The agreements entered into in connection with a project, whether time and materials based or fixed-fee or capped-fee based, typically allow the Company’s clients to terminate early due to breach or for convenience with 30 days’ notice. In the event of termination, the client is contractually required to pay for all time, materials and expenses incurred by the Company through the effective date of the termination. In addition, from time to time the Company enters into agreements with clients that limit the Company’s right to enter into business relationships with specific competitors of that client for a specific time period. These provisions typically prohibit the Company from performing a defined range of services that it might otherwise be willing to perform for potential clients. These provisions are generally limited to six to twelve months and usually apply only to specific employees or the specific project team.
Under SFAS No. 123, compensation cost for the Company’s stock-based compensation plans would be determined based on the fair value at the grant dates for awards under those plans. The assumptions underlying the fair value calculations of the stock option grants are presented in Note 11. Had the Company adopted SFAS No. 123 in accounting for its stock option plans, the Company’s consolidated net loss and net loss per share for the years ended December 31, 2004, January 2, 2004, January 3, 2003 would have been adjusted to the pro forma amounts indicated as follows (in thousands, expect per share data):
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Nature of Business and Significant Accounting Policies (continued)
Included in the pro forma net loss for the year ended January 3, 2003 is $10.6 million of expense related to the reversal of pro forma accumulated deferred tax benefits established in previous years to provide a pro forma valuation allowance on all deferred tax assets.
Income Taxes
The Company records income taxes using the liability method. Under this method, the Company records deferred taxes based on temporary taxable and deductible differences between the tax bases of the Company’s assets and liabilities and their financial reporting bases. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. With regard to restricted stock or restricted stock units issued to employees, the calculation includes only the vested portion of such stock.
Net income (loss) per share assuming dilution is computed by dividing the net income (loss) by the weighted average number of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the period.
Potentially dilutive shares were excluded from the diluted loss per share calculation for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 because their effects would have been anti-dilutive to the loss incurred by the Company. Therefore, the amounts reported for basic and diluted net loss per share were the same for those years. Potentially dilutive shares which were not included in the diluted loss per share calculation for the years ending December 31, 2004, January 2, 2004 and January 3, 2003 were 3,601,100 shares, 1,806,963 shares and 333,644 shares, respectively, of unvested restricted stock issued to employees and 667,728 shares, 289,647 shares and 310,478 shares, respectively, of common stock issuable upon the exercise of stock options and warrants following the treasury stock method.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, marketable investments, accounts receivable and unbilled revenue, accounts payable, and accrued expenses and other liabilities. At December 31, 2004, and January 2, 2004, the fair value of these instruments approximated their carrying value.
Concentration of Credit Risk
The Company provides services primarily to Global 2000 companies and other sophisticated buyers of business consulting and IT services. The Company performs ongoing credit evaluations of its major customers and maintains reserves for potential credit losses. In fiscal year 2004, one customer had revenues greater than 5% of total revenues, accounting for approximately 7% of total revenues. In fiscal year 2003, three customers had revenues greater than 5% of total revenues, which, in the aggregate, accounted for approximately 20% of total revenues. In fiscal year 2002, three customers had revenues greater than 5% of total revenues, which, in the aggregate, accounted for approximately 36% of total revenues.
Management’s Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Actual results could differ from those estimates.
-34-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Nature of Business and Significant Accounting Policies (continued)
Other Comprehensive Income (Loss)
Other comprehensive income consists of unrealized gains and losses on available-for-sale securities, and cumulative foreign currency translation adjustments.
Translation of Non-U.S. Currency Amounts
The net assets and operations of entities outside of the United States are translated into U.S. dollars. Assets and liabilities are translated at year-end exchange rates and income and expense items are translated at average exchange rates prevailing during the year. Translation adjustments are included in accumulated other comprehensive income (loss). Gains and losses arising from intercompany foreign currency transactions that are of a long-term-investment nature are reported in the same manner as translation adjustments.
Segment Reporting
The Company engages in business activities in one operating segment, which provides business and technology consulting services.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued SFAS 123 (revised 2004),Share-Based Payment, (“SFAS 123R”). SFAS 123R addresses the accounting for share-based payments to employees, including grants of employee stock options. Under the new standard, companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance with APB Opinion No. 25,Accounting for Stock Issued to Employees. Instead, companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated statement of income. SFAS 123R will be effective for periods beginning after June 15, 2005 and allows, but does not require, companies to restate the full fiscal year of 2005 to reflect the impact of expensing share-based payments under SFAS 123R. The Company has not yet determined which fair-value method and transitional provision it will follow, or if the adoption of SFAS 123R will have a significant impact on its results of operations.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform current year presentation, including reflecting the gross purchases and sales of investment grade variable rate securities as investing activities rather than as a component of cash and equivalents. This reclassification did not affect previously reported cash flows from operations.
| 2. | | Acquisitions and Investing Activities |
During the three year period ended December 31, 2004, the Company acquired four businesses providing information technology services (collectively, the “Acquired Entities”) in separate transactions. One was completed in 2004, one was completed in 2003, and two were completed in 2002. Aggregate consideration for the Acquired Entities was $11.4 million. This amount has been allocated, on an entity-by-entity basis, to the assets acquired and liabilities assumed based on their respective fair values on the dates of acquisition.
The components of the purchase price allocation for the Acquired Entities, contingent consideration earned for previous acquisitions, and fees and expenses incurred are as follows (in thousands):
| | | | 2004
| | 2003
| | 2002
|
|---|
| Fair value of net assets (excluding cash) acquired | | | | $ | 1,121 | | | $ | 1,264 | | | $ | 851 | |
| Goodwill | | | | | 7,066 | | | | — | | | | — | |
| Intangible assets | | | | | 1,943 | | | | 2,287 | | | | — | |
| Deferred payment | | | | | (2,920 | ) | | | — | | | | — | |
| Accrued earn-out | | | | | — | | | | (250 | ) | | | — | |
| Cash used in acquisitions of businesses, net of cash acquired | | | | $ | 7,210 | | | $ | 3,301 | | | $ | 851 | |
-35-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Acquisitions and Investing Activities (continued)
These acquisitions have been accounted for using the purchase method of accounting. Accordingly, the results of the acquisitions are included in the Company’s consolidated results of operations from the respective dates of acquisition. For each acquisition, the excess of the purchase price including any contingent consideration over the estimated fair value of the net identifiable assets acquired has been recorded as goodwill and/or intangible assets. The pro forma impact of the acquisitions completed in 2004, 2003 and 2002 was not significant to the results of the Company’s consolidated operations for the years ended December 31, 2004, January 2, 2004 and January 3, 2003.
