UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended June 30,
2011
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or
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period
from to
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COMMISSION FILE NUMBER:
000-27577
(Exact Name of Registrant as
Specified in its Charter)
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DELAWARE
(State or Other Jurisdiction
of
Incorporation or Organization)
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16-1538028
(I.R.S. Employer
Identification No.)
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161 Sixth Avenue,
New York, New York
(Address of principal
executive offices)
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10013
(zip code)
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Registrants telephone number, including area code:
(212) 539-9600
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 par value per share
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the
Act:
NONE
INDICATE BY CHECK MARK IF THE REGISTRANT IS A WELL-KNOWN
SEASONED ISSUER, as defined in Rule 405 of the Securities
Act. Yes o No þ
INDICATE BY CHECK MARK IF THE REGISTRANT IS NOT REQUIRED TO FILE
REPORTS pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS
PURSUANT to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
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):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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INDICATE BY CHECK MARK WHETHER REGISTRANT IS A SHELL COMPANY (as
defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of voting and non-voting common
equity securities held by non-affiliates of the registrant,
computed by reference to the closing price as of the last
business day of the registrants most recently completed
second fiscal quarter, December 31, 2010, was $58,998,977.
On September 23, 2011, 55,651,735 shares of the
Registrants Common Stock, $.001 par value, were
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the
extent not set forth herein, is incorporated by reference from
the Registrants definitive proxy statement relating to the
annual meeting of stockholders to be held on November 1,
2011, which definitive proxy statement will be filed with the
Securities and Exchange Commission within 120 days after
the end of the fiscal year to which this Report relates.
HARRIS
INTERACTIVE INC.
FORM 10-K
FOR THE FISCAL
YEAR ENDED JUNE 30, 2011
INDEX
2
The discussion in this Annual Report on
Form 10-K
contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Annual Report on
Form 10-K
that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act), including statements
regarding expectations, beliefs, plans, objectives, intentions
or strategies regarding the future. In some cases, you can
identify forward-looking statements by terminology such as,
may, should, expects,
plans, anticipates, feel,
believes, estimates,
predicts, potential,
continue, consider,
possibility, or the negative of these terms or other
comparable terminology. All forward-looking statements included
in this document are based on the information available to
Harris Interactive (the Company) on the date hereof,
and the Company assumes no obligation to update any such
forward-looking statement. Actual results could differ
materially from the results discussed herein. Factors that might
cause or contribute to such differences include but are not
limited to, those discussed in the Risk Factors section of this
Annual Report on
Form 10-K
and as set forth in other reports or documents the Company files
from time to time with the Securities and Exchange Commission
(the SEC). Risks and uncertainties also include the
continued volatility of the global macroeconomic environment and
its impact on the Company and its clients, the Companys
ability to sustain and grow its revenue base, the Companys
ability to maintain and improve cost efficient operations, the
impact of reorganization and restructuring and related charges,
quarterly variations in financial results, actions of
competitors, our ability to develop and maintain products and
services attractive to the market, our ability to remain in
compliance with the financial covenants in our credit agreement,
and uncertainties surrounding compliance with certain Nasdaq
listing requirements.
Note: All dollar amounts shown below are in
thousands of U.S. Dollars, unless otherwise noted.
References herein to we, our,
us, its, the Company or
Harris Interactive refer to Harris Interactive
Inc. and its subsidiaries, unless the context specifically
requires otherwise.
Harris Interactive®
and The Harris
Poll®
are U.S. registered trademarks of Harris Interactive
Inc. This Annual Report on
Form 10-K
also may include other trademarks, trade names, and service
marks of Harris Interactive and of other parties.
Corporate
Overview
Harris Interactive was founded in 1975 in upstate New York
as the Gordon S. Black Corporation, however, its roots date back
to the founding of Louis Harris and Associates in New York City
in 1956. Today, Harris Interactive is an international,
full-service, consultative market research firm widely known for
The Harris Poll (one of the worlds longest-running,
independent opinion polls) and for pioneering online market
research methods. Harris Interactive primarily serves
clients worldwide through its offices in North America and
Europe, and through a global network of independent market
research firms.
Our corporate headquarters are located in New York City. Our
fiscal year ends June 30th.
Mergers,
Acquisitions and Sale of Business
The Gordon S. Black Corporation was founded in 1975 as a New
York corporation. It formed and became part of the Delaware
corporation now known as Harris Interactive in 1997. Since
that time, our acquisitions have included:
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February 1996 Louis Harris and Associates, Inc.,
headquartered in New York,
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February 2001 the custom research division of
Yankelovich Partners, Inc., headquartered in Norwalk,
Connecticut,
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3
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August 2001 Market Research Solutions Limited, a
privately-owned U.K. company headquartered in Oxford, England,
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September 2001 M&A Create Limited, a
privately-owned company headquartered in Tokyo, Japan,
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November 2001 Total Research Corporation, a Delaware
corporation headquartered in Princeton, New Jersey,
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March 2004 Novatris, S.A., a share corporation
organized and existing under the laws of France,
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September 2004 Wirthlin Worldwide, Inc., a
privately-held California corporation headquartered in Reston,
Virginia,
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April 2007 MediaTransfer AG Netresearch &
Consulting (MediaTransfer), a privately-held German
stock corporation headquartered in Hamburg, Germany,
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August 2007 Decima Research Inc.
(Decima), a corporation incorporated in Ontario,
Canada, and
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August 2007 Marketshare Limited, a company
incorporated under the laws of Hong Kong, and Marketshare Pte
Ltd, a company incorporated under the laws of Singapore
(collectively, Marketshare). In July 2011, we
disclosed our plans to cease operations in Asia by
September 30, 2011.
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In May 2005, we completed the sale of our Japanese subsidiaries,
M&A Create Limited, Adams Communications Limited, and
Harris Interactive Japan, K.K., in a management buy-out. In
August 2007, we sold our Rent and Recruit business, which was
engaged primarily in providing facilities for and conducting
focus group interviews.
Business
Overview
Harris Interactive is a professional services firm that
serves clients in many industries and many countries. We provide
full service market research and polling services which include
ad-hoc and customized qualitative and quantitative research,
service bureau research (conducted for other market research
firms), and long-term tracking studies.
We conduct market research projects for clients in many
industries, including the automotive, transportation, travel,
tourism, energy, professional services, consumer goods,
restaurants, retail, financial services, healthcare, public
affairs and policy, technology, media and telecommunications
industries. We also offer consultative solutions in areas
such as market assessment, product development, brand and
communications, stakeholder relationships, reputation
management, and youth and education.
We conduct a significant portion of our market research using
online data collection. We also conduct data collection through,
among others, mail and telephone surveys, focus groups, and
personal interviews. During fiscal 2011, our telephone data
collection was conducted through our telephone data collection
centers in the United Kingdom, Canada, Hong Kong and Singapore,
and through outsourced providers in India and, to a lesser
extent, Costa Rica. In August 2011, we sold our U.K. telephone
data collection center to a third-party. By September 30,
2011, we anticipate that our telephone data collection centers
in Hong Kong and Singapore will be closed.
4
Our Products and
Services
Custom
Research
We conduct many types of custom research including customer
satisfaction surveys, market share studies, new product
introduction studies, brand recognition studies, reputation
studies, ad concept testing and more. A custom research project
has three distinct phases:
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Survey Design Initial meetings are conducted
with the client to clearly define the objectives and reasons for
the study to ensure that the final data collected will meet the
clients needs. Based on the clients requirements, we
then determine the proper data collection process (such as a
mail, telephone or online survey, focus groups, personal
interviews, or any combination thereof), sampling scheme (the
demographics and number of people to be surveyed) and survey
design or focus group protocol.
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Data Collection Field data collection is
conducted through online or telephone interviewing, by mail or
in person, by holding focus group meetings, or any combination
of the above. Multiple quality assurance processes are employed
to ensure that the survey data are accurately reported and that
the correct number and type of interviews have been completed.
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Weighting, Analysis, and Reporting We review
the collected data for sufficiency and completeness, weight the
data accordingly, and then analyze by desired demographic,
business or industry characteristics. A comprehensive report
that typically includes recommendations is then prepared and
delivered to the client.
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Our sample design and questionnaire development techniques help
ensure that appropriate information is collected and that the
information satisfies the specific inquiries of our clients. We
have developed in-depth data collection techniques to enhance
the integrity and reliability of our sample database. Our survey
methodology is intended to ensure that responses are derived
from the appropriate decision-makers in each category. As a
result, we have a solid foundation for delivering data and
insight that meets our clients needs.
Tracking Study
Research
We apply our expertise to the design, execution and maintenance
of custom, online tracking studies for clients in a broad range
of industries and around the globe. Tracking studies regularly
ask identical questions to similar demographic groups within a
constant interval (once a month, once a quarter, etc.) to feed
business decision-makers with dynamic data and intelligence that
enables them to:
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Measure, sustain and improve customer loyalty,
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Gather market and customer intelligence relative to the brand
and category,
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Detect emerging market trends
and/or
potential competitive threats,
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Assess the impact of marketing on customer behaviors and
attitudes, and
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Identify opportunities for growth.
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Service Bureau
Research
We provide our market research industry clients with mixed-mode
data collection, panel development services, and syndicated and
tracking research consultation through our service bureau group.
Research and
Development
We have not incurred expenditures for the three fiscal years
ended June 30, 2011 that would be classified as research
and development as defined by accounting principles generally
accepted in the United States of America (GAAP)
under the Financial Accounting Standards Board
(FASB) guidance for research and development
expenses.
5
Our Intellectual
Property and Other Proprietary Rights
We believe that the Harris brand and its associated intellectual
property provide us with many competitive advantages. To protect
our brand and our intellectual property, we rely on a
combination of patent, copyright, trademark and trade-secret
laws, as well as confidentiality, non-disclosure, non-compete
and license agreements, and clearly defined standard terms and
conditions in our sales contracts.
Our
Clients
At June 30, 2011, we had approximately 1,400 clients. No
single client accounted for more than 10% of our consolidated
revenue.
Our Competition
and Competitive Advantages
We compete with numerous market research firms, as well as
corporations and individuals that perform market research
studies on an isolated basis, many of which have market shares
or financial and marketing resources larger than our own. Our
competitors include, but are not limited to, Synovate (owned by
Aegis Group plc), GfK AG, Ipsos SA, and TNS and Millward Brown
(both owned by WPP Group plc).
We believe we have a number of competitive advantages, including:
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Our Highly Skilled Employees many of whom are
recognized by their peers as leaders in the field of market
research or in the particular industry sectors in which they
specialize.
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Our Strong Brand we believe that
Harris Interactive and The Harris Poll are two of
the best known and most trusted names for U.S. market
research and public opinion polling today. We have expanded
The Harris Poll throughout Europe and expect to continue
our relationships with The Financial Times (London),
International Herald Tribune, and France 24 (Paris), in
order to raise awareness of the Harris Interactive brand on
a global scale.
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Our Online Panel our online panel consists of
individuals from around the world who have voluntarily agreed to
participate in our various online research studies. Our panel
enables us to:
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project results to large segments of the population, such as
all U.S. voters or all British
adults,
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conduct a broad range of studies across a wide set of industries,
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rapidly survey very large numbers of the general
population, and
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survey certain low-incidence,
hard-to-find
subjects.
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Our Specialty
Sub-Panels
we have developed numerous specialty
sub-panels
of
hard-to-find
respondents, including: Affluent, Chronic Illness, Mothers and
Expectant Mothers, Physicians, Pet Companion, Technology
Decision-Makers, and Youth. Our clients value our ability to
survey these hard to find subjects. Many of our clients have
asked us to develop specialty
sub-panels
exclusively for their use.
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Our Global Enterprise Solutions Portfolio a
comprehensive tool-box of research techniques, methodologies,
and models that can be applied by marketing experts to help
develop strategy, implement tactics, and assess their impact in
the marketplace. These tools also can be used to analyze
markets, develop new products and services, create
and/or
measure brand positioning and awareness, and measure
and/or
improve customer loyalty.
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Financial
Information about Geographic Areas
We are comprised principally of operations in North America and
Europe.
Non-U.S. market
research is comprised of operations in United Kingdom, Canada,
France and Germany. During fiscal 2011, we also maintained
operations in Hong Kong and Singapore, along with a
representative office in mainland China, all of which we
anticipate will cease by September 30, 2011. Revenue from
services is attributable to the country in which the work is
performed. There were no intercompany transactions that
materially affected the financial statements, and all
intercompany sales have been eliminated upon consolidation.
6
Our business model for offering custom market research is
consistent across the geographic regions in which we operate.
Geographic management facilitates local execution of our global
strategies. We maintain global leaders with responsibility
across all geographic regions for the majority of our critical
business processes, and the most significant performance
evaluations and resource allocations are made on a global basis
by our chief operating decision-maker. Accordingly, we have
concluded that we have one reportable segment.
We have prepared the financial results for geographic
information on a basis that is consistent with the manner in
which management internally disaggregates information to assist
in making internal operating decisions. We have allocated common
expenses among these geographic regions differently than we
would for stand-alone information prepared in accordance with
GAAP. Geographic operating income (loss) may not be consistent
with measures used by other companies.
Geographic information from continuing operations for the fiscal
years ended June 30 was as follows (amounts in thousands):
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2011
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2010
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2009
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Revenue from services
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United States
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$
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92,885
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$
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96,942
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$
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112,821
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United Kingdom
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22,864
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28,398
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32,454
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Canada
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23,160
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20,653
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19,939
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Other European countries
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21,755
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17,554
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14,536
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Asia
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4,600
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4,868
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4,584
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Total revenue from services
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$
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165,264
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$
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168,415
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$
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184,334
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Operating income (loss)(1)
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United States
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$
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(2,298
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$
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2,371
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$
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(41,406
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United Kingdom
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(4,371
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(627
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(3,431
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Canada
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(1,330
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(2,277
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(5,539
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Other European countries
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1,627
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919
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(5,048
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Asia
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(615
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(909
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(1,025
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Total operating loss
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$
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(6,987
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$
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(523
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$
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(56,449
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Long-lived assets
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United States
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$
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1,641
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$
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2,964
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$
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4,879
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United Kingdom
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976
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1,300
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1,039
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Canada
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431
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1,093
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1,693
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Other European countries
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243
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210
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301
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Asia
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156
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59
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103
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Total long-lived assets
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$
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3,447
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$
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5,626
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$
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8,015
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Deferred tax assets (liabilities)
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United States
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$
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$
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$
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United Kingdom
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283
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Canada
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(1,706
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(1,709
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(2,018
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Other European countries
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(183
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(307
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(512
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Asia
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Total deferred tax assets (liabilities)
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$
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(1,889
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$
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(2,016
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$
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(2,247
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7
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(1) |
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Operating loss for fiscal 2009 included a $40,250 goodwill
impairment charge. The charge was allocated to our geographic
locations, specifically, $28,888 to the United States, $3,315 to
the United Kingdom, $2,435 to Canada, $4,873 to other
European countries, and $739 to Asia. |
During fiscal 2011, 2010 and 2009, 56.2%, 57.6% and 61.2%,
respectively, of our total consolidated revenue was derived from
our U.S. operations, and 43.8%, 42.4% and 38.8%,
respectively, of our total consolidated revenue was derived from
our
non-U.S. operations.
See Item 1A. Risk Factors below for a
description of certain risks attendant to our
non-U.S. operations.
Backlog
At June 30, 2011, we had a revenue backlog, also referred
to as secured revenue, of approximately $45,922, as compared to
a revenue backlog of approximately $44,929 at June 30,
2010. We estimate that substantially all of the backlog at
June 30, 2011 will be recognized as revenue from services
during the fiscal year ending June 30, 2012, based on our
experience from prior years.
Employees
At June 30, 2011, we employed a total of 733 full-time
individuals on a worldwide basis, 402 of whom were employed in
the United States. In addition, we employed 187 part-time
and hourly individuals on a worldwide basis for data gathering
and processing activities, 35 of whom were employed in the
United States. Temporary employees and hourly call center
staff are not included in these headcount numbers.
None of our employees are represented by a collective bargaining
agreement. We have not experienced any work stoppages. We
consider our relationship with our employees to be good.
Executive
Officers of Harris Interactive
The following table sets forth the name, age and position of
each of the persons who were serving as our executive officers
as of September 28, 2011. These individuals have been
appointed by and are serving at the pleasure of the board of
directors of the Company (the Board).
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Name
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Age
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Position
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Al Angrisani
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62
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Interim Chief Executive Officer
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Michael de Vere
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38
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President, U.S. Business Groups
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Marc H. Levin
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38
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Executive Vice President, Chief Administrative Officer, General
Counsel and Corporate Secretary
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Todd Myers
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42
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Interim Head of Technology, Operations and Panel, and Senior
Vice President
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Eric W. Narowski
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42
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Interim Chief Financial Officer, Principal Accounting Officer,
and Senior Vice President, Global Controller
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Al Angrisani is our Interim Chief Executive Officer, a
position he has held since June 2011. Mr. Angrisani also
currently serves as Chairman and Chief Executive Officer of
Angrisani Turnarounds, LLC, an advisory firm for underperforming
companies. Mr. Angrisani served as President and Chief
Executive Officer of Greenfield Online, a provider of global
consumer attitudes about products and services, from September
2005 until it was acquired by the Microsoft Corporation in
October 2008, and then provided consulting services to Microsoft
Corporation related to the acquisition until September 2009.
Between November 2001 and April 2004, Mr. Angrisani served
as President and Chief Operating Officer of
Harris Interactive. Prior to this role, he served as
President and Chief Executive Officer of Total Research
Corporation from July 1998 through the Companys merger
with Harris Interactive in November
8
2001. Earlier in his career, Mr. Angrisani served as
President Reagans U.S. Assistant Secretary of Labor
and Chief of Staff, and as a Vice President of Chase Manhattan
Bank in New York.
Michael de Vere is our President, U.S. Business
Groups, a position he has held since June 2011. From January
2011 to June 2011, Mr. de Vere served as our President,
U.S. Client Services. From September 2010 to January 2011,
Mr. de Vere led our U.S. Healthcare group. From August 2009
to September 2010, Mr. de Vere led our Global Sales and
Marketing function and our U.S. Technology,
Media & Entertainment group. Prior to joining us, Mr.
de Vere served as Chief Operations Officer for Radius Financial,
Inc. from March 2008 to August 2009. From February 1999 to March
2008, Mr. de Vere served in progressively senior roles at J.D.
Power and Associates, most recently as Executive Director of
Proprietary Research.
Marc H. Levin is our Chief Administrative Officer, a
position he has held since June 2011. He continues to serve as
Executive Vice President, General Counsel and Corporate
Secretary. He served as our Senior Vice President, General
Counsel, and Corporate Secretary from April 2009 to
April 2010. He also served as our interim Head of Human
Resources from January 2010 to April 2010. Prior to joining us,
Mr. Levin spent five years at TNS, most recently as Senior
Vice President and General Counsel, North America. Before
joining TNS, Mr. Levin was a senior associate in the
New York City office of the law firm Thacher
Proffitt & Wood, where he specialized in corporate and
securities law.
Todd Myers is our Interim Head of Technology, Operations
and Panel, and Senior Vice President, a position he has held
since June 2011. He continues to serve as a Senior Vice
President of the Company. From December 2009 to June 2011,
Mr. Myers served as our Senior Vice President, Global
Operations. Prior to joining us, Mr. Myers spent more than
three years at TNS, serving as Senior Vice President of North
American Operations from August 2009 to December 2009 and as
Senior Vice President, Operations, from June 2006 to August
2009. Before joining TNS, Mr. Myers served in senior
operations roles at Opinion Research Corporation, Roper Starch
Worldwide and Response Analysis Corporation.
Eric W. Narowski is our Interim Chief Financial Officer,
a position he has held since June 2011. He continues to serve as
our Principal Accounting Officer and Senior Vice President,
Global Controller, positions he has held since February 2006 and
October 2007, respectively. From November 2009 to October
2010, he also served as our interim Chief Financial Officer.
From January 2000 to October 2007, Mr. Narowski served
as our Vice President, Corporate Controller. Mr. Narowski
joined us in July 1997 as our Controller, and is a New York
State Certified Public Accountant.
Available
Information
Information about our products and services, shareholder
information, press releases and SEC filings can be found on our
website at www.harrisinteractive.com. Through our website, we
make available free of charge the documents and reports we file
with the SEC, including our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports, as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the SEC. Information on our websites (or the
websites of our subsidiaries) does not constitute part of this
Annual Report on
Form 10-K.
The public may also read and copy any materials that we file
with the SEC at the SECs Public Reference Room at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC
at
1-800-SEC-0330.
The SEC also maintains an Internet site at www.sec.gov, which
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC.
Factors That May
Affect Future Performance.
We operate in a very competitive and rapidly changing
environment that involves numerous risks and uncertainties, some
of which are beyond our control. In addition, we and our clients
are affected by global economic conditions. The following
section discusses many of these risks and uncertainties, but is
not intended to be all-inclusive.
9
Risks Related to
Our Business
Our business
is vulnerable to fluctuations in general economic
conditions.
Our business tends to be adversely affected by slow or depressed
business conditions in the market as a whole. Many of our
clients treat all or a portion of their market research
expenditures as discretionary. As global macroeconomic
conditions decline and our clients seek to control variable
costs, new bookings tend to slow, existing bookings become
increasingly vulnerable to subsequent cancellations and delays,
and our sales backlog may convert to revenue more slowly than it
has historically. Any of the above factors may result in a
material adverse impact to our growth, revenues, and earnings.
Failure to
maintain our brand reputation and recognition could impair our
ability to remain competitive.
We believe that maintaining our good brand reputation and
recognition is critical to attracting and expanding our current
client base as well as attracting and retaining qualified
employees. If our reputation and name are damaged through, among
others, our participation in surveys involving controversial
topics or if the results of our surveys are inaccurate or are
misused or used out of context by one of our clients, we may
become less competitive or lose market share.
If we are
unable to maintain adequate capacity and demographic composition
of our existing online panel, our business, financial condition
and results of operations may be adversely
affected.
Our success is highly dependent on our ability to maintain
sufficient capacity of our online panel and its specialty
sub-panels.
Our ability to do this may be harmed if we lose panel capacity
or are unable to attract and maintain an adequate number of
replacement panelists and specialty
sub-panel
members. There are currently no industry or other benchmarks for
determining the optimal size and composition of an online panel.
Among other factors, panelist response rates vary with differing
survey content, and the frequency with which panelists are
willing to respond to survey invitations is variable. We
constantly reassess our panel size and demographics as survey
requests are made and, based upon availability of existing
panelists to fulfill project requests, determine our need to
recruit additional panelists. We are not always able to
accommodate client requests to survey low-incidence, limited
populations with specific demographic characteristics. If our
need to recruit panelists or specialty
sub-panel
members increases significantly, our operating costs will rise.
Further, our business will be adversely affected if we do not
achieve sufficient response rates with our existing panelists or
our panel narrows and we are unable to spend the funds necessary
to recruit additional panelists.
We face
competitive pressures within our industry and must continuously
replace completed work with new projects.
The market research industry includes many competitors, some of
which are much larger than we are, have a greater global
presence,
and/or have
specialized products and services we do not offer. There can be
no assurance that we will be able to successfully compete
against current and future competitors and our failure to do so
could result in loss of market share, diminished value in our
products and services, reduced pricing, and increased marketing
expenditures. Furthermore, we may not be successful if we cannot
compete effectively on quality of our services, timely delivery
of information, customer service, and the ability to offer
products and services to meet changing market needs or prices.
No one client accounts for more than 10% of our revenues and
most of our revenues are derived on a project by project basis.
We must continuously replace completed work with new projects
from both existing and new clients, and these competitive
pressures may make it more difficult for us to do so and to
sustain and grow our revenues. Additionally, a portion of our
business involves longer-term tracking studies, which are often
renewable on an annual basis. Non-renewal of a large tracking
study can have an immediate disproportionate impact on our
revenues, and we may have a lag time in replacing the
non-renewed tracking study or adjusting our cost structure to
reflect the effects of the non-renewal.
10
Our
outstanding debt obligations and ability to comply with related
covenants could impact our financial condition or future
operating results.
At June 30, 2011, we had $10.8 million outstanding
under our credit agreement, which provides for an amortizing
term loan with quarterly payments and, subject to certain
conditions, the availability of a maximum amount of
$5.0 million under a revolving credit facility. However, we
were not in compliance with certain financial covenants under
our credit agreement at June 30, 2011 largely due to the
magnitude of restructuring and other charges incurred during
fiscal 2011. These covenant violations were permanently waived
on September 27, 2011 as more fully described below under
Subsequent Events Amendment Agreement and
Waiver and in Note 24, Subsequent Events,
to our consolidated financial statements included in this Annual
Report on
Form 10-K.
The affirmative, negative and financial covenants of our credit
agreement could limit our future financial flexibility and could
adversely impact our ability to conduct our business.
Additionally, a failure to comply with these covenants could
result in acceleration of all amounts outstanding under our
credit agreement, which would materially impact our financial
condition unless accommodations could be negotiated with our
lenders. No assurance can be given that we would be successful
in doing so in this current financial climate, or that any
accommodations that we were able to negotiate would be on terms
as favorable as those presently contained in our credit
agreement.
The associated debt service costs of the borrowing arrangement
under our credit agreement will continue to be reflected in
operating results. The outstanding debt may limit the amount of
cash or additional credit available to us, which could restrain
our ability to expand or enhance products and services, respond
to competitive pressures, or pursue future business
opportunities requiring substantial investments of additional
capital.
A breach of
our online security measures, security concerns, or liability
arising from the use of the personal information of our online
panel, could adversely affect our business.
A failure in our online security measures could result in the
misappropriation of private data. As a result, we may be
required to expend capital and other resources to protect
against the threat of such security breaches or to alleviate
problems caused by such breaches, which could have a material
adverse effect on our business, financial condition and results
of operations.
Online security concerns could cause some online panelists to
reduce their participation levels, provide inaccurate responses,
or end their membership in our Internet panel. This could harm
our credibility with our current clients. If our clients become
dissatisfied, they may stop using our services. In addition,
dissatisfied and lost clients could damage our reputation. A
loss of online panelists or a loss of clients would hurt our
efforts to generate increased revenues and impair our ability to
attract potential clients.
We could be subject to liability claims by our online panelists
for any misuse of their personal information. These claims could
result in costly litigation. We could also incur additional
costs and expenses if new regulations regarding the use of
personal information are introduced or if our privacy practices
are investigated by a governmental body.
We must
continue to attract and retain highly skilled
employees.
Our future success will depend, in large part, on our ability to
continue to attract, retain and motivate highly skilled
technical, managerial, marketing, sales and client support
personnel. Research managers with industry expertise are
important to our ability to retain and expand our business.
Intense competition for these personnel exists, and we may be
unable to attract, integrate or retain the proper number of
sufficiently qualified personnel that our business plan assumes.
In the past, we have from time to time experienced difficulty
hiring and retaining qualified employees. There are few, if any,
educational institutions that provide specialized training
related to market research. Therefore, employees must be
recruited in competition with other industries. In the past,
competition for highly skilled employees has
11
resulted in additional costs for recruitment, training,
compensation and relocation or the provision of remote access to
our facilities. We may continue in the future to experience
difficulty in hiring and retaining employees with appropriate
qualifications. To the extent that we are unable to hire and
retain skilled employees in the future, our business, financial
condition and results of operations would likely suffer.
We may require
additional cash resources which may not be available on
favorable terms or at all.
We believe that our existing cash balances, projected cash flow
from operations, and the borrowing capacity we have under our
revolving line of credit will be sufficient to meet our expected
cash requirements for the next twelve months.
We may, however, require additional cash resources due to
unanticipated business conditions, to repay indebtedness or to
pursue future business opportunities requiring substantial
investments of additional capital. If our existing financial
resources are insufficient to satisfy our requirements, which
would occur if we fail to achieve our fiscal 2012 budget as
approved by the Board, we may seek to obtain additional
borrowings or to monetize non-core assets. We cannot guarantee
that we will be able to do so on acceptable terms or at all. In
addition, the incurrence of additional indebtedness would result
in increased debt service obligations and could require us to
agree to operating and financial covenants that would further
restrict our operations. Further, our ability to access our
revolving line of credit is subject to our compliance with the
terms and conditions of our credit agreement, including
financial covenants, the details of which are described in
Note 11, Borrowings, to our consolidated
financial statements included in this Annual Report on
Form 10-K.
There can be no assurance that we will remain in compliance with
such terms and conditions.
Our
international operations expose us to a variety of operational
risks which could negatively impact our future revenue and
growth.
Our operating results are subject to the risks inherent in
international business activities, including general political
and economic conditions in each country, changes in market
demand as a result of tariffs and other trade barriers,
challenges in staffing and managing foreign operations, changes
in regulatory requirements, compliance with numerous foreign
laws and regulations, differences between U.S. and foreign
tax rates and laws, currency exchange fluctuations, problems in
collecting accounts receivable and longer collection periods,
issues related to repatriation of earnings of foreign
subsidiaries, Internet access restrictions, protecting
intellectual property rights in international jurisdictions,
political instability, and anti-U.S. sentiment or terrorist
activity against U.S. interests abroad. We have little or
no control over these risks. For example, we have encountered
more restrictive privacy laws in connection with our business
operations in Europe, which have inhibited the growth of our
European online panel. If we were to increase our global
operations in the future, we may experience some or all of these
risks, which may have a material adverse effect on our business,
financial condition and results of operations.
We rely on
services provided by off-shore providers, the disruption of
which could adversely impact our business
We rely on off-shore providers in India and to a lesser extent,
in Costa Rica, to provide certain of our programming and data
processing services, as well as telephone and online data
collection. In the case of India, we rely heavily on a single
off-shore provider. Political or economic instability in
countries where such support services are provided, or a
significant increase in the costs of such services, could
adversely affect our business. From time to time, laws and
regulations are proposed in the jurisdictions where we operate
that would restrict or limit the benefits of off-shore
operations, the enactment of which could further harm our
business. If any of these risks were to be realized and assuming
that similar off-shore provider relationships could not be
established, our results of operations and financial condition
could be materially affected.
12
If we are
unable to enforce and protect our intellectual property rights
our competitive position may be harmed.
We rely on a combination of copyright, trademark, trade secret,
confidentiality, non-compete and other contractual provisions to
protect our intellectual property rights. Despite our efforts to
protect our intellectual property rights, unauthorized third
parties may obtain and use technology or other information that
we regard as proprietary. Our intellectual property rights may
not survive a legal challenge to their validity or provide
significant protection for us. The laws of certain countries do
not protect our proprietary rights to the same extent as the
laws of the United States. Accordingly, we may not be able to
protect our intellectual property in such countries against
unauthorized third-party copying or use, which could adversely
affect our competitive position.
We may be
subject to liability for publishing or distributing content over
the Internet.
We may be subject to claims relating to content that is
published on or downloaded from our websites. We also may be
subject to liability for content that is accessible from our
website through links to other websites. For example, as part of
our surveys panelists sometimes access, through our websites or
linkages to our clients or other third parties
websites, content provided by our clients, such as advertising
copy, that may be incomplete or contain inaccuracies. We also
recruit panelists to participate in research sponsored and
hosted by our clients on their websites, and we cannot
necessarily control breaches of privacy policies, warranties, or
other terms by those third parties. Additionally, we may be
accused of sending bulk unsolicited email and have our email
blocked by one or more Internet service providers and,
therefore, our online data collection efforts may suffer.
Although we carry general and professional liability insurance,
our insurance may not cover potential liability claims for
publishing or distributing content over the Internet, or may not
be adequate to cover all costs incurred in defense of potential
claims or to indemnify us for all liability that may be imposed.
In addition, any claims of this type, with or without merit,
would result in the diversion of our financial resources and
management personnel.
Any failure in
the performance of our technology infrastructure could harm our
business.
Any system delays or failures, including network, software or
hardware failures, that cause an interruption in our ability to
communicate with our Internet panel, collect research data, or
protect visual materials included in our surveys, could result
in reduced revenue, impair our reputation, and have a material
adverse effect on our business, financial condition and results
of operations.
