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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.) |
330 South Service Road, Melville, New York | 11747 | |
(Address of principal executive offices) | (Zip code) |
Name of each exchange | ||
Title of each class | on which registered | |
Common Stock, $.001 par value per share | The NASDAQ Stock Market, LLC |
* | The registrant is not presently required to submit Interactive Data Files. |
Large accelerated filero | Accelerated filerþ | Non-accelerated filero (Do not check if a smaller reporting company) | Smaller reporting companyo |
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Exhibit 10.28 | ||||||||
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Exhibit 21.1 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | uncertainties regarding the impact of general economic conditions, particularly in information technology spending, on our business; |
• | risks due to aggressive competition in all of our markets, including with respect to maintaining margins and sufficient levels of investment in our business; |
• | risks associated with keeping pace with technological changes and evolving industry standards in our product offerings and with successfully introducing new, quality products which meet customer needs and achieve market acceptance; |
• | risks created by continued consolidation of competitors or introduction of large competitors in our markets with greater resources than we have; |
• | risks 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; |
• | risks relating to our implementation and maintenance of adequate systems and internal controls for our current and future operations and reporting needs and related risks of financial statement omissions, misstatements, restatements, or filing delays; |
• | risks associated with being a consolidated, controlled subsidiary of Comverse Technology, Inc. (“Comverse”) and formerly part of Comverse’s consolidated tax group, including risks of any future impact on us resulting from Comverse’s extended filing delay or any other future issues; |
• | risks associated with Comverse controlling our board of directors and the outcome of all matters submitted for stockholder action, including the approval of significant corporate transactions, such as certain equity issuances or mergers and acquisitions, as well as speculation or announcements regarding Comverse’s strategic plans; |
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• | risks that products may contain undetected defects which could expose us to substantial liability; |
• | risks associated with allocating limited financial and human resources to opportunities that may not come to fruition or produce satisfactory returns; |
• | 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 geographies in which we operate; |
• | risks associated with mergers and acquisitions and with related system integrations and asset impairments; |
• | challenges in accurately forecasting revenue and expenses and maintaining profitability; |
• | 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 assets 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, including the ability to maintain security clearances for certain projects; |
• | risks that we improperly handle sensitive or confidential information or perception of such mishandling; |
• | risks associated with our dependence on a limited number of suppliers or original equipment manufacturers (“OEMs”) for certain components of our products; |
• | risks that we are unable to maintain and enhance relationships with key resellers, partners, and systems integrators; |
• | risks that contract terms may expose us to unlimited liability or other unfavorable positions and risks that we may experience losses that are not covered by insurance; |
• | risks that we will experience liquidity or working capital issues and related risks that financing sources will be unavailable to us on reasonable terms or at all; |
• | risks associated with significant leverage resulting from our current debt position; |
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• | risks that we will be unable to comply with the leverage ratio covenant or financial statement delivery covenant under our credit facility; |
• | risks that our credit rating could be downgraded or placed on a credit watch; |
• | risks relating to timely implementation of new accounting pronouncements or new interpretations of existing accounting pronouncements and related risks of future restatements or filing delays; |
• | risks associated with future regulatory actions or private litigations relating to our extended filing delay and related circumstances; and |
• | risks that use of our tax benefits may be restricted or eliminated in the future. |
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Item 1. | Business |
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• | Comprehensive, unified suite of workforce optimization applications.A core part of our product strategy has been to tightly integrate our workforce optimization applications. Our comprehensive, unified suite of workforce optimization applications offers many advantages in terms of both functionality and total cost of ownership, and we believe that this approach helps further differentiate us in the workforce optimization market. |
• | Advanced Customer Interaction Analytics. We were an early innovator of speech analytics for call centers, and today we offer an advanced suite of Customer Interaction Analytics™, which includes speech, data, text, and customer feedback survey solutions. We believe that these solutions are attractive to a broad set of customers, enabling them to better understand workforce performance, the customer experience, and the factors underlying important business trends. |
• | Compelling Workforce Optimization solutions for back-office and branch operations. Workforce optimization solutions have traditionally been deployed in contact centers. However, many customer service employees work in other areas of the enterprise, such as the back office and branch and remote office locations. We believe that enterprises are interested in deploying workforce optimization solutions outside the contact center to enable the same type of performance measurement and improvement that has historically been available to contact centers, and we have built a portfolio of solutions specifically for this opportunity. |
• | Focus on delivering best-in-class customer service. A core part of our strategy is to help enable our customers to derive maximum value from our Actionable Intelligence solutions. We believe that a combination of our unified Workforce Optimization solutions and focus on customer service has been a major factor in our success. |
• | Strong OEM partner relationships. We have increased our focus on partners, including resellers and OEMs, which is a core element of our go-to-market strategy. We believe that this investment has strengthened our relationships with our partners, expanded our market coverage and provided our customers with tighter integration of certain third-party solutions. |
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• | Broad IP video portfolio.Our Video Intelligence portfolio includes Internet Protocol (“IP”) video management software and services, edge devices for capturing, digitizing, and transmitting video over different types of wired and wireless networks, video analytics, network video recorders, and a physical security information management system. Our broad portfolio enables organizations to deploy an end-to-end IP video solution with analytics or evolve to IP video solutions over time, enabling organizations to generate Actionable Intelligence from video and related data. |
• | Open platform.Designed on an open platform, our solutions facilitate interoperability with our customers’ business and security systems and with complementary third-party products, such as cameras, video analytics, video management software, command and control systems, and access control systems. |
• | Ability to help our customers cost effectively migrate to networked IP video. While the security market is evolving to networked IP video solutions, many organizations have already made significant investments in analog technology. Our Nextiva® solutions help our customers cost effectively migrate to networked IP video without discarding their existing analog closed circuit television (“CCTV”) investments. |
• | Broad portfolio.Our broad Communications Intelligence portfolio includes solutions for communications interception, service provider compliance, mobile location tracking, fusion and data management, Web intelligence, and tactical communications intelligence. Our portfolio is designed to handle massive amounts of unstructured and structured information from different sources (including fixed and mobile networks, IP networks, and the Internet), quickly make sense of complex scenarios, and generate evidence and intelligence. |
• | Highly scalable solutions for a broad range of communications.Our solutions can be deployed stand-alone or collectively as part of a large-scale system to address the needs of large government agencies that require advanced, comprehensive solutions. Our solutions can process very large amounts of information, enabling 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. |
• | High-quality, long-term customer relationships.We have security customers around the world, including large and sophisticated government organizations, as well as commercial companies that are leaders in their respective markets. We have long-term relationships with many of these customers that allow us to gain insight into their challenges and develop new security solutions for a broader set of customers. |
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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. 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 investments in research and development, protect our intellectual property through patents and other means, and maintain a regular dialog with our customer base in order to understand their business objectives and requirements. |
• | Continue to expand our market presence through OEM and partner relationships. We have expanded our relationships with OEMs and other channel partners. We believe that these relationships broaden our market coverage, and we intend to continue expanding our existing relationships, while creating new ones. |
• | Augment our organic growth with acquisitions. 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 doing so in the future when strategic opportunities arise. |
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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. | |
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, Text, and Customer Feedback Survey Analytics) | Our speech analytics solutions 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 and call-content 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 text analytics analyze structured and unstructured data in multiple text sources, including email, chat sessions, blogs, contact center notes, white mail, survey comments, and social media channels, to provide enterprises with a better understanding of customer sentiment, corporate image, competitors, and other market factors for more effective decision making. | ||
Our customer feedback survey 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. |
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Solution | Description | |
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 and Process Analytics | 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 assurance, forecasting and scheduling, speech analytics, performance scorecards, citizen surveys, incident investigation and 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 interoperability 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. |
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Solution | Description | |
Network Video Recorders | Performs networked video recording utilizing secure, embedded operating systems and market-specific data integrations for applications that require local storage, as well as remote networking. | |
Physical Security Information Management System | Captures and integrates information from various standalone security and public safety systems, such as access control, video, intrusion, fire and public safety, first responder, and other mobile device systems, to enable efficient information correlation and analysis and rapid, rules-based alerts and actions. |
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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 | Enables communication service providers to collect and deliver to government agencies specific call-related and call-content 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. |
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Solution | Description | |
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 a wide range of complex investigations, including financial crimes, that require expertise across various domains, involve multiple government agencies, and require significant resources and time. | |
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. | |
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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Item 1A. | Risk Factors |
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• | anticipate and respond to changes in technology and industry standards in our offerings; | ||
• | successfully develop and introduce new, enhanced, and competitive products, services, and technologies that meet our customers’ changing needs; and | ||
• | deliver these new and enhanced offerings 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; |
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• | 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; | ||
• | preference for or policies and procedures that protect local suppliers; | ||
• | 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; |
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• | 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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• | a majority of the board of directors consist of independent directors; | ||
• | compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee comprised solely of independent directors; and | ||
• | director nominees be selected or recommended to the board of directors by a majority of its independent directors or by a nominating committee that is composed entirely of independent directors. |
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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; |
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• | 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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Item 1B. | Unresolved Staff Comments |
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Item 2. | Properties |
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Item 3. | Legal Proceedings |
Item 4. | Removed and Reserved |
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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, | Period | Low | High | |||||||||
2010 | 2/1/09 – 4/30/09 | $ | 3.10 | $ | 6.75 | |||||||
5/1/09 – 7/31/09 | $ | 5.30 | $ | 12.85 | ||||||||
8/1/09 – 10/31/09 | $ | 11.31 | $ | 17.25 | ||||||||
11/1/09 – 1/31/10 | $ | 15.05 | $ | 19.35 | ||||||||
2011 | 2/1/10 – 4/30/10 | $ | 17.73 | $ | 28.00 | |||||||
5/1/10 – 7/2/10 | $ | 22.20 | $ | 27.00 |
Year Ended | ||||||||||||
January 31, | Period | Low | High | |||||||||
2011 | 7/6/10 – 7/31/10 | $ | 19.63 | $ | 23.80 | |||||||
8/1/10 – 10/31/10 | $ | 22.02 | $ | 32.93 | ||||||||
11/1/10 – 1/31/11 | $ | 30.67 | $ | 38.10 |
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January | January | January | January | January | January | |||||||||||||||||||
31, 2006 | 31, 2007 | 31, 2008 | 31, 2009 | 31, 2010 | 31, 2011 | |||||||||||||||||||
Verint Systems Inc. | $ | 100.00 | $ | 91.17 | $ | 51.03 | $ | 17.93 | $ | 50.48 | $ | 95.06 | ||||||||||||
NASDAQ Composite Index | $ | 100.00 | $ | 109.00 | $ | 107.45 | $ | 66.46 | $ | 97.13 | $ | 123.13 | ||||||||||||
NASDAQ Computer & Data Processing Index | $ | 100.00 | $ | 111.75 | $ | 114.42 | $ | 70.76 | $ | 108.46 | $ | 132.27 |
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• | March 17, 2010 — equity awards representing approximately 283,850 shares; and | ||
• | April 17, 2010 — equity awards representing approximately 209,900 shares. |
