Unassociated Document
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 September 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: 001-33584
DICE
HOLDINGS, INC.
(Exact
name of Registrant as specified in its Charter)
Delaware
|
20-3179218
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1040
Avenue of the Americas, 16th
Floor
New
York, New York
|
10018
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(212)
725-6550
(Registrant’s
telephone number, including area code)
None
(Former
name, former address and former fiscal year - if changed since last
report)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No 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 the
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, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o Accelerated
filer x Non-accelerated
filer o 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 x
As of
October 28, 2010, 63,086,951 shares of common stock (“Common Stock”) of the
Registrant were outstanding.
DICE
HOLDINGS, INC.
TABLE
OF CONTENTS
|
|
Page
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
Financial Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2010 and December 31,
2009
|
|
1
|
Condensed
Consolidated Statements of Operations for the three and nine months ended
September 30, 2010 and 2009
|
|
2
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2010 and 2009
|
|
3
|
Notes
to the Condensed Consolidated Financial Statements
|
|
4
|
|
|
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
|
|
18
|
|
|
|
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
|
|
33
|
|
|
|
Item 4.
Controls and Procedures
|
|
33
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
|
Item 1.
Legal Proceedings
|
|
34
|
|
|
|
Item 1A.
Risk Factors
|
|
34
|
|
|
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
34
|
|
|
|
Item 3.
Defaults Upon Senior Securities
|
|
34
|
|
|
|
Item 4.
(Removed and Reserved)
|
|
34
|
|
|
|
Item 5.
Other Information
|
|
34
|
|
|
|
Item 6.
Exhibits
|
|
34
|
|
|
|
SIGNATURES
|
|
|
|
|
|
Certification
of CEO Pursuant to Section 302
|
|
|
Certification
of CFO Pursuant to Section 302
|
|
|
Certification
of CEO Pursuant to Section 906
|
|
|
Certification
of CFO Pursuant to Section 906
|
|
|
PART
I — FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in
thousands, except per share data)
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
38,641 |
|
|
$ |
44,925 |
|
Marketable
securities
|
|
|
3,510 |
|
|
|
4,214 |
|
Accounts
receivable, net of allowance for doubtful accounts of $1,488 and
$1,764
|
|
|
13,074 |
|
|
|
11,336 |
|
Deferred
income taxes – current
|
|
|
1,436 |
|
|
|
812 |
|
Income
taxes receivable
|
|
|
1,883 |
|
|
|
906 |
|
Prepaid
and other current assets
|
|
|
2,170 |
|
|
|
1,360 |
|
Total
current assets
|
|
|
60,714 |
|
|
|
63,553 |
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
5,442 |
|
|
|
5,719 |
|
Acquired
intangible assets, net
|
|
|
69,428 |
|
|
|
48,536 |
|
Goodwill
|
|
|
177,393 |
|
|
|
142,638 |
|
Deferred
financing costs, net of accumulated amortization of $76 and
$2,918
|
|
|
1,514 |
|
|
|
1,875 |
|
Other
assets
|
|
|
239 |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
314,730 |
|
|
$ |
262,555 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
12,913 |
|
|
$ |
9,930 |
|
Deferred
revenue
|
|
|
44,745 |
|
|
|
33,909 |
|
Current
portion of acquisition related contingencies
|
|
|
1,277 |
|
|
|
275 |
|
Current
portion of long-term debt
|
|
|
4,000 |
|
|
|
1,000 |
|
Income
taxes payable
|
|
|
1,031 |
|
|
|
601 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
63,966 |
|
|
|
45,715 |
|
Long-term
debt
|
|
|
53,000 |
|
|
|
49,300 |
|
Deferred
income taxes - non-current
|
|
|
18,261 |
|
|
|
10,886 |
|
Interest
rate hedge liability - non-current
|
|
|
- |
|
|
|
550 |
|
Accrual
for unrecognized tax benefits
|
|
|
4,319 |
|
|
|
5,778 |
|
Acquisition
related contingencies
|
|
|
9,565 |
|
|
|
588 |
|
Other
long-term liabilities
|
|
|
1,168 |
|
|
|
1,118 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
150,279 |
|
|
|
113,935 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Convertible
preferred stock, $.01 par value, authorized 20,000 shares; issued and
outstanding: 0 shares
|
|
|
- |
|
|
|
- |
|
Common
stock, $.01 par value, authorized 240,000; issued and
outstanding: 62,951 and 62,502 shares,
respectively
|
|
|
630 |
|
|
|
625 |
|
Additional
paid-in capital
|
|
|
236,021 |
|
|
|
232,508 |
|
Accumulated
other comprehensive loss
|
|
|
(10,855 |
) |
|
|
(10,013 |
) |
Accumulated
deficit
|
|
|
(61,345 |
) |
|
|
(74,500 |
) |
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
164,451 |
|
|
|
148,620 |
|
Total
liabilities and stockholders' equity
|
|
$ |
314,730 |
|
|
$ |
262,555 |
|
See
accompanying notes to the condensed consolidated financial
statements.
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in
thousands, except per share amounts)
|
|
For the three months
ended September 30,
|
|
|
For the nine months
ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
34,360 |
|
|
$ |
26,733 |
|
|
$ |
91,108 |
|
|
$ |
83,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
2,685 |
|
|
|
1,929 |
|
|
|
6,973 |
|
|
|
5,570 |
|
Product
development
|
|
|
1,993 |
|
|
|
1,130 |
|
|
|
4,615 |
|
|
|
2,886 |
|
Sales
and marketing
|
|
|
11,278 |
|
|
|
8,261 |
|
|
|
32,487 |
|
|
|
26,180 |
|
General
and administrative
|
|
|
5,431 |
|
|
|
4,725 |
|
|
|
14,607 |
|
|
|
14,849 |
|
Depreciation
|
|
|
1,003 |
|
|
|
933 |
|
|
|
3,082 |
|
|
|
2,786 |
|
Amortization
of intangible assets
|
|
|
3,374 |
|
|
|
3,822 |
|
|
|
8,518 |
|
|
|
11,730 |
|
Change
in acquisition related contingencies
|
|
|
(181 |
) |
|
|
- |
|
|
|
(481 |
) |
|
|
- |
|
Total
operating expenses
|
|
|
25,583 |
|
|
|
20,800 |
|
|
|
69,801 |
|
|
|
64,001 |
|
Operating
income
|
|
|
8,777 |
|
|
|
5,933 |
|
|
|
21,307 |
|
|
|
19,310 |
|
Interest
expense
|
|
|
(712 |
) |
|
|
(1,598 |
) |
|
|
(2,807 |
) |
|
|
(5,170 |
) |
Deferred
financing cost write-off
|
|
|
(1,388 |
) |
|
|
- |
|
|
|
(1,388 |
) |
|
|
- |
|
Interest
income
|
|
|
27 |
|
|
|
37 |
|
|
|
88 |
|
|
|
173 |
|
Other
income
|
|
|
- |
|
|
|
294 |
|
|
|
216 |
|
|
|
1,051 |
|
Income
before income taxes
|
|
|
6,704 |
|
|
|
4,666 |
|
|
|
17,416 |
|
|
|
15,364 |
|
Income
tax expense
|
|
|
538 |
|
|
|
1,664 |
|
|
|
4,261 |
|
|
|
5,728 |
|
Net
income
|
|
$ |
6,166 |
|
|
$ |
3,002 |
|
|
$ |
13,155 |
|
|
$ |
9,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.10 |
|
|
$ |
0.05 |
|
|
$ |
0.21 |
|
|
$ |
0.15 |
|
Diluted
earnings per share
|
|
$ |
0.09 |
|
|
$ |
0.05 |
|
|
$ |
0.20 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares outstanding
|
|
|
62,799 |
|
|
|
62,305 |
|
|
|
62,436 |
|
|
|
62,248 |
|
Weighted
average diluted shares outstanding
|
|
|
67,561 |
|
|
|
65,659 |
|
|
|
67,406 |
|
|
|
66,070 |
|
See
accompanying notes to the condensed consolidated financial
statements.
DICE
HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
|
|
For the nine months ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
13,155 |
|
|
$ |
9,636 |
|
Adjustments
to reconcile net income to net cash from operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,082 |
|
|
|
2,786 |
|
Amortization
of intangible assets
|
|
|
8,518 |
|
|
|
11,730 |
|
Deferred
income taxes
|
|
|
(2,321 |
) |
|
|
(3,861 |
) |
Amortization
of deferred financing costs
|
|
|
562 |
|
|
|
625 |
|
Write-off
of deferred financing costs
|
|
|
1,388 |
|
|
|
- |
|
Share
based compensation
|
|
|
2,693 |
|
|
|
4,407 |
|
Change
in acquisition related contingencies
|
|
|
(481 |
) |
|
|
- |
|
Change
in accrual for unrecognized tax benefits
|
|
|
(1,502 |
) |
|
|
- |
|
Gain
from interest rate hedges
|
|
|
(216 |
) |
|
|
(1,051 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(104 |
) |
|
|
4,853 |
|
Prepaid
expenses and other assets
|
|
|
(478 |
) |
|
|
(51 |
) |
Accounts
payable and accrued expenses
|
|
|
3,184 |
|
|
|
(1,743 |
) |
Income
taxes receivable/payable
|
|
|
(569 |
) |
|
|
(1,315 |
) |
Deferred
revenue
|
|
|
7,940 |
|
|
|
(9,646 |
) |
Payments
to reduce interest rate hedge agreements
|
|
|
(333 |
) |
|
|
(514 |
) |
Other,
net
|
|
|
134 |
|
|
|
507 |
|
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
|
|
34,652 |
|
|
|
16,363 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of fixed assets
|
|
|
(3,414 |
) |
|
|
(2,080 |
) |
Purchases
of marketable securities
|
|
|
(2,442 |
) |
|
|
(1,750 |
) |
Maturities
and sales of marketable securities
|
|
|
3,111 |
|
|
|
4,500 |
|
Payments
for acquisitions, net of cash acquired of $1,152 and $0
|
|
|
(43,796 |
) |
|
|
(2,690 |
) |
|
|
|
|
|
|
|
|
|
Net
cash from investing activities
|
|
|
(46,541 |
) |
|
|
(2,020 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments
on long-term debt
|
|
|
(62,300 |
) |
|
|
(32,900 |
) |
Proceeds
from long-term debt
|
|
|
69,000 |
|
|
|
2,000 |
|
Financing
costs paid
|
|
|
(1,450 |
) |
|
|
- |
|
Other
|
|
|
825 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
Net
cash from financing activities
|
|
|
6,075 |
|
|
|
(30,881 |
) |
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes
|
|
|
(470 |
) |
|
|
2,017 |
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents for the period
|
|
|
(6,284 |
) |
|
|
(14,521 |
) |
Cash
and cash equivalents, beginning of period
|
|
|
44,925 |
|
|
|
55,144 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
38,641 |
|
|
$ |
40,623 |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities
|
|
|
|
|
|
|
|
|
Contingent
consideraton to be paid in cash for acquisitions
|
|
$ |
10,510 |
|
|
$ |
863 |
|
Issuance
of common stock for the acquisition of AllHealthcareJobs
|
|
|
- |
|
|
|
959 |
|
See
accompanying notes to the condensed consolidated financial
statements.
DICE
HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Dice
Holdings, Inc. (“DHI” or the “Company”) have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) have been omitted and condensed
pursuant to such rules and regulations. In the opinion of the Company’s
management, all adjustments (consisting of only normal and recurring accruals)
have been made to present fairly the financial positions, the results of
operations and cash flows for the periods presented. Although the Company
believes that the disclosures are adequate to make the information presented not
misleading, these financial statements should be read in conjunction with the
Company’s audited consolidated financial statements as of and for the year ended
December 31, 2009 that are included in the Company’s Annual Report on Form
10-K. Operating results for the nine month period ended September 30, 2010 are
not necessarily indicative of the results to be achieved for the full
year.
Preparation
of the condensed consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the period. Management believes
the most complex and sensitive judgments, because of their significance to the
condensed consolidated financial statements, result primarily from the need to
make estimates about the effects of matters that are inherently uncertain.
Actual results could differ materially from management’s estimates.
During
the three month period ended September 30, 2010, the Accrual for Unrecognized
Tax Benefits was reduced by $1.5 million related to the outcome of a federal tax
exam and the expiration of the statute of limitations covering certain tax
positions. This reduction in the accrual resulted in lower income tax
expense in the current period. There have been no other significant changes in
the Company’s assumptions regarding critical accounting estimates during the
nine month period ended September 30, 2010.
2. NEW
ACCOUNTING STANDARDS
In
October 2009, new accounting standards were issued in the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) subtopic on
Revenue Recognition-Multiple-Element Arrangements. The standards enable
companies to account for certain products and services (deliverables) separately
rather than as a combined unit. The standards are effective for the Company
beginning on January 1, 2011, with early adoption permitted. The Company is
currently evaluating the impact these standards will have on its financial
statements.
3. ACQUISITIONS
AllHealthcareJobs-
On June 10, 2009, the Company acquired substantially all of the assets of
AllHealthcareJobs.com (“AllHealthcareJobs”), a leading online career site
dedicated to matching healthcare professionals with available career
opportunities. The purchase price consisted of initial consideration
of $2.7 million in cash (including working capital adjustments) and the issuance
of 205,000 shares of the Company’s common stock (with certain restrictions)
valued at $959,000. Additional consideration of up to a maximum of
$1.0 million in cash is payable upon the achievement of certain operating and
financial goals over the two year period ending June 30, 2011. The
acquisition resulted in recording intangible assets of $3.1 million and goodwill
of $1.4 million. A liability of $513,000 is recorded as of
September 30, 2010 for the estimated consideration remaining to be paid. The
AllHealthcareJobs.com acquisition is not deemed significant to the Company’s
financial results, thus limited disclosures are presented herein.
WorldwideWorker-
On May 6, 2010, the Company acquired the online and career-events
business of WorldwideWorker.com (“WorldwideWorker”), a global leader in online
recruitment for the energy industry. The purchase price consisted of
initial consideration of $6.0 million in cash. Additional
consideration of up to a maximum of $3.0 million in cash is payable upon the
achievement of certain financial goals over the two year period ending December
31, 2011. The acquisition resulted in recording intangible assets of
$4.9 million and goodwill of $4.9 million. A liability of $2.3 million is
recorded as of September 30, 2010 for the estimated consideration remaining to
be paid. The WorldwideWorker acquisition is not deemed significant to the
Company’s financial results, thus limited disclosures are presented
herein.
