Attached files
file | filename |
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EX-10.1 - DHI GROUP, INC. | v191383_ex10-1.htm |
EX-32.1 - DHI GROUP, INC. | v191383_ex32-1.htm |
EX-32.2 - DHI GROUP, INC. | v191383_ex32-2.htm |
EX-31.1 - DHI GROUP, INC. | v191383_ex31-1.htm |
EX-31.2 - DHI GROUP, INC. | v191383_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
(Mark
One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30, 2010
OR
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
to
Commission
File Number: 001-33584
DICE
HOLDINGS, INC.
(Exact
name of Registrant as specified in its Charter)
Delaware
|
20-3179218
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1040
Avenue of the Americas, 16th
Floor
New
York, New York
|
10018
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(212)
725-6550
(Registrant’s
telephone number, including area code)
None
(Former
name, former address and former fiscal year - if changed since last
report)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨ Accelerated
filer x Non-accelerated
filer ¨ Smaller
Reporting Company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act). Yes ¨ No x
As
of July 20, 2010, 62,932,507 shares of common stock (“Common Stock”) of
the Registrant were
outstanding.
|
DICE
HOLDINGS, INC.
TABLE
OF CONTENTS
Page
|
|
PART
I. FINANCIAL INFORMATION
|
|
Item 1.
Financial Statements
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2010 and December 31,
2009
|
2
|
Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009
|
3
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2010 and 2009
|
4
|
Notes
to the Condensed Consolidated Financial Statements
|
5
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
|
29
|
Item 4.
Controls and Procedures
|
29
|
PART
II. OTHER INFORMATION
|
|
Item 1.
Legal Proceedings
|
30
|
Item 1A.
Risk Factors
|
30
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
30
|
Item 3.
Defaults Upon Senior Securities
|
30
|
Item 4.
(Removed and Reserved)
|
30
|
Item 5.
Other Information
|
30
|
Item 6.
Exhibits
|
30
|
SIGNATURES
|
31
|
Certification
of CEO Pursuant to Section 302
|
|
Certification
of CFO Pursuant to Section 302
|
|
Certification
of CEO Pursuant to Section 906
|
|
Certification
of CFO Pursuant to Section 906
|
1
PART
I — FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in
thousands, except per share data)
June 30,
2010
|
December 31,
2009
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 36,911 | $ | 44,925 | ||||
Marketable
securities
|
3,522 | 4,214 | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $1,453 and
$1,764
|
11,071 | 11,336 | ||||||
Deferred
income taxes - current
|
806 | 812 | ||||||
Income
taxes receivable
|
2,096 | 906 | ||||||
Prepaid
and other current assets
|
1,437 | 1,360 | ||||||
Total
current assets
|
55,843 | 63,553 | ||||||
Fixed
assets, net
|
5,531 | 5,719 | ||||||
Acquired
intangible assets, net
|
48,119 | 48,536 | ||||||
Goodwill
|
145,037 | 142,638 | ||||||
Deferred
financing costs, net of accumulated amortization of $3,335 and
$2,918
|
1,458 | 1,875 | ||||||
Other
assets
|
389 | 234 | ||||||
Total
assets
|
$ | 256,377 | $ | 262,555 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 10,740 | $ | 9,930 | ||||
Deferred
revenue
|
41,144 | 33,909 | ||||||
Current
portion of acquisition related contingencies
|
1,554 | 275 | ||||||
Current
portion of long-term debt
|
1,000 | 1,000 | ||||||
Income
taxes payable
|
922 | 601 | ||||||
Total
current liabilities
|
55,360 | 45,715 | ||||||
Long-term
debt
|
28,700 | 49,300 | ||||||
Deferred
income taxes - non-current
|
10,597 | 10,886 | ||||||
Interest
rate hedge liability - non-current
|
- | 550 | ||||||
Accrual
for unrecognized tax benefits
|
5,821 | 5,778 | ||||||
Other
long-term liabilities
|
2,647 | 1,706 | ||||||
Total
liabilities
|
103,125 | 113,935 | ||||||
Commitments
and contingencies (Note 8)
|
||||||||
Stockholders'
equity
|
||||||||
Convertible
preferred stock, $.01 par value, authorized 20,000 shares;
|
||||||||
issued
and outstanding: 0 shares
|
- | - | ||||||
Common
stock, $.01 par value, authorized 240,000;
|
||||||||
issued
and outstanding: 62,930 and 62,502 shares,
respectively
|
629 | 625 | ||||||
Additional
paid-in capital
|
235,025 | 232,508 | ||||||
Accumulated
other comprehensive loss
|
(14,891 | ) | (10,013 | ) | ||||
Accumulated
deficit
|
(67,511 | ) | (74,500 | ) | ||||
Total
stockholders' equity
|
153,252 | 148,620 | ||||||
Total
liabilities and stockholders' equity
|
$ | 256,377 | $ | 262,555 |
See
accompanying notes to the condensed consolidated financial
statements.
2
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in
thousands, except per share amounts)
For the three months
ended June 30,
|
For the six months ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues
|
$ | 29,921 | $ | 27,009 | $ | 56,748 | $ | 56,578 | ||||||||
Operating
expenses:
|
||||||||||||||||
Cost
of revenues
|
2,181 | 1,811 | 4,288 | 3,641 | ||||||||||||
Product
development
|
1,432 | 961 | 2,622 | 1,756 | ||||||||||||
Sales
and marketing
|
11,078 | 8,483 | 21,209 | 17,919 | ||||||||||||
General
and administrative
|
4,890 | 5,128 | 9,176 | 10,124 | ||||||||||||
Depreciation
|
1,107 | 932 | 2,079 | 1,853 | ||||||||||||
Amortization
of intangible assets
|
2,748 | 4,017 | 5,144 | 7,908 | ||||||||||||
Change
in acquisition related contingencies
|
24 | - | (300 | ) | - | |||||||||||
Total
operating expenses
|
23,460 | 21,332 | 44,218 | 43,201 | ||||||||||||
Operating
income
|
6,461 | 5,677 | 12,530 | 13,377 | ||||||||||||
Interest
expense
|
(974 | ) | (1,649 | ) | (2,095 | ) | (3,572 | ) | ||||||||
Interest
income
|
23 | 53 | 61 | 136 | ||||||||||||
Other
income
|
141 | 369 | 216 | 757 | ||||||||||||
Income
from continuing operations before income taxes
|
5,651 | 4,450 | 10,712 | 10,698 | ||||||||||||
Income
tax expense
|
1,963 | 1,674 | 3,723 | 4,064 | ||||||||||||
Net
income
|
$ | 3,688 | $ | 2,776 | $ | 6,989 | $ | 6,634 | ||||||||
Basic
earnings per share
|
$ | 0.06 | $ | 0.04 | $ | 0.11 | $ | 0.11 | ||||||||
Diluted
earnings per share
|
$ | 0.05 | $ | 0.04 | $ | 0.10 | $ | 0.10 | ||||||||
Weighted
average basic shares outstanding
|
62,665 | 62,229 | 62,478 | 62,219 | ||||||||||||
Weighted
average diluted shares outstanding
|
67,630 | 65,941 | 67,348 | 65,834 |
See
accompanying notes to the condensed consolidated financial
statements.
3
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
For the six months ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 6,989 | $ | 6,634 | ||||
Adjustments
to reconcile net income to net cash from operating
activities:
|
||||||||
Depreciation
|
2,079 | 1,853 | ||||||
Amortization
of intangible assets
|
5,144 | 7,908 | ||||||
Deferred
income taxes
|
(1,498 | ) | (3,198 | ) | ||||
Amortization
of deferred financing costs
|
417 | 417 | ||||||
Share
based compensation
|
1,798 | 3,098 | ||||||
Change
in acquisition related contingencies
|
(300 | ) | - | |||||
Gain
from interest rate hedges
|
(216 | ) | (757 | ) | ||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
595 | 3,747 | ||||||
Prepaid
expenses and other assets
|
17 | 358 | ||||||
Accounts
payable and accrued expenses
|
1,336 | (1,899 | ) | |||||
Income
taxes payable
|
(815 | ) | (412 | ) | ||||
Deferred
revenue
|
6,825 | (6,507 | ) | |||||
Payments
to reduce interest rate hedge agreements
|
(333 | ) | (514 | ) | ||||
Other,
net
|
127 | 187 | ||||||
Net
cash from operating activities
|
22,165 | 10,915 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of fixed assets
|
(2,520 | ) | (1,470 | ) | ||||
Purchases
of marketable securities
|
(2,442 | ) | (1,234 | ) | ||||
Maturities
and sales of marketable securities
|
3,111 | 4,000 | ||||||
Payments
for acquisitions
|
(6,000 | ) | (2,690 | ) | ||||
Net
cash from investing activities
|
(7,851 | ) | (1,394 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Payments
on long-term debt
|
(23,600 | ) | (32,600 | ) | ||||
Proceeds
from long-term debt
|
3,000 | 2,000 | ||||||
Other
|
724 | 3 | ||||||
Net
cash from financing activities
|
(19,876 | ) | (30,597 | ) | ||||
Effect
of exchange rate changes
|
(2,452 | ) | 1,567 | |||||
Net
change in cash and cash equivalents for the period
|
(8,014 | ) | (19,509 | ) | ||||
Cash
and cash equivalents, beginning of period
|
44,925 | 55,144 | ||||||
Cash
and cash equivalents, end of period
|
$ | 36,911 | $ | 35,635 | ||||
Non-cash
investing and financing activities
|
||||||||
Issuance
of common stock for the acquisition of AllHealthcareJobs
|
$ | - | $ | 959 |
See
accompanying notes to the condensed consolidated financial
statements.
4
DICE
HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Dice
Holdings, Inc. (“DHI” or the “Company”) have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) have been omitted and condensed
pursuant to such rules and regulations. In the opinion of the Company’s
management, all adjustments (consisting of only normal and recurring accruals)
have been made to present fairly the financial positions, the results of
operations and cash flows for the periods presented. Although the Company
believes that the disclosures are adequate to make the information presented not
misleading, these financial statements should be read in conjunction with the
Company’s audited consolidated financial statements as of and for the year ended
December 31, 2009 that are included in the Company’s Annual Report on Form 10-K.
Operating results for the six month period ended June 30, 2010 are not
necessarily indicative of the results to be achieved for the full
year.
Preparation
of the condensed consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the period. Management believes
the most complex and sensitive judgments, because of their significance to the
condensed consolidated financial statements, result primarily from the need to
make estimates about the effects of matters that are inherently uncertain.
Actual results could differ materially from management’s estimates. There have
been no significant changes in the Company’s assumptions regarding critical
accounting estimates during the six month period ended June 30,
2010.
2.
NEW ACCOUNTING STANDARDS
In
October 2009, new accounting standards were issued in the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) subtopic on
Revenue Recognition-Multiple-Element Arrangements. The standards enable
companies to account for certain products and services (deliverables) separately
rather than as a combined unit. The standards are effective for the Company
beginning on January 1, 2011, with early adoption permitted. The Company is
currently evaluating the impact these standards will have on its financial
statements.
3.
ACQUISITIONS
In June
2009, the Company acquired substantially all of the assets of
AllHealthcareJobs.com, a leading online career site dedicated to matching
healthcare professionals with available career opportunities. The purchase price
consisted of initial consideration of $2.7 million in cash (including working
capital adjustments) and the issuance of 205,000 shares of the Company’s common
stock (with certain restrictions) valued at $959,000. Additional consideration
of up to a maximum of $1.0 million in cash is payable upon the achievement of
certain operating and financial goals over the two year period ending June 30,
2011. The acquisition resulted in recording intangible assets of $3.1 million
and goodwill of $1.4 million. A liability of $563,000 is recorded as of June 30,
2010 for the estimated consideration remaining to be paid.
In May
2010, the Company acquired the online and career-events business of
WorldwideWorker.com, a global leader in online recruitment for the energy
industry. The purchase price consisted of initial consideration of $6.0 million
in cash. Additional consideration of up to a maximum of $3.0 million in cash is
payable upon the achievement of certain financial goals over the two year period
ending December 31, 2011. The acquisition resulted in recording intangible
assets of $4.9 million and goodwill of $4.9 million.