• | March 17, 2010 — equity awards representing approximately 426,850 shares; | ||
• | March 18, 2010 — equity awards representing approximately 20,000 shares; and | ||
• | April 17, 2010 — equity awards representing approximately 37,600 shares. |
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Item 6. | Selected Financial Data |
Year Ended January 31, | ||||||||||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Revenue | $ | 726,799 | $ | 703,633 | $ | 669,544 | $ | 534,543 | $ | 368,778 | ||||||||||
Operating income (loss) | $ | 73,105 | $ | 65,679 | $ | (15,026 | ) | $ | (114,630 | ) | $ | (47,253 | ) | |||||||
Net income (loss) | $ | 28,585 | $ | 17,100 | $ | (78,577 | ) | $ | (197,545 | ) | $ | (39,598 | ) | |||||||
Net income (loss) attributable to Verint Systems Inc. | $ | 25,581 | $ | 15,617 | $ | (80,388 | ) | $ | (198,609 | ) | $ | (40,519 | ) | |||||||
Net income (loss) attributable to Verint Systems Inc. common shares | $ | 11,403 | $ | 2,026 | $ | (93,452 | ) | $ | (207,290 | ) | $ | (40,519 | ) | |||||||
Net income (loss) per common share attributable to Verint Systems Inc.: | ||||||||||||||||||||
Basic | $ | 0.33 | $ | 0.06 | $ | (2.88 | ) | $ | (6.43 | ) | $ | (1.26 | ) | |||||||
Diluted | $ | 0.31 | $ | 0.06 | $ | (2.88 | ) | $ | (6.43 | ) | $ | (1.26 | ) | |||||||
Weighted-average shares: | ||||||||||||||||||||
Basic | 34,544 | 32,478 | 32,394 | 32,222 | 32,156 | |||||||||||||||
Diluted | 37,179 | 33,127 | 32,394 | 32,222 | 32,156 | |||||||||||||||
January 31, | ||||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Total assets | $ | 1,376,127 | $ | 1,396,337 | $ | 1,337,393 | $ | 1,492,275 | $ | 593,676 | ||||||||||
Long-term debt, including current maturities | 583,234 | 620,912 | 625,000 | 610,000 | 1,058 | |||||||||||||||
Preferred stock | 285,542 | 285,542 | 285,542 | 293,663 | — | |||||||||||||||
Total stockholders’ equity (deficit) | 77,687 | (14,567 | ) | (76,070 | ) | 30,325 | 198,890 |
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• | amortization of intangible assets associated with the acquisition of Witness of $27.4 million; |
• | interest expense on our term loan and revolving credit agreement of $26.2 million; |
• | stock-based compensation expense of $46.8 million; |
• | realized losses on our interest rate swap of $3.1 million; and |
• | approximately $29 million in professional fees and related expenses associated with our restatement of previously filed consolidated financial statements for periods through January 31, 2005 and our extended filing delay status. During this year, we resumed filing timely periodic reports with the SEC. |
• | amortization of intangible assets associated with the acquisition of Witness of $28.3 million; |
• | interest expense on our term loan and revolving credit agreement of $22.6 million; |
• | stock-based compensation expense of $44.2 million; |
• | realized and unrealized losses on our interest rate swap of $13.6 million; and |
• | approximately $54 million in professional fees and related expenses associated with our restatement of previously filed consolidated financial statements for periods through January 31, 2005 and our extended filing delay status. |
• | a full year’s revenue from Witness compared to eight months in the prior year; |
• | amortization of intangible assets associated with the acquisition of Witness of $31.1 million; |
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• | integration costs of $3.2 million incurred to support and facilitate the combination of Verint and Witness into a single organization; |
• | net proceeds after legal fees of approximately $4.3 million associated with the settlement of pre-existing litigation between Witness and a competitor; |
• | interest expense on our term loan and revolving credit agreement of $35.2 million; |
• | stock-based compensation expense of $36.0 million; |
• | realized and unrealized losses on our interest rate swap of $11.5 million; |
• | restructuring costs of $5.7 million and approximately $28 million in professional fees and related expenses associated with our restatement of previously filed consolidated financial statements for periods through January 31, 2005 and our extended filing delay status; and |
• | non-cash goodwill impairment charges of $26.0 million. |
• | an increase in revenue of $123.1 million from the Witness business, beginning in the quarter ended July 31, 2007; |
• | amortization of intangible assets associated with the acquisition of Witness of $22.6 million; |
• | a $6.7 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; |
• | stock-based compensation expense of $31.0 million; |
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• | realized and unrealized losses on our interest rate swap of $29.2 million; |
• | unrealized gains of $7.2 million on an embedded derivative financial instrument related to the variable dividend feature of our preferred stock; |
• | restructuring costs of $3.3 million and approximately $26 million in professional fees and related expenses associated with our restatement of previously filed consolidated financial statements for periods through January 31, 2005 and our extended filing delay status; and |
• | non-cash goodwill and intangible asset impairment charges of $23.4 million. |
• | $19.2 million for a one-time settlement charge related to our exit from a royalty-bearing program with the OCS; and |
• | approximately $4 million in professional fees and related expenses associated with our restatement of previously filed consolidated financial statements for periods through January 31, 2005 and our extended filing delay status. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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• | 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 capital structure may impact our financing activities, investments, 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, engage in mergers or acquisitions, or make certain investments in our business. These limitations may impede our ability to execute upon our business strategy. | ||
• | Information technology spending.Our growth and results depend in part on continued improvement in the economic environment and the pace of growth in information technology spending. |
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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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Year Ended January 31, | ||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2009 | |||||||||
Revenue | $ | 726,799 | $ | 703,633 | $ | 669,544 | ||||||
Operating income (loss) | $ | 73,105 | $ | 65,679 | $ | (15,026 | ) | |||||
Net income (loss) attributable to Verint Systems Inc. common shares | $ | 11,403 | $ | 2,026 | $ | (93,452 | ) | |||||
Net income (loss) per common share attributable to Verint Systems Inc.: | ||||||||||||
Basic | $ | 0.33 | $ | 0.06 | $ | (2.88 | ) | |||||
Diluted | $ | 0.31 | $ | 0.06 | $ | (2.88 | ) | |||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Workforce Optimization | $ | 410,529 | $ | 374,778 | $ | 352,367 | 10 | % | 6 | % | ||||||||||
Video Intelligence | 134,012 | 144,970 | 127,012 | (8 | %) | 14 | % | |||||||||||||
Communications Intelligence | 182,258 | 183,885 | 190,165 | (1 | %) | (3 | %) | |||||||||||||
Total revenue | $ | 726,799 | $ | 703,633 | $ | 669,544 | 3 | % | 5 | % | ||||||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Product revenue | $ | 375,164 | $ | 374,272 | $ | 365,485 | 0 | % | 2 | % | ||||||||||
Service and support revenue | 351,635 | 329,361 | 304,059 | 7 | % | 8 | % | |||||||||||||
Total revenue | $ | 726,799 | $ | 703,633 | $ | 669,544 | 3 | % | 5 | % | ||||||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Product cost of revenue | $ | 111,989 | $ | 122,961 | $ | 125,175 | (9 | %) | (2 | %) | ||||||||||
Service and support cost of revenue | 117,261 | 108,953 | 124,051 | 8 | % | (12 | %) | |||||||||||||
Amortization of acquired technology | 9,094 | 8,021 | 9,024 | 13 | % | (11 | %) | |||||||||||||
Total cost of revenue | $ | 238,344 | $ | 239,935 | $ | 258,250 | (1 | %) | (7 | %) | ||||||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Research and development, net | $ | 96,525 | $ | 83,797 | $ | 88,309 | 15 | % | (5 | %) | ||||||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Selling, general and administrative | $ | 297,365 | $ | 291,813 | $ | 282,147 | 2 | % | 3 | % | ||||||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Amortization of other acquired intangible assets | $ | 21,460 | $ | 22,268 | $ | 25,249 | (4 | %) | (12 | %) | ||||||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Impairments of goodwill | $ | — | $ | — | $ | 25,961 | ||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Restructuring expenses | $ | — | $ | — | $ | 5,685 | ||||||
Integration expenses | — | 141 | 3,261 | |||||||||
Other legal recoveries, net | — | — | (4,292 | ) | ||||||||
Integration, restructuring and other, net | $ | — | $ | 141 | $ | 4,654 | ||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Interest income | $ | 454 | $ | 616 | $ | 1,872 | (26 | %) | (67 | %) | ||||||||||
Interest expense | (29,896 | ) | (24,964 | ) | (37,211 | ) | 20 | % | (33 | %) | ||||||||||
Other income (expense): | ||||||||||||||||||||
Gains on investments | — | — | 4,713 | — | (100 | %) | ||||||||||||||
Foreign currency gains (losses), net | 857 | (1,898 | ) | 1,645 | (145 | %) | (215 | %) | ||||||||||||
Losses on derivatives, net | (5,864 | ) | (14,709 | ) | (14,591 | ) | (60 | %) | 1 | % | ||||||||||
Other, net | (131 | ) | (516 | ) | (308 | ) | (75 | %) | 68 | % | ||||||||||
Total other income (expense) | (5,138 | ) | (17,123 | ) | (8,541 | ) | (70 | %) | 100 | % | ||||||||||
Total other expense, net | $ | (34,580 | ) | $ | (41,471 | ) | $ | (43,880 | ) | (17 | %) | (5 | %) | |||||||
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Year Ended January 31, | % Change | |||||||||||||||||||
(in thousands) | 2011 | 2010 | 2009 | 2011 - 2010 | 2010 - 2009 | |||||||||||||||
Provision for income taxes | $ | 9,940 | $ | 7,108 | $ | 19,671 | 40 | % | (64 | %) | ||||||||||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Cash and cash equivalents | $ | 169,906 | $ | 184,335 | ||||
Preferred stock (at carrying value) | $ | 285,542 | $ | 285,542 | ||||
Long-term debt | $ | 583,234 | $ | 598,234 | ||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Net cash provided by operating activities | $ | 70,520 | $ | 100,837 | $ | 53,635 | ||||||
Net cash used in investing activities | (77,833 | ) | (24,599 | ) | (26,247 | ) | ||||||
Net cash provided by (used in) financing activities | (6,937 | ) | (10,491 | ) | 11,888 | |||||||
Effect of exchange rate changes on cash and cash equivalents | (179 | ) | 2,660 | (6,581 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | $ | (14,429 | ) | $ | 68,407 | $ | 32,695 | |||||
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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 | $ | 685,374 | $ | 23,220 | $ | 72,462 | $ | 589,692 | $ | — | ||||||||||
Operating lease obligations | 44,027 | 13,315 | 17,484 | 7,421 | 5,807 | |||||||||||||||
Purchase obligations | 41,557 | 38,582 | 2,975 | — | — | |||||||||||||||
Other long-term obligations | 3,134 | 2,409 | 725 | — | — | |||||||||||||||
Total contractual obligations | $ | 774,092 | $ | 77,526 | $ | 93,646 | $ | 597,113 | $ | 5,807 | ||||||||||
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Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
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Base Rate | LIBOR | |||||||
Consolidated Leverage Ratio | Loans Margin | Loans Margin | ||||||
Greater than 3.00:1.00 | 3.25 | % | 4.25 | % | ||||
Greater than 2.75:1.00, but less than or equal to 3.00:1.00 | 3.00 | % | 4.00 | % | ||||
Greater than 2.50:1.00, but less than or equal to 2.75:1.00 | 2.75 | % | 3.75 | % | ||||
Less than or equal to 2.50:1.00 | 2.50 | % | 3.50 | % |
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Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
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• | Designed and completed our implementation of analytical procedures to review the financial results at each of our subsidiary locations on a regular basis. |
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• | Formalized and communicated our critical accounting policies and procedures to ensure worldwide compliance with GAAP; | ||
• | Implemented rigorous policies and procedures related to accounts requiring management estimates, as well as other complex areas, which include multiple levels of review; | ||
• | Appointed a VP of Global Accounting to help ensure accurate consistent application of GAAP; and | ||
• | Expanded our accounting policy and controls organization by creating and filling new positions with suitably qualified accounting and finance personnel, increasing significantly the number of persons who are Certified Public Accountants. |
• | 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, perform extensive substantive reviews and provide oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting applications; | ||
• | 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; | ||
• | Provided training across various functions to increase our general understanding of revenue recognition principles and enhance awareness of the implications associated with non-standard arrangements requiring specific revenue recognition; | ||
• | Hired additional resources at our subsidiary locations with primary responsibility for revenue recognition; | ||
• | Implemented additional levels of review over various aspects of the revenue recognition process to ensure proper accounting treatment; and | ||
• | Established a quarterly forum to discuss the complexities of current GAAP related to software revenue recognition. |
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• | Established a corporate tax department, which now includes a Vice President, two Domestic Directors, two International Directors, a Tax Manager and two full-time tax accountants; | ||
• | Engaged external tax advisors to prepare and/or review significant tax provisions for compliance with accounting guidance for income taxes, as well as any changes in local tax law; | ||
• | Implemented a tax software program designed to prepare the consolidated income tax provisions and related footnote disclosures; | ||
• | Engaged external subject matter experts with specialized international and consolidated income tax knowledge to assist in creating, implementing, and documenting a consolidated tax process; | ||
• | Implemented policies and procedures related to amounts requiring management estimates, such as uncertain tax positions and valuation allowances, which include multiple levels of review; | ||
• | Implemented policies and procedures designed to standardize tax provision computations and ensure that reconciliations of key tax accounts were accurate in all material respects and properly reviewed by management; | ||
• | Implemented training guidelines to provide appropriate technical knowledge related to accounting for income taxes and technical matters to the personnel involved in the preparation and review of income tax accounts; and | ||
• | Established global tax reporting procedures to effectively monitor the global tax provision. |
As disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2010, we were not able to conclude that the material weaknesses referred to above had been remediated because certain actions taken or controls designed to remediate such material weaknesses were not in place or had not been operating for a sufficient period of time, or because they were not intended to be executed until later in the year, as well as because the operating effectiveness of these measures had not yet been fully tested. However, during the fourth quarter, we concluded that these material weaknesses have been remediated based on the fact that a sufficient period of time had passed and all controls were fully executed, as well as the completion of our testing of the effectiveness of our internal control over financial reporting in support of our assessment as of January 31, 2011. In evaluating whether there were any reportable changes in our internal control over financial reporting during the quarter ended January 31, 2011, management determined, with the participation of our Chief Executive Officer and Chief Financial Officer, that there were no additional changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as described above.
