IGATE CORP - FORM 10-Q - July 28, 2010

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file	filename
EX-31.1 - SECTION 302 CEO CERTIFICATION - IGATE CORP	dex311.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - IGATE CORP	dex322.htm
EX-10.1 - FORM OF PERFORMANCE SHARE AWARD AGREEMENT - IGATE CORP	dex101.htm
EX-10.3 - PERFORMANCE SHARE AWARD AGREEMENT - IGATE CORP	dex103.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - IGATE CORP	dex321.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - IGATE CORP	dex312.htm
EX-10.2 - PERFORMANCE SHARE AWARD AGREEMENT - IGATE CORP	dex102.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

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-21755

iGATE CORPORATION

(Exact name of registrant as specified in its charter)


PENNSYLVANIA		25-1802235
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6528 Kaiser Drive Fremont, CA		94555
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (510) 896-3015

Securities registered pursuant to Section 12(g) of the Act: None

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 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.:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of June 30, 2010 was 55,557,299.

iGATE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2010

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements:

	—Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2010 and 2009	3

	—Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009	4

	—Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009	5

	—Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION		25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 4.	(Removed and Reserved)	25

Item 6.	Exhibits	25

SIGNATURES		26

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

iGATE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2010		2009			2010		2009
Revenues	$	66,849	$	46,831		$	124,739	$	91,640
Cost of revenues (exclusive of depreciation and amortization)		41,390		28,943			76,068		57,662

Gross margin		25,459		17,888			48,671		33,978
Selling, general and administrative		11,843		8,852			21,848		17,438
Depreciation and amortization		2,126		1,867			4,348		3,770

Income from operations		11,490		7,169			22,475		12,770
Other income (expense), net		976		(987	)		1,808		(1,740	)

Income before income taxes		12,466		6,182			24,283		11,030
Income tax expense (benefit)		1,312		126			1,515		(27	)

Net income	$	11,154	$	6,056		$	22,768	$	11,057


Distributed earnings per share:
Common stock	$	—	$	—		$	0.11	$	0.11
Unvested restricted stock		—		—			0.11		0.11

Basic earnings per share:
Common stock	$	0.20	$	0.11		$	0.41	$	0.20
Unvested restricted stock		0.20		0.11			0.41		0.20

Diluted earnings per share	$	0.20	$	0.11		$	0.40	$	0.20

See accompanying notes.

iGATE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)


	June 30, 2010 (unaudited)			December 31, 2009 (audited)
ASSETS
Current assets:
Cash and cash equivalents	$	18,854		$	29,565
Short-term investments		85,559			67,192
Accounts receivable, net		32,941			24,533
Unbilled revenues		13,613			9,636
Prepaid expenses and other current assets		4,702			4,628
Foreign exchange derivative contracts		381			—
Prepaid income taxes		2,247			4,247
Deferred tax assets		1,476			31
Receivable from Mastech Holdings Inc.		135			87

Total current assets		159,908			139,919

Deposits and other assets		6,465			4,482
Property and equipment, net		43,250			42,682
Deferred tax assets		9,947			8,474
Intangible assets, net		1,710			2,086
Goodwill		30,570			30,517

Total assets	$	251,850		$	228,160

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,135		$	1,515
Accrued payroll and related costs		14,135			14,173
Other accrued liabilities		20,711			18,003
Foreign exchange derivative contracts		—			1,097
Restructuring reserve		56			101
Deferred revenue		865			918

Total current liabilities		37,902			35,807
Other long-term liabilities		1,086			1,035

Total liabilities		38,988			36,842


Shareholders’ equity:
Preferred shares, without par value: 20,000,000 shares authorized, 1 share held in treasury		—			—
Common shares, par value $0.01 per share:
100,000,000 shares authorized, and 56,547,401 and 56,126,209 shares issued as of June 30, 2010 and December 31, 2009, respectively and 55,557,299 and 55,136,107 shares outstanding as of June 30, 2010 and December 31, 2009, respectively		565			561
Common shares held in treasury, at cost, 990,102 shares		(14,714	)		(14,714	)
Additional paid-in capital		183,023			180,278
Retained earnings		54,920			38,228
Accumulated other comprehensive loss		(10,932	)		(13,035	)

Total shareholders’ equity		212,862			191,318

Total liabilities and shareholders’ equity	$	251,850		$	228,160

See accompanying notes.

iGATE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)


	Six Months ended June 30,
	2010			2009
Cash Flows From Operating Activities:
Net income	$	22,768		$	11,057
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		4,348			3,770
Stock based compensation		2,999			2,517
Realized gain on investments		(1,130	)		(1,191	)
Provision for doubtful debts		(34	)		252
Deferred income taxes		(2,937	)		(1,397	)
Gain on sale of fixed assets		(1,137	)		(2	)
Gain on sale of investments in affiliate		(568	)		—
Deferred rent		77			55
Working capital items:
Accounts receivable and unbilled revenue		(12,979	)		4,823
Prepaid and other assets		(129	)		1,264
Accounts payable		33			(937	)
Accrued and other liabilities		5,019			(304	)
Deferred revenue		(41	)		189
Restructuring reserve		(45	)		(271	)

Net cash flows provided by operating activities		16,244			19,825


Cash Flows From Investing Activities:
Purchase of property and equipment		(5,437	)		(5,207	)
Sale of property and equipment		2,896			12
Purchase of investments		(44,025	)		(35,017	)
Sale of investments		25,158			20,135
Receipts from (payments for) lease deposits		181			(218	)
Proceeds from sale of investments in affiliates		568			—

Net cash flows used in investing activities		(20,659	)		(20,295	)


Cash Flows From Financing Activities:
Payments on capital leases		(94	)		(84	)
Dividends paid		(6,076	)		(5,960	)
Purchase of subsidiary’s stock		(22	)		(54	)
Net proceeds from exercise of stock options		323			240
Payment of withholding taxes related to restricted stock		(865	)		—
Tax benefits related to stock option exercises		288			165

Net cash flows used in financing activities		(6,446	)		(5,693	)

Effect of currency translation		150			(451	)


Net change in cash and cash equivalents		(10,711	)		(6,614	)
Cash and cash equivalents, beginning of period		29,565			30,878

Cash and cash equivalents, end of period	$	18,854		$	24,264

See accompanying notes

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009

(Amounts in thousands)

1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of iGATE Corporation (“iGATE” or the “Company”) have been prepared by management in accordance with U.S. generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation have been included.

