PERFICIENT INC - Quarter Report: 2009 March (Form 10-Q)

 

 

 

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Part I.	Financial Information	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008	2
	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2009	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	17
Part II.	Other Information	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6.	Exhibits	17
	Signatures	18

 

 

 

 

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Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets

		March 31, 2009				December 31, 2008
ASSETS		(In thousands, except share information)
Current assets:
Cash and cash equivalents		$	24,872			$	22,909
Accounts and note receivable, net			43,654				47,584
Prepaid expenses			1,161				1,374
Other current assets			2,524				3,157
Total current assets			72,211				75,024
Property and equipment, net			1,925				2,345
Goodwill			104,178				104,178
Intangible assets, net			10,424				11,456
Other non-current assets			1,456				1,244
Total assets		$	190,194			$	194,247
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	4,098			$	4,509
Other current liabilities			10,010				14,339
Total current liabilities			14,108				18,848
Other non-current liabilities			640				581
Total liabilities		$	14,748			$	19,429
Stockholders’ equity:
Common stock (par value $.001 per share; 50,000,000 shares authorized and
30,532,042 shares issued and 28,058,742 shares outstanding as of March 31, 2009;
30,350,700 shares issued and 28,502,400 shares outstanding as of December 31, 2008)		$	31			$	30
Additional paid-in capital			200,198				197,653
Accumulated other comprehensive loss			(413	)			(338	)
Treasury stock, at cost (2,473,300 shares as of March 31, 2009; 1,848,300 shares as of      December 31, 2008)			(11,937	)			(9,179	)
Accumulated deficit			(12,433	)			(13,348	)
Total stockholders’ equity			175,446				174,818
Total liabilities and stockholders’ equity		$	190,194			$	194,247

See accompanying notes to interim unaudited condensed consolidated financial statements.

 

 

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Perficient, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

		Three Months Ended March 31,
		2009				2008
		(In thousands, except share information)
Revenues
Services		$	44,980			$	52,100
Software and hardware			3,919				1,684
Reimbursable expenses			2,393				3,539
Total revenues			51,292				57,323
Cost of revenues (exclusive of depreciation and amortization, shown separately below)
Project personnel costs			30,830				33,703
Software and hardware costs			3,607				1,469
Reimbursable expenses			2,393				3,539
Other project related expenses			1,123				1,050
Total cost of revenues			37,953				39,761
Gross margin			13,339				17,562
Selling, general and administrative			10,511				10,760
Depreciation			475				538
Amortization			1,111				1,217
Income from operations			1,242				5,047
Interest income, net of interest expense			98				108
Other income			176				48
Income before income taxes			1,516				5,203
Provision for income taxes			601				2,127
Net income		$	915			$	3,076
Basic net income per share		$	0.03			$	0.10
Diluted net income per share		$	0.03			$	0.10
Shares used in computing basic net income per share			28,262,954				29,535,262
Shares used in computing diluted net income per share			28,774,210				30,724,006

 See accompanying notes to interim unaudited condensed consolidated financial statements.

 

 

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Perficient, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

Three Months Ended March 31, 2009

(Unaudited)

(In thousands)

 

														Accumulated
		Common				Common				Additional				Other												Total
		Stock				Stock				Paid-in				Comprehensive				Treasury				Accumulated				Stockholders’
		Shares				Amount				Capital				Loss				Stock				Deficit				Equity
Balance at December 31,    2008			28,502			$	30			$	197,653			$	(338	)		$	(9,179	)		$	(13,348	)		$	174,818
Stock options exercised			96				1				185				--				--				--				186
Purchase of stock under the    Employee Stock    Purchase Plan			6				--				30				--				--				--				30
Tax expense of stock    option exercises and    restricted stock vesting			--				--				(121	)			--				--				--				(121	)
Stock compensation and    retirement savings plan    contributions			80				--				2,451				--				--				--				2,451
Purchases of treasury stock			(625	)			--				--				--				(2,758	)			--				(2,758	)
Foreign currency    translation adjustment			--				--				--				(75	)			--				--				(75	)
Net income			--				--				--				--				--				915				915
Total comprehensive    income			--				--				--				--				--				--				840
Balance at March 31, 2009			28,059			$	31			$	200,198			$	(413	)		$	(11,937	)		$	(12,433	)		$	175,446

See accompanying notes to interim unaudited condensed consolidated financial statements.