Our systems and operations are vulnerable to damage or
interruption from fire, earthquake, flooding, power loss,
telecommunications failure, break-ins and similar events. Also,
the redundancy of our systems may not be adequate. We have
experienced technical difficulties and downtime of individual
components of our systems in the past, and we believe that
technical difficulties and downtime may occur from time to time
in the future. The impact of technical difficulties and downtime
may be severe. We have not fully implemented a formal disaster
recovery plan, and our business interruption insurance may not
adequately compensate us for any losses that may occur due to
failures in our systems.
Risks Related to
Our Common Stock
Our business
may be harmed if we cannot maintain our listing on the Nasdaq
Global Select Stock Market.
Variations in our operating results may cause our stock price to
fluctuate. Our quarterly operating results have in the past, and
may in the future, fluctuate significantly and we may incur
losses in any given quarter. Our future results of operations
may fall below the expectations of public market analysts and
investors. If this happens, the price of our common stock would
likely decline. Other factors, such as general market conditions
and investors perceptions of our longer term prospects,
also may cause fluctuations in the price of our common stock.
13
To maintain our listing on the Nasdaq Global Select Market we
must satisfy certain minimum financial and other continued
listing standards, including, among other requirements:
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minimum $10,000,000 stockholders equity,
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minimum 750,000 publicly traded shares,
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minimum $5,000,000 market value of publicly held shares,
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$1.00 per share minimum bid price, and
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two registered and active market makers.
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On June 13, 2011, we received a letter from Nasdaq (the
Notice) notifying us that for 30 consecutive trading
days preceding the date of the Notice, the bid price of our
common stock had closed below the $1.00 per share minimum
required for continued trading on the Nasdaq Global Select
Market. The Notice also stated that we have 180 calendar days,
or until December 12, 2011, to achieve a closing bid price
for our common stock of $1.00 or greater for at least 10
consecutive business days. There can be no assurance that this
will occur, or that any appeal of a decision to de-list our
common stock will be successful. Any failure to meet the minimum
bid price requirement must continue for 30 consecutive business
days and may be cured within 180 days after notification by
Nasdaq of non-compliance by meeting the standard for 10 or, in
Nasdaqs discretion, 20 or more consecutive business days.
If we fail to meet these requirements, we would have the option
to apply to transfer our securities to the Nasdaq Capital
Market, which would provide us with an additional 180 days
to meet the $1.00 minimum bid requirement. If we fail to meet
the minimum bid requirement after that additional 180 days
have elapsed, Nasdaq may provide written notification to us
regarding the de-listing of our common stock. At that time, we
would have the right to request a hearing to appeal the Nasdaq
de-listing determination.
If our common stock loses its status on the Nasdaq Global Select
Market in the future and we are not successful in obtaining a
listing on the Nasdaq Capital Market, shares of our common stock
would likely trade in the over-the-counter market bulletin
board, commonly referred to as the pink sheets,. If
our stock were to trade on the over-the-counter market, selling
our common stock could be more difficult because smaller
quantities of share would likely be bought and sold, transaction
could be delayed, and security analysts coverage of us may
be reduce. In addition, in the event our common stock is
do-listed, broker-dealers have certain regulatory burdens
imposed upon them, which may discourage broker-dealers from
affecting transactions in our common stock, further limiting the
liquidity or our common stock. These factors could have a
material adverse effect on the trading price, liquidity, value
and marketability of our common stock.
Our operating
results may fluctuate from period to period and may not meet the
expectations of securities analysts or investors or
forward-looking statements we have made, which may cause the
price of our common stock to decline.
Our quarterly and annual operating results may fluctuate in the
future as a result of many factors, some of which are outside
our control, including declines in general economic conditions
or the budgets of our clients, changes in the demand for market
research and polling products and services, currency
fluctuations, the timing of client projects, and competition in
the industry, and others which are partially within our control,
including the amount of new business generated, effective
management of the professional services aspects of our business,
including utilization and realization rates, the mix of domestic
and international business, and the timing of the development,
introduction and marketing of new products and services. An
inability to generate sufficient earnings and cash flow may
impact our operating and other activities. The potential
fluctuations in our operating results could cause
period-to-period
comparisons of operating results not to be meaningful and may
provide an unreliable indication of future operating results.
Furthermore, our operating results may not meet the expectations
of securities analysts or investors in the future or
forward-looking statements we have made. If this occurs, the
price of our stock would likely decline.
14
Our stock
price may be volatile, and you may not be able to resell shares
of our common stock at or above the price you
paid.
The trading prices of our common stock could be subject to
significant fluctuations in response to, among other factors,
variations in operating results, developments in the industries
in which we do business, general economic conditions, general
market conditions, changes in the nature and composition of our
stockholder base, changes in securities analysts
recommendations regarding our securities, and our performance
relative to securities analysts expectations for any
quarterly period. Further, even though our stock is quoted on
the Nasdaq Global Select Market, our stock has had and may
continue to have low trading volume and high volatility. The
historically low trading volume of our stock makes it more
likely that a significant fluctuation in volume, either up or
down, will significantly impact the stock price. Because of the
relatively low trading volume of our stock, our stockholders may
have difficulty selling our common stock. In addition, the stock
market in general has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. Such volatility
may adversely affect the market price of our common stock.
Anti-takeover
provisions in our charter and applicable law could delay or
prevent an acquisition of our company.
Our restated certificate of incorporation provides for the
division of the Board into three classes, eliminates the right
of stockholders to act by written consent without a meeting, and
provides the Board with the power to issue shares of preferred
stock without stockholder approval. The preferred stock could
have voting, dividend, liquidation, and other rights established
by the Board that are superior to those of our common stock. In
addition, Section 203 of the Delaware General Corporation
Law contains provisions that impose restrictions on stockholder
action to acquire our company. The effect of these provisions of
our certificate of incorporation and Delaware law could
discourage or prevent third parties from seeking to obtain
control of us, including transactions in which the holders of
common stock might receive a premium for their shares over
prevailing market prices.
The Board also adopted a stockholder rights plan, pursuant to
which we declared and paid a dividend of one right for each
share of common stock outstanding as of March 29, 2005, and
one right attaches to each share issued thereafter until a
specified date. Unless redeemed by us prior to the time the
rights are exercised, upon the occurrence of certain events, the
rights will entitle the holders to receive upon exercise of each
right shares of our preferred stock, or shares of an acquiring
entity, having a value equal to the exercise price of the right
divided by 50% of the then market price of our common stock. The
issuance of the rights could have the effect of delaying or
preventing a change in control of our company.
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Item 1B.
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Unresolved
Staff Comments
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None.
Our corporate headquarters and principal United States operating
facility is located at 161 Sixth Avenue, New York, New York,
under an operating lease that expires in April 2012. We also
lease offices in the following locations:
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Rochester, New York;
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Princeton, New Jersey;
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Norwalk, Connecticut;
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Reston, Virginia;
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Minneapolis, Minnesota;
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Grand Rapids and Ann Arbor, Michigan;
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Portland, Oregon;
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Washington, District of Columbia;
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Brentford and Hazel Grove, United Kingdom;
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Ottawa and Toronto, Ontario;
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Montreal, Quebec;
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Paris, France;
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Hamburg and Munich, Germany;
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Hong Kong and Shanghai, China; and
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Singapore.
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We lease all of our facilities and believe our current
facilities are adequate to meet our needs for the foreseeable
future. We continually assess the adequacy of our space needs
relative to the size and scope of our business and have, from
time to time, reduced our leased space accordingly. We believe
that additional or alternative facilities can be leased to meet
our future needs on commercially reasonable terms.
Information concerning each of our properties with material
remaining lease obligations is as follows (amounts in thousands
of U.S. Dollars):
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Remaining
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Lease Obligation
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Address
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Location
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Termination Date
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June 30, 2011
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161 Sixth Avenue
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New York, New York
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April 2012
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567
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39 Rue Crozatier
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Paris, France
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September 2014
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3,297
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1920 Association Drive
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Reston, Virginia
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April 2015
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580
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101 Merritt 7 Corporate Park
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Norwalk, Connecticut
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May 2015
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1,386
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60 Corporate Woods
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Rochester, New York
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July 2015
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5,497
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160 Elgin
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Ottawa, Ontario
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February 2016
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2,564
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1080 Beaver Hall Hill
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Montreal, Quebec
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April 2016
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1,075
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5 Independence Way
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Princeton, New Jersey
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December 2018
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4,800
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Great West Road
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Brentford, United Kingdom
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June 2020
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1,520
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Item 3.
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Legal
Proceedings
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In the normal course of business, we are at times subject to
pending and threatened legal actions and proceedings. After
reviewing with counsel pending and threatened actions and
proceedings, management believes that the outcome of such
actions or proceedings is not expected to have a material
adverse effect on our business, financial condition or results
of operations.
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Item 5.
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Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
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Market
Information
Our common stock is traded on the Global Select Market of Nasdaq
under the symbol HPOL. The following table shows,
the high and low sales prices per share of our common stock on
the Nasdaq exchange for fiscal 2011 and 2010.
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Fiscal 2011
|
|
Fiscal 2010
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
Quarter Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
$
|
1.18
|
|
|
$
|
0.70
|
|
|
$
|
1.49
|
|
|
$
|
0.99
|
|
March 31
|
|
|
1.44
|
|
|
|
0.82
|
|
|
|
1.55
|
|
|
|
1.02
|
|
December 31
|
|
|
1.31
|
|
|
|
0.80
|
|
|
|
1.26
|
|
|
|
0.80
|
|
September 30
|
|
|
1.10
|
|
|
|
0.70
|
|
|
|
1.10
|
|
|
|
0.37
|
|
Holders
At September 23, 2011, our common stock was held by
approximately 4,900 stockholders, reflecting stockholders of
record or persons holding stock through nominee or street name
accounts with brokers.
Dividends
We have never declared or paid any cash dividends on our common
stock. We currently anticipate that we will retain any future
earnings for internal purposes, such as investing in our key
strategic initiatives. Accordingly, we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.
Issuer Purchases
of Equity Securities
There were no repurchases of our equity securities for the three
months ended June 30, 2011.
17
Performance
Graph
The graph below matches the cumulative
5-year total
return of holders of our common stock with the cumulative total
returns of the NASDAQ Composite index, the S&P Smallcap 600
index and a customized peer group of four companies that
includes Aegis Group plc, GfK AG, Ipsos SA, and WPP Group plc.
The graph tracks the performance of a $100 investment in our
common stock, in each index and in the peer group (assuming the
reinvestment of all dividends) from June 30, 2006 to
June 30, 2011.
COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN*
Among Harris Interactive Inc., The NASDAQ Composite
Index,
The S&P Smallcap 600 Index and a Peer Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/06
|
|
|
6/07
|
|
|
6/08
|
|
|
6/09
|
|
|
6/10
|
|
|
6/11
|
Harris Interactive Inc.
|
|
|
|
100.00
|
|
|
|
|
93.86
|
|
|
|
|
35.26
|
|
|
|
|
7.19
|
|
|
|
|
18.60
|
|
|
|
|
14.91
|
|
NASDAQ Composite
|
|
|
|
100.00
|
|
|
|
|
122.33
|
|
|
|
|
108.31
|
|
|
|
|
86.75
|
|
|
|
|
100.42
|
|
|
|
|
132.75
|
|
S&P Smallcap 600
|
|
|
|
100.00
|
|
|
|
|
116.04
|
|
|
|
|
99.02
|
|
|
|
|
73.95
|
|
|
|
|
91.43
|
|
|
|
|
125.28
|
|
Peer Group
|
|
|
|
100.00
|
|
|
|
|
123.70
|
|
|
|
|
87.08
|
|
|
|
|
61.12
|
|
|
|
|
85.56
|
|
|
|
|
121.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* $100 invested on
6/30/06 in
stock or index, including reinvestment of dividends. Fiscal year
ending June 30.
Copyright©
2011 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
The stock price performance included in this graph is not
necessarily indicative of future stock price performance.
The cumulative total shareholder return graph and accompanying
information shall not be deemed to be soliciting
material or to be filed with the SEC or
subject to Regulation 14A or 14C promulgated by the SEC or
the liabilities of Section 18 of the Exchange Act, except
to the extent that the Company specifically requests that the
information be treated as soliciting material or specifically
incorporates it by reference into a document filed under the
Securities Act or the Exchange Act. The cumulative total
shareholder return graph and accompanying information shall not
be deemed to be incorporated by reference into any filing under
the Securities Act or the Exchange Act, except to the extent
Harris Interactive specifically incorporates it by
reference.
18
|
|
Item 6.
|
Selected
Financial Data
|
The following selected consolidated financial data of
Harris Interactive should be read in conjunction with
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations and the
consolidated financial statements and the notes to those
statements and other financial information appearing elsewhere
in this Annual Report on
Form 10-K.
The selected consolidated financial data reported below includes
the financial results of the following entities which we
acquired as of the dates indicated: Decima (August 2007),
Marketshare (August 2007), and MediaTransfer (April 2007). In
addition, information reported for fiscal years 2007 and 2008
has been reclassified to reflect our Rent and Recruit operations
as discontinued operations for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from services
|
|
$
|
165,264
|
|
|
$
|
168,415
|
|
|
$
|
184,334
|
|
|
$
|
238,723
|
|
|
$
|
211,803
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
108,887
|
|
|
|
107,266
|
|
|
|
115,235
|
|
|
|
140,578
|
|
|
|
122,052
|
|
Selling, general and administrative
|
|
|
51,932
|
|
|
|
54,335
|
|
|
|
65,678
|
|
|
|
83,084
|
|
|
|
72,590
|
|
Depreciation and amortization
|
|
|
6,040
|
|
|
|
6,714
|
|
|
|
7,610
|
|
|
|
8,526
|
|
|
|
5,295
|
|
Gain on sale of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(788
|
)
|
Restructuring and other charges
|
|
|
5,392
|
|
|
|
623
|
|
|
|
12,010
|
|
|
|
4,609
|
|
|
|
337
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
40,250
|
|
|
|
86,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
172,251
|
|
|
|
168,938
|
|
|
|
240,783
|
|
|
|
323,294
|
|
|
|
199,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(6,987
|
)
|
|
|
(523
|
)
|
|
|
(56,449
|
)
|
|
|
(84,571
|
)
|
|
|
12,317
|
|
Interest and other income
|
|
|
(47
|
)
|
|
|
(58
|
)
|
|
|
(400
|
)
|
|
|
(1,119
|
)
|
|
|
(2,246
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,359
|
|
|
|
2,029
|
|
|
|
3,433
|
|
|
|
1,951
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(8,299
|
)
|
|
|
(3,218
|
)
|
|
|
(59,482
|
)
|
|
|
(85,403
|
)
|
|
|
14,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
154
|
|
|
|
(1,052
|
)
|
|
|
15,849
|
|
|
|
(661
|
)
|
|
|
5,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(8,453
|
)
|
|
|
(2,166
|
)
|
|
|
(75,331
|
)
|
|
|
(84,742
|
)
|
|
|
8,954
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to holders of common stock
|
|
$
|
(8,453
|
)
|
|
$
|
(2,166
|
)
|
|
$
|
(75,331
|
)
|
|
$
|
(84,618
|
)
|
|
$
|
9,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
0.16
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
0.16
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(1.60
|
)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding basic
|
|
|
54,566,590
|
|
|
|
54,089,971
|
|
|
|
53,547,670
|
|
|
|
52,861,354
|
|
|
|
56,133,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding diluted
|
|
|
54,566,590
|
|
|
|
54,089,971
|
|
|
|
53,547,670
|
|
|
|
52,861,354
|
|
|
|
56,397,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,224
|
|
|
$
|
14,158
|
|
|
$
|
16,752
|
|
|
$
|
32,874
|
|
|
$
|
28,911
|
|
Marketable securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,010
|
|
|
$
|
|
|
|
$
|
4,418
|
|
Working capital
|
|
$
|
2,773
|
|
|
$
|
7,430
|
|
|
$
|
10,778
|
|
|
$
|
32,489
|
|
|
$
|
22,046
|
|
Total assets
|
|
$
|
71,848
|
|
|
$
|
73,130
|
|
|
$
|
84,527
|
|
|
$
|
187,049
|
|
|
$
|
242,038
|
|
Short-term borrowings
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
19,625
|
|
Long-term borrowings
|
|
$
|
10,787
|
|
|
$
|
15,581
|
|
|
$
|
22,506
|
|
|
$
|
29,431
|
|
|
$
|
|
|
Total stockholders equity
|
|
$
|
11,472
|
|
|
$
|
16,034
|
|
|
$
|
18,123
|
|
|
$
|
98,636
|
|
|
$
|
172,356
|
|
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
For our fiscal year ended June 30, 2011:
|
|
|
|
|
Revenue from services was $165,264, down 1.9% from fiscal 2010.
Excluding foreign currency exchange rate differences, revenue
was down 2.9% from fiscal 2010. The decrease was primarily due
to revenue declines in the U.K. and U.S.
|
|
|
|
Our operating loss was $6,987, compared with an operating loss
of $523 for fiscal 2010. Our fiscal 2011 operating loss included
$5,392 in restructuring and other charges, compared with $623
for the same prior year period. The increase in our operating
loss was caused mainly by the aforementioned revenue decline and
the restructuring and other charges incurred during the fiscal
year as more fully described below under Restructuring and
Other Charges.
|
|
|
|
We had $14,224 in cash at June 30, 2011, essentially flat
compared with $14,158 at June 30, 2010.
|
|
|
|
Our outstanding debt at June 30, 2011 was $10,787, down
from $15,581 at June 30, 2010 as a result of quarterly
principal payments made during fiscal 2011. However, we were not
in compliance with certain financial covenants under our credit
agreement at June 30, 2011 largely due to the magnitude of
restructuring and other charges incurred during fiscal 2011, as
described below under Subsequent Events
Amendment Agreement and Waiver and in Note 24,
Subsequent Events, to our consolidated financial
statements included in this Annual Report on
Form 10-K.
|
Subsequent
Events
Closure of
Asian Operations
On July 18, 2011, our Board approved the closure of our
operations in Hong Kong, Singapore and Shanghai. This decision
was based on the Boards determination that these
operations did not adequately support our strategic objectives.
We have not yet been able to make a meaningful determination of
the range of estimated costs associated with, amounts to be
incurred in connection with, and amounts of the charge that will
result in future cash expenditures through the closure of these
operations. The disposition plan could result in contract
termination costs, severance related charges and other charges.
Any such charges will be reflected in our unaudited consolidated
financial statements for the fiscal quarter ending
September 30, 2011.
Amendment
Agreement and Waiver
On September 27, 2011, we entered into an amendment and
waiver to our amended and restated credit agreement.
At June 30, 2011, we were not in compliance with the
leverage and interest coverage ratio covenants contained in our
amended and restated credit agreement largely due to the
magnitude of restructuring and other charges incurred during the
fiscal year ended June 30, 2011. Pursuant to the amendment
and waiver, these covenant violations were permanently waived
and we regained compliance with the terms of our
20
amended and restated credit agreement. The amendment and waiver
includes both the addition and modification of certain
definitions, terms, financial covenants, and reporting
requirements. Obligations under our amended and restated credit
agreement continue to be secured by our domestic assets and 66%
of the equity interests in first tier foreign subsidiaries.
Our credit facilities under our amended and restated credit
agreement consist of our previously existing term loan, which
matures September 30, 2013, and a revolving line of credit.
A maximum amount of $5,000 remains available under the revolving
line of credit, subject to our satisfaction of certain
conditions. Until we achieve trailing twelve month adjusted
EBITDA of $5,000, borrowings under the revolving line of credit
are limited to the lesser of $2,000 or our net
U.S. accounts receivable, defined as our U.S. accounts
receivable plus our U.S. unbilled accounts receivable, less
our deferred revenue. The principal amount outstanding under the
term loan, $10,787 at June 30, 2011, and the payment terms
of the term loan remain unchanged. Pursuant to the amendment and
waiver, the manner in which outstanding amounts accrue interest
remains unchanged, except that the Eurodollar Applicable Rate
and ABR Applicable Rate (each as defined in our amended and
restated credit agreement) are fixed at 5.50% and 4.50%,
respectively, through March 31, 2012.
The amendment and waiver also impacts certain financial
covenants, as follows:
|
|
|
|
|
The Consolidated Interest Coverage Ratio and Consolidated Total
Leverage Ratio (each as defined in our amended and restated
credit agreement) covenants are suspended for the fiscal
quarters ending September 30, 2011, December 31, 2011
and March 31, 2012. During each of those fiscal quarters,
we are subject to a trailing twelve month adjusted EBITDA
covenant of $4,548, $3,817 and $4,424, respectively.
|
|
|
|
For fiscal quarters commencing on or after April 1, 2012,
we will again be subject to the Consolidated Interest Coverage
Ratio and Consolidated Total Leverage Ratio covenants contained
in our amended and restated credit agreement.
|
|
|
|
Cash paid to fund restructuring and other charges incurred on or
before September 30, 2011 are limited to amounts agreed
upon as contained in the amendment and waiver.
|
|
|
|
We must maintain minimum global cash of $7,000 and
U.S. cash of $1,000 through June 30, 2012, at which
time we will again be subject to only a minimum global cash
requirement of $5,000.
|
For further discussion of the risks and uncertainties
surrounding our availability of additional cash resources, our
outstanding debt obligations, and our ability to comply with
related covenants, see Risk Factors Risks
Related to Our Business above.
Restructuring and
Other Charges
Restructuring
Fiscal
2011
During the second and fourth quarters of fiscal 2011, we took
actions designed to re-align the cost structure of our U.K.
operations. Specifically, we reduced headcount at our U.K.
facilities by a total of 27 full-time employees and
incurred $834 in one-time termination benefits, all of which
involved cash payments. The reductions in staff were
communicated to the affected employees in December 2010 and
April 2011 and all actions were completed at those respective
times. Related cash payments were completed in June 2011.
During the third and fourth quarters of fiscal 2011, we took
actions designed to re-align the cost structure of our
U.S. operations. Specifically, we reduced headcount at our
U.S. facilities by a total of 21 full-time employees
and incurred $330 in one-time termination benefits, all of which
involved cash payments. The reductions in staff were
communicated to the affected employees in December 2010 and
April 2011 and all actions were completed at those respective
times. Related cash payments were completed in June 2011.
21
During the fourth quarter of fiscal 2011, we reduced our
occupancy of leased office space at our Norwalk, Connecticut,
Brentford, United Kingdom, and Portland, Oregon facilities. We
incurred $1,942 in lease exit costs associated with the
remaining lease obligations, all of which involve cash payments.
All actions associated with the leased office space reductions
were completed in June 2011, and all cash payments will be
completed in June 2020.
Fiscal
2009
During the third quarter of fiscal 2009, we took actions to
re-align the cost structure of our U.S. and U.K.
operations. Specifically, the Company reduced headcount at our
U.S. facilities by 92 full-time employees and
announced plans to reduce headcount at our U.K. facilities by
25 full-time employees. One-time termination benefits
associated with the U.S. and U.K. actions were $2,656 and
$389, respectively, all of which involved cash payments. The
reductions in staff were communicated to the affected employees
in March 2009. All actions were completed by March 2009 in the
U.S. and May 2009 in the U.K. The related cash payments
were completed by June 2009 in the U.K. and March 2010 in the
U.S.
At March 31, 2009, we reviewed the estimate of anticipated
sublease rental income for our Rochester, New York office
located at 135 Corporate Woods. This review, prompted by adverse
changes in real estate market conditions, resulted in a decrease
to our estimate of the portion of the remaining lease obligation
period over which we expect to derive sublease rental income.
This change in estimate resulted in a charge of $35 in the third
quarter of fiscal 2009.
Previously, during the second quarter of fiscal 2009, we took
actions to re-align the cost structure of our
U.S. operations. Specifically, we reduced headcount at our
U.S. facilities by 78 full-time employees and incurred
$2,261 in one-time termination benefits, all of which involved
cash payments. The reductions in staff were communicated to the
affected employees in October and December 2008. All actions
were completed by December 2008 and the related cash payments
were completed in December 2009.
Additionally during the second quarter of fiscal 2009, we
substantially vacated leased space at 135 Corporate Woods. We
incurred $493 in charges related to the remaining operating
lease obligation, all of which involved cash payments. All
actions associated with this vacated space were completed by
December 2008. The related cash payments were completed in June
2010.
At December 31, 2008, we reviewed the estimates of
anticipated sublease rental income for our Grandville, Michigan
and Norwalk, Connecticut offices, which were included in
restructuring charges taken during the third quarter of fiscal
2008 in conjunction with our reduction of leased space at these
facilities. This review, prompted by adverse changes in real
estate market conditions within each of these locales, resulted
in a decrease to our estimate of the portion of the remaining
lease obligation period over which we expect to derive sublease
rental income. This change in estimate resulted in a charge of
$366 for the three months ended December 31, 2008.
Summary of
Restructuring Charges and Reserves
The following table summarizes the restructuring charges
recognized in our consolidated statements of operations for the
fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Termination benefits
|
|
$
|
1,165
|
|
|
$
|
|
|
|
$
|
5,306
|
|
Lease commitments
|
|
|
1,942
|
|
|
|
|
|
|
|
894
|
|
Reversals of prior accruals
|
|
|
|
|
|
|
|
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,107
|
|
|
$
|
|
|
|
$
|
5,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
The following table summarizes activity during fiscal 2011 with
respect to our remaining reserves for the restructuring
activities described above and those undertaken in prior fiscal
years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
|
|
|
July 1,
|
|
|
Costs
|
|
|
Changes in
|
|
|
Cash
|
|
|
Non-Cash
|
|
|
June 30,
|
|
|
|
2010
|
|
|
Incurred
|
|
|
Estimate
|
|
|
Payments
|
|
|
Settlements
|
|
|
2011
|
|
|
Termination benefits
|
|
$
|
|
|
|
$
|
1,165
|
|
|
$
|
45
|
|
|
$
|
(788
|
)
|
|
$
|
|
|
|
$
|
422
|
|
Lease commitments
|
|
|
408
|
|
|
|
1,942
|
|
|
|
|
|
|
|
(138
|
)
|
|
|
|
|
|
|
2,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining reserve
|
|
$
|
408
|
|
|
$
|
3,107
|
|
|
$
|
45
|
|
|
$
|
(926
|
)
|
|
$
|
|
|
|
$
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in estimate noted above were the result of certain
outplacement benefits that expired unused.
Other
Charges
Other charges reflected in the Restructuring and other
charges line shown on our consolidated statements of
operations for the fiscal years ended June 30, 2011, 2010
and 2009 included the following:
|
|
|
|
|
Post-employment payments to former senior executives
In connection with their departures from the
Company during fiscal 2011, we reached negotiated settlements
with Kimberly Till, Pavan Bhalla, and Enzo Micali. Under the
separation agreements, cash payments to Ms. Till are due to
be completed in August 2013, while cash payments to
Messrs. Bhalla and Micali are due to be completed in
December 2011 and January 2012, respectively. In connection with
their departures from the Company during fiscal 2009, Gregory T.
Novak, Ronald E. Salluzzo, and David B. Vaden became entitled to
certain contractually obligated cash payments. The cash payments
to Messrs. Novak, Salluzzo, and Vaden were completed in
December 2010, December 2009 and February 2010, respectively.
|
|
|
|
Consultant fees During fiscal 2009, we
incurred fees for services rendered by a consulting firm related
to, among others, performance improvement initiatives, bank
negotiations, and an interim CFO arrangement, the details of
which are described in Note 21, Related-Party
Transactions, to our consolidated financial statements
included in this Annual Report on Form
10-K.
|
|
|
|
Other For fiscal 2011, Other
included costs associated with reorganizing the operational
structure of our Canadian and U.K. operations, as well as
immaterial prior period adjustments related to our Asia
operations. For fiscal 2010, Other included costs
associated with reorganizing the operational structure of our
Asian operations and costs incurred to close our telephone-based
data collection center in Brentford, United Kingdom. For fiscal
2009, Other included bad debt expense for a note
receivable for which collectability became doubtful, recruitment
fees for senior executives, and legal fees associated with the
waiver and amendments to our credit agreement due to certain
financial covenant violations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Post-employment payments to former senior executives
|
|
$
|
1,312
|
|
|
$
|
|
|
|
$
|
1,997
|
|
Consultant fees
|
|
|
|
|
|
|
|
|
|
|
3,095
|
|
Other
|
|
|
973
|
|
|
|
623
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,285
|
|
|
$
|
623
|
|
|
$
|
6,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical
Accounting Policies and Estimates
The preparation of financial statements requires management to
make estimates and assumptions that affect amounts reported
therein. The most significant of these areas involving difficult
or complex judgments made by management with respect to the
preparation of our financial statements in fiscal 2011 include:
|
|
|
|
|
Revenue recognition,
|
|
|
|
Impairment of other intangible assets,
|
23
|
|
|
|
|
Impairment of long-lived assets,
|
|
|
|
Income taxes,
|
|
|
|
Stock-based compensation,
|
|
|
|
HIpoints loyalty program, and
|
|
|
|
Contingencies and other accruals.
|
In each situation, management is required to make estimates
about the effects of matters or future events that are
inherently uncertain.
Revenue
Recognition
We recognize revenue from services on a proportional performance
basis. In assessing contract performance, both input and output
criteria are reviewed. Costs incurred are used as an objective
input measure of performance. The primary input of all work
performed under these arrangements is labor. As a result of the
relationship between labor and cost, there is normally a direct
relationship between the costs incurred and the proportion of
the contract performed to date. Costs incurred as an initial
proportion of expected total costs is used as an initial
proportional performance measure. This indicative proportional
performance measure is always subsequently validated against
more subjective criteria (i.e. relevant output measures) such as
the percentage of interviews completed, percentage of reports
delivered to a client and the achievement of any project
milestones stipulated in the contract. In the event of
divergence between the objective and more subjective measures,
the more subjective measures take precedence since these are
output measures.
Clients are obligated to pay based upon services performed, and
in the event that a client cancels the contract, the client is
responsible for payment for services performed through the date
of cancellation. Losses expected to be incurred, if any, on jobs
in progress are charged to income as soon as it becomes probable
that such losses will occur. Invoices to clients in the ordinary
course are generated based upon the achievement of specific
events, as defined by each contract, including deliverables,
timetables, and incurrence of certain costs. Such events may not
be directly related to the performance of services. Revenues
earned on contracts in progress in excess of billings are
classified as unbilled receivables. Amounts billed in excess of
revenues earned are classified as deferred revenue.
Revisions to estimated costs and differences between actual
contract losses and estimated contract losses would affect both
the timing of revenue allocated and the results of our
operations.
Impairment of
Intangible Assets
Intangible assets with estimable useful lives are amortized over
their respective estimated useful lives to the estimated
residual values and reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important that could
trigger a review for impairment include the following:
|
|
|
|
|
Significant under-performance relative to historical or
projected future operating results;
|
|
|
|
Significant changes in the manner of our use of acquired assets
or the strategy for our overall business;
|
|
|
|
Significant negative industry or economic trends;
|
|
|
|
Significant decline in our stock price for a sustained
period; and
|
|
|
|
Significant decline in our market capitalization relative to net
book value.
|
We are required to amortize intangible assets with estimable
useful lives over their respective estimated useful lives to the
estimated residual values and to review intangible assets with
estimable useful lives for impairment in accordance with the
FASB guidance for property, plant, and equipment.
24
Impairment of
Long-Lived Assets
We account for the impairment or disposal of long-lived assets
in accordance with the FASB guidance for property, plant, and
equipment. Events that trigger a test for recoverability include
material adverse changes in the projected revenues and expenses,
significant underperformance relative to historical or projected
future operating results, and significant negative industry or
economic trends. A test for recoverability also is performed
when we have committed to a plan to sell or otherwise dispose of
an asset group and the plan is expected to be completed within a
year. Recoverability of an asset group is evaluated by comparing
its carrying value to the future net undiscounted cash flows
expected to be generated by the asset group. If the comparison
indicates that the carrying value of an asset group is not
recoverable, an impairment loss is recognized. The impairment
loss is measured by the amount by which the carrying amount of
the asset group exceeds the estimated fair value. When an
impairment loss is recognized for assets to be held and used,
the adjusted carrying amount of those assets is depreciated over
its remaining useful life. Restoration of a
previously-recognized long-lived asset impairment loss is not
allowed.
