost, gross unrealized gains, and gross unrealized losses on
available-for-sale marketable securities are as follows (in thousands):
As of June 30, 2011 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Fair | Amortized | unrealized | unrealized | |||||||||||||
value | cost | gains | losses | |||||||||||||
U.S. government agency obligations |
$ | 20,044 | $ | 20,037 | $ | 213 | $ | 206 | ||||||||
Tax exempt obligations of other states |
63,521 | 62,052 | 1,705 | 236 | ||||||||||||
$ | 83,565 | $ | 82,089 | $ | 1,918 | $ | 442 | |||||||||
As of March 31, 2011 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Fair | Amortized | unrealized | unrealized | |||||||||||||
value | cost | gains | losses | |||||||||||||
U.S. government agency obligations |
$ | 23,721 | $ | 24,042 | $ | 164 | $ | 485 | ||||||||
Tax exempt obligations of other states |
62,458 | 62,310 | 1,109 | 961 | ||||||||||||
$ | 86,179 | $ | 86,352 | $ | 1,273 | $ | 1,446 | |||||||||
The following table summarizes marketable securities maturities (in thousands):
As of June 30, 2011 | ||||||||
Fair market | Amortized | |||||||
value | cost | |||||||
Matures in less than 1 year |
$ | | $ | | ||||
Matures after 1 year through 5 years |
34,911 | 33,516 | ||||||
Matures after 5 years through 10 years |
48,654 | 48,573 | ||||||
$ | 83,565 | $ | 82,089 | |||||
The gross realized losses on sales of available-for-sale investments were $124,000 in the
three months ended June 30, 2010. Other than redemptions upon maturity, there were no sales during
the three months ended June 30, 2011.
The weighted average maturity on all marketable securities held by the Company as of June 30,
2011 was approximately 5.0 years. Pre-tax net unrealized gains on the Companys investments of $1.5
million as indicated above were caused by the decrease in market interest rates compared to the
average interest rate of the Companys marketable securities portfolio. Of this amount, none is
related to investments that mature before June 30, 2012. The Company purchased certain of its
investments at a premium or discount to their relative fair values. The Company does not intend to
sell these investments and it is not more likely than not that it will be required to sell the
investments before recovery of the amortized cost bases, which may be maturity; therefore, the
Company does not consider these investments to be other than temporarily impaired as of June 30,
2011. The Company has reflected the net unrealized gains and losses, net of tax, in accumulated
other comprehensive income in the consolidated balance sheets. The Company uses the specific
identification method to determine the cost of marketable securities that are sold.
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Note 5. Acquisitions
Cielo
On February 1, 2011, the Company acquired for cash substantially all the assets of Cielo
MedSolutions, LLC (Cielo), a leading provider of population management analytics and patient
registry software in the ambulatory environment. The Company acquired Cielo to enhance its existing
suite of physician performance management solutions through the addition of analytics and workflow
tools that give providers visibility across a patient population to enable appropriate clinical
decisions. The total purchase price of $11.7 million consisted of an initial payment of $7.3
million of cash and the fair value of estimated additional contingent cash payments of $4.4
million. These additional contingent payments will become due and payable to the former owner of
the Cielo business if certain product development and subscription milestones are met over the
evaluation periods beginning at the acquisition date and extending through July 31, 2012. The
Company allocated $3.8 million to intangible assets with a weighted average amortization period of
five years and allocated $8.1 million to goodwill, which represents synergistic benefits expected
to be generated from scaling Cielos offerings across the Companys large membership base. Goodwill
is deductible for tax purposes.
The total purchase price was allocated to the assets acquired, including intangible assets and
liabilities assumed, based on their estimated fair values as of February 1, 2011. The Companys
fair value of identifiable tangible and intangible assets was determined by management taking into
account a valuation using an income approach from a market participant perspective, and estimates
and assumptions provided by management. Of the total estimated purchase price, $0.4 million was
allocated to acquired assets, $0.4 million was allocated to assumed liabilities, and $3.8 million
was allocated to intangible assets, which consist of the value assigned to acquired technology
related intangibles of $3.0 million and customer relationships and employee related intangibles of
$0.8 million.
The financial results of Cielo are included in the Companys consolidated financial statements
from the date of acquisition. Pro forma financial information for this acquisition has not been
presented because the effects were not material to the Companys historical consolidated financial
statements.
Concuity
On April 1, 2010, the Company acquired for cash all outstanding shares of the health care
division of Trintech Group plc (Concuity), a leading provider of a contract and payment
management solution for hospitals and physician groups. The Company acquired Concuity to supplement
its revenue cycle portfolio by incorporating Concuitys web-based ClearContracts software tool into
a new program. The total purchase price consisted of an initial payment of $34.0 million, and an
additional $4.0 million placed into escrow, which can be released through December 31, 2011 as
certain business performance and indemnity conditions are satisfied. The Company allocated $11.3
million to intangible assets with a weighted average amortization period of five years.
Approximately $21.8 million was allocated to goodwill, which represents synergistic benefits
expected to be generated from scaling Concuitys offerings across the Companys large membership
base. Goodwill is deductible for tax purposes.
Note 6. Other non-current assets
In June 2009, the Company invested in the convertible preferred stock of a private company
that provides technology tools and support services to health care providers. In addition, the
Company entered into a licensing agreement with that company. The convertible preferred stock
investment is recorded at cost, and the carrying amount of this investment as of June 30, 2011 is
$5.0 million and is included in other non-current assets on the Companys consolidated balance
sheets. The convertible preferred stock carries a dividend rate of 8% that is payable if and when
declared by the investees board of directors, none of which have been declared by the investee and
recorded by the Company. This investment is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of this asset may not be recoverable. The Company
believes that no such impairment indicators existed during the three months ended June 30, 2011 or
2010.
Note 7. Property and equipment
Property and equipment consists of leasehold improvements, furniture, fixtures, equipment,
capitalized internal software development costs, and acquired developed technology. Property and
equipment is stated at cost, less accumulated depreciation and amortization. In certain of its
membership programs, the Company provides software tools under hosting arrangements where the
software application resides on the Companys or its service providers hardware. The members do
not take delivery of the software and only receive access to the software tools during the term of
their membership agreement. Software development costs that are incurred in the preliminary project
stage are expensed as incurred. During the development stage, direct consulting costs and payroll-
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related costs for employees that are directly associated with each project are capitalized and
amortized over the estimated useful life of the software once placed into operation. Capitalized
software is amortized using the straight-line method over its estimated useful life, which is
generally five years. Replacements and major improvements are capitalized, while maintenance and
repairs are charged to expense as incurred.
The acquired developed technology is classified as software within property and equipment
because the developed software application resides on the Companys or its service providers
hardware. Amortization for acquired developed software is included in depreciation and amortization
of property and equipment on the Companys consolidated statements of income. Developed software
obtained through acquisitions is amortized over its weighted average estimated useful life of
approximately seven years based on the cash flow estimate used to determine the value of the asset.