 

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

 

1. Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of Perficient, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States and are presented in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. Accordingly, certain footnote disclosures have been condensed or omitted. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Operating results for the three months ended March 31, 2009 may not be indicative of the results for the full fiscal year ending December 31, 2009.

2. Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and such differences could be material to the financial statements.

Revenue Recognition

 

Revenues are primarily derived from professional services provided on a time and materials basis. For time and material contracts, revenues are recognized and billed by multiplying the number of hours expended in the performance of the contract by the established billing rates. For fixed fee projects, revenues are generally recognized using the input method based on the ratio of hours expended to total estimated hours. Amounts invoiced to clients in excess of revenues recognized are classified as deferred revenues. On many projects the Company is also reimbursed for out-of-pocket expenses such as airfare, lodging and meals.  These reimbursements are included as a component of revenues. Revenues from software and hardware sales are generally recorded on a gross basis based on the Company's role as a principal in the transaction.  On rare occasions, the Company enters into a transaction where it is not the principal.  In these cases, revenue is recorded on a net basis.

Revenues are recognized when the following criteria are met: (1) persuasive evidence of the customer arrangement exists, (2) fees are fixed and determinable, (3) delivery and acceptance have occurred, and (4) collectibility is deemed probable. The Company’s policy for revenue recognition in instances where multiple deliverables are sold contemporaneously to the same counterparty is in accordance with American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2, Software Revenue Recognition, Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, and SEC Staff Accounting Bulletin No. 104, Revenue Recognition. Specifically, if the Company enters into contracts for the sale of services and software or hardware, then the Company evaluates whether the services are essential to the functionality of the software or hardware and whether it has objective fair value evidence for each deliverable in the transaction. If the Company has concluded that the services to be provided are not essential to the functionality of the software or hardware and it can determine objective fair value evidence for each deliverable of the transaction, then it accounts for each deliverable in the transaction separately, based on the relevant revenue recognition policies. Generally, all deliverables of the Company’s multiple element arrangements meet these criteria. The Company may provide multiple services under the terms of an arrangement and are required to assess whether one or more units of accounting are present.  Fees are typically accounted for as one unit of accounting as fair value evidence for individual tasks or milestones is not available.  The Company follows the guidelines discussed above in determining revenues; however, certain judgments and estimates are made and used to determine revenues recognized in any accounting period. If estimates are revised, material differences may result in the amount and timing of revenues recognized for a given period.

Revenues are presented net of taxes assessed by governmental authorities.  Sales taxes are generally collected and subsequently remitted on all software and hardware sales and certain services transactions as appropriate.

 

 

 

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Goodwill, Other Intangible Assets and Impairment of Long-Lived Assets

Goodwill represents the excess purchase price over the fair value of net assets acquired, or net liabilities assumed, in a business combination. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the Company performs an annual impairment test of goodwill. The Company evaluates goodwill as of October 1 each year and more frequently if events or changes in circumstances indicate that goodwill might be impaired.  As required by SFAS 142, the impairment test is accomplished using a two-step approach.  The first step screens for impairment and, when impairment is indicated, a second step is employed to measure the impairment.

Due to recent volatility in the equity markets and the decline in the value of the Company’s share price, management will continue to monitor the Company’s common stock price relative to its book value per common share.  If the Company’s common stock price trades below its book value per share for a continued and sustained period of time, it could signify a triggering event that may indicate an impairment of goodwill has occurred.

Other intangible assets include customer relationships, non-compete arrangements and internally developed software, which are being amortized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives range from three to eight years. Amortization of customer relationships, non-compete arrangements and internally developed software is considered an operating expense and is included in “Amortization” in the accompanying Condensed Consolidated Statements of Operations. The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a lack of recoverability or revised useful life. 

Stock-Based Compensation

 

The Company recognizes stock-based compensation ratably using the straight-line attribution method over the requisite service period. In addition, pursuant to SFAS No. 123 (revised), Share Based Payment (“SFAS 123R”), the Company is required to estimate the amount of expected forfeitures when calculating stock-based compensation.  Refer to Note 3, Stock-Based Compensation, for further discussion.

3. Stock-Based Compensation

 

Stock Award Plans

 

The Company made various stock option and award grants under the 1999 Stock Option/Stock Issuance Plan (the “1999 Plan”) prior to May 2009.  On April 24, 2009, the Company’s Board of Directors and stockholders approved the 2009 Long-Term Incentive Plan (the “Incentive Plan”).  The Incentive Plan allows for the granting of various types of stock awards over the next three years, not to exceed a total of 1.5 million shares, to eligible individuals.  The Compensation Committee of the Board of Directors will administer the Incentive Plan and determine the terms of all stock awards made under the Plan.

