Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv32w2.htm |
EX-32.1 - EXHIBIT 32.1 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv32w1.htm |
EX-99.1 - EXHIBIT 99.1 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv99w1.htm |
EX-31.1 - EXHIBIT 31.1 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. | c04124exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter ended June 30, 2010
or
o | 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: 000-22125
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
36-4069408 (I.R.S. Employer Identification No.) |
|
875 N. Michigan Avenue, Suite 3000, Chicago, Illinois (Address of principal executive offices) |
60611 (Zip Code) |
(312) 255-5000
Registrants Telephone Number, Including Area Code
Registrants Telephone Number, Including Area Code
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 þ No o
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 registrant was required to submit and post such files.) Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the Registrant is a shell company (as defined in rule 12b-2 of
the Exchange Act): Yes o No þ
As
of July 31, 2010, there were 27,406,182 shares of Common Stock of the Registrant outstanding.
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JUNE 30, 2010
FOR THE FISCAL QUARTER ENDED JUNE 30, 2010
TABLE OF CONTENTS
PART I |
||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
10 | ||||||||
17 | ||||||||
17 | ||||||||
PART II |
||||||||
18 | ||||||||
18 | ||||||||
18 | ||||||||
19 | ||||||||
20 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
Exhibit 99.1 |
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, | June 30, | |||||||
2010 | 2010 | |||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 55,834 | $ | 60,204 | ||||
Restricted Cash |
4,104 | 4,104 | ||||||
Accounts receivable, net of allowance of $477 and $510
as of March 31, 2010 and June 30, 2010, respectively |
22,947 | 21,378 | ||||||
Income taxes receivable |
| 2,682 | ||||||
Deferred tax asset, net current portion |
6,888 | 2,754 | ||||||
Prepaid expenses |
1,594 | 1,822 | ||||||
Other current assets |
1,472 | 1,414 | ||||||
Total current assets |
92,839 | 94,358 | ||||||
Computers, equipment, leasehold improvements and software, net |
3,667 | 3,858 | ||||||
Deferred tax asset, net long-term portion |
7,911 | 7,237 | ||||||
Other assets |
1,584 | 1,316 | ||||||
Total assets |
$ | 106,001 | $ | 106,769 | ||||
Liabilities and Stockholders Equity | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 5,613 | $ | 3,922 | ||||
Accrued compensation |
17,741 | 22,044 | ||||||
Deferred revenue |
1,358 | 1,156 | ||||||
Income taxes payable current portion |
2,752 | | ||||||
Accrued benefits |
2,355 | 2,986 | ||||||
Other accrued liabilities |
4,274 | 4,753 | ||||||
Total current liabilities |
34,093 | 34,861 | ||||||
Deferred rent long term portion |
1,613 | 1,573 | ||||||
Accrued income tax liabilities long-term portion |
585 | 585 | ||||||
Total liabilities |
36,291 | 37,019 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred Stock, $1.00 par value, 2,000 shares authorized, no shares issued |
| | ||||||
Common Stock, $0.001 par value, 100,000 shares authorized, 40,082 shares
issued as of March 31, 2010 and June 30, 2010 |
40 | 40 | ||||||
Additional paid-in capital |
615,467 | 614,354 | ||||||
Accumulated other comprehensive loss |
(4,423 | ) | (4,593 | ) | ||||
Accumulated deficit |
(437,517 | ) | (436,665 | ) | ||||
173,567 | 173,136 | |||||||
Less Common Stock in treasury, at cost, 12,830 and 12,804 shares held at
March 31, 2010 and June 30, 2010, respectively |
103,857 | 103,386 | ||||||
Total stockholders equity |
69,710 | 69,750 | ||||||
Total liabilities and stockholders equity |
$ | 106,001 | $ | 106,769 | ||||
See accompanying notes to condensed consolidated financial statements.
3
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(In thousands, except per share data)
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenue: |
||||||||
Net revenue |
$ | 37,892 | $ | 52,002 | ||||
Reimbursable expenses |
7,080 | 9,171 | ||||||
Total revenue |
44,972 | 61,173 | ||||||
Project personnel expenses: |
||||||||
Project personnel costs before reimbursable expenses |
28,621 | 35,740 | ||||||
Reimbursable expenses |
7,080 | 9,171 | ||||||
Total project personnel expenses |
35,701 | 44,911 | ||||||
Gross margin |
9,271 | 16,262 | ||||||
Other operating expenses: |
||||||||
Professional development and recruiting |
706 | 2,133 | ||||||
Marketing and sales |
541 | 804 | ||||||
Management and administrative support |
6,103 | 6,925 | ||||||
Total other operating expenses |
7,350 | 9,862 | ||||||
Income from operations |
1,921 | 6,400 | ||||||
Other expense, net |
(19 | ) | (57 | ) | ||||
Income from continuing operations before income taxes |
1,902 | 6,343 | ||||||
Income tax expense |
1,055 | 3,037 | ||||||
Income from continuing operations after income taxes |
847 | 3,306 | ||||||
Discontinued operations: |
||||||||
Income from discontinued operations, net of income taxes |
85 | | ||||||
Net income |
932 | 3,306 | ||||||
Foreign currency translation adjustments |
418 | (158 | ) | |||||
Unrealized gain (loss) on investment |
7 | (12 | ) | |||||
Comprehensive income |
$ | 1,357 | $ | 3,136 | ||||
Basic income per share of common stock: |
||||||||
Income from continuing operations |
$ | 0.03 | $ | 0.12 | ||||
Income from discontinued operations |
0.00 | | ||||||
Net income |
$ | 0.03 | $ | 0.12 | ||||
Diluted income per share of common stock: |
||||||||
Income from continuing operations |
$ | 0.03 | $ | 0.12 | ||||
Income from discontinued operations |
0.00 | | ||||||
Net income |
$ | 0.03 | $ | 0.12 | ||||
Shares used in computing basic income per share of common stock |
27,273 | 27,105 | ||||||
Shares used in computing diluted income per share of common stock |
27,369 | 28,394 |
The following
amounts of stock-based
compensation expense
(SBC) are included in
each of the respective
expense categories
reported above:
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Project personnel costs before reimbursable expenses |
$ | 842 | $ | 840 | ||||
Professional development and recruiting |
12 | 13 | ||||||
Marketing and sales |
90 | 107 | ||||||
Management and administrative support |
373 | 367 | ||||||
Total SBC |
$ | 1,317 | $ | 1,327 | ||||
See accompanying notes to condensed consolidated financial statements.