The amount of acquired developed software amortization included in depreciation and amortization of
property and equipment for the three months ended June 30, 2011 and 2010 was approximately $0.2
million and $0.1 million, respectively.
Furniture, fixtures, and equipment are depreciated using the straight-line method over the
estimated useful lives of the assets, which range from three to seven years. Leasehold improvements
are depreciated using the straight-line method over the shorter of the estimated useful lives of
the assets or the lease term. There are no capitalized leases included in property and equipment
for the periods presented. Property and equipment consists of the following (in thousands):
As of | ||||||||
June 30, | March 31, | |||||||
2011 | 2011 | |||||||
Leasehold improvements |
$ | 15,984 | $ | 15,734 | ||||
Furniture, fixtures and equipment |
19,759 | 18,472 | ||||||
Software |
35,037 | 30,524 | ||||||
70,780 | 64,730 | |||||||
Accumulated depreciation and amortization |
(37,091 | ) | (35,201 | ) | ||||
Property and equipment, net |
$ | 33,689 | $ | 29,529 | ||||
The Company evaluates its long-lived assets for impairment when changes in circumstances exist
that suggests the carrying value of a long-lived asset may not be fully recoverable. If an
indication of impairment exists, and the Companys net book value of the related assets is not
fully recoverable based upon an analysis of its estimated undiscounted future cash flows, the
assets are written down to their estimated fair value. The Company did not recognize any impairment
losses on any of its long-lived assets during the three months ended June 30, 2011 or 2010.
Note 8. Goodwill and other intangibles
Included in the Companys goodwill and other intangibles balances are goodwill and acquired
intangibles and internally developed capitalized software for sale. Goodwill is not amortized as it
has an estimated infinite life. Goodwill is reviewed for impairment at least annually as of March
31, or whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company believes that no such impairment indicators existed during the
three months ended June 30, 2011 or 2010. There was no impairment of goodwill recorded in the three
months ended June 30, 2011 or 2010.
Intangible assets with finite lives are amortized on a straight-line basis over their
estimated useful lives, which range from six months to ten years. As of June 30, 2011, the weighted
average remaining useful life of acquired intangibles was approximately 4.8 years. As of June 30,
2011, the weighted average remaining useful life of internally developed intangibles was
approximately 3.9 years.
The gross and net carrying balances and accumulated amortization of other intangibles are as
follows (in thousands):
As of June 30, 2011 | As of March 31, 2011 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
carrying | Accumulated | carrying | carrying | Accumulated | carrying | |||||||||||||||||||
amount | amortization | amount | amount | amortization | amount | |||||||||||||||||||
Other Intangibles |
||||||||||||||||||||||||
Internally developed intangible for sale: |
||||||||||||||||||||||||
Capitalized software |
$ | 5,322 | $ | (1,435 | ) | $ | 3,887 | $ | 4,695 | $ | (1,173 | ) | $ | 3,522 | ||||||||||
Acquired intangibles: |
||||||||||||||||||||||||
Developed software |
6,250 | (1,563 | ) | 4,687 | 6,250 | (1,250 | ) | 5,000 | ||||||||||||||||
Customer relationships |
8,200 | (1,650 | ) | 6,550 | 8,200 | (1,320 | ) | 6,880 | ||||||||||||||||
Trademarks |
2,000 | (606 | ) | 1,394 | 2,000 | (500 | ) | 1,500 | ||||||||||||||||
Non-compete agreements |
750 | (238 | ) | 512 | 750 | (205 | ) | 545 | ||||||||||||||||
Customer contracts |
3,599 | (2,784 | ) | 815 | 3,599 | (2,596 | ) | 1,003 | ||||||||||||||||
Total other intangibles |
$ | 26,121 | $ | (8,276 | ) | $ | 17,845 | $ | 25,494 | $ | (7,044 | ) | $ | 18,450 | ||||||||||
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Amortization expense for other intangible assets for the three months ended June 30, 2011, and
2010, recorded in cost of services on the accompanying consolidated statements of income, was
approximately $1.2 million and $1.3 million, respectively. The following approximates the
anticipated aggregate amortization expense to be recorded in cost of services on the consolidated
statements of income for the remaining nine months of the fiscal year ending March 31, 2012 and for
each of the fiscal years ending March 31, 2013 through 2016: $3.1 million, $4.1 million, $4.0
million, $3.6 million, and $0.9 million, respectively, and $1.4 million thereafter.
Note 9. Fair value measurements
Financial assets and liabilities
The estimated fair values of financial instruments are determined based on relevant market
information. These estimates involve uncertainty and cannot be determined with precision. The
Companys financial instruments consist primarily of cash, cash equivalents, and marketable
securities. The following methods and assumptions are used to estimate the fair value of each class
of financial assets or liabilities that are valued on a recurring basis.
Cash and cash equivalents: This includes all cash and liquid investments with an original
maturity of three months or less from the date acquired. The carrying amount approximates fair
value because of the short maturity of these instruments. Cash equivalents consist of money market
funds with original maturity dates of less than three months for which the fair value is based on
quoted market prices. The Companys cash and cash equivalents are held at major commercial banks.
Marketable securities: The Companys marketable securities, consisting of U.S. government
agency obligations and various state tax-exempt notes and bonds, are classified as
available-for-sale and are carried at fair market value based on quoted market prices.
Contingent earn-out liabilities: This represents the Companys estimated fair value of the
contingent earn-out liabilities related to acquisitions based on probability assessments of certain
performance achievements during the earn-out periods. Contingent earn-out liabilities are included
in other long-term liabilities on the accompanying consolidated balance sheets. See Note 5,
Acquisitions, for further details.
Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the measurement date. The
valuation can be determined using widely accepted valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income or cash flow), and
the cost approach (cost to replace the service capacity of an asset or replacement cost). As a
basis for applying a market-based approach in fair value measurements, GAAP establishes a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. The following is a brief description of those three levels:
| Level 1 Quoted prices in active markets for identical assets or liabilities. |
| Level 2 Observable market-based inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
| Level 3 Unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies. |
Assets and liabilities are classified based on the lowest level of input that is significant
to the fair value measurements. The Company reviews the fair value hierarchy classification on a
quarterly basis. Changes in the observability of valuation inputs may result in a reclassification
of levels for certain securities within the fair value hierarchy. There were no significant
transfers between Level 1, Level 2 or Level 3 during the three months ended June 30, 2011 or 2010.