Rigzone-
On August 11, 2010, the Company acquired all of the issued and outstanding
shares of Rigzone.com, Inc. (“Rigzone”), a U.S. market leader in the oil and gas
industry delivering online content, data, advertising and career services. The
purchase extends the Company’s footprint in the energy vertical. The purchase
price consisted of initial consideration of approximately $39 million in
cash. On or about October 15, 2011, additional consideration of up to
a maximum of $16 million in cash is payable upon the achievement of certain
revenue goals through June 30, 2011. The amount of the contingent
payment is equal to five times the amount to which revenue for the year ended
June 30, 2011 exceeds $8.2 million. Approximately $3.9 million of the purchase
price was placed in an escrow account, with funds to be released to pay
indemnification claims. The escrow arrangement will terminate in
October 2011.
The
assets acquired and liabilities assumed were recorded at fair value as of the
acquisition date. The acquired accounts receivable of $1.4 million were recorded
at fair value of $1.0 million, with an expectation of uncollectible accounts.
The fair value of the contingent consideration is determined using an expected
present value technique. Expected cash flows are determined using the
probability-weighted average of possible outcomes that would occur should
certain financial metrics be reached. There is no market data available to use
in valuing the contingent consideration; therefore, the Company developed its
own assumptions related to the future revenues of the businesses to estimate the
fair value of these liabilities. The contingent payment can range
from zero to $16.0 million, with $8.1 million being the Company’s best estimate
as of the date of acquisition. The assets and liabilities recognized as of the
acquisition date include (in thousands):
Assets:
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,152 |
|
Accounts
receivable
|
|
|
1,000 |
|
Acquired
intangible assets
|
|
|
24,606 |
|
Goodwill
|
|
|
30,206 |
|
Other
assets
|
|
|
75 |
|
Assets
acquired
|
|
|
57,039 |
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
166 |
|
Deferred
revenue
|
|
|
2,180 |
|
Deferred
income taxes
|
|
|
7,843 |
|
Fair
value of contingent consideration
|
|
|
8,050 |
|
Liabilities
assumed
|
|
|
18,239 |
|
|
|
|
|
|
Net
Assets Acquired
|
|
$ |
38,800 |
|
Goodwill
results from the expansion of our market share in the energy vertical, from
intangible assets that do not qualify for separate recognition including an
assembled workforce, and from expected synergies from combining operations of
Rigzone into the existing DHI operations. Goodwill is not deductible for
tax purposes.
Pro forma
Information- The following pro forma condensed consolidated results of
operations are presented as if the acquisitions of Rigzone, WorldwideWorker and
All Healthcare Jobs were completed as of January 1, 2009:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
35,305 |
|
|
$ |
29,099 |
|
|
$ |
96,913 |
|
|
$ |
90,750 |
|
Net
income
|
|
|
6,021 |
|
|
|
1,723 |
|
|
|
11,845 |
|
|
|
6,507 |
|
The pro
forma financial information represents the combined historical operating results
of the Company, Rigzone, WorldwideWorker and All Healthcare Jobs with
adjustments for purchase accounting and is not necessarily indicative of the
results of operations that would have been achieved if the acquisitions had
taken place at the beginning of the period presented. The pro forma
adjustments included adjustments for interest on borrowings, amortization of
acquired intangible assets, amortization of deferred financing costs and the
related income tax impacts of such adjustments.
Rigzone
and WorldwideWorker, both acquired in 2010, comprise the Energy
segment. The Consolidated Statements of Operations include revenue
from the Energy segment of $1.5 million and $1.7 million for the three and nine
month periods ended September 30, 2010, respectively, and operating loss of
$610,000 and $951,000 for the three and nine month periods ended September 30,
2010, respectively.
4. FAIR
VALUE MEASUREMENTS
The FASB
ASC Fair Value Measurements and Disclosures Topic defines fair value,
establishes a framework for measuring fair value and requires certain
disclosures for each class of assets and liabilities measured at fair value on
either a recurring or nonrecurring basis. As a basis for considering assumptions
a three-tier fair value hierarchy is used, which prioritizes the inputs used in
measuring fair value as follows:
|
·
|
Level
1 – Quoted prices for identical instruments in active
markets.
|
|
·
|
Level
2 – Quoted prices for similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are not active and
model-derived valuations, in which all significant inputs are observable
in active markets.
|
|
·
|
Level
3 – Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
Money
market funds are included in cash and cash equivalents on the Condensed
Consolidated Balance Sheets. The money market funds and marketable
securities are valued using quoted prices in the market. The carrying
amounts reported in the Condensed Consolidated Balance Sheets for cash and cash
equivalents, accounts receivable, and accounts payable and accrued expenses
approximate their fair values. The estimated fair value of long-term
debt, as of September 30, 2010 and December 31, 2009 was approximately $57
million and $50 million, respectively.
The
interest rate hedge liability as of December 31, 2009 is valued using the market
approach, with the forward one-month LIBOR yield curve as the primary input.
Valuations are obtained from two third-party providers, one of which is the swap
counterparty. There were no interest rate hedges outstanding at
September 30, 2010.
The
Company has obligations, to be paid in cash, related to its acquisitions if
certain future operating and financial goals are met. See Note 3- Acquisitions.
The fair value of this contingent consideration is determined using an expected
present value technique. Expected cash flows are determined using the
probability-weighted average of possible outcomes that would occur should
certain events and certain financial metrics be reached. There is no market data
available to use in valuing the contingent consideration; therefore, the Company
developed its own assumptions related to the future financial performance of the
businesses to estimate the fair value of these liabilities. The liabilities for
the contingent consideration were established at the time of acquisition and are
evaluated at each reporting period. During the three and nine month periods
ended September 30, 2010, the liability for contingent consideration was reduced
by $181,000 and $481,000, respectively, due to the sales performance of
AllHealthcareJobs and WorldwideWorker to date and expectations of future sales
being lower than the initial assumptions. The decrease in the liability resulted
in a gain, which is included in Change in Acquisition Related Contingencies on
the Condensed Consolidated Statements of Operations. These liabilities are
included on the Condensed Consolidated Balance Sheets in the Current Portion of
Acquisition Related Contingencies and in Acquisition Related Contingencies.
There was no impairment of goodwill or intangibles assets
indicated.
The assets and liabilities measured at
fair value on a recurring basis are as follows (in thousands):
|
|
As of September 30, 2010
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$ |
18,669 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
18,669 |
|
Marketable
securities
|
|
|
3,510 |
|
|
|
- |
|
|
|
- |
|
|
|
3,510 |
|
Contingent
consideration to be paid in cash for acquisitions
|
|
|
- |
|
|
|
- |
|
|
|
10,842 |
|
|
|
10,842 |
|
|
|
As of December 31, 2009
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$ |
23,655 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
23,655 |
|
Marketable
securities
|
|
|
4,214 |
|
|
|
- |
|
|
|
- |
|
|
|
4,214 |
|
Interest
rate hedge liability - non-current
|
|
|
- |
|
|
|
550 |
|
|
|
- |
|
|
|
550 |
|
Contingent
consideration to be paid in cash for acquisitions
|
|
|
- |
|
|
|
- |
|
|
|
863 |
|
|
|
863 |
|
Reconciliations
of liabilities measured and carried at fair value on a recurring basis with the
use of significant unobservable inputs (Level 3) are as follows (in
thousands):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent
consideration for acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$ |
3,023 |
|
|
$ |
863 |
|
|
$ |
863 |
|
|
$ |
- |
|
Additions
for acquisitons
|
|
|
8,050 |
|
|
|
- |
|
|
|
10,510 |
|
|
|
863 |
|
Cash
payments
|
|
|
(50 |
) |
|
|
- |
|
|
|
(50 |
) |
|
|
|
|
Losses
(gains) included in earnings
|
|
|
(181 |
) |
|
|
- |
|
|
|
(481 |
) |
|
|
- |
|
Balance
at end of period
|
|
$ |
10,842 |
|
|
$ |
863 |
|
|
$ |
10,842 |
|
|
$ |
863 |
|
Certain
assets and liabilities are measured at fair value on a non-recurring basis and
therefore are not included in the tables above. These assets include
goodwill and intangible assets which result as acquisitions occur. Items valued
using such internally generated valuation techniques are classified according to
the lowest level input or value driver that is significant to the valuation.
Thus, an item may be classified in Level 3 even though there may be some
significant inputs that are readily observable. Such instruments are
not measured at fair value on an ongoing basis but are subject to fair value
adjustments in certain circumstances, for example, when there is evidence of
impairment.
The
Company determines whether the carrying value of recorded goodwill is impaired
on an annual basis or more frequently if indicators of potential impairment
exist. The impairment test for goodwill from the 2005 Dice Inc. acquisition is
performed annually as of August 31 and resulted in no impairment. The
impairment test for goodwill from the 2006 eFinancialCareers acquisition, the
2009 AllHealthcareJobs acquisition, and the 2010 WorldwideWorker and Rigzone
acquisitions are performed annually as of October 31. The first step of the
impairment review process compares the fair value of the reporting unit in which
the goodwill resides to the carrying value of that reporting unit. The second
step measures the amount of impairment loss, if any, by comparing the implied
fair value of the reporting unit goodwill with its carrying amount. The
determination of whether or not goodwill has become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of the reporting units. Fair values of each reporting unit
are determined either by using a discounted cash flow methodology or by using a
combination of a discounted cash flow methodology and a market comparable
method. The discounted cash flow methodology is based on projections of the
amounts and timing of future revenues and cash flows, assumed discount rates and
other assumptions as deemed appropriate. Factors such as historical performance,
anticipated market conditions, operating expense trends and capital expenditure
requirements are considered. Additionally, the discounted cash flows analysis
takes into consideration cash expenditures for product development, other
technological updates and advancements to the websites and investments to
improve the candidate databases. The market comparable method indicates the fair
value of a business by comparing it to publicly traded companies in similar
lines of business or to comparable transactions or assets. Considerations for
factors such as size, growth, profitability, risk and return on investment are
analyzed and compared to the comparable businesses and adjustments are made. A
market value of invested capital of the publicly traded companies is calculated
and then applied to the entity’s operating results to arrive at an estimate of
value.
The
indefinite-lived acquired intangible assets include the Dice trademarks and
brand name. The Company determines whether the carrying value of recorded
indefinite-lived acquired intangible assets is impaired on an annual basis or
more frequently if indicators of potential impairment exist. The impairment test
is performed annually as of August 31 and resulted in no impairment. The
impairment review process compares the fair value of the indefinite-lived
acquired intangible assets to its carrying value. If the carrying value exceeds
the fair value, an impairment loss is recorded. The determination of whether or
not indefinite-lived acquired intangible assets have become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of the indefinite-lived acquired intangible assets. Fair
values are determined using a profit allocation methodology which estimates the
value of the trademark and brand name by capitalizing the profits saved because
the company owns the asset. Factors such as historical performance, anticipated
market conditions, operating expense trends and capital expenditure requirements
are considered. Changes in Company strategy and/or market conditions could
significantly impact these judgments and require adjustments to recorded amounts
of intangible assets.
5.
MARKETABLE SECURITIES
DHI’s
marketable securities are stated at fair value. The following tables summarize
the Company’s marketable securities as of September 30, 2010 and December 31,
2009 (in thousands):
|
As of September 30, 2010
|
|
|
|
|
Gross
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
Maturity
|
|
Amortized Cost
|
|
|
Gain
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
Within
one year
|
|
$ |
3,507 |
|
|
$ |
3 |
|
|
$ |
3,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
Gross
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
Maturity
|
|
Amortized Cost
|
|
|
Gain
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Government and agencies
|
Within
one year
|
|
$ |
4,203 |
|
|
$ |
- |
|
|
$ |
4,203 |
|
Corporate
debt securities
|
1
to 5 years
|
|
|
11 |
|
|
|
- |
|
|
|
11 |
|
Total
|
|
|
$ |
4,214 |
|
|
$ |
- |
|
|
$ |
4,214 |
|
6.
ACQUIRED INTANGIBLE ASSETS, NET
Below is a summary of the major
acquired intangible assets and weighted average amortization periods for the
acquired identifiable intangible assets (in thousands).
|
|
As of September 30, 2010
|
|
|
|
|
|
Acquisition of
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
Weighted
|
|
|
|
|
|
Worldwide
|
|
|
|
|
|
|
|
|
Currency
|
|
|
Acquired
|
|
Average
|
|
|
|
|
|
Worker and
|
|
|
Total
|
|
|
Accumulated
|
|
|
Translation
|
|
|
Intangible
|
|
Amortization
|
|
|
Cost
|
|
|
Rigzone
|
|
|
Cost
|
|
|
Amortization
|
|
|
Adjustment
|
|
|
Assets,
Net
|
|
Period
|
Technology
|
|
$ |
12,420 |
|
|
|
5,580 |
|
|
$ |
18,000 |
|
|
$ |
(12,610 |
) |
|
$ |
(61 |
) |
|
$ |
5,329 |
|
3.9
years
|
Trademarks
and brand names- Dice
|
|
|
39,000 |
|
|
|
- |
|
|
|
39,000 |
|
|
|
- |
|
|
|
- |
|
|
|
39,000 |
|
Indefinite
|
Trademarks
and brand names- Other
|
|
|
7,270 |
|
|
|
9,520 |
|
|
|
16,790 |
|
|
|
(5,507 |
) |
|
|
(507 |
) |
|
|
10,776 |
|
6.0
years
|
Customer
lists
|
|
|
36,943 |
|
|
|
4,570 |
|
|
|
41,513 |
|
|
|
(35,857 |
) |
|
|
(725 |
) |
|
|
4,931 |
|
4.6
years
|
Candidate
and content database
|
|
|
18,982 |
|
|
|
9,259 |
|
|
|
28,241 |
|
|
|
(19,212 |
) |
|
|
(46 |
) |
|
|
8,983 |
|
3.0
years
|
Order
Backlog
|
|
|
17 |
|
|
|
577 |
|
|
|
594 |
|
|
|
(185 |
) |
|
|
- |
|
|
|
409 |
|
.5
years
|
Acquired
intangible assets, net
|
|
$ |
114,632 |
|
|
$ |
29,506 |
|
|
$ |
144,138 |
|
|
$ |
(73,371 |
) |
|
$ |
(1,339 |
) |
|
$ |
69,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
Weighted
|
|
|
|
|
|
Acquisition of
|
|
|
|
|
|
|
|
|
Currency
|
|
|
Acquired
|
|
Average
|
|
|
Original
|
|
|
AllHealthcare
|
|
|
Total
|
|
|
Accumulated
|
|
|
Translation
|
|
|
Intangible
|
|
Amortization
|
|
|
Cost
|
|
|
Jobs
|
|
|
Cost
|
|
|
Amortization
|
|
|
Adjustment
|
|
|
Assets, Net
|
|
Period
|
Technology
|
|
$ |
12,420 |
|
|
|
138 |
|
|
$ |
12,558 |
|
|
$ |
(12,396 |
) |
|
$ |
(61 |
) |
|
$ |
101 |
|
3.7
years
|
Trademarks
and brand names- Dice
|
|
|
39,000 |
|
|
|
- |
|
|
|
39,000 |
|
|
|
- |
|
|
|
- |
|
|
|
39,000 |
|
Indefinite
|
Trademarks
and brand names- Other
|
|
|
6,400 |
|
|
|
870 |
|
|
|
7,270 |
|
|
|
(4,279 |
) |
|
|
(474 |
) |
|
|
2,517 |
|
4.6
years
|
Customer
lists
|
|
|
36,361 |
|
|
|
582 |
|
|
|
36,943 |
|
|
|
(30,483 |
) |
|
|
(667 |
) |
|
|
5,793 |
|
4.6
years
|
Candidate
database
|
|
|
17,440 |
|
|
|
1,542 |
|
|
|
18,982 |
|
|
|
(17,811 |
) |
|
|
(46 |
) |
|
|
1,125 |
|
3.5
years
|
Order
backlog
|
|
|
- |
|
|
|
17 |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
- |
|
|
|
- |
|
.5
years
|
Acquired
intangible assets, net
|
|
$ |
111,621 |
|
|
$ |
3,149 |
|
|
$ |
114,770 |
|
|
$ |
(64,986 |
) |
|
$ |
(1,248 |
) |
|
$ |
48,536 |
|
|
Based on the carrying
value of the acquired finite–lived intangible assets recorded as of September
30, 2010, and assuming no subsequent impairment of the underlying assets, the
estimated future amortization expense is as follows (in thousands):
October
1, 2010 through December 31, 2010
|
|
$ |
2,911 |
|
2011
|
|
|
9,204 |
|
2012
|
|
|
5,883 |
|
2013
|
|
|
3,492 |
|
2014
|
|
|
2,959 |
|
2015
and thereafter
|
|
|
5,979 |
|
7.