These
acquisitions are not deemed significant to the Company’s financial results, thus
limited disclosures are presented herein.
4.
FAIR VALUE MEASUREMENTS
The FASB
ASC Fair Value Measurements and Disclosures Topic defines fair value,
establishes a framework for measuring fair value and requires certain
disclosures for each class of assets and liabilities measured at fair value on
either a recurring or nonrecurring basis. As a basis for considering assumptions
a three-tier fair value hierarchy is used, which prioritizes the inputs used in
measuring fair value as follows:
|
·
|
Level
1 – Quoted prices for identical instruments in active
markets.
|
5
|
·
|
Level
2 – Quoted prices for similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are not active and
model-derived valuations, in which all significant inputs are observable
in active markets.
|
|
·
|
Level
3 – Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
Money
market funds are included in cash and cash equivalents on the Condensed
Consolidated Balance Sheets. The money market funds and marketable securities
are valued using quoted prices in the market. The carrying amounts reported in
the Condensed Consolidated Balance Sheets for cash and cash equivalents,
accounts receivable, and accounts payable and accrued expenses approximate their
fair values. The estimated fair value of long-term debt, as of June 30, 2010 and
December 31, 2009 was approximately $29 million and $50 million,
respectively.
The
interest rate hedge liability is valued using the market approach, with the
forward one-month LIBOR yield curve as the primary input. Valuations are
obtained from two third-party providers, one of which is the swap counterparty.
There were no interest rate hedges outstanding at June 30, 2010.
The
Company has obligations, to be paid in cash, to the former owners of
AllHealthcareJobs and WorldwideWorker if certain future operating and financial
goals are met. The fair value of this contingent consideration is determined
using an expected present value technique. Expected cash flows are determined
using the probability-weighted average of possible outcomes that would occur
should certain events and certain financial metrics be reached. There is no
market data available to use in valuing the contingent consideration; therefore,
the Company developed its own assumptions related to the future financial
performance of the businesses to estimate the fair value of these liabilities.
The liabilities for the contingent consideration were established at the time of
acquisition and are evaluated at each reporting period. During the six months
ended June 30, 2010, the liability for contingent consideration was reduced by
$300,000 due to the sales performance of AllHealthcareJobs to date and
expectations of future sales being lower than the initial assumptions. The
decrease in the liability resulted in a gain, which is included in Change in
Acquisition Related Contingencies on the Condensed Consolidated Statements of
Operations. The current liability is included on the Condensed Consolidated
Balance Sheets in the Current Portion of Acquisition Related Contingencies and
the non-current portion is included in Other Long-term Liabilities. There was no
impairment of goodwill or intangibles assets indicated.
The assets and liabilities measured at
fair value on a recurring basis are as follows (in
thousands):
As of June 30, 2010
|
||||||||||||||||
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|||||||||||||
Money
market funds
|
$ | 17,978 | $ | - | $ | - | $ | 17,978 | ||||||||
Marketable
securities
|
3,522 | - | - | 3,522 | ||||||||||||
Contingent
consideration to be paid in cash for acquisitions
|
- | - | 3,023 | 3,023 |
As of December 31, 2009
|
||||||||||||||||
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|||||||||||||
Money
market funds
|
$ | 23,655 | $ | - | $ | - | $ | 23,655 | ||||||||
Marketable
securities
|
4,214 | - | - | 4,214 | ||||||||||||
Interest
rate hedge liability - non-current
|
- | 550 | - | 550 | ||||||||||||
Contingent
consideration to be paid in cash for acquisitions
|
- | - | 863 | 863 |
6
Reconciliations
of liabilities measured and carried at fair value on a recurring basis with the
use of significant unobservable inputs (Level 3) are as follows (in
thousands):
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Contingent
consideration to be paid in cash for acquisitions
|
||||||||||||||||
Balance
at beginning of period
|
$ | 539 | $ | - | $ | 863 | $ | - | ||||||||
Additions
for acquisitions
|
2,460 | 863 | 2,460 | 863 | ||||||||||||
Losses
(gains) included in earnings
|
24 | - | (300 | ) | - | |||||||||||
Balance
at end of period
|
$ | 3,023 | $ | 863 | $ | 3,023 | $ | 863 |
Certain
assets and liabilities are measured at fair value on a non-recurring basis and
therefore are not included in the tables above. These assets include
goodwill and intangible assets which result as acquisitions occur. Items valued
using such internally generated valuation techniques are classified according to
the lowest level input or value driver that is significant to the valuation.
Thus, an item may be classified in Level 3 even though there may be some
significant inputs that are readily observable. Such instruments are
not measured at fair value on an ongoing basis but are subject to fair value
adjustments in certain circumstances, for example, when there is evidence of
impairment.
The
Company determines whether the carrying value of recorded goodwill is impaired
on an annual basis or more frequently if indicators of potential impairment
exist. The impairment test for goodwill from the 2005 Dice Inc. acquisition is
performed annually as of August 31 and the impairment test for goodwill
from the 2006 eFinancialCareers acquisition and the 2009 AllHealthcareJobs
acquisition is performed annually as of October 31. The first step of the
impairment review process compares the fair value of the reporting unit in which
the goodwill resides to the carrying value of that reporting unit. The second
step measures the amount of impairment loss, if any, by comparing the implied
fair value of the reporting unit goodwill with its carrying amount. The
determination of whether or not goodwill has become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of the reporting units. Fair values of each reporting unit
are determined either by using a discounted cash flow methodology or by using a
combination of a discounted cash flow methodology and a market comparable
method. The discounted cash flow methodology is based on projections of the
amounts and timing of future revenues and cash flows, assumed discount rates and
other assumptions as deemed appropriate. Factors such as historical performance,
anticipated market conditions, operating expense trends and capital expenditure
requirements are considered. Additionally, the discounted cash flows analysis
takes into consideration cash expenditures for product development, other
technological updates and advancements to the websites and investments to
improve the candidate databases. The market comparable method indicates the fair
value of a business by comparing it to publicly traded companies in similar
lines of business or to comparable transactions or assets. Considerations for
factors such as size, growth, profitability, risk and return on investment are
analyzed and compared to the comparable businesses and adjustments are made. A
market value of invested capital of the publicly traded companies is calculated
and then applied to the entity’s operating results to arrive at an estimate of
value.
The
indefinite-lived acquired intangible assets include the Dice trademarks and
brand name. The Company determines whether the carrying value of recorded
indefinite-lived acquired intangible assets is impaired on an annual basis or
more frequently if indicators of potential impairment exist. The annual
impairment test is performed annually as of August 31. The impairment
review process compares the fair value of the indefinite-lived acquired
intangible assets to its carrying value. If the carrying value exceeds the fair
value, an impairment loss is recorded. The determination of whether or not
indefinite-lived acquired intangible assets have become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of the indefinite-lived acquired intangible assets. Fair
values are determined using a profit allocation methodology which estimates the
value of the trademark and brand name by capitalizing the profits saved because
the company owns the asset. Factors such as historical performance, anticipated
market conditions, operating expense trends and capital expenditure requirements
are considered. Changes in Company strategy and/or market conditions could
significantly impact these judgments and require adjustments to recorded amounts
of intangible assets.
7
5.
MARKETABLE SECURITIES
DHI’s
marketable securities are stated at fair value. The following tables summarize
the Company’s marketable securities as of June 30, 2010 and December 31, 2009
(in thousands):
As of June 30, 2010
|
||||||||||||||
Gross
|
Gross Unrealized
|
Estimated
|
||||||||||||
Maturity
|
Amortized Cost
|
Gain
|
Fair Value
|
|||||||||||
U.S.
Government and agencies
|
Within one year
|
$ | 3,216 | $ | 3 | $ | 3,219 | |||||||
U.S.
Government and agencies
|
1
to 5 years
|
303 | - | 303 | ||||||||||
Total
|
$ | 3,519 | $ | 3 | $ | 3,522 |
As of December 31, 2009
|
||||||||||||||
Gross
|
Gross Unrealized
|
Estimated
|
||||||||||||
Maturity
|
Amortized Cost
|
Gain
|
Fair Value
|
|||||||||||
U.S.
Government and agencies
|
Within
one year
|
$ | 4,203 | $ | - | $ | 4,203 | |||||||
Corporate
debt securities
|
1
to 5 years
|
11 | - | 11 | ||||||||||
Total
|
$ | 4,214 | $ | - | $ | 4,214 |
6.
ACQUIRED INTANGIBLE ASSETS, NET
Below is a summary of the major
acquired intangible assets and weighted average amortization periods for the
acquired identifiable intangible assets (in thousands).
As of June 30, 2010
|
|||||||||||||||||||||||||
Foreign
|
Weighted
|
||||||||||||||||||||||||
Acquisition of
|
Currency
|
Acquired
|
Average
|
||||||||||||||||||||||
Worldwide
|
Total
|
Accumulated
|
Translation
|
Intangible
|
Amortization
|
||||||||||||||||||||
Cost
|
Worker
|
Cost
|
Amortization
|
Adjustment
|
Assets, Net
|
Period
|
|||||||||||||||||||
Technology
|
$ | 12,420 | 500 | $ | 12,920 | $ | (12,400 | ) | $ | (61 | ) | $ | 459 |
3.6
years
|
|||||||||||
Trademarks
and brand names- Dice
|
39,000 | - | 39,000 | - | - | 39,000 |
Indefinite
|
||||||||||||||||||
Trademarks
and brand names- Other
|
7,270 | 1,300 | 8,570 | (4,987 | ) | (563 | ) | 3,020 |
4.5
years
|
||||||||||||||||
Customer
lists
|
36,943 | 1,500 | 38,443 | (34,258 | ) | (751 | ) | 3,434 |
4.6
years
|
||||||||||||||||
Candidate
database
|
18,982 | 1,600 | 20,582 | (18,330 | ) | (46 | ) | 2,206 |
3.3
years
|
||||||||||||||||
Order
Backlog
|
17 | - | 17 | (17 | ) | - | - |
.5
years
|
|||||||||||||||||
Acquired
intangible assets, net
|
$ | 114,632 | $ | 4,900 | $ | 119,532 | $ | (69,992 | ) | $ | (1,421 | ) | $ | 48,119 |
As of December 31, 2009
|
|||||||||||||||||||||||||
Foreign
|
Weighted
|
||||||||||||||||||||||||
Acquisition of
|
Currency
|
Acquired
|
Average
|
||||||||||||||||||||||
Original
|
AllHealthcare
|
Total
|
Accumulated
|
Translation
|
Intangible
|
Amortization
|
|||||||||||||||||||
Cost
|
Jobs
|
Cost
|
Amortization
|
Adjustment
|
Assets, Net
|
Period
|
|||||||||||||||||||
Technology
|
$ | 12,420 | 138 | $ | 12,558 | $ | (12,396 | ) | $ | (61 | ) | $ | 101 |
3.7
years
|
|||||||||||
Trademarks
and brand names- Dice
|
39,000 | - | 39,000 | - | - | 39,000 |
Indefinite
|
||||||||||||||||||
Trademarks
and brand names- Other
|
6,400 | 870 | 7,270 | (4,279 | ) | (474 | ) | 2,517 |
4.6
years
|
||||||||||||||||
Customer
lists
|
36,361 | 582 | 36,943 | (30,483 | ) | (667 | ) | 5,793 |
4.6
years
|
||||||||||||||||
Candidate
database
|
17,440 | 1,542 | 18,982 | (17,811 | ) | (46 | ) | 1,125 |
3.5
years
|
||||||||||||||||
Order
backlog
|
- | 17 | 17 | (17 | ) | - | - |
.5
years
|
|||||||||||||||||
Acquired
intangible assets, net
|
$ | 111,621 | $ | 3,149 | $ | 114,770 | $ | (64,986 | ) | $ | (1,248 | ) | $ | 48,536 |
8
Based on
the carrying value of the acquired finite–lived intangible assets recorded as of
June 30, 2010, and assuming no subsequent impairment of the underlying assets,
the estimated future amortization expense is as follows (in
thousands):
July
1, 2010 through December 31, 2010
|
$ | 3,508 | ||
2011
|
3,287 | |||
2012
|
1,324 | |||
2013
|
767 | |||
2014
|
233 |
7.