4
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 932 | $ | 3,306 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
489 | 431 | ||||||
Stock-based compensation |
1,317 | 1,327 | ||||||
Deferred income taxes |
6,839 | 4,786 | ||||||
Excess tax benefits from employee stock plans |
(5 | ) | (324 | ) | ||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
1,020 | 1,549 | ||||||
Prepaid expenses and other |
(110 | ) | (316 | ) | ||||
Accounts payable |
(904 | ) | (1,512 | ) | ||||
Accrued compensation |
331 | 4,298 | ||||||
Income taxes payable /
receivable |
(6,512 | ) | (5,283 | ) | ||||
Other assets and liabilities |
677 | 1,304 | ||||||
Net cash provided by operating activities |
4,074 | 9,566 | ||||||
Cash flows from investing activities: |
||||||||
Increase in restricted cash |
(2 | ) | | |||||
Capital expenditures, net |
(480 | ) | (816 | ) | ||||
Net cash used in investing activities |
(482 | ) | (816 | ) | ||||
Cash flows from financing activities: |
||||||||
Stock option and employee stock purchase plan proceeds |
397 | 443 | ||||||
Payment of employee withholding taxes from equity transactions |
(106 | ) | (612 | ) | ||||
Common stock cash dividends |
(1,921 | ) | (2,453 | ) | ||||
Excess tax benefits from employee stock plans |
5 | 324 | ||||||
Purchase of treasury stock |
(280 | ) | (1,963 | ) | ||||
Net cash used in financing activities |
(1,905 | ) | (4,261 | ) | ||||
Effect of exchange rate changes on cash |
276 | (119 | ) | |||||
Net increase in cash and cash equivalents |
1,963 | 4,370 | ||||||
Cash and cash equivalents at beginning of period |
46,112 | 55,834 | ||||||
Cash and cash equivalents at end of period |
$ | 48,075 | $ | 60,204 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for interest |
$ | 35 | $ | 1 | ||||
Cash paid during the period for income taxes |
$ | 653 | $ | 3,539 |
See accompanying notes to condensed consolidated financial statements.
5
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Reporting
The accompanying unaudited interim condensed consolidated financial statements include the
accounts of Diamond Management & Technology Consultants, Inc., formerly DiamondCluster
International, Inc., and its wholly-owned subsidiaries. In this Quarterly Report on Form 10-Q, we
use the terms Diamond, we, our Company, the Company, our, and us to refer to Diamond
Management & Technology Consultants, Inc. and its wholly-owned subsidiaries. All intercompany
accounts and balances have been eliminated in consolidation.
In the opinion of management, the condensed consolidated financial statements reflect all
adjustments that are necessary for a fair presentation of the Companys financial position, results
of operations, and cash flows as of the dates and for the periods presented. These adjustments are
of a normal and recurring nature. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with U.S. generally accepted accounting principles,
(GAAP), for interim financial information. Consequently, these statements do not include all the
disclosures normally required by GAAP for annual financial statements nor those normally made in
the Companys Annual Report on Form 10-K. Accordingly, reference should be made to the Companys
Annual Report on Form 10-K for the fiscal year ended March 31, 2010, for additional disclosures,
including a summary of the Companys accounting policies, which have not changed except as
discussed in Note (H) below. The preparation of financial statements in conformity with 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, and the amounts of
revenues and expenses during the period. Actual results could differ from those estimates. The
consolidated results of operations for the three months ended June 30, 2010, are not necessarily
indicative of results for the full fiscal year.
B. Restricted Cash
The Company initially deposited $5.5 million in a U.S. Dollar denominated bank account during
the fourth quarter of fiscal year 2006 to support the 4.3 million Euros bank guarantee described in
Note (C) below. Based upon the terms of the restrictions on the use of the pledged cash, the
Company has reported these funds as restricted cash on the Consolidated Balance Sheets. As a
result of a favorable ruling received in the fourth quarter of fiscal year 2010, the $4.1 million
of restricted cash is classified as a current asset at March 31, 2010, and June 30, 2010. In July
2010, the cash restriction was removed and the cash was released.
C. Discontinued Operations
On July 31, 2006, the Company sold a portion of its international operations which included
consulting operations in France, Germany, Spain, Brazil, and the United Arab Emirates as part of a
stock sale agreement. Prior to the stock sale, as a result of a tax inspection of the former
Spanish subsidiary for the tax years 1999 to 2000, the Company provided a bank guarantee in the
amount of 4.3 million Euros, secured by restricted cash, with the Spanish taxing authority in order
to appeal such authoritys assessment. In accordance with the terms of the transaction, the
Company agreed to indemnify the buyer for any liability related to this Spanish tax inspection
(tax indemnification obligation). The terms of the guarantee require that it be renewed annually
until the results of the appealed tax inspection are settled. At the time of the transaction, such
settlement was not expected before a period of approximately eight years.