The accompanying balance sheet and financial information as of December 31, 2009 is derived from audited financial statements but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2009.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates

Preparing financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. Interim results are not necessarily indicative of results for a full year.

2. Goodwill and Intangible Assets

The changes in the carrying value of goodwill for the six months ended June 30, 2010 (in thousands):


	Amount

Goodwill as of December 31, 2009	$	30,517
Foreign currency translation effect		53

Goodwill as of June 30, 2010	$	30,570

Intangible assets relate to customer relationships. The changes in the carrying value during for the six months ended June 30, 2010 (in thousands):


	Amount

Intangible assets as of December 31, 2009	$	2,086
Foreign currency translation effect		10
Amortization		(386	)

Intangible assets as of June 30, 2010	$	1,710

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

Amortization expenses related to identifiable intangible assets was $0.4 million and $0.5 million for the six months ended June 30, 2010 and 2009, respectively. Future estimated annual amortization is as follows (in thousands):


	Amount
Remainder of 2010	$	382
2011		764
2012		564

	$	1,710

3. Income Taxes

The provision (benefit) for income taxes, as shown in the accompanying Condensed Consolidated Financial Statements, consists of the following (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Current provision :
Federal	$	864		$	—		$	895		$	—
State		100			44			113			62
Foreign		1,779			999			3,425			1,445

Total current provision		2,743			1,043			4,433			1,507

Deferred benefit :
Federal		—			—			—			(12	)
State		—			—			—			(2	)
Foreign		(1,431	)		(917	)		(2,918	)		(1,520	)

Total deferred benefit		(1,431	)		(917	)		(2,918	)		(1,534	)

Total provision (benefit) for income taxes	$	1,312		$	126		$	1,515		$	(27	)

The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes were as follows:


	Three Months Ended June 30, 2010					Three Months Ended June 30, 2009
Income taxes computed at the federal statutory rate	$	4,363		35.0	%	$	2,102		34.0	%
State income taxes, net of federal tax benefit		66		0.5			29		0.5
Benefit for untaxed foreign income, subject to tax holiday		(4,127	)	(33.1	)		(1,984	)	(32.1	)
Foreign taxes at other than U.S. statutory rate		(79	)	(0.6	)		(205	)	(3.3	)
Unbenefited tax losses		702		5.6			170		2.7
Other—net		387		3.1			14		0.2

	$	1,312		10.5	%	$	126		2.0	%

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)


	Six Months Ended June 30, 2010					Six Months Ended June 30, 2009
Income taxes computed at the federal statutory rate	$	8,499		35.0	%	$	3,750		34.0	%
State income taxes, net of federal tax benefit		75		0.3			40		0.4
Benefit for untaxed foreign income, subject to tax holiday		(7,507	)	(31.0	)		(4,222	)	(38.3	)
Foreign taxes at other than U.S. statutory rate		(194	)	(0.8	)		(19	)	(0.2	)
Unbenefited tax losses		334		1.4			417		3.8
Other—net		308		1.3			7		0.1

	$	1,515		6.2	%	$	(27	)	(0.2	)%

Under the Indian Income Tax Act, 1961, our subsidiary iGATE Global Solutions Ltd. (“iGS”) is eligible to claim a tax holiday for ten consecutive assessment years on profits derived from the export of software services from divisions registered under the Software Technology Parks at Bangalore and Noida. For the three and six months ended June 30, 2010, the tax holiday benefits were $3.1 million and $5.6 million, respectively, as compared to $2.0 million and $4.2 million for the three and six months ended June 30, 2009, respectively, when calculated at the statutory US rate. The majority of the remaining benefits will extend through March 2011. Non-operating income, such as interest income and capital gains income along with operating income to the extent of expiry of tax holiday is not included in the tax holiday, and has been considered as part of our income tax provision.

In 2009, iGS set up units in Chennai and Hyderabad Special Economic Zone (“SEZ”). Under the Indian Income Tax Act, 1961, iGS is eligible to claim income tax holiday of 100% for the initial five consecutive assessment years followed by 50% for the subsequent ten consecutive assessment years on the profits derived from the export of software services from the divisions registered under the SEZ. For the three and six months ended June 30, 2010, the tax holiday resulted in income tax benefits of $1.0 million and $1.9 million, respectively, when calculated at the US statutory rates.

4. Earnings Per Share

The Company computes earnings per share in accordance with ASC Topic 260, “Earnings per share” and ASC Topic 260-10-45 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. Basic earnings per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net income by the weighted average number of shares of common stock and unvested restricted stock outstanding. Diluted earnings per share is computed using the weighted average number of common stock and unvested restricted stock plus the potentially dilutive effect of common stock equivalents

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

Earnings per share for the common stock and the unvested restricted stock under the two class method are presented below (dollars and shares in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Net income	$	11,154	$	6,056	$	22,768	$	11,057

Less: Dividends paid on
Common stock		—		—		6,076		5,894
Unvested restricted stock		—		—		60		66

		—		—		6,136		5,960

Undistributed Income	$	11,154	$	6,056	$	16,632	$	5,097

Basic and diluted allocation of undistributed income :
Common stock	$	11,082	$	5,989	$	16,497	$	5,040
Unvested restricted stock		72		67		135		57

	$	11,154	$	6,056	$	16,632	$	5,097

Weighted average shares outstanding:
Common stock		55,447		54,264		55,234		54,224
Unvested restricted stock		363		611		455		611

		55,810		54,875		55,689		54,835

Weighted average common stock outstanding		55,447		54,264		55,234		54,224
Dilutive effect of stock options outstanding		1,670		1,175		1,707		1,066

Dilutive weighted average shares outstanding		57,117		55,439		56,941		55,290

The number of outstanding options to purchase common shares for which the option exercise prices exceeded the average market price of the common shares aggregated 0.3 million and 0.7 million shares for the three months ended June 30, 2010 and 2009, respectively. The number of outstanding options to purchase common shares for which the option exercise prices exceeded the average market price of the common shares aggregated 0.4 million and 0.8 million shares for the six months ended June 30, 2010 and 2009, respectively. These options were excluded from the computation of diluted earnings per share under the treasury stock method.

