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SECURITIES AND EXCHANGE COMMISSION
OF THE SECURITIES EXCHANGE ACT OF 1934
Delaware | 11-3200514 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip code)
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Title of each class | on which registered | |
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Title of class
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo |
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Exhibit 21.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | risks relating to the filing of our Securities and Exchange Commission (“SEC”) reports, including the occurrence of known contingencies or unforeseen events that could delay our plan for completion of our outstanding financial statements, management distraction, and significant expense; |
• | risk associated with the SEC’s initiation of an administrative proceeding on March 3, 2010 to suspend or revoke the registration of our common stock under the Exchange Act due to our previous failure to file an annual report on either Form 10-K or Form 10-KSB since April 25, 2005 or quarterly reports on either Form 10-Q or Form 10-QSB since December 12, 2005; | ||
• | risks that the delay in the filing of this report, our Annual Report on Form 10-K for the year ended January 31, 2009, and the Quarterly Reports for each of the quarters ended April 30, July 31, and October 31, 2009 may cause us to be delayed in the completion of the audit relating to, and timely filing of our Annual Report for, the year ended January 31, 2010, which may cause us to not be in compliance with the financial statement delivery requirements of our credit facility and result in an event of default thereunder; | ||
• | risks related to the announcement by Standard & Poor’s (“S&P”) on January 29, 2010 that our credit rating had been placed on CreditWatch Developing, or that S&P or Moody’s could downgrade our credit ratings; |
• | risks associated with being a consolidated, controlled subsidiary of Comverse Technology, Inc. (“Comverse”) and formerly part of Comverse’s consolidated tax group, including risk of any future impact on us resulting from Comverse’s special committee investigation and restatement or related effects, and risks related to our dependence on Comverse to provide us with accurate financial information, including with respect to stock-based compensation expense and net operating loss carryforwards (“NOLs”) for our financial statements; |
• | uncertainty regarding the impact of general economic conditions, particularly in information technology spending, on our business; |
• | risk that our financial results will cause us not to be compliant with the leverage ratio covenant under our credit facility; |
• | risk that customers or partners delay or cancel orders or are unable to honor contractual commitments due to liquidity issues, challenges in their business, or otherwise; |
• | risk that we will experience liquidity or working capital issues and related risk that financing sources will be unavailable to us on reasonable terms or at all; |
• | uncertainty regarding the future impact on our business of our internal investigation, restatement, extended filing delay, and the SEC’s administrative proceeding, including customer, partner, employee, and investor concern and potential customer and partner transaction deferrals or losses; |
• | risks relating to the remediation or inability to adequately remediate internal control weaknesses and to the proper application of highly complex accounting rules and pronouncements in order to produce accurate SEC reports on a timely basis; |
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• | risks relating to our implementation and maintenance of adequate systems and internal controls for our current and future operations and reporting needs; |
• | risk of possible future restatements if the special processes being used to prepare the financial statements contained in this report or the regular recurring processes that will be used to produce future SEC reports are inadequate; |
• | risk associated with current or future regulatory actions or private litigations relating to our internal investigation, restatement, or delay in timely making required SEC filings; |
• | risk that we will be unable to re-list our common stock on a national securities exchange and maintain such listing; |
• | risks associated with Comverse controlling our board of directors and a majority of our common stock (and therefore the results of any significant stockholder vote); |
• | risks associated with significant leverage resulting from our current debt position; |
• | risks due to aggressive competition in all of our markets, including with respect to maintaining margins and sufficient levels of investment in the business and with respect to introducing quality products which achieve market acceptance; |
• | risks created by continued consolidation of competitors or introduction of large competitors in our markets with greater resources than us; |
• | risks associated with significant foreign and international operations, including exposure to fluctuations in exchange rates; |
• | risks associated with complex and changing local and foreign regulatory environments; |
• | risks associated with our ability to recruit and retain qualified personnel in all geographies in which we operate; |
• | challenges in accurately forecasting revenue and expenses; |
• | risks associated with acquisitions and related system integrations; |
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• | risks relating to our ability to improve our infrastructure to support growth; |
• | risks that our intellectual property rights may not be adequate to protect our business or that others may make claims on our intellectual property or claim infringement on their intellectual property rights; |
• | risks associated with a significant amount of our business coming from domestic and foreign government customers; |
• | risk that we improperly handle sensitive or confidential information or perception of such mishandling; |
• | risks associated with dependence on a limited number of suppliers for certain components of our products; |
• | risk that we are unable to maintain and enhance relationships with key resellers, partners, and systems integrators; and |
• | risk that use of our NOLs or other tax benefits may be restricted or eliminated in the future. |
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• | Phase I – No evidence of any differences between the actual dates of measurement and the recorded dates of measurement with respect to Verint stock option grants was discovered during the course of our management review. Although it was not the focus of the Phase II investigation, our audit committee subsequently uncovered no evidence of improper stock option backdating. As described below, Phase I adjustments consist of tax related adjustments resulting from errors in Comverse’s stock-based compensation accounting and additional stock-based compensation expense related to Comverse’s grant of its options to our employees. |
• | Phase II – Our audit committee found that prior to the year ended January 31, 2003, accounting reserves were intentionally overstated. In addition, our audit committee found this practice of overstating reserves was not systemic within Verint but rather was done on an ad hoc basis by a small number of employees, including our former Chief Financial Officer and certain other former employees who directly or indirectly reported to him. Following the recommendation of our audit committee, we terminated our relationship with our former Chief Financial Officer and these other employees. Moreover, although this practice of overstating reserves (and the subsequent release of these overstated reserves) necessarily had an impact on our published earnings, our audit committee found no evidence that the purpose of the individuals involved in overstating reserves was to cause any particular effect on earnings. Rather, our audit committee found that the apparent intent of these individuals in overstating reserves was to build a conservative reserve to protect against unanticipated future expenses or erroneous judgments. Our audit committee also concluded that the overstated reserves had resulted in large measure from a simple lack of rigorous and diligent accounting. Our audit committee found no evidence indicating that reserves were intentionally overstated in any period subsequent to the year ended January 31, 2003. |
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• | VSOE/revenue recognition review – We found that the requirement to prepare contemporaneous documentation analyzing and supporting the adoption of SOP 97-2 was not adequately performed, that we had prepared limited documentation analyzing our initial and ongoing compliance with SOP 97-2, that we had not appropriately determined whether VSOE of fair value (as defined below) existed for undelivered elements, and that other errors had been made in the recognition of revenue and cost of revenue related to many of our contracts. |
• | additional stock-based compensation expense relating to grants by Comverse of options to acquire Comverse common stock granted to our employees during the period from the year ended January 31,1991 through our May 2002 IPO, during which time we were a wholly-owned subsidiary of Comverse; |
• | tax-related adjustments resulting from errors in Comverse’s stock-based compensation accounting; |
• | the correction of certain misstated reserves for periods through October 31, 2005; |
• | the reclassification of royalty and license fees from either selling, general and administrative expense or research and development expense to cost of revenues for periods prior to the year ended January 31, 2003; and |
• | corrections relating to revenue recognition (including correction of errors in determining vendor specific objective evidence of fair value, or “VSOE”) under SOP 97-2, and associated corrections to cost of revenue, deferred revenue, and deferred cost of revenue, for periods from February 1, 2000 through October 31, 2005. |
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Impact of Restatement | ||||||||||||||||||||||||||||||||
Cost of | Phase I | Phase II | Other | Total | Income Tax | Total | ||||||||||||||||||||||||||
Revenue | Revenue | Adjustments | Adjustments | Adjustments | Adjustments, | Effect of All | Adjustments, | |||||||||||||||||||||||||
(in thousands) | (1) | (2) | (3) | (4) | (5) | Before Taxes | Adjustments | Net of Taxes | ||||||||||||||||||||||||
Increase (Decrease) to Earnings | ||||||||||||||||||||||||||||||||
Period: | ||||||||||||||||||||||||||||||||
Cumulative effect on February 1, 2003 opening retained earnings | $ | (145,176 | ) | $ | 54,479 | $ | (18,135 | ) | $ | 4,376 | $ | 1,064 | $ | (103,392 | ) | $ | 2,197 | $ | (101,195 | ) | ||||||||||||
Year ended January 31, 2004 | (20,873 | ) | 10,421 | (111 | ) | (2,170 | ) | 1,235 | (11,498 | ) | (4,164 | ) | (15,662 | ) | ||||||||||||||||||
Year ended January 31, 2005 | (37,422 | ) | 7,234 | (57 | ) | (1,486 | ) | (353 | ) | (32,084 | ) | 32,039 | (45 | ) | ||||||||||||||||||
Cumulative effect on February 1, 2005 opening retained earnings | (203,471 | ) | 72,134 | (18,303 | ) | 720 | 1,946 | (146,974 | ) | 30,072 | (116,902 | ) | ||||||||||||||||||||
Nine month period ended October 31, 2005 | (36,722 | ) | 11,611 | (28 | ) | 99 | 626 | (24,414 | ) | 2,736 | (21,678 | ) | ||||||||||||||||||||
Total adjustments | $ | (240,193 | ) | $ | 83,745 | $ | (18,331 | ) | $ | 819 | $ | 2,572 | $ | (171,388 | ) | $ | 32,808 | $ | (138,580 | ) | ||||||||||||
(1) | Because they do not affect our reported income (loss) before income tax and noncontrolling interest or net income (loss) in any period, these restatement adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. | |
(2) | Includes cost of revenue as well as certain operating costs that vary directly with revenue. These adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. | |
(3) | Includes impact of errors identified in the Phase I review. Further details of these adjustments by year are presented in the table below. | |
(4) | Includes impact of errors identified in the Phase II investigation, primarily relating to impacts to reserves, as well as certain revenue recognition matters unrelated to our VSOE/revenue recognition review and account classifications. | |
(5) | Includes adjustments to correct misstatements identified during our restatement process that were not related to historical stock option practices, reserves, or revenue recognition. |
• | $26 million in the three-month period ended January 31, 2006; |
• | $84 million in the year ended January 31, 2007; |
• | $48 million in the year ended January 31, 2008; |
• | $34 million in the year ended January 31, 2009; |
• | $25 million in the year ended January 31, 2010; |
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• | $12 million in the year ending January 31, 2011; and |
• | $11 million thereafter. |
Impact of Phase I Adjustments by Period | ||||
(in thousands) | ||||
Year ended January 31, 1991 | $ | 3 | ||
Year ended January 31, 1992 | 5 | |||
Year ended January 31, 1993 | 94 | |||
Year ended January 31, 1994 | 34 | |||
Year ended January 31, 1995 | 95 | |||
Year ended January 31, 1996 | 171 | |||
Year ended January 31, 1997 | 184 | |||
Year ended January 31, 1998 | 15 | |||
Year ended January 31, 1999 | 393 | |||
Year ended January 31, 2000 | 2,147 | |||
Year ended January 31, 2001 | 5,829 | |||
Year ended January 31, 2002 | 3,881 | |||
Year ended January 31, 2003 | 5,284 | |||
Cumulative effect on February 1, 2003 opening retained earnings | 18,135 | |||
Year ended January 31, 2004 | 111 | |||
Year ended January 31, 2005 | 57 | |||
Cumulative effect on February 1, 2005 opening retained earnings | 18,303 | |||
Nine-month period ended October 31, 2005 | 28 | |||
Total Adjustments | $ | 18,331 | ||
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• | establishing an Internal Audit Department, which reports directly to our audit committee; |
• | updating our Employee Code of Business Conduct and Ethics and implementing a new Finance and Accounting Code of Conduct that serves as a set of guiding principles emphasizing our commitment to integrity in financial and accounting reporting, as well as transparency and robust and complete communications with, and disclosures to, internal and external auditors; |
• | revising and enhancing our revenue recognition policies and controls, including |
• | appointing a VP Finance and Global Revenue Controller and Regional Revenue Controllers, and establishing a centralized revenue recognition department to address complex revenue recognition matters and to provide oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting application; and |
• | designing and implementing enhanced information technology systems and user applications, including a broader and more sophisticated implementation of our Enterprise Resource Planning system; |
• | engaging external subject matter experts to assist in developing, implementing, and/or enhancing accounting and finance-related policies and procedures, including |
• | advising on the accounting for and disclosure of stock-based compensation matters; |
• | assisting in developing and implementing a formal remediation plan; and |
• | assisting in developing, implementing and/or enhancing revenue recognition, account reconciliations, journal entry review/approval procedures, end-user computing, fixed assets, and reserve and accrual analyses; |
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• | revising our policies and procedures regarding the manner in which transactions are to be documented, the level of support required for documenting management’s judgments and related document retention procedures, including |
• | implementing a record retention program to centralize global finance documentation in a standard repository; |
• | engaging external subject matter experts with specialized international and consolidated income tax knowledge to assist in creating,implementing, and documenting a consolidated tax process; and |
• | expanding our accounting policy and controls organization by creating and filling new positions with qualified accounting and finance personnel including a new Chief Financial Officer, a new Senior Vice President Finance and Corporate Controller, and a Vice President of Global Accounting as well as creating the position of Chief Compliance Officer. |
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• | contact center managers can receive instant alerts when staff is out of adherence with standards, monitor and record interactions to determine the cause, and act quickly to correct the problem; |
• | supervisors can assign and deliver electronic learning material to staff desktops based on training needs automatically identified from quality monitoring evaluation scores and performance management scorecard metrics, and then track courses taken and new skills acquired; and |
• | using integrated speech analytics with quality monitoring, our solutions can categorize calls, allowing organizations to review the interactions that are most significant to the business and identify the underlying causes of customer service issues. |
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Solution | Description | |
Quality Monitoring | Records multimedia interactions based on user-defined business rules and provides sophisticated interaction assessment functionality, including intelligent evaluation forms and automatic delivery of calls for evaluation according to quotas or contact-related criteria, to help enterprises evaluate and improve the performance of customer service staff. | |
Full-Time and Compliance Recording | Provides contact center recording for compliance, sales verification, and monitoring in IP, traditional TDM, and mixed telephony environments. Includes encryption capabilities to help support the Payment Card Industry Data Security Standard and other regulatory requirements for protecting sensitive data. |
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Solution | Description | |
Workforce Management | Helps enterprises forecast staffing requirements, deploy the appropriate level of resources, and evaluate the productivity of their customer service staff. Also includes optional strategic planning capabilities to help determine optimal hiring plans. | |
Customer Interaction Analytics (Speech, Data, and Customer Feedback) | Our speech analytics analyze call content for the purpose of proactively identifying business trends, building effective cost containment and customer service strategies, and enhancing quality monitoring programs. Our data analytics apply our data mining technology to call-related information (metadata) and call content, as well as to productivity, quality, and customer experience metrics, to help enterprises identify hidden service and quality issues, determine the causes, and correct them. Our customer feedback analytics help enterprises efficiently survey customers via Interactive Voice Response (“IVR”), Web, or email in order to gather customer feedback on products, processes, agent performance, and customer satisfaction and loyalty. | |
Performance Management | Provides a comprehensive view of key performance indicators (“KPIs”), with performance scorecards and reports on customer interactions, customer experience trends, and contact center, back office, branch, remote office, and customer service staff performance. | |
eLearning and Coaching | Enables enterprises to deliver Web-based training to customer service staff desktops, including learning clips created from recordings and other customized materials targeted to staff needs and competencies. | |
Desktop Activity Management | Captures information from customer service employee interactions with their desktop applications to provide insights into productivity, training issues, process adherence, and bottlenecks. | |
Workforce Optimization for Small-to-Medium Sized Businesses (“SMB”) | Designed for smaller companies (with contact centers), which increasingly face the same business requirements as their larger competitors. Enables companies of all sizes to boost productivity, reduce attrition, capture and evaluate interactions, and satisfy compliance and risk management requirements in a cost-effective way. | |
Public Safety | Includes quality monitoring, speech analytics, and full-time and compliance recording solutions under the brand Impact 360 for Public Safety Powered by Audiolog™. Our public safety solution allows first responders (police, fire departments, emergency medical services, etc.) in the Security Intelligence market to deploy workforce optimization solutions to record, manage, and act on incoming assistance requests and related data. |
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Solution | Description | |
IP Video Management Software | Simplifies management of large volumes of video and geographically-dispersed video surveillance operations, with a suite of applications that includes automated system health monitoring, policy-based video distribution, networked video viewing, and investigation management. Designed for use with industry-standard servers and storage solutions and for inter-operability with other enterprise systems. | |
Edge Devices | Captures, digitizes, and transmits video across enterprise networks, providing many of the benefits of IP video while using existing analog CCTV investments. Includes IP cameras; bandwidth-efficient video encoders to convert analog images to IP video for transmission over IP networks; and wireless devices that perform both video encoding and wireless IP transmission, facilitating video surveillance in areas too difficult or expensive to wire. | |
Video Analytics | Analyzes video content to automatically detect anomalies and activities of interest, such as perimeter intrusion, unattended objects, camera tampering, and vehicles moving in the wrong direction. Also includes industry-specific analytics applications focused on the behavior of people in retail and other environments. | |
Networked DVRs | Performs networked digital video recording utilizing secure, embedded operating systems and market-specific data integrations for applications that require local storage, as well as remote networking. |
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Solution | Description | |
Communications Interception | Enables the interception, monitoring, and analysis of information collected from a wide range of communications networks, including fixed and mobile networks, IP networks, and the Internet. Includes lawful interception solutions designed to intercept specific target communications pursuant to legal warrants and mass interception solutions for investigating and proactively addressing criminal and terrorist threats. | |
Communications Service Provider Compliance | Provides communication service providers with the ability to collect and deliver to government agencies specific call-related information in compliance with CALEA, ETSI, and other compliance regulations and standards. Includes a scalable warrant and subpoena management system for efficient, cost-effective administration of legal warrants across multiple networks and sites. | |
Mobile Location Tracking | Tracks the location of mobile network devices for intelligence and evidence gathering, with analytics and workflow designed to support investigative activities. Provides real-time tracking of multiple targets, real-time alerts, and investigative capabilities, such as geospatial fencing and events correlation. | |
Fusion and Investigation Management | Fuses data gathered from multiple database sources, with link analysis, adaptable investigative workflow, and analytics to improve investigation efficiency and productivity. Supports complex investigations that require expertise across various domains, involve multiple government agencies, and require significant resources and time. | |
Financial Crime Investigation | Helps law enforcement and government financial regulatory agencies investigate financial fraud, money laundering, and other financial crimes, as well as drug- and terror-related cases. |
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Solution | Description | |
Web Intelligence | Increases the productivity and efficiency of investigations in which the Internet is the prime source of information. Features advanced data collection, text analysis, data enrichment, advanced analytics, and a clearly defined investigative workflow on a scalable platform. | |
Integrated Video Monitoring | Enables the scalable collection, storage, and analysis of video captured by surveillance systems and its integration with other sources of information, such as intercepted communications or location tracking data. | |
Tactical Communications Intelligence | Provides portable communications interception and location tracking capabilities for local use or integration with centralized monitoring systems, to support tactical field operations. |
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• | identify and respond to emerging technological trends in our target markets; |
• | develop and maintain competitive solutions that meet our customers’ changing needs; |
• | enhance our existing products by adding features and functionality to meet specific customer needs or differentiate our products from those of our competitors; and |
• | attract, recruit, and retain highly skilled and experienced employees. |
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• | product performance and functionality; |
• | product quality and reliability; |
• | breadth of product portfolio and interoperability; |
• | global presence and high-quality customer service and support; |
• | specific industry knowledge, vision, and experience; and |
• | price. |
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• | risk associated with the SEC’s initiation of an administrative proceeding on March 3, 2010 to suspend or revoke the registration of our common stock under the Exchange Act due to our previous failure to file an annual report on either Form 10-K or Form 10-KSB since April 25, 2005 or quarterly reports on either Form 10-Q or Form 10-QSB since December 12, 2005; |
• | continued risk in maintaining compliance with the covenants and other requirements of our credit agreement, which, among other things, makes it an event of default if we do not provide audited financial statements for the year ended January 31, 2010 to our lenders on or before May 31, 2010; |
• | continued concern on the part of customers, partners, investors, and employees about our financial condition and extended filing delay status, including potential loss of business opportunities; |
• | additional significant time and expense required to complete our remaining filings and the process of seeking the re-listing of our common stock on NASDAQ or another national securities exchange beyond the very significant time and expense we have already incurred in connection with our internal investigation, restatement, and audits to date; |
• | continued distraction of our senior management team and our board of directors as we work to complete our remaining filings and seek to re-list our common stock; |
• | limitations on our ability to raise capital and make acquisitions; and |
• | general reputational harm as a result of the foregoing. |
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• | make changes to our finance organization; |
• | adopt new accounting and reporting processes and procedures; |
• | enhance our revenue recognition and other existing accounting policies and procedures; |
• | introduce new or enhanced accounting systems and processes; and |
• | improve our internal controls over financial reporting. |
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• | anticipate and respond to changes in technology and industry standards; |
• | successfully develop and introduce new, enhanced, and competitive products which meet our customers’ changing needs; and |
• | deliver these new and enhanced products on a timely basis while adhering to our high quality standards. |
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• | changes in budgets and purchasing priorities; |
• | reductions in need to upgrade existing systems; |
• | deferrals in anticipation of enhanced or new products; |
• | introduction of new products by our competitors; or |
• | lower prices offered by our competitors. |
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• | foreign currency fluctuations; |
• | political, security, and economic instability in foreign countries; |
• | changes in and compliance with local laws and regulations, including export control laws, tax laws, labor laws, employee benefits, customs requirements, currency restrictions, and other requirements; |
• | differences in tax regimes and potentially adverse tax consequences of operating in foreign countries; |
• | customizing products for foreign countries; |
• | legal uncertainties regarding liability and intellectual property rights; |
• | hiring and retaining qualified foreign employees; and |
• | difficulty in accounts receivable collection and longer collection periods. |
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• | our reputation or relationship with government agencies is impaired; |
• | we are suspended or otherwise prohibited from contracting with a domestic or foreign government or any significant law enforcement agency; |
• | levels of government expenditures and authorizations for law enforcement and security related programs decrease or shift to programs in areas where we do not provide products and services; |
• | we are prevented from entering into new government contracts or extending existing government contracts based on violations or suspected violations of laws or regulations, including those related to procurement; |
• | we are not granted security clearances that are required to sell our products to domestic or foreign governments or such security clearances are deactivated; |