We estimate the fair value of an asset group based on market
prices (i.e., the amount for which the asset could be bought by
or sold to a third party), when available. When market prices
are not available, we estimate the fair value of the asset group
using the income approach
and/or the
market approach. The income approach uses cash flow projections.
Inherent in our development of cash flow projections are
assumptions and estimates derived from a review of our operating
results, approved business plans, expected growth rates and cost
of capital, among others. We also make certain assumptions about
future economic conditions, interest rates, and other market
data. Many of the factors used in assessing fair value are
outside the control of management, and these assumptions and
estimates can change in future periods.
Changes in assumptions or estimates could materially affect the
determination of fair value of an asset group, and therefore
could affect the amount of potential impairment of the asset.
The following assumptions are key to our income approach:
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|
|
|
|
Business Projections We make assumptions
about the level of demand for our services in the marketplace.
These assumptions drive our planning assumptions for revenue
growth. We also make assumptions about our cost levels. These
assumptions are key inputs for developing our cash flow
projections. These projections are derived using our internal
business plans.
|
|
|
|
Growth Rate The growth rate is the expected
rate at which an asset groups earnings stream is projected
to grow beyond the planning period.
|
|
|
|
Economic Projections Assumptions regarding
general economic conditions are included in and affect our
assumptions regarding revenue from services. These macroeconomic
assumptions include inflation, interest rates and foreign
currency exchange rates.
|
Income
Taxes
We account for income taxes using the asset and liability
method, under which deferred tax assets and liabilities are
recognized for future tax consequences attributable to operating
loss carryforwards and differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective income tax bases for operating profit and
tax liability carryforward.
The FASB guidance for income taxes requires the establishment of
a valuation allowance to reflect the likelihood of the
realization of deferred tax assets. Significant management
judgment is required in determining our provision for income
taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. We
evaluate the weight of the available evidence to determine
whether it is more likely than not that some portion or all of
the deferred income tax assets will not be realized. The
decision to record a valuation allowance requires varying
degrees of judgment based upon the nature of the item giving
rise to the deferred tax asset. The amount of the deferred tax
asset
25
considered realizable is based on significant estimates, and it
is at least reasonably possible that changes in these estimates
in the near term could materially affect our financial condition
and results of operations.
We apply the FASB guidance for uncertain tax positions, which
contains a two-step approach to recognizing and measuring
uncertain tax positions taken or expected to be taken in a tax
return by determining if the weight of available evidence
indicates that it is more likely than not that the tax position
will be sustained on audit, including resolution of any related
appeals or litigation processes. The second step is to measure
the tax benefit as the largest amount that is more than 50%
likely to be realized upon ultimate settlement. Although we
believe we have adequately provided for our uncertain tax
positions, no assurance can be given with respect to the final
outcome of these matters. We adjust reserves for our uncertain
tax positions due to changing facts and circumstances, such as
the closing of a tax audit or the refinement of an estimate. To
the extent that the final outcome of these matters is different
than the amounts recorded, such differences will impact our
provision for income taxes in the period in which such a
determination is made. Our provisions for income taxes include
the impact of reserve provisions and changes to reserves that
are considered appropriate and also include the related interest
and penalties.
Stock-Based
Compensation
We account for stock-based compensation in accordance with the
FASB guidance for stock-based compensation. For share-based
payments granted subsequent to July 1, 2005, compensation
expense based on the grant date fair value is recognized in our
consolidated statements of operations over the requisite service
period. In determining the fair value of stock options, we use
the Black-Scholes option pricing model, which employs the
following assumptions:
|
|
|
|
|
Expected volatility based on historical
volatilities from daily share price observations for our stock
covering a period commensurate with the expected term of the
options granted.
|
|
|
|
Expected life of the option based on the
vesting terms of the respective option and a contractual life of
ten years, calculated using the simplified method as
allowed by
ASC 718-10
and corroborated through review of the expected life assumptions
of publicly-traded market research companies.
|
|
|
|
Risk-free rate based on the implied yield
available at the time the options were granted on
U.S. Treasury zero coupon issues with a remaining term
equal to the expected life of the option when granted.
|
|
|
|
Dividend yield based on our historical
practice of electing not to pay dividends to our stockholders.
|
Expected volatility and the expected life of the options
granted, both of which impact the fair value of the option
calculated under the Black-Scholes option pricing model, involve
managements best estimates at that time. The
weighted-average assumptions used to value options during the
fiscal years ended June 30, 2009, 2010 and 2011,
respectively, are set forth in Note 14, Stock-Based
Compensation, to our consolidated financial statements
contained in this Annual Report on
Form 10-K.
The fair value of restricted stock awards is based on the price
per share of our common stock on the date of grant. We grant
options to purchase our stock at fair value as of the date of
grant. We recognize compensation expense for only the portion of
options or restricted shares that are expected to vest.
Therefore, we apply estimated forfeiture rates that are derived
from historical employee termination behavior and the vesting
period of the respective stock options or restricted shares. If
the actual number of forfeitures differs from those estimated by
management, additional adjustments to compensation expense may
be required in future periods.
HIpoints
Loyalty Program
Our HIpoints loyalty program is designed to reward respondents
who register for our online panel, complete online surveys and
refer others to join our online panel. The earned points are
non-transferable
26
and may be redeemed for gifts from a specific product folio at
any time prior to expiration. Points awarded under the HIpoints
program expire after nine months of account inactivity. We
maintain a reserve for our obligations with respect to future
redemption of outstanding points based on the expected
redemption rate of the points. This expected redemption rate is
based on our actual redemption rates since the inception of the
program. An actual redemption rate that differs from the
expected redemption rate could have a material impact on our
results of operations.
Contingencies
and Other Accruals
From time to time, we record accruals for severance costs both
in connection with formal restructuring programs and in the
normal course, lease costs associated with excess facilities,
contract terminations, and asset impairments as a result of
actions we undertake to streamline our organization, reposition
certain businesses and reduce ongoing costs. Estimates of costs
to be incurred to complete these actions, such as future lease
payments, sublease income, the fair value of assets, and
severance and related benefits, are based on assumptions at the
time the actions are initiated. To the extent actual costs
differ from those estimates, reserve levels may need to be
adjusted. In addition, these actions may be revised due to
changes in business conditions that we did not foresee at the
time such actions were approved. Additionally, we record
accruals for estimated incentive compensation costs during each
year. Amounts accrued at the end of each reporting period are
based on our estimates and may require adjustment as the
ultimate amount paid for these incentives are sometimes not
finally determinable until the completion of our fiscal year end
closing process.
Explanation of
Key Financial Statement Captions
Revenue from
Services
We recognize revenue from services on a proportional performance
basis, as more particularly described above in Critical
Accounting Policies and Estimates Revenue
Recognition.
Our revenue from services is derived principally from the
following:
|
|
|
|
|
Custom Research including, but not limited
to, customer satisfaction surveys, market share studies, new
product introduction studies, brand recognition studies,
reputation studies, and ad concept testing.
|
|
|
|
Tracking Studies studies that regularly ask
identical questions to similar demographic groups within a
constant interval (once a month, once a quarter, etc.) to
provide business decision-makers with dynamic data and
intelligence.
|
|
|
|
Service Bureau Research data collection and
other services that we perform primarily for market research
industry clients.
|
Cost of
Services
Our direct costs associated with generating revenues principally
consist of the following items:
|
|
|
|
|
Project Personnel Project personnel have four
distinct roles: project management, survey design, data
collection, and data analysis. We maintain project personnel in
North America, Europe and Asia. We expect to have no project
personnel in Asia by September 30, 2011. Labor costs are
specifically allocated to the projects they relate to. We
utilize a timekeeping system that tracks the time of project
personnel as incurred for each specific revenue-generating
project to determine the labor costs allocable to such project.
|
|
|
|
Respondent Incentives Our panelists receive
both cash and non-cash incentives (through programs such as our
HIpoints loyalty program) for participating in our surveys. We
award cash incentives to our respondents for participating in
surveys, which are earned when we receive timely and complete
survey responses. Non-cash incentives in the form of points are
awarded to respondents who register for our online panel,
complete online surveys, and refer others to join
|
27
|
|
|
|
|
our online panel. The earned points are non-transferable and may
be redeemed for gifts from a specific product folio at any time
prior to their expiration.
|
|
|
|
|
|
Data Processing We manage the processing of
survey data using our own employees. We also engage third-party
suppliers to perform data processing on an as-needed basis.
|
|
|
|
Other Direct Costs Other direct costs include
direct purchases, principally labor and materials, related to
data collection and analysis, and the amortization of software
developed for internal use.
|
Selling,
General and Administrative
Selling, general and administrative expense includes the
following:
|
|
|
|
|
payroll and related costs, including commissions, for sales and
marketing professionals;
|
|
|
|
payroll and related costs for staff in the areas of finance,
human resources, information technology, legal, and executive
management; and
|
|
|
|
other indirect costs necessary to support the business,
including among others, office rents, travel, stock-based
compensation, and public company costs.
|
Operating
Income (Loss)
We calculate operating income (loss) as revenue from services
less total operating expenses. Operating income (loss)
represents only those amounts that relate to our consolidated
operations and does not include interest income and expense,
amortization of debt issuance costs, or loss on extinguishment
of debt.
Provision
(Benefit) for Income Taxes
The provision for income taxes includes current and deferred
income taxes. A valuation allowance is recorded when it is
necessary to reduce a deferred tax asset to an amount that we
expect to realize in the future. We continually review the
adequacy of our valuation allowance and adjust it based on
whether or not our assessment indicates that it is more likely
than not that these benefits will be realized.
28
Results of
Operations
The following table sets forth the results of our operations,
expressed both as a dollar amount and as a percentage of revenue
from services, for the fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
%
|
|
|
2010
|
|
|
%
|
|
|
2009
|
|
|
%
|
|
|
Revenue from services
|
|
$
|
165,264
|
|
|
|
100.0
|
%
|
|
$
|
168,415
|
|
|
|
100.0
|
%
|
|
$
|
184,334
|
|
|
|
100.0
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
108,887
|
|
|
|
65.9
|
|
|
|
107,266
|
|
|
|
63.7
|
|
|
|
115,235
|
|
|
|
62.5
|
|
Selling, general and administrative
|
|
|
51,932
|
|
|
|
31.4
|
|
|
|
54,335
|
|
|
|
32.3
|
|
|
|
65,678
|
|
|
|
35.6
|
|
Depreciation and amortization
|
|
|
6,040
|
|
|
|
3.7
|
|
|
|
6,714
|
|
|
|
4.0
|
|
|
|
7,610
|
|
|
|
4.1
|
|
Restructuring and other charges
|
|
|
5,392
|
|
|
|
3.3
|
|
|
|
623
|
|
|
|
0.4
|
|
|
|
12,010
|
|
|
|
6.5
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,250
|
|
|
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,987
|
)
|
|
|
(4.2
|
)
|
|
|
(523
|
)
|
|
|
(0.3
|
)
|
|
|
(56,449
|
)
|
|
|
(30.6
|
)
|
Interest and other income
|
|
|
(47
|
)
|
|
|
(0.0
|
)
|
|
|
(58
|
)
|
|
|
(0.0
|
)
|
|
|
(400
|
)
|
|
|
(0.2
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
724
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
1,359
|
|
|
|
0.8
|
|
|
|
2,029
|
|
|
|
1.2
|
|
|
|
3,433
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before taxes
|
|
|
(8,299
|
)
|
|
|
(5.0
|
)
|
|
|
(3,218
|
)
|
|
|
(1.9
|
)
|
|
|
(59,482
|
)
|
|
|
(32.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
|
154
|
|
|
|
(0.0
|
)
|
|
|
(1,052
|
)
|
|
|
(0.6
|
)
|
|
|
15,849
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,453
|
)
|
|
|
(5.1
|
)
|
|
$
|
(2,166
|
)
|
|
|
(1.3
|
)
|
|
$
|
(75,331
|
)
|
|
|
(40.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
Ended June 30, 2011 Versus Fiscal Year Ended June 30,
2010
Revenue from services. Revenue from
services decreased by $3,151, or 1.9%, to $165,264 for fiscal
2011 compared with fiscal 2010. As more fully described below,
revenue from services was impacted by several factors. Excluding
foreign currency exchange rate differences, revenue from
services in fiscal 2011 was down 2.9% compared with fiscal 2010.
North American revenue decreased by $1,550 to $116,045 for
fiscal 2011 compared with fiscal 2010, a decrease of 1.3%. By
country, North American revenue for fiscal 2011 was comprised of:
|
|
|
|
|
Revenue from U.S. operations of $92,885, down 4.2% compared
with $96,942 for fiscal 2010. This decline was driven mainly by
declines of:
|
|
|
|
|
|
9.8% in our Healthcare sector, driven by the revenue impact of
bookings decreases experienced during the first nine months of
fiscal 2011;
|
|
|
|
10.7% in our Financial Services sector, driven mainly by the
loss of a large tracking study;
|
|
|
|
17.1% in our Consumer Goods, Restaurant and Retail sector, as a
result of a non-recurring project that was sold and delivered
during the fourth quarter of fiscal 2010; and
|
|
|
|
6.4% in our Technology, Media and Telecom sector, driven mainly
by the loss of a large tracking study.
|
|
|
|
|
|
Revenue from Canadian operations of $23,160, up 12.1% compared
with $20,653 for fiscal 2010. In local currency (Canadian
Dollar), Canadian revenue increased by 5.7% compared with fiscal
2010. The increase was mainly attributable to revenue from work
on a large tracking study that was won during the second quarter
of fiscal 2011.
|
29
European revenue decreased by $1,332 to $44,619 for fiscal 2011
compared with fiscal 2010, a decrease of 2.9%. By country,
European revenue for fiscal 2011 was comprised of:
|
|
|
|
|
Revenue from U.K. operations of $22,864, down 19.5% compared
with $28,398 for fiscal 2010. In local currency (British Pound),
U.K. revenue decreased by 20.4% compared with fiscal 2010. The
decrease was due primarily to the revenue impact of a large
tracking study that was not renewed during the second quarter of
fiscal 2011, as well as challenging market conditions across
several industry sectors. The loss of this tracking study will
have a $7.7 million negative impact on annual U.K. revenue.
|
|
|
|
Revenue from French operations of $14,092, up 19.8% compared
with $11,764 for fiscal 2010. In local currency (Euro), French
revenue increased by 18.8% compared with fiscal 2010. The
increase was due primarily to continued success in selling to
new and existing clients across several industry sectors.
|
|
|
|
Revenue from German operations of $7,663, up 32.4% compared with
$5,789 for fiscal 2010. In local currency (Euro), German revenue
increased by 32.5% compared with fiscal 2010. Similar to our
French operations, the increase was driven mainly by continued
success in selling to new and existing clients across several
industry sectors.
|
Revenue from Asia operations decreased by $268 to $4,600 for
fiscal 2011, a decrease of 5.5% compared with fiscal 2010. The
impact of foreign exchange rate differences on Asian revenue was
inconsequential compared with fiscal 2010. The decrease in Asian
revenue was driven primarily by a lack of adequate sales
resources throughout fiscal 2011.
Cost of services. Cost of services was
$108,887 or 65.9% of total revenue for fiscal 2011, compared
with $107,266 or 63.7% of total revenue for fiscal 2010. Cost of
services as a percentage of revenue for fiscal 2011 was impacted
by the differing types of custom research projects performed
when compared with fiscal 2010.
Selling, general and
administrative. Selling, general and
administrative expense for fiscal 2011 was $51,932 or 31.4% of
total revenue, compared with $54,335 or 32.3% of total revenue
for fiscal 2010. Selling, general and administrative expense was
principally impacted by the following:
|
|
|
|
|
a $607 decrease in facilities-related expense, driven primarily
by space reductions taken during fiscal 2010;
|
|
|
|
a $382 decrease in travel expense, driven primarily by our
continued focus on controlling these costs;
|
|
|
|
a $255 decrease in payroll-related expenses, driven primarily by
headcount reductions made throughout fiscal 2011; and
|
|
|
|
a $173 decrease in legal expenses, driven primarily by improved
operational efficiency of our legal function.
|
The remainder of the decrease in selling, general and
administrative expense was the result of decreases across a
number of other operating expense categories because of our
continued efforts to properly align our cost structure with the
needs of our business.
Depreciation and
amortization. Depreciation and amortization
was $6,040 or 3.7% of total revenue for fiscal 2011, compared
with $6,714 or 4.0% of total revenue for fiscal 2010. The
decrease in depreciation and amortization expense for fiscal
2011 when compared with the same prior year period was the
result of fixed and intangible assets that became fully
depreciated or amortized during fiscal 2011 combined with
decreased capital spending as part of our overall focus on
controlling costs.
Restructuring and other charges. See
above under Restructuring and Other Charges for
further discussion regarding restructuring and other charges
incurred during fiscal 2011 and 2010.
30
Interest and other income. Interest and
other income was $47 or less than 1% of total revenue for fiscal
2011, compared with $58 or less than 1% of total revenue for
fiscal 2010. The decrease in interest and other income was
principally the result of a lower average cash balance during
fiscal 2011 when compared with fiscal 2010.
Loss on extinguishment of debt. During
fiscal 2010, we incurred a loss on extinguishment of debt of
$724, of which $550 represented unamortized debt issuance costs,
as a result of amending and restating our credit agreement on
June 30, 2010. We did not incur a similar loss during
fiscal 2011. Further financial information about our amended and
restated credit agreement is included in Note 11,
Borrowings, to our consolidated financial statements
contained in this Annual Report on
Form 10-K.
Interest expense. Interest expense was
$1,359 or 0.8% of total revenue for fiscal 2011, compared with
$2,029 or 1.2% of total revenue for fiscal 2010. The decrease in
interest expense for fiscal 2011 as compared with fiscal 2010
reflects the impact of the decline in our outstanding debt as we
continue to make required principal payments, as well as the
decline in our effective interest rate as a result of amending
our credit agreement in June 2010.
Income taxes. We recorded an income tax
provision of $154 for fiscal 2011, compared with an income tax
benefit of $1,052 for fiscal 2010. The tax provision for fiscal
2011 was comprised primarily of tax expense related to income in
certain of our foreign jurisdictions. The tax benefit for fiscal
2010 was principally due to a U.S. tax law change which
resulted in the recognition of an additional tax benefit of
$1,103. In addition, a valuation allowance of approximately $300
was recorded during the three months ended June 30, 2010
against the net deferred tax assets of the U.K. operations due
to the impact of the global recession on revenues. A full
valuation allowance continues to be recorded at June 30,
2011 against our deferred tax assets in the U.S., U.K., and
Asia. We will continue to assess the realizability of our
deferred tax assets in accordance with the FASB guidance for
income taxes and will adjust the valuation allowances should all
or a portion of the deferred tax assets become realizable in the
future.
Fiscal Year
Ended June 30, 2010 Versus Fiscal Year Ended June 30,
2009
Revenue from services. Revenue from
services decreased by $15,919, or 8.6%, to $168,415 for fiscal
2010 compared with fiscal 2009. As more fully described below,
revenue from services was impacted by several factors. Foreign
currency exchange rate differences had a neutral impact on
revenue from services in fiscal 2010 compared with fiscal 2009.
North American revenue decreased by $15,165 to $117,595 for
fiscal 2010 compared with fiscal 2009, a decrease of 11.4%. By
country, North American revenue for fiscal 2010 was comprised of:
|
|
|
|
|
Revenue from U.S. operations of $96,942, down 14.1%
compared with $112,821 for fiscal 2009, primarily due to the
impact of the global recession on revenue for the first half of
fiscal 2010 and declines across several of our
U.S. industry sectors partially as a result of the loss of
a large tracking study and the reduction in size of another.
|
|
|
|
Revenue from Canadian operations of $20,653, up 3.6% compared
with $19,939 for fiscal 2009. In local currency (Canadian
Dollar), Canadian revenue decreased by 5.8% compared with fiscal
2009. The decrease was primarily due to the impact of the global
recession on revenue for the first half of fiscal 2010.
|
European revenue decreased by $1,039 to $45,951 for fiscal 2010
compared with fiscal 2009, a decrease of 2.2%. By country,
European revenue for fiscal 2010 was comprised of:
|
|
|
|
|
Revenue from U.K. operations of $28,398, down 12.5% compared
with $32,454 for fiscal 2009. In local currency (British Pound),
U.K. revenue decreased by 11.0% compared with fiscal 2009. The
decrease was primarily due to the decrease in scope of a large
tracking study.
|
|
|
|
Revenue from French operations of $11,764, up 37.8% compared
with $8,535 for fiscal 2009. In local currency (Euro), French
revenue increased by 32.7% compared with fiscal 2009. The
increase was primarily due to revenue generated from success in
selling to new clients across several industry sectors.
|
31
|
|
|
|
|
Revenue from German operations of $5,789, down 3.5% compared
with $6,001 for fiscal 2009. In local currency (Euro), German
revenue decreased by 6.4% compared with fiscal 2009. German
revenue was essentially flat for the first nine months of fiscal
2010 compared with the same prior year period. The overall
decrease was driven by sales growth later in the fourth quarter
of fiscal 2010, which had less time to convert to revenue within
that same quarter.
|
Revenue from Asia operations increased by $284 to $4,868 for
fiscal 2010, an increase of 6.2% compared with fiscal 2009. The
impact of foreign exchange rate differences on Asian revenue was
inconsequential compared with fiscal 2009. The increase in Asian
revenue was driven primarily by the positive effects of the
management changes we made in the region during fiscal 2010.
Cost of services. Cost of services was
$107,266 or 63.7% of total revenue for fiscal 2010, compared
with $115,235 or 62.5% of total revenue for fiscal 2009. Cost of
services as a percentage of revenue for fiscal 2010 was greater
than fiscal 2009 principally due to the mix of research projects
performed when compared with fiscal 2009.
Selling, general and
administrative. Selling, general and
administrative expense for fiscal 2010 was $54,335 or 32.3% of
total revenue, compared with $65,678 or 35.6% of total revenue
for fiscal 2009. Selling, general and administrative expense was
principally impacted by the following:
|
|
|
|
|
a $5,675 decrease in payroll-related expense, driven primarily
by headcount reductions taken during fiscal 2009;
|
|
|
|
a $1,285 decrease in stock-based compensation expense, driven
primarily by the forfeiture of stock options and restricted
stock upon the departure of several senior executives during
fiscal 2009 and 2010;
|
|
|
|
a $765 decrease in office rent, driven by space reductions taken
during fiscal 2009 and 2010; and
|
|
|
|
a $698 decrease in travel expense, driven primarily by our
continued focus on controlling these costs.
|
The remainder of the decrease in selling, general and
administrative expense was the result of decreases across a
number of other operating expense categories driven primarily by
our continued focus on ensuring appropriate alignment of our
cost structure relative to the needs of our business.
Depreciation and
amortization. Depreciation and amortization
was $6,714 or 4.0% of total revenue for fiscal 2010, compared
with $7,610 or 4.1% of total revenue for fiscal 2009. The
decrease in depreciation and amortization expense for fiscal
2010 when compared with the same prior year period was the
result of fixed and intangible assets that became fully
depreciated or amortized during fiscal 2010 combined with
decreased capital spending during both fiscal 2009 and 2010 as
part of our overall focus on controlling costs.
Restructuring and other charges. See
above under Restructuring and Other Charges for
further discussion regarding restructuring and other charges
incurred during fiscal 2010 and 2009.
Goodwill impairment charge. We did not
incur a goodwill impairment charge during fiscal 2010. During
fiscal 2009, we recognized a goodwill impairment charge of
$40,250 at December 31, 2008. We completed our two-step
goodwill impairment evaluation at that time, outside of our
annual impairment evaluation date (June 30), after considering
certain factors related to our business and the market research
industry. Further financial information about goodwill
impairment charges and related considerations is included in
Note 8, Goodwill, to our consolidated financial
statements contained in this Annual Report on
Form 10-K.
Interest and other income. Interest and
other income was $58 or less than 1% of total revenue for fiscal
2010, compared with $400 or less than 1% of total revenue for
fiscal 2009. The decrease in interest and other income was
principally the result of having a lower average cash balance
and lower rate of return during fiscal 2010 when compared with
fiscal 2009.
Loss on extinguishment of debt. We
incurred a loss on extinguishment of debt of $724, of which $550
represented unamortized debt issuance costs, during fiscal 2010
as a result of amending and
32
restating our credit agreement on June 30, 2010. We did not
incur a similar loss during fiscal 2009. Further financial
information about our amended and restated credit agreement is
included in Note 11, Borrowings, to our
consolidated financial statements contained in this Annual
Report on
Form 10-K.
Interest expense. Interest expense was
$2,029 or 1.2% of total revenue for fiscal 2010, compared with
$3,433 or 1.9% of total revenue for fiscal 2009. Interest
expense for fiscal 2009 included a $1,017 charge to reflect the
ineffectiveness of our interest rate swap as a cash flow hedge
as a result of the violation of certain financial covenants
under our credit agreement. There was no such charge during
fiscal 2010. The decrease in interest expense for fiscal 2010 as
compared with fiscal 2009 resulted from the decline in our
outstanding debt as we continue to make required principal
payments.
Income taxes. We recorded an income tax
benefit of $1,052 for fiscal 2010, compared with an income tax
provision of $15,849 for fiscal 2009. The tax benefit for fiscal
2010 was principally due to a U.S. tax law change which
resulted in the recognition of an additional tax benefit of
$1,103. In addition, a valuation allowance of approximately $300
was recorded during the three months ended June 30, 2010
against the net deferred tax assets of the U.K. operations due
to the impact of the global recession on revenues. The tax
provision for fiscal 2009 was principally impacted by the
valuation allowance of $18,861 recorded against our
U.S. deferred tax assets. A full valuation allowance was
recorded at June 30, 2010 against both U.S. and U.K.
deferred tax assets.
Significant
Factors Affecting Company Performance
Key Operating
Metrics
We closely track certain key operating metrics, specifically
bookings and secured revenue. These key operating metrics enable
us to measure the current and forecasted performance of our
business relative to historical trends.
Key operating metrics, by quarter, for the fiscal years ended
June 30, 2010 and 2011, were as follows (U.S. Dollar
amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
|
FY2010
|
|
FY2010
|
|
FY2010
|
|
FY2010
|
|
FY2011
|
|
FY2011
|
|
FY2011
|
|
FY2011
|
|
Bookings
|
|
$
|
32.7
|
|
|
$
|
53.2
|
|
|
$
|
44.9
|
|
|
$
|
35.7
|
|
|
$
|
35.4
|
|
|
$
|
55.3
|
|
|
$
|
40.9
|
|
|
$
|
34.6
|
|
Secured revenue
|
|
$
|
42.5
|
|
|
$
|
51.1
|
|
|
$
|
52.9
|
|
|
$
|
44.9
|
|
|
$
|
45.0
|
|
|
$
|
55.4
|
|
|
$
|
56.5
|
|
|
$
|
45.9
|
|
Additional information regarding each of the key operating
metrics noted above is as follows:
Bookings are defined as the contract value of
revenue-generating projects that are anticipated to take place
during the next four fiscal quarters for which a firm client
commitment was received during the current period, less any
adjustments to prior period bookings due to contract value
adjustments or project cancellations during the current period.
Bookings for the three months ended June 30, 2011 were
$34.6 million, compared with $35.7 million for the
same prior year period. Excluding foreign exchange rate
differences, bookings were down 9.8% over the same prior year
period. Bookings in local currency for the three months ended
June 30, 2011 compared with the same prior year period were
principally impacted by the following:
|
|
|
|
|
U.S. bookings increased by 0.7%, impacted mainly by
increased sales in our Technology, Media and Telecom and
Healthcare sectors, which were offset by decreases in our
Financial Services and Consumer Goods, Restaurant and Retail
sectors.
|
|
|
|
Canadian bookings decreased by 8.9%, due primarily to declined
sales in our Canadian service bureau business.
|
|
|
|
U.K bookings decreased by 60.4%, due primarily to the loss of
two large tracking studies in fiscal 2011.
|
|
|
|
French and German bookings increased by 37.6% and 35.0%,
respectively, both due primarily to increased sales at both new
and existing clients.
|
33
|
|
|
|
|
Asian bookings decreased by 12.7%, due primarily to a shortage
of adequate sales resources.
|
Monitoring bookings enhances our ability to forecast long-term
revenue and to measure the effectiveness of our marketing and
sales initiatives. However, we also are mindful that bookings
often vary significantly from quarter to quarter. Information
concerning our new bookings is not comparable to, nor should it
be substituted for, an analysis of our revenue over time. There
are no third-party standards or requirements governing the
calculation of bookings. New bookings involve estimates and
judgments regarding new contracts and renewals, as well as
extensions and additions to existing contracts. Subsequent
cancellations, extensions and other matters may affect the
amount of bookings previously reported.
Secured Revenue is defined as prior period secured
revenue plus current period bookings, less revenue recognized on
outstanding projects as of the end of the period.
Secured revenue helps us manage our future staffing levels more
accurately and is also an indicator of the effectiveness of our
marketing and sales initiatives. Based on our experience,
projects included in secured revenue at the end of a fiscal
period generally convert to revenue from services during the
following twelve months.
Secured revenue for the three months ended June 30, 2011
was $45.9 million, compared with $44.9 million for the
same prior year period. Excluding foreign currency exchange rate
differences, secured revenue was down 2.0% over the same prior
year period. The decrease was due primarily to the impact of
bookings declines throughout fiscal 2011 when compared with
fiscal 2010.
Liquidity and
Capital Resources
Cash and Cash
Equivalents
The following table sets forth net cash provided by (used in)
operating activities, net cash used in investing activities and
net cash used in financing activities, for the fiscal years
ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Net cash provided by (used in) operating activities
|
|
$
|
3,983
|
|
|
$
|
6,461
|
|
|
$
|
(4,334
|
)
|
Net cash used in investing activities
|
|
|
(810
|
)
|
|
|
(631
|
)
|
|
|
(2,256
|
)
|
Net cash used in financing activities
|
|
|
(4,555
|
)
|
|
|
(7,031
|
)
|
|
|
(8,015
|
)
|
Net cash provided by (used in) operating
activities. Net cash provided by operating
activities was $3,983 for fiscal 2011, compared with $6,461 for
fiscal 2010. The decrease in cash provided by operating
activities was principally the result of an increase in fiscal
2011 net loss compared with fiscal 2010.
Net cash provided by operating activities was $6,461 for fiscal
2010, compared with $4,334 used in operating activities for
fiscal 2009. The change was principally the result of a decrease
in the net loss for fiscal 2010 when compared with fiscal 2009,
along with timing differences in cash payments and receipts when
compared with fiscal 2009.
Net cash used in investing
activities. Net cash used in investing
activities was $810 for fiscal 2011, compared with $631 for
fiscal 2010. Investing activities for fiscal 2010 included
capital expenditures, which were offset by $998 in proceeds from
the maturities and sales of marketable securities. Investing
activities for fiscal 2011 consisted solely of capital
expenditures.
Net cash used in investing activities was $631 for fiscal 2010,
compared with $2,256 for fiscal 2009. The change from fiscal
2009 was principally the result of an increase in the net
proceeds from the maturities and sales of marketable securities
to $998 for fiscal 2010, partially offset by an increase in
capital expenditures from $1,241 for fiscal 2009 to $1,629 for
fiscal 2010 as a result of leasehold improvements made to our
U.K. office space.
Net cash used in financing
activities. Net cash used in financing
activities was $4,555 for fiscal 2011, compared with $7,031 for
fiscal 2010. Cash used during both fiscal 2010 and 2011 was for
required
34
principal payments on our outstanding debt, partially offset by
cash received from the purchase of shares by employees through
our Employee Stock Purchase Plan and exercise of stock options.
The required quarterly principal payments on our outstanding
debt decreased from $1,731 to $1,199 in fiscal 2010 as a result
of amending our credit agreement in June 2010.
