EX-99.1 2 c00351exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
(DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS LOGO)
News Release
FOR IMMEDIATE RELEASE
Investor Contact:
Margaret Boyce
312-255-5784
margaret.boyce@diamondconsultants.com
Media Contact:
David Moon
312-255-4560
david.moon@diamondconsultants.com
DIAMOND REPORTS FOURTH QUARTER AND FISCAL YEAR 2010 RESULTS
Increases Fourth Quarter Net Revenue 40% Year-over-Year and 11% Sequentially
Expects Net Revenue Growth of 20% to 25% in FY2011
Raises Quarterly Dividend to $0.09 per share
CHICAGO, May 6, 2010—Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI), a premier global management and technology consulting firm, today announced results for its fourth quarter and fiscal year 2010 (ended March 31, 2010).
  •  
Fourth quarter net revenue was $50.3 million compared with $45.5 million in the third quarter of fiscal year 2010 and $35.9 million in the fourth quarter of fiscal year 2009.
 
  •  
Fourth quarter diluted earnings from continuing operations was $0.26 per share, including a one-time income tax benefit from a deferred tax asset valuation allowance reversal in the United Kingdom (“UK”). Excluding the one-time tax benefit and using the 49% tax rate from last quarter, EPS would have been $0.11 per share. This compares to EPS of $0.08 per share in the third quarter of fiscal year 2010 and $0.02 per share, excluding the impact of the tender offer(1), in the fourth quarter of fiscal year 2009.
 
  •  
Fourth quarter free cash flow was $7.8 million compared with negative $1.0 million in the third quarter of fiscal year 2010 and $4.4 million in the fourth quarter of fiscal year 2009.
 
  •  
Fiscal year 2011 net revenue is expected to increase 20% to 25% and be in the range of $213 million to $221 million.

 

1

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
  (1)  
Information regarding the employee tender offer is available in the Schedule TO-I/A filed on March 10, 2009.
“We finished fiscal year 2010 with an outstanding fourth quarter, with net revenue, EPS and free cash flow all exceeding our previous guidance,” said Adam Gutstein, President and CEO of Diamond. “Our financial results improved throughout fiscal year 2010 and we expect that trend to continue. In addition, the Board of Directors approved a quarterly dividend of $0.09, a $0.02 increase over our previous quarterly dividend.”
Financial Review
The fourth quarter and full-year results from fiscal year 2009, presented in the following table and financial review, exclude the impact of the Tender Offer completed in the fourth quarter of fiscal year 2009. Management believes this presentation format better reflects recurring operations of the Company.
The Company’s fourth quarter and full year comparative financial results are summarized as follows:
Financial Results ($ in millions except Earnings per Share)
                                         
    Q4 FY09     Q3 FY10     Q4 FY10     FY09     FY10  
Net Revenue
   $ 35.9     $ 45.5     $ 50.3     $ 152.2     $ 177.2  
Income (Loss) from Continuing Operations before Income Tax (Pretax Income)
   $ (16.4 )   $ 4.4     $ 5.8     $ (13.0 )   $ 15.8  
Adjusted Income from Continuing Operations before Income Tax (Pretax Income)(1)
   $ 0.3     $ 4.4     $ 5.8     $ 3.7     $ 15.8  
Diluted Earnings (Loss) Per Share from Continuing Operations(2)
   $ (0.39 )   $ 0.08     $ 0.26     $ (0.34 )   $ 0.44  
Adjusted Diluted Earnings Per Share from Continuing Operations(1), (2)
     0.02     $ 0.08     $ 0.26     $ 0.06     $ 0.44  
Adjusted EBITDA(1)
   $ 0.7     $ 4.8     $ 6.2     $ 4.8     $ 17.4  
Free Cash Flow(3)
   $ 4.4     $ (1.0 )   $ 7.8     $ 13.0     $ 21.1  
     
(1)  
Excluding the one-time non-cash charge related to the fourth quarter fiscal year 2009 employee tender offer of $16.7 million ($10.5 million net of related $6.2 million tax benefit).
 
(2)  
Excluding the one-time tax benefit from an income tax valuation allowance reversal in the UK and using the 49% tax rate from the prior quarter, fourth quarter fiscal year 2010 EPS would have been $0.11 per share.
 