• | there is a change in government procurement procedures; or |
• | there is a change in political climate that adversely affects our existing or prospective relationships. |
• | terminate or cancel existing contracts for convenience; |
• | in the case of the U.S. federal government, suspend us from doing business with a foreign government or prevent us from selling our products in certain countries; |
• | audit and object to our contract-related costs and expenses, including allocated indirect costs; and |
• | unilaterally change contract terms and conditions, including warranty provisions, schedule, quantities, and scope of work, in advance of our agreement on corresponding pricing adjustments. |
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• | limit our ability to obtain additional debt financing in the future for working capital, capital expenditures, acquisitions, or other general corporate purposes; |
• | require us to dedicate a substantial portion of our cash flow from operations to debt service, reducing the availability of our cash flow for other purposes; |
• | require us to repatriate cash for debt service from our foreign subsidiaries resulting in dividend tax costs or require us to adopt other disadvantageous tax structures to accommodate debt service payments; or |
• | increase our vulnerability to economic downturns, limit our ability to capitalize on significant business opportunities, and restrict our flexibility to react to changes in market or industry conditions. |
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• | incur additional indebtedness or liens or issue preferred stock; |
• | pay dividends or make other distributions or repurchase or redeem our stock or subordinated indebtedness; |
• | engage in transactions with affiliates; |
• | engage in sale-leaseback transactions; |
• | sell certain assets; |
• | change our lines of business; |
• | make investments, loans, or advances; and |
• | engage in consolidations, mergers, liquidations, or dissolutions. |
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• | Suit filed on July 20, 2004, in the U.S. District Court for the Southern District of New York by STS Software Systems Ltd. (“STS Software”), a wholly-owned subsidiary of NICE and declaratory judgment action filed the same day by Witness against STS Software in the U.S. District Court for the Northern District of Georgia. These two cases were consolidated to the Northern District of Georgia, where STS Software asserted that certain Witness recording products infringed on claims of U.S. Patent Nos. 6,122,665; 6,865,604; 6,871,229; and 6,880,004 relating to VoIP technology and sought only injunctive relief. A bench trial was held from March 17-21, 2008. On May 23, 2008, the court entered a judgment of non-infringement in our favor. |
• | Suit filed on August 30, 2004, in the U.S. District Court for the Northern District of Georgia, Atlanta Division, by Witness against NICE Systems, Inc., a wholly-owned subsidiary of NICE. Witness asserted that NICE’s screen capture products infringed on claims of U.S. Patent Nos. 5,790,790 and 6,510,220. The case was consolidated with a separate February 24, 2005 suit filed by Witness against NICE alleging infringement on the same patents. We were waiting on the court to assign a trial date at the time of the settlement. |
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• | Suit filed on January 19, 2006, in the U.S. District Court for the Northern District of Georgia, Atlanta Division, by Witness against NICE. Witness asserted that NICE’s speech analytics products infringed on claims of U.S. Patent No. 6,404,857. A jury trial was held from May 12-16, 2008 and the jury returned a verdict in our favor and against NICE on the claims of infringement. The jury also awarded us $3.3 million in damages; however, this award was superseded by the terms of the settlement agreement disclosed above. |
• | Suit filed on May 10, 2006, in the U.S. District Court for the District of Delaware by NICE against Witness seeking monetary damages and injunctive relief. NICE asserted that various Witness recording products infringed on claims of U.S. Patent Nos. 5,274,738; 5,396,371; 5,819,005; 6,249,570; 6,728,345; 6,775,372; 6,785,370; 6,870,920; 6,959,079; and 7,010,109. These patents cover various aspects for recording customer interaction communications and traditional call logging. A jury trial was held from January 14-22, 2008, and the jury was unable to reach a verdict, resulting in a mistrial. |
• | Declaratory judgment action filed on December 27, 2006, in the U.S. District Court for the Northern District of Georgia by NICE against Witness seeking a declaration that the claims of U.S. Patent No. 6,757,361 (relating to speech analytics) were invalid and that NICE has not infringed this patent. The Court granted our motion to dismiss the case for lack of subject matter jurisdiction on August 10, 2007. |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities |
Year Ended January 31, | Quarter | Low | High | |||||||
2006 | 2/1/05 – 4/30/05 | $ | 29.74 | $ | 40.80 | |||||
5/1/05 – 7/31/05 | $ | 30.18 | $ | 39.59 | ||||||
8/1/05 – 10/31/05 | $ | 36.48 | $ | 42.73 | ||||||
11/1/05 – 1/31/06 | $ | 33.21 | $ | 39.77 | ||||||
2007 | 2/1/06 – 4/30/06 | $ | 31.86 | $ | 37.98 | |||||
5/1/06 – 7/31/06 | $ | 25.14 | $ | 33.89 | ||||||
8/1/06 – 10/31/06 | $ | 26.50 | $ | 33.05 | ||||||
11/1/06 – 1/31/07 | $ | 32.09 | $ | 36.67 | ||||||
2008 | 2/1/07 – 4/30/07 | $ | 28.40 | $ | 32.80 | |||||
5/1/07 – 7/31/07 | $ | 28.40 | $ | 33.25 | ||||||
8/1/07 – 10/31/07 | $ | 23.50 | $ | 30.25 | ||||||
11/1/07 – 1/31/08 | $ | 13.35 | $ | 25.10 |
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May 16, 2002 | January 31, 2003 | January 31, 2004 | January 31, 2005 | January 31, 2006 | January 31, 2007 | January 31, 2008 | ||||||||||||||||||||||
Verint Systems Inc. | $ | 100 | $ | 128.50 | $ | 169.77 | $ | 263.15 | $ | 250.17 | $ | 228.09 | $ | 127.67 | ||||||||||||||
NASDAQ Composite Index | $ | 100 | $ | 90.60 | $ | 159.14 | $ | 152.93 | $ | 183.47 | $ | 181.75 | $ | 178.73 | ||||||||||||||
NASDAQ Computer & Data Processing Index | $ | 100 | $ | 85.53 | $ | 113.76 | $ | 121.70 | $ | 131.70 | $ | 147.19 | $ | 150.86 |
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• | July 2, 2007 and August 23, 2007 — equity awards representing an aggregate of approximately 669,000 shares; |
• | December 7, 2007 — equity awards representing approximately 235,000 shares; |
• | April 10, 2008 and May 28, 2008 — equity awards representing an aggregate of approximately 717,000 shares; |
• | March 4, 2009 — equity awards representing approximately 585,000 shares; and |
• | May 20, 2009 — equity awards representing approximately 458,000 shares. |
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• | July 2, 2007 — equity awards representing approximately 602,000 shares; |
• | December 6, 2007 — equity awards representing approximately 262,000 shares; |
• | May 28, 2008 — equity awards representing approximately 524,000 shares; |
• | March 4, 2009 — equity awards representing approximately 768,000 shares; |
• | March 19, 2009 — equity awards representing approximately 20,000 shares; and |
• | May 20, 2009 — equity awards representing approximately 72,000 shares. |
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(d) | ||||||||||||||||
Maximum number (or | ||||||||||||||||
(c) | approximate dollar value) | |||||||||||||||
(a) | Total number of shares (or | of shares (or units) that | ||||||||||||||
Total number of | (b) | units) purchased as part of | may yet be purchased | |||||||||||||
shares (or units) | Average price paid per | publicly announced plans or | under the plans or | |||||||||||||
Period | purchased | share (or unit) | programs | programs | ||||||||||||
December 2005 | 12,340 | $ | 38.22 | N/A | N/A | |||||||||||
December 2006 | 15,976 | $ | 33.82 | N/A | N/A | |||||||||||
July 2007 | 7,500 | $ | 30.77 | 7,500 | 1 | N/A | 1 | |||||||||
August 2007 | 3,000 | $ | 27.55 | 3,000 | 1 | N/A | 1 | |||||||||
November 2007 | 2,500 | $ | 21.00 | 2,500 | 1 | N/A | 1 |
1 | On June 28, 2007, our board of directors approved a limited stock repurchase program (the “Director Repurchase Program”) to enable us to automatically repurchase, upon vesting, 40% of the shares of restricted stock otherwise deliverable to the independent directors of our board of directors (and such other directors as our board of directors may from time to time designate) upon such vesting in order to enable these directors to make required tax payments. The Director Repurchase Program is effective through the date we become compliant with our SEC reporting obligations. Based on all grants made eligible for the Director Repurchase Program as of the filing date of this report, assuming that the Director Repurchase Program is still in effect at the time of vesting and that all grants vest, the maximum number of shares yet to be repurchased is currently 8,000. In addition, on November 24, 2009, our board of directors approved a limited stock repurchase program (the “Officer Repurchase Program”) to enable us to offer to repurchase from each executive officer the number of shares necessary to satisfy such officer’s minimum tax withholding obligation in connection with equity vesting-related tax events that occur during a company-imposed trading blackout. Our executive officers are not obligated to participate in the Officer Repurchase Program, which is effective through the date we file our Annual Report on Form 10-K for the year ending January 31, 2010 and is not limited to a set number of shares. |
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Consolidated Statements of Operations Data | ||||||||||||||||||||
For the Years Ended January 31, | ||||||||||||||||||||
(in thousands, except per share data) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||
Revenue | $ | 534,543 | $ | 368,778 | $ | 278,754 | $ | 214,038 | $ | 174,132 | ||||||||||
Operating income (loss) | $ | (114,630 | ) | $ | (47,253 | ) | $ | 4,112 | $ | (15,074 | ) | $ | 5,609 | |||||||
Net income (loss) | $ | (198,609 | ) | $ | (40,519 | ) | $ | 1,664 | $ | 19,027 | $ | 2,276 | ||||||||
Net income (loss) applicable to common shares | $ | (207,290 | ) | $ | (40,519 | ) | $ | 1,664 | $ | 19,027 | $ | 2,276 | ||||||||
Net income (loss) per share: | ||||||||||||||||||||
Basic | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | $ | 0.62 | $ | 0.08 | ||||||||
Diluted | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | $ | 0.59 | $ | 0.08 | ||||||||
Weighted-average shares: | ||||||||||||||||||||
Basic | 32,222 | 32,156 | 31,781 | 30,881 | 27,831 | |||||||||||||||
Diluted | 32,222 | 32,156 | 32,620 | 32,175 | 29,083 | |||||||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||||
As of January 31, | ||||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
(Restated) | (Restated) | |||||||||||||||||||
Total assets | $ | 1,492,275 | $ | 593,676 | $ | 609,558 | $ | 529,761 | $ | 414,639 | ||||||||||
Long-term debt, including current maturities | 610,000 | 1,058 | 1,325 | 1,823 | 1,889 | |||||||||||||||
Preferred stock | 293,663 | — | — | — | — | |||||||||||||||
Total stockholders’ equity | 29,298 | 197,604 | 219,632 | 203,074 | 151,045 |
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• | an increase in revenue of $123.1 million; |
• | additional amortization of intangible assets of $22.6 million; |
• | a $6.4 million charge for in-process research and development; |
• | integration costs of $11.0 million incurred to support and facilitate the combination of Verint and Witness into a single organization; |
• | legal fees of $8.7 million associated with pre-existing litigation between Witness and a competitor; |
• | interest expense on our term loan of $34.4 million; |
• | realized and unrealized losses on our interest rate swap of $29.2 million; and |
• | unrealized gains of $7.2 million on an embedded derivative financial instrument related to the variable dividend feature of our preferred stock. |
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Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||
For the Years Ended January 31, | ||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
(in thousands, except per share data) | As Reported | Adjustments | As Restated | As Reported | Adjustments | As Restated | ||||||||||||||||||
Revenue | $ | 249,824 | $ | (35,786 | ) | $ | 214,038 | $ | 192,744 | $ | (18,612 | ) | $ | 174,132 | ||||||||||
Cost of revenue | 112,774 | (494 | ) | 112,280 | 89,302 | (6,075 | ) | 83,227 | ||||||||||||||||
Gross profit | 137,050 | (35,292 | ) | 101,758 | 103,442 | (12,537 | ) | 90,905 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development, net | 31,961 | (2,644 | ) | 29,317 | 23,233 | (3,676 | ) | 19,557 | ||||||||||||||||
Selling, general and administrative | 83,070 | 1,291 | 84,361 | 63,020 | 2,719 | 65,739 | ||||||||||||||||||
In-process research and development | 3,154 | — | 3,154 | — | — | — | ||||||||||||||||||
Acquisition-related write-downs (1) | 1,481 | (1,481 | ) | — | — | — | — | |||||||||||||||||
Total operating expenses | 119,666 | (2,834 | ) | 116,832 | 86,253 | (957 | ) | 85,296 | ||||||||||||||||
Operating income (loss) | 17,384 | (32,458 | ) | (15,074 | ) | 17,189 | (11,580 | ) | 5,609 | |||||||||||||||
Other income, net | 3,618 | 374 | 3,992 | 2,670 | 82 | 2,752 | ||||||||||||||||||
Income (loss) before income taxes | 21,002 | (32,084 | ) | (11,082 | ) | 19,859 | (11,498 | ) | 8,361 | |||||||||||||||
Provision for (benefit from) income taxes | 1,930 | (32,039 | ) | (30,109 | ) | 1,921 | 4,164 | 6,085 | ||||||||||||||||
Net income (loss) | $ | 19,072 | $ | (45 | ) | $ | 19,027 | $ | 17,938 | $ | (15,662 | ) | $ | 2,276 | ||||||||||
Net income (loss) per share | ||||||||||||||||||||||||
Basic | $ | 0.62 | $ | — | $ | 0.62 | $ | 0.65 | $ | (0.57 | ) | $ | 0.08 | |||||||||||
Diluted | $ | 0.58 | $ | 0.01 | $ | 0.59 | $ | 0.61 | $ | (0.53 | ) | $ | 0.08 | |||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||
Basic | 30,894 | (13 | ) | 30,881 | 27,690 | 141 | 27,831 | |||||||||||||||||
Diluted | 32,626 | (451 | ) | 32,175 | 29,437 | (354 | ) | 29,083 | ||||||||||||||||
(1) | $1.5 million of acquisition-related write-downs was reclassified to cost of revenue to correctly present the acquisition-related write-downs in accordance with GAAP. |
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Condensed Consolidated Balance Sheets | ||||||||||||||||||||||||
As of January 31, | ||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
(in thousands) | As reported | Adjustments | As Restated | As reported | Adjustments | As Restated | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 45,100 | $ | (177 | ) | $ | 44,923 | $ | 77,516 | $ | (76 | ) | $ | 77,440 | ||||||||||
Restricted cash and bank time deposits | — | 177 | 177 | — | 76 | 76 | ||||||||||||||||||
Short-term investments | 195,314 | — | 195,314 | 151,197 | — | 151,197 | ||||||||||||||||||
Accounts receivable, net | 39,072 | (6,309 | ) | 32,763 | 31,856 | (8,790 | ) | 23,066 | ||||||||||||||||
Inventories | 17,267 | 994 | 18,261 | 15,833 | 2,499 | 18,332 | ||||||||||||||||||
Receivables from affiliates | — | 1,221 | 1,221 | 1,824 | 3,922 | 5,746 | ||||||||||||||||||
Property and equipment, net | 17,540 | (49 | ) | 17,491 | 14,129 | (7 | ) | 14,122 | ||||||||||||||||
Goodwill | 49,625 | 44 | 49,669 | 14,364 | 293 | 14,657 | ||||||||||||||||||
Intangible assets, net | 12,026 | (83 | ) | 11,943 | 2,051 | (27 | ) | 2,024 | ||||||||||||||||
Capitalized software development costs, net (1) | 9,728 | 86 | 9,814 | 10,815 | 172 | 10,987 | ||||||||||||||||||
Other assets | 13,306 | 134,879 | 148,185 | 9,121 | 87,871 | 96,992 | ||||||||||||||||||
Total assets | $ | 398,978 | $ | 130,783 | $ | 529,761 | $ | 328,706 | $ | 85,933 | $ | 414,639 | ||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||
Accounts payable and accrued expenses | $ | 67,012 | $ | 16,517 | $ | 83,529 | $ | 49,564 | $ | 9,380 | $ | 58,944 | ||||||||||||
Deferred revenue | 41,086 | 184,865 | 225,951 | 26,701 | 151,560 | 178,261 | ||||||||||||||||||
Liabilities to affiliates | 2,154 | (768 | ) | 1,386 | �� | 1,178 | (26 | ) | 1,152 | |||||||||||||||
Other liabilities (2) | 5,351 | 10,470 | 15,821 | 6,595 | 18,642 | 25,237 | ||||||||||||||||||
Total liabilities | 115,603 | 211,084 | 326,687 | 84,038 | 179,556 | 263,594 | ||||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||||
Common stock | 32 | — | 32 | 30 | — | 30 | ||||||||||||||||||
Additional paid-in capital | 282,364 | 39,576 | 321,940 | 262,472 | 24,844 | 287,316 | ||||||||||||||||||
Unearned stock-based compensation | (3,395 | ) | — | (3,395 | ) | (1,615 | ) | — | (1,615 | ) | ||||||||||||||
Retained earnings (accumulated deficit) | 2,155 | (116,902 | ) | (114,747 | ) | (16,917 | ) | (116,857 | ) | (133,774 | ) | |||||||||||||
Accumulated other comprehensive income (loss) | 2,219 | (2,975 | ) | (756 | ) | 698 | (1,610 | ) | (912 | ) | ||||||||||||||
Total stockholders’ equity | 283,375 | (80,301 | ) | 203,074 | 244,668 | (93,623 | ) | 151,045 | ||||||||||||||||
Total liabilities and stockholders’ equity | $ | 398,978 | $ | 130,783 | $ | 529,761 | $ | 328,706 | $ | 85,933 | $ | 414,639 | ||||||||||||
(1) | Previously presented within Other assets. | |
(2) | Includes liability of $2,125 and $1,586 for severance pay as of January 31, 2005 and 2004, respectively, and a convertible note of $2,200 as of January 31, 2004, all previously reported separately. |
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Accumulated deficit as originally reported — January 31, 2003 | $ | (34,855 | ) | |
Restatement adjustments: | ||||
Phase I — Stock-based compensation | (18,135 | ) | ||
Phase II — Other restatement adjustments | 4,376 | |||
Revenue recognition | (145,176 | ) | ||
Cost of revenue | 54,479 | |||
Other restatement adjustments | 1,064 | |||
(103,392 | ) | |||
Income tax benefit | 2,197 | |||
Total impact of restatement on opening accumulated deficit | (101,195 | ) | ||
Accumulated deficit as restated — January 31, 2003 | $ | (136,050 | ) | |
• | Revenue adjustments reflect the net impact of the recognition of revenue over longer periods of time than originally recorded for those multiple element arrangements for which we were unable to determine the fair value of undelivered elements, or where the criteria for revenue recognition was otherwise not met; |
• | Adjustments to cost of revenue reflect the net impact of the deferral or recognition of the cost of revenue associated with the corresponding revenue adjustments; |
• | Cost of revenue has also been adjusted to reflect the reclassification of certain expenses previously classified as research and development expenses into cost of revenue. These adjustments also account for the reduction in research and development expenses; |
• | Cost of revenue and operating expenses have been adjusted to reflect adjustments to stock-based compensation expense, relating to grants by Comverse of options to acquire Comverse common stock, pursuant to the Phase I review performed by Comverse’s Special Committee; |
• | Cost of revenue and operating expenses have been adjusted to reflect adjustments to reserves and accruals pursuant to the Phase II investigation performed by our audit committee; |
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• | The provision for (benefit from) income taxes has been adjusted to reflect the anticipated income tax consequences of all restatement adjustments; |
• | Certain restricted cash balances have been reclassified from cash and cash equivalents and into restricted cash and time deposits; |
• | Accounts receivable has been adjusted as a result of our revenue recognition corrections, primarily to present accounts receivable net of related deferred revenue; |
• | Certain previously recognized cost of revenue deferrals have been reclassified from inventories to deferred cost of revenue within other assets; |
• | Property and equipment, net, goodwill, intangible assets, net, and capitalized software development costs, net, have been adjusted to reflect the impact of correcting misstatements identified during our restatement process. |
• | We have recorded sizeable increases in deferred revenue and deferred cost of revenue resulting from our revenue recognition corrections. Deferred cost of revenue is reflected within other assets; |
• | Accounts payable and accrued expenses have been adjusted to reflect adjustments to reserves and accruals pursuant to the Phase II investigation performed by our audit committee. Accounts payable and accrued expenses have also been adjusted to reflect the impact of correcting misstatements identified during our restatement process. |
• | Additional paid-in capital has been corrected to reflect adjustments to stock-based compensation expense pursuant to the Phase I review performed by Comverse’s Special Committee; |
• | The changes to accumulated deficit reflect the cumulative impact of all corrections to our statement of operations for periods up to and through the balance sheet date; |
• | The changes to accumulated other comprehensive income (loss) reflect the impact of foreign currency translation on corrected balance sheet accounts with functional currencies other than the U.S. Dollar. |
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Impact of Restatement | ||||||||||||||||||||||||||||||||
Cost of | Phase I | Phase II | Other | Total | Income Tax | Total | ||||||||||||||||||||||||||
Revenue | Revenue | Adjustments | Adjustments | Adjustments | Adjustments, | Effect of All | Adjustments, | |||||||||||||||||||||||||
(in thousands) | (1) | (2) | (3) | (4) | (5) | Before Taxes | Adjustments | Net of Taxes | ||||||||||||||||||||||||
Increase (Decrease) to Earnings | ||||||||||||||||||||||||||||||||
Period: | ||||||||||||||||||||||||||||||||
Cumulative effect on February 1, 2003 opening retained earnings | $ | (145,176 | ) | $ | 54,479 | $ | (18,135 | ) | $ | 4,376 | $ | 1,064 | $ | (103,392 | ) | $ | 2,197 | $ | (101,195 | ) | ||||||||||||
Year ended January 31, 2004 | (20,873 | ) | 10,421 | (111 | ) | (2,170 | ) | 1,235 | (11,498 | ) | (4,164 | ) | (15,662 | ) | ||||||||||||||||||
Year ended January 31, 2005 | (37,422 | ) | 7,234 | (57 | ) | (1,486 | ) | (353 | ) | (32,084 | ) | 32,039 | (45 | ) | ||||||||||||||||||
Cumulative effect on February 1, 2005 opening retained earnings | (203,471 | ) | 72,134 | (18,303 | ) | 720 | 1,946 | (146,974 | ) | 30,072 | (116,902 | ) | ||||||||||||||||||||
Nine month period ended October 31, 2005 | (36,722 | ) | 11,611 | (28 | ) | 99 | 626 | (24,414 | ) | 2,736 | (21,678 | ) | ||||||||||||||||||||
Total adjustments | $ | (240,193 | ) | $ | 83,745 | $ | (18,331 | ) | $ | 819 | $ | 2,572 | $ | (171,388 | ) | $ | 32,808 | $ | (138,580 | ) | ||||||||||||
1) | Because they do not affect our reported income (loss) before income tax and noncontrolling interest or net income (loss) in any period, these restatement adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. |
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2) | Includes cost of revenue as well as certain operating costs that vary directly with revenue. These adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. | |
3) | Includes impact of errors identified in the Phase I review. Further details of these adjustments by year are presented in the table below. | |
4) | Includes impact of errors identified in the Phase II investigation, primarily relating to impacts to reserves, as well as certain revenue recognition matters unrelated to our VSOE/revenue recognition review and account classifications. | |
5) | Includes adjustments to correct misstatements identified during our restatement process that were not related to historical stock option practices, reserves, or revenue recognition. |
• | $26 million in the three-month period ended January 31, 2006; |
• | $84 million in the year ended January 31, 2007; |
• | $48 million in the year ended January 31, 2008; |
• | $34 million in the year ended January 31, 2009; |
• | $25 million in the year ended January 31, 2010; |
• | $12 million in the year ending January 31, 2011; and |
• | $11 million thereafter. |
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Impact of Phase I Adjustments by Period | ||||
(in thousands) | ||||
Year ended January 31, 1991 | $ | 3 | ||
Year ended January 31, 1992 | 5 | |||
Year ended January 31, 1993 | 94 | |||
Year ended January 31, 1994 | 34 | |||
Year ended January 31, 1995 | 95 | |||
Year ended January 31, 1996 | 171 | |||
Year ended January 31, 1997 | 184 | |||
Year ended January 31, 1998 | 15 | |||
Year ended January 31, 1999 | 393 | |||
Year ended January 31, 2000 | 2,147 | |||
Year ended January 31, 2001 | 5,829 | |||
Year ended January 31, 2002 | 3,881 | |||
Year ended January 31, 2003 | 5,284 | |||
Cumulative effect on February 1, 2003 opening retained earnings | 18,135 | |||
Year ended January 31, 2004 | 111 | |||
Year ended January 31, 2005 | 57 | |||
Cumulative effect on February 1, 2005 opening retained earnings | 18,303 | |||
Nine-month period ended October 31, 2005 | 28 | |||
Total Adjustments | $ | 18,331 | ||
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• | establishing an Internal Audit Department, which reports directly to our audit committee; |
• | updating our Employee Code of Business Conduct and Ethics and implementing a new Finance and Accounting Code of Conduct that serves as a set of guiding principles emphasizing our commitment to integrity in financial and accounting reporting, as well as transparency and robust and complete communications with, and disclosures to, internal and external auditors; |
• | revising and enhancing our revenue recognition policies and controls, including |
• | appointing a VP Finance and Global Revenue Controller and Regional Revenue Controllers, and establishing a centralized revenue recognition department to address complex revenue recognition matters and to provide oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting application; and |
• | designing and implementing enhanced information technology systems and user applications, including a broader and more sophisticated implementation of our Enterprise Resource Planning system; |
• | engaging external subject matter experts to assist in developing, implementing, and/or enhancing accounting and finance-related policies and procedures, including |
• | advising on the accounting for and disclosure of stock-based compensation matters; |
• | assisting in developing and implementing a formal remediation plan; and |
• | assisting in developing, implementing and/or enhancing revenue recognition, account reconciliations, journal entry review/approval procedures, end-user computing, fixed assets, and reserve and accrual analyses; |
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• | revising our policies and procedures regarding the manner in which transactions are to be documented, the level of support required for documenting management’s judgments and related document retention procedures, including |
• | implementing a record retention program to centralize global finance documentation in a standard repository; |
• | engaging external subject matter experts with specialized international and consolidated income tax knowledge to assist in creating,implementing, and documenting a consolidated tax process; and |
• | expanding our accounting policy and controls organization by creating and filling new positions with qualified accounting and finance personnel, including a new Chief Financial Officer, a new Senior Vice President Finance and Corporate Controller, and a Vice President of Global Accounting as well as creating the position of Chief Compliance Officer. |
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• | The Workforce Optimization segment (comprising our legacy business intelligence solutions business and Witness’ entire business) became, and continues to be, our largest business, as measured by revenue and assets. As of January 31, 2008, our Workforce Optimization segment represented approximately 49% of our revenue; |
• | the acquisition of Witness increased the software portion of our product mix, which increased our gross margins and has provided us with more recurring maintenance revenue; |
• | our customer base has increased to more than 10,000 organizations; |
• | we incurred approximately $650.0 million of indebtedness to finance a portion of the Witness acquisition. See “- Liquidity and Capital Resources Requirements” below; and |
• | we issued 293,000 shares of preferred stock to Comverse at an aggregate purchase price of $293.0 million to finance a portion of the Witness acquisition, which increased Comverse’s majority ownership position in us to approximately 67% (assuming conversion of all of the preferred stock into common stock). See “Certain Relationships and Related Transactions, and Director Independence” under Item 13. |
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• | Continue to drive the development of Actionable Intelligence solutions for unstructured data. We were a pioneer in the development of solutions that help businesses and governmental organizations derive intelligence from unstructured data (such as telephone conversations, video streams, email and Internet communications, etc.) to help them make better decisions. We believe that traditional business intelligence solutions, which have generally been designed for structured data stored in relational databases, cannot easily analyze this unstructured information and that the market opportunity for Actionable Intelligence solutions is still in its early stages. We intend to continue to drive the adoption of Actionable Intelligence solutions by delivering solutions to the workforce optimization and security intelligence markets designed to provide a high return on investment. |