Net cash used in financing activities was $7,031 for fiscal
2010, compared with $8,015 for fiscal 2009. This change was
principally the result of a decrease in the costs associated
with modifications to our credit agreement from $1,274 in fiscal
2009 to $296 in fiscal 2010.
Working
Capital
At June 30, 2011, we had cash and cash equivalents of
$14,224, compared with $14,158 at June 30, 2010. Available
sources of cash to support known or reasonably likely cash
requirements over the next 12 months include cash, cash
equivalents and marketable securities on hand, additional cash
that may be generated from our operations, and funds to the
extent available through our credit facilities discussed below.
While we believe that our available sources of cash, including
funds available through our revolving line that are subject to
certain minimum cash balance requirements, will support known or
reasonably likely cash requirements over the next
12 months, including quarterly principal payments of $1,199
and interest payments due under our credit agreement, our
ability to generate cash from our operations is dependent upon
our ability to profitably generate revenue, which requires that
we continually develop new business, both for growth and to
replace completed projects. Although work for no one client
constitutes more than 10% of our revenue, we have had to find
significant amounts of replacement and additional revenue as
client relationships and work for continuing clients change and
will likely have to continue to do so in the future. Our ability
to profitably generate revenue depends not only on execution of
our business plans, but also on general market factors outside
of our control. As many of our clients treat all or a portion of
their market research expenditures as discretionary, our ability
to profitably generate revenue is adversely impacted whenever
there are adverse macroeconomic conditions in the markets we
serve.
Our capital requirements depend on numerous factors, including
but not limited to, market acceptance of our products and
services, the resources we allocate to the continuing
development of new products and services, our technology
infrastructure and online panel, and the marketing and selling
of our products and services. We are able to control or defer
certain capital and other expenditures in order to help preserve
cash if necessary. We expect to incur capital expenditures of
between $2,500 and $3,000 during the fiscal year ending
June 30, 2012.
Credit
Facilities
The required principal repayments under our amended and restated
credit agreement for each of the three succeeding fiscal years
are set forth in Note 11, Borrowings, to our
consolidated financial statements included in this Annual Report
on
Form 10-K.
At June 30, 2011, we had no outstanding borrowings under
our revolving line of credit and $359 of outstanding letters of
credit. The letters of credit reduce the remaining undrawn
portion of the Revolving Line that is available for future
borrowings.
At June 30, 2011, we were not in compliance with certain
financial covenants under our amended and restated credit
agreement largely due to the magnitude of restructuring and
other charges incurred during fiscal 2011. On September 27,
2011, these covenant violations were permanently waived through
an amendment agreement and waiver, as more fully described above
under Subsequent Events Amendment Agreement
and Waiver and in Note 24, Subsequent
Events, to our consolidated financial statements included
in this Annual Report on
Form 10-K.
Interest Rate
Swap
The principal terms of our interest rate swap, as well as the
impact of the covenant violations noted above on our interest
rate swap, are described in Note 11, Borrowings, to
our consolidated financial statements included in this Annual
Report on
Form 10-K.
35
Off-Balance Sheet
Risk Disclosure
At June 30, 2011 and 2010, we did not have any
transactions, agreements or other contractual arrangements
constituting an off-balance sheet arrangement as
defined in Item 303(a)(4) of
Regulation S-K.
Contractual
Obligations
Our consolidated contractual obligations and other commercial
commitments at June 30, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
3-5
|
|
|
More than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Long-term debt obligations
|
|
$
|
10,787
|
|
|
$
|
4,794
|
|
|
$
|
5,993
|
|
|
$
|
|
|
|
$
|
|
|
Interest obligations on long-term debt(1)
|
|
|
1,168
|
|
|
|
798
|
|
|
|
370
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
23,488
|
|
|
|
5,507
|
|
|
|
9,598
|
|
|
|
6,715
|
|
|
|
1,668
|
|
Other long-term liabilities(2)
|
|
|
107
|
|
|
|
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,550
|
|
|
$
|
11,099
|
|
|
$
|
16,068
|
|
|
$
|
6,715
|
|
|
$
|
1,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest obligations shown above were derived using an interest
rate of 8.82%. This rate is a combination of the 4.32% that is
fixed by our interest rate swap, and the 4.50% additional spread
based on a pricing grid tied to our Consolidated Total Leverage
Ratio. These rates are more fully described in Note 11,
Borrowings, to the consolidated financial statements
contained in this Annual Report on
Form 10-K. |
|
(2) |
|
Amounts in the 1-3 Years category represent
liabilities associated with uncertain tax positions, determined
in accordance with the FASB guidance for uncertain tax
positions, as more fully described in Note 16, Income
Taxes, to the consolidated financial statements contained
in this Annual Report on
Form 10-K. |
Recently Adopted
Accounting Pronouncements and Accounting Pronouncements Not Yet
Adopted
See Recently Adopted Accounting Pronouncements and
Accounting Pronouncements Not Yet Adopted in Note 3,
Summary of Significant Accounting Policies, to our
consolidated financial statements contained in this Annual
Report on
Form 10-K
for a discussion of the impact of recently issued accounting
pronouncements on our consolidated financial statements at
June 30, 2011, for the fiscal year then ended, as well as
the expected impact on our consolidated financial statements for
future periods.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We have two kinds of market risk exposures, interest rate
exposure and foreign currency exposure. We have no market risk
sensitive instruments entered into for trading purposes.
In light of recent economic conditions, we reviewed the cash
equivalents and marketable securities held by us. We do not
believe that our holdings have a material liquidity risk under
current market conditions.
Interest Rate
Exposure
At June 30, 2011, we had outstanding debt under our credit
facilities of $10,787. The debt matures September 30, 2013
and bears interest at the floating adjusted LIBOR plus an
applicable margin. Our interest rate swap fixes the floating
adjusted LIBOR portion of the interest rate at 4.32% through
36
September 30, 2013. The additional applicable margin is
determined quarterly using a pricing grid based on our
Consolidated Total Leverage Ratio. At June 30, 2011, the
additional applicable margin was 4.50%, resulting in an
effective interest rate of 8.82% on our outstanding debt.
Using a sensitivity analysis based on a hypothetical 1% increase
in prevailing interest rates over a
12-month
period, each 1% increase from prevailing interest rates at
June 30, 2011 would have decreased the fair value of the
interest rate swap by $107 and each 1% decrease from prevailing
interest rates at June 30, 2011 would have increased the
fair value of the interest rate swap by $112.
Foreign Currency
Exposure
As a result of operating in foreign markets, our financial
results could be affected by significant changes in foreign
currency exchange rates. We have international sales and
operations in North America, Europe and Asia. We expect to cease
operations in Asia by September 30, 2011. Therefore, we are
subject to foreign currency rate exposure.
Non-U.S. transactions
are denominated in the functional currencies of the respective
countries in which our foreign subsidiaries reside. Our
consolidated assets and liabilities are translated into
U.S. Dollars at the applicable exchange rates in effect as
of the balance sheet date. Consolidated income and expense items
are translated into U.S. Dollars at the average exchange
rates for each period presented. Accumulated net translation
adjustments are recorded in the accumulated other comprehensive
income component of stockholders equity. We measure our
risk related to foreign currency rate exposure on two levels,
the first being the impact of operating results on the
consolidation of foreign subsidiaries that are denominated in
the functional currencies of their home countries, and the
second being the extent to which we have instruments denominated
in foreign currencies.
Foreign exchange translation gains and losses are included in
our results of operations since we consolidate the results of
our international operations, which are denominated in each
countrys functional currency, with our U.S. results.
The impact of translation gains or losses on net income from
consolidating foreign subsidiaries was not material for the
periods presented. We have historically had low exposure to
changes in foreign currency exchange rates upon consolidating
the results of our foreign subsidiaries with our
U.S. results due to the size of our foreign operations in
comparison to our consolidated operations. However, if the
operating profits of our international operations increase as a
percentage of our consolidated operations, our exposure to the
appreciation or depreciation in the U.S. Dollar could have
a more significant impact on our net income and cash flows.
Thus, we evaluate our exposure to foreign currency fluctuation
risk on an ongoing basis.
Since our foreign operations are conducted using foreign
currencies, we bear additional risk of fluctuations in exchange
rates because of instruments denominated in foreign currencies.
We have historically had low exposure to changes in foreign
currency exchange rates with regard to instruments denominated
in foreign currencies, given the amount and short-term nature of
the maturity of these instruments. The carrying values of
financial instruments denominated in foreign currencies,
including cash, cash equivalents, accounts receivable and
accounts payable, approximate fair value because of the
short-term nature of the maturity of these instruments.
We performed a sensitivity analysis at June 30, 2011.
Holding all other variables constant, we have determined that
the impact of a near-term 10% appreciation or depreciation of
the U.S. Dollar would have an insignificant effect on our
financial condition, results of operations and cash flows.
37
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Index to
Consolidated Financial Statements
All other schedules for which provision is made in the
applicable accounting regulations of the SEC are not required
under the related instructions or are inapplicable and have
therefore been omitted.
38
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Harris
Interactive Inc.
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Harris Interactive Inc. and its
subsidiaries at June 30, 2011 and 2010, and the results of
their operations and their cash flows for each of the three
years in the period ended June 30, 2011 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers
LLP
Rochester, New York
September 28, 2011
39
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,224
|
|
|
$
|
14,158
|
|
Accounts receivable, less allowances of $582 and $641,
respectively
|
|
|
26,480
|
|
|
|
23,735
|
|
Unbilled receivables
|
|
|
7,580
|
|
|
|
7,566
|
|
Prepaid expenses and other current assets
|
|
|
3,619
|
|
|
|
3,722
|
|
Deferred tax assets
|
|
|
306
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
52,209
|
|
|
|
49,556
|
|
Property, plant and equipment, net
|
|
|
3,447
|
|
|
|
5,626
|
|
Other intangibles, net
|
|
|
14,582
|
|
|
|
16,382
|
|
Other assets
|
|
|
1,610
|
|
|
|
1,566
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
71,848
|
|
|
$
|
73,130
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,521
|
|
|
$
|
8,952
|
|
Accrued expenses
|
|
|
21,249
|
|
|
|
16,768
|
|
Current portion of outstanding debt
|
|
|
4,794
|
|
|
|
4,794
|
|
Deferred revenue
|
|
|
13,872
|
|
|
|
11,612
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
49,436
|
|
|
|
42,126
|
|
Long-term debt
|
|
|
5,993
|
|
|
|
10,787
|
|
Deferred tax liabilities
|
|
|
2,195
|
|
|
|
2,391
|
|
Other long-term liabilities
|
|
|
2,752
|
|
|
|
1,792
|
|
Commitments and contingencies (Note 19)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding at
June 30, 2011 and 2010
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value, 100,000,000 shares
authorized; 55,417,531 shares issued and outstanding at
June 30, 2011 and 54,465,449 shares issued and
outstanding at June 30, 2010
|
|
|
55
|
|
|
|
54
|
|
Additional paid-in capital
|
|
|
186,648
|
|
|
|
185,726
|
|
Accumulated other comprehensive income
|
|
|
5,526
|
|
|
|
2,558
|
|
Accumulated deficit
|
|
|
(180,757
|
)
|
|
|
(172,304
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
11,472
|
|
|
|
16,034
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
71,848
|
|
|
$
|
73,130
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Revenue from services
|
|
$
|
165,264
|
|
|
$
|
168,415
|
|
|
$
|
184,334
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
108,887
|
|
|
|
107,266
|
|
|
|
115,235
|
|
Selling, general and administrative
|
|
|
51,932
|
|
|
|
54,335
|
|
|
|
65,678
|
|
Depreciation and amortization
|
|
|
6,040
|
|
|
|
6,714
|
|
|
|
7,610
|
|
Restructuring and other charges
|
|
|
5,392
|
|
|
|
623
|
|
|
|
12,010
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
40,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
172,251
|
|
|
|
168,938
|
|
|
|
240,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(6,987
|
)
|
|
|
(523
|
)
|
|
|
(56,449
|
)
|
Interest and other income
|
|
|
(47
|
)
|
|
|
(58
|
)
|
|
|
(400
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
724
|
|
|
|
|
|
Interest expense
|
|
|
1,359
|
|
|
|
2,029
|
|
|
|
3,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes
|
|
|
(8,299
|
)
|
|
|
(3,218
|
)
|
|
|
(59,482
|
)
|
Provision (benefit) for income taxes
|
|
|
154
|
|
|
|
(1,052
|
)
|
|
|
15,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,453
|
)
|
|
$
|
(2,166
|
)
|
|
$
|
(75,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding basic and diluted
|
|
|
54,566,590
|
|
|
|
54,089,971
|
|
|
|
53,547,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,453
|
)
|
|
$
|
(2,166
|
)
|
|
$
|
(75,331
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,451
|
|
|
|
8,145
|
|
|
|
9,125
|
|
Deferred taxes
|
|
|
(84
|
)
|
|
|
(276
|
)
|
|
|
16,831
|
|
Stock-based compensation
|
|
|
682
|
|
|
|
680
|
|
|
|
1,965
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
40,250
|
|
Non-cash portion of loss on extinguishment of debt
|
|
|
|
|
|
|
550
|
|
|
|
|
|
Bad debt expense
|
|
|
|
|
|
|
|
|
|
|
532
|
|
Amortization of deferred financing costs
|
|
|
70
|
|
|
|
442
|
|
|
|
479
|
|
Amortization of premium on marketable securities
|
|
|
|
|
|
|
2
|
|
|
|
4
|
|
(Increase) decrease in assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,331
|
)
|
|
|
(1,254
|
)
|
|
|
9,339
|
|
Unbilled receivables
|
|
|
633
|
|
|
|
(1,530
|
)
|
|
|
4,199
|
|
Prepaid expenses and other current assets
|
|
|
(1,227
|
)
|
|
|
2,051
|
|
|
|
(235
|
)
|
Other assets
|
|
|
9
|
|
|
|
(153
|
)
|
|
|
(559
|
)
|
(Decrease) increase in liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
165
|
|
|
|
2,482
|
|
|
|
(2,307
|
)
|
Accrued expenses
|
|
|
3,214
|
|
|
|
(636
|
)
|
|
|
(6,096
|
)
|
Deferred revenue
|
|
|
1,896
|
|
|
|
(847
|
)
|
|
|
(3,326
|
)
|
Other liabilities
|
|
|
958
|
|
|
|
(1,029
|
)
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
3,983
|
|
|
|
6,461
|
|
|
|
(4,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(3,703
|
)
|
Proceeds from maturities and sales of marketable securities
|
|
|
|
|
|
|
998
|
|
|
|
2,688
|
|
Capital expenditures
|
|
|
(810
|
)
|
|
|
(1,629
|
)
|
|
|
(1,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(810
|
)
|
|
|
(631
|
)
|
|
|
(2,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit agreement amendment financing costs
|
|
|
|
|
|
|
(296
|
)
|
|
|
(1,274
|
)
|
Repayments of borrowings
|
|
|
(4,794
|
)
|
|
|
(6,925
|
)
|
|
|
(6,925
|
)
|
Proceeds from exercise of employee stock options and employee
stock purchases
|
|
|
239
|
|
|
|
190
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(4,555
|
)
|
|
|
(7,031
|
)
|
|
|
(8,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1,448
|
|
|
|
(1,393
|
)
|
|
|
(1,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
66
|
|
|
|
(2,594
|
)
|
|
|
(16,122
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
14,158
|
|
|
|
16,752
|
|
|
|
32,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14,224
|
|
|
$
|
14,158
|
|
|
$
|
16,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Outstanding
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance at July 1, 2008
|
|
|
53,784
|
|
|
$
|
54
|
|
|
$
|
182,709
|
|
|
$
|
10,680
|
|
|
$
|
(94,807
|
)
|
|
$
|
98,636
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,331
|
)
|
|
|
(75,331
|
)
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244
|
|
|
|
|
|
|
|
244
|
|
Actuarial loss on postretirement obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
(61
|
)
|
Unrealized gain on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,528
|
)
|
|
|
|
|
|
|
(7,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for restricted stock grants and exercise of
options
|
|
|
(229
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Issuance of common stock under Employee Stock Purchase Plan and
U.K. Limited Share Incentive Plan
|
|
|
409
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
190
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,965
|
|
|
|
|
|
|
|
|
|
|
|
1,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
53,964
|
|
|
$
|
54
|
|
|
$
|
184,860
|
|
|
$
|
3,347
|
|
|
$
|
(170,138
|
)
|
|
$
|
18,123
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,166
|
)
|
|
|
(2,166
|
)
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
(33
|
)
|
Change in postretirement obligation, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
242
|
|
|
|
|
|
|
|
242
|
|
Unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
(10
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(988
|
)
|
|
|
|
|
|
|
(988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for restricted stock grants and exercise of
options
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under Employee Stock Purchase Plan and
U.K. Limited Share Incentive Plan
|
|
|
392
|
|
|
|
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
186
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010
|
|
|
54,465
|
|
|
$
|
54
|
|
|
$
|
185,726
|
|
|
$
|
2,558
|
|
|
$
|
(172,304
|
)
|
|
$
|
16,034
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,453
|
)
|
|
|
(8,453
|
)
|
Change in fair value of interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
304
|
|
|
|
|
|
|
|
304
|
|
Change in postretirement obligation, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(196
|
)
|
|
|
|
|
|
|
(196
|
)
|
Unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,861
|
|
|
|
|
|
|
|
2,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for restricted stock grants and exercise of
options
|
|
|
699
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Issuance of common stock under Employee Stock Purchase Plan and
U.K. Limited Share Incentive Plan
|
|
|
254
|
|
|
|
1
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
213
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2011
|
|
|
55,418
|
|
|
$
|
55
|
|
|
$
|
186,648
|
|
|
$
|
5,526
|
|
|
$
|
(180,757
|
)
|
|
$
|
11,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
1.
|
Description of
Business
|
Harris Interactive Inc. (the Company) is a leading
global custom market research firm that uses online, telephone
and other research methodologies to provide clients with
information about the views, behaviors and attitudes of people
worldwide.
|
|
2.
|
Summary of
Significant Accounting Policies
|
Principles of
Consolidation
The accompanying consolidated financial statements include the
assets, liabilities and results of operations of the Company and
its wholly-owned subsidiaries. There are no unconsolidated
entities or off-balance sheet arrangements. All intercompany
accounts and transactions have been eliminated.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (GAAP) requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and
liabilities, if any, at the date of the consolidated financial
statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from
those estimates.
Cash and Cash
Equivalents
Cash and cash equivalents include all highly liquid instruments
with a remaining maturity of three months or less at date of
purchase.
Marketable
Securities
The Company accounts for its investments in accordance with the
FASB guidance for debt and equity securities. Investments for
all periods presented have been classified as
available-for-sale
securities.
Available-for-sale
securities are stated at fair value, with the unrealized gains
and losses reported in accumulated other comprehensive income.
Realized gains and losses, as well as interest and dividends on
available-for-sale
securities, are included in interest and other income. The cost
of securities sold is based on the specific identification
method.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and do
not bear interest. The collectibility of outstanding client
invoices is continually assessed. The Company maintains an
allowance for estimated losses resulting from the inability of
clients to make required payments. In estimating the allowance,
the Company considers factors such as historical collections, a
clients current creditworthiness, age of the receivable
balance both individually and in the aggregate, and general
economic conditions that may affect a clients ability to
pay.
Concentration
of Credit Risk
Financial instruments which potentially expose the Company to
concentrations of credit risk consist principally of accounts
receivable and unbilled receivables. An allowance for doubtful
accounts is provided for in the accompanying consolidated
financial statements and is monitored by management to ensure
that it is consistent with managements expectations.
Credit risk is limited with respect to accounts
44
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
receivable by the Companys large client base. For fiscal
years 2011, 2010, and 2009, no single client accounted for more
than 10% of the Companys consolidated revenue.
Property,
Plant and Equipment
Property, plant and equipment, including improvements that
significantly add to productive capacity or extend useful life,
are recorded at cost. Maintenance and repairs are expensed as
incurred. Upon sale or other disposition, the applicable amounts
of asset cost and accumulated depreciation are removed from the
accounts and the net amount, less proceeds from disposal, is
charged or credited to income.
Depreciation is calculated using the straight-line or
accelerated methods over the estimated useful lives of the
assets. Estimated useful lives are as follows:
|
|
|
|
|
Computer equipment
|
|
|
3 years
|
|
Non-computer equipment
|
|
|
5 years
|
|
Furniture and fixtures
|
|
|
7 years
|
|
In accordance with the FASB guidance for leases, leasehold
improvements are amortized using the straight-line method over
the lesser of the estimated useful life of the assets or the
term of the underlying lease arrangements.
Business
Combinations
Acquisitions are accounted for under the purchase method of
accounting pursuant to the FASB guidance for business
combinations. Accordingly, the purchase price is allocated to
the tangible assets and liabilities and intangible assets
acquired, based on their estimated fair values. The excess
purchase price over the fair value is recorded as goodwill and
identifiable intangible assets are valued separately and
amortized over their expected useful life.
Goodwill
The FASB guidance on goodwill requires the Company to test its
goodwill for impairment on an annual basis and between annual
tests in certain circumstances, and to write down goodwill and
non-amortizable
intangible assets when impaired. These assessments require the
Company to estimate the fair market value of its single
reporting unit. If the Company determines that the fair value of
its reporting unit is less than its carrying amount, absent
other facts to the contrary, an impairment charge must be
recognized for the associated goodwill of the reporting unit
against earnings in its consolidated financial statements. As
the Company has one reportable segment, it utilizes the
entity-wide approach for assessing goodwill.
Goodwill is evaluated for impairment using the two-step process
as prescribed in the FASB guidance. The first step is to compare
the fair value of the reporting unit to the carrying amount of
the reporting unit. If the carrying amount exceeds the fair
value, a second step must be followed to calculate impairment.
Otherwise, if the fair value of the reporting unit exceeds the
carrying amount, the goodwill is not considered to be impaired
as of the measurement date. To determine fair value for its
reporting unit, the Company uses the fair value of the cash
flows that its reporting unit can be expected to generate in the
future. This valuation method requires management to project
revenues, operating expenses, working capital investment,
capital spending and cash flows for the reporting unit over a
multiyear period, as well as determine the weighted average cost
of capital to be used as a discount rate.
45
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
Intangible
Assets
Intangible assets with estimable useful lives are amortized over
their respective estimated useful lives to the estimated
residual values and reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value may
not be recoverable.
The Companys intangible assets are stated at cost less
accumulated amortization and are amortized over estimated useful
lives that range as follows:
|
|
|
|
|
Contract-based intangibles
|
|
|
2 to 4 years
|
|
Internet respondent database
|
|
|
2 to 9 years
|
|
Customer relationships
|
|
|
3 to 10 years
|
|
Trade names
|
|
|
0.5 to 20 years
|
|
The Company has no indefinite-lived intangible assets.
Computer
Software Developed or Obtained for Internal Use
The Company follows the provisions of the FASB guidance for
internally developed software, which addresses the accounting
for the costs of computer software developed or obtained for
internal use and identifies the characteristics of internal use
software. Costs that satisfy the capitalization criteria
prescribed in the FASB guidance are included in other assets in
the consolidated balance sheet and amounted to $1,596 and $2,146
at June 30, 2011 and 2010, respectively. Amortization
expense related to these costs amounted to $1,411, $1,430 and
$1,515 for the fiscal years ended June 30, 2011, 2010 and
2009, respectively.
Long-Lived
Assets
In accordance with the FASB guidance for property, plant, and
equipment, the Company evaluates the recoverability of the
carrying value of its long-lived assets, excluding goodwill,
based on undiscounted cash flows to be generated from each of
such assets compared to the original estimates used in measuring
the assets.
Events that trigger a test for recoverability include material
adverse changes in the projected revenues and expenses,
significant underperformance relative to historical or projected
future operating results, and significant negative industry or
economic trends. A test for recoverability also is performed
when the Company has committed to a plan to sell or otherwise
dispose of an asset group and the plan is expected to be
completed within a year. Recoverability of an asset group is
evaluated by comparing its carrying value to the future net
undiscounted cash flows expected to be generated by the asset
group. If the comparison indicates that the carrying value of an
asset group is not recoverable, an impairment loss is
recognized. The impairment loss is measured by the amount by
which the carrying amount of the asset group exceeds the
estimated fair value. When an impairment loss is recognized for
assets to be held and used, the adjusted carrying amount of
those assets is depreciated over its remaining useful life.
Restoration of a previously-recognized long-lived asset
impairment loss is not allowed.
The Company estimates the fair value of an asset group based on
market prices (i.e., the amount for which the asset could be
bought by or sold to a third party), when available. When market
prices are not available, the Company estimates the fair value
of the asset group using the income approach
and/or the
market approach. The income approach uses cash flow projections.
Inherent in the Companys development of cash flow
projections are assumptions and estimates derived from a review
of its
46
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
operating results, approved business plans, expected growth
rates and cost of capital, among others. The Company also makes
certain assumptions about future economic conditions, interest
rates, and other market data. Many of the factors used in
assessing fair value are outside the control of management, and
these assumptions and estimates can change in future periods.
Changes in assumptions or estimates could materially affect the
determination of fair value of an asset group, and therefore
could affect the amount of potential impairment of the asset.
The following assumptions are key to the Companys income
approach:
|
|
|
|
|
Business Projections The Company makes
assumptions about the level of demand for its services in the
marketplace. These assumptions drive the Companys planning
assumptions for revenue growth. The Company also makes
assumptions about its cost levels. These assumptions are key
inputs for developing the Companys cash flow projections.
These projections are derived using the Companys internal
business plans.
|
|
|
|
Growth Rate The growth rate is the expected
rate at which an asset groups earnings stream is projected
to grow beyond the planning period.
|
|
|
|
Economic Projections Assumptions regarding
general economic conditions are included in and affect the
Companys assumptions regarding revenue from services.
These macroeconomic assumptions include inflation, interest
rates, and foreign currency exchange rates.
|
During the three months ended December 31, 2008, as a
result of the factors discussed in Note 8,
Goodwill, to the accompanying consolidated financial
statements, the Company tested its asset groups for
recoverability. As the projected undiscounted cash flows for the
individual asset groups exceeded the carrying value of the
long-lived assets for each asset group, the Company did not
record an impairment charge for any of its long-lived assets
during the three months ended December 31, 2008. No
additional facts and circumstances have since arisen to cause
the Company to change this conclusion.
Fair Value of
Financial Instruments
On July 1, 2008, the Company adopted the FASB guidance for
fair value measurements, which defines fair value, establishes a
fair value hierarchy and requires expanded disclosures about
fair value measurements. On this same date, the Company adopted
additional FASB guidance for fair value measurements which
permits entities to choose to measure many financial instruments
and certain other items at fair value at specified election
dates. The Company did not elect the fair value option for any
financial assets and liabilities existing at July 1, 2008
which had not previously been carried at fair value. Any future
transacted financial assets or liabilities will be evaluated for
the fair value election as prescribed by this guidance.
The fair value of the Companys cash equivalents and
available for sale marketable securities is derived from quoted
market prices for similar instruments, with all significant
inputs derived from or corroborated by observable market data.
The fair value of the Companys interest rate swap was
based on quotes from the respective counterparty, which are
corroborated by the Company using discounted cash flow
calculations based upon forward interest-rate yield curves
obtained from independent pricing services. The carrying value
of the Companys accounts receivable, accounts payable and
accrued expenses approximate their fair value. The Company had
$10,787 of outstanding debt at June 30, 2011 under its
credit facilities, which is considered a financial instrument.
The carrying amount of this debt approximates its fair value as
the rate of interest on the Companys term loans that are
outstanding under its credit facilities reflect current market
rates of interest for similar instruments with comparable
maturities.
47
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
Derivative
Financial Instruments
The Company uses an interest rate swap to manage the economic
effect of the variable interest obligation on the outstanding
debt under its credit agreement so that the interest payable on
the outstanding debt effectively becomes fixed at a certain
rate, thereby reducing the impact of future interest rate
changes on the Companys future interest expense.
The Company accounts for its interest rate swap in accordance
with the FASB guidance for derivatives and hedging. The Company
records the interest rate swaps fair value in other assets
or liabilities in its consolidated balance sheet. The effective
portion of the change in the interest rate swaps fair
value is recorded as a component of accumulated other
comprehensive income and is recorded as interest expense when
the hedged debt affects interest expense. The ineffective
portion of the change in fair value is recognized in interest
expense in the period of the change.
The Company determined its interest rate swap to be a highly
effective cash flow hedge at inception and evaluates the
swaps continued effectiveness on a quarterly basis. If it
is determined that the interest rate swap is no longer a highly
effective cash flow hedge, the Company will discontinue hedge
accounting and recognize all subsequent changes in fair value in
its results of operations.
Post-employment
Payments
The Company has entered into employment and letter agreements
with certain of its executives which obligate the Company to
make post-employment payments for varying periods of time and
under terms and circumstances set forth in these agreements. In
part, the payments are in consideration for obligations of the
executives not to compete with the Company after termination of
their employment, and in part, the payments relate to other
relationships between the parties. The Company accounts for its
obligations under these agreements in accordance with the FASB
guidance for non-retirement post-employment benefits.
Revenue
Recognition
The Company recognizes revenue from services on a proportional
performance basis. In assessing contract performance, both input
and output criteria are reviewed. Costs incurred are used as an
objective input measure of performance. The primary input of all
work performed under these arrangements is labor. As a result of
the relationship between labor and cost, there is normally a
direct relationship between the costs incurred and the
proportion of the contract performed to date. Costs incurred as
an initial proportion of expected total costs is used as an
initial proportional performance measure. This indicative
proportional performance measure is always subsequently
validated against more subjective criteria (i.e. relevant output
measures) such as the percentage of interviews completed,
percentage of reports delivered to a client and the achievement
of any project milestones stipulated in the contract. In the
event of divergence between the objective and more subjective
measures, the more subjective measures take precedence since
these are output measures.
Clients are obligated to pay based upon services performed, and
in the event that a client cancels the contract, the client
generally is responsible for payment for services performed
through the date of cancellation. Losses expected to be
incurred, if any, on jobs in progress are charged to income as
soon as it becomes probable that such losses will occur.
Invoices to clients in the ordinary course are generated based
upon the achievement of specific events, as defined by each
contract, including deliverables, timetables, and incurrence of
certain costs. Such events may not be directly related to the
performance of
48
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
services. Revenues earned on contracts in progress in excess of
billings are classified as unbilled receivables. Amounts billed
in excess of revenues earned are classified as deferred revenue.
In accordance with the FASB guidance for revenue recognition,
revenue includes amounts billed to clients for subcontractor
costs incurred in the completion of surveys and reflects
reductions offered to clients in the form of rebates and
reimbursements of
out-of-pocket
expenses related to service contracts.
Cost of
Services
The Companys direct costs of providing services
principally consist of project personnel, which relate to the
labor costs directly associated with a project, panelist
incentives, which represent cash and non-cash incentives awarded
to individuals who complete surveys, data processing, which
represents both the internal and outsourced processing of survey
data, and other direct costs related to survey production,
including the amortization of software developed for internal
use.
Panelist
Incentives
The Companys HIpoints loyalty program is designed to
reward respondents who register for its panel, complete online
surveys, and refer others to join its online panel. The earned
points are non-transferable and may be redeemed for gifts from a
specific product portfolio at any time prior to expiration.
Points awarded under the HIpoints program expire after nine
months of account inactivity. The Company maintains a reserve
for obligations with respect to future redemption of outstanding
points based on the expected redemption rate of the points. This
expected redemption rate is based on the Companys actual
redemption rates since the inception of the program.
In addition, certain of the Companys panelists receive
cash incentives for participating in surveys from the Company,
which are earned by the panelist when the Company receives a
timely survey response. The Company accrues these incentives in
the period in which they are earned.
Advertising
Expenses
Advertising costs are expensed as incurred and are included in
selling, general and administrative expense in the accompanying
consolidated statements of operations. Such expenses amounted to
$732, $871 and $1,511 for the fiscal years ended June 30,
2011, 2010 and 2009, respectively.