(3)  
Third quarter fiscal year 2010 free cash flow includes the payout of $14.8 million in variable compensation.

 

2

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
Fourth Quarter 2010
Net revenue for the fourth quarter ended March 31, 2010 was $50.3 million, an increase of 11% compared with $45.5 million in the third quarter of fiscal year 2010, and an increase of 40% compared with $35.9 million reported in the fourth quarter of the prior fiscal year.
Pretax income was $5.8 million in the fourth quarter of fiscal year 2010 compared with $4.4 million in the third quarter of fiscal year 2010 and $0.3 million in the fourth quarter of fiscal year 2009. Pretax margin increased to 11.5%, up from 9.6% in the previous quarter and 0.8% in the fourth quarter last year.
Income from continuing operations after taxes was $7.2 million, or $0.26 per diluted share, in the fourth quarter of fiscal year 2010. Excluding a $3.4 million income tax benefit from the reversal of a UK valuation allowance, and using the 49% effective tax rate from the prior quarter, income from continuing operations after taxes would have been $3.0 million or $0.11 per diluted share. Management believes the third quarter tax rate is more reflective of the recurring operations of the Company. This compares with income from continuing operations after taxes of $2.2 million, or $0.08 per diluted share, in the third quarter of fiscal year 2010, and $0.5 million, or $0.02 per diluted share, in the fourth quarter of fiscal year 2009.
Diluted weighted average shares outstanding was 27.8 million compared with 27.6 million in the third quarter of fiscal year 2010 and 26.1 million in the fourth quarter of fiscal year 2009.
During the fourth quarter of fiscal year 2010, the Company reversed a deferred tax asset valuation allowance in the UK resulting in a one-time income tax benefit of $3.4 million. In addition, the UK reported no income tax expense in the fourth quarter due to the utilization of prior net operating losses which had a valuation allowance. The reported effective tax rate was negative 25% in the fourth quarter compared with 49% in the third quarter of fiscal year 2010 and negative 56% in the fourth quarter of fiscal year 2009.
EBITDA (defined as income from continuing operations before interest, taxes, depreciation, and amortization) was $6.2 million in the fourth quarter of fiscal year 2010 compared with $4.8 million in the third quarter of fiscal year 2010.
During the fourth quarter, the Company received a favorable decision regarding its Spanish tax indemnification obligation. As a result, the remaining accrual and the partially offsetting escrow shares receivable were reversed, resulting in $70,000 in income from discontinued operations. As a result of this favorable decision, the Company does not anticipate any impact from discontinued operations going forward. The $4.1 million of restricted cash which was required by the Spanish authorities to pursue the appeal is expected to be released in the near future.
Free cash flow (cash flow provided by operating activities less capital expenditures) was $7.8 million in the fourth quarter of fiscal year 2010 compared with negative $1.0 million in the third quarter of fiscal year 2010 and $4.4 million in the fourth quarter of fiscal year 2009. The third quarter of fiscal year 2010 free cash flow included the payout of $14.8 million in variable compensation related to the Company’s annual bonus period ended September 30, 2010. The

 

3

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
Company ended the quarter with cash and cash equivalents of $55.8 million. This figure excludes the $4.1 million of restricted cash expected to be released in the near future.
Fiscal Year 2010
Fiscal year 2010 net revenue was $177.2 million, an increase of 16% compared to $152.2 million reported in fiscal year 2009.
Pretax income was $15.8 million, compared to $3.7 million in the prior fiscal year. Pretax margin was 8.9% in fiscal year 2010, compared with 2.5% in fiscal year 2009.
Income from continuing operations after taxes was $12.1 million, or $0.44 per diluted share. Excluding the one-time tax benefit from an income tax valuation allowance reversal in the UK, income from continuing operations after taxes would have been $8.7 million or $0.32 per diluted share. This compares with $1.7 million, or $0.06 per diluted share, in the prior fiscal year.
EBITDA (defined as income from continuing operations before interest, taxes, depreciation, and amortization) was $17.4 million in fiscal year 2010, compared with negative $11.9 million last fiscal year. Fiscal year 2009 includes a one-time charge of $16.7 million related to the employee Tender Offer. Adjusted for the Tender Offer, EBITDA for fiscal year 2009 would have been $4.8 million.
During fiscal year 2010, the Company repurchased 0.8 million shares at an average price of $6.05 per share for a total payout of $4.9 million. The Company generated free cash flow (cash flow provided by operating activities less capital expenditures) of $21.1 million compared with $13.0 million last fiscal year.
Business Metrics
The Company’s business metrics are summarized as follows:
Business Metrics
                                         