5. Short Term Investments


	As of June 30, 2010
	Carrying Value		Unrealized Gain			Fair Value
Money market mutual funds	$	85,300	$	259		$	85,559


	As of December 31, 2009
	Carrying Value		Unrealized Loss			Fair Value
Money market mutual funds	$	67,579	$	(387	)	$	67,192

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

6. Comprehensive Income

The components of comprehensive income (loss), net of tax, were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net income	$	11,154		$	6,056		$	22,768		$	11,057
Unrealized gain (loss) on investments		290			(1	)		646			(616	)
Unrecognized actuarial (loss) gain on defined benefit plan		(9	)		(126	)		84			(120	)
Change in fair value of derivative contracts		(976	)		4,756			1,649			4,553
Foreign currency translation		(6,673	)		7,890			(276	)		2,158

Comprehensive income	$	3,786		$	18,575		$	24,871		$	17,032

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss was as follows (in thousands):


	As of
	June 30, 2010			December 31, 2009
Unrealized gain (loss) on investment	$	259		$	(387	)
Actuarial gain (loss) relating to defined benefit plan		39			(45	)
Unrealized gain (loss) on foreign exchange derivative contracts		332			(1,317	)
Loss on foreign currency translation		(11,562	)		(11,286	)

	$	(10,932	)	$	(13,035	)

7. Derivative Instruments and Hedging Activities

As part of the Company’s on-going business operations, certain assets and forecasted transactions are exposed to foreign currency risks due to fluctuations in exchange rate between the Rupee, CAD and USD. The objective for holding derivatives is to eliminate or reduce the impact of these exposures.

The Company enters into forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates on inter-company transactions and forecasted transactions denominated in foreign currencies. Contracts are designated as cash flow hedges if they satisfy the criteria for hedge accounting under ASC Topic 815 “Accounting for Derivative Instruments and Hedging Activities” The effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gain or loss of hedging instruments are recognized in the earnings of each period and are included in other income (expense), net.

The Company documents all relationships between hedging instruments including the risk management objectives and strategy for each hedge transaction. In addition, formal assessment is done for effectiveness testing both at the inception of the hedge and on a quarterly basis. If it is determined that a derivative or a portion thereof is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company will prospectively discontinue hedge accounting with respect to that derivative.

In all situations in which hedge accounting is discontinued and the derivative is retained, the derivative is continued to be carried at its fair value on the balance sheet and any subsequent change in its fair value is recognized in the consolidated statement of income.

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

The following table presents information related to foreign currency contracts held:

OUTSTANDING HEDGE TRANSACTIONS AS OF JUNE 30, 2010 (in thousands)


	Maturity Date Ranges	Strike Price At Rupee Rate Ranges	Amount		Net Unrealized Gains (Losses) June 30, 2010
FORWARD CONTRACTS USD
From:	31-Jul-10	49.98
To:	31-Aug-10	50.20
Subtotal			$	2,000	$	146

CURRENCY OPTION CONTRACTS USD
From:	26-Jul-10	40.08
To:	30-Jun-11	52.36
Subtotal			$	61,350		(249	)

CURRENCY OPTION CONTRACTS CAD
From:	28-Jul-10	44.25
To:	27-Jun-11	45.70
Subtotal			$	33,390		435

					$	332

The forward contracts as of June 30, 2010 will all mature by August 31, 2010. As each contract matures, USDs are sold at each contracted strike price and equivalent Indian Rupees received. The outstanding contracts meet the qualifying criteria to receive hedge accounting and have been deemed to be effective. As a result, the Company has recorded accumulated other comprehensive gain of $0.1 million and $0.2 million as of June 30, 2010 and December 31, 2009, respectively.

The option contracts as of June 30, 2010 will all mature by June 30, 2011. As each contract matures, the Company will sell USDs and CADs at each contracted strike price depending upon prevailing Rupee exchange rates. The outstanding contracts meet the qualifying criteria to receive hedge accounting and have been deemed to be effective. As a result, the Company has recorded accumulated other comprehensive gain of $0.2 million and accumulated other comprehensive loss of $1.5 million as of June 30, 2010 and December 31, 2009, respectively. The unamortized premium on options of $0.05 million and $0.2 million is disclosed as part of derivative asset and net of derivative liability as of June 30, 2010 and December, 31, 2009, respectively in the consolidated balance sheet.

The estimated net amount of existing gains as of June 30, 2010 that is expected to be reclassified from accumulated other comprehensive income into earnings within next 12 months is $0.3 million.

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

The effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the three months ended June 30, 2010 (in thousands):

Derivatives as per ASC Topic
815

Amount of
Gain/(Loss)
recognized in OCI
on Derivative

Location of

Gain/(Loss)
reclassified from
Accumulated OCI

into Income

Amount of Gain/
(Loss)
reclassified from
Accumulated OCI
into Income

Location of

Gain/(Loss)

reclassified in

Income on

Derivative

Amount of Gain /
(Loss)
Reclassified from
Accumulated OCI
into Income

(Effective Portion)

(Ineffective Portion and amount excluded

from effectiveness testing)

June 30, 2010

Foreign Exchange Contracts

332

Other Income/ (expenses)

(257

)

Other Income/ (expenses)

—

The effect of Derivative Instruments on the Condensed Consolidated Statements of Income for the six months ended June 30, 2010 (in thousands):