INDEBTEDNESS
Amended and
Restated Financing Agreement- In March 2007, the Company entered
into an Amended and Restated Financing Agreement (the “Amended and Restated
Credit Facility”) which provides for a revolving credit facility of $75.0
million and a term loan facility of $125.0 million, maturing in March 2012.
Borrowings under the facility bear interest, at the Company’s option, at the
LIBOR rate plus 3.25% or reference rate plus 1.75%. Quarterly payments of
$250,000 of principal are required on the term loan facility. Payments of
principal on the term loan facility result in permanent reductions to that
facility. The borrowing capacity of the revolving credit facility is reduced by
reserves against our interest rate swaps, which are determined by the swap
counterparty. The Amended and Restated Credit Facility contains certain
financial and other covenants. The Company was in compliance with all such
covenants as of June 30, 2010. In May 2010, the Amended and Restated Credit
Facility was amended to allow for the purchase of WorldwideWorker and to reduce
the revolving credit facility from $75.0 million to $65.0 million. Payments of
principal of $20.6 million on the term loan were made during the six month
period ended June 30, 2010.
9
The
amounts borrowed and terms of the financing agreement as of June 30, 2010 and
December 31, 2009 are as follows (dollars in thousands):
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Maximum
available under revolving credit facility
|
$ | 65,000 | $ | 74,400 | ||||
Maximum
available under term loan facility
|
$ | 29,700 | $ | 50,300 | ||||
Amounts
borrowed:
|
||||||||
LIBOR
rate loans
|
$ | 24,700 | $ | 50,300 | ||||
Reference
rate loans
|
5,000 | - | ||||||
Total
borrowed
|
$ | 29,700 | $ | 50,300 | ||||
Interest
rates:
|
||||||||
LIBOR
option:
|
||||||||
Interest
margin
|
3.25 | % | 3.25 | % | ||||
Minimum
LIBOR rate
|
3.00 | % | 3.00 | % | ||||
Actual
interest rates
|
6.25 | % | 6.25 | % | ||||
Reference
rate option:
|
||||||||
Interest
margin
|
1.75 | % | - | |||||
Minimum
reference rate
|
6.00 | % | - | |||||
Actual
interest rate
|
7.75 | % |
-
|
Interest
rate swaps are used by the Company for the purpose of interest rate risk
management. The fair value of the swap agreements are reflected as
interest rate hedge liabilities in the Condensed Consolidated Balance
Sheets. The Company does not apply hedge accounting under the
Derivatives and Hedging topic of the FASB ASC. The change in the fair
value of the swap agreements is included in Other income in the Condensed
Consolidated Statements of Operations. As of June 30, 2010, there are no swap
agreements outstanding. A payment of $333,000 was made during the
three months ended June 30, 2010 to terminate the swap on $20.0 million of
LIBOR-based borrowings at 6.37% until February 11, 2011.
Future
maturities as of June 30, 2010 are as follows (in thousands):
July
1, 2010 through December 31, 2010
|
$ | 500 | ||
2011
|
1,000 | |||
2012
|
28,200 | |||
Total
minimum payments
|
$ | 29,700 |
8.
COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases equipment and office space under operating leases expiring at
various dates through February 2020. Future minimum lease payments under
non-cancelable operating leases as of June 30, 2010 are as follows (in
thousands):
July
1, 2010 through December 31, 2010
|
$ | 640 | ||
2011
|
1,229 | |||
2012
|
704 | |||
2013
|
384 | |||
2014
|
384 | |||
2015
and thereafter
|
2,102 | |||
Total
minimum payments
|
$ | 5,443 |
Rent
expense was $332,000, and $706,000 for the three and six month periods ended
June 30, 2010, respectively, and $345,000 and $677,000 for the three and six
month periods ended June 30, 2009, respectively, and is included in General and
administrative expense on the Condensed Consolidated Statements of
Operations.
10
Litigation
The
Company is subject to various lawsuits, claims, and complaints arising in the
ordinary course of business. The Company records provisions for losses when
claims become probable and the amounts are estimable. Although the outcome of
these legal matters cannot be determined, it is the opinion of management that
the final resolution of these matters will not have a material adverse effect on
the Company’s financial condition, operations or liquidity.
9.
COMPREHENSIVE INCOME (LOSS)
The
components of comprehensive income (loss) are as follows (in
thousands):
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income
|
$ | 3,688 | $ | 2,776 | $ | 6,989 | $ | 6,634 | ||||||||
Foreign
currency translation adjustment
|
(1,101 | ) | 9,371 | (4,876 | ) | 7,180 | ||||||||||
Unrealized
losses (gains) on marketable securities, net of tax of $(3), $0,
$(2) and $(7)
|
(5 | ) | 2 | (2 | ) | (10 | ) | |||||||||
Total
other comprehensive income (loss)
|
(1,106 | ) | 9,373 | (4,878 | ) | 7,170 | ||||||||||
Comprehensive
income
|
$ | 2,582 | $ | 12,149 | $ | 2,111 | $ | 13,804 |
Accumulated
other comprehensive income (loss), net consists of the following components, net
of tax, (in thousands):
June 30,
2010
|
December 31,
2009
|
|||||||
Foreign
currency translation adjustment, net of tax of $1,336 and
$1,336
|
$ | (14,889 | ) | $ | (10,013 | ) | ||
Unrealized
gains on marketable securities, net of tax of $(1) and $0
|
(2 | ) | - | |||||
Total
accumulated other comprehensive income (loss), net
|
$ | (14,891 | ) | $ | (10,013 | ) |
9.
STOCK BASED COMPENSATION
The
Company has two plans (the 2005 Plan and 2007 Plan) under which it may grant
stock-based awards to certain employees, directors and consultants of the
Company and its subsidiaries. Compensation expense for stock-based awards made
to employees, directors and consultants in return for service is recorded in
accordance with Compensation-Stock Compensation of the FASB ASC. The expense is
measured at the grant-date fair value of the award and recognized as
compensation expense on a straight-line basis over the service period, which is
the vesting period. The Company estimates forfeitures that it expects will occur
and records expense based upon the number of awards expected to
vest.
The
Company recorded stock based compensation expense of $972,000 and $1.8 million
during the three and six month periods ended June 30, 2010, respectively, and
$1.6 million and $3.1 million during the three and six month periods ended June
30, 2009, respectively. At June 30, 2010, there was $8.3 million of unrecognized
compensation expense related to unvested awards, which is expected to be
recognized over a weighted-average period of approximately 1.9
years.
Restricted
Stock—Restricted stock is granted to employees and to non-employee
members of the Company’s Board. These shares are part of the compensation plan
for services provided by the employees or Board members. The closing price of
the Company’s stock on the date of grant was used to determine the fair value of
the grants. The expense related to the restricted stock grants is recorded over
the vesting period. There was no cash flow impact resulting from the
grants.
Number of
|
Fair value of
|
Vesting
|
||||||||
Grant Date
|
shares issued
|
Awarded to
|
common stock
|
Period
|
||||||
April
18, 2008
|
16,000 |
Board
members
|
$ | 8.09 |
1
year
|
|||||
May
21, 2009
|
45,000 |
Board
members
|
$ | 4.15 |
1
year
|
|||||
February
10, 2010
|
120,000 |
Management
|
$ | 6.08 |
4
years
|
|||||
April
29, 2010
|
24,000 |
Board
members
|
$ | 9.05 |
1
year
|
11
A summary
of the status of restricted stock awards as of June 30, 2010 and 2009, and the
changes during the three and six month periods then ended is presented below:
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
|||||||||||||||
Shares
|
Weighted
Average Fair
Value at Grant
Date
|
Shares
|
Weighted
Average Fair
Value at Grant
Date
|
|||||||||||||
Non-vested
at beginning of the period
|
165,000 | $ | 5.55 | 16,000 | $ | 8.09 | ||||||||||
Granted-
Restricted Stock
|
24,000 | $ | 9.05 | 45,000 | $ | 4.15 | ||||||||||
Vested
during the period
|
(45,000 | ) | $ | 4.15 | (16,000 | ) | $ | 8.09 | ||||||||
Non-vested
at end of period
|
144,000 | $ | 6.58 | 45,000 | $ | 4.15 |
Six Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
|||||||||||||||
Shares
|
Weighted
Average Fair
Value at Grant
Date
|
Shares
|
Weighted
Average Fair
Value at Grant
Date
|
|||||||||||||
Non-vested
at beginning of the period
|
45,000 | $ | 4.15 | 16,000 | $ | 8.09 | ||||||||||
Granted-
Restricted Stock
|
144,000 | $ | 6.58 | 45,000 | $ | 4.15 | ||||||||||
Vested
during the period
|
(45,000 | ) | $ | 4.15 | (16,000 | ) | $ | 8.09 | ||||||||
Non-vested
at end of period
|
144,000 | $ | 6.58 | 45,000 | $ | 4.15 |
Stock
Options— The fair value of each option grant is estimated using the
Black-Scholes option-pricing model using the weighted average assumptions in the
table below. Because the Company’s stock has not been publicly traded for a
period long enough to use to determine volatility, the average implied
volatility rate for a similar entity was used. The expected life of options
granted is derived from historical exercise behavior. The risk-free rate for
periods within the expected life of the option is based on the U.S. Treasury
rates in effect at the time of grant.
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
The
weighted average fair value of options granted
|
$ | 4.13 | $ | - | $ | 2.58 | $ | 1.54 | ||||||||
Dividend
yield
|
0.00 | % | - | 0.00 | % | 0.00 | % | |||||||||
Weighted
avarage risk free interest rate
|
2.46 | % | - | 1.46 | % | 1.38 | % | |||||||||
Weighted
average expected volatility
|
52.00 | % | - | 48.96 | % | 66.00 | % | |||||||||
Expected
life (in years)
|
4.6 | - | 4.6 | 4.6 |
During
the six months ended June 30, 2010 the Company granted the following stock
options with exercise prices as follows:
Number of stock
|
Fair value of
|
Exercise
|
Intrinsic
|
|||||||||||||
Grant Date
|
options issued
|
common stock
|
price
|
value
|
||||||||||||
February
10, 2010
|
1,490,800 | $ | 6.08 | $ | 6.08 | $ | - | |||||||||
February
15, 2010
|
20,000 | $ | 6.31 | $ | 6.31 | $ | - | |||||||||
April
22, 2010
|
5,000 | $ | 8.38 | $ | 8.38 | $ | - | |||||||||
April
30, 2010
|
20,000 | $ | 9.25 | $ | 9.25 | $ | - |
A summary of the status of options
granted as of June 30, 2010 and 2009, and the changes during the three and six
month periods then ended is presented below:
12
Three Months Ended
June 30, 2010
|
Three Months Ended
June 30, 2009
|
|||||||||||||||
Options
|
Weighted
Average
Exercise Price
|
Options
|
Weighted
Average
Exercise Price
|
|||||||||||||
Options
oustanding at beginning of the period
|
12,843,167 | $ | 3.22 | 11,328,722 | $ | 2.78 | ||||||||||
Granted
|
25,000 | $ | 9.08 | - | $ | - | ||||||||||
Exercised
|
(168,875 | ) | $ | 2.62 | (12,663 | ) | $ | 0.20 | ||||||||
Forfeited
|
(17,813 | ) | $ | 4.51 | (576 | ) | $ | 6.89 | ||||||||
Options
oustanding at June 30
|
12,681,479 | $ | 3.24 | 11,315,483 | $ | 2.79 |
Six Months Ended
June 30, 2010
|
Six Months Ended
June 30, 2009
|
|||||||||||||||
Options
|
Weighted
Average
Exercise Price
|
Options
|
Weighted
Average
Exercise Price
|
|||||||||||||
Options
oustanding at beginning of the period
|
11,451,740 | $ | 2.82 | 9,653,074 | $ | 2.77 | ||||||||||
Granted
|
1,535,800 | $ | 6.13 | 1,707,900 | $ | 2.88 | ||||||||||
Exercised
|
(284,248 | ) | $ | 2.07 | (12,663 | ) | $ | 0.20 | ||||||||
Forfeited
|
(21,813 | ) | $ | 4.42 | (32,828 | ) | $ | 4.88 | ||||||||
Options
oustanding at June 30
|
12,681,479 | $ | 3.24 | 11,315,483 | $ | 2.79 | ||||||||||
Exercisable
at June 30
|
8,777,830 | $ | 2.35 | 7,286,963 | $ | 1.96 |
The
following table summarizes information about options outstanding as of June 30,
2010:
Options Outstanding
|
Options Exercisable
|
|||||||||||
Exercise Price
|
Number
Outstanding
|
Weighted-Average
Remaining
Contractual Life
|
Number
Exercisable
|
|||||||||
(in years)
|
||||||||||||
$0.20
- $0.99
|
3,696,616 | 5.2 | 3,696,616 | |||||||||
$1.00
- $2.99
|
3,892,468 | 5.4 | 2,727,205 | |||||||||
$4.00
- $5.99
|
918,106 | 6.3 | 705,366 | |||||||||
$6.00
- $8.99
|
4,114,489 | 5.8 | 1,623,768 | |||||||||
$9.00
- $10.99
|
59,800 | 7.2 | 24,875 | |||||||||
12,681,479 | 8,777,830 |
10.