Stock-Based
Compensation
The FASB guidance for stock-based compensation requires that all
share-based payments to employees after July 1, 2005,
including employee stock options and shares issued to employees
under the Companys Employee Stock Purchase Plans, be
recognized in the financial statements as stock-based
compensation expense based on their fair value on the date of
grant using an option-pricing model, such as the Black-Scholes
model. The guidance also requires that the Company estimate
forfeitures when recognizing stock-based compensation expense
and that this estimate of forfeitures be adjusted over the
requisite service period based on the extent to which actual
forfeitures differ, or are expected to differ, from such
estimates. Changes in estimated forfeitures are recognized
through a cumulative
catch-up
adjustment, which is recognized in the period of change, and
also impact the amount of unamortized stock-based compensation
expense to be recognized in future periods.
A deferred tax asset is recorded on the stock-based compensation
expense required to be accrued under the FASB guidance. A
current income tax deduction arises at the time of vesting
(restricted stock) or
49
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
exercise (stock options). In the event the current income tax
deduction is greater or less than the associated deferred tax
asset, the difference is required to be charged first to the
windfall tax benefit pool. In the event that there is not an
adequate pool of windfall tax benefits, the shortfall is charged
to expense. The Company elected to adopt the alternative method
of calculating the historical pool of windfall benefits as
permitted by the FASB guidance.
Debt Issuance
Costs
Debt issuance costs are amortized and recognized as interest
expense under the effective interest method over the expected
term of the related debt. Unamortized debt issuance costs
related to extinguished debt are expensed at the time the debt
is extinguished and recorded as a component of the gain or loss
recognized upon extinguishment. Unamortized debt issuance costs
are recorded in other assets in the consolidated balance sheet.
Income
Taxes
The Company follows the asset and liability approach to account
for income taxes in accordance with the FASB guidance for income
taxes, which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences
of operating loss carryforwards and temporary differences
between the carrying amounts and the tax bases of assets and
liabilities. Through December 31, 2010, the Company did not
provide U.S. deferred income taxes applicable to the
unremitted earnings of its foreign subsidiaries, as these
amounts were considered to be indefinitely reinvested outside
the U.S. During the three months ended March 31, 2011,
the Company began to provide U.S. deferred income taxes
applicable to the unremitted earnings of certain of its foreign
subsidiaries, as more fully described in Note 16,
Income Taxes, to the accompanying consolidated
financial statements.
On July 1, 2007, the Company adopted the FASB guidance for
uncertain tax positions, which contains a two-step approach to
recognizing and measuring uncertain tax positions taken or
expected to be taken in a tax return and which is now
incorporated into the FASB guidance for income taxes. Applying
the two-step approach, the Company first determines if the
weight of available evidence indicates that it is more likely
than not that the tax position will be sustained on audit,
including resolution of any related appeals or litigation
processes. The second step is that the Company measures the tax
benefit as the largest amount that is more than 50% likely to be
realized upon ultimate settlement. The Company recognizes
interest and penalties related to uncertain tax positions in the
provision for income taxes line of its consolidated statements
of operations.
Net Income
(Loss) Per Share
In accordance with the FASB guidance on earnings per share,
basic net income (loss) per share amounts are computed by
dividing net loss by the weighted-average number of common
shares outstanding for the period. Diluted net income (loss) per
share reflects the assumed exercise and conversion of employee
stock options that have an exercise price that is below the
average market price of the common shares for the respective
periods. The treasury stock method is used in calculating
diluted shares outstanding whereby assumed proceeds from the
exercise of stock options, net of average unrecognized
stock-based compensation expense for stock options and
restricted stock, and the related tax benefit are assumed to be
used to repurchase common stock at the average market price
during the period. When the impact of stock options or other
stock-based compensation is anti-dilutive, they are excluded
from the calculation.
50
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
2.
|
Summary of
Significant Accounting
Policies (Continued)
|
Foreign
Currency Translation
For the Companys subsidiaries located outside of the
United States, the local currency is the functional currency. In
accordance with FASB guidance on foreign currency matters, the
financial statements of those subsidiaries are translated into
U.S. Dollars as follows. Consolidated assets and
liabilities are translated at the exchange rates in effect at
the balance sheet date. Consolidated income, expenses and cash
flows are translated at the average exchange rates for each
period and stockholders equity is translated using
historical exchange rates. The resulting translation adjustment
is recorded as a component of accumulated other comprehensive
income (loss) in the accompanying consolidated balance sheets.
Comprehensive
Income (Loss)
The Company accounts for comprehensive income (loss) in
accordance with the FASB guidance on comprehensive income.
Comprehensive income (loss) consists of two components, net
income (loss) and other comprehensive income (loss). Other
comprehensive income (loss) refers to revenue, expenses, gains
and losses that, under generally accepted accounting principles,
are recorded as an element of stockholders equity but are
excluded from net income. The Companys other comprehensive
income (loss) is comprised of changes in the fair value of the
Companys interest rate swap, any unrealized holding gain
(loss) on
available-for-sale
marketable securities, and the foreign currency translation
adjustments from those subsidiaries not using the
U.S. Dollar as their functional currency.
Segment
Reporting
The Company reports segment information in accordance with the
FASB guidance on segment reporting. The Company operates a
globally consistent business model, offering custom market
research to its customers in the geographic regions in which it
operates. Geographic management facilitates local execution of
the Companys global strategies. However, the Company
maintains global leaders for the majority of its critical
business processes, and the most significant performance
evaluations and resource allocations made on a global basis by
the Companys chief operating decision-maker. Accordingly,
the Company has concluded that it has one reportable segment.
|
|
3.
|
Recently Adopted
Accounting Pronouncements and Accounting Pronouncements Not Yet
Adopted
|
Presentation
of Comprehensive Income
In June 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
No. 2011-05,
Comprehensive Income (Topic 220) Presentation
of Comprehensive Income. ASU
No. 2011-05
eliminates the option to present the components of other
comprehensive income as part of the statement of equity and
requires an entity to present the total of comprehensive income,
the components of net income, and the components of other
comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive
statements. The amendments are effective retrospectively for
fiscal years, and interim periods within those years, beginning
after December 15, 2011 (July 1, 2012 for the
Company). The guidance requires changes in presentation only and
will have no material impact on the Companys accompanying
consolidated financial statements.
51
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
3.
|
Recently Adopted
Accounting Pronouncements and Accounting Pronouncements Not Yet
Adopted (Continued)
|
Goodwill
Impairment Testing
In December 2010, the FASB issued ASU
No. 2010-28,
When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts,
which amends Accounting Standards Codification (ASC)
Topic 350, Intangibles Goodwill and Other.
ASU
No. 2010-28
amends the ASC to require entities that have a reporting unit
with a zero or negative carrying value to assess whether
qualitative factors indicate that it is more likely than not
that an impairment of goodwill exists, and if an entity
concludes that it is more likely than not that an impairment
exists, the entity must measure the goodwill impairment. The
changes to the ASC as a result of this update were effective for
annual and interim reporting periods beginning after
December 15, 2010. The Company adopted this guidance on
July 1, 2011 and adoption did not impact the Companys
accompanying consolidated financial statements.
Accounting for
Transfers of Financial Assets
In June 2009, the FASB issued new guidance on the accounting for
the transfers of financial assets. The new guidance, which was
issued as Statement of Financial Accounting Standards
No. 166, Accounting for Transfers of Financial Assets,
an Amendment of FASB Statement No. 140, is now part of
ASC Topic 860. The new guidance requires additional disclosures
for transfers of financial assets, including securitization
transactions, and any continuing exposure to the risks related
to transferred financial assets. There is no longer a concept of
a qualifying special-purpose entity, and the requirements for
derecognizing financial assets have changed. The new guidance
was effective on a prospective basis for the annual period
beginning after November 15, 2009 and interim and annual
periods thereafter. The Company adopted the new guidance on
July 1, 2010 and adoption did not have a material impact on
the Companys accompanying consolidated financial
statements.
Amendments to
Accounting for Variable Interest Entities
In June 2009, the FASB issued revised guidance on the accounting
for variable interest entities. The revised guidance, which was
issued as Statement of Financial Accounting Standards
No. 167, Amendments to FASB Interpretation
No. 46(R), is now part of ASC Topic 810. The revised
guidance significantly affects the overall consolidation
analysis and was effective as of the beginning of the first
fiscal year that commenced after November 15, 2009. The
Company adopted the revised guidance on July 1, 2010 and
adoption did not have a material impact on the Companys
accompanying consolidated financial statements.
Fair Value
Disclosures
In January 2010, the FASB issued ASU
2010-06,
Improving Disclosures about Fair Value Measurements. ASU
2010-06
provides amendments to subtopic
820-10 that
require separate disclosure of significant transfers in and out
of Level 1 and Level 2 fair value measurements, in
addition to the presentation of purchases, sales, issuances and
settlements for Level 3 fair value measurements. ASU
2010-06 also
provides amendments to subtopic
820-10 that
clarify existing disclosures about the level of disaggregation
and inputs and valuation techniques. The new disclosure
requirements were effective for interim and annual periods
beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements
of Level 3 fair value measurements. Those disclosures were
effective for interim and annual periods beginning after
December 15, 2010. The Company adopted the disclosures
involving Level 1 and Level 2 fair value measurements
on January 1, 2010, and on January 1, 2011, adopted
52
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
3.
|
Recently Adopted
Accounting Pronouncements and Accounting Pronouncements Not Yet
Adopted (Continued)
|
the disclosures involving Level 3 fair value measurements.
Adoption did not have a material impact on the Companys
accompanying consolidated financial statements.
|
|
4.
|
Restructuring and
Other Charges
|
Restructuring
Fiscal
2011
During the second and fourth quarters of fiscal 2011, the
Company took actions designed to re-align the cost structure of
its U.K. operations. Specifically, the Company reduced headcount
at its U.K. facilities by a total of 27 full-time employees
and incurred $834 in one-time termination benefits, all of which
involved cash payments. The reductions in staff were
communicated to the affected employees in December 2010 and
April 2011 and all actions were completed at those respective
times. Related cash payments were completed in June 2011.
During the third and fourth quarters of fiscal 2011, the Company
took actions designed to re-align the cost structure of its
U.S. operations. Specifically, the Company reduced
headcount at its U.S. facilities by a total of
21 full-time employees and incurred $330 in one-time
termination benefits, all of which involved cash payments. The
reductions in staff were communicated to the affected employees
in December 2010 and April 2011 and all actions were completed
at those respective times. Related cash payments were completed
in June 2011.
During the fourth quarter of fiscal 2011, the Company reduced
its occupancy of leased office space at Norwalk, Connecticut,
Brentford, United Kingdom, and Portland, Oregon facilities. The
Company incurred $1,942 in lease exit costs associated with the
remaining lease obligations, all of which involve cash payments.
All actions associated with the leased office space reductions
were completed in June 2011, and all cash payments will be
completed in June 2020.
Fiscal
2009
During the third quarter of fiscal 2009, the Company took
actions to re-align the cost structure of its U.S. and U.K.
operations. Specifically, the Company reduced headcount at its
U.S. facilities by 92 full-time employees and
announced plans to reduce headcount at its U.K. facilities by
25 full-time employees. One-time termination benefits
associated with the U.S. and U.K. actions were $2,656 and
$389, respectively, all of which involved cash payments. The
reductions in staff were communicated to the affected employees
in March 2009. All actions were completed by March 2009 in the
U.S. and May 2009 in the U.K. The related cash payments
were completed by June 2009 in the U.K. and March 2010 in the
U.S.
At March 31, 2009, the Company reviewed the estimate of
anticipated sublease rental income for its Rochester, New York
office located at 135 Corporate Woods. This review, prompted by
adverse changes in real estate market conditions, resulted in a
decrease to the Companys estimate of the portion of the
remaining lease obligation period over which it expects to
derive sublease rental income. This change in estimate resulted
in a charge of $35 in the third quarter of fiscal 2009.
Previously, during the second quarter of fiscal 2009, the
Company took actions to re-align the cost structure of its
U.S. operations. Specifically, the Company reduced
headcount at its U.S. facilities by 78 full-time
employees and incurred $2,261 in one-time termination benefits,
all of which involved cash payments. The reductions in staff
were communicated to the affected employees in October and
December 2008. All actions were completed by December 2008 and
the related cash payments were completed in December 2009.
53
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
4.
|
Restructuring and
Other Charges (Continued)
|
Additionally during the second quarter of fiscal 2009, the
Company substantially vacated leased space at 135 Corporate
Woods. The Company incurred $493 in charges related to the
remaining operating lease obligation, all of which involved cash
payments. All actions associated with this vacated space were
completed by December 2008. The related cash payments were
completed in June 2010.
At December 31, 2008, the Company reviewed the estimates of
anticipated sublease rental income for its Grandville, Michigan
and Norwalk, Connecticut offices, which were included in
restructuring charges taken during the third quarter of fiscal
2008 in conjunction with its reduction of leased space at these
facilities. This review, prompted by adverse changes in real
estate market conditions within each of these locales, resulted
in a decrease to the Companys estimate of the portion of
the remaining lease obligation period over which it expects to
derive sublease rental income. This change in estimate resulted
in a charge of $366 for the three months ended December 31,
2008.
Summary of
Restructuring Charges and Reserves
The following table summarizes the restructuring charges
recognized in the Companys consolidated statements of
operations for the fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Termination benefits
|
|
$
|
1,165
|
|
|
$
|
|
|
|
$
|
5,306
|
|
Lease commitments
|
|
|
1,942
|
|
|
|
|
|
|
|
894
|
|
Reversals of prior accruals
|
|
|
|
|
|
|
|
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,107
|
|
|
$
|
|
|
|
$
|
5,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes activity during fiscal 2011 with
respect to the Companys remaining reserves for the
restructuring activities described above and those undertaken in
prior fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
|
|
|
|
July 1,
|
|
|
Costs
|
|
|
Changes in
|
|
|
Cash
|
|
|
Non-Cash
|
|
|
June 30,
|
|
|
|
2010
|
|
|
Incurred
|
|
|
Estimate
|
|
|
Payments
|
|
|
Settlements
|
|
|
2011
|
|
|
Termination benefits
|
|
$
|
|
|
|
$
|
1,165
|
|
|
$
|
45
|
|
|
$
|
(788
|
)
|
|
$
|
|
|
|
$
|
422
|
|
Lease commitments
|
|
|
408
|
|
|
|
1,942
|
|
|
|
|
|
|
|
(138
|
)
|
|
|
|
|
|
|
2,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining reserve
|
|
$
|
408
|
|
|
$
|
3,107
|
|
|
$
|
45
|
|
|
$
|
(926
|
)
|
|
$
|
|
|
|
$
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in estimate noted above were the result of certain
outplacement benefits that expired unused.
Other
Charges
Other charges reflected in the Restructuring and other
charges line shown on the Companys consolidated
statements of operations for the fiscal years ended
June 30, 2011, 2010 and 2009 included the following:
|
|
|
|
|
Post-employment payments to former senior executives
In connection with their departures from the
Company during fiscal 2011, the Company reached negotiated
settlements with Kimberly Till, Pavan Bhalla, and Enzo Micali.
Under the separation agreements, cash payments to Ms. Till
are due to be completed in August 2013, while cash payments to
Messrs. Bhalla and Micali are due to be completed in
December 2011 and January 2012, respectively. In connection with
their departures from the Company during fiscal 2009, Gregory T.
Novak, Ronald E. Salluzzo and
|
54
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
4.
|
Restructuring and
Other Charges (Continued)
|
David B. Vaden became entitled to certain contractually
obligated cash payments. The cash payments to
Messrs. Novak, Vaden, and Salluzzo were completed in
December 2010, December 2009, and February 2010, respectively.
|
|
|
|
|
Consultant fees During fiscal 2009,
the Company incurred fees for services rendered by a consulting
firm related to, among others, performance improvement
initiatives, bank negotiations, and an interim CFO arrangement,
the details of which are described in Note 21,
Related-Party Transactions, to the accompanying
consolidated financial statements.
|
|
|
|
Other For fiscal 2011,
Other included costs associated with reorganizing
the operational structure of the Companys Canadian and
U.K. operations, as well as immaterial prior period adjustments
related to the Companys Asian operations. For fiscal 2010,
Other included costs associated with reorganizing
the operational structure of the Companys Asia operations
and costs incurred to close the Companys telephone-based
data collection center in Brentford, United Kingdom. For fiscal
2009, Other included bad debt expense for a note
receivable for which collectability became doubtful, recruitment
fees for senior executives, and legal fees associated with the
waiver and amendments to the Companys credit agreement due
to certain financial covenant violations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Post-employment payments to former senior executives
|
|
$
|
1,312
|
|
|
$
|
|
|
|
$
|
1,997
|
|
Consultant fees
|
|
|
|
|
|
|
|
|
|
|
3,095
|
|
Other
|
|
|
973
|
|
|
|
623
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,285
|
|
|
$
|
623
|
|
|
$
|
6,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Fair Value
Measurements
|
The hierarchy for inputs used in measuring fair value for
financial assets and liabilities maximizes the use of observable
inputs and minimizes the use of unobservable inputs by requiring
that the most observable inputs be used when available. The
hierarchy is broken down into three levels:
|
|
|
|
|
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities.
|
|
|
|
Level 2 inputs include data points that are observable such
as quoted prices for similar assets or liabilities in active
markets, quoted prices for identical assets or similar assets or
liabilities in markets that are not active, and inputs (other
than quoted prices) such as interest rates and yield curves that
are observable for the asset and liability, either directly or
indirectly.
|
|
|
|
Level 3 inputs are unobservable data points for the asset
or liability, and include situations where there is little, if
any, market activity for the asset or liability.
|
55
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
5.
|
Fair Value
Measurements (Continued)
|
The following table presents the fair value hierarchy for the
Companys financial assets and liabilities measured at fair
value on a recurring basis at June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measurements
|
|
|
Quoted
|
|
Significant
|
|
|
|
|
|
|
Prices in
|
|
Other
|
|
Significant
|
|
|
|
|
Active
|
|
Observable
|
|
Unobservable
|
|
|
|
|
Markets
|
|
Inputs
|
|
Inputs
|
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
|
At June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
$
|
|
|
|
$
|
513
|
|
|
$
|
|
|
|
$
|
513
|
|
At June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
$
|
|
|
|
$
|
889
|
|
|
$
|
|
|
|
$
|
889
|
|
The Companys fair value hierarchy at June 30, 2011 is
consistent with its fair value hierarchy at June 30, 2010.
The fair value of the Companys interest rate swap was
based on quotes from the respective counterparty, which are
corroborated by the Company using discounted cash flow
calculations based upon forward interest-rate yield curves
obtained from independent pricing services.
The Company had no marketable securities at June 30, 2011
or 2010.
|
|
7.
|
Property, Plant
and Equipment
|
At June 30, property, plant and equipment consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Furniture and fixtures
|
|
$
|
7,405
|
|
|
$
|
7,168
|
|
Equipment
|
|
|
35,856
|
|
|
|
34,683
|
|
Leasehold improvements
|
|
|
11,987
|
|
|
|
11,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,248
|
|
|
|
53,589
|
|
Accumulated depreciation
|
|
|
(51,801
|
)
|
|
|
(47,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,447
|
|
|
$
|
5,626
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense on property, plant and equipment amounted
to $3,173, $3,911 and $4,634 for the fiscal years ended
June 30, 2011, 2010 and 2009, respectively.
The Company had no goodwill at June 30, 2011 or 2010.
56
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
8.
|
Goodwill (Continued)
|
Fiscal
2009
As part of its closing process for the three months ended
December 31, 2008, the Company considered the following
factors in determining whether an impairment review outside of
its annual impairment evaluation date was necessary:
|
|
|
|
|
operating losses in its single reporting unit for the fiscal
quarters ended September 30, 2008 and December 31,
2008;
|
|
|
|
potential declines in market research spending for calendar year
2009 based on industry forecasts from Inside Research;
|
|
|
|
headcount reductions and related charges as announced in October
and December 2008, the details of which are described in
Note 4, Restructuring and Other Charges, to the
accompanying consolidated financial statements; and
|
|
|
|
a 62% decline in the Companys per share stock price from
$1.73 at September 30, 2008 to $0.65 at December 31,
2008, which resulted in a market capitalization that, based on
the Companys per share stock price as of market close on
December 31, 2008, was below the carrying value of its
reporting units net assets at that date.
|
Based on its consideration of the above-noted factors, the
Company concluded that an interim period goodwill impairment
evaluation was necessary at December 31, 2008. Accordingly,
the Company performed the initial step of its impairment
evaluation and determined that the carrying value of its
reporting units net assets exceeded their fair value. The
fair value of the reporting unit was determined using a
discounted cash flow analysis, which used a discount rate based
on the Companys best estimate of the after-tax weighted
average cost of capital, adjusted for the financial risk
associated with its future operations.
In the second step of its impairment evaluation, the Company
determined the implied fair value of goodwill and compared it to
the carrying value of the goodwill. The fair value of its
reporting unit was allocated to all of its assets and
liabilities as if it had been acquired in a business combination
and the fair value of the reporting unit was the price paid to
acquire the reporting unit. This allocation resulted in no
implied fair value of goodwill. Therefore, the Company
recognized an impairment charge of $40,250, the remaining amount
of its previously reported goodwill.
The changes in the carrying amount of goodwill for the fiscal
year ended June 30, 2009 were as follows:
|
|
|
|
|
Balance at July 1, 2008
|
|
$
|
42,805
|
|
Foreign currency translation adjustments
|
|
|
(2,404
|
)
|
Prior period purchase accounting adjustment of deferred taxes
|
|
|
(151
|
)
|
Goodwill impairment charge
|
|
|
(40,250
|
)
|
|
|
|
|
|
Balance at June 30, 2009
|
|
$
|
|
|
|
|
|
|
|
57
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
9.
|
Acquired
Intangible Assets Subject to Amortization
|
At June 30, acquired intangible assets subject to
amortization consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
Weighted-Average
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Amortization Period
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Book
|
|
|
|
(In Years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
|
Contract-based intangibles
|
|
|
3
|
|
|
$
|
1,768
|
|
|
$
|
1,768
|
|
|
$
|
|
|
Internet respondent database
|
|
|
7
|
|
|
|
3,457
|
|
|
|
2,878
|
|
|
|
579
|
|
Customer relationships
|
|
|
10
|
|
|
|
22,667
|
|
|
|
11,619
|
|
|
|
11,048
|
|
Trade names
|
|
|
16
|
|
|
|
5,352
|
|
|
|
2,397
|
|
|
|
2,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
33,244
|
|
|
$
|
18,662
|
|
|
$
|
14,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
Weighted-Average
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Amortization Period
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Book
|
|
|
|
(In Years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
|
Contract-based intangibles
|
|
|
3
|
|
|
$
|
1,768
|
|
|
$
|
1,768
|
|
|
$
|
|
|
Internet respondent database
|
|
|
7
|
|
|
|
3,000
|
|
|
|
2,187
|
|
|
|
813
|
|
Customer relationships
|
|
|
10
|
|
|
|
21,039
|
|
|
|
8,677
|
|
|
|
12,362
|
|
Trade names
|
|
|
16
|
|
|
|
5,283
|
|
|
|
2,076
|
|
|
|
3,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
31,090
|
|
|
$
|
14,708
|
|
|
$
|
16,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Aggregate amortization expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended June 30:
|
|
$
|
2,866
|
|
|
$
|
2,803
|
|
|
$
|
2,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated amortization expense for the fiscal years ending June
30:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
2,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
$
|
2,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
2,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
$
|
1,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
1,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
$
|
3,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amount and accumulated amortization of the
Companys acquired intangible assets for the fiscal years
ended June 30, 2011 and 2010, as well as the related
amortization expense, reflect the impact of foreign currency
exchange rate fluctuations during the period.
58
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
At June 30, accrued expenses consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Panelist incentives
|
|
$
|
3,234
|
|
|
$
|
3,282
|
|
Project-related accruals
|
|
|
1,838
|
|
|
|
2,194
|
|
Payroll and withholding expenses
|
|
|
2,626
|
|
|
|
1,996
|
|
Accrued vacation
|
|
|
1,990
|
|
|
|
1,616
|
|
Bonuses
|
|
|
1,351
|
|
|
|
1,193
|
|
Other
|
|
|
10,210
|
|
|
|
6,487
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,249
|
|
|
$
|
16,768
|
|
|
|
|
|
|
|
|
|
|
Other consists of accrued expenses that are
individually less than 5% of total current liabilities.
As of June 30, 2011, largely due to the magnitude of
restructuring and other charges incurred by the Company during
fiscal 2011, the Company was not in compliance with the
Consolidated Interest Coverage Ratio and Consolidated Total
Leverage Ratio (each as defined below) covenants under the
Amended and Restated Credit Agreement (as defined below). As a
result of the violations, JP Morgan Chase Bank, N.A.
(JPMC) had the right in their sole discretion to
demand immediate payment, in full of the amount outstanding
under the Amended and Restated Credit Agreement. However, on
September 27, 2011, the Company entered into an amendment
agreement and waiver with JPMC, as more fully described in
Note 24, Subsequent Events, which permanently
waived the covenant violations.
Fiscal 2010
Amended and Restated Credit Agreement
On June 30, 2010, the Company entered into an Amended and
Restated Credit Agreement (the Amended and Restated Credit
Agreement) with JPMC as Administrative Agent (the
Administrative Agent) and Issuing Bank (the
Issuing Bank), and the Lenders party thereto (the
Lenders). The Amended and Restated Credit Agreement
supersedes and replaces the Credit Agreement, dated
September 21, 2007, as amended on December 31, 2008,
March 6, 2009 and May 6, 2009 (the Original
Credit Agreement), by and among the Company, JPMC, as
Administrative Agent, and the Lenders party thereto. Pursuant to
the Amended and Restated Credit Agreement, the Lenders made
available certain credit facilities (the Credit
Facilities) as more fully described below. The Credit
Facilities replace existing credit arrangements under the
Original Credit Agreement. In accordance with ASC Topic 470, the
Company evaluated the change in cash flows, determined that
there was a greater than 10% change, and concluded that
treatment of the amendment and restatement of its credit
agreement as an extinguishment of debt was appropriate.
Accordingly, a loss on extinguishment of $724, of which $550
represented unamortized debt issuance costs, was recorded in the
Companys consolidated statement of operations at
June 30, 2010.
59
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
11.
|
Borrowings (Continued)
|
The principal terms of the Original Credit Agreement and Amended
and Restated Credit Agreement are described below:
|
|
|
|
Original Credit
Agreement
|
|
|
Amended and Restated Credit
Agreement
|
Availability:
|
|
|
|
$5,000 Revolving Line
|
|
|
$5,000 Revolving Line
|
Until certain leverage ratios are achieved, advances
require minimum cash balances and no outstanding balance may
exist at least 5 consecutive days in every
30-day period
|
|
|
The Revolving Line may be used to back Letters of
Credit.
|
The Revolving Line may be used to back Letters of
Credit
|
|
|
Requires the Company to maintain a minimum cash
balance of the greater of $5,000 and 1.2 times the outstanding
amount under the Revolving Line (including outstanding letters
of credit)
|
Term Loan A original principal, $12,000
|
|
|
New Term Loan original principal, $15,581
|
Term Loan B, as consolidated with Term Loan C
original principal $22,625
|
|
|
|
|
|
|
|
Pricing Grid:
|
|
|
|
Not applicable
|
|
|
See below
|
|
|
|
|
Interest:
|
|
|
|
Company option:
|
|
|
Company option:
|
Base Rate (greater of Federal Funds Rate plus 0.5%,
LIBOR plus 1%, or Prime) plus 4%
|
|
|
Base Rate (greater of Federal Funds Rate plus 0.5%,
LIBOR plus 1%, or Prime) plus an Applicable Rate based on the
pricing grid tied to the Companys Consolidated Total
Leverage Ratio, as described below (the Pricing Grid)
|
OR
|
|
|
|
LIBOR plus 5%
|
|
|
OR
|
|
|
|
LIBOR plus an Applicable Rate based on the Pricing
Grid
|
The Company elected LIBOR and the interest swap agreement, which
fixed the LIBOR-based portion of the rate at 5.08%, remained
unchanged. With the spread, the effective rate on the Term Loans
was 10.08%.
|
|
|
The Company elected LIBOR and the interest swap agreement fixes
the LIBOR-based portion of the rate at 4.32%. At June 30, 2011,
with the spread at 4.50%, the effective rate on the New Term
Loan was 8.82%.
|
Interest payments are due at end of LIBOR interest periods, but
at least quarterly in arrears
|
|
|
Interest payments are due at end of LIBOR interest periods, but
at least quarterly in arrears
|
Letter of credit participation fees equal to 5% of outstanding
face amounts
|
|
|
Letter of credit fees equal to 5% of outstanding face amounts
until the first quarterly adjustment pursuant to the Pricing
Grid, and are set under the Pricing Grid thereafter
|
|
|
|
|
60
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
11.
|
Borrowings (Continued)
|
|
|
|
|
Original Credit
Agreement
|
|
|
Amended and Restated Credit
Agreement
|
Interest Rate Swap:
|
|
|
|
Fixes the floating LIBOR interest portion of the rates on the
amounts outstanding under the Term Loans at 5.08% through
September 21, 2012
|
|
|
Fixes the floating LIBOR interest portion of the rates on the
amounts outstanding under the New Term Loan (reflecting the
consolidation of Term Loans A and B into a single New Term Loan)
at 4.32% through September 30, 2013
|
Three-month LIBOR rate received on the swap matches the LIBOR
base rate paid on the Term Loans
|
|
|
Three-month LIBOR rate received on the swap matches the LIBOR
base rate paid on the New Term Loan
|
Notional amount equal to outstanding amount of the Term Loans
|
|
|
Notional amount of $10,787 at June 30, 2011, equal to
outstanding amount of the New Term Loan
|
|
|
|
|
Unused Facility Fees:
|
|
|
|
Fee fixed at 1.0% of unused Revolving Line amount
|
|
|
Fee fixed at 0.75% of unused Revolving Line amount
|
|
|
|
|
Principal Payments:
|
|
|
|
Term Loans September 21, 2012
|
|
|
New Term Loan Maturity September 30, 2013
|
Revolving Line Maturity July 15, 2010
|
|
|
Revolving Line Maturity September 30, 2013
|
Revolving Line payable at maturity
|
|
|
Revolving Line payable at maturity
|
Quarterly Term Loan Payments $1,731
|
|
|
Quarterly New Term Loan Payments $1,199
|
|
|
|
|
Financial Covenants:
|
|
|
|
Minimum Consolidated Interest Coverage Ratio ranging over
various quarters between 3.00:1.00 and 1.75:1.00
|
|
|
Minimum Consolidated Interest Coverage Ratio of at least
3.00:1.00
|
Maximum Consolidated Leverage Ratio ranging over various quarters between 6.40:1.00 and 2.00:1.00
Minimum Consolidated Revenue (trailing 3 months) ranging over various quarters between $33,200 and $45,400
|
|
|
Maximum Consolidated Leverage Ratio of 2.90:1.00 for quarterly periods ending through December 31, 2010, 2.70:1.00 for the quarterly period ending March 31, 2011, and 2.50:1.00 for quarterly periods ending thereafter.
Minimum cash balance of the greater of $5,000 and 1.2 times the outstanding amount under the Revolving Line (including outstanding letters of credit)
|
|
|
|
|
Collateral:
|
|
|
|
Secured by all domestic assets and 66% of equity interests in
first tier foreign subsidiaries
|
|
|
Secured by all domestic assets and 66% of equity interests in
first tier foreign subsidiaries
|
|
|
|
|
61
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
11.
|
Borrowings (Continued)
|
The Pricing Grid provides for quarterly adjustment of rates and
fees, and is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABR
|
|
|
|
|
|
Commitment
|
|
|
Consolidated Total
|
|
Applicable
|
|
Adjusted LIBO
|
|
Letter of Credit
|
|
Fee
|
Pricing Level
|
|
Leverage Ratio
|
|
Rate
|
|
Applicable Rate
|
|
Applicable Rate
|
|
Rate
|
|
1
|
|
< 1.0
|
|
|
2.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
0.50
|
%
|
2
|
|
³
1.0 but < 1.5
|
|
|
3.25
|
%
|
|
|
4.25
|
%
|
|
|
4.25
|
%
|
|
|
0.75
|
%
|
3
|
|
³
1.5 but < 2.0
|
|
|
3.50
|
%
|
|
|
4.50
|
%
|
|
|
4.50
|
%
|
|
|
0.75
|
%
|
4
|
|
³
2.0 but < 2.5
|
|
|
3.75
|
%
|
|
|
4.75
|
%
|
|
|
4.75
|
%
|
|
|
0.75
|
%
|
5
|
|
³
2.5
|
|
|
4.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
1.00
|
%
|
The Amended and Restated Agreement contains customary
representations, default provisions, and affirmative and
negative covenants, including among others prohibitions of
dividends, sales of certain assets and mergers, and restrictions
related to acquisitions, indebtedness, liens, investments, share
repurchases and capital expenditures. Among others, the Company
may freely transfer assets and incur obligations among its
domestic subsidiaries, but limitations apply to transfers of
assets and loans to foreign subsidiaries.