During the fourth quarter of fiscal year 2008, the Spanish tax authorities ruled in favor of
the Company on a portion of the assessments that were being appealed. The remaining assessments
under appeal were based on the same merits and the Company believed that the tax authorities would
rule in favor of the Company on those appeals. As a result, $3.9 million of the indemnification
obligation was reversed during the fourth quarter of fiscal year 2008. In addition, the Company
also obtained a release in June 2008 of $3.1 million of the restricted cash related to the portion
of the assessments that had received a favorable ruling.
6
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the fourth quarter of fiscal year 2010, the Spanish tax authorities ruled in favor of
the Company on the assessed penalties related to the remaining tax assessments under appeal. As a
result, the remaining $0.4 million of the indemnification obligation was reversed during the fourth
quarter of fiscal year 2010. During the first quarter of fiscal year 2011, the Spanish tax
authorities ruled in favor of the Company on the remaining underlying tax assessment. Based on the
favorable rulings, the $4.1 million of restricted cash is
classified as a current asset at March 31, 2010, and
June 30, 2010. In July 2010, the cash restriction was removed
and the cash was released.
The Company holds shares of Diamonds Common Stock beneficially owned by third parties in an
escrow account for the benefit of recovering from the third parties a portion of any payments made
by the Company under the tax indemnification obligation from the sale transaction. As a result of
the favorable rulings on the assessments that were appealed, the Company is in the process of
releasing the shares as part of the favorable conclusion of the tax assessments. The Company
recorded a net $0.1 million benefit in the fourth quarter of fiscal year 2010, which reflected the
$0.4 million reversal of the indemnification obligation discussed above, offset by the expected
release of the remaining escrow shares of $0.3 million.
D. Income Taxes
The Company recorded income tax expense of $3.0 million, which represents a 48% effective
income tax rate, in the quarter ended June 30, 2010, compared to income tax expense of $1.1
million, a 55% effective income tax rate, in the quarter ended June 30, 2009. The effective tax
rate decreased in the quarter ended June 30, 2010, due to an increase in pre-tax income relative to
the corresponding period in the prior fiscal year, which resulted in permanent differences
representing a smaller percentage of income. In the quarters ended June 30, 2009 and 2010, the
Company incurred international losses in India where, due to ongoing losses and valuation
allowances on related deferred tax assets, the Company currently does not recognize a tax benefit.
This caused a significant difference between the reported effective tax rate and the statutory tax
rate.
The Company has deferred tax assets which have arisen primarily as a result of temporary
differences between the tax bases of assets and liabilities and their related amounts in the
financial statements as well as operating losses incurred in international jurisdictions. In
assessing the realizability of deferred tax assets, the Company considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized and adjust the
valuation allowances accordingly. Management judgment is required in determining any valuation
allowance recorded against the gross deferred tax assets. As of June 30, 2010, the remaining
valuation allowance against deferred tax assets was $3.0 million attributable to net operating loss
carryforwards in foreign and certain state jurisdictions, as well as U.S. federal capital loss
carryforwards.
E. Income Per Share
Basic income per share is computed using the weighted average number of common
shares outstanding. Diluted income per share is computed using the weighted average number of
common shares outstanding and, where dilutive, the assumed exercise of stock options and stock
appreciation rights (SARs) and vesting of restricted stock and restricted stock units (using the
treasury stock method). Following is a reconciliation of the shares used in computing basic and
diluted income per share for the three months ended June 30, 2009 and 2010 (in thousands):
7
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
Shares used in computing basic income per share |
27,273 | 27,105 | ||||||
Dilutive effect of stock options, SARs and restricted stock/units |
96 | 1,289 | ||||||
Shares used in computing diluted income per share |
27,369 | 28,394 | ||||||
Antidilutive securities not included in dilutive income per share
calculation |
6,100 | 902 | ||||||
F. Geographic Data
The Company operates in only one segment, providing management and technology consulting
services. Even though the Company has different legal entities operating in various countries, its
operations and management are performed on a global basis.
Data regarding net revenue based on the geographic regions in which the Company operates is
presented below for the periods presented in the Condensed Consolidated Statements of Operations
and Comprehensive Income (in thousands):
Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
Net revenue: |
||||||||
North America |
$ | 34,393 | $ | 47,307 | ||||
United Kingdom and India |
3,499 | 4,695 | ||||||
Total net revenue |
$ | 37,892 | $ | 52,002 | ||||
The segregation of revenue by geographic region is based upon the location of the legal entity
performing the services. The Company had no clients that accounted for over 10% of revenue during
the three months ended June 30, 2009. The Company had one client that accounted for over 10% of
revenue during the three months ended June 30, 2010.
Data regarding long-lived assets based on the geographic regions in which the Company operates
is presented below for the periods presented in the Condensed Consolidated Balance Sheets (in
thousands):
March 31, | June 30, | |||||||
2010 | 2010 | |||||||
Long-lived assets: |
||||||||
North America |
$ | 4,741 | $ | 4,629 | ||||
United Kingdom and India |
615 | 544 | ||||||
Total long-lived assets |
$ | 5,356 | $ | 5,173 | ||||
8
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
G. Dividends
The Board declared the following quarterly cash dividend during the three months ended June
30, 2009, and June 30, 2010:
Three Months Ended | Three Months Ended | |||||||
June 30, 2009 | June 30, 2010 | |||||||
Declaration date |
June 1, 2009 | May 5, 2010 | ||||||
Per share dividend |
$ | 0.07 | $ | 0.09 | ||||
Record date |
June 10, 2009 | June 1, 2010 | ||||||
Total amount (in thousands) |
$ | 1,921 | $ | 2,453 | ||||
Payment date |
June 18, 2009 | June 11, 2010 |
H. Recent Accounting Pronouncements
Effective April 1, 2010, the Company adopted Financial Accounting Standards Board (FASB)
Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic
820): Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires
new disclosures about recurring or nonrecurring fair value measurements and provides clarification
over certain existing fair value measurement disclosure requirements. The adoption of ASU 2010-06
did not have an impact on the Companys financial condition or results of operations.