INDEBTEDNESS
Credit Agreement-
In July 2010, the Company entered into a Credit Agreement (the “Credit
Agreement”) which provides for a revolving facility of $70.0 million and a term
facility of $20.0 million, with each facility maturing in January 2014.
Borrowings of $30 million were made on July 29, 2010, including $20.0 million on
the term facility and $10.0 million on the revolving
facility. Proceeds from the Credit Agreement were used to pay the
full amount outstanding on the Amended and Restated Credit Facility (as defined
below), terminating that facility. A portion of the proceeds were
also used to pay certain costs associated with the Credit
Agreement.
Borrowings
under the Credit Agreement bear interest at the Company’s option, at a LIBOR
rate, Eurocurrency rate, or base rate plus a margin. The margin
ranges from 2.75% to 3.50% on LIBOR and Eurocurrency loans and 1.75% to 2.50% on
the base rate, determined by the Company’s most recent consolidated leverage
ratio. Quarterly payments of $1.0 million of principal are required
on the term loan facility, commencing December 31, 2010. The revolving loans and
term loan may be prepaid at any time without penalty, although payments of
principal on the term loan facility result in permanent reductions to that
facility.
The
Credit Agreement contains various customary affirmative and negative covenants
and also contains certain financial covenants, including a consolidated leverage
ratio, consolidated fixed charge coverage ratio and a minimum liquidity
requirement. Negative covenants include restrictions on incurring
certain liens; making certain payments, like stock repurchases and dividend
payments; making certain investments; making certain acquisitions; and incurring
additional indebtedness. The Credit Agreement also provides that the payment of
obligations may be accelerated upon the occurrence of customary events of
default, including, but not limited to, non-payment, change of control, or
insolvency.
The
obligations under the Credit Agreement are guaranteed by two of the Company’s
wholly-owned subsidiaries, JobsintheMoney.com, Inc. and Targeted Job Fairs,
Inc., and secured by substantially all of the assets of the Company and the
guarantors and stock pledges from certain of the Company’s foreign
subsidiaries.
Debt
issuance costs of approximately $1.5 million were incurred and will be amortized
over the life of the loan.
Additional
borrowings of $36.0 million were made during August 2010 for the purchase of
Rigzone. Repayments of $9.0 million on the revolving facility have
been made during the quarter ended September 30, 2010, resulting in a balance
outstanding at September 30, 2010 of $57.0 million. Payments
subsequent to September 30, 2010 have totaled $3.0 million, reducing the balance
outstanding currently to $54.0 million.
Amended and
Restated Financing Agreement- In March 2007, the Company entered
into an Amended and Restated Financing Agreement (the “Amended and Restated
Credit Facility”) which provided for a revolving credit facility of $75.0
million and a term loan facility of $125.0 million, maturing in March 2012.
Borrowings under the facility bear interest, at the Company’s option, at the
LIBOR rate plus 3.25% or reference rate plus 1.75%. Quarterly payments of
$250,000 of principal are required on the term loan facility. Payments of
principal on the term loan facility result in permanent reductions to that
facility. The borrowing capacity of the revolving credit facility is reduced by
reserves against our interest rate swaps, which are determined by the swap
counterparty. The Amended and Restated Credit Facility contains certain
financial and other covenants. In June 2010, the Amended and Restated Credit
Facility was amended to allow for the purchase of WorldwideWorker and to reduce
the revolving credit facility from $75.0 million to $65.0 million. On July 29,
2010, the Company used $29.6 million of the proceeds from the Credit Agreement
to repay in full all outstanding indebtedness, including interest and fees,
under the Amended and Restated Credit Facility.
The
amounts borrowed under and terms of the Credit Agreement as of September 30,
2010 and under the Amended and Restated Financing Agreement as of
December 31, 2009 are as follows (dollars in thousands):
LIBOR
rate loans
|
|
$ |
57,000 |
|
|
$ |
50,300 |
|
Eurocurrency
rate loans
|
|
|
- |
|
|
n.a.
|
|
Base
rate/Reference rate loans
|
|
|
- |
|
|
|
- |
|
Total
borrowed
|
|
$ |
57,000 |
|
|
$ |
50,300 |
|
|
|
|
|
|
|
|
|
|
Term
loan facility
|
|
$ |
20,000 |
|
|
$ |
50,300 |
|
Revolving
credit facility
|
|
|
37,000 |
|
|
|
- |
|
Total
borrowed
|
|
$ |
57,000 |
|
|
$ |
50,300 |
|
|
|
|
|
|
|
|
|
|
Amount
available to be borrowed under revolving facility
|
|
$ |
33,000 |
|
|
$ |
74,400 |
|
|
|
|
|
|
|
|
|
|
Interest
rates:
|
|
|
|
|
|
|
|
|
LIBOR
option:
|
|
|
|
|
|
|
|
|
Interest
margin
|
|
|
2.75 |
% |
|
|
3.25 |
% |
Minimum
LIBOR rate
|
|
n.a.
|
|
|
|
3.00 |
% |
Actual
interest rates
|
|
|
3.01 |
% |
|
|
6.25 |
% |
Future
maturities as of September 30, 2010 are as follows (in thousands):
October
1, 2010 through December 31, 2010
|
|
$ |
1,000 |
|
2011
|
|
|
4,000 |
|
2012
|
|
|
4,000 |
|
2013
|
|
|
4,000 |
|
2014
|
|
|
44,000 |
|
Total
minimum payments
|
|
$ |
57,000 |
|
Interest
rate swaps are used by the Company for the purpose of interest rate risk
management. The fair value of the swap agreements are reflected as
interest rate hedge liabilities in the Condensed Consolidated Balance
Sheets. The Company does not apply hedge accounting under the
Derivatives and Hedging topic of the FASB ASC. The change in the fair
value of the swap agreements is included in Other income in the Condensed
Consolidated Statements of Operations. A payment of $333,000 was made during the
nine months ended September 30, 2010 to terminate the swap on $20.0 million of
LIBOR-based borrowings at 6.37% until February 11, 2011. As of
September 30, 2010, there are no swap agreements outstanding.
8.
COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases equipment and office space under operating leases expiring at
various dates through February 2020. Future minimum lease payments under
non-cancelable operating leases as of September 30, 2010 are as follows (in
thousands):
October
1, 2010 through December 31, 2010
|
|
$ |
347 |
|
2011
|
|
|
1,334 |
|
2012
|
|
|
801 |
|
2013
|
|
|
455 |
|
2014
|
|
|
384 |
|
2015
and thereafter
|
|
|
2,102 |
|
|
|
|
|
|
Total
minimum payments
|
|
$ |
5,423 |
|
Rent
expense was $379,000 and $1.1 million for the three and nine month periods ended
September 30, 2010, respectively, and $309,000 and $914,000 for the three and
nine month periods ended September 30, 2009, respectively, and is included in
General and administrative expense on the Condensed Consolidated Statements of
Operations.
Litigation
The
Company is subject to various lawsuits, claims, and complaints arising in the
ordinary course of business. The Company records provisions for losses when
claims become probable and the amounts are estimable. Although the outcome of
these legal matters cannot be determined, it is the opinion of management that
the final resolution of these matters will not have a material adverse effect on
the Company’s financial condition, operations or liquidity.
9.
COMPREHENSIVE INCOME (LOSS)
The
components of comprehensive income (loss) are as follows (in
thousands):
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
income
|
|
$ |
6,166 |
|
|
$ |
3,002 |
|
|
$ |
13,155 |
|
|
$ |
9,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment, net of tax of $0, $0, $0 and
$0
|
|
|
4,037 |
|
|
|
(1,318 |
) |
|
|
(839 |
) |
|
|
5,868 |
|
Unrealized
gains on marketable securities, net of tax of $0, $(4), $(2) and
$(11)
|
|
|
(1 |
) |
|
|
(8 |
) |
|
|
(3 |
) |
|
|
(18 |
) |
Total
other comprehensive income (loss)
|
|
|
4,036 |
|
|
|
(1,326 |
) |
|
|
(842 |
) |
|
|
5,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$ |
10,202 |
|
|
$ |
1,676 |
|
|
$ |
12,313 |
|
|
$ |
15,486 |
|
Accumulated
other comprehensive income, net consists of the following components, net of
tax, (in thousands):
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
Foreign
currency translation adjustment, net of tax of $1,336 and
$1,336
|
|
$ |
(10,852 |
) |
|
$ |
(10,013 |
) |
Unrealized
gains on marketable securities, net of tax of $(1) and $0
|
|
|
(3 |
) |
|
|
- |
|
Total
accumulated other comprehensive loss, net
|
|
$ |
(10,855 |
) |
|
$ |
(10,013 |
) |
10.
STOCK BASED COMPENSATION
The
Company has two plans (the 2005 Plan and 2007 Plan) under which it may grant
stock-based awards to certain employees, directors and consultants of the
Company and its subsidiaries. Compensation expense for stock-based awards made
to employees, directors and consultants in return for service is recorded in
accordance with Compensation-Stock Compensation of the FASB ASC. The expense is
measured at the grant-date fair value of the award and recognized as
compensation expense on a straight-line basis over the service period, which is
the vesting period. The Company estimates forfeitures that it expects will occur
and records expense based upon the number of awards expected to
vest.
The
Company recorded stock based compensation expense of $895,000 and $2.7 million
during the three and nine month periods ended September 30, 2010, respectively,
and $1.3 million and $4.4 million during the three and nine month periods ended
September 30, 2009, respectively. At September 30, 2010, there was $6.3 million
of unrecognized compensation expense related to unvested awards, which is
expected to be recognized over a weighted-average period of approximately 2.0
years.
Restricted
Stock—Restricted stock is granted to employees and to non-employee
members of the Company’s Board. These shares are part of the compensation plan
for services provided by the employees or Board members. The closing price of
the Company’s stock on the date of grant was used to determine the fair value of
the grants. The expense related to the restricted stock grants is recorded over
the vesting period. There was no cash flow impact resulting from the
grants.
|
|
Number
of
|
|
|
|
Fair
value of
|
|
Vesting
|
Grant Date
|
|
shares issued
|
|
Awarded to
|
|
common stock
|
|
Period
|
April
18, 2008
|
|
|
16,000 |
|
Board
members
|
|
$ |
8.09 |
|
1
year
|
May
21, 2009
|
|
|
45,000 |
|
Board
members
|
|
$ |
4.15 |
|
1
year
|
February
10, 2010
|
|
|
120,000 |
|
Management
|
|
$ |
6.08 |
|
4
years
|
April
29, 2010
|
|
|
24,000 |
|
Board
members
|
|
$ |
9.05 |
|
1
year
|
A summary of the status of restricted
stock awards as of September 30, 2010 and 2009, and the changes during the three
and nine month periods then ended is presented
below:
|
|
Three Months Ended
September 30, 2010
|
|
Three Months Ended
September 30, 2009
|
|
|
|
Shares
|
|
|
Weighted
Average Fair
Value at Grant
Date
|
|
Shares
|
|
|
Weighted
Average Fair
Value at Grant
Date
|
|
Non-vested at beginning of
the period
|
|
|
144,000 |
|
|
$ |
6.58 |
|
|
|
45,000 |
|
|
$ |
4.15 |
|
Forfeited
during the period
|
|
|
(4,000 |
) |
|
$ |
6.08 |
|
|
|
- |
|
|
$ |
- |
|
Non-vested
at end of period
|
|
|
140,000 |
|
|
$ |
6.59 |
|
|
|
45,000 |
|
|
$ |
4.15 |
|
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
|
|
Shares
|
|
|
Weighted
Average Fair
Value at Grant
Date
|
|
|
Shares
|
|
|
Weighted
Average Fair
Value at Grant
Date
|
|
Non-vested
at beginning of the period
|
|
|
45,000 |
|
|
$ |
4.15 |
|
|
|
16,000 |
|
|
$ |
8.09 |
|
Granted-
Restricted Stock
|
|
|
144,000 |
|
|
$ |
6.58 |
|
|
|
45,000 |
|
|
$ |
4.15 |
|
Forfeited
during the period
|
|
|
(4,000 |
) |
|
$ |
6.08 |
|
|
|
- |
|
|
$ |
- |
|
Vested
during the period
|
|
|
(45,000 |
) |
|
$ |
4.15 |
|
|
|
(16,000 |
) |
|
$ |
8.09 |
|
Non-vested
at end of period
|
|
|
140,000 |
|
|
$ |
6.59 |
|
|
|
45,000 |
|
|
$ |
4.15 |
|
Stock
Options— The fair value of each option grant is estimated using the
Black-Scholes option-pricing model using the weighted average assumptions in the
table below. Because the Company’s stock has not been publicly traded for a
period long enough to use to determine volatility, the average implied
volatility rate for a similar entity was used. The expected life of options
granted is derived from historical exercise behavior. The risk-free rate for
periods within the expected life of the option is based on the U.S. Treasury
rates in effect at the time of grant.