At June 30, 2011, the Company was not in compliance with
the Consolidated Interest Coverage Ratio and the Consolidated
Total Leverage Ratio covenants under the Amended and Restated
Credit Agreement, as noted above. At June 30, 2010, the
Company was in compliance with certain financial covenants under
the Amended and Restated Credit Agreement.
At June 30, 2011, the required principal repayments of the
term loan under the Amended and Restated Credit Agreement (the
New Term Loan) for the four succeeding fiscal years
are as follows:
|
|
|
|
|
|
|
Total
|
|
|
2012
|
|
|
4,794
|
|
2013
|
|
|
4,794
|
|
2014
|
|
|
1,199
|
|
|
|
|
|
|
|
|
$
|
10,787
|
|
|
|
|
|
|
At June 30, 2010, the Company had $15,581 outstanding under
the Original Credit Agreement.
At June 30, 2011 and 2010, the Company had no outstanding
borrowings under its revolving line of credit and $359 and $381,
respectively, of outstanding letters of credit. The letters of
credit reduce the remaining undrawn portion of the revolving
line of credit that is available for future borrowings.
Interest Rate
Swap
Effective September 21, 2007, the Company entered into an
interest rate swap agreement with JPMC, which effectively fixed
the floating LIBOR interest portion of the rates on the term
loans outstanding under the Original Credit Agreement at 5.08%
through September 21, 2012. The three-month LIBOR rate
received on the swap matched the LIBOR base rate paid on the
term loans since both used three-month LIBOR. The swap had an
initial notional value of $34,625, which declined as payments
were made on the term loans so that the amount outstanding under
those term loans and the notional amount of the swap were always
equal.
As a result of the Amended and Restated Credit Agreement, the
Company modified the terms of its interest rate swap to ensure
that the notional amount of the swap matches the outstanding
amount of the
62
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
11.
|
Borrowings (Continued)
|
New Term Loan and the three-month LIBOR rate received on the
swap matches the LIBOR base rate on the New Term Loan. The term
of the interest rate swap was extended through
September 30, 2013 to be consistent with the maturity date
of the New Term Loan. As a result of these modifications, the
Company re-designated its interest rate swap as a cash flow
hedge and determined it to be highly effective at that time.
The interest rate swap had a notional amount of $10,787 at
June 30, 2011, which was the same as the outstanding amount
of the New Term Loan. The applicable spread referenced in the
pricing grid set forth above is added to the 4.32% rate fixed by
the interest rate swap.
At June 30, 2011 and 2010, the Company had liabilities of
$513 and $889, respectively, in the Other
liabilities line item of its consolidated balance sheet to
reflect the fair value of the interest rate swap. The interest
rate swap was effective at June 30, 2010 and through the
nine months ended March 31, 2011. During those periods,
changes in the fair value of the interest rate swap were
recorded through other comprehensive income, and any
ineffectiveness was recorded through interest expense. As a
result of the covenant violations noted above, the Company
determined that the interest rate swap was not an effective cash
flow hedge at June 30, 2011 and recorded a charge to
interest expense of $68, the amount of the change in the
swaps fair value during the fourth quarter of fiscal 2011.
|
|
12.
|
Derivative
Financial Instruments
|
As discussed in Note 11, Borrowings, to the
accompanying consolidated financial statements, the Company uses
an interest rate swap to manage the economic effect of the
variable interest obligation on its outstanding debt under the
Credit Facilities so that the interest payable on the
outstanding debt effectively becomes fixed at a certain rate,
thereby reducing the impact of future interest rate changes on
the Companys future interest expense. The critical terms
of the interest rate swap match those of the outstanding debt,
including the notional amounts, interest rate reset dates,
maturity dates and underlying market indices. Accordingly, the
Company has designated its interest rate swap as a qualifying
instrument. The unrealized losses on the interest rate swap are
included in other comprehensive loss and the corresponding fair
value payables are included in other liabilities in the
Companys consolidated balance sheet. The periodic interest
settlements, which occur at the same interval as the outstanding
debt, are recorded as interest expense.
Fair Value of
Derivative Instruments in Consolidated Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
|
Balance Sheet Location
|
|
|
Fair Value
|
|
|
Interest rate swap agreements designated as cash flow hedges
|
|
|
Other liabilities
|
|
|
$
|
513
|
|
Total derivatives designated as hedging instruments
|
|
|
|
|
|
$
|
513
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
|
|
$
|
513
|
|
|
|
|
|
|
|
|
|
|
63
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
12.
|
Derivative
Financial Instruments (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
|
Balance Sheet Location
|
|
|
Fair Value
|
|
|
Interest rate swap agreements designated as cash flow hedges
|
|
|
Other liabilities
|
|
|
$
|
889
|
|
Total derivatives designated as hedging instruments
|
|
|
|
|
|
$
|
889
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
|
|
$
|
889
|
|
|
|
|
|
|
|
|
|
|
Effects of
Derivative Instruments on Income and Accumulated Other
Comprehensive Income (OCI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Location
|
|
|
|
|
|
|
|
of Gain (Loss)
|
|
|
|
|
|
Amount and Location
|
|
Recognized in Income
|
|
|
Amount of Gain
|
|
|
of Gain (Loss)
|
|
on Derivative
|
|
|
(Loss) Recognized in
|
|
|
Reclassified from
|
|
(Ineffective Portion
|
|
|
Accumulated OCI
|
|
|
Accumulated OCI
|
|
and Amount
|
|
|
on Derivative
|
|
|
into Income
|
|
Excluded from
|
|
|
(Effective Portion)
|
|
|
(Effective Portion)
|
|
Effectiveness Testing)
|
|
|
June 30, 2011
|
|
|
June 30, 2011
|
|
June 30, 2011
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
$
|
62
|
|
|
$
|
296
|
|
|
Interest expense
|
|
$
|
68
|
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Location
|
|
|
|
|
|
|
|
of Gain (Loss)
|
|
|
|
|
|
Amount and Location
|
|
Recognized in Income
|
|
|
Amount of Gain
|
|
|
of Gain (Loss)
|
|
on Derivative
|
|
|
(Loss) Recognized in
|
|
|
Reclassified from
|
|
(Ineffective Portion
|
|
|
Accumulated OCI
|
|
|
Accumulated OCI
|
|
and Amount
|
|
|
on Derivative
|
|
|
into Income
|
|
Excluded from
|
|
|
(Effective Portion)
|
|
|
(Effective Portion)
|
|
Effectiveness Testing)
|
|
|
June 30, 2010
|
|
|
June 30, 2010
|
|
June 30, 2010
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
$
|
358
|
|
|
$
|
837
|
|
|
Interest expense
|
|
$
|
|
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
100,000,000 shares of the Companys Common Stock
(Common Stock), par value $.001 per share, are
authorized by the Companys Certificate of Incorporation,
as amended in fiscal 2000.
Restricted
Stock Award Withholdings
The Company issues restricted stock awards as part of the
Incentive Plans (defined below). For certain of the restricted
stock awards granted, the number of shares released on the date
the restricted stock awards vest is net of the statutory
withholding requirements that the Company pays to the
appropriate taxing authorities on behalf of its employees. The
shares repurchased to satisfy the statutory withholding
requirements are immediately retired.
64
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
13.
|
Stockholders
Equity (Continued)
|
Stockholder
Rights Plan
On March 11, 2005, the Board of Directors of the Company
(the Board) adopted a stockholder rights plan, as
set forth in the Rights Agreement, dated March 11, 2005
(the Rights Agreement). Under the Rights Agreement,
the Board declared a dividend distribution of one preferred
share purchase right (a Right) for each outstanding
share of Common Stock to stockholders of record as of the close
of business on March 29, 2005 (the Record
Date). In addition, one Right automatically attaches to
each share of Common Stock issued between the Record Date and
the Distribution Date (defined below). Each Right entitles the
holder to purchase from the Company a unit consisting of one
one-thousandth of a share (a Unit) of the
Companys Series A Preferred Stock, par value $.01 per
share (Preferred Stock), at a cash exercise price of
$27.48 per Unit, subject to adjustment under certain conditions
specified in the Rights Agreement. The Rights will separate from
Common Stock and will become exercisable only when a public
announcement has been made that a person or group acquires
beneficial ownership of 15% or more of the outstanding shares of
the Common Stock (an Acquiring Person), other than
as a result of repurchases of stock by the Company or certain
inadvertent actions by a stockholder, or ten days after a person
commences, or publicly announces the intention to commence
(which intention to commence remains in effect for five business
days after such announcement), a tender offer or exchange offer
that could result in the person or group becoming an Acquiring
Person and that is not terminated within such
ten-day
period (the earlier of such dates being referred to as the
Distribution Date). If a person or group becomes an
Acquiring Person, each holder of a Right (other than the
Acquiring Person and certain of its related parties, whose
Rights become null and void) will be entitled to receive upon
exercise of each Right that number of Units equal to $27.48 (as
adjusted) multiplied by the number of Units for which the Right
is then exercisable, divided by 50% of the then current per
share market price of the Common Stock. If there are
insufficient shares of Preferred Stock to permit full exercise
of all of the Rights, holders of Rights may instead receive
shares of the Common Stock, other securities, cash or property,
or a combination thereof. If, at any time after a person or
group becomes an Acquiring Person, the Company is acquired in a
merger or other business combination transaction with an
Acquiring Person or certain other types of transaction specified
in the Rights Agreement, each holder of a Right (other than the
Acquiring Person and certain of its related parties, whose
Rights become null and void) will be entitled to receive upon
exercise of each Right, in lieu of shares of Preferred Stock,
that number of shares of Common Stock of the surviving entity
equal to $27.48 (as adjusted) multiplied by the number of Units
for which the Right is then exercisable, divided by 50% of the
then current per share market price of the surviving
entitys common stock.
The Rights are not exercisable until a Distribution Date occurs
and will expire on March 11, 2015, unless earlier
terminated or redeemed by the Company in accordance with the
Rights Agreement. Until a Right is exercised, the holder
thereof, as such, will have no rights as a stockholder of the
Company, including without limitation, no right to vote or
receive dividends. The Rights Agreement will be reviewed and
evaluated at least once every three years by a TIDES
Committee of independent directors. During fiscal 2010,
the TIDES Committee reviewed the Rights Agreement and
recommended no changes to it.
|
|
14.
|
Stock-Based
Compensation
|
The Company adopted a Long Term Incentive Plan in 1999, amended
in November 2004 (1999 Incentive Plan), and a 2007
Long Term Incentive Plan (2007 Incentive Plan and
together with the 1999 Incentive Plan, the Incentive
Plans). In addition, in 2001, as part of its acquisition
of Total Research Corporation, the Company also assumed certain
options previously issued by that company under its incentive
plans (Total Plans). The Company also adopted an
Employee Stock Purchase Plan in 1999, amended in November 2004
(1999 ESPP), and a 2007 Employee Stock Purchase
Plan, amended in
65
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
14.
|
Stock-Based
Compensation (Continued)
|
November 2009 (2007 ESPP and together with the 1999
ESPP, the ESPPs). In January 2008, the Company
adopted the Harris Interactive U.K. Limited Share Incentive Plan
(SIP). The Company also has issued stock options to
certain new employees outside the Incentive Plans.
The Company did not capitalize stock-based compensation expense
as part of the cost of an asset for any periods presented. The
following table illustrates the stock-based compensation expense
included in the Companys consolidated statements of
operations for the cost of stock options and restricted stock
issued under the Incentive Plans, stock options issued to new
employees outside the Incentive Plans, and shares issued under
the ESPPs for the fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cost of services
|
|
$
|
12
|
|
|
$
|
18
|
|
|
$
|
54
|
|
Selling, general and administrative
|
|
|
670
|
|
|
|
662
|
|
|
|
1,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
682
|
|
|
$
|
680
|
|
|
$
|
1,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Any potential tax benefits associated with incentive stock
options are recognized if and when the Company receives a tax
deduction associated with the options. Accordingly, due to the
timing of the recognition of the tax benefit versus the related
stock-based compensation expense, the Companys effective
tax rate was increased for the fiscal years ended June 30,
2011, 2010 and 2009.
The Company determines the fair value of each option award on
the date of grant using the Black-Scholes option-pricing model.
Expected volatilities are based on historical volatilities from
daily share price observations for the Companys stock
covering a period commensurate with the expected term of the
options granted. The Company continues to use the
simplified method as permitted by
ASC 718-10
for purposes of determining the expected life of options when
granted, but has corroborated the expected option life derived
using this method to the expected option lives used by other
companies within the market research industry to ensure
reasonableness. The risk-free interest rate is based on the
implied yield available at the time the options were granted on
U.S. Treasury zero coupon issues with a remaining term
equal to the expected life of the options when granted. The
expected dividend yield is based on the Companys
historical practice of electing not to pay dividends to its
stockholders.
Long Term
Incentive Plans
The Company maintains the Incentive Plans, under which it may
grant nonqualified and incentive stock options, as well as
restricted stock awards to employees and directors of the
Company. The Company grants options to purchase Common Stock at
an exercise price equal to the fair market value as of the date
of grant. Options generally vest over a period of up to four
years for employees, and expire after ten years from the date of
grant or earlier, if in connection with termination of
employment or service as a director. Certain options vest upon
the achievement of performance targets. Vesting of options is
accelerated in certain circumstances upon a change in control.
Restricted stock awards generally vest over a period of up to
four years for employees and one year for directors, and any
unvested portion forfeits upon termination of employment or
service as a director. Certain restricted stock awards vest upon
achievement of performance targets.
The Company has registered a total of 10,250,000 shares of
Common Stock for issuance under the Incentive Plans. At
June 30, 2011, 2,327,521 shares were unissued and
available for grant under the Incentive Plans.
66
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
14.
|
Stock-Based
Compensation (Continued)
|
Investor Stock
Options
At June 30, 2011 and 2010, the Company had outstanding
non-qualified investor options to acquire 88,887 shares of
Common Stock that were issued in connection with the
Companys acquisition of Novatris, S.A. in March 2004.
Investor options are not included as options under the Incentive
Plans.
Summary of
Options and Restricted Stock Award Status
The following table provides a summary of the status of the
Companys employee stock options (including options issued
under the Incentive Plans and Total Plans, as well as options
issued outside the Incentive Plans to new employees) for the
fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Options outstanding at July 1
|
|
|
3,873,452
|
|
|
$
|
2.38
|
|
|
|
3,857,209
|
|
|
$
|
3.09
|
|
|
|
5,804,172
|
|
|
$
|
5.32
|
|
Granted
|
|
|
4,750,500
|
|
|
|
0.75
|
|
|
|
1,248,812
|
|
|
|
0.97
|
|
|
|
1,910,000
|
|
|
|
0.93
|
|
Forfeited
|
|
|
(2,160,913
|
)
|
|
|
1.36
|
|
|
|
(1,232,569
|
)
|
|
|
3.20
|
|
|
|
(3,856,963
|
)
|
|
|
5.37
|
|
Exercised
|
|
|
(66,666
|
)
|
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at June 30
|
|
|
6,396,373
|
|
|
$
|
1.53
|
|
|
|
3,873,452
|
|
|
$
|
2.38
|
|
|
|
3,857,209
|
|
|
$
|
3.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during the fiscal
years ended June 30, 2011, 2010 and 2009 was $34, $0 and
$0, respectively.
The following weighted-average assumptions were used to value
options granted by the Company during the fiscal years ended
June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Risk-free interest rate
|
|
|
2.8
|
%
|
|
|
2.7
|
%
|
|
|
2.7
|
%
|
Weighted-average expected life (in years)
|
|
|
6.7
|
|
|
|
6.3
|
|
|
|
6.3
|
|
Volatility factor
|
|
|
66
|
%
|
|
|
68
|
%
|
|
|
56
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value
|
|
$
|
0.46
|
|
|
$
|
0.62
|
|
|
$
|
0.51
|
|
Cash received from the exercise of employee stock options was
$28, $0 and $0, respectively, for the fiscal years ended
June 30, 2011, 2010 and 2009, respectively.
67
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
14.
|
Stock-Based
Compensation (Continued)
|
The following table summarizes the Companys granted and
outstanding employee stock options (including options issued
under the Incentive Plans and Total Plans, as well as options
issued outside the Incentive Plans to new employees) at
June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Aggregate
|
|
Range of
|
|
Number of
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Intrinsic
|
|
|
Number of
|
|
|
Contractual
|
|
|
Exercise
|
|
|
Intrinsic
|
|
Exercise Prices
|
|
Options
|
|
|
Life (In Years)
|
|
|
Price
|
|
|
Value
|
|
|
Options
|
|
|
Life (In Years)
|
|
|
Price
|
|
|
Value
|
|
|
$ 0.38 1.18
|
|
|
5,402,860
|
|
|
|
9.4
|
|
|
$
|
0.80
|
|
|
|
276
|
|
|
|
874,781
|
|
|
|
7.6
|
|
|
$
|
1.01
|
|
|
|
(141
|
)
|
2.10 3.97
|
|
|
116,374
|
|
|
|
1.2
|
|
|
|
2.35
|
|
|
|
(175
|
)
|
|
|
115,957
|
|
|
|
1.2
|
|
|
|
2.35
|
|
|
|
(174
|
)
|
4.05 5.81
|
|
|
450,339
|
|
|
|
4.9
|
|
|
|
4.81
|
|
|
|
(1,786
|
)
|
|
|
444,054
|
|
|
|
4.8
|
|
|
|
4.82
|
|
|
|
(1,765
|
)
|
6.27 8.57
|
|
|
426,800
|
|
|
|
2.9
|
|
|
|
7.11
|
|
|
|
(2,671
|
)
|
|
|
426,800
|
|
|
|
2.9
|
|
|
|
7.11
|
|
|
|
(2,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,396,373
|
|
|
|
8.5
|
|
|
$
|
1.53
|
|
|
$
|
(4,356
|
)
|
|
|
1,861,592
|
|
|
|
5.5
|
|
|
$
|
3.40
|
|
|
$
|
(4,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2011, 3,381,000 of the granted and outstanding
employee stock option awards consist of awards that vest with
the achievement of certain performance targets.
The following table provides a summary of the status of the
Companys granted and outstanding employee and director
restricted stock awards for the fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Restricted shares outstanding at July 1
|
|
|
73,751
|
|
|
$
|
2.09
|
|
|
|
110,718
|
|
|
$
|
2.86
|
|
|
|
555,574
|
|
|
$
|
3.79
|
|
Granted
|
|
|
627,482
|
|
|
|
0.74
|
|
|
|
119,000
|
|
|
|
1.09
|
|
|
|
128,833
|
|
|
|
1.04
|
|
Forfeited
|
|
|
(3,351
|
)
|
|
|
2.63
|
|
|
|
(24,331
|
)
|
|
|
4.59
|
|
|
|
(412,785
|
)
|
|
|
3.47
|
|
Vested
|
|
|
(168,861
|
)
|
|
|
1.13
|
|
|
|
(131,636
|
)
|
|
|
1.37
|
|
|
|
(160,904
|
)
|
|
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares outstanding at June 30
|
|
|
529,021
|
|
|
$
|
0.79
|
|
|
|
73,751
|
|
|
$
|
2.09
|
|
|
|
110,718
|
|
|
$
|
2.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
14.
|
Stock-Based
Compensation (Continued)
|
Unamortized stock-based compensation expense for stock options
and restricted stock awards issued and outstanding at
June 30, 2011 will be recognized during the fiscal years
ending June 30 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
|
|
|
|
Options
|
|
|
Awards
|
|
|
Total
|
|
|
2012
|
|
$
|
465
|
|
|
$
|
385
|
|
|
$
|
850
|
|
2013
|
|
|
450
|
|
|
|
|
|
|
|
450
|
|
2014
|
|
|
365
|
|
|
|
|
|
|
|
365
|
|
2015
|
|
|
149
|
|
|
|
|
|
|
|
149
|
|
2016
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,441
|
|
|
$
|
385
|
|
|
$
|
1,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average vesting period (in years)
|
|
|
3.4
|
|
|
|
1.0
|
|
|
|
3.3
|
|
Employee Stock
Purchase Plans
The ESPPs provide employees with an opportunity to purchase
Common Stock through payroll deductions through semi-annual
offerings in July and January of each fiscal year. Under the
ESPPs, the Companys employees may purchase, subject to
certain restrictions, shares of Common Stock at the lesser of
85% of the fair value at either the beginning or the end of each
six month offering period. During fiscal years 2011, 2010 and
2009, employees purchased 206,270, 293,179 and
337,876 shares of Common Stock, respectively, through the
ESPPs. Of the 1,500,000 shares available for issuance under
the ESPPs, 354,096 shares remained available for issuance
as of June 30, 2011.
The ESPPs are considered compensatory under the FASB guidance
and thus, a portion of the cost related to the July and January
offerings under the ESPPs are included in the Companys
stock-based compensation expense for the fiscal years ended
June 30, 2011, 2010 and 2009.
The fair value of the July and January offerings under the ESPPs
were determined on the date of grant using the Black-Scholes
option-pricing model. Expected volatility was determined based
on the historical volatility from daily share price observations
for the Companys stock covering a period commensurate with
the expected life of the rights under the ESPPs. The risk-free
interest rate is based on the implied yield currently available
at the time the rights under the ESPPs were granted on
U.S. Treasury zero-coupon issues with a remaining term
equal to the expected life of the rights under the ESPPs when
granted. The expected dividend yield is based on the
Companys historical practice of electing not to pay
dividends to its stockholders.
The following weighted-average assumptions were used to value
rights under the ESPPs for the July and January offerings for
the fiscal years ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Risk-free interest rate
|
|
|
0.2
|
%
|
|
|
0.3
|
%
|
|
|
1.6
|
%
|
Weighted-average expected life (in years)
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Volatility factor
|
|
|
63
|
%
|
|
|
108
|
%
|
|
|
80
|
%
|
Dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value
|
|
$
|
0.33
|
|
|
$
|
0.25
|
|
|
$
|
0.50
|
|
69
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
14.
|
Stock-Based
Compensation (Continued)
|
U.K. employees may purchase the Companys common stock
pursuant to the SIP through a payroll deduction with no discount
to the market price. Employees are entitled to receive three
matching shares for every seventeen shares purchased under the
SIP. The SIP has been deemed non-compensatory and, therefore, no
stock-based compensation costs were recognized for fiscal 2011,
2010 or 2009.
The Company established a 401(k) Plan effective January 1,
1995. Eligible employees may begin to participate in the 401(k)
Plan the first of the month following their date of hire, but
are not eligible to receive employer matching contributions, if
any, until the first day of the calendar quarter following the
one anniversary year of service during which they have worked at
least 1,000 hours.
Participants may contribute from 1% to 60% of compensation up to
federally established limitations. Employer matching
contributions are discretionary, and were made in the form of
Company stock through March 31, 2008. The Company suspended
its matching contributions on January 1, 2009 and had not
resumed them as of June 30, 2011.
Matching contribution expense incurred by the Company during the
fiscal years ended June 30, 2011, 2010 and 2009 was $0, $0
and $563, respectively.
For the fiscal years ended June 30, the U.S. and
foreign components of loss from operations before income taxes
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
U.S.
|
|
$
|
(3,527
|
)
|
|
$
|
(153
|
)
|
|
$
|
(44,457
|
)
|
Foreign
|
|
|
(4,772
|
)
|
|
|
(3,065
|
)
|
|
|
(15,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(8,299
|
)
|
|
$
|
(3,218
|
)
|
|
$
|
(59,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal years ended June 30, the provision (benefit)
for income taxes from operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1
|
|
|
$
|
(1,053
|
)
|
|
$
|
(1,375
|
)
|
State
|
|
|
104
|
|
|
|
56
|
|
|
|
192
|
|
Foreign
|
|
|
451
|
|
|
|
439
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
556
|
|
|
$
|
(558
|
)
|
|
$
|
(1,141
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(52
|
)
|
|
$
|
(73
|
)
|
|
$
|
15,010
|
|
State
|
|
|
(12
|
)
|
|
|
(17
|
)
|
|
|
3,028
|
|
Foreign
|
|
|
(338
|
)
|
|
|
(404
|
)
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(402
|
)
|
|
$
|
(494
|
)
|
|
$
|
16,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
154
|
|
|
$
|
(1,052
|
)
|
|
$
|
15,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
16.
|
Income
Taxes (Continued)
|
The provision (benefit) for income taxes from operations differs
from the amount of income tax computed by applying the
applicable U.S. statutory federal income tax rate to income
from operations before income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Provision at federal statutory rate
|
|
$
|
(2,905
|
)
|
|
$
|
(1,127
|
)
|
|
$
|
(20,819
|
)
|
State income tax provision, net of federal effect
|
|
|
60
|
|
|
|
25
|
|
|
|
3,220
|
|
Incremental U.S. taxes on earnings outside the U.S. and other
foreign taxes
|
|
|
833
|
|
|
|
634
|
|
|
|
534
|
|
French R&D tax credits
|
|
|
(338
|
)
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
135
|
|
|
|
155
|
|
|
|
1,981
|
|
Change in valuation allowance
|
|
|
(153
|
)
|
|
|
(906
|
)
|
|
|
18,908
|
|
Change in indefinite reinvestment assertion on unremitted
foreign earnings
|
|
|
2,409
|
|
|
|
|
|
|
|
|
|
Alternative minimum tax credit
|
|
|
|
|
|
|
|
|
|
|
(1,182
|
)
|
Non-deductible portion of goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
13,049
|
|
Other
|
|
|
113
|
|
|
|
167
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
154
|
|
|
$
|
(1,052
|
)
|
|
$
|
15,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, deferred tax assets (liabilities) consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Operating loss carryforwards
|
|
$
|
16,964
|
|
|
$
|
15,789
|
|
Internet database development expenses
|
|
|
981
|
|
|
|
1,016
|
|
Stock-based compensation
|
|
|
577
|
|
|
|
518
|
|
HIpoints accrual
|
|
|
1,047
|
|
|
|
1,086
|
|
Goodwill
|
|
|
1,080
|
|
|
|
1,321
|
|
Accrued expenses
|
|
|
1,679
|
|
|
|
548
|
|
Property, plant and equipment
|
|
|
2,075
|
|
|
|
1,387
|
|
Other
|
|
|
1,071
|
|
|
|
1,565
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
25,474
|
|
|
|
23,230
|
|
Valuation allowance
|
|
|
(22,149
|
)
|
|
|
(21,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,325
|
|
|
|
1,303
|
|
Other intangibles
|
|
|
(2,805
|
)
|
|
|
(3,319
|
)
|
Unremitted foreign earnings
|
|
|
(2,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities
|
|
|
(5,214
|
)
|
|
|
(3,319
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(1,889
|
)
|
|
$
|
(2,016
|
)
|
|
|
|
|
|
|
|
|
|
At June 30, 2011, the Company had U.S. federal and
various state net operating loss carryforwards of $38,629 that
will begin to expire in 2021.
Under existing federal tax laws, Internal Revenue Code
Section 382 provides for an annual limitation on the
utilization of federal operating loss and tax credit
carryforwards generated prior to certain
71
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
16.
|
Income
Taxes (Continued)
|
ownership changes. The Companys acquisition of Total
Research Corporation in November 2001 resulted in an ownership
change for federal income tax purposes and accordingly, this
could limit the Companys ability to use its federal
operating loss and tax credit carryforwards in future years. As
of June 30, 2011, of the Companys total federal
operating loss carryover, approximately $21,489 is subject to an
annual limitation under Internal Revenue Code Section 382.
During the third quarter of fiscal 2011, the Company concluded
that the undistributed earnings of its foreign subsidiaries
would no longer be considered permanently reinvested. After
assessing the assets of the subsidiaries relative to the
specific opportunities for reinvestment, as well as the
forecasted uses of cash for both its domestic and foreign
operations, the Company concluded that it was prudent to change
its indefinite reinvestment assertion to allow for greater
flexibility in its cash management. At that time, the Company
recorded a deferred tax liability of $2,732 and at June 30,
2011, that deferred tax liability was adjusted to $2,409.
However, this change in assertion had no net impact on tax
expense for the fiscal year ended June 30, 2011, as the
deferred tax liability was fully offset by a corresponding
decrease in the Companys U.S. valuation allowance.
At June 30, 2011, the Companys unrecognized tax
benefits were $107, all of which would impact the effective tax
rate, if recognized. The table below reconciles the beginning
and ending amount of unrecognized tax benefits for the fiscal
years ended June 30, 2009, 2010 and 2011:
|
|
|
|
|
Balance, July 1, 2008
|
|
$
|
418
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
3
|
|
Reduction for tax positions of prior years
|
|
|
(353
|
)
|
|
|
|
|
|
Balance, June 30, 2009
|
|
$
|
68
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
46
|
|
Reduction for tax positions of prior years
|
|
|
(24
|
)
|
|
|
|
|
|
Balance, June 30, 2010
|
|
$
|
90
|
|
Additions based on tax positions related to the current year
|
|
|
|
|
Additions for tax positions of prior years
|
|
|
17
|
|
Reduction for tax positions of prior years
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2011
|
|
$
|
107
|
|
|
|
|
|
|
It is reasonably possible that the liability associated with the
Companys unrecognized tax benefits will increase or
decrease within the next twelve months. These changes may be the
result of ongoing audits or the expiration of statutes of
limitations. At this time, an estimate of the range of the
reasonably possible outcomes cannot be made.
In accordance with the Companys accounting policy, the
Company recognizes accrued interest and penalties related to
unrecognized tax benefits as a component of income tax expense.
At June 30, 2011 and 2010, $75 and $59, respectively, were
included in the liability for uncertain tax positions for the
possible payment of interest and penalties.
The Company files U.S. federal income tax returns and
various state, local and foreign income tax returns. The
Internal Revenue Service completed its examination of the fiscal
years ended June 30, 2008
72
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
16.
|
Income
Taxes (Continued)
|
and 2009 in the first quarter of fiscal 2011. In addition, the
Canada Customs and Revenue Agency completed its examination of
the fiscal years ended July 31, 2007 and August 15,
2007 (both pre-acquisition years), and the fiscal year ended
June 30, 2011. None of these examinations resulted in a
material adjustment. With few exceptions, the remaining state,
local and foreign income tax returns are no longer subject to
examination for fiscal years prior to June 30, 2007.
The following table sets forth the reconciliation of the basic
and diluted net loss per share computations for the fiscal years
ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss used for calculating basic and diluted net loss per
share of Common Stock
|
|
$
|
(8,453
|
)
|
|
$
|
(2,166
|
)
|
|
$
|
(75,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of Common Stock used in the calculation
of basic net loss per share
|
|
|
54,566,590
|
|
|
|
54,089,971
|
|
|
|
53,547,670
|
|
Dilutive effect of outstanding stock options and restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the calculation of diluted net loss per share
|
|
|
54,566,590
|
|
|
|
54,089,971
|
|
|
|
53,547,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested restricted stock and unexercised stock options to
purchase 6,925,394, 3,947,203 and 3,967,927 shares of
Common Stock for the fiscal years ended June 30, 2011, 2010
and 2009, respectively, at weighted-average prices per share of
$1.47, $2.37 and $3.08, respectively, were not included in the
computations of diluted net loss per share because their
inclusion would have been anti-dilutive.
|
|
18.
|
Enterprise-Wide
Disclosures
|
The Company is comprised principally of operations in North
America, Europe and Asia.