SEGMENT INFORMATION
The
Company has two reportable segments: DCS Online (which includes Dice.com and
ClearanceJobs.com) and eFinancialCareers. Management has organized its
reportable segments based upon similar geographic locations and similar economic
characteristics. Both DCS Online and eFinancialCareers generate revenue from
sales of recruitment packages. In addition to these two reportable segments, the
Company has other businesses and activities that individually are not more than
10% of consolidated revenues, net income, or total assets. These include
Targeted Job Fairs, JobsintheMoney.com, AllHealthcareJobs (beginning June 2009),
WorldwideWorker (beginning May 2010), and eFinancialCareers’ North American
operations and are reported in the “Other” category. The Company’s foreign
operations are comprised of eFinancialCareers, whose business is principally in
Europe, Middle East and Asia Pacific. Additionally, WorldwideWorker serves
certain of the major energy regions in the world. The following table
shows the segment information for the three and six month periods ended June 30,
2010 and 2009 (in thousands):
13
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues:
|
||||||||||||||||
DCS
Online
|
$ | 21,342 | $ | 20,098 | $ | 40,434 | $ | 42,093 | ||||||||
eFC
|
6,737 | 5,473 | 12,860 | 11,395 | ||||||||||||
Other
|
1,842 | 1,438 | 3,454 | 3,090 | ||||||||||||
Total
revenues
|
$ | 29,921 | $ | 27,009 | $ | 56,748 | $ | 56,578 | ||||||||
Depreciation:
|
||||||||||||||||
DCS
Online
|
$ | 969 | $ | 836 | $ | 1,825 | $ | 1,663 | ||||||||
eFC
|
102 | 56 | 203 | 109 | ||||||||||||
Other
|
36 | 40 | 51 | 81 | ||||||||||||
Total
depreciation
|
$ | 1,107 | $ | 932 | $ | 2,079 | $ | 1,853 | ||||||||
Amortization
of intangible assets:
|
||||||||||||||||
DCS
Online
|
$ | 1,215 | $ | 2,777 | $ | 2,430 | $ | 5,555 | ||||||||
eFC
|
733 | 1,007 | 1,501 | 1,942 | ||||||||||||
Other
|
800 | 233 | 1,213 | 411 | ||||||||||||
Total
amortization of intangible assets
|
$ | 2,748 | $ | 4,017 | $ | 5,144 | $ | 7,908 |
Operating
income (loss):
|
||||||||||||||||
DCS
Online
|
$
|
5,665
|
$
|
4,547
|
$
|
10,421
|
$
|
10,522
|
||||||||
eFC
|
1,628
|
935
|
3,038
|
2,511
|
||||||||||||
Other
|
(832
|
)
|
195
|
(929
|
)
|
344
|
||||||||||
Operating
income
|
6,461
|
5,677
|
12,530
|
13,377
|
||||||||||||
Interest
expense
|
(974
|
)
|
(1,649
|
)
|
(2,095
|
)
|
(3,572
|
)
|
||||||||
Interest
income
|
23
|
53
|
61
|
136
|
||||||||||||
Other
income
|
141
|
369
|
216
|
757
|
||||||||||||
Income
before income taxes
|
$
|
5,651
|
$
|
4,450
|
$
|
10,712
|
$
|
10,698
|
||||||||
Capital
expenditures:
|
||||||||||||||||
DCS
Online
|
$
|
583
|
$
|
616
|
$
|
1,415
|
$
|
1,449
|
||||||||
eFC
|
66
|
8
|
159
|
18
|
||||||||||||
Other
|
117
|
-
|
220
|
3
|
||||||||||||
Total
capital expenditures
|
$
|
766
|
$
|
624
|
$
|
1,794
|
$
|
1,470
|
The
following table shows the segment information as June 30, 2010 and
December 31, 2009 (in thousands):
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Total
assets:
|
||||||||
DCS
Online
|
$ | 146,073 | $ | 160,513 | ||||
eFinancial
Careers
|
85,717 | 86,854 | ||||||
Other
|
24,587 | 15,188 | ||||||
Total
assets
|
$ | 256,377 | $ | 262,555 |
14
The
following table shows the change in the carrying amount of goodwill by
reportable segment as of December 31, 2009 and the changes in goodwill for
the six month period ended June 30, 2010 (in thousands):
DCS Online
|
eFC
|
Other
|
Total
|
|||||||||||||
Balance,
December 31, 2009
|
$ | 84,778 | $ | 47,357 | $ | 10,503 | $ | 142,638 | ||||||||
Acquisition
of WorldwideWorker
|
- | - | 4,898 | 4,898 | ||||||||||||
Foreign
currency translation adjustment
|
- | (2,499 | ) | - | (2,499 | ) | ||||||||||
Balance,
June 30, 2010
|
$ | 84,778 | $ | 44,858 | $ | 15,401 | $ | 145,037 |
11.
EARNINGS PER SHARE
Basic
earnings per share (“EPS”) is computed based on the weighted average number of
shares of common stock outstanding. Diluted EPS is computed based on the
weighted average number of shares of common stock outstanding plus common stock
equivalents assuming exercise of stock options and conversion of outstanding
convertible securities, where dilutive. Options with exercise prices greater
than the average market price of the common shares are excluded from the
calculation of diluted EPS as they are anti-dilutive. Anti-dilutive
options totaled 79,000 and 191,000 for the three and six month periods ended
June 30, 2010, respectively, and 3.5 million for the three and six month periods
ended June 30, 2009, respectively. The following is a calculation of basic and
diluted earnings per share and weighted average shares outstanding for
continuing operations (in thousands except per share amounts):
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Income
attributable to common stockholders from
|
||||||||||||||||
continuing
operations - basic and diluted
|
$ | 3,688 | $ | 2,776 | $ | 6,989 | $ | 6,634 | ||||||||
Weighted
average shares outstanding - basic
|
62,665 | 62,229 | 62,478 | 62,219 | ||||||||||||
Add
shares issuable upon exercise of stock options
|
4,965 | 3,712 | 4,870 | 3,615 | ||||||||||||
Weighted
average shares outstanding - diluted
|
67,630 | 65,941 | 67,348 | 65,834 | ||||||||||||
Basic
earnings per share
|
$ | 0.06 | $ | 0.04 | $ | 0.11 | $ | 0.11 | ||||||||
Diluted
earnings per share
|
$ | 0.05 | $ | 0.04 | $ | 0.10 | $ | 0.10 |
* * * *
*
15
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes included elsewhere in
this report.
Information
contained herein contains forward-looking statements. You should not place undue
reliance on those statements because they are subject to numerous uncertainties
and factors relating to our operations and business environment, all of which
are difficult to predict and many of which are beyond our control.
Forward-looking statements include information concerning our possible or
assumed future results of operations, including descriptions of our business
strategy. These statements often include words such as “may,” “will,” “should,”
“believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar
expressions, including without limitation, statements under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” These statements are based on assumptions that we have made in
light of our experience in the industry as well as our perceptions of historical
trends, current conditions, expected future developments and other factors we
believe are appropriate under the circumstances. Although we believe that these
forward-looking statements are based on reasonable assumptions, you should be
aware that many factors could affect our actual financial results or results of
operations and could cause actual results to differ materially from those in the
forward-looking statements. These factors include, but are not limited to,
competition from existing and future competitors in the highly competitive
developing market in which we operate, failure to adapt our business model to
keep pace with rapid changes in the recruiting and career services business,
failure to maintain and develop our reputation and brand recognition, failure to
increase or maintain the number of customers who purchase recruitment packages,
cyclicality or downturns in the economy or industries we serve, the failure to
attract qualified professionals to our websites or grow the number of qualified
professionals who use our websites, the failure to successfully identify or
integrate acquisitions, United States and foreign government regulation of the
Internet and taxation, our ability to borrow funds under our revolving credit
facility or refinance our indebtedness and restrictions on our current and
future operations under our credit facility. These factors and others are
discussed in more detail in our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, under the headings “Risk Factors,” “Forward-Looking
Statements” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” You should keep in mind that any forward-looking
statement made by us herein, or elsewhere, speaks only as of the date on which
we make it. New risks and uncertainties come up from time to time, and it is
impossible for us to predict these events or how they may affect us. We have no
obligation to update any forward-looking statements after the date hereof,
except as required by federal securities laws.
Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, proxy and information statements and other material information
concerning us are available free of charge on the Investor Relations page of our
website at www.diceholdingsinc.com.
Overview
We are a
leading provider of specialized career websites for select professional
communities. We target employment categories in which there is a long-term
scarcity of highly skilled, highly qualified professionals relative to market
demand. Our career websites serve as online marketplaces where employers and
recruiters find and recruit prospective employees, and where professionals find
relevant job opportunities and information to further their careers. Each of our
career websites offers job postings, content, career development and recruiting
services tailored to the specific needs of the professional community that it
serves. Our largest websites by revenue are Dice.com, the leading career website
in the United States for technology professionals, and eFinancialCareers.com,
the leading global career website for financial services
professionals.
We have
identified two reportable segments based on our operating structure. Our
reportable segments include DCS Online (which includes Dice.com and
ClearanceJobs.com) and eFinancialCareers’ international business.
eFinancialCareers’ North American operations, WorldwideWorker (beginning in May
2010), AllHealthcareJobs (beginning in June 2009), Targeted Job Fairs, and
JobsintheMoney.com do not meet certain quantitative thresholds, and therefore
are reported in aggregate in the Other segment.
Recent
Developments
In May
2010, the Company acquired the online and career-events business of
WorldwideWorker.com, a global leader in recruitment for the energy industry. The
purchase price consisted of initial consideration of $6.0 million. Additional
consideration of up to a maximum of $3.0 million in cash is payable upon the
achievement of certain financial goals over the two year period ended December
31, 2011.
Our
Revenues and Expenses
We derive
the majority of our revenues from customers who pay fees, either annually,
quarterly or monthly, to post jobs on our websites and to access our searchable
databases of resumes. Our fees vary by customer based on the number of
individual users of our databases of resumes, the number and type of job
postings purchased and the terms of the package purchased. In the United States,
we sell recruitment packages that include both access to our databases of
resumes and job posting capabilities. At eFinancialCareers, our job postings and
access to our resume databases are often sold separately and not as a single
package.
16
We
believe the key metrics that are material to an analysis of our U.S. businesses
are our total number of recruitment package customers and the revenue, on
average, that these customers generate. Similar metrics are important to our
international businesses. At June 30, 2010, Dice.com had approximately 6,750
total recruitment package customers and as of the same date our other websites
collectively served approximately 2,400 customers, including some customers who
are also customers of Dice.com. Deferred revenue is another key metric of our
business as it indicates a level of sales already made that will be recognized
as revenue in the future. Deferred revenue reflects the impact of our ability to
sign customers to long-term contracts. We recorded deferred revenue of $41.1
million and $33.9 million at June 30, 2010 and December 31, 2009,
respectively.