• | Maintain market leadership through innovation and customer centricity. We believe that to compete successfully we must continue to introduce solutions that better enable customers to derive Actionable Intelligence from their unstructured data. In order to do this, we intend to continue to make significant investment in research and development and to protect our intellectual property through patents and other means. We must continue to be in regular dialog with our customer base in order to understand their business objectives and requirements. |
• | Grow through acquisitions, in addition to organic growth. Companies in our markets continue to consolidate, and we believe this trend will continue. We examine acquisition opportunities regularly as a means to add technology, increase our geographic presence, enhance our market leadership, or expand into adjacent markets. Historically, we have engaged in acquisitions for all of these purposes and expect to continue to do so in the future when strategic opportunities arise. |
• | Expand our market presence through OEM and partner relationships.We offer our products and solutions to customers both directly and indirectly. For our indirect sales, we have expanded our relationships with OEMs and other channel partners. We believe these relationships broaden our market coverage, particularly in the SMB portion of the market, though in these arrangements, the partner has the primary relationship with the customer. We believe this is an important part of our growth strategy and intend to expand existing relationships while creating new relationships. |
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• | Completion of our outstanding SEC filings. The prolonged period of being a delayed filer has limited the information we have been able to provide to the public and other interested parties, including customers, partners, and bank lenders. This has had an adverse impact upon relationships with customers and partners and, we believe, upon our actual results. |
• | Decreased information technology spending. During the current global recession, information technology spending has decreased, and the market for our products and services has been adversely affected. Customers are delaying, reducing, and eliminating their spending on information technology, and we believe this has adversely affected our results. |
• | Market acceptance of Actionable Intelligence for unstructured data, particularly analytics. We are in an early stage market where the value of certain aspects of our products and solutions is still in the process of market acceptance. We believe that our future growth depends in part on the continued and increasing acceptance of the value of our data analytics across our product offerings. |
• | Our ownership and capital structure constrains investment and growth. We have a majority stockholder that can effectively control our business and affairs. We also are subject to various restrictive covenants under our credit facility, as well as a leverage ratio financial covenant. As a result, our current capital structure limits our ability to issue equity, incur additional debt or make certain investments in our business. We are also limited in our ability to raise additional capital until such time that we have filed certain additional late periodic reports. These limitations may impede our ability to execute upon our business strategy. |
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• | future expected cash flows from software license sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies; |
• | expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed; |
• | the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio; |
• | cost of capital and discount rates; and |
• | estimating the useful lives of acquired assets as well as the pattern or manner in which the assets will amortize. |
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For the Years Ended January 31, | ||||||||||||
(in thousands, except per share data) | 2008 | 2007 | 2006 | |||||||||
Total revenue | $ | 534,543 | $ | 368,778 | $ | 278,754 | ||||||
Operating income (loss) | $ | (114,630 | ) | $ | (47,253 | ) | $ | 4,112 | ||||
Net income (loss) applicable to common shares | $ | (207,290 | ) | $ | (40,519 | ) | $ | 1,664 | ||||
Net income (loss) per share | ||||||||||||
Basic and diluted | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | ||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Workforce Optimization | $ | 260,938 | $ | 125,982 | $ | 68,500 | 107 | % | 84 | % | ||||||||||
Video Intelligence | 147,225 | 122,681 | 102,225 | 20 | % | 20 | % | |||||||||||||
Communications Intelligence | 126,380 | 120,115 | 108,029 | 5 | % | 11 | % | |||||||||||||
Total revenue | $ | 534,543 | $ | 368,778 | $ | 278,754 | 45 | % | 32 | % | ||||||||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Product revenue | $ | 333,130 | $ | 251,584 | $ | 187,253 | 32 | % | 34 | % | ||||||||||
Service and support revenue | 201,413 | 117,194 | 91,501 | 72 | % | 28 | % | |||||||||||||
Total revenue | $ | 534,543 | $ | 368,778 | $ | 278,754 | 45 | % | 32 | % | ||||||||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Product cost of revenue | $ | 121,627 | $ | 116,274 | $ | 88,996 | 5 | % | 31 | % | ||||||||||
Service and support cost of revenue | 100,397 | 48,175 | 40,598 | 108 | % | 19 | % | |||||||||||||
Amortization and impairment of acquired technology and backlog | 8,018 | 7,664 | 5,017 | 5 | % | 53 | % | |||||||||||||
Settlement with OCS | — | 19,158 | — | -100 | % | 0 | % | |||||||||||||
Total cost of revenue | $ | 230,042 | $ | 191,271 | $ | 134,611 | 20 | % | 42 | % | ||||||||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Research and development, net | $ | 87,668 | $ | 53,029 | $ | 34,889 | 65 | % | 52 | % | ||||||||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Selling, general and administrative | $ | 259,183 | $ | 148,229 | $ | 98,399 | 75 | % | 51 | % | ||||||||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Amortization of other acquired intangible assets | $ | 19,668 | $ | 3,164 | $ | 1,337 | 522 | % | 137 | % | ||||||||||
For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
In-process research and development | $ | 6,682 | $ | — | $ | 2,852 | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Intangible asset impairment | $ | 2,295 | $ | 838 | $ | — | ||||||
Goodwill impairment | 20,639 | 20,265 | — | |||||||||
Impairments of goodwill and other acquired intangible assets | $ | 22,934 | $ | 21,103 | $ | — | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Integration costs | $ | 10,980 | $ | — | $ | — | ||||||
Restructuring costs | 3,308 | — | — | |||||||||
Other legal costs | 8,708 | — | 2,554 | |||||||||
Gain on sale of land | — | (765 | ) | — | ||||||||
Integration, restructuring and other, net | $ | 22,996 | $ | (765 | ) | $ | 2,554 | |||||
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Interest income | $ | 5,443 | $ | 8,835 | $ | 8,503 | (38 | %) | 4 | % | ||||||||||
Interest expense | (36,862 | ) | (444 | ) | (310 | ) | * | 43 | % | |||||||||||
Other income (expense): | ||||||||||||||||||||
Gains (losses) on investments | (4,713 | ) | 360 | 1 | * | * | ||||||||||||||
Foreign currency gains (losses), net | 1,431 | (919 | ) | (151 | ) | (256 | %) | 509 | % | |||||||||||
Losses on derivatives, net | (20,407 | ) | — | — | * | 0 | % | |||||||||||||
Other, net | (78 | ) | (36 | ) | (48 | ) | 117 | % | (25 | %) | ||||||||||
Other expense | (23,767 | ) | (595 | ) | (198 | ) | * | 201 | % | |||||||||||
Total other income (expense), net | $ | (55,186 | ) | $ | 7,796 | $ | 7,995 | (808 | %) | (2 | %) | |||||||||
* | Percentage is not meaningful. |
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For the Years Ended January 31, | % Change | |||||||||||||||||||
2008 – | 2007 – | |||||||||||||||||||
(in thousands) | 2008 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
Provision for income taxes | $ | 27,729 | $ | 141 | $ | 9,625 | * | (99 | %) | |||||||||||
* | Percentage is not meaningful. |
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For the Quarters Ended | ||||||||||||||||||||||||||||||||
Jan. 31, | Oct. 31, | Jul. 31, | Apr. 30, | Jan. 31, | Oct. 31, | Jul. 31, | Apr. 30, | |||||||||||||||||||||||||
(In thousands, except per share data) | 2008 | 2007 | 2007 | 2007 | 2007 | 2006 | 2006 | 2006 | ||||||||||||||||||||||||
Revenue | $ | 158,712 | $ | 158,135 | $ | 128,325 | $ | 89,371 | $ | 100,759 | $ | 82,337 | $ | 92,327 | $ | 93,355 | ||||||||||||||||
Cost of revenue | 61,415 | 64,421 | 56,230 | 39,958 | 42,427 | 35,754 | 40,792 | 45,476 | ||||||||||||||||||||||||
Amortization and impairment of acquired technology and backlog | 2,819 | 2,468 | 2,039 | 692 | 4,255 | 850 | 1,559 | 1,000 | ||||||||||||||||||||||||
Settlement with OCS | — | — | — | — | — | — | 19,158 | — | ||||||||||||||||||||||||
Gross profit | 94,478 | 91,246 | 70,056 | 48,721 | 54,077 | 45,733 | 30,818 | 46,879 | ||||||||||||||||||||||||
Research and development, net | 24,361 | 23,278 | 22,933 | 17,096 | 13,675 | 13,534 | 13,157 | 12,663 | ||||||||||||||||||||||||
Selling, general and administrative | 80,476 | 72,306 | 63,090 | 43,311 | 43,217 | 36,703 | 34,351 | 33,958 | ||||||||||||||||||||||||
Amortization of other acquired intangible assets | 6,941 | 6,961 | 5,264 | 502 | 837 | 929 | 689 | 709 | ||||||||||||||||||||||||
In-process research and development | — | — | 6,439 | 243 | — | — | — | — | ||||||||||||||||||||||||
Impairment of goodwill and other acquired intangible assets | 22,934 | — | — | — | 21,103 | — | — | — | ||||||||||||||||||||||||
Integration, restructuring and other, net | 9,216 | 5,836 | 7,705 | 239 | — | (765 | ) | — | — | |||||||||||||||||||||||
Income (loss) from operations | (49,450 | ) | (17,135 | ) | (35,375 | ) | (12,670 | ) | (24,755 | ) | (4,668 | ) | (17,379 | ) | (451 | ) | ||||||||||||||||
Other income (expense), net | (29,195 | ) | (17,734 | ) | (9,316 | ) | 1,059 | 1,758 | 1,818 | 2,559 | 1,661 | |||||||||||||||||||||
Income (loss) before taxes and noncontrolling interest | (78,645 | ) | (34,869 | ) | (44,691 | ) | (11,611 | ) | (22,997 | ) | (2,850 | ) | (14,820 | ) | 1,210 | |||||||||||||||||
Provision for (benefit from) income taxes | (104 | ) | (3 | ) | 30,676 | (2,840 | ) | (1,757 | ) | 329 | 1,701 | (132 | ) | |||||||||||||||||||
Noncontrolling interest in net income (loss) of joint venture | 149 | 235 | 244 | 436 | 324 | (16 | ) | 184 | 429 | |||||||||||||||||||||||
Net income (loss) | (78,690 | ) | (35,101 | ) | (75,611 | ) | (9,207 | ) | (21,564 | ) | (3,163 | ) | (16,705 | ) | 913 | |||||||||||||||||
Dividends on preferred stock | (3,197 | ) | (3,164 | ) | (2,320 | ) | — | — | — | — | — | |||||||||||||||||||||
Net income (loss) applicable to common shares | $ | (81,887 | ) | $ | (38,265 | ) | $ | (77,931 | ) | $ | (9,207 | ) | $ | (21,564 | ) | $ | (3,163 | ) | $ | (16,705 | ) | $ | 913 | |||||||||
Net income (loss) per share | ||||||||||||||||||||||||||||||||
Basic | $ | (2.54 | ) | $ | (1.19 | ) | $ | (2.42 | ) | $ | (0.29 | ) | $ | (0.67 | ) | $ | (0.10 | ) | $ | (0.52 | ) | $ | 0.03 | |||||||||
Diluted | $ | (2.54 | ) | $ | (1.19 | ) | $ | (2.42 | ) | $ | (0.29 | ) | $ | (0.67 | ) | $ | (0.10 | ) | $ | (0.52 | ) | $ | 0.03 | |||||||||
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As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Cash and cash equivalents | $ | 83,233 | $ | 49,325 | $ | 55,730 | ||||||
Short-term investments | — | 127,453 | 167,922 | |||||||||
Total cash, cash equivalents, and short-term investments | $ | 83,233 | $ | 176,778 | $ | 223,652 | ||||||
Preferred stock (at carrying value) | $ | 293,663 | $ | — | $ | — | ||||||
Long-term debt | $ | 610,000 | $ | 1,058 | $ | 1,325 | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Net cash provided by (used in) operating activities | $ | (299 | ) | $ | 9,099 | $ | 58,273 | |||||
Net cash used in investing activities | (851,733 | ) | (15,086 | ) | (56,019 | ) | ||||||
Net cash provided by (used in) financing activities | 885,017 | (1,089 | ) | 8,993 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 923 | 671 | (440 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | 33,908 | $ | (6,405 | ) | $ | 10,807 | |||||
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Payments due by period | ||||||||||||||||||||
(in thousands) | Total | < 1 year | 1-3 years | 3-5 years | > 5 years | |||||||||||||||
Long-term debt obligations, including interest | $ | 909,552 | $ | 42,875 | $ | 119,212 | $ | 104,573 | $ | 642,892 | ||||||||||
Operating lease obligations | 63,036 | 12,492 | 21,402 | 18,355 | 10,787 | |||||||||||||||
Purchase obligations | 25,105 | 23,775 | 1,318 | 8 | 4 | |||||||||||||||
Other long-term obligations | 2,900 | 600 | 1,200 | 1,100 | — | |||||||||||||||
Total contractual obligations | $ | 1,000,593 | $ | 79,742 | $ | 143,132 | $ | 124,036 | $ | 653,683 | ||||||||||
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• | FSP No. FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(“FSP FAS 157-4”); | ||
• | FSP No. FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments(“FSP FAS 115-2”); and | ||
• | FSP No. FAS 107-1 and APB 28-1,Interim Disclosures About Fair Value of Financial Instruments(“FSP FAS 107-1”). |
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• | Issue No. 08-1,Revenue Arrangements with Multiple Deliverables(“EITF No. 08-1”); and | ||
• | Issue No. 09-3,Certain Revenue Arrangements That Include Software Elements(“EITF No. 09-3”). |
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• | Risk Assessment |
• | Monitoring |
• | Financial Reporting |
a) | Inadequate policies and procedures. We did not design, establish, and maintain effective documented GAAP compliant financial accounting policies and procedures, nor a formalized process for determining, documenting, communicating, implementing, monitoring, and updating accounting policies and procedures, including policies and procedures related to significant, complex, and non-routine transactions. | ||
b) | Journal entries.We did not design, establish, and maintain effective procedures for ensuring adequate review, approval, and existence of sufficient supporting documentation over journal entries, both recurring and non-recurring. | ||
c) | Accruals and Reserves. We did not design, establish, and maintain effective policies and procedures and documentation requirements as they relate to accrued liabilities and reserves, including those accounts requiring significant management estimates and judgment. |
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d) | Account reconciliations. We did not design, establish, and maintain effective controls over the preparation, timely review, and documented approval of account reconciliations. Specifically, we did not have effective controls over the completeness and accuracy of supporting schedules. | ||
e) | Inadequate segregation of duties within financial systems. In various accounting processes, applications, and systems we did not design effective controls to adequately segregate job responsibilities and system access for initiating, authorizing, and recording transactions, nor were there adequate mitigating or monitoring controls in place. Specifically, we did not perform an analysis of financial reporting job responsibilities and system user access, including information technology (“IT”) personnel, in order to establish effective segregation of responsibilities. | ||
f) | Deficiencies in end-user computing controls of critical spreadsheets. We did not design, establish or maintain adequate controls over the access, completeness, accuracy, validity, and review of, certain spreadsheet information that supports the financial reporting process. | ||
g) | Property and Equipment.We did not have adequate controls over our property and equipment process, as we did not maintain effective controls over the existence, completeness, and accuracy of our property and equipment and recording of depreciation and amortization expense. In addition, effective controls were not designed and in place for appropriate classification of our property and equipment and the selection and consistent application of useful lives. | ||
• | Equity Compensation |
a) | Inaccurate accounting and disclosure.We did not maintain adequate procedures or effective controls over accounting, communication, and disclosure of compensation expense related to awards. Specifically, we lacked a process of financial and administrative oversight over the stock-based compensation process. | ||
b) | Administration of awards. We did not maintain effective controls as it related to the reconciliation of source data and sufficient procedures to ensure that grantees were notified in a timely manner. | ||
c) | Insufficient tracking of employee data.We did not maintain adequate procedures or effective controls over reporting changes affecting employees and other award holders (e.g., terminations) that ultimately impacted the timely accounting for compensation expense. |
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• | Revenue and Cost of Revenue |
a) | we lacked sufficient personnel with appropriate knowledge, experience, and training in the complexities of software revenue recognition; | ||
b) | we did not establish adequate procedures or effective controls to determine VSOE of fair value for installation, training services, or certain PCS agreements; | ||
c) | we did not establish adequate procedures or effective controls to determine proper accounting treatment for multiple element sales arrangements in accordance with SOP 97-2; | ||
d) | we did not establish adequate procedures or effective controls to ensure that all elements included in a multiple element arrangement were timely identified and measured including establishment of VSOE of fair value for undelivered elements; | ||
e) | we did not establish adequate procedures or effective controls to identify the nature of projects, capture the necessary data, and determine the appropriate accounting treatment for arrangements subject to contract accounting; | ||
f) | we did not establish or maintain appropriate policies and procedures to identify, capitalize, and amortize product costs associated with revenue arrangements for which related revenue had been deferred; | ||
g) | we did not establish adequate procedures or effective controls to identify sufficient evidence of customer delivery and acceptance; and | ||
h) | we lacked consistent communication and coordination between and among the various finance and non-finance organizations across the company on the scope and terms of customer arrangements, including the proper identification of all undelivered contractual obligations that impacted revenue recognition. |
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• | Income Taxes |
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• | appointed a new Chief Financial Officer effective December 2006; | ||
• | established an internal audit department in March 2008, which reports directly to the audit committee. Our internal audit department continues to be expanded and strengthened by hiring additional qualified staff as well as increasing the number of external consultants engaged; | ||
• | appointed a VP Finance and Global Revenue Controller and Regional Revenue Controllers, and established a centralized revenue recognition department to address complex revenue recognition matters, and to provide oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting application; | ||
• | appointed our Chief Legal Officer as Chief Compliance Officer in September 2008, and established a robust world-wide compliance program; | ||
• | hired a new Senior Vice President Finance and Corporate Controller; | ||
• | appointed a Vice President of Global Accounting to help ensure accurate, consistent application of GAAP; | ||
• | engaged a large global public accounting firm to act as an external subject matter expert with respect to the accounting for and disclosure of stock-based compensation related matters, including providing additional SFAS No. 123(R), training and accounting assistance. Centralized responsibility for the administration of stock-based compensation within the purview of the Senior Vice President and Corporate Controller; |
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• | established a corporate tax department in the first quarter of the year ended January 31, 2009, which now includes a Vice President, Domestic Director, International Director, and two full-time tax accountants, assisted by external expert tax advisors to prepare and/or review significant tax provisions in accordance with SFAS No. 109,Accounting for Income Taxes/ FIN 48, Accounting for Uncertainty in Income Taxes / APB 28,Interim Financial Reporting/ FIN 18,Accounting for Income Taxes in Interim Periods,as well as any changes in local law. In the first quarter of 2009, we implemented a tax provision software program designed to prepare the consolidated tax provision and related SFAS No. 109 footnote disclosures; | ||
• | engaged external subject matter experts with specialized international and consolidated income tax knowledge to assist in creating and implementing and documenting a consolidated tax process; | ||
• | performed a detailed Sarbanes-Oxley scoping and risk analysis and global fraud risk assessment for the year ending January 31, 2010 to properly identify material locations; | ||
• | engaged external subject matter experts to assist in developing and implementing a formal remediation plan; | ||
• | updated our Employee Code of Business Conduct and Ethics and implemented a new Finance and Accounting Code of Conduct that serves as a set of guiding principles emphasizing our commitment to financial and accounting reporting integrity, as well as transparency and robust and complete communications with, and disclosures to, internal and external auditors; annually, all finance department personnel are required to acknowledge their commitment to adhering to the Finance and Accounting Code of Conduct; | ||
• | reemphasized to all employees the availability of our whistleblower hotline, through which all employees at all levels can anonymously submit information or express concerns regarding accounting, financial reporting, or other irregularities they become aware of or have observed; | ||
• | expanded our accounting policy and controls organization by creating and filling new positions with qualified accounting and finance personnel, increasing significantly the number of persons who are CPAs or the CPA international equivalent; | ||
• | engaged external subject matter experts to assist in developing, implementing and/or enhancing accounting and finance-related policies and procedures, including revenue recognition, account reconciliations, journal entry review/approval procedures, end-user computing, fixed assets, and reserve and accrual analyses. Also, we have established an online global portal which includes, among other items, an electronic library containing various accounting policies and literature; | ||
• | implemented a record retention program, with the assistance of an external expert, to centralize global finance documentation in a standard repository. This program is being administered by regional coordinators with oversight by the internal audit department; |
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• | initiated a project to review our key financial systems security processes and responsibilities to appropriately design automated controls that adequately segregate job responsibilities; | ||
• | significantly increased our investment in the design and implementation of enhanced information technology systems and user applications commensurate with the complexity of our business and our financial reporting requirements, including a broader and more sophisticated implementation of our Enterprise Resource Planning system, particularly in the area of revenue recognition accounting. It is expected that these investments will improve the reliability of our financial reporting by reducing the need for manual processes, reducing the chance for errors and omissions and thereby decreasing our reliance on manual controls to detect and correct accounting and financial reporting inaccuracies; | ||
• | conducted employee training sessions on insider trading and general ethics; and | ||
• | implemented a training program in the areas of business ethics, certain compliance matters, financial statements and processes, and best management practices, targeted to appropriate employees to enhance awareness and understanding of standards and principles for accounting and financial reporting. |
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Verint Systems Inc.
Melville, New York
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1. | The Company failed to perform an adequate global risk assessment to identify all material locations, balances and related fraud risks when evaluating internal control over financial reporting and therefore, did not maintain an effective process to identify, analyze, and manage risks associated with financial reporting and anti-fraud programs and controls. | ||
2. | The Company did not design adequate monitoring controls as it related to certain subsidiaries such that management of the Company could not be assured that a material misstatement of financial results would be prevented or detected on a timely basis. | ||
3. | Due to a lack of adequate systems, processes, and resources with sufficient knowledge of generally accepted accounting principles (“GAAP”), experience, and training, the Company did not maintain effective controls over the period-end financial close and reporting processes as of January 31, 2008. Due to the actual and potential effect on financial statement balances and disclosures, the resulting restatement of the financial statements and the importance of the financial closing and reporting processes, management of the Company concluded that, in the aggregate, these deficiencies in internal controls over the period-end financial close and reporting process constituted a material weakness in internal control over financial reporting. The specific deficiencies contributing to this material weakness were as follows: |
a) | Inadequate policies and procedures. The Company did not design, establish, and maintain effective documented financial accounting policies and procedures that are compliant with GAAP, nor a formalized process for determining, documenting, communicating, implementing, monitoring and updating accounting policies and procedures, including policies and procedures related to significant, complex, and non-routine transactions. | ||
b) | Journal entries.The Company did not design, establish and maintain effective procedures for ensuring adequate review, approval and existence of sufficient supporting documentation over journal entries, both recurring and non-recurring. | ||
c) | Accruals and Reserves. The Company did not design, establish, and maintain effective policies and procedures and documentation requirements as they relate to accrued liabilities and reserves, including those accounts requiring significant management estimates and judgment. |
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d) | Account reconciliations. The Company did not design, establish and maintain effective controls over the preparation, timely review, and documented approval of account reconciliations. Specifically, the Company did not have effective controls over the completeness and accuracy of supporting schedules. | ||
e) | Inadequate segregation of duties within financial systems. In various accounting processes, applications, and systems the Company did not design effective controls to adequately segregate job responsibilities and system access for initiating, authorizing, and recording transactions, nor were there adequate mitigating or monitoring controls in place. Specifically, the Company did not perform an analysis of financial reporting job responsibilities and system user access, including IT personnel, in order to establish effective segregation of responsibilities. | ||
f) | Deficiencies in end-user computing controls of critical spreadsheets. The Company did not design, establish or maintain adequate controls over the access, completeness, accuracy, validity, and review of, certain spreadsheet information that supports the financial reporting process. | ||
g) | Property and Equipment.The Company did not have adequate controls over the property and equipment process, as the Company did not maintain effective controls over the existence, completeness, and accuracy of property and equipment and recording of depreciation and amortization expense. In addition, effective controls were not designed and in place for appropriate classification of property and equipment and the selection and consistent application of useful lives. |
4. | Equity Compensation. The Company did not maintain adequate policies and procedures to ensure effective controls over the administration, accounting, and disclosure for stock-based compensation sufficient to prevent a material misstatement of related compensation expense. Specifically, the following deficiencies in the granting, administration, and accounting for awards were identified: |
a) | Inaccurate accounting and disclosure. The Company did not maintain adequate procedures or effective controls over accounting, communication, and disclosure of compensation expense related to awards. Specifically, the Company lacked a process of financial and administrative oversight over the stock-based compensation process. | ||
b) | Administration of awards. The Company did not maintain effective controls as it related to the reconciliation of source data and sufficient procedures to ensure that grantees were notified in a timely manner. | ||
c) | Insufficient tracking of employee data. The Company did not maintain adequate procedures or effective controls over reporting changes affecting employees and other award holders (e.g., terminations) that ultimately impacted the timely accounting for compensation expense. |