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Verint Systems Inc.
Melville, New York
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April 5, 2011
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(a) | (b) | (c) | ||||||||||
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Future Issuance under | ||||||||||||
Number of Securities to | Weighted-Average | Equity Compensation | ||||||||||
be Issued upon Exercise | Exercise Price of | Plans (Excluding | ||||||||||
of Outstanding Options, | Outstanding Options, | Securities Reflected in | ||||||||||
Plan Category | Warrants, and Rights | Warrants and Rights (1) | Column (a)) | |||||||||
Equity compensation plans approved by security holders | 4,221,174 | (2) | $ | 27.34 | 2,112,317 | |||||||
Equity compensation plans not approved by security holders | 2,164 | (3) | $ | 21.66 | — | |||||||
Total | 4,223,338 | $ | 26.19 | 2,112,317 | ||||||||
(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 1,764,767 stock options and 2,456,407 RSUs. Does not include 15,000 shares of restricted stock previously issued under our equity compensation plans. | |
(3) | Consists solely of certain new-hire inducement grants made by Witness outside of its stockholder-approved equity plans prior to May 25, 2007. |
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Item 15. | Exhibits, Financial Statement Schedules. |
Filed Herewith / | ||||||
Incorporated by | ||||||
Number | Description | Reference from | ||||
2.1 | 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 | ||||
3.3 | Amended and Restated By-laws of Verint Systems Inc. | Form 8-K filed on January 7, 2011 |
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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 | Form 10-K filed on March 17, 2010 | ||||
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 | Verint Systems Inc. 2002 Employee Stock Purchase Plan | Form S-1 (Commission File No. 333-82300) effective on May 16, 2002 | ||||
10.5 | Verint Systems Inc. Stock Incentive Compensation Plan (as amended through December 12, 2002) | Form 10-K filed on May 1, 2003 | ||||
10.6 | Amendment No. 1 to Verint Systems Inc. Stock Incentive Compensation Plan (dated December 23, 2008) | Form 10-K filed on March 17, 2010 | ||||
10.7 | Amendment No. 2 to Verint Systems Inc. Stock Incentive Compensation Plan (dated March 4, 2009) | Form 10-K filed on March 17, 2010 | ||||
10.8 | Verint Systems Inc. 2004 Stock Incentive Compensation Plan, as amended and restated | Form 8-K filed on January 10, 2006 | ||||
10.9 | Amendment No. 1 to Verint Systems Inc. 2004 Stock Incentive Compensation Plan, as amended and restated (dated December 23, 2008) | Form 10-K filed on March 17, 2010 | ||||
10.10 | Witness Systems Amended and Restated Stock Incentive Plan | Witness Systems, Inc. Form 10-Q for the period ended June 30, 2005 | ||||
10.11 | 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 | ||||
10.12 | 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 |
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Filed Herewith / | ||||||
Incorporated by | ||||||
Number | Description | Reference from | ||||
10.13 | Amendment No. 3 to Witness Systems Amended and Restated Stock Incentive Plan (dated December 6, 2007) | Form 10-K filed on March 17, 2010 | ||||
10.14 | Amendment No. 4 to Witness Systems Amended and Restated Stock Incentive Plan (dated December 23, 2008) | Form 10-K filed on March 17, 2010 | ||||
10.15 | Verint Systems Inc. 2010 Stock Incentive Plan | Form S-8 (Comission File No. 333-169768) effective on October 5, 2010 | ||||
10.16 | Form of Stock Option Award Agreement* | Form 8-K filed on December 7, 2004 | ||||
10.17 | Form of Restricted Stock Award Agreement to an Independent Director, as amended* | Form 10-K filed on March 17, 2010 | ||||
10.18 | Form of Time-Based Restricted Stock Unit Award Agreement* | Form 10-K filed on March 17, 2010 | ||||
10.19 | Form of Performance-Based Restricted Stock Unit Award Agreement* | Form 10-K filed on March 17, 2010 | ||||
10.20 | Form of Time-Based Deferred Stock Award Agreement* | Form 10-K filed on March 17, 2010 | ||||
10.21 | Form of Performance-Based Deferred Stock Award Agreement* | Form 10-K filed on March 17, 2010 | ||||
10.22 | Form of Amendment to Time-Based and Performance-Based Equity Award Agreements* | Form 10-K filed on March 17, 2010 | ||||
10.24 | Form of Time-Based Restricted Stock Unit Award Agreement Solely Related to 2010 Grant* | Form 10-K filed on April 8, 2010 | ||||
10.25 | Form of Performance-Based Restricted Stock Unit Award Agreement Solely Related to 2010 Grant* | Form 10-K filed on April 8, 2010 | ||||
10.26 | Form of Time-Based Deferred Stock Award Agreement Solely Related to 2010 Grant* | Form 10-K filed on April 8, 2010 | ||||
10.27 | Form of Performance-Based Deferred Stock Award Agreement Solely Related to 2010 Grant* | Form 10-K filed on April 8, 2010 | ||||
10.28 | Form of Global Performance-Based Restricted Stock Unit Award* | Filed herewith | ||||
10.29 | Form of Global Time-Based Restricted Stock Unit Award* | Filed herewith | ||||
10.30 | 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 | ||||
10.31 | 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 |
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Filed Herewith / | ||||||
Incorporated by | ||||||
Number | Description | Reference from | ||||
10.32 | 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 | ||||
10.33 | Registration Rights Agreement, by and between the Company and Comverse Technology, Inc., dated May 25, 2007 | Form 8-K filed on May 30, 2007 | ||||
10.34 | Securities Purchase Agreement, by and between the Company and Comverse Technology, Inc., dated May 25, 2007 | Form 8-K filed on May 30, 2007 | ||||
10.35 | 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 | ||||
10.36 | Employment Agreement, dated February 23, 2010, between Verint Systems Inc. and Dan Bodner* | Form 8-K filed on February 23, 2010 | ||||
10.37 | Employment Agreement, dated August 14, 2006, between Verint Systems Inc. and Douglas E. Robinson* | Form 10-K filed on March 17, 2010 | ||||
10.38 | Amendment No. 1, dated July 2, 2007, to Employment Agreement between Verint Systems and Douglas E. Robinson* | Form 10-K filed on March 17, 2010 | ||||
10.39 | Amendment No. 2, dated December 29, 2008, to Employment Agreement between Verint Systems Inc. and Douglas E. Robinson* | Form 10-K filed on March 17, 2010 | ||||
10.40 | Amended and Restated Employment Agreement, dated October 29, 2009, between Verint Systems Inc. and Elan Moriah* | Form 10-K filed on March 17, 2010 | ||||
10.41 | Employment Agreement, dated April 16, 2001, between Comverse Infosys UK Limited and David Parcell* | Form 10-K filed on March 17, 2010 | ||||
10.42 | Supplemental Employment Agreement, dated June 13, 2008, between Verint Systems UK Limited and David Parcell* | Form 10-K filed on March 17, 2010 | ||||
10.43 | Amended and Restated Employment Agreement, dated November 10, 2009, between Verint Systems Inc. and Peter Fante* | Form 10-K filed on March 17, 2010 | ||||
10.44 | Employment Offer Letter, dated August 30, 2000, between Comverse Infosys Ltd. and Meir Sperling* | Form 10-K filed on March 17, 2010 | ||||
10.45 | Manager’s Insurance Policy Letter between Comverse Infosys Ltd. and Meir Sperling* (English translation) | Form 10-K filed on March 17, 2010 | ||||
10.46 | Summary of the Terms of Verint Systems Inc. Executive Officer Annual Bonus Plan* | Form 10-K filed on May 19, 2010 | ||||
10.47 | 2009 Executive Officer Retention Letter* | Form 10-K filed on March 17, 2010 |
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Filed Herewith / | ||||||
Incorporated by | ||||||
Number | Description | Reference from | ||||
10.48 | Amendment, Waiver, and Consent, dated April 27, 2010, to Credit Agreement among the Company, as Borrower, the Lenders, as parties thereto, and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent | Form 8-K filed on May 3, 2010 | ||||
10.49 | Letter Agreement, dated July 16, 2010, between Comverse Technology, Inc. and Verint Systems Inc. | Form 8-K filed on July 19, 2010 | ||||
10.50 | Amendment No. 3 to Credit Agreement, dated July 27, 2010, among Verint Systems Inc., the lenders from time to time party thereto, and the administrative agent party thereto, to the Credit Agreement, dated as of May 25, 2007, among Verint Systems Inc., the lenders from time to time party thereto, and the administrative agent party thereto. | Form 8-K filed on August 2, 2010 | ||||
10.51 | Incremental Amendment and Joinder Agreement, dated July 30, 2010, among Verint Systems Inc., the additional lenders party thereto, and the administrative agent. | Form 8-K filed on August 2, 2010 | ||||
21.1 | Subsidiaries of the Company | Filed herewith | ||||
23.1 | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm | 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 |
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Item 15A. | Financial Statements and Supplementary Data |
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-21 | ||||
F-22 | ||||
F-22 | ||||
F-24 | ||||
F-27 | ||||
F-31 | ||||
F-32 | ||||
F-36 | ||||
F-38 | ||||
F-41 | ||||
F-41 | ||||
F-47 | ||||
F-50 | ||||
F-53 | ||||
F-62 | ||||
F-64 | ||||
F-68 | ||||
F-72 | ||||
F-72 | ||||
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Melville, New York
April 5, 2011
F-2
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January 31, | ||||||||
(in thousands, except share and per share data) | 2011 | 2010 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 169,906 | $ | 184,335 | ||||
Restricted cash and bank time deposits | 13,639 | 5,206 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $5.4 million and $4.7 million, respectively | 150,769 | 127,826 | ||||||