Derivatives as per ASC Topic
815

Amount of
Gain/(Loss)
recognized in OCI
on Derivative

Location of

Gain/(Loss)
reclassified from
Accumulated OCI into
Income

Amount of
Gain/(Loss)
reclassified from
Accumulated OCI
into Income

Location of

Gain/(Loss)

reclassified in

Income on

Derivative

Amount of Gain /
(Loss)
Reclassified from
Accumulated OCI
into Income

(Effective Portion)

(Ineffective Portion and amount excluded from
effectiveness testing)

June 30, 2010

Foreign Exchange Contracts

332

Other Income/ (expenses)

(1,015

)

Other Income/ (expenses)

—

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets (in thousands):


	June 30, 2010			December 31, 2009
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments under ASC Topic 815

Foreign Exchange Contracts	Current Assets	$	332	Current Liabilities	$	1,317


Total Derivatives designated as hedging instruments under ASC Topic 815		$	332		$	1,317

8. Fair Value Measurements

ASC Topic 820 “Fair Value Measurements” establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Includes other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In accordance with ASC Topic 820, the Company measures cash equivalents, short term investments, non convertible debentures and foreign currency derivative contracts at fair value. Cash equivalents and short term investments are primarily classified within Level 1 or Level 2. This is because the cash equivalents and short term investments are valued primarily using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The foreign currency derivative contracts and non convertible debentures are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets or alternative pricing sources and models utilizing market observable inputs.

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

Assets and liabilities measured at fair value are summarized below (in thousands):


Description	June 30, 2010		Fair value measurement at reporting date using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets
Short term investments:
Money market mutual funds	$	85,559	$	85,559	$	—	$	—
Foreign currency derivative contracts		381		—		381		—
Non convertible debentures		3,230		—		3,230		—

Total assets	$	89,170	$	85,559	$	3,611	$	—


Description	December 31, 2009		Fair value measurement at reporting date using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Assets
Short term investments:
Money market mutual funds	$	67,192	$	67,192	$	—	$	—

Total assets	$	67,192	$	67,192	$	—	$	—

Liabilities
Other current liabilities
Foreign currency derivative contracts	$	1,097	$	—	$	1,097	$	—

Total liabilities	$	1,097	$	—	$	1,097	$	—

ASC Topic 820, “Fair Value Measurements” provides additional guidance on estimating fair value when the volume and level of transaction activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. The ASC Topic 820 also provides additional guidance on circumstances that may indicate that a transaction is not orderly. The application of ASC Topic 820 did not have a significant impact on earnings or the financial position for the six months ended June 30, 2010.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2010-06, “Fair Value Measurements and Disclosures”. The amendments in this ASU apply to all entities that are required to make disclosure about the recurring and nonrecurring fair value measurements. An entity is required to disclose the amounts of significant amount of transfers in, out and valuation techniques of level 1, level 2 and level 3 fair value measurements and describe the reasons for the transfers; and also present separately the information about the purchases, sales, issuance and settlements in significant unobservable inputs in level 3 on gross basis. The guidance provided in this ASU is effective for the first reporting period (including interim periods) beginning after issuance. The Company adopted this ASU and noted that it did not have any impact on its consolidated financial statements.

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

9. Employee Benefits

Defined Contribution Plan

The Company’s eligible employees in India participate in the Employees’ Provident Fund (the “Provident Fund”), which is a defined contribution plan. The employee and the Company make monthly contributions of a specified percentage of salary to the Provident Fund, which is administered by the prescribed authority in India. The aggregate contributions along with interest thereon are paid at retirement, death, incapacitation or termination of employment. The Company’s contribution to the Provident Fund for the three months ended June 30, 2010 and 2009 was $0.6 million and $0.4 million, respectively. The Company’s contribution for the six months ended June 30, 2010 and 2009 it was $1.2 million and $0.9 million, respectively.

401(k) Plan

Eligible United States employees of the Company participate in an employee retirement savings plan (“the Plan”) under Section 401(k) of the United States Internal Revenue Code. The Plan allows for employees to defer a portion of their annual earnings on a pre-tax basis through voluntary contributions to the Plan. The Plan does not provide for any Company matching.

Defined Benefit Plan

The Company provides for gratuity, a defined benefit retirement plan covering eligible employees in India. The plan provides a lump sum payment to the vested employees at retirement, death, incapacitation or termination of employment subject to specified period of service, of an amount based on the respective employees’ salary and the tenure of employment. Liabilities with regard to the plan are determined by actuarial valuation. The contributions are made to the Company administered trust and managed by a third party fund manager.

The following table sets forth the net periodic cost recognized by the Company in respect of such plan.


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net periodic plan cost
Service cost	$	289		$	413		$	504		$	588
Interest cost		51			40			103			62
Expected return on plan asset		(54	)		(53	)		(108	)		(76	)
Recognized net actuarial (gain) loss		(11	)		2			(6	)		1

Net periodic plan cost for the period	$	275		$	402		$	493		$	575

10. Share-based compensation

During the three and six months ended June 30, 2010, the Company granted 295,000 and 479,238 stock options, respectively and 5,000 and 250,733 restricted stock awards, respectively. During the three and six months ended June 30, 2009, the Company granted nil and 6,000 stock options, respectively, and nil and 60,750 restricted stock awards, respectively.

The dividends paid on unvested restricted stock awards are charged to compensation cost. For the six months ended June 30, 2010 and 2009, the Company recorded $0.06 million and $0.07 million, respectively, as compensation cost for dividends paid on shares of unvested restricted stock.

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

Share-based compensation expense recorded in income from operations during the three and six months ended June 30, 2010 and 2009 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Share-based compensation recorded in
—Cost of revenues	$	415	$	512	$	859	$	1,118
—Selling, general and administrative expense		1,385		698		2,200		1,473

Total share-based compensation expense	$	1,800	$	1,210	$	3,059	$	2,591

During the three months ended June 30, 2010 and 2009, the Company issued 0.4 million and 0.23 million shares, respectively upon exercise of stock options and awards. During the six months ended June 30, 2010 and 2009, the Company issued 0.5 million and 0.3 million shares, respectively upon exercise of stock options and awards.