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5. | Revenue and Cost of Revenue. The Company did not maintain effective internal controls over order management, contract management, master file monitoring, issuance of credit memos and policies and procedures to ensure effective controls over accounts receivable and the recognition of revenue, deferred revenue and cost of revenue in accordance with GAAP, which resulted in material errors in the recognition of revenue and related cost of revenue. Specifically: |
a) | The Company lacked sufficient personnel with appropriate knowledge, experience and training in the complexities of software revenue recognition. | ||
b) | The Company did not establish adequate procedures or effective controls to determine vendor specific objective evidence (“VSOE”) of fair value for installation, training services, or certain post-contract customer support agreements. | ||
c) | The Company did not establish adequate procedures or effective controls to determine proper accounting treatment for multiple element sales arrangements in accordance with SOP 97-2. | ||
d) | The Company did not establish adequate procedures or effective controls to ensure that all elements included in a multiple element arrangement were timely identified and measured including establishment of VSOE of fair value for undelivered elements. | ||
e) | The Company did not establish adequate procedures or effective controls to identify the nature of projects, capture the necessary data, and determine the appropriate accounting treatment for arrangements subject to contract accounting. | ||
f) | The Company did not establish or maintain appropriate policies and procedures to identify, capitalize, and amortize product costs associated with revenue arrangements for which related revenue had been deferred. | ||
g) | The Company did not establish adequate procedures or effective controls to identify sufficient evidence of customer delivery and acceptance. | ||
h) | The Company lacked consistent communication and coordination between and among the various finance and non-finance organizations across the Company on the scope and terms of customer arrangements, including the proper identification of all undelivered contractual obligations that impacted revenue recognition. |
6. | Income Taxes. The Company did not maintain adequate policies and procedures and related internal controls to ensure the completeness, accuracy, and timely preparation and review of the consolidated income tax provision, related account balances, and disclosures sufficient to prevent a material misstatement of related account balances. The Company did not employ adequate resources, with sufficient technical expertise in the area of accounting for income taxes, to properly account for and disclose income taxes in accordance with GAAP. |
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March 16, 2010
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Name | Age | Position | ||||
Dan Bodner | 51 | President, Chief Executive Officer, Corporate Officer, and Director | ||||
Peter D. Fante | 42 | Chief Legal Officer, Chief Compliance Officer, Secretary, and Corporate Officer | ||||
Elan Moriah | 47 | President, Verint Witness Actionable Solutions and Verint Video Intelligence Solutions and Corporate Officer | ||||
David Parcell | 56 | Managing Director, EMEA and Corporate Officer | ||||
Douglas E. Robinson | 53 | Chief Financial Officer and Corporate Officer | ||||
Meir Sperling | 61 | President, Verint Communications Intelligence and Investigative Solutions and Corporate Officer | ||||
Paul D. Baker | 51 | Director | ||||
John Bunyan | 57 | Director | ||||
Andre Dahan | 61 | Chairman of the Board | ||||
Victor A. DeMarines | 72 | Director | ||||
Kenneth A. Minihan | 66 | Director | ||||
Larry Myers | 71 | Director | ||||
Howard Safir | 68 | Director | ||||
Shefali Shah | 38 | Director | ||||
Stephen Swad | 48 | Director | ||||
Lauren Wright | 56 | Director |
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Kobi Alexander | (February 1994 – April 2006) | |
Avi Aronovitz | (November 2004 – November 2008) | |
David Kreinberg | (January 1999 – April 2006) | |
Paul Robinson | (May 2002 – June 2007) | |
William Sorin | (January 1999 – April 2006) | |
John Spirtos | (November 2008 – June 2009) |
David Ledwell | (May 2002 – January 2008) | |
Igal Nissim | (January 1999 – December 2006) |
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330 South Service Road
Melville, NY 11747 USA
(631) 962-9600
Attn: Corporate Secretary
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• | during the year ended January 31, 2006, our directors, executive officers, and 10% stockholders complied with all filing requirements, except that an untimely Form 4 was filed by Mr. Bodner on December 16, 2005; | ||
• | during the year ended January 31, 2007, our directors, executive officers, and 10% stockholders complied with all filing requirements, except that an untimely Form 3 was filed by Mr. Dahan on September 17, 2007; and | ||
• | during the year ended January 31, 2008, our directors, executive officers, and 10% stockholders complied with all filing requirements. |
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• | Dan Bodner, President and Chief Executive Officer and Corporate Officer | ||
• | Douglas Robinson, Chief Financial Officer and Corporate Officer | ||
• | Elan Moriah, President, Verint Witness Actionable Solutions and Verint Video Intelligence Solutions and Corporate Officer | ||
• | Meir Sperling, President, Verint Communications Intelligence and Investigative Solutions and Corporate Officer | ||
• | David Parcell, Managing Director, EMEA and Corporate Officer | ||
• | Peter Fante, Chief Legal Officer, Chief Compliance Officer, Secretary and Corporate Officer |
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• | attract and retain highly qualified and effective officers by providing a total compensation package that is competitive in the market in which we compete for talent; | ||
• | incentivize our executive officers to execute on our operational and strategic goals and reward the successful achievement of such goals; and | ||
• | align the interests of our officers with those of our stockholders. |
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• | Business Objects SA, | ||
• | Citrix Systems Inc., | ||
• | Cognos Inc., |
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• | Entrust Inc., | ||
• | Flir Systems Inc., | ||
• | Filenet Corp., | ||
• | Informatica Corporation, | ||
• | Intergraph Corporation, | ||
• | Nuance Communications, Inc., | ||
• | Open Text Corp., | ||
• | Progress Software Corp., | ||
• | Real Networks Inc., | ||
• | RSA Security, | ||
• | SPSS Inc., | ||
• | Websense, Inc., and | ||
• | Witness Systems, Inc. |
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• | the officer’s compensation for the previous year; | ||
• | the officer’s performance in the previous year; | ||
• | our performance in the previous year; | ||
• | our growth from the previous year; | ||
• | our outlook, budget, and cash forecast for the upcoming year; | ||
• | the proposed packages for the other executive officers (internal pay equity); | ||
• | the proposed merit increases, if any, being offered to our employees generally; | ||
• | equity dilution and burn rates; | ||
• | the value of previously-awarded equity grants; | ||
• | executive officer recruiting and retention considerations; and | ||
• | compensation trends and competitive factors in the market for talent in which we compete. |
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Budget / | ||
Performance Goal | ||
Metric | Differences from Corresponding GAAP Metric | |
Revenue | GAAP revenue excluding the impact of fair value adjustments relating to future support obligations under acquired contracts which would otherwise have been recognized on a stand-alone basis, as well as adjustments for sales concessions related to accounts receivable balances that existed prior to the date of an acquisition. | |
Operating income | GAAP operating income, adjusted for revenue as described above, and adjustments related to acquisitions including amortization of acquisition-related intangibles, integration costs, acquisition-related write-downs, in-process research and development, impairment of goodwill and intangibles assets and special legal costs and settlement income, as well adjustments for stock-based compensation, expenses related to our restatement and extended filing delay, and certain other non-cash or non-recurring charges. | |
Net income | GAAP net income, adjusted for revenue and operating expenses as described above, and further adjusted for certain non-operating expenses, namely unrealized gains and losses on derivative financial instruments and the income tax impact of the above adjustments. |
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individualized bonus plan per the table below)
Percentage of Performance Goal | ||
Achieved | Payout Percentage (by goal) | |
Less than 85% | 0% | |
86% | 65% | |
90% | 75% | |
95% | 88% | |
100% | 100% | |
105% | 113% | |
110% | 125% | |
120% | 150% | |
130% | 175% | |
140% or more | 200% |
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Actual | Actual | |||||||||||
Target | Actual Achievement Against | Payout | Payout | |||||||||
Name | Description of Bonus Plan | Bonus | Performance Goals | Percentage | Amount | |||||||
Bodner | Bonus determined by the compensation committee based on its review of Mr. Bodner’s performance and the company’s performance generally and not by reference to pre-defined performance goals. | None set | No pre-defined performance goals. | Discretionary | $ | 447,300 | ||||||
Robinson | Bonus determined by the compensation committee based on its review of Mr. Robinson’s performance and the company’s performance generally (for the partial year of service) and not by reference to pre-defined performance goals. | $195,000 | No pre-defined performance goals. | Discretionary | $ | 95,400 | (1) | |||||
Moriah | Bonus based 25% on company revenue, 25% on company net income, 25% on unit revenue, and 25% on unit contribution margin (relating to the unit for which Mr. Moriah was responsible). | $175,000 | Company revenue: 95.8% Company net income: 101.7% Unit revenue: 93.8% Unit contribution margin: 95.2% | 90% 104% 85% 88% | $ | 160,300 | ||||||
Sperling | Bonus based 25% on company revenue, 25% on company net income, 25% on unit revenue, and 25% on unit contribution margin (relating to the unit for which Mr. Sperling was responsible). | Originally approved at $155,000, subsequently increased to $175,000 | Company revenue: 95.8% Company net income: 101.7% Unit revenue: 96.1% Unit contribution margin: 106% | 90% 104% 90% 115% | $ | 175,843 | ||||||
Parcell | Bonus based 5% on company revenue, 5% on company net income, 45% on unit revenue, and 45% on unit contribution margin (relating to the unit for which Mr. Parcell was responsible). | $131,753 | Company revenue: 95.8% Company net income: 101.7% Unit revenue: 99.4% Unit contribution margin: 95% | 90% 104% 99% 88% | $ | 135,549 | ||||||
Fante | Bonus based 25% on company revenue, 25% on company net income, and 50% on MBOs. | Originally approved at $100,000, subsequently increased to $150,000 | Company revenue: 95.8% Company net income: 101.7% MBO: 100% | 90% 104% 100% | $ | 147,700 | ||||||
Nissim | Mr. Nissim began his transition from Chief Financial Officer in August 2006, formally resigned as Chief Financial Officer in December of 2006 (prior to the end of the year ended January 31, 2007), and was not included in the compensation committee’s normal compensation review process for the year ended January 31, 2007. | None set | N/A | None(2) |
(1) | Pro-rated for partial year. | |
(2) | We are currently in arbitration with Mr. Nissim on certain compensation-related matters. |
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individualized bonus plan per the table below)
Percentage of Performance Goal | ||
Achieved | Payout Percentage (by goal) | |
Less than 85% | 0% | |
86% | 65% | |
90% | 75% | |
95% | 88% | |
100% | 100% | |
105% | 113% | |
110% | 125% | |
120% | 150% | |
130% | 175% | |
140% or more | 200% |
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Actual | Actual | |||||||||||
Target | Actual Achievement Against | Payout | Payout | |||||||||
Name | Description of Bonus Plan | Bonus | Performance Goals | Percentage | Amount | |||||||
Bodner | Bonus based 50% on company revenue and 50% on company operating income. | $ | 433,700 | Company revenue: 99% Company operating income: 114% | 99.30% 134.40% | $506,616 | ||||||
Robinson | Bonus based 50% on company revenue and 50% on company operating income. | $ | 204,000 | Company revenue: 99% Company operating income: 114% | 99.30% 134.40% | $238,298 | ||||||
Moriah | Bonus based 50% on company revenue and 50% on company operating income. | $ | 182,900 | Company revenue: 99% Company operating income: 114% | 99.30% 134.40% | $213,650 | ||||||
Sperling | Bonus based 25% on company revenue, 25% on company operating income, 25% on unit revenue, and 25% on unit contribution margin (relating to the unit for which Mr. Sperling was responsible). | $ | 182,900 | Company revenue: 99% Company operating income: 114% Unit revenue: 103% Unit contribution margin: 117.6% | 99.30% 134.40% 125.20% 137.40% | $245,586 | ||||||
Parcell | Bonus based 25% on company revenue, 25% on company operating income, 25% on unit revenue, and 25% on unit contribution margin (relating to the unit for which Mr. Parcell was responsible). | $ | 139,169 | Company revenue: 99% Company operating income: 114% Unit revenue: 98.3% Unit contribution margin: 100.1% | 99.30% 134.40% 85.80% 100.30% | $146,356 | ||||||
Fante | Bonus based 25% on company revenue, 25% on company operating income, and 50% on MBOs. | $ | 104,500 | Company revenue: 99% Company operating income: 114% MBO: 150% | 99.30% 134.40% 150% | $165,000 (includes $25,590 discretionary bonus) |
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Performance vs. Payout Matrix | ||
Percentage of Eligible Performance | ||
Percentage of Revenue Goal Achieved | Shares Earned for Period | |
Less than 98.3% | 0% | |
98.30% | 75% | |
100% or more | 100% |
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Name | Date of Employment Agreement or Material Amendment | |
Bodner | • Employment agreement signed on February 23, 2010 | |
Robinson | • Employment agreement signed on August 14, 2006 | |
Moriah | • Initial employment agreement signed on September 18, 2007 | |
• Amended and restated agreement signed on October 29, 2009 | ||
Sperling | • No formal employment agreement as of the filing date of this report | |
Parcell | • Initial employment agreement signed on April 16, 2001 | |
• Supplemental employment agreement signed on June 13, 2008 | ||
Fante | • Initial employment agreement signed on September 18, 2007 | |
• Amended and restated agreement signed on November 10, 2009 |
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Victor DeMarines
Kenneth Minihan
Shefali Shah
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Year | Non-Equity | |||||||||||||||||||||||||||||||
Ended | Stock | Option | Incentive Plan | All Other | ||||||||||||||||||||||||||||
Name and Principal Position | January 31, | Salary | Bonus | Awards | Awards | Compensation | Compensation | Total ($) | ||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||
($) | ($)(1) | ($)(2) | ($)(2) | ($)(3) | ($)(4) | |||||||||||||||||||||||||||
Dan Bodner | 2008 | 506,800 | — | 1,531,006 | 985,935 | 506,616 | 36,412 | 3,566,769 | ||||||||||||||||||||||||
President and Chief Executive Officer and Corporate Officer | 2007 | 440,000 | (5) | 447,300 | (5) | 960,799 | 1,209,953 | — | 37,337 | 3,095,389 | ||||||||||||||||||||||
Douglas Robinson | 2008 | 340,000 | — | 397,354 | — | 238,298 | 24,000 | 999,652 | ||||||||||||||||||||||||
Chief Financial Officer and Corporate Officer | 2007 | 151,458 | (6) | 95,400 | (6) | — | — | — | 7,500 | 254,358 | ||||||||||||||||||||||
Elan Moriah | 2008 | 340,000 | — | 427,212 | 319,731 | 213,650 | 11,969 | 1,312,562 | ||||||||||||||||||||||||
President, Verint Witness Actionable Solutions and Verint Video Intelligence Solutions and Corporate Officer | 2007 | 325,000 | — | 173,656 | 434,887 | 160,300 | 12,731 | 1,106,574 | ||||||||||||||||||||||||
Meir Sperling | 2008 | 277,601 | (7) | — | 420,830 | 315,927 | 245,586 | (7) | 93,388 | 1,353,332 | ||||||||||||||||||||||
President, Verint Communications Intelligence and Investigative Solutions and Corporate Officer | 2007 | 244,404 | (8) | — | 173,656 | 392,769 | 175,843 | (8) | 93,621 | 1,080,293 | ||||||||||||||||||||||
David Parcell | 2008 | 376,470 | (9) | 67,413 | (9) | 171,156 | 158,206 | 146,356 | (9) | 52,188 | 971,789 | |||||||||||||||||||||
Managing Director, EMEA and Corporate Officer | 2007 | 334,674 | (10) | — | 68,753 | 204,367 | 135,549 | (10) | 46,963 | 790,306 | ||||||||||||||||||||||
Peter Fante | 2008 | 292,500 | 25,590 | (11) | 258,757 | 187,191 | 139,410 | 48,672 | 952,120 | |||||||||||||||||||||||
Chief Legal Officer, Chief Compliance Officer, Secretary and Corporate Officer | 2007 | 280,000 | — | 60,159 | 241,713 | 147,700 | 2,000 | 731,572 | ||||||||||||||||||||||||
Igal Nissim | 2007 | 219,230 | (12) | — | (12) | 253,002 | 330,293 | — | 73,827 | 876,352 | ||||||||||||||||||||||
Former Chief Financial Officer |
(1) | Includes annual bonuses paid based on general performance reviews by the compensation committee not tied to pre-defined performance goals or other special bonuses. | |
(2) | Reflects the dollar amount recognized for financial statement reporting purposes for years ended January 31, 2008 and 2007, in accordance with SFAS No. 123(R), for restricted stock units, shares of restricted stock, and stock options awarded in and prior to the years ended January 31, 2008 and January 31, 2007. For further discussion of our accounting for equity compensation, see Note 15, “Employee Benefit Plans” to the consolidated financial statements included in Item 15. | |
(3) | Amount represents performance-based annual cash bonuses tied to pre-defined performance goals. | |
(4) | See the table below for additional information on “All Other Compensation” amounts for the years ended January 31, 2008 and January 31, 2007. “All Other Compensation” does not include premiums for group life, health, or disability insurance that is available generally to all salaried employees in the country in which the executive officer is employed and do not discriminate in scope, terms, or operation in favor of our executive officers or directors. | |
(5) | Mr. Bodner did not receive a salary increase during the year ended January 31, 2007, however, $45,000 of Mr. Bodner’s bonus payment for the year ended January 31, 2007 was attributable to a retroactive increase in Mr. Bodner’s base salary for such year that was approved by the compensation committee after the year had ended. This $45,000 amount is included in Mr. Bodner’s bonus for the year ended January 31, 2007 in column (d) and is not reflected in his salary for the year ended January 31, 2007 in column (c). |
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(6) | Represents pro rated portion of $325,000 base salary and of $189,000 bonus approved by the compensation committee for Mr. Robinson for partial year of service in the year ended January 31, 2007. | |
(7) | Mr. Sperling received a salary of NIS 1,128,000 per annum ($277,601 based on the average exchange rate from February 1, 2007 through January 31, 2008 of NIS 1=$0.2461) and a performance-based bonus of NIS 794,262 ($245,586 based on the June 1, 2008 exchange rate of NIS 1=$0.3092). | |
(8) | Mr. Sperling received a salary of NIS 1,080,000 per annum ($244,404 based on the average exchange rate from February 1, 2006 through January 31, 2007 of NIS 1=$0.2263) and a performance-based bonus of NIS 731,155 ($175,843 based on the April 1, 2007 exchange rate of NIS 1=$0.2405). | |
(9) | Mr. Parcell received a salary of £188,000 per annum ($376,470 based on the average exchange rate from February 1, 2007 through January 31, 2008 of £1= $2.0025) and a performance-based bonus of £72,572 ($146,356) paid in installments based on the average exchange rate from July 1, 2007 through February 29, 2008 of £1= $2.0167). Mr. Parcell also received £33,429 ($67,413 based on the August 31, 2007 exchange rate of £1=$2.0166) representing one-half of his 2007 cash retention bonus. The remainder of Mr. Parcell’s 2007 cash retention bonus was earned and paid in 2008 and is not included in the table above. | |
(10) | Mr. Parcell received a salary of £180,000 per annum ($334,674 based on the average exchange rate from February 1, 2006 through January 31, 2007 of £1= $1.8593) and a performance-based bonus of £70,595 ($135,549) paid in installments based on the average exchange rate from August 1, 2006 through February 28, 2007 of £1= $1.9201). | |
(11) | Represents discretionary increase to Mr. Fante’s performance-based bonus for the year ended January 31, 2008. | |
(12) | Mr. Nissim ceased to be an executive officer in the year ended January 31, 2007. For the year ended January 31, 2007, Mr. Nissim received a salary of NIS 968,760 per annum ($219,230 based on the average exchange rate from February 1, 2006 through January 31, 2007 of NIS 1=$0.2263). Mr. Nissim did not receive a bonus for the year ended January 31, 2007. We are currently in arbitration with Mr. Nissim on certain compensation-related matters. |
Car Allowance or Cost | ||||||||||||||||||||||||||||||||||||||||
Year | Employer | Severance | of Company | Professional | Accrued | Statutory | Supplemental | |||||||||||||||||||||||||||||||||
Ended | Retirement | Fund | Study Fund | Car Plus | Advice | Vacation | Recreation | Life | ||||||||||||||||||||||||||||||||
Name | January 31, | Contribution | Contribution | Contribution | Fuel Allowance | Allowance | Payout | Payment | Insurance/Other(7) | Total | ||||||||||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||||
Dan Bodner | 2008 | 2,000 | — | — | 10,532 | 20,000 | — | — | 3,880 | 36,412 | ||||||||||||||||||||||||||||||
2007 | 2,000 | — | — | 12,007 | 20,000 | — | — | 3,330 | 37,337 | |||||||||||||||||||||||||||||||
Douglas Robinson | 2008 | 2,000 | — | — | 12,000 | 10,000 | — | — | — | 24,000 | ||||||||||||||||||||||||||||||
2007 | 2,000 | — | — | 5,500 | — | — | — | — | 7,500 | |||||||||||||||||||||||||||||||
Elan Moriah | 2008 | 2,000 | — | — | 9,969 | — | — | — | — | 11,969 | ||||||||||||||||||||||||||||||
2007 | 2,000 | — | — | 10,731 | — | — | — | — | 12,731 | |||||||||||||||||||||||||||||||
Meir Sperling | 2008 | (2) | 13,851 | 23,154 | 21,846 | 20,308 | — | 13,681 | 548 | — | 93,388 | |||||||||||||||||||||||||||||
2007 | (3) | 12,234 | 20,500 | 20,170 | 15,685 | — | 24,528 | 504 | — | 93,621 | ||||||||||||||||||||||||||||||
David Parcell | 2008 | (4) | 22,428 | — | — | 29,760 | — | — | — | — | 52,188 | |||||||||||||||||||||||||||||
2007 | (5) | 19,941 | — | — | 27,022 | — | — | — | — | 46,963 | ||||||||||||||||||||||||||||||
Peter Fante | 2008 | 2,000 | — | — | 12,000 | 4,672 | — | — | 30,000 | 48,672 | ||||||||||||||||||||||||||||||
2007 | 2,000 | — | — | — | — | — | — | — | 2,000 | |||||||||||||||||||||||||||||||
Igal Nissim | 2007 | (6) | 11,041 | 18,753 | 17,415 | 11,123 | 1,810 | 12,965 | 720 | — | 73,827 |
(1) | This supplemental table is provided as additional information for our stockholders and is not intended as a substitute for the information presented in the “Summary Compensation Table”. |
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(2) | For the year ended January 31, 2008, Mr. Sperling received a company contribution to his retirement fund of NIS 56,284 ($13,851), to his severance fund of NIS 94,084 ($23,154), to his study fund of NIS 88,769 ($21,846), payout of accrued vacation of NIS 55,592 ($13,681), a statutory recreation payment of NIS 2,226 ($548), and use of a company car plus a fuel reimbursement allowance which cost us NIS 82,520 ($20,308) for the period, in each case, based on the average exchange rate from February 1, 2007 through January 31, 2008 of NIS 1=$0.2461). | |
(3) | For the year ended January 31, 2007, Mr. Sperling received a company contribution to his retirement fund of NIS 54,062 ($12,234), to his severance fund of NIS 90,586 ($20,500), to his study fund of NIS 89,129 ($20,170), payout of accrued vacation of NIS 108,386 ($24,528), a statutory recreation payment of NIS 2,226 ($504), and use of a company car plus a fuel reimbursement allowance which cost us NIS 69,310 ($15,685) for the period, in each case, based on the average exchange rate from February 1, 2006 through January 31, 2007 of NIS 1=$0.2263). | |
(4) | For the year ended January 31, 2008, Mr. Parcell received a company contribution to his retirement fund of £11,200 ($22,428) and use of a company car plus a fuel reimbursement allowance which cost us £14,862 ($29,760) for the period, in each case, based on the average exchange rate from February 1, 2007 through January 31, 2008 of £1= $2.0025). | |
(5) | For the year ended January 31, 2007, Mr. Parcell received a company contribution to his retirement fund of £10,725 ($19,941) and use of a company car plus a fuel reimbursement allowance which cost us £14,534 ($27,022) for the period, in each case, based on the average exchange rate from February 1, 2006 through January 31, 2007 of £1= $1.8593). | |
(6) | Mr. Nissim ceased to be an executive officer in the year ended January 31, 2007. For the year ended January 31, 2007, Mr. Nissim received a company contribution to his retirement fund of NIS 48,789 ($11,041), to his severance fund of NIS 82,869 ($18,753), to his study fund of NIS 76,954 ($17,415), a professional advice allowance of NIS 8,000 ($1,810), payout of accrued vacation of NIS 57,292 ($12,965), a statutory recreation payment of NIS 3,180 ($720), and use of a company car plus a fuel reimbursement allowance which cost us NIS 49,153 ($11,123) for the period, in each case, based on the average exchange rate from February 1, 2006 through January 31, 2007 of NIS 1=$0.2263). | |
(7) | For Mr. Bodner, represents cost of a supplemental company-paid life insurance policy. For Mr. Fante, represents a one-time relocation allowance. |
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All Other | ||||||||||||||||||||||||||||||||||||||||||
Stock | 123(R) | |||||||||||||||||||||||||||||||||||||||||
Awards: | Grant Date | |||||||||||||||||||||||||||||||||||||||||
Date of | Number of | Fair Value | ||||||||||||||||||||||||||||||||||||||||
Board | 123(R) | Estimated Possible Payouts | Estimated Future Payouts | Shares of | of Stock | |||||||||||||||||||||||||||||||||||||
Approval | Grant | Under Non-Equity Incentive | Under Equity Incentive Plan | Stock or | and Option | |||||||||||||||||||||||||||||||||||||
Name | Type of Award | of Grant | Date | Plan Awards | Awards | Units | Awards(2) | |||||||||||||||||||||||||||||||||||
Threshold | Target | Max | Threshold | Target | Max | |||||||||||||||||||||||||||||||||||||
($)(1) | ($) | ($) | (#) | (#) | (#) | (#) | ||||||||||||||||||||||||||||||||||||
Dan Bodner | RSU (Time-vested grant)(3) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 56,300 | $ | 1,732,351 | ||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 38,800 | $ | 1,193,876 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 14,075 | (13) | 18,766 | 18,766 | — | $ | 347,171 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 14,075 | (13) | 18,767 | 18,767 | — | $ | 411,936 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 9,384 | (13) | 18,767 | 18,767 | — | $ | 63,808 | ||||||||||||||||||||||||||||||
2007 Annual Bonus | n/a | n/a | 325,275 | 433,700 | 867,400 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Douglas Robinson | RSU (Time-vested welcome grant)(6) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 22,400 | $ | 689,248 | ||||||||||||||||||||||||||||||
RSU (Time-vested grant)(7) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 12,900 | $ | 396,933 | |||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 25,800 | $ | 793,866 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 3,225 | (13) | 4,300 | 4,300 | — | $ | 79,550 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 3,225 | (13) | 4,300 | 4,300 | — | $ | 94,385 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 2,150 | (13) | 4,300 | 4,300 | — | $ | 14,620 | ||||||||||||||||||||||||||||||
2007 Annual Bonus | n/a | n/a | 153,000 | 204,000 | 408,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Elan Moriah | RSU (Time-vested grant)(3) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 11,300 | $ | 347,701 | ||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 28,200 | $ | 867,714 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 2,825 | (13) | 3,766 | 3,766 | — | $ | 69,671 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 2,825 | (13) | 3,767 | 3,767 | — | $ | 82,686 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 1,884 | (13) | 3,767 | 3,767 | — | $ | 12,808 | ||||||||||||||||||||||||||||||
2007 Annual Bonus | n/a | n/a | 137,175 | 182,900 | 365,800 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
2006 Annual Bonus | n/a | n/a | 113,750 | 175,000 | 350,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Meir Sperling | RSU (Time-vested grant)(3) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 11,300 | $ | 347,701 | ||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 27,200 | $ | 836,944 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 2,825 | (13) | 3,766 | 3,766 | — | $ | 69,671 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 2,825 | (13) | 3,767 | 3,767 | — | $ | 82,686 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 1,884 | (13) | 3,767 | 3,767 | — | $ | 12,808 | ||||||||||||||||||||||||||||||
2007 Annual Bonus(8) | n/a | n/a | 137,175 | 182,900 | 365,800 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
2006 Annual Bonus(9) | Original: | Original: | Original: | |||||||||||||||||||||||||||||||||||||||
100,750 | 155,000 | 310,000 | ||||||||||||||||||||||||||||||||||||||||
Revised: | Revised: | Revised: | ||||||||||||||||||||||||||||||||||||||||
n/a | n/a | 113,750 | 175,000 | 350,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