Inventories | 16,987 | 14,373 | ||||||
Deferred cost of revenue | 6,269 | 11,232 | ||||||
Deferred income taxes | 13,179 | 21,140 | ||||||
Prepaid expenses and other current assets | 31,195 | 43,414 | ||||||
Total current assets | 401,944 | 407,526 | ||||||
Property and equipment, net | 23,176 | 24,453 | ||||||
Goodwill | 738,674 | 724,670 | ||||||
Intangible assets, net | 157,071 | 173,833 | ||||||
Capitalized software development costs, net | 6,787 | 8,530 | ||||||
Long-term deferred cost of revenue | 21,715 | 33,019 | ||||||
Long-term deferred income taxes | 6,700 | 7,469 | ||||||
Other assets | 20,060 | 16,837 | ||||||
Total assets | $ | 1,376,127 | $ | 1,396,337 | ||||
Liabilities, Preferred Stock, and Stockholders’ Equity (Deficit) | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 36,861 | $ | 46,570 | ||||
Accrued expenses and other current liabilities | 162,650 | 154,935 | ||||||
Current maturities of long-term debt | — | 22,678 | ||||||
Deferred revenue | 142,465 | 183,719 | ||||||
Deferred income taxes | 379 | 487 | ||||||
Liabilities to affiliates | 1,847 | 1,709 | ||||||
Total current liabilities | 344,202 | 410,098 | ||||||
Long-term debt | �� | 583,234 | 598,234 | |||||
Long-term deferred revenue | 40,424 | 51,412 | ||||||
Long-term deferred income taxes | 13,226 | 21,425 | ||||||
Other liabilities | 31,812 | 44,193 | ||||||
Total liabilities | 1,012,898 | 1,125,362 | ||||||
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 $338,717 at January 31, 2011 | 285,542 | 285,542 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity (Deficit): | ||||||||
Common stock — $0.001 par value; authorized 120,000,000 shares. Issued 37,349,000 and 32,687,000 shares, respectively; outstanding 37,089,000 and 32,584,000 shares as of January 31, 2011 and 2010, respectively | 38 | 33 | ||||||
Additional paid-in capital | 519,834 | 451,166 | ||||||
Treasury stock, at cost — 260,000 and 103,000 shares as of January 31, 2011 and 2010, respectively | (6,639 | ) | (2,493 | ) | ||||
Accumulated deficit | (394,757 | ) | (420,338 | ) | ||||
Accumulated other comprehensive loss | (42,069 | ) | (43,134 | ) | ||||
Total Verint Systems Inc. stockholders’ equity (deficit) | 76,407 | (14,766 | ) | |||||
Noncontrolling interest | 1,280 | 199 | ||||||
Total stockholders’ equity (deficit) | 77,687 | (14,567 | ) | |||||
Total liabilities, preferred stock, and stockholders’ equity (deficit) | $ | 1,376,127 | $ | 1,396,337 | ||||
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Year Ended January 31, | ||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2009 | |||||||||
Revenue: | ||||||||||||
Product | $ | 375,164 | $ | 374,272 | $ | 365,485 | ||||||
Service and support | 351,635 | 329,361 | 304,059 | |||||||||
Total revenue | 726,799 | 703,633 | 669,544 | |||||||||
Cost of revenue: | ||||||||||||
Product | 111,989 | 122,961 | 125,175 | |||||||||
Service and support | 117,261 | 108,953 | 124,051 | |||||||||
Amortization of acquired technology | 9,094 | 8,021 | 9,024 | |||||||||
Total cost of revenue | 238,344 | 239,935 | 258,250 | |||||||||
Gross profit | 488,455 | 463,698 | 411,294 | |||||||||
Operating expenses: | ||||||||||||
Research and development, net | 96,525 | 83,797 | 88,309 | |||||||||
Selling, general and administrative | 297,365 | 291,813 | 282,147 | |||||||||
Amortization of other acquired intangible assets | 21,460 | 22,268 | 25,249 | |||||||||
Impairments of goodwill | — | — | 25,961 | |||||||||
Integration, restructuring and other, net | — | 141 | 4,654 | |||||||||
Total operating expenses | 415,350 | 398,019 | 426,320 | |||||||||
Operating income (loss) | 73,105 | 65,679 | (15,026 | ) | ||||||||
Other income (expense), net: | ||||||||||||
Interest income | 454 | 616 | 1,872 | |||||||||
Interest expense | (29,896 | ) | (24,964 | ) | (37,211 | ) | ||||||
Other income (expense), net | (5,138 | ) | (17,123 | ) | (8,541 | ) | ||||||
Total other expense, net | (34,580 | ) | (41,471 | ) | (43,880 | ) | ||||||
Income (loss) before provision for income taxes | 38,525 | 24,208 | (58,906 | ) | ||||||||
Provision for income taxes | 9,940 | 7,108 | 19,671 | |||||||||
Net income (loss) | 28,585 | 17,100 | (78,577 | ) | ||||||||
Net income attributable to noncontrolling interest | 3,004 | 1,483 | 1,811 | |||||||||
Net income (loss)��attributable to Verint Systems Inc. | 25,581 | 15,617 | (80,388 | ) | ||||||||
Dividends on preferred stock | (14,178 | ) | (13,591 | ) | (13,064 | ) | ||||||
Net income (loss) attributable to Verint Systems Inc. common shares | $ | 11,403 | $ | 2,026 | $ | (93,452 | ) | |||||
Net income (loss) per common share attributable to Verint Systems Inc. | ||||||||||||
Basic | $ | 0.33 | $ | 0.06 | $ | (2.88 | ) | |||||
Diluted | $ | 0.31 | $ | 0.06 | $ | (2.88 | ) | |||||
Weighted-average common shares outstanding | ||||||||||||
Basic | 34,544 | 32,478 | 32,394 | |||||||||
Diluted | 37,179 | 33,127 | 32,394 | |||||||||
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Verint Systems Inc. Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||
Accumulated | Total Verint | |||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Systems Inc. | Total | ||||||||||||||||||||||||||||||||
Par | Paid-in | Treasury | Accumulated | Comprehensive | Stockholders’ | Noncontrolling | Stockholders’ | |||||||||||||||||||||||||||||
(in thousands) | Shares | Value | Capital | Stock | Deficit | Loss | Equity (Deficit) | Interest | Equity (Deficit) | |||||||||||||||||||||||||||
Balances as of January 31, 2008 | 32,526 | $ | 32 | $ | 387,537 | $ | (2,094 | ) | $ | (355,567 | ) | $ | (610 | ) | $ | 29,298 | $ | 1,027 | $ | 30,325 | ||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | (80,388 | ) | — | (80,388 | ) | 1,811 | (78,577 | ) | ||||||||||||||||||||||||
Unrealized gains on derivative financial instruments, net | — | — | — | — | — | 101 | 101 | — | 101 | |||||||||||||||||||||||||||
Unrealized losses on available-for-sale securities, net | — | — | — | — | — | (29 | ) | (29 | ) | — | (29 | ) | ||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | (57,866 | ) | (57,866 | ) | (23 | ) | (57,889 | ) | |||||||||||||||||||||||
Total comprehensive income | — | — | — | — | (80,388 | ) | (57,794 | ) | (138,182 | ) | 1,788 | (136,394 | ) | |||||||||||||||||||||||
Stock-based compensation expense | — | — | 32,040 | — | — | — | 32,040 | — | 32,040 | |||||||||||||||||||||||||||
Common stock issued for stock awards | 23 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Forfeitures of restricted stock awards | (9 | ) | — | 166 | (166 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Purchases of treasury stock | (5 | ) | — | — | (93 | ) | — | — | (93 | ) | — | �� | (93 | ) | ||||||||||||||||||||||
Dividends to noncontrolling interest | — | — | — | — | — | — | — | (2,142 | ) | (2,142 | ) | |||||||||||||||||||||||||
Tax effects from stock award plans | — | — | (21 | ) | — | — | — | (21 | ) | — | (21 | ) | ||||||||||||||||||||||||
Other tax adjustments | — | — | 215 | — | — | — | 215 | — | 215 | |||||||||||||||||||||||||||
Balances as of January 31, 2009 | 32,535 | 32 | 419,937 | (2,353 | ) | (435,955 | ) | (58,404 | ) | (76,743 | ) | 673 | (76,070 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 15,617 | — | 15,617 | 1,483 | 17,100 | |||||||||||||||||||||||||||
Unrealized gains on derivative financial instruments, net | — | — | — | — | — | 5 | 5 | — | 5 | |||||||||||||||||||||||||||
Unrealized gains on available-for-sale securities, net | — | — | — | — | — | 34 | 34 | — | 34 | |||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | 15,231 | 15,231 | 46 | 15,277 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | 15,617 | 15,270 | 30,887 | 1,529 | 32,416 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 31,195 | — | — | — | 31,195 | — | 31,195 | |||||||||||||||||||||||||||
Common stock issued for stock awards | 64 | 1 | — | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||
Forfeitures of restricted stock awards | (4 | ) | — | 34 | (34 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Purchases of treasury stock | (11 | ) | — | — | (106 | ) | — | — | (106 | ) | — | (106 | ) | |||||||||||||||||||||||
Dividends to noncontrolling interest | — | — | — | — | — | — | — | (2,003 | ) | (2,003 | ) | |||||||||||||||||||||||||
Balances as of January 31, 2010 | 32,584 | 33 | 451,166 | (2,493 | ) | (420,338 | ) | (43,134 | ) | (14,766 | ) | 199 | (14,567 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 25,581 | — | 25,581 | 3,004 | 28,585 | |||||||||||||||||||||||||||
Unrealized losses on derivative financial instruments, net | — | — | — | — | — | (351 | ) | (351 | ) | — | (351 | ) | ||||||||||||||||||||||||
Currency translation adjustments | — | — | — | — | — | 1,416 | 1,416 | 268 | 1,684 | |||||||||||||||||||||||||||
Total comprehensive income | — | — | — | — | 25,581 | 1,065 | 26,646 | 3,272 | 29,918 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 28,784 | — | — | — | 28,784 | — | 28,784 | |||||||||||||||||||||||||||
Common stock issued for stock awards | 2,498 | 3 | (3 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
Exercises of stock options | 2,164 | 2 | 40,833 | — | — | — | 40,835 | — | 40,835 | |||||||||||||||||||||||||||
Purchases of treasury stock | (157 | ) | — | — | (4,146 | ) | — | — | (4,146 | ) | — | (4,146 | ) | |||||||||||||||||||||||
Dividends to noncontrolling interest | — | — | — | — | — | — | — | (2,191 | ) | (2,191 | ) | |||||||||||||||||||||||||
Tax effects from stock award plans | — | — | (946 | ) | — | — | — | (946 | ) | — | (946 | ) | ||||||||||||||||||||||||
Balances as of January 31, 2011 | 37,089 | $ | 38 | $ | 519,834 | $ | (6,639 | ) | $ | (394,757 | ) | $ | (42,069 | ) | $ | 76,407 | $ | 1,280 | $ | 77,687 | ||||||||||||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 28,585 | $ | 17,100 | $ | (78,577 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 48,951 | 49,290 | 55,142 | |||||||||