    Q4 FY09     Q3 FY10     Q4 FY10     FY09     FY10  
Total Clients
     62       56       66       99       88  
Top 5 Client Concentration (% of Net Revenue)
     34 %     40 %     42 %     36 %     37 %
New Clients Added
     17       7       16       43       27  
Revenue Generated from New Clients
     9 %     3 %     4 %     13 %     8 %
Client-Serving Professionals (Quarter End)
     465       496       527       465       527  
Revenue per Professional (Annualized, $ in thousands)
   $ 306     $ 370     $ 393     $ 315     $ 367  
Chargeability
     69 %     71 %     77 %     63 %     74 %
Voluntary Attrition (Annualized)
     5 %     11 %     14 %     12 %     11 %
Total Headcount (Quarter End)
     577       610       643       577       643  
Revenue by Industry
                                         
    Q4 FY09     Q3 FY10     Q4 FY10     FY09     FY10  
Financial Services
     30 %     29 %     32 %     30 %     31 %
Insurance
     26 %     27 %     25 %     24 %     26 %
Healthcare
     19 %     23 %     20 %     19 %     21 %
Enterprise*
     21 %     18 %     19 %     23 %     18 %
Public Sector
     4 %     3 %     4 %     4 %     4 %
     
*  
The enterprise vertical includes telecommunications, consumer packaged goods, travel and entertainment, retail and distribution, and manufacturing and logistics.

 

4

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
Business Outlook and Guidance
“Reflecting the strong demand for our services and the stability of our pipeline, we are returning to the practice of providing annual guidance,” said Gutstein. “In fiscal year 2011, we expect net revenue to increase 20% to 25%, pretax income to increase at least 65%, and free cash flow to be greater than $20 million.”
First Quarter 2011
The Company expects first quarter net revenue to be in the range of $51 to $53 million, pretax income of $6.0 to $6.6 million and GAAP EPS to be $0.12 to $0.13 per diluted share. The Company expects stock based compensation expense to be $1.3 million, reported tax expense to be in the range of $2.7 to $3.0 million, and the weighted average share count to be approximately 28 million. Free cash flow is expected to be $7 to $9 million.
Fiscal Year 2011
For the full fiscal year of 2011, the Company expects net revenue to be in the range of $213 to $221 million, up 20% to 25% year-over-year; pretax income of $27 to $29 million and GAAP EPS in the range of $0.53 to $0.58. The Company expects stock based compensation expense to be $5.3 million, reported tax expense to be in the range of $12 to $13 million, and the weighted average share count to be approximately 28 million. Free cash flow is expected to be greater than $20 million.
Quarterly Dividend
The Company also announced today that its Board of Directors declared a quarterly dividend of $0.09 per share of common stock, payable on June 11, 2010 to shareholders of record at the close of business on June 1, 2010. This quarterly dividend of $0.09 is a $0.02 increase over the previous quarterly dividend of $0.07 per share.

 

5

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
Conference Call
Diamond will host a conference call today, May 6, 2010, at 8:00 am CT to discuss the results of the quarter and fiscal year 2010. The dial-in number for the conference call is 1-800-768-2950 for North American callers and 212-231-2900 for international callers. The replay will be available until May 13, 2010 and can be accessed by calling 402-977-9140, then entering passcode number 21465325. The call will be broadcast live and archived on Diamond’s web site at www.diamondconsultants.com
About Diamond
Clients engage Diamond Management & Technology Consultants, Inc. (NASDAQ: DTPI) to help their companies grow, improve margins, and increase the productivity of their investments. Working together to design and execute business strategies that capitalize on changing market forces and technology, Diamond’s consultants are experts in helping clients attract and retain customers, increase the value of their information, and plan and execute projects that turn strategy into measurable results.
Diamond’s capabilities are rooted in deep strategy, technology, operations, and industry experience. The firm’s approach to client service is based on objectivity, collaboration, and an unwavering commitment to its clients’ best interests. Headquartered in Chicago, Diamond has offices in New York, Washington, D.C, Hartford, London, and Mumbai. To learn more, visit: www.diamondconsultants.com.
Forward-Looking Statements
Statements in this press release that do not involve strictly historical or factual matters are forward-looking statements within the meaning of the “safe harbor” provisions of the federal securities laws. Forward-looking statements involve estimates, projections, assumptions, risks, and uncertainties and speak only as of the date of this release based on information available to the Company as of the date of this release, and the Company assumes no obligation to update any forward-looking statements. Actual results may differ materially from the results projected in any forward-looking statement. For a discussion of some of the risks and uncertainties that could cause actual results to differ materially, please refer to the risks and uncertainties identified in our filings with the SEC.
Non-GAAP Financial Measures
The press release includes non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons management believes the non-GAAP measures are useful to investors, and reconciliations of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), please see the section entitled “Unaudited Reconciliations of GAAP to Non-GAAP Financial Measures.”