Our
ability to grow our revenues will largely depend on our ability to grow our
customer bases in the markets in which we operate by acquiring new recruitment
package customers while retaining a high proportion of the customers we
currently serve, and to expand the breadth of services our customers purchase
from us. We continue to make investments in our business and infrastructure to
help us achieve our long-term growth objectives.
Our
revenues are generated primarily from servicing customers seeking to recruit
qualified professionals in the technology and finance sectors. Accordingly,
significant increases or decreases in the unemployment rate, labor shortages or
a decrease in available jobs, specifically in the technology, finance,
healthcare, and other vertical industries we serve, can have a material affect
on our revenues and results of operations. The significant increase in the
unemployment rate and general reduction in recruitment activity during late 2008
and throughout 2009 negatively impacted our revenues and income. We began to see
improvement in recruitment activity during the latter half of 2009 and that
improvement has continued in the second quarter in 2010. During the first half
of 2010, total revenues are essentially flat with the first half of 2009. Our
revenues in the second quarter of 2010 were up 11% over the same period in 2009
and were up 12% over the first quarter of 2010. We saw an increase in the number
of customers served at Dice.com from approximately 6,400 customers at March 31,
2010 to approximately 6,750 customers at June 30, 2010.
Any
slowdown in recruitment activity that occurs will negatively impact our revenues
and results of operations. Alternatively, a decrease in the unemployment rate or
a labor shortage, including as a result of an increase in job turnover,
generally means that employers (including our customers) are seeking to hire
more individuals, which would generally lead to more job postings and have a
positive impact on our revenues and results of operations. Based on historical
trends, improvements in labor markets and the need for our services generally
lag behind overall economic improvements. Additionally, there has historically
been a lag from the time customers begin to increase purchases of our services
and the impact on our revenues due to the recognition of revenue occurring over
the length of the contract, which can be several months to a year.
Other
material factors that may affect our results of operations include our ability
to attract qualified professionals to our websites and our ability to attract
customers with relevant job opportunities. The more qualified professionals that
use our websites, the more attractive our websites become to employers, which in
turn makes them more likely to become our customers, resulting in positive
impacts on our results of operations. If we are unable to continue to attract
qualified professionals to our websites, our customers may no longer find our
services attractive, which could have a negative impact on our results of
operations. Additionally, in order to attract qualified professionals to our
websites we need to ensure that our websites remain relevant.
The
largest components of our expenses are personnel costs and marketing and sales
expenditures. Personnel costs consist of salaries, benefits, and incentive
compensation for our employees, including commissions for salespeople. Personnel
costs are categorized in our statements of operations based on each employee’s
principal function. Marketing and sales expenditures primarily consist of online
advertising and direct mail programs.
Critical
Accounting Policies
This
discussion of our financial condition and results of operations is based upon
our consolidated financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States (“U.S.
GAAP”). The preparation of these financial statements requires us to make
estimates, judgments and assumptions that affect the reported amount of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue, goodwill and intangible assets, stock-based compensation and
income taxes. We based our estimates of the carrying value of certain assets and
liabilities on historical experience and on various other assumptions that we
believe are reasonable. In many cases, we could reasonably have used different
accounting policies and estimates. In some cases, changes in the accounting
estimates are reasonably likely to occur from period to period. Our actual
results may differ from these estimates under different assumptions or
conditions. We believe the following critical accounting policies affect our
more significant judgments used in the preparation of our consolidated financial
statements.
17
Revenue
Recognition
We
recognize revenues when persuasive evidence of an agreement exists, delivery has
occurred, the sales price is fixed or determinable and collectability is
reasonably assured. Payments received in advance of services being rendered are
recorded as deferred revenue and recognized generally on a straight-line basis
over the service period. We generate a majority of our revenue from the sale of
recruitment packages.
Recruitment
package revenues are derived from the sale to recruiters and employers of a
combination of job postings and access to a searchable database of candidates on
Dice.com, Clearancejobs.com, eFinancialCareers.com, AllHealthcareJobs.com, and
WorldwideWorker.com. Certain of our arrangements include multiple deliverables,
which consist of access to job postings and access to a searchable database of
resumes. We consider a delivered item as a separate unit of accounting if it has
value to the customer on a standalone basis, if there is objective and reliable
evidence of the fair value of the undelivered elements, and, if the arrangement
includes a general right of return relative to the delivered element, delivery
or performance of the undelivered element is considered probable and is
substantially within our control. Services to customers buying a package of
available job postings and access to the database are delivered over the same
period and revenue is recognized ratably over the length of the underlying
contract, typically from one to twelve months. Revenue from the sale of
classified job postings is recognized ratably over the length of the contract or
the period of actual usage.
Fair
Value of Acquired Businesses
We
completed the acquisition of Dice Inc. in 2005, eFinancialGroup in 2006,
AllHealthcareJobs in 2009, and WorldwideWorker in 2010. FASB ASC topic on
Business Combinations requires acquired businesses are to be recorded at fair
value by the acquiring entity. The Business Combinations Topic also requires
that intangible assets that meet the legal or separable criterion be separately
recognized on the financial statements at their fair value, and provides
guidance on the types of intangible assets subject to recognition. A significant
component of the value of these acquired businesses has been allocated to
intangible assets.
The
significant assets acquired and liabilities assumed from our acquisitions
consist of intangible assets, goodwill, deferred revenue and contingent
consideration. Fair values of the technology and trademarks were determined
using a profit allocation methodology which estimates the value of the trademark
and brand name by capitalizing the profits saved because the Company owns the
asset. Fair values of the customer lists were estimated using the discounted
cash flows method based on projections of the amounts and timing of future
revenues and cash flows, discount rates and other assumptions as deemed
appropriate. Fair values of the candidate database were determined based on the
estimated cost to acquire a seeker applied to the number of active seekers as of
the acquisition date. The acquired deferred revenue is recorded at fair value as
it represents an assumed legal obligation. We estimated our obligation related
to deferred revenue using the cost build-up approach which determines fair value
by estimating the costs related to fulfilling the obligation plus a reasonable
profit margin. The estimated costs to fulfill our deferred revenue obligation
were based on our expected future costs to fulfill our obligation to our
customers. Contingent consideration is an obligation to transfer assets or
equity interests to the former owners if certain future operating and financial
goals are met. The fair value of the contingent consideration is determined
based on management’s estimation that certain events will occur and certain
financial metrics will be reached. Goodwill is the amount of purchase price paid
for an acquisition that exceeds the estimated fair value of the net identified
tangible and intangible assets acquired.
The
remaining useful life of the technology was determined through review of the
technology roadmaps, the pattern of projected economic benefit of each existing
technology asset, and the time period over which the majority of the
undiscounted cash flows are projected to be achieved. The remaining useful life
of the trademarks and brand names was determined based on the estimated time
period over which each asset is projected to be used, the pattern of projected
economic benefit, and the time period over which the majority of the
undiscounted cash flows are projected to be achieved. The remaining useful life
of the customer list was determined based on the projected customer attrition
rates, the pattern of projected economic benefit of each list and the time
period over which the majority of the undiscounted cash flows are projected to
be achieved.
Determining
the fair value for these specifically identified intangible assets involves
significant professional judgment, estimates and projections related to the
valuation to be applied to intangible assets such as customer lists, technology
and trade names. The subjective nature of management’s assumptions increases the
risk associated with estimates surrounding the projected performance of the
acquired entity. Additionally, as we amortize the finite-lived intangible assets
over time, the purchase accounting allocation directly impacts the amortization
expense we record on our financial statements.
Goodwill
As a
result of our various acquisitions, we have recorded goodwill. We record
goodwill when the purchase price paid for an acquisition exceeds the estimated
fair value of the net identified tangible and intangible assets
acquired.
18
We
determine whether the carrying value of recorded goodwill is impaired on an
annual basis or more frequently if indicators of potential impairment exist. The
first step of the impairment review process compares the fair value of the
reporting unit in which the goodwill resides to the carrying value of that
reporting unit. The second step measures the amount of impairment loss, if any,
by comparing the implied fair value of the reporting unit goodwill with its
carrying amount. Our annual impairment test for the goodwill from the 2005 Dice
Acquisition is performed as of August 31 by comparing the goodwill recorded from
the 2005 Acquisition to the fair value of the DCS Online and Targeted Job Fairs
reporting units. The annual impairment test performed as of August 31, 2009
resulted in no impairment. The goodwill at the eFinancialCareers’ international
business and eFinancialCareers’ U.S. business was the result of the
eFinancialGroup Acquisition in October 2006. Goodwill at the AllHealthcareJobs
reporting unit is the result of the acquisition of AllHealthcareJobs assets in
June 2009. The annual test of impairment of goodwill from the eFinancialGroup
and AllHealthcareJobs acquisitions is performed as of October 31 by comparing
the goodwill recorded from these acquisitions to the fair value of the
respective reporting units. The annual impairment test performed as of October
31, 2009 resulted in no impairment.
The
determination of whether or not goodwill has become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of our reporting units. Fair values are determined either by
using a discounted cash flow methodology or by using a combination of a
discounted cash flow methodology and a market comparable method. The discounted
cash flow methodology is based on projections of the amounts and timing of
future revenues and cash flows, assumed discount rates and other assumptions as
deemed appropriate. We consider factors such as historical performance,
anticipated market conditions, operating expense trends and capital expenditure
requirements. Additionally, the discounted cash flows analysis takes into
consideration cash expenditures for product development, other technological
updates and advancements to our websites and investments to improve our
candidate databases. The market comparable method indicates the fair value of a
business by comparing it to publicly traded companies in similar lines of
business or to comparable transactions or assets. Considerations for factors
such as size, growth, profitability, risk and return on investment are analyzed
and compared to the comparable businesses and adjustments are made. A market
value of invested capital of the publicly traded companies is calculated and
then applied to the entity’s operating results to arrive at an estimate of
value. Changes in our strategy and/or market conditions could significantly
impact these judgments and require adjustments to recorded amounts of
goodwill.
Indefinite-Lived
Acquired Intangible Assets
The
indefinite-lived acquired intangible assets include the Dice trademarks and
brand name. The Dice.com trademark, trade name and domain name is one of the
most recognized names of online job boards. Since Dice’s inception in 1991, the
brand has been recognized as a leader in recruiting and career development
services for technology and engineering professionals. Currently, the brand is
synonymous with the most specialized online marketplace for industry-specific
talent. The brand has a significant online and offline presence in online
recruiting and career development services. Considering the recognition and the
awareness of the Dice brand in the talent acquisition and staffing services
market, Dice’s long operating history and the intended use of the Dice brand,
the remaining useful life of the Dice.com trademark, trade name and domain name
was determined to be indefinite.
We
determine whether the carrying value of recorded indefinite-lived acquired
intangible assets is impaired on an annual basis or more frequently if
indicators of potential impairment exist. The impairment review process compares
the fair value of the indefinite-lived acquired intangible assets to its
carrying value. If the carrying value exceeds the fair value, an impairment loss
is recorded. The impairment test is performed annually as of August
31. No impairment was recorded at August 31, 2009.
The
determination of whether or not indefinite-lived acquired intangible assets have
become impaired involves a significant level of judgment in the assumptions
underlying the approach used to determine the value of the indefinite-lived
acquired intangible assets. Fair values are determined using a profit allocation
methodology which estimates the value of the trademark and brand name by
capitalizing the profits saved because the Company owns the asset. We consider
factors such as historical performance, anticipated market conditions, operating
expense trends and capital expenditure requirements. Changes in our strategy
and/or market conditions could significantly impact these judgments and require
adjustments to recorded amounts of intangible assets.
Income
Taxes
We
utilize the liability method of accounting for income taxes as set forth in FASB
ASC topic, Income Taxes. Under this method, deferred income taxes are recognized
for differences between the financial statement and tax bases of assets and
liabilities at enacted statutory tax rates in effect for the years in which the
differences are expected to reverse. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. In addition, valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. We have concluded
that based on expected future results and the future reversals of existing
taxable temporary differences, it is more likely than not that the deferred tax
assets will be used in the future, net of valuation allowances. Uncertain tax
positions are evaluated and amounts are recorded when it is more likely than not
that the position will be sustained upon examination, including resolutions of
any related appeals or litigation processes, based on the technical merits.