In May 2004, the Company purchased the US and India operations of EZCommerce Global Solutions, Inc., a business specializing in the dual-shore implementation of primarily SAP and, to a lesser extent, Oracle software. The purchase price for this acquisition was $9.0 million in cash, which included $3.0 million of deferred payments payable in equal installments on the first and second anniversary of the purchase. In addition, approximately $3.0 million of contingent consideration will be payable over the next two years if certain earnings goals are achieved. The excess of the purchase price of the acquisition over the estimated fair value of the net identifiable assets acquired has been recorded as $1.4 million of intangible assets and $6.5 million of goodwill. The intangible assets are being amortized over periods ranging from 8 months to 4 years.
In July 2003, the Company purchased the assets of Beacon Analytics, Inc., a business performance management consulting company focusing on the implementation of Hyperion software. The purchase price for this acquisition was $4.0 million in cash and approximately $2.5 million of contingent cash consideration due over the next three years if certain earnings goals are achieved. The excess of the purchase price of the acquisition over the estimated fair value of the net identifiable assets which totaled $2.0 million has been recorded as intangible assets and are being amortized over periods ranging from 6 months to 3 years. During 2004, the Company paid $1.1 million for earned contingent consideration related to the purchase of Beacon. Of this amount, $566 thousand was recorded as intangible assets and $528 thousand as goodwill.
The Company includes its acquired intangible assets with definitive lives in other assets in the accompanying consolidated balance sheets. As of December 31, 2004 and January 2, 2004, intangible assets totaled approximately $2.3 million and $2.4 million, respectively, net of accumulated amortization of $3.1 million and $1.1 million, respectively. Acquired intangible assets with definite lives are amortized over periods ranging from 6 months to 4 years. Amortization expense for such intangible assets was $2.0 million, $893 thousand and $208 thousand for the fiscal years ended December 31, 2004, January 2, 2004 and January 3, 2003, respectively. As of December 31, 2004, the Company estimates remaining amortization expense to be approximately $1.6 million, $645 thousand and $90 thousand in fiscal years 2005, 2006 and 2007, respectively.
| 3. | | Accounts Receivable and Unbilled Revenue, Net |
Accounts receivable and unbilled revenues, net consists of the following (in thousands):
| | | | December 31,
2004
| | January 2,
2004
|
|---|
| Accounts receivable | | | | $ | 24,932 | | | $ | 18,632 | |
| Unbilled revenue | | | | | 6,060 | | | | 8,002 | |
| Allowance for doubtful accounts | | | | | (2,109 | ) | | | (1,757 | ) |
| | | | | $ | 28,883 | | | $ | 24,877 | |
-36-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| 4. | | Marketable investments |
At December 31, 2004 and January 2, 2004, all of the Company’s marketable securities were U.S. Government Agencies and were classified as available for sale. Marketable investments are carried on the balance sheet at their fair value.
The following tables summarize the Company’s marketable investments (in thousands):
| | | | Amortized
Cost
| | Gross
Unrealized
Gains
| | Gross
Unrealized
Losses
| | Market
Value
|
|---|
| 2004 | | | | | | | | | | | | | | | | | | |
| U.S. Government Agencies | | | | $ | 10,000 | | | $ | — | | | $ | (98 | ) | | $ | 9,902 | |
| 2003 | | | | | | | | | | | | | | | | | | |
| U.S. Government Agencies | | | | $ | 10,000 | | | $ | — | | | $ | — | | | $ | 10,000 | |
Contractual maturities of marketable investments at December 31, 2004 are as follows (in thousands):
| | | | Amortized
Cost
| | Market
Value
|
|---|
| Less than one year | | | | $ | — | | | $ | — | |
| Due in 1–2 years | | | | | 10,000 | | | | 9,902 | |
| Due in 3–5 years | | | | | — | | | | — | |
| Due after 5 years | | | | | — | | | | — | |
| | | | | $ | 10,000 | | | $ | 9,902 | |
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations. Gross realized gains and losses on the sale of securities were not material to the Company’s consolidated results of operations for the years ended December 31, 2004, January 2, 2004 and January 3, 2003.
| 5. | | Property and Equipment |
Property and equipment consists of the following (in thousands):
| | | | December 31,
2004
| | January 2,
2004
|
|---|
| Equipment | | | | $ | 8,997 | | | $ | 12,736 | |
| Furniture and fixtures | | | | | 149 | | | | 385 | |
| Software | | | | | 5,478 | | | | 6,892 | |
| Leasehold improvements | | | | | 3,310 | | | | 5,123 | |
| | | | | | 17,934 | | | | 25,136 | |
| Less accumulated depreciation | | | | | (10,366 | ) | | | (16,422 | ) |
| | | | | $ | 7,568 | | | $ | 8,714 | |
During fiscal years 2004 and 2002, write-offs of $1.2 million and $5.0 million for leasehold improvements and other assets were recorded as part of the restructuring costs.
Depreciation expense for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 was $3.2 million, $4.1 million and $5.1 million, respectively. Of these amounts, $1.0 million was included in the loss from discontinued operations in the consolidated statements of operations for the year ended January 3, 2003.
-37-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| 6. | | Accrued Expenses and Other Liabilities |
Accrued expenses and other liabilities consist of the following (in thousands):
| | | | December 31,
2004
| | January 2,
2004
|
|---|
| Accrued compensation and benefits | | | | $ | 4,418 | | | $ | 5,364 | |
| Accrued restructuring related expenses | | | | | 2,021 | | | | 4,835 | |
| Deferred revenue | | | | | 4,680 | | | | 4,850 | |
| Other accrued expenses | | | | | 5,355 | | | | 5,910 | |
| Acquisition related deferred payment | | | | | 1,436 | | | | — | |
| Current accrued expenses and other liabilities | | | | | 17,910 | | | | 20,959 | |
| Accrued restructuring related expenses — non-current | | | | | 6,023 | | | | 5,236 | |
| Acquisition related deferred payment — non-current | | | | | 1,484 | | | | — | |
| Non-current accrued expenses and other liabilities | | | | | 7,507 | | | | 5,236 | |
| Total accrued expenses and other liabilities | | | | $ | 25,417 | | | $ | 26,195 | |
The Company has outstanding letters of credit of $2.6 million to secure our obligations on various operating leases. The Company has deposited $3.0 million at December 31, 2004 and January 2, 2004, with a financial institution as collateral for these letters of credit and has classified this deposit as restricted cash on the accompanying consolidated balance sheets.