I. Fair Value Measurements
In September 2006, the Financial Accounting Standards Board issued a statement which defines
fair value, establishes a framework for measuring fair value, and requires expanded disclosures
about fair value measurements. Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure
fair value was established. The hierarchy requires entities to maximize the use of observable
inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair
value are as follows:
| Level 1 Quoted prices in active markets for identical assets and liabilities. |
| Level 2 Quoted prices in active markets for similar assets and liabilities, or
other inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument. |
| Level 3 Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets and liabilities. This
includes certain pricing models, discounted cash flow methodologies and similar
techniques that use significant unobservable inputs. |
The Companys financial assets that are measured at fair value on a recurring basis consist of
cash and cash equivalents and restricted cash and are measured using Level 1 inputs.
J. Subsequent Event
On July 29, 2010, the Board declared a quarterly cash dividend of $0.09 per share of common stock
payable on September 15, 2010, to shareholders of record at the close of business on September 1,
2010.
9
Table of Contents
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
The following information should be read in conjunction with the information contained in the
Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly
Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and
uncertainties. See Disclosure Regarding Forward-Looking Statements below. We use the terms
we, our, us, the Company and Diamond in this report to refer to Diamond Management &
Technology Consultants, Inc. and its wholly-owned subsidiaries.
Overview
Diamond is a management and technology consulting firm. Clients engage Diamond Management &
Technology Consultants, Inc. to help their companies grow, improve margins, and increase the
productivity of their investments. Working together to design and execute business strategies that
capitalize on changing market forces and technology, Diamonds consultants are experts in helping
clients attract and retain customers, increase the value of their information, and plan and execute
projects that turn strategy into measurable results.
Diamonds capabilities are rooted in deep strategy, technology, operations, and industry
experience. The firms approach to client service is based on objectivity, collaboration, and an
unwavering commitment to its clients best interests.
During the quarter ended June 30, 2010, we generated net revenue of $52.0 million from 67
clients. At June 30, 2010, we employed 532 consultants and 120 operations employees. Our
operations are comprised of six offices in North America, Europe and Asia, which include Chicago,
Hartford, London, Mumbai, New York City and Washington, D.C.
Our revenue is driven by our ability to secure new client engagements, maintain existing
client engagements and develop and implement solutions that add value to our clients. Our revenue
is comprised of professional fees for services rendered to our clients plus reimbursable expenses.
Prior to the commencement of a client engagement, we and our client agree on fees for services
based upon the scope of the project, our staffing requirements, and the level of client
involvement. We recognize revenue as services are performed. Our services are performed in
accordance with the terms of the client engagement agreement. We bill our clients for these
services on either a monthly or semi-monthly basis in accordance with the terms of the client
engagement agreement. Accordingly, we recognize amounts due from our clients as the related
services are rendered and revenue is earned even though we may be contractually required to bill
for those services at an earlier or later date than the date services are provided. Provisions are
made based on our experience for estimated uncollectible amounts. These provisions, net of
write-offs of accounts receivable, are reflected in the allowance for doubtful accounts. We also
defer a portion of the revenue from each client engagement to cover the estimated costs that are
likely to be incurred subsequent to targeted project completion. We refer to this as project
run-on. This portion of the project revenue is reflected in deferred revenue and is calculated
based on our historical project run-on experience. While we have been required to make revisions
to our clients estimated deliverables and to incur additional project costs in some instances, to
date there have been no such revisions that have had a material adverse effect on our operating
results.
Approximately 90% of our revenues and expenses are denominated in the U.S. Dollar, which
limits the impact of foreign currency exchange rate fluctuations on consolidated revenues and
expenses. Approximately 10% of our revenues and expenses are generated from international
transactions, which are denominated in foreign currencies. The most common foreign currencies that
we operate under are the British Pound Sterling, the Indian Rupee, and the Euro.
The largest portion of our operating expenses consists of project personnel costs. Project
personnel costs before reimbursable expenses consist of payroll costs, variable incentive
compensation, stock-based compensation expense, and related benefits expense associated with our
consulting staff. Other expenses included in project personnel costs before reimbursable expenses
are non-billable travel, third-party vendor payments, and other non-billable costs associated with
the delivery of services to our clients. Net revenue less project personnel costs before
reimbursable expenses (gross margin) is considered by management to be an important measure of
our operating performance and is driven largely by the chargeability of our consultant base, the
prices we charge to our clients, project personnel compensation costs, and the level
of non-billable costs associated with securing new client engagements and developing new
service offerings.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Gross margin increased $7.0 million, or 75%, in the first quarter of fiscal year 2011 compared
to the first quarter of fiscal year 2010 primarily due to a $14.1 million increase in net revenue
partially offset by a $7.1 million increase in project personnel costs before reimbursable expenses
as discussed below under Project Personnel Costs. Our project personnel headcount was 532 at
June 30, 2010, compared to 441 at June 30, 2009. Our annualized net revenue per practice
professional was $393 thousand for the first quarter of fiscal year 2011 compared to $335 thousand
for the first quarter of fiscal year 2010. The increase compared to the quarter ended June 30,
2009, is primarily due to the increase in net revenue and higher realized billing rates.
Our other recurring operating expenses are comprised of expenses associated with the
development of our business and the support of our client-serving professionals, such as
professional development and recruiting, marketing and sales, management and administrative
support, and stock-based compensation expense earned by personnel working in these functional
areas. Professional development and recruiting expenses consist primarily of recruiting and
training course content development and delivery costs. Marketing and sales expenses consist
primarily of the costs associated with the development and maintenance of our marketing materials
and programs. Management and administrative support expenses consist primarily of the costs
associated with operations including finance, information technology, human resources, facilities
administration and support (including the renting of office space) and legal services.