11. Other income (expense), net

Components of other income (expense) for the three and six months ended June 30, 2010 and 2009 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Investment income	$	722		$	915		$	1,193		$	1,826
Interest expense		(14	)		(16	)		(33	)		(33	)
Foreign exchange gain (loss), net		243			(2,001	)		(1,078	)		(3,778	)
Gain on sale of fixed assets		19			—			1,137			—
Gain on sale of investments in affiliate		—			—			568			—
Other		6			115			21			245

Other income (expense), net	$	976		$	(987	)	$	1,808		$	(1,740	)

12. Concentration of revenues

The following is a concentration of iGATE revenues greater than 10% by customer for the periods shown:


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Royal Bank of Canada	36	%	26	%	35	%	24	%
General Electric Company	20	%	24	%	20	%	24	%

iGATE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

JUNE 30, 2010 AND 2009

(Amounts in thousands)

13. Commitments

Capital commitments

As of June 30, 2010, the Company has open purchase orders totaling $ 5.6 million to purchase property and equipment.

Bank guarantees

As of June 30, 2010, guarantees provided by banks on behalf of iGS to customs authorities aggregated to $0.4 million. These guarantees have a remaining expiry term of approximately one to two years.

Other commitments

The Company’s business process delivery centers in India are 100% Export Oriented units or Software Technology Parks of India units (“STPI”) under the STPI guidelines issued by the Government of India. These units are exempted from customs, central excise duties, and levies on imported and indigenous capital goods, stores, and spares. The Company has executed legal undertakings to pay custom duty, central excise duty, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores, and spares consumed duty free, in the event that certain terms and conditions are not fulfilled.

The Company has entered into a service agreement with a customer that provides a customer the option, exercisable at any time by providing 60 days’ notice to the Company to acquire an equity stake of up to 7% of the outstanding voting shares at fair market value. The fair market value is the volume weighted average trading price of the Company’s shares on the NASDAQ National Market for the five consecutive trading days immediately before the date on which the customer delivers its notice under the option. The option does not restrict the customer in any way from buying the Company shares in the open market.

14. Recently Issued Accounting Pronouncements

In October 2009, the FASB issued ASU No. 2009-13 “Revenue recognition—Multiple deliverable revenue arrangements”. The ASU provides amendments to the criteria in “Revenue recognition—multiple element arrangements” for separating consideration in multiple element arrangements. The amendments in this ASU establish a selling price hierarchy for determining the selling price of a deliverable. Further, the term fair value in the revenue guidance will be replaced with selling price to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a market place participant. The amendments in this ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating this ASU.

15. Subsequent Events

The Company has evaluated subsequent events through the date of filing the financial statements and no events have occurred from the balance sheet date that would impact the Consolidated Financial Statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Some of the statements in this Form 10-Q contain statements that are not historical facts and that constitute “forward-looking statements” within the meaning of such term under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include our financial growth and liquidity projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify certain forward-looking statements. These forward-looking statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements. While we cannot predict all of the risks and uncertainties, they include, but are not limited to, our ability to predict our financial performance, the level of market demand for our services, the highly-competitive market for the types of services that we offer, the impact of competitive factors on profit margins, market conditions that could cause our customers to reduce their spending for our services, our ability to create, acquire and build new businesses and grow our existing businesses, our ability to attract and retain qualified personnel, our ability to reduce costs and conserve cash, currency fluctuations and market conditions in India and elsewhere around the world, political and military tensions in India and Southern Asia, changes in generally accepted accounting principles and/or their interpretation and other risks that are described in more detail in our filings with the Securities and Exchange Commission, including our Form 10-K (“Form 10-K”) for the year ended December 31, 2009.

Unless otherwise indicated or the context otherwise requires, all references in this report to “iGATE”, the “Company”, “us”, “our”, or “we” are to iGATE Corporation, a Pennsylvania corporation, and its consolidated subsidiaries. iGATE Corporation, formerly named iGATE Capital Corporation, through its operating subsidiaries, is a worldwide provider of Information Technology (“IT”) and IT enabled operations offshore outsourcing services to large and medium-sized organizations. These services include client/server design and development, conversion/migration services, offshore outsourcing, enterprise resource planning (“ERP”) package implementation and integration services, software development and applications maintenance outsourcing.

Website Access to SEC Reports

The Company’s website is http://www.igate.com. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports are available free of charge on the Investors page of the Company’s website as soon as reasonably practicable after the reports are filed electronically with the Securities and Exchange Commission.

Business Overview

We are a worldwide outsourcing provider of IT and IT-enabled operations solutions and services. We believe our innovative approach of integrating IT and IT-enabled operations and our ability to leverage a global delivery model provide our clients with clearly differentiated and demonstrated business value. We target large and medium-sized organizations across a diverse set of industries, including financial services, insurance, manufacturing, media and healthcare.

Our service offerings include IT and IT-enabled operations offshore outsourcing solutions and services to large and medium-sized organizations using an offshore/onsite model. These services include client/server design and development, conversion/migration services, offshore outsourcing, enterprise resource planning (“ERP”) package implementation and integration services, software development and applications maintenance outsourcing. We also offer Integrated Technology and Operations (“iTOPS”) solutions that integrate IT outsourcing and IT-enabled operations offshore outsourcing solutions and services seamlessly.

IT services that we deliver using our offshore centers include software application development and maintenance, implementation and support of enterprise applications, package evaluation and implementation, re-engineering, data warehousing, business intelligence, analytics, data management and integration, software testing and IT infrastructure management services. We believe that we deliver high quality solutions to our clients at a substantial savings by using our global pool of highly talented people.

IT-enabled operations offshore outsourcing solutions and services offered include business process outsourcing, transaction processing services and call center services. The call center services are offered to clients in several industries and are not industry specific. The transaction processing services offered are focused on the mortgage banking, financial services, insurance and capital market industries, except for the delivery of finance and accounting functions such as accounts payable which can be performed for clients across all industries.