David Parcell | RSU (Time-vested grant)(3) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 8,500 | $ | 261,545 | ||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 8,000 | $ | 246,160 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 2,125 | (13) | 2,833 | 2,833 | — | $ | 52,411 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 2,125 | (13) | 2,833 | 2,833 | — | $ | 62,184 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 1,417 | (13) | 2,834 | 2,834 | — | $ | 9,636 | ||||||||||||||||||||||||||||||
2007 Annual Bonus(10) | n/a | n/a | 104,377 | 139,169 | 278,338 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
2006 Annual Bonus(11) | n/a | n/a | 85,639 | 131,753 | 263,506 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Peter Fante | RSU (Time-vested grant)(3) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 5,800 | $ | 178,466 | ||||||||||||||||||||||||||||||
RSU (Retention grant)(4) | 7/2/2007 | 7/2/2007 | — | — | — | — | — | — | 25,200 | $ | 775,404 | |||||||||||||||||||||||||||||||
RSU (Performance-vested grant)(5) | 7/2/2007 | 1/31/2008 | (12) | — | — | — | 1,450 | (13) | 1,933 | 1,933 | — | $ | 35,761 | |||||||||||||||||||||||||||||
7/2/2007 | 5/28/2008 | (12) | — | — | — | 1,450 | (13) | 1,933 | 1,933 | — | $ | 42,429 | ||||||||||||||||||||||||||||||
7/2/2007 | 3/18/2009 | (12) | — | — | — | 967 | (13) | 1,934 | 1,934 | — | $ | 6,576 | ||||||||||||||||||||||||||||||
2007 Annual Bonus | n/a | n/a | 78,375 | 104,500 | 209,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||||
2006 Annual Bonus | Original: | Original: | Original: | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
65,000 | 100,000 | 200,000 | ||||||||||||||||||||||||||||||||||||||||
Revised: | Revised: | Revised: | ||||||||||||||||||||||||||||||||||||||||
n/a | n/a | 97,500 | 150,000 | 300,000 | — | — | — | — | — |
(1) | The threshold column corresponds to the minimum bonus payable to the executive officer assuming that minimum performance goals are achieved. If minimum performance goals are not achieved, the bonus payable to the executive officer would be zero. |
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(2) | The 123(R) grant date fair value of equity awards is based on the target number of shares and calculated using the closing price of our common stock on the 123(R) grant date, which is not always the same as the date the stock option committee approved the grant. The following table summarizes the grant date fair value of the July 2, 2007 performance-vested awards based on the target number of shares and calculated using the closing price of our common stock on July 2, 2007 ($30.77), the date the stock option committee approved the grants. |
�� | Fair Value on | |||||||||||
Date of Board | Target | Date of Board | ||||||||||
Name | Approval of Grant | Shares | Approval | |||||||||
Dan Bodner | 7/2/07 (1st tranche) | 18,766 | $ | 577,430 | ||||||||
7/2/07 (2nd tranche) | 18,767 | $ | 577,461 | |||||||||
7/2/07 (3rd tranche) | 18,767 | $ | 577,461 | |||||||||
Douglas Robinson | 7/2/07 (1st tranche) | 4,300 | $ | 132,311 | ||||||||
7/2/07 (2nd tranche) | 4,300 | $ | 132,311 | |||||||||
7/2/07 (3rd tranche) | 4,300 | $ | 132,311 | |||||||||
Elan Moriah | 7/2/07 (1st tranche) | 3,766 | $ | 115,880 | ||||||||
7/2/07 (2nd tranche) | 3,767 | $ | 115,911 | |||||||||
7/2/07 (3rd tranche) | 3,767 | $ | 115,911 | |||||||||
Meir Sperling | 7/2/07 (1st tranche) | 3,766 | $ | 115,880 | ||||||||
7/2/07 (2nd tranche) | 3,767 | $ | 115,911 | |||||||||
7/2/07 (3rd tranche) | 3,767 | $ | 115,911 | |||||||||
David Parcell | 7/2/07 (1st tranche) | 2,833 | $ | 87,171 | ||||||||
7/2/07 (2nd tranche) | 2,833 | $ | 87,171 | |||||||||
7/2/07 (3rd tranche) | 2,834 | $ | 87,202 | |||||||||
Peter Fante | 7/2/07 (1st tranche) | 1,933 | $ | 59,478 | ||||||||
7/2/07 (2nd tranche) | 1,933 | $ | 59,478 | |||||||||
7/2/07 (3rd tranche) | 1,934 | $ | 59,509 |
For further discussion of our accounting for equity compensation, see Note 15, “Employee Benefit Plans” to the consolidated financial statements included in Item 15. | ||
(3) | This award vests 33% on March 15, 2008, 33% on March 15, 2009, and 34% on July 2, 2010 and as of January 31, 2008 was subject to the special vesting conditions described in “Narrative to “Grants of Plan-Based Awards” Table”. | |
(4) | 2007 special retention equity award discussed in the Compensation Discussion and Analysis above. This award vests 50% on March 15, 2008 and 50% on July 2, 2010 and as of January 31, 2008 was subject to the special vesting conditions described in “Narrative to “Grants of Plan-Based Awards” Table”. | |
(5) | This award vests 1/3 upon the stock option committee’s determination of our achievement of specified revenue targets (set by the stock option committee for the relevant performance period) for the period from August 1, 2007 through January 31, 2008, 1/3 upon the determination of such achievement for the period from February 1, 2008 through January 31, 2009, and 1/3 upon the determination of such achievement for the period from February 1, 2009 through January 31, 2010 (provided that, with respect to the period from February 1, 2009 through January 31, 2010, no such determination by the stock option committee shall be final until on or after July 2, 2010), and as of January 31, 2008 was subject to the special vesting conditions described in “Narrative to “Grants of Plan-Based Awards” Table”. |
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(6) | This award vests 25% on August 14, 2007, 25% on August 14, 2008, 25% on August 14, 2009, and 25% on August 14, 2010 and as of January 31, 2008 was subject to the special vesting conditions described below. | |
(7) | This award vests 30% on August 14, 2007, 30% on August 14, 2008, 30% on August 14, 2009, and 10% on July 2, 2010 and as of January 31, 2008 was subject to the special vesting conditions described in “Narrative to “Grants of Plan-Based Awards” Table”. | |
(8) | Mr. Sperling’s bonus target for the year ended January 31, 2008 was established in U.S. Dollars, but his bonus payments are made in Israeli shekels using the U.S.$-to-NIS spot rate on the applicable payment date. | |
(9) | Mr. Sperling’s bonus target for the year ended January 31, 2007 was established in U.S. Dollars, but his bonus payments are made in Israeli shekels using the U.S.$-to-NIS spot rate on the applicable payment date. | |
(10) | On March 12, 2007, the compensation committee approved threshold, target, and maximum bonus awards for Mr. Parcell of £54,000, £72,000, and £144,000, respectively ($104,377, $139,169, and $278,338 based on the March 12, 2007 exchange rate of £1=$1.9329). | |
(11) | On July 20, 2006, the compensation committee approved threshold, target, and maximum bonus awards for Mr. Parcell of £46,800, £72,000, and £144,000, respectively ($85,639, $131,753, and $263,506) based on the July 20, 2006 exchange rate of £1=$1.8299). | |
(12) | Each performance award contains three equal tranches which vest based on three separate performance periods. Dates correspond to the SFAS No. 123(R) grant date applicable to the first, second, and third tranches, respectively, and are based on the date the stock option committee approved the performance goal for the applicable performance period. | |
(13) | Represents the threshold number of shares that were available to be earned in each of the 2007, 2008, and 2009 performance periods. The following table summarizes the actual number of shares earned for the 2007 and 2008 performance periods (which have now been completed). If the minimum performance goal is not achieved in any performance period, no shares are earned for that period. |
Actual Shares Earned for | Actual Shares Earned for | |||||||
Name | 2007 Performance Period | 2008 Performance Period | ||||||
Dan Bodner | 18,625 | 15,275 | ||||||
Douglas Robinson | 4,267 | 3,500 | ||||||
Elan Moriah | 3,737 | 3,065 | ||||||
Meir Sperling | 3,737 | 3,065 | ||||||
David Parcell | 2,811 | 2,306 | ||||||
Peter Fante | 1,918 | 1,573 |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Equity IncentivePlan | |||||||||||||||||||||||||||||||||
Securities | Securities | Shares or | Market Value | Equity IncentivePlan | Awards: Market or | |||||||||||||||||||||||||||||||
Underlying | Underlying | Units of | of Shares or | Awards: Number of | Payout Value of | |||||||||||||||||||||||||||||||
Date of | Unexercised | Unexercised | Option | Stock That | Units of Stock | Unearned Shares, | Unearned Shares, | |||||||||||||||||||||||||||||
Board | Options | Options | Exercise | Option | Have Not | That Have | Units or OtherRights | Units or OtherRights | ||||||||||||||||||||||||||||
Approval | (#) | (#) | Price | Expiration | Vested | Not Vested | That Have Not Vested | That Have Not Vested | ||||||||||||||||||||||||||||
Name | of Grant | Exercisable | Unexercisable | ($) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
Dan Bodner | 5/21/2002 | (2) | 16,635 | 16.00 | 5/21/2012 | |||||||||||||||||||||||||||||||
3/5/2003 | (2) | 40,000 | 17.00 | 3/5/2013 | ||||||||||||||||||||||||||||||||
12/12/2003 | (2) | 37,200 | 23.00 | 12/12/2013 | ||||||||||||||||||||||||||||||||
12/9/2004 | (3),(4) | 60,000 | 20,000 | 35.11 | 12/9/2014 | 8,750 | 161,875 | |||||||||||||||||||||||||||||
1/11/2006 | (5),(6) | 44,000 | 44,000 | 34.40 | 1/11/2016 | 19,350 | 357,975 | |||||||||||||||||||||||||||||
7/2/2007 | (7) | 38,800 | 717,800 | |||||||||||||||||||||||||||||||||
7/2/2007 | (8) | 56,300 | 1,041,550 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 56,300 | 1,041,550 | |||||||||||||||||||||||||||||||||
Douglas Robinson | 7/2/2007 | (10) | 22,400 | 414,400 | ||||||||||||||||||||||||||||||||
7/2/2007 | (7) | 25,800 | 477,300 | |||||||||||||||||||||||||||||||||
7/2/2007 | (11) | 12,900 | 238,650 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 12,900 | 238,650 | |||||||||||||||||||||||||||||||||
Elan Moriah | 5/21/2002 | (2) | 2,446 | 16.00 | 5/21/2012 | |||||||||||||||||||||||||||||||
3/5/2003 | (2) | 20,000 | 17.00 | 3/5/2013 | ||||||||||||||||||||||||||||||||
12/12/2003 | (2) | 18,750 | 23.00 | 12/12/2013 | ||||||||||||||||||||||||||||||||
12/9/2004 | (3),(4) | 18,750 | 6,250 | 35.11 | 12/9/2014 | 2,500 | 46,250 | |||||||||||||||||||||||||||||
1/11/2006 | (5),(6) | 10,000 | 10,000 | 34.40 | 1/11/2016 | 5,000 | 92,500 | |||||||||||||||||||||||||||||
7/2/2007 | (7) | 28,200 | 521,700 | |||||||||||||||||||||||||||||||||
7/2/2007 | (8) | 11,300 | 209,050 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 11,300 | 209,050 | |||||||||||||||||||||||||||||||||
Meir Sperling | 4/1/2001 | (2) | 2,446 | 8.69 | 4/1/2011 | |||||||||||||||||||||||||||||||
5/21/2002 | (2) | 2,446 | 16.00 | 5/21/2012 | ||||||||||||||||||||||||||||||||
3/5/2003 | (2) | 25,000 | 17.00 | 3/5/2013 | ||||||||||||||||||||||||||||||||
12/12/2003 | (2) | 25,000 | 23.00 | 12/12/2013 | ||||||||||||||||||||||||||||||||
12/9/2004 | (3) | 18,750 | 6,250 | 35.11 | 12/9/2014 | 2,500 | 46,250 | |||||||||||||||||||||||||||||
1/11/2006 | (5),(6) | 10,000 | 10,000 | 34.40 | 1/11/2016 | 5,000 | 92,500 | |||||||||||||||||||||||||||||
7/2/2007 | (7) | 27,200 | 503,200 | |||||||||||||||||||||||||||||||||
7/2/2007 | (8) | 11,300 | 209,050 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 11,300 | 209,050 | |||||||||||||||||||||||||||||||||
David Parcell | 5/21/2002 | (2) | 2,446 | 16.00 | 5/21/2012 | |||||||||||||||||||||||||||||||
3/5/2003 | (2) | 7,500 | 17.00 | 3/5/2013 | ||||||||||||||||||||||||||||||||
12/12/2003 | (2) | 11,250 | 23.00 | 12/12/2013 | �� | |||||||||||||||||||||||||||||||
12/9/2004 | (3) | 15,000 | 5,000 | 35.11 | 12/9/2014 | |||||||||||||||||||||||||||||||
1/11/2006 | (6) | 4,000 | 74,000 | |||||||||||||||||||||||||||||||||
7/2/2007 | (7) | 8,000 | 148,000 | |||||||||||||||||||||||||||||||||
7/2/2007 | (8) | 8,500 | 157,250 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 8,500 | 157,250 | |||||||||||||||||||||||||||||||||
Peter Fante | 11/20/2002 | (2) | 6,250 | 14.90 | 11/20/2012 | |||||||||||||||||||||||||||||||
12/12/2003 | (2) | 18,750 | 23.00 | 12/12/2013 | ||||||||||||||||||||||||||||||||
12/9/2004 | (3) | 15,000 | 5,000 | 35.11 | 12/9/2014 | |||||||||||||||||||||||||||||||
1/11/2006 | (6) | 3,500 | 64,750 | |||||||||||||||||||||||||||||||||
7/2/2007 | (7) | 25,200 | 466,200 | |||||||||||||||||||||||||||||||||
7/2/2007 | (8) | 5,800 | 107,300 | |||||||||||||||||||||||||||||||||
7/2/2007 | (9) | 5,800 | 107,300 | |||||||||||||||||||||||||||||||||
Igal Nissim(1) | 4/1/2001 | (2) | 6,115 | 8.69 | 4/1/2011 | |||||||||||||||||||||||||||||||
5/21/2002 | (2) | 4,892 | 16.00 | 5/21/2012 | ||||||||||||||||||||||||||||||||
3/5/2003 | (2) | 40,000 | 17.00 | 3/5/2013 | ||||||||||||||||||||||||||||||||
12/9/2004 | (3) | 18,750 | 35.11 | 12/9/2014 | ||||||||||||||||||||||||||||||||
1/11/2006 | (5) | 9,000 | 34.40 | 1/11/2016 |
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(1) | Mr. Nissim ceased to be an executive officer in the year ended January 31, 2007. We are currently in arbitration with Mr. Nissim on certain compensation-related matters. | |
(2) | These options were fully vested at January 31, 2008. | |
(3) | The vesting schedule for this option grant was/is 25% on December 9, 2005, 25% on December 9, 2006, 25% on December 9, 2007, and 25% on December 9, 2008. | |
(4) | The vesting schedule for this restricted stock grant was/is 50% on December 9, 2006, 25% on December 9, 2007, and 25% on December 9, 2008. | |
(5) | The vesting schedule for this option grant was/is 25% on January 11, 2007, 25% on January 11, 2008, 25% on January 11, 2009, and 25% on January 11, 2010. | |
(6) | The vesting schedule for this restricted stock grant was/is 50% on January 11, 2008, 25% on January 11, 2009, and 25% on January 11, 2010. | |
(7) | The vesting schedule for this RSU grant was/is 50% on March 15, 2008 and 50% on July 2, 2010, and as of January 31, 2008, this award was subject to the special vesting conditions described below. | |
(8) | The vesting schedule for this RSU grant was/is 33% on March 15, 2008, 33% on March 15, 2009, and 34% on July 2, 2010, and as of January 31, 2008, this award was subject to the special vesting conditions described below. | |
(9) | The vesting schedule for this RSU grant was/is 1/3 upon the stock option committee’s determination of our achievement of specified revenue targets (set by the stock option committee for the relevant performance period) for the period from August 1, 2007 through January 31, 2008, 1/3 upon the determination of such achievement for the period from February 1, 2008 through January 31, 2009, and 1/3 upon the determination of such achievement for the period from February 1, 2009 through January 31, 2010 (provided that, with respect to the period from February 1, 2009 through January 31, 2010, no such determination by the stock option committee shall be final until on or after July 2, 2010), and as of January 31, 2008, this award was subject to the special vesting conditions described below. | |
(10) | The vesting schedule for this RSU grant was/is 25% on August 14, 2007, 25% on August 14, 2008, 25% on August 14, 2009, and 25% on August 14, 2010, and as of January 31, 2008, this award was subject to the special vesting conditions described below. | |
(11) | The vesting schedule for this RSU grant was/is 30% on August 14, 2007, 30% on August 14, 2008, 30% on August 14, 2009, and 10% on July 2, 2010, and as of January 31, 2008, this award was subject to the special vesting conditions described below. |
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Option Awards | Stock Awards | |||||||||||||||
Number of Shares | ||||||||||||||||
Acquired on | Value Realized on | Number of Shares | Value Realized on | |||||||||||||
Exercise | Exercise | Acquired on Vesting | Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Dan Bodner | — | — | 42,075 | 739,426 | ||||||||||||
Douglas Robinson | — | — | — | — | ||||||||||||
Elan Moriah | — | — | 7,500 | 138,575 | ||||||||||||
Meir Sperling | — | — | 7,500 | 138,575 | ||||||||||||
David Parcell | — | — | 4,000 | 77,200 | ||||||||||||
Peter Fante | — | — | 3,500 | 67,550 |
Option Awards | Stock Awards | |||||||||||||||
Number of Shares | ||||||||||||||||
Acquired on | Value Realized on | Number of Shares | Value Realized on | |||||||||||||
Exercise | Exercise | Acquired on Vesting | Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($) | ||||||||||||
Dan Bodner | — | — | 31,475 | 1,066,401 | ||||||||||||
Douglas Robinson | — | — | — | — | ||||||||||||
Elan Moriah | — | — | 5,000 | 168,250 | ||||||||||||
Meir Sperling | — | — | 5,000 | 168,250 | ||||||||||||
David Parcell | — | — | — | — | ||||||||||||
Peter Fante | — | — | — | — | ||||||||||||
Igal Nissim(1) | — | — | 9,200 | 311,764 |
(1) | Mr. Nissim ceased to be an executive officer in the year ended January 31, 2007. |
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• | The table does not include amounts that would be payable by third parties where we have no continuing liability, such as amounts payable under private insurance policies, government insurance such as social security or national insurance, or 401(k) or similar defined contribution retirement plans. As a result, the table does not reflect amounts payable to Mr. Sperling or Mr. Parcell under the applicable local company retirement plan or retirement fund, for which we have no liability at the time of payment. |
• | Except as noted in the following bullet, the table does not include payments or benefits that are available generally to all salaried employees in the country in which the executive officer is employed and do not discriminate in scope, terms, or operation in favor of our executive officers or directors, such as short-term disability payments or payment for accrued but unused vacation. |
• | The table includes all severance or notice payments for which we are financially responsible, even if such payments are available generally to all salaried employees in the country in which the executive officer is employed and do not discriminate in scope, terms, or operation in favor of our executive officers or directors. |
• | With respect to Mr. Sperling’s severance fund, the table includes the difference between the amount that would have been owed to Mr. Sperling under applicable Israeli labor law in the event of an involuntary termination and the amount in his severance fund at January 31, 2008. |
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• | As noted in the previous section, as of January 31, 2008, Messrs. Bodner and Sperling had not entered into employment agreements with us, however, Mr. Sperling (but not Mr. Bodner) is included in the table below because he was entitled to certain statutory severance benefits and advanced notice payments, as described below. |
• | The information for Messrs. Robinson, Moriah, Parcell, and Fante included in the table below reflects their entitlements as of January 31, 2008 and therefore excludes amounts attributable to any recent amendments to their employment agreements (signed after January 31, 2008) providing for enhanced cash severance and other benefits in the event of a termination in connection with a change in control. |
• | The value of equity awards in the table below is based on the closing price of our common stock on January 31, 2008, which was $18.50. |
• | All amounts are calculated on a pre-tax basis. |
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Accelerated | Cont. Health | Cont. | ||||||||||||||||||||||||||
Salary | Pro Rata | Additional | Equity | (present Insurance | Other | |||||||||||||||||||||||
Name of Executive Officer and | Continuation(1) | Bonus(2) | Bonus(3) | Awards(4) | Coverage value)(5) | Benefits(6) | Total | |||||||||||||||||||||
Triggering Event | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Douglas Robinson | ||||||||||||||||||||||||||||
Death | — | 204,000 | — | — | 29,918 | — | 233,918 | |||||||||||||||||||||
Disability | 170,000 | 204,000 | — | — | 14,959 | — | 388,959 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause | 340,000 | — | 334,833 | — | 29,918 | — | 704,751 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause in Connection with CIC | 340,000 | — | 334,833 | 1,369,000 | 29,918 | — | 2,073,751 | |||||||||||||||||||||
CIC Only (continued employment) | — | — | — | 1,369,000 | — | — | 1,369,000 | |||||||||||||||||||||
Elan Moriah | ||||||||||||||||||||||||||||
Death | — | 182,900 | — | — | 29,918 | — | 212,818 | |||||||||||||||||||||
Disability | 170,000 | 182,900 | — | — | 14,959 | — | 367,859 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause | 340,000 | 182,900 | 177,310 | — | 29,918 | — | 730,128 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause in Connection with CIC | 340,000 | 182,900 | 177,310 | 1,078,550 | 29,918 | — | 1,808,678 | |||||||||||||||||||||
CIC Only (continued employment) | — | — | — | — | — | — | — | |||||||||||||||||||||
Meir Sperling | ||||||||||||||||||||||||||||
Death | — | — | — | — | — | — | — | |||||||||||||||||||||
Disability | — | — | — | — | — | — | — | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause | 114,615 | — | — | — | 15 | 28,400 | 143,030 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause in Connection with CIC | 114,615 | — | — | — | 15 | 28,400 | 143,030 | |||||||||||||||||||||
CIC Only (continued employment) | — | — | — | — | — | — | — | |||||||||||||||||||||
David Parcell | ||||||||||||||||||||||||||||
Death | — | — | — | — | — | — | — | |||||||||||||||||||||
Disability | — | — | — | — | — | — | — | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause | 350,649 | 123,861 | 73,313 | — | 3,334 | 38,845 | 590,002 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause in Connection with CIC | 350,649 | 123,861 | 73,313 | — | 3,334 | 38,845 | 590,002 | |||||||||||||||||||||
CIC Only (continued employment) | — | — | — | — | — | — | — | |||||||||||||||||||||
Peter Fante | ||||||||||||||||||||||||||||
Death | — | 104,500 | — | — | 29,918 | — | 134,418 | |||||||||||||||||||||
Disability | 146,250 | 104,500 | — | — | 14,959 | — | 265,709 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause | 292,500 | 104,500 | 133,567 | — | 29,918 | — | 560,485 | |||||||||||||||||||||
Resignation for Good Reason/Involuntary Termination without Cause in Connection with CIC | 292,500 | 104,500 | 133,567 | 745,550 | 29,918 | — | 1,306,035 | |||||||||||||||||||||
CIC Only (continued employment) | — | — | — | — | — | — | — |
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(1) | For Mr. Parcell, includes six months of base salary during his contractual notice period plus an additional 21 weeks of salary (assuming a termination event on January 31, 2008) assuming the application of local company redundancy policy, costing an aggregate of £176,250, or $350,649 as indicated in the table above, based on the January 31, 2008 exchange rate of £1= $1.9895. For Mr. Sperling, includes the difference between the amount that would have been owed to Mr. Sperling under applicable Israeli labor law in the event of an involuntary termination at January 31, 2008 and the amount in his severance fund on such date, or NIS 85,521 ($23,647 based on the January 31, 2008 exchange rate of NIS 1 = $0.2765) plus three and one-half month’s base salary during his notice period assuming the application of local company notice guidelines equaling NIS 329,000 ($90,969 based on the January 31, 2008 exchange rate of NIS 1 = $0.2765). | |
(2) | For Mr. Parcell, includes six-month’s worth (or 50%) of the average annual bonus paid or payable to him over the course of the three years ended January 31, 2008 as part of his six month contractual notice period plus an additional 21 week’s worth (assuming a termination event on January 31, 2008) of his three-year average annual bonus assuming the application of local company redundancy policy, costing an aggregate of £62,257, or $123,861 as indicated in the table above, based on the January 31, 2008 exchange rate of £1= $1.9895. | |
(3) | For Mr. Parcell, represents the second half of his 2007 cash retention bonus equaling £36,850 ($73,313 based on the January 31, 2008 exchange rate of £1= $1.9895), which would have been payable within his six month notice period assuming a termination on January 31, 2008. | |
(4) | For equity awards other than stock options, value is calculated as the closing price of our common stock on January 31, 2008 ($18.50) times the number of shares accelerating. For stock options, value is calculated as the difference between the closing price of our common stock on January 31, 2008 and the option exercise price per share times the number of stock options accelerating. | |
(5) | For executive officers other than Messrs. Parcell and Sperling, amounts shown represent the actual cost of the contractually-agreed number of months of COBRA payments. As of January 31, 2008, neither Mr. Parcell nor Mr. Sperling was entitled to company-paid or reimbursed health insurance following a termination event, however, Mr. Parcell was entitled to continued health benefits during his six-month notice period costing £1,676, or $3,334 as indicated in the table above, based on the January 31, 2008 exchange rate of £1= $1.9895 and Mr. Sperling was entitled to continued health benefits during his notice period assuming the application of local company notice guidelines costing NIS 53, or $15 as indicated in the table above, based on the January 31, 2008 exchange rate of NIS 1 = $0.2765. | |
(6) | For Mr. Parcell, includes six months of continued retirement plan contributions, car allowance/fuel reimbursement allowance, and insurance premiums during his contractual notice period costing £5,640 ($11,221), £7,431 ($14,784), and £1,286 ($2,559), respectively, plus an additional 21 weeks of car allowance assuming the application of local company redundancy policy, costing £5,168 ($10,282), for a total of £19,525 ($38,845), in each case, based on the January 31, 2008 exchange rate of £1= $1.9895. For Mr. Sperling, assuming the application of local company notice guidelines, includes three and one-half months of continued contributions to his retirement fund of NIS 16,416 ($4,539), to his severance fund of NIS 27,441 ($7,587), to his study fund of NIS 25,891 ($7,159), disability insurance premiums of NIS 8,247 ($2,280), a statutory recreation payment of NIS 649 ($180), and use of a company car plus a fuel reimbursement allowance costing NIS 24,068 ($6,655) for the period, for a total of NIS 102,712 ($28,400), in each case, based on the January 31, 2008 exchange rate of NIS 1 = $0.2765. |
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Annual Compensation | Long-Term Compensation | |||||||||||||||||||||||
Securities | ||||||||||||||||||||||||
Name and | Other Annual | Restricted Stock | Underlying | |||||||||||||||||||||
Principal | Year Ended | Salary | Bonus | Compensation | Awards | Options/SARs | ||||||||||||||||||
Position | January 31, | ($)(1) | ($)(2) | ($)(3) | ($) | (#) | ||||||||||||||||||
Dan Bodner, | 2006 | $ | 440,000 | $ | 316,923 | $ | 37,182 | $ | 1,331,280 | (4) | 88,000 | |||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||
Igal Nissim, | 2006 | $ | 207,324 | $ | 158,461 | $ | 44,945 | $ | 275,200 | (5) | 18,000 | |||||||||||||
Former Chief Financial Officer |
(1) | Includes salary and payments in lieu of earned vacation. For Mr. Nissim, represents NIS 936,000 ($207,324 based on the average exchange rate from February 1, 2005 through January 31, 2006 of NIS 1=$0.2215). | |
(2) | Includes bonuses accrued for services performed in the year indicated regardless of the year of payment. For Mr. Nissim, represents NIS 717,100 ($158,461 based on the spot rate on the payment date of NIS 1=$0.2210). | |
(3) | Includes company car, 401(k) partial match, life insurance, legal, tax, and financial advisement fees, and, for Mr. Nissim, contribution to a managers’ insurance fund and other customary Israeli savings funds. | |
(4) | On January 11, 2006, Mr. Bodner was granted 38,700 restricted shares of our common stock. These shares of restricted stock vest 50% on January 11, 2008, 25% on January 11, 2009 and 25% on January 11, 2010. If dividends are paid by Verint, Mr. Bodner is entitled to receive such dividends whether or not the shares of restricted stock are vested. The value of these holdings on the January 11, 2006 grant date was $1,331,280 based on a closing price per share of $34.40 on such date. The aggregate value of all unvested restricted stock held by Mr. Bodner as of January 31, 2006 was $3,684,813 based on a closing price per share of $36.25 on such date. | |
(5) | On January 11, 2006, Mr. Nissim was granted 8,000 restricted shares of our common stock. These shares of restricted stock vest 50% on January 11, 2008, 25% on January 11, 2009 and 25% on January 11, 2010. If dividends are paid by Verint, Mr. Nissim is entitled to receive such dividends whether or not the shares of restricted stock are vested. The value of these holdings on the January 11, 2006 grant date was $275,200 based on a closing price per share of $34.40 on such date. The aggregate value of all unvested restricted stock held by Mr. Nissim as of January 31, 2006 was $957,000 based on a closing price per share of $36.25 on such date. |
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Potential Realized Value at | ||||||||||||||||||||||||
Assumed Annual Rates of | ||||||||||||||||||||||||
Stock Price Appreciation | ||||||||||||||||||||||||
Individual Grants | for Option Term | |||||||||||||||||||||||
Percent of | ||||||||||||||||||||||||
Number | Total Options | |||||||||||||||||||||||
of Shares | Granted to | Exercise | ||||||||||||||||||||||
Subject | Employees in | Price per | ||||||||||||||||||||||
Name | to Option | Period(1) | Share | Expiration Date | 5% | 10% | ||||||||||||||||||
Dan Bodner | 88,000 | 43.35 | % | $ | 34.40 | January 11, 2016 | $ | 1,903,790 | $ | 4,824,577 | ||||||||||||||
Igal Nissim | 18,000 | 8.87 | % | $ | 34.40 | January 11, 2016 | $ | 389,412 | $ | 986,845 |
(1) | In the year ended January 31, 2006, excluding grants to non-employee directors, we granted a total of only 191,000 options to a total of 15 employees, including Mr. Bodner and Mr. Nissim. |