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
2010
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
The
weighted average fair value of options granted
|
n.a.
|
|
$ |
1.90 |
|
|
$ |
2.58 |
|
|
$ |
1.56 |
|
Dividend
yield
|
n.a.
|
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
Weighted
avarage risk free interest rate
|
n.a.
|
|
|
1.46 |
% |
|
|
1.46 |
% |
|
|
1.38 |
% |
Weighted
average expected volatility
|
n.a.
|
|
|
56.07 |
% |
|
|
48.96 |
% |
|
|
65.51 |
% |
Expected
life (in years)
|
n.a.
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
4.6 |
|
During the nine months
ended September 30, 2010 the Company granted the following stock options with
exercise prices as follows:
|
|
Number of stock
|
|
|
Fair value of
|
|
|
Exercise
|
|
|
Intrinsic
|
|
Grant Date
|
|
options issued
|
|
|
common stock
|
|
|
price
|
|
|
value
|
|
February
10, 2010
|
|
|
1,490,800 |
|
|
$ |
6.08 |
|
|
$ |
6.08 |
|
|
$ |
- |
|
February
15, 2010
|
|
|
20,000 |
|
|
$ |
6.31 |
|
|
$ |
6.31 |
|
|
$ |
- |
|
April
22, 2010
|
|
|
5,000 |
|
|
$ |
8.38 |
|
|
$ |
8.38 |
|
|
$ |
- |
|
April
30, 2010
|
|
|
20,000 |
|
|
$ |
9.25 |
|
|
$ |
9.25 |
|
|
$ |
- |
|
A summary of the status of options
granted as of September 30, 2010 and 2009, and the changes during the three and
nine month periods then ended is presented below:
|
|
Three Months Ended
September 30, 2010
|
|
|
Three Months Ended
September 30, 2009
|
|
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
Options oustanding at
beginning of the period
|
|
|
12,681,479 |
|
|
$ |
3.24 |
|
|
|
11,315,483 |
|
|
$ |
2.79 |
|
Granted
|
|
|
- |
|
|
$ |
- |
|
|
|
85,500 |
|
|
$ |
4.03 |
|
Exercised
|
|
|
(20,632 |
) |
|
$ |
4.91 |
|
|
|
(10,702 |
) |
|
$ |
0.20 |
|
Forfeited
|
|
|
(127,541 |
) |
|
$ |
5.06 |
|
|
|
- |
|
|
$ |
- |
|
Options
oustanding at September 30
|
|
|
12,533,306 |
|
|
$ |
3.22 |
|
|
|
11,390,281 |
|
|
$ |
2.80 |
|
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
Options
oustanding at beginning of the period
|
|
|
11,451,740 |
|
|
$ |
2.82 |
|
|
|
9,653,074 |
|
|
$ |
2.77 |
|
Granted
|
|
|
1,535,800 |
|
|
$ |
6.13 |
|
|
|
1,793,400 |
|
|
$ |
2.93 |
|
Exercised
|
|
|
(304,880 |
) |
|
$ |
2.27 |
|
|
|
(23,365 |
) |
|
$ |
0.20 |
|
Forfeited
|
|
|
(149,354 |
) |
|
$ |
4.96 |
|
|
|
(32,828 |
) |
|
$ |
4.88 |
|
Options
oustanding at September 30
|
|
|
12,533,306 |
|
|
$ |
3.22 |
|
|
|
11,390,281 |
|
|
$ |
2.80 |
|
Exercisable
at September 30
|
|
|
9,098,367 |
|
|
$ |
2.45 |
|
|
|
7,891,125 |
|
|
$ |
1.99 |
|
The
following table summarizes information about options outstanding as of September
30, 2010:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Exercise Price
|
|
Number
Outstanding
|
|
|
Weighted-Average
Remaining
Contractual Life
|
|
|
Number
Exercisable
|
|
|
|
|
|
|
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.20
- $0.99
|
|
|
3,696,616 |
|
|
|
4.9 |
|
|
|
3,696,616 |
|
$1.00
- $2.99
|
|
|
3,851,443 |
|
|
|
5.1 |
|
|
|
2,823,373 |
|
$4.00
- $5.99
|
|
|
880,294 |
|
|
|
6.1 |
|
|
|
777,971 |
|
$6.00
- $8.99
|
|
|
4,045,153 |
|
|
|
5.6 |
|
|
|
1,773,045 |
|
$9.00
- $10.99
|
|
|
59,800 |
|
|
|
7.0 |
|
|
|
27,362 |
|
|
|
|
12,533,306 |
|
|
|
|
|
|
|
9,098,367 |
|
11.
SEGMENT INFORMATION
The
Company changed its reportable segments during the three months ended September
30, 2010 following the acquisition of Rigzone, to reflect the current operating
structure. Accordingly, all prior period amounts have been recast to
reflect the current segment presentation.
The
Company has three reportable segments: Tech & Clearance, Finance, and
Energy. The Tech & Clearance reportable segment includes the
Dice.com and ClearanceJobs.com businesses. The Finance reportable
segment includes the eFinancialCareers business worldwide, including both the
operating segments of North America and International. The Energy
reportable segment includes the Rigzone and WorldwideWorker operating segments,
both of which were acquired during 2010. Management has organized its reportable
segments based upon the industry verticals served. Each of the
reportable segments generates revenue from sales of recruitment packages and
related services. In addition to these reportable segments, the Company has
other businesses and activities that individually are not more than 10% of
consolidated revenues, net income, or total assets. These include Targeted Job
Fairs, AllHealthcareJobs (beginning June 2009), and JobsintheMoney.com (shut
down in June 2010), and are reported in the “Other” category. The Company’s
foreign operations are comprised of a portion of the eFinancialCareers business,
which operates in Europe, Middle East and Asia Pacific. Additionally,
WorldwideWorker serves certain of the major energy regions in the
world.
The
following table shows the segment information for the three and nine month
periods ended September 30, 2010 and 2009 (in thousands):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
By
Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
23,000 |
|
|
$ |
19,456 |
|
|
$ |
63,434 |
|
|
$ |
61,549 |
|
Finance
|
|
|
9,115 |
|
|
|
6,678 |
|
|
|
24,059 |
|
|
|
19,952 |
|
Energy
|
|
|
1,537 |
|
|
|
- |
|
|
|
1,715 |
|
|
|
- |
|
Other
|
|
|
708 |
|
|
|
599 |
|
|
|
1,900 |
|
|
|
1,810 |
|
Total
revenues
|
|
$ |
34,360 |
|
|
$ |
26,733 |
|
|
$ |
91,108 |
|
|
$ |
83,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
842 |
|
|
$ |
835 |
|
|
$ |
2,666 |
|
|
$ |
2,498 |
|
Finance
|
|
|
112 |
|
|
|
80 |
|
|
|
330 |
|
|
|
233 |
|
Energy
|
|
|
17 |
|
|
|
- |
|
|
|
20 |
|
|
|
- |
|
Other
|
|
|
32 |
|
|
|
18 |
|
|
|
66 |
|
|
|
55 |
|
Total
depreciation
|
|
$ |
1,003 |
|
|
$ |
933 |
|
|
$ |
3,082 |
|
|
$ |
2,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
810 |
|
|
$ |
2,257 |
|
|
$ |
3,240 |
|
|
$ |
7,812 |
|
Finance
|
|
|
846 |
|
|
|
1,203 |
|
|
|
2,516 |
|
|
|
3,416 |
|
Energy
|
|
|
1,416 |
|
|
|
- |
|
|
|
1,737 |
|
|
|
- |
|
Other
|
|
|
302 |
|
|
|
362 |
|
|
|
1,025 |
|
|
|
502 |
|
Total
amortization of intangible assets
|
|
$ |
3,374 |
|
|
$ |
3,822 |
|
|
$ |
8,518 |
|
|
$ |
11,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
7,317 |
|
|
$ |
5,370 |
|
|
$ |
17,723 |
|
|
$ |
15,891 |
|
Finance
|
|
|
2,645 |
|
|
|
987 |
|
|
|
6,029 |
|
|
|
3,646 |
|
Energy
|
|
|
(610 |
) |
|
|
- |
|
|
|
(951 |
) |
|
|
- |
|
Other
|
|
|
(575 |
) |
|
|
(424 |
) |
|
|
(1,494 |
) |
|
|
(227 |
) |
Operating
income
|
|
|
8,777 |
|
|
|
5,933 |
|
|
|
21,307 |
|
|
|
19,310 |
|
Interest
expense
|
|
|
(712 |
) |
|
|
(1,598 |
) |
|
|
(2,807 |
) |
|
|
(5,170 |
) |
Deferred
financing cost write-off
|
|
|
(1,388 |
) |
|
|
- |
|
|
|
(1,388 |
) |
|
|
- |
|
Interest
income
|
|
|
27 |
|
|
|
37 |
|
|
|
88 |
|
|
|
173 |
|
Other
income
|
|
|
- |
|
|
|
294 |
|
|
|
216 |
|
|
|
1,051 |
|
Income
before income taxes
|
|
$ |
6,704 |
|
|
$ |
4,666 |
|
|
$ |
17,416 |
|
|
$ |
15,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$ |
26,174 |
|
|
$ |
20,916 |
|
|
$ |
69,884 |
|
|
$ |
66,099 |
|
Non-U.S.
|
|
|
8,186 |
|
|
|
5,817 |
|
|
|
21,224 |
|
|
|
17,212 |
|
|
|
$ |
34,360 |
|
|
$ |
26,733 |
|
|
$ |
91,108 |
|
|
$ |
83,311 |
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Capital
expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
525 |
|
|
$ |
589 |
|
|
$ |
1,940 |
|
|
$ |
2,037 |
|
Finance
|
|
|
170 |
|
|
|
21 |
|
|
|
454 |
|
|
|
39 |
|
Energy
|
|
|
49 |
|
|
|
- |
|
|
|
49 |
|
|
|
- |
|
Other
|
|
|
189 |
|
|
|
- |
|
|
|
286 |
|
|
|
4 |
|
Total
capital expenditures
|
|
$ |
933 |
|
|
$ |
610 |
|
|
$ |
2,729 |
|
|
$ |
2,080 |
|
The
following table shows the segment information as September 30, 2010 and
December 31, 2009 (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
Total
assets:
|
|
|
|
|
|
|
Tech
& Clearance
|
|
$ |
151,577 |
|
|
$ |
160,513 |
|
Finance
|
|
|
92,394 |
|
|
|
95,882 |
|
Energy
|
|
|
65,523 |
|
|
|
- |
|
Other
|
|
|
5,236 |
|
|
|
6,160 |
|
Total
assets
|
|
$ |
314,730 |
|
|
$ |
262,555 |
|
The
following table shows goodwill by reportable segment as of December 31,
2009 and the changes in goodwill for the nine month period ended September 30,
2010 (in thousands):
|
|
Tech &
Clearance
|
|
|
Finance
|
|
|
Energy
|
|
|
Other
|
|
|
Total
|
|
Balance,
December 31, 2009
|
|
$ |
84,778 |
|
|
$ |
54,549 |
|
|
$ |
- |
|
|
$ |
3,311 |
|
|
$ |
142,638 |
|
Acquisition
of WorldwideWorker
|
|
|
- |
|
|
|
- |
|
|
|
4,898 |
|
|
|
- |
|
|
|
4,898 |
|
Acquisition
of Rigzone
|
|
|
- |
|
|
|
- |
|
|
|
30,206 |
|
|
|
- |
|
|
|
30,206 |
|
Foreign
currency translation adjustment
|
|
|
- |
|
|
|
(349 |
) |
|
|
- |
|
|
|
- |
|
|
|
(349 |
) |
Balance,
September 30, 2010
|
|
$ |
84,778 |
|
|
$ |
54,200 |
|
|
$ |
35,104 |
|
|
$ |
3,311 |
|
|
$ |
177,393 |
|
12.
EARNINGS PER SHARE
Basic
earnings per share (“EPS”) is computed based on the weighted average number of
shares of common stock outstanding. Diluted EPS is computed based on the
weighted average number of shares of common stock outstanding plus common stock
equivalents assuming exercise of stock options and conversion of outstanding
convertible securities, where dilutive. Options with exercise prices greater
than the average market price of the common shares are excluded from the
calculation of diluted EPS as they are anti-dilutive. Anti-dilutive
options totaled 201,000 and 187,000 for the three and nine month periods ended
September 30, 2010, respectively, and 2.6 million and 3.5 million for the three
and nine month periods ended September 30, 2009, respectively. The following is
a calculation of basic and diluted earnings per share and weighted average
shares outstanding for continuing operations (in thousands except per share
amounts):
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Income
attributable to common stockholders from continuing operations - basic and
diluted
|
|
$ |
6,166 |
|
|
$ |
3,002 |
|
|
$ |
13,155 |
|
|
$ |
9,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
62,799 |
|
|
|
62,305 |
|
|
|
62,436 |
|
|
|
62,248 |
|
Add
shares issuable upon exercise of stock options
|
|
|
4,762 |
|
|
|
3,354 |
|
|
|
4,970 |
|
|
|
3,822 |
|
Weighted
average shares outstanding - diluted
|
|
|
67,561 |
|
|
|
65,659 |
|
|
|
67,406 |
|
|
|
66,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.10 |
|
|
$ |
0.05 |
|
|
$ |
0.21 |
|
|
$ |
0.15 |
|
Diluted
earnings per share
|
|
$ |
0.09 |
|
|
$ |
0.05 |
|
|
$ |
0.20 |
|
|
$ |
0.15 |
|
* * * *
*
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion should be read in conjunction with our condensed
consolidated financial statements and the related notes included elsewhere in
this report.
Information
contained herein contains forward-looking statements. You should not place undue
reliance on those statements because they are subject to numerous uncertainties
and factors relating to our operations and business environment, all of which
are difficult to predict and many of which are beyond our control.