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The Companys financial assets and liabilities subject to fair value measurements on a
recurring basis and the necessary disclosures are as follows (in thousands):
Fair value | Fair value measurement as of June 30, 2011 | |||||||||||||||
as of June 30, | using fair value hierarchy | |||||||||||||||
2011 | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets |
||||||||||||||||
Cash and cash equivalents (1) |
$ | 35,194 | $ | 35,194 | | | ||||||||||
Available-for-sale marketable securities (2) |
83,565 | 83,565 | | | ||||||||||||
Financial liabilities |
||||||||||||||||
Contingent earn-out liabilities (3) |
18,700 | | | 18,700 |
Fair value | Fair value measurement as of March 31, 2011 | |||||||||||||||
as of March 31, | using fair value hierarchy | |||||||||||||||
2011 | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets |
||||||||||||||||
Cash and cash equivalents (1) |
$ | 30,378 | $ | 30,378 | | | ||||||||||
Available-for-sale marketable securities (2) |
86,179 | 86,179 | | | ||||||||||||
Financial liabilities |
||||||||||||||||
Contingent earn-out liabilities (3) |
15,500 | | | 15,500 |
(1) | Fair value is based on quoted market prices. | |
(2) | Fair value is determined using quoted market prices of the assets. For further detail, see Note 4, Marketable securities. | |
(3) | This fair value measurement is based on unobservable inputs that are supported by little or no market activity and reflect the Companys own assumptions in measuring fair value using the income approach. In developing these estimates, the Company considered certain performance projections, historical results, and general macro-economic environment and industry trends. |
The Companys fair value estimate of the earn-out liability related to its acquisition of
Southwind Health Partners, L.L.C. and Southwind Navigator, LLC (Southwind) in December 2009 was
$5.6 million as of the date of acquisition. The final amount paid will be made in a combination of
cash and/or the Companys common stock. The Companys fair value estimate of the Concuity earn-out
liability, which is payable in cash, was $4.0 million as of the date of acquisition. The Companys
fair value estimate of the Cielo earn-out liability, which is payable in cash, was $4.4 million as
of the date of acquisition. Changes in the fair value of the contingent earn-out liabilities
subsequent to the acquisition date, including changes arising from events that occurred after the
acquisition date, such as changes in the Companys estimate of performance achievements and
discount rates, are recognized in earnings in the periods when the estimated fair value changes.
The following table represents a reconciliation of the change in the contingent earn-out
liabilities for the three months ended June 30, 2010 and 2011 (in thousands):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Beginning balance |
$ | 15,500 | $ | 5,600 | ||||
Fair value change in Southwind contingent earn-out liability (1) |
3,200 | 400 | ||||||
Addition of Concuity contingent earn-out liability |
| 4,000 | ||||||
Ending balance |
$ | 18,700 | $ | 10,000 | ||||
(1) | Amounts were recognized in cost of services on the accompanying consolidated statements of income. |
Non-financial assets and liabilities
Certain assets and liabilities are not measured at fair value on an ongoing basis but instead
are measured at fair value on a non-recurring basis; that is, such assets and liabilities are
subject to fair value adjustments in certain circumstances (e.g., when there is evidence of
impairment). As of June 30, 2011, no fair value adjustments or material fair value measurements
were required for non-financial assets or liabilities.
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Note 10. Stock-based compensation
Equity incentive plans
The Company issues awards, including stock options and restricted stock units (RSUs), under
the Companys 2005 Stock Incentive Plan (the 2005 Plan), the 2009 Stock Incentive Plan (the 2009
Plan), and, through September 11, 2009, the Companys 2006 Stock Incentive Plan (the 2006 Plan).
Upon approval of the 2009 Plan by the Companys stockholders on September 11, 2009, the 2006 Plan
was frozen with respect to new awards.
The aggregate number of shares of the Companys common stock available for issuance under the
2005 Plan may not exceed 1,600,000, plus the shares that remained available for issuance under the
Companys 2001 Stock Incentive Plan (the 2001 Plan) as of November 15, 2005 and shares subject to
outstanding awards under the 2001 Plan that, on or after such date, cease for any reason to be
subject to such awards (other than reason of exercise or settlement of the awards to the extent
they are exercised for or settled in vested and non-forfeitable shares). Stock-based awards granted
under the 2005 Plan have a seven year maximum contractual term. The aggregate number of shares of
the Companys common stock available for issuance under the 2009 Plan may not exceed 1,055,000,
plus the shares that remained available for issuance under the 2006 Plan as of June 26, 2009 and
shares subject to outstanding awards under the 2006 Plan that, on or after such date, cease for any
reason to be subject to such awards (other than reason of exercise or settlement of the awards to
the extent they are exercised for or settled in vested and non-forfeitable shares). Stock-based
awards granted under the 2006 Plan and the 2009 Plan have a five year maximum contractual term. As
of June 30, 2011, there were 508,081 shares available for issuance under the 2005 Plan and 1,422
shares available for issuance under the 2009 Plan.
Stock option activity. During the three months ended June 30, 2011 and 2010, the Company
granted a total of 255,706 and 271,500 stock options, respectively, with weighted average exercise
prices of $48.49 and $33.34, respectively. The weighted average fair values of the stock option
grants are listed in the stock option valuation section below. During the three months ended June
30, 2011 and 2010, participants exercised 186,871 and 120,119 stock options, respectively, for a
total intrinsic value of $4.2 million and $1.2 million, respectively. Intrinsic value is calculated
as the number of shares exercised times the Companys stock price at exercise less the exercise
price of the option.
Stock option valuation
The Company calculates the fair value of all stock option awards, with the exception of the
stock options issued with market-based conditions, on the date of grant using the Black-Scholes
model. The expected term for its stock options was determined through analysis of historical data
on employee exercises, vesting periods of awards, and post-vesting employment termination behavior.
The risk-free interest rate is based on U.S. Treasury bonds issued with similar life terms to the
expected life of the grant. Volatility is calculated based on historical volatility of the daily
closing price of the Companys common stock continuously compounded with a look back period similar
to the terms of the expected life of the grant. The Company has not declared or paid any cash
dividend on its common stock since the closing of its initial public offering and does not
currently anticipate declaring or paying any cash dividends. The timing and amount of future cash
dividends, if any, is periodically evaluated by the Companys Board of Directors and would depend
upon, among other factors, the Companys earnings, financial condition, and cash requirements.
The following average key assumptions were used in the valuation of stock options granted in
each respective period:
Three Months Ended June 30, | ||||||||
2011 | 2010 (1) | |||||||
Stock option grants: |
||||||||
Risk-free interest rate |
1.27% - 2.22 | % | 1.63% - 2.56 | % | ||||
Expected lives in years |
4.0 | 3.9 | ||||||
Expected volatility |
36.7% - 41.6 | % | 36.7% - 42.1 | % | ||||
Dividend yield |
0.0 | % | 0.0 | % | ||||
Weighted average exercise price of options granted |
$ | 48.49 | $ | 33.34 | ||||
Weighted average grant date fair value of options granted |
$ | 15.87 | $ | 10.82 | ||||
Number of shares granted |
255,706 | 271,500 |
(1) | Includes 45,000 stock options that were issued with market-based conditions to an employee. The Company calculated the fair value of these stock option awards on the date of grant at $9.82 per share using a lattice option-pricing model. The significant assumptions used were as follows: risk-free interest rate of 1.71%; expected term of 3.3 years; expected volatility of 38.35%; dividend yield of 0.0%; and a weighted average exercise price of $34.27 per share. |
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Restricted stock unit activity and valuation. RSUs are equity settled stock-based compensation
arrangements of a number of shares of the Companys common stock. During the three months ended
June 30, 2011, the Company granted 219,998 RSUs, of which 3,000 RSUs were issued with
performance-based conditions to an employee. During the three months ended June 30, 2011, the
Company granted 252,114 RSUs. The weighted average grant date fair value of RSUs granted for the
three months ended June 30, 2011 and 2010 was $48.49 and $33.16, respectively, the majority of
which vest in four equal annual installments on the anniversary of the grant date. The valuation of
RSUs is determined as the fair market value of the underlying shares on the date of grant.