Management believes that income from operations, which is gross margin less other operating
expenses, is an important measure of our operating performance. Income from operations was $6.4
million in the first quarter of fiscal year 2011 compared to $1.9 million in the first quarter of
fiscal year 2010, an increase of $4.5 million. The increase is primarily due to the $7.0 million
increase in gross margin discussed above partially offset by an increase in training and recruiting
costs, an increase in variable compensation expense, and an increase in marketing costs.
We regularly review our fees for services, professional compensation and overhead costs to
ensure that our services and compensation are competitive within the industry, and that our
overhead costs are aligned with our revenue level. In addition, we regularly monitor the progress
of client projects with client senior management. We manage the activities of our professionals by
closely monitoring engagement schedules and staffing requirements for new engagements. However, a
rapid decline in the demand for the professional services that we provide could result in lower
utilization of our professionals than we planned. In addition, because most of our client
engagements are terminable by our clients without penalty, an unanticipated termination of a client
project could require us to maintain underutilized employees. While professional staff levels must
be adjusted to reflect active engagements, we must also maintain a sufficient number of senior
professionals to oversee existing client engagements and participate in our sales efforts to secure
new client assignments. Our utilization rate for the first quarter of fiscal year 2011 increased to
75% compared to 74% in the first quarter of fiscal year 2010.
Free cash flow was $8.8 million for the three months ended June 30, 2010. Management believes
that the free cash flow metric, which is a non-GAAP measure, defined as net cash provided by
operating activities of $9.6 million net of capital expenditures of $0.8 million, provides a
consistent metric from which the performance of the business may be monitored.
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act relating to our operations,
results of operations and other matters that are based on our current expectations, estimates and
projections, based on information currently available to us, and we assume no obligation to update
any forward-looking statements. Words such as expects, intends, plans, projects,
believes, estimates and similar expressions are used to identify these forward-looking
statements. These statements are not guarantees of future performance and involve risks and
uncertainties that are difficult to predict. Forward-looking statements are based upon assumptions
as to future events that may not prove to be accurate. Actual outcomes and results may differ
materially from what is expressed or forecast in these forward-looking statements. For a discussion
of some of the risks and
uncertainties that could cause actual outcomes and results to materially differ, please see the
section entitled Risk Factors to this Quarterly Report on Form 10-Q.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Recent Accounting Pronouncements
See Note (H) to the condensed consolidated financial statements for accounting pronouncements
adopted during the first quarter of fiscal year 2011.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in conformity with U.S. generally
accepted accounting principles. As such, we are required to make certain estimates, judgments and
assumptions that we believe are reasonable based upon the information available. These estimates
and assumptions affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the periods presented. For a
description of the significant accounting policies which we believe are the most critical to aid in
understanding and evaluating our reported financial position and results, refer to our Annual
Report on Form 10-K for the fiscal year ended March 31, 2010.
Revenue
Net revenue increased $14.1 million, or 37%, in the quarter ended June 30, 2010, as compared
to the same period in the prior fiscal year. The increase was
primarily due to further penetration of existing clients and the
addition of new client relationships. We served 67
clients during the first quarter of fiscal year 2011 compared to 61 clients during the first
quarter of the prior fiscal year. Average net revenue per client increased to $0.8 million during
the first quarter of fiscal year 2011, as compared to $0.6 million during the first quarter of the
prior fiscal year.
Revenue from new clients (defined as clients that generated revenue in the current period but
were absent from the prior period) accounted for 3% of revenue during the quarter ended June 30,
2010, and 6% of revenue during quarter ended June 30, 2009. For the quarters ended June 30, 2009
and 2010, billed fee revenue and new client revenue mix by the industries that we serve was as
follows:
Billed Fee Revenue | New Client Revenue | |||||||||||||||
For the Three Months | For the Three Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
Industry | 2009 | 2010 | 2009 | 2010 | ||||||||||||
Financial Services |
33 | % | 30 | % | 54 | % | 42 | % | ||||||||
Insurance |
24 | % | 26 | % | 30 | % | 1 | % | ||||||||
Healthcare |
19 | % | 21 | % | 12 | % | 29 | % | ||||||||
Enterprise |
18 | % | 19 | % | 3 | % | 21 | % | ||||||||
Public Sector |
6 | % | 4 | % | 1 | % | 7 | % | ||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Operating Expenses
Project Personnel Costs
Project personnel costs before reimbursable expenses increased $7.1 million, or 25%, during
the quarter ended June 30, 2010, as compared to the same period in the prior fiscal year. This
increase was primarily caused by an increase in
compensation costs associated with an increase in headcount and an increase in variable
compensation. As a percentage of net revenue, project personnel costs before reimbursable expenses
decreased to 69% during the quarter ended June 30, 2010, compared to 76% in the same period in the
prior fiscal year. This decrease was primarily due to higher realized billing rates and higher
chargeability of our project personnel staff.