 

6

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                 
    For the Three Months     For the Twelve Months  
    Ended March 31,     Ended March 31,  
    2009     2010     2009     2010  
    (Unaudited)     (Unaudited)           (Unaudited)  
Revenue:
                                
Net revenue
   $ 35,887     $ 50,308     $ 152,166     $ 177,245  
Reimbursable expenses
     6,114       9,233       22,812       32,699  
 
                        
Total revenue
     42,001       59,541       174,978       209,944  
 
                                
Project personnel expenses:
                                
Project personnel costs before reimbursable expenses
     26,645       35,475       113,703       126,926  
Reimbursable expenses
     6,114       9,233       22,812       32,699  
Stock-based compensation acceleration — tender offer
     14,290       —       14,290       —  
 
                        
Total project personnel expenses
     47,049       44,708       150,805       159,625  
 
                                
 
                        
Gross margin
     (5,048 )     14,833       24,173       50,319  
 
                        
 
                                
Other operating expenses:
                                
Professional development and recruiting
     1,032       1,484       6,716       5,580  
Marketing and sales
     1,057       1,025       3,103       3,288  
Management and administrative support
     6,889       6,686       25,846       25,798  
Stock based compensation acceleration — tender offer
     2,402       —       2,402       —  
Restructuring recovery
     —       —       (284 )     —  
 
                        
Total other operating expenses
     11,380       9,195       37,783       34,666  
 
                        
 
                                
Income (loss) from operations
     (16,428 )     5,638       (13,610 )     15,653  
 
                                
Other income, net
     27       157       656       124  
 
                        
 
                                
Income (loss) from continuing operations before income taxes
     (16,401 )     5,795       (12,954 )     15,777  
 
                                
Income tax expense (benefit)
     (6,348 )     (1,426 )     (4,156 )     3,666  
 
                        
 
                                
Income (loss) from continuing operations after income taxes
     (10,053 )     7,221       (8,798 )     12,111  
 
Discontinued operations
                                
Income from discontinued operations, net of income taxes
     400       70       400       262  
 
                        
Discontinued operations, net of income taxes
     400       70       400       262  
 
                                
Net income (loss)
   $ (9,653 )   $ 7,291     $ (8,398 )   $ 12,373  
 
                        
 
Basic income (loss) per share of common stock:
                                
Income (loss) from continuing operations
   $ (0.39 )   $ 0.27     $ (0.34 )   $ 0.45  
Income from discontinued operations
     0.02       0.00       0.02       0.01  
 
                        
Net income (loss)
   $ (0.37 )   $ 0.27     $ (0.32 )   $ 0.46  
 
                        
 
                                
Diluted income (loss) per share of common stock:
                                
Income (loss) from continuing operations
   $ (0.39 )   $ 0.26     $ (0.34 )   $ 0.44  
Income from discontinued operations
     0.02       0.00       0.02       0.01  
 
                        
Net income (loss)
   $ (0.37 )   $ 0.26     $ (0.32 )   $ 0.45  
 
                        
 
                                
Shares used in computing basic income (loss) per share
     26,110       27,050       26,209       27,139  
 
                                
Shares used in computing diluted income (loss) per share
     26,110       27,848       26,209       27,632  
Excluding the expense associated with the tender offer, the following amounts of stock-based compensation expense (“SBC”) are included in each of the respective expense categories reported above:
                                 