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Shares | Value | Number of Securities | Value of Unexercised In the | |||||||||||||||||||||
Acquired on | Realized | Underlying Unexercised | Money Options at | |||||||||||||||||||||
Exercise | ($) | Options at January 31, 2006 | January 31, 2006 (1) | |||||||||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||
Dan Bodner | 48,864 | 1,119,982 | 38,600 | 223,235 | $ | 269,250.00 | $ | 1,584,508.75 | ||||||||||||||||
Igal Nissim | — | — | 34,811 | 59,196 | $ | 610,204.24 | $ | 489,206.50 |
(1) | Calculated on the basis of the closing price of our common stock as reported on NASDAQ on January 31, 2006 of $36.25 per share minus the exercise price. |
Date | Change in Board Composition | |
April 28, 2006 | Resignations of Messrs. Alexander, Kreinberg, and Sorin | |
December 11, 2006 | Resignation of Mr. Nissim | |
June 29, 2007 | Resignation of Mr. P. Robinson | |
July 26, 2007 | Appointment of Mr. Dahan | |
September 11, 2007 | Appointments of Ms. Shah and Ms. Wright | |
January 31, 2008 | Resignation of Mr. Ledwell | |
March 24, 2008 | Appointment of Mr. Bunyan | |
November 24, 2008 | Resignation of Mr. Aronovitz; appointment of Mr. Spirtos | |
June 12, 2009 | Resignation of Mr. Spirtos; appointment of Mr. Swad |
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Fees Earned or | Stock | Option | ||||||||||||||||||
Year Ended | Paid in Cash | Awards | Awards | Total | ||||||||||||||||
Name | January 31, | ($)(6) | ($)(7) | ($)(7) | ($) | |||||||||||||||
Alexander, Kobi(1),(9) | 2007 | — | — | — | — | |||||||||||||||
Aronovitz, Avi(2), (9) | 2008 | — | — | — | — | |||||||||||||||
2007 | — | — | 54,532 | 54,532 | ||||||||||||||||
Baker, Paul(9) | 2008 | — | — | 9,837 | 9,837 | |||||||||||||||
2007 | — | — | 65,970 | 65,970 | ||||||||||||||||
Bodner, Dan | 2008 | — | — | — | — | |||||||||||||||
2007 | — | — | — | — | ||||||||||||||||
Dahan, Andre(9) | 2008 | — | — | — | ||||||||||||||||
DeMarines, Victor | 2008 | 178,375 | 256,577 | (8) | — | 434,952 | ||||||||||||||
2007 | 97,616 | — | 47,419 | 145,035 | ||||||||||||||||
Kreinberg, David(1) | 2007 | — | — | 39 | 39 | |||||||||||||||
Ledwell, David(3) | 2008 | — | 102,727 | (8) | — | 102,727 | ||||||||||||||
2007 | — | — | — | — | ||||||||||||||||
Minihan, Kenneth | 2008 | 123,500 | 256,577 | (8) | — | 380,077 | ||||||||||||||
2007 | 80,768 | — | 47,419 | 128,187 | ||||||||||||||||
Myers, Larry | 2008 | 194,500 | 256,577 | (8) | — | 451,077 | ||||||||||||||
2007 | 92,517 | — | 65,346 | 157,863 | ||||||||||||||||
Nissim, Igal(4) | 2007 | — | — | — | — | |||||||||||||||
Robinson, Paul(5), (9) | 2008 | — | — | 9,837 | 9,837 | |||||||||||||||
2007 | — | — | 65,970 | 65,970 | ||||||||||||||||
Safir, Howard | 2008 | 140,000 | 256,577 | (8) | — | 396,577 | ||||||||||||||
2007 | 76,321 | — | 47,419 | 123,740 | ||||||||||||||||
Shah, Shefali(9) | 2008 | — | — | — | — | |||||||||||||||
Sorin, William(1), (9) | 2007 | — | — | 11,271 | 11,271 | |||||||||||||||
Wright, Lauren(9) | 2008 | — | — | — | — |
(1) | Resigned from the board of directors on April 28, 2006. | |
(2) | Resigned from the board of directors on November 24, 2008. |
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(3) | Resigned from the board of directors on January 31, 2008. | |
(4) | Resigned from the board of directors on December 11, 2006. | |
(5) | Resigned from the board of directors on June 29, 2007. | |
(6) | Represents amount earned for board of directors service during the year indicated regardless of the year of payment. | |
(7) | Reflects the dollar amount recognized for financial statement reporting purposes for years ended January 31, 2008 and 2007 in accordance with SFAS No. 123(R). No new equity awards of any kind were made to our directors during the year ended January 31, 2007. | |
(8) | On July 2, 2007, each of Messrs. DeMarines, Minihan, Myers, and Safir received (i) an award of 5,000 shares of restricted stock in respect of board of directors service for the year ended January 31, 2008, vesting quarterly over 12 months and (ii) a fully-vested award of 5,000 shares of restricted stock in respect of board of directors service during the previous year (the year ended January 31, 2007). On July 2, 2007, Mr. Ledwell also received an award of 5,000 shares of restricted stock in respect of board of directors service for the year ended January 31, 2008, vesting quarterly over 12 months. These were the only equity awards made to our directors (for service as directors) in the year ended January 31, 2008. The fair value on the date of board of directors approval of each of these awards was $153,850 ($307,700 for the combination of the two awards received by Messrs. DeMarines, Minihan, Myers, and Safir) based on a closing price of our common stock of $30.77 on July 2, 2007. | |
(9) | Comverse-designated director. |
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Unvested | Unvested | ||||||||||||
Year Ended | Options | Stock Awards | |||||||||||
Name | January 31, | (#) | (#) | ||||||||||
Alexander, Kobi | 2007 | — | — | ||||||||||
Aronovitz, Avi | 2008 | — | — | ||||||||||
2007 | — | — | |||||||||||
Baker, Paul | 2008 | — | — | ||||||||||
2007 | 750 | — | |||||||||||
Bodner, Dan | 2008 | — | — | ||||||||||
2007 | — | — | |||||||||||
Dahan, Andre | 2008 | — | — | ||||||||||
DeMarines, Victor | 2008 | — | 2,500 | ||||||||||
2007 | — | — | |||||||||||
Kreinberg, David | 2007 | — | — | ||||||||||
Ledwell, David | 2008 | — | 3,500 | ||||||||||
2007 | — | 2,000 | |||||||||||
Minihan, Kenneth | 2008 | — | 2,500 | ||||||||||
2007 | — | — | |||||||||||
Myers, Larry | 2008 | — | 2,500 | ||||||||||
2007 | — | — | |||||||||||
Nissim, Igal | 2007 | — | — | ||||||||||
Robinson, Paul | 2008 | — | — | ||||||||||
2007 | 750 | — | |||||||||||
Safir, Howard | 2008 | — | 2,500 | ||||||||||
2007 | — | — | |||||||||||
Shah, Shefali | 2008 | — | — | ||||||||||
Sorin, William | 2007 | — | — | ||||||||||
Wright, Lauren | 2008 | — | — |
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Period | ||||||||||||||||
(Through January 31, 2008) | ||||||||||||||||
Component of | Year ended | From and after | From and after | |||||||||||||
Compensation | January 31, 2006 | August 1, 2006 | November 1, 2007 | |||||||||||||
Annual retainer ( per annum) | $ | 15,000 | $ | 30,000 | $ | 50,000 | ||||||||||
Board meeting fee | $ | 1,000 | $ | 1,500 | $ | 1,500 | ||||||||||
Committee meeting fee | $ | 500 | $ | 750 | $ | 750 | ||||||||||
Annual equity grant | 6,000 options (vesting quarterly over 12 months) | 5,000 shares of restricted stock (vesting quarterly over 12 months) | 5,000 shares of restricted stock (vesting annually for 12 months of service) | |||||||||||||
Special quarterly retainer (per quarter) | — | — | $10,000 | |||||||||||||
Chairmanship fee (per annum) | — | — | Board | $ | 25,000 | |||||||||||
Audit | $ | 20,000 | ||||||||||||||
Compensation | $ | 10,000 | ||||||||||||||
Stock Option | $ | 5,000 | ||||||||||||||
Governance | $ | 7,500 | ||||||||||||||
Per diem fee (for work outside meetings) | — | — | $2,500 |
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• | each person (or group within the meaning of Section 13(d)(3) of the Exchange Act) known by us to own beneficially 5% or more of our common stock; |
• | each of our directors and named executive officers; and |
• | all our directors and named executive officers as a group. |
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Number of Shares Name of Beneficial Owner | Class | Beneficially Owned(1) | Percentage of Total Shares Outstanding | |||||||||
Principal Stockholders: | ||||||||||||
Comverse Technology, Inc. 909 Third Avenue New York, NY 10022 | Common | 18,589,023 | (2) | 57.1 | % | |||||||
Comverse Technology, Inc. 909 Third Avenue New York, NY 10022 | Series A Preferred | 9,978,682 | 100 | %(3) | ||||||||
Cadian Capital Management, LLC(4) 461 Fifth Avenue 24th Floor New York, NY 10017 | Common | 2,302,525 | 7.1 | % | ||||||||
Platinum Partners(5) 152 West 57th Street 54th Floor New York, NY 10019 | Common | 1,718,300 | 5.3 | % | ||||||||
Directors and Executive Officers: | ||||||||||||
Dan Bodner | Common | 524,517 | (6) | 1.6 | % | |||||||
Douglas E. Robinson | Common | 82,911 | (7) | * | ||||||||
Peter Fante | Common | 101,229 | (8) | * | ||||||||
Elan Moriah | Common | 170,000 | (9) | * | ||||||||
David Parcell | Common | 58,165 | (10) | * | ||||||||
Meir Sperling | Common | 177,827 | (11) | * | ||||||||
Paul D. Baker | Common | 10,723 | (12) | * | ||||||||
John Bunyan | Common | 0 | (13) | * | ||||||||
Andre Dahan | Common | 0 | (14) | * | ||||||||
Victor A. DeMarines | Common | 31,000 | (15) | * | ||||||||
Kenneth A. Minihan | Common | 32,000 | (16) | * | ||||||||
Larry Myers | Common | 20,000 | (17) | * | ||||||||
Howard Safir | Common | 37,000 | (18) | * | ||||||||
Shefali Shah | Common | 0 | (19) | * | ||||||||
Lauren Wright | Common | 0 | (20) | * | ||||||||
Stephen M. Swad | Common | 0 | (21) | * | ||||||||
All executive officers and directors as a group (sixteen persons) | 1,245,372 | 3.7 | % |
* | Less than 1% | |
(1) | Unless otherwise indicated and except pursuant to applicable community property laws, to our knowledge, each person or entity listed in the table above has sole voting and investment power with respect to all shares listed as owned by such person or entity. |
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(2) | As the preferred stock is not currently convertible, assumes that the 9,978,682 shares currently underlying the preferred stock (if converted 60 days after the Reference Date) are not issued. If the preferred stock were converted to common stock 60 days after the Reference Date, then the percentage of beneficial ownership of Comverse would equal 67.2%. Please see “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities — Recent Sales of Unregistered Securities” under Item 5 and “Certain Relationships and Related Transactions, and Director Independence — Preferred Stock Financing” under Item 13 for a discussion of the conversion rights of the preferred stock. | |
(3) | Comverse is the sole holder of our preferred stock. See “Certain Relationships and Related Transactions, and Director Independence — Preferred Stock Financing” under Item 13 for details on the rights of the preferred stock. | |
(4) | As reported in the Schedule 13G filed with the SEC on January 15, 2010 by Cadian Capital Management, LLC (“CCM”) on behalf of itself and Eric Bannasch, CCM and Eric Bannasch have shared voting and dispositive power over all the shares. | |
(5) | As reported in the Schedule 13G/A filed with the SEC on February 11, 2010 by Platinum Partners Value Arbitrage Fund LP (“PPVAF”), Platinum Partners Legacy Feeder Ltd (“PPLF”) and Platinum Partners Liquid Opportunity Fund L.P. (“PPLOF”) (collectively, “Platinum Partners”), Platinum Partners expressly affirms their membership of a group and each has sole voting and dispositive power over the following shares: PPVAF — 401,153 shares; PPLF — 1,212,140 shares; and PPLOF — 105,007 shares. | |
(6) | Includes options to purchase 261,835 shares of common stock, which are currently exercisable. Includes 103,474 shares of restricted stock, which are fully vested. Also includes 159,208 restricted stock units, of which 115,458 are fully vested and of which 43,750 will vest within 60 days after the Reference Date but are currently subject to forfeiture. Mr. Bodner beneficially owns options to purchase 4,781 shares of Comverse common stock exercisable within 60 days after the Reference Date. | |
(7) | Consists of 82,911 restricted stock units, of which 64,114 are fully vested and of which 18,797 will vest within 60 days after the Reference Date but are currently subject to forfeiture. | |
(8) | Includes options to purchase 45,000 shares of common stock which are currently exercisable. Includes 6,235 shares of restricted stock, which are fully vested. Also includes 49,994 restricted stock units, of which 33,286 are fully vested and of which 16,708 will vest within 60 days after the Reference Date but are currently subject to forfeiture. | |
(9) | Includes options to purchase 91,088 shares of common stock, which are fully vested. Includes 16,718 shares of restricted stock, which are fully vested. Also includes 62,194 restricted stock units, of which 43,397 are fully vested and of which 18,797 will vest within 60 days after the Reference Date but are currently subject to forfeiture. | |
(10) | Includes options to purchase 41,196 shares of common stock which are currently exercisable. Includes 6,944 shares of restricted stock, which are fully vested. Also includes 10,025 restricted stock units that will vest within 60 days of the Reference Date but are currently subject to forfeiture. Excludes 34,777 restricted stock units that will vest immediately upon the earlier of finalization of an amendment to Mr. Parcell’s equity award agreements or satisfaction of certain compliance conditions as discussed in Item 11. | |
(11) | Includes options to purchase 99,892 shares of common stock, which are currently exercisable. Includes 20,000 shares of restricted stock, which are fully vested. Also includes 57,935 restricted stock units, of which 41,227 are fully vested and of which 16,708 will vest within 60 days after the Reference Date but are currently subject to forfeiture. | |
(12) | Includes options to purchase 10,223 shares of common stock which are currently exercisable and 500 shares of common stock held following the exercise of stock options. Mr. Baker beneficially owns 12,000 shares of Comverse common stock deliverable in settlement of vested deferred stock unit awards on the first date within calendar 2010 on which such shares are the subject of an effective registration statement on Form S-8 and no resale restrictions apply. Mr. Baker also beneficially owns options to purchase 81,250 shares of Comverse common stock exercisable within 60 days after the Reference Date. Mr. Baker is a senior executive at Comverse. He disclaims beneficial ownership of any of our securities held by Comverse. |
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(13) | Mr. Bunyan beneficially owns 66,000 shares of Comverse common stock deliverable in settlement of vested deferred stock unit awards on the first date within calendar 2010 on which such shares are the subject of an effective registration statement on Form S-8 and no resale restrictions apply. Mr. Bunyan is a senior executive at Comverse. He disclaims beneficial ownership of any of our securities held by Comverse. | |
(14) | Mr. Dahan beneficially owns 441,543 shares of Comverse common stock deliverable in settlement of vested deferred stock unit awards on the first date within calendar 2010 on which such shares are the subject of an effective registration statement on Form S-8 and no resale restrictions apply. Mr. Dahan is President, Chief Executive Officer, and a director of Comverse. He disclaims beneficial ownership of any of our securities held by Comverse. | |
(15) | Includes options to purchase 17,000 shares of common stock which are currently exercisable. Includes 14,000 shares of restricted stock, of which 9,000 are fully vested and of which 5,000 are unvested and subject to forfeiture. | |
(16) | Includes options to purchase 18,000 shares of common stock which are currently exercisable. Includes 14,000 shares of restricted stock, of which 9,000 are fully vested and of which 5,000 are unvested and subject to forfeiture. | |
(17) | Includes options to purchase 6,000 shares of common stock which are currently exercisable. Includes 14,000 shares of restricted stock, of which 9,000 are fully vested and of which 5,000 are unvested and subject to forfeiture. | |
(18) | Includes options to purchase 23,000 shares of common stock which are currently exercisable. Includes 14,000 shares of restricted stock, of which 9,000 are fully vested and of which 5,000 are unvested and subject to forfeiture. | |
(19) | Ms. Shah beneficially owns 34,667 shares of Comverse common stock deliverable in settlement of vested deferred stock unit awards on the first date within calendar 2010 on which such shares are the subject of an effective registration statement on Form S-8 and no resale restrictions apply. Ms. Shah is a senior executive at Comverse. She disclaims beneficial ownership of any of our securities held by Comverse. | |
(20) | Ms. Wright beneficially owns 45,001 shares of Comverse common stock deliverable in settlement of vested deferred stock unit awards on the first date within calendar 2010 on which such shares are the subject of an effective registration statement on Form S-8 and no resale restrictions apply. Ms. Wright is a senior executive at Comverse. She disclaims beneficial ownership of any of our securities held by Comverse. | |
(21) | Mr. Swad is a senior executive at Comverse. Mr. Swad does not beneficially own any shares of Comverse common stock or options to purchase shares of Comverse common stock and disclaims beneficial ownership of any of our securities held by Comverse. |
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(a) | (b) | (c) | ||||||||||
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Number of Securities | Weighted-Average | Future Issuance under | ||||||||||
to be Issued upon | Exercise Price of | Equity Compensation | ||||||||||
Exercise of | Outstanding Options, | Plans (Excluding | ||||||||||
Outstanding Options, | Warrants and | Securities Reflected in | ||||||||||
Plan Category | Warrants and Rights | Rights(1) | Column (a)) | |||||||||
Equity compensation plans approved by security holders | 6,697,224 | (2) | $ | 21.89 | 4,489,138 | (3) | ||||||
Equity compensation plans not approved by security holders | 158,573 | (4) | $ | 17.57 | 0 | |||||||
Total | 6,855,797 | $ | 21.77 | 4,489,138 | (5) |
(a) | (b) | (c) | ||||||||||
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Number of Securities | Weighted-Average | Future Issuance under | ||||||||||
to be Issued upon | Exercise Price of | Equity Compensation | ||||||||||
Exercise of | Outstanding Options, | Plans (Excluding | ||||||||||
Outstanding Options, | Warrants and | Securities Reflected in | ||||||||||
Plan Category | Warrants and Rights | Rights(1) | Column (a)) | |||||||||
Equity compensation plans approved by security holders | 6,753,781 | (6) | $ | 23.35 | 580,498 | |||||||
Equity compensation plans not approved by security holders | 5,943 | (4) | $ | 19.53 | 0 | |||||||
Total | 6,759,724 | $ | 23.34 | 580,498 | (5) |
(1) | The weighted-average price relates to outstanding stock options only (as of the applicable date). Other outstanding awards carry no exercise price and are therefore excluded from the weighted average price. |
(2) | Consists of 5,576,094 stock options and 1,121,130 restricted stock units. Does not include 146,425 shares of restricted stock previously issued under our equity compensation plans. |
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(3) | The Witness Amended and Restated Stock Incentive Plan contains an evergreen provision pursuant to which the number of shares available under the plan may increase annually so that the total number of shares reserved will equal the sum of (a) the aggregate number of shares previously issued under the plan, (b) the aggregate number of shares subject to outstanding options granted under the plan, and (c) 10% of the number of shares outstanding on the last day of the preceding year. Notwithstanding the foregoing, the board of directors (or an authorized committee thereof), in its discretion, may authorize a smaller number of additional shares to be reserved under this plan. The maximum annual increase in the number of shares, however, shall not exceed 3,000,000 in any calendar year. No new awards are permitted to be made under this plan after November 18, 2009. | |
(4) | Consists solely of certain new-hire inducement grants made by Witness outside of its stockholder-approved equity plans prior to May 25, 2007. | |
(5) | Does not include 743,489 shares available for issuance pursuant to our Employee Stock Purchase Plan as of January 31, 2008 and as of February 28, 2010. The Witness Employee Stock Purchase Plan was terminated immediately prior to our acquisition of Witness and therefore was not assumed by us. | |
(6) | Consists of 4,667,328 stock options and 2,086,453 restricted stock units. Does not include 20,000 shares of restricted stock previously issued under our equity compensation plans. |
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Audit Fees (1) | $ | 7,790 | $ | 1,553 | $ | 811 | ||||||
Audit-related fees (2) | 8 | — | — | |||||||||
Tax fees (3) | 99 | 83 | — | |||||||||
All other fees (4) | — | — | — | |||||||||
Total Fees | $ | 7,897 | $ | 1,636 | $ | 811 | ||||||
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(a) | Documents filed as part of this report. |
(b) | Exhibits |
Filed Herewith / | ||||
Incorporated by | ||||
Number | Description | Reference from | ||
2.1 | Asset Purchase Agreement between Verint Systems Ltd. and ECtel Ltd. dated as of February 9, 2004 | Form 8-K filed on March 31, 2004 | ||
2.2 | Merger Agreement and Plan of Reorganization by and among Witness Systems, Inc., Baron Acquisition Corporation, Blue Pumpkin Software, Inc., and, solely with respect to Article VIII and Article IX, Laurence R. Hootnick as Shareholder Agent and The U.S. Stock Transfer Corporation as Depository Agent dated December 16, 2004 | Witness Systems, Inc. Form 8-K (Commission File No. 000-29335) filed on January 27, 2005 | ||
2.3 | Agreement and Plan of Merger, dated as of February 11, 2007, among Verint Systems Inc., White Acquisition Corporation and Witness Systems, Inc. | Form 8-K filed on February 15, 2007 | ||
3.1 | Amended and Restated Certificate of Incorporation of Verint Systems Inc. | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
3.2 | Certificate of Designation, Preferences and Rights of the Series A Convertible Perpetual Preferred Stock | Form 8-K filed on May 30, 2007 8-K | ||
3.3 | Amended and Restated By-laws of Verint Systems Inc. | Filed herewith |
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Filed Herewith / | ||||
Incorporated by | ||||
Number | Description | Reference from | ||
4.1 | Specimen Common Stock certificate | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
4.2 | Specimen Series A Convertible Perpetual Preferred Stock certificate | Filed herewith | ||
4.3 | Registration Rights Agreement by and among the Company, Nic. Christiansen Invest A/G and Ulrik Ortiz Rasmussen, dated as of September 2, 2004 | Form S-3 (Commission File No. 333-120266) effective on December 17, 2004 | ||
4.4 | Registration Rights Agreement, by and between the Company and Comverse Technology, Inc., dated May 25, 2007 | Form 8-K filed on May 30, 2007 | ||
10.1 | Form of Indemnification Agreement | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.2 | Federal Income Tax Sharing Agreement, dated as of January 31, 2002, between Comverse and the Company | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.3 | Business Opportunities Agreement dated as of March 19, 2002, between Comverse and the Company | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.4 | Offer Letter, dated July 27, 2006, from the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel (regarding final part of settlement payment) (English translation) | Filed herewith | ||
10.5 | Acceptance Letter, dated July 31, 2006, from Verint Systems Ltd. to the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of the State of Israel (regarding final part of settlement payment) (English translation) | Filed herewith | ||
10.6 | Verint Systems Inc. 2002 Employee Stock Purchase Plan | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.7 | Verint Systems Inc. Stock Incentive Compensation Plan (as amended through December 12, 2002) | Form 10-K filed on May 1, 2003 | ||
10.8 | Amendment No. 1 to Verint Systems Inc. Stock Incentive Compensation Plan (dated December 23, 2008) | Filed herewith |
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Filed Herewith / | ||||
Incorporated by | ||||
Number | Description | Reference from | ||
10.9 | Amendment No. 2 to Verint Systems Inc. Stock Incentive Compensation Plan (dated March 4, 2009) | Filed herewith | ||
10.10 | Verint Systems Inc. 2004 Stock Incentive Compensation Plan, as amended and restated | Form 8-K filed on January 10, 2006 | ||
10.11 | Amendment No. 1 to Verint Systems Inc. 2004 Stock Incentive Compensation Plan, as amended and restated (dated December 23, 2008) | Filed herewith | ||
10.12 | Witness Systems Amended and Restated Stock Incentive Plan | Witness Systems, Inc. Form 10-Q for the period ended June 30, 2005 | ||
10.13 | Amendment No. 1 to Witness Systems Amended and Restated Stock Incentive Plan (dated May 29, 2001) | Witness Systems, Inc. Form 10-K filed on March 17, 2006 | ||
10.14 | Amendment No. 2 to Witness Systems Amended and Restated Stock Incentive Plan (dated January 15, 2004) | Witness Systems, Inc. Form 10-K filed on March 15, 2004 | ||
10.15 | Amendment No. 3 to Witness Systems Amended and Restated Stock Incentive Plan (dated December 6, 2007) | Filed herewith | ||
10.16 | Amendment No. 4 to Witness Systems Amended and Restated Stock Incentive Plan (dated December 23, 2008) | Filed herewith | ||
10.17 | Form of Stock Option Award Agreement* | Form 8-K filed on December 7, 2004 | ||
10.18 | Form of Restricted Stock Award Agreement to a U.S. executive officer* | Form 8-K filed on January 10, 2006 | ||
10.19 | Form of Restricted Stock Award Agreement to an Israeli executive officer* | Form 8-K filed on January 10, 2006 | ||
10.20 | Form of Restricted Stock Award Agreement to an Independent Director, as amended* | Filed herewith | ||
10.21 | Form of Time-Based Restricted Stock Unit Award Agreement* | Filed herewith | ||
10.22 | Form of Performance-Based Restricted Stock Unit Award Agreement* | Filed herewith | ||
10.23 | Form of Time-Based Deferred Stock Award Agreement* | Filed herewith | ||
10.24 | Form of Performance-Based Deferred Stock Award Agreement* | Filed herewith | ||
10.25 | Form of Amendment to Time-Based and Performance-Based Equity Award Agreements | Filed herewith | ||
10.26 | Contribution Agreement, dated as of February 1, 2001, between Comverse and the Company | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 |
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Filed Herewith / | ||||
Incorporated by | ||||
Number | Description | Reference from | ||
10.27 | Stock Purchase Agreement, dated as of January 31, 2002, between Comverse, Inc. and the Company | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.28 | Registration Rights Agreement, dated as of January 31, 2002, between Comverse and the Company | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||
10.29 | Stock Purchase Agreement, dated as of September 7, 2005, by and among Verint Systems Inc., MultiVision Holdings Limited, and MultiVision Intelligent Surveillance Limited | Form 10-Q/A filed on December 12, 2005 | ||
10.30 | Securities Purchase Agreement, by and between the Company and Comverse Technology, Inc., dated May 25, 2007. | Form 8-K filed on May 30, 2007 | ||
10.31 | Credit Agreement dated as of May 25, 2007 among the Company, as Borrower, the Lenders as parties thereto and Lehman Commercial Paper Inc., as Administrative Agent | Form 8-K filed on May 30, 2007 | ||
10.32 | Employment Agreement, dated February 23, 2010, between Verint Systems Inc. and Dan Bodner* | Form 8-K filed on February 23, 2010 | ||
10.33 | Employment Agreement, dated August 14, 2006, between Verint Systems Inc. and Douglas E. Robinson* | Filed herewith | ||
10.34 | Amendment No. 1, dated July 2, 2007, to Employment Agreement between Verint Systems and Douglas E. Robinson* | Filed herewith | ||
10.35 | Amendment No. 2, dated December 29, 2008, to Employment Agreement between Verint Systems Inc. and Douglas E. Robinson* | Filed herewith | ||
10.36 | Amended and Restated Employment Agreement, dated October 29, 2009, between Verint Systems Inc. and Elan Moriah* | Filed herewith | ||
10.37 | Employment Agreement, dated April 16, 2001, between Comverse Infosys UK Limited and David Parcell* | Filed herewith | ||
10.38 | Supplemental Employment Agreement, dated June 13, 2008, between Verint Systems UK Limited and David Parcell* | Filed herewith | ||
10.39 | Amended and Restated Employment Agreement, dated November 10, 2009, between Verint Systems Inc. and Peter Fante* | Filed herewith | ||
10.40 | Employment Offer Letter, dated August 30, 2000, between Comverse Infosys Ltd. and Meir Sperling* | Filed herewith | ||
10.41 | Manager’s Insurance Policy Letter between Comverse Infosys Ltd. and Meir Sperling* (English translation) | Filed herewith |
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Filed Herewith / | ||||
Incorporated by | ||||
Number | Description | Reference from | ||
10.42 | Summary of the Terms of Verint Systems Inc. Executive Officer Annual Bonus Plan* | Filed herewith | ||
10.43 | 2009 Executive Officer Retention Letter | Filed herewith | ||
14.1 | Verint Code of Conduct: Ethics Promote Excellence, revised and restated March 19, 2009 | Form 8-K filed on March 24, 2009 | ||
21.1 | Subsidiaries of the Company | Filed herewith | ||
31.1 | Certification of Dan Bodner, Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
31.2 | Certification of Douglas E. Robinson, Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
32.1 | Certification of the Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350(1) | Filed herewith | ||
32.2 | Certification of the Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350(1) | Filed herewith |
(1) = | These exhibits are being “furnished” with this periodic report and are not deemed “filed” with the Securities and Exchange Commission and are not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934. | |
* | Denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(b) of this report. |
(c) | Financial Statement Schedules | |
None. |
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Item 15A. | Financial Statements and Supplementary Data |
F-2 | ||||
F-3 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 |
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Verint Systems Inc.