The following table summarizes practice personnel data for quarters ended June 30, 2009 and
2010:
For the Three Months | ||||||||
Ended June 30, | ||||||||
2009 | 2010 | |||||||
Practice headcount |
441 | 532 | ||||||
Annualized net revenue per practice professional (in thousands) |
$ | 335 | $ | 393 | ||||
Chargeability |
74 | % | 75 | % | ||||
Annualized voluntary attrition |
13 | % | 17 | % | ||||
Total annualized attrition (1) |
34 | % | 20 | % |
(1) | Defined as voluntary attrition plus Company initiated attrition. |
Professional Development and Recruiting
Professional development and recruiting expenses increased $1.4 million, or 202%, during the
quarter ended June 30, 2010, as compared to the same period in the prior fiscal year. The increase
was primarily due to costs incurred in the first quarter of fiscal year 2011 for a firm-wide
training event, an increase in new hire training costs, and higher costs associated with the
recruitment and on boarding of our project personnel. The costs incurred to recruit consultants
include travel and lodging costs for our consultants and recruiting staff, travel expense
reimbursements for candidates, costs related to our summer intern program and sourcing fees related
to non-campus searches.
Marketing and Sales
Marketing and sales expenses increased $0.3 million, or 49%, during the quarter ended June 30,
2010, as compared to the same period in the prior fiscal year. The increase was primarily due to
an increase in costs related to increasing our brand awareness.
Management and Administrative Support
Management and administrative support expenses increased $0.8 million, or 14%, during the
quarter ended June 30, 2010, as compared to the same period in the prior fiscal year. This
increase was primarily due to an increase in variable compensation expense.
Other Income, Net
Other income (expense), did not change significantly during the quarter ended June 30, 2010,
as compared to the same period in the prior fiscal year.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Income Tax Expense
We recorded income tax expense of $3.0 million, which represents a 48% effective income tax
rate, in the quarter ended June 30, 2010, compared to income tax expense of $1.1 million, a 55%
effective income tax rate, in the quarter ended June 30, 2009. The effective tax rate decreased in
the quarter ended June 30, 2010, due to an increase in pre-tax income relative to the corresponding
period in the prior fiscal year, which resulted in permanent differences representing a smaller
percentage of income. We incurred international losses in India where, due to ongoing losses
and valuation allowances on related international deferred tax assets, we currently do not
recognize a tax benefit. This caused a significant difference between the reported effective tax
rate and the statutory tax rate.
We have deferred tax assets which have arisen primarily as a result of temporary differences
between the tax bases of assets and liabilities and their related amounts in the financial
statements as well as operating losses incurred in international jurisdictions. In assessing the
realizability of deferred tax assets, we consider whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized and adjust the valuation allowances
accordingly. Management judgment is required in determining any valuation allowance recorded
against the gross deferred tax assets. As of June 30, 2010, the remaining valuation allowance
against deferred tax assets was $3.0 million attributable to net operating loss carryforwards in
foreign and certain state jurisdictions, as well as U.S. federal capital loss carryforwards.
Discontinued Operations
On July 31, 2006, we sold a portion of our international operations which included consulting
operations in France, Germany, Spain, Brazil, and the United Arab Emirates as part of a stock sale
agreement. Prior to the stock sale, as a result of a tax inspection of the former Spanish
subsidiary for the tax years 1999 to 2000, we provided a bank guarantee in the amount of 4.3
million Euros, secured by restricted cash, with the Spanish taxing authority in order to appeal
such authoritys assessment. In accordance with the terms of the transaction, we agreed to
indemnify the buyer for any liability related to this Spanish tax inspection (tax indemnification
obligation). The terms of the guarantee require that it be renewed annually until the results of
the appealed tax inspection are settled. At the time of the transaction, such settlement was not
expected before a period of approximately eight years.
During fiscal year 2008, the Spanish tax authorities ruled in favor of the Company on a
portion of the assessments that were being appealed. The appeals of the remaining assessments were
based on the same merits and the Company believed that the tax authorities would rule in favor of
the Company on those appeals. As a result, $3.9 million of the indemnification obligation was
reversed during the fourth quarter of fiscal year 2008. In addition, the Company also obtained a
release in June 2008 of $3.1 million of the restricted cash related to the portion of the
assessments that had received a favorable ruling.
During the fourth quarter of fiscal year 2010, the Spanish tax authorities ruled in favor of
the Company on the assessed penalties related to the remaining tax assessments under appeal. As a
result, the remaining $0.4 million of the indemnification obligation was reversed during the fourth
quarter of fiscal year 2010. During the first quarter of fiscal year 2011, the Spanish tax
authorities ruled in favor of the Company on the remaining underlying tax assessment. Based on the
favorable rulings, the $4.1 million of restricted cash is
classified as a current asset at March 31, 2010, and
June 30,2010. In July 2010, the cash restriction was removed and
the cash was released.
The Company holds shares of Diamonds Common Stock beneficially owned by third parties in an
escrow account for the benefit of recovering from the third parties a portion of any payments made
by the Company under the tax indemnification obligation from the sale transaction. As a result of
the favorable rulings on the assessments that were appealed, the Company is in the process of
releasing the shares as part of the favorable conclusion of the tax assessments. The Company
recorded a net $0.1 million benefit in the fourth quarter of fiscal year 2010, which reflected the
$0.4 million reversal of the indemnification obligation discussed above, offset by the expected
release of the remaining escrow shares of $0.3 million.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Liquidity and Capital Resources
The following table describes our liquidity and financial position as of June 30, 2009 and
2010:
June 30, | ||||||||
2009 | 2010 | |||||||
(in millions) | ||||||||
Working capital (1) |
$ | 51.8 | $ | 59.5 | ||||
Cash and cash equivalents (1) |
$ | 48.1 | $ | 60.2 | ||||
Non-utilized bank credit facilities |
$ | 17.8 | $ | 12.3 | ||||
Stockholders equity (1) |
$ | 64.8 | $ | 69.8 |
(1) | The change in working capital, cash and cash equivalents, and stockholders
equity as of June 30, 2010, as compared to June 30, 2009, is primarily related to
increased net income and positive operating cash flows during the twelve month
period, partially offset by cash used for our share repurchase and dividend programs. |
|
(2) | The decrease in unutilized bank credit facilities as of June 30, 2010, as
compared to June 30, 2009, is due to the expiration of the JP Morgan Chase Bank, N.A.