The Company has operating lease agreements for its premises that expire on various dates through 2015. Rent expense for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 was $2.0 million, $2.2 million and $4.9 million, respectively.
Future minimum lease commitments under non-cancelable operating leases for premises having a remaining term in excess of one year at December 31, 2004 are as follows (in thousands):
| 2005 | | | | $ | 5,240 | |
| 2006 | | | | | 5,246 | |
| 2007 | | | | | 4,804 | |
| 2008 | | | | | 4,573 | |
| 2009 | | | | | 4,523 | |
| Thereafter | | | | | 14,558 | |
| | | | | | 38,944 | |
| Less: sublease income | | | | | 8,581 | |
| Total minimum lease payments, less sublease income | | | | $ | 30,363 | |
-38-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The components of the tax expense (benefit) for income taxes are as follows (in thousands):
| | | | Year Ended
| |
|---|
| | | | December 31,
2004
| | January 2,
2004
| | January 3,
2003
|
|---|
| Current tax expense (benefit) | | | | | | | | | | | | | | |
| Federal | | | | $ | — | | | $ | — | | | $ | (8,469 | ) |
| State | | | | | 231 | | | | 262 | | | | — | |
| Foreign | | | | | 93 | | | | 88 | | | | — | |
| | | | | | 324 | | | | 350 | | | | (8,469 | ) |
| Deferred tax expense | | | | | | | | | | | | | | |
| Federal | | | | | — | | | | — | | | | 4,697 | |
| State | | | | | — | | | | — | | | | — | |
| Foreign | | | | | — | | | | — | | | | 264 | |
| | | | | | — | | | | — | | | | 4,961 | |
| Income taxes | | | | $ | 324 | | | $ | 350 | | | $ | (3,508 | ) |
A reconciliation of the federal statutory tax rate with the effective tax rate is as follows:
| | | | Year Ended
| |
|---|
| | | | December 31,
2004
| | January 2,
2004
| | January 3,
2003
|
|---|
| U.S. statutory income tax (benefit) rate | | | | | (35.0 | ) % | | | (35.0 | ) % | | | (35.0 | ) % |
| State income taxes, net of Federal income tax benefit | | | | | 77.7 | | | | 3.8 | | | | — | |
| Loss on investment in subsidiary | | | | | 2,573.4 | | | | (129.6 | ) | | | (85.2 | ) |
| Valuation allowance | | | | | (2,559.2 | ) | | | 166.4 | | | | 87.2 | |
| Impairment of goodwill | | | | | — | | | | — | | | | 21.6 | |
| Other, net | | | | | 110.7 | | | | 2.2 | | | | 0.6 | |
| Effective rate | | | | | 167.6 | % | | | 7.8 | % | | | (10.8 | ) % |
The components of the net deferred income tax asset are as follows (in thousands):
| | | | December 31,
2004
| | January 2,
2004
|
|---|
| Deferred income tax assets: | | | | | | | | | | |
| Purchased research and development | | | | $ | 817 | | | $ | 921 | |
| Allowance for doubtful accounts | | | | | 833 | | | | 615 | |
| Net operating loss and tax credits carryforward | | | | | 30,581 | | | | 36,121 | |
| Accrued expenses and other liabilities | | | | | 6,373 | | | | 5,906 | |
| | | | | | 38,604 | | | | 43,563 | |
| Valuation allowance | | | | | (35,360 | ) | | | (40,818 | ) |
| | | | | | 3,244 | | | | 2,745 | |
| Deferred income tax liabilities: | | | | | | | | | | |
| Depreciation and amortization | | | | | (2,060 | ) | | | (1,627 | ) |
| Other items | | | | | (1,184 | ) | | | (1,118 | ) |
| | | | | | (3,244 | ) | | | (2,745 | ) |
| Net deferred income tax asset | | | | $ | — | | | $ | — | |
-39-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Income Taxes (continued)
At December 31, 2004 and January 2, 2004, the Company had $74.0 million and $88.0 million, respectively, of U.S. federal net operating loss carryforwards available for tax purposes, most of which expire in 2022 if not utilized.
In 2002, the Company discontinued its interactive marketing business which was acquired with THINK New Ideas. The Company claimed a worthless stock deduction for its investment in THINK New Ideas in its 2002 tax return as a result of the discontinuance of THINK New Ideas. The Company voluntarily requested that the Internal Revenue Service (“IRS”) review this position on an expedited basis. On August 5, 2004, the Company reached an agreement with the IRS representing the final step in the review process. Pursuant to the agreement, the Company and the IRS agreed that the Company was entitled to a worthless stock deduction of $77.3 million on the Company’s 2002 tax return.
The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. At December 31, 2004 and January 2, 2004, the Company had established a valuation allowance of $35.4 million and $40.8 million, respectively, to reduce deferred income tax assets primarily related to net operating loss carryforwards.
Securities Purchase Agreement
In March 1999, THINK New Ideas entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Capital Ventures International and Marshall Capital Management, Inc. (the “Purchasers”) whereby the Purchasers agreed to purchase shares of common stock and warrants to acquire shares of common stock. Pursuant to the Securities Purchase Agreement, on March 5, 1999, THINK New Ideas issued, for proceeds of $6 million, 609,799 shares of its common stock at $9.84 per share. In connection with this agreement, at any time prior to March 5, 2000 the Purchasers also had the right but not the obligation to purchase 371,353 additional shares of common stock at $13.46 per share, together with warrants for 1/5 share for each additional share purchased, exercisable at an exercise price of 150% of the market price on the date the related additional shares were purchased. Pursuant to the Securities Purchase Agreement, the additional shares were sold in March 2000 for $5.0 million and warrants to acquire 74,270 shares of common stock, exercisable for a five-year term, were issued at an exercise price of $36.94. All of these warrants were outstanding as of December 31, 2004.