Melville, New York
March 16, 2010
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Consolidated Balance Sheets
As of January 31, 2008, 2007, and 2006
As of January 31, | ||||||||||||
(in thousands, except share and per share data) | 2008 | 2007 | 2006 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 83,233 | $ | 49,325 | $ | 55,730 | ||||||
Restricted cash and bank time deposits | 3,612 | 3,652 | 4,047 | |||||||||
Short-term investments | — | 127,453 | 167,922 | |||||||||
Accounts receivable, net of allowance for doubtful accounts of $6.5 million, $2.6 million and $2.3 million, respectively | 116,427 | 51,321 | 53,218 | |||||||||
Inventories | 19,525 | 20,922 | 18,840 | |||||||||
Deferred cost of revenue | 8,698 | 11,968 | 6,131 | |||||||||
Deferred income taxes | 30,991 | 33,306 | 27,252 | |||||||||
Prepaid expenses and other current assets | 31,565 | 20,621 | 22,562 | |||||||||
Total current assets | 294,051 | 318,568 | 355,702 | |||||||||
Property and equipment, net | 36,315 | 26,968 | 24,106 | |||||||||
Goodwill | 785,014 | 122,727 | 96,424 | |||||||||
Intangible assets, net | 249,542 | 17,213 | 20,931 | |||||||||
Capitalized software development costs, net | 10,272 | 9,762 | 10,241 | |||||||||
Deferred cost of revenue | 64,043 | 64,712 | 68,361 | |||||||||
Deferred income taxes | 12,686 | 24,595 | 25,563 | |||||||||
Other assets | 40,352 | 9,131 | 8,230 | |||||||||
Total assets | $ | 1,492,275 | $ | 593,676 | $ | 609,558 | ||||||
Liabilities, Preferred Stock and Stockholders’ Equity | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | $ | 49,434 | $ | 35,107 | $ | 21,757 | ||||||
Accrued expenses and other liabilities | 143,941 | 94,959 | 91,092 | |||||||||
Deferred revenue | 157,803 | 100,092 | 113,871 | |||||||||
Deferred income taxes | 1,021 | 1,202 | 1,013 | |||||||||
Liabilities to affiliates | 1,277 | 1,335 | 1,218 | |||||||||
Income taxes payable | 3,360 | 1,388 | 134 | |||||||||
Total current liabilities | 356,836 | 234,083 | 229,085 | |||||||||
Long-term debt | 610,000 | 1,058 | 1,325 | |||||||||
Deferred income taxes | 18,990 | 1,948 | 3,147 | |||||||||
Deferred revenue | 114,897 | 128,988 | 134,324 | |||||||||
Other liabilities | 68,591 | 29,995 | 22,045 | |||||||||
Total liabilities | 1,169,314 | 396,072 | 389,926 | |||||||||
Preferred Stock — $0.001 par value; authorized 2,500,000 shares. Series A convertible preferred stock; 293,000 shares issued and outstanding; aggregate liquidation preference and redemption value of $301,681 at January 31, 2008. | 293,663 | — | — | |||||||||
Commitments and Contingencies | ||||||||||||
Stockholders’ Equity: | ||||||||||||
Common stock — $0.001 par value; authorized 120,000,000 shares. Issued 32,600,000, 32,547,000, and 32,524,000 shares, respectively; outstanding 32,526,000, 32,519,000, and 32,524,000 shares, respectively. | 32 | 32 | 32 | |||||||||
Additional paid-in capital | 387,537 | 352,895 | 346,644 | |||||||||
Treasury stock, at cost - 74,000 and 28,000 shares, respectively. | (2,094 | ) | (936 | ) | — | |||||||
Unearned stock-based compensation | — | — | (13,119 | ) | ||||||||
Accumulated deficit | (355,567 | ) | (153,602 | ) | (113,083 | ) | ||||||
Accumulated other comprehensive loss | (610 | ) | (785 | ) | (842 | ) | ||||||
Total stockholders’ equity | 29,298 | 197,604 | 219,632 | |||||||||
Total liabilities, preferred stock and stockholders’ equity | $ | 1,492,275 | $ | 593,676 | $ | 609,558 | ||||||
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Consolidated Statements of Operations
For the Years Ended January 31, 2008, 2007, and 2006
For the Years Ended January 31, | ||||||||||||
(in thousands, except per share data) | 2008 | 2007 | 2006 | |||||||||
Revenue: | ||||||||||||
Product | $ | 333,130 | $ | 251,584 | $ | 187,253 | ||||||
Service and support | 201,413 | 117,194 | 91,501 | |||||||||
Total revenue | 534,543 | 368,778 | 278,754 | |||||||||
Cost of revenue: | ||||||||||||
Product | 121,627 | 116,274 | 88,996 | |||||||||
Service and support | 100,397 | 48,175 | 40,598 | |||||||||
Amortization and impairment of acquired technology and backlog | 8,018 | 7,664 | 5,017 | |||||||||
Settlement with OCS | — | 19,158 | — | |||||||||
Total cost of revenue | 230,042 | 191,271 | 134,611 | |||||||||
Gross profit | 304,501 | 177,507 | 144,143 | |||||||||
Operating expenses: | ||||||||||||
Research and development, net | 87,668 | 53,029 | 34,889 | |||||||||
Selling, general and administrative | 259,183 | 148,229 | 98,399 | |||||||||
Amortization of other acquired intangible assets | 19,668 | 3,164 | 1,337 | |||||||||
In-process research and development | 6,682 | — | 2,852 | |||||||||
Impairments of goodwill and other acquired intangible assets | 22,934 | 21,103 | — | |||||||||
Integration, restructuring and other, net | 22,996 | (765 | ) | 2,554 | ||||||||
Total operating expenses | 419,131 | 224,760 | 140,031 | |||||||||
Operating income (loss) | (114,630 | ) | (47,253 | ) | 4,112 | |||||||
Other income (expense), net: | ||||||||||||
Interest income | 5,443 | 8,835 | 8,503 | |||||||||
Interest expense | (36,862 | ) | (444 | ) | (310 | ) | ||||||
Other expense, net | (23,767 | ) | (595 | ) | (198 | ) | ||||||
Total other income (expense), net | (55,186 | ) | 7,796 | 7,995 | ||||||||
Income (loss) before income taxes and noncontrolling interest | (169,816 | ) | (39,457 | ) | 12,107 | |||||||
Provision for income taxes | 27,729 | 141 | 9,625 | |||||||||
Noncontrolling interest in net income of joint venture | 1,064 | 921 | 818 | |||||||||
Net income (loss) | (198,609 | ) | (40,519 | ) | 1,664 | |||||||
Dividends on preferred stock | (8,681 | ) | — | — | ||||||||
Net income (loss) applicable to common shares | $ | (207,290 | ) | $ | (40,519 | ) | $ | 1,664 | ||||
Net income (loss) per share | ||||||||||||
Basic | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | ||||
Diluted | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | ||||
Weighted average common shares outstanding | ||||||||||||
Basic | 32,222 | 32,156 | 31,781 | |||||||||
Diluted | 32,222 | 32,156 | 32,620 | |||||||||
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Consolidated Statements of Stockholders’ Equity
For the Years Ended January 31, 2008, 2007, and 2006
Accumulated Other | ||||||||||||||||||||||||||||||||||||
Common Stock | Retained | Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||
Additional | Unearned | Earnings | Cumulative | Total | ||||||||||||||||||||||||||||||||
Par | Paid-in | Treasury | Stock-based | (Accumulated | Unrealized | Translation | Stockholders’ | |||||||||||||||||||||||||||||
(in thousands) | Shares | Value | Capital | Stock | Compensation | Deficit) | Gains (Losses) | Adjustment | Equity | |||||||||||||||||||||||||||
Balances as of January 31, 2005 - as previously reported | 31,578 | $ | 32 | $ | 282,364 | $ | — | $ | (3,395 | ) | $ | 2,155 | $ | (151 | ) | $ | 2,370 | $ | 283,375 | |||||||||||||||||
Cumulative impact of restatement adjustments — see Note 2 | — | — | 39,576 | — | — | (116,902 | ) | (2 | ) | (2,973 | ) | (80,301 | ) | |||||||||||||||||||||||
Balances as of January 31, 2005 - as restated | 31,578 | 32 | 321,940 | — | (3,395 | ) | (114,747 | ) | (153 | ) | (603 | ) | 203,074 | |||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,664 | — | — | 1,664 | |||||||||||||||||||||||||||
Unrealized gain on available for sale securities, net | — | — | — | — | — | — | 6 | — | 6 | |||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | — | — | — | — | (92 | ) | (92 | ) | |||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | — | 1,664 | 6 | (92 | ) | 1,578 | ||||||||||||||||||||||||||
Exercise of stock options | 591 | — | 7,979 | — | — | — | — | — | 7,979 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 50 | — | 1,137 | — | — | — | 1,187 | |||||||||||||||||||||||||||
Common stock issued for stock awards | 291 | — | 10,389 | 472 | (10,861 | ) | — | — | — | — | ||||||||||||||||||||||||||
Purchases of treasury stock | (12 | ) | — | — | (472 | ) | — | — | — | — | (472 | ) | ||||||||||||||||||||||||
Tax effects from stock award plans | — | — | 4,074 | — | — | — | — | — | 4,074 | |||||||||||||||||||||||||||
Common stock issued for Employee Stock Purchase Plan | 76 | — | 2,212 | — | — | — | — | — | 2,212 | |||||||||||||||||||||||||||
Balances as of January 31, 2006 | 32,524 | 32 | 346,644 | — | (13,119 | ) | (113,083 | ) | (147 | ) | (695 | ) | 219,632 | |||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (40,519 | ) | — | — | (40,519 | ) | |||||||||||||||||||||||||
Unrealized gain on available for sale securities, net | — | — | — | — | — | — | 135 | — | 135 | |||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | — | — | — | — | (78 | ) | (78 | ) | |||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | (40,519 | ) | 135 | (78 | ) | (40,462 | ) | ||||||||||||||||||||||||
Implementation of SFAS No. 123(R) | — | — | (13,119 | ) | — | 13,119 | — | — | — | — | ||||||||||||||||||||||||||
Exercise of stock options | 23 | — | 382 | — | — | — | — | — | 382 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 18,132 | — | — | — | — | — | 18,132 | |||||||||||||||||||||||||||
Forfeitures of restricted stock awards | (12 | ) | — | 395 | (395 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Purchases of treasury stock | (16 | ) | — | — | (541 | ) | — | — | — | — | (541 | ) | ||||||||||||||||||||||||
Tax effects from stock award plans | — | — | 149 | — | — | — | — | — | 149 | |||||||||||||||||||||||||||
Other tax adjustments | — | — | 312 | — | — | — | — | — | 312 | |||||||||||||||||||||||||||
Balances as of January 31, 2007 | 32,519 | 32 | 352,895 | (936 | ) | — | (153,602 | ) | (12 | ) | (773 | ) | 197,604 | |||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | (198,609 | ) | — | — | (198,609 | ) | |||||||||||||||||||||||||
Unrealized gain on available for sale securities, net | — | — | — | — | — | — | 12 | — | 12 | |||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | — | — | — | — | 163 | 163 | |||||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | (198,609 | ) | 12 | 163 | (198,434 | ) | |||||||||||||||||||||||||
Cumulative effect of the adoption of FIN 48 | — | — | (1,674 | ) | — | — | (3,356 | ) | — | — | (5,030 | ) | ||||||||||||||||||||||||
Stock-based compensation expense | — | — | 31,013 | — | — | — | — | — | 31,013 | |||||||||||||||||||||||||||
Stock options issued in business acquisition | — | — | 4,717 | — | — | — | — | — | 4,717 | |||||||||||||||||||||||||||
Common stock issued for stock awards | 53 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Forfeitures of restricted stock awards | (33 | ) | — | 792 | (792 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Purchases of treasury stock | (13 | ) | — | — | (366 | ) | — | — | — | — | (366 | ) | ||||||||||||||||||||||||
Tax effects from stock award plans | — | — | (206 | ) | — | — | — | — | — | (206 | ) | |||||||||||||||||||||||||
Balances as of January 31, 2008 | 32,526 | $ | 32 | $ | 387,537 | $ | (2,094 | ) | $ | — | $ | (355,567 | ) | $ | — | $ | (610 | ) | $ | 29,298 | ||||||||||||||||
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Consolidated Statements of Cash Flows
For the Years Ended January 31, 2008, 2007, and 2006
For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (198,609 | ) | $ | (40,519 | ) | $ | 1,664 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 46,791 | 20,873 | 17,736 | |||||||||
Provision for doubtful accounts | 3,380 | 495 | 684 | |||||||||
Impairments of assets | 28,083 | 25,036 | — | |||||||||
In-process research and development | 6,682 | — | 2,852 | |||||||||
Stock-based compensation | 31,013 | 18,132 | 1,187 | |||||||||
Provision for deferred income taxes | 19,992 | (6,222 | ) | 4,864 | ||||||||
Excess tax benefits from stock-based compensation | — | (107 | ) | — | ||||||||
Non-cash losses on derivative financial instruments | 22,267 | — | — | |||||||||
Other non-cash items, net | 2,631 | 2,406 | 1,104 | |||||||||
Changes in operating assets and liabilities, net of effects of business combinations: | ||||||||||||
Accounts receivable | (20,184 | ) | 7,067 | (11,889 | ) | |||||||
Inventories | 1,005 | (1,936 | ) | (1,251 | ) | |||||||
Deferred cost of revenue | 5,613 | (740 | ) | (7,737 | ) | |||||||
Accounts payable and accrued expenses | 8,480 | 6,105 | 23,236 | |||||||||
Deferred revenue | 25,130 | (23,666 | ) | 24,521 | ||||||||
Prepaid expenses and other assets | 14,040 | (2,731 | ) | (5,600 | ) | |||||||
Other liabilities | 4,697 | 5,381 | 7,813 | |||||||||
Other, net | (1,310 | ) | (475 | ) | (911 | ) | ||||||
Net cash provided by (used in) operating activities | (299 | ) | 9,099 | 58,273 | ||||||||
Cash flows from investing activities: | ||||||||||||
Cash paid for business combinations, net of cash acquired | (953,154 | ) | (42,473 | ) | (63,201 | ) | ||||||
Purchases of property and equipment | (14,247 | ) | (11,166 | ) | (10,857 | ) | ||||||
Cash paid for capitalized software development costs | (4,624 | ) | (4,492 | ) | (4,758 | ) | ||||||
Purchases of investments | (208,000 | ) | (1,347,100 | ) | (1,308,411 | ) | ||||||
Sales and maturities of investments | 328,465 | 1,388,684 | 1,334,809 | |||||||||
Other investing activities | (173 | ) | 1,461 | (3,601 | ) | |||||||
Net cash used in investing activities | (851,733 | ) | (15,086 | ) | (56,019 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of preferred stock | 293,000 | — | — | |||||||||
Proceeds from issuance of long-term debt | 650,000 | — | — | |||||||||
Payment of debt issuance costs | (13,606 | ) | — | — | ||||||||
Exercises of stock options and employee stock purchase plan | — | 382 | 10,191 | |||||||||
Repayments of long-term debt | (42,496 | ) | (424 | ) | (726 | ) | ||||||
Excess tax benefits from stock-based compensation | — | 107 | — | |||||||||
Other financing activities | (1,881 | ) | (1,154 | ) | (472 | ) | ||||||
Net cash provided by (used in) financing activities | 885,017 | (1,089 | ) | 8,993 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 923 | 671 | (440 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 33,908 | (6,405 | ) | 10,807 | ||||||||
Cash and cash equivalents, beginning of period | 49,325 | 55,730 | 44,923 | |||||||||
Cash and cash equivalents, end of period | $ | 83,233 | $ | 49,325 | $ | 55,730 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid for interest | $ | 30,680 | $ | 150 | $ | 135 | ||||||
Cash paid for income taxes | $ | 4,113 | $ | 3,323 | $ | 4,189 | ||||||
Non-cash investing transactions: | ||||||||||||
Fair value of stock options exchanged in connection with business combinations | $ | 4,717 | $ | — | $ | — | ||||||
Accrued but unpaid purchases of property and equipment | $ | 1,466 | $ | 1,878 | $ | 2,122 | ||||||
Inventory transfers to property and equipment | $ | 795 | $ | 947 | $ | 1,484 | ||||||
Business combination consideration earned, but paid in subsequent periods | $ | 1,796 | $ | 8,152 | $ | 1,936 | ||||||
Acquisition of license, paid for in subsequent periods | $ | — | $ | — | $ | 2,856 | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Balance at beginning of year | $ | 2,630 | $ | 2,304 | $ | 2,571 | ||||||
Provisions charged to expense | 3,366 | 425 | 348 | |||||||||
Amounts written-off | (251 | ) | (294 | ) | (583 | ) | ||||||
Other (1) | 745 | 195 | (32 | ) | ||||||||
Balance at end of year | $ | 6,490 | $ | 2,630 | $ | 2,304 | ||||||
(1) | Includes balances from acquisitions and changes in balances due to foreign currency exchange rates. |
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Year Ended | ||||
(in thousands, except per share amounts) | January 31, 2006 | |||
Net income (loss): | ||||
As reported | $ | 1,664 | ||
Add: Stock-based compensation included in net income, net of related tax effect | 836 | |||
Add: Stock option expense related to Comverse options issued below fair market value | 29 | |||
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects | (9,961 | ) | ||
Pro forma net loss | $ | (7,432 | ) | |
Net income (loss) per share — basic and diluted | ||||
As reported | $ | 0.05 | ||
Pro forma | $ | (0.23 | ) | |
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• | FSP No. FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(“FSP FAS 157-4”); | ||
• | FSP No. FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments(“FSP FAS 115-2”); and | ||
• | FSP No. FAS 107-1 and APB 28-1,Interim Disclosures About Fair Value of Financial Instruments(“FSP FAS 107-1”). |
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• | Issue No. 08-1,Revenue Arrangements with Multiple Deliverables(“EITF No. 08-1”); and |
• | Issue No. 09-3,Certain Revenue Arrangements That Include Software Elements(“EITF No. 09-3”). |
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• | whether we provided any services or PCS, including bug fixes, updates, and upgrades, to customers that were more than minimal and infrequent; |
• | our pricing and discounting practices in respect to our service and support offerings, such as installation services and maintenance services; |
• | whether we had sufficient data points to evidence our ability to reasonably estimate the amount of effort required to perform services; and |
• | whether we had objective evidence of certain aspects of customer transactions, such as customer acceptance of our product and installation. |
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Cumulative | ||||
effect through | ||||
(in thousands) | January 31, 2005 | |||
Revenue (1) | $ | (203,471 | ) | |
Cost of revenue (2) | 72,134 | |||
Phase I review (3) | (18,303 | ) | ||
Phase II investigation (4) | 720 | |||
Other adjustments (5) | 1,946 | |||
(146,974 | ) | |||
Income tax effect of all adjustments | 30,072 | |||
Total cumulative effect to accumulated deficit as of February 1, 2005 | $ | (116,902 | ) | |
(1) | These restatement adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. | |
(2) | Includes cost of revenue as well as certain operating costs that vary directly with revenue. These adjustments do not reflect the impact of certain transactions now reported on a gross rather than net basis of accounting. | |
(3) | Includes impact of errors identified in the Phase I review related to stock-based compensation. | |
(4) | Includes impact of errors identified in the Phase II investigation, including impacts to reserves, certain revenue recognition matters unrelated to our VSOE/revenue recognition review and account classifications. | |
(5) | Includes adjustments to correct misstatements identified during our restatement process that were not related to historical stock option practices, reserves, or revenue recognition. |
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For the Years Ended January 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net income (loss) | $ | (198,609 | ) | $ | (40,519 | ) | $ | 1,664 | ||||
Dividends on preferred stock | (8,681 | ) | — | — | ||||||||
Net income (loss) applicable to common shares — basic and diluted | $ | (207,290 | ) | $ | (40,519 | ) | $ | 1,664 | ||||
Weighted average shares outstanding | ||||||||||||
Basic | 32,222 | 32,156 | 31,781 | |||||||||
Dilutive effect of employee stock plans | — | — | 839 | |||||||||
Weighted average shares outstanding — diluted | 32,222 | 32,156 | 32,620 | |||||||||
Net income (loss) per share | ||||||||||||
Basic and diluted | $ | (6.43 | ) | $ | (1.26 | ) | $ | 0.05 | ||||
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As of January 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Estimated | Estimated | Estimated | ||||||||||||||||||||||
(in thousands) | Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | ||||||||||||||||||
Short-term investments: | ||||||||||||||||||||||||
Auction rate securities | $ | — | $ | — | $ | 126,465 | $ | 126,465 | $ | 148,550 | $ | 148,550 | ||||||||||||
U.S. Government corporation and agency bonds | — | — | 1,000 | 988 | 19,499 | 19,372 | ||||||||||||||||||
Total short-term investments | — | — | 127,465 | 127,453 | 168,049 | 167,922 | ||||||||||||||||||
Long-term investments: | ||||||||||||||||||||||||
Auction rate securities classified in other assets | 7,000 | 2,288 | — | — | — | — | ||||||||||||||||||
U.S. Government corporation and agency bonds | — | — | — | — | 1,000 | 980 | ||||||||||||||||||
Total investments | $ | 7,000 | $ | 2,288 | $ | 127,465 | $ | 127,453 | $ | 169,049 | $ | 168,902 | ||||||||||||
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Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
(in thousands) | Fair Value | Loss | Fair Value | Loss | Fair Value | Loss | ||||||||||||||||||
At January 31, 2007: | ||||||||||||||||||||||||
U.S. Government corporation and agency bonds | $ | — | $ | — | $ | 988 | $ | 12 | $ | 988 | $ | 12 | ||||||||||||
Total | $ | — | $ | — | $ | 988 | $ | 12 | $ | 988 | $ | 12 | ||||||||||||
At January 31, 2006: | ||||||||||||||||||||||||
U.S. Government corporation and agency bonds | $ | 8,485 | $ | 14 | $ | 11,867 | $ | 133 | $ | 20,352 | $ | 147 | ||||||||||||
Total | $ | 8,485 | $ | 14 | $ | 11,867 | $ | 133 | $ | 20,352 | $ | 147 | ||||||||||||
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Estimated | ||||||||
(in thousands) | Cost | Fair Value | ||||||
Due in one year or less | $ | — | $ | — | ||||
Due after one year through three years | — | — | ||||||
Due after three years through five years | — | — | ||||||
Due after five years through ten years | 1,800 | 990 | ||||||
Due after ten years through twenty years | — | — | ||||||
Due after twenty years | 5,200 | 1,298 | ||||||
Total investments | $ | 7,000 | $ | 2,288 | ||||
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Estimated | ||||||||
(in thousands) | Amount | Useful Lives | ||||||
Components of Purchase Price: | ||||||||
Acquisition of approximately 35.2 million shares of outstanding common stock of Witness at $27.50 per share in cash, net of interest earned | $ | 966,518 | ||||||
Settlement of vested and accelerated Witness stock options in cash | 93,225 | |||||||
Fair value of unvested Witness stock options exchanged | 4,717 | |||||||
Subsequent payments on assumed contingent consideration arrangements | 4,736 | |||||||
Direct transaction costs | 14,833 | |||||||
Total purchase price | $ | 1,084,029 | ||||||
Allocation of Purchase Price: | ||||||||
Net tangible assets: | ||||||||
Cash | $ | 139,777 | ||||||
Other current assets | 71,045 | |||||||
Deferred income taxes — current | 1,823 | |||||||
Other assets | 15,028 | |||||||
Current liabilities | (65,130 | ) | ||||||
Deferred income taxes — long-term | (12,042 | ) | ||||||
Other liabilities | (7,590 | ) | ||||||
Net tangible assets | 142,911 | |||||||
Identifiable intangible assets: | ||||||||
Developed technology | 43,000 | 6 years | ||||||
Trademark and trade name | 10,000 | 2-4 years | ||||||
Customer relationships | 206,000 | 10 years | ||||||
Non-competition agreements | 1,300 | 1 year | ||||||
Total identifiable intangible assets (1) | 260,300 | |||||||
In-process research and development | 6,440 | |||||||
Goodwill | 674,378 | |||||||
Total purchase price | $ | 1,084,029 | ||||||
(1) | The weighted average amortization period of all finite-lived identifiable intangible assets is 9.0 years. |
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Estimated | ||||||||
(in thousands) | Amount | Useful Lives | ||||||
Components of Purchase Price: | ||||||||
Cash | $ | 35,000 | ||||||
Payments under contingent consideration arrangement | 3,657 | |||||||
Direct transaction costs | 651 | |||||||
Total purchase price | $ | 39,308 | ||||||
Allocation of Purchase Price: | ||||||||
Net tangible assets: | ||||||||
Cash | $ | 536 | ||||||
Other current assets | 5,018 | |||||||
Deferred income taxes — current | 186 | |||||||
Other assets | 299 | |||||||
Current liabilities | (6,241 | ) | ||||||
Deferred income taxes — long-term | (1,406 | ) | ||||||
Other liabilities | (1,243 | ) | ||||||
Net tangible assets | (2,851 | ) | ||||||
Identifiable intangible assets: | ||||||||
Developed technology | 3,745 | 7 years | ||||||
Distribution network | 2,440 | 10 years | ||||||
Trademark and trade name | 375 | 1 year | ||||||
Backlog | 450 | 1 month | ||||||
Non-competition agreements | 1,035 | 5 years | ||||||
Total identifiable intangible assets (1) | 8,045 | |||||||
Goodwill | 34,114 | |||||||
Total purchase price | $ | 39,308 | ||||||
(1) | The weighted average amortization period of all finite-lived identifiable intangible assets is 7.0 years. |
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Estimated | ||||||||
(in thousands) | Amount | Useful Lives | ||||||
Components of Purchase Price: | ||||||||
Cash | $ | 47,251 | ||||||
Direct transaction costs | 1,638 | |||||||
Total purchase price | $ | 48,889 | ||||||
Allocation of Purchase Price: | ||||||||
Net tangible assets: | ||||||||
Cash | $ | 431 | ||||||
Other current assets | 9,755 | |||||||
Deferred income taxes — current | 194 | |||||||
Other assets | 290 | |||||||
Current liabilities | (970 | ) | ||||||
Deferred income taxes — long-term | (1,661 | ) | ||||||
Other liabilities | (8,578 | ) | ||||||
Net tangible assets | (539 | ) | ||||||
Identifiable intangible assets: | ||||||||
Developed technology | 5,125 | 5 years | ||||||
Customer relationships | 3,385 | 5 years | ||||||
Distribution network | 1,004 | 5 years | ||||||
Non-competition agreements | 222 | 5 years | ||||||
Total identifiable intangible assets (1) | 9,736 | |||||||
In-process research and development | 2,852 | |||||||
Goodwill | 36,840 | |||||||
Total purchase price | $ | 48,889 | ||||||
(1) | The weighted average amortization period of all finite-lived identifiable intangible assets is 5.0 years. |
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For the Years Ended January 31, | ||||||||
(in thousands, except per share data) | 2008 | 2007 | ||||||
Revenue | $ | 601,833 | $ | 599,409 | ||||
Net loss | $ | (230,288 | ) | $ | (117,891 | ) | ||
Net loss applicable to common shares | $ | (243,310 | ) | $ | (130,913 | ) | ||
Basic and diluted net loss per share | $ | (7.55 | ) | $ | (4.07 | ) | ||
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As of January 31, 2008 | ||||||||||||
Accumulated | ||||||||||||
(in thousands) | Cost | Amortization | Net | |||||||||
Customer relationships | $ | 208,399 | $ | (15,891 | ) | $ | 192,508 | |||||
Acquired technology | 56,798 | (11,786 | ) | 45,012 | ||||||||
Trade names | 10,283 | (2,848 | ) | 7,435 | ||||||||
Non-competition agreements | 4,742 | (2,219 | ) | 2,523 | ||||||||
Distribution network | 2,440 | (376 | ) | 2,064 | ||||||||
Total | $ | 282,662 | $ | (33,120 | ) | $ | 249,542 | |||||
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As of January 31, 2007 | ||||||||||||
Accumulated | ||||||||||||
(in thousands) | Cost | Amortization | Net | |||||||||
Customer relationships | $ | 6,043 | $ | (2,109 | ) | $ | 3,934 | |||||
Acquired technology | 12,830 | (4,724 | ) | 8,106 | ||||||||
Trade names | 645 | (645 | ) | — | ||||||||
Non-competition agreements | 4,054 | (1,270 | ) | 2,784 | ||||||||
Sales backlog | 1,812 | (1,731 | ) | 81 | ||||||||
Distribution network | 2,440 | (132 | ) | 2,308 | ||||||||
Total | $ | 27,824 | $ | (10,611 | ) | $ | 17,213 | |||||
As of January 31, 2006 | ||||||||||||
Accumulated | ||||||||||||
(in thousands) | Cost | Amortization | Net | |||||||||
Customer relationships | $ | 5,995 | $ | (886 | ) | $ | 5,109 | |||||
Acquired technology | 14,813 | (3,861 | ) | 10,952 | ||||||||
Trade names | 984 | (468 | ) | 516 | ||||||||
Non-competition agreements | 4,445 | (1,456 | ) | 2,989 | ||||||||
Sales backlog | 2,060 | (1,686 | ) | 374 | ||||||||
Distribution network | 1,003 | (12 | ) | 991 | ||||||||
Total | $ | 29,300 | $ | (8,369 | ) | $ | 20,931 | |||||
As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Workforce Optimization | $ | 243,628 | $ | 7,026 | $ | 955 | ||||||
Video Intelligence | 1,847 | 5,927 | 13,231 | |||||||||
Communications Intelligence | 4,067 | 4,260 | 6,745 | |||||||||
Total | $ | 249,542 | $ | 17,213 | $ | 20,931 | ||||||
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(in thousands) For the Years Ending January 31, | Amount | |||
2009 | $ | 35,091 | ||
2010 | 31,858 | |||
2011 | 30,765 | |||
2012 | 29,796 | |||
2013 | 28,994 | |||
2014 and thereafter | 93,038 | |||
Total | $ | 249,542 | ||
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Reportable Segment | ||||||||||||||||
Workforce | Video | Communications | ||||||||||||||
(in thousands) | Total | Optimization | Intelligence | Intelligence | ||||||||||||
Balance at January 31, 2005 | $ | 49,669 | $ | — | $ | 24,615 | $ | 25,054 | ||||||||
Acquisition of Opus | 8,487 | 8,487 | — | — | ||||||||||||
Acquisition of MultiVision | 36,840 | — | 36,840 | — | ||||||||||||
Additional consideration — previous acquisitions (1) | 2,359 | — | 2,359 | — | ||||||||||||
Foreign currency translation and other | (931 | ) | — | (931 | ) | — | ||||||||||
Balance at January 31, 2006 | 96,424 | 8,487 | 62,883 | 25,054 | ||||||||||||
Acquisition of CM Insight | 9,676 | 9,676 | — | — | ||||||||||||
Acquisition of Mercom | 34,114 | 34,114 | — | — | ||||||||||||
Additional consideration — previous acquisitions (1) | 1,567 | — | 1,567 | — | ||||||||||||