Compensation expense for RSU awards is recognized over the vesting period on a straight-line basis.
During the three months ended June 30, 2011 and 2010, participants vested in 72,486 and 45,587
RSUs, respectively, for a total intrinsic value of $3.8 million and $1.7 million, respectively.
Intrinsic value is calculated as the number of shares vested times the Companys closing stock
price at the vesting date. During the three months ended June 30, 2011 and 2010, 24,435 and 16,290
shares, respectively, were withheld to satisfy minimum employee tax withholding.
Employee stock purchase plan
The Company sponsors an employee stock purchase plan (ESPP) for all eligible employees.
Under the ESPP, employees authorize payroll deductions from 1% to 15% of their eligible
compensation to purchase shares of the Companys common stock. Under the ESPP, shares of the
Companys common stock may be purchased at the end of each fiscal quarter at 95% of the closing
price of the Companys common stock. A total of 842,000 shares of the Companys common stock are
authorized for issuance under the ESPP. As of June 30, 2011, a total of 754,196 shares were
available for issuance under the ESPP. During the three months ended June 30, 2011 and 2010, the
Company issued 1,036 and 983 shares, respectively, under the ESPP at an average price of $54.99 and
$40.81 per share, respectively. Compensation expense was not recorded for the ESPP during the three
months ended June 30, 2011 and 2010.
Compensation expense
The Company recognized stock-based compensation expense in the following consolidated
statements of income line items for stock options and RSUs and for shares issued under the
Companys ESPP, for the three months ended June 30, 2011 and 2010 (in thousands, except per share
amounts):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Stock-based compensation expense included in: |
||||||||
Costs and expenses: |
||||||||
Cost of services |
$ | 843 | $ | 687 | ||||
Member relations and marketing |
501 | 432 | ||||||
General and administrative |
1,371 | 1,187 | ||||||
Depreciation |
| | ||||||
Total costs and expenses |
$ | 2,715 | $ | 2,306 | ||||
Income from operations |
$ | (2,715 | ) | $ | (2,306 | ) | ||
Net income |
$ | (1,697 | ) | $ | (1,478 | ) | ||
Impact on diluted earnings per share |
$ | (0.10 | ) | $ | (0.09 | ) | ||
There are no stock-based compensation costs capitalized as part of the cost of an asset.
Stock-based compensation expense by award type is below (in thousands):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Stock-based compensation by award type: |
||||||||
Stock options |
$ | 1,123 | $ | 865 | ||||
Restricted stock units |
1,592 | 1,441 | ||||||
Total stock-based compensation |
$ | 2,715 | $ | 2,306 | ||||
As of June 30, 2011, $26.2 million of total unrecognized compensation cost related to
stock-based compensation is expected to be recognized over a weighted average period of 1.6 years.
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Tax benefits
The benefits of tax deductions in excess of recognized book compensation expense are reported
as a financing cash inflow in the accompanying consolidated statements of cash flows. Approximately
$0.9 million and $0.6 million of tax benefits associated with the exercise of employee stock
options were recorded as cash from financing activities in June 30, 2011 and 2010, respectively.
Note 11. Earnings per share
Basic earnings per share is computed by dividing net income by the number of weighted average
common shares outstanding during the period. Diluted earnings per share is computed by dividing net
income by the number of weighted average common shares increased by the dilutive effects of
potential common shares outstanding during the period. The number of potential common shares
outstanding is determined in accordance with the treasury stock method, using the Companys
prevailing tax rates. Certain potential common share equivalents were not included in the
computation because their effect was anti-dilutive. Fully diluted shares outstanding for the three
months ended June 30, 2011 and 2010 includes 55,187 and 34,916 contingently issuable shares,
respectively, related to the component of the Southwind earn-out estimated to be settled in stock.
For additional information regarding these shares, see Note 9, Fair value measurements.
A reconciliation of basic to diluted weighted average common shares outstanding is as follows
(in thousands):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Basic weighted average common shares outstanding |
16,118 | 15,548 | ||||||
Dilutive impact of stock options |
615 | 318 | ||||||
Dilutive impact of restricted stock units |
108 | 68 | ||||||
Dilutive impact of earn-out liability |
56 | 56 | ||||||
Diluted weighted average common shares outstanding |
16,897 | 15,990 | ||||||
The following potential common share equivalents were not included in calculating diluted net
income per share because their effect was anti-dilutive (in thousands):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Anti-dilutive stock options and restricted stock units |
270 | 1,313 |
Note 12. Accumulated other comprehensive income
Comprehensive income consists of net income plus the net-of-tax impact of unrealized gains and
losses on certain investments in debt securities. Comprehensive income for the three months ended
June 30, 2011 and 2010 was $4.9 million and $4.8 million, respectively. The accumulated elements of
other comprehensive income, net of tax, included within stockholders equity on the consolidated
balance sheets are composed solely of net unrealized gains and losses on marketable securities net
of applicable income taxes.
Note 13. Income taxes
The Company uses a more-likely-than-not recognition threshold based on the technical merits of
the tax position taken for the financial statement recognition and measurement of a tax position.
If a tax position does not meet the more-likely-than-not initial recognition threshold, no benefit
is recorded in the financial statements. The Company does not currently anticipate that the total
amounts of unrecognized tax benefits will significantly change within the next 12 months. The
Company classifies interest and penalties on any unrecognized tax benefits as a component of the
provision for income taxes. No interest or penalties were recognized in the consolidated statements
of income for either of the three month periods ended June 30, 2011 or 2010. The Company files
income tax returns in U.S. federal and state and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal, state, and local tax examinations for filings in
major tax jurisdictions before 2005.
15
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Note 14. Stockholders equity
During the three months ended June 30, 2011 and 2010, the Company repurchased 44,036 and
52,340 shares of its common stock at a total cost of approximately $2.3 million and $2.0 million,
respectively, pursuant to its share repurchase program. The total amount of common stock purchased
under the program as of June 30, 2011 was 7,564,707 shares, respectively, at a total cost of $318.6
million. Of these repurchased shares, 1,000,000 shares have been retired and resumed the status of
authorized and unissued shares. All repurchases to date have been made in the open market. No
minimum number of shares subject to repurchase has been fixed and the share repurchase
authorization has no expiration date. The Company has funded, and expects to continue to fund, its
share repurchases with cash on hand, proceeds from the sale of marketable securities, and cash
generated from operations. As of June 30, 2011, the remaining authorized repurchase amount was
$31.4 million.