Stock Plans
Effective July 1, 1998, the Company adopted an Employee Stock Purchase Plan to provide substantially all employees who have completed three months of service as of the beginning of an offering period an opportunity to purchase shares of its common stock through payroll deductions. Purchases on any one grant are limited to 10% of eligible compensation. Participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares on the first trading day of the six-month offering period or on the last trading day of such offering period. The aggregate fair market value, determined as of the first trading date of the offering period, as to shares purchased by an employee may not exceed $25,000 annually. The Employee Stock Purchase Plan expires on July 1, 2008. A total of 4,275,000 shares of common stock are available for purchase under the plan with a limit of 400,000 shares of common stock to be issued per offering period. For plan years 2004, 2003 and 2002, 316,889 shares, 455,482 shares and 734,047 shares, respectively, were issued.
The Company has granted stock options to employees and directors of the Company at exercise prices equal to the market value of the stock at the date of grant. The options generally vest ratably over four years with a maximum term of 10 years. The number of shares available for future issuance at December 31, 2004 is 10,882,169 shares.
On June 11, 2003, the Company commenced two tender offer programs involving voluntary stock option exchanges for the Company’s employees. The offering periods for the two stock option exchange programs ended on July 14, 2003.
-40-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Shareholders’ Equity (continued)
One program was offered to employees at a director level or below. Under this exchange program, employees holding nonqualified or incentive stock options to purchase the Company’s common stock with an exercise price of $4.50 or more were given the opportunity to exchange their existing options for new options to purchase shares of the Company’s common stock equal to an amount depending on the exercise price of the surrendered options. Options for 521,991 shares were tendered on July 14, 2003 in the exchange program. On January 15, 2004, the Company granted 163,995 options to purchase shares of the Company’s common stock in exchange for the options tendered. The new options were granted six months and one day after acceptance of the old options for exchange and cancellation. The exercise price of the new options was $6.34, which was the last reported sale price of the Company’s common stock on the Nasdaq Stock Market’s National Market on January 15, 2004. The new options vest over a two-year period from the date of grant.
The other program was offered to employees at a senior director level or above who had been with the Company since July 4, 2002. Under this exchange program, employees holding nonqualified options to purchase the Company’s common stock with an exercise price of $2.80 or more were given the opportunity to exchange their existing options for restricted stock units which were granted on a one-to-one ratio and are subject to a new four-year vesting schedule. On July 14, 2003, the Company accepted for cancellation options to purchase 3,826,561 shares of the Company’s common stock representing 95% of the 4,045,182 options that were eligible to be tendered in the exchange program. Pursuant to the terms of the exchange program, the Company issued 3,826,561 restricted stock units in exchange for the options surrendered. Eligible options that were not exchanged are required to be accounted for under variable plan accounting pursuant to FASB Interpretation No. 28,Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. As of December 31, 2004, 182,858 remaining eligible options were outstanding. The weighted average exercise price of these remaining eligible options is $2.07. Variable plan accounting resulted in approximately $62 thousand and $103 thousand of stock compensation expense for the years ended December 31, 2004 and January 2, 2004, respectively.
As of December 31, 2004 and January 2, 2004 the Company had 3,476,996 and 3,618,209 restricted stock units outstanding, respectively, of which 3,385,223 and 3,585,636 related to the exchange program. The Company recorded non-cash compensation expense of $2.3 million and $1.2 million, respectively in 2004 and 2003, based on the vesting provisions of the restricted stock units and the fair market value of the stock on the grant date. The Company expects to incur approximately $600 thousand of stock compensation expense per quarter over the remaining vesting period of the restricted stock units which fully vest in the third quarter of 2007.
Stock option activity under the Company’s stock option plans is summarized as follows:
| | Year Ended
|
|---|
| | December 31, 2004
| | January 2, 2004
| | January 3, 2003
|
|---|
| | Option
Shares
| | Weighted
Average
Exercise
Price
| | Option
Shares
| | Weighted
Average
Exercise
Price
| | Option
Shares
| | Weighted
Average
Exercise
Price
|
|---|
| Outstanding at beginning of year | | | 3,013,625 | | | | $ | 5.69 | | | | 8,263,971 | | | | $ | 6.78 | | | | 6,812,444 | | | | $ | 8.42 | |
| Granted | | | 1,425,744 | | | | | 6.19 | | | | 2,149,238 | | | | | 2.96 | | | | 5,594,518 | | | | | 5.46 | |
| Exercised | | | (361,652 | ) | | | | 4.26 | | | | (125,779 | ) | | | | 5.29 | | | | (824,356 | ) | | | | 3.47 | |
| Canceled | | | (818,265 | ) | | | | 7.19 | | | | (7,273,805 | ) | | | | 6.15 | | | | (3,318,635 | ) | | | | 8.69 | |
| Outstanding at end of year | | | 3,259,452 | | | | $ | 5.68 | | | | 3,013,625 | | | | $ | 5.69 | | | | 8,263,971 | | | | $ | 6.78 | |
| Weighted average fair value of options granted during the period | | $ | 4.33 | | | | | | | | $ | 2.08 | | | | | | | | $ | 3.83 | | | | | | |
-41-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Shareholders’ Equity (continued)
The following assumptions were used by the Company to determine the fair value of stock options granted using the Black-Scholes options-pricing model:
| | Year Ended
| |
|---|
| | December 31,
2004
| | January 2,
2004
| | January 3,
2003
|
|---|
Expected volatility
| | 75% to 100% | | 100% | | 100% |
Average expected option life
| | 4 years | | 4 years | | 4 years |
Risk-free rate
| | 3.5% | | 2.5% | | 3.0% |
Dividend yield
| | 0% | | 0% | | 0% |
The following table summarizes information about the Company’s stock options outstanding at December 31, 2004:
| | Options Outstanding
| | Options Exercisable
|
|---|
Range of Exercise
Prices
| | Number
Outstanding
| | Weighted
Average
Remaining
Contractual Life
(Years)
| | Weighted Average
Exercise Price
| | Number
Exercisable
| | Weighted
Average
Exercise Price
|
|---|
| $1.45–$2.74 | | | 400,661 | | | | 7.6 | | | $ | 2.19 | | | | 158,829 | | | $ | 2.17 | |
| $2.75–$3.79 | | | 493,725 | | | | 6.6 | | | | 3.34 | | | | 340,420 | | | | 3.52 | |
| $3.80–$5.35 | | | 195,499 | | | | 8.0 | | | | 4.85 | | | | 56,832 | | | | 4.98 | |