Stock-based compensation cost recognized for the three months ended March 31, 2009 was approximately $2.5 million, which included $0.3 million of expense for retirement savings plan contributions.  For the three months ended March 31, 2008, stock-based compensation cost was approximately $2.3 million, which included $0.3 million of expense for retirement savings plan contributions.  The associated current and future income tax benefits recognized for the three months ended March 31, 2009 and 2008 were approximately $0.8 million and $0.7 million, respectively.  As of March 31, 2009, there was $30.1 million of total unrecognized compensation cost related to non-vested share-based awards. This cost is expected to be recognized over a weighted-average period of 4 years.

 

 

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Stock option activity for the three months ended March 31, 2009 was as follows (in thousands, except exercise price information):

						Range of				Weighted-Average
		Shares				Exercise Prices				Exercise Price
Options outstanding at January 1, 2009			2,030			$	0.03 – 16.94			$	4.81
Options exercised			(96	)			0.10 –   4.50				1.93
Options outstanding at March 31, 2009			1,934				0.03 – 16.94				4.95
Options vested at March 31, 2009			1,677			$	0.03 – 16.94			$	4.74

 

Restricted stock activity for the three months ended March 31, 2009 was as follows (in thousands, except fair value information):

 

		Shares				Weighted-Average Grant Date Fair Value
Restricted stock awards outstanding at January 1, 2009			3,510			$	9.65
Awards granted			41				4.84
Awards vested			(17	)			8.62
Awards forfeited			(9	)			9.90
Restricted stock awards outstanding at March 31, 2009			3,525			$	9.59

  

4. Net Income per Share

 

The following table presents the calculation of basic and diluted net income per share (in thousands, except per share information):

 

		Three months ended March 31,
		2009				2008
Net income		$	915			$	3,076
Basic:
Weighted-average shares of common stock outstanding			28,263				29,535
Shares used in computing basic net income per share			28,263				29,535
Effect of dilutive securities:
Stock options			497				1,068
Warrants			4				7
Restricted stock subject to vesting			10				114
Shares used in computing diluted net income per share (1)			28,774				30,724
Basic net income per share		$	0.03			$	0.10
Diluted net income per share		$	0.03			$	0.10

(1)	For the three months ended March 31, 2009, approximately 915,000 options for shares and 3.4 million shares of restricted stock were excluded from shares used in computing diluted net income per share because they would have had an anti-dilutive effect.

 

 

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5. Commitments and Contingencies

 

The Company leases its office facilities and certain equipment under various operating lease agreements. The Company has the option to extend the term of certain of its office facilities leases. Future minimum commitments under these lease agreements are as follows (table in thousands):

		Operating Leases
2009 remaining		$	1,721
2010			2,245
2011			1,866
2012			856
2013			585
Thereafter			363
Total minimum lease payments		$	7,636

 

At March 31, 2009, the Company had one letter of credit outstanding for $100,000 to serve as collateral to secure an office lease.  This letter of credit expires in October 2009 and while outstanding, reduces the credit available for revolving credit borrowings under the Company’s credit agreement with Silicon Valley Bank (“SVB”) and KeyBank National Association (“KeyBank”).

6. Balance Sheet Components

 

The components of accounts receivable are as follows (in thousands):

		March 31, 2009				December 31, 2008
Accounts receivable		$	26,375			$	30,565
Unbilled revenue			16,386				16,374
Note receivable (1)			1,454				2,142
Allowance for doubtful accounts			(561	)			(1,497	)
Total		$	43,654			$	47,584

(1)	In June 2008, the Company entered into a note arrangement with a customer.  The note provides that the customer will pay for a portion of services performed by the Company up to $2.5 million over a one-year term.  The customer’s outstanding balance bears an annual interest rate of 10%.

The components of other current assets are as follows (in thousands):

		March 31, 2009				December 31, 2008
Income tax receivable		$	1,612			$	1,558
Other current assets			912				1,599
Total		$	2,524			$	3,157

The components of other current liabilities are as follows (in thousands):

		March 31, 2009				December 31, 2008
Accrued bonus		$	2,979			$	5,644
Accrued subcontractor fees			1,924				1,625
Payroll related costs			1,423				1,495
Accrued reimbursable expenses			675				671
Accrued medical claims expense			664				654
Deferred revenues			359				1,575
Accrued settlement (2)			--				800
Other accrued expenses			1,986				1,875
Total		$	10,010			$	14,339

(2)

During the first quarter of 2009, the Company negotiated the termination of an ongoing fixed fee contract.  Management believed the negotiation would result in a probable loss that was reasonably estimatable and accrued its best estimate of the settlement amount as of December 31, 2008.  The Company settled with the customer in February 2009 for an amount approximating the accrual.