Note 15. Subsequent events
On August 1, 2011, the Company completed the acquisition of substantially all of the assets of
PivotHealth, LLC (PivotHealth) a leading physician practice management firm. The Company acquired
PivotHealth to supplement its existing physician practice management capabilities and provide new
growth opportunities with the addition of PivotHealths expertise in long-term physician practice
management. The total purchase price consists of an initial payment of $15.0 million; estimated
additional contingent cash payments of $3.5 million based on business performance over a three-year
evaluation period beginning on the acquisition date and payable in November 2014; and an additional
$1.9 million placed into escrow, which can be released across the next 12 months as certain
indemnity conditions are satisfied. The Company is in the process of finalizing the purchase price
allocation and valuation of certain intangible assets.
16
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Unless the context indicates otherwise, references in this report to the Company, the
registrant, we, our, and us mean The Advisory Board Company and its subsidiaries.
This report includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. These statements can sometimes be
identified by our use of forward-looking words such as may, will, believes, anticipates,
plans, expects, seeks, estimates, or intends and similar expressions. These statements
involve known and unknown risks, uncertainties, and other factors that may cause our actual
results, performance, or achievements to be materially different from the results, performance, or
achievements expressed or implied by the forward-looking statements, including the factors
discussed under Item 1A. Risk Factors in our annual report on Form 10-K for the fiscal year ended
March 31, 2011, or the 2011 Form 10-K, filed with the Securities and Exchange Commission. We
undertake no obligation to update any forward-looking statements, whether as a result of
circumstances or events that arise after the date the statements are made, new information, or
otherwise.
Executive Overview
We provide best practices research and analysis, business intelligence and software tools, and
management and advisory services to approximately 3,200 organizations, including hospitals, health
systems, pharmaceutical and biotech companies, health care insurers, medical device companies,
colleges, universities, and other educational institutions through 51 discrete programs. Members of
each program typically are charged a fixed fee and have access to an integrated set of services
that may include best practice research studies, executive education seminars, customized research
briefs, web-based access to the programs content database, and software tools.
Our four key areas of focus for fiscal 2012 are to continue to deliver world-class programs that drive
significant returns for our members and ensure member loyalty through outstanding value delivery; to make
select investments to capture the unique opportunities presented by current healthcare market conditions, through
developing and launching new programs and acquiring products, services, and technologies that improve performance
for our members; to integrate our recent acquisitions into our broader portfolio of services; and
to attract, develop, engage, and retain world class talent across our organization. Success in all of these
areas requires very strong execution across our business, and we have a heavy focus on setting
each team up to manage against and hit high goals in each area of our operations.
Our membership business model allows us to create value for our members by providing proven
solutions to common and complex problems as well as quality content on a broad set of relevant
issues. Our growth has been driven by strong renewal rates, ongoing addition of new memberships in
our existing programs, continued new program launches, acquisition activity, and continued annual
price increases. We believe high renewal rates are a reflection of our members recognition of the
value they derive from participating in our programs. Our revenue grew 22.4% in the three months
ended June 30, 2011 over the prior year period. Our contract value increased 21.2% to $332.5
million as of June 30, 2011 from $274.4 million as of June 30, 2010. We define contract value as
the aggregate annualized revenue attributed to all agreements in effect at a given point in time,
without regard to the initial term or remaining duration of any such agreement.
As of June 30, 2011, memberships in 41 of our programs were renewable at the end of their
membership contract term. Contract terms for these memberships generally run one, two, or three
years. Our other ten programs provide management and advisory services. Memberships in these ten
programs help members accelerate the adoption of best practices profiled in our research studies
and are not individually renewable. In each of our programs, we generally invoice and collect fees
in advance of accrual revenue.
Our operating costs and expenses consist of cost of services, member relations and marketing,
general and administrative expenses, and depreciation and amortization of property and equipment
expenses. Cost of services includes the costs associated with the production and delivery of our
products and services, consisting of compensation for research personnel, in-house faculty,
software developers, and consultants; the organization and delivery of membership meetings,
teleconferences, and other events; production of published materials; technology license fees; and
costs of developing and supporting our web-based content and business intelligence and software
tools. Member relations and marketing includes the costs of acquiring new members and the costs of
account management, consisting of compensation, including sales incentives; travel and
entertainment expenses; training of personnel; sales and marketing materials; and associated
support services. General and administrative expenses include the costs of human resources and
recruiting, finance and accounting, management information systems, facilities management, new
program development, and other administrative functions. Depreciation and amortization of property
and equipment expense includes the cost of depreciation of our property and equipment, amortization
of costs associated with the development of software and tools that are offered as part of certain
of our membership programs, and amortization of acquired developed technology. Included in our
operating costs for each period presented are stock-based compensation expenses and expenses
representing additional payroll taxes for compensation expense as a result of the taxable income
employees recognized upon the exercise of common stock options and the vesting of restricted stock
units.
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Table of Contents
Critical Accounting Policies
Our accounting policies, which are in compliance with U.S. generally accepted accounting
principles, or GAAP, require us to apply methodologies, estimates, and judgments that have a
significant impact on the results we report in our financial statements. In our 2011 Form 10-K,
we have discussed those material accounting policies that we believe are critical and
require the use of complex judgment in their application. There have been no material changes to
our material accounting policies since our last fiscal year ended March 31, 2011 other than the
adoption of the amended accounting standards for revenue recognition with multiple elements for
revenue arrangements, which is discussed in Note 2 to the consolidated financial statements.
Analyzing arrangements to identify the deliverables, determine if they can be accounted for as
separate units of accounting, and measure and allocate arrangement consideration requires the
application of judgment and interpretation by management.
Non-GAAP Financial Presentation
This managements discussion and analysis presents supplemental measures of our performance
which are derived from our consolidated financial information but which are not presented in our
consolidated financial statements prepared in accordance with GAAP. These financial measures, which
are considered non-GAAP financial measures under SEC rules, are referred to as adjusted EBITDA,
adjusted net income, and non-GAAP earnings per diluted share. See Non-GAAP Financial Measures
below for definitions and reconciliations of each non-GAAP financial measure to the most directly
comparable GAAP financial measure.