Provision for doubtful accounts | 1,863 | 849 | 793 | |||||||||
Impairments of goodwill | — | — | 25,961 | |||||||||
Stock-based compensation | 28,784 | 31,195 | 32,040 | |||||||||
Provision (benefit) for deferred income taxes | (1,092 | ) | (62 | ) | 17,768 | |||||||
Excess tax benefits from stock award plans | (815 | ) | — | — | ||||||||
Non-cash losses on derivative financial instruments, net | 5,863 | 14,709 | 14,591 | |||||||||
Non-cash gains on sales of auction rate securities | — | — | (4,713 | ) | ||||||||
Other non-cash items, net | 1,139 | 1,443 | 441 | |||||||||
Changes in operating assets and liabilities, net of effects of business combinations: | ||||||||||||
Accounts receivable | (24,574 | ) | (13,910 | ) | (3,328 | ) | ||||||
Inventories | (3,471 | ) | 5,686 | (2,761 | ) | |||||||
Deferred cost of revenue | 16,616 | 14,082 | 12,201 | |||||||||
Prepaid expenses and other assets | 9,924 | (11,542 | ) | 8,876 | ||||||||
Accounts payable and accrued expenses | 15,839 | 12,912 | (10,754 | ) | ||||||||
Deferred revenue | (51,226 | ) | (21,143 | ) | (7,329 | ) | ||||||
Other liabilities | (5,933 | ) | 471 | (6,877 | ) | |||||||
Other, net | 67 | (243 | ) | 161 | ||||||||
Net cash provided by operating activities | 70,520 | 100,837 | 53,635 | |||||||||
Cash flows from investing activities: | ||||||||||||
Cash paid for business combinations, net of cash acquired, and payments of contingent consideration associated with business combinations consummated in prior periods | (23,485 | ) | (96 | ) | (3,092 | ) | ||||||
Purchases of property and equipment | (8,536 | ) | (4,965 | ) | (11,113 | ) | ||||||
Sales and maturities of investments | — | — | 7,000 | |||||||||
Settlements of derivative financial instruments not designated as hedges | (34,783 | ) | (19,414 | ) | (10,041 | ) | ||||||
Cash paid for capitalized software development costs | (2,527 | ) | (2,715 | ) | (4,547 | ) | ||||||
Change in restricted cash and bank time deposits | (8,502 | ) | 2,591 | (4,454 | ) | |||||||
Net cash used in investing activities | (77,833 | ) | (24,599 | ) | (26,247 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from borrowings | — | — | 15,000 | |||||||||
Repayments of borrowings and other financing obligations | (38,163 | ) | (6,088 | ) | (2,869 | ) | ||||||
Proceeds from exercises of stock options | 40,787 | — | — | |||||||||
Payment of debt issuance and other debt-related costs | (4,039 | ) | (152 | ) | (150 | ) | ||||||
Dividends paid to noncontrolling interest | (2,191 | ) | (4,145 | ) | — | |||||||
Purchases of treasury stock | (4,146 | ) | — | — | ||||||||
Excess tax benefits from stock award plans | 815 | — | — | |||||||||
Other financing activities | — | (106 | ) | (93 | ) | |||||||
Net cash provided by (used in) financing activities | (6,937 | ) | (10,491 | ) | 11,888 | |||||||
Effect of exchange rate changes on cash and cash equivalents | (179 | ) | 2,660 | (6,581 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (14,429 | ) | 68,407 | 32,695 | ||||||||
Cash and cash equivalents, beginning of year | 184,335 | 115,928 | 83,233 | |||||||||
Cash and cash equivalents, end of year | $ | 169,906 | $ | 184,335 | $ | 115,928 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid for interest | $ | 21,053 | $ | 24,705 | $ | 36,544 | ||||||
Cash paid for income taxes, net of refunds received | $ | 8,528 | $ | 11,661 | $ | 3,319 | ||||||
Non-cash investing and financing transactions: | ||||||||||||
Accrued but unpaid purchases of property and equipment | $ | 1,047 | $ | 642 | $ | 382 | ||||||
Inventory transfers to property and equipment | $ | 874 | $ | 621 | $ | 1,325 | ||||||
Settlement of embedded derivative | $ | — | $ | — | $ | 8,121 | ||||||
Dividend to noncontrolling interest — declared, but paid in subsequent year | $ | — | $ | — | $ | 2,142 | ||||||
Stock options exercised, proceeds received subsequent to year end | $ | 65 | $ | — | $ | — | ||||||
Purchases under supplier financing arrangements | $ | 1,859 | $ | — | $ | — | ||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Balance at beginning of year | $ | 4,706 | $ | 5,989 | $ | 6,490 | ||||||
Provisions charged to expense | 1,832 | 801 | 793 | |||||||||
Amounts written off | (1,126 | ) | (2,210 | ) | (868 | ) | ||||||
Other (1) | (17 | ) | 126 | (426 | ) | |||||||
Balance at end of year | $ | 5,395 | $ | 4,706 | $ | 5,989 | ||||||
(1) | Includes balances from acquisitions and changes in balances due to changes in foreign currency exchange rates. |
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Year Ended January 31, | ||||||||||||
(in thousands, except per share amounts) | 2011 | 2010 | 2009 | |||||||||
Net income (loss) | $ | 28,585 | $ | 17,100 | $ | (78,577 | ) | |||||
Net income attributable to noncontrolling interest | 3,004 | 1,483 | 1,811 | |||||||||
Net income (loss) attributable to Verint Systems Inc. | 25,581 | 15,617 | (80,388 | ) | ||||||||
Dividends on preferred stock | (14,178 | ) | (13,591 | ) | (13,064 | ) | ||||||
Net income (loss) attributable to Verint Systems Inc. for basic net income (loss) per common share | 11,403 | 2,026 | (93,452 | ) | ||||||||
Dilutive effect of dividends on preferred stock | — | — | — | |||||||||
Net income (loss) attributable to Verint Systems Inc. for diluted net income (loss) per common share | $ | 11,403 | $ | 2,026 | $ | (93,452 | ) | |||||
Weighted-average shares outstanding: | ||||||||||||
Basic | 34,544 | 32,478 | 32,394 | |||||||||
Dilutive effect of employee equity award plans | 2,635 | 649 | — | |||||||||
Dilutive effect of assumed conversion of preferred stock | — | — | — | |||||||||
Diluted | 37,179 | 33,127 | 32,394 | |||||||||
Net income (loss) per common share attributable to Verint Systems Inc. | ||||||||||||
Basic | $ | 0.33 | $ | 0.06 | $ | (2.88 | ) | |||||
Diluted | $ | 0.31 | $ | 0.06 | $ | (2.88 | ) | |||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Shares excluded from calculation: | ||||||||||||
Stock options and restricted stock-based awards | 1,158 | 4,714 | 7,055 | |||||||||
Convertible preferred stock | 10,223 | 9,836 | 9,464 | |||||||||
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Estimated | ||||||
(in thousands) | Amount | Useful Lives | ||||
Components of Purchase Price: | ||||||
Cash | $ | 17,738 | ||||
Fair value of contingent consideration | 3,224 | |||||
Prepaid product licenses and support services | 1,493 | |||||
Trade accounts payable | (712 | ) | ||||
Total purchase price | $ | 21,743 | ||||
Allocation of Purchase Price: | ||||||
Net tangible assets: | ||||||
Cash and cash equivalents | $ | 2,569 | ||||
Other current assets | 286 | |||||
Other assets | 89 | |||||
Current liabilities | (211 | ) | ||||
Deferred income taxes — current and long-term | (993 | ) | ||||
Net tangible assets | 1,740 | |||||
Identifiable intangible assets: | ||||||
Developed technology | 6,949 | 6 years | ||||
Non-competition agreements | 278 | 3 years | ||||
Total identifiable intangible assets (1) | 7,227 | |||||
Goodwill | 12,776 | |||||
Total purchase price | $ | 21,743 | ||||
(1) | The weighted-average amortization period of all finite-lived identifiable intangible assets is 5.9 years. |
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January 31, 2011 | ||||||||||||
Accumulated | ||||||||||||
(in thousands) | Cost | Amortization | Net | |||||||||
Customer relationships | $ | 198,106 | $ | (74,412 | ) | $ | 123,694 | |||||
Acquired technology | 66,794 | (37,579 | ) | 29,215 | ||||||||
Trade names | 9,552 | (9,177 | ) | 375 | ||||||||
Non-competition agreements | 5,215 | (2,760 | ) | 2,455 | ||||||||
Distribution network | 2,440 | (1,108 | ) | 1,332 | ||||||||
Total | $ | 282,107 | $ | (125,036 | ) | $ | 157,071 | |||||
January 31, 2010 | ||||||||||||
Accumulated | ||||||||||||
(in thousands) | Cost | Amortization | Net | |||||||||
Customer relationships | $ | 198,084 | $ | (54,825 | ) | $ | 143,259 | |||||
Acquired technology | 54,629 | (28,419 | ) | 26,210 | ||||||||
Trade names | 9,551 | (7,989 | ) | 1,562 | ||||||||
Non-competition agreements | 3,429 | (2,203 | ) | 1,226 | ||||||||
Distribution network | 2,440 | (864 | ) | 1,576 | ||||||||
Total | $ | 268,133 | $ | (94,300 | ) | $ | 173,833 | |||||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Workforce Optimization | $ | 148,471 | $ | 171,133 | ||||
Video Intelligence | 934 | 1,149 | ||||||
Communications Intelligence | 7,666 | 1,551 | ||||||
Total | $ | 157,071 | $ | 173,833 | ||||
(in thousands) | ||||
Years Ending January 31, | Amount | |||
2012 | $ | 31,364 | ||
2013 | 30,574 | |||
2014 | 25,394 | |||
2015 | 22,264 | |||
2016 | 21,590 | |||
2017 and thereafter | 25,885 | |||
Total | $ | 157,071 | ||
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Reportable Segment | ||||||||||||||||
Workforce | Video | Communications | ||||||||||||||
(in thousands) | Total | Optimization | Intelligence | Intelligence | ||||||||||||
Year Ended January 31, 2010 | ||||||||||||||||
Goodwill, gross, at January 31, 2009 | $ | 776,849 | $ | 681,140 | $ | 65,726 | $ | 29,983 | ||||||||
Accumulated impairment losses at January 31, 2009 | (66,865 | ) | (30,791 | ) | (36,074 | ) | — | |||||||||
Goodwill, net, at January 31, 2009 | 709,984 | 650,349 | 29,652 | 29,983 | ||||||||||||
Additional consideration — previous acquisitions (1) | 89 | — | — | 89 | ||||||||||||
Foreign currency translation and other | 14,597 | 13,325 | 1,272 | — | ||||||||||||
Goodwill, net, at January 31, 2010 | $ | 724,670 | $ | 663,674 | $ | 30,924 | $ | 30,072 | ||||||||
Year Ended January 31, 2011 | ||||||||||||||||
Goodwill, gross, at January 31, 2010 | $ | 791,535 | $ | 694,465 | $ | 66,998 | $ | 30,072 | ||||||||