 

 

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Property and equipment consists of the following (in thousands):

		March 31, 2009				December 31, 2008
Computer hardware (useful life of 2 years)		$	6,008			$	6,206
Furniture and fixtures (useful life of 5 years)			1,424				1,406
Leasehold improvements (useful life of 5 years)			968				969
Software (useful life of 1 year)			986				1,216
Less: Accumulated depreciation			(7,461	)			(7,452	)
Total		$	1,925			$	2,345

 

7. Goodwill and Intangible Assets

 

Goodwill

During the later part of first quarter 2009, the Company’s stock price continued trending upward as compared to the price at December 31, 2008.  Based on the upward trend of the Company’s stock price and comparison of actual results to those projected for the first quarter 2009, the Company did not experience a significant adverse change in its business climate and therefore does not believe a triggering event occurred that would require a detailed test of goodwill for impairment as of an interim date.  Consequently, the first step of the goodwill impairment test was not performed during first quarter 2009.

Intangible Assets with Definite Lives

 

The following table presents a summary of the Company’s intangible assets that are subject to amortization (in thousands):

		March 31, 2009												December 31, 2008
		Gross Carrying Amounts				Accumulated Amortization				Net Carrying  Amounts				Gross Carrying  Amounts				Accumulated Amortization				Net Carrying Amounts
Customer relationships		$	18,013			$	(8,565	)		$	9,448			$	18,013			$	(7,693	)		$	10,320
Non-compete agreements			2,633				(2,225	)			408				2,633				(2,098	)			535
Internally developed software			1,411				(843	)			568				1,358				(757	)			601
Total		$	22,057			$	(11,633	)		$	10,424			$	22,004			$	(10,548	)		$	11,456

The estimated useful lives of identifiable intangible assets are as follows:

 

Customer relationships	3 - 8 years
Non-compete agreements	3 - 5 years
Internally developed software	3 - 5 years

8. Line of Credit

 

In May 2008, the Company entered into a Credit Agreement (the “Credit Agreement”) with SVB and KeyBank.  The Credit Agreement provides for revolving credit borrowings up to a maximum principal amount of $50 million, subject to a commitment increase of $25 million.  The Credit Agreement also allows for the issuance of letters of credit in the aggregate amount of up to $500,000 at any one time; outstanding letters of credit reduce the credit available for revolving credit borrowings.  Substantially all of the Company’s assets are pledged to secure the credit facility.

 

All outstanding amounts owed under the Credit Agreement become due and payable no later than the final maturity date of May 30, 2012.  Borrowings under the credit facility bear interest at the Company’s option of SVB’s prime rate (4.00% on March 31, 2009) plus a margin ranging from 0.00% to 0.50% or one-month LIBOR (0.50% on March 31, 2009) plus a margin ranging from 2.50% to 3.00%.  The additional margin amount is dependent on the amount of outstanding borrowings. As of March 31, 2009, the Company has $49.9 million of available borrowing capacity.  The Company will incur an annual commitment fee of 0.30% on the unused portion of the line of credit.

 

 

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The Company is required to comply with various financial covenants under the Credit Agreement. Specifically, the Company is required to maintain a ratio of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) plus stock compensation and minus income taxes paid and capital expenditures to interest expense and scheduled payments due for borrowings on a trailing three months basis annualized of less than 2.00 to 1.00 and a ratio of current maturities of long-term debt to EBITDA plus stock compensation and minus income taxes paid and capital expenditures of not more than 2.75 to 1.00.  As of March 31, 2009, the Company was in compliance with all covenants under the credit facility and the Company expects to be in compliance during the next twelve months.

 

9. Income Taxes

 

The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions.  The Internal Revenue Service (IRS) has completed examinations of the Company’s U.S. income tax returns for 2002, 2003 and 2004. The IRS has proposed no significant adjustments to any of the Company's tax positions.

 

The Company adopted the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (“FIN 48”), on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized no increases or decreases in the total amount of previously unrecognized tax benefits.  The Company had no unrecognized tax benefits as of March 31, 2009.