Results of Operations
The following table shows statements of income data expressed as a percentage of revenue for
the periods indicated:
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Revenue |
100.0 | % | 100.0 | % | ||||
Costs and expenses: |
||||||||
Cost of services |
55.7 | % | 51.9 | % | ||||
Member relations and marketing |
22.0 | % | 22.8 | % | ||||
General and administrative |
13.3 | % | 12.3 | % | ||||
Depreciation and amortization of property and equipment |
2.4 | % | 2.5 | % | ||||
Total costs and expenses |
93.4 | % | 89.6 | % | ||||
Income from operations |
6.6 | % | 10.5 | % | ||||
Other income, net |
1.0 | % | 0.3 | % | ||||
Income before provision for income taxes |
7.6 | % | 10.8 | % | ||||
Provision for income taxes |
-2.9 | % | -3.9 | % | ||||
Net income |
4.7 | % | 6.9 | % | ||||
Three months ended June 30, 2011 compared to the three months ended June 30, 2010
Overview. Net income decreased from $4.6 million in the three months ended June 30, 2010 to
$3.9 million in the three months ended June 30, 2011. The decrease in net income was due to a $3.2
million fair value adjustment to our acquisition-related earn-out liability. Adjusted net income
increased 18% from $7.1 million in the three months ended June 30, 2010 to $8.4 million in the
three months ended June 30, 2011, and adjusted EBITDA increased 18% from $12.4 million in the three
months ended June 30, 2010 to $14.6 million in the three months ended June 30, 2011. The increases
in adjusted net income and adjusted EBITDA during the three months ended June 30, 2011 were
due to increased revenue, which was partially offset by costs associated with the launch
of new programs and an increase in the number of new sales teams.
Revenue. Revenue increased 22.4% from $66.7 million in the three months ended June 30, 2010 to
$81.6 million in the three months ended June 30, 2011. Our contract value increased 21.2% from
$274.4 million as of June 30, 2010 to $332.5 million as of June 30, 2011. The increase in revenue
in the three months ended June 30, 2011 over the three months ended June 30, 2010 was primarily due
to the cross-selling of existing programs to existing members, the introduction and expansion of
new programs, the addition of new member organizations, and, to a lesser degree, price increases.
We offered 46 membership programs as of June 30, 2010 and 51 as of June 30, 2011.
Cost of services. Cost
of services increased from $34.6 million in the three months
ended June 30, 2010 to $45.5 million in the three months ended June 30, 2011. As a percentage of
revenue, cost of services was 51.9% for the three months ended June 30,
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2010 and 55.7% for the
three months ended June 30, 2011. The increase of $10.9 million for the three months ended June 30,
2011 was primarily due to a $3.2 million fair value adjustment to an acquisition-related earn-out
liability, as well as an increase of $6.1 million in personnel, meetings, and deliverable costs
incurred to support the expansion of growing programs, and an increase of $1.7 million in travel
and related expenses to serve our expanding member base.
Member relations and marketing. Member relations and marketing expense increased 18.3% from
$15.2 million in the three months ended June 30, 2010 to $18.0 million in the three months ended
June 30, 2011. As a percentage of revenue, member relations and marketing expense in the three
months ended June 30, 2010 and 2011 was 22.8% and 22.0%, respectively. The increase in member
relations and marketing expense during the three months ended June 30, 2011 was primarily
attributable to an increase in sales staff and related travel and other associated costs, as well
as an increase in member relations personnel and related costs required to serve the expanding
membership base. During the three months ended June 30, 2011 and 2010, we had an average of 145 and
129 new business development teams, respectively.
General and administrative. General and
administrative expense increased from $8.2 million in the three months ended June 30, 2010 to
$10.8 million in the three months ended June 30, 2011. As a percentage of revenue, general
and administrative expense increased to 13.3% in the
three months ended June 30, 2011 from 12.3% in the three months ended June 30, 2010. The increase
of $2.6 million in general and administrative costs for the three months ended June 30, 2011 was
primarily due an increase in new product development costs of $1.0 million and, to a lesser extent,
increased recruiting, human resources, and finance personnel costs incurred to support our growing
employee base.
Depreciation and amortization of property and equipment. Depreciation expense increased from
$1.7 million, or 2.5% of revenue, in the three months ended June 30, 2010, to $1.9 million, or 2.4%
of revenue, in the three months ended June 30, 2011. The increase was primarily due to increased
amortization expense from technology acquired in the Cielo MedSolutions, LLC (Cielo) acquisition.
Other income, net. Other
income, net increased from $0.2 million in the three months ended
June 30, 2010 to $0.8 million in the three months ended June 30, 2011. Other income, net consists
of interest income and foreign exchange rate gains and losses. Higher average cash and investment balances contributed an increase in
interest income from $0.3 million in the three months ended June 30, 2010 to $0.6 million in the
three months ended June 30, 2011. We recognized foreign exchange losses of $76,000 and foreign
exchange gains of $212,000 during the three months ended June 30, 2010 and 2011, respectively, due
to the effect of fluctuating currency rates on our receivable balances denominated in foreign
currencies.
Provision for income taxes. Our provision for income taxes was $2.6 million and $2.3 million
in the three months ended June 30, 2010 and 2011, respectively. Our effective tax rate in the three
months ended June 30, 2010 and 2011 was 35.9% and 37.5%, respectively. The increase in our
effective tax rate for the three months ended June 30, 2011 was primarily due to the effect that
higher estimated net income for fiscal year 2012, when compared to fiscal year 2011, has on our
effective rate when compared to the fixed nature of our Washington D.C. tax credits that we receive
under the New E-conomy Transformation Act of 2000.
Stock-based compensation expense. We recognized the following stock-based compensation expense
in the consolidated statements of income line items for stock options and restricted stock units
issued under our stock incentive plans and for shares issued under our employee stock purchase plan
for the three months ended June 30, 2011 and 2010 (in thousands except per share amounts):
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Stock-based compensation expense included in: |
||||||||
Costs and expenses: |
||||||||
Cost of services |
$ | 844 | $ | 687 | ||||
Member relations and marketing |
500 | 432 | ||||||
General and administrative |
1,371 | 1,187 | ||||||
Depreciation |
| | ||||||
Total costs and expenses |
2,715 | 2,306 | ||||||
Income from operations |
(2,715 | ) | (2,306 | ) | ||||
Net income |
$ | (1,697 | ) | $ | (1,478 | ) | ||
Impact on diluted earnings per share |
$ | (0.10 | ) | $ | (0.09 | ) | ||
There are no stock-based compensation costs capitalized as part of the cost of an asset.
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As of June 30, 2011, $26.2 million of total unrecognized compensation cost related to
stock-based compensation is expected to be recognized over a weighted average period of 1.6 years.
Non-GAAP Financial Measures
The tables below present information for the fiscal periods indicated about our adjusted
EBITDA, adjusted net income, and non-GAAP earnings per diluted share. We define adjusted EBITDA
as earnings before other income, net, which includes interest income and foreign currency losses
and gains; income taxes; depreciation and amortization of property and equipment; amortization of acquisition-related
intangibles and capitalized software included in cost of services; costs associated with
acquisitions; share-based compensation expense; and fair value adjustments made to our
acquisition-related earn-out liabilities. We define adjusted net income as net income excluding
the net of tax effect of share-based compensation expense; amortization of acquisition-related
intangibles; costs associated with acquisitions; and fair value adjustments made to our
acquisition-related earn-out liabilities. We define non-GAAP earnings per diluted share as net
income per share excluding the net of tax effect of share-based compensation expense; amortization
of acquisition-related intangibles; costs associated with acquisitions; and fair value adjustments
made to our acquisition-related earn-out liabilities. See Managements Discussion and Analysis of
Financial Condition and Results of OperationsNon-GAAP Financial Presentation in our 2011 Form
10-K for our reasons for including these financial measures in this report and for a description of
material limitations with respect to the usefulness of such measures.