    For the Three Months     For the Twelve Months  
    Ended March 31,     Ended March 31,  
    2009     2010     2009     2010  
    (Unaudited)     (Unaudited)           (Unaudited)  
 
                                
Project personnel costs before reimbursable expenses
   $ 2,585     $ 862     $ 11,687     $ 3,411  
Professional development and recruiting
     30       9       110       42  
Marketing and sales
     53       38       265       413  
Management and administrative support
     1,039       306       2,861       1,495  
 
                        
Total SBC
   $ 3,707     $ 1,215     $ 14,923     $ 5,361  
 
                        

 

7

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
                 
    March 31,     March 31,  
    2009     2010  
          (Unaudited)  
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 46,112     $ 55,834  
Restricted cash
     —       4,104  
Accounts receivable, net of allowance of $566 and $477 as of March 31, 2009 and 2010, respectively
     15,872       22,947  
Deferred tax asset — current portion
     6,747       6,888  
Prepaid expenses
     1,323       1,594  
Other current assets
     1,479       1,472  
 
            
 
                
Total current assets
     71,533       92,839  
 
                
Restricted cash
     4,099       —  
Computers, equipment, leasehold improvements and software, net
     4,280       3,667  
Deferred tax asset — long-term portion
     7,757       7,911  
Other assets
     1,480       1,584  
 
            
 
                
Total assets
   $ 89,149     $ 106,001  
 
            
 
                
Liabilities and Stockholders’ Equity
                
 
                
Current liabilities:
                
Accounts payable
   $ 4,595     $ 5,613  
Accrued compensation
     4,269       17,741  
Deferred revenue
     722       1,358  
Accrued benefits
     2,481       2,355  
Income taxes payable — current portion
     1,493       2,752  
Other accrued liabilities
     2,901       4,274  
 
            
 
                
Total current liabilities
     16,461       34,093  
 
                
Deferred rent — long term portion
     1,593       1,613  
Accrued income tax liabilities — long-term portion
     687       585  
Net tax indemnification obligation
     368       —  
 
            
 
                
Total liabilities
     19,109       36,291  
 
            
Commitments and contingencies
                
 
                
Stockholders’ equity:
                
Common Stock, $0.001 par value, 300,000 and 100,000 shares authorized, 27,202 and 27,252 shares issued as of March 31, 2009 and 2010, respectively
     516,937       511,650  
Accumulated other comprehensive loss
     (4,636 )     (4,423 )
Accumulated deficit
     (442,261 )     (437,517 )
 
            
 
                
Total stockholders’ equity
     70,040       69,710  
 
            
 
                
Total liabilities and stockholders’ equity
   $ 89,149     $ 106,001  
 
            

 

8

 

Diamond Reports Fourth Quarter and Full Year 2010 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(In thousands)
                                 
    For the Three Months     For the Year  
    Ended March 31,     Ended March 31,  
    2009     2010     2009     2010  
    (Unaudited)     (Unaudited)           (Unaudited)  
Cash flows from operating activities:
                                
Net income (loss)
   $ (9,653 )   $ 7,291     $ (8,398 )   $ 12,373  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                                
Restructuring recovery
     —       —       (284 )     —  
Depreciation and amortization
     462       410       1,801       1,639  
Stock-based compensation
     20,399       1,216       31,615       5,361  
Deferred income taxes
     (7,148 )     (5,481 )     (5,783 )     (6,385 )
Excess tax benefits from employee stock plans
     (45 )     (40 )     (307 )     (123 )
Changes in assets and liabilities:
                                
Accounts receivable
     (2,032 )     (7,138 )     (3,332 )     (6,978 )
Prepaid expenses and other
     506       218       216       (103 )
Accounts payable
     1,461       1,349       1,730       1,300  
Accrued compensation
     500       9,462       (344 )     13,526  
Restructuring accrual
     —       —       (55 )     —  
Deferred revenue
     (376 )     (389 )     (369 )     655  
Income taxes payable
     (146 )     (192 )     (2,244 )     706  
Other assets and liabilities
     795       1,384       354       433  
 
                        
 
                                
Net cash provided by operating activities
     4,723       8,090       14,600       22,404  
 
                        
 