Accumulated impairment losses at January 31, 2010 | (66,865 | ) | (30,791 | ) | (36,074 | ) | — | |||||||||
Goodwill, net, at January 31, 2010 | 724,670 | 663,674 | 30,924 | 30,072 | ||||||||||||
Acquisition of Iontas Limited | 12,776 | 12,776 | — | — | ||||||||||||
Foreign currency translation and other | 1,228 | (39 | ) | (209 | ) | 1,476 | ||||||||||
Goodwill, net, at January 31, 2011 | $ | 738,674 | $ | 676,411 | $ | 30,715 | $ | 31,548 | ||||||||
Balance at January 31, 2011 | ||||||||||||||||
Goodwill, gross, at January 31, 2011 | $ | 805,539 | $ | 707,202 | $ | 66,789 | $ | 31,548 | ||||||||
Accumulated impairment losses at January 31, 2011 | (66,865 | ) | (30,791 | ) | (36,074 | ) | — | |||||||||
Goodwill, net, at January 31, 2011 | $ | 738,674 | $ | 676,411 | $ | 30,715 | $ | 31,548 | ||||||||
(1) | Contingent consideration for acquisitions completed in prior years. |
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Term loan facility | $ | 583,234 | $ | 605,912 | ||||
Revolving line of credit | — | 15,000 | ||||||
583,234 | 620,912 | |||||||
Less: current portion | — | 22,678 | ||||||
Long-term debt | $ | 583,234 | $ | 598,234 | ||||
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(in thousands) | ||||
Years Ending January 31, | Amount | |||
2012 | $ | — | ||
2013 | 4,593 | |||
2014 | 6,123 | |||
2015 | 572,518 | |||
Total | $ | 583,234 | ||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Raw materials | $ | 7,112 | $ | 5,987 | ||||
Work-in-process | 5,112 | 4,649 | ||||||
Finished goods | 4,763 | 3,737 | ||||||
Total inventories | $ | 16,987 | $ | 14,373 | ||||
January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Land | $ | 3,861 | $ | 3,903 | ||||
Buildings | 2,204 | 2,250 | ||||||
Leasehold improvements | 10,097 | 9,617 | ||||||
Software | 23,973 | 20,862 | ||||||
Equipment, furniture, and other | 45,874 | 45,168 | ||||||
86,009 | 81,800 | |||||||
Less: accumulated depreciation and amortization | (62,833 | ) | (57,347 | ) | ||||
Total property and equipment, net | $ | 23,176 | $ | 24,453 | ||||
January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Deferred debt issuance costs, net | $ | 9,725 | $ | 8,474 | ||||
Other | 10,335 | 8,363 | ||||||
Total other assets | $ | 20,060 | $ | 16,837 | ||||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Compensation and benefits | $ | 57,863 | $ | 52,151 | ||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 47,692 | 26,102 | ||||||
Professional fees and consulting | 6,962 | 17,204 | ||||||
Derivative financial instruments — current portion | 1,886 | 21,624 | ||||||
Distributor and agent commissions | 7,511 | 9,193 | ||||||
Taxes other than income taxes | 8,357 | 7,034 | ||||||
Interest on indebtedness | 5,699 | 416 | ||||||
Other | 26,680 | 21,211 | ||||||
Total accrued expenses and other liabilities | $ | 162,650 | $ | 154,935 | ||||
January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Unrecognized tax benefits | $ | 14,470 | $ | 18,609 | ||||
Derivative financial instruments — long-term portion | — | 8,824 | ||||||
Obligation for severance compensation | 3,279 | 3,259 | ||||||
Other | 14,063 | 13,501 | ||||||
Total other liabilities | $ | 31,812 | $ | 44,193 | ||||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Foreign currency translation losses, net | $ | (41,829 | ) | $ | (43,245 | ) | ||
Unrealized gains (losses) on derivative financial instruments, net | (245 | ) | 106 | |||||
Unrealized gains on available-for-sale marketable securities | 5 | 5 | ||||||
Total accumulated other comprehensive loss | $ | (42,069 | ) | $ | (43,134 | ) | ||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Restructuring expenses | $ | — | $ | 141 | $ | 5,685 | ||||||
Integration expenses | — | — | 3,261 | |||||||||
Other legal recoveries, net | — | — | (4,292 | ) | ||||||||
Total integration, restructuring and other, net | $ | — | $ | 141 | $ | 4,654 | ||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Restructuring activity: | ||||||||||||
Global cost reduction plan | $ | — | $ | 25 | $ | 3,193 | ||||||
Consulting business in Europe | — | — | 1,370 | |||||||||
Acquisition of Witness | — | 116 | 858 | |||||||||
Video Intelligence segment | — | — | 264 | |||||||||
Total | $ | — | $ | 141 | $ | 5,685 | ||||||
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Severance and | ||||
(in thousands) | Related Costs | |||
Accrued restructuring costs — January 31, 2009 | $ | 531 | ||
Expenses accrued | 25 | |||
Payments and settlements | (556 | ) | ||
Accrued restructuring costs — January 31, 2010 | $ | — | ||
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(in thousands) | Total | |||
Accrued restructuring costs — January 31, 2008 | $ | 420 | ||
Expenses accrued | 858 | |||
Payments and settlements | (1,278 | ) | ||
Accrued restructuring costs — January 31, 2009 | — | |||
Expenses accrued | 116 | |||
Accrued restructuring costs — January 31, 2010 | 116 | |||
Payments and settlements | (116 | ) | ||
Accrued restructuring costs — January 31, 2011 | $ | — | ||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Capitalized software development costs, net, beginning of year | $ | 8,530 | $ | 10,489 | $ | 10,272 | ||||||
Software development costs capitalized during the year | 2,527 | 2,715 | 4,547 | |||||||||
Amortization of capitalized software development costs | (4,236 | ) | (4,717 | ) | (4,135 | ) | ||||||
Foreign currency translation and other | (34 | ) | 43 | (195 | ) | |||||||
Capitalized software development costs, net, end of year | $ | 6,787 | $ | 8,530 | $ | 10,489 | ||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Domestic | $ | 13,746 | $ | (47,139 | ) | $ | (68,109 | ) | ||||
Foreign | 24,779 | 71,347 | 9,203 | |||||||||
Total income (loss) before income taxes | $ | 38,525 | $ | 24,208 | $ | (58,906 | ) | |||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Current income tax provision (benefit): | ||||||||||||
Federal | $ | 24 | $ | (835 | ) | $ | (11,266 | ) | ||||
State | 1,140 | 415 | (755 | ) | ||||||||
Foreign | 9,868 | 7,590 | 13,924 | |||||||||
Total current income tax provision | 11,032 | 7,170 | 1,903 | |||||||||
Deferred income tax provision (benefit): | ||||||||||||
Federal | (16 | ) | 500 | 11,805 | ||||||||
State | 459 | 777 | 1,088 | |||||||||
Foreign | (1,535 | ) | (1,339 | ) | 4,875 | |||||||
Total deferred income tax provision (benefit) | (1,092 | ) | (62 | ) | 17,768 | |||||||
Total provision for income taxes | $ | 9,940 | $ | 7,108 | $ | 19,671 | ||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
U.S. federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Income tax provision (benefit) at the U.S. statutory rate | $ | 13,484 | $ | 8,471 | $ | (20,618 | ) | |||||
State tax provision (benefit) | 3,720 | 756 | (5,086 | ) | ||||||||
Foreign rate differential | (2,204 | ) | (8,869 | ) | 1,989 | |||||||
Tax incentive | (2,114 | ) | (9,762 | ) | (4,956 | ) | ||||||
Valuation allowance | (13,042 | ) | 7,737 | 30,233 | ||||||||
Stock-based and other compensation | 1,823 | 3,262 | 2,808 | |||||||||
Non-deductible expenses | 787 | 882 | 745 | |||||||||
Tax credits | (1,880 | ) | (2,019 | ) | (221 | ) | ||||||
Tax contingencies | (4,233 | ) | 1,102 | (997 | ) | |||||||
Impairment of goodwill and intangible assets | — | — | 9,127 | |||||||||
Change in tax rates | (516 | ) | 1,227 | 3,873 | ||||||||
U.S. tax effects of foreign operations | 13,774 | 4,750 | 3,394 | |||||||||
Other, net | 341 | (429 | ) | (620 | ) | |||||||
Total provision for income taxes | $ | 9,940 | $ | 7,108 | $ | 19,671 | ||||||
Effective income tax rate | 25.8 | % | 29.4 | % | -33.4 | % |
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Deferred tax assets: | ||||||||
Accrued expenses | $ | 5,040 | $ | 4,891 | ||||
Allowance for doubtful accounts | 1,246 | 672 | ||||||
Deferred revenue | 24,954 | 42,511 | ||||||
Inventory | 1,263 | 757 | ||||||
Depreciation of property and equipment | 3,804 | 3,498 | ||||||
Loss carryforwards | 98,938 | 92,336 | ||||||
Tax credits | 6,566 | 7,164 | ||||||
Stock-based and other compensation | 16,567 | 30,182 | ||||||
Capitalized research and development expenses | 4,395 | 4,712 | ||||||
Fair value of derivatives | — | 9,720 | ||||||
Other long-term liabilities | 1,938 | 2,157 | ||||||
Other, net | 1,825 | 605 | ||||||
Total deferred tax assets | 166,536 | 199,205 | ||||||
Deferred tax liabilities: | ||||||||
Deferred cost of revenue | �� | (6,270 | ) | (10,106 | ) | |||
Prepaid expenses | (617 | ) | (1,025 | ) | ||||
Goodwill and other intangible assets | (47,655 | ) | (56,809 | ) | ||||
Total deferred tax liabilities | (54,542 | ) | (67,940 | ) | ||||
Valuation allowance | (105,720 | ) | (124,568 | ) | ||||
Net deferred tax assets | $ | 6,274 | $ | 6,697 | ||||
Recorded as: | ||||||||
Current deferred tax assets | $ | 13,179 | $ | 21,140 | ||||
Long-term deferred tax assets | 6,700 | 7,469 | ||||||
Current deferred tax liabilities | (379 | ) | (487 | ) | ||||
Long-term deferred tax liabilities | (13,226 | ) | (21,425 | ) | ||||
Net deferred tax assets | $ | 6,274 | $ | 6,697 | ||||
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Year Ended January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Valuation allowance, beginning of year | $ | (124,568 | ) | $ | (116,817 | ) | ||
Provision for (benefit from) income taxes | 13,042 | (7,737 | ) | |||||
Shortfall deductions on stock-based compensation | 5,771 | 1,264 | ||||||
Cumulative translation adjustment | 35 | (1,278 | ) | |||||
Valuation allowance, end of year | $ | (105,720 | ) | $ | (124,568 | ) | ||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Gross unrecognized tax benefits, beginning of year | $ | 37,495 | $ | 35,172 | $ | 46,903 | ||||||
Increases related to tax positions taken during the current year | 4,778 | 2,715 | 6,355 | |||||||||