| $5.36–$5.99 | | | 392,868 | | | | 7.8 | | | | 5.58 | | | | 180,126 | | | | 5.55 | |
| $6.00–$6.20 | | | 408,948 | | | | 4.4 | | | | 6.03 | | | | 405,450 | | | | 6.03 | |
| $6.21–$6.25 | | | 817,500 | | | | 9.1 | | | | 6.25 | | | —
| | —
|
| $6.26–$6.99 | | | 216,146 | | | | 8.5 | | | | 6.42 | | | | 21,297 | | | | 6.68 | |
| $7.00–$9.99 | | | 186,099 | | | | 6.4 | | | | 8.34 | | | | 112,562 | | | | 8.73 | |
| $10.00–$32.56 | | | 148,006 | | | | 4.2 | | | | 15.82 | | | | 148,006 | | | | 15.82 | |
| | | | 3,259,452 | | | | 7.3 | | | $ | 5.68 | | | | 1,423,522 | | | $ | 6.14 | |
Treasury Stock
On July 30, 2002, the Company announced that its Board of Directors approved the repurchase of up to $5.0 million of the Company’s common stock. During the second quarter of 2003, and the second, third and fourth quarters of 2004, the Board of Directors approved the repurchase of an additional $5 million of the Company’s common stock for each of the these four quarters, thereby increasing the total program size to $25 million. Under the repurchase plans, the Company may buy back shares of its outstanding stock from time to time either on the open market or through privately negotiated transactions, subject to market conditions and trading restrictions. As of December 31, 2004 and January 2, 2004, the Company had repurchased 5,526,855 shares and 3,550,279 shares of its common stock at an average price of $3.29 and $2.16 per share, respectively. The amount of shares repurchased includes 465,120 shares purchased in 2003 from the Company’s president, who is also a director, at $2.15 per share. The Company holds repurchased shares of its common stock as treasury stock and accounts for treasury stock under the cost method.
Shareholder Rights Plan
On February 13, 2004, the Board of Directors of the Company adopted a Shareholder Rights Plan. Under the plan, a dividend of one preferred share purchase right (a “Right”) was declared for each share of common stock of the Company that was outstanding on February 26, 2004. Each right entitles the holder to purchase from the Company one one-thousandth of a share of Series A Junior Preferred Stock at a purchase price of $32.50, subject to adjustment.
-42-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Shareholders’ Equity (continued)
The Rights will trade automatically with the common stock and will not be exercisable until a person or group has become an “acquiring person” by acquiring 15% or more of the Company’s outstanding common stock, or a person or group commences or publicly announces a tender offer that will result in such a person or group owning 15% or more of the Company’s outstanding common stock. However, Liberty Wanger Asset Management, L.P. (now known as Columbia Wanger Asset Management, L.P.), together with its affiliates and associates will be permitted to acquire up to 20% or more of the common stock without making the rights exercisable. Upon announcement that any person or group has become an acquiring person, each Right will entitle all rightholders (other than the acquiring person) to purchase, for the exercise price of $32.50, a number of shares of the Company’s common stock having a market value equal to twice the exercise price. Rightholders would also be entitled to purchase common stock of the acquiring person having a value of twice the exercise price if, after a person had become an acquiring person, the Company were to enter into certain mergers or other transactions. If any person becomes an acquiring person, the Board of Directors may, at its option and subject to certain limitations, exchange one share of common stock for each right.
The rights have certain anti-takeover effects, in that they would cause substantial dilution to a person or group that attempts to acquire a significant interest in the Company on terms not approved by the Board of Directors. In the event that the Board of Directors determines a transaction to be in the best interests of the Company and its stockholders, the Board of Directors may redeem the Rights for $0.001 per share at any time prior to a person or group becoming an acquiring person. The Rights will expire on February 13, 2014.
Equity Related Commitments
Pursuant to an agreement with the Chief Executive Officer (“CEO”) of the Hackett Group, Inc. (“Hackett”), one of our wholly owned subsidiaries, in the event of an initial public offering (“IPO”) of common stock or sale of Hackett, the CEO will receive a 5% pre-sale/distributed equity ownership interest in Hackett. This ownership interest will be given in exchange for the surrender of Answerthink stock options held by the CEO. The equity value distributed will vest 50% at the IPO or sale and 50% on the first anniversary of such IPO or sale.
In addition, in the event of an IPO or sale of Hackett and subject to meeting certain performance criteria, certain employees of Hackett may elect to convert on a 1:1 to 3:1 basis, the in-the-money cash value of each of their Answerthink options or restricted stock units to an equivalent number of options or shares of Hackett common stock at the IPO price.
The Company maintains a 401(k) plan covering all eligible employees. Subject to certain dollar limits, eligible employees may contribute up to 15% of their pre-tax annual compensation to the plan. The Company may make discretionary contributions on an annual basis. During fiscal years 2004, 2003 and 2002, the Company made matching contributions of 25% of employee contributions up to 4% of their gross salaries. The Company’s matching contributions were $289,000, $169,000 and $656,000 for the years ended December 31, 2004, January 2, 2004 and January 3, 2003, respectively.
-43-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company recorded restructuring costs of $10.9 million and $5.6 million in fiscal years 2002 and 2001, respectively, for reductions in consultants and functional support personnel and for closure and consolidation of facilities and related exit costs. These actions were taken as a result of the continued decline in demand for technology services throughout 2001 and 2002. The Company took steps to reduce its costs to better align its overall cost structure and organization with anticipated demand for its services. In 2004 and 2003, the Company recorded restructuring costs of $3.7 and $4.9 million, respectively, to increase existing reserves to account for potentially higher estimated losses on the sublease of facilities as a result of lower than expected sublease rates and longer than expected time estimates to sublease excess facilities. The 2004 and 2003 restructuring costs consisted of additions of $1.8 million and $3.1 million to the 2002 restructuring accrual and $1.9 million and $1.8 million to the 2001 restructuring accrual, respectively. Also in 2004, the 2002 restructuring accrual was reduced by $370 thousand relating to the final settlement of a lease obligation which was recorded as income from discontinued operations in the accompanying consolidated statement of operations for year ended December 31, 2004.