                                
Cash flows from investing activities:
                                
Decrease (increase) in restricted cash
     (3 )     —       3,082       (5 )
Distribution from available-for-sale investments
     —       —       289       —  
Capital expenditures, net
     (345 )     (304 )     (1,642 )     (1,272 )
 
                        
 
                                
Net cash provided by (used in) investing activities
     (348 )     (304 )     1,729       (1,277 )
 
                        
 
                                
Cash flows from financing activities:
                                
Stock option and employee stock purchase plan proceeds
     477       382       2,052       1,585  
Payment of employee withholding taxes from equity transactions
     (1,178 )     (129 )     (2,675 )     (647 )
Common stock cash dividends
     —       (1,905 )     (9,032 )     (7,629 )
Excess tax benefits from employee stock plans
     45       40       307       123  
Purchase of treasury stock
     —       —       (13,145 )     (4,872 )
 
                        
 
                                
Net cash used in financing activities
     (656 )     (1,612 )     (22,493 )     (11,440 )
 
                        
 
                                
Effect of exchange rate changes on cash
     (44 )     (186 )     (991 )     35  
 
                        
 
                                
Net increase (decrease) in cash and cash equivalents
     3,675       5,988       (7,155 )     9,722  
 
                                
Cash and cash equivalents at beginning of period
     42,437       49,846       53,267       46,112  
 
                        
 
                                
Cash and cash equivalents at end of period
   $ 46,112     $ 55,834     $ 46,112     $ 55,834  
 
                        
     
(1)  
The Condensed Consolidated Statements of Cash Flows is prepared on a combined basis and the reported results include both continuing and discontinued operations for the three month and twelve month periods ended March 31, 2009 and 2010.

 

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Diamond Reports Fourth Quarter and Full Year 2010 Results
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
UNAUDITED RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands)
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES TO EBITDA & ADJUSTED EBITDA:
                                         
    For the Three Months     For the Three Months     For the Year  
    Ended December 31,     Ended March 31,     Ended March 31,  
    2009     2009     2010     2009     2010  
    (Unaudited)     (Unaudited)     (Unaudited)           (Unaudited)  
 
                                        
Income (loss) from continuing operations after income taxes
   $ 2,215     $ (10,053 )   $ 7,221     $ (8,798 )   $ 12,111  
Depreciation and amortization expense
     388       462       410       1,801       1,639  
Interest income, net
     (14 )     (97 )     (5 )     (784 )     (50 )
Income tax expense (benefit)
     2,161       (6,348 )     (1,426 )     (4,156 )     3,666  
 
                              
EBITDA (1)
   $ 4,750     $ (16,036 )   $ 6,200     $ (11,937 )   $ 17,366  
 
                              
Fiscal Year 2009 Tender Offer expense
     —       16,692       —       16,692       —  
 
                              
Adjusted EBITDA (2)
   $ 4,750     $ 656     $ 6,200     $ 4,755     $ 17,366  
 
                              
     
(1)  
EBITDA, defined as income from continuing operations before interest, taxes, depreciation and amortization, is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP). Management believes EBITDA is a useful indicator of the Company’s financial and operating performance and its ability to generate cash flows from operations that are available for share repurchases and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.
 
(2)  
Adjusted EBITDA represents EBITDA, as defined above, excluding the fiscal year 2009 Tender Offer expense.
RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (3):
                                         
    For the Three Months     For the Three Months     For the Year  
    Ended December 31,     Ended March 31,     Ended March 31,  
    2010     2009     2010     2009     2010  
    (Unaudited)     (Unaudited)     (Unaudited)           (Unaudited)  
Net cash provided by (used in) operating activities
   $ (698 )   $ 4,723     $ 8,090     $ 14,600     $ 22,404  
Capital expenditures
     (308 )     (345 )     (304 )     (1,642 )     (1,272 )
 
                              
Free cash flow
   $ (1,006 )   $ 4,378     $ 7,786     $ 12,958     $ 21,132  
 
                              
     
(3)  
Free cash flow, defined as net cash provided by operating activities less capital expenditures, is a non-GAAP term. Management believes that by providing more visibility on free cash flow and reconciling to net cash provided by operating activities, the Company provides a consistent metric from which the quality of its business may be monitored. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.

 

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