A reconciliation of adjusted EBITDA, adjusted net income and non-GAAP earnings per diluted
share to the most directly comparable GAAP financial measures is provided below (in thousands).
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 3,871 | $ | 4,593 | ||||
Provision for income taxes |
2,323 | 2,573 | ||||||
Other income, net |
(797 | ) | (221 | ) | ||||
Depreciation
and amortization of property and equipment |
1,925 | 1,377 | ||||||
Amortization of intangibles (1) |
1,199 | 1,335 | ||||||
Acquisition charges |
144 | | ||||||
Fair value adjustments to acquisition-related earn-out liabilities |
3,200 | 400 | ||||||
Share-based compensation expense |
2,715 | 2,306 | ||||||
Adjusted EBITDA |
$ | 14,580 | $ | 12,363 | ||||
(1) | Consists of those amounts included in cost of services on our consolidated statements of income. |
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 3,871 | $ | 4,593 | ||||
Amortization of acquisition-related intangibles, net of tax |
750 | 820 | ||||||
Acquisition charges, net of tax |
90 | | ||||||
Fair value adjustments to acquisition-related earn-out liabilities, net of tax |
2,000 | 256 | ||||||
Share-based compensation, net of tax |
1,697 | 1,478 | ||||||
Adjusted net income |
$ | 8,408 | $ | 7,147 | ||||
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
GAAP earnings per diluted share |
$ | 0.23 | $ | 0.29 | ||||
Amortization of acquisition-related intangibles, net of tax |
0.04 | 0.05 | ||||||
Acquisition charges, net of tax |
0.01 | | ||||||
Fair value adjustments to acquisition-related earn-out liabilities, net of tax |
0.12 | 0.02 | ||||||
Share-based compensation, net of tax |
0.10 | 0.09 | ||||||
Non-GAAP earnings per diluted share |
$ | 0.50 | $ | 0.45 | ||||
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Liquidity and Capital Resources
Cash flows generated from operating activities are our primary source of liquidity. We believe
that existing cash, cash equivalents, and marketable securities balances and operating cash flows
will be sufficient to support operating and capital expenditures, as well as share repurchases and
potential acquisitions, during at least the next 12 months. We had cash, cash equivalents, and
marketable securities balances of $118.8 million and $116.6 million as of June 30, 2011 and March
31, 2011, respectively. We expended $2.3 million and $2.0 million in cash to purchase shares of our
common stock through our share repurchase program during the three months ended June 30, 2011 and
2010, respectively. We have no long-term indebtedness.
Cash flows from operating activities. The combination of revenue growth, profitable
operations, and payment for memberships in advance of accrual revenue typically results in
operating activities that generate cash flows in excess of net income on an annual basis. Cash
flows from operating activities fluctuate from quarter to quarter based on the timing of new and
renewal contracts as well as certain expenses, and the first quarter of our fiscal year typically
provides the lowest quarterly cash flows from operations. Net cash flows provided by operating
activities were $4.6 million in the three months ended June 30, 2011, compared to net cash flows
used in operating activities of $4.1 million in the three months ended June 30, 2010. The increase
in net cash flows provided by operating activities during the current period was primarily due to
acceleration in contract value and deferred revenue growth, as well as an increase in adjusted net
income.
Cash flows from investing activities. Our cash management and investment strategy and capital
expenditure programs affect investing cash flows. Net cash flows used in investing activities were
$2.5 million and $34.0 million in the three months ended June 30, 2011 and 2010, respectively.
Investing activities during the three months ended June 30, 2011 consisted primarily of capital
expenditures of $6.5 million, partially offset by proceeds on the redemption and sales of
marketable securities of $4.0 million. Investing activities during the three months ended June 30,
2010 consisted primarily of $36.0 million used in our acquisition of the health care division of
Trintech Group plc (Concuity) and the related escrow, partially offset by the net proceeds on the
redemption and sales of marketable securities of $3.8 million. Capital expenditures for the three
months ended June 30, 2010 were $1.8 million.
Cash flows from financing activities. We had net cash flows provided by financing activities
of $2.8 million and $1.8 million in the three months ended June 30, 2011 and 2010, respectively.
Financing activities during the three months ended June 30, 2011 primarily consisted of $5.4
million from the issuance of common stock upon the exercise of stock options, offset in part by
share repurchase activity. Financing activities during the three months ended June 30, 2010
primarily consisted of $3.5 million from the issuance of common stock from the exercise of stock
options, netted by share repurchase activity. We repurchased 44,036 shares at a total cost of
approximately $2.3 million and 52,340 shares at a total cost of approximately $2.0 million in the
three months ended June 30, 2011 and 2010, respectively, pursuant to our share repurchase program.
Also in the three months ended June 30, 2011 and 2010, we withheld $1.3 million and $0.4 million in
shares, respectively, to satisfy minimum employee tax withholding for vested restricted stock
units.
Contractual Obligations
Our 2011 Form 10-K discloses certain commitments and contractual obligations that existed as
of March 31, 2011. Our December 31, 2009 acquisition of Southwind Health Partners, L.L.C. and
Southwind Navigator, LLC included a contingent obligation to make additional cash and/or common
stock payments if certain milestones were met. As of June 30, 2011, based on current facts and
circumstances, we have increased the estimated the aggregate fair value of this contingent
obligation to $10.3 million, which will be paid at various intervals, if earned, over the
evaluation periods beginning on the acquisition date extending through December 31, 2014.
In April 2010, we acquired all outstanding shares of Concuity. The consideration paid in
connection with this acquisition included a contingent obligation to make additional payments based
on the achievement of certain performance targets. As of June 30, 2011, we have estimated the
aggregate fair value of this contingent obligation at $4.0 million, which we anticipate will be
paid, if earned, on December 31, 2011.
Our February 2011 acquisition of substantially all of the assets of Cielo included a
contingent obligation to make additional cash payments if certain milestones were met. As of June
30, 2011, based on current facts and circumstances, we have estimated the aggregate fair value of
this contingent obligation at $4.4 million which will be paid at various intervals, if certain
product development and subscription milestones are met over the evaluation periods beginning at
the acquisition date extending through July 31, 2012.