The following table sets forth the detail and activity in the restructuring expense accruals during the years ended December 31, 2004, January 2, 2004 and January 3, 2003 (in thousands):
2001 Restructuring Accrual
| | | | Accrual
Balance at
December 29,
2000
| | Additions to
Accrual from
Continuing
Operations
| | Additions to
Accrual from
Discontinued
Operations
| | 2001
Expenditures
| | 2002
Expenditures
| | 2003
Expenditures
| | 2004
Expenditures
| | 2004
Asset
Write-offs
| | Accrual
Balance at
December 31,
2004
|
|---|
| Severance and other employee costs | | | | $ | — | | | $ | 3,694 | | | $ | 559 | | | $ | (3,186 | ) | | $ | (1,067 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | Closure and consolidation of facilities and related exit costs | | | | | — | | | | 5,553 | | | | 2,311 | | | | (248 | ) | | | (1,965 | ) | | | (933 | ) | | | (839 | ) | | | (1,205 | ) | | | 2,674 | |
| Total restructuring accrual | | | | $ | — | | | $ | 9,247 | | | $ | 2,870 | | | $ | (3,434 | ) | | $ | (3,032 | ) | | $ | (933 | ) | | $ | (839 | ) | | $ | (1,205 | ) | | $ | 2,674 | |
2002 Restructuring Accrual
| | | | Accrual
Balance at
December 28,
2001
| | Additions to
Accrual from
Continuing
Operations
| | Additions to
Accrual from
Discontinued
Operations
| | 2002
Asset
Write-offs
| | 2002
Expenditures
| | 2003
Expenditures
| | 2004
Expenditures
| | Accrual
Balance at
December 31,
2004
| |
|---|
| Severance and other employee costs | | | | $ | — | | | $ | 1,528 | | | $ | 616 | | | $ | — | | | $ | (855 | ) | | $ | (1,289 | ) | | $ | — | | | $ | — | | | | | |
| | Closure and consolidation of facilities and related exit costs | | | | $ | — | | | $ | 13,984 | | | $ | 2,747 | | | $ | (5,217 | ) | | $ | (584 | ) | | $ | (2,198 | ) | | $ | (3,362 | ) | | $ | 5,370 | | | | | |
| Total restructuring accrual | | | | $ | — | | | $ | 15,512 | | | $ | 3,363 | | | $ | (5,217 | ) | | $ | (1,439 | ) | | $ | (3,487 | ) | | $ | (3,362 | ) | | $ | 5,370 | | | | | |
-44-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| 13. | | Discontinued Operations |
As a result of a decline in the demand for interactive marketing services, during 2002, the Company discontinued the interactive marketing business which was acquired in the merger with THINK New Ideas in 1999. In accordance with Financial Accounting Standards Board Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, the results of the interactive marketing business have been reported as discontinued operations in the consolidated statements of operations and results for prior periods have been restated.
The following table sets forth revenues, pre-tax income (loss), income tax benefit and income (loss) from discontinued operations for the years ended December 31, 2004, January 2, 2004 and January 3, 2003 (in thousands):
| | | | December 31,
2004
| | January 2,
2004
| | January 3,
2003
|
|---|
| Revenues | | | | $ | — | | | $ | — | | | $ | 7,235 | |
| | Pre-tax income (loss) from discontinued operations | | | | $ | 370 | | | $ | — | | | $ | (8,911 | ) |
| Income tax benefit | | | | $ | — | | | $ | — | | | $ | — | |
| Income (loss) from discontinued operations | | | | $ | 370 | | | $ | — | | | $ | (8,911 | ) |
During 2004, the Company reduced the restructuring accrual by $370 thousand relating to the final settlement of a lease obligation resulting in income from discontinued operations.
Included in the loss from discontinued operations for fiscal year 2002 were restructuring costs of $3.4 million, for reduction in consultants and for closure and consolidation of facilities and related exit costs.
Between November 2002 and January 2003, six class actions seeking unspecified damages were filed against Answerthink and certain of its current and former officers and directors alleging violations of the Securities and Exchange Act of 1934. The complaints alleged misstatements and omissions concerning, among other things, related party transactions during the alleged class period of February 8, 2000 to April 25, 2002. On January 7, 2003 the federal district court entered an order closing and consolidating these cases and any subsequently filed related cases into Druskin, et al. v. Answerthink, Inc., et al., Case No. 02-23304-CIV-GOLD. A consolidated amended complaint was filed on May 9, 2003. The Company filed a motion to dismiss the consolidated amended complaint on July 15, 2003. The court granted the Company’s motion to dismiss the consolidated and amended complaint on January 5, 2004 and allowed the plaintiffs leave to amend the consolidated amended complaint. The plaintiffs did not file an amended complaint within the time allowed by the court. On February 11, 2004, the court entered a final judgment dismissing the case against all parties with prejudice and closed the case. The time for appeal has expired. This matter is concluded.
The Company is involved in legal proceedings, claims, and litigation arising in the ordinary course of business not specifically discussed herein. In the opinion of management, the final disposition of such other matters will not have a material adverse effect on the Company’s financial position or results of operations.
-45-
ANSWERTHINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Related Party Transactions
During 2002, the Company and HCL Technologies Limited, an Indian information technology services and product engineering firm, formed HCL-Answerthink, Inc. to provide offshore custom application development and support services. The Company has a non-controlling equity interest of 50% in this joint venture. For the year ended December 31, 2004 and January 2, 2004, the Company’s net equity income from the joint venture was $32,000 and $30,000, respectively. During 2004, 2003 and 2002, the Company sold services of $22,000, $232,000 and $233,000, respectively, to the joint venture. The Company also incurred costs of $27,000, $194,000 and $230,000 for consulting services provided by the joint venture to Answerthink in 2004, 2003 and 2002, respectively. In addition, the Company reduced general and administrative expenses by $14,000 and $856,000 for administrative services billed to the joint venture during 2003 and 2002, respectively. At December 31, 2004 and January 2, 2004, the Company had receivables of $1,000 and $258,000, respectively, due from the joint venture. At January 2, 2004 the Company had payables due to the joint venture of $193,000.