Forward-looking statements include information concerning our possible or
assumed future results of operations, including descriptions of our business
strategy. These statements often include words such as “may,” “will,” “should,”
“believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar
expressions, including without limitation, statements under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” These statements are based on assumptions that we have made in
light of our experience in the industry as well as our perceptions of historical
trends, current conditions, expected future developments and other factors we
believe are appropriate under the circumstances. Although we believe that these
forward-looking statements are based on reasonable assumptions, you should be
aware that many factors could affect our actual financial results or results of
operations and could cause actual results to differ materially from those in the
forward-looking statements. These factors include, but are not limited to,
competition from existing and future competitors in the highly competitive
developing market in which we operate, failure to adapt our business model to
keep pace with rapid changes in the recruiting and career services business,
failure to maintain and develop our reputation and brand recognition, failure to
increase or maintain the number of customers who purchase recruitment packages,
cyclicality or downturns in the economy or industries we serve, the failure to
attract qualified professionals to our websites or grow the number of qualified
professionals who use our websites, the failure to successfully identify or
integrate acquisitions, United States and foreign government regulation of the
Internet and taxation, our ability to borrow funds under our revolving credit
facility or refinance our indebtedness and restrictions on our current and
future operations under our credit facility. These factors and others are
discussed in more detail in our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, under the headings “Risk Factors,” “Forward-Looking
Statements” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” You should keep in mind that any forward-looking
statement made by us herein, or elsewhere, speaks only as of the date on which
we make it. New risks and uncertainties come up from time to time, and it is
impossible for us to predict these events or how they may affect us. We have no
obligation to update any forward-looking statements after the date hereof,
except as required by federal securities laws.
Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, proxy and information statements and other material
information concerning us are available free of charge on the Investor Relations
page of our website at www.diceholdingsinc.com.
Overview
We are a
leading provider of specialized career websites for select professional
communities. We target employment categories in which there is a long-term
scarcity of highly skilled, highly qualified professionals relative to market
demand. Our career websites serve as online marketplaces where employers and
recruiters find and recruit prospective employees, and where professionals find
relevant job opportunities and information to further their careers. Each of our
career websites offers job postings, content, career development and recruiting
services tailored to the specific needs of the professional community that it
serves. Our largest websites by revenue are Dice.com, the leading career website
in the United States for technology professionals, and eFinancialCareers.com,
the leading global career website for financial services
professionals.
We
changed our reportable segments during the three months ended September 30, 2010
following the acquisition of Rigzone, to reflect our current operating
structure. We have identified three reportable segments based on our
operating structure. Our reportable segments include Tech & Clearance (which
includes Dice.com and ClearanceJobs.com), Finance (which includes
eFinancialCareers worldwide), and Energy (which includes Rigzone beginning in
August 2010 and WorldwideWorker beginning in May 2010). AllHealthcareJobs
(beginning in June 2009), Targeted Job Fairs, and JobsintheMoney.com (shut down
in June 2010) do not meet certain quantitative thresholds, and therefore are
reported in aggregate in the Other segment.
Recent
Developments
On July
29, 2010, we entered into a Credit Agreement which provides for a revolving
facility of $70.0 million and a term facility of $20.0 million, maturing in
January 2014. Proceeds from the Credit Agreement were used to pay the full
amount outstanding on our Amended and Restated Credit Facility, terminating that
facility.
On August
11, 2010, we acquired all of the issued and outstanding shares of Rigzone.com,
Inc., a U.S. market leader in the oil and gas information industry delivering
online content, data, advertising and career services. The purchase price
consisted of initial consideration of $39 million in cash. In October
2011, additional consideration of up to a maximum of $16 million in cash is
payable based upon the achievement of certain revenue goals through June 30,
2011.
In October 2010, we repaid $3.0 million
of the revolving facility of our Credit Agreement reducing the balance
outstanding to $54 million.
Our
Revenues and Expenses
We derive
the majority of our revenues from customers who pay fees, either annually,
quarterly or monthly, to post jobs on our websites and to access our searchable
databases of resumes. Our fees vary by customer based on the number of
individual users of our databases of resumes, the number and type of job
postings purchased and the terms of the package purchased. In the United States,
we sell recruitment packages that include both access to our databases of
resumes and job posting capabilities. At eFinancialCareers, our job postings and
access to our resume databases are often sold separately and not as a single
package.
We
believe the key metrics that are material to an analysis of our U.S. businesses
are our total number of recruitment package customers and the revenue, on
average, that these customers generate. Similar metrics are important to our
international businesses. At September 30, 2010, Dice.com had approximately
7,050 total recruitment package customers and as of the same date our other
websites collectively served approximately 3,300 customers, including some
customers who are also customers of Dice.com. Deferred revenue is another key
metric of our business as it indicates a level of sales already made that will
be recognized as revenue in the future. Deferred revenue reflects the impact of
our ability to sign customers to long-term contracts. We recorded deferred
revenue of $44.7 million and $33.9 million at September 30, 2010 and
December 31, 2009, respectively. Approximately $2.8 million of this
increase is related to the businesses that comprise our Energy Segment which
were acquired during 2010.
Our
ability to grow our revenues will largely depend on our ability to grow our
customer bases in the markets in which we operate by acquiring new recruitment
package customers while retaining a high proportion of the customers we
currently serve, and to expand the breadth of services our customers purchase
from us. We continue to make investments in our business and infrastructure to
help us achieve our long-term growth objectives.
Our
revenues are generated primarily from servicing customers seeking to recruit
qualified professionals in the technology, finance, and energy verticals.
Accordingly, significant increases or decreases in the unemployment rate, labor
shortages or a decrease in available jobs, specifically in the technology,
finance, energy, healthcare, and other vertical industries we serve, can have a
material affect on our revenues and results of operations. The significant
increase in the unemployment rate and general reduction in recruitment activity
during late 2008 and throughout 2009 negatively impacted our revenues and
income. We began to see improvement in recruitment activity during the latter
half of 2009 and that improvement has continued into the third quarter of 2010.
During the first half of 2010, total revenues were essentially flat with the
first half of 2009. Our revenues in the third quarter of 2010 were up
29% over the same period in 2009 and were up 15% over the second quarter of
2010. Revenue growth in the third quarter without the impact of our 2010
WorldwideWorker and Rigzone acquisitions was 23% over the same period in 2009.
We saw an increase in the number of customers served at Dice.com from
approximately 6,750 customers at June 30, 2010 to approximately 7,050 customers
at September 30, 2010.
Any
slowdown in recruitment activity that occurs will negatively impact our revenues
and results of operations. Alternatively, a decrease in the unemployment rate or
a labor shortage, including as a result of an increase in job turnover,
generally means that employers (including our customers) are seeking to hire
more individuals, which would generally lead to more job postings and have a
positive impact on our revenues and results of operations. Based on
historical trends, improvements in labor markets and the need for our services
generally lag behind overall economic improvements. Additionally,
there has historically been a lag from the time customers begin to increase
purchases of our services and the impact on our revenues due to the recognition
of revenue occurring over the length of the contract, which can be several
months to a year.
Other
material factors that may affect our results of operations include our ability
to attract qualified professionals to our websites and our ability to attract
customers with relevant job opportunities. The more qualified professionals that
use our websites, the more attractive our websites become to employers, which in
turn makes them more likely to become our customers, resulting in positive
impacts on our results of operations. If we are unable to continue to attract
qualified professionals to our websites, our customers may no longer find our
services attractive, which could have a negative impact on our results of
operations. Additionally, in order to attract qualified professionals to our
websites we need to ensure that our websites remain relevant.
The
largest components of our expenses are personnel costs and marketing and sales
expenditures. Personnel costs consist of salaries, benefits, and incentive
compensation for our employees, including commissions for salespeople. Personnel
costs are categorized in our statements of operations based on each employee’s
principal function. Marketing and sales expenditures primarily consist of online
advertising and direct mail programs.
Critical
Accounting Policies
This
discussion of our financial condition and results of operations is based upon
our condensed consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles in the United States
(“U.S. GAAP”). The preparation of these financial statements requires us to make
estimates, judgments and assumptions that affect the reported amount of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue, goodwill and intangible assets, stock-based compensation and
income taxes. We based our estimates of the carrying value of certain assets and
liabilities on historical experience and on various other assumptions that we
believe are reasonable. In many cases, we could reasonably have used different
accounting policies and estimates. In some cases, changes in the accounting
estimates are reasonably likely to occur from period to period. Our actual
results may differ from these estimates under different assumptions or
conditions. We believe the following critical accounting policies affect our
more significant judgments used in the preparation of our
condensed consolidated financial statements.
Revenue
Recognition
We
recognize revenues when persuasive evidence of an agreement exists, delivery has
occurred, the sales price is fixed or determinable and collectability is
reasonably assured. Payments received in advance of services being rendered are
recorded as deferred revenue and recognized generally on a straight-line basis
over the service period. We generate a majority of our revenue from the sale of
recruitment packages.
Recruitment
package revenues are derived from the sale to recruiters and employers of a
combination of job postings and access to a searchable database of candidates on
each of our six career center websites. Certain of our arrangements include
multiple deliverables, which consist of access to job postings and access to a
searchable database of resumes. We consider a delivered item as a separate unit
of accounting if it has value to the customer on a standalone basis, if there is
objective and reliable evidence of the fair value of the undelivered elements,
and, if the arrangement includes a general right of return relative to the
delivered element, delivery or performance of the undelivered element is
considered probable and is substantially within our control. Services to
customers buying a package of available job postings and access to the database
are delivered over the same period and revenue is recognized ratably over the
length of the underlying contract, typically from one to twelve months. Revenue
from the sale of classified job postings is recognized ratably over the length
of the contract or the period of actual usage.
Fair
Value of Acquired Businesses
We
completed the acquisition of Dice Inc. in 2005, eFinancialGroup in 2006,
AllHealthcareJobs in 2009, and WorldwideWorker and Rigzone in 2010. FASB ASC
topic on Business Combinations requires acquired businesses to be recorded at
fair value by the acquiring entity. The Business Combinations Topic also
requires that intangible assets that meet the legal or separable criterion be
separately recognized on the financial statements at their fair value, and
provides guidance on the types of intangible assets subject to recognition. A
significant component of the value of these acquired businesses has been
allocated to intangible assets.
The
significant assets acquired and liabilities assumed from our acquisitions
consist of intangible assets, goodwill, deferred revenue and contingent
consideration. Fair values of the technology and trademarks were determined
using a profit allocation methodology which estimates the value of the trademark
and brand name by capitalizing the profits saved because the Company owns the
asset. Fair values of the customer lists were estimated using the discounted
cash flows method based on projections of the amounts and timing of future
revenues and cash flows, discount rates and other assumptions as deemed
appropriate. Fair values of the candidate database were determined based on the
estimated historical cost to acquire unique visitors and cost to get job seekers
to apply. Fair values of the content database was determined based on the
estimated cost spent to build the database over time. The acquired deferred
revenue is recorded at fair value as it represents an assumed legal obligation.
We estimated our obligation related to deferred revenue using the cost build-up
approach which determines fair value by estimating the costs related to
fulfilling the obligation plus a reasonable profit margin. The estimated costs
to fulfill our deferred revenue obligation were based on our expected future
costs to fulfill our obligation to our customers. Contingent consideration is an
obligation to transfer assets or equity interests to the former owners if
certain future operating and financial goals are met. The fair value of the
contingent consideration is determined based on management’s estimation that
certain events will occur and certain financial metrics will be reached.
Goodwill is the amount of purchase price paid for an acquisition that exceeds
the estimated fair value of the net identified tangible and intangible assets
acquired.
The
remaining useful life of the technology was determined through review of the
technology roadmaps, the pattern of projected economic benefit of each existing
technology asset, and the time period over which the majority of the
undiscounted cash flows are projected to be achieved. The remaining useful life
of the trademarks and brand names was determined based on the estimated time
period over which each asset is projected to be used, the pattern of projected
economic benefit, and the time period over which the majority of the
undiscounted cash flows are projected to be achieved. The remaining useful life
of the customer list was determined based on the projected customer attrition
rates, the pattern of projected economic benefit of each list and the time
period over which the majority of the undiscounted cash flows are projected to
be achieved.
Determining
the fair value for these specifically identified intangible assets involves
significant professional judgment, estimates and projections related to the
valuation to be applied to intangible assets such as customer lists, technology
and trade names. The subjective nature of management’s assumptions increases the
risk associated with estimates surrounding the projected performance of the
acquired entity. Additionally, as we amortize the finite-lived intangible assets
over time, the purchase accounting allocation directly impacts the amortization
expense we record on our financial statements.
Goodwill
As a
result of our various acquisitions, we have recorded goodwill. We record
goodwill when the purchase price paid for an acquisition exceeds the estimated
fair value of the net identified tangible and intangible assets
acquired.
We
determine whether the carrying value of recorded goodwill is impaired on an
annual basis or more frequently if indicators of potential impairment exist. The
first step of the impairment review process compares the fair value of the
reporting unit in which the goodwill resides to the carrying value of that
reporting unit. The second step measures the amount of impairment loss, if any,
by comparing the implied fair value of the reporting unit goodwill with its
carrying amount. Our annual impairment test for the goodwill from the 2005 Dice
Acquisition is performed as of August 31 by comparing the goodwill recorded
from the 2005 Acquisition to the fair value of the DCS Online and Targeted Job
Fairs reporting units. The annual impairment test performed as of August 31,
2010 resulted in no impairment. The goodwill at eFinancialCareers was the result
of the eFinancialGroup Acquisition in October 2006. Goodwill at the
AllHealthcareJobs reporting unit is the result of the acquisition of
AllHealthcareJobs assets in June 2009. The annual test of impairment of goodwill
from the eFinancialGroup, AllHealthcareJobs, WorldwideWorker and Rigzone
acquisitions will be performed as of October 31 by comparing the goodwill
recorded from these acquisitions to the fair value of the respective reporting
units. The annual impairment test performed as of October 31, 2009 for the
eFinancialCareers and AllHealthcareJobs reporting units resulted in no
impairment.
The
determination of whether or not goodwill has become impaired involves a
significant level of judgment in the assumptions underlying the approach used to
determine the value of our reporting units. Fair values are determined either by
using a discounted cash flow methodology or by using a combination of a
discounted cash flow methodology and a market comparable method. The discounted
cash flow methodology is based on projections of the amounts and timing of
future revenues and cash flows, assumed discount rates and other assumptions as
deemed appropriate. We consider factors such as historical performance,
anticipated market conditions, operating expense trends and capital expenditure
requirements. Additionally, the discounted cash flows analysis takes into
consideration cash expenditures for product development, other technological
updates and advancements to our websites and investments to improve our
candidate databases. The market comparable method indicates the fair value of a
business by comparing it to publicly traded companies in similar lines of
business or to comparable transactions or assets. Considerations for factors
such as size, growth, profitability, risk and return on investment are analyzed
and compared to the comparable businesses and adjustments are made. A market
value of invested capital of the publicly traded companies is calculated and
then applied to the entity’s operating results to arrive at an estimate of
value. Changes in our strategy and/or market conditions could significantly
impact these judgments and require adjustments to recorded amounts of
goodwill.
Indefinite-Lived
Acquired Intangible Assets
The
indefinite-lived acquired intangible assets include the Dice trademarks and
brand name. The Dice.com trademark, trade name and domain name is one of the
most recognized names of online job boards. Since Dice’s inception in 1991, the
brand has been recognized as a leader in recruiting and career development
services for technology and engineering professionals. Currently, the brand is
synonymous with the most specialized online marketplace for industry-specific
talent. The brand has a significant online and offline presence in online
recruiting and career development services. Considering the recognition and the
awareness of the Dice brand in the talent acquisition and staffing services
market, Dice’s long operating history and the intended use of the Dice brand,
the remaining useful life of the Dice.com trademark, trade name and domain name
was determined to be indefinite.
We
determine whether the carrying value of recorded indefinite-lived acquired
intangible assets is impaired on an annual basis or more frequently if
indicators of potential impairment exist. The impairment review process compares
the fair value of the indefinite-lived acquired intangible assets to its
carrying value. If the carrying value exceeds the fair value, an impairment loss
is recorded. The impairment test is performed annually as of August 31. No
impairment was recorded at August 31, 2010.
The
determination of whether or not indefinite-lived acquired intangible assets have
become impaired involves a significant level of judgment in the assumptions
underlying the approach used to determine the value of the indefinite-lived
acquired intangible assets. Fair values are determined using a profit allocation
methodology which estimates the value of the trademark and brand name by
capitalizing the profits saved because the Company owns the asset. We consider
factors such as historical performance, anticipated market conditions, operating
expense trends and capital expenditure requirements. Changes in our strategy
and/or market conditions could significantly impact these judgments and require
adjustments to recorded amounts of intangible assets.
Income
Taxes
We
utilize the liability method of accounting for income taxes as set forth in FASB
ASC topic, Income Taxes. Under this method, deferred income taxes are recognized
for differences between the financial statement and tax bases of assets and
liabilities at enacted statutory tax rates in effect for the years in which the
differences are expected to reverse. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. In addition, valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. We have concluded
that based on expected future results and the future reversals of existing
taxable temporary differences, it is more likely than not that the deferred tax
assets will be used in the future, net of valuation allowances. Uncertain tax
positions are evaluated and amounts are recorded when it is more likely than not
that the position will be sustained upon examination, including resolutions of
any related appeals or litigation processes, based on the technical merits.
Judgment is required in evaluating each uncertain tax position to determine
whether the more likely than not recognition threshold has been
met.
Stock
and Stock-Based Compensation
We have
granted stock options to certain of our employees and directors under our 2005
Omnibus Stock Plan and our 2007 Equity Award Plan. We follow the
Compensation-Stock Compensation subtopic of the FASB ACS. Compensation expense
is recorded for stock awards made to employees and directors in return for
service to the Company. The expense is measured at the fair value of the award
on the date of grant and recognized as compensation expense on a straight-line
basis over the service period, which is the vesting period. The fair value of
options granted was estimated on the grant date using Black-Scholes
option-pricing model. The use of an option valuation model includes highly
subjective assumptions based on long-term predictions, including the expected
stock price volatility and average life of each grant.
Results
of Operations
Three
Months Ended September 30, 2010 Compared to the Three Months Ended September 30,
2009
Revenues
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Tech
& Clearance
|
|
$ |
23,000 |
|
|
$ |
19,456 |
|
|
$ |
3,544 |
|
|
|
18.2 |
% |
Finance
|
|
|
9,115 |
|
|
|
6,678 |
|
|
|
2,437 |
|
|
|
36.5 |
% |
Energy
|
|
|
1,537 |
|
|
|
- |
|
|
|
1,537 |
|
|
n.a.
|
|
Other
|
|
|
708 |
|
|
|
599 |
|
|
|
109 |
|
|
|
18.2 |
% |
Total
revenues
|
|
$ |
34,360 |
|
|
$ |
26,733 |
|
|
$ |
7,627 |
|
|
|
28.5 |
% |
Our
revenues were $34.4 million for the three months ended September 30, 2010
compared to $26.7 million for the same period in 2009, an increase of $7.6
million, or 29%. The increase in revenues is a result of increased recruitment
activity during late 2009 into 2010, which impacted customer usage of our
primary services and due to the addition of revenues from our Energy
segment.
We
experienced an increase in revenue at the Tech & Clearance segment of $3.5
million, or 18% which was driven by increased revenues at both Dice.com and
ClearanceJobs.com. Recruitment activity began to strengthen in the latter part
of 2009 and into 2010, as we saw increases in our job count and database usage
by our customers. There is a lag from the time customers begin to increase
purchases of our services and the impact on our revenue due to the recognition
of revenue occurring over the length of the contract, which can be several
months to a year. The strengthening of recruitment activity is evidenced by an
increase in our recruitment package customer count. The number of customers
served at Dice.com increased from approximately 6,750 at June 30, 2010 to
approximately 7,050 at September 30, 2010. At September 30, 2009, recruitment
package customers totaled approximately 6,350. Average revenue per recruitment
package customer is approximately 3% higher during the three months ended
September 30, 2010 as compared to the same period in 2009. This is the first
quarter with a year-over-year increase in the average revenue per recruitment
package customer since the fourth quarter of 2008. Revenues at ClearanceJobs
were up $404,000, or 28% during the three months ended September 30, 2010
compared to the same period in 2009. ClearanceJobs continues to experience
strong revenue and customer growth.
We
experienced an increase in the Finance segment revenues of $2.4 million, or 37%.
The increase is the result of an increase in recruitment activity in all of the
markets we serve, partially offset by the weakening of the pound sterling versus
the U.S. dollar in comparing the three months ended September 30, 2010 with the
same period in 2009. Revenue related to increased recruitment activity was $2.9
million. The offsetting decrease in revenue due to the unfavorable effect of
foreign exchange rates was $460,000. Revenue increased 62% in our Asia market,
46% in our UK market, and 54% in our United States market during the three
months ended September 30, 2010 compared to the prior year period, as measured
in the functional currency of each region.
Revenues
from our Energy segment totaled $1.5 million for the three month period ended
September 30, 2010. The Energy segment includes revenue from WorldwideWorker for
the entire quarter and revenue from Rigzone since the date of acquisition,
August 11, 2010.
Revenues
from the Other segment, which consists of Targeted Job Fairs, AllHealthcareJobs
(beginning June 2009) and JobsintheMoney.com, increased $109,000, or 18%.
AllHealthcareJobs revenue increased by $189,000, partially offset by a decline
in revenue from JobsintheMoney.com of $113,000 due to the site being shut down
in June 2010.
Cost
of Revenues
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in
thousands, except percentages)
|
|
|
|
|
Cost
of revenues
|
|
$ |
2,685 |
|
|
$ |
1,929 |
|
|
$ |
756 |
|
|
|
39.2 |
% |
Percentage
of revenues
|
|
|
7.8 |
% |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
Our cost
of revenues for the three months ended September 30, 2010 were $2.7 million
compared to $1.9 million for the same period in 2009, an increase of $756,000,
or 39%. The increase in cost of revenues experienced at the Tech & Clearance
segment of $436,000 was primarily due to an increase in subscription and
maintenance contracts and due to the number of network services personnel we
employed to support our websites. Cost of revenues at the Finance segment were
flat with the prior year period. The Energy segment incurred $341,000 of cost of
revenue expenses during the current quarter for customer support and network
services functions.
Product
Development Expenses
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Product
Development
|
|
$ |
1,993 |
|
|
$ |
1,130 |
|
|
$ |
863 |
|
|
|
76.4 |
% |
Percentage
of revenues
|
|
|
5.8 |
% |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
Product
development expenses for the three months ended September 30, 2010 were $2.0
million compared to $1.1 million for the same period of 2009, an increase of
$863,000, or 76%. Product development expenses increased by $558,000 for the
Tech & Clearance segment, due to costs incurred related to adding features
and functionality on the Dice and ClearanceJobs sites. Product development
expenses increased at the Finance segment by $245,000 due primarily to an
increase in salaries and benefit costs for the product development team. The
Energy segment incurred product development expenses of $105,000 during the
current period related to the personnel employed to develop the
websites.
Sales
and Marketing Expenses
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Sales
and Marketing
|
|
$ |
11,278 |
|
|
$ |
8,261 |
|
|
$ |
3,017 |
|
|
|
36.5 |
% |
Percentage
of revenues
|
|
|
32.8 |
% |
|
|
30.9 |
% |
|
|
|
|
|
|
|
|
Sales and
marketing expenses for the three months ended September 30, 2010 were $11.3
million compared to $8.3 million for the same period in 2009, an increase of
$3.0 million, or 37%. Of the increase, $1.6 million is from the Tech &
Clearance segment, $831,000 is from the Finance segment, $314,000 is from the
Other segment and $231,000 is due to the addition of the Energy
businesses.
Marketing
expenses, including advertising programs and employee costs to conduct marketing
activities comprised 55% of the sales and market expenses for the three month
period ended September 30, 2010. Advertising and other marketing costs for the
Tech & Clearance segment totaled $3.6 million for the three month period
ended September 30, 2010 compared to $3.1 million for the same period in 2009.
We continue to focus our marketing spending on online media, particularly paid
search and banner advertising programs. In marketing to customers, we continue
to dedicate the majority of our spend to direct mail and email campaigns focused
on communicating the value proposition of our services to current and potential
customers. During the three month period ended September 30, 2010, approximately
60% of our advertising and marketing spending for the Tech & Clearance
segment was focused on reaching professionals who visit our sites and increasing
their levels of activity on the websites. This percentage is consistent with
spending during 2009 focused on attracting professionals, but has historically
been approximately 75%. With recruitment activity lower and job seeker activity
high during 2009, we were able to reduce the amount of spending on job seeker
marketing and still provide results that match our customers’ needs. We expect
to increase our spending on job seekers as a percentage of our total marketing
spend in the future.
The
salaries, commissions, and benefits component of sales and marketing expense for
the Tech & Clearance segment totaled $3.0 million for the three months ended
September 30, 2010, compared to $2.0 million during the same period in 2009, an
increase of $1.0 million, or 50%. Increased commission and other incentive
compensation expense due to the increase in sales during the current period
contributed $714,000 of this increase, with the remainder coming from an
increase in sales and marketing personnel salaries and credit card processing
fees.
The
Finance segment experienced an increase in sales and marketing expense of
$831,000 during the three month period ended September 30, 2010 compared to the
same period in 2009. Of this increase, $534,000 was from sales costs, which is
driven by increased commissions on higher sales. Marketing expense increased by
$298,000. We are continuing to spend on marketing to potential customers and to
grow our resume database in many of the markets we serve. These increases are
partially offset by $108,000 due to the strengthening of the U.S. dollar
compared to the pound sterling.
General
and Administrative Expenses
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
General and administrative
|
|
$ |
5,431 |
|
|
$ |
4,725 |
|
|
$ |
706 |
|
|
|
14.9 |
% |
Percentage
of revenues
|
|
|
15.8 |
% |
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
General and administrative
expenses for the three months ended September 30, 2010 were $5.4 million
compared to $4.7 million for the same period in 2009, an increase of $706,000,
or 15%. General and administrative expenses increased $901,000 primarily due to
an increase in incentive compensation costs and professional fees. An increase
of $218,000 is related to the addition of the Energy businesses in the current
year. Executive salary and related expenses, office rent expense and
miscellaneous administrative costs comprise the general and administrative
expense for the Energy segment. A decrease of $414,000 was related to a
reduction in stock-based compensation expense due to certain options becoming
fully vested prior to the current period, and thus fully expensed.
Depreciation
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Depreciation
|
|
$ |
1,003 |
|
|
$ |
933 |
|
|
$ |
70 |
|
|
|
7.5 |
% |
Percentage
of revenues
|
|
|
2.9 |
% |
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
Depreciation
expense for the three month period ended September 30, 2010 was $1.0 million
compared to $933,000 for the same period in 2009, an increase of $70,000, or 8%.
The increase was due to a higher depreciable fixed asset balance during the
three month period ended September 30, 2010 compared to the same period in 2009
primarily due to software and capitalized development costs related to the site
enhancements made on Dice, ClearanceJobs, and AllHealthcareJobs.
Amortization
of Intangible Assets
|
|
Three Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Decrease
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Amortization
|
|
$ |
3,374 |
|
|
$ |
3,822 |
|
|
$ |
(448 |
) |
|
|
-11.7 |
% |
Percentage
of revenues
|
|
|
9.8 |
% |
|
|
14.3 |
% |
|
|
|
|
|
|
|
|
Amortization expense for the three
month period ended September 30, 2010 was $3.4 million compared to $3.8 million
for the same period in 2009, a decrease of $448,000, or 12%. Amortization
expense decreased in the current period by $1.8 million due to certain
intangible assets from the 2005 Dice acquisition and 2006 eFinancialCareers
acquisition becoming fully amortized prior to or during the current period,
partially offset by $1.4 million of additional amortization of intangible assets
for Rigzone and WorldwideWorker, our recent acquisitions.
Change
in Acquisition Related Contingencies
The
change in acquisition related contingencies for the three month period ended
September 30, 2010 was a gain of $181,000. The contingent liability related to
the WorldwideWorker acquisition was decreased to match our current expectation
of contingent payments to be made on the acquisition.
Operating
Income
Operating
income for the three months ended September 30, 2010 was $8.8 million compared
to $5.9 million for the same period in 2009, an increase of $2.8 million, or
48%. The increase is primarily the result of higher revenues for all businesses,
partially offset by higher operating expenses. Operating expenses have increased
due to sales compensation expense increasing from higher sales in the quarter
and costs related to investments made in product development and marketing,
slightly offset by lower amortization of intangible assets and stock based
compensation costs.
Interest
Expense
Interest
expense for the three months ended September 30, 2010 was $712,000 compared to
$1.6 million for the same period in 2009, a decrease of $886,000, or 55%. The
decrease in interest expense was due to a lower interest rate in the current
period resulting from refinancing our Credit Agreement. Weighted average
long-term debt outstanding during the three months ended September 30, 2010
approximated that outstanding in the same period in 2009. Significant repayments
of the long-term debt balance were made over the past year, offset by borrowings
in August 2010 to purchase Rigzone. The debt outstanding at September 30, 2010
was $57.0 million.
Deferred
Financing Cost Write-off
Deferred
financing costs of $1.4 million were written off in the current period. Our
Amended and Restated Credit Facility was paid off in full during the period,
resulting in all financing costs related to the facility being written off.
Costs of $1.5 million associated with the new Credit Agreement have been
capitalized and will be amortized over the life of the Credit Agreement. The
amortization is included in interest expense.
Other
income
Other
income of $294,000 during the three months ended September 30, 2009, resulted
from a gain on interest rate hedges. The gain resulted from increases in the
fair value of our interest rate swap agreements. There are no swap agreements
outstanding during the current period.
Income
Taxes
|
|
Three Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands, except
|
|
|
|
percentages)
|
|
Income from continuing operations before income taxes
|
|
$ |
6,704 |
|
|
$ |
4,666 |
|
Income
tax expense
|
|
|
538 |
|
|
|
1,664 |
|
Effective
tax rate
|
|
|
8.0 |
% |
|
|
35.7 |
% |
Income tax expense for the three month
period ended September 30, 2010 was $538,000 compared to $1.7 million for the
same period in 2009 and the effective tax rate decreased to 8.0% from 35.7%. The
rate was lower in the current period as compared to the prior year period due to
a change in estimate associated with uncertain tax positions. During the current
period a federal tax exam concluded in no proposed adjustment. This resulted in
a decrease in the liability of $1.2 million. In addition, the statute of
limitations covering certain other tax positions expired which resulted in a
decrease in the liability of $0.3 million. The decrease in the liability
favorably impacted income tax expense.
Nine
Months Ended September 30, 2010 Compared to the Nine Months Ended September 30,
2009
Revenues
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Tech & Clearance
|
|
$ |
63,434 |
|
|
$ |
61,549 |
|
|
$ |
1,885 |
|
|
|
3.1 |
% |
Finance
|
|
|
24,059 |
|
|
|
19,952 |
|
|
|
4,107 |
|
|
|
20.6 |
% |
Energy
|
|
|
1,715 |
|
|
|
- |
|
|
|
1,715 |
|
|
n.a.
|
|
Other
|
|
|
1,900 |
|
|
|
1,810 |
|
|
|
90 |
|
|
|
5.0 |
% |
Total
revenues
|
|
$ |
91,108 |
|
|
$ |
83,311 |
|
|
$ |
7,797 |
|
|
|
9.4 |
% |
Our
revenues were $91.1 million for the nine months ended September 30, 2010
compared to $83.3 million for the same period in 2009, an increase of $7.8
million.
Revenues
at the Tech & Clearance segment increased by $1.9 million, or 3% compared to
the prior year period due to increases at both Dice.com and ClearanceJobs. As
recruitment activity began to strengthen in the latter part of 2009 and into
2010, we saw increases in our job count and database usage by our customers.
There is a lag from the time customers begin to increase purchases of our
services and the impact on our revenue due to the recognition of revenue
occurring over the length of the contract, which can be several months to a
year. The strengthening of recruitment activity is evidenced by an increase in
our recruitment package customer count. The number of customers served at
Dice.com increased from approximately 5,900 at December 31, 2009 to
approximately 7,050 at September 30, 2010. At September 30, 2009, Dice.com
customers totaled approximately 6,300. Average revenue per recruitment package
customer decreased by approximately 1% from the nine months ended September 30,
2009 to the nine months ended September 30, 2010. ClearanceJobs revenue
increased by $1.1 million, or 27% during the nine months ended September 30,
2010 compared to the same period in 2009.
We
experienced an increase in the Finance segment revenues of $4.1 million, or 21%.
The increase is the result of increased recruitment activity in all of the
markets we serve. Similar to in the Tech & Clearance segment, we began to
see an improvement in recruitment activity in late 2009 and this trend has
continued into each of our Finance markets during 2010. Our Asia market
experienced the highest growth at 45% over the prior year period, as measured in
Singapore dollars. Revenue from our United Kingdom market measured in pound
sterling increased 22% during the nine months ended September 30, 2010 compared
to the prior year period. Revenues from the U.S. market improved 24% over the
prior year period.
Revenues
from our Energy segment totaled $1.7 million for the nine month period ended
September 30, 2010. The Energy segment includes revenues from WorldwideWorker
and Rigzone since their acquisition dates of May 6, 2010 and August 11, 2010,
respectively.
Revenues
from the Other segment, which consists of Targeted Job Fairs, AllHealthcareJobs
(beginning in June 2009) and JobsintheMoney.com (shut down in June 2010), were
essentially flat. Revenues from AllHealthcareJobs increased $659,000 for the
period. Revenue from JobsintheMoney.com declined by $500,000 as revenue during
the current year period was minimal. The operations of JobsintheMoney.com were
shut down as of June 30, 2010.
Cost
of Revenues
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Cost
of revenues
|
|
$ |
6,973 |
|
|
$ |
5,570 |
|
|
$ |
1,403 |
|
|
|
25.2 |
% |
Percentage
of revenues
|
|
|
7.7 |
% |
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
Our cost
of revenues for the nine months ended September 30, 2010 were $7.0 million
compared to $5.6 million for the same period in 2009, an increase of $1.4
million, or 25%. The increase in cost of revenues experienced at the Tech &
Clearance segment of $1.1 million was primarily due to an increase in
subscription and maintenance contracts and due to the number of network services
personnel we employed to support our websites. Cost of revenues from the newly
acquired Energy businesses totaled $396,000. Cost of revenues in the Finance
segment increased by $79,000 primarily due to an increase in salary and benefits
costs for our customer support and network services personnel, due to employing
more personnel. These increases were partially offset by a decrease of $172,000
in the Other segment primarily due to a decrease in the number of job fairs
conducted.
Product
Development Expenses
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in
thousands, except percentages)
|
|
|
|
|
Product
Development
|
|
$ |
4,615 |
|
|
$ |
2,886 |
|
|
$ |
1,729 |
|
|
|
59.9 |
% |
Percentage
of revenues
|
|
|
5.1 |
% |
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
Product
development expenses for the nine months ended September 30, 2010 were $4.6
million compared to $2.9 million for the same period of 2009, an increase of
$1.7 million, or 60%. Product development expenses increased by $1.1 million for
the Tech & Clearance segment, due to costs incurred related to adding
features and functionality on the Dice and ClearanceJobs sites and due to costs
related to building the editorial and community aspects of the websites. Product
development expenses increased at eFinancialCareers by $411,000 due primarily to
an increase in product development personnel employed as well as costs for
external consultants. Product development expenses from the newly acquired
Energy businesses totaled $110,000. The Other segment contributed an increase of
$96,000 in product development expenses, primarily related to the redesign of
the AllHealthcareJobs site.
Sales
and Marketing Expenses
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
|
|
|
Sales
and Marketing
|
|
$ |
32,487 |
|
|
$ |
26,180 |
|
|
$ |
6,307 |
|
|
|
24.1 |
% |
Percentage
of revenues
|
|
|
35.7 |
% |
|
|
31.4 |
% |
|
|
|
|
|
|
|
|
Sales and
marketing expenses for the nine months ended September 30, 2010 were $32.5
million compared to $26.2 million for the same period in 2009, an increase of
$6.3 million, or 24%. Of the increase, $3.0 million is related to Tech &
Clearance, $1.9 million to Finance, $317,000 to Energy, and $1.1 million to the
Other segment.
Advertising
and other marketing costs for the Tech & Clearance segment totaled $10.9
million for the nine month period ended September 30, 2010, consistent with the
same period in 2009. We continue to focus our marketing spending on online
media, particularly paid search and banner advertising programs. In marketing to
customers, we continue to dedicate the majority of our spend to direct mail and
email campaigns focused on communicating the value proposition of our services
to current and potential customers. During the nine month period ended September
30, 2010, approximately 60% of our advertising and marketing spending for the
Tech & Clearance segment was focused on reaching professionals who visit our
sites and increasing their levels of activity on the websites. This percentage
is consistent with 2009, but has historically been approximately 75%. With
recruitment activity and job seeker activity high during 2009, we were able to
reduce the amount of spending on job seeker marketing and still provide results
that matched our customers’ needs. We expect to increase our spending on job
seekers as a percentage of our total marketing spend in the future.
The
salaries, commissions, and benefits component of sales and marketing expense for
the Tech & Clearance segment totaled $8.8 million for the nine months ended
September 30, 2010, compared to $6.3 million during the same period in 2009, an
increase of $2.5 million, or 40%. Increased commission and other incentive
compensation expense due to the increase in sales during the current period
contributed $2.0 million of this increase with the remainder coming from an
increase in sales and marketing personnel and credit card fees.
The
Finance segment experienced an increase in sales and marketing expense of $1.9
million during the nine month period ended September 30, 2010 compared to the
same period in 2009. Of this increase, $1.3 million was from sales costs, which
is driven by increased commissions on higher sales. An increase in marketing
expense of $526,000 was due to investing in growing our resume database and to
win back customers lost during the economic downturn.
The increase in sales and marketing
expenses in the Other segment is related to investments made in
AllHealthcareJobs. We’ve invested in marketing programs and added sales
personnel. In addition, variable sales compensation expense has increased, which
was driven by higher sales.
General
and Administrative Expenses
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Decrease
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
General
and administrative
|
|
$ |
14,607 |
|
|
$ |
14,849 |
|
|
$ |
(242 |
) |
|
|
-1.6 |
% |
Percentage
of revenues
|
|
|
16.0 |
% |
|
|
17.8 |
% |
|
|
|
|
|
|
|
|
General
and administrative expenses for the nine months ended September 30, 2010 were
$14.6 million compared to $14.8 million for the same period in 2009, a decrease
of $242,000, or 2%. A decrease of $1.7 million was related to a reduction in
stock-based compensation expense due to certain options becoming fully vested
prior to or during the current period. Partially offsetting this was an increase
in incentive compensation costs and professional fees incurred to acquire
WorldwideWorker and Rigzone. The addition of the Energy business added $267,000
of general and administrative expense during the current period related to
executive compensation and office rent.
Depreciation
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Increase
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Depreciation
|
|
$ |
3,082 |
|
|
$ |
2,786 |
|
|
$ |
296 |
|
|
|
10.6 |
% |
Percentage
of revenues
|
|
|
3.4 |
% |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
Depreciation
expense for the nine month period ended September 30, 2010 was $3.1 million
compared to $2.8 million for the same period in 2009, an increase of $296,000,
or 11%. The increase was due to a higher depreciable fixed asset balance during
the nine month period ended September 30, 2010 compared to the same period in
2009 primarily due to software and capitalized development costs related to the
site enhancements made on Dice, ClearanceJobs, and
AllHealthcareJobs.
Amortization
of Intangible Assets
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Percent
|
|
|
|
2010
|
|
|
2009
|
|
|
Decrease
|
|
|
Change
|
|
|
|
(in thousands, except percentages)
|
|
|
|
|
Amortization
|
|
$ |
8,518 |
|
|
$ |
11,730 |
|
|
$ |
(3,212 |
) |
|
|
-27.4 |
% |
Percentage
of revenues
|
|
|
9.3 |
% |
|
|
14.1 |
% |
|
|
|
|
|
|
|
|
Amortization expense for the nine month
period ended September 30, 2010 was $8.5 million compared to $11.7 million for
the same period in 2009, a decrease of $3.2 million, or 27%. Amortization
expense in the current period decreased by $5.4 million due to certain
intangible assets from the 2005 Dice acquisition and 2006 eFinancialCareers
acquisition becoming fully amortized prior to or during the current period,
partially offset by a $2.3 million increase for amortization of intangible
assets at our recently acquired sites of AllHealthcareJobs, WorldwideWorker, and
Rigzone.
Change
in Acquisition Related Contingencies
The
change in acquisition related contingencies for the nine month period ended
September 30, 2010 was a gain of $481,000. The contingent liability related to
the AllHealthcareJobs and WorldwideWorker acquisitions was reduced due to the
sales performance of the business and expectations of future sales being lower
than the initial assumptions.
Operating
Income
Operating
income for the nine months ended September 30, 2010 was $21.3 million compared
to $19.3 million for the same period in 2009, an increase of $2.0 million, or
10%. The increase is primarily the result of higher revenue, partially offset by
higher operating expenses. Operating expenses have increased due to increased
sales compensation expense from the increased sales during the period and costs
related to investments made in product development, offset partially by lower
amortization of intangible assets and lower stock based compensation
costs.
Interest
Expense
Interest
expense for the nine months ended September 30, 2010 was $2.8 million compared
to $5.2 million for the same period in 2009, a decrease of $2.4 million, or 46%.
The decrease in interest expense was due to lower borrowings outstanding in the
nine months ended September 30, 2010, on average, as compared to the same period
in 2009 due to payments made on our Amended and Restated Credit Facility and
Credit Agreement. In addition, the weighted-average interest rate during the
nine month period ended September 30, 2010 was less than the rate in the prior
year period due to refinancing our long-term debt with a new lender in July
2010.
Deferred
Financing Cost Write-off
Deferred
financing costs of $1.4 million were written off in the current period. Our
Amended and Restated Credit Facility was paid off in full during the period,
resulting in all financing costs related to the facility to be written off.
Costs of $1.5 million associated with the new Credit Agreement have been
capitalized and will be amortized over the life of the Agreement. The
amortization is included in interest expense.
Other
income
Other
income of $216,000 and $1.1 million during the nine months ended September 30,
2010 and 2009, respectively, resulted from a gain on interest rate hedges. The
gains resulted from increases in the fair value of our interest rate swap
agreements. We have no swaps outstanding at September 30, 2010.
Income
Taxes
|
|
Nine Months Ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in thousands, except
|
|
|
|
percentages)
|
|
Income from
continuing operations before income taxes
|
|
$ |
17,416 |
|
|
$ |
15,364 |
|
Income
tax expense
|
|
|
4,261 |
|
|
|
5,728 |
|
Effective
tax rate
|
|
|
24.5 |
% |
|
|
37.3 |
% |
Income
tax expense for the nine month period ended September 30, 2010 was $4.3 million
compared to $5.7 million for the same period in 2009 and the effective tax rate
decreased to 24.5% from 37.3%. The rate was lower in the current period as
compared to the prior year period due to a change in estimate associated with
uncertain tax positions. During the current period a federal tax exam concluded
in no proposed adjustment. This resulted in a decrease in the liability of $1.2
million. In addition, the statute of limitations covering certain other tax
positions expired which resulted in a decrease in the liability of $0.3 million.
The decrease in the liability favorably impacted income tax
expense.
Liquidity
and Capital Resources
|
We
have shown our cash flows for the nine month periods ended September 30,
2010 and 2009 in the table below.
|
|
|
For the nine months
ended September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
|
$ |
34,652 |
|
|
$ |
16,363 |
|
|
|
|
|
|
|
|
|
|
Net
cash from investing activities
|
|
|
(46,541 |
) |
|
|
(2,020 |
) |
|
|
|
|
|
|
|
|
|
Net
cash from financing activities
|
|
|
6,075 |
|
|
|
(30,881 |
) |
Operating
Activities
Net cash
provided by operating activities primarily consists of net income adjusted for
certain non-cash items, including depreciation, amortization, changes in
deferred income taxes, share based compensation, gain on interest rate hedges,
change in acquisition related contingencies, change in accrual for unrecognized
tax benefits and for the effect of changes in working capital. Net cash provided
by operating activities was $34.7 million and $16.4 million for the nine
month periods ended September 30, 2010 and 2009, respectively. The increase in
cash provided by operating activities during these periods was primarily due to
an increase in deferred revenue during the current period. Deferred revenue
increased by $7.9 million during the nine months ended September 30, 2010
compared to a decrease of $9.6 million in the comparable period in 2009. The
increase in deferred revenue is due to an increase in sales during the nine
months ended September 30, 2010.
Investing
Activities
Cash used
for investing activities during the nine month period ended September 30, 2010
was $46.5 million compared to $2.0 million for the comparable period in 2009.
Cash used for investing activities for the nine month period ended September 30,
2010 consisted of $43.8 million for the purchase of WorldwideWorker and Rigzone,
$3.4 million of capital expenditures, $2.4 million for purchases of marketable
securities, partially offset by maturities and sales of marketable securities of
$3.1 million. Cash used for investing activities for the nine month period ended
September 30, 2009 consisted of $2.7 million for the acquisition of
AllHealthcareJobs, $2.1 million of capital expenditures, $1.8 million of
purchases of marketable securities, partially offset by maturities of marketable
securities of $4.5 million. Capital expenditures are generally comprised of
computer hardware, software, and website development costs.
Financing
Activities
Cash
provided by financing activities during the nine month period ended September
30, 2010 consisted of $69.0 million of borrowings on our Credit Agreement,
offset by payments on long-term debt of $62.3 million and financing costs paid
of $1.5 million. Cash used for financing activities for the nine month period
ended September 30, 2009 consisted of $30.9 million for payments on the term
portion of our Amended and Restated Credit Facility.
Credit
Agreement
On July
29, 2010, we entered into a Credit Agreement which provides for a revolving
facility of $70.0 million and a term facility of $20.0 million, with each
facility maturing in January 2014. Proceeds from the Credit Agreement were
used to pay the full amount outstanding on the Amended and Restated Credit
Facility, terminating that facility. Quarterly payments of $1.0 million of
principal are required on the term loan facility, commencing December 31, 2010.
The revolving loans and term loan may be prepaid at any time without penalty,
although payments of principal on the term loan facility result in permanent
reductions to that facility.
The
Credit Agreement contains various customary affirmative and negative covenants
and also contains certain financial covenants, including a consolidated leverage
ratio, consolidated fixed charge coverage ratio and a minimum liquidity
requirement. Negative covenants include restrictions on incurring certain liens;
making certain payments, like stock repurchases and dividend payments; making
certain investments; making certain acquisitions; and incurring additional
indebtedness. The Credit Agreement also provides that the payment of obligations
may be accelerated upon the occurrence of customary events of default,
including, but not limited to, non-payment, change of control, or
insolvency.
The
obligations under the Credit Agreement are guaranteed by two of the Company’s
wholly-owned subsidiaries, JobsintheMoney.com, Inc. and Targeted Job Fairs,
Inc., and secured by substantially all of the assets of the Company and the
guarantors and stock pledges from certain of the Company’s foreign
subsidiaries.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonable likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to
investors.
Commitments
and Contingencies
The
following table presents certain minimum payments due under contractual
obligations with minimum firm commitments as of September 30, 2010:
|
|
Payments by period
|
|
|
|
Total
|
|
|
October 1,
2010 through
December 31,
2010
|
|
2011-2012
|
|
|
2013-2014
|
|
|
Thereafter
|
|
|
|
(in
thousands)
|
|
Long-term
debt
|
|
$ |
57,000 |
|
|
$ |
1,000 |
|
|
$ |
8,000 |
|
|
$ |
48,000 |
|
|
$ |
- |
|
Operating
lease obligations
|
|
|
5,423 |
|
|
|
347 |
|
|
|
2,135 |
|
|
|
839 |
|
|
|
2,102 |
|
Total
contractual obligations
|
|
$ |
62,423 |
|
|
$ |
1,347 |
|
|
$ |
10,135 |
|
|
$ |
48,839 |
|
|
$ |
2,102 |
|
We make commitments to
purchase advertising from online vendors which we pay for on a monthly basis. We
have no long-term obligations to purchase a fixed or minimum amount with these
vendors.
Our
principal commitments consist of obligations under operating leases for office
space and equipment and long-term debt. As of September 30, 2010, we had $57.0
million outstanding under our Credit Agreement. Interest payments are due on the
facility at varying, specified periods (to a maximum of three months). See Note
7 “Indebtedness” in our condensed consolidated financial statements for
additional information related to the Credit Agreement. Future interest payments
on our term loan and revolving facilities are variable due to our interest rate
being based on LIBOR, a Eurocurrency rate, or a base rate or a reference
rate.
We have
contingent payments related to the AllHealthcareJobs, WorldwideWorker and
Rigzone acquisitions to be paid in the future upon the achievement of certain
operating and financial goals until December 31, 2011. As of September 30,
2010, a liability of $10.8 million is recorded for these
contingencies.
As of
September 30, 2010, we have recorded approximately $4.3 million of unrecognized
tax benefits as liabilities, and we are uncertain as to if or when such amounts
may be settled. Related to the unrecognized tax benefits considered permanent
differences, we have also recorded a liability for potential penalties and
interest. Included in the balance of unrecognized tax benefits at September 30,
2010, are $4.3 million of tax benefits that, if recognized, would affect the
effective tax rate.
Recent
Accounting Pronouncements
For a
discussion of new accounting pronouncements affecting the Company, refer to Note
2 of Notes to Condensed Consolidated Financial Statements.
Cyclicality
The labor
market and certain of the industries that we serve have historically experienced
short-term cyclicality. However, we believe that the economic and strategic
value provided by online career websites has led to overall growth in the use of
these services during the most recent labor market cycle, and has somewhat
lessened the impact of cyclicality on our businesses as compared to traditional
offline competitors.
The
significant increase in the unemployment rate and general reduction in
recruitment activity during late 2008 and throughout 2009 negatively impacted
our revenues and income. We began to see improvement in recruitment activity
during the latter half of 2009 and that improvement has continued through the
third quarter of 2010. Our revenues in the third quarter of 2010 were up 29%
over the same period in 2009 and were up 15% over the second quarter of 2010.
Revenue growth in the third quarter without the impact of our 2010
WorldwideWorker and Rigzone acquisitions was 23% over the same period in 2009.
We saw an increase in the number of customers served at Dice.com from
approximately 6,750 customers at June 30, 2010 to approximately 7,050 customers
at September 30, 2010.
Any
slowdown in recruitment activity that occurs will negatively impact our revenues
and results of operations. Alternatively, a decrease in the unemployment rate or
a labor shortage generally means that employers (including our customers) are
seeking to hire more individuals, which would generally lead to more job
postings and have a positive impact on our revenues and results of operations.
Based on historical trends, improvements in labor markets and the need for our
services generally lag behind overall economic improvements. Additionally, there
has historically been a lag from the time customers begin to increase purchases
of our services and the impact on our revenues due to the recognition of revenue
occurring over the length of the contract, which can be several months to a
year.
ITEM 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
We have
exposure to financial market risks, including changes in interest rates, foreign
currency exchange rates and other relevant market prices.
Foreign
Exchange Risk
We
conduct business serving 18 markets, in five languages across Europe, Asia,
Australia, and Canada using the eFinancialCareers name. Our WorldwideWorker
business serves certain of the major energy regions of the world. Our revenues
earned outside the United States and collected in local currency for the nine
months ended September 30, 2010 and 2009 were approximately 23% and 21%,
respectively. We are subject to risk for exchange rate fluctuations between such
local currencies and the pound sterling and the subsequent translation of the
pound sterling to U.S. dollars. We currently do not hedge currency risk. A
decrease in foreign exchange rates during a period would result in decreased
amounts reported in our Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Operations and of Cash Flows. For example, if foreign
exchange rates between the pound sterling and U.S. dollar decreased by 1.0%, the
impact on our revenues during the nine months ended September 30, 2010 would
have been a decrease of approximately $210,000.
The
financial statements of our non-U.S. subsidiaries are translated into U.S.
dollars using current exchange rates, with gains or losses included in the
cumulative translation adjustment account, which is a component of stockholders’
equity. As of September 30, 2010 and December 31, 2009 our cumulative
translation adjustment, net of tax, decreased stockholders’ equity by $10.9
million and $10.0 million, respectively. The change from December 31, 2009 to
September 30, 2010 is primarily attributable to the strengthening of the U.S.
dollar against the pound sterling.
Interest
Rate Risk
We have
interest rate risk primarily related to borrowings under our Credit Agreement.
Borrowings under our Credit Agreement bear interest, at our option, at a LIBOR
rate, a Eurocurrency rate, or a base rate, plus a margin. As of September 30,
2010, we had outstanding borrowings of $57.0 million under our Credit Agreement.
If interest rates increased by 1.0%, interest expense for the remainder of 2010
on our current borrowings would increase by approximately $43,000.
We also
have interest rate risk related to our portfolio of marketable securities and
money market accounts. Our marketable securities and money market accounts will
produce less income than expected if market interest rates fall.
ITEM 4.
|
CONTROLS
AND PROCEDURES
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Evaluation
of Disclosure Controls and Procedures
We have
established a system of controls and other procedures designed to ensure that
information required to be disclosed in our periodic reports filed under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded,
processed, summarized and reported within the time periods specified by the
Exchange Act and in the Securities and Exchange Commission’s rules and forms.
These disclosure controls and procedures have been evaluated under the direction
of our Chief Executive Officer and Chief Financial Officer for the period
covered by this report. We acquired Rigzone.com, Inc. in the third quarter of
2010. Rigzone represented approximately 18% of our total assets as of
September 30, 2010 and 3% of our revenues for the three month period ended
September 30, 2010. As the acquisition occurred during 2010, the scope of our
assessment of the effectiveness of internal control over financial reporting
does not include Rigzone. This exclusion is in accordance with the SEC’s general
guidance that an assessment of a recently acquired business may be omitted from
our scope in the year of acquisition. Based on such
evaluations, the Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”) have concluded that the disclosure controls and procedures are effective
to provide reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified by the SEC, and that such information is accumulated and
communicated to management, including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure.
Changes
in Internal Controls
No change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
under the Exchange Act) occurred during the quarter ended September 30, 2010
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART
II — OTHER INFORMATION
ITEM 1.
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LEGAL
PROCEEDINGS
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From time
to time we may be involved in disputes or litigation related to claims arising
out of our operations. We are not currently a party to any material legal
proceedings.
We have
disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K the
risk factors which materially affect our business, financial condition or
results of operations. There have been no material changes from the risk factors
previously disclosed. You should carefully consider the risk factors set forth
in the Annual Report on Form 10-K and the other information set forth elsewhere
in this Quarterly Report on Form 10-Q. You should be aware that these risk
factors and other information may not describe every risk facing our Company.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
ITEM 2.
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UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
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Unregistered
Sales of Equity Securities
Use
of Proceeds
ITEM 3.
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DEFAULTS
UPON SENIOR SECURITIES
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None.
ITEM 4.
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(REMOVED
AND RESERVED)
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ITEM 5.
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OTHER
INFORMATION
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None.
2.1
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Stock
Purchase Agreement, dated as of August 11, 2010, by and among Dice
Holdings, Inc., Rigzone.com, Inc. and David Kent, Jr. (with agreement of
the Company to provide schedules) (incorporated by reference from Exhibit
2.1 to the Company’s Current Report on Form 8-K (File No. 001-33584) filed
on August 16, 2010).
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4.1*
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Credit
Agreements dated as of July 29, 2010 among Dice Holdings, Inc., Dice Inc.
and Dice Career Solutions, Inc., as Borrowers, the various parties lender
thereto, Bank of America, N.A., as administrative agent, and Banc of
America Securities LLC, J.P. Morgan Securities, Inc., and Key Banc Capital
Markets Inc., as Joint Lead Arrangers and Co-Book
Managers
|
31.1*
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Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
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31.2*
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Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 302 of
the Sarbanes–Oxley Act of 2002.
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32.1*
|
Certification
of Scot W. Melland, Chief Executive Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002.
|
32.2*
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Certification
of Michael P. Durney, Chief Financial Officer, pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002.
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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.
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DICE HOLDINGS, INC.
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|
Registrant
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DATE: November 2,
2010
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|
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/s/ Scot W. Melland
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|
Scot
W. Melland
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Chairman,
President and Chief Executive Officer
(Principal
Executive Officer)
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|
|
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/s/ Michael P. Durney
|
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Michael
P. Durney, CPA
|
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Senior
Vice President, Finance and Chief Financial Officer
(Principal
Financial Officer)
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EXHIBIT
INDEX
2.1
|
Stock
Purchase Agreement, dated as of August 11, 2010, by and among Dice
Holdings, Inc., Rigzone.com, Inc. and David Kent, Jr. (with agreement of
the Company to provide schedules) (incorporated by reference from Exhibit
2.1 to the Company’s Current Report on Form 8-K (File No. 001-33584) filed
on August 16, 2010).
|
4.1*
|
Credit
Agreements dated as of July 29, 2010 among Dice Holdings, Inc., Dice Inc.
and Dice Career Solutions, Inc., as Borrowers, the various parties lender
thereto, Bank of America, N.A., as administrative agent, and Banc of
America Securities LLC, J.P. Morgan Securities, Inc., and Key Banc Capital
Markets Inc., as Joint Lead Arrangers and Co-Book
Managers
|
31.1*
|
Certification of Scot W. Melland,
Chief Executive Officer, pursuant to Section 302 of the Sarbanes–Oxley Act
of 2002.
|
31.2*
|
Certification of Michael P.
Durney, Chief Financial Officer, pursuant to Section 302 of the
Sarbanes–Oxley Act of 2002.
|
32.1*
|
Certification of Scot W. Melland,
Chief Executive Officer, pursuant to Section 906 of the Sarbanes–Oxley Act
of 2002.
|
32.2*
|
Certification of Michael P.
Durney, Chief Financial Officer, pursuant to Section 906 of the
Sarbanes–Oxley Act of 2002.
|