Judgment is required in evaluating each uncertain tax position to determine
whether the more likely than not recognition threshold has been
met.
19
Stock
and Stock-Based Compensation
We have
granted stock options to certain of our employees and directors under our 2005
Omnibus Stock Plan and our 2007 Equity Award Plan. We follow the
Compensation-Stock Compensation subtopic of the FASB ACS. Compensation expense
is recorded for stock awards made to employees and directors in return for
service to the Company. The expense is measured at the fair value of the award
on the date of grant and recognized as compensation expense on a straight-line
basis over the service period, which is the vesting period. The fair value of
options granted was estimated on the grant date using Black-Scholes
option-pricing model. The use of an option valuation model includes highly
subjective assumptions based on long-term predictions, including the expected
stock price volatility and average life of each grant.
Results
of Operations
Three
Months Ended June 30, 2010 Compared to the Three Months Ended June 30,
2009
Revenues
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
DCS
Online
|
$ | 21,342 | $ | 20,098 | $ | 1,244 | 6.2 | % | ||||||||
eFinancialCareers
|
6,737 | 5,473 | 1,264 | 23.1 | % | |||||||||||
Other
|
1,842 | 1,438 | 404 | 28.1 | % | |||||||||||
Total
revenues
|
$ | 29,921 | $ | 27,009 | $ | 2,912 | 10.8 | % |
Our
revenues were $29.9 million for the three months ended June 30, 2010 compared to
$27.0 million for the same period in 2009, an increase of $2.9 million, or 11%.
The increase in revenues is a result of increased recruitment activity during
late 2009 into 2010, which impacted customer usage of our primary
services.
We
experienced an increase in revenue at the DCS Online segment of $1.2 million, or
6% which was driven by increased revenues at both Dice.com and
ClearanceJobs.com. Recruitment activity began to strengthen in the
latter part of 2009 and into 2010, as we saw increases in our job count and
database usage by our customers. There is a lag from the time
customers begin to increase purchases of our services and the impact on our
revenue due to the recognition of revenue occurring over the length of the
contract, which can be several months to a year. The strengthening of
recruitment activity is evidenced by an increase in our recruitment package
customer count. The number of customers served at Dice.com increased
from approximately 6,400 at March 31, 2010 to approximately 6,750 at June 30,
2010. At June 30, 2009, recruitment package customers totaled
approximately 6,450. Average revenue per recruitment package customer is
approximately 1% lower during the three months ended June 30, 2010 as compared
to the same period in 2009. Revenues at ClearanceJobs were up
$347,000, or 26% during the three months ended June 30, 2010 compared to the
same period in 2009. ClearanceJobs continues to experience strong
revenue and customer count growth.
We
experienced an increase in the eFinancialCareers segment revenues of $1.3
million, or 23%. The increase is the result of an increase in
recruitment activity in all of the markets we serve, partially offset by the
weakening of the pound sterling versus the U.S. dollar in comparing the three
months ended June 30, 2010 with the same period in 2009. Revenue
related to increased recruitment activity was $1.5 million. The offsetting
decrease in revenue due to the unfavorable effect of foreign exchange rates was
$246,000. Similar to in the United States, we have continued to see an
improvement in recruitment activity, particularly in the United Kingdom and
Asia. Revenue from our United Kingdom market measured in pound sterling
increased 23% during the three months ended June 30, 2010 compared to the prior
year period. Similarly, revenue from our Asia market measured in
Singapore dollars increased 76% year over year.
Revenues
from the Other segment, which consists of eFinancialCareers’ North America
operations, Targeted Job Fairs, JobsintheMoney.com, AllHealthcareJobs (beginning
June 2009) and WorldwideWorker (beginning May 2010), increased $404,000, or
28%. Our two recent acquisitions, AllHealthcareJobs and
WorldwideWorker, combined for revenue of $442,000. eFinancialCareers’
North America operations grew 12% compared to the prior year
period. Revenue from JobsintheMoney.com declined by $168,000 as
revenue during the current year period was minimal. The operations of
JobsintheMoney.com have been shut down as of June 30, 2010.
Cost
of Revenues
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Cost
of revenues
|
$ | 2,181 | $ | 1,811 | $ | 370 | 20.4 | % | ||||||||
Percentage
of revenues
|
7.3 | % | 6.7 | % |
Our cost
of revenues for the three months ended June 30, 2010 were $2.2 million compared
to $1.8 million for the same period in 2009, an increase of $370,000, or 20%.
The increase in cost of revenues experienced at DCS Online of $440,000 was
primarily due to an increase in subscription and maintenance contracts and due
to the number of network services personnel we employed to support our websites.
Cost of revenues at eFinancialCareers increased by $69,000 primarily due to an
increase in the number of customer support and network services
personnel. These increases were partially offset by a decrease of
$150,000 in the Other segment primarily due to a decrease in the number of job
fairs conducted.
20
Product
Development Expenses
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Product
Development
|
$ | 1,432 | $ | 961 | $ | 471 | 49.0 | % | ||||||||
Percentage
of revenues
|
4.8 | % | 3.6 | % |
Product
development expenses for the three months ended June 30, 2010 were $1.4 million
compared to $961,000 for the same period of 2009, an increase of $471,000, or
49%. Product development expenses increased by $340,000 for the U.S. businesses,
due to costs incurred related to adding features and functionality on the Dice
and ClearanceJobs sites, a redesign of the AllHealthcareJobs site and due to
costs related to building the editorial and community aspects of the websites.
Product development expenses increased at eFinancialCareers by $126,000 due
primarily to an increase in salaries and benefit costs for the product
development team.
Sales
and Marketing Expenses
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Sales
and Marketing
|
$ | 11,078 | $ | 8,483 | $ | 2,595 | 30.6 | % | ||||||||
Percentage
of revenues
|
37.0 | % | 31.4 | % |
Sales and
marketing expenses for the three months ended June 30, 2010 were $11.1 million
compared to $8.5 million for the same period in 2009, an increase of $2.6
million, or 31%. Of the increase, $2.0 million is related to the U.S.
businesses. An increase of $530,000 relates to the eFinancialCareers
segment.
Advertising
and other marketing costs for the U.S. businesses totaled $4.0 million for the
three month period ended June 30, 2010 compared to $3.7 million for the same
period in 2009. We continue to focus our marketing spending on online media,
particularly paid search and banner advertising programs. In marketing to
customers, we continue to dedicate the majority of our spend to direct mail and
email campaigns focused on communicating the value proposition of our services
to current and potential customers. During the three month period
ended June 30, 2010, approximately 65% of our advertising and marketing spending
for the U.S. businesses was focused on reaching professionals who visit our
sites and increasing their levels of activity on the websites. The portion of
our marketing spend that focused on attracting professionals to our sites was
approximately 60% during 2009, but has historically been approximately
75%. With recruitment activity and job postings lower and job seeker
activity high during 2009, we were able to reduce the amount of spending on job
seeker marketing and still provide results that match our customers’
needs. We expect to increase our spending on job seekers through the
remainder of 2010.
The
salaries, commissions, and benefits component of sales and marketing expense for
the United States businesses totaled $3.9 million for the three months ended
June 30, 2010, compared to $2.3 million during the same period in 2009, an
increase of $1.6 million, or 70%. Increased commission and other
incentive compensation expense due to the increase in sales during the current
period contributed $1.2 million of this increase, with the remainder coming from
an increase in sales and marketing personnel salaries and credit card
fees.
The
eFinancialCareers segment experienced an increase in sales and marketing expense
of $530,000 during the three month period ended June 30, 2010 compared to the
same period in 2009. Of this increase, $340,000 was from sales costs, which is
driven by increased commissions on higher sales. Marketing expense
increased by $190,000. We are continuing to spend on marketing to
potential customers and to grow our resume database in many of the markets we
serve.
General
and Administrative Expenses
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Decrease
|
Change
|
|||||||||||||
(in
thousands, expect percentages)
|
||||||||||||||||
General
and administrative
|
$ | 4,890 | $ | 5,128 | $ | (238 | ) | -4.6 | % | |||||||
Percentage
of revenues
|
16.3 | % | 19.0 | % |
21
General and administrative
expenses for the three months ended June 30, 2010 were $4.9 million compared to
$5.1 million for the same period in 2009, a decrease of $238,000, or 4%. A
decrease of $651,000 was related to a reduction in stock-based compensation
expense due to certain options becoming fully vested during 2009, and thus fully
expensed in 2009. Offsetting this decrease was an increase of
$365,000 in miscellaneous administrative expenses including senior bonus
compensation costs and professional fees incurred to acquire
WorldwideWorker.
Depreciation
Three
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Depreciation
|
$ | 1,107 | $ | 932 | $ | 175 | 18.8 | % | ||||||||
Percentage
of revenues
|
3.7 | % | 3.5 | % |
Depreciation
expense for the three month period ended June 30, 2010 was $1.1 million compared
to $932,000 for the same period in 2009, an increase of $175,000, or 19%. The
increase was due to a higher depreciable fixed asset balance during the three
month period ended June 30, 2010 compared to the same period in 2009 primarily
due to software and capitalized development costs related to the site
enhancements made on Dice, ClearanceJobs, and AllHealthcareJobs.
Amortization
of Intangible Assets
Three Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Decrease
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Amortization
|
$ | 2,743 | $ | 4,017 | $ | (1,269 | ) | -31.6 | % | |||||||
Percentage of revenues
|
9.2 | % | 14.9 | % |
Amortization expense for the three
month period ended June 30, 2010 was $2.7 million compared to $4.0 million for
the same period in 2009, a decrease of $1.3 million, or 31%. Amortization
expense in the three month period ended June 30, 2010 decreased by $1.9 million
due to certain intangible assets from the 2005 Dice acquisition and 2006
eFinancialCareers acquisition becoming fully amortized during 2009, partially
offset by $655,000 of additional amortization of intangible assets for
AllHealthcareJobs and WorldwideWorker, our recent acquisitions.
Change
in Acquisition Related Contingencies
The
change in acquisition related contingencies for the three month period ended
June 30, 2010 was a loss of $24,000. The contingent liability related to the
AllHealthcareJobs acquisition was increased slightly to match our current
expectation of contingent payments to be made on the acquisition.
Operating
Income
Operating
income for the three months ended June 30, 2010 was $6.5 million compared to
$5.7 million for the same period in 2009, an increase of $784,000, or 14%. The
increase is primarily the result of higher revenues for all businesses, offset
partially by higher operating expenses and the loss from the change in
acquisition related contingencies. Operating expenses have increased
due to sales compensation expense increasing from higher sales in the quarter
and costs related to investments made in product development and marketing,
slightly offset by lower amortization of intangible assets and stock based
compensation costs.
Interest
Expense
Interest
expense for the three months ended June 30, 2010 was $974,000 compared to $1.6
million for the same period in 2009, a decrease of $675,000, or 41%. The
decrease in interest expense was due to lower borrowings outstanding in the
three months ended June 30, 2010, on average, as compared to the same period in
2009 due to payments made on the term loan portion of our Amended and Restated
Credit Facility. Payments totaling $31.2 million were made in 2009
and an additional $20.6 million of payments were made during the six months
ended June 30, 2010 on the term loan.
22
Other
income
Other
income of $141,000 and $369,000 during the three months ended June 30, 2010 and
2009, respectively, resulted from a gain on interest rate hedges. The
gains resulted from increases in the fair value of our interest rate swap
agreements. There are no swap agreements outstanding as of June 30,
2010.
Income
Taxes
Three
Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(in
thousands, except
|
||||||||
percentages)
|
||||||||
Income
from continuing operations before income taxes
|
$ | 5,651 | $ | 4,450 | ||||
Income
tax expense
|
1,963 | 1,674 | ||||||
Effective
tax rate
|
34.7 | % | 37.6 | % |
Income
tax expense for the three month period ended June 30, 2010 was $2.0 million
compared to $1.7 million for the same period in 2009 and the effective tax rate
decreased to 34.7% from 37.6%. The rate was lower in the current period as
compared to the prior year period due to a change in the mix of U.S. and
non-U.S. income.