credit agreement and the commencement of our Harris N.A. credit agreement on July 31,
2009. Our total borrowing capacity under the Harris N.A. credit agreement is $12.5
million reduced by outstanding letters of credit totaling $0.2 million as of June 30,
2010, compared to a total borrowing capacity under the JP Morgan Chase Bank, N.A.
credit agreement of $20.0 million reduced by outstanding letters of credit totaling
$2.2 million as of June 30, 2009. We have never borrowed against either line of
credit. |
Over the past several years, our principal sources of liquidity have consisted of our existing
cash and cash equivalents and cash flow from operations. We anticipate that these sources will
provide sufficient liquidity to fund our operating, capital, stock repurchase program and Common
Stock dividend requirements at least through fiscal year 2012. These internal sources of liquidity
have been adequate to support our operating and capital expenditure requirements as well as to
provide the funding needed for our stock repurchase program.
Our cash is invested in highly-liquid, short-term investments with little to no principal
risk. These investments must be rated either AAA or A1/P1 by Standard & Poors, Moodys or Fitch,
Inc. We do not invest in nonconsolidated conduits, collateralized debt obligations, auction-rate
securities, or structured investment vehicles, and we do not have any plans to invest in such
investments in the foreseeable future.
On July 31, 2009, the Company entered into a credit agreement with Harris N.A. (Harris Bank)
to secure a revolving line of credit. Pursuant to the terms of the credit agreement, the Company
may borrow up to $12.5 million. The extensions of credit from Harris Bank may be made in the form
of loans and letters of credit, and certain other credit and financial accommodations. The Company
is required to adhere to certain operating and financial covenants including a minimum net worth of
$30.0 million and, when borrowing against the credit facility, a minimum interest coverage ratio of
1.5 to 1. The minimum interest coverage is measured as the ratio of earnings before interest and
tax expense to interest expense for the past four fiscal quarters.
The annual interest rate under this credit agreement is at the Companys option, LIBOR plus
one hundred and twenty five basis points or a base rate. The base rate is generally defined as the
greatest of: a) the prime rate, b) the sum of the Federal Funds rate plus one half of one percent,
or c) the one month LIBOR rate plus one hundred basis points. The Company agrees to pay an annual
commitment fee to Harris Bank equal to one-quarter of one percent on the unused credit facility
from August 1, 2009, through the termination date of the agreement. Pursuant to the terms of the
agreement, outstanding letters of credit issued by Harris Bank for the Company cannot exceed $2.5
million and any outstanding obligations under the line of credit are secured by substantially all
of the Companys assets. As of June 30, 2010, the Company had letters of credit outstanding
totaling $0.2 million and there have been no cash borrowings against the line of credit since it
was established. The Harris Bank credit agreement expires July 31, 2011.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
As of June 30, 2009, and through July 31, 2009, the Company maintained a revolving line of
credit pursuant to the terms of a credit agreement with JP Morgan Chase Bank, N.A. (Chase Bank)
under which the Company could borrow up to $20.0 million. On July 31, 2009, this credit agreement
was replaced by the credit agreement with Harris Bank discussed above. Under the Chase Bank credit
agreement, the Company was required to adhere to financial covenants. The Chase Bank credit
agreement expired on July 31, 2009. The Company never borrowed cash against this line of credit
during the two years it was in effect.
Cash Flows from Operating Activities
During the three months ended June 30, 2010, net cash provided by operating activities was
$9.6 million primarily resulting from the net income reported for the period, adjusted for
depreciation and stock-based compensation expense, and the increase in accrued compensation,
partially offset by the net change in deferred income taxes and income taxes payable/receivable.
The decrease in deferred income tax assets was primarily due to the timing of the income tax
deduction for accrued variable compensation expense, which became deductible in the first quarter
of fiscal year 2011. This decrease was offset by an increase in income taxes receivable, primarily
related to the income tax deduction discussed above and income tax deposits paid in the first
quarter of fiscal year 2011.
Our billings for the three months ended June 30, 2010, totaled $61.6 million compared to $45.5
million for the three months ended June 30, 2009. The increase in billings is due to an increase in
net revenue and reimbursable expenses as a result of increased project personnel headcount. These
amounts include value added tax (VAT) and billings to clients for reimbursable expenses (which
are not included in net revenue). Our gross accounts receivable balance of $21.9 million at June
30, 2010, represented 32 days of billings for the quarter ended June 30, 2010. At June 30, 2009,
the gross receivable balance was $15.6 million which represented 31 days of billings for the
quarter ended June 30, 2009. The increase in accounts receivable at June 30, 2010, as compared to
June 30, 2009, was principally due to increased total revenue during the quarter ended June 30,
2010. An increase or decrease in accounts receivable and days of billings in accounts receivable
between periods is primarily the result of the timing of the collection of payments and issuance of
invoices, and therefore, we do not believe it is indicative of a trend in the business.
Cash Flows from Investing Activities
Cash used in investing activities was $0.8 million for the three months ended June 30, 2010,
primarily related to capital expenditures which consisted of purchases of computer hardware and
software licenses.
Cash Flows from Financing Activities
Cash used in financing activities was $4.3 million for three months ended June 30, 2010,
primarily due to the payment of common stock cash dividends and the purchase of treasury stock.
Contractual Obligations
There have been no material changes to the table presented in our Annual Report on Form 10-K
for the fiscal year ended March 31, 2010.