A majority of our clients have headquarters in North America and operate internationally. iGATE has 8,158 employees as of June 30, 2010.

iGATE markets its service offerings to large and medium-sized organizations. Certain contracts are based upon a fixed price with payment based upon deliverables and/or project milestones reached. Certain contracts are time-and-materials based where contract payments are based on the number of consultant hours worked on the project. Certain contracts with no stated deliverables have a designated workforce and are based on fixed periodic payments. Some process outsourcing contracts provide pricing per transaction. Customers typically have the right to cancel contracts with minimal notice. Contracts with deliverables or project milestones can provide for certain penalties if the deliverables or project milestones are not met within contract timelines.

iGATE services customers in a wide range of industries. Our largest customer is Royal Bank of Canada which accounted for approximately 35% and 24% of revenues for the six months ended June 30, 2010 and 2009, respectively. Our second largest customer, General Electric Company (“GE”), accounted for approximately 20% and 24% of revenues for the six months ended June 30, 2010 and 2009, respectively. iGATE is a Global Preferred Partner of GE.

Reportable Financial Segments

The Company’s Chief Executive Officer who is the chief operating decision making officer (“CODM”) reviews the operations of the Company on consolidated basis. As a result of this, the Company is operating as a single reportable segment.

Critical Accounting Policies

Our critical accounting policies are described in the summary of significant accounting policies as discussed in Note 1 of our Form 10-K.

Recently Issued Accounting Pronouncements

The following paragraph discusses recently issued accounting pronouncements.

In October 2009, the FASB issued ASU No. 2009-13 “Revenue recognition—Multiple deliverable revenue arrangements” . The ASU provides amendments to the criteria in “Revenue recognition—multiple element arrangements” for separating consideration in multiple element arrangements. The amendments in this ASU establish a selling price hierarchy for determining the selling price of a deliverable. Further, the term fair value in the revenue guidance will be replaced with selling price to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a market place participant. The amendments in this ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating this ASU.

Results of Operations for the Three Months Ended June 30, 2010 as Compared to the Three Months Ended June 30, 2009:

Revenues for the three months ended June 30, 2010 were $66.8 million, an increase of $20.0 million, or 42.7%, as compared to $46.8 million for the three months ended June 30, 2009. Our revenue increase for the periods presented is directly attributable to a combination of increased business with our recurring customers, favorable movement in currency markets and new customer wins. There was an increase in average billable headcount from 5,922 for the three months ended June 30, 2009 to 7,432 for the three months ended June 30, 2010. Revenues increased due to the favorable movement in currency markets by 5.4%, increased volume by 32.9% and increased average blended realization rate by 4.4% for the three months ended June 30, 2010 as compared to the three months ended June 30, 2009. Our top five customers accounted for 72.5% and 70.0% of the revenue for the three months ended June 30, 2010 and 2009, respectively.

The gross margin as a percentage of sales (“gross margin percentage”) was 38.1% for the three months ended June 30, 2010, as compared to 38.2% for the three months ended June 30, 2009.

Selling, general and administrative expenses (“S,G&A”) include all costs that are not directly associated with revenue-generating activities. S,G&A expenses include employee costs, corporate costs and facilities costs. Employee costs include selling, marketing and administrative salaries and related employee benefits, travel, recruiting and training costs. Corporate costs include costs such as legal, accounting and outside consulting fees. Facilities costs primarily include rent and communications costs.

S,G&A costs for the three months ended June 30, 2010 were $11.8 million or 17.7% of revenues, as compared to $8.9 million or 18.9% of revenues for the three months ended June 30, 2009. Our net employee cost increased by $2.3 million for the three months ended June 30, 2010, as compared to three months ended June 30, 2009, mainly due to an increase in salaries, bonus and benefits of $1.5 million, recruitment expense of $0.5 million, and travel expense and related costs of $0.3 million. Our net corporate cost increased by $0.5 million for the three months ended June 30, 2010 due to increase in outside professional services, legal costs, marketing, accounting, insurance and administrative charges. Our net facilities costs increased by $0.2 million for the three months ended June 30, 2010, mainly due to increase in rental and communication related expenses. The increase in S,G&A cost includes an unfavorable movement of the US Dollar against other currencies amounting to $0.4 million.

Depreciation and amortization costs for the three months ended June 30, 2010 were $2.1 million or 3.2% of revenues, as compared to $1.9 million or 4.0% of revenues for the three months ended June 30, 2009.

Operating income was 17.2% of revenue for the three months ended June 30, 2010 and 15.3% of revenue for the three months ended June 30, 2009. This increase was primarily due to the increased revenue and operational efficiency.

Our investment income for the three months ended June 30, 2010 totaled $0.7 million as compared to $0.9 million for the three months ended June 30, 2009. In 2010, our investments have been primarily in a dividend yielding money market mutual fund. The Net Asset Value of the units tends to decrease on payment of the dividends leading to a loss on redemption of the units which has been compensated by the dividend income. In 2009, the investments were primarily in a high yield interest bearing fixed income securities.

Other income is primarily comprised of the favorable foreign currency movements resulting in the reduction of the realized loss on our hedges amounting to $0.3 million for the three months ended June 30, 2010 as compared to $2.5 million for the three months ended June 30, 2009.

Our income tax provision was $1.3 million and $0.1 million at an effective rate of 10.5% and 2.0% for the three months ended June 30, 2010 and 2009, respectively. Several items caused variations from our statutory tax rate to the effective rate. iGS is eligible to claim a tax holiday on the majority of its operating income through March 31, 2011. Federal income taxes, calculated at the U.S. statutory rate, totaled $4.4 million and $2.1 million for the three months ended June 30, 2010 and 2009, respectively. The Federal income taxes and the effective tax rate increased mainly due to higher income in USA.

Taxable income for determining the income tax provision of iGS includes non operating income, such as interest income and capital gains income and operating income of two units for which the tax holiday has expired. The tax holiday has resulted in a benefit of $4.1 million and $2.0 million for the three months ended June 30, 2010 and 2009, respectively. Due to the tax rate variation in the foreign countries as compared to the US tax rate, our foreign operations resulted in a tax benefit of $0.1 million and $0.2 million for the three months ended June 30, 2010 and 2009, respectively.