Six
Months Ended June 30, 2010 Compared to the Six Months Ended June 30,
2009
Revenues
Six
Months Ended June 30,
|
Increase
|
Percent
|
||||||||||||||
2010
|
2009
|
(Decrease)
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
DCS
Online
|
$ | 40,434 | $ | 42,093 | $ | (1,659 | ) | -3.9 | % | |||||||
eFinancialCareers
|
12,860 | 11,395 | $ | 1,465 | 12.9 | % | ||||||||||
Other
|
3,454 | 3,090 | $ | 364 | 11.8 | % | ||||||||||
Total
revenues
|
$ | 56,748 | $ | 56,578 | $ | 170 |
0.3
|
% |
Our
revenues were $56.7 million for the six months ended June 30, 2010 compared to
$56.6 million for the same period in 2009, an increase of $170,000.
Revenues
at DCS Online decreased by $1.7 million, or 4% compared to the prior year period
due to results for Dice.com. Recruitment activity declined during
2008 and into 2009, but began to strengthen in the latter part of 2009 and into
2010, as we saw increases in our job count and database usage by our
customers. There is a lag from the time customers begin to increase
purchases of our services and the impact on our revenue due to the recognition
of revenue occurring over the length of the contract, which can be several
months to a year. The strengthening of recruitment activity is evidenced by an
increase in our recruitment package customer count. The number of
customers served at Dice.com increased from approximately 5,900 at December 31,
2009 to approximately 6,750 at June 30, 2010. At June 30, 2009,
Dice.com customers totaled approximately 6,450. Average revenue per recruitment
package customer decreased by approximately 3% from the six months ended June
30, 2009 to the six months ended June 30, 2010. Partially offsetting
the decrease experienced at Dice.com was an increase in revenues at
ClearanceJobs of $675,000, or 26% during the six months ended June 30, 2010
compared to the same period in 2009. ClearanceJobs was largely
unaffected by the economic downturn experienced in late 2008 and throughout
2009.
We
experienced an increase in the eFinancialCareers segment revenues of $1.5
million, or 13%. The increase is the result of increased recruitment
activity in all of the markets we serve, and a favorable effect of foreign
exchange rates of $250,000. Similar to in the United States, we began to see an
improvement in recruitment activity in late 2009 and this trend has continued
into all of our international markets during 2010. Revenue from our United
Kingdom market measured in pound sterling increased 14% during the six months
ended June 30, 2010 compared to the prior year period.
23
Revenues
from the Other segment, which consists of eFinancialCareers’ North America
operations, Targeted Job Fairs, AllHealthcareJobs (beginning in June 2009) and
WorldwideWorker (beginning in May 2010), increased by $364,000, or
12%. Revenues from our newly acquired AllHealthcareJobs and
WorldwideWorker sites totaled $650,000 for the period. Revenues from
eFinancialCareers’ North America operations grew $204,000 year over year. These
increases were offset by a $100,000 decline in revenues due to fewer job fairs
conducted at Targeted Job Fairs. Revenue from JobsintheMoney.com declined by
$386,000 as revenue during the current year period was minimal. The
operations of JobsintheMoney.com have been shut down as of June 30,
2010.
Cost
of Revenues
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Cost
of revenues
|
$ | 4,288 | $ | 3,641 | $ | 647 | 17.8 | % | ||||||||
Percentage
of revenues
|
7.6 | % | 6.4 | % |
Our cost
of revenues for the six months ended June 30, 2010 were $4.3 million compared to
$3.6 million for the same period in 2009, an increase of $647,000, or 18%. The
increase in cost of revenues experienced at DCS Online of $664,000 was primarily
due to an increase in subscription and maintenance contracts and due to the
number of network services personnel we employed to support our websites. Cost
of revenues at eFinancialCareers increased by $182,000 primarily due to an
increase in salary and benefits costs for our customer support and network
services personnel, due to employing more personnel. These increases
were partially offset by a decrease of $250,000 in the Other segment primarily
due to a decrease in the number of job fairs conducted.
Product
Development Expenses
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Product
Development
|
$ | 2,622 | $ | 1,756 | $ | 866 | 49.3 | % | ||||||||
Percentage
of revenues
|
4.6 | % | 3.1 | % |
Product
development expenses for the six months ended June 30, 2010 were $2.6 million
compared to $1.8 million for the same period of 2009, an increase of $866,000,
or 49%. Product development expenses increased by $670,000 for the U.S.
businesses, due to costs incurred related to adding features and functionality
on the Dice and ClearanceJobs sites, the redesign of the AllHealthcareJobs site
and due to costs related to building the editorial and community aspects of the
websites. Product development expenses increased at eFinancialCareers by
$190,000 due primarily to an increase in salaries and benefit costs for the
product development team.
Sales
and Marketing Expenses
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Sales
and Marketing
|
$ | 21,209 | $ | 17,919 | $ | 3,290 | I8.4 | % | ||||||||
Percentage
of revenues
|
37.4 | % | 31.7 | % |
Sales and
marketing expenses for the six months ended June 30, 2010 were $21.2 million
compared to $17.9 million for the same period in 2009, an increase of $3.3
million, or 18%. Of the increase, $2.3 million is related to the U.S.
businesses. An additional $203,000 relates to the eFinancialCareers
segment.
Advertising
and other marketing costs for the U.S. businesses totaled $7.9 million for the
six month period ended June 30, 2010 compared to $7.7 million for the same
period in 2009. We continue to focus our marketing spending on online media,
particularly paid search and banner advertising programs. In marketing to
customers, we continue to dedicate the majority of our spend to direct mail and
email campaigns focused on communicating the value proposition of our services
to current and potential customers. During the six month period ended
June 30, 2010, approximately 65% of our advertising and marketing spending for
the U.S. businesses was focused on reaching professionals who visit our sites
and increasing their levels of activity on the websites. The portion of our
marketing spend that focused on attracting professionals to our sites was
approximately 60% during 2009, but has historically been approximately
75%. With recruitment activity and job postings lower and job seeker
activity high during 2009, we were able to reduce the amount of spending on job
seeker marketing and still provide results that match our customers’
needs.
The
salaries, commissions, and benefits component of sales and marketing expense for
the U.S. businesses totaled $7.1 million for the six months ended June 30, 2010,
compared to $5.0 million during the same period in 2009, an increase of $2.1
million, or 41%. Increased commission and other incentive
compensation expense due to the increase in sales during the current period
contributed $1.6 million of this increase with the remainder coming from an
increase in sales and marketing personnel and credit card fees.
24
The
eFinancialCareers segment experienced an increase in sales and marketing expense
of $863,000 during the six month period ended June 30, 2010 compared to the same
period in 2009. Of this increase, $660,000 was from sales costs, which is driven
by increased commissions on higher sales. An increase in marketing
expense of $203,000 was due to investing in growing our resume database and to
win back customers lost during the economic downturn.
General
and Administrative Expenses
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Decrease
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
General
and administrative
|
$ | 9,176 | $ | 10,124 | $ | (948 | ) | -9.4 | % | |||||||
Percentage
of revenues
|
16.2 | % | 17.9 | % |
General
and administrative expenses for the three months ended June 30, 2010 were $9.2
million compared to $10.1 million for the same period in 2009, a decrease of
$948,000, or 9%. A decrease of $1.3 million was related to a reduction in
stock-based compensation expense due to certain options becoming fully vested
during 2009, and thus fully expensed in 2009. Offsetting this was an
increase in miscellaneous administrative expenses including senior bonus
compensation costs and professional fees incurred to acquire
WorldwideWorker.
Depreciation
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Increase
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Depreciation
|
$ | 2,079 | $ | 1,853 | $ | 226 | 12.2 | % | ||||||||
Percentage
of revenues
|
3.7 | % | 3.3 | % |
Depreciation
expense for the six month period ended June 30, 2010 was $2.1 million compared
to $1.9 million for the same period in 2009, an increase of $226,000, or 12%.
The increase was due to a higher depreciable fixed asset balance during the six
month period ended June 30, 2010 compared to the same period in 2009 primarily
due to software and capitalized development costs related to the site
enhancements made on Dice, ClearanceJobs, and AllHealthcareJobs.
Amortization
of Intangible Assets
Six
Months Ended June 30,
|
Percent
|
|||||||||||||||
2010
|
2009
|
Decrease
|
Change
|
|||||||||||||
(in
thousands, except percentages)
|
||||||||||||||||
Amortization
|
$ | 5,144 | $ | 7,908 | $ | (2,764 | ) | -35.0 | % | |||||||
Percentage
of revenues
|
9.1 | % | 14.0 | % |
Amortization expense for the six month
period ended June 30, 2010 was $5.1 million compared to $7.9 million for the
same period in 2009, a decrease of $2.8 million, or 35%. Amortization expense in
the six month period ended June 30, 2010 decreased by $3.7 million due to
certain intangible assets from the 2005 Dice acquisition and 2006
eFinancialCareers acquisition becoming fully amortized during 2009, partially
offset by $979,000 increase for additional amortization of intangible assets at
our recently acquired sites of AllHealthcareJobs and
WorldwideWorker.
Change
in Acquisition Related Contingencies
The
change in acquisition related contingencies for the six month period ended June
30, 2010 was a gain of $300,000. The contingent liability related to the
AllHealthcareJobs acquisition was reduced due to the sales performance of the
business and expectations of future sales being lower than the initial
assumptions.
Operating
Income
Operating
income for the six months ended June 30, 2010 was $12.5 million compared to
$13.4 million for the same period in 2009, a decrease of $0.9 million, or 6%.
The decrease is primarily the result higher operating expenses, offset by the
gain from the change in acquisition related contingencies. Operating
expenses have increased due to increased sales compensation expense from the
increased sales during the period and costs related to investments made in
product development, offset partially by lower amortization of intangible assets
and lower stock based compensation costs.
25
Interest
Expense
Interest
expense for the six months ended June 30, 2010 was $2.1 million compared to $3.6
million for the same period in 2009, a decrease of $1.5 million, or 41%. The
decrease in interest expense was due to lower borrowings outstanding in the six
months ended June 30, 2010, on average, as compared to the same period in 2009
due to payments made on the term loan portion of our Amended and Restated Credit
Facility. Payments totaling $31.2 million were made in 2009 and an
additional $20.6 million of payments were made during the six months ended June
30, 2010 on the term loan.
Interest
Income
Interest
income for the six months ended June 30, 2010 was $61,000 compared to $136,000
for the same period in 2009, a decrease of $75,000, or 55%. The decrease in
interest income was due to smaller average cash and marketable securities
balances during the six months ended June 30, 2010 as compared to the same
period in 2009. The smaller cash balance was primarily due to payments made on
our Amended and Restated Credit Facility.
Other
income
Other
income of $216,000 and $757,000 during the six months ended June 30, 2010 and
2009, respectively, resulted from a gain on an interest rate
hedges. The gains resulted from increases in the fair value of our
interest rate swap agreements. We have no swaps outstanding at June
30, 2010.
Income
Taxes
Six Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
(in
thousands, except
|
||||||||
percentages)
|
||||||||
Income
from continuing operations before income taxes
|
$ | 10,712 | $ | 10,698 | ||||
Income
tax expense
|
3,723 | 4,064 | ||||||
Effective
tax rate
|
34.8 | % | 38.0 | % |
Income
tax expense for the six month period ended June 30, 2010 was $3.7 million
compared to $4.1 million for the same period in 2009 and the effective tax rate
decreased to 34.8% from 38.0%. The six months ended June 30, 2009 included
$142,000 of interest charged by the United Kingdom related to the timing of
estimated tax payments made in 2007 and 2008. Additionally, the rate
was lower in the current period as compared to the prior year period due to a
change in the mix of U.S. and non-U.S. income.
Liquidity
and Capital Resources
We have
shown our cash flows for the six month periods ended June 30, 2010 and 2009 in
the table below.