Off Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements that would have a material current or
future impact on our financial condition or results of operations.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Treasury Stock Transactions
The Board has authorized, from time to time, the repurchase of our Common Stock in the open
market or through privately negotiated transactions. During the period beginning with the
inception of the Buy-back Program in October 1998 until the meeting of directors on September 14,
2004, the Board had authorized the repurchase of up to 6.0 million shares, of which 5.3 million
shares were repurchased at an aggregate cost of $70.5 million as of September 14, 2004. At the
meeting of directors on September 14, 2004, the Board restated the aggregate amount of repurchases
that could be made under the Buy-back Program to be based on a maximum dollar amount rather than a
maximum number of shares. The authorization approved the repurchase of shares under the Buy-back
Program having an aggregate market value of no more than $25.0 million. In April 2005, July 2006,
March 2007 and February 2008, the Board authorized the repurchase of an additional $50.0 million,
$35.0 million, $50.0 million and $25.0 million, respectively, of shares of the Companys
outstanding Common Stock under the existing Buy-back Program, resulting in an aggregate market
value of up to $185.0 million in addition to the 5.3 million shares repurchased prior to September
14, 2004. During the quarter ended June 30, 2010, we repurchased approximately 0.2 million shares
at an average price of $8.19. As of June 30, 2010, the amount available for repurchase under the
Buy-back Program was $20.1 million.
Summary
We believe that our current cash balances, existing lines of credit, and cash flow from
existing and future operations will be sufficient to fund our operating requirements at least
through fiscal year 2012. In addition, we could consider seeking additional public or private debt
or equity financing to fund future growth opportunities. However, there is no assurance that such
financing would be available to us on acceptable terms, or at all.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This information is set forth in the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2010. There have been no material changes to the Companys market risk during the
three months ended June 30, 2010.
Item 4. Controls and Procedures
(a) Controls and Procedures. Our senior management, with the participation of our Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this quarterly
report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, our disclosure controls and procedures are effective
such that information relating to the Company (i) is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in our
internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in several legal claims or proceedings concerning matters arising in the
ordinary course of business. However, we do not expect that any of these matters, individually or
in the aggregate, will have a material effect or impact on our results of operation or financial
condition.
Item 1A. Risk Factors
There have been no material changes to our Risk Factors as reported in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2010.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
The Board has authorized, from time to time, the repurchase of the Companys Common Stock in
the open market or through privately negotiated transactions. During the period beginning with the
inception of the Buy-back Program in October 1998 until the meeting of directors on September 14,
2004, the Board had authorized the repurchase of up to 6.0 million shares, of which 5.3 million
shares were repurchased at an aggregate cost of $70.5 million as of September 14, 2004. At the
meeting of directors on September 14, 2004, the Board restated the aggregate amount of repurchases
that could be made under the Buy-back Program to be based on a maximum dollar amount rather than a
maximum number of shares. The authorization approved the repurchase of shares under the Buy-back
Program having an aggregate market value of no more than $25.0 million. In April 2005, July 2006,
March 2007 and February 2008, the Board authorized the repurchase of an additional $50.0 million,
$35.0 million, $50.0 million and $25.0 million, respectively, of shares of the Companys
outstanding Common Stock under the existing Buy-back Program, resulting in an aggregate market
value of up to $185.0 million in addition to the 5.3 million shares repurchased prior to September
14, 2004. In the absence of an additional buy-back authorization from the Board, the Buy-back
Program expires when the existing authorized amounts for share repurchases has been expended.
During the quarter ended June 30, 2010, the Company repurchased approximately 0.2 million shares at
an average price of $8.19. As of June 30, 2010, the amount available for repurchase under the
Buy-back Program was $20.1 million.
Issuer Purchases of Equity Securities | ||||||||||||||||
Maximum Approximate Dollar | ||||||||||||||||
Average Price | Total Number of Shares | Value of Shares | ||||||||||||||
Total Number of | Paid per | Purchased as Part of | That May be Purchased | |||||||||||||
Period | Shares Purchased (1) | Share (2) | Publicly Announced Plans | Under the Plan | ||||||||||||
April 1, 2010
April 30, 2010 |
239,614 | 8.19 | 239,614 | $ | 20,098,028 | |||||||||||
May 1, 2010
May 31, 2010 |
547 | 9.72 | | $ | 20,098,028 | |||||||||||
June 1, 2010
June 30, 2010 |
| | | $ | 20,098,028 |
(1) | In addition to purchases made under the Companys publicly announced Buy-back Program,
included in this column are transactions under the Companys stock based compensation plans
involving the delivery to the Company of 547 shares of Common Stock to satisfy tax withholding
obligations in connection with the vesting of restricted shares granted to Company employees. |
|
(2) | Average price paid per share of stock repurchased under the Buy-back Program is execution
price, including commissions paid to brokers. |
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DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC.
Item 6. Exhibits
(a) Exhibits
3.1 | Form of Restated Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to the quarterly report on Form 10-Q for the period
ended September 30, 2009 and incorporated herein by reference) |
|||
3.2 | Amended and Restated By-Laws (filed as Exhibit 3.2 to the quarterly
report on Form 10-Q for the period ended September 30, 2006 and
incorporated herein by reference) |
|||
31.1 | * | CEO Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
||
31.2 | * | CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 302 of the Sarbanes-Oxley Act of 2002 |
||
32.1 | * | CEO Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
||
32.2 | * | CFO Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
||
99.1 | * | Press Release dated August 4, 2010, Reporting First Quarter Earnings |
* | filed herewith |
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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.
DIAMOND MANAGEMENT & TECHNOLOGY CONSULTANTS, INC. |
||||
Date: August 4, 2010 | By: | /s/ Adam J. Gutstein | ||
Adam J. Gutstein | ||||
President and Chief Executive Officer | ||||
Date: August 4, 2010 | By: | /s/ Karl E. Bupp | ||
Karl E. Bupp | ||||
Chief Financial Officer | ||||
20