Other variations typically arise because certain expenses or benefits recorded in our financial statements are either limited or disallowed when calculating our income tax provision. Certain expenses such as meals and entertainment are limited for income tax purposes. Carry forward of NOLs will offset taxable income. The impact of the limited or disallowed items and benefit of losses discussed above was $1.1 million and $0.2 million for the three months ended June 30, 2010 and 2009, respectively.

Results of Operations for the Six Months Ended June 30, 2010 as Compared to the Six Months Ended June 30, 2009:

Revenues for the six months ended June 30, 2010 were $124.7 million, an increase of $33.1 million, or 36.1%, as compared to $91.6 million for the six months ended June 30, 2009. Our revenue increase for the periods presented is directly attributable to a combination of increased business with our recurring customers, favorable movement in currency markets and new customer wins. There was an increase in average billable headcount from 6,026 for the six months ended June 30, 2009 to 7,069 for the six months ended June 30, 2010. Revenues increased due to the favorable movement in currency markets by 6.8%, increased volume by 27.5% and increased average blended realization rate by 1.8% for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009. Our top five customers accounted for 72.6% and 69.1% of the revenue for the six months ended June 30, 2010 and 2009, respectively.

The gross margin as a percentage of sales (“gross margin percentage”) was 39.0% for the six months ended June 30, 2010, as compared to 37.1% for the six months ended June 30, 2009. The increase in gross margin percentage was primarily on account of favorable movement of the US Dollar against other currencies.

S,G&A costs for the six months ended June 30, 2010 were $21.8 million or 17.5% of revenues, as compared to $17.4 million or 19.0% of revenues for the six months ended June 30, 2009. Our net employee cost increased by $3.3 million for the six months ended June 30, 2010, as compared to six months ended June 30, 2009, mainly due to increase in salaries, bonus and benefits by $2.0 million , recruitment expense of $0.6 million, and travel and related costs of $0.6 million. Our net corporate cost increased by $0.7 million for the six months ended June 30, 2010 due to increase in outside professional services, legal, accounting and administrative charges which was partly offset by a decrease in provision for doubtful debts. Our net facilities costs increased by $0.4 million for the six months ended June 30, 2010, mainly due to the increase in rental expense. The increase in S,G&A cost includes an unfavorable movement of the US Dollar against other currencies amounting to $1.0 million.

Depreciation and amortization costs for the six months ended June 30, 2010 were $4.3 million or 3.5% of revenues, as compared to $3.8 million or 4.1% of revenues for the six months ended June 30, 2009.

Operating income was 18.0% of revenue for the six months ended June 30, 2010 and 13.9% of revenue for the six months ended June 30, 2009. This increase was due primarily to the increase in revenues and increased operational efficiency.

Our investment income for the six months ended June 30, 2010 totaled $1.2 million as compared to $1.8 million for the six months ended June 30, 2009. In 2010, our investments have been primarily in a dividend yielding money market mutual fund. The Net Asset Value of the units tends to decrease on the payment of the dividends leading to a loss on redemption of the units which has been compensated by the dividend income. In 2009, the investments were primarily in a high yield interest bearing fixed income securities.

Other income is primarily comprised of the favorable foreign currency movements resulting in the reduction of the realized loss on our hedges to $1.0 million for the six months ended June 30, 2010 as compared to $4.7 million for the six months ended June 30, 2009. The unfavorable foreign currency loss related to our intercompany debt in India and the remeasurement of the current assets denominated in the foreign currency, amounting to $0.1 million for the six months ended June 30, 2010 as compared to the favourable foreign currency gain of $1.0 million for the six months ended June 30, 2009.

We recognized gain on sale of fixed assets of $1.1 million and gain on sale of investment in affiliate of $0.6 million during the six months ended June 30, 2010

Our income tax provision was $1.5 million and tax benefit of $0.03 million at an effective rate of 6.2% and 0.2% for the six months ended June 30, 2010 and 2009, respectively. Several items caused variations from our statutory tax rate to the effective rate. iGS is eligible to claim a tax holiday on the majority of its operating income through March 31, 2011. Federal income taxes, calculated at the U.S. statutory rate, totaled $8.5 million and $3.8 million for the six months ended June 30, 2010 and 2009, respectively. The Federal income taxes and the effective tax rate increased mainly due to higher income in USA.

Taxable income for determining the income tax provision of iGS includes non operating income, such as interest income and capital gains income and operating income of two units for which the tax holiday has expired. The tax holiday resulted in a benefit of $7.5 million and $4.2 million for the six months ended June 30, 2010 and 2009, respectively. Due to the tax rate variation in the foreign countries as compared to the US tax rate, our foreign operations resulted in a tax benefit of $0.2 million and $0.02 million for the six months ended June 30, 2010 and 2009, respectively.

Other variations typically arise because certain expenses or benefits recorded in our financial statements are either limited or disallowed when calculating our income tax provision. Certain expenses such as meals and entertainment are limited for income tax purposes. Carry forward of NOLs will offset taxable income. The impact of the limited or disallowed items and benefit of losses discussed above was $0.6 million and $0.4 million for the six months ended June 30, 2010 and 2009, respectively.

Liquidity and Capital Resources

Cash from Operations

Cash provided by operations was $16.2 million for the six months ended June 30, 2010. Factors contributing to our cash provided by operations were income from operations of $22.8 million for the period and an increase of accrued and other liabilities of $5.0 million offset by an increase in prepaid and other assets $0.1 million, increase in accounts receivable and unbilled receivables of $13.0 million. During the period, significant non-cash items totaled $4.5 million and included depreciation and amortization costs of $4.3 million and stock based compensation expense of $3.0 million offset by deferred income taxes of $2.9 million.