Non-U.S. market
research is comprised of operations in United Kingdom, Canada,
France and Germany. During fiscal 2011, the Company also
maintained operations in Hong Kong and Singapore, along with a
representative office in mainland China, all of which we
anticipate will cease by September 30, 2011. Revenue from
services is attributable to the country in which the work is
performed. There were no intercompany transactions that
materially affected the financial statements, and all
intercompany sales have been eliminated upon consolidation.
The Companys business model for offering custom market
research is consistent across the geographic regions in which it
operates. Geographic management facilitates local execution of
the Companys global strategies. The Company maintains
global leaders with responsibility across all
73
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
18.
|
Enterprise-Wide
Disclosures (Continued)
|
geographic regions for the majority of its critical business
processes, and the most significant performance evaluations and
resource allocations are made are made on a global basis by the
Companys chief operating decision-maker. Accordingly, the
Company has concluded that it has one reportable segment.
The Company has prepared the financial results for geographic
information on a basis that is consistent with the manner in
which management internally disaggregates information to assist
in making internal operating decisions. The Company has
allocated common expenses among these geographic regions
differently than it would for stand-alone information prepared
in accordance with GAAP. Geographic operating income (loss) may
not be consistent with measures used by other companies.
74
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
18.
|
Enterprise-Wide
Disclosures (Continued)
|
Geographic information from continuing operations for the fiscal
years ended June 30 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Revenue from services
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
92,885
|
|
|
$
|
96,942
|
|
|
$
|
112,821
|
|
United Kingdom
|
|
|
22,864
|
|
|
|
28,398
|
|
|
|
32,454
|
|
Canada
|
|
|
23,160
|
|
|
|
20,653
|
|
|
|
19,939
|
|
Other European countries
|
|
|
21,755
|
|
|
|
17,554
|
|
|
|
14,536
|
|
Asia
|
|
|
4,600
|
|
|
|
4,868
|
|
|
|
4,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from services
|
|
$
|
165,264
|
|
|
$
|
168,415
|
|
|
$
|
184,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(2,298
|
)
|
|
$
|
2,371
|
|
|
$
|
(41,406
|
)
|
United Kingdom
|
|
|
(4,371
|
)
|
|
|
(627
|
)
|
|
|
(3,431
|
)
|
Canada
|
|
|
(1,330
|
)
|
|
|
(2,277
|
)
|
|
|
(5,539
|
)
|
Other European countries
|
|
|
1,627
|
|
|
|
919
|
|
|
|
(5,048
|
)
|
Asia
|
|
|
(615
|
)
|
|
|
(909
|
)
|
|
|
(1,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating loss
|
|
$
|
(6,987
|
)
|
|
$
|
(523
|
)
|
|
$
|
(56,449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,641
|
|
|
$
|
2,964
|
|
|
$
|
4,879
|
|
United Kingdom
|
|
|
976
|
|
|
|
1,300
|
|
|
|
1,039
|
|
Canada
|
|
|
431
|
|
|
|
1,093
|
|
|
|
1,693
|
|
Other European countries
|
|
|
243
|
|
|
|
210
|
|
|
|
301
|
|
Asia
|
|
|
156
|
|
|
|
59
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
3,447
|
|
|
$
|
5,626
|
|
|
$
|
8,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets (liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
|
|
283
|
|
Canada
|
|
|
(1,706
|
)
|
|
|
(1,709
|
)
|
|
|
(2,018
|
)
|
Other European countries
|
|
|
(183
|
)
|
|
|
(307
|
)
|
|
|
(512
|
)
|
Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets (liabilities)
|
|
$
|
(1,889
|
)
|
|
$
|
(2,016
|
)
|
|
$
|
(2,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Operating loss for fiscal 2009 included a $40,250 goodwill
impairment charge. The charge was allocated to the
Companys geographic locations, specifically, $28,888 to
the United States, $3,315 to the United Kingdom, $2,435 to
Canada, $4,873 to other European countries, and $739 to Asia. |
|
|
19.
|
Commitments and
Contingencies
|
The Company has several non-cancelable operating leases for
office space and equipment. Certain of the lease agreements
contain rent escalation clauses based on increases in the
Consumer Price Index
75
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
19.
|
Commitments and
Contingencies (Continued)
|
or the landlords operating costs. Rent expense under such
agreements is recorded using the straight-line method over the
term of the lease. Future minimum lease payments under
non-cancelable operating leases at June 30, 2011 were as
follows:
|
|
|
|
|
Fiscal Years Ending June 30:
|
|
|
|
2012
|
|
$
|
5,507
|
|
2013
|
|
|
4,718
|
|
2014
|
|
|
4,880
|
|
2015
|
|
|
4,857
|
|
2016
|
|
|
1,858
|
|
2017 and thereafter
|
|
|
1,668
|
|
Total rental expense for operating leases during the fiscal
years ended June 30, 2011, 2010 and 2009 was $5,757, $6,174
and $6,938, respectively.
In the normal course of business, the Company is at times
subject to pending and threatened legal actions and proceedings.
After reviewing with counsel pending and threatened actions and
proceedings which existed at June 30, 2011 or which arose
subsequent to that date but before the filing of this Annual
Report on
Form 10-K,
management believes that the outcome of such actions or
proceedings will not have a material adverse effect on the
Companys business, financial condition, results of
operations or cash flows.
|
|
21.
|
Related-Party
Transactions
|
Angrisani
Turnarounds, LLC
On June 7, 2011, the Company entered into a services
agreement (the Services Agreement) with Angrisani
Turnarounds, LLC (ATL) and Al Angrisani, pursuant to
which Mr. Angrisani, Chairman and Chief Executive Officer
of ATL, agreed to serve as Interim Chief Executive Officer of
the Company, effective immediately, and continuing through and
including June 30, 2012 (the Service Period),
subject to certain early termination rights set forth therein.
The material terms of the Services Agreement include:
|
|
|
|
|
ATLs agreement to provide Mr. Angrisani to serve as
Interim Chief Executive Officer of the Company at a rate of $20
per month (the Monthly Retainer) during the Service
Period.
|
|
|
|
Mr. Angrisanis agreement to perform the duties and
responsibilities set forth in the Angrisani Employment Agreement
(as defined below).
|
|
|
|
The Companys agreement to pay ATL the Monthly Retainer
through the month of November 2011 or for an additional three
months following the termination date, whichever occurs later,
if the Company terminates Mr. Angrisanis employment
without cause, as defined in the Angrisani
Employment Agreement, prior to June 30, 2012.
|
|
|
|
The Companys agreement to pay ATL the Monthly Retainer
through the month of November 2011 if Mr. Angrisani
terminates his employment for good reason, as
defined in the Angrisani Employment Agreement, prior to November
2011.
|
76
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
21.
|
Related-Party
Transactions (Continued)
|
|
|
|
|
|
Mr. Angrisanis agreement to be bound by certain
non-competition obligations in the Angrisani Employment
Agreement for the duration of each monthly period associated
with a Monthly Retainer payment.
|
|
|
|
The Companys option, in its sole discretion, to continue
to pay the Monthly Retainer for a minimum of six months
following the end of the Service Period, binding
Mr. Angrisani to the non-competition obligations during
such period.
|
|
|
|
ATLs agreement to preserve the confidentiality of
non-public confidential and proprietary information received in
the course of the Service Period.
|
|
|
|
The Companys ownership of work product created for the
Company.
|
|
|
|
Limitation of the Companys and ATLs liability.
|
|
|
|
Arbitration of disputes.
|
In addition, the Company separately engaged ATL beginning in
March 2011 to provide a thorough review of the Companys
operations and business model and a report of observations and
recommendations.
For the fiscal year ended June 30, 2011, the Company
incurred $60 in expenses related to services provided by ATL,
all of which were reported in the Selling, general and
administrative line of the Companys consolidated
statement of operations for the period then ended.
Alix Partners
LLP
In December 2008, the Company entered into an agreement (the
Alix Agreement) with AlixPartners LLP
(Alix) pursuant to which Deborah Rieger-Paganis, an
employee of Alix, served as interim Chief Financial Officer of
the Company from December 20, 2008 through June 1,
2009. The Alix Agreement, among its material terms, provided for
the engagement of Alix to provide interim management, financial
advisory, and consulting services to the Company, including:
|
|
|
|
|
Alixs agreement to provide Ms. Rieger-Paganis to
serve as interim Chief Financial Officer of the Company at an
hourly rate plus
out-of-pocket
expenses;
|
|
|
|
Alixs agreement to provide other consulting assistance to
the Company at hourly rates dependent upon the particular
consultant involved;
|
|
|
|
payment by the Company of a retainer to Alix, refundable to the
extent not earned;
|
|
|
|
agreement of Alix to preserve the confidentiality of non-public
confidential and proprietary information received in the course
of the engagement;
|
|
|
|
preservation of intellectual property rights of Alix in its
methodologies, processes, and the like, and ownership by the
Company of work product created specifically for the Company;
|
|
|
|
agreement of the Company to provide specified insurance and to
indemnify Alix under specified circumstances;
|
|
|
|
ability of Alix or the Company to terminate the arrangement at
will;
|
|
|
|
limitation of Alix liability; and
|
|
|
|
arbitration of disputes.
|
77
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
21.
|
Related-Party
Transactions (Continued)
|
In addition, the Company had separately engaged Alix beginning
in July 2008 to provide performance improvement, financial
advisory and consulting services to the Company on an hourly
basis.
For the fiscal year ended June 30, 2009, the Company
incurred $3,263 in expenses related to services provided by
Alix, of which $3,096 and $167 were reported in the
Restructuring and other charges and Selling,
general and administrative lines, respectively, of the
Companys consolidated statement of operations for the
period then ended. $658 of such expenses were in relation to the
interim Chief Financial Officer arrangement described above.
|
|
22.
|
Supplemental Cash
Flow Information
|
Cash paid (received) for interest and taxes during the fiscal
years ended June 30 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Interest
|
|
$
|
1,382
|
|
|
$
|
2,067
|
|
|
$
|
1,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
(55
|
)
|
|
$
|
(2,852
|
)
|
|
$
|
(621
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.
|
Unaudited
Quarterly Results of Operations
|
The following table presents unaudited consolidated quarterly
statements of operations data for the fiscal years ended
June 30, 2011 and 2010. In managements opinion, this
information has been prepared on the same basis as the audited
consolidated financial statements and includes all adjustments,
consisting only of normal recurring adjustments necessary for
the fair statement of the unaudited information in the periods
presented. This information should be read in conjunction with
the accompanying consolidated financial statements and related
notes included under this Item 8 and in conjunction with
other financial information included elsewhere in this Annual
Report on
Form 10-K.
The
78
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
23.
|
Unaudited
Quarterly Results of
Operations (Continued)
|
results of operations for any quarter are not necessarily
indicative of results that may be expected for any future
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
Mar. 31,
|
|
|
June 30,
|
|
|
Sept. 30,
|
|
|
Dec. 31,
|
|
|
Mar. 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2010
|
|
|
2011
|
|
|
2011
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue from services(1)
|
|
$
|
38,935
|
|
|
$
|
44,629
|
|
|
$
|
41,203
|
|
|
$
|
43,648
|
|
|
$
|
37,015
|
|
|
$
|
44,940
|
|
|
$
|
38,087
|
|
|
$
|
45,223
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services(1)
|
|
|
24,431
|
|
|
|
28,085
|
|
|
|
26,569
|
|
|
|
28,182
|
|
|
|
24,193
|
|
|
|
29,560
|
|
|
|
25,138
|
|
|
|
29,995
|
|
Selling, general and administrative
|
|
|
12,962
|
|
|
|
13,849
|
|
|
|
13,829
|
|
|
|
13,694
|
|
|
|
12,564
|
|
|
|
12,312
|
|
|
|
12,870
|
|
|
|
14,188
|
|
Depreciation and amortization
|
|
|
1,754
|
|
|
|
1,718
|
|
|
|
1,656
|
|
|
|
1,586
|
|
|
|
1,527
|
|
|
|
1,515
|
|
|
|
1,517
|
|
|
|
1,480
|
|
Restructuring and other charges
|
|
|
148
|
|
|
|
383
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
679
|
|
|
|
448
|
|
|
|
4,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
39,295
|
|
|
|
44,035
|
|
|
|
42,146
|
|
|
|
43,462
|
|
|
|
38,284
|
|
|
|
44,066
|
|
|
|
39,973
|
|
|
|
49,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(360
|
)
|
|
|
594
|
|
|
|
(943
|
)
|
|
|
186
|
|
|
|
(1,269
|
)
|
|
|
874
|
|
|
|
(1,886
|
)
|
|
|
(4,706
|
)
|
Interest and other income
|
|
|
(15
|
)
|
|
|
(12
|
)
|
|
|
(30
|
)
|
|
|
(1
|
)
|
|
|
(14
|
)
|
|
|
(8
|
)
|
|
|
(13
|
)
|
|
|
(12
|
)
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
537
|
|
|
|
499
|
|
|
|
524
|
|
|
|
469
|
|
|
|
470
|
|
|
|
316
|
|
|
|
285
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations before income taxes
|
|
|
(882
|
)
|
|
|
107
|
|
|
|
(1,437
|
)
|
|
|
(1,006
|
)
|
|
|
(1,725
|
)
|
|
|
566
|
|
|
|
(2,158
|
)
|
|
|
(4,983
|
)
|
Provision (benefit) for income taxes
|
|
|
(249
|
)
|
|
|
(1,227
|
)
|
|
|
121
|
|
|
|
303
|
|
|
|
(388
|
)
|
|
|
223
|
|
|
|
177
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(633
|
)
|
|
$
|
1,334
|
|
|
$
|
(1,558
|
)
|
|
$
|
(1,309
|
)
|
|
$
|
(1,337
|
)
|
|
$
|
343
|
|
|
$
|
(2,335
|
)
|
|
$
|
(5,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Gross profit, not shown above, can be derived by subtracting the
Companys cost of services from its revenue from services
for each of the periods shown above. |
Closure of
Asian Operations
On July 18, 2011, the Board approved the closure of the
Companys operations in Hong Kong, Singapore and Shanghai
(collectively, Harris Asia). This decision was based
on the Boards determination that Harris Asias
operations did not adequately support the Companys
strategic objectives.
The Company has not yet been able to make a meaningful
determination of the range of estimated costs associated with,
amounts to be incurred in connection with, and amounts of the
charge that will result in future cash expenditures through the
closure of Harris Asia. The disposition plan could result in
contract termination costs, severance related charges and other
charges. Any such charges will be reflected in the
Companys unaudited consolidated financial statements for
the fiscal quarter ending September 30, 2011.
79
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
|
|
24.
|
Subsequent
Events (Continued)
|
Amendment
Agreement and Waiver
On September 27, 2011, the Company entered into Amendment
Agreement No. 2 and Waiver (Amendment
No. 2) to the Amended and Restated Credit Agreement.
At June 30, 2011, the Company was not in compliance with
the Consolidated Total Leverage Ratio and Consolidated Interest
Coverage Ratio covenants contained in the Amended and Restated
Credit Agreement largely due to the magnitude of restructuring
and other charges incurred during the fiscal year ended
June 30, 2011. Pursuant to Amendment No. 2, these
covenant violations were permanently waived and the Company
regained compliance with the terms of the Amended and Restated
Credit Agreement. Amendment No. 2 includes both the
addition and modification of certain definitions, terms,
financial covenants, and reporting requirements. Obligations
under the Amended and Restated Credit Agreement continue to be
secured by the Companys domestic assets and 66% of the
equity interests in first tier foreign subsidiaries.
The Companys credit facilities under the Amended and
Restated Credit Agreement consist of its previously existing
term loan, which matures September 30, 2013, and a
revolving line of credit. A maximum amount of $5,000 remains
available under the revolving line of credit, subject to the
Companys satisfaction of certain conditions. Until the
Company achieves trailing twelve month adjusted EBITDA of
$5,000, borrowings under the revolving line of credit are
limited to the lesser of $2,000 or net U.S. accounts
receivable, defined as U.S. accounts receivable plus
U.S. unbilled accounts receivable, less deferred revenue.
The principal amount outstanding under the term loan, $10,787 at
June 30, 2011, and the payment terms of the term loan
remain unchanged. Pursuant to Amendment No. 2, the manner
in which outstanding amounts accrue interest remains unchanged,
except that the Eurodollar Applicable Rate and ABR Applicable
Rate are fixed at 5.50% and 4.50%, respectively, through
March 31, 2012.
Amendment No. 2 also impacts certain financial covenants,
as follows:
|
|
|
|
|
The Consolidated Interest Coverage Ratio and Consolidated Total
Leverage Ratio covenants are suspended for the fiscal quarters
ending September 30, 2011, December 31, 2011 and
March 31, 2012. During each of those fiscal quarters, the
Company is subject to a trailing twelve month adjusted EBITDA
covenant of $4,548, $3,817 and $4,424, respectively.
|
|
|
|
For fiscal quarters commencing on or after April 1, 2012,
the Company will again be subject to the Consolidated Interest
Coverage Ratio and Consolidated Total Leverage Ratio covenants
contained in the Amended and Restated Credit Agreement.
|
|
|
|
Cash paid to fund restructuring and other charges incurred on or
before September 30, 2011 are limited to amounts agreed
upon as contained in Amendment No. 2.
|
|
|
|
The Company must maintain minimum global cash of $7,000 and
U.S. cash of $1,000 through June 30, 2012, at which
time the Company will again be subject to only a minimum global
cash requirement of $5,000.
|
Future
Liquidity Considerations
At June 30, 2011, the Company had cash and cash equivalents
of $14,224, compared with $14,158 at June 30, 2010.
Available sources of cash to support known or reasonably likely
cash requirements over the next 12 months include cash,
cash equivalents and marketable securities on hand, additional
cash that may be generated from the Companys operations,
and funds to the extent available through its credit facilities.
While the Company believes that its available sources of cash,
including funds available through
80
HARRIS
INTERACTIVE INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fiscal Years
Ended June 30, 2011, 2010 and 2009
its revolving line that are subject to certain minimum cash
balance requirements, will support known or reasonably likely
cash requirements over the next 12 months, including
quarterly principal payments of $1,199 and interest payments due
under the Companys credit agreement, the Companys
ability to generate cash from its operations is dependent upon
its ability to profitably generate revenue, which requires that
it continually develops new business, both for growth and to
replace completed projects. Although work for no one client
constitutes more than 10% of our revenue, the Company has had to
find significant amounts of replacement and additional revenue
as client relationships and work for continuing clients change
and will likely have to continue to do so in the future. The
Companys ability to profitably generate revenue depends
not only on execution of its business plans, but also on general
market factors outside of its control. As many of the
Companys clients treat all or a portion of their market
research expenditures as discretionary, the Companys
ability to profitably generate revenue is adversely impacted
whenever there are adverse macroeconomic conditions in the
markets the Company serves.
Index to
Financial Statement Schedules
|
|
|
Schedule II Valuation Qualifying Accounts
|
|
85
|
81
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation of
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as
defined in
Rule 13a-15(e)
of the Securities Exchange Act of 1934, as amended (the
Exchange Act)) that are designed to ensure that
information required to be disclosed in reports that the Company
files or submits pursuant to the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission, and that such information is accumulated and
communicated to the Companys management, including its
Principal Executive Officer and Principal Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.
As of the end of each fiscal quarter and with the participation
of the Companys Principal Executive Officer and Principal
Financial Officer, the Companys management conducts an
evaluation of the effectiveness of the Companys disclosure
controls and procedures. It is the conclusion of the
Companys Principal Executive Officer and Principal
Financial Officer, based upon an evaluation completed as of
June 30, 2011, the end of the period covered by this Annual
Report on
Form 10-K,
that the Companys disclosure controls and procedures were
effective.
Managements
Report on Internal Control over Financial Reporting
The Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting as defined in
Rule 13a-15(f)
under the Exchange Act. The Companys internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external reporting
purposes in accordance with accounting principles generally
accepted in the United States of America (GAAP).
The Companys internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the Company, (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
directors of the Company, and (iii) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that
could have a material effect on the Companys consolidated
financial statements. Internal control over financial reporting
includes the controls themselves, monitoring and internal
auditing practices and actions taken to correct deficiencies as
identified.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework
in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on its evaluation, management
concluded that the Companys internal control over
financial reporting was effective as of June 30, 2011.
This Annual Report on
Form 10-K
does not include an attestation report of the Companys
independent registered public accounting firm regarding internal
control over financial reporting. Managements report on
internal control over financial reporting was not subject to
attestation by the
82
Companys independent registered public accounting firm
pursuant to the rules of the Securities and Exchange Commission
that permit the Company to provide only managements report
in this Annual Report on
Form 10-K.
Changes in
Internal Control over Financial Reporting
There were no changes in the Companys internal control
over financial reporting during the quarter ended June 30,
2011 that materially affected, or are reasonably likely to
materially affect, the Companys internal control over
financial reporting.
|
|
Item 9B.
|
Other
Information
|
None.
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required by Item 10 of
Form 10-K
with respect to our directors is incorporated by reference from
the information contained in the section captioned
Proposal No. 1 Election of
Directors in our definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on November 1, 2011 (the
Proxy Statement), a copy of which will be filed with
the Securities and Exchange Commission within 120 days
after the end of the fiscal year ended June 30, 2011. The
information required by Item 10 of
Form 10-K
with respect to the Companys executive officers is
incorporated by reference from Item 1
Business Executive Officers of Harris
Interactive of this Annual Report on
Form 10-K.
The information required by Item 10 of
Form 10-K
with respect to the identification of the Companys Audit
Committee and Audit Committee financial expert is incorporated
by reference from the information contained in the section
captioned Corporate Governance Committees of
the Board Audit Committee in the Proxy
Statement.
The information required by Item 10 of
Form 10-K
with respect to compliance with Section 16(a) of the
Exchange Act is incorporated by reference from the information
contained in the section captioned Stock Ownership and
Reporting Section 16(a)
Beneficial Ownership Reporting Compliance in the Proxy
Statement.
The Companys employees, officers, directors,
representatives, consultants, contractors, and agents are
subject to the Companys Code of Ethics. An Addendum to the
Code of Ethics contains additional requirements for the
Companys Chief Executive Officer and senior financial
officers. The Code of Ethics and Addendum are available in the
Investor Relations section of the Companys website at
www.harrisinteractive.com. The Company intends to satisfy the
disclosure requirements of Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of the
Companys Code of Ethics or the Addendum applicable to our
Chief Executive Officer and senior financial officers by posting
such information in the Investor Relations section of our
website.
|
|
Item 11.
|
Executive
Compensation
|
The information required by Item 11 of
Form 10-K
is incorporated by reference from the information contained in
the sections captioned Compensation Discussion and
Analysis, Compensation of Directors and Executive
Officers, Corporate Governance
Committees of the Board
Compensation Committee
Compensation Committee Interlocks and Insider
Participation and Compensation Committee
Report in the Proxy Statement.
83
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by Item 12 of
Form 10-K
is incorporated by reference from the information contained in
the section captioned Stock Ownership and Reporting
in the Proxy Statement.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by Item 13 of
Form 10-K
with respect to transactions with related persons is
incorporated by reference from the information contained in the
section captioned Transactions with Related Persons
in the Proxy Statement.
The information required by Item 13 of
Form 10-K
with respect to director independence is incorporated by
reference from the information contained in the section
captioned Corporate Governance Director
Independence in the Proxy Statement.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by Item 14 of
Form 10-K
is incorporated by reference from the information contained in
the section captioned Proposal No. 2
Ratification of the Appointment of
Independent Registered Public Accounting Firm in the Proxy
Statement.
|
|
Item 15.
|
Exhibit
and Financial Statement Schedule
|
Financial
Statements
Reference is made to Item 8, Financial Statements and
Supplementary Data, of Part II of this Annual Report
on
Form 10-K.
Financial
Statement Schedule
Reference is made to the Index to Financial Statement
Schedule in Item 8 Financial Statements and
Supplementary Data of Part II of this Annual Report
on
Form 10-K.
Exhibits
Reference is made to the Index of Exhibits accompanying this
Annual Report on
Form 10-K
as filed with the Securities and Exchange Commission. The
Company will furnish to any stockholder, upon written request,
any exhibit listed in such Index of Exhibits upon payment by
such stockholder of the Companys reasonable expenses in
furnishing such exhibit.
84
Schedule II
Valuation and Qualifying Accounts
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Additions
|
|
Deductions
|
|
Balance
|
|
|
Beginning
|
|
Charged to
|
|
Amounts
|
|
at End
|
|
|
of Period
|
|
Earnings
|
|
Written Off
|
|
of Period
|
|
Fiscal year ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts receivable
|
|
$
|
482
|
|
|
$
|
381
|
|
|
$
|
84
|
|
|
$
|
779
|
|
Deferred tax valuation allowance
|
|
$
|
1,289
|
|
|
$
|
22,878
|
|
|
$
|
618
|
|
|
$
|
23,549
|
|
Fiscal year ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts receivable
|
|
$
|
779
|
|
|
$
|
60
|
|
|
$
|
198
|
|
|
$
|
641
|
|
Deferred tax valuation allowance
|
|
$
|
23,549
|
|
|
$
|
463
|
|
|
$
|
2,085
|
|
|
$
|
21,927
|
|
Fiscal year ended June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts receivable
|
|
$
|
641
|
|
|
$
|
546
|
|
|
$
|
605
|
|
|
$
|
582
|
|
Deferred tax valuation allowance
|
|
$
|
21,927
|
|
|
$
|
1,307
|
|
|
$
|
1,085
|
|
|
$
|
22,149
|
|
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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,
HARRIS INTERACTIVE INC.
Date: September 28, 2011
Interim Chief Financial Officer
(On Behalf of the Registrant and as
Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
Name
|
|
Capacity
|
|
Date
|
|
|
|
|
|
|
/s/ Al
Angrisani
Al
Angrisani
|
|
Interim Chief Executive Officer
(Principal Executive Officer)
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Eric
W. Narowski
Eric
W. Narowski
|
|
Interim Chief Financial Officer and Senior Vice President,
Global Controller
(Principal Financial and Accounting Officer)
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Marty
Beard
Marty
Beard
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ David
Brodsky
David
Brodsky
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Steven
L. Fingerhood
Steven
L. Fingerhood
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Alan
Gould
Alan
Gould
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ James
R. Riedman
James
R. Riedman
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Howard
L. Shecter
Howard
L. Shecter
|
|
Director
|
|
September 28, 2011
|
|
|
|
|
|
/s/ Antoine
G. Treuille
Antoine
G. Treuille
|
|
Director
|
|
September 28, 2011
|
86
INDEX OF
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated August 5, 2001, among
Harris Interactive Inc. (the Company), Total Merger
Sub Inc., and Total Research Corporation (filed as
Exhibit 99.1 to the Companys Current Report on
Form 8-K
filed August 14, 2001 and incorporated herein by reference).
|
|
2
|
.2
|
|
Share Purchase Agreement dated March 2, 2004 among Harris
Interactive International Inc. (HII) and the
Shareholders of Novatris, S.A. (filed as Exhibit 10.1 to
the Companys Registration Statement on
Form S-3
filed March 8, 2004 (Registration
No. 333-113389)
and incorporated herein by reference).
|
|
2
|
.3
|
|
Share Purchase Agreement dated August 16, 2007 by and among
the Company, 2144798 Ontario Inc., and all the stockholders of
Decima Research Inc. (filed as Exhibit 2.1.1 to the
Companys Current Report on
Form 8-K
filed August 16, 2007 and incorporated herein by reference).
|
|
2
|
.4
|
|
Amendment to Share Purchase Agreement by and among the Company,
2144798 Ontario Inc. and the former stockholders of Decima
Research Inc. executed on January 25, 2009 and effective as
of January 1, 2009 (filed as Exhibit 2.1 to the
Companys Current Report on
Form 8-K
filed January 29, 2009 and incorporated herein by
reference).
|
|
2
|
.5
|
|
Agreement Relating to the Sale and Purchase of the Entire Issued
Share Capitals of Marketshare Limited and Marketshare Pte Ltd
dated August 16, 2007 by and among Harris Interactive Asia
Limited, HII, and all the stockholders of Marketshare Limited
and Marketshare Pte Ltd (filed as Exhibit 2.1.6 to the
Companys Current Report on
Form 8-K
filed August 16, 2007 and incorporated herein by reference).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of the Company
(filed as Exhibit 3.1 to the Companys Annual Report
on
Form 10-K
for the fiscal year ended June 30, 2000 and incorporated
herein by reference).
|
|
3
|
.2
|
|
By-laws of the Company (filed as Exhibit 3.2 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2001 and incorporated
herein by reference).
|
|
3
|
.3
|
|
Certificate of Designation, Preferences and Rights of
Series A Preferred Stock of the Company (filed as
Exhibit 3.1 to the Companys Current Report on
Form 8-K
filed March 14, 2005 and incorporated herein by reference).
|
|
4
|
.1
|
|
Rights Agreement, dated as of March 11, 2005, by and
between the Company and American Stock Transfer &
Trust Company, as Rights Agent (filed as Exhibit 4.1
to the Companys Current Report on
Form 8-K
filed March 14, 2005 and incorporated herein by reference).
|
|
10
|
.1.1*
|
|
1999 Long-Term Incentive Plan of the Company (included as
Appendix B to the Companys Definitive Proxy Statement
on Schedule 14A filed October 8, 2004 and incorporated
herein by reference).
|
|
10
|
.1.2*
|
|
2007 Long-Term Incentive Plan of the Company (included as
Appendix A to the Companys Definitive Proxy Statement
on Schedule 14A filed September 12, 2007 and
incorporated herein by reference).
|
|
10
|
.1.3*
|
|
Form of Non-Qualified Stock Option Agreement (filed as
Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2006 and
incorporated herein by reference).
|
|
10
|
.1.4*
|
|
Form of Non-Qualified Stock Option Agreement (filed as
Exhibit 10.5 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 and
incorporated herein by reference).
|
|
10
|
.1.5*
|
|
Form of Non-Qualified Stock Option Agreement
Employees (filed as Exhibit 10.2 to the Companys
Registration Statement on
Form S-8
filed on December 10, 2007 (Registration
No. 333-147974)
and incorporated herein by reference).
|
|
10
|
.1.6*
|
|
Form of Non-Qualified Stock Option Agreement (filed as
Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2008 and
incorporated herein by reference).
|
87
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.1.7*
|
|
Form of Non-Qualified Stock Option Agreement Grants
After May 1, 2008 (filed as Exhibit 10.1.22 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.1.8*
|
|
Form of Restricted Stock Agreement Director Grants
After May, 1, 2008 (filed as Exhibit 10.1.24 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.1.9*
|
|
Form of Restricted Stock Agreement Employee Grants
After May 1, 2008 (filed as Exhibit 10.1.23 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.1.10*
|
|
Form of Restricted Stock Unit Agreement (Canadian employees)
(filed as Exhibit 10.1.19 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.1.11*
|
|
Form of Non-Qualified Stock Option Agreement between the Company
and certain employees of Novatris, S.A. dated as of
March 2, 2004 (filed as Exhibit 4.2 to the
Companys Registration Statement on
Form S-8
filed March 8, 2004 (Registration
No. 333-113392)
and incorporated herein by reference).
|
|
10
|
.1.12*
|
|
Non-Qualified Stock Option Agreement (Time-Based Vesting)
between the Company and Enzo Micali, dated as of May 15,
2009 (filed as Exhibit 10.1.23 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.1.13*
|
|
Non-Qualified Stock Option Agreement (Time-Based Vesting)
between the Company and Kimberly Till, dated as of
October 21, 2008 (filed as Exhibit 10.3 to the
Companys Current Report on
Form 8-K
filed October 22, 2008 and incorporated herein by
reference).
|
|
10
|
.1.14*
|
|
Restricted Stock Agreement, dated as of June 7, 2011,
between Harris Interactive Inc. and Al Angrisani (filed as
Exhibit 10.3 to the Companys Current Report on
Form 8-K
filed June 9, 2011 and incorporated herein by reference).