 

The Company’s effective tax rate was 39.6% for the three months ended March 31, 2009 compared to 40.9% for the three months ended March 31, 2008. The decrease in the effective rate is due to a decline in the Company’s projected federal tax rate for 2009 and decreased stock compensation expense related to incentive stock options. The difference between the Company’s federal statutory rate of 34% and effective tax rate relates primarily to state income taxes, net of the federal benefit, and permanent non-deductible items such as 50% of meals and entertainment expenses, partially offset by the tax benefits of certain dispositions of incentive stock options by holders.  The Company has deferred tax assets resulting from net operating losses and capital loss carry forwards of acquired companies amounting to approximately $2.1 million, for which a valuation allowance of $0.1 million is recorded. Additionally, the Company has deferred tax assets of $2.6 million related to stock compensation, reserves and accruals. At March 31, 2009, deferred tax assets net of the valuation allowance total $4.6 million and are offset by deferred tax liabilities of $4.1 million related to identifiable intangibles and cash to accrual adjustments from current and prior acquisitions.  All of the net operating losses and capital loss carry forwards relate to acquired entities, and as such are subject to annual limitations on usage under the “ownership change” provisions of the Internal Revenue Code.

 

10.  Recent Accounting Pronouncements

 

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”).  In February 2008, the FASB issued Staff Position (“FSP”) No. 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delayed the effective date of SFAS 157 for certain non-financial assets and liabilities, including fair value measurements under SFAS No. 141, Business Combinations (“SFAS 141”), and SFAS 142 of goodwill and other intangible assets, to fiscal years beginning after November 15, 2008.  SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value under SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

 

·	Level 1 – Quoted prices in active markets for identical assets or liabilities.

·

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

On January 1, 2009, the Company implemented the previously deferred provisions of SFAS 157 for non-financial assets and liabilities recorded at fair value, as required.

 

As of March 31, 2009, the Company did not hold any assets or liabilities that were required to be measured at fair value on a recurring basis and did not hold any non-financial assets or liabilities that were required to be re-measured at fair value, and therefore the adoption of the respective provisions of SFAS 157 did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

 

 

 

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Effective January 1, 2009, the Company adopted FSP No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”).  FSP 142-3 requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for SFAS 142’s entity-specific factors. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008.  The adoption of FSP 142-3 did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

 

Effective January 1, 2009, the Company adopted SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”), which is a revision of SFAS 141.  SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The revised statement requires, among other things, that transaction costs be expensed instead of recognized as purchase price. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. 

 

On April 1, 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP 141(R)-1”), to amend and clarify the initial recognition and measurement, subsequent measurement and accounting, and related disclosures arising from contingencies in a business combination under SFAS 141R. Under the new guidance, assets acquired and liabilities assumed in a business combination that arise from contingencies should be recognized at fair value on the acquisition date if fair value can be determined during the measurement period.  If fair value can not be determined, acquired contingencies should be accounted for using existing guidance.  FSP 141(R)-1 is effective January 1, 2009.  As such, the adoption applies to business combinations for which the acquisition date is on or after January 1, 2009.

 

 

 

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, concluded that these disclosure controls and procedures were effective.

There was no change in the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the three months ended March 31, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

Item 1A. Risk Factors

 

In evaluating all forward-looking statements, you should specifically consider various risk factors that may cause actual results to vary from those contained in the forward-looking statements. Our risk factors are included in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on March 6, 2009 and available at www.sec.gov. There have been no material changes to these risk factors since the filing of our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In 2008, the Company’s Board of Directors approved a share repurchase authority of up to $20.0 million.  The repurchase program expires June 30, 2010.  While it is not the Company’s intention, the program could be suspended or discontinued at any time, based on market, economic or business conditions.  The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price and other factors.

 

The Company had repurchased approximately $11.9 million of its outstanding common stock under the program as of March 31, 2009.

Period		Total Number of Shares Purchased				Average Price Paid Per Share (1)				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Beginning Balance as of December 31, 2008		1,848,300				4.97				1,848,300				$	10,821,786
January 1-31, 2009			200,000				4.47				200,000			$	9,927,481
February 1-28, 2009			200,000				4.11				200,000			$	9,105,299
March 1-31, 2009			225,000				4.63				225,000			$	8,063,791
Ending Balance as of March 31, 2009			2,473,300				4.83				2,473,300

(1)	Average price paid per share includes commission.