Cash provided by operations was $19.8 million for the six months ended June 30, 2009. Factors contributing to our cash provided by operations were income from operations of $11.1 million; a decrease of prepaid and other assets of $1.3 million and a decrease of accounts receivable and unbilled receivables of $4.8 million and an increase of deferred revenue of $0.2 million offset by a decrease of accounts payable of $0.9 million, a decrease of accrued and other current liabilities of $0.3 million and decrease of restructuring reserve of $0.3 million. Significant non-cash items during the six months ended June 30, 2009 totaled $5.2 million and included depreciation and amortization costs of $3.8 million, stock based compensation expense of $2.5 million, provision for bad and doubtful debt of $0.3 million, offset by deferred income taxes of $1.4 million.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2010 was $20.7 million, as compared to cash used in investing activities of $20.3 million for the six months ended June 30, 2009.

During the six months ended June 30, 2010, we sold one of the office buildings located in Bangalore, India for a consideration of $2.8 million and incurred the capital expenditure of $5.4 million. Our capital expenditures was $5.2 million for the six months ended June 30, 2009.

We have increased our investment portfolios and other investments by $16.7 million and $14.9 million for the six month periods ended June 30, 2010 and 2009, respectively.

Financing Activities

Cash used by financing activities for the six months ended June 30, 2010 was $6.4 million, as compared to $5.7 million for the six months ended June 30, 2009. Dividends paid amounted to $6.1 million and $6.0 million for the six month periods ended June 30, 2010 and 2009, respectively.

The Company’s cash and cash equivalents as of June 30, 2010 was $18.9 million. The Company believes that cash generated from operations and its current cash reserves are adequate to meet the Company’s reasonably foreseeable operating liquidity requirements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Factors

Market risk factors associated with our business are discussed in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2009. There have been no material changes from the market risk factors previously disclosed in the Company’s Form 10-K.

Effect of Hypothetical Currency Rate Fluctuations

Our primary net foreign currency exposure is the Rupee. The fair value of foreign exchange contracts is subject to changes in foreign currency exchange rates.

As of June 30, 2010, the potential gain or loss in the fair value of iGS outstanding foreign currency contracts assuming hypothetical 10%, 5%, 2% and 1% fluctuations in currency rates would be approximately:


	Valuation given X% decrease In Rupee / USD rate								Fair Value as of June 30, 2010		Valuation given X% increase in Rupee / USD rate
	(10%)		(5%)		(2%)		(1%)		Fair Value as of June 30, 2010		1%			2%			5%			10%
Rupee to U.S. Rate		41.801		44.123		45.516		45.981		46.445		46.909			47.374			48.767			51.090
Derivative Instruments	$	11.1	$	5.4	$	2.3	$	1.3	$	0.3	$	(0.6	)	$	(1.6	)	$	(4.3	)	$	(8.5	)

Seasonality

Our operations are generally not affected by seasonal fluctuations. However, our consultants’ billable hours are affected by national holidays and vacation policies, which vary by country and by operating company.

Economic Trends and Outlook

According to the latest report by Gartner Inc., an IT research and advisory company, the Global IT Services industry with worldwide IT spending revised its forecast to total $786 billion in 2010, a 2.9 % increase from 2009 revenue of nearly $763 billion.

With a global economic recovery widely anticipated, modest growth in IT spending is expected. The industry is aggressively pursuing innovations that it expects to stimulate demand beyond such modest growth. A majority of our business comes from the United States and Canada. The situation has improved now with quarter on quarter revenue growth in the last five quarters. We believe that our business model is somewhat diversified, both geographically and operationally—we serve both IT and IT enabled solutions. We believe our strategy of a global delivery model positions us well to provide a greater breadth of services in catering to market needs and opportunities.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of Company management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) Rules 13a-15(b) and 15d-15(b). Based upon, and as of the date of this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. The results of management’s assessment were reviewed with the Company’s Audit Committee.

The certification required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits 31.1 and 31.2, respectively, to this quarterly report on Form 10-Q.

PART II. OTHER INFORMATION

ITEM 1A.

RISK FACTORS

Other than the risk factor set forth below, there are no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

Industry consolidation may cause us to lose key relationships and intensify competition.

Acquisitions or other consolidating transactions within our industry could harm us in a number of ways, including the loss of customers if competitors consolidate with our current or potential customers, or our current competitors become stronger, or new competitors emerge from consolidations. Any of these events could put us at a competitive disadvantage, which could cause us to lose customers, revenue and market share. Consolidation in our industry, or in related industries, could force us to expend greater resources to meet new or additional competitive threats, which could also harm our operating results.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company granted shares of restricted common stock that allow statutory tax withholding obligations incurred upon vesting of those shares to be satisfied by forfeiting a portion of those shares to the Company. The following table shows the shares acquired by the Company upon forfeiture of restricted shares during the quarter ended June 30, 2010.


Period	Total Number of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1-30, 2010	71,679	$	12.05	—	—
May 1-31, 2010	—		—	—	—
June 1-30, 2010	—		—	—	—
Total	71,679	$	12.05	—	—

ITEM 4.

(REMOVED AND RESERVED)

ITEM 6.

EXHIBITS

(a)

Exhibits


10.1		Form of performance share award agreement is filed herewith.

10.2		Performance Share Award Agreement by and between the company and Phaneesh Murthy dated March 30, 2010 is filed herewith.

10.3		Performance Share Award Agreement by and between the company and Phaneesh Murthy dated March 30, 2010 is filed herewith.

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer is filed herewith.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Chief Financial Officer is filed herewith.

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, on this 28th day of July 2010.


				iGATE CORPORATION

July 28, 2010				/S/ PHANEESH MURTHY
				Phaneesh Murthy Chief Executive Officer and Director

				/S/ SUJIT SIRCAR
				Sujit Sircar Chief Financial Officer

EXHIBIT INDEX


10.1		Form of performance share award agreement is filed herewith.

10.2		Performance Share Award Agreement by and between the company and Phaneesh Murthy dated March 30, 2010 is filed herewith.

10.3		Performance Share Award Agreement by and between the company and Phaneesh Murthy dated March 30, 2010 is filed herewith.

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer is filed herewith.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer is filed herewith.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Financial Officer is filed herewith.

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