|
|
10
|
.1.15*
|
|
Non-Qualified Stock Option Agreement, dated as of June 7,
2011, between Harris Interactive Inc. and Al Angrisani (filed as
Exhibit 10.4 to the Companys Current Report on
Form 8-K
filed June 9, 2011 and incorporated herein by reference).
|
|
10
|
.1.16*
|
|
Incentive Stock Option Agreement, dated as of June 7, 2011,
between Harris Interactive Inc. and Al Angrisani (filed as
Exhibit 10.5 to the Companys Current Report on
Form 8-K
filed June 9, 2011 and incorporated herein by reference).
|
|
10
|
.1.17*
|
|
Form of Non-Qualified Stock Option Agreement (2011
Performance-Based Grants to Michael de Vere, Marc H. Levin, Todd
Myers, Eric W. Narowski and certain other employees of the
Company and its subsidiaries) (filed herewith).
|
|
10
|
.2.1*
|
|
1999 Employee Stock Purchase Plan of the Company (included as
Appendix C to the Companys Definitive Proxy Statement
on Schedule 14A filed October 8, 2004 and incorporated
herein by reference).
|
|
10
|
.2.2*
|
|
Form of Subscription Agreement under 1999 Employee Stock
Purchase Plan of the Company (included as Exhibit A to
Exhibit 10.2 to the Companys Registration Statement
on
Form S-1
filed September 17, 1999 (Registration
No. 333-87311)
and incorporated herein by reference).
|
|
10
|
.2.3*
|
|
2007 Employee Stock Purchase Plan of the Company (included as
Appendix B to the Companys Definitive Proxy Statement
on Schedule 14A filed September 12, 2007 and
incorporated herein by reference).
|
|
10
|
.2.4*
|
|
2007 Employee Stock Purchase Plan of the Company, as amended
(included as Appendix A to the Companys Definitive
Proxy Statement on Schedule 14A filed September 14,
2009 and incorporated herein by reference).
|
|
10
|
.2.5*
|
|
Harris Interactive UK Limited Share Incentive Plan (relating to
shares of Harris Interactive Inc.) (filed as Exhibit 4.3 to
the Companys Registration Statement on
Form S-8
filed March 20, 2008 (Registration
No. 333-149831)
and incorporated herein by reference).
|
88
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.2.6*
|
|
Harris Interactive UK Limited Share Incentive Plan Partnership
and Matching Share Agreement (filed as Exhibit 4.4 to the
Companys Registration Statement on
Form S-8
filed March 20, 2008 (Registration
No. 333-149831)
and incorporated herein by reference).
|
|
10
|
.2.7*
|
|
Trust Deed between Harris Interactive UK Limited and
Equiniti Share Plan Trustees related to Harris Interactive UK
Limited Share Incentive Plan (filed as Exhibit 4.5 to the
Companys Registration Statement on
Form S-8
filed March 20, 2008 (Registration
No. 333-149831)
and incorporated herein by reference).
|
|
10
|
.4.1*
|
|
Services Agreement, dated as of June 7, 2011, among Harris
Interactive Inc., Angrisani Turnarounds, LLC, and Al Angrisani
(filed as Exhibit 10.1 to the Companys Current Report
on
Form 8-K
filed June 9, 2011 and incorporated herein by reference).
|
|
10
|
.4.2*
|
|
Employment Agreement, dated as of June 7, 2011, between
Harris Interactive Inc. and Al Angrisani (filed as
Exhibit 10.2 to the Companys Current Report on
Form 8-K
filed June 9, 2011 and incorporated herein by reference).
|
|
10
|
.4.3*
|
|
Separation Agreement between the Company and David Bakken, dated
March 30, 2009 (filed as Exhibit 10.4 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2009 and
incorporated herein by reference).
|
|
10
|
.4.4*
|
|
Employment Agreement between the Company and Pavan Bhalla,
effective as of October 11, 2010 (filed as
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed October 4, 2010 and incorporated herein by reference).
|
|
10
|
.4.5*
|
|
Employment Agreement Amendment 1 dated December 20, 2010
between the Company and Pavan Bhalla (filed as Exhibit 10.2
to the Companys Current Report on
Form 8-K
filed on December 21, 2010 and incorporated herein by
reference).
|
|
10
|
.4.6*
|
|
Separation Agreement between the Company and Pavan Bhalla,
effective June 20, 2011 (filed as Exhibit 10.1 to
the Companys Current Report on
Form 8-K
filed on June 21, 2011 and incorporated herein by
reference).
|
|
10
|
.4.7*
|
|
Separation Agreement between the Company and Dennis K. Bhame,
dated March 16, 2009 (filed as Exhibit 10.3 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2009 and
incorporated herein by reference).
|
|
10
|
.4.8*
|
|
Employment Agreement between the Company and Robert J. Cox,
effective as of June 1, 2009 (filed as Exhibit 10.1 to
the Companys Current Report on
Form 8-K
filed on June 2, 2009 and incorporated herein by reference).
|
|
10
|
.4.9*
|
|
Letter Agreement between the Company and Michael de Vere, dated
January 3, 2011 (filed as Exhibit 10.5 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.10*
|
|
Letter Agreement between the Company and Frank E. Forkin, dated
June 2, 2009 (filed as Exhibit 10.4.7 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.4.11*
|
|
Separation Agreement between the Company and Frank E. Forkin,
dated March 5, 2010 (filed as Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.12*
|
|
Letter Agreement between the Company and Patti B. Hoffman, dated
May 11, 2009 (filed as Exhibit 10.4.8 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.4.13*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Patti B. Hoffman (filed as Exhibit 10.5 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.14*
|
|
Modification to Compensation Arrangement for Executive Officer
by and between the Company and Patti B. Hoffman (filed as
Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2011 and
incorporated herein by reference).
|
89
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.4.15*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Marc H. Levin (filed as Exhibit 10.3 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.16*
|
|
Modification to Compensation Arrangement for Executive Officer
by and between the Company and Marc H. Levin (filed as
Exhibit 10.4 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.17*
|
|
Modification to Compensation Arrangement for Executive Officer
by and between the Company and Marc H. Levin (filed herewith).
|
|
10
|
.4.18*
|
|
Letter Agreement between the Company and Enzo Micali, dated
March 24, 2009 (filed as Exhibit 10.5 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2009 and
incorporated herein by reference).
|
|
10
|
.4.19*
|
|
Separation Agreement between the Company and Enzo Micali,
effective June 24, 2011 (filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on June 24, 2011 and incorporated herein by
reference).
|
|
10
|
.4.20*
|
|
Letter Agreement between the Company and Todd Myers, dated
November 2, 2009 (filed herewith).
|
|
10
|
.4.21*
|
|
Form of Change in Control Agreement between the Company and Eric
W. Narowski (filed as Exhibit 10.4.43 to the Companys
Annual Report on
Form 10-K
for the fiscal year ended June 30, 2007 and incorporated
herein by reference).
|
|
10
|
.4.22*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Eric W. Narowski (filed as Exhibit 10.5 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2007 and
incorporated herein by reference).
|
|
10
|
.4.23*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Eric W. Narowski (filed as Exhibit 10.2 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2009 and
incorporated herein by reference).
|
|
10
|
.4.24*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Eric W. Narowski (filed as Exhibit 10.1 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2009 and
incorporated herein by reference).
|
|
10
|
.4.25*
|
|
Employment Agreement between the Company and Gregory T. Novak,
dated as of April 30, 2007 (filed as Exhibit 10.8 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 and
incorporated herein by reference).
|
|
10
|
.4.26*
|
|
Employment Agreement Amendment 1 between the Company and Gregory
T. Novak dated February 8, 2008 (filed as Exhibit 10.4
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2007 and
incorporated herein by reference).
|
|
10
|
.4.27*
|
|
Employment Agreement Amendment 2 between the Company and Gregory
T. Novak dated as of October 21, 2008 (filed as
Exhibit 10.4 to the Companys Current Report on
Form 8-K
filed October 22, 2008 and incorporated herein by
reference).
|
|
10
|
.4.28*
|
|
Employment Agreement between the Company and Ronald E. Salluzzo,
dated as of April 30, 2007 (filed as Exhibit 10.9 to
the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 and
incorporated herein by reference).
|
|
10
|
.4.29*
|
|
Employment Agreement Amendment 1 between the Company and Ronald
E. Salluzzo dated February 8, 2008 (filed as
Exhibit 10.5 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2007 and
incorporated herein by reference).
|
|
10
|
.4.30*
|
|
Employment Agreement between the Company and Robert Salvoni,
dated May 15, 2009 (filed as Exhibit 10.4.15 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.4.31*
|
|
Letter Agreement between Harris Interactive UK Ltd and Robert
Salvoni, dated May 9, 2009 (filed as Exhibit 10.4.23
to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010 and incorporated
herein by reference).
|
90
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.4.32*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Robert Salvoni (filed as Exhibit 10.2
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2009 and
incorporated herein by reference).
|
|
10
|
.4.33*
|
|
Compensation Arrangement for Executive Officer by and between
the Company and Robert Salvoni (filed as Exhibit 10.2
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.4.34*
|
|
Provisions of Separation Agreement between Harris Interactive UK
Limited and Robert Salvoni, dated February 4, 2011
(filed as Exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q
for the fiscal quarter ended March 31, 2011 and
incorporated herein by reference).
|
|
10
|
.4.35*
|
|
Separation Agreement with Stephan B. Sigaud (filed as
Exhibit 10.6 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2008 and
incorporated herein by reference).
|
|
10
|
.4.36*
|
|
Employment Agreement between the Company and George H.
Terhanian, effective as of September 1, 2007 (filed as
Exhibit 10.4.34 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2007 and incorporated
herein by reference).
|
|
10
|
.4.37*
|
|
Employment Agreement Amendment 1 between the Company and George
H. Terhanian dated April 30, 2008 (filed as
Exhibit 10.8 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2008 and
incorporated herein by reference).
|
|
10
|
.4.38*
|
|
Employment Agreement Amendment 2 dated December 16, 2008
between the Company and George H. Terhanian (filed as
Exhibit 10.2 to the Companys Current Report on
Form 8-K
filed December 17, 2008 and incorporated herein by
reference).
|
|
10
|
.4.39*
|
|
Agreement between the Company and George Terhanian Regarding
Post-Termination Obligations, dated as of September 28,
2010 (filed as Exhibit 10.2 to the Companys Quarterly
Report on
Form 10-Q
for the fiscal quarter ended September 30, 2010 and
incorporated herein by reference).
|
|
10
|
.4.40*
|
|
Employment Agreement between the Company and Kimberly Till,
dated as of October 21, 2008 (filed as Exhibit 10.1 to
the Companys Current Report on
Form 8-K
filed October 22, 2008 and incorporated herein by
reference).
|
|
10
|
.4.41*
|
|
Description of Bonus Arrangement by and between the Company and
Kimberly Till (filed as Exhibit 10.3 to the Companys
Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2009 and
incorporated herein by reference).
|
|
10
|
.4.42*
|
|
Description of Fiscal 2011 Bonus Arrangement by and between the
Company and Kimberly Till (filed as Exhibit 10.4 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2010 and
incorporated herein by reference).
|
|
10
|
.4.43*
|
|
Employment Agreement Amendment 1 dated December 20, 2010
between the Company and Kimberly Till (filed as
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed December 21, 2010 and incorporated herein by
reference).
|
|
10
|
.4.44*
|
|
Separation Agreement between the Company and Kimberly Till,
effective June 16, 2011 (filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on June 21, 2011 and incorporated herein by
reference).
|
|
10
|
.4.45*
|
|
Employment Agreement between the Company and David B. Vaden,
dated as of April 3, 2006 and effective as of
February 20, 2006 (filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed April 7, 2006 and incorporated herein by reference).
|
|
10
|
.4.46*
|
|
Employment Agreement between the Company and David B. Vaden,
effective as of April 30, 2007 (filed as Exhibit 10.10
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 and
incorporated herein by reference).
|
|
10
|
.4.47*
|
|
Employment Agreement Amendment 1 between the Company and David
B. Vaden dated April 30, 2008 (filed as Exhibit 10.7
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2008 and
incorporated herein by reference).
|
91
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.4.48*
|
|
Description of Salary and Bonus Arrangements with Executive
Officers Fiscal 2008 and 2009 (filed as
Exhibit 10.4.59 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.4.49*
|
|
Description of Amended Terms of Corporate Bonus Plan and
Business Unit Bonus Plan (filed as Exhibit 10.3 to the
Companys Current Report on
Form 8-K
filed December 17, 2008 and incorporated herein by
reference).
|
|
10
|
.4.50*
|
|
Description of Salary and Bonus Arrangements with Executive
Officers and Terms of Bonus Plans Fiscal 2010 (filed
as Exhibit 10.4.28 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.4.51*
|
|
Description of Salary and Bonus Arrangements with Executive
Officers, Terms of Fiscal 2011 Bonus Plan, and Fiscal 2010 Bonus
Payouts to Executive Officers (filed as Exhibit 10.4.38 to
the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.4.52*
|
|
Retention Bonus Agreement between the Company and Michael de
Vere, dated August 22, 2011 (filed herewith).
|
|
10
|
.4.53*
|
|
Retention Bonus Agreement between the Company and Marc H. Levin,
dated August 22, 2011 (filed herewith).
|
|
10
|
.4.54*
|
|
Retention Bonus Agreement between the Company and Todd Myers,
dated August 22, 2011 (filed herewith).
|
|
10
|
.4.55*
|
|
Retention Bonus Agreement between the Company and Eric W.
Narowski, dated August 22, 2011 (filed herewith).
|
|
10
|
.4.56*
|
|
Description of Changes to Compensation Arrangements for
Non-Employee Directors of Harris Interactive Inc. effective as
of September 6, 2007 (filed as Exhibit 10.4.48 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2007 and incorporated
herein by reference).
|
|
10
|
.4.57*
|
|
Description of Changes to Compensation Arrangements for
Non-Employee Directors of Harris Interactive Inc. effective as
of November 15, 2008 (filed as Exhibit 10.4.52 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.4.58*
|
|
Agreement with Steven L. Fingerhood dated June 4, 2008
(filed as Exhibit 10.4.53 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.4.59*
|
|
Description of Changes to Compensation Arrangements for
Non-Employee Directors of Harris Interactive Inc. effective as
of November 15, 2009 (filed as Exhibit 10.4.36 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.5
|
|
Form of Option Agreement between the Company and certain of the
Shareholders of Novatris, S.A. (filed as Exhibit 10.2 to
the Companys Registration Statement on
Form S-3
filed March 8, 2004 (Registration
No. 333-113389)
and incorporated herein by reference).
|
|
10
|
.6.1
|
|
Lease Agreement for 60 and 135 Corporate Woods, Rochester, New
York, between the Company and Corporate Woods Associates, LLC,
dated February 2, 2007 (filed as Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2006 and
incorporated herein by reference).
|
|
10
|
.6.2
|
|
Lease Agreement for 70 Carlson Road, Rochester, New York,
between Gordon S. Black Corporation and Carlson Park Associates,
together with the First and Second amendments thereto, dated
July 1, 1998 (filed as Exhibit 10.6.2 to the
Companys Registration Statement on
Form S-1
filed September 17, 1999 (Registration
No. 333-87311)
and incorporated herein by reference).
|
92
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.6.3
|
|
Third Amendment to Lease Agreement for 70 Carlson Road,
Rochester, New York, between the Company and 100 Carlson Road
LLC, dated March 20, 2003 (filed as Exhibit 10.6.3 to
the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.4
|
|
Fourth Amendment to Lease Agreement for 70 Carlson Road,
Rochester, New York, between the Company and 100 Carlson Road
LLC, dated September 23, 2008 (filed as Exhibit 10.6.3
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2008 and
incorporated herein by reference).
|
|
10
|
.6.5
|
|
Agreement of Sublease for 161 Avenue of the Americas, New York,
New York, between the Company and The McCall Pattern Company,
Inc., as
successor-in-interest
by merger to Butterick Company, Inc., dated as of June 8,
2004 (filed as Exhibit 10.5.4 to the Companys Current
Report on
Form 8-K
filed March 18, 2005 and incorporated herein by reference).
|
|
10
|
.6.6
|
|
Agreement of Sublease for 161 Avenue of the Americas, New York,
New York between the Company and McCann Erickson Inc., dated as
of March 29, 2007 (filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed April 4, 2007 and incorporated herein by reference).
|
|
10
|
.6.7
|
|
First Addendum to Agreement of Sublease for 161 Avenue of the
Americas, New York, New York between the Company and McCann
Erickson Inc., dated as of May 13, 2010 (filed as
Exhibit 10.6.7 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010 and incorporated
herein by reference).
|
|
10
|
.6.8
|
|
Second Addendum to Agreement of Sublease for 161 Avenue of the
Americas, New York, between the Company and McCann Erickson
Inc., dated December 20, 2010 (filed as Exhibit 10.1
to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2010 and
incorporated herein by reference).
|
|
10
|
.6.9
|
|
Lease Agreement for 1920 Association Drive, Reston, Virginia,
between Wirthlin (formerly known as Decima Research) and Richard
B. Wirthlin Family LLC, dated April 23, 2002 (filed as
Exhibit 10.5 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2004 and
incorporated herein by reference).
|
|
10
|
.6.10
|
|
First Amendment to Lease Agreement for 1920 Association Drive,
Reston, Virginia, between the Company and Richard B. Wirthlin
Family LLC, dated as of May 10, 2007 (filed as
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed May 16, 2007 and incorporated herein by reference).
|
|
10
|
.6.11
|
|
Second Amendment to Lease Agreement for 1920 Association Drive,
Reston, Virginia, between the Company and Richard B. Wirthlin
Family LLC, dated as of September 1, 2009 (filed as
Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2009 and
incorporated herein by reference).
|
|
10
|
.6.12
|
|
Lease Agreement for Watermans Park, High Street, Brentford (UK),
among Procter & Gamble (L&CP Limited),
Procter & Gamble (Health & Beauty Care
Limited, HI Europe Limited and the Company, dated May 9,
2005 (filed as Exhibit 10.5.10 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2005 and incorporated
herein by reference).
|
|
10
|
.6.13
|
|
Agreement for Surrender of Watermans Park, High Street,
Brentford (UK), among Procter & Gamble (L&CP
Limited), Procter & Gamble (Health & Beauty
Care Limited, HI Europe Limited and the Company, dated
April 4, 2005 (filed as Exhibit 10.5.11 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2005 and incorporated
herein by reference).
|
|
10
|
.6.14
|
|
Underlease for Watermans Park, High Street, Brentford (UK),
among Crowvale Properties Limited, Max Factor Limited, and
International Playtex Inc., dated June 27, 1985 (filed as
Exhibit 10.6.10 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.15
|
|
Rent Review Memorandum for Watermans Park, High Street,
Brentford (UK), between Procter & Gamble
(L &CP) Limited and HI Europe Limited, dated
June 24, 2005 (filed as Exhibit 10.6.11 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
93
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.6.16
|
|
Agreement for Lease Relating to Vantage West, Great West Road,
London, by and among the Company, Harris Interactive U.K.
Limited, and UBS Global Asset Management (filed as
Exhibit 10.6 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.6.17
|
|
Lease Agreement for 101 Merritt 7, Norwalk, Connecticut, between
Merritt 7 Venture LLC and the Company, dated March 27, 2001
(filed as Exhibit 10.5.12 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2005 and incorporated
herein by reference).
|
|
10
|
.6.18
|
|
Lease Amendment Number 1 for 101 Merritt 7, Norwalk,
Connecticut, between Merritt 7 Venture LLC and the Company,
dated as of January 21, 2005 (filed as Exhibit 10.5.13
to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2005 and incorporated
herein by reference).
|
|
10
|
.6.19
|
|
Second Amendment and Extension to Lease for 101 Merritt 7,
Norwalk, Connecticut, between Merritt 7 Venture LLC and the
Company, dated October 22, 2007 (filed as
Exhibit 10.6.14 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.20
|
|
Agreement of Sublease for 101 Merritt 7, Norwalk, Connecticut,
between the Company and Verde Energy USA, Inc., dated as of
September 10, 2010 (filed as Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2010 and
incorporated herein by reference).
|
|
10
|
.6.21
|
|
Lease Agreement for 5 Independence Way, Princeton, New Jersey,
between Bellemead Development Corporation and Total Research
Corporation, dated December 2, 1985, including all
amendments to date (filed as Exhibit 10.6.15 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.22
|
|
Ninth Amendment and Partial Surrender Agreement to Lease
Agreement for 5 Independence Way, Princeton, New Jersey, between
Bellemead Development Corporation and the Company, dated
September 24, 2008, signed on or about October 27,
2008, and effective December 31, 2008 (filed as
Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2008 and
incorporated herein by reference).
|
|
10
|
.6.23
|
|
Tenth Amendment to Lease Agreement for 5 Independence Way,
Princeton, New Jersey, between Bellemead Development Corporation
and the Company, dated May 8, 2009, and effective
January 1, 2009 (filed as Exhibit 10.6.18 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.6.24
|
|
Lease Agreement for Pepper Road, Hazel Grove, Stockport (UK),
between Meggitt Properties plc and Business Market Research
Limited, dated July 31, 2000 (filed as Exhibit 10.5.15
to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2006 and incorporated
herein by reference).
|
|
10
|
.6.25
|
|
Rent Review Memorandum for Pepper Road, Hazel Grove, Stockport
(UK), between Meggitt Properties plc and Business Market
Research Limited dated May 9, 2006 (filed as
Exhibit 10.5.16 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2006 and incorporated
herein by reference).
|
|
10
|
.6.26
|
|
Lease Agreement for Pepper Road, Hazel Grove, Stockport (UK),
between Meggitt Properties and Harris Interactive UK Limited,
dated November 29, 2010 (filed as Exhibit 10.3 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended December 31, 2010 and
incorporated herein by reference).
|
|
10
|
.6.27
|
|
Lease Agreement for Vanwall Road, Maidenhead (UK) between Seiko
UK Limited and HI Europe Limited, dated July 29, 2005
(filed as Exhibit 10.5.17 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2006 and incorporated
herein by reference).
|
|
10
|
.6.28
|
|
Lease Agreement for Beim Strohhause 17- 31, 20097, Hamburg,
Germany, between Dieter Becken and Media Transfer AG, dated
July 8, 2005, including all amendments to date
(filed Exhibit 10.6.19 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
94
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.6.29
|
|
Lease Agreement for 1080 Beaver Hall Hill, Montreal, Quebec
(CAN), between Alexis Nihon Real Estate Investment Trust and
Decima Research Inc., dated January 16, 2006 (filed as
Exhibit 10.6.20 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.30
|
|
Lease Agreement for 160 Elgin Street, Ottawa, Ontario (CAN),
between 160 Elgin Leaseholds Inc. and Decima Research Inc.,
dated January 19, 2006 (filed as Exhibit 10.6.21 to
the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.31
|
|
Lease Agreement for 2345 Yonge Street, Toronto, Ontario (CAN),
between Stockton & Bush 2345 Limited and OSI Group
Inc., dated May 1, 2002 (filed as Exhibit 10.6.22 to
the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.32
|
|
Office License for 2345 Yonge Street, Toronto, Ontario (CAN),
between Decima Research Inc. and Westmount Decision Science
Inc., dated September 1, 2007 (filed as
Exhibit 10.6.23 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2008 and incorporated
herein by reference).
|
|
10
|
.6.33
|
|
Agreement for
463-483
Lockhart Road, Hong Kong, between Marketshare Limited and Gilroy
Company Limited, dated May 28, 2007 (filed as
Exhibit 10.6.27 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.6.34
|
|
Tenancy Agreement for
463-483
Lockhart Road, Hong Kong, between Marketshare Limited and Gilroy
Company Limited, dated December 14, 2007 (filed as
Exhibit 10.6.28 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.6.35
|
|
Supplemental Agreement for
463-483
Lockhart Road, Hong Kong, between Marketshare Limited and Gilroy
Company Limited, dated April 21, 2008 (filed as
Exhibit 10.6.29 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2009 and incorporated
herein by reference).
|
|
10
|
.6.36
|
|
Lease Agreement for 39 Rue Crozatier, Paris, France, between
Harris Interactive SAS and Sci Mera, dated July 29, 2011
(filed herewith).
|
|
10
|
.7.1
|
|
Credit Agreement dated September 21, 2007 between JPMorgan
Chase Bank, N.A., as Administrative Agent, the lenders parties
thereto and the Company (filed as Exhibit 10.7 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.7.2
|
|
Master Guaranty dated September 21, 2007 made by Louis
Harris & Associates, Inc., Wirthlin Worldwide, LLC,
Harris Interactive International Inc., Harris International
Asia, LLC, and The Wirthlin Group International, L.L.C. in favor
of JPMorgan Chase Bank, N.A., as Administrative Agent, for
itself and the Lenders parties to the Credit Agreement (filed as
Exhibit 10.2 to the Companys Current Report on
Form 8-K
filed September 26, 2007 and incorporated herein by
reference).
|
|
10
|
.7.3
|
|
Form of Master Securities Pledge Agreement to be delivered at
option of the Company or its domestic subsidiary, as applicable,
in favor of JPMorgan Chase Bank, N.A., as Administrative Agent,
for itself and the Lenders parties to the Credit Agreement
(filed as Exhibit 10.3 to the Companys Current Report
on
Form 8-K
filed September 26, 2007 and incorporated herein by
reference).
|
|
10
|
.7.4
|
|
Interest Rate Swap Confirmation by and between the Company and
JPMorgan Chase Bank, N.A., dated as of July 2, 2007 (filed
as Exhibit 10.7.9 to the Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2007 and incorporated
herein by reference).
|
|
10
|
.7.5
|
|
Amendment to Interest Rate Swap Confirmation by and between the
Company and JPMorgan Chase Bank, N.A., dated as of
September 21, 2007 (filed as Exhibit 10.4 to the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended September 30, 2007 and
incorporated herein by reference).
|
95
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.7.6
|
|
Waiver and Amendment Agreement Number 1 to that certain Credit
Agreement, dated as of February 5, 2009, and effective as
of December 31, 2008, among JPMorgan Chase Bank, National
Association, the Lenders Party Thereto, and the Company,
incorporating as Annex I thereto the Credit Agreement dated
September 21, 2007, and amended as of December 31,
2008 (filed as Exhibit 10.8 to the Companys Quarterly
Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.7.7
|
|
Waiver and Amendment Agreement No. 2 to that certain Credit
Agreement, dated as of March 6, 2009, among JPMorgan Chase
Bank, National Association, the Lenders Party Thereto, and the
Company (filed as Exhibit 10.1 to the Companys
Current Report on
Form 8-K
filed March 9, 2009 and incorporated herein by reference).
|
|
10
|
.7.8
|
|
Waiver and Amendment Agreement No. 3 to that certain Credit
Agreement, dated as of May 6, 2009, among JPMorgan Chase
Bank, National Association, the Lenders Party Thereto, and the
Company (filed as Exhibit 10.9 to the Companys
Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2010 and
incorporated herein by reference).
|
|
10
|
.7.9
|
|
Amended and Restated Credit Agreement, dated June 30, 2010,
among the Company, the Lenders party thereto, and JPMorgan Chase
Bank, National Association, as Administrative Agent and Issuing
Bank (filed as Exhibit 10.1 to the Companys Current
Report on
Form 8-K
filed July 6, 2010 and incorporated herein by reference).
|
|
10
|
.7.10
|
|
Amended and Restated Master Guaranty, dated June 30, 2010,
among Louis Harris & Associates, Inc., Wirthlin
Worldwide, LLC, Harris Interactive International Inc., Harris
International Asia, LLC, The Wirthlin Group International,
L.L.C., and GSBC Ohio Corporation in favor of JPMorgan Chase
Bank, National Association, as Administrative Agent for itself
and the Lenders parties to the Amended and Restated Credit
Agreement (filed as Exhibit 10.2 to the Companys
Current Report on
Form 8-K
filed July 6, 2010 and incorporated herein by reference).
|
|
10
|
.7.11
|
|
Amended and Restated Master Securities Pledge Agreement, dated
June 30, 2010, among the Company, Louis Harris &
Associates, Inc., Wirthlin Worldwide, LLC, Harris Interactive
International Inc., Harris International Asia, LLC, The Wirthlin
Group International, L.L.C., GSBC Ohio Corporation, and JPMorgan
Chase Bank, National Association, as Administrative Agent for
itself and the other Secured Parties, including the Lenders
parties to the Amended and Restated Credit Agreement, and
consented and agreed to by Harris Interactive Asia, LLC,
Wirthlin UK Limited, Harris Interactive SAS, Harris Interactive
AG, 2144798 Ontario, Inc., and Harris Interactive Asia
(Holdings) Limited (filed as Exhibit 10.3 to the
Companys Current Report on
Form 8-K
filed July 6, 2010 and incorporated herein by reference).
|
|
10
|
.7.12
|
|
Amended and Restated Master Security Agreement, dated
June 30, 2010, among the Company, Louis Harris &
Associates, Inc., Wirthlin Worldwide, LLC, Harris Interactive
International Inc., Harris International Asia, LLC, The Wirthlin
Group International, L.L.C., GSBC Ohio Corporation, and JPMorgan
Chase Bank, National Association, as Administrative Agent for
itself and the other Secured Parties, including the Lenders
parties to the Amended and Restated Credit Agreement (filed as
Exhibit 10.4 to the Companys Current Report on
Form 8-K
filed July 6, 2010 and incorporated herein by reference).
|
|
10
|
.7.13
|
|
Amendment to Interest Rate Swap Confirmation by and between the
Company and JPMorgan Chase Bank, N.A., dated as of June 24,
2010 (filed as Exhibit 10.7.13 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2010 and incorporated
herein by reference).
|
|
10
|
.7.14
|
|
Amendment Agreement No. 1 to that certain Amended and
Restated Credit Agreement, dated as of August 27, 2010,
among JPMorgan Chase Bank, National Association, as
Administrative Agent for itself and the Lenders parties to the
Amended and Restated Credit Agreement, and the Lenders parties
thereto, and the Company (filed as Exhibit 10.7.14 to the
Companys Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010 and incorporated
herein by reference).
|
96
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit Title
|
|
|
10
|
.7.15
|
|
Amendment Agreement No. 2 and Waiver, dated as of
September 27, 2011, to that certain Amended and Restated
Credit Agreement, dated as of June 30, 2010, among the
Company, JPMorgan Chase Bank, N.A., as Administrative Agent and
Issuing Bank, and the Lenders party thereto, as amended by
Amendment Agreement No. 1, dated as of August 27, 2010
(filed as Exhibit 10.1 to the Companys Current Report
on
Form 8-K
filed September 28, 2011 and incorporated herein by
reference).
|
|
10
|
.9*
|
|
Agreement dated December 16, 2008 between the Company and
Alix Partners LLP (filed as Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed December 17, 2008 and incorporated herein by
reference).
|
|
10
|
.11
|
|
Non-Competition Agreement dated August 16, 2007 by and
among Decima Research Inc., 2144798 Ontario Inc., Bruce
Anderson, Kevin Loiselle, Michel Lucas, Daniel Kirkland, and Ed
Hum (filed as Exhibit 2.1.2 to the Companys Current
Report on
Form 8-K
filed August 16, 2007 and incorporated herein by reference).
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21
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|
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List of Subsidiaries (filed herewith).
|
|
23
|
|
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Consent of Independent Registered Public Accounting Firm (filed
herewith).
|
|
31
|
.1
|
|
Certificate of the Chief Executive Officer pursuant to
18 U.S.C. §1350 (Section 302 of the
Sarbanes-Oxley Act of 2002) (filed herewith).
|
|
31
|
.2
|
|
Certificate of the Chief Financial Officer pursuant to
18 U.S.C. §1350 (Section 302 of the
Sarbanes-Oxley Act of 2002) (filed herewith).
|
|
32
|
.1
|
|
Certificate of the Chief Executive Officer pursuant to
18 U.S.C. §1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) (filed herewith).
|
|
32
|
.2
|
|
Certificate of the Chief Financial Officer pursuant to
18 U.S.C. §1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) (filed herewith).
|
|
|
|
* |
|
Denotes management contract or compensatory plan or arrangement |
97