| 16. | | Quarterly Financial Information (unaudited) |
The following table presents unaudited supplemental quarterly financial information for the years ended December 31, 2004 and January 2, 2004 (in thousands, except per share data):
| | Quarter Ended
|
|---|
| | April 2,
2004
| | July 2,
2004
| | October 1,
2004
| | December 31,
2004
|
|---|
| Total revenues | | $ | 35,089 | | | $ | 37,649 | | | $ | 37,131 | | | $ | 33,678 | |
| Income (loss) from operations | | | 820 | | | | (1,871 | ) | | | 806 | | | | (751 | ) |
| Income (loss) before income taxes and income from discontinued operations | | | 1,010 | | | | (1,675 | ) | | | 950 | | | | (479 | ) |
| Income (loss) from continuing operations | | | 967 | | | | (1,579 | ) | | | 824 | | | | (730 | ) |
| Income from discontinued operations | | | — | | | | 370 | | | | — | | | | — | |
| Net income (loss) | | $ | 967 | | | $ | (1,209 | ) | | $ | 824 | | | $ | (730 | ) |
| | Basic and diluted income (loss) per common share | | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 0.02 | | | $ | (0.04 | ) | | $ | 0.02 | | | $ | (0.02 | ) |
| Income from discontinued operations | | $ | — | | | $ | 0.01 | | | $ | — | | | $ | — | |
| Net income (loss) | | $ | 0.02 | | | $ | (0.03 | ) | | $ | 0.02 | | | $ | (0.02 | ) |
| | | |
|---|
| | Quarter Ended
|
|---|
| | April 4,
2003
| | July 4,
2003
| | October 3,
2003
| | January 2,
2004
|
|---|
| Total revenues | | $ | 36,785 | | | $ | 31,497 | | | $ | 32,918 | | | $ | 31,187 | |
| Income (loss) from operations | | | (1,246 | ) | | | (5,962 | ) | | | 1,055 | | | | 975 | |
| Income (loss) before income taxes | | | (1,022 | ) | | | (5,824 | ) | | | 1,210 | | | | 1,164 | |
| Net income (loss) | | $ | (1,022 | ) | | $ | (5,974 | ) | | $ | 1,135 | | | $ | 1,039 | |
| | Basic net income (loss) per common share | | $ | (0.02 | ) | | $ | (0.13 | ) | | $ | 0.03 | | | $ | 0.02 | |
| Diluted net income (loss) per common share | | $ | (0.02 | ) | | $ | (0.13 | ) | | $ | 0.02 | | | $ | 0.02 | |
Quarterly basic and diluted net income or loss per common share were computed independently for each quarter and do not necessarily total to the year to date basic and diluted net income (loss) per common share.
-46-
ANSWERTHINK, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2004, JANUARY 2, 2004 AND JANUARY 3, 2003
(in thousands)
Allowance for Doubtful Accounts
| | | | Balance at
Beginning of
Year
| | Charge to
Expense
| | Write-offs
| | Balance at
Ending of
Year
|
|---|
| Year Ended December 31, 2004 | | | | $ | 1,757 | | | $ | 1,060 | | | $ | (708 | ) | | $ | 2,109 | |
| Year Ended January 2, 2004 | | | | $ | 3,526 | | | $ | (235 | ) | | $ | (1,534 | ) | | $ | 1,757 | |
| Year Ended January 3, 2003 | | | | $ | 6,810 | | | $ | 779 | | | $ | (4,063 | ) | | $ | 3,526 | |
-47-
| ITEM 9. | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
| ITEM 9A. | | CONTROL AND PROCEDURES |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
SEC rules require us to include in our Annual Report on Form 10-K, beginning with this Annual Report on Form 10-K, (1) a report of our management on internal control over financial reporting as of December 31, 2004 and (2) a report of our independent certified registered public accounting firm, on such assessment by our management of internal control over financial reporting. We have omitted these two reports from this Annual Report on Form 10-K as originally filed in reliance on the SEC’s Order Under Section 36 of the Securities Exchange Act of 1934 Granting an Exemption from Specified Provisions of Exchange Act Rules 13a-1 and 15d-1, as set forth in SEC Release No. 34-50754 (the “Order”). In accordance with the Order, we will file the foregoing two reports in an amendment to this Annual Report on Form 10-K within the period, and subject to the other conditions, prescribed in the Order.
| ITEM 9B. | | OTHER INFORMATION |
None
PART III
| ITEM 10. | | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
Information responsive to this Item is incorporated herein by reference to the Company’s definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.
| ITEM 11. | | EXECUTIVE COMPENSATION |
Information responsive to this Item is incorporated herein by reference to the Company’s definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.
| ITEM 12. | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
Information responsive to this Item is incorporated herein by reference to the Company’s definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.
| ITEM 13. | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Information responsive to this Item is incorporated herein by reference to the Company’s definitive 2005 proxy statement for the 2005 Annual Meeting of Shareholders.
| ITEM 14. | | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Information appearing under the caption “Fees Paid to Independent Accountants” in the 2005 Proxy Statement is hereby incorporated by reference.
-48-
PART IV
| ITEM 15. | | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
| (a) | | The following documents are filed as a part of this Form: |
The Consolidated Financial Statements filed as part of this report are listed and indexed on page 25. Schedules other than those listed in the index have been omitted because they are not applicable or the required information has been included elsewhere in this report.
| 2. | | Financial Statement Schedules. |
Schedule II—Valuation and Qualifying Accounts and Reserves are included in this report. Schedules other than those listed in the index have been omitted because they are inapplicable or the information required to be set forth therein is contained, or incorporated by reference, in the Consolidated Financial Statements of Answerthink or notes thereto.
| 3. | | Exhibits: See Index to Exhibits on page 51. |
The Exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this report.
-49-
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, in the City of Miami, State of Florida, on the 16th day of March, 2005.
| | ANSWERTHINK, INC.
By: /s/ Ted A. Fernandez
Ted A. Fernandez
Chief Executive Officer and Chairman |
Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has been signed by the following persons in the capacities and on the date indicated.