Increases related to tax position taken during prior years | 2,271 | — | — | |||||||||
Increases (decreases) related to foreign currency exchange rate fluctuations | 97 | 1,545 | (2,011 | ) | ||||||||
Reductions for tax positions of prior years | (10,829 | ) | (152 | ) | (14,912 | ) | ||||||
Reduction for settlements with taxing authorities | — | (508 | ) | (125 | ) | |||||||
Lapses of statutes of limitation | (1,140 | ) | (1,277 | ) | (1,038 | ) | ||||||
Gross unrecognized tax benefits, end of year | $ | 32,672 | $ | 37,495 | $ | 35,172 | ||||||
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Jurisdiction | Tax Years | |
Canada | January 31, 2009 | |
United Kingdom | December 31, 2006 – January 31, 2008 | |
Hong Kong | March 31, 2003 – March 31, 2005, January 31, 2006 – January 31, 2007 | |
India | March 31, 2006 – March 31, 2008 |
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• | Level 1: quoted prices in active markets for identical assets or liabilities; |
• | Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or |
• | Level 3: unobservable inputs that are supported by little or no market activity. |
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January 31, 2011 | ||||||||||||
Fair Value Hierarchy Category | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
Assets: | ||||||||||||
Money market funds (included in cash and cash equivalents) | $ | 24,505 | $ | — | $ | — | ||||||
Foreign currency forward contracts | — | 88 | — | |||||||||
Total assets | $ | 24,505 | $ | 88 | $ | — | ||||||
Liabilities: | ||||||||||||
Foreign currency forward contracts | $ | — | $ | 1,886 | $ | — | ||||||
Contingent consideration — business combinations | — | — | 3,686 | |||||||||
Total liabilities | $ | — | $ | 1,886 | $ | 3,686 | ||||||
January 31, 2010 | ||||||||||||
Fair Value Hierarchy Category | ||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | |||||||||
Assets: | ||||||||||||
Money market funds (included in cash and cash equivalents) | $ | 82,593 | $ | — | $ | — | ||||||
Foreign currency forward contracts | — | 140 | — | |||||||||
Total assets | $ | 82,593 | $ | 140 | $ | — | ||||||
Liabilities: | ||||||||||||
Foreign currency forward contracts | $ | — | $ | 636 | $ | — | ||||||
Interest rate swap agreement | — | 29,812 | — | |||||||||
Total liabilities | $ | — | $ | 30,448 | $ | — | ||||||
(in thousands) | Amount | |||
Fair value measurement at January 31, 2010 | $ | — | ||
Contingent consideration liability recorded for business combinations | 3,424 | |||
Change in fair value recorded in operating expenses | 262 | |||
Fair value measurement at January 31, 2011 | $ | 3,686 | ||
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January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
Foreign currency forward contracts | $ | 51,050 | $ | 50,437 | ||||
Interest rate swap agreement | — | 450,000 | ||||||
$ | 51,050 | $ | 500,437 | |||||
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January 31, 2011 | ||||||||||||
Assets | Liabilities | |||||||||||
Balance Sheet | Balance Sheet | |||||||||||
(in thousands) | Classification | Fair Value | Classification | Fair Value | ||||||||
Derivative financial instruments designated as hedging instruments: | ||||||||||||
Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 88 | Accrued expenses and other liabilities | $ | 396 | ||||||
Total derivative financial instruments designated as hedging instruments | $ | 88 | $ | 396 | ||||||||
Derivative financial instruments not designated as hedging instruments: | ||||||||||||
Foreign currency forward contracts | — | $ | — | Accrued expenses and other liabilities | $ | 1,490 | ||||||
Total derivative financial instruments not designated as hedging instruments | $ | — | $ | 1,490 | ||||||||
January 31, 2010 | ||||||||||||
Assets | Liabilities | |||||||||||
Balance Sheet | Balance Sheet | |||||||||||
(in thousands) | Classification | Fair Value | Classification | Fair Value | ||||||||
Derivative financial instruments designated as hedging instruments: | ||||||||||||
Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 140 | Accrued expenses and other liabilities | $ | 38 | ||||||
Total derivative financial instruments designated as hedging instruments | $ | 140 | $ | 38 | ||||||||
Derivative financial instruments not designated as hedging instruments: | ||||||||||||
Foreign currency forward contracts | — | $ | — | Accrued expenses and other liabilities | $ | 598 | ||||||
Interest rate swap — current portion | — | — | Accrued expenses and other liabilities | 20,988 | ||||||||
Interest rate swap — long-term portion | — | — | Other liabilities | 8,824 | ||||||||
Total derivative financial instruments not designated as hedging instruments | $ | — | $ | 30,410 | ||||||||
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Classification of Net | Net Gains Reclassified | |||||||||||||||||||
Gains Reclassified from | from Other Accumulated | |||||||||||||||||||
Net Gains (Losses) | Other Comprehensive | Comprehensive Loss into | ||||||||||||||||||
Recognized in Accumulated | Loss into the | the Consolidated | ||||||||||||||||||
Other Comprehensive Loss | Consolidated Statements | Statements of Operations | ||||||||||||||||||
January 31, | of Operations | Year Ended January 31, | ||||||||||||||||||
(in thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Foreign currency forward contracts | $ | (245 | ) | $ | 106 | Operating Expenses | $ | 925 | $ | 3,042 | ||||||||||
Classification | Year Ended January 31, | |||||||||||||||
(in thousands) | in Statement of Operations | 2011 | 2010 | 2009 | ||||||||||||
Interest rate swap agreement | Other expense, net | $ | (3,102 | ) | $ | (13,591 | ) | $ | (11,490 | ) | ||||||
Foreign currency forward contracts | Other expense, net | (2,761 | ) | (1,118 | ) | (3,101 | ) | |||||||||
Total | $ | (5,863 | ) | $ | (14,709 | ) | $ | (14,591 | ) | |||||||
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Number of | Number of | Number of | ||||||||||
Shares Reserved | Shares | Shares Available | ||||||||||
(in thousands) | for Grants | Outstanding | for Grants | |||||||||
The 1996 Plan | 5,000 | 774 | 360 | |||||||||
The 1997 Plan | 6,400 | 504 | — | |||||||||
The 1997 Blue Pumpkin inducement grants | 158 | — | — | |||||||||
The 2004 Plan | 3,000 | 960 | 373 | |||||||||
The 2010 Plan | 4,000 | 1,448 | 1,914 | |||||||||
Total | 18,558 | 3,686 | 2,647 | |||||||||
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Year Ended January 31, | ||||||||||||
(in thousands, except per share amounts) | 2011 | 2010 | 2009 | |||||||||
Component of income (loss) before provision for income taxes: | ||||||||||||
Cost of revenue — product | $ | 1,595 | $ | 1,302 | $ | 540 | ||||||
Cost of revenue — service and support | 4,612 | 4,543 | 4,886 | |||||||||
Research and development, net | 7,081 | 7,960 | 6,813 | |||||||||
Selling, general and administrative | 33,531 | 30,422 | 23,751 | |||||||||
Stock-based compensation expense | 46,819 | 44,227 | 35,990 | |||||||||
Income tax benefits related to stock-based compensation (before consideration of valuation allowance) | 12,165 | 11,716 | 9,027 | |||||||||
Stock-based compensation, net of taxes | $ | 34,654 | $ | 32,511 | $ | 26,963 | ||||||
Impact on net income (loss) per common share attributable to Verint Systems Inc: | ||||||||||||
Basic | $ | 1.00 | $ | 1.00 | $ | 0.83 | ||||||
Diluted | $ | 0.93 | $ | 0.98 | $ | 0.83 |
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Component of stock-based compensation expense: | ||||||||||||
Verint stock options | $ | 3,135 | $ | 7,332 | $ | 15,977 | ||||||
Verint restricted stock awards and restricted stock units | 25,583 | 23,917 | 15,948 | |||||||||
Verint phantom stock units | 18,101 | 12,978 | 4,050 | |||||||||
Comverse stock options | — | — | 15 | |||||||||
Stock-based compensation expense | $ | 46,819 | $ | 44,227 | $ | 35,990 | ||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Equity-classified awards | $ | 28,784 | $ | 31,195 | $ | 32,040 | ||||||
Liability-classified awards | 18,035 | 13,032 | 3,950 | |||||||||
Total stock-based compensation expense | $ | 46,819 | $ | 44,227 | $ | 35,990 | ||||||
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Year Ended January 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||
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 | 4,731 | $ | 23.16 | 5,225 | $ | 22.36 | 5,735 | $ | 21.77 | |||||||||||||||
Exercised | (2,164 | ) | $ | 18.88 | — | $ | — | — | $ | — | ||||||||||||||
Forfeited | (4 | ) | $ | 23.94 | (30 | ) | $ | 21.69 | (296 | ) | $ | 22.40 | ||||||||||||
Expired | (796 | ) | $ | 25.56 | (464 | ) | $ | 14.23 | (214 | ) | $ | 5.94 | ||||||||||||
Ending balance | 1,767 | $ | 27.33 | 4,731 | $ | 23.16 | 5,225 | $ | 22.36 | |||||||||||||||
Stock options exercisable | 1,764 | $ | 27.33 | 4,499 | $ | 23.24 | 4,461 | $ | 22.42 | |||||||||||||||
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Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Number of | Remaining | Average | Number of | Average | ||||||||||||||||
(number of options in thousands) | Options | Contractual | Exercise | Options | Exercise | |||||||||||||||
Range of Exercise Prices | Outstanding | Term (years) | Price | Exercisable | Price | |||||||||||||||
$4.93 – $17.00 | 249 | 1.76 | $ | 14.76 | 249 | $ | 14.76 | |||||||||||||
$17.06 – $18.77 | 179 | 0.60 | $ | 18.25 | 179 | $ | 18.25 | |||||||||||||
$19.16 – $23.00 | 190 | 2.47 | $ | 22.20 | 190 | $ | 22.20 | |||||||||||||
$23.95 – $23.95 | 210 | 1.00 | $ | 23.95 | 210 | $ | 23.95 | |||||||||||||
$25.01 – $29.27 | 101 | 2.06 | $ | 28.29 | 98 | $ | 28.28 | |||||||||||||
$31.78 – $31.78 | 18 | 3.43 | $ | 31.78 | 18 | $ | 31.78 | |||||||||||||
$32.16 – $32.16 | 27 | 2.69 | $ | 32.16 | 27 | $ | 32.16 | |||||||||||||