For
the six months ended
|
||||||||
June
30,
|
||||||||
2010
|
2009
|
|||||||
Cash
provided by operating activities
|
$ | 22,165 | $ | 10,915 | ||||
Cash
used for investing activities
|
(7,851 | ) | (1,394 | ) | ||||
Cash
used for financing activities
|
(19,876 | ) | (30,597 | ) |
Operating
Activities
Net cash
provided by operating activities primarily consists of net income adjusted for
certain non-cash items, including depreciation, amortization, changes in
deferred income taxes, share based compensation, gain on interest rate hedges,
change in acquisition related contingencies and for the effect of changes in
working capital. Net cash provided by operating activities was
$22.2 million and $10.9 million for the six month periods ended June 30,
2010 and 2009, respectively. The increase in cash provided by operating
activities during these periods was primarily due to an increase in deferred
revenue during the current period. Deferred revenue increased by $6.8 million
during the six months ended June 30, 2010 compared to a decrease of $6.5 million
in the comparable period in 2009. The increase in deferred revenue is
due to an increase in sales during the six months ended June 30,
2010.
26
Investing
Activities
Cash used
for investing activities during the six month period ended June 30, 2010 was
$7.9 million compared to $1.4 million for the comparable period in
2009. Cash used for investing activities for the six month period
ended June 30, 2010 consisted of $6.0 million for the purchase of
WorldwideWorker, $2.5 million of capital expenditures, $2.4 million for
purchases of marketable securities, partially offset by maturities and sales of
marketable securities of $3.1 million. Cash used for investing
activities for the six month period ended June 30, 2009 consisted of $2.7
million for the acquisition of AllHealthcareJobs.com, $1.5 million of capital
expenditures, $1.2 million of purchases of marketable securities, partially
offset by maturities of marketable securities of $4.0 million. Capital
expenditures are generally comprised of computer hardware, software, and website
development costs.
Financing
Activities
Cash used
for financing activities during the six month periods ended June 30, 2010 and
2009 of $19.9 million and $30.6 million, respectively, was related primarily to
payments on the term portion of our Amended and Restated Credit
Facility.
Amended
and Restated Credit Facility
In March
2007, we entered into our Amended and Restated Credit Facility which provides
for a revolving facility of $75.0 million and a term loan facility of $125.0
million, both of which mature in March 2012. In May 2010, the Amended and
Restated Credit Facility was amended to allow for the purchase of
WorldwideWorker and to reduce the revolving credit facility from $75.0 million
to $65.0 million. Quarterly payments of $250,000 are due on the term loan
facility. We may prepay our revolving facility or the term loan facility at any
time without penalty. Payments of principal on the term loan facility result in
permanent reductions to that facility.
During
the six months ended June 30, 2010, we made payments on our term loan facility
of $20.6 million, resulting in total borrowings at June 30, 2010 of $29.7
million. Cash and marketable securities as of June 30, 2010 totaled
approximately $40.4 million.
Our
existing and future domestic subsidiaries unconditionally guaranteed our
borrowings under the Amended and Restated Credit Facility. The obligations under
the Amended and Restated Credit Facility and the guarantees are secured by
substantially all of the individual assets of each of the borrowers and
guarantors. Our Amended and Restated Credit Facility also contains certain
financial covenants, including a senior leverage ratio, fixed charge coverage
ratio, and a minimum adjusted EBITDA. The Company was in compliance with all
such covenants as of June 30, 2010.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonable likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to
investors.
27
Commitments
and Contingencies
The
following table presents certain minimum payments due under contractual
obligations with minimum firm commitments as of June 30, 2010:
Payments by
period
|
|||||||||||||||||||||
Total
|
July
1, 2010
through
December
31,
2010
|
|
2011-2012
|
2012-2013
|
Thereafter
|
||||||||||||||||
(in
thousands)
|
|||||||||||||||||||||
Term
loan facility
|
$ | 29,700 | $ | 500 | $ | 29,200 | $ | - | $ | - | |||||||||||
Operating
lease obligations
|
5,443 | 640 | 1,933 | 768 | 2,102 | ||||||||||||||||
Total
contractual obligations
|
$ | 35,143 | $ | 1,140 | $ | 31,133 | $ | 768 | $ | 2,102 |
We make commitments to
purchase advertising from online vendors which we pay for on a monthly basis. We
have no long-term obligations to purchase a fixed or minimum amount with these
vendors.
Our
principal commitments consist of obligations under operating leases for office
space and equipment and long-term debt. As of June 30, 2010, we had $29.7
million outstanding under our Amended and Restated Credit Facility. Interest
payments are due monthly on a portion of the facility and at varying, specified
periods (to a maximum of three months) for the remaining portion. See Note 7
“Indebtedness” in our condensed consolidated financial statements for additional
information related to the Amended and Restated Credit Facility.
Future
interest payments on our term loan and revolving facilities are variable due to
our interest rate being based on LIBOR or a reference rate.
We have
contingent payments related to the AllHealthcareJobs and WorldwideWorker
acquisitions to be paid in the future upon the achievement of certain operating
and financial goals over the two year period ending December 31, 2011. As
of June 30, 2010, a liability of $3.0 million is recorded for these
contingencies.
As of
June 30, 2010, we have recorded approximately $5.8 million of unrecognized tax
benefits as liabilities, and we are uncertain as to if or when such amounts may
be settled. Related to the unrecognized tax benefits considered permanent
differences, we have also recorded a liability for potential penalties and
interest. Included in the balance of unrecognized tax benefits at June 30, 2010,
are $5.8 million of tax benefits that, if recognized, would affect the effective
tax rate.
Recent
Accounting Pronouncements
For a
discussion of new accounting pronouncements affecting the Company, refer to Note
2 of Notes to Condensed Consolidated Financial Statements.
Cyclicality
The labor
market and certain of the industries that we serve have historically experienced
short-term cyclicality. However, we believe that the economic and strategic
value provided by online career websites has led to overall growth in the use of
these services during the most recent labor market cycle, and has somewhat
lessened the impact of cyclicality on our businesses as compared to traditional
offline competitors.
The
significant increase in the unemployment rate and general reduction in
recruitment activity during late 2008 and throughout 2009 negatively impacted
our revenues and income. We began to see improvement in recruitment activity
during the latter half of 2009 and that improvement has continued in the second
quarter in 2010. During the first half of 2010, total revenues were essentially
flat with the first half of 2009. Our revenues in the second quarter
of 2010 are up 10% over the same period in 2009 and were up 12% over the first
quarter of 2010. We saw an increase in the number of customers served
at Dice.com from approximately 6,400 customers at March 31, 2010 to
approximately 6,750 customers at June 30, 2010.
Any
slowdown in recruitment activity that occurs will negatively impact our revenues
and results of operations. Alternatively, a decrease in the unemployment rate or
a labor shortage generally means that employers (including our customers) are
seeking to hire more individuals, which would generally lead to more job
postings and have a positive impact on our revenues and results of
operations. Based on historical trends, improvements in labor markets
and the need for our services generally lag behind overall economic
improvements. Additionally, there has historically been a lag from
the time customers begin to increase purchases of our services and the impact on
our revenues due to the recognition of revenue occurring over the length of the
contract, which can be several months to a year.
28
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
We have
exposure to financial market risks, including changes in interest rates, foreign
currency exchange rates and other relevant market prices.
Foreign
Exchange Risk
We
conduct business serving 18 markets, in five languages across Europe, Asia,
Australia, and Canada using the eFinancialCareers name. Our WorldwideWorker
business is conducted in certain of the major energy regions of the world. Our
revenues earned outside the United States and collected in local currency for
the six months ended June 30, 2010 and 2009 were approximately 23% and 20%,
respectively. We are subject to risk for exchange rate fluctuations between such
local currencies and the pound sterling and the subsequent translation of the
pound sterling to U.S. dollars. We currently do not hedge currency risk because
our Amended and Restated Credit Facility places limitations on our ability to do
so. A decrease in foreign exchange rates during a period would result in
decreased amounts reported in our Condensed Consolidated Balance Sheets,
Condensed Consolidated Statements of Operations and of Cash Flows. For example,
if foreign exchange rates between the pound sterling and U.S. dollar decreased
by 1.0%, the impact on our revenues during the six months ended June 30, 2010
would have been a decrease of approximately $130,000.
The
financial statements of our non-U.S. subsidiaries are translated into U.S.
dollars using current exchange rates, with gains or losses included in the
cumulative translation adjustment account, which is a component of stockholders’
equity. As of June 30, 2010 and December 31, 2009 our cumulative
translation adjustment, net of tax, decreased stockholders’ equity by $14.9
million and $10.0 million, respectively. The change from December 31, 2009 to
June 30, 2010 is primarily attributable to the strengthening of the U.S. dollar
against the pound sterling.
Interest
Rate Risk
We have
interest rate risk primarily related to borrowings under our Amended and
Restated Credit Facility and related to our interest rate swap
agreement. Borrowings under our Amended and Restated Credit Facility
bear interest, at our option, at either the LIBOR rate plus 3.25% or a reference
rate plus 1.75%. As of June 30, 2010, we had outstanding borrowings of $29.7
million under our Amended and Restated Credit Facility. If interest rates
increased by 1.0%, interest expense for the remainder of 2010 on our current
borrowings would not change. Interest expense on our LIBOR based borrowings is
calculated with reference to a 3.0% LIBOR floor. Current LIBOR rates are more
than 1.0% below the floor on our LIBOR based borrowings. Therefore,
we would incur no additional expense if interest rates were to rise 1.0% because
the 3.0% LIBOR floor would still be in effect, nor would we incur additional
expense until LIBOR rates exceeded 3.0%.
We also
have interest rate risk related to our portfolio of marketable securities and
money market accounts. Our marketable securities and money market accounts will
produce less income than expected if market interest rates fall.
ITEM 4.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
We have
established a system of controls and other procedures designed to ensure that
information required to be disclosed in our periodic reports filed under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified by the
Exchange Act and in the Securities and Exchange Commission’s rules and forms.
These disclosure controls and procedures have been evaluated under the direction
of our Chief Executive Officer and Chief Financial Officer for the period
covered by this report. Based on such evaluations, the Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”) have concluded that the disclosure
controls and procedures are effective to provide reasonable assurance that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified by the SEC,
and that such information is accumulated and communicated to management,
including the CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosure.
Changes
in Internal Controls
No change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
under the Exchange Act) occurred during the quarter ended June 30, 2010 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
29
PART
II — OTHER INFORMATION
ITEM 1.
|
LEGAL
PROCEEDINGS
|
From time
to time we may be involved in disputes or litigation related to claims arising
out of our operations. We are not currently a party to any material legal
proceedings.
ITEM 1A.
|
RISK
FACTORS
|
We have
disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K the
risk factors which materially affect our business, financial condition or
results of operations. There have been no material changes from the risk factors
previously disclosed. You should carefully consider the risk factors set forth
in the Annual Report on Form 10-K and the other information set forth elsewhere
in this Quarterly Report on Form 10-Q. You should be aware that these risk
factors and other information may not describe every risk facing our Company.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
ITEM 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
Unregistered
Sales of Equity Securities
None.
Use
of Proceeds
|
None.
|
ITEM 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM 4.
|
(REMOVED
AND RESERVED)
|
ITEM 5.
|
OTHER
INFORMATION
|
None.
ITEM 6.
|
EXHIBITS
|
|
||
10.1*
|
Waiver
and Amendment No. 3 to Amended and Restated Financing
Agreement
|
|
31.1*
|
Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
|
|
31.2*
|
Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
|
|
32.1*
|
Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002.
|
|
32.2*
|
Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002.
|
*
|
Filed
herewith.
|
30
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
DICE HOLDINGS, INC.
|
|
Registrant
|
|
DATE: July 27, 2010
|
|
/s/ Scot W. Melland
|
|
Scot W. Melland
|
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Michael P. Durney
|
|
Michael P. Durney, CPA
|
|
Senior Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
|
31
EXHIBIT
INDEX
10.1*
|
Waiver
and Amendment No. 3 to Amended and Restated Financing
Agreement
|
|
31.1*
|
Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
|
|
31.2*
|
Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
|
|
32.1*
|
Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002.
|
|
32.2*
|
Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of
2002.
|
*
|
Filed
herewith.
|
32