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Table of Contents
Off-Balance Sheet Arrangements
As of June 30, 2011, we had no off-balance sheet financing or other arrangements with
unconsolidated entities or financial partnerships (such as entities often referred to as structured
finance or special purpose entities) established for purposes of facilitating off-balance sheet
financing or other debt arrangements or for other contractually narrow or limited purposes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest rate risk. We are exposed to interest rate risk primarily through our portfolio of
cash, cash equivalents, and marketable securities, which is designed for safety of principal and
liquidity. Cash and cash equivalents include investments in highly liquid U.S. Treasury obligations
with maturities of less than three months. As of June 30, 2011, our marketable securities consisted
of $63.5 million in tax-exempt notes and bonds issued by various states, and $20.0 million in U.S.
government agency securities. The weighted average maturity on all our marketable securities as of
June 30, 2011 was approximately 5.0 years. We perform periodic evaluations of the relative credit
ratings related to our cash, cash equivalents, and marketable securities. Our portfolio is subject
to inherent interest rate risk as investments mature and are reinvested at current market interest
rates. We currently do not use derivative financial instruments to adjust our portfolio risk or
income profile. Due to the nature of our investments we have not prepared quantitative disclosure
for interest rate sensitivity in accordance with Item 305 of the SECs Regulation S-K, as we
believe the effect of interest rate fluctuations would not be material.
Foreign currency risk. Although they represent approximately 3% of our revenue, our
international operations subject us to risks related to currency exchange fluctuations. Prices for
our services sold to members located outside the United States are sometimes denominated in local
currencies (primarily British Pound Sterling). As a consequence, increases in the U.S. dollar
against local currencies in countries where we have members would result in a foreign exchange loss
recognized by us. In the three months ended June 30, 2011 and 2010, we recorded foreign currency
exchange gains or (losses) of $212,000 and ($76,000), respectively, which are included in other
income, net in our consolidated statements of income. A hypothetical 10% change in foreign currency
exchange rates would not have had a material impact on our financial position as of June 30, 2011.
Item 4. Controls and Procedures.
Our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, have evaluated
the effectiveness of our disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this
quarterly report as required by Rules 13a-15(b) or 15d-15(b) under the Exchange Act.
Our management, including our CEO and CFO, does not expect that our disclosure controls and
procedures or our internal control over financial reporting will prevent all errors and all fraud.
A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. Based on their evaluation,
such officers have concluded that, as of the end of the period covered by this quarterly report,
our disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms and to provide reasonable assurance that such
information is accumulated and communicated to our management, including our CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure.
During the period covered by this quarterly report, there have been no changes to our internal
control over financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. Risk Factors.
In addition to the other information contained in this Quarterly Report on Form 10-Q, you
should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our 2011 Form
10-K. The risks discussed in our 2011 Form 10-K could materially affect our business, financial
condition, and future results. The risks described in our 2011 Form 10-K are not the only risks
facing us. Additional risks and uncertainties not currently known to us or that we currently deem
to be immaterial also may materially and adversely affect our business, financial condition or
operating results.
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Table of Contents
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In January 2004, our Board of Directors authorized the repurchase by us from time to time of
up to $50 million of our common stock. That authorization was increased in cumulative amount to
$100 million in October 2004, to $150 million in February 2006, to $200 million in January 2007, to
$250 million in July 31, 2007, and to $350 million in April 2008. All repurchases have been made in
the open market pursuant to this publicly announced repurchase program. No minimum number of shares
has been fixed, and the share repurchase authorization has no expiration date. A summary of the
share repurchase activity for the Companys first quarter of fiscal 2011 follows:
Total Number of | Approximate | |||||||||||||||
Shares Purchased as | Dollar Value of | |||||||||||||||
Part of Publicly | Shares That May | |||||||||||||||
Total Number of | Average Price | Announced Plans or | Yet Be Purchased | |||||||||||||
Shares Purchased | Paid Per Share | Programs | Under the Plan | |||||||||||||
April 1 to April 30, 2011 |
3,972 | $ | 50.42 | 3,972 | $ | 33,469,678 | ||||||||||
May 1 to May 31, 2011 |
| $ | | | $ | 33,469,678 | ||||||||||
June 1 to June 30, 2011 |
40,064 | $ | 51.86 | 40,064 | $ | 31,391,959 | ||||||||||
Total |
44,036 | $ | 51.73 | 44,036 | ||||||||||||
As of June 30, 2011, we had repurchased a total of 7,564,707 shares under our repurchase
program.
Item 6. Exhibits.
(a) | Exhibits: |
*3.1
|
Certificate of Incorporation of the Company, as amended. Incorporated by reference to the Companys Registration Statement on Form S-1/A filed with the Securities and Exchange Commission (the Commission) on October 29, 2001. | |
**3.2
|
Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.1 of the Companys Current Report on Form 8-K filed with the Commission on November 14, 2007. | |
#4.1
|
Form of Common Stock Certificate | |
31.1
|
Certification of the Chief Executive Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended | |
31.2
|
Certification of the Chief Financial Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended | |
32.1
|
Certifications pursuant to 18 U.S.C. Section 1350 | |
***101 |
XBRL (Extensible Business Reporting Language). The following materials from the Advisory Board Companys Quarterly Report on Form 10-Q for the period ended June 30, 2011, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2011 (unaudited) and March 31, 2011, (ii) Unaudited Consolidated Statements of Income for the Three Months Ended June 30, 2011 and 2010, (iii) Unaudited Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2011 and 2010, and (iv) Notes to Unaudited Consolidated Financial Statements, tagged as blocks of text. |
* | Incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form S-1, filed with the U.S. Securities and Exchange Commission on August 22, 2001. | |
** | Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on November 14, 2007. | |
# | Incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the Companys Registration Statement on Form S-1, filed with the U.S. Securities and Exchange Commission on October 29, 2001. | |
*** | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
23
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE ADVISORY BOARD COMPANY |
||||
Date: August 9, 2011 | By: | /s/ Michael T. Kirshbaum | ||
Michael T. Kirshbaum | ||||
Chief Financial Officer and Treasurer |
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INDEX TO EXHIBITS
Exhibit | |||
Number | Description of Exhibit | ||
*3.1
|
Certificate of Incorporation of the Company, as amended. Incorporated by reference to the Companys Registration Statement on Form S-1/A filed with the Securities and Exchange Commission (the Commission) on October 29, 2001. | ||
**3.2
|
Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.1 of the Companys Current Report on Form 8-K filed with the Commission on November 14, 2007. | ||
#4.1
|
Form of Common Stock Certificate | ||
31.1
|
Certification of the Chief Executive Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended | ||
31.2
|
Certification of the Chief Financial Officer pursuant to Rule13a-14(a) of the Securities Exchange Act of 1934, as amended | ||
32.1
|
Certifications pursuant to 18 U.S.C. Section 1350 | ||
***101 |
XBRL (Extensible Business Reporting Language). The following materials from the Advisory Board Companys Quarterly Report on Form 10-Q for the period ended June 30, 2011, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2011 (unaudited) and March 31, 2011, (ii) Unaudited Consolidated Statements of Income for the Three Months Ended June 30, 2011 and 2010, (iii) Unaudited Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2011 and 2010, and (iv) Notes to Unaudited Consolidated Financial Statements, tagged as blocks of text. |
* | Incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form S-1, filed with the U.S. Securities and Exchange Commission on August 22, 2001. | |
** | Incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on November 14, 2007. | |
# | Incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the Companys Registration Statement on Form S-1, filed with the U.S. Securities and Exchange Commission on October 29, 2001. | |
*** | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
25