Signatures
| | Title
| | Date
|
|---|
/s/ Ted A. Fernandez
Ted A. Fernandez | | Chief Executive Officer and Chairman (Principal Executive Officer) | | March 16, 2005 |
/s/ John F. Brennan
John F. Brennan | | Executive Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) | | March 16, 2005 |
/s/ Allan R. Frank
Allan R. Frank | | President and Director | | March 16, 2005 |
/s/ David N. Dungan
David N. Dungan | | Chief Operating Officer and Director | | March 16, 2005 |
/s/ Richard Hamlin
Richard Hamlin | | Director | | March 16, 2005 |
/s/ Edwin A. Huston
Edwin A. Huston | | Director | | March 16, 2005 |
/s/ Jeffrey E. Keisling
Jeffrey E. Keisling | | Director | | March 16, 2005 |
/s/ Alan T. G. Wix
Alan T. G. Wix | | Director | | March 16, 2005 |
-50-
INDEX TO EXHIBITS
Exhibit
No.
| | | | Exhibit Description
|
|---|
| 3.1++++ | | | | Second Amended and Restated Articles of Incorporation of the Registrant, as amended |
| 3.2++++ | | | | Amended and Restated Bylaws of the Registrant, as amended |
| 9.1+ | | | | Shareholders Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, the Miller Group, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant parties thereto |
| 9.2+ | | | | Amendment No. 1 to Shareholders Agreement dated February 24, 1998 |
| 9.3+ | | | | Letter Agreement dated as of March 15, 1998 to amend Shareholders Agreement |
| 9.4+ | | | | Form of Restricted Securities Agreement dated April 23, 1997 among the Initial Investors and each of Messrs. Fernandez, Frank, Knotts and Miller |
| 10.1+ | | | | Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, Gator and Tara |
| 10.2+ | | | | Series A Preferred Stock Purchase Agreement dated February 24, 1998 among the Registrant, GTCR V, GTCR Associates and Miller Capital |
| 10.3+ | | | | Stock Purchase Agreement dated March 5, 1998 between the Registrant and FSC |
| 10.4+ | | | | Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 among the Registrant, GTCR V, MG, GTCR Associates, Miller Capital, FSC, Messrs. Fernandez, Frank, Knotts and Miller and certain other shareholders of the Registrant named therein |
| 10.5+ | | | | Second Amended and Restated Registration Rights Agreement dated as of May 5, 1998 among the Registrant and the eight former shareholders of RTI |
| 10.6*+ | | | | Registrant’s 1998 Stock Option and Incentive Plan |
| 10.7*+++++ | | | | Amendment to Registrant’s 1998 Stock Option and Incentive Plan |
| 10.8*+ | | | | Form of Senior Management Agreement dated April 23, 1997 between the Registrant and each of Messrs. Fernandez, Frank and Knotts |
| 10.9*++++ | | | | Senior Management Agreement dated July 11, 1997 between Registrant and Mr. Dungan |
| 10.10*+++++ | | | | Form of Employment Agreement entered into between the Registrant and Mr. Dungan |
| 10.11*+ | | | | Form of Employment Agreement entered into between the Registrant and each of Messers. Fernandez, Frank and Knotts |
| 10.12+ | | | | Amendment No. 2 dated as of May 5, 1998 to Purchase Agreement dated April 23, 1997 among the Registrant, GTCR V, MG, Gator and Tara |
| 10.13+ | | | | Amendment No. 2 dated as of May 5, 1998 to Stock Purchase Agreement dated March 5, 1998 between the Registrant and FSC |
| 10.14*+ | | | | Amendment to Certain Senior Management Agreements dated March 27, 1998 among the Company, the Board of Directors and each of Messrs. Fernandez, Frank, Knotts and Dungan |
| 10.15*+ | | | | Second Amendment to Certain Senior Management Agreements dated May 26, 1998 among the Company, the Board of Directors and each of Messrs. Fernandez, Frank, Knotts and Dungan |
| 10.16*++ | | | | AnswerThink Consulting Group, Inc. Employee Stock Purchase Plan |
| 10.17*+++++ | | | | Amendment to Registrant’s Employee Stock Purchase Plan dated February 16, 2001 |
| 10.18*+++ | | | | Employment Agreement dated March 23, 1999 between the Registrant and Mr. Brennan |
| 10.19*+++ | | | | Restricted Stock Agreement dated July 31, 1997 between the Registrant and Mr. Brennan |
-51-
Exhibit
No.
| | Exhibit Description
|
|---|
| 10.20*+++ | | Amendment to Restricted Stock Agreement dated March 27, 1998 between the Registrant and Mr. Brennan |
| 10.21*+++ | | Form of Senior Management Agreement dated July 31, 1997 between the Registrant and Mr. Brennan |
| 10.22++++++ | | Securities Purchase Agreement by and among THINK New Ideas, Inc., Capital Ventures International and Marshall Capital Management, Inc. |
| 10.23++++++ | | Registration Rights Agreement dated as of March 3, 1999 by and among THINK New Ideas, Inc., Capital Ventures International and Marshall Capital Management, Inc. |
| 10.24+++++++ | | Joint Marketing and Alliance Agreement, dated October 7, 2003, by and among Answerthink, Inc., The Hackett Group, Inc. and Accenture, L.L.P. |
| 11.1++++++++ | | Amendment to Executive Agreement between Answerthink, Inc. and Ted A. Fernandez |
| 11.2++++++++ | | Amendment to Executive Agreement between Answerthink, Inc. and David N. Dungan |
| 11.3++++++++ | | Amendment to Executive Agreement between Answerthink, Inc. and Allan R. Frank |
| 11.4++++++++ | | Amendment to Executive Agreement between Answerthink, Inc. and John F. Brennan |
| 21.1ˆ | | Subsidiaries of the Registrant |
| 23.1ˆ | | Consent of PricewaterhouseCoopers LLP |
| 31.1ˆ | | Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2ˆ | | Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32ˆ | | Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| * | | Management agreement or compensatory plan or arrangement |
| ˆ | | Exhibits filed herewith. |
| + | | Incorporated herein by reference to the Company’s Registration Statement on Form S-1 (333-48123). |
| ++ | | Incorporated herein by reference to the Company’s Registration Statement on Form S-8 (333-69951). |
| +++ | | Incorporated herein by reference to the Company’s Form 10-K for the year ended January 1, 1999. |
| ++++ | | Incorporated herein by reference to the Company’s Form 10-K for the year ended December 29, 2000. |
| +++++ | | Incorporated herein by reference to the Company’s Form 10-K for the year ended December 28, 2001. |
| ++++++ | | Incorporated herein by reference to THINK New Ideas, Inc.’s Form 8-K dated March 12, 1999. |
| +++++++ | | Incorporated herein by reference to the Company’s Form 8-K dated October 14, 2003. |
| ++++++++ | | Incorporated herein by reference to the Company’s Form 10-Q dated November 10, 2004 |
-52-