Goodwill impairment | (20,265 | ) | (3,123 | ) | (17,142 | ) | — | |||||||||
Foreign currency translation and other | 1,211 | 628 | 583 | — | ||||||||||||
Balance at January 31, 2007 | 122,727 | 49,782 | 47,891 | 25,054 | ||||||||||||
Acquisition of Witness | 674,378 | 674,378 | — | — | ||||||||||||
Acquisition of View Links | 4,692 | — | — | 4,692 | ||||||||||||
Additional consideration — previous acquisitions (1) | 1,730 | — | 1,730 | — | ||||||||||||
Income tax-related adjustments | (971 | ) | (186 | ) | (785 | ) | — | |||||||||
Goodwill impairment | (20,639 | ) | (14,019 | ) | (6,620 | ) | — | |||||||||
Foreign currency translation and other | 3,097 | 969 | 2,128 | — | ||||||||||||
Balance at January 31, 2008 | $ | 785,014 | $ | 710,924 | $ | 44,344 | $ | 29,746 | ||||||||
(1) | Contingent consideration paid for acquisitions completed prior to February 1, 2005. |
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Revolving | ||||||||
(in thousands) | Term Loan | Credit Facility | ||||||
Balance outstanding at January 31, 2007 | $ | — | $ | — | ||||
Funds borrowed | 650,000 | — | ||||||
Principal repaid | (40,000 | ) | — | |||||
Balance outstanding at January 31, 2008 | $ | 610,000 | $ | — | ||||
Unused commitment amount at January 31, 2008 | $ | — | $ | 25,000 | ||||
Interest rate at January 31, 2008 | 7.38 | % | — | |||||
(in thousands) For the Year Ended January 31, | Amount | |||
2009 | $ | — | ||
2010 | 3,112 | |||
2011 | 6,225 | |||
2012 | 6,225 | |||
2013 | 6,224 | |||
2014 and thereafter | 588,214 | |||
$ | 610,000 | |||
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As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Raw materials | $ | 6,225 | $ | 6,117 | $ | 4,725 | ||||||
Work-in-process | 3,308 | 4,518 | 7,046 | |||||||||
Finished goods | 9,992 | 10,287 | 7,069 | |||||||||
Total inventories | $ | 19,525 | $ | 20,922 | $ | 18,840 | ||||||
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As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Land | $ | 4,161 | $ | 3,650 | $ | 3,535 | ||||||
Buildings | 2,250 | 2,248 | 2,224 | |||||||||
Leasehold improvements | 9,967 | 7,610 | 4,729 | |||||||||
Software | 14,735 | 9,707 | 7,489 | |||||||||
Equipment, furniture and other | 43,518 | 29,224 | 28,845 | |||||||||
74,631 | 52,439 | 46,822 | ||||||||||
Less: accumulated depreciation and amortization | (38,316 | ) | (25,471 | ) | (22,716 | ) | ||||||
Total property and equipment, net | $ | 36,315 | $ | 26,968 | $ | 24,106 | ||||||
As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Deferred debt issuance costs, net | $ | 11,749 | $ | — | $ | — | ||||||
Derivative instruments, at fair value | 8,121 | — | — | |||||||||
Other | 20,482 | 9,131 | 8,230 | |||||||||
Total other assets | $ | 40,352 | $ | 9,131 | $ | 8,230 | ||||||
As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Compensation and benefits | $ | 48,335 | $ | 24,086 | $ | 17,608 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 29,284 | 28,130 | 30,070 | |||||||||
Professional fees and consulting | 15,185 | 7,626 | 4,615 | |||||||||
Derivative instruments, at fair value | 8,832 | — | — | |||||||||
Taxes other than income | 6,799 | 3,011 | 1,700 | |||||||||
Interest on indebtedness | 3,754 | 6 | 11 | |||||||||
Business acquisition consideration | 1,796 | 8,152 | 1,936 | |||||||||
Product royalties | 690 | — | 12,825 | |||||||||
Other | 29,266 | 23,948 | 22,327 | |||||||||
Total accrued expenses and other liabilities | $ | 143,941 | $ | 94,959 | $ | 91,092 | ||||||
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As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Unrecognized tax benefits | $ | 28,219 | $ | 16,173 | $ | 11,803 | ||||||
Derivative instruments, at fair value | 21,040 | — | — | |||||||||
Obligation for severance compensation | 4,414 | 3,256 | 2,301 | |||||||||
Other | 14,918 | 10,566 | 7,941 | |||||||||
Total other liabilities | $ | 68,591 | $ | 29,995 | $ | 22,045 | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Foreign currency translation losses, net | $ | (610 | ) | $ | (773 | ) | $ | (695 | ) | |||
Unrealized losses on available-for-sale marketable securities | — | (12 | ) | (147 | ) | |||||||
Total accumulated other comprehensive loss | $ | (610 | ) | $ | (785 | ) | $ | (842 | ) | |||
For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Integration costs | $ | 10,980 | $ | — | $ | — | ||||||
Restructuring costs | 3,308 | — | — | |||||||||
Other legal costs | 8,708 | — | 2,554 | |||||||||
Gain on sale of land | — | (765 | ) | — | ||||||||
Total integration, restructuring and other, net | $ | 22,996 | $ | (765 | ) | $ | 2,554 | |||||
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(in thousands) | Restructuring | Integration | Total | |||||||||
Acquisition of Witness | $ | 1,501 | $ | 10,980 | $ | 12,481 | ||||||
Video Intelligence business | 1,807 | — | 1,807 | |||||||||
Total | $ | 3,308 | $ | 10,980 | $ | 14,288 | ||||||
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(in thousands) | Total | |||
Accrued restructuring costs — January 31, 2007 | $ | — | ||
Costs accrued during the year | 1,501 | |||
Payments and settlements during the year | (1,081 | ) | ||
Accrued restructuring costs — January 31, 2008 | $ | 420 | ||
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Consulting | ||||||||||||
Severance | and | |||||||||||
and Related | Temporary | |||||||||||
(in thousands) | Costs | Staff | Total | |||||||||
Accrued restructuring costs — January 31, 2007 | $ | — | $ | — | $ | — | ||||||
Costs accrued during the year | 1,513 | 294 | 1,807 | |||||||||
Payments and settlements during the year | (597 | ) | (294 | ) | (891 | ) | ||||||
Accrued restructuring costs — January 31, 2008 | $ | 916 | $ | — | $ | 916 | ||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Capitalized software development costs, net, beginning of year | $ | 9,762 | $ | 10,241 | $ | 9,814 | ||||||
Software development costs capitalized during the year | 4,624 | 4,492 | 4,758 | |||||||||
Amortization of software development costs | (3,268 | ) | (4,971 | ) | (4,331 | ) | ||||||
Other | (846 | ) | — | — | ||||||||
Capitalized software development costs, net, end of year | $ | 10,272 | $ | 9,762 | $ | 10,241 | ||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Domestic | $ | (116,844 | ) | $ | (8,887 | ) | $ | 9,404 | ||||
Foreign | (52,972 | ) | (30,570 | ) | 2,703 | |||||||
Total income (loss) before income taxes and noncontrolling interest | $ | (169,816 | ) | $ | (39,457 | ) | $ | 12,107 | ||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Current income tax provision: | ||||||||||||
Federal | $ | 847 | $ | 926 | $ | 2,577 | ||||||
State | 398 | 201 | 633 | |||||||||
Foreign | 6,492 | 5,236 | 1,551 | |||||||||
Total current income tax provision | 7,737 | 6,363 | 4,761 | |||||||||
Deferred income tax provision (benefit): | ||||||||||||
Federal | 26,056 | (1,416 | ) | 3,499 | ||||||||
State | 1,748 | 160 | 579 | |||||||||
Foreign | (7,812 | ) | (4,966 | ) | 786 | |||||||
Total deferred income tax provision (benefit) | 19,992 | (6,222 | ) | 4,864 | ||||||||
Total provision for income taxes | $ | 27,729 | $ | 141 | $ | 9,625 | ||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
U.S. federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Income tax provision (benefit) at the U.S. statutory rate | $ | (59,436 | ) | $ | (13,810 | ) | $ | 4,237 | ||||
State tax provision, net of federal benefit | (5,747 | ) | 234 | 788 | ||||||||
Foreign taxes at rates different from U.S. federal statutory rate | 7,305 | 2,128 | (2,965 | ) | ||||||||
Valuation allowance | 73,404 | (408 | ) | 3,128 | ||||||||
Foreign exchange | (860 | ) | (2,495 | ) | 806 | |||||||
Stock-based compensation | 2,831 | 4,556 | 141 | |||||||||
Non-deductible expenses | 1,063 | 2,398 | 759 | |||||||||
Tax credits | (2,260 | ) | (1,345 | ) | (1,040 | ) | ||||||
Tax contingencies | 5,495 | 3,351 | 4,011 | |||||||||
Impairment of goodwill and intangible assets | 4,716 | 5,463 | 3 | |||||||||
Fair value of derivatives | (2,837 | ) | — | — | ||||||||
In-process research and development | 2,253 | — | 998 | |||||||||
Changes in tax laws | 751 | (244 | ) | 184 | ||||||||
Effect of foreign operations | (94 | ) | (906 | ) | (1,376 | ) | ||||||
Income from controlled foreign corporations | 805 | 476 | — | |||||||||
Other, net | 340 | 743 | (49 | ) | ||||||||
Total provision for income taxes | $ | 27,729 | $ | 141 | $ | 9,625 | ||||||
Effective income tax rate | -16.3 | % | -0.4 | % | 79.5 | % |
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Year Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Deferred tax assets: | ||||||||||||
Accrued expenses | $ | 6,110 | $ | 658 | $ | — | ||||||
Allowance for doubtful accounts | 3,508 | 981 | — | |||||||||
Deferred revenue | 73,027 | 73,535 | 72,820 | |||||||||
Inventory | 3,814 | 1,893 | 1,945 | |||||||||
Depreciation of property and equipment | 2,613 | — | — | |||||||||
Loss carryforwards | 83,363 | 11,354 | 13,785 | |||||||||
Tax credits | 9,165 | 451 | 616 | |||||||||
Stock-based and other compensation | 12,325 | 4,060 | 1,683 | |||||||||
Capitalized research and development expenses | 2,898 | 2,119 | 1,389 | |||||||||
Fair value of derivatives | 11,543 | — | — | |||||||||
Other long-term liabilities | 2,549 | — | — | |||||||||
Other (net) | 2,339 | 911 | 249 | |||||||||
Total deferred tax assets | 213,254 | 95,962 | 92,487 | |||||||||
Deferred tax liabilities: | ||||||||||||
Accrued expenses | — | — | (418 | ) | ||||||||
Allowance for doubtful accounts | — | — | (535 | ) | ||||||||
Deferred cost of revenue | (19,953 | ) | (22,588 | ) | (22,064 | ) | ||||||
Prepaid expenses | (1,486 | ) | (1,065 | ) | (2,092 | ) | ||||||
Depreciation of property and equipment | — | (611 | ) | (1,214 | ) | |||||||
Goodwill and other intangible assets | (79,089 | ) | (898 | ) | (908 | ) | ||||||
Total deferred tax liabilities | (100,528 | ) | (25,162 | ) | (27,231 | ) | ||||||
Valuation allowance | (89,060 | ) | (16,049 | ) | (16,601 | ) | ||||||
Net deferred tax assets | $ | 23,666 | $ | 54,751 | $ | 48,655 | ||||||
Recorded as: | ||||||||||||
Current deferred tax assets | $ | 30,991 | $ | 33,306 | $ | 27,252 | ||||||
Long-term deferred tax assets | 12,686 | 24,595 | 25,563 | |||||||||
Current deferred tax liabilities | (1,021 | ) | (1,202 | ) | (1,013 | ) | ||||||
Long-term deferred tax liabilities | (18,990 | ) | (1,948 | ) | (3,147 | ) | ||||||
Net deferred tax assets | $ | 23,666 | $ | 54,751 | $ | 48,655 | ||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Balance at beginning of year | $ | (16,049 | ) | $ | (16,601 | ) | $ | (13,444 | ) | |||
Goodwill | — | 143 | (28 | ) | ||||||||
Provision for (benefit from) income taxes | (73,404 | ) | 408 | (3,128 | ) | |||||||
SFAS No. 5 and FIN 48 | 139 | 1 | (1 | ) | ||||||||
Cumulative translation adjustment | 254 | — | — | |||||||||
Balance at end of year | $ | (89,060 | ) | $ | (16,049 | ) | $ | (16,601 | ) | |||
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Year Ended | ||||
(in thousands) | January 31, 2008 | |||
Gross unrecognized tax benefits as of February 1, 2007 | $ | 27,073 | ||
Increases as a result of acquisitions | 13,619 | |||
Increases related to tax positions taken during the current year | 5,755 | |||
Increases (decreases) related to foreign currency exchange rate fluctuations | 1,039 | |||
Lapses of statutes of limitation | (583 | ) | ||
Gross unrecognized tax benefits as of January 31, 2008 | $ | 46,903 | ||
Jurisdiction | Tax Years | |||
United States | January 31, 2004 - January 31, 2007 | |||
Canada | January 31, 2004 - January 31, 2008 | |||
United Kingdom | December 31, 2003, December 31, 2005 | |||
Hong Kong | March 31, 2003 - March 31, 2005, January 31, 2006 |
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Number of | Number of | Number of | ||||||||||
shares reserved | shares | shares available | ||||||||||
(in thousands) | for grant | outstanding | for grant | |||||||||
The 1996 Plan | 5,000 | 1,900 | 200 | |||||||||
The 1997 Plan | 6,400 | 2,700 | 3,700 | |||||||||
The 1997 Blue Pumpkin inducement grants | 158 | 153 | 5 | |||||||||
The 2004 Plan | 3,000 | 2,100 | 600 | |||||||||
Total | 14,558 | 6,853 | 4,505 | |||||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands, except per share amounts) | 2008 | 2007 | 2006 | |||||||||
Component of income (loss) before provision for income taxes: | ||||||||||||
Cost of revenue — product | $ | 223 | $ | 360 | $ | 3 | ||||||
Cost of revenue — service and support | 4,329 | 1,279 | 8 | |||||||||
Research and development, net | 4,831 | 3,822 | 39 | |||||||||
Selling, general, and administrative | 21,665 | 13,154 | 1,115 | |||||||||
Stock-based compensation expense | 31,048 | 18,615 | 1,165 | |||||||||
Income tax benefits related to stock-based compensation (before consideration of valuation allowance) | 7,750 | 2,264 | 300 | |||||||||
Stock-based compensation, net of taxes | $ | 23,298 | $ | 16,351 | $ | 865 | ||||||
Impact on net income (loss) per share: | ||||||||||||
Basic | $ | 0.72 | $ | 0.51 | $ | 0.03 | ||||||
Diluted | $ | 0.72 | $ | 0.51 | $ | 0.03 | ||||||
For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Component of stock-based compensation expense: | ||||||||||||
Verint stock options | $ | 22,011 | $ | 13,276 | $ | — | ||||||
Verint restricted stock awards and restricted stock units | 9,229 | 3,390 | 1,137 | |||||||||
Comverse stock options | (487 | ) | 1,834 | 28 | ||||||||
Verint phantom stock units | 295 | 115 | — | |||||||||
Stock-based compensation expense | $ | 31,048 | $ | 18,615 | $ | 1,165 | ||||||
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As of May 25, | ||||
2007 | ||||
Expected life (in years) | 2.62 | |||
Risk-free interest rate | 4.88 | % | ||
Expected volatility | 40.5 | % | ||
Dividend yield | 0 | % |
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For the Years Ended January 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Stock | Exercise | Stock | Exercise | Stock | Exercise | |||||||||||||||||||
(in thousands, except exercise prices) | Options | Price | Options | Price | Options | Price | ||||||||||||||||||
Beginning balance | 3,003 | $ | 23.56 | 3,151 | $ | 23.78 | 3,689 | $ | 21.57 | |||||||||||||||
Issued in acquisition (1) | 3,065 | $ | 20.24 | — | $ | — | — | $ | — | |||||||||||||||
Granted | — | $ | — | — | $ | — | 227 | $ | 34.34 | |||||||||||||||
Exercised | — | $ | — | (24 | ) | $ | 16.22 | (591 | ) | $ | 13.49 | |||||||||||||
Forfeited | (326 | ) | $ | 24.16 | (121 | ) | $ | 30.80 | (172 | ) | $ | 25.73 | ||||||||||||
Expired | (7 | ) | $ | 8.56 | (3 | ) | $ | 17.83 | (2 | ) | $ | 16.97 | ||||||||||||
Ending balance | 5,735 | $ | 21.77 | 3,003 | $ | 23.56 | 3,151 | $ | 23.78 | |||||||||||||||
Options exercisable | 3,663 | $ | 21.17 | 2,081 | $ | 20.57 | 1,394 | $ | 17.59 | |||||||||||||||
(1) | On May 25, 2007, 3.3 million non-vested stock options of Witness were converted to options to acquire our stock using the purchase conversion ratio of 0.9335 shares of Verint common stock for every 1.0 share of Witness stock. |
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Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
(in thousands, except exercise prices) | Number of | Remaining | Average | Number of | Average | |||||||||||||||
Range of Exercise | Options | Contractual | Exercise | Options | Exercise | |||||||||||||||
Prices | Outstanding | Term | Price | Exercisable | Price | |||||||||||||||
$4.46 – $8.69 | 584 | 1.86 | $ | 6.78 | 584 | $ | 6.78 | |||||||||||||
$8.86 – $17.00 | 790 | 3.78 | $ | 15.47 | 745 | $ | 15.60 | |||||||||||||
$17.06 – $18.00 | 615 | 2.78 | $ | 17.80 | 264 | $ | 17.80 | |||||||||||||
$18.18 – $19.16 | 612 | 2.94 | $ | 18.74 | 216 | $ | 18.74 | |||||||||||||
$19.39 – $21.75 | 697 | 2.77 | $ | 21.10 | 270 | $ | 20.96 | |||||||||||||
$22.11 – $23.95 | 1,008 | 3.97 | $ | 23.47 | 588 | $ | 23.19 | |||||||||||||
$25.01 – $32.16 | 345 | 4.38 | $ | 28.68 | 172 | $ | 28.97 | |||||||||||||
$34.40 – $34.40 | 147 | 7.56 | $ | 34.40 | 83 | $ | 34.40 | |||||||||||||
$35.11 – $35.11 | 913 | 5.69 | $ | 35.11 | 717 | $ | 35.11 | |||||||||||||
$37.99 – $37.99 | 24 | 7.64 | $ | 37.99 | 24 | $ | 37.99 | |||||||||||||
$4.46 – $37.99 | 5,735 | 3.75 | $ | 21.77 | 3,663 | $ | 21.17 | |||||||||||||
For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
The intrinsic value of options exercised | $ | — | $ | 480 | $ | 14,710 | ||||||
Cash received from the exercise of stock options | $ | — | $ | 382 | $ | 7,979 | ||||||
The tax benefit realized from stock options exercised | $ | — | $ | 107 | $ | 3,644 | ||||||
The fair value of options vested | $ | 52,661 | $ | 26,641 | $ | 15,299 |
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Year Ended | ||||
January 31, | ||||
2006 | ||||
Expected life (in years) | 5.86 | |||
Risk-free interest rate | 4.27 | % | ||
Expected volatility | 55.0 | % | ||
Dividend yield | 0 | % |
Year Ended | ||||
January 31, | ||||
2006 | ||||
Expected life (in years) | 0.5 | |||
Risk-free interest rate | 3.13 | % | ||
Expected volatility | 39.0 | % | ||
Dividend yield | 0 | % |
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For the Years Ended January 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Grant Date | Grant Date | Grant Date | ||||||||||||||||||||||
(in thousands, except grant date fair value) | Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | ||||||||||||||||||
Beginning balance | 354 | $ | 33.88 | 417 | $ | 33.52 | 137 | $ | 28.72 | |||||||||||||||
Granted | 1,215 | $ | 28.64 | — | — | 316 | $ | 34.40 | ||||||||||||||||
Released | (203 | ) | $ | 32.85 | (51 | ) | $ | 30.77 | (36 | ) | $ | 23.00 | ||||||||||||
Forfeited | (99 | ) | $ | 29.21 | (12 | ) | $ | 34.40 | — | — | ||||||||||||||
Ending balance | 1,267 | $ | 29.39 | 354 | $ | 33.88 | 417 | $ | 33.52 | |||||||||||||||
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For the Years Ended | ||||||||
January 31, | ||||||||
(in thousands) | 2008 | 2007 | ||||||
Beginning balance, in units | 19 | — | ||||||
Granted | 87 | 19 | ||||||
Released | (17 | ) | — | |||||
Forfeited | (4 | ) | — | |||||
Ending balance, in units | 85 | 19 | ||||||
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(in thousands) | ||||
For the Years Ending January 31, | Amount | |||
2009 | $ | 12,492 | ||
2010 | 11,373 | |||
2011 | 10,029 | |||
2012 | 9,461 | |||
2013 | 8,894 | |||
2014 and thereafter | 10,787 | |||
Total | $ | 63,036 | ||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
Warranty liability, beginning of year | $ | 2,521 | $ | 2,237 | $ | 2,889 | ||||||
Provisions charged to expenses | 266 | 385 | 657 | |||||||||
Warranty charges | (989 | ) | (364 | ) | (1,284 | ) | ||||||
Foreign currency translation and other(1) | 76 | 263 | (25 | ) | ||||||||
Warranty liability, end of year | $ | 1,874 | $ | 2,521 | $ | 2,237 | ||||||
(1) | Includes $245 related to the acquisition of Mercom in July 2006. |
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• | Suit filed on July 20, 2004 in the U.S. District Court for the Southern District of New York by STS Software Systems Ltd. (“STS Software”), a wholly-owned subsidiary of NICE and declaratory judgment action filed the same day by Witness against STS Software in the U.S. District Court for the Northern District of Georgia. These two cases were consolidated to the Northern District of Georgia, where STS Software asserted that certain Witness recording products infringed on claims of U.S. Patent Nos. 6,122,665; 6,865,604; 6,871,229; and 6,880,004 relating to VoIP technology and sought only injunctive relief. A bench trial was held from March 17-21, 2008. On May 23, 2008, the court entered a judgment of non-infringement in our favor. |
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• | Suit filed on August 30, 2004, in the U.S. District Court for the Northern District of Georgia, Atlanta Division, by Witness against NICE Systems, Inc., a wholly-owned subsidiary of NICE. Witness asserted that NICE’s screen capture products infringed on claims of U.S. Patent Nos. 5,790,790 and 6,510,220. The case was consolidated with a separate February 24, 2005 suit filed by Witness against NICE alleging infringement on the same patents. We were waiting on the court to assign a trial date at the time of the settlement. |
• | Suit filed on January 19, 2006, in the U.S. District Court for the Northern District of Georgia, Atlanta Division, by Witness against NICE. Witness asserted that NICE’s speech analytics products infringed on claims of U.S. Patent No. 6,404,857. A jury trial was held from May 12-16, 2008 and the jury returned a verdict in our favor and against NICE on the claims of infringement. The jury also awarded us $3.3 million in damages, however, this award was superseded by the terms of the settlement agreement disclosed above. |
• | Suit filed on May 10, 2006, in the U.S. District Court for the District of Delaware by NICE against Witness seeking monetary damages and injunctive relief. NICE asserted that various Witness recording products infringed on claims of U.S. Patent Nos. 5,274,738; 5,396,371; 5,819,005; 6,249,570; 6,728,345; 6,775,372; 6,785,370; 6,870,920; 6,959,079; and 7,010,109. These patents cover various aspects for recording customer interaction communications and traditional call logging. A jury trial was held from January 14-22, 2008, and the jury was unable to reach a verdict, resulting in a mistrial. |
• | Declaratory judgment action filed on December 27, 2006, in the U.S. District Court for the Northern District of Georgia by NICE against Witness seeking a declaration that the claims of U.S. Patent No. 6,757,361 (relating to speech analytics) were invalid and that NICE has not infringed this patent. The Court granted our motion to dismiss the case for lack of subject matter jurisdiction on August 10, 2007. |
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(in thousands) | Workforce | Video | Communications | |||||||||||||
For the Years Ended January 31, | Optimization | Intelligence | Intelligence | Total | ||||||||||||
2008 | ||||||||||||||||
Revenue | $ | 260,938 | $ | 147,225 | $ | 126,380 | $ | 534,543 | ||||||||
Revenue adjustment | 37,254 | — | — | 37,254 | ||||||||||||
Segment revenue | $ | 298,192 | $ | 147,225 | $ | 126,380 | $ | 571,797 | ||||||||
Segment contribution | $ | 112,856 | $ | 37,213 | $ | 40,173 | 190,242 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 27,249 | |||||||||||||||
Impairments of goodwill and other acquired intangible assets | 23,370 | |||||||||||||||
Stock-based compensation | 31,048 | |||||||||||||||
Integration, restructuring and other, net | 22,996 | |||||||||||||||
Other common expenses | 200,209 | |||||||||||||||
Operating loss | (114,630 | ) | ||||||||||||||
Other expense, net | (55,186 | ) | ||||||||||||||
Loss before taxes and noncontrolling interest | $ | (169,816 | ) | |||||||||||||
2007 | ||||||||||||||||
Segment revenue | $ | 125,982 | $ | 122,681 | $ | 120,115 | $ | 368,778 | ||||||||
Segment contribution | $ | 43,357 | $ | 23,670 | $ | 38,489 | 105,516 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 6,889 | |||||||||||||||
Impairments of goodwill and other acquired intangible assets | 24,729 | |||||||||||||||
Stock-based compensation | 18,615 | |||||||||||||||
Settlement with OCS | 19,158 | |||||||||||||||
Integration, restructuring and other, net | (765 | ) | ||||||||||||||
Other common expenses | 84,143 | |||||||||||||||
Operating loss | (47,253 | ) | ||||||||||||||
Other income, net | 7,796 | |||||||||||||||
Loss before taxes and noncontrolling interest | $ | (39,457 | ) | |||||||||||||
2006 | ||||||||||||||||
Segment revenue | $ | 68,500 | $ | 102,225 | $ | 108,029 | $ | 278,754 | ||||||||
Segment contribution | $ | 16,872 | $ | 17,862 | $ | 40,728 | 75,462 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 6,354 | |||||||||||||||
Stock-based compensation | 1,165 | |||||||||||||||
Integration, restructuring and other, net | 2,554 | |||||||||||||||
Other common expenses | 61,277 | |||||||||||||||
Operating income | 4,112 | |||||||||||||||
Other income, net | 7,995 | |||||||||||||||
Income before taxes and noncontrolling interest | $ | 12,107 | ||||||||||||||
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For the Years Ended January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
United States | $ | 245,836 | $ | 141,457 | $ | 128,688 | ||||||
United Kingdom | 73,437 | 40,959 | 23,642 | |||||||||
Other | 215,270 | 186,362 | 126,424 | |||||||||
Total revenue | $ | 534,543 | $ | 368,778 | $ | 278,754 | ||||||
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As of January 31, | ||||||||||||
(in thousands) | 2008 | 2007 | 2006 | |||||||||
United States | $ | 12,740 | $ | 8,569 | $ | 7,312 | ||||||
Israel | 12,656 | 10,643 | 10,286 | |||||||||
Germany | 3,535 | 3,267 | 3,404 | |||||||||
United Kingdom | 2,431 | 1,189 | 593 | |||||||||
Canada | 2,014 | 2,268 | 1,897 | |||||||||
Other | 2,939 | 1,032 | 614 | |||||||||
Total property and equipment, net | $ | 36,315 | $ | 26,968 | $ | 24,106 | ||||||
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For the Quarters Ended | ||||||||||||||||
April 30, | July 31, | October 31, | January 31, | |||||||||||||
(in thousands, except per share data) | 2007 | 2007 | 2007 | 2008 | ||||||||||||
Revenue | $ | 89,371 | $ | 128,325 | $ | 158,135 | $ | 158,712 | ||||||||
Gross profit | 48,721 | 70,056 | 91,246 | 94,478 | ||||||||||||
Loss before income taxes and noncontrolling interest | (11,611 | ) | (44,691 | ) | (34,869 | ) | (78,645 | ) | ||||||||
Net loss | (9,207 | ) | (75,611 | ) | (35,101 | ) | (78,690 | ) | ||||||||
Net loss applicable to common shares | (9,207 | ) | (77,931 | ) | (38,265 | ) | (81,887 | ) | ||||||||
Basic and diluted net loss per share | $ | (0.29 | ) | $ | (2.42 | ) | $ | (1.19 | ) | $ | (2.54 | ) | ||||
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For the Quarters Ended | ||||||||||||||||
April 30, | July 31, | October 31, | January 31, | |||||||||||||
(in thousands, except per share data) | 2006 | 2006 | 2006 | 2007 | ||||||||||||
Revenue | $ | 93,355 | $ | 92,327 | $ | 82,337 | $ | 100,759 | ||||||||
Gross profit | 46,879 | 30,818 | 45,733 | 54,077 | ||||||||||||
Income (loss) before income taxes and noncontrolling interest | 1,210 | (14,820 | ) | (2,850 | ) | (22,997 | ) | |||||||||
Net income (loss) | 913 | (16,705 | ) | (3,163 | ) | (21,564 | ) | |||||||||
Net income (loss) applicable to common shares | 913 | (16,705 | ) | (3,163 | ) | (21,564 | ) | |||||||||
Basic and diluted net income (loss) per share | $ | 0.03 | $ | (0.52 | ) | $ | (0.10 | ) | $ | (0.67 | ) | |||||
• | an increase in revenue beginning in the quarter ended July 31, 2007; |
• | additional amortization of intangible assets of $6.1 million, $8.3 million, and $8.2 million for the quarters ended July 31, 2007, October 31, 2007, and January 31, 2008, respectively; |
• | a charge for in-process research and development of $6.4 million in the quarter ended July 31, 2007; |
• | integration costs incurred to support and facilitate the combination of Verint and Witness into a single organization, of $0.2 million, $4.8 million, $3.2 million, and $2.8 million for the four quarterly periods ended January 31, 2008, respectively; |
• | legal fees associated with pre-existing litigation between Witness and a competitor of $1.3 million, $2.4 million, and $5.0 million for the quarters ended July 31, 2007, October 31, 2007, and January 31, 2008, respectively; |
• | interest expense on our term loan of $9.9 million, $12.6 million, and $11.9 million for the quarters ended July 31, 2007, October 31, 2007, and January 31, 2008, respectively; |
• | realized and unrealized losses on our interest rate swap of $1.5 million, $6.9 million, and $20.8 million for the quarters ended July 31, 2007, October 31, 2007, and January 31, 2008, respectively; and |
• | unrealized gains on an embedded derivative financial instrument related to the variable dividend feature of our convertible preferred stock of $0.8 million, $1.9 million, and $4.5 million for the quarters ended July 31, 2007, October 31, 2007, and January 31, 2008, respectively. |
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VERINT SYSTEMS INC. (Registrant) | ||||
March 16, 2010 | By: | /s/ Dan Bodner | ||
Dan Bodner, President and Chief Executive Officer | ||||
March 16, 2010 | By: | /s/ Douglas E. Robinson | ||
Douglas E. Robinson, Chief Financial Officer | ||||
(Principal Financial Officer and Accounting Officer) |
/s/ Dan Bodner and President; Director of Verint Systems Inc. (Principal Executive Officer) | March 16, 2010 | |||
/s/ Douglas E. Robinson (Principal Financial Officer and Principal Accounting Officer) | March 16, 2010 | |||
/s/ Paul D. Baker | March 16, 2010 |
Table of Contents
/s/ John Bunyan | March 16, 2010 | |||
/s/ Andre Dahan | March 16, 2010 | |||
/s/ Victor A. DeMarines | March 16, 2010 | |||
/s/ Kenneth A. Minihan | March 16, 2010 | |||
/s/ Larry Myers | March 16, 2010 | |||
/s/ Howard Safir | March 16, 2010 | |||
/s/ Shefali Shah | March 16, 2010 | |||
/s/ Stephen M. Swad | March 16, 2010 | |||
/s/ Lauren Wright | March 16, 2010 |