$34.40 – $34.40 | 137 | 4.95 | $ | 34.40 | 137 | $ | 34.40 | |||||||||||||
$35.11 – $35.11 | 632 | 3.84 | $ | 35.11 | 632 | $ | 35.11 | |||||||||||||
$37.99 – $37.99 | 24 | 4.64 | $ | 37.99 | 24 | $ | 37.99 | |||||||||||||
$4.93 – $37.99 | 1,767 | 2.71 | $ | 27.33 | 1,764 | $ | 27.33 | |||||||||||||
Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Intrinsic value of options exercised | $ | 18,430 | $ | — | $ | — | ||||||
Cash received from the exercise of stock options | $ | 40,787 | $ | — | $ | — | ||||||
Tax benefits realized from stock options exercised | $ | 3,391 | $ | — | $ | — | ||||||
Fair value of options vested | $ | 30,209 | $ | 69,575 | $ | 68,250 |
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Year Ended January 31, | ||||||||||||||||||||||||
2011 | 2010 | 2009 | ||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
(in thousands, except | Grant-Date | Grant-Date | Grant-Date | |||||||||||||||||||||
grant-date fair values) | Shares | Fair Value | Shares | Fair Value | Shares | Fair Value | ||||||||||||||||||
Beginning balance | 3,412 | $ | 14.92 | 1,830 | $ | 24.48 | 1,267 | $ | 29.39 | |||||||||||||||
Granted | 1,102 | $ | 26.01 | 1,812 | $ | 6.50 | 865 | $ | 18.07 | |||||||||||||||
Released | (2,503 | ) | $ | 17.39 | (116 | ) | $ | 29.93 | (85 | ) | $ | 33.98 | ||||||||||||
Forfeited | (76 | ) | $ | 13.23 | (114 | ) | $ | 19.94 | (217 | ) | $ | 23.91 | ||||||||||||
Ending balance | 1,935 | $ | 18.09 | 3,412 | $ | 14.92 | 1,830 | $ | 24.48 | |||||||||||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Beginning balance, in units | 1,106 | 1,239 | 85 | |||||||||
Granted | 196 | 421 | 1,323 | |||||||||
Released | (865 | ) | (482 | ) | (33 | ) | ||||||
Forfeited | (34 | ) | (72 | ) | (136 | ) | ||||||
Ending balance, in units | 403 | 1,106 | 1,239 | |||||||||
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(in thousands) | ||||
Years Ending January 31, | Amount | |||
2012 | $ | 13,315 | ||
2013 | 10,472 | |||
2014 | 7,012 | |||
2015 | 4,973 | |||
2016 | 2,448 | |||
2017 and thereafter | 5,807 | |||
Total | $ | 44,027 | ||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
Warranty liability, beginning of year | $ | 1,292 | $ | 1,188 | $ | 1,874 | ||||||
Provision charged to expenses | 957 | 220 | 483 | |||||||||
Warranty charges | (121 | ) | (42 | ) | (1,115 | ) | ||||||
Foreign currency translation and other | (132 | ) | (74 | ) | (54 | ) | ||||||
Warranty liability, end of year | $ | 1,996 | $ | 1,292 | $ | 1,188 | ||||||
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(in thousands) | ||||||||||||||||
Workforce | Video | Communications | ||||||||||||||
Year Ended January 31, | Optimization | Intelligence | Intelligence | Total | ||||||||||||
2011 | ||||||||||||||||
Revenue | $ | 410,529 | $ | 134,012 | $ | 182,258 | $ | 726,799 | ||||||||
Segment contribution | $ | 191,068 | $ | 42,318 | $ | 66,802 | 300,188 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 30,554 | |||||||||||||||
Stock-based compensation | 46,819 | |||||||||||||||
Other unallocated expenses | 149,710 | |||||||||||||||
Operating income | 73,105 | |||||||||||||||
Other expense, net | (34,580 | ) | ||||||||||||||
Income before provision for income taxes | $ | 38,525 | ||||||||||||||
2010 | ||||||||||||||||
Revenue | $ | 374,778 | $ | 144,970 | $ | 183,885 | $ | 703,633 | ||||||||
Segment contribution | $ | 178,674 | $ | 57,200 | $ | 62,348 | 298,222 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 30,289 | |||||||||||||||
Stock-based compensation | 44,227 | |||||||||||||||
Integration, restructuring and other, net | 141 | |||||||||||||||
Other unallocated expenses | 157,886 | |||||||||||||||
Operating income | 65,679 | |||||||||||||||
Other expense, net | (41,471 | ) | ||||||||||||||
Income before provision for income taxes | $ | 24,208 | ||||||||||||||
2009 | ||||||||||||||||
Revenue | $ | 352,367 | $ | 127,012 | $ | 190,165 | $ | 669,544 | ||||||||
Revenue adjustment | 5,890 | — | — | 5,890 | ||||||||||||
Segment revenue | $ | 358,257 | $ | 127,012 | $ | 190,165 | $ | 675,434 | ||||||||
Segment contribution | $ | 139,375 | $ | 28,013 | $ | 65,987 | 233,375 | |||||||||
Unallocated expenses: | ||||||||||||||||
Amortization of other acquired intangible assets | 34,273 | |||||||||||||||
Impairments of goodwill and other acquired intangible assets | 25,961 | |||||||||||||||
Stock-based compensation | 35,990 | |||||||||||||||
Integration, restructuring and other, net | 4,654 | |||||||||||||||
Other unallocated expenses | 147,523 | |||||||||||||||
Operating loss | (15,026 | ) | ||||||||||||||
Other expense, net | (43,880 | ) | ||||||||||||||
Loss before provision for income taxes | $ | (58,906 | ) | |||||||||||||
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Year Ended January 31, | ||||||||||||
(in thousands) | 2011 | 2010 | 2009 | |||||||||
United States | $ | 292,604 | $ | 328,420 | $ | 304,602 | ||||||
United Kingdom | 102,389 | 65,793 | 77,213 | |||||||||
Other | 331,806 | 309,420 | 287,729 | |||||||||
Total revenue | $ | 726,799 | $ | 703,633 | $ | 669,544 | ||||||
January 31, | ||||||||
(in thousands) | 2011 | 2010 | ||||||
United States | $ | 9,322 | $ | 9,096 | ||||
Israel | 8,221 | 9,148 | ||||||
Germany | 2,474 | 2,581 | ||||||
United Kindgom | 796 | 1,014 | ||||||
Canada | 371 | 660 | ||||||
Other | 1,992 | 1,954 | ||||||
Total property and equipment, net | $ | 23,176 | $ | 24,453 | ||||
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Quarter Ended | ||||||||||||||||
April 30, | July 31, | October 31, | January 31, | |||||||||||||
(in thousands, except per share data) | 2010 | 2010 | 2010 | 2011 | ||||||||||||
Revenue | $ | 172,613 | $ | 180,676 | $ | 186,641 | $ | 186,869 | ||||||||
Gross profit | 114,806 | 120,330 | 127,700 | 125,619 | ||||||||||||
Income (loss) before provision for (benefit from) income taxes | (13,545 | ) | 15,532 | 23,720 | 12,818 | |||||||||||
Net income (loss) | (15,616 | ) | 12,391 | 18,388 | 13,422 | |||||||||||
Net income (loss) attributable to Verint Systems Inc. | (16,208 | ) | 11,475 | 17,174 | 13,140 | |||||||||||
Net income (loss) attributable to Verint Systems Inc. common shares, | ||||||||||||||||
for basic net income (loss) per common share | (19,611 | ) | 7,921 | 13,582 | 9,511 | |||||||||||
for diluted net income (loss) per common share | (19,611 | ) | 7,921 | 17,174 | 9,511 | |||||||||||
Net income (loss) per common share attributable to Verint Systems Inc. | ||||||||||||||||
Basic | $ | (0.60 | ) | $ | 0.24 | $ | 0.38 | $ | 0.26 | |||||||
Diluted | $ | (0.60 | ) | $ | 0.23 | $ | 0.36 | $ | 0.25 | |||||||
Quarter Ended | ||||||||||||||||
April 30, | July 31, | October 31, | January 31, | |||||||||||||
(in thousands, except per share data) | 2009 | 2009 | 2009 | 2010 | ||||||||||||
Revenue | $ | 175,148 | $ | 169,269 | $ | 186,480 | $ | 172,736 | ||||||||
Gross profit | 118,079 | 110,202 | 122,970 | 112,447 | ||||||||||||
Income (loss) before provision for (benefit from) income taxes | 24,840 | 4,332 | 15,118 | (20,082 | ) | |||||||||||
Net income (loss) | 20,572 | 1,482 | 13,315 | (18,269 | ) | |||||||||||
Net income (loss) attributable to Verint Systems Inc. | 19,634 | 1,598 | 13,176 | (18,791 | ) | |||||||||||
Net income (loss) attributable to Verint Systems Inc. common shares, | ||||||||||||||||
for basic net income (loss) per common share | 16,372 | (1,808 | ) | 9,733 | (22,271 | ) | ||||||||||
for diluted net income (loss) per common share | 19,634 | (1,808 | ) | 9,733 | (22,271 | ) | ||||||||||
Net income (loss) per common share attributable to Verint Systems Inc. | ||||||||||||||||
Basic | $ | 0.50 | $ | (0.06 | ) | $ | 0.30 | $ | (0.68 | ) | ||||||
Diluted | $ | 0.47 | $ | (0.06 | ) | $ | 0.29 | $ | (0.68 | ) | ||||||
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• | Professional fees and related expenses associated with our restatement of previously filed financial statements for periods through January 31, 2005 and extended filing delay status of approximately $20 million, $6 million, $1 million, and $2 million for the four quarterly periods ended January 31, 2011, respectively. |
• | Realized and unrealized losses on our interest rate swap of $1.6 million and $1.5 million, for the quarterly periods ended April 30, 2010 and July 30, 2010, respectively. |
• | Professional fees and related expenses associated with our restatement of previously filed financial statements for periods through January 31, 2005 and extended filing delay status of approximately $7 million, $10 million, $12 million, and $25 million for the four quarterly periods ended January 31, 2010, respectively; and |
• | Realized and unrealized losses on our interest rate swap of $3.7 million, $2.9 million, $4.4 million, and $2.6 million for the four quarterly periods ended January 31, 2010, respectively. |
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VERINT SYSTEMS INC. (Registrant) | ||||
April 5, 2011 | By: | /s/ Dan Bodner | ||
Dan Bodner, President and Chief Executive Officer | ||||
April 5, 2011 | By: | /s/ Douglas E. Robinson | ||
Douglas E. Robinson, Chief Financial Officer | ||||
(Principal Financial Officer and Principal Accounting Officer) |
/s/ Dan Bodner | April 5, 2011 | |
and President; Director of Verint Systems Inc. | ||
(Principal Executive Officer) | ||
/s/ Douglas E. Robinson | April 5, 2011 | |
(Principal Financial Officer and Principal Accounting Officer) | ||
/s/ Paul D. Baker | April 5, 2011 | |
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/s/ John Bunyan | April 5, 2011 | |
/s/ Charles Burdick | April 5, 2011 | |
/s/ Victor A. DeMarines | April 5, 2011 | |
/s/ Larry Myers | April 5, 2011 | |
/s/ Howard Safir | April 5, 2011 | |
/s/ Shefali Shah | April 5, 2011 | |
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