e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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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
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission file number 000-26679
ART TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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04-3141918 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number) |
One Main Street, Cambridge, Massachusetts
(Address of principal executive offices)
02142
(Zip Code)
(617) 386-1000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that 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,
or 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.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
As of
November 3, 2010 there were 158,471,879 shares of the Registrants common stock outstanding.
ART TECHNOLOGY GROUP, INC.
INDEX TO FORM 10-Q
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(UNAUDITED)
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September 30, |
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December 31, |
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2010 |
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2009 |
ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
58,842 |
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$ |
57,319 |
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Marketable securities (including restricted cash of $50 at September 30, 2010
and December 31, 2009, respectively) |
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93,166 |
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21,775 |
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Accounts receivable (net of reserves of $481 and $1,060 at September 30, 2010
and December 31, 2009, respectively) |
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44,307 |
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41,522 |
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Deferred costs, current |
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1,502 |
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767 |
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Prepaid expenses and other current assets |
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6,493 |
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3,789 |
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Total current assets |
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204,310 |
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125,172 |
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Property and equipment, net |
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15,220 |
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9,934 |
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Deferred costs, less current portion |
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4,058 |
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1,387 |
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Marketable securities (including restricted cash of $738 at September 30,
2010 and December 31, 2009, respectively) |
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30,518 |
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6,439 |
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Other assets |
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2,228 |
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1,357 |
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Intangible assets, net |
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7,205 |
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4,064 |
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Goodwill |
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77,689 |
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65,683 |
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Total Assets |
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$ |
341,228 |
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$ |
214,036 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
2,916 |
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$ |
5,720 |
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Accrued expenses |
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18,474 |
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18,873 |
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Deferred revenue, current portion |
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47,045 |
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42,640 |
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Total current liabilities |
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68,435 |
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67,233 |
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Deferred revenue, less current portion |
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23,136 |
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10,356 |
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Other liabilities |
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1,527 |
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536 |
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Commitments and contingencies (Note 8) |
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Stockholders equity: |
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Preferred stock, $0.01 par value; authorized - 10,000,000 shares; issued and
outstanding-no shares |
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Common stock, $0.01 par value; authorized - 200,000,000 shares;
165,509,988 shares and 134,117,921 shares issued, respectively;
and 158,375,293 shares and 127,427,826 shares outstanding,
respectively, at September 30, 2010 and December 31, 2009 |
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1,657 |
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1,341 |
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Additional paid-in capital |
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429,993 |
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326,925 |
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Accumulated deficit |
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(164,731 |
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(175,150 |
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Treasury stock, at cost (7,134,695 and 6,690,095 shares at September 30, 2010 and
December 31, 2009, respectively) |
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(17,553 |
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(16,075 |
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Accumulated other comprehensive loss |
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(1,236 |
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(1,130 |
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Total stockholders equity |
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248,130 |
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135,911 |
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Total Liabilities and Stockholders Equity |
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$ |
341,228 |
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$ |
214,036 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(UNAUDITED)
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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2010 |
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2009 |
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2010 |
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2009 |
Revenue: |
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Product licenses |
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$ |
13,729 |
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$ |
10,890 |
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$ |
42,937 |
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$ |
37,396 |
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Recurring services |
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30,165 |
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24,904 |
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84,046 |
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72,035 |
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Professional and education services |
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6,441 |
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7,587 |
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17,239 |
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20,288 |
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Total revenue |
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50,335 |
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43,381 |
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144,222 |
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129,719 |
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Cost of Revenue: |
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Product licenses |
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735 |
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399 |
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1,781 |
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1,246 |
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Recurring services |
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10,878 |
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9,393 |
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30,848 |
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27,012 |
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Professional and education services |
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5,759 |
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6,029 |
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15,406 |
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16,836 |
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Total cost of revenue |
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17,372 |
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15,821 |
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48,035 |
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45,094 |
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Gross Profit |
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32,963 |
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27,560 |
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96,187 |
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84,625 |
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Operating Expenses: |
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Research and development |
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8,983 |
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7,599 |
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25,793 |
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22,732 |
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Sales and marketing |
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15,205 |
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12,503 |
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45,084 |
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37,332 |
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General and administrative |
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5,165 |
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4,831 |
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15,404 |
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13,990 |
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Restructuring charges |
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352 |
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Total operating expenses |
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29,353 |
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24,933 |
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86,633 |
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74,054 |
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Income from operations |
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3,610 |
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2,627 |
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9,554 |
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10,571 |
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Interest and other income (expense), net |
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838 |
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(314 |
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694 |
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236 |
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Income before income taxes |
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4,448 |
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2,313 |
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10,248 |
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10,807 |
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Provision (benefit) for income taxes |
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275 |
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(1,650 |
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(158 |
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(750 |
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Net income |
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$ |
4,173 |
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$ |
3,963 |
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$ |
10,406 |
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$ |
11,557 |
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Basic net income per share |
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$ |
0.03 |
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$ |
0.03 |
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$ |
0.07 |
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$ |
0.09 |
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Diluted net income per share |
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$ |
0.03 |
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$ |
0.03 |
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$ |
0.06 |
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$ |
0.09 |
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Basic weighted average common shares outstanding |
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158,232 |
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127,224 |
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153,986 |
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126,742 |
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Diluted weighted average common shares outstanding |
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164,139 |
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134,736 |
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161,141 |
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132,409 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
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Nine months ended September 30, |
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2010 |
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2009 |
Cash Flows from Operating Activities: |
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Net income |
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$ |
10,406 |
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$ |
11,557 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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8,960 |
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6,829 |
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Stock-based compensation expense |
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7,725 |
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6,820 |
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Amortization of investment premiums |
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2,373 |
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Non-cash deferred tax benefit |
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(1,326 |
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(1,871 |
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Net changes in current assets and liabilities: |
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Accounts receivable |
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(1,650 |
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3,256 |
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Prepaid expenses and other current assets |
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(2,497 |
) |
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931 |
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Deferred costs |
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(3,408 |
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390 |
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Other assets |
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139 |
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(59 |
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Accounts payable |
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(3,185 |
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1,697 |
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Accrued expenses and other liabilities |
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(699 |
) |
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(2,328 |
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Deferred revenue |
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15,636 |
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(4,086 |
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Accrued restructuring |
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(146 |
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Net cash provided by operating activities |
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32,474 |
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22,990 |
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Cash Flows from Investing Activities: |
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Purchases of marketable securities |
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(161,100 |
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(28,287 |
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Maturities of marketable securities |
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63,327 |
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14,725 |
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Purchases of property and equipment |
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(9,929 |
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(4,620 |
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Increase in other assets |
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(913 |
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Acquisition of business, net of cash acquired |
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(15,174 |
) |
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Net cash used in investing activities |
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(123,789 |
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(18,182 |
) |
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Cash Flows from Financing Activities: |
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Proceeds from exercise of stock options |
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1,962 |
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1,428 |
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Proceeds from employee stock purchase plan |
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914 |
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797 |
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Net proceeds from equity offering |
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94,968 |
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Repayment of acquired debt |
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(1,573 |
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Repurchase of common stock |
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(1,478 |
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(4,265 |
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Payments of employee restricted stock tax withholdings |
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(2,174 |
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(873 |
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Net cash provided by (used in) financing activities |
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92,619 |
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(2,913 |
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Effect of foreign exchange rate changes on cash and cash equivalents |
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219 |
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1,130 |
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Net increase in cash and cash equivalents |
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1,523 |
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3,025 |
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Cash and cash equivalents, beginning of period |
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57,319 |
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47,413 |
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Cash and cash equivalents, end of period |
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$ |
58,842 |
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$ |
50,438 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization, Business and Summary of Significant Accounting Policies
Art Technology Group, Inc. (ATG or the Company) develops and markets a comprehensive suite
of e-commerce software products, and provides related services including support and maintenance,
education, application hosting, professional services and Optimization service solutions for
enhancing online sales and support.
(a) Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company have
been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports
on Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not
include all of the information and footnotes required by United States generally accepted
accounting principles, and while the Company believes that the disclosures presented are adequate
to make the information presented not misleading, these financial statements should be read in
conjunction with the audited financial statements and related notes included in the Companys 2009
Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements and notes contain all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the Companys financial position, results
of operations, and cash flows at the dates and for the periods indicated. The operating results for
the three and nine months ended September 30, 2010 are not necessarily indicative of the results to
be expected for the full year ending December 31, 2010. The Company considers which events or
transactions that occur after the balance sheet date but before the financial statements are issued
should be included to provide additional evidence relative to certain estimates or to identify
matters that require additional disclosures.
The accompanying consolidated financial statements include the accounts of ATG and its wholly
owned subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
(b) Accounts Receivable
Accounts receivable represents amounts currently due from customers. Accounts receivable also
include $8.6 million and $2.5 million of unbilled accounts receivable at September 30, 2010 and
December 31, 2009, respectively. Unbilled accounts receivable consist of future billings related to
transactions with extended payment terms, as well as future billings for professional services
performed but not yet invoiced to the customer. At September 30, 2010, $6.4 million of the $8.6
million was unbilled due to extended payment terms. At December 31, 2009, $1.0 million of the $2.5
million related to extended payment terms. Unbilled accounts receivable related to professional
services are generally invoiced the following month.
(c) Comprehensive Income
Accounting guidance requires financial statements to include the reporting of comprehensive
income, which includes net income and certain transactions that have generally been reported in the
statement of stockholders equity. ATGs comprehensive income consists of net income, foreign
currency translation adjustments and unrealized gains and losses on available-for-sale securities.
The components of accumulated other comprehensive income are as follows (in thousands):
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
4,173 |
|
|
$ |
3,963 |
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|
$ |
10,406 |
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$ |
11,557 |
|
Net changes in: |
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Foreign currency translation adjustment |
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|
827 |
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|
426 |
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|
(172 |
) |
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1,061 |
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Unrealized gain (loss) on available-for-sale securities |
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283 |
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(12 |
) |
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|
66 |
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|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
5,283 |
|
|
$ |
4,377 |
|
|
$ |
10,300 |
|
|
$ |
12,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(d) Concentrations of Credit Risk and Major Customers
At September 30, 2010 and 2009 no customer accounted for more than 10% of accounts receivable.
Furthermore, no customer accounted for more than 10% of revenues for either the three or nine month
periods ended September 30, 2010 and 2009.
(e) New Accounting Pronouncements
In September 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, Multiple
Element Arrangements. ASU 2009-13 addresses the determination of when the individual deliverables
included in a multiple element arrangement may be treated as separate units of accounting. ASU
2009-13 also modifies the manner in which the transaction consideration is allocated across
separately identified deliverables and establishes definitions for determining fair value of
elements in an arrangement. This standard must be adopted by the Company no later than January 1,
2011 with earlier adoption permitted. The Company is currently evaluating the impact, if any, that
this standard update will have on its consolidated financial statements.
(2) Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted average number
of shares of common stock outstanding during the period. Diluted net income per share is computed
by dividing net income by the weighted average number of shares of common stock outstanding plus
the dilutive effect of common stock equivalents using the treasury stock method. Common stock
equivalents consist of stock options, restricted stock and restricted stock unit awards. Under the
treasury stock method, the assumed proceeds, including the exercise price as well as the average
unrecognized compensation expense of dilutive stock options and restricted stock awards, are used
to effect an assumed buyback of additional shares, thereby reducing the dilutive impact of the
stock options and restricted stock awards.
The following table sets forth the computation of basic and diluted net income per share for
the periods indicated (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
4,173 |
|
|
$ |
3,963 |
|
|
$ |
10,406 |
|
|
$ |
11,557 |
|
Weighted average common shares outstanding
used in computing basic net income per
share |
|
|
158,232 |
|
|
|
127,224 |
|
|
|
153,986 |
|
|
|
126,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive common stock equivalents |
|
|
5,907 |
|
|
|
7,512 |
|
|
|
7,154 |
|
|
|
5,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average common stock and
common stock equivalent shares outstanding
used in computing diluted net income per
share |
|
|
164,139 |
|
|
|
134,736 |
|
|
|
161,141 |
|
|
|
132,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.03 |
|
|
$ |
0.03 |
|
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.03 |
|
|
$ |
0.03 |
|
|
$ |
0.06 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive common stock equivalents |
|
|
13,924 |
|
|
|
10,891 |
|
|
|
12,867 |
|
|
|
12,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3) Stock-Based Compensation
Grant-Date Fair Value of Stock Options
The Company uses the Black-Scholes option pricing model to estimate the grant-date fair value
of stock options. Information pertaining to stock options granted during the nine months ended
September 30, 2010 and 2009 and related weighted average assumptions is as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
Stock Options |
|
2010 |
|
2009 |
Options granted (in thousands) |
|
|
1,849 |
|
|
|
1,088 |
|
Weighted-average exercise price |
|
$ |
4.33 |
|
|
$ |
2.84 |
|
Weighted-average grant date fair value |
|
$ |
2.72 |
|
|
$ |
1.86 |
|
Assumptions: |
|
|
|
|
|
|
|
|
Expected volatility |
|
|
65.02 |
% |
|
|
70.50 |
% |
Expected term (in years) |
|
|
6.25 |
|
|
|
6.25 |
|
Risk-free interest rate |
|
|
1.84 |
% |
|
|
2.68 |
% |
Expected dividend yield |
|
|
|
|
|
|
|
|
Expected volatility The Company has determined that the historical volatility of its common
stock is the best indicator of the future volatility of its common stock, and therefore uses
historical volatility to estimate the grant-date fair value of stock options. Historical volatility
is calculated for the period that is commensurate with the stock options expected term.
Expected term The expected term of an option is based on the historical experience for the
population of option holders.
Risk-free interest rate The yield on zero-coupon U.S. Treasury securities for a period that
is commensurate with the expected term is used as the risk-free interest rate.
Expected dividend yield The Companys Board of Directors historically has not declared cash
dividends and does not expect to issue cash dividends in the future.
The Company uses the straight-line attribution method to recognize stock-based compensation
expense for stock options. The amount of stock-based compensation recognized during a period is
based on the value of the portion of the awards that are ultimately expected to vest. Expected
forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if
actual forfeitures differ from those estimates. The term forfeitures is distinct from
cancellations or expirations and represents only the unvested portion of the surrendered
option. The Company has applied a forfeiture rate of 9.6% to all unvested options as of September
30, 2010. This estimate is re-evaluated periodically and the forfeiture rate is adjusted as
necessary. Ultimately, the actual expense recognized over the vesting period will only be for those
shares that vest.
Stock Option Award Activity
A summary of the activity under the Companys stock option plans for the nine months ended
September 30, 2010 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
|
|
Average |
|
Average |
|
|
|
|
|
|
|
|
Exercise |
|
Remaining |
|
Aggregate |
|
|
Number of |
|
Price |
|
Contractual |
|
Intrinsic |
|
|
Options |
|
Per Share |
|
Term in Years |
|
Value |
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
(in thousands) |
Options outstanding at December 31, 2009 |
|
|
13,003 |
|
|
$ |
2.83 |
|
|
|
|
|
|
|
|
|
Options granted |
|
|
1,849 |
|
|
|
4.33 |
|
|
|
|
|
|
|
|
|
Options exercised |
|
|
(1,105 |
) |
|
|
1.78 |
|
|
|
|
|
|
|
|
|
Options forfeited |
|
|
(647 |
) |
|
|
11.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2010 |
|
|
13,100 |
|
|
|
2.71 |
|
|
|
5.5 |
|
|
$ |
22,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at September 30, 2010 |
|
|
9,893 |
|
|
|
2.35 |
|
|
|
4.4 |
|
|
|
23,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested or expected to
vest at September 30, 2010 (1) |
|
|
12,672 |
|
|
|
2.67 |
|
|
|
5.4 |
|
|
|
22,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In addition to the vested options, the Company expects a portion of the unvested
options to vest at some point in the future. Options expected to vest are calculated by
applying an estimated forfeiture rate to the unvested options. |
8
During the nine months ended September 30, 2010 and 2009, the total intrinsic value of options
exercised (i.e. the difference between the market price at exercise and the price paid by the
employee to exercise the options) was $2.3 million and $1.9 million, respectively, and the total
amount of cash received by the Company from exercise of these options was $2.0 million and $1.4
million, respectively.
Restricted Stock Awards
A summary of the Companys restricted stock unit (RSU) award activity for the nine months
ended September 30, 2010 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average Grant |
|
|
Restricted Stock |
|
Date Fair Value |
|
|
and RSUs |
|
Per Share |
|
|
(in thousands) |
Non-vested shares outstanding at December 31, 2009 |
|
|
5,446 |
|
|
$ |
2.89 |
|
Awards granted |
|
|
2,690 |
|
|
|
3.91 |
|
Awards vested |
|
|
(1,804 |
) |
|
|
2.89 |
|
Awards forfeited |
|
|
(333 |
) |
|
|
3.00 |
|
|
|
|
Non-vested shares outstanding at September 30, 2010 |
|
|
5,999 |
|
|
|
3.32 |
|
|
|
|
During the nine months ended September 30, 2010, the Company granted 2.7 million RSUs to
employees, directors and executives. The fair value of the RSUs is based on the market value of
ATGs common stock price on the date of grant. Stock-based compensation expense related to RSUs is
recognized on a straight-line basis over the requisite service period provided there are no
performance-based measures. The Company has applied a forfeiture rate of 18% to its RSUs as of
September 30, 2010.
The RSUs provide the holder with the right to receive shares of ATG common stock upon vesting.
RSUs granted to employees generally vest over four years. A majority of the RSUs vest based on the
lapsing of time. A portion of the RSUs granted to executives are subject to performance criteria.
Of the RSUs outstanding at September 30, 2010, 1.9 million were performance-based. The fair value
of these performance-based awards is being recognized over the requisite service period under the
accelerated method. All performance-based RSUs contain an additional condition which, if achieved,
would result in the immediate vesting of the awards. At September 30, 2010, the achievement of this
additional condition is not deemed probable by the Company.
As of September 30, 2010, there was $20.4 million of total unrecognized compensation cost
related to unvested awards of stock options and RSUs. That cost is expected to be recognized over a
weighted-average period of 2.1 years.
The Company recorded total stock-based compensation expense of $2.9 million and $2.5 million,
respectively, for the three months ended September 30, 2010 and 2009 and $7.7 million and $6.8
million, respectively, for the nine months then ended.
(4) Disclosures About Segments of an Enterprise
Operating segments are components of an enterprise for which separate discrete financial
information is available for evaluation by the chief operating decision-maker in making decisions
on how to allocate resources and assess performance. The Companys chief operating decision-maker
is its Chief Executive Officer. ATG views its operations and manages its business as one segment
with three product offerings: software licenses, recurring
9
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
services, and professional and education
services. ATG evaluates these product offerings based on their respective
revenues and gross margins. As a result, the financial information disclosed in the
consolidated financial statements represents the material financial information related to our
principal operating segment.
Revenues from foreign sources were approximately $16.2 million and $12.7 million for the three
months ended September 30, 2010 and 2009, respectively, and $41.3 million and $39.0 million for the
nine months ended September 30, 2010 and 2009, respectively. Revenues from foreign sources were
primarily generated from customers located in Europe. All of the Companys product sales for the
three and nine months ended September 30, 2010 and 2009 were delivered from ATGs headquarters
located in the United States.
The following table represents the percentage of total revenue by geographic region for the
three and nine month periods ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
United States |
|
|
68 |
% |
|
|
71 |
% |
|
|
71 |
% |
|
|
70 |
% |
United Kingdom (UK) |
|
|
22 |
|
|
|
9 |
|
|
|
16 |
|
|
|
17 |
|
Europe, Middle East and Africa (excluding UK) |
|
|
8 |
|
|
|
15 |
|
|
|
10 |
|
|
|
10 |
|
Other |
|
|
2 |
|
|
|
5 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
(5) Fair Value Measurement
As defined in ASC 820-10, Fair Value Measurements and Disclosures (ASC 820-10), fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. In order to increase
consistency and comparability in fair value measurements, ASC 820-10 establishes a fair value
hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three
broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement
date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1
inputs.
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for
similar assets and liabilities or market corroborated inputs.
Level 3: Unobservable inputs are used when little or no market data is available, which
requires the Company to develop its own assumptions about how market participants would value the
assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs to the extent possible in its
assessment of fair value.
10
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Companys financial assets that are measured at fair value on
a recurring basis at September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
|
|
|
$ |
4,082 |
|
|
$ |
|
|
|
$ |
4,082 |
|
Commercial paper |
|
|
|
|
|
|
6,998 |
|
|
|
|
|
|
|
6,998 |
|
Corporate debt securities |
|
|
|
|
|
|
4,019 |
|
|
|
|
|
|
|
4,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
|
|
|
|
15,099 |
|
|
|
|
|
|
|
15,099 |
|
Debt securities current (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
|
|
|
|
8,938 |
|
|
|
|
|
|
|
8,938 |
|
U.S. Federal Government securities |
|
|
13,077 |
|
|
|
|
|
|
|
|
|
|
|
13,077 |
|
Corporate debt securities |
|
|
|
|
|
|
70,627 |
|
|
|
|
|
|
|
70,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities current |
|
|
13,077 |
|
|
|
79,565 |
|
|
|
|
|
|
|
92,642 |
|
Debt securities non-current (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal Government securities |
|
|
2,001 |
|
|
|
|
|
|
|
|
|
|
|
2,001 |
|
Corporate debt securities |
|
|
|
|
|
|
27,778 |
|
|
|
|
|
|
|
27,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities non-current |
|
|
2,001 |
|
|
|
27,778 |
|
|
|
|
|
|
|
29,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets: |
|
$ |
15,078 |
|
|
$ |
122,442 |
|
|
$ |
|
|
|
$ |
137,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Included within cash and cash equivalents in the Consolidated Balance Sheet. |
|
(2) |
|
Included within marketable securities, current in the Consolidated Balance Sheet. |
|
(3) |
|
Included within marketable securities, non-current in the Consolidated Balance Sheet. |
When available, the Company uses unadjusted quoted market prices to measure the fair value and
classifies such items as Level 1. The valuation technique used to measure fair value for our Level
2 assets is a market approach, using prices and other relevant information generated by market
transactions involving identical or comparable assets.
As of September 30, 2010, the Companys marketable securities had a fair value of $137.5
million, amortized cost of $137.4 million, and unrealized gain recorded in other comprehensive
income of $0.1 million. In addition, 78% of the marketable securities held by the Company at
September 30, 2010 had a maturity of less than one year, and all investments had fair value greater
than 90% of their amortized cost.
(6) Restricted Cash
At September 30, 2010, the Company has collateralized $0.8 million in outstanding letters of
credit with certificates of deposit. The letters of credit were issued in favor of various
landlords to secure obligations under ATGs facility leases expiring through December 2018. The
collateral for the letters of credit is reflected on the Companys balance sheet as restricted cash
within short-term and long-term marketable securities dependent on the underlying term of the
leases.
(7) Acquisitions
On January 8, 2010, the Company acquired all of the outstanding shares of common stock of
privately held InstantService.com, Inc. (InstantService) in a non-material business combination.
During the three months ended September 30, 2010, the Company did not record any material revisions
to any of the assumptions, estimates or
11
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
amounts used to complete its preliminary purchase price
accounting as of March 31, 2010; however, pending the
outcome of further analysis related to certain other assets and contingencies recorded as part
of the transaction, the preliminary purchase price allocation could change.
(8) Commitments and Contingencies
Indemnifications
The Company in general agrees to indemnification provisions in its software license agreements
and service agreements in the ordinary course of its business.
With respect to software license and service agreements, these indemnifications generally
include provisions indemnifying the customer against losses, expenses, and liabilities from damages
that may be awarded against the customer in the event the Companys software is found to infringe
upon the intellectual property rights of others. The software license and service agreements
generally limit the scope of and remedies for such indemnification obligations in a variety of
industry-standard respects. The Company relies on a combination of patent, copyright, trademark and
trade secret laws and restrictions on disclosure to protect its intellectual property rights. The
Company believes such laws and practices, along with its internal development processes and other
policies and practices, limit its exposure related to the indemnification provisions of the
software license agreements and service agreements. However, in recent years there has been
significant litigation in the United States involving patents and other intellectual property
rights. Companies providing Internet-related products and services are increasingly bringing and
becoming subject to suits alleging infringement of proprietary rights, particularly patent rights.
From time to time, the Companys customers have been subject to third party patent claims, and the
Company has agreed to indemnify these customers from claims to the extent the claims relate to the
Companys products.
(9) Goodwill and Intangible Assets
Goodwill
The Company evaluates goodwill for impairment annually and whenever events or changes in
circumstances suggest that the carrying value of goodwill may not be recoverable. No impairment of
goodwill resulted from the Companys most recent evaluation of goodwill for impairment, which
occurred in the fourth quarter of fiscal 2009, nor in any of the periods presented. The Companys
next annual impairment assessment will be made in the fourth quarter of 2010. The following table
presents the changes in goodwill during fiscal 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Year Ended |
|
|
September 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
|
Balance at beginning of period |
|
$ |
65,683 |
|
|
$ |
65,683 |
|
Acquisition of InstantService |
|
|
12,006 |
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
77,689 |
|
|
$ |
65,683 |
|
|
|
|
Intangible Assets
The Company reviews identified intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. Recoverability
of these assets is measured by comparison of their carrying value to future undiscounted cash flows
the assets are expected to generate over their remaining economic lives. If such assets are
considered to be impaired, the impairment to be recognized in the statement of operations equals
the amount by which the carrying value of the assets exceeds their fair value determined by either
a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.
12
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Intangible
assets, which will continue to be amortized, consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
December 31, 2009 |
|
|
Gross |
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Carrying |
|
Accumulated |
|
Net Book |
|
Carrying |
|
Accumulated |
|
Net Book |
|
|
Amount |
|
Amortization |
|
Value |
|
Amount |
|
Amortization |
|
Value |
Customer relationships |
|
$ |
10,782 |
|
|
$ |
(7,912 |
) |
|
$ |
2,870 |
|
|
$ |
7,460 |
|
|
$ |
(6,032 |
) |
|
$ |
1,428 |
|
Developed technology |
|
|
9,510 |
|
|
|
(5,455 |
) |
|
|
4,055 |
|
|
|
6,110 |
|
|
|
(3,964 |
) |
|
|
2,146 |
|
Trademarks |
|
|
1,400 |
|
|
|
(1,120 |
) |
|
|
280 |
|
|
|
1,400 |
|
|
|
(910 |
) |
|
|
490 |
|
|
|
|
|
Total intangible assets |
|
$ |
21,692 |
|
|
$ |
(14,487 |
) |
|
$ |
7,205 |
|
|
$ |
14,970 |
|
|
$ |
(10,906 |
) |
|
$ |
4,064 |
|
|
|
|
Intangible assets are amortized based upon the pattern of estimated economic use or on a
straight-line basis over their estimated useful lives, which range from 1 to 5 years. Amortization
expense related to intangibles was $1.2 million and $0.9 million for the three-month periods ended
September 30, 2010 and 2009, respectively, and $3.6 million and $2.8 million for the nine-month
periods ended September 30, 2010 and 2009, respectively.
The Company expects amortization expense for these intangible assets to be (in thousands):
|
|
|
|
|
Remainder of 2010 |
|
$ |
753 |
|
2011 |
|
|
2,376 |
|
2012 |
|
|
1,344 |
|
2013 |
|
|
1,344 |
|
2014 |
|
|
1,344 |
|
2015 |
|
|
44 |
|
|
|
|
|
Total |
|
$ |
7,205 |
|
(10) Income Taxes
The Company records a deferred tax asset or liability based on the difference between the
financial statement and tax bases of assets and liabilities, as measured by enacted tax rates
assumed to be in effect when these differences reverse. The Company believes there is significant
uncertainty in its future profits due to the growing breadth of its product mix and the effect that
can have on the timing of revenue recognition, and the related effect on reported U.S. income.
At September 30, 2010, the Company determined that it is more likely than not that the net U.S.
deferred tax assets may not be realized and a full valuation allowance continues to be recorded.
The $0.3 million income tax provision recorded for the three month period ended September 30,
2010 relates to the U.S. alternative minimum tax (AMT), inclusive of allowable tax loss
carryforwards, state and foreign income taxes as well as interest related to uncertain tax
positions. The AMT liability is available as a credit against future tax obligations upon the full
utilization or expiration of our net operating loss carryforwards. The $0.2 million benefit for
the nine months ended September 30, 2010 includes approximately
$1.4 million related to the
reversal of the valuation allowance on certain deferred tax assets as described below.
During the nine months ended September 30, 2010, the Company recorded net deferred tax
liabilities of approximately $1.4 million related to basis differences resulting from the
acquisition of InstantService. As a result of the InstantService acquisition, the Company released
a portion of its valuation allowance amounting to approximately $1.4 million to offset the impact
of the deferred tax liabilities acquired on its pre-acquisition net deferred tax asset balance. In
accordance with ASC 805, Business Combinations, the release of the valuation allowance was recorded
as a tax benefit in the statement of operations.
For the three and nine months ended September 30, 2009, the Company recorded income tax
benefits of $1.7 million and $0.8 million, respectively, which related to the tax benefits
recorded as a result of the decreases in the Companys uncertain tax positions offset by U.S.
federal alternative minimum tax, state and foreign income taxes.
(11) Litigation
In December 2001, a purported class action complaint was filed against the Companys wholly
owned subsidiary Primus Knowledge Solutions, Inc., two former officers of Primus and the
underwriters of Primus 1999 initial public offering. The complaints are similar and allege
violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
primarily based on the allegation that the underwriters received
13
ART TECHNOLOGY GROUP, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
undisclosed compensation in
connection with Primus initial public offering. The litigation has been coordinated in
the United States District Court for the Southern District of New York with claims against
approximately 300 other companies that had initial public offerings during the same general time
period. The parties have reached a global settlement of the litigation under which insurance will
pay the full amount of the settlement share allocated to Primus, and Primus bears no financial
liability. In October 2009, the Court issued an order granting final approval of the settlement.
Certain objectors are appealing the final order. While the Company cannot predict the outcome of
the litigation, it does not expect any material adverse impact to its business, or the results of
its operations, from this matter.
In May 2009, LivePerson, Inc. (LivePerson) commenced an action in the United States
District Court for the Southern District of New York against InstantService. In the action,
LivePerson alleges that InstantService infringes two United States patents held by LivePerson and
seeks injunctive relief, damages and attorneys fees. In April 2010, InstantService asserted
counter-claims against LivePerson, alleging that LivePerson infringes one of InstantServices
patents and is seeking injunctive relief, damages and attorneys fees. In May 2010, the Company
joined the action and asserted counter claims against LivePerson, alleging that LivePerson
infringes two of its patents and is seeking injunctive relief, damages and attorneys fees against
LivePerson. In August 2010, LivePerson added the Company as a
defendant to the suit. The Company is investigating the claims made by LivePerson and has reached no
conclusion as to the likelihood of an adverse outcome in the litigation, which the Company intends
to contest vigorously.
(12) Subsequent Events
Merger Agreement with Oracle (Non-recognized subsequent event)
On November 2, 2010, ATG, Oracle Corporation, a Delaware corporation (Oracle), and Amsterdam
Acquisition Sub Corporation, a Delaware corporation and wholly-owned subsidiary of Oracle (Merger
Sub), entered into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which,
subject to satisfaction or waiver of the conditions therein, Merger
Sub will merge with and into ATG (the Merger) with ATG surviving as a wholly-owned
subsidiary of Oracle. A description of the Merger Agreement is contained in the Companys Current
Report on Form 8-K filed with the SEC on November 2, 2010, and a copy of the Merger Agreement is
attached thereto as Exhibit 2.1.
Shareholder Lawsuit (Non-recognized subsequent event)
On November 4, 2010, a putative shareholder class action lawsuit was filed in the Court of
Chancery in the State of Delaware in and for New Castle County (Cronenwett v. Art Technology Group,
Inc. et al) naming the Company and its directors, as well as Oracle Corporation and its
wholly-owned subsidiary Amsterdam Acquisition Sub Corporation, as defendants. The complaint seeks
to enjoin the proposed acquisition of the Company by Oracle Corporation and alleges claims for
breach of fiduciary duty against the Companys directors and for aiding and abetting a breach of
fiduciary duty against Oracle Corporation and Amsterdam Acquisition Sub Corporation. The complaint
generally alleges that the consideration offered in the proposed transaction is unfair and
inadequate. The Company intends to defend this case vigorously. There can be no assurance,
however, that the Company will be successful in its defense of this action. It is not known when or
on what basis the action will be resolved.
14
ART TECHNOLOGY GROUP, INC.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
This Managements Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with our condensed consolidated financial statements and the notes
contained in Item 1 of this Quarterly Report on Form 10-Q. The following discussion contains
forward-looking statements. The forward-looking statements do not include the potential impact of
any mergers, acquisitions, or divestitures of business combinations that may be announced after the
date hereof.
We develop and market a comprehensive suite of e-commerce software solutions, as well as
provide related services in conjunction with our products, including support and maintenance,
professional services, managed application hosting services, and Optimization services for
enhancing online sales and support. We primarily derive revenue from the sale of software products
and related services. Our software licenses are priced based on the size of the customer
implementation. Our recurring services revenue is attributable to managed application hosting
services, Optimization services, and support and maintenance services. Managed application hosting
revenue is recognized monthly as the services are provided and pricing is based on a per
transaction, per CPU or percent of customers revenue basis. Optimization services are priced on a
per transaction basis and recognized monthly as the services are provided. Support and maintenance
arrangements are priced based on the level of support services provided as a percent of net license
fees per annum. Under support and maintenance services, customers are generally entitled to receive
software upgrades and updates, maintenance releases and technical support. Professional and
education services revenue includes implementation, technical consulting and education training. We
bill professional service fees primarily on a time and materials basis. Education services are
billed as services are provided.
Recent
Developments
On
November 2, 2010, our Company, Oracle Corporation, a Delaware
corporation (Oracle), and Amsterdam Acquisition Sub
Corporation, a Delaware corporation and wholly-owned subsidiary of
Oracle (Merger Sub), entered into an Agreement and Plan
of Merger (the Merger Agreement), pursuant to which,
subject to satisfaction or waiver of the conditions therein. Merger
Sub will merge with and into our Company (the Merger) with
our Company surviving as a wholly-owned subsidiary of Oracle. A
description of the Merger Agreement is contained in our Current
Report on Form 8-K filed with the SEC on November 2, 2010, and a copy
of the Merger Agreement is attached thereto as Exhibit 2.1.
Shift to Increasing Ratably Recognized Revenue
Before 2007, most of our revenue from arrangements involving the sale of our software was
derived from perpetual software licenses and in most circumstances was recognized at the time the
license agreement was executed and the software was delivered. Beginning in the first quarter of
2007, an increasing number of our perpetual software license arrangements have also included the
sale of our managed application hosting services or Optimization services. As a result of applying
the requirements of accounting principles generally accepted in the United States of America,
(GAAP) to our evolving business model, the revenue from these arrangements with combined product
offerings is recognized on a ratable basis over the estimated term of the contract or in certain
cases over the estimated term of the customer arrangement, commencing with the site-delivered
date for providing the managed application hosting services or Optimization services.
The addition of Optimization services and managed application hosting services solution
offerings introduced new products to our portfolio for which we do not have vendor-specific
objective evidence (or VSOE) of fair value. As a result, when we sell Optimization services and
managed application hosting services in conjunction with e-commerce software, we defer all up-front
fees, such as those for licenses, support and maintenance, and professional services, received
prior to the delivery of the managed application hosting services or Optimization services. We
recognize revenue from these fees ratably over either the term of the contract or estimated life of
the arrangement depending on the specific facts of the arrangement, commencing with the
site-delivered date for providing the managed application hosting services or Optimization
services. In addition, when professional services revenue is deferred in connection with these
arrangements and other instances in which there are undelivered elements to a transaction for which
we do not have VSOE of fair value, we defer the direct costs related to performing the professional
services prior to delivery of the element related to these services. These amounts are recognized
to cost of revenue ratably in the same manner as the related revenue.
Key measures that we use to evaluate our performance:
In addition to the traditional measures of financial performance that are reflected in our results
of operations determined in accordance with GAAP, we also monitor certain non-GAAP financial
measures related to the performance of our business. A non-GAAP financial measure is a numerical
measure of a companys historical or future financial performance that excludes amounts that are
included in the most directly comparable measure
15
ART TECHNOLOGY GROUP, INC.
calculated and presented in the GAAP statement of operations. Among the GAAP and non-GAAP measures
that we believe are most important in evaluating the performance of our business are the following:
|
|
|
We use product license bookings, a non-GAAP financial measure, as an important measure
of growth in demand for our ATG e-commerce platform and the success of our sales and
marketing efforts. We define product license bookings as the sale of perpetual software
licenses regardless of the timing of revenue recognition under GAAP. When considering the
value of perpetual software licenses executed during the period we use our judgment in
assessing collectability and likelihood of granting future concessions. Factors that we
consider include the financial condition of the customer and contractual provisions
included in the license contract. See Results of Operations-Product License Bookings
below. |
|
|
|
|
Product license revenue associated with a particular transaction may be deferred for reasons
other than the presence of a managed application hosting or Optimization services
arrangement, such as the presence of credit risk or other contractual terms that, under
GAAP, require us to defer the recognition of revenue. The deferred revenue for such a
transaction may be recognized in a single future period rather than ratably when the
conditions that originally required deferral have been resolved. We include all additions to
deferred product license revenue in our calculation of product license bookings. |
|
|
|
|
We use cash flow from operations as an indicator of the success of the business. Because
a portion of our revenue is deferred in the near term, our net income may be significantly
different from the cash that we generate from operations. |
|
|
|
|
We use recurring services revenue, as reported under GAAP, to evaluate the success of
our strategy to deliver site-independent online services and the growth of our recurring
revenue sources. Recurring services revenue includes Optimization services, application
hosting services, and support and maintenance related to ATG e-commerce platform sales. |
|
|
|
|
We use revenue and gross margins on our various lines of business to measure our success
at meeting cash and non-cash cost and expense targets in relation to revenue earned. |
|
|
|
|
We use days sales outstanding (DSO), calculated by dividing accounts receivable at
period end (including unbilled accounts receivable which may exist as a result of extended
payment terms) by revenue and multiplying the result by the number of days in the period.
The percentage of accounts receivable that are less than 60 days old is an important factor
that our management uses to understand the strength of our accounts receivable portfolio.
This measure is important because a disproportionate percentage of our product license
bookings often occur late in the quarter, which has the effect of increasing our DSO. |
Trends in On-Line Sales and our Business
Set forth below is a discussion of recent developments in our industry that we believe
offer us significant opportunities, or present us with significant challenges, and have the
potential to significantly influence our results of operations.
Impact
of recovering economy. The rate of recovery from the global
recession impacts all sectors of the U.S. and most foreign economies
and continues to create uncertainty
for our business. These fragile economic conditions have led to delays or reductions in capital
spending, including purchases of information technology across industries and markets including
customers across the markets that we serve. We cannot accurately predict the duration or potential
severity of the current economic uncertainty or the impact it will have on our customers or their
demand for our products and services.
Trend in on-line sales. The growth of e-commerce as an important sales channel is the
principal driver for demand for our products and services. We believe that in the current
environment, the on-line channel continues to grow in importance for many of our customers, as
e-commerce may offer more opportunities for revenue growth as well as significant cost savings and
operational benefits such as improved inventory control and purchasing processes.
16
ART TECHNOLOGY GROUP, INC.
E-commerce replatforming. Enterprises periodically upgrade or replace the network and
enterprise applications software and the related hardware systems that they use to run their
e-commerce operations in order to take advantage of advances in computing power, system
architectures, and enterprise software functionality that enable them to increase the capabilities
of their e-commerce systems while simplifying operation and maintenance of these systems and
reducing their cost of ownership. In the e-commerce software industry, we refer to these major
system upgrades or replacements as replatforming. We believe that on average, customers in our
market replatform or refresh their e-commerce software approximately every four to five years. The
extent to which this trend will continue is unknown. However, we are cautiously optimistic that in
the near term spending on e-commerce technology will continue at levels comparable to those we have
recently experienced, and that it may even increase as a priority for some of our customers and
prospects, due to the growing importance and cost benefits of the on-line channel.
Emergence of the on demand model of Software as a Service (SaaS). An important trend
throughout the enterprise software industry in recent years has been the emergence of the SaaS
software delivery model whereby a software vendor that has developed a software application hosts
and operates it for use by its customers over the Internet. The emergence of SaaS has been driven
by customers desire to reduce the costs of owning and operating critical applications software,
while shifting the risks and burdens associated with operating and maintaining the software to the
software vendor, enabling the customer to focus its resources on its core business.
Rapidly evolving and increasingly complex customer requirements. The market for
e-commerce is constantly and rapidly evolving, as we and our competitors introduce new and enhanced
products, retire older ones, and react to changes in Internet-related technology and customer
demands. The market for e-commerce has seen diminishing product differentiators, increasing product
commoditization, and evolving industry standards. To succeed, we need to enhance our current
products and develop or acquire new products on a timely basis to keep pace with market needs,
satisfy the increasingly sophisticated requirements of customers, and leverage strategic alliances
with third parties in the e-commerce field who have complementary products. Our customers may
request that we structure our arrangements with them in new ways that may impact the timing of
revenue recognition and cash flows.
International expansion. Revenues derived from foreign sales as a percentage of our
total revenues were 32% and 29%, respectively, for the three and nine months ended September 30,
2010, remaining relatively stable compared to 29% and 30%, respectively, for the three and nine
months ended September 30, 2009. We continue to seek opportunities to invest resources into
further developing our reach internationally. In support of this initiative we have entered into
partnership agreements abroad that will support our continued growth. As the international market
opportunity continues to develop we will adjust our strategy accordingly.
Competitive trend. The market for online sales, marketing, and customer service software
is intensely competitive, subject to rapid technological change, and significantly affected by new
product introductions by large competitors with significantly greater resources and installed
customer bases. We expect competition to persist and intensify in the future.
Virtualization. The trend towards virtualization could challenge our current software
license pricing structure. Virtualization is an approach to computing wherein the actual, physical
hardware resources of a computer system are configured to simulate the operations of one or more
abstract computers, known as virtual machines, on which software can be executed. The
introduction of virtualization technologies may require us to consider alternative pricing
strategies.
Development of ATGs partner ecosystem. As we train and develop our ATG partner
ecosystem we will see a larger number of implementations outsourced to these partners resulting in
stable, or potentially lower, professional services revenue.
17
ART TECHNOLOGY GROUP, INC.
Critical Accounting Policies and Estimates
This managements discussion and analysis of financial condition and results of
operations discusses our consolidated financial statements, which have been prepared in accordance
with GAAP. The preparation of these financial statements 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 financial statements and the reported amounts
of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its
estimates and judgments, including those related to revenue recognition, deferral of costs, the
allowance for accounts receivable, research and development costs, the impairment of long-lived
assets and goodwill, income taxes, and assumptions for stock-based compensation. Management bases
its estimates and judgments on historical experience, known trends, or events and various other
factors that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We define our critical accounting policies as those that require us to make subjective
estimates about matters that are uncertain and are likely to have a material impact on our
financial condition and results of operations or that concern the specific manner in which we apply
GAAP. Our estimates are based upon assumptions and judgments about matters that are highly
uncertain at the time the accounting estimate is made and applied and require us to assess a range
of potential outcomes. We have not made any changes to any of our critical accounting policies or
our procedures for developing material estimates from those disclosed in our Annual Report on Form
10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on
February 1, 2010.
Results of Operations
The following table sets forth statement of operations data as a percentage of total revenue
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product licenses |
|
|
27 |
% |
|
|
25 |
% |
|
|
30 |
% |
|
|
29 |
% |
Recurring services |
|
|
60 |
|
|
|
57 |
|
|
|
58 |
|
|
|
55 |
|
Professional and education services |
|
|
13 |
|
|
|
18 |
|
|
|
12 |
|
|
|
16 |
|
|
|
|
|
|
Total revenue |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
Cost of Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product licenses |
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Recurring services |
|
|
22 |
|
|
|
22 |
|
|
|
21 |
|
|
|
21 |
|
Professional and education services |
|
|
11 |
|
|
|
14 |
|
|
|
11 |
|
|
|
13 |
|
|
|
|
|
|
Total cost of revenue |
|
|
35 |
|
|
|
37 |
|
|
|
33 |
|
|
|
35 |
|
|
|
|
|
|
Gross profit |
|
|
65 |
|
|
|
63 |
|
|
|
67 |
|
|
|
65 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
18 |
|
|
|
17 |
|
|
|
18 |
|
|
|
17 |
|
Sales and marketing |
|
|
30 |
|
|
|
29 |
|
|
|
31 |
|
|
|
29 |
|
General and administrative |
|
|
10 |
|
|
|
11 |
|
|
|
11 |
|
|
|
11 |
|
|
|
|
|
|
Total operating expenses |
|
|
58 |
|
|
|
57 |
|
|
|
60 |
|
|
|
57 |
|
|
|
|
|
|
Income from operations |
|
|
7 |
|
|
|
6 |
|
|
|
7 |
|
|
|
8 |
|
Interest and other income (expense), net |
|
|
2 |
|
|
|
(1 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
Income before provision for income taxes |
|
|
9 |
|
|
|
5 |
|
|
|
7 |
|
|
|
8 |
|
Provision (benefit) for income taxes |
|
|
1 |
|
|
|
(4 |
) |
|
|
0 |
|
|
|
(1 |
) |
|
|
|
|
|
Net income |
|
|
8 |
% |
|
|
9 |
% |
|
|
7 |
% |
|
|
9 |
% |
|
|
|
|
|
18
ART TECHNOLOGY GROUP, INC.
The following table sets forth, for the periods indicated, our cost of revenue as a percentage
of the related revenue and the related gross margins:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
Cost of product license revenue |
|
|
5 |
% |
|
|
4 |
% |
|
|
4 |
% |
|
|
3 |
% |
Gross margin on product license revenue |
|
|
95 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
97 |
% |
Cost of recurring services revenue |
|
|
36 |
% |
|
|
38 |
% |
|
|
37 |
% |
|
|
37 |
% |
Gross margin on recurring services revenue |
|
|
64 |
% |
|
|
62 |
% |
|
|
63 |
% |
|
|
63 |
% |
Cost of professional and education services revenue |
|
|
89 |
% |
|
|
79 |
% |
|
|
89 |
% |
|
|
83 |
% |
Gross margin on professional and education services revenue |
|
|
11 |
% |
|
|
21 |
% |
|
|
11 |
% |
|
|
17 |
% |
Product License Bookings
We use product license bookings, a non-GAAP financial measure, as an important measure of
growth in demand for our ATG Commerce and the success of our sales and marketing efforts. We define
product license bookings as the sale of perpetual software licenses regardless of the timing of
revenue recognition under GAAP. When considering the value of perpetual software licenses executed
during the period we use our judgment in assessing collectability and likelihood of granting future
concessions. Factors that we consider include the financial condition of the customer and
contractual provisions included in the license contract.
The following table summarizes and reconciles to our product license revenue, as reported
under GAAP, our product license bookings for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Product license bookings |
|
$ |
14,224 |
|
|
$ |
10,436 |
|
|
$ |
46,259 |
|
|
$ |
39,396 |
|
Increase in product license deferred revenue |
|
|
(3,664 |
) |
|
|
(4,321 |
) |
|
|
(14,515 |
) |
|
|
(16,299 |
) |
Product license deferred revenue recognized |
|
|
3,169 |
|
|
|
4,775 |
|
|
|
11,193 |
|
|
|
14,299 |
|
|
|
|
|
|
Product license revenue |
|
$ |
13,729 |
|
|
$ |
10,890 |
|
|
$ |
42,937 |
|
|
$ |
37,396 |
|
|
|
|
|
|
Product license bookings increased $3.8 million, or 36%, to $14.2 million and increased $6.8
million, or 17% to $46.3 million in the three and nine months ended September 30, 2010,
respectively, when compared to the same periods in 2009. The increase in both cases reflects growth
in the demand for our e-commerce solutions and the success of our sales and marketing initiatives.
Product license bookings deferred was 26% and 41% of our total product license bookings for
the three months ended September 30, 2010 and 2009, respectively, and 31% and 41%, respectively,
for the nine month periods then ended. The deferral of bookings is due to various factors which may
include e-commerce Optimization services or application hosting included in the arrangement for
which we do not have VSOE of fair value, extended payment terms in the arrangement, the inclusion
of hosting services in the arrangement which may require that revenue be deferred and recorded over
the estimated customer life, or other elements in our contracts that preclude recognition of
revenue at the time of booking. Deferred revenue will be recognized in future periods when delivery
of the service commences or as contractual requirements are met.
Product license deferred revenue recognized was $3.2 million and $4.8 million for the three
month periods ended September 30, 2010 and 2009, respectively, and $11.2 million and $14.3 million,
respectively, for the nine month periods then ended. These amounts were recognized upon the
resolution of contractual conditions or other conditions that required their initial deferral.
19
ART TECHNOLOGY GROUP, INC.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Total revenue |
|
$ |
50,335 |
|
|
$ |
43,381 |
|
|
$ |
144,222 |
|
|
$ |
129,719 |
|
Total revenue increased $7.0 million, or 16%, to $50.3 million and increased $14.5 million, or
11% to $144.2 million, respectively, in the three and nine months ended September 30, 2010 when
compared to the same periods in 2009. Revenue is derived from perpetual software licenses,
recurring services, which is comprised of support and maintenance services, application hosting
services, and e-commerce optimization services, and professional and education services. The
revenue growth in 2010 is primarily due to a combined increase of $17.6 million, or 16%, in product
license and recurring services revenues, which was partially offset by a decrease of $3.0 million,
or 15% in professional and education services. Information on revenue changes, by type, for the
three and nine month periods ended September 30, 2010 compared to the same periods in 2009 is
provided below.
Revenue generated from international customers increased to $16.2 million or 32% of total
revenue from $12.7 million, or 29% of total revenue, respectively, for the three months ended
September 30, 2010 when compared to the same period in 2009. International revenue also increased
to $41.3 million or 29% of total revenue from $39.0 million, or 30% of total revenue, respectively,
for the nine month periods ended September 30, 2010 and 2009. The primary driver of the overall
increase in foreign source revenues as a percentage of total revenues compared to similar periods
in the prior year was the consummation of two significant product license transactions totaling
$5.0 million in revenue recognized during the quarter ended September 30, 2010. Offsetting this
amount is an increase in U.S. revenues in 2010 as a result of the addition of the InstantService
business acquired January 8, 2010, as InstantServices customer portfolio is primarily U.S. based.
No customer accounted for more than 10% of revenues for either the three or nine month periods
ended September 30, 2010 and 2009.
Product License Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Product license revenue |
|
$ |
13,729 |
|
|
$ |
10,890 |
|
|
$ |
42,937 |
|
|
$ |
37,396 |
|
As a percent of total revenue |
|
|
27 |
% |
|
|
25 |
% |
|
|
30 |
% |
|
|
29 |
% |
Product license revenue increased $2.8 million, or 26%, to $13.7 million and increased $5.5
million, or 15% to $42.9 million in the three and nine months ended September 30, 2010,
respectively, when compared to the same periods in 2009. The increase experienced in the three
months ended September 30, 2010 compared to the same period in 2009 is due to an increase in
current period product license bookings of $3.8 million and a decrease in product license deferred
revenue of $0.6 million offset by a decrease in the recognition of previously deferred product
license revenue of $1.6 million. The increase experienced in the nine months ended September 30,
2010 compared to the same period in 2009 is based on an increase in product license bookings of
$6.8 million and a decrease in product license deferred revenue of $1.8 million offset by a
decrease in the recognition of previously deferred product license revenue of $3.1 million.
Bookings have increased due to increased demand for our e-commerce solutions and the success of our
sales and marketing initiatives.
Product license revenue generated from international customers was $6.1 million and $13.4
million, respectively, for the three and nine months ended September 30, 2010 compared to $4.4
million and $14.9 million, respectively, for the same periods in 2009.
20
ART TECHNOLOGY GROUP, INC.
Recurring Services Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Support and maintenance |
|
$ |
14,573 |
|
|
$ |
12,403 |
|
|
$ |
40,640 |
|
|
$ |
35,883 |
|
Optimization services and managed application hosting services |
|
|
15,592 |
|
|
|
12,501 |
|
|
|
43,406 |
|
|
|
36,152 |
|
|
|
|
|
|
|
Total recurring services revenue |
|
$ |
30,165 |
|
|
$ |
24,904 |
|
|
$ |
84,046 |
|
|
$ |
72,035 |
|
|
|
|
|
|
As a percent of total revenue |
|
|
60 |
% |
|
|
57 |
% |
|
|
58 |
% |
|
|
55 |
% |
Our recurring services revenue increased $5.3 million, or 21%, to $30.2 million and increased
$12.0 million, or 17% to $84.0 million, respectively, in the three and nine months ended September
30, 2010 when compared to the same periods in 2009, as follows:
|
|
|
Support and maintenance revenue increased $2.2 million, or 17%, to $14.6 million and
increased $4.8 million, or 13.0% to $40.6 million, respectively, in the three and nine
months ended September 30, 2010 when compared to the same periods in 2009, primarily as a
result of continued renewal rates of 98% for the three months ended September 30, 2010 and
99% for the nine months then ended, coupled with growth in our installed base of ATG
e-commerce software. |
|
|
|
|
e-Commerce optimization services and managed application hosting services revenue
increased $3.1 million, or 25%, to $15.6 million and increased $7.3 million, or 20% to
$43.4 million, respectively, in the three and nine months ended September 30, 2010 when
compared to the same periods in 2009 primarily as a result of the addition of
InstantService revenues not included in the prior year and growth in the average contract
size for customers purchasing e-commerce Optimization services. |
Recurring service revenue generated from international customers was $7.2 million and $20.4
million, respectively, for the three and nine months ended September 30, 2010 compared to $6.7
million and $19.3 million, respectively, for the same periods in 2009.
Professional and Education Services Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Professional and education services revenue |
|
$ |
6,441 |
|
|
$ |
7,587 |
|
|
$ |
17,239 |
|
|
$ |
20,288 |
|
As a percent of total revenue |
|
|
13 |
% |
|
|
18 |
% |
|
|
12 |
% |
|
|
16 |
% |
Professional and education services revenue consists primarily of revenue from consulting and
implementation services, which typically are performed in the quarters closely following the
execution of a product license transaction. Our professional services and education revenue
decreased $1.1 million, or 15%, to $6.4 million and decreased $3.0 million, or 15.0% to $17.2
million, respectively, in the three and nine months ended September 30, 2010 when compared to the
same periods in 2009, primarily due to the continued winding down of the government funded research
business that we acquired with CleverSet in 2008 and the deferral of revenue on multiple element arrangements.
Professional services and education revenue generated from international customers was $3.0
million and $7.5 million, respectively, for the three and nine months ended September 30, 2010
compared to $1.6 million and $4.1 million , respectively, for the same periods in 2009.
21
ART
TECHNOLOGY GROUP, INC.
Cost of Product License Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Cost of product license revenue |
|
$ |
735 |
|
|
$ |
399 |
|
|
$ |
1,781 |
|
|
$ |
1,246 |
|
As a percent of license revenue |
|
|
5 |
% |
|
|
4 |
% |
|
|
4 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin on product license revenue |
|
$ |
12,994 |
|
|
$ |
10,491 |
|
|
$ |
41,156 |
|
|
$ |
36,150 |
|
As a percent of license revenue |
|
|
95 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
97 |
% |
Cost
of product license revenue includes salary, benefits and stock-based compensation, costs
of fulfillment and engineering staff dedicated to maintenance of products that are in general
release, the amortization of licenses purchased in support of and used in our products, royalties
paid to vendors whose technology is incorporated into our products and amortization expense related
to acquired developed technology. Variations in our cost of product license revenue did not
materially influence our results of operations in the periods presented.
Cost of Recurring Services Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Cost of recurring services revenue |
|
$ |
10,878 |
|
|
$ |
9,393 |
|
|
$ |
30,848 |
|
|
$ |
27,012 |
|
As a percent of recurring services revenue |
|
|
36 |
% |
|
|
38 |
% |
|
|
37 |
% |
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin on recurring services revenue |
|
$ |
19,287 |
|
|
$ |
15,511 |
|
|
$ |
53,198 |
|
|
$ |
45,023 |
|
As a percent of recurring services revenue |
|
|
64 |
% |
|
|
62 |
% |
|
|
63 |
% |
|
|
63 |
% |
Cost of recurring services revenues includes salary, benefits, and stock-based compensation
and other costs for recurring services support staff, costs associated with the hosting centers,
third-party contractors, amortization of technology acquired in connection with acquisitions, and
royalties.
When we perform professional consulting and implementation services in connection with managed
application hosting arrangements we generally defer the direct costs incurred prior to delivery of
the element related to the performance of these services. Deferred costs are amortized to cost of
revenue ratably over the longer of the contract term or the estimated life of the arrangement once
services commence.
Cost of recurring services revenue increased $1.5 million, or 16%, to $10.9 million and
increased $3.8 million, or 14% to $30.8 million, respectively, in the three and nine months ended
September 30, 2010 when compared to the same periods in 2009. The increase in cost of recurring
services in the three months ended September 30, 2010 is primarily related to increased salary and
benefit-related costs of $0.6 million due to increased headcount stemming from the InstantService
acquisition, an increase in depreciation and amortization expense of $0.7 million related to
equipment purchases made in 2010 to support new hosting customers and to intangible assets obtained
as part of the InstantService acquisition, and an increase in telecommunications and hosting
expenses of $0.6 related to our new hosting customers. The causes of the increases in salaries and
benefit related costs of $1.8 million, depreciation and amortization expense of $1.4 million and
telecommunications and hosting expenses of $0.7 million in the nine months ended September 30, 2010
when compared to the prior year, are consistent with those experienced in the three months then
ended.
22
ART TECHNOLOGY GROUP, INC.
Cost of Professional and Education Services Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Cost of professional and education services revenue |
|
$ |
5,759 |
|
|
$ |
6,029 |
|
|
$ |
15,406 |
|
|
$ |
16,836 |
|
As a percent of professional and education services revenue |
|
|
89 |
% |
|
|
79 |
% |
|
|
89 |
% |
|
|
83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin on professional and education services revenue |
|
$ |
682 |
|
|
$ |
1,556 |
|
|
$ |
1,833 |
|
|
$ |
3,452 |
|
As a percent of professional and education services revenue |
|
|
11 |
% |
|
|
21 |
% |
|
|
11 |
% |
|
|
17 |
% |
Cost of professional and education services revenue includes salary, benefits, and stock-based
compensation and other costs for professional services and technical support staff and third-party
contractors.
Cost of professional and education services revenue decreased $0.3 million, or 4%, to $5.8
million and decreased $1.4 million, or 8% to $15.4 million, respectively, in the three and nine
months ended September 30, 2010 when compared to the same periods in 2009. The decrease in cost of
professional and education services in the three months ended September 30, 2010 is primarily
driven by a decrease in outside service expenses of $0.7 related to a reduction in cost for
contract/temporary labor due to the winding down of the of the government funded research business
that we acquired with CleverSet in 2008 coupled with a $0.5 million increase in the amount of costs
that were deferred on multiple element arrangements that will not be recorded until recognition of
revenue commences. These decreases were offset by an increase in salary and benefit and
travel-related costs of $0.8 million. The decrease in cost of professional and education services
in the nine months ended September 30, 2010 is primarily related to a decrease in outside service
expenses of $0.4 coupled with a $3.1 million increase in the amount of costs that were deferred on
multiple element arrangements, offset by an increase in salary and benefit and travel-related costs
of $1.8 million. The decrease in professional and education services gross margins for both the
three and nine months ended September 30, 2010, was caused by
increases in the use of outside contractors in 2010 compared to 2009
which resulted in higher cost.
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Research and development expenses |
|
$ |
8,983 |
|
|
$ |
7,599 |
|
|
$ |
25,793 |
|
|
$ |
22,732 |
|
As a percent of total revenue |
|
|
18 |
% |
|
|
17 |
% |
|
|
18 |
% |
|
|
17 |
% |
Research and development expenses consist primarily of salary, benefits, and stock-based
compensation costs to support product development. To date all of our software development costs
have been expensed as research and development costs in the period incurred.
Research and development expenses increased $1.4 million, or 18%, to $9.0 million and
increased $3.1 million, or 13% to $25.8 million in the three and nine months ended September 30,
2010, respectively, when compared to the same periods in 2009. Over the same periods, research and
development expenses as a percentage of total revenue remained relatively consistent. The increase
for the three month period ended September 30, 2010 compared to the same period in 2009 is
primarily related to increases in salary and benefit expenses of $1.2 million coupled with an
increase in cost related to contract/temporary labor of $0.2 million. Increases in salary and
benefits were a result of increased headcount over the prior year and the increase in
contract/temporary labor is related to our increased research and development activities.
The increase for the nine month period ended September 30, 2010
compared to the same period in 2009 primarily relates to increases in salary and benefit expenses
of $2.6 million, in contract/temporary labor of $0.3 million and in travel related expenses of $0.2
million. The primary drivers of the increases during the nine months ended September 30, 2010
compared to the same period
23
ART TECHNOLOGY GROUP, INC.
in 2009 are the same as those experienced over the three month period then ended. The
increase in travel related expenses is due to the fact that many of the outside contractors used
are based internationally.
During the three and nine month periods ended September 30, 2010, we capitalized $0.5 million
and $1.1 million, respectively, in certain internal use software development costs related to our
optimization and hosting services in accordance with ASC 350-40, Internal-Use Software. We
capitalized an insignificant amount of these cost during the three
and nine month periods ended September 30, 2009.
Sales and Marketing Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
Sales and marketing expenses |
|
$ |
15,205 |
|
|
$ |
12,503 |
|
|
$ |
45,084 |
|
|
$ |
37,332 |
|
As a percent of total revenue |
|
|
30 |
% |
|
|
29 |
% |
|
|
31 |
% |
|
|
29 |
% |
Sales and marketing expenses consist primarily of salaries, commissions, benefits, and
stock-based compensation and other related costs for sales and marketing personnel, travel, public
relations and marketing materials and events. We generally recognize commission expense upon
contract execution with the result that commission expense may be recognized earlier than the
related revenue.
Sales and marketing expenses increased $2.7 million, or 22%, to $15.2 million and increased
$7.8 million, or 21% to $45.1 million in the three and nine months ended September 30, 2010,
respectively, when compared to the same periods in 2009. Sales and marketing expenses as a
percentage of total revenue remained relatively consistent when compared to the three and nine
month periods of the prior year. The increase for the three month period ended September 30, 2010
compared to the same period in 2009 is primarily related to increases in salary and benefit
expenses of $2.3 million and an increase of $0.4 million in travel related expenses. The increase
in salary and benefit expenses was driven by increased headcount and an increase in commissions of
$1.2 million due to higher bookings. The increase for the nine month period ended September 30,
2010 compared to the same period in 2009 is primarily related to increases in salary and benefit
expenses of $5.0 million, driven by increased headcount and an increase in commissions of $1.9
million due to higher bookings coupled with increases in travel and entertainment related expenses
of $1.3 million and other direct expenses, such as amortization
and facilities charges, of $1.2 million.
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
|
(In thousands) |
General and administrative expenses |
|
$ |
5,165 |
|
|
$ |
4,831 |
|
|
$ |
15,404 |
|
|
$ |
13,990 |
|
As a percent of total revenue |
|
|
10 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
General and administrative expenses consist primarily of salaries, benefits, and stock-based
compensation and other related costs for internal systems, finance, human resources, legal and
executive related functions.
General and administrative expenses increased $0.3 million, or 7%, to $5.2 million and
increased $1.4 million, or 10% to $15.4 million in the three and nine months ended September 30,
2010, respectively, when compared to the same periods in 2009. General and administrative expenses
as a percentage of total revenues remained relatively consistent when compared to the three and
nine month periods of the prior year. The increase for the three month period ended September 30,
2010 compared to the same period in 2009 is primarily related to an increase in salary and benefit
expenses of $0.5 million. The increase for the nine month period ended September 30, 2010 compared
to the same period in 2009 primarily relates to an increase in salary and benefit expenses of $1.5
million.
24
ART TECHNOLOGY GROUP, INC.
Stock-Based Compensation Expense
Stock-based compensation expense was $2.9 million and $2.5 million for the three month periods
ended September 30, 2010 and 2009, respectively, and was $7.7 million and $6.8 million for the nine
month periods ended September 30, 2010 and 2009, respectively, and is reflected in our costs and
expenses above based on the function of the relevant personnel. As of September 30, 2010, the
total compensation cost related to unvested awards not yet recognized in the statement of
operations was approximately $20.4 million, which will be recognized over a weighted average period
of approximately 2.1 years.
Interest and Other Income (Expense), Net
Interest and other income (expense), net was $0.8 million and ($0.3) million for the three
months ended September 30, 2010 and 2009, respectively, and $0.7 million and $0.2 million for the
nine months ended September 30, 2010 and 2009, respectively. The changes for both the three and
nine month periods compared to the same periods in 2009 primarily related to favorable changes in
foreign exchange rates and net increases in interest income in both the three and nine month
periods in 2010 due to the increase in our marketable securities balances.
Provision for Income Taxes
Our $0.3 million income tax provision recorded for the three month period ended September 30,
2010 relates to the U.S. alternative minimum tax (AMT), inclusive of allowable tax loss
carryforwards, state and foreign income taxes as well as interest related to uncertain tax
positions. Our AMT liability is available as a credit against future tax obligations upon the full
utilization or expiration of our net operating loss carryforwards. Our $0.2 million benefit for the
nine months ended September 30, 2010 includes approximately $1.4 million related to the reversal of
the valuation allowance on certain deferred tax assets as described below.
During the nine months ended September 30, 2010, we recorded net deferred tax liabilities of
approximately $1.4 million related to basis differences resulting from the acquisition of
InstantService. As a result of the InstantService acquisition, we released a portion of our
valuation allowance amounting to approximately $1.4 million to offset the impact of the deferred
tax liabilities acquired on our pre-acquisition net deferred tax asset balance. In accordance with
ASC 805, Business Combinations, the release of the valuation allowance was recorded as a tax
benefit in our statement of operations.
For the three and nine months ended September 30, 2009, we recorded income tax benefits of
$1.7 million and $0.8 million, respectively, which related to the tax benefits recorded as a result
of decreases in our uncertain tax positions offset by U.S. federal alternative minimum tax, state
and foreign income taxes.
We account for our uncertain tax positions in accordance with ASC 740-10, Income Taxes. During
the quarter ended September 30, 2010, there was no change in our gross liability for unrecognized
tax benefits. Through the nine months ended September 30, 2010 we have recorded less than $0.1 million of interest and
penalties in our statement of operations and at September 30, 2010,
we have approximately $0.1 million of potential
interest and penalties accrued in our statement of financial position. If the uncertain tax positions are
ultimately resolved in our favor, the effective tax rates in any future periods would be favorably
affected by approximately $0.4 million.
Liquidity and Capital Resources
Our capital requirements relate primarily to labor costs, facilities, employee and
customer infrastructure, and working capital requirements. Our primary sources of liquidity at
September 30, 2010 were our cash, cash equivalents, short and long-term marketable securities of
$182.5 million, including $0.8 million of restricted cash used to collateralize letters of credit,
and our cash flows from operations.
Cash provided by operating activities was $32.5 million for the nine months ended
September 30, 2010, an increase of $9.5 million compared to the same period in the prior year. This
increase is primarily driven by an increase in cash inflows related to deferred revenue of $19.7
million, to $15.6 million, compared to a cash outflow of ($4.1) million in the nine months ended
September 30, 2009. This increase was offset by an increase in cash outflows related to deferred
costs, accounts payable and prepaid and other assets over the same periods of $3.8
25
ART TECHNOLOGY GROUP, INC.
million, $4.9 million and $3.4 million, respectively. The increase in deferred revenue was
driven by improved renewal rates for support and maintenance contracts and the entrance into
certain hosting contracts and professional service engagements during the nine months ended
September 30, 2010 which require the deferral of revenue. The change in deferred costs relates to
work performed on projects where both costs and revenues are being deferred until certain
contractual terms are met and the increased cash outflows related to accounts payable are due to
timing of vendor payments during the period. Finally, the change in our prepaid expenses and other
current assets account is primarily related to prepayment of rent and information technology
related support fees.
Net cash used in investing activities was $123.8 million for the nine months ended September
30, 2010, an increase of $105.6 million compared to the nine months ended September 30, 2009. The
difference is primarily driven by a net cash outflow in purchases/settlements of marketable
securities of $97.8 million as a result of cash raised from our equity offering coupled with cash
outflows of $15.2 million related to our acquisition of InstantService, net of cash acquired and
$5.3 million related to the purchase of property and equipment. We do not expect any material
adjustments to the cash flows related to the IntantService acquisition in the fourth quarter of
2010 and would expect continued changes in our net cash flows related to our marketable securities
as certain investments mature and are either reinvested or converted to cash.
Net cash provided by financing activities was $92.6 million for the nine months ended
September 30, 2010, an increase of $95.5 million compared to the same period in the prior year. The
difference between the periods primarily relates to a cash inflow of $95.0 million in net proceeds
from our February 2010 equity offering.
We believe that our cash equivalents, and marketable securities, along with other working
capital and cash expected to be generated by our operations, will allow us to meet our liquidity
requirements over at least the next twelve months and for the foreseeable future; however, our
actual cash requirements will depend on many factors, including particularly, overall economic
conditions both domestically and abroad. We may find it necessary or advisable to seek additional
external funds through public or private securities offerings, strategic alliances or other
financing sources. There can be no assurance that if we seek external funding, it will be available
on favorable terms, if at all.
On October 27, 2009 our Board of Directors authorized a stock repurchase program
providing for the repurchase of up to $25.0 million of our outstanding common stock in the open
market or in privately negotiated transactions, at times and prices considered appropriate
depending on the prevailing market conditions. This authorization was in addition to the remaining
$3.9 million under our existing $20.0 million repurchase program authorized in April 2007. During
the nine months ended September 30, 2010, we repurchased 444,600 shares of our common
stock. Over the life of the stock repurchase program through September 30, 2010, we have
repurchased 7,134,695 shares of our common stock at a cost of $17.6 million.
Accounts Receivable and Days Sales Outstanding
Information about our accounts receivable balance and days sales outstanding for the quarters
ended September 30, 2010 and December 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
As of and for the |
|
|
Quarter Ended |
|
|
September 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
(In thousands) |
Days sales outstanding |
|
|
79 |
|
|
|
75 |
|
Revenue |
|
$ |
50,335 |
|
|
$ |
49,663 |
|
Accounts receivable, net |
|
$ |
44,307 |
|
|
$ |
41,522 |
|
Percent of accounts receivable less than 60 days |
|
|
99 |
% |
|
|
97 |
% |
26
ART TECHNOLOGY GROUP, INC.
We evaluate our performance on collections on a quarterly basis. As of September 30, 2010, our
days sales outstanding increased from December 31, 2009 due to timing of sales and associated
billings during the quarter, as well as the effect of receiving payments on sales made during the
current and previous quarters.
Recent Accounting Pronouncements
In September 2009, the FASB issued ASU 2009-13, Multiple Element Arrangements. ASU 2009-13
addresses the determination of when the individual deliverables included in a multiple arrangement
may be treated as separate units of accounting. ASU 2009-13 also modifies the manner in which the
transaction consideration is allocated across separately identified deliverables and establishes
definitions for determining fair value of elements in an arrangement. This standard must be adopted
by us no later than January 1, 2011, with earlier adoption permitted. We are currently evaluating
the impact, if any, that this standard update will have on our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We maintain an investment portfolio consisting mainly of money market funds, commercial paper,
corporate obligations, and government obligations with a weighted average maturity of less than one
year. These available-for-sale securities are subject to interest rate risk. However, a 10% change
in interest rates would not have a material impact to the fair values of these securities at
September 30, 2010, primarily due to their short maturity and our intent to hold the securities to
maturity. There have been no significant changes subsequent to September 30, 2010.
The majority of our operations are based in the U.S., and accordingly, the majority of our
transactions are denominated in U.S. dollars. However, we have foreign-based operations where
transactions are denominated in foreign currencies and are subject to market risk with respect to
fluctuations in the relative value of foreign currencies. Our primary foreign currency exposures
relate to our short-term intercompany balances with our foreign subsidiaries and accounts
receivables valued in the United Kingdom in U.S. dollars. Our primary foreign subsidiaries have
functional currencies denominated in the British pound and Euro, and foreign denominated assets and
liabilities are remeasured each reporting period with any exchange gains and losses recorded in our
consolidated statements of operations. Based on currency exposures existing at September 30, 2010,
a 10% movement in foreign exchange rates would not expose us to significant gains or losses in
earnings or cash flows. We may use derivative instruments to manage the risk of exchange rate
fluctuations. However, at September 30, 2010, we had no outstanding derivative instruments. We do
not use derivative instruments for trading or speculative purposes.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30,
2010. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and
other procedures of a company that are designed to ensure that information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the companys management, including its
principal executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on the evaluation of our disclosure controls and procedures
as of September 30, 2010, our Chief Executive Officer and Chief Financial Officer concluded that,
as of such date, our disclosure controls and procedures were effective at the reasonable assurance
level.
27
ART TECHNOLOGY GROUP, INC.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-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. Legal Proceedings
On November 4, 2010, a putative shareholder class action lawsuit was filed in the Court of
Chancery in the State of Delaware in and for New Castle County (Cronenwett v. Art Technology Group,
Inc. et al) naming our Company and our directors, as well as Oracle Corporation and its
wholly-owned subsidiary Amsterdam Acquisition Sub Corporation, as defendants. The complaint seeks
to enjoin the proposed acquisition of our Company by Oracle Corporation and alleges claims for
breach of fiduciary duty against our directors and for aiding and abetting a breach of fiduciary
duty against Oracle Corporation and Amsterdam Acquisition Sub Corporation. The complaint generally
alleges that the consideration offered in the proposed transaction is unfair and inadequate. We
intend to defend this case vigorously. There can be no assurance, however, that we will be
successful in our defense of this action. It is not known when or on what basis the action will be
resolved.
No previously disclosed legal proceedings were terminated during the three months ended
September 30, 2010.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2009, which could materially affect our business, financial condition or
future results. To the best of our knowledge, as of the date of this report there has been no
material change in any of the risk factors described in that Annual Report on Form 10-K.
The announcement and pendency of our agreement to be acquired by Oracle could adversely affect
our business.
On November 2, 2010, we entered into a Merger Agreement with Oracle and Amsterdam Acquisition
Sub Corporation, a Delaware corporation and wholly-owned subsidiary of Oracle (Merger Sub),
pursuant to which, subject to satisfaction or waiver of the conditions therein, Merger Sub will
merge with us (the Merger) with the Company surviving as a wholly-owned subsidiary of Oracle.
Subject to the terms of the Merger Agreement, which has been approved by our board of directors and
the boards of directors of Oracle and Merger Sub, at the effective time of the Merger (the
Effective Time), each share of our common stock issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive $6.00 in cash, without interest. The
Merger is conditioned upon, among other things, customary closing conditions. We will continue to
operate separately from Oracle until the transaction closes. The announcement and pendency of the
Merger, or any significant delay in the consummation of the Merger, could cause disruptions in our
business, including affecting our relationship with our customers, vendors and employees, which
could have an adverse effect on our business, financial results and operations.
The failure to complete the merger could adversely affect our business.
There is no assurance that the Merger with Oracle or any other transaction will occur. If the
proposed Merger or a similar transaction is not completed, the share price of our common stock may
change to the extent that the current market price of our common stock reflects an assumption that
a transaction will be completed. In addition, under circumstances defined in the Merger Agreement,
we may be required to pay a termination fee of $33.5 million and, in certain circumstances,
reimburse reasonable out-of-pocket fees and expenses of Oracle up to $5.0 million incurred with
respect to the transactions contemplated by the Merger Agreement. Further, a failed transaction may
result in negative publicity and a negative impression of us in the investment community.
In certain instances, the Merger Agreement requires us to pay a termination fee of $33.5 million to
Oracle. This payment could affect the decisions of a third party considering making an alternative
acquisition proposal to the merger.
Under
the terms of the Merger Agreement, we will be required to pay to Oracle a termination
fee of $33.5 million if the Merger Agreement is terminated under certain circumstances. This
payment could affect the structure, pricing and terms proposed by a third party seeking to acquire
or merge with us and could deter such third party from making a competing acquisition proposal.
28
ART TECHNOLOGY GROUP, INC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On October 27, 2009 our Board of Directors authorized a new stock repurchase program providing
for the repurchase of up to $25.0 million of our outstanding common stock in the open market or in
privately negotiated transactions, at times and prices considered appropriate depending on the
prevailing market conditions. This new authorization is in addition to the remaining $3.9 million
under our existing $20 million repurchase program authorized in April of 2007. During the nine
months ended September 30, 2010, we repurchased 444,600 shares of our common stock at a
cost of $1.5 million. Under the program to date, we have repurchased 7,134,695 shares of
our common stock at a cost of $17.6 million.
Our stock repurchase authorization does not have an expiration date and the pace of our
repurchase activity will depend on factors such as our working capital needs, our cash requirements
for acquisitions, any debt repayment obligations which may arise, our stock price, and economic and
market conditions. Our stock repurchases may be effected from time to time through open market
purchases or pursuant to a Rule 10b5-1 plan. Our stock repurchase program may be accelerated,
suspended, delayed or discontinued at any time.
The table below presents information regarding our repurchases of our common stock during the
three months ended September 30, 2009.
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|
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|
Approximate dollar |
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|
|
|
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|
|
Total number of |
|
value of shares that may |
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|
|
shares purchased |
|
yet be purchased under |
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Total number of |
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Average price |
|
as part of publicly |
|
the plans or programs |
Period |
|
shares purchased |
|
paid per share |
|
announced plan |
|
(In thousands) |
July 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 2010 |
|
|
444,600 |
|
|
|
$3.32 |
|
|
|
444,600 |
|
|
|
|
|
September 2010 |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444,600 |
|
|
|
$3.32 |
|
|
|
444,600 |
|
|
|
$27,447,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Reserved)
Item 5. Other Information
None.
29
ART TECHNOLOGY GROUP, INC.
Item 6. Exhibits
Exhibits
2.1 |
|
Agreement and Plan of Merger dated November 2, 2010 among ATG,
Oracle Corporation and Amsterdam Acquisition Sub Corporation
(incorporated by reference to Exhibit 2.1 to our Current Report on
Form 8-K dated November 2, 2010). |
|
3.1 |
|
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit
4.1 to our Registration Statement on Form S-8 dated June 12, 2003). |
|
3.2 |
|
Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on April 23, 2008). |
|
4.1 |
|
Rights Agreement dated September 26, 2001 with EquiServe Trust Company, N.A. (incorporated
by reference to Exhibit 4.1 to our Current Report on Form 8-K dated October 2, 2001). |
|
4.2 |
|
Amendment No. 1 to Rights Agreement dated November 2, 2010
with Computershare Trust Company, N.A. (f/k/a EquiServe Trust Company, N.A.)
(incorporated by reference to Exhibit 4.1 to our Current Report on
Form 8-K dated November 2, 2010). |
|
|
10.1 |
|
Amended and Restated Non-Employee Director Compensation Plan,
as amended on September 16, 2010.* |
|
10.2 |
|
Form of Indemnification Agreement between us and our
executive officers and directors, and schedule of signatories
thereto. *++ |
|
31.1 |
|
Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14 and
15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31.2 |
|
Certification of Principal Financial and Accounting Officer Pursuant to Exchange Act Rules
13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32.1 |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
32.2 |
|
Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
99.1 |
|
Form of Voting Agreement and schedule of signatories thereto,
other than Oracle Corporation (incorporated by reference to Exhibit
99.1 to our Current Report on Form 8-K dated November 2, 2010). |
|
101 |
|
The following materials from Art Technology Group, Inc.s Quarterly
Report on From 10-Q for the quarter ended September 30, 2010,
formatted in XBRL (Extensible Business Reporting Language): (i) the
Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited
Condensed Consolidated Statements of Operations, (iii) the Unaudited
Condensed Consolidated Statements of Cash Flows, and (iv) Notes to
Unaudited Condensed Consolidated Financial Statements, tagged as
blocks of text.++ |
|
|
|
* |
|
Management contract or compensatory plan. |
|
++ |
|
Furnished herewith. |
30
ART TECHNOLOGY GROUP, INC.
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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ART TECHNOLOGY GROUP, INC. |
|
|
|
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(Registrant)
|
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By: |
|
/s/ ROBERT D. BURKE
Robert D. Burke |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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By:
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/s/ JULIE M.B. BRADLEY
Julie M.B. Bradley
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Senior Vice President and Chief |
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Financial Officer |
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(Principal Financial and Accounting Officer) |
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Date:
